Insight – Discover Latin America’s fastest-growing major economy
Peru remains relatively unknown to most Australian exporters but all that
will change when the Peru-Australia Free Trade Agreement (PAFTA) enters
into force. Overnight, the cost of exporting Australian goods and services
will drop as Peru eliminates tariffs on 93.5% of tariff lines, rising to
99% in five years.
All tariffs will be eliminated for Australian beef (within five years),
dairy, wheat, rice, sheep meat, nuts, wine, pharmaceuticals, medical
devices and machinery.
This means Peru will become a strong prospect for Australian exporters
seeking to diversify their customer base and manage exposure to Asian
markets. It also allows Australian degrees to be recognised by Peru, giving
peace of mind to returning alumni.
The agreement creates opportunities for Australian companies in areas where
Australia has real expertise and a strong international reputation for
quality, such as mining equipment, technology and services (METS), food,
education, agtech, transport solutions, and services and equipment for
major sporting events.
Premium food on the menu
Anyone who has visited Peru will know it has one of the most exciting
culinary scenes in the world. Two of the world’s top ten restaurants are in
Lima, and the country has become a fixture of global food tourism thanks to
the work of renowned chefs such as Virgilio Martinez and Pia Leon of
Central, Mitsuharu Tsumara of Maido, and Gaston Acurio of Astrid y Gaston.
With four million foreign tourists visiting the country each year – a
number expected to grow by 8% in 2018 – and 70% of visitors nominating
gastronomy as their principal reason for visiting, Peru has a discerning
consumer base that places a high value on quality food and beverage.
Beyond food service, there is strong interest in premium food at the retail
level. Peru’s middle class numbers 13.4 million, defined as those earning
between US$10–$50 per day. The middle class has grown by over 36% in less
than a decade, supporting a 9% increase in food consumption per annum in
While 70% of food retail sales occur in cornerstores and markets, and 30%
at supermarkets, this is set to change, with Peru ranked in the top 10
retail growth markets by research firm A.T. Kearney. As networks of
shopping centres and associated supermarkets and food courts expand across
Lima and in regional centres, supermarket (and fast food) sales are
forecast to expand.
Three major supermarket groups account for 90% of supermarket sales –
Cencosud, which owns Wong and Metro; Supermercados Peruanos, which owns
Plaza Vea and Vivanda; and Saga Falabella, which operates Tottus
supermarkets. Austrade has relationships with the import buyers at each of
these supermarket chains. All have expressed interest in either Australian
foods, beef and/or wine. Their customers are increasingly looking for
healthier, “greener” foods and more convenience items. Previously, only
those who could afford to travel could access these kinds of foods.
Food consumers are set to become more informed too, with the Peruvian
Government expected to introduce a traffic light-style food labelling
system, similar to Chile and Ecuador, indicating high sugar, fat and salt
Demand for dairy
Australian food producers should also look to areas where local demand is
exceeding supply – in particular, dairy. Thanks to PAFTA, Australian
producers will soon have the opportunity to enter the Peruvian market with
tariff-free quota access for 7,000 tonnes of dairy into Peru (growing to
10,000 tonnes in 10 years). Sanitary import protocols for dairy are already
in place with Peru’s biosecurity agency, SENASA.
The major producer of milk and dairy products in Peru is Grupo Gloria, which has about 75%
of the market and is a major regional player, exporting to more than 40
countries. Other producers include local company Laive and Nestlé.
Peru’s demand for dairy products outstrips supply and the industry faces
some significant logistical challenges due to Peru’s rugged geography.
Local milk also tends to be high in bacteria and the poor cold chain
logistics mean evaporated milk is the most commonly consumed dairy product
Given supply constraints, manufacturers import milk powder and combine it
with local fresh milk to produce evaporated milk, UHT milk, flavoured milk,
yoghurt, butter and cheese. There is now greater scrutiny of dairy retail
products since 2017 legislation designed to guarantee the quality of all
dairy products and highlight their nutritional value. This regulation
establishes the minimum requirements that milk and each dairy product must
contain, both for domestic and imported production, from packaging,
transport to point-of-sale. This is expected to push up unit prices
significantly and create opportunities for final product importers to
satisfy the demand.
In terms of finished products, there are very few local cheeses produced on
a commercial scale. Many cheeses are imported from Europe (France, Italy,
Spain and the Netherlands), the US and New Zealand (Mainland brand).
Consumption of cheese is expected to increase at a value CAGR of 4% at
constant 2017 prices to reach A$400 million in 2022.
Good news for grain exporters
While Peru’s terrain lends itself to the production of Andean grains such
as quinoa, traditional grains such as oats, wheat and rice, in which
Australia excels, are not so widely produced. Oats are widely consumed for
breakfast across the country and Peruvians are the highest per head
consumers of rice in Latin America. They’re also keen consumers of bread,
with sales of baked goods in 2017 estimated at $2.1 billion, up 1% compared
to 2016. Peru also has the largest consumption of panettone per capita
outside of Italy, eaten both at Christmas and on the independence day at
the end of July, in addition to being given as gifts throughout the year.
A taste for beef
There is also an opportunity for Australian meat producers to enter the
Peruvian market given its reliance on imports, especially at the
high-quality end of the market. Beef imports have been growing steadily to
2017, at just under US$23 million (CIF), up from US$11.5 million in 2009,
according to Peruvian import data.
The US Free Trade Agreement has already driven an expansion in imports of
premium beef, which rose from US$6.79 million in 2015 to US$7.8 million in
2017. PAFTA grants Australian beef exporters the most immediate competitive
Austrade has received preliminary expressions of interest from two of the
country’s leading supermarket chains in purchasing beef. Several members of
Peru’s national association of refrigerated goods (ASIPAR), whose members
account for around 70% of beef imports, have also expressed interest.
A desire to learn
Education remains a key growth sector. There were 1,712 Peruvian students
in Australia during 2017 and collaboration is ongoing across a range of
institutions. Industry-related training, especially in mining, and the
burgeoning demand for locally delivered English language training, offer
opportunities for Australian providers willing to consider offshore and
online delivery. A new Centre of Best Practice in Mining and Resources
(modelled on examples from South Australia, Queensland, Canada and Chile)
was recently established.
Agtech on the agenda
Peru is a major horticultural exporter, particularly of asparagus, avocado,
grapes, and citrus, traditionally to the US and Europe and more recently,
to parts of Asia. Exports are currently valued at US$6 billion, and
forecast to reach US$10 billion by 2021.
As Peru seeks to expand production and move up the value chain to meet the
expectations of sophisticated consumers in export markets, it will need
strong traceability systems, as well as minimise pesticide and herbicide
usage, reduce water consumption, increase yield and use data to better
manage production. Australia is already supplying ovine and bovine genetic
material to Peru to increase the quality of the national herd, and pasture
seeds and fertilizers to improve production.
Getting ready for the Pan American Games
Lima will host the Pan American Games in 2019, the fourth largest sporting
event in the world. Approximately 15 Australian firms have been actively
soliciting contracts, with several more Australian consultants working
under the British Government to Government arrangement with the Peruvians
to supply services and build the capacity of the local Organising Committee
(COPAL). The President of COPAL and his Chief Advisor visited the Gold
Coast in April to observe the operations of the Commonwealth Games.
Interest in transport solutions
Several developments in transport over the past year have expanded
Australia’s interests in the sector in Peru. IFM Investors purchased the
interests of OHL Concesiones, specifically the Red Vial IV toll road that
is part of the Panamericana Highway. Yojee, an Australian technology
company using artificial intelligence (AI) and blockchain technology for
regional freight networks, concluded a deal with Peruvian logistics firm
Scharff, while Reynolds Soil Technologies (dust reduction solutions) won a
contract with Lima’s Jorge Chavez Airport. Heavy haul transport solutions
and rail safety technologies have good prospects in Peru due to the need to
transport mineral exports to ports, and get tourists to major sites.
Offroad accessories are also in demand due to Peru’s challenging terrain.
Australian brands ARB and Old Man Emu, among others, have a presence in the
Mining gets a boost
Established trading relationships also receive a boost from PAFTA. Peru’s
mining sector knows and respects Australia’s mining expertise. Australian
METS products are seen as the benchmark in terms of innovation, safety,
performance, lifespan and quality. When PAFTA comes into force, providing
duty-free access for Australian mining machinery, equipment and parts, it
will help make premium-quality Australian products an even more accessible
and cost-effective proposition.
Australian Export Award winner, Hedweld Group, is a great example. Hedweld
has been exporting mining and earthmoving products to Peru for the past six
years. Peru is the largest importer of Hedweld’s Trilift products globally,
and when PAFTA comes into force, Hedweld’s costs will be reduced, as will
those of its Peruvian customers.
Groundprobe, which was recently taken over by Orica, is another great example. With
the PAFTA signing, both companies aim to expand their business in Peru even
Hofmann Engineering is opening a A$12 million new workshop in the southern
Peruvian city of Arequipa in coming months, while Deswik, a supplier of
mine visualization and scenario planning tools, opened an office in Lima in
August 2018 following its participation at PeruMin in 2017.
As global metals and minerals prices expand, investment is flowing and new
mine construction and expansions of existing mines are signalling
opportunities for Australian METS, including projects such as Marcobre’s
Mina Justa project and Anglo American’s Quellaveco. Key areas of demand
relate to automation, underground, skills, mine closure, water in mining,
and social licence.
Austrade can help with insights, market visits and introductions to
supermarkets, producers, manufacturers and importers.
Find out more about
doing business in Peru
or contact Marie Hill for
An earlier version of this article first appeared in Dynamic Export,
Peru: The Facts
- The fastest-growing major economy in Latin America over the past decade,
with 16 years of continuous growth
GDP: US$189 billion (comparable to Vietnam)
Population: 31.7 million
- Highly centralised: 12 million Peruvians live in Lima, making the market
relatively easy to service
- Australia’s commercial presence includes over 90 companies and an
estimated $5 billion in Australian investment, made up of mining, resources
- Australia: fifth-largest foreign investor in Peru’s mining sector