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Peru's Competitive Advantage

Background Information
Peru's Competitive Advantage
Working in Peru
Peru's Economy
Meet the Culture
The Peruvian Markets
Risk Management in Peru
Social Issues and Concerns in Peru
Conclusion and Recommendations

For companies to gain a competitive advantage, they need to do something better, faster, or less expensively than their competition. On this page you will find Peru's conditions regarding absolute and comparative advantages.

A) Does your country have resources that can be found only there, or are resources there of a high quality? Describe the quality and quantity of natural resources.

The main industries in Peru are mining, fishing, metal work, textiles, food, chemicals and tourism. Due to Peru’s unique geographic location, the country has abundant mineral resources in the mountainous areas, and the country’s coastal waters provide excellent fishing grounds. The result of this is a high quality and quantity of natural resources for Peru.

B) List three products for which your country is best known. Describe either the comparative or absolute advantage that these products have (relate these to cost).

South American coffee is world renown for its rich flavour. Coffee gives Peru both an absolute competitive advantage and comparative advantage. The absolute competitive advantage comes from Peru’s low wages and cost of living. This allows Peru to produce coffee much cheaper than industrialized countries, and at par with other South American countries. The competitive advantage is caused by Peru’s mildly acidic tasting coffee. Peru’s coffee is used in dark roasts and as the base for flavoured coffees. Peru is also producing high quality organic flavoured coffees which other countries have been slower to catch onto.

Fish provides Peru with an absolute and comparative advantage as well. Fish is relatively inexpensive to catch since wages are low in the country. Peru also has a major comparative advantage since it has ideal fishing grounds along the coast. This is caused by the cold offshore Humboldt Current (Peruvian Current) that causes growth of marine and plant life on which the fish feed.

Metals and ores give Peru both an absolute and a comparative advantage. Peru has been able to stay competitive despite major reductions in world metal prices due to their high inflation rate and low wages. Their comparative advantage comes from the fact that Peru is widely believed to hold undiscovered deposits and untapped resources.

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C) In what ways does your country have advantages that will give it a competitive edge?

Peru has many advantages in a variety of forms. The most basic is the country's low wages, high inflation and low cost of living. This allows Peru to produce products very cheaply and gives it a competitive edge on the world market. Peru also has many natural resources that are not in abundance throughout the world. Deposits of gold and copper as well as stocks of fish give the country unique products that many other countries can not produce or can not produce at a low enough cost to make it worth their while.

D) Is something manufactured in your country that is not manufactured elsewhere?
There are not many products manufactured in Peru that you could not find being made in other countries, but Peru does have their on "style" or brand of product. Take for example, Peruvian rugs and baskets. Both of these items are made around the world, but Peru is very well known for their quality and beauty of these such goods.

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E) Has your country been responsible for any major innovations? List them.
Although Peru has many natural resources, and is able to produce many goods, they are still not well-known for being an innovative country. After a lot of unsuccessful searching, we were not able to find a particular item that Peru, alone, has introduced to the market.

F) How do the competitive advantages offered by this country provide opportunities for rationalization of Canadian business operations? For example, is labour less expensive, making it efficient for a Canadian firm to build a plant in or source exports from this country?

Peru has low labour costs and a good infrastructure already in place, but due to the mining companies and use of other natural resources, this infrastructure is improving at fast pace. Peru also has many resources like forests that will help assist companies in meeting their building needs.

Copyright 2004 Peru-4-U