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Risk Management in Peru

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

Peru's Overall Risk Assesment.
Be sure you have a clear understanding of the previous chapters before reading the following passage. These recommendations are the writers' personal opinions and they do not in any way force you to agree with these ratings.

Political Risk

The "politican landscape" in Peru has stabalized greatly over the last few years. With the election of President Alejandro Toledo, politics in Peru have become much more calm as opposed to the many scandals that haunted previous governments. It is widely believed and anticipated that President Toledo's grip on power will continue to be strong, and will make it though the next election without much difficulty.
This means there will be great stability, and the major economic gains Peru has seen recently will continue. The risk of uprisings, protests, strikes and many other factors that have a huge economic and political risk for companies will also decrease greatly because of this.


Economic/Financial Risk
The nuevo sol has been stable in recent years even at times of political mayhem and economic rollercoasters. This is grounded by "prudent monetary and fiscal policies, and solid external accounts" (AIG Online, 2004). High export income, new investment from the Camisea Natural Gas Project, and new mining projects will help to maintain currency strength. The Central Bank will continue to target inflation successfully. After two years of being led by primary sectors of the economy, growth is now more broad-based, with manufacturing and construction now showing solid growth. The ATPDEA, a trade agreement between Andean countries and the US, is also providing a boost to agriculture and textiles.

Social/Cultural Risk

Some Peruvians are very contious about foreign goods and have deep resentment of supporting international companies. However, over time the country as a whole has realized the importance of international trade. Peru does not have any forbidden foods and has very few products that the country makes that you can't find in other parts of the world. Their values are relatively conservative in nature and they value the country's natural resources which help provide many jobs throughout the country.
These factors help maintain a relatively low social and cultural risk. If the products are portrayed in the native tongue without Western values of sex dipicted on the labels, then most Peruvians would not even think twice about buying the product.


Commercial Risk

The commercial risk in Peru has come a long way but there are still many factors affecting it. Despite major economic gains recently, the GDP per capita and standard of living in Peru is still relatively low. Because of this, Peruvians have little money to spend on commercial goods. This means that a well made product with excellent marketing could still fail due to the citizen's inability to buy products they want to.
Other areas of concerns that increase commercial risk are crime, unemployment and shoplifting that businesses must take into account. Overall, the commercial risk is decreasing, but still has a great way to go. With time as the standard of living continues to increase, the commercial risk for foreign investors will decrease dramatically.


Natural/Physical Risk

Peru on occasion is struck with natural disasters that range from flooding, earthquakes and hurricanes. Overall, the natural disaster rating is relatively low due to the infrequency of these events, and the quick response and infrastructure in place to help recover fast.
When hurricanes hit, they hit hard. In 1998 a reported six hurricanes landed on Peruvian soil, but this unusual period was caused by the El Nino weather current that changed climate throughout the world. Flooding is usually a problem in the low-lying areas and is rarely seen in cities such as Lima.
Overall, there is relatively low risk for natural or physical disaster, however on the rare occasion it can devestate the region and it's people, much like any other country.


Peru's Overall Risk Rating: 5

Copyright 2004 Peru-4-U