Political instability, corruption, and social conflict negatively impact Peru’s investment climate.  As of August 2022, President Castillo had appointed four cabinets since taking office in July 2021, and rotating through 65 ministers at the time of this report.  Allegations of corruption plague the current and previous administrations, with multiple ministers and the president under investigation for alleged corrupt involvement in public procurement irregularities.  Transparency International ranked Peru 105 out of 180 countries in its 2021 Corruption Perceptions Index.  In addition, Peru’s Ombudsman’s office reported 153 active social conflicts as of June 2022.  More than half of those defined as “socio-environmental” disputes occurred in the mining sector, which represents 10% of Peru’s economic output.  Citing political instability, including contentious relations between the administration and congress, and governance challenges, the three major credit rating agencies (Fitch, Moody’s, and S&P) downgraded Peru’s sovereign credit ratings since Castillo’s inauguration.  All three, however, maintained Peru at investment grade. 

One of the private sector’s main challenges is Peru’s cumbersome and inefficient government procurement processes.  The Embassy continues to work with the GOP to encourage government contracting procedures that follow international procurement standards.  A recent challenge was Peru’s use of a government-to-government procurement mechanism that restricted the ability of U.S. companies to compete directly in certain infrastructure tenders.  That said, the Castillo administration has not to date continued this practice.   Other challenges include the reluctance of some government officials to make final contracting decisions for fear of oversight investigations and legal liabilities and the tendency to base awards on the lowest cost rather than the overall greatest value or lifecycle cost methodology. 

Business owners often find it difficult to resolve disputes with the government, so the Commercial Service recommends including an arbitration clause in commercial agreements.   In 2004, the Peruvian government established commercial courts with specialized judges to rule on business disputes.  These courts reportedly reduced the amount of time to resolve a case.  However, the judicial system is often slow to hear cases and issue decisions.  Court rulings and the degree of enforcement are often inconsistent and unpredictable.  Allegations of political corruption and outside interference in the judicial system are common.  Frequent use of the appellate processes as a delay tactic reinforces the belief among foreign investors that contracts can be difficult to enforce in Peru.  Firms operating in Peru also note difficulties securing legal solutions to commercial disputes or enforcing arbitration awards.