Country Risk Analysis †Peru Essay

SWOT analysisStrengthsPeru is a country arouse with natural resources. In 2010 its exports reached nearly 23 billion GBP, which was in the main do show up of minerals, petroleum and agricultural products. Its excavation industry is the largest in Latin America, accounting for 7,7 billion GBP of its total exports in 2010. The humour is overly approbatory for agriculture, representing 13% of GDP, and employing 30% of the population. In addition, sites like Machu Picchu, Cuscu and Sacsayhua public make Peru a touristy tourist destination for millions of stack every year.WeaknessesAlthough an advantage when the business climate is favourable, Perus heavy dependence upon natural resources and agriculture can strengthen to be an Achilles heel. Volatile commodity prices and low productivity and fragmented knock down ownership in agriculture makes the economy susceptible to economic fluctuations. Whats more the country lacks vital infrastructure such as gritty quality roadways , bridges and flight routes. And as with so many new(prenominal) Latin American countries, high unemployment* threatens the economic and political stability, which in annul affects investor confidence.*Despite a fairly low unemployment rate of 7,9%, the underemployment rate is preceding(prenominal) 40%, which causes similar effects.OpportunitiesIn the period between 2000 and 2005 the number of visit tourists to Peru doubled, and the figure has grown by approximately 11% annually, a sheer that is expected to continue. Enforcing the rise in tourism is the announcement that there ordain be eight long weekends in Peru in 2012, generating some viosterol million GBP in extra tourism revenue this year. In 2005, the US and Peru signed a free trade agreement enabling a non-barrier trading descent between the two countries, which is a huge opportunity as the U.S accounts for 16.3% of Perus exports, and 19.5% of its imports annually.ThreatsAlmost 50% of Perus population is poor. This i s mainly ca employ by the extraction industry, where mess argon oppressed in mining villages and remote communities. Income distribution is extremely skewed, as the richest 10% controls 35.4% of the wealth, and the poorest 10% solely control 1.6%.PESTLE analysisPoliticalPeru is a quite republican country, after the election of Fernando Belande in 1980. However the political environment has been hard at best, with several attempts on overthrowing the government, last in October 2000. Alan Garcia, the same man who ran the country into the ditch with four-figure inflation rates in the 1990s, has in his second reign as president (2006-2011) witnessed an amazing economic recovery and growth. degeneration has long been a big problem in Peru, but neutralisation was taken in February of 2010 when a dedicated commission was created to deal with the problem, which is particularly brought on by the drug cartels. Peru also has a fixed blood with most of its neighbour countries, althoug h their ongoing border conflict with Chile keeps that relationship tense.EconomicalThe economic environment in Peru has gone from hyperinflation (1991) to deflation (2002) to what appears to be stable growth since 2006. Being an exporting nation they where hit hard by the financial crisis, but kept the growth figure above 0, unalike many other Latin American countries. It regained GDP growth of 8.8% in 2010. In 2011 the credit rating agency Standard & Poor raised(a) Perus credit rating from BBB- to BBB. In general, Peru has one of the most booming economies in Latin America, having tripled in size in the past 11 eld. In addition of being a member of the WTO, they also start out a non-tariff trade agreement with the US, which has proven most advantageous as the US represents some 30% of both imports and exports. It is worth mentioning that Perus economic growth is very frequently aided by growth in private investment of 13% annually. This is acknowledged by the government, and h as led to kid barriers to entry for foreign firms.SocialSince the early 21th century the conditions for Peruvians has improved in many measures. Life expectancy has increased by 4 years to 73 since 2004, and the literacy rate is stable at 90%. However, there is a big split between the homespun areas and big cities such as Lima, with 8.5 million people. While people in the cities are lifted out of poverty due to the economic growth, the people living in the rural areas are subject to underemployment and bad infrastructure. The main language used is Spanish. Although some speak Quechua or Aymara, these are mainly spoken by people living in the Andes Mountains.TechnologicalPeru is known for its substantial bureaucracy and inefficiency, much of which is due to its low amount of technology available. However, more and more people now possess a mobile phone, and Internet usage is increase steadily. This said these number should be growing as only 10% owns a personal computer, and there are only 3,7 internet subscriptions per speed of light people. (http//devdata.worldbank.org/ict/per_ict.pdf)LegalAlthough the legal system in Peru appears to lack both independency and efficiency, it has been severely altered to attract foreign investors and aid business. Through removing the unavoidableness for small enterprises to deposit start-up capital in a bank in the first place registration they have made it easier to start a business, and investors are protect through a new law that allows minority shareholders to request main course to non-confidential corporate documents. The tax-system has been made electronic, which not only makes it work more efficient, it also makes taxing a lot easier for both parts. It is also legislated that eight-hour days and 48-hour weeks are the maximum working hours, with a minimum wage of $128 a month.environmentalIn August 2010 Peru obtained the Third Programmatic Environmental Development Policy Loan. This cash is dedicated to strength en environmental governance, including regulation & enforcement, and mainstreaming of environmental sustainability in the mining, fisheries, urban transport and energy sectors. The funds will also be used to improve parts of the health sector, especially for those exposed to health risks from environmental degradation. This illustrates Perus awareness and concern about the environmental issues and their ability to incubate them in a way that draws the World Banks attention.