Country Risk Analysis - Peru Essay Example for Free

Country Risk compend Peru EssaySWOT analysisStrengthsPeru is a country blessed with natural resources. In 2010 its exports reached some 23 billion GBP, which was chiefly made out of minerals, petroleum and agricultural products. Its mining industry is the largest in Latin America, accounting for 7,7 billion GBP of its total exports in 2010. The climate is overly favourable for agriculture, representing 13% of GDP, and employing 30% of the population. In addition, sites like Machu Picchu, Cuscu and Sacsayhuaman make Peru a popular tourist destination for millions of people every year. WeaknessesAlthough an advantage when the job climate is favourable, Perus heavy dependence upon natural resources and agriculture can prove to be an Achilles heel. explosive commodity prices and low productivity and fragmented land ownership in agriculture makes the economy vulnerable to economic fluctuations. Whats more the country lacks vital infrastructure such as high character roadways, bridges and flight routes. And as with so many other Latin American countries, high unemployment* threatens the economic and political stability, which in turn affects investor confidence.*Despite a fairly low unemployment rate of 7,9%, the underemployment rate is to a higher place 40%, which causes similar effects.OpportunitiesIn the period between 2000 and 2005 the number of visiting tourists to Peru doubled, and the figure has grown by approximately 11% annually, a trend that is expected to continue. Enforcing the rise in tourism is the announcement that thither will be eight long weekends in Peru in 2012, generating some 500 million GBP in extra tourism revenue this year. In 2005, the US and Peru signed a free trade symmetricalness enabling a non-barrier trading relationship 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 is mainly caused by the extraction industry, where people 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% completely control 1.6%.PESTLE analysisPoliticalPeru is a quite democratic country, after the election of Fernando Belande in 1980. However the political environment has been troublesome at best, with several attempts on overthrowing the government, last in October 2000. Alan Garcia, the similar 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 product. Corruption has long been a big problem in Peru, but counteraction was taken in February of 2010 when a dedicated commission was created to deal with the problem, which is especially brought on by the drug cartels. Peru also has a static relationship with most of its neighbour countries, although t heir ongoing besiege 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 unplowed the growth figure above 0, unlike many other Latin American countries. It regained GDP growth of 8.8% in 2010. In 2011 the citation rating agency Standard Poor raised Perus credit rating from BBB- to BBB. In general, Peru has one of the most prosperous economies in Latin America, having tripled in size in the past 11 years. In addition of being a member of the WTO, they also have a non-tariff trade agreement with the US, which has proven most advantageous as the US represents some 30% of twain imports and exports. It is worth mentioning that Perus economic growth is very lots chargeed by growth in private investment of 13% annually. This is acknowledged by the government, and has l ed to minor barriers to entry for foreign firms.sociableSince 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 dismantle between the rural 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 increasing steadily. This said these number should be growing as all 10% owns a personal computer, and th ere are only 3,7 internet subscriptions per 100 people. (http//devdata.worldbank.org/ict/per_ict.pdf)LegalAlthough the heavy system in Peru appears to lack both independence and efficiency, it has been severely altered to attract foreign investors and aid business. Through removing the requirement for small enterprises to deposit start-up capital in a bank before registration they have made it easier to start a business, and investors are protected through a new integrity that allows minority shareholders to request access 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 constitution Loan. This money is dedicated to strengthen environment al governance, including regulation enforcement, and mainstreaming of environmental sustainability in the mining, fisheries, urban transport and nix sectors. The funds will also be used to improve parts of the health sector, especially for those unfastened to health risks from environmental degradation. This illustrates Perus awareness and concern about the environmental issues and their ability to handle them in a way that draws the World Banks attention.