Economy

Red-ucing Tape

Regulation

Like many Latin American countries, Peru has historically suffered from a complex regulatory environment that has been a challenge to navigate for both international investors and Peruvian businesses.

Open a Peruvian newspaper or speak with a Peruvian businessperson and you are likely to hear frequent mention of the words tramitologí­a and permisologí­a, both “syndromes” that plague the Peruvian state, referring to the often complex and time-consuming processes involved in obtaining permits and paperwork from the government.

For years, as Peru rode the wave of the mid-2000s mineral super-cycle, most foreign investors saw Peru’s complex regulations and red tape as simply part of the cost of doing business in the country’s booming mining sector, and willingly invested the time and money to move forward with investments. However, as mineral prices entered a gradual slowdown towards the beginning of the 2010s, and Peru’s GDP growth has steadied, the government has realized that reducing regulation is a key element to ensuring the continued flow of foreign investment. In November 2014, the government announced that the simplification of bureaucracy and a reduction in the costs of investing and doing business would be a key element in a series of measures it is implementing to reactivate economic growth. One of the main areas that has been the focus of these efforts has been the Environmental Impact Assessment process, which is required for any mining or energy project. This process has undergone a number of reforms to integrate the approval process through the Ministry of Environment.

Peru’s efforts have not gone unnoticed, and for the past few years, it has repeatedly ranked among the top economies in the World Bank’s Doing Business report. In the 2015 report, Peru was ranked number 35 in the world and number two in Latin America, behind Colombia. The report cited many improvements over the past decade, such as the reduction in time to register a property transfer from 33 days in 2004 to 6.5 days in 2014, which placed Peru ahead of richer countries like the United States and Austria.

A key player in Peru’s efforts to reduce red tape and complex bureaucracy has been INDECOPI (the National Institute for the Defense of Competition and the Protection of Intellectual Property). INDECOPI was created in 1993 to promote competition, protect consumers, and protect intellectual property. As Herbert Tassano Velaochaga, President of the Executive Council of INDECOPI explained to TBY in an interview, “…our institution has done crucial work in eliminating illegal and/or irrational bureaucratic barriers to market access.” According to Tassano, a study by INDECOPI found that, in 2013, Peruvian businesses saved $44 million because of costs and barriers that had been eliminated by INDECOPI over the previous two decades. Today, INDECOPI aims to support local municipalities and other government organizations to conduct studies that better identify which bureaucratic barriers to business are most costly and could be streamlined over the coming years.

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