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Swiss Economic Cooperation and Development
Peru Country Strategy 2013-2016
Federal Department of Economic Affa i rs , Educat ion and Research EAER State Secretariat for Economic Affairs SECO
Peru 3
State Secretariat for Economic Affairs (SECO)
SECO’s Economic Cooperation and Development
Division is responsible for the planning and imple-
mentation of economic cooperation and develop-
ment activities with middle income developing coun-
tries, with countries of Eastern Europe and the
Commonwealth of Independent States (transition
countries) as well as the new Member States of
the European Union. It coordinates Switzerland’s
relations with the World Bank Group, the regional
development banks and the economic organizations
of the United Nations. SECO is part of the Federal
Department of Economic Affairs, Education and
Research (EAER).
The overriding objective of Switzerland’s interna-
tional cooperation is sustainable global develop-
ment that will reduce poverty and global risks.
Accordingly, SECO’s economic and trade policy
measures strive to integrate its partner countries
into the global economy and foster economic growth
that is both socially responsible and environmentally
friendly. The Economic and Development Division
bases its activities on its specifi c areas of compe-
tence and experience in promoting economic and
fi scal policy, urban infrastructures and utilities, the
private sector and entrepreneurship, sustainable
trade and climate-friendly growth. Special emphasis
is placed on issues relating to economic governance
and gender. SECO is headed by the State Secretary
Marie-Gabrielle Ineichen-Fleisch. SECO’s Economic
Cooperation and Development Division employs
100 people at headquarter and spends appro ximately
380 million Swiss francs per year. Ambassador
Beatrice Maser heads the division.
Editorial
Egypt, Ghana, South Africa, Indonesia, Vietnam, Colombia, Peru – all rapidly expanding economies on the threshold of global
market integration yet still facing the problem of poverty. These have been SECO’s priority countries since 2008 and, together with
Tunisia, they will remain the focus of our intervention over the next four years.
All of SECO’s priority countries are classifi ed as middle-income countries (MICs). As their role in the global economy expands, they
continue to gain in signifi cance, for example in providing global public goods. However, despite rapid growth rates in these coun-
tries, their development remains fragile. Poverty and social disparities persist, accompanied by other global challenges such as
urbanisation, infrastructure bottlenecks and unemployment.
Through its economic cooperation, SECO strives to integrate its partner countries into the global economy and to foster economic
growth that is both socially responsible and environmentally friendly. These approaches correspond to the main challenges facing
MICs. Middle-income countries are also important regional hubs of development for neighbouring States and serve as valuable
examples.
SECO’s activities are based on our many years of experience in international cooperation and our specifi c expertise in economic
issues. Whether we are seeking to strengthen economic and fi scal policy, expand urban infrastructure and utilities, support the
private sector and entrepreneurship, promote sustainable trade, or stimulate climate-friendly growth: all of our measures are
aligned with Switzerland’s foreign trade policy and the Federal Council’s foreign policy objectives.
In 2012 the Swiss Parliament passed the 2013-2016 Message on International Cooperation. For the fi rst time, all of the tasks in
international cooperation were presented in a single bill, incorporated into a joint, overall strategy. This has the overriding objective
of sustainable global development that will reduce poverty and global risks.
The present Country Strategy is based on the framework credit for economic and trade policy measures, as described in the afore-
mentioned Message. It is determined by our areas of expertise and comparative advantages and paves the way for our continued
efforts over the next four years. We fi rmly believe that, in doing so, we can support our partner countries on their development path
while also making a contribution to addressing global challenges.
Marie-Gabrielle Ineichen-FleischState Secretary,Director of SECO
Beatrice MaserAmbassador,Head of Economic Cooperationand Development SECO
4 Peru
Competent institutions allow effective and transparent public management.
AML/CFT Anti-Money Laundering / Combating the Financing of Terrorism
APCI Peruvian Agency for International Cooperation
APEC Asia-Pacific Economic Cooperation
ASEAN Association of South-East Asian Nations
CAF Andean Corporation Bank
CDM Clean Development Mechanism
CEPLAN National Strategic Planning Centre
CHF Swiss Franc
COOF Swiss Cooperation Office
CPC Cleaner Production Centre
CSR Corporate Social Responsibility
EFTA European Free Trade Association
EU European Union
FDI Foreign Direct Investment
FTA Free Trade Agreement
GDP Gross Domestic Product
IDB Inter-American Development Bank
IFC International Finance Corporation
ILO International Labour Organization
IMF International Monetary Fund
IPR Intellectual Property Rights
MDG Millennium Development Goals
MEF Ministry of Economy and Finance
MINCETUR Ministry of Trade and Tourism
ODA Official Development Assistance
OECD Organization for Economic Cooperation and Development
PEFA Public Expenditure and Financial Accountability Program
PENX National Export Strategy
PFM Public Financial Management
PPP Public-Private Partnership
SDC Swiss Agency for Cooperation and Development
SECO State Secretariat of Economic Affairs
SME Small and Medium-sized Enterprise
SOE State-Owned Enterprises
TBT/SPS Technical Barriers to Trade / Sanitary and Phytosanitary Measures
USD United States Dollar
WBG World Bank Group
WEF World Economic Forum
WTO World Trade Organization
Abbreviations Contents
Editorial 3
Abbreviations 4
1. Country context 6
1.1 Political situation 6
1.2 Economic and social situation 7
1.3 Bilateral economic relations 10
2. Development cooperation context 11
2.1 Partner country development strategy 11
2.2 Donor landscape 12
2.3 Lessons learnt from 2009-2012 14
3. Development challenges and SECO’s response 15
4. Financial resources 20
5. Results monitoring 21
6. Partner institutions 24
7. Statistical annex 25
Peru 76 Peru
1.1 Political situation
Political stability and economic growth: After
two decades of political turbulence, including a deep
economic crisis and a violent internal conflict, Peru
achieved relative political stability and exceptional eco-
nomic growth during the governments of Alejandro
Toledo (2001-06) and Alan García (2006-11).
The new President, Ollanta Humala, took office
on 28 July 2011: One of the priorities of the current
government of Peru is to reduce poverty, while main-
taining economic stability and generating more inclusive
growth. Despite Peru’s economic growth and substan-
tial progress made with regard to poverty reduction,
poverty and inequality remain widespread. In fact, 60%
of the rural population still live below the poverty line
and do not have access to public services of adequate
quality, such as in the areas of healthcare, education
and water and sanitation.
Social inclusion as a major policy goal: Against
this backdrop, President Humala has defined social
inclusion as the key issue on the policy agenda for his
government’s five-year term. As a first important step in
this direction, a Ministry of Social Inclusion was created.
Through this new ministry, in charge of all relevant
social programmes (e.g. a basic pension for elderly
people, child-care programmes, scholarships for poor
students, etc.), the government seeks to expand the
social safety nets and thereby complement the current
development model of economic openness in places
where there is little potential for a productive livelihood.
Social conflicts as a major political challenge:
One of the most important political challenges of the
new administration relates to the management of social
conflicts. In the past five years, social conflicts and
protests, mainly linked to a booming extractive industry
sector, have increased dramatically. While the Office of
the National Ombudsman registered 97 social conflicts
in 2006, well over 200 such conflicts were reported by
the end of 2011, many of these in relation to mining
projects. Despite the adoption of the long-awaited law
on prior consultation of the local population, the central
government has thus far not been able to effectively
deal with the respective demands. The arising conflicts
are closely linked to the virtual absence of the state in
rural areas and a variety of stakeholder interests, often
further complicated by the involvement of illegal actors,
including informal miners (gold), smugglers and drug-
traffickers.
Decentralization as a major institutional task: A
further pending challenge closely linked to the issue of
social inclusion and peace is related to the far-from-
completed decentralization process started in 2002. The
process has slowed down in recent years, although a
gradual transfer of responsibilities from central govern-
ment to sub-national levels has taken place. Today,
regional and local governments are − at least partially
− responsible for the provision of basic social services
and for a significant proportion of public investment in
basic infrastructure in areas such as education, health,
water and sanitation, waste management, public trans-
port, and security. Thus, 40% of the national budget
is currently executed at sub-national levels (compared
to 25% in 2002). Still, very little systematic action has
been directed so far at strengthening and modernizing
regional and municipal governments, thus undermining
the capacity of local governments to securely deliver key
public services linked to social inclusion and security.
Additional pending challenges worth mentioning include
the fight against widespread corruption, drug trafficking
and money laundering.
1. Country context
1.2 Economic and social situation
A decade of solid growth: As a result of prudent
macroeconomic policies as well as a favourable external
environment characterized by high commodity prices,
the Peruvian economy has been one of the top perform-
ers in Latin America since 2000. After an average growth
rate of almost 9% between 2001 and 2008, Peru was
one of the few countries in the region to still record
positive growth amidst the financial crisis. In 2010, the
Peruvian economy had already fully recovered. Official
projections for 2012-2014 forecast an average growth
rate of 6.0%. Downside risks are mainly related to a
potential international crisis and uncertainties regarding
investments in the extractive industries due to rising
social conflicts. On the fiscal side, Peru has a fiscal bal-
ance rule to limit the overall public sector deficit to a
maximum of 1% of GDP. Though the rule was waived
between 2009 and 2010 to accommodate for counter-
cyclical fiscal stimulus measures, the Fiscal Stabilization
Fund, supplied by fiscal surpluses, had accumulated USD
6.7 billion by the end of 2011. Monetary policy is closely
coordinated with fiscal policy so as to maintain eco-
nomic stability. The largely respected inflation policy
band of 1-3% has led to one of the lowest core inflation
rates in the region. While international reserves con-
tinue to rise, the public debt-to-GDP ratio is expected to
further decline from its 2011 level of 21%, already one
of the lowest worldwide. The outstanding performance
of the Peruvian economy has also contributed to con-
tinual growth in FDI inflows.
Peru is an exemplary representative of an open
economy: Peru has considerably increased participa-
tion in the world economy in recent years, both through
unilateral tariff reductions and as a result of free trade
agreements negotiated with its main trade partners,
including the US, China, EFTA, EU, Chile, Singapore,
Canada, Japan, South Korea and Mexico. Thus, by
next year, 96% of Peruvian exports will be covered by
An improved business climate allows for a thriving private sector.
Peru 98 Peru
preferential market access arrangements. Furthermore,
Peru has strengthened its cooperation with APEC in line
with Peru’s vision of a trans-Pacific friendship between
Asia and South America, with Peru playing a central role.
Finally, Peru is participating as a negotiating country of
the trans-Pacific Partnership Agreement – a free trade
agreement currently being negotiated.
Important challenges remain: Despite some very
noteworthy economic policy achievements and a bright
economic outlook in general, Peru’s development con-
tinues to face substantial challenges:
Informality/low tax basis: Even if Peru is among Latin
America’s top ranked countries in the Doing Business
index (second only to Chile), informality in Peruvian busi-
ness is still among the highest in
the region (approximately 60%),
and eight out of ten workers are
informal. Main explanations for
this widespread informality refer
to high administrative barriers,
the burdensome labour and tax
Export growth model based on natural resources:
Peruvian exports have quadrupled in the past decade
(almost doubled in the period 2009-11). However, 70%
of exports stem from non-renewable, extractive indus-
tries (60% mining). Apart from the resulting sensitivity
to changes in commodity prices and the ensuing impact
on natural resources revenues, the importance of the
extractive sector also presents important sustainability
challenges, related to the sectors’ potential environmen-
tal impacts (water, CO2, biodiversity), its limited job
creation capacity, its weak links with local economic
sectors, and the resultant social conflicts. Around 20%
of exports relate to agro-products (asparagus, mangos,
garlic, bananas, coffee, cacao, etc.), fishery and (few)
wood products. The main sustainability issues here
relate to the limited added value, overfishing, illegal
logging and, in the case of agro-exports − probably
most importantly − unregulated use of limited water
resources.
Vulnerability to climate change: Peru is one of the
countries most affected by and vulnerable to climate
change. The Peruvian Southern Andes have become a
regular location of extreme climate events, causing irre-
versible damage to the energy, agriculture, fishery and
forestry sectors. Inherent conditions, such as poverty
and inequality are structural factors that increase human
and nature’s vulnerability to climate change impacts.
regimes and the lack of fiscal culture in general. As a
consequence, tax revenues reach only 15%, which is
considerably lower than in other emerging economies in
the region, such as Chile and Uruguay, where tax
revenues represent between 20% and 30%.
Need to deepen the financial sector: In general,
Peruvian banks are well-capitalized, liquid and profita-
ble, and would be prepared to financially support a
strong expansion of the real economy. The microfinance
sector is internationally recognized as very advanced
and innovative. However, some microcredit providers are
highly politicized and do not have adequate governance
structures to ensure their independence and impartiality.
In addition, access to finance remains limited for SMEs,
especially in the Andean and Amazon regions outside
Lima. Bank penetration in Peru is still low when compared
with other emerging market countries. Bank savings-to-
GDP ratios in other emerging market countries in the
region, like Chile and Brazil, are 2.5 to 3 times larger
than in Peru. Peru’s outstanding credit has increased in
recent years, but with 24% of GDP (2009), the rate is still
considerably lower than in neighbouring Chile (73%).
Informality in Peruvian business is still among the highest in the region.
Integrated urban planning leads to sustainable public infrastructure and reliable services.
Peru 1110 Peru
1.3 Bilateral economic relations
Solid institutional basis: With an agreement on
the promotion and mutual protection of investments
(1991), the entry into force of a comprehensive EFTA
free trade agreement in July 2011 and the signing of
a double-taxation treaty in September 2012, bilateral
economic relations between Switzerland and Peru are
well established. Aside from improved market access for
goods and investments, the free trade agreement also
contains provisions in other areas, including intellectual
property rights, public procurement, cooperation and
competition. The agreement will allow Peru to improve
its competitiveness and to strengthen its attractiveness
for investors from EFTA countries.
Bilateral relations are expanding continuously:
Economic relations with Switzerland have been steadily
growing over the last years. According to Peruvian sta-
tistics, Switzerland is the second
most important export market
for Peruvian products, with gold
accounting for 97% of the total
(USD 5.9 billion in 2011). Since
gold trade is not accounted for
in the statistics of the Swiss Fed-
eral Customs Administration,
from a Swiss perspective, Swit-
zerland traditionally has a posi-
tive balance of trade with Peru.
The main Swiss export products
to Peru are machines, pharmaceutical products, preci-
sion instruments and chemical goods (CHF 114 million
in 2011), while the bulk of non-gold imports from Peru
(CHF 47 million in 2011) are agricultural products. With
regard to Foreign Direct Investment (FDI), Swiss firms
rank among the most important investors in Peru, mainly
due to substantial investments in the extractive sector.
Other important Swiss industries represented in Peru are
the service sector (e.g. banking, insurance, logistics,
inspections), mechanical and electrical engineering, as
well as the food, pharmaceutical and chemical industry.
2.1 Partner country development strategy
National Accord: In an effort to overcome the
institutional crisis in the aftermath of the increasingly
authoritarian Fujimori Regime, the Toledo administra-
tion proposed a National Accord (Acuerdo Naciona)
in 2002, by which all relevant political, religious, civil
society and private sector leaders agreed on the main
development goals and principles. This agreement cov-
ers a set of 32 state policies based on four pillars: (1)
democracy and rule of law; (2) equity and social justice;
(3) competitiveness and (4) an efficient, transparent and
decentralized state. For each policy, general and specific
targets for the short, medium and long term where
defined up to 2021.
Bicentennial Plan: As a direct result of the National
Accord, the National Strategic Planning Centre (CEPLAN)
was created in 2005. In view of the Republic’s 200th
anniversary in 2021, CEPLAN has formulated a “Bicen-
2. Development cooperation context
Skilled Peruvian farmers contribute to quench the worldwide thirst for sustainable agricultural products, such as certified coffee.
Non-traditional export products, such as asparagus, provide new opportunities
The Agreement will allow Peru to improve its competitiveness and strengthen its attractiveness for investors from EFTA countries.
tennial Plan”, which was finally announced in March
2011. The Plan established six strategic objectives: (1)
people’s rights; (2) access to public services; (3) state
and governance; (4) economy, competitiveness and
employment; (5) natural resources and the environment;
(6) regional development and infrastructure. From these,
the Bicentennial Plan sets specific goals and action lines,
such as to double the country’s per capita income to
USD 10,000, to reduce the poverty rate to less than
10%, and to bring the country’s extreme poverty rate
down to 5% by 2021.
President Humala’s Road Map: The government plan
for 2011-16, known as the Road Map, is fully in line
with the development goals and objectives established
in the National Accord and the Bicentennial Plan.
The Road Map covers all relevant policy areas, placing a
special emphasis on the subject “growth with social
Peru 1312 Peru
inclusion”. The plan aims to (1) provide equal access to
basic services, employment and social security; (2)
reduce extreme poverty with the emphasis on rural
poverty; (3) prevent social conflicts by increasing the
credibility of public institutions; and (4) improve the sur-
veillance of potential environmental damages. Among
other things, the government plan foresees the creation
of new social programmes such as a basic pension for
elderly people without other provision (Pensión 65), a
state-run childcare programme (Cuña Más), scholar-
ships for poor students (Beca 18) and a medical support
programme in remote rural areas (SAMU). All these pro-
grammes will gradually introduce a performance-based
budgeting system developed by the Ministry of Economy
and Finance (MEF), to which all public institutions in
Peru have adhered. The Road Map further defines a
range of macroeconomic goals, such as a sustained
annual growth rate of 6% and a public debt rate below
15% of GDP. Other ambitious objectives include increas-
ing access to water and sanitation services in urban
areas to 92% and 88%, respectively; ensuring national
energy security through reliable, clean and affordable
energy (primarily based on gas and hydropower); pro-
moting SME formalization and doubling the number of
exporting SMEs; doubling the total amount of exports
and tripling the amount of non-traditional exports; and
increasing the number of tourists by 75% (to 3.5 mil-
lion) by 2016.
2.2 Donor landscape
Aid focus: According to the Peruvian Agency for
International Cooperation (APCI), in charge of official
non-refundable development aid, the aid flows are
mainly focused on Millennium Development Goals no. 1
(eradication of extreme poverty and hunger), no. 7 (envi-
ronmental sustainability) and no. 3 (fight against HIV/
AIDS, malaria and other illnesses).
Declining importance of donor support: Due to
Peru’s transition to middle-income country status in
recent years, the importance of international develop-
ment cooperation has dropped in both nominal and
relative terms. While the amount of non-repayable
development aid (executed) declined from USD 0.5 bil-
lion to USD 0.375 billion in the period 2007-2009, Peru-
vian GDP grew from USD 93 billion to USD 127 billion,
lowering the development aid share of GDP from 0.54%
to 0.29%.
Bilateral and private aid: Official bilateral aid
amounted to 46% of total aid in 2009, while private aid
represented around 42%. In 2009, the largest bilateral
donors were, in order of volume: Spain, US, Germany,
EU, Italy, Switzerland, Belgium, Canada, South Korea,
Japan and Sweden. For the coming years, it can be
expected that the debt crisis in Europe and the US will
lead to a further decline of bilateral development aid.
For instance, the European Commission announced
that, given the need to focus on poorer countries, eleven
middle-income countries − including Peru − will no
longer be part of its 2014-20 ODA budget, but will
instead become part of a regional support scheme. On
The Road Map places a special emphasis on growth with social inclusion.
the other hand, it is probable that emerging donors,
such as South Korea, Brazil and China, will gradually
increase their aid to Peru. In 2011, China positioned
itself as a bilateral donor with a non-refundable coop-
eration for USD 3 million in areas such as health and
education. However, the bulk of China’s development
assistance takes the form of economic investment, con-
centrated mainly in the extractive sector.
Multilateral assistance: Representing only 12% of
total ODA (2011), multilateral agencies are of lesser
importance in Peru. Among the main multilateral donors,
the World Bank Group (WBG) has recently finalized its
Country Partnership Strategy (CPS) for the period 2012-
2016. This defines four strategic objectives: (1) Increase
access and quality of social services for the poor; (2)
Connecting the poor to services and markets; (3) Sus-
tainable growth and productivity; and (4) Improved pub-
lic sector performance for greater inclusion. The new
CPS will give the government more flexibility than the
previous partnership and is tailored to Peru’s status as a
middle-income country. The overall credit volume and
thus the importance of the WBG in Peru have decreased
over the past few years. In the case of the Inter-Ameri-
can Development Bank (IDB), the portfolio in Peru con-
sists of USD 1 billion. The main sectors are transporta-
tion, state modernization, energy and education.
Another key player among the development banks is the
Andean Corporation Bank (CAF). During 2009, CAF
approved USD 2.29 billion for operations in Peru, of
which 57% accounted for sovereign risk operations.
CAF has a strong presence in the transportation sector,
among others.
Donor coordination: In 2005, APCI created a donor
forum (foro de donantes) as a coordination mechanism
between the Peruvian government and donor countries.
This forum serves as an instrument to reconcile interna-
tional cooperation interventions with national policies
and supports efforts towards greater effectiveness, effi-
ciency and transparency in the context of the DAC Guid-
ing Principles for Aid Effectiveness. In addition, there are
specific donor coordination mechanisms, such as in the
case of decentralization or Public Finance Management.
Its rich cultural heritage and beautiful landscapes make Peru a prime tourism destination.
Peru 1514 Peru
2.3 Lessons learnt from 2009-2012
SECO’s new country strategy for Peru builds on the
2009-12 strategy, which proved to be relevant and in
line with Peru’s national development strategies. In this
period, SECO was able to substantially consolidate its
programme in the areas of trade promotion, macroeco-
nomic support and public finance management. In addi-
tion, after years of planning, SECO has finally started the
implementation of its urban infrastructure programme,
most notably with an important project in Chiclayo,
which will act as a model for other emerging cities in
Peru. The programme was completed with interventions
targeting improvements to the general investment
climate. Throughout its operations, SECO has always
sought to accompany its programme by a targeted pol-
icy dialogue with national and sub-national governments.
Several important lessons can be drawn from the imple-
mentation of the Country Strategy 2009-12:
Remain flexible: Flexible, efficient and tailor-made
technical assistance mechanisms, rather than financial
resources, have been extremely appreciated by local
counterparts and can make an important difference to
big donor agencies, which often suffer from complex
and thus slower internal decision-making processes.
Combination of multi-bi cooperation: The strategy
of complementing bilateral projects with multilateral
partnerships has proved appropriate and should be fur-
ther extended. While support to multilateral technical
assistance strengthens SECO’s role and leverage in the
policy dialogue, bilateral assistance enhances the impact
of multilateral measures through better adaption to the
local context, complementary follow-up measures and
local networking in general.
Regional presence: In the context of increased decen-
tralization, it is crucial to have a strong regional pres-
ence and work directly with sub-national governments
and other local economic actors. Policy dialogues at
the national level are structured differently and need
to be complemented by policy dialogues at regional
and municipal levels. Also, the need for capacity building
is much more pronounced in the regions than in the
capital.
Consequent use of synergy potential: As can be
seen in the case of SECO’s programme in the city of
Chiclayo and the regions of San Martin and Cusco, for
instance, SECO’s projects of different operational divi-
sions and under the various business lines have a strong
complementarity, which is not always self-evident. Such
synergy and cooperation potential should be sought
more systematically, during implementation as well as
already at the project development stage, e.g. by adopt-
ing a more programmatic approach and considering
joint interventions.
Partnerships with private companies: Public-pri-
vate partnerships (PPP) and other direct and indirect
alliances with private companies should be further
strengthened in light of the increasing importance of
FDI and the private sectors’ manifold potential develop-
ment impacts in terms of job creation, product innova-
tion, employees and provider training, etc. Such partner-
ships can substantially leverage SECO’s interventions
and enhance their sustainability. However, potential
risks related to such cooperation need to be carefully
assessed prior to engaging with private-sector partners.
In the context of increased decentralization, it is crucial to have a strong regional presence.
SECO plans to address the development challenges
identified in the previous section by supporting Peru’s
sustainable and regionally balanced growth and the
country’s integration into the global economy in order to
fight poverty and promote social inclusion. To achieve
this overall goal, SECO has identified four objectives,
which are aligned with the Peruvian development objec-
tives discussed in Chapter 2.
Objective 1: Competitive private sector
Challenge: Economic activity in Peru remains very
much concentrated in Lima and some coastal areas. In
other regions, private sector development is generally
hampered by low rates of productivity and competitive-
ness. These are mainly due to a high degree of informal-
ity, a lack of technical and managerial capacities as well
as limited access to financial services, especially in the
case of SMEs. Such shortcomings also have a negative
impact on producers’ and SMEs’ capacity to access
international markets and the diversification of the
Peruvian export sector in general.
Focus: By directly working with private-sector associa-
tions, companies and farmers, and in close coordination
with the competent public entities, SECO has gained
ample experience in reducing informality and enhancing
productivity, innovation and thus competitiveness. SECO
will strive to foster entrepreneurship both at SMEs as
well as at farmers’ level, with a view to encouraging
new businesses start-ups and formal job creation.
Another line of intervention will aim at improving access
to finance for SMEs and producers outside Lima. This
should lead to an expansion of economic activity in dif-
ferent regions of the country. To this end, SECO will
make an effort to strengthen local financial intermediar-
ies, through both capacity as well as institution building.
A third focal area under this objective will be to
strengthen the Peruvian export sector and its access to
foreign markets. Here, attention will be paid not only to
quality improvements, innovation and product diversifi-
cation, but also to linking different actors in the supply
chain through the establishment of dialogue platforms
and export networks.
3. Development challenges and SECO’s response
Contribution to Peru’s country development ob-
jectives: SECO’s interventions under this objective will
contribute to the goal of the Peruvian government to
increase private sector investments and to improve
access to credit. Moreover, it will support the govern-
ment’s target of continual export growth.
Proposed SECO measures:
Capacity building and vocational training on
key managerial skills and in financial literacy
Sensitization and technical assistance with
regard to good corporate governance and corpo-
rate social responsibility
Development of new and innovative financial
products through seed funding and technical
assistance (e.g. via Swiss Investment Fund for
Emerging Markets, SIFEM AG)
Export value chain development and promo-
tion of Peruvian products in potential export mar-
kets through participation in international fairs
and the organization of sellers/buyers mission, in
coordination with Peruvian export promotion
institutions
Institution and capacity building in the fields
of sustainable tourism and destination manage-
ment, working with public and private tourism
promotion entities
Support the development and implementation
of national sector strategies, such as the National
Export Strategy 2013-2021 (PENX)
Peru 1716 Peru
Objective 2: Sustainable integrated urban infrastructure
Challenge: Due to persistently high poverty rates in
rural areas, urban centres in more prospering areas
exhibit an unsustainable, widely uncontrolled growth
pattern, putting enormous strain on urban infrastruc-
tures such as water supply, sanitation,
energy, waste management or transport
facilities. Apart from constituting a serious
threat to both the environment as well as
human health, this situation also prevents
economic development by restraining pri-
vate investment, business start-ups and thus
also job creation.
Focus: SECO has substantial know-how in
the promotion of appropriate and integrated
infrastructure solutions as well as in devel-
oping financially viable operating arrangements, estab-
lishing partnerships between private and public sector
actors, for instance. Building on this experience, the
main focus of SECO’s programme under this objective
will be on interventions in two closely related areas. On
the one hand, SECO will support the establishment of
sustainable urban infrastructure, to grant the provision
of reliable, cost-efficient, environmentally friendly, and
climate-change-resilient services in key areas such as
waste management, water and sanitation. On the other
hand, SECO will focus on the development of an inte-
grated urban infrastructure, encouraging the adoption
of a broader urban planning vision with the ultimate
aim of creating an attractive place to live and work.
Proposed SECO measures:
Strengthening of public utilities in selected
emerging cities
Promotion of environmental technologies in
the areas of waste and wastewater management
serving as a model for other Peruvian regions
through technical assistance and direct financing
Promotion of integrated water resources man-
agement approaches required for the safe and
reliable provision of urban water supply and sani-
tation services
Strengthening of legal and regulatory frame-
work to enable the establishment of effective
management structures and adequate tariffs
Technical assistance to support trans-sectorial
urban planning processes, leading to transparent
and prioritized infrastructure development
Strengthening of the financial position of
emerging cities to enhance their ability to invest
in infrastructure
Urban centres exhibit an unsustainable, widely uncon-trolled growth pattern.
Contribution to Peru’s country development ob-
jectives: Measures foreseen under this objective will
support the government’s goal of enhancing environ-
mental governance at a central, regional and local level.
More specifically, SECO’s measures in the field of urban
infrastructure will assist Peru in achieving its objective of
enhanced wastewater treatment, recycling and sustain-
able solid waste handling.
Objective 3: Sustainable management of natural resources
Challenges: Peru’s economic growth model is largely
based on the extraction of non-renewable natural
resources and the export of selected agricultural and
fishery products. Often, the benefits of these activities
are distributed unequally, and sustainability issues and
therefore the long-term viability of the model are not
or only insufficiently taken into consideration, fuelling
social conflict. As Peru is particularly vulnerable to the
adverse impacts of climate change, issues such as
resource efficiency and climate change mitigation have
to become an important part of the industrial develop-
ment strategy, and innovative solutions need to be
offered to the private sector.
Focus: SECO’s experience has shown that the integra-
tion of environmental and social sustainable issues into
production does not need to jeopardize commercial
viability. On the contrary, a solid reflection on sustaina-
bility issues leads to a reorganization of working pro-
cesses and resource efficiency, which also increases
overall competitiveness. SECO will thus continue to fos-
ter more sustainable production processes in both the
industrial and agricultural sectors and encourage recy-
cling of waste products. On the other hand, SECO
aims at strengthening the framework conditions and
promoting market mechanisms for climate protection,
e.g. emissions trading. In addition, SECO will work with
national and regional authorities as well as with the pri-
vate sector to increase transparency and the efficient
use of financial flows stemming from the extractive
sector.
Proposed SECO measures:
Capacity building to promote resource-effi-
cient industrial production processes
Development and provision of financial instru-
ments to encourage private sector investment in
resource-efficient production methods
Promotion of private voluntary standards in
agro-forestry and extractive sectors
Promotion of transparency with regard to
extractive industry concession agreements and in
the use of revenues stemming from these
Technical assistance to support sector-wide
climate mitigation measures and Peru’s participa-
tion in the international emissions trade
Mobilization of private capital for forestry and
climate change mitigation options
Contribution to Peru’s country development ob-
jectives: Through the proposed measures, SECO will
support the government of Peru in its goal to increase
the introduction of environmentally friendly production
processes and to boost exports of sustainably produced
goods. Interventions will also contribute to the stated
national objective of substantially reducing greenhouse
gas emissions generated by land use and land use
change.
Peru 1918 Peru
Modality mix
SECO’s programme will be implemented in line with
the principles of Aid and Development Effectiveness.
SECO will seek to align its programme with the govern-
ment’s priorities and to harmonize it with other donors’
activities. SECO’s support will be channelled through
both bilateral and multilateral and/or multi-donor pro-
jects and programmes. In the case of the latter, thematic
sub-accounts to multi-donor trust funds have proven a
good option to ensure leverage while still being able to
shape processes and have visibility. Where appropriate,
cooperation and partnerships with the private sector
will be promoted to enhance the prospects for financial
viability and increase the leverage of interventions.
SECO’s programme will be reinforced by policy dialogue
with key government partners. Whenever possible, SECO
will use country systems in order to foster ownership
and effective institutions. To ensure effective develop-
ment cooperation, SECO is committed to building
capacity and interacting closely with public and private
actors. Building on the encouraging experiences in the
city of Chiclayo and the regions of San Martín and
Cusco, SECO will strive to systematically build comple-
mentarities and use synergy potential between pro-
grammes and projects under the different objectives
mentioned above.
SECO’s activities are complementary to those of other
Swiss cooperation actors, particularly those of the Swiss
Agency for Development Cooperation (SDC). The SDC’s
activities in Peru and the Andean region under its global
programmes business line focus on the topics of water
and climate change. SECO and the SDC will continue to
exchange information on planned interventions in order
to ensure the identification of synergy potential and
avoid duplication of efforts.
Economic governance and gender as cross-cutting issues
The reinforcement of economic governance in the
partner countries is an essential component of SECO’s
support for the integration of partner countries into the
global economy and the promotion of sustainable eco-
nomic growth. Economic governance comprises all insti-
tutions, regulations, judiciary systems and norms that
promote the effectiveness, non-discrimination, legiti-
macy and accountability of economic activity and there-
fore contribute to combating corruption. The majority of
SECO’s interventions strengthen good economic gov-
ernance at public and private levels.
SECO sees gender equality as an important element of
poverty reduction and improving economic prospects of
partner countries. No projects should place either
women or men at a disadvantage. The gender dimen-
sion is integrated into project design and implementa-
tion, where it can contribute to the greater effectiveness
of SECO’s projects.
Objective 4: Effective and transparent public economic governance
Challenges: Peruvians’ trust in their public institutions
is generally low. The state is perceived as widely absent
or ineffective. According to the WEF competitiveness
report for 2011-12, the top three factors limiting Peru-
vian competitiveness − corruption, inefficient govern-
ment bureaucracy and burdensome tax regulation, all
major barriers to private sector-led growth − are closely
linked to poor governance. Public management capacity,
transparency in decision-making and accountability to
citizens is generally even lower at sub-national level. In
a context of increasing decentralization and transfer of
competences and financial resources to sub-national
levels, this becomes a major threat to development and
social peace.
Focus: SECO’s interventions in this respect can be
divided into two broad areas, one focusing on the
strengthening of economic and financial policies, and
the other on the improvement of the general framework
conditions for private-sector development. The former
will strive to build capacities in public finance manage-
ment so as to improve budget stability, increase the
accountability of public institutions and enhance trans-
parency in public decision-making processes. With
regard to private-sector framework conditions, SECO
aims to contribute to an improved general investment
climate through the strengthening of policies and regu-
lations in areas such as taxation, competition, or intel-
lectual property. The principal counterparts under this
objective are government authorities, both at central
government as well as the sub-national level. Whereas,
in the case of central government, high-level technical
assistance will be of particular importance, such support
will need to be complemented by substantive capacity-
building measures at regional and local levels. In regions
that do not benefit from large tax revenues from the
mining industry (cañón minero), decentralized budget
support can be considered a valid option (e.g. San Mar-
tín region).
Contribution to Peru’s country development ob-
jectives: SECO will assist Peru in achieving its goal of
maintaining its solid financial position while continually
improving the financial management of the public
administration. Measures are also aligned with Peru’s
objective of providing sound financial-sector framework
conditions and improving the general investment cli-
mate at national as well as sub-national level.
Proposed SECO measures:
Technical assistance in the area of monetary
policy and analysis (macroeconomic accounting &
statistics, macro-prudential supervision, capital
control strategies, international reserve manage-
ment)
Strengthening financial sector supervision and
regulation framework through capacity-building
measures, including support towards an improved
AML/CFT strategy and the establishment of a
regional training centre for financial intermediaries
Improvement of public finance management
and fiscal decentralization, supporting results-
oriented budgeting and expenditure at central,
regional and municipal level through technical
assistance and capacity building
Institution building, technical assistance and
capacity building to enhance transparency with
regard to extractive industry concessions and to
promote fair and effective tax policies in that sector
Targeted business environment reforms in
areas such as competition policy, IPR, e-govern-
ment, inspections, customs administration, tax
simplification, etc.
Peru 2120 Peru
Peru benefits from abundant biodiversity, but is also very vulnerable to climate change impacts.
SECO’s interventions under this strategy will be
financed through the Swiss Framework Credit for Inter-
national Cooperation 2013-16. The allocation of funds
to individual countries, programmes and projects will
depend on the identification of suitable interventions,
the absorption capacity as well as the efficiency and
effectiveness of the cooperation with the relevant part-
ners in each country.
Accordingly, the following information on planned com-
mitments for the four-year period of this strategy is
indicative only. It cannot be considered a firm commit-
ment or claimed as such by the partner country. This
information serves merely as a basis for the forward
spending plans that are reviewed each year. Actual
disbursements will depend on various factors, such as
changes in the project portfolio and the framework con-
ditions of the partner country.
The following table provides an overview of SECO’s
economic cooperation strategy for Peru for 2013-2016,
including monitoring and evaluation indicators at the
outcome level and alignment with the Peruvian develop-
ment objectives.
The monitoring and evaluation indicators are selected
examples; the success of implementation of this country
strategy will be measured in relation to the projects
implemented by SECO. The different projects agreed
upon will contain some of these indicators. This will
make SECO and the Peruvian partners accountable with
regard to what has been achieved by the projects imple-
mented in the framework of this country strategy. It is
not SECO’s intention to measure Peru’s development
objectives as a whole.
4. Financial resources 5. Results monitoring
SECO’s overall objective for Peru Support Peru’s sustainable and regionally balanced growth and its integration into the global economy to fight poverty and promote social inclusion.
Main objectives of SECO’s interventions
Contribution by SECO’s programme Peru’s country development objectives
Objective 1: Competitive private sector
… with access to finance and global markets
• Improved access to long-term finance for SMEs, e.g. through innovative financing instruments and PPP
Selected indicator: Type and number of new financial products created and respective demand; number of jobs created and retained in SMEs
• More efficient working processes of producers and SMEs improve their productivity and promote their international competitiveness
Selected indicators: Number of producers with higher net income; number of producers/SMEs that enter new markets
• Strengthened entrepreneurship promotes the creation of new businesses and enhances success of existing ones
Selected indicator: Number of companies supported that receive a loan
• Increase of private investment level and improvement of access to credit
– By 2014, private investment increases to 22% of GDP
• Continual growth of the export sector – Between 2012 and 2014, exports grow on
average by 7.9%
Commitment for Peru 2013-2016CHF 75 million*
The approximate distribution of funds foreseen
among the four objectives is as follows:
1. Competitive private sector 25%
2. Sustainable integrated urban infrastructure
30%
3. Sustainable management of natural resources
15%
4. Effective and transparent public economic governance
30%
* Peru also benefits from regional and global initiatives financed by SECO. When these measures cannot be earmarked to a specific country, they are not accounted for in the financial projections mentioned above.
Peru 2322 Peru
Main objectives of SECO’s interventions
Contribution by SECO’s programme Peru’s country development objectives
Objective 2: Sustainable integrated urban infrastructure
… to address challenges in relation to rapid growth of emerging cities
• Strengthening of public utilities and improvement of the legal and regulatory framework to improve water supply as well as waste and wastewater management
Selected indicators: Number of people with access to improved public utilities; volumes (m3) of wastewater treated
• Improved planning methods and financing strategies support integrated urban infrastructure development
Selected indicator: Number of successful pilot projects that can be replicated
• Improvement of urban infrastructure towards increased sustainability
– By 2021, 100% of urban wastewater is treated and 50% is reused
– By 2021, 100% of municipal solid waste is properly handled and disposed of
• Improvement in environmental governance – By 2021, 100% of regional governments
implement climate change mitigation and adaptation strategies
– By 2021, 100% of public entities implement the National Environmental Plan
Objective 3:Sustainable management of natural resources
… to promote long-lasting growth, prevent environ-mental degradation and mitigate climate change impacts
• Environmental reforms promote sustainable and climate-friendly energy supply and industrial production
Selected indicator: Reduction in CO2 emissions (t)
• Respect of sustainability standards in interna-tional commodity trade increases Peruvian trade in certified natural and agro resources
Selected indicators: Volume (USD) of certified products traded; number of jobs created or maintained
• The creation of incentives (financial and market mechanisms), particularly in the area of climate change mitigation, contributes to protection of the environment.
Selected indicators: Number of users of new mitigation solutions and financing mechanisms; reduction in CO2 emissions (t)
• Increased transparency with regard to extractive industry concession agreements and the use of revenues stemming from these
Selected indicator: Degree of public access to key financial information
• Increased commitment of the business sector to environmentally friendly production processes
– By 2021, 40% of medium-sized and large mining and energy companies are implement-ing an environmental management system
• Growth of exports of sustainably produced goods – 80% increase in organic production areas by
2021 compared to 2008.
• Implementation of climate change mitigation options
– 100% reduction of greenhouse gas emissions (compared to 2000) generated by land use, land use change and forestry by 2021
Main objectives of SECO’s interventions
Contribution by SECO’s programme Peru’s country development objectives
Objective 4: Effective and transparent public economic governance
… to promote stable and favourable economic framework conditions and accountability to citizens
• Economic reforms and improved financial policy lead to a transparent fiscal policy and a more reliable administration of public finances
Selected indicators: Number and type of successful reforms; key PFM indicators according to PEFA methodology
• Enhanced regulation and supervision of the financial sector contributes to a stable, diversified and competitive financial market
Selected indicator: Number and type of relevant measures implemented
• An improved business environment and good regulation promote competitiveness
Selected indicators: “Doing Business” Indicators; number and type of reforms
• Maintenance of solid financial position and continual improvement of financial management of the public sector
– By 2016 tax income reaches 18% of GDP – Results-oriented budget methodology is
widespread within public sector institutions as of 2016
• Provision of sound financial sector framework conditions
– By 2016 the accounting of Treasury transac-tions has improved as a result of automation of processes and technical capacity building of regional treasurers.
• Improvement of the general investment climate – Provinces are increasingly implementing
online services to open new businesses
The strategy will be monitored on an annual basis, with
the following purposes:
Institutional learning: Documentation and repli-
cation of best practices or lessons learnt
Monitoring of relevance, topicality, efficiency and
effectiveness of SECO’s programmes and projects
(and corrections/adaptations where necessary)
Accountability:
• between the field and headquarters
• to the public
• to the partner country
SECO’s strategy is aligned with the development strat-
egy of the partner country. Therefore, the annual country
strategy monitoring also seeks to verify that SECO’s
portfolio does indeed contribute to the achievement of
the partner country’s development goals. Adaptive or
corrective measures will be implemented if major
changes occur in the country context or development
goals.
Peru 2524 Peru
The following data from the respective years are
based on statistics from the World Bank and other inter-
national bodies, including the IMF1, the World Economic
Forum, the ILO and the UNDP.
7. Statistical annex
1 International Monetary Fund, World Economic Outlook Database, April 20122 Lending rate minus deposit rate (%)
Strengthened Integration in the World Economy*
2008 2009 2010
Exports of goods and services (E) (% of GDP) 27.1 26.5 23.6
Imports of goods and services (I) (% of GDP) 26.5 23.6 19.7
FDI (net inflows, BoP, current USD) (millions) 6.924 5.576 7.328
Sustainable Growth* 2008 2009 2010 20112012
(proj.)2013
(proj.)
GDP per capita (current international USD) 4.403 4.370 5.205 5.782 6.069 6.470
Real GDP growth (annual %) 9.8 0.9 8.8 6.9 5.5 6.0
Global Competitiveness Index (rank) – – 78 73 67 –
External Debt Stocks (% of GDP) 27.2 28.7 23.1 – – –
Government Gross Debt (% of GDP) 25.2 28.4 24.6 21.6 20.7 19.8
Gross Capital Formation (% of GDP) 27 21 24 – – –
Inflation, average consumer prices (annual %) 5.8 2.9 1.5 3.4 3.3 2.6
Domestic credit provided by banking sector (% of GDP) 18.8 18.6 18.0 – – –
Interest rate spread2 20.2 18.2 17.4 – – –
SECO continues to work with both local and interna-
tional partners in the public and private sectors. In par-
ticular, SECO will work with the following partners
depending on the thematic priority:
6. Partner institutions
Abbreviation Institution
Local partners
BCP Banco Central del Perú
INDECOPI Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual
MEF Ministerio de Economía y Finanzas
MINAM Ministerio de Medio Ambiente
MINCETUR Ministerio de Comercio Exterior y Turismo
PROMPERU Comisión de Promoción del Perú para la Exportación y el Turismo
PUCP Pontificia Universidad Católica del Perú
SUNAT Peruvian Tax and Customs Authority
VIVIENDA Ministerio de Vivienda, Construcción y Saneamiento
Swiss partners
EMPA Federal Material Testing Laboratory
IPI Swiss Federal Institute for Intellectual Property
SIFEM Swiss Investment Fund for Emerging Markets
SIPPO Swiss Import Promotion Programme
Swisscontact Swisscontact Foundation
International partners
EBRD European Bank for Reconstruction and Development
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
HEID Graduate Institute of International and Development Studies
IDB Inter-American Development Bank
IFC International Finance Cooperation
ILO International Labour Organization
IMF International Monetary Fund
ITC International Trade Centre
IUCN International Union for the Conservation of Nature
KFW Kreditanstalt für Wiederaufbau
PPIAF (WB) Public Private Infrastructure Advisory Facility
PIDG Private Infrastructure Development Group
UNCTAD United Nations Conference on Trade and Development
UNIDO United Nations Industrial Development Organization
UNDP United Nation Development Programme
WB World Bank
* Missing data due to one of the following reasons: – Depending on source, no projections available – Statistics collected only on perennial base – Data for the respective year not yet available
Peru 2726 Peru
Notes
Improvement of Economic Governance* 2008 2009 2010 2011
Ease of Doing Business (rank) 62 56 36 41
Trade Across Borders (rank) – 91 53 56
Governance Indicators of the World Bank: 4
a) Government Effectiveness (%) 44.7 42.1 47.4 –
b) Regulatory Quality (%) 60.7 64.1 66.5 –
c) Rule of Law (%) 23.6 30.3 32.2 –
d) Control of Corruption (%) 51.5 46.9 50.2 –
3 A value of 0 represents absolute equality, and a value of 100 absolute inequality. 4 Percentile rank indicates the percentage of countries worldwide that rate below the selected country. Higher values indicate better
governance ratings. 5 The GDP data have been compiled for individual countries at market prices in local currency and annual rates. These data have been scaled
up/down to the price levels of 2000 and then converted to US dollars using the yearly average exchange rates of 2000 or purchasing power parities (PPPs).
Improvement of Environmental Conditions* 2008 2009
CO2 emissions / population (tonnes per capita) 1.21 1.32
Share of renewable energy of TPES (%) 23.9 26.5
Energy use per unit of GDP(tonnes of oil equivalent per thousand US dollars)5
0.08 0.08
Reduction of Disparities* 2008 2009 2010 2011
Gini index3 49 49 48 –
Unemployment rate (%), labour force survey 8.4 8.4 7.9 7.5
Poverty headcount ratio at national poverty line (% of population)
36.2 34.8 – –
Improved water source, urban (% of population with access)
90 – 91 –
Improved sanitation facilities, urban (% of population) 36 – 81 –
Electrification rate (%) – 85.7 – –
* Missing data due to one of the following reasons: – Depending on source, no projections available – Statistics collected only on perennial base – Data for the respective year not yet available
Imprint
Federal Department of Economic Affairs,
Education and Research (EAER)
State Secretariat for Economic Affairs SECO
Holzikofenweg 36
CH-3003 Berne
Phone +41 31 324 09 10
www.seco-cooperation.ch
info@seco-cooperation.ch
Editing/Coordination:
SECO Cooperation
Graphic Design/Concept:
Casalini, Berne
www.casalini.ch
Project Photos:
SECO/Antonio Escalante
Cover: Thomas J. Müller/SPDA
Copies may be ordered from
info@seco-cooperation.ch
Phone +41 31 324 09 10
Berne 2013
Federal Department of Economic Affa i rs , Educat ion and Research EAER State Secretariat for Economic Affairs SECO
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