Peru Case Study

Center for Experiential Learning Global Management Studies Symposium 2008© Jeannie Chan, 2008

PERUa case study of an emerging economy


Presentation Agenda

�Country Overview

�SWOT Analysis

�Conclusion


Country Overview: Basic Peru Facts

� Climate: � Tropical east

� Desert west

� Frigid Andes

� Government:� Constitutional Republic

� Currency: � nuevo sol (since 1985)

� Major industries:� Agriculture

� Mining

� Tourism


Country Overview: Case Question

�Country credit rating*: �United States: 94.1

�China: 75.9�Peru: 58.2

�What factors affect the strength and the stability of the Peruvian economy?

*Credit Rating by Institutional Investor http://www.iimagazinerankings.com.


SWOT Analysis: Strengths

�Natural resources: oil,

natural gas, minerals etc.

�Major industries: mining and agriculture

�Cultural heritage and

tourism


Strengths: Mining

�No.1 industry in Peru

�Largest producer of metals in Latin America

�Provides jobs (e.g. Yanacocha)


Strengths: Agriculture

�No.2 industry in Peru

�Fertile land and weather

�Different plants: variety of potatoes

�Lama / Alpaca textiles


Strengths: Cultural Heritage and Tourism

�Historical sites: Machu Picchu, Cusco, Sacsayhuaman

�Local culture: clothes, music, art crafts

�Food culture: exotic dishes, Inca Kola, Pisco Sour


SWOT Analysis: Weaknesses

�Natural resources-dependent economy

� Mining exports are subject to volatile commodity prices

� Agriculture sector is challenged by low productivity and highly-fragmented land ownership

� Insufficient infrastructure

� Hesitation in investing in high capital intensive infrastructure (e.g. hydroelectric energy)

� Inadequate transportation infrastructure (e.g. roadways, bridges, flight routes)


SWOT Analysis: Weaknesses

�High poverty and unemployment rates

� Pose risk for economic and political stability

� Hamper development of human capital

� Impact investor confidence

�Low capacity of local governments

� Conflict between companies and government as to who bares social responsibility in local communities


SWOT Analysis: Opportunities

� Tourism growth� Number of tourists doubled from

2000 to 2005

� Net Income of the hotels owned by ACRES has increased over 400% from 2000 to 2007

� This trend is expected to continue in the following years

� The U.S. - Peru Free Trade Agreement in 2006

� One of the best stock markets in Latin America� Political supports for attracting

foreign and domestic investors

� Peru’s growing economy with low inflation rate attracts investors


Threat Analysis:

�Socioeconomic Stability


SWOT Analysis: Threats - Social

� Disparity between classes

� 44.5% of population is poor

� Most effected by mining

(extraction) industry

� Mining Villages, Indigenous Tribes, Remote Communities

� Welfare/Responsibility

� Income Redistribution: “How can

we improve welfare of population

through distribution of wealth?”


SWOT Analysis: Threats - Economic

� Trade Disputes: failure to maintain free trade agreement with the U.S. or seek out FDI

� Policy Failure: Dependence on Developed Countries

� Slowdown in world economic growth/Domestic GDP (i.e. Asian Financial Crisis)

� Volatile Commodity Prices


Conclusion

�Strengths

� Natural Resources

� Cultural Heritage

�Weaknesses

� Natural resources-dependent economy

� Insufficient infrastructure

� High poverty and unemployment rates

� Low capacity of local governments

�Opportunities

� Tourism Growth

� Free Trade Agreements

� Attractive to Investors

�Threats

� Socioeconomic Stability


Questions?


Thank You to All Our Advisors

� Pre-trip� Frank Benavides, Trip Advisor: Peru overview � Todd Milbourn, Olin Business School: “Estimating the Cost of Capital in Emerging Markets”

� Lima � Alberto Arispe, Project Development Manager, Bolsa de Valores de Lima (Peru stock exchange)� Ismael Benavides Ferreyors, Minister of Agriculture � Margarita Benavides, Sub-Director, Instituto Del Bien Comun (non-profit on common resource

management)� Javier Riofrio Orrego, Vice President, Acres Investments (venture capital)� Livia Benavides, Senior Social Sectors Specialist, World Bank� Victor Grande, Project Operations Officer, IFC� Raul Benavides, Vice President, Buenaventura (NYSE: BVN, mining company)

� Cajamarca� Carlos Scerpella, External Affairs, Communications, & Human Rights Senior Specialist,

Yanacocha Gold Mine� Operators of Yanacocha / Newmont Mining� Staff of Koriwasi Center of Technoloigcal Innovation in Jewelry

� Cuzco & Arequipa� Vamos Expeditions


The Team


About Me

Jeannie ChanA Curious Marketeer Exploring the World

www.jeanniechan.com

www.linkedin.com/in/chanj

Twitter: @jeannie_chan

Peru Case Study

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Transcript of Peru Case Study