Juan Carlos Mathews
Economist and Former Minster of Foreign Trade and Tourism of Peru
Lima, Peru
juancarlosmathews@gmail.com
LATAM FDI: Hello. We’re honored to have Juan Carlos Mathews, a distinguished economist and former Minister of Foreign Trade and Tourism for Peru, with us today. Hello, Juan Carlos. Could you share your background before we delve into Peru’s foreign direct investment opportunities?
Juan Carlos Mathews: Thank you for your invitation, Steven. As you mentioned, I am an economist. I have mainly worked in the private sector in international trade. I was also the Peruvian government’s vice minister of SMEs and industry. Until recently, I was the Minister of Foreign Trade and Tourism. I have also been involved in academia, working for two private universities in Peru. My experience spans international trade and the private and public mining sectors.
LATAM FDI: That’s interesting. Given your knowledge, which is very broad, obviously, what sectors do you consider to be the most promising for foreign direct investment opportunities in Peru? Are there any emerging industries or markets that are particularly attractive?
Juan Carlos Mathews: The ones referred to are in the mining sector, mainly because 60% of Peru’s total exports are minerals and metals. We are still developing different projects, in most cases through joint ventures with some of the prominent investors in this field.
For example, Newman is an Anglo-American investing in Quellaveco, a big project here. But during the last decade, our agro exports have experienced exciting growth. I’m talking about fruit, not only fruits and vegetables, our superfoods, but also seafood products. We are increasing the production with excellent levels of quality, and in most cases, through foreign direct investment in some cases and joint ventures in others. That big area of agro-industry and seafood products is also an attractive sector in which to invest. Some small sectors are rolling very fast. We refer to, for example, the export of software. In Peru, we are developing different software for USA, Spain, and India companies. We are a very open economy. In most cases, we invite investors here in Peru. Through joint ventures, they are exporting the products to those countries where we have a free trade agreement.
For example, we have been negotiating a free trade agreement with India and the USA as a big market. They are thinking not of Peru; they are thinking of the USA. But by taking advantage of foreign direct investment opportunities in Peru, they are going to produce it, in some cases, at a lower price, and in all cases, at a lower rate from Peru to sell in the US. Almost all cases, there is no import tax due to our free trade agreements. For example, the mining, agribusiness, and software sectors are interesting areas where we have grown fast during the last few years.
LATAM FDI: In particular, regarding mining and agribusiness, before we started recording, we were talking about the Puerto de Chancay project.
Juan Carlos Mathews: Yes.
LATAM FDI: Can you briefly explain how that project will facilitate Peru’s overseas sale of mining and agricultural products?
Juan Carlos Mathews: Today, the main port in Peru is Callao. Callao represents more than 80% of Peru’s total trade and imports. We have two big global players operating there: APM Terminals from Denmark and BP World from Emirates in the southern part of the port. They have invested a lot during the last few years, but we have discovered the advantages of developing this port, which is 76 km north of Lima and very close to Callao. Depth is one of the significant advantages and a positive for foreign direct investments in Peru. We can receive a vessel with a capacity of 21,000 containers. It’s a very, very big vessel. It means a reduction in terms of cost because of economic skills. However, the main advantage is that we can go directly to Asia, particularly China. That’s why the slogan from Chancay to Shanghai exists: the name of our port to Shanghai, the port in China. It represents a reduction in terms of rate of 10 days. Instead of 45 days, it will take 35 days to move from Chancay to China. In the case of products from Brazil, instead of going through the Panama Canal, there will be a reduction in the rate of 16 to 17 days, which is quite a lot. This is another positive for foreign direct investment opportunities in Peru.
It’s very, very important. The idea is to transform it into a hub for South America. We are considering the demand for Peruvian products and goods from different countries.
LATAM FDI: One of the most important things companies that want to invest in a country consider is the workforce. Could you describe the quality and availability of the Peruvian workforce? Are there particular skills in industries where Peruvians excel?
Juan Carlos Mathews: Yes, maybe you can find some differences because, in the mining sector, we have… Well, it is improving the labor in that sector in Peru. In some cases, the investors also bring people from around the world. We have a lack of capacity in that field, specifically. But in the case of agribusiness, we are also teaching to some of our neighbor countries because we have developed a very strong agro-industry due to our climatic conditions, excellent position, and the possibility of exporting the product during the entire year. We have created a robust industry. In northern Peru, companies can be here, in California, or wherever because they have global standards. In that area, in the agro-industry, I think we have enough well-formed labor used in the supply chain. A difference with the mining sector is that we can find some areas where we need labor from overseas.
LATAM FDI: What’s the relationship between labor and business? For instance, have any recent labor market reforms taken place or may take place in the future that could affect foreign direct investment opportunities in Peru?
Juan Carlos Mathews: When I was in the government, I saw a complete reform of the labor system in Peru. But it is tough to implement because always when you have it ready, from the technical point of view, it is prepared. But from the political point of view, it’s a big issue. You don’t know when the right moment is. You will never find the proper time to do it. You have to do it because you have to do it, but you have to do it, considering that you will face some social problems. In some cases, for example, in Peru, you can start working in a company and immediately have one month of vacation. That’s too much. Everybody’s used to it. It’s a right that the people think they have and are unwilling to accept changes in that instance, to mention a specific point. However, if you compare the labor costs for an entrepreneur, it is usually higher than in all the other countries in Latin America. So that’s a weak point. That’s an essential question because facing that problem is necessary.
I think a new government will face the possibility because these reforms should usually be implemented at the beginning of a government, not at the end. In 2026, we are going to have elections. I think the new government will be able to look at Peru compared to other countries. According to the World Economic Forum, we are in an unfavorable position in education, health, infrastructure, science and technology, and the solidity of institutions. Within these five significant areas, you can identify some others, such as the one you mentioned and the labor related to this. I agree that it is a crucial point, a critical reform that has to be done. But as I mentioned before, it is tough to expect a reform like this to happen in the next one and a half years.
LATAM FDI: What incentives does Peru offer to attract foreign direct investment? Are there any tax breaks, grants, or other benefits from which foreign countries can benefit?
Juan Carlos Mathews: Yes. The foreign investor has the same conditions as a national investor. The same conditions. But maybe in two months or earlier, you will have a new law referring to the economic, special economic zones. We have had free zones here in Peru throughout history, but not exactly as they work in the USA and different parts of the world. I have been participating in the law, and the idea is to have clear incentives. The problem with incentives here in Peru includes tax incentives. The Ministry of Economy and Finance is sometimes unwilling to accept this incentive. Of course, we showed them the cost and benefit of those measures. You are taxing companies that are not in Peru. They are going to generate income for Peru. So, it is understandable that we have to give them incentives. You are competing with other countries at the same time. We have natural incentives. In some cases, I have been in different places in the UK, Australia, and Spain, talking with investors, and most of the questions referred to macroeconomic stability and legal security.
But there are more than incentives, tributary incentives, or financial incentives. But in some cases, it is a need. If you are working in the jungle of Peru or the highlands of Peru, in some cases, you need this incentive, or otherwise, you will not be competitive. Our advantage is that, in some cases, our resources are so vital that we can compete without offering some tax incentive. But I think if we have the opportunity to talk again in less than two months, we will have a clear idea of the law that will be launched soon.
LATAM FDI: That’s a good reason to have another conversation shortly. But what about political stability in Peru? How has Peru’s political stability recently affected the business environment and economic policy?
Juan Carlos Mathews: Yes. Our group is extraordinary for some people because you can see the macroeconomic indicators not during the last year but over the previous 20 years. You will see that our economy’s performance is better than the average in Latin America. In some cases, indicators like inflation are the best in Latin America. This is good for foreign direct investment opportunities in Peru. But at the same time, we have had six presidents in six years. How can we say we have political stability? We can say we have macroeconomic stability, but it does not sound logical because the economy and politics are linked. But mentioning this, I have to recognize that we are always in similar situations. You cannot be bored in Peru. You must read the news constantly because you will be aware of different things daily. I think that, yes, we are having a lot of discussions and uncertainty in terms of the political arena. But in the end, the entrepreneurs know how to deal with that. When I talk, for example, with Anglo-American, this is a massive company that is investing in Quellaveco in the mining sector.
I have been talking with them twice in the UK and the Emirates in the last six months with the CEO, and they were planning to expand the investment in Peru. All the questions refer to macroeconomic stability and legal security. Some questions refer to the political situation, but understanding that it is almost standard in Peru. So it is not affecting decisions too much. But I have to be frank. Of course, the entrepreneur’s expectations and trust in the system have been affected. So, it is recovering. Despite the situation in Peru, it is recovering slowly, unfortunately, because I think the flow of foreign and domestic investment would undoubtedly be higher in other conditions.
LATAM FDI: What advice would you give to parties looking for foreign direct investment opportunities in Peru for the first time?
Juan Carlos Mathews: My best advice is to believe in a joint venture. I am a believer in strategic alliances for both parties. I mean, for the Peruvian part, because it is going to receive know-how from the company that comes from the USA, for example, and through a USA company, because we know how Peru works better. If you look at the figures showing many high levels of corruption, some people do not trust the judicial system and prefer not to invest in Peru. But if you do it through the correct partner, you can understand that there are some routes to do it correctly, and the risk would be reduced significantly. The critical issue is to select the correct partner. Not any partner, but a correct one. But my advice would be in that sense because I have seen a lot of problems, even with Latin American companies. You can hear in Latin America that Latin America is only one. It’s not only one. There are some significant differences between Colombia and Peru, Peru and Argentina, et cetera. I have seen a lot of Peruvian investment in those countries, and investment from those countries in Peru can have many problems.
It is not so easy. You have to understand even the idiosyncrasies, the punctuality, and many other things that are characteristic. In some cases, it is good, and in some cases, not so good, but through a partner, you can do it better, I think, or at least a representative that can translate all you have, the reality of Peru.
LATAM FDI: You mentioned changes in government, but despite those changes, could you comment on how open the Peruvian government is to collaborating with foreign businesses and addressing their concerns? Did they work well with business?
Juan Carlos Mathews: Yes. For example, I was the Minister because I talked clearly with the President and the Prime Minister to understand if they favored the investment. If they told me I was not in favor of the investment, I would say, Thank you very much, I won’t participate. It’s as straightforward as that. I’m a professional, and I’m not a politician. I received support from the government during this year that I have been working for the government. The idea is that we have 22 free trade agreements. They include investment protection, and we are negotiating six additional ones with Hong Kong, the mobilization of the free trade agreement with China that will be ready in the next 15 days, and the negotiation with India, Indonesia, the Emirates, and Morocco. That reflects our belief that the open economy is essential for our development.
LATAM FDI: Given that and Peru’s openness to opportunities for foreign direct investment, how would you compare Peru to other regional countries in terms of its ability to attract foreign investment? What sets Peru apart?
Juan Carlos Mathews: Yes. In some cases, I have to say, unfortunately, that in some cases, the great advantage is the natural resources, location, and the free trade agreements we have. I said, unfortunately, because I think it is a need of what you mentioned before, specific incentives to move faster this investment in different sectors that we need to improve. But the location is critical. That’s why we were talking about Shanghai and ports, not only the port but also the airports. We will have a new airport at the end of the year in Lima, in Callao, and it will be ready at the end of December. We are improving the airport in Cusco, which will be prepared in two years. We have habilitated two more in the jungle and the highlands. We are investing in infrastructure, and that keeps considering the location of Peru with this investment in infrastructure is a crucial point. Natural resources, of course, we have to improve the specific promotion of some incentives. Still, with the conditions that we have, even the foreign investor, the same conditions as the national investor, I think we are an attractive place to do it.
As I mentioned, the investors are asking for macro-stability and legal security, but in some cases, they also ask about the political situation. I’m trying to say that in the short term, if we have a clear idea of what will happen in the coming five years for our country, there will be a very significant increase in investment. I have been, for example, when I was in, I think it was in New York, and I was taking a coffee after a conference, I’ve referred to a portfolio of investment. One of the investors was talking with another one, and they said that two countries should invest in Latin America: Peru and Colombia. We have to do it right now because we will have one or two years of advantage when the competition comes. After all, it is going to change for good. They mentioned this, not me, as a Peruvian, but the two investors participating in the forum. That’s the impression that, in some cases, some investors have when they evaluate the complete situation in Peru.
LATAM FDI: Well, we’ve covered quite a bit of the topic in this podcast for the past 20 or 25 minutes. We find that listeners to these recordings often have questions after they’ve absorbed the information that has been presented to them. We like to make our guests available to people with questions. How would somebody with a question from what they heard in this podcast contact you? Would that be something that you’d be willing to do?
Juan Carlos Mathews: Yes, I can give you… Well, you have my contact information, and you can transmit the questions to me. I would be glad to answer them.
LATAM FDI: Well, what we might do, and what we usually do for our guests, is put a link to their LinkedIn page in the transcript section of the podcast so that people can go directly to you. We’ll add your phone number and email address. Is there a website that you have?
Juan Carlos Mathews: Yes. I said yes because I was referring to the institution where I work, but I don’t have a personal one. However, I can put my phone number and my email.
LATAM FDI: Okay, we’ll do that. We’re happy you chose to speak with us today. We wish you a lot of luck in attracting foreign investment in Peru and look forward to having a future discussion with you when you know more about the special economic zone law being worked on in Peru.
Juan Carlos Mathews: No, thank you very much. It has been a pleasure, Steven, talking with you. Bye. Take care.