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Last Updated: December 2008

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Peru

	Score	Rank
Financial Standards Index	40.00 out of 100	49
Business Indicator Index	8.07 out of 12	58

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12 Key Standards Overview
Summary by Standard
Business Indicator Summary
Quick Facts & Global Indices

Overall Standards Summary

Peru achieves low overall compliance with international standards and codes, with a score of 38.33 out of 100 in our Standards Compliance Index. Peru's compliance in the area of Macroeconomic Policy and Data Transparency is reasonably high, although fiscal transparency, despite having a sound the legal framework needs stronger enforcement. Similarly, in the category of Institutional and Market Infrastructure standards, enforcement appears to be a major issue, such as in corporate governance. In the case of anti-money laundering the country has not been able to keep up with stricter international requirements, showing important weaknesses in its regulatory framework. Still, Peru is in the process of adopting international accounting and auditing practices and in the area of Financial Regulation and Supervision, Peru has been diligent in aligning itself with international core principles for effective banking supervision. With respect to the insurance core principles, Peru has made improvements regarding the flow of information between supervisory agencies, on and off-site supervisions, and consolidated supervisions. The insurance regulator has prepared a plan to achieve full compliance with the international core principles. Peru's securities regulation framework lacks comprehensive, published information on the country's compliance with the international standard.

Choose a standard for a detailed compliance report:

12 Key Standards for Sound Financial Systems	Compliance Level
Special Data Dissemination Standard	CP
Code of Good Practices on Transparency in Monetary Policy	CP
Code of Good Practices on Transparency in Fiscal Policy	EN
Effective Insolvency and Creditor Rights Systems	II
International Financial Reporting Standards	ID
Principles of Corporate Governance	EN
International Standards on Auditing	ID
Anti-Money Laundering/Combating Terrorist Financing Standard	ID
Core Principles for Systemically Important Payment Systems	II
Core Principles for Effective Banking Supervision	CP
Objectives and Principles of Securities Regulation	II
Insurance Core Principles	ID
II = Insufficient Information \| NC = No Compliance \| ID = Intent Declared \| EN = Enacted \| CP = Compliance in Process \| FC = Full Compliance

Macroeconomic Policy and Data Transparency

CPSpecial Data Dissemination Standard

Information provided on the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) website and in a 2007 report on Peru by the IMF indicate that the country subscribes to the SDDS and has been doing so since August 1996. The report also notes that Peru meets the SDDS requirements for timeliness, periodicity, and coverage of data and provides advance release calendars for all data categories. Peru meets SDDS access criteria, but falls short in terms of the quality and integrity of data. In general, Peru does not announce in advance when modifications of methodologies occur. Furthermore, a 2008 report by the IMF calls for improvements on the methodological soundness and coordination in the compilation of data between statistical agencies. The Central Reserve Bank of Peru and the National Institute of Statistics and Informatics are the main institutions in charge of compiling and disseminating statistics in Peru, while additional important data are also provided by the Superintendency of Banks, Insurance and Private Pension, the Lima Stock Exchange and the Ministry of Labor and Employment Promotion.

CPCode of Good Practices on Transparency in Monetary Policy

In its 2006 report on Monetary Policy Transparency, Oxford Analytica (OA) rates Peru's compliance with this standard as "Compliance in Progress." The Peruvian monetary authority is the Central Reserve Bank of Peru (BCRP) whose responsibilities and functions are set up in the Constitution and in its Organic Law. The high professionalism and traditional strong independence are noteworthy characteristics of the BCRP. The transition to a new government in July 2006 and the ensuing change of the Board of Directors were conduced transparently, by all accounts. A draft bill intended to de-link the terms of the BCRP Board of Directors from the election cycle has been submitted to Congress and is expected to enhance the independence of the institution and to be implemented by 2011. The communication policy and practice of the BCRP have been gradually upgraded from an already good starting point. In 2002, the BCRP adopted an inflation targeting scheme and since then uses a reference short-term interest rate as its main monetary policy instrument. In 2006, the BCRP has switched to a continuous, monthly year-on-year target instead of the previous end-of-year target, which has increased transparency. Peru also maintains a unified, managed floating exchange rate. The establishment of a free-floating currency regime remains a long-term policy objective. The International Monetary Fund notes that although Peruvian inflation is above the 1-3 percent range, it is among the lowest in Latin America.

ENCode of Good Practices on Transparency in Fiscal Policy

Oxford Analytica's 2006 Report on Fiscal Policy Transparency rates Peru's compliance with this standard as "Enacted." A 2004 IMF assessment acknowledged that Peru had achieved major progress regarding fiscal transparency. A number of laws provide for a solid legal basis for fiscal policy transparency, such as the Law on Transparency and Access to Public Information of 2002 and the Law on Fiscal Prudence and Transparency of 1999 modified by the Law on Fiscal Responsibility and Transparency (LRTF) of 2003. Public access to budget information is especially good, reflected in the Open Budget Project's rating of Peru's performance at 77%, or "Substantial." Among Peru's shortcomings, which are mainly identified in the IMF's 2004 assessment, were inadequate clarity and predictability in fiscal legislation, insufficient detailed specification of the allocation of functions between the government and the rest of the public sector, inadequate resources available for internal and external audits, and the lack of clear assignments of spending responsibilities and revenue sources across the different levels of government.. In this sense, the government of President Alan Garcia announced plans to increase fiscal decentralization with the aim of restoring a number of responsibilities to sub-national governments by 2009. Accordingly, Congress passed the Executive Organic Law No. 29.158 in 2007 transferring certain functions from the national government to sub-national governments in line with the decentralization framework established in the 2003 Law on the General Framework for Decentralization. These transfers of functions are being made at a good pace, notes the Council of Ministries Presidency. Peru has also adopted fiscal rules, which are included in the LRTF establishing limits on: (1) fiscal deficit of the non-financial public sector; (2) central government expenditure real growth rate; and (3) public debt. Moreover, as of July 2008, the Peruvian Congress was analyzing a draft law aiming to improve the enforcement of fiscal rules by introducing sanctions for non compliance.

IIEffective Insolvency and Creditor Rights Systems

Bankruptcy proceedings in Peru are regulated by the General Insolvency System Law No. 27.809, effective since August 8, 2002, which introduced liquidation and reorganization procedures as an alternative to bankruptcy. Moreover, it removed prevailing shortcomings concerning the powers of the insolvency authority, and improved the insolvency procedures. The bankruptcy procedures are filed before a government agency called the National Institute for the Defense of Free Competition and the Protection of Intellectual Property, which is an autonomous body under the Presidency of the Council of Ministers. According to the U.S. Department of Commerce's 2008 Country Commercial Guide on Peru, the enforcement of bankruptcy laws through the courts is rather slow. However, the World Bank's 2009 Closing a Business Indicator shows that Peru is ranked above regional average levels. This indicator asserts that the process of closing a business in Peru takes 3.1 years, compared to the average of 3.3 years in the region and 1.7 years for the Organization for Economic Co-operation and Development's countries. Further, Peru ranked rather high in terms of recovery rate (expressed in terms of how many cents on the dollar claimants recover from the insolvent firm) and the cost of closing a business, ranking 96th out of 181 countries surveyed. However, there is insufficient publicly available information as to Peru's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems promulgated by the World Bank.

IDInternational Financial Reporting Standards

The adoption of International Financial Reporting Standards (IFRSs), formerly known as International Accounting Standards (IASs), started in Peru in 1994, as noted in the 2004 World Bank's assessment of accounting and auditing practices in the country. Through several resolutions issued between 1994 and 1998, the Peruvian standard setting authority, the Accounting Standards Board of Peru (CNC), officially adopted IFRSs in effect as of December 2002 to be applied by all Peruvian non-financial listed and non-listed companies. Financial institutions regulated by the Superintendency of Banks, Insurance and Pension (SBS) must follow norms established by the SBS, which as Rubiño in his 2007 report points out, differ from IFRSs. The World Bank assessment asserted that the adoption process slowed down due to the CNC's inadequate resources and frequent changes in the international standards. It also noted that there are shortcomings regarding the enforcement of financial reporting standards. However, according to the information provided on the website of the National Public Accounting Department (DNCP), in 2005 Peru adopted all IFRSs that were issued as a result of the Improvements Project completed by the International Accounting Standards Board (IASB) in 2004. The effective date of the new standards was set for January 1, 2006. Subsequently, the CNC Resolution 040-2008-EF/94 adopted for application in Peru IFRS 7, IFRS 8 and IAS 39 (revised 2006) issued by the IASB after 2005. The effective date of the new standards was set for January 1, 2009. Although the website does not provide information regarding the adoption of amendments to IFRSs introduced by the IASB in 2008, several publications on the issue suggest that the Peruvian authorities are committed to the full adoption of international standards.

ENPrinciples of Corporate Governance

Corporate governance in Peru has improved since the voluntary Code of Good Corporate Governance - modeled on the Organization of Economic Co-operation and Development (OECD) recommendations, was first published in 2002 by a Committee assembled by the National Supervisory Commission for Companies and Securities (CONASEV). Still, a 2004 World Bank assessment concluded that the development and reform of corporate governance in Peru was at an early stage, and made a number of specific recommendations. The same World Bank report also noted that a key challenge going forward will be the implementation and enforcement of corporate governance. It recommended granting more independence to CONASEV, as well as improving CONASEV's enforcement mechanisms. A 2006 OECD Progress Report for Peru noted that improvements were recorded in 2005 and 2006 that addressed previous shortcomings in the areas of shareholder rights, market for corporate control, integrity of financial reporting, and the development of guidelines for the selection of board members. Since 2005, Peruvian companies have been required to document their adherence to the Code of Good Corporate Governance in their annual reports on a "comply-or-explain" basis. The CONASEV 2007 Strategic Plan indicates that it is in the process of updating the Principles of Good Corporate Governance and revisiting CONASEV's regulations.

IDInternational Standards on Auditing

The adoption of International Standards on Auditing (ISAs) started in Peru as early as 1993, notes the World Bank in its 2004 assessment of accounting and auditing environment in Peru. By 1998, all existing ISAs were adopted for application in Peru, although at the time of the World Bank assessment subsequent revisions introduced to ISAs had not been incorporated into the Peruvian requirements. The World Bank also pointed out to the shortcomings related to the enforcement of ISAs. In fact, the report argues that regulatory agencies have insufficient funds to control the implementation of auditing standards. As a result, the World Bank recommended that Peru create an independent oversight board for the audit profession so as to enforce auditing standards and regulate the auditing profession. According to a 2006 Falconí report, in December 2004, the 2004 Edition of the International Handbook of International Auditing, Assurance, and Ethics Pronouncements was adopted in Peru. In 2007, the Council of Heads of Associations of Public Accountants of Peru published a self-assessment as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, wherein they stated that the most recent (2006) Edition of the IFAC Handbook will take effect in Peru effective January 1, 2007. However, as of December 2008, there is insufficient publicly available information concerning the adoption of that Edition.

IDAnti-Money Laundering/Combating Terrorist Financing Standard

According to a 2008 joint report by the Financial Action Task Force (FATF) and the Financial Action Task Force of South America (GAFISUD), Peru fully complies with 10 of the FATF Recommendations and Special Recommendations on Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT), while largely complies with 14, partially complies with 24, and does not comply with 1 of those recommendations, namely the implementation of AML/CFT to branches and subsidiaries of financial intermediaries. The report concludes that Peru complies with the FATF's requirements on the criminalization of money laundering and terrorist financing, and its requirements on the seizure and confiscation of funds relating to such activities. Peru has also set up a functional financial intelligence unit (UIF), which receives and analyzes suspicious transaction reports filed by financial institutions. However, the regulatory framework for preventive measures in financial institutions and designated non-financial businesses and professions (DNFBPs) are seriously lacking according to the FATF/GAFIUSD evaluation. The country is rated as only partially compliant with regards to the FATF's requirements on customer due diligence, record keeping, internal controls, and suspicious transaction reporting in financial institutions and DNFBPs. The main shortcoming identified by the FATF/GAFIUSD is that several informal sectors (exchange and remittance funds) are not covered under the Peruvian regulatory framework and do not come under the supervision of any financial supervisory authority. By law the UIF has jurisdiction over these sectors but the FATF/GAFIUSD report notes that the organization lacks sufficient resources to perform the task of regulating and supervising these institutions. In a 2004 report, the FATF had noted that the Peruvian authorities had been incorporating changes to the country's AML/CFT regime in line with international standards. The 2008 U.S. Department of State report states that the "Government of Peru has made advances in strengthening its anti-money laundering and counter-terrorist financing regime in recent years, however, some progress is still required to better comply with international standards."

IICore Principles for Systemically Important Payment Systems

Peru has three systematically important payment systems: (1) the real time gross settlement (RTGS) system that is operated by the BCRP for high-value transactions; (2) the Electronic Clearing House system operated by the Cámara de Compensación Electrónica that uses a net and deferred scheme; and (3) the Multibank Settlement System that started to operate in 2005 and uses a delivery versus payment mechanism. According to the BCRP, this framework is the result of a process of modernization that started in 1997 with the objective of increasing the security and efficiency of the payment systems. The BCRP is in charge of supervising the RTGS system and issuing regulations on low-value payment systems. In addition, the Superintendency of Banks, Insurance and Pension is in charge of authorizing the organization and functioning of clearing firms. Nonetheless, as indicated by a 2007 Ministry of Economy and Finance and BCRP letter of intent to the International Monetary Fund, the Central bank is fostering legal changes in order to strengthen its role as the supervisor of the entire payment system. However, as of September 2008, there is insufficient information regarding Peru's compliance with the Core Principles for Systemically Important Payment Systems promulgated by the Committee on Payment and Settlement Systems. There is also no authoritative designation by the BCRP as to which systems it considers systemically important.

CPCore Principles for Effective Banking Supervision

In 2005 the IMF and the World Bank carried out an assessment within the framework of the Financial Sector Assessment Program (FSAP) and concluded that Peru fully complies with 21 of the 30 Basel Core Principles for Effective Banking Supervision (considering that Principle 1 is subdivided into 6 sub-principles) and largely complies with 8. The principle related to the legal protection of the supervisor is the only sub-principle that Peru is rated as materially non-compliant. The Superintendency of Banks, Insurance and Pension (SBS) is in charge of the regulation and supervision of the financial system. The functions and responsibilities of the SBS and general provisions regarding the financial sector are established by Law No. 26702 of 2006. At the time the IMF assessment was carried out, the Peruvian Congress was analyzing a draft Law in order to improve the legal protection of the SBS, as stated in a document by the Association of Supervisors of Banks of the Americas. In its 2006 report, the SBS mentions that it is taking action to improve on-site and off-site as well as consolidated supervision of financial institutions. Moreover, a 2007 report by the IMF based on its Fourth and Fifth Reviews on Peru indicates that the Peruvian authorities have finalized a roadmap for the implementation of the Basel II framework.

IIObjectives and Principles of Securities Regulation

Securities markets in Peru are regulated by the CONASEV,which is in charge of the surveillance and control of compliance with the Securities Market Law and the Law on Investment Funds and their managers. CONASEV also regulates issuers of securities, including their disclosure of information, and enforces certain aspects of the General Companies Law on public companies. In 2006, Peru carried out an assisted self-assessment in order to evaluate the level of compliance with International Organization of Securities Commissions (IOSCO) principles. Though the assessment was not published, Peru has begun developing an action plan in order to align national regulations with IOSCO principles. However, CONASEV's 2008 strategic plan did not include the implementation of the action plan among its objectives. According to the IMF's 2006 Article IV consultations report, to benefit from the growth of domestic capital markets, especially in long-term bond issues and the market capitalization of listed shares, Peruvian authorities are planning to remove regulatory burdens, facilitate the issuance of securities, and allow the publication of a yield curve for private securities. Two 2008 IMF Reviews under the Stand-By Agreement with Peru mention that the authorities have adopted measures with the purpose of promoting access to capital markets, boosting different financial instruments and improving the pension fund system. However, overall, there is insufficient publicly available information as to Peru's compliance with IOSCO principles.

IDInsurance Core Principles

As per the 2006 quarterly report of the International Insurance Foundation (IIF), in 2004 the IIF carried out an assessment of Peru's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). The assessment concluded that Peru complies with 80% of ICPs. Ian Webb, research director of the IIF, pointed out to the following shortcomings identified during the assessment: the quality of the data reported to the supervisor, the supervision of reserves of the insurance companies, and the powers of the supervisor to verify insurers' assets, and on-site supervisions. Overall, it was concluded that insufficient resources and lack of legislative powers of the SBS hold back effective supervision of the insurance sector. Taking into consideration the results of the evaluation, the SBS has prepared a plan to achieve full compliance with the IAIS principles. As noted by the SBS, during 2005 Peru has made improvements regarding the flow of information between supervisory agencies, on and off-site supervisions, consolidated supervisions, and anti-money laundering regulations.

Business Indicators

With an overall score of 8.07/12, Peru is progressing toward standard on the economic, legal, and political indicators that make up our Business Index. Peru has a market-based private sector driven economy, in which total government expenditure, including consumption and transfer payments, is low. Peru has carried out marked-oriented reforms and privatizations during the 1990s, and since 2001 has promoted trade and investment. These measures have contributed to the recent economic evolution of Peru, showing rates of growth around eight percent during 2006 and 2007. Recent economic expansion has been driven mainly by the dynamic performance exhibited by the mining sector, which dominates Peruvian exports. The 1993 Constitution guarantees national treatment for foreign investors and allows foreign investment in almost all economic sectors. The Foreign Investment Promotion guarantees the possibility of investing in every economic sector, grants the same rights for local and foreign investors, and establishes that property rights for foreign investors are those established in the Peruvian Constitution. Although secured interests in property are technically recognized, the judicial process is often very slow and outcomes and enforcement are unpredictable. Consequently, enforcing contracts is difficult. However, the Peruvian government has stated that improving the judicial system is a priority. Peru ranks 72nd out of 180 countries in the Transparency International's 2008 Corruption Perception Index.

Global Indices & Quick Facts

Peru is ranked from the 2nd to the 3rd quintiles of the global indices benchmarking political, economic, business, and human capital climates, as shown below. This reflects the impressive economic growth paired with relative political stability that Peru has enjoyed in recent years. Its positive rankings in the business and capital access indices are explained by market-oriented economic reforms and privatizations in the 1990s, as well as measures taken since 2001 to promote trade and attract investment. However, the two indices where Peru falls below the 2nd quintile show the prevailing challenges for the country. The low ranking in the Global Competitiveness Index is chiefly explained by an inefficient government bureaucracy and restrictive labor regulations. The low rank in the UNDP's Human Development Index underlines that half of the population of Peru is still considered poor, with heavy concentrations of poverty in the Andean region. Finally, the relatively good position in Transparency International's Corruption Perceptions Index does not belie the high perceived rate of corruption in Peru.

Name	Year	Rank	Score	Quintile
Bertelsmann Transformation Status Index	2010	36/128	6.74/10	2
Heritage Foundation Economic Freedom Index	2010	45/179	67.6%	2
Economic Freedom of the World Index	2009	41/141	7.26/10	2
World Economic Forum Global Competitiveness Index	2009	78/133	4.01/7	3
Milken Institute Capital Access Index	2009	56/122	4.84/10	3
World Bank Ease of Doing Business Index	2009	56/183	N/A	2
UNDP Human Development Index	2009	78/177	0.81/1	3
Transparency International Corruption Perceptions Index	2009	75/180	3.7/12	3
Freedom House Index	2009	Free	2.5/7

Credit Ratings

BBB-/Stable Fitch

Baa3/Stable Moody's

BBB-/Stable Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 127.4 billion USD (IMF)

2009 GDP (Per Capita): 4,377 USD (IMF)

2010 GDP (Growth Forecast): 5.8% (IMF)

2009 Inflation (CPI): 3.2% (IMF)

2008 Unemployment: 8.1% (CIA)

2008 Foreign Direct Investment

FDI (Inward): 4.8 billion USD (UNCTAD)

FDI (Outward): 0.70 billion USD (UNCTAD)

2007 Official Development Assistance

ODA (Received): 263 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)