Peru achieves low overall compliance with international standards and codes, with a score of 35.8 out of 100 in our Standards Compliance Index. Peru's compliance in the area of Macroeconomic Policy and Data Transparency is reasonably high. The exception is fiscal transparency, where the legal basis is sound but enforcement remains problematic. Enforcement of sound legal frameworks also appears to be a major issue for a few other standards, especially corporate governance and money laundering. In the areas of financial sector supervision and the insolvency framework, there is ample evidence of sustainable progress, though publicly available assessments detailing Peru's compliance with international standards are wanting. Peru has been diligent in aligning itself with the international accounting and auditing standards.

Macroeconomic Policy and Data Transparency

Information provided on the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) website and 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 2007 IMF 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. According to the IMF's SDDS website, Peru meets SDDS access criteria, but falls short in terms of the quality and integrity of data. Peru does not provide information on the confidentiality of individually identifiable information for all data categories and, according to the 2007 IMF report, needs to improve on issues relating to methodological soundness and coordination in the compilation of data between statistical agencies. More »

In its 2006 report on Monetary Policy Transparency, Oxford Analytica (OA) rates Peru's compliance with this standard as "Compliance in Progress." The high professionalism and traditional strong independence are especially noteworthy characteristics of the Central Reserve Bank of Peru (Banco Central Reserva de Peru, or 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, and a planned draft bill intended to de-link the terms of the BCRP Board of Directors from the election cycle would enhance the independence of the institution. The communication policy and practice of the BCRP have been gradually upgraded from their already good base. The inflation-targeting framework seems to be working well, and the BCRP has switched to a continuous, monthly year-on-year target in 2006 instead of the previous end-of-year target, which also increases transparency. Peru maintains a unified, managed floating exchange rate. While the establishment of a free-floating currency remains a long-term policy objective, it is likely to be gradual. More »

Oxford Analytica's 2006 Report on Fiscal Policy Transparency rates Peru's compliance with this standard as "Enacted." A 2004 International Monetary Fund (IMF) assessment acknowledged that Peru had achieved major progress regarding fiscal transparency. A number of laws, such as the Law on Fiscal Prudence and Transparency (1999) and the Law on Transparency and Access to Public Information (2002) give a solid legal basis for fiscal policy transparency. 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 IMF's 2004 assessment, were inadequate clarity and predictability in fiscal legislation, insufficiently 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. The government of President Alan Garcia has announced plans for increased fiscal decentralization, devolving 180 functions to sub-national governments by 2009. These plans would include substantive transfers of functions and projects. However, the enforceability of such bold proposals could be difficult, given the often low level of technical capacities at Peru's sub-national level. More »

Institutional and market infrastructure

Bankruptcy proceedings in Peru are regulated by the General Insolvency System Law No. 27809 of 2001. This law, which became effective on August 8, 2002, introduced liquidation and reorganization procedures as an alternative to bankruptcy of enterprises. 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 (INDECOPI). According to the U.S. Department of Commerce's 2007 Country Commercial Guide on Peru, the enforcement of bankruptcy laws through the courts is rather slow. This finding is also confirmed by the World Bank's 2006 Closing a Business Indicator. As of 2006, the process of closing a business in Peru takes 3.1 years, compared to the average of 2.6 years in the region and 1.4 years for Organization for Economic Co-operation and Development countries. On the other hand, 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 73rd out of 175 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. More »

Adoption of the International Financial Reporting Standards (IFRSs), formerly known as the International Accounting Standards (IASs), started in Peru as early as 1994, as noted in the 2004 World Bank's Accounting and Auditing assessment. In a number of resolutions issued between 1994 and 1998, the Accounting Standards Board of Peru (CNC) officially adopted the IFRSs to serve as Peru's Generally Accepted Accounting Principles (GAAP). However, the World Bank assessment discloses that the adoption process was slowed by the CNC's inadequate resources and by frequent changes in the international standards. Finally, 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. As of August 2007, IFRSs issued subsequently by the IASB, along with revisions made to some existing standards, had not yet been adopted in Peru. However, several publications on the issue suggest that the Peruvian authorities are committed to the full adoption of international standards. More »

Corporate governance in Peru has seen progress since the voluntary Code of Good Corporate Governance - modeled on the Organization of Economic Cooperation 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 various changes occurring in 2005 and 2006 that addressed previous shortcomings in the areas of shareholder rights, corporate control markets, 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. More »

In 1998, International Standards on Auditing (ISAs) were fully adopted in Peru. However, according to the assessment of accounting and auditing practices in Peru conducted by the World Bank in 2004, these standards have not been adapted to reflect the changes subsequently introduced to ISAs by the International Auditing and Assurance Standards Board (IAASB). In 2007 the Council of Heads of Associations of Public Accountants of Peru completed a self-assessment as a part of the International Federation of Accountants' Member Body Compliance Program, wherein they stated that the 2006 Edition of the IFAC Handbook of International Auditing, Assurance, and Ethics Pronouncements issued by the IAASB would take effect in Peru beginning on January 1, 2007. More »

Based on information in a 2005 joint report by the Financial Action Task Force (FATF) and the Financial Action Task Force of South America (GAFISUD), Peru complies with most of the legal and institutional requirements of the FATF. The major recommendation identified by the report is that the country fails to comply with Special Recommendation III, dealing with the freezing of funds used for terrorist financing. An earlier report (2004) by the FATF indicates that authorities in Peru were, at the time, making changes to Peru's anti-money laundering (AML) regime so as to incorporate international standards. The 2007 U.S. Department of State (DoS) report also arrives at the same conclusion, and indicates that Peru has made significant progress recently, in strengthening its AML regime. Law No. 27.765 of 2002 criminalizes money laundering in Peru. The 2007 U.S. DoS report indicates that the Financial Intelligence Unit of Peru is responsible for receiving and analyzing suspicious transaction reports filed by financial institutions and that the Government of Peru is a member of several international organizations. However, the 2007 U.S. DoS report did mention several deficiencies in Peru's AML and the combating the financing of terrorism (CFT) regime, the most obvious being the lack of a proper definition for terrorist financing that is in line with the United Nations Convention. More »

There is little information regarding Peru's compliance with the Core Principles for Systemically Important Payment Systems, either in terms of clear adherence or descriptive information. In 2000, the Center for Latin American Monetary Studies (CEMLA) and the World Bank published a study of Peruvian payment system mechanisms, and found that Peru had implemented a real time gross settlement system (RTGS) for large value transactions. The CEMLA/World Bank report notes that the RTGS system has clearly defined participation rules and the Central Reserve Bank of Peru (BCRP) is in charge of administering and regulating the RTGS system. According to a 2006 BCRP report, the two systemically important payment systems in the country are the RTGS and, for low-value transactions, the Electronic Clearing House system operated by the Cámara de Compensación Electrónica. More »

Financial Regulation and Supervision

There is scant information publicly available in terms of both descriptive information and explicit compliance levels as to Peru's adherence to the Basel Committee on Banking Supervision's Basel Core Principles. According to information provided in the International Monetary Fund's (IMF) 2006 Article IV Consultation report, published in 2007, there was a Financial Sector Assessment Program (FSAP) undertaken on Peru in 2001 by the IMF and the World Bank. However, the results of this assessment are not publicly available. The report further indicates that Peru has a generally sound banking system with improving financial indicators such as asset quality and capitalization. The U.S Department of Commerce, in its 2007 Country Commercial Guide of Peru, notes that the Superintendence of Banks, Insurance and Pension generally applies the Bank for International Settlements' regulatory guidelines, and 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. More »

Securities markets in Peru are regulated by two institutions: the Superintendence of Banks, Insurance and Pension is responsible for the supervision of private pension funds; and the National Supervisory Committee of Corporations and Securities (CONASEV) 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. Reports by the International Monetary Fund (IMF) in 2007 confirm the Peruvian authorities' intention to develop and deepen domestic capital markets. Peru's domestic capital markets have already grown significantly, especially in long-term bond issues and the market capitalization of listed shares. According to the IMF's 2006 Article IV consultations report, to benefit from these positive developments, Peruvian authorities are planning to remove regulatory burdens, facilitate the issuance of securities, and allow the publication of a yield curve for private securities. However, there is not enough publicly available information to make an assessment as to Peru's overall level of compliance against the Principles of Effective Securities Regulation developed by the International Organization of Securities Commissions. More »

Peru's insurance industry is regulated by the Superintendence of Banks, Insurance (SBS), whose main insurance-related objective is to protect the interests of policyholders. According to Ruben Mendiolaza, Intendent of the SBS, in 2004 the SBS carried out a self-assessment on the degree of implementation of the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). According to the self-assessment, Peru observed 8 ICPs, whereas 18 ICPs were qualified as largely observed. ICP 22 Derivatives and Similar Commitments was found to be non-observed, and ICP 27 Fraud was only partly observed. Mendiolaza further stated that Peru intends to fully comply with international standards within the next coming three to four years. In 2004, the International Insurance Foundation undertook a technical assistance project to assist Peru in improving its ICP compliance. Its main recommendation was to move to a Risk Based-supervisory approach. More »

Legend:

Credit Ratings

Moody's Ba1/stable

Fitch BBB-/Stable

Standard & Poor's BB+/Positive

Macroeconomic Data

2007 GDP (Current Prices): 109.069 billion USD (IMF)

2007 GDP (Per Capita): 3,886 USD (IMF)

2008 GDP (Growth Forecast): 7% (IMF)

2008 Inflation (CPI): 4.2% (IMF)

2007 Unemployment: 7.4% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 3.467 billion USD (UNCTAD)

FDI (Outward): 0.428 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 468 million USD (OECD)

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