Manufacturing in Peru: Why invest in this growing industry?

There is a positive outlook for the coming months in this industry.

Manufacturing plays a crucial role in Peru's economy. Despite encountering challenges lately, forecasts suggest a notable increase in growth for the sector in the upcoming years.

According to the National Institute of Statistics and Informatics (INEI), in the first quarter of 2024, national production increased by 1.38%. This growth was primarily fueled by the following sectors: mining and hydrocarbons (7.64%), construction (5.12%), transportation, storage, mail, and courier services (4.30%), electricity, gas, and water (3.87%), as well as lodging and restaurants (3.58%).

POSITIVE OUTLOOK

Given the current situation, things are looking up for the manufacturing industry in Peru. According to analysts at FocusEconomics Consensus Forecast LatinFocus, they predict a 1.1 % growth for Peruvian manufacturing, which is higher than the Latin American average.

In addition to that, they have also given their forecast for this region, expecting it to grow by 1.8 % in 2024, 1.9 % in 2025, and 2.1 % in 2026. Meanwhile, the average growth for Latin America is projected to be 1.6 % in 2024, 2.3 % in 2025, and 2.6 % in 2026.

Photograph: Yayo López

AT THE LATIN AMERICAN LEVEL

Experts predict that in Latin America, Peru will rank second in manufacturing, with a growth of 1.1 %, just after Mexico, which is expected to see a 1.7 % increase in its industrial output. Following these, Brazil's industrial production is forecasted to grow by 0.1%, along with Colombia at 0.1 %, Uruguay at -0.2 %, Chile at -1.1 %, and Argentina at -1.9 %.

In the second quarter of 2024, Peru is expected to see a growth of 1.5 %. This trend continues into the third quarter, with the Peruvian GDP projected to expand by 1.9 %. Looking ahead to the fourth quarter, the country's economic activity is anticipated to show a significant expansion of 2.9 %, as forecasted by Focus Economics Consensus Forecast LatinFocus.

Experts anticipate that Peru's economy will experience a 3.6 % growth in the first quarter of next year, followed by a 3.1 % expansion in the second quarter. Peru's economic activity is expected to grow by 2.6 % by the third quarter.

The Central Reserve Bank of Peru (BCRP) forecasts that the Peruvian economy will grow by 3.0% in 2024. This growth is expected to be driven primarily by improved fishing conditions due to the reversal of climate anomalies (projected growth of 10.5%), as well as growth in the agricultural sector (3.5%) and primary manufacturing (3.9%).

This will help boost real incomes and restore consumer confidence. Increased private spending will lead to growth in non-primary manufacturing (3.9%), commerce (3.2%), and services (3.0%). Meanwhile, private investment will drive construction growth at 3.9%. The electricity and water sector is also projected to grow by 3.9%.

The economy is expected to maintain its current pace of growth in 2025, projected at 3.0%.

Photograph: Sandro Aguilar

WHAT NEEDS TO BE DONE

As the sector keeps growing, Peru is expected to rise in the regional rankings, reaching third place in industrial production by 2026.

Peruvian manufacturing is poised for a comeback and expansion in the upcoming years, as economic forecasts suggest. But achieving this will demand fresh, inventive strategies. By offering tax breaks, upgrading infrastructure, fostering innovation, and investing in workforce development, we can breathe new life into the manufacturing sector. This revitalization will pave the way for a sustainable and varied economic boom in Peru.

Photograph: Ricardo Zamudio