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					                                   PERU
                               NORMAS LEGALES
  LEY No. 26897: Ley que establece la prorroga de las exoneraciones contenidas en los
  apéndices i y ii del decreto legislativo Nº 821, ley del impuesto general a las ventas e
                               impuesto selectivo al consumo

Artículo 1º.- Modificase el primer párrafo del artículo 7º del Decreto Legislativo Nº 821, en los
términos siguientes:

"Artículo 7º.- VIGENCIA Y RENUNCIA A LA EXONERACION
Las exoneraciones contenidas en los Apéndices I y II tendrán vigencia hasta el 31 de diciembre
de 1998."

Artículo 2º.- Deróganse todas las normas que se opongan a la presente ley.

Comuníquese al señor Presidente de la República para su promulgación.

En Lima, a los nueve días del mes de diciembre de mil novecientos noventa y siete.

CARLOS TORRES Y TORRES LARA
Presidente del Congreso de la República

EDITH MELLADO CESPEDES
Primera Vicepresidenta del Congreso de la República

AL SEÑOR PRESIDENTE CONSTITUCIONAL DE LA REPUBLICA

POR TANTO:

Mando se publique y cumpla.

Dado en la Casa de Gobierno, en Lima, a los doce días del mes de diciembre de mil novecientos
noventa y siete.

ALBERTO FUJIMORI FUJIMORI
Presidente Constitucional de la República

ALBERTO PANDOLFI ARBULU
Presidente del Consejo de Ministros

JORGE CAMET DICKMANN
Ministro de Economía y Finanzas

14401

  Precisan alcances de numeral del Apéndice V de la Ley del IGV e Impuesto Selectivo al
                                      Consumo

                               DECRETO LEGISLATIVO Nº 883

El PRESIDENTE DE LA REPUBLICA CONSIDERANDO
Que de conformidad con lo previsto en el Artículo 104º de la Constitución Política del Estado;
mediante Ley Nº 26648, prorrogada por la Ley Nº 26679, el Congreso de la República ha
delegado en el Poder Ejecutivo la facultad de legislar, entre otras, en Materia de generación de
empleo, eliminando trabas a la inversión e inequidades, con énfasis en el incremento de las
exportaciones y el desarrollo del mercado de capitales:
Con el voto aprobatorio del Consejo de Ministros;
Con cargo de dar cuenta al Congreso;
Ha dado el siguiente Decreto Legislativo;

Artículo 1º.- Precisase que el numeral 10 del Apéndice V del Decreto Legislativo Nº 775 - Ley del
Impuesto General a las Ventas e Impuesto Selectivo al Consumo, se refería a todos los servicios
que conforman el paquete turístico, tales como: servicio, de transporte, hospedaje, alimentación,
mediación y/u organización, que prestan y transfieren los operadores turísticos domiciliados en
favor de los operadores turísticos no domiciliados, no siendo de aplicación en estos casos lo
dispuesto en el inciso d) del artículo 9º del Decreto Supremo Nº 29-94-EF. Derógase la Tercera
Disposición Complementaria y Transitoria del Decreto Legislativo Nº 821.

Artículo 2º.- Las nuevas inversiones que efectúen los titulares de proyectos de inversión turística
en infraestructura que constituya servicio público, serán depreciadas a razón de 10% anual,
siempre que estas inversiones hubieran sido aprobadas por el organismo del sector competente,
en coordinación con el MITINCI. Mediante Decreto Supremo refrendado por el Ministro de
Economía y Finanzas y el Ministro de Industria, Turismo, Integración y Negociaciones
Comerciales Internacionales, se dictarán las normas reglamentarias que se requieran para la
aplicación del presente artículo.

Dado en la Casa de Gobierno, en Lima, a los ocho días del mes de noviembre de mil novecientos
noventa y seis.

ALBERTO FUJIMORI FUJIMORI
Presidente Constitucional de la República

ALBERTO PANDOLFI ARBULU
Presidente del Consejo de Ministros y encargado de la Cartera de Economía y Finanzas

GUSTAVO CAILLAUX ZAZZALI
Ministro de Industria, Turismo, Integración y Negociaciones Comerciales Internacionales


      Incorporan numerales referidos a la prestación de servicios turísticos, en
            apéndices de la Ley del IGV e Impuesto Selectivo al Consumo

                               DECRETO SUPREMO Nº 063-96-EF

EL PRESIDENTE DE LA REPUBLICA CONSIDERANDO:

Que de conformidad con lo previsto en el Artículo 6º de la Ley del Impuesto General a las Ventas
e Impuesto Selectivo al Consumo aprobado por Decreto Legislativo Nº 821, por Decreto Supremo
se modifican los servicios comprendidos en su Apéndice II;

Que, de conformidad con lo establecido en el Artículo 33º de la Ley del Impuesto General a las
Ventas e Impuesto Selectivo al Consumo aprobada por Decreto Legislativo Nº 821, por Decreto
Supremo se incluyen en el Apéndice V las operaciones consideradas como exportación de
servicios;

Con el voto aprobatorio del Consejo de Ministros;

DECRETA:

Artículo 1º.- Incorpórase en el Apéndice II del Decreto Legislativo Nº 821, el siguiente numeral:
"9. Los servicios de hospedaje y alimentación por establecimientos de hospedaje en favor de
operadores turísticos domiciliados en el país, que transfieran dichos servicios en favor de
operadores turísticos del exterior para ser utilizados por personas no domiciliadas en el país":

Artículo 2º.- Incorpórese en el Apéndice V del Decreto Legislativo Nº 821, el siguiente numeral:

"10. Servicios de mediación y/u organización de servicios turísticos prestados por operadores
Turísticos domiciliados en el país en favor de agencias u operadores turísticos domiciliados en el
exterior".

Artículo 3º.- Lo dispuesto en el Artículo Primero será de aplicación para las transferencias de
servicios que se efectúen hasta el 30 de junio de 1997.

Artículo 4º.- Mediante resolución Ministerial expedida por el Ministro de Economía y Finanzas se
podrán dictar las normas que fueran necesarias para la mejor aplicación de lo dispuesto en el
presente Decreto Supremo.

Artículo 5º.- El presente Decreto Supremo será refrendado por la Ministra de Industria, Turismo,
Integración y Negociaciones Comerciales Internacionales y por el Ministro de economía y
Finanzas.

Dado en Lima, en la Casa de Gobierno, a los diecisiete días del mes de mayo de mil novecientos
noventa y seis.

ALBERTO FUJIMORI FUJIMORI
Presidente Constitucional de la República

LILLIANA CANALE NOVELLA
Ministra de Industria, Turismo, Integración y Negociaciones Comerciales Internacionales
Encargada de la Cartera de Economía y Finanzas


  Exoneran de los Impuestos Mínimo a la Renta y Predial a las empresas de servicios de
     hospedaje que inicien o amplíen sus operaciones antes de finalizar el año 1998

                                DECRETO LEGISLATIVO Nº 820

EL PRESIDENTE DE LA REPUBLICA POR CUANTO:

El Congreso de la República por Ley Nº 26557 ha delegado en el Poder Ejecutivo la facultad de
legislar sobre las normas relacionadas con impuestos, contribuciones, aportaciones y demás
tributos y normas tributarias, a fin de establecer ajustes técnicos, simplificar y uniformizar los
procedimientos, precisar la vigencia y cobertura de los regímenes especiales, entre otros
aspectos; así como armonizar las normas relativas al delito tributario y los cambios que éstos
demanden en el Código Penal y demás normas pertinentes, entre otras materias;

Con el voto aprobatorio del Consejo de Ministros;
Con cargo de dar cuenta al Congreso de la República;
Ha dado el Decreto Legislativo siguiente:

Artículo 1º.- Las empresas de servicios de establecimiento de hospedaje que inicien o amplíen
sus operaciones antes del 31 de diciembre de 1998, estarán exoneradas del Impuesto Mínimo a
la Renta e Impuesto Predial. Asimismo, podrán depreciar a razón de 10% anual los inmuebles
de su propiedad afectados a la producción de rentas gravadas.
Mediante Decreto Supremo refrendado por el ministro de Economía y Finanzas y el Ministro de
Industria, Turismo, Integración y Negociaciones Comerciales Internacionales, se definirán las
características de lo que se entiende por ampliación para los fines del presente artículo.

Artículo 2º.- Para las empresas ubicadas fuera de la provincia de Lima y Callao los beneficios
establecidos en el Articulo 1º tendrán una vigencia de cinco (5) años computados a partir de la
fecha de inicio de sus operaciones

Tratándose de empresas ubicadas dentro de la provincia de Lima y Callao, el plazo de vigencia de
dichos beneficios será de tres (3) años contados a partir deja fecha en la que inicien sus
operaciones.

POR TANTO:

Mando se publique, cumpla, dando cuenta al Congreso de la República.

Dado en la Casa de Gobierno, en Lima, a los veintidós días del mes de abril de mil novecientos
noventa y seis.

ALBERTO FUJIMORI FUJIMORI
Presidente Constitucional de la República

ALBERTO PANDOLFI ARBULU
Presidente del Consejo de Ministros

JORGE CAMET DICKMANN
Ministro de Economía y Finanzas


 Dictan disposiciones referidas a la aplicación de beneficios tributarios a las empresas de
                        servicios de establecimiento de hospedaje

                               DECRETO SUPREMO Nº 089-96-EF

EL PRESIDENTE DE LA REPUBLICA CONSIDERANDO:

Que, el Decreto Legislativo Nº 820 ha dispuesto la exoneración del impuesto Mínimo a la Renta e
Impuesto Predial a las empresas de servicios de establecimiento de hospedaje que inicien o
amplíen sus operaciones hasta el 31 e diciembre de 1998;

Que, la mencionada norma establece que por Decreto Supremo refrendado por el Ministro de
Economía y Finanzas y por el Ministro de Industria, Turismo, Integración y negociaciones
Comerciales Internacionales, se definirán las características de lo que se entiende por ampliación
para efecto de la aplicación de los beneficios tributarios;

En uso de las facultades conferidas por el inciso 8) del Artículo 118º de la Constitución Política del
Perú

DECRETA:

Artículo 1º.- Para efecto de lo dispuesto en el Artículo 1º del Decreto Legislativo Nº 820, se
considera empresa de servicios de establecimiento de hospedaje a las comprendidas en el
Artículo 1º del Decreto Supremo Nº 012-94 ITINCI.

Artículo 2º.- Los beneficios tributarios establecidos en el Artículo 1º del Decreto Legislativo Nº
820, se aplicarán de la siguiente manera:
a) Las empresas que inicien operaciones antes del 31 de diciembre de 1998, estarán exoneradas
del Impuesto Mínimo a la Renta e Impuesto Predial.
b) Las empresas que amplíen sus operaciones antes del 31 de diciembre de 1998, estarán
exoneradas del impuesto Mínimo a la Renta e Impuesto Predial que corresponde a las nuevas
inversiones efectuadas.

c) La tasa de depreciación del 10% anual se aplicará a los bienes inmuebles existentes al inicio de
operaciones y a los que son materia de ampliación de operaciones, estando los demás bienes
sujetos a lo dispuesto en el Reglamento de la Ley del Impuesto a la Renta.

Para efecto de lo establecido en el literal a) del presente artículo, no se considerarán como
empresas que inician operaciones aquellas que:

i) hubieran sido constituidas por fusión o división de empresas o sociedades ya existentes; o
ii) adquieran bienes inmuebles que formen o hayan formado parte de activos fijos de empresas de
servicios de establecimiento de hospedaje.

En estos casos, dichas empresas sólo gozarán de los beneficios Tributarios otorgados a las
empresas que amplían operaciones, en tanto realicen las actividades consideradas como
ampliación.

Artículo 3º.- Se entiende por ampliación de operaciones, a la inversión destinada a la
construcción de nuevos ambientes o locales que sean utilizados para el servicio de hospedaje.
Asimismo, se considera ampliación a la remodelación, restauración y cualquier otra inversión
destinada a mejorar e incrementar el valor de los bienes inmuebles existentes del activo fijo de los
establecimientos de hospedaje.

Artículo 4º.- En el caso de ampliación de operaciones, las nuevas inversiones serán deducibles
de la base imponible de los Impuestos a que se refiere el Decreto Legislativo Nº 820, debiendo
para el efecto ser registradas en cuentas del activo denominadas "Inversiones para ampliación -
Decreto Legislativo Nº 820".

Artículo 5º.- El plazo de vigencia de los beneficios tributarios para las empresas que inicien o
amplíen sus operaciones será de:

a) cinco (5) años, si los establecimientos de hospedaje se ubican fuera de la provincia de Lima y
Callao, o
b) tres (3) años, si los establecimientos de hospedaje se ubican dentro de la provincia de Lima y
Callao.

Para las empresas que inicien operaciones, el cómputo del plazo se inicia en el ejercicio en que
se realice la primera prestación de servicios a título oneroso. En el caso de empresas existentes"
que amplíen sus operaciones, el cómputo del plazo se inicia en el ejercicio en que se efectúan las
inversiones para la ampliación de operaciones, de acuerdo a lo establecido en el Artículo 3º del
presente dispositivo.

Se entenderá que las empresas se encuentran ubicadas dentro o fuera de la provincia de Lima y
Callao, en función al lugar donde se realiza efectivamente la prestación del servicio de hospedaje.

Artículo 6º.- El presente Decreto Supremo será refrendado por el Ministro de Economía y
Finanzas y, por la Ministra de Industria, Turismo, Integración y Negociaciones Comerciales
Internacionales.

Dado en la Casa de Gobierno, en Lima, a los diez días del mes de setiembre de mil novecientos
noventa y seis

ALBERTO FUJIMORI FUJIMORI
Presidente Constitucional de la República

JORGE CAMET DICKMANN
Ministro de Economía y Finanzas

LILLIANA CANALE NOVELLA
Ministra de Industria, Turismo, Integración
y Negociaciones Comerciales Internacionales



                           Investing in Peru
                            A Country in the Midst of Growth

                               Measures Applied:
            Macroeconomic Adjustment and State and Economic Reforms

In 1990, Peru decisively changed direction, implementing an economic stabilization and financial
reinsertion plan aimed at eliminating hyperinflation, recovering fiscal order, balancing
macroeconomic variables and reintegrating the country to international credit flows.

The country also underwent profound structural reforms, geared at modernizing economic activity
and making it more competitive, on the basis of free market and private initiative principles.

This program -among the most comprehensive and active to be implemented in Latin America-
changed and clarified the rules of the game, opening the doors for the private sector to fully and
equally participate in all economic activities, even those previously reserved to the State.


                                   The Objectives:
                     Economic Freedom and Government Efficiency

The reforms have two complementary purposes. The first is to develop an efficient market
economy by fostering private investment and opening to foreign markets in terms of the flow of
goods, services, technology and capital, to achieve sustained development.

To this end, foreign trade, all markets and foreign investment have been deregulated.

The second aim is to create a solid and competent State, geared at providing infrastructure, basic
services, adequate justice administration services, internal order and national security. Within
this context, the role of the State has been redefined and tax administration restructured to
unleash the productive strength of private initiative.

A fundamental component of the State reform is the privatization of more than 140 State-owned
companies, which gave raise to one of the most attractive assets sales program worldwide.


                                     Results Obtained :
                                  Growth, Order and Stability

Due to the structural reforms which have been implemented, a strict fiscal policy and the
increasing level of social peace, the Peruvian economy has experienced growing stability and
production levels and has re-entered the international financial fold.
Today Peru offers investors the possibility to invest in any type of property or economic activity in
one of the freest, most open and expansive economies in the world.

An economy guided by clear and stable rules, free competition and equitable treatment of all
investments.


                                    ... in a growing economy

 Between 1993 and 1995 Peru was the most dynamic economy in Latin America, reaching an
  average annual GDP growth of 8.6%.

 From 1997 onwards, annual GDP growth is expected to reach 6% or more, boosted by heavy
  investments made in various sectors of the economy.

 At the end of 1996, GDP growth is expected to stand between 3% and 4.5%.

 The sectors which are expected to lead Peru's economic growth over the next five years are
  manufacturing, construction, fishing, agribusiness and mining.

 After years of negative growth, the oil sector is expected to develop significantly as it reaps the
  benefits of the numerous exploration, development and production contracts held with
  international companies.

 The contract for the exploration and development of the Camisea natural gas fields signed with
  the Mobil-Shell consortium, will act as an important stimulant of the Peruvian oil and gas sector.

 Exports up to the year 2000 will grow at a pace of not less than 25% per year, driven by mining,
  agribusiness and manufactured goods, and the intensive promotion of Peruvian products.

                                     ... healthy and reliable,

 Thanks to a strict fiscal and monetary discipline enforced since 1990, when inflation soared to
  7,650%, Peru managed to reduce the rate to 10.2% in 1995.

 Inflation is expected to remain between 9.5% and 11% by the end of 1996.

 For the following years, inflation is expected to continue its descent towards international levels,
  reaching 8% in 1997 and an average 6% from 1998 onwards.

 In 1995, fiscal revenues reached 1 3.5% of GDP, greatly due to the higher efficiency of tax
  authorities and a larger base of tax payers. Thanks to the strict fiscal policy imposed, a fiscal
  superavit of 0.5% of GDP was obtained.

 International reserves, which by the end of the eighties had fallen to negative levels, today
  reach US$6.8bn, thanks to the inflow of foreign investment over the last five years, mostly due
  to Peru's successful privatization process initiated in 1992.

 Peru has achieved significant progress on its way to re-establishing full ties with the
  international financial community. In this respect, in 1995 Peru reached a preliminary
  agreement for a future Brady-style restructuring of its external debt. The definitive agreement is
  expected to be subscribed by the end of 1996.


                                 ... international and dynamic,
 Private investment, in particular foreign investment, has flowed back to Peru in significant
  quantities, directed towards the telecommunication, financial, mining and oil and gas sectors.

 As of April 30 1996, foreign direct investment (FDI) reached US$5.52bn, a 338% increment
  over US$1.26bn at the beginning of 1990. Additionally, another US$6bn in future FDI is
  already on stream, mainly related to investment commitments associated to privatizations.

 One of the key elements in this rapid growth of foreign investment has been the privatization
  process. Up to mid-May 1996, 98 state-owned assets and companies had been sold, for
  approximately US$4.6bn.

 At the same time, foreign investment in the Lima Stock Exchange reached US$1.6bn, after no
  registered investment at the beginning of 1990.

 Peruvian customers have already begun to benefit of the increase in competition resulting from
  the entry of foreign banks into the local market, such as lower interest rates and new products
  like mortgage loans, consumer credit, and credit cards.

 The subscription of the Brady-type plan will reduce Peru's country risk perception and increase
  confidence. These effects will have a direct impact on the cost of financing in international and
  domestic markets.


                            ... in a climate of peace and stability.

 Today Peru offers a stable and attractive legal framework for domestic and foreign investment,
  with one of the most liberal and open regimes in the world, and equal conditions for foreign and
  domestic investors.

 Peru offers private investors clear, stable and consistent rules, in order to create adequate
  conditions for private enterprise.

 All sectors are open to foreign investment. No areas, including public utilities and energy, are
  considered strategic and consequently off-limits to foreign investment.

 Peru, as in the case of developed nations, offers all the adequate conditions and guarantees for
  business, investment and tourism.

 Peru is a country on the move, where the main guidelines of the economic policy implemented
  have gathered a widespread consensus among the population, representing the strongest
  guarantee of continuity in the process of structural reforms.

 Investors will find a broad range of legal forms for investment, including joint-ventures and
  companies with total foreign ownership.

 Peru is a country of opportunities, where the conditions are set for efficiency and higher
  productivity geared for the success of companies and workers in an truly competitive
  environment.
                   NEW LEGAL FRAMEWORK FOR INVESTMENT
The following legal framework covers the ample consensus existing in Peru on what the State's
participation should be in the economy, the relation between the public and private sectors and the
ethical and economic values that the laws should set and develop.

The law enshrines unrestricted freedom of private enterprise and initiative, limiting the State's
activity to those areas in which it is irreplaceable.

This orientation has two clear purposes. First to direct government handling to carrying out
healthy macroeconomic and monetary policies for proper development of market forces. Second,
to guarantee the economic rights of individuals and companies between themselves and towards
the State.

I.       FOUR FUNDAMENTAL LAWS

This section briefly describes the most important points of four fundamental laws making up the
new legal framework for investments in Peru. A complete and literal version of these laws is
given in the Second part of this document.

1.       Foreign Investment Promotion Law (Legislative Decree 662)

Legislative Decree 662 sets out the basic legal framework for foreign investment in Peru. This
law creates mechanisms aimed at guaranteeing foreign investors tax and legal stability, availability
of foreign currency and non-discriminatory treatment, with the purpose of stimulating an adequate
flow of foreign capital. Moreover, it recognises the right to free trade and industry, as well as free
exportation and importation.

1.1      Modalities of investment

Present legislation permits all kinds of foreign investment without requiring prior authorization.
Foreign investment should come from abroad and may be carried out in any economic activity that
generates income, in the following ways:

a) Direct foreign investment.

b) Portfolio investment.

c) Investment in goods and property located within the country.

1.2    Types of capital contributions
Contributions made in:

a) Convertible currency.

b) Goods (industrial plants; new, used and repaired spare parts; raw materials and intermediate
   products).

c) National currency with the right to remit same.

d) Debt converted into capital.

e) Reinvestment of profits.

f)    Intangible technological contributions (trademarks, industrial models, technical assistance and
      technological know-how, patented or not).
g) Resources for joint-ventures.

h) Any other type of foreign investment contributing to the country's development.

1.3     Constitution of companies

Companies may adopt the following modalities according to Peruvian law:

a) Stock company.

b) Limited-liability corporation.

c) General partnership.

d) Simple limited partnership.

e) Joint stock partnership.

f) Joint-Venture.

g) Branches.

1.4     Economic activities open to foreign investment

All economic activities are open to foreign investment with no restriction whatsoever on the
participation of foreign investors.

1.5     Foreign investors' rights

a) Foreign investors have the same rights as nationals and enjoy equal legal status with these and
   with the State.

b) Foreign investors may acquire shares, participation or property rights from national investors or
   from the Andean sub region.

c) Foreign investors may remit in foreign currency the entire amount of their profits after deducting
   the corresponding taxes, as well as all their dividends which are exempted from taxes.

d) Foreign investors may remit their entire capital in foreign currency, after deducting the
   corresponding taxes.

e) No Government authorization is required in any case whatsoever.          Remittances of foreign
   currency should be carried out through the banking system.

f) Access to short, medium and long term internal credit.

1.6     Guarantees to foreign investment

1.6.1 Investment protection agreements:
Peru signed the Constitutive Agreement of the World Bank's Multilateral Investment Guarantee
Agency (MIGA), ratified by the Peruvian Congress on April 2, 1991.

To date, Peru has signed Investment Promotion and Protection Reciprocal Agreements with
countries such as Argentina, Australia, Bolivia, Colombia, Czech Republic, People's Republic of
China, Denmark, Finland, France, Germany, Great Britain, Italy, Korea, Malaysia, Netherlands,
Norway, Paraguay, Portugal, Romania, Spain, Sweden, Switzerland, Thailand, and Venezuela.
Furthermore, Peru has signed the Covenant with the United States Overseas Private Investment
Corporation (OPIC), ratified by the Peruvian Congress on May 14, 1993.

Peru has also signed the World Bank's International Covenant on the Settlement of Investment
Disputes between States and Nationals of other States (ICSID).

The government is also interested in negotiating agreements or covenants with developed
countries to avoid double taxation.

1.6.2 Guarantee of legal stability:
National and foreign investors enjoy the following benefits derived from legal stability relating to
their investments within the country:

a) Stability of the income tax system.

b) Stability of the free availability of foreign currency regimen.

c) Stability of equal treatment by national law which does not discriminate between investors in
   companies on the basis of national or foreign participation.

To this end, before investing, foreign investors may sign a stability agreement for a maximum
period often (10) years.

To enjoy the above-mentioned benefits national and/or foreign investors shall comply alternatively
with one or other of the following requisites:

a) To invest more than US$2,000,000 in foreign currency.

b) To invest in strong currency more than US$500,000, provided that the investment generates
   more than 20 permanent jobs or exportations amounting to more than US$2,000,000 during the
   first three years of the agreement in force.

c) To acquire more than 50% of the stock of Public Companies.

Legal stability extends to the tax system on leasing contracts provided that the value of the goods
is greater than US$2,000,000. Should the value be less than US$2,000,000 but greater than
US$500,000, the investment shall generate more than twenty permanent jobs or exportations for
more than US$2,000,000 in the first three years following execution of the agreement.

National companies receiving foreign investments may also enjoy the right to tax stability, but
exclusively referring to income tax, provided that the amount of the investment is greater than 50%
of the paid up capital and reserves of the receiving company and that the investment is aimed at
expansion of productive capacity or technological improvement. The tax stability agreement may
also be signed when dealing with a transfer of more than 50% of the stock of a State-owned
company being privatized.

1.7    National Competent Entity

The National Commission of Foreign Investment and Technology (CONITE) is the agency charged
with matters relating to the signing of stability agreements and registering foreign investment.

Investments made are automatically registered in CONITE simply by filling out the corresponding
forms.

2.     Framework Law for Private Investment (Legislative Decree 757)
Legislative Decree 757 was promulgated to consolidate the Structural Reforms of the economy.
It contains provisions required for growth of private investment in all economic sectors, including
the elimination of ail legal and administrative hindrances and distortions that block economic
development and restrict free private initiative, leaving competition to the companies, an essential
element for the successful insertion of Peru into the international community.

Aside from reducing Government's interference in economic activities and introducing an
innovative system to end unnecessary measures, this Law establishes basic provisions regarding
taxes and tributes, protecting investors from arbitrary changes and encouraging a development of
productive investment in harmony with environmental conservation.

2.1    Legal stability of the economic regime

a) Economic freedom. The State guarantees free private initiative. The Social Market Economy
   develops based on free competition and free access of individuals and enterprises to economic
   activity, which includes production or trade of goods and supply of services.

b) Free prices: Prices in the economy are the result of free supply and demand. The only prices
   that may be fixed administratively are tariffs on public services.

c) Economic pluralism: Any and all companies have the right to organize in any legal corporate
   form. Access of investors or their companies shall not be limited to specific activities within the
   corporate form they adopt, with the exception of the financial system.

d) Equality of conditions: There are no reservations in favor of nor monopolies by the State in
   carrying out economic activities or exploitation of natural resources, except in the case of
   protected natural areas.

e) Property guarantee: The State may not expropriate companies nor stocks or participation in
   them, and guarantees private property without any limits other than those established in the
   Political Constitution.

f) Freedom to organize: All legal provisions fixing production modalities or indexes of productivity,
   or prohibiting or obliging the utilisation of inputs or technological processes and, generally, that
   intervene in the productive process of companies, in their type of economic activity, their
   installed capacity or similar economic factors have been abolished.

g) Distribution of profits: Whatever corporate form adopted, a company may freely agree on the
   distribution of all profits generated and the right of investors to receive the entirety of those
   corresponding to them, including those referred to in the present fiscal year.

h) Guarantee of non-discrimination: The State does not establish discriminatory treatment nor
   does it differentiate in matters of exchange, prices, tariffs or non-tariff rights among investors or
   the company in which they participate, on the basis of criteria relating to economic activity or
   geographical location.

i) Legal stability of investments: Generally the same rights and guarantees established in
   Legislative Decree 662 (points 1.5 and 1.6 above) are applicable.


2.2    Investment security in tax issues

The creation, modification and suppression of taxes, as well as the concession of exemptions and
other tax services, the determination of tax burdens, of passive tax subjects, of tax collectors and
tax withholding agents of the corresponding aliquots and of the basis of the levy shall be carried
out by Congress Law of the Republic or through a Law delegating legislative faculties (which shall
expressly determine the tax matter dealt with, the scope of the delegation and the term during
which said faculties are exercised).

Using their tax levying powers, including those of delegates, Local Governments may not create
taxes that contravene national laws or where the tax burden matter is subject to national
imposition. Taxes, tariffs and rights created by Local Governments may not burden the entry, exit
or transit of goods, merchandise, products or animals.

2.3    Investment security in administrative issues

In order to initiate an effective process to minimise bureaucracy and alleviate investors' costs and
difficulties in their relations with Public Administration, Legislative Decree 757 eliminates
administrative restrictions on investment and promotes simplicity and transparency through
provisions aimed at unifying, reducing the number and drastically simplifying all the administrative
procedures and measures.

Moreover, a procedure may only be created through Supreme Decrees, Regional Executive
Decrees or Municipal Ordinances, according to whether it deals with the Central, Regional or Local
Governments.

However, any and all Public Administration entities before which procedures are taken, shall draw
up a Single Text of Administrative Procedures (TUPA) to be updated by June 30 each year.
Compliance may only be demanded of procedures included in the corresponding TUPA.
Moreover, requests filed with different entities shall be considered automatically approved the
same day they are presented, provided that they comply with the requisites of each TUPA.
Furthermore, to complement same, formal paperwork has been made more flexible, incorporating
confidence in the good will of the interested parties.

2.4    legal security for environmental protection

The State encourages rational balance between socio-economic development, protection of the
environment and the sustained use of natural resources, guaranteeing investors due legal
security. On their part, investors are responsible for contracting duly registered and recognised
entities to carry out environmental impact studies.

3.     Law for the Promotion of Private Investment in State-Owned Companies

The public sector has been restructured to improve public finances and services, the State's role
now oriented towards essential functions: health, education, justice, security and infrastructure
works.

One of the consubstantial factors of the State's reform is the privatization of about 140 public
companies. The Law for the Promotion of Private Investment in State-Owned Companies
(Legislative Decree 674), in force since October 26, 1991, governs the privatization of said
companies and sets out procedures for their sale, liquidation, issuance of new stocks and signing
of joint-venture agreements.

All public companies are subject to privatization through:

a) Transfer of all the company's stocks or assets.

b) Capital increase by contributions to the paid up capital.

c) Joint venture agreements.
d) Sale of assets.

Moreover, Law 26250, published on November 25, 1993, authorises the payment of the sales
price of public companies subject to privatization, by a combination of monies in cash and eligible
obligations (titles to short, medium and long term foreign debts owed by Peru, that comply with
certain requisites). The corresponding percentage of each one of these means of payment shall
be determined for each particular case by the of Private Investment Promotion Commission
(COPRI).

4.     Law for the Promotion of Private Investment in Public Utility Facilities

The Law for the Promotion of Private Investment in Public Utility Facilities (Legislative Decree 758)
in force since December 13, 1991, regulates the granting of concessions to private investors for
providing services or for building and administration of public works traditionally carried out by the
State, including, although not limited to, roads, public services, education and transportation.

Concessions may be granted by special public tender or by competitive overall projects. The
latter method consists of private companies presenting a project to a State entity. The maximum
period for granting a concession is for sixty (60) years.

Decree Law 25844 -Law on Electric Power Concessions- declares as of national interest the
promotion of private investment in activities for generating, transmitting and distributing electric
power. This law grants concessionaires tax, foreign exchange and administrative guaranties
required to carry out these activities efficiently. Said guaranties shall appear in the respective
concession contracts which are for an undetermined period.

Similar to Legislative Decrees 662 and 757, this decree guarantees investors the right to free
remittance of their profits, dividends and financial resources and the right to free availability of
foreign currency. On its part, the State commits itself not to modify unilaterally the guaranties
granted.

II.    FOREIGN TECHNOLOGY

Contracts for technology transfers, licences for the use of patents, trademarks and other elements
of foreign copyrights, technical assistance, basic and detail engineering, administration and
franchises may be signed without any prior authorization by State agencies. However, the
payment of royalties requires the corresponding registration with INDECOPI, the National Institute
for the Defence of Competition and for the Protection of Intellectual Property.

Payment of a foreign company's royalties may be made to its parent company.

Parties may freely negotiate contract conditions, except for restrictive clauses set out in point 3
below.

1.     Contract contents

Contracts shall include, at least, clauses on the following aspects:

a) Identification of the parties, expressly mentioning their nationalities and domiciles.

b) Description of technology transfers.

c) Value assigned to each element of the contract.

d) Duration of the contract.
2.     Rights granted

Contracts confer the right to remit abroad royalties or stipulated payments, in strong currency and
through the banking system, after deducting corresponding taxes.

No government authorization is necessary to effect such remittances.

3.     Restrictive Clauses

INDECOPI shall not register technology transfer contracts containing clauses prohibiting or limiting
any type of exportation to Andean countries of products manufactured, according to said
contracts.

III.   EXCHANGE REGULATIONS

No exchange controls exist in Peru. No government authorization is required to carry out
exchange operations. Possession and receipt of foreign currencies is free. individuals or
corporations may remit foreign currency abroad or retain it in the country. Exporters are no
longer required to exchange foreign currencies they receive for importations.

Foreign currency investments by foreign investors may be exchanged for domestic currency
through the banking system or deposited in said system.

Residents and non-residents in Peru may open and maintain deposits in foreign currency in the
local banking system, in current accounts, savings and fixed term certificates. Similarly,
individuals and companies may hold accounts in foreign currency abroad.

IV.    LABOR REGIME

In order to strengthen competition in the private sector to generate stable and sustained medium
and long-term employment, laws governing the labour market have been substantially liberalized.
Laws have been passed to create a new regime for involuntary severance compensation,
regulating temporary employment and making labour stability more flexible. Following are
modalities of contracts valid for contracting personnel:

1.     Temporary Contracts

Contracts for initiating a new activity or transforming a company; contracts for specific needs;
occasional contracts; emergency contracts; and intermittent contracts.

The presentation of these contracts to the Ministry of Labour is sufficient for approval.

Said contracts may be in force for a maximum period of one year and be renewed for the same
period of time.

2.     Distribution of profits to workers

Legislative Decree 677 sets out provisions by which workers (employees and labourers) have the
right to receive a proportion of the profits of the company they work for. Companies may deduct
said amounts when calculating Income Tax.

Previously, workers had proportionate representation in the company's Board of Directors. Now
they have minority representation in the Administration Committee charged with increasing
productivity.
3.     Contracting foreigners

Legislative Decree 689, in force since December 4, 1991, governs the contracting of foreign staff
by local companies. A company established in Peru may contract up to 20% of foreign workers,
provided that the amount of the remuneration of same does not exceed 30% of the total salaries
and wages paid by the company.

Exemptions to such limits apply to new entrepreneur activities or businesses undergoing a
reorganization when contracting specialized, directing or managing personnel.

A labour contract is automatically approved by the presentation of same to the Ministry of Labor
and Social Promotion. It should cover a period not greater than three (3) years, and may be
renewed as often as the parties so require.

V.     FINANCIAL, INSURANCE AND CAPITAL MARKET REFORMS

The Government has expanded and substantially liberalized operations carried out by financial
institutions:

a) Interest rates and the distribution of financial resources are determined exclusively by market
   forces.

b) There exist no limits on foreigners participation in banking, insurance and underwriter activities.

c) insurance and underwriting may be freely contracted abroad by Peruvian residents.

d) There is freedom to determine policies and rates.

e) Foreign investors have access to local short, medium and long term credits under the same
   conditions as nationals.

However, a new law on the capital market strengthens the requisites for divulging and supervising
securities markets. Furthermore, the operation of private pension funds is permitted.

VI.    FOREIGN TRADE

Legislative Decree 668 dated September 14, 1991, introduced important innovations in the
regulation of foreign trade, such as free importation of ail types of goods and the elimination of any
prior governmental authorization, prohibition, control, public and private registration requisites and
other non-tariff restrictions, both on importations and exportations and marketing of products.

Importation of goods is subject to the following taxes:

a) CIF ad – valorem duties, with rates of 15% to 25%, depending on the type of goods imported.
   Nearly all importations are subject to the 1 5% rate.

b) General Sales Tax, at a rate of 1 8%.

c) Selective Consumption Tax, with rates ranging from 1 0% to 30%, applicable to a reduced
   number of products, such as cigarettes, liquor, gambling games, slot machines, and some
   automobiles, etc.

However, exportations are not subject to any taxes.          Moreover, companies exporting
manufactured products have the right to reimbursement of indirect taxes through a drawback
mechanism. Similarly, prior authorisations and licences have been eliminated, as well as other
administrative requisites regarding exportations, although a short list of goods may not be
exported.

It should be noted here that the reordering and growth of foreign trade included successful
measures taken to drastically reduce loading and unloading costs in ports and airports.

VII.    FREE ZONES

Legislative Decree 704, in force since December 12, 1991, governs all aspects relating to Free
Zones, and granting special facilities to companies established there, particularly those aimed at
exporting.

Legislation identifies four types of free zones:

1.      Industrial Free Zones

These are the most important zones for foreign trade and are devoted to industrialization of goods
and services for export. Benefits to investors in these zones are:

a) Exoneration from taxes and import duties on capital goods, inputs and other components used
   in production.

b) Faculty to contract temporary personnel through time labour contracts.

c) Freedom to keep accounting records in foreign currency denomination.

2.      Tourism Free Zones

The purpose of these is to promote national and foreign tourism in some areas of Peru. The
benefits are the same as those granted to Industrial Free Zones.

3.      Special Commercial Treatment Zones

Their aim is exclusively commercial.       They are located in border zones and in the jungle.
Benefits to investors a re:

a) All products pay 1 0% customs duties.

b) These are exonerated from the General Sales Tax (value added tax) and from taxes affecting
   sales.

c) Accounting may be carried out in foreign currency.

4.      Special Development Zones

These are zones that the Government may establish to develop certain areas of the country by
promoting investments through granting of special benefits. in order to enjoy these benefits
investors must sign an agreement with the State.

VIII.   SOME SECTORIAL LAWS

1.      Fisheries

Law Decree 25977, General Fisheries Law, has eliminated all restrictions on developing fishing
activities that are not founded on the needs for conservation of hydrobiological resources. The
Law promotes foreign investment in the sector and establishes the procedure and requisites for
obtaining licences for fishing in Peruvian waters.

2.     Mining

Legislative Decree 708, in force since December 13, 1991, establishes rules applicable to
investment in the mining sector, including:

a) Tax, administrative and free exchange stability.

b) Exemption from Income Tax.

c) Free remittance of dividends or profits.

d) No discrimination vis a vis other industries

3.     Oil

Laws 26221, 26224 and 26225, published on August 20 and 24, 1993 respectively, abolished the
State's monopoly and liberalized all provisions on investment in petroleum exploration and
production activities.

Present legislation expands the exploration period to seven (7) years, permitting contractors to
participate in different phases of the activity, and simplifies procedures for approval of exploration
and production contracts. Moreover, these laws establish measures for reducing contractors'
costs and authorise guaranties for the use of foreign currency and the remittance of profits in
foreign currency.

4.     Agriculture

The Law for the Promotion of investments in the Agricultural Sector (Legislative Decree 653)
published on August 1, 1991, derogated the Agrarian Reform laws. New legislation relaxes the
land tenure system and promotes private investment, especially through the expansion of the
agricultural front through developing uncultivated lands.

Holding and ownership of agricultural land is guaranteed by the State. Agricultural industry
disputes are handled according to the Civil Procedures Code and through ordinary legal
procedures.

Moreover, the Law promotes the development of agroindustry, re-establishing the role of the
private sector in production, trading and credits, importation and exportation of agricultural inputs.
Following are some key changes:

a) Companies may invest in agriculture and own lands. The owning and handling of lands may
   be exercised by any person or company, in equal conditions.

b) Agricultural land may be freely sold, rented, taxed and exploited in diverse associative forms,
   among individuals or legal entities, indiscriminately.

c) Foreign investment, as in any other sector, does receive the same treatment as national
   investment.

d) There are no limits to the number of hectares that private individuals or companies may own.
   However, the Executive Power has been given the faculty to enact through Legislative Decree,
   a tax on any property exceeding 3,000 hectares.
IX.    TAXATION SYSTEM

The central aim of the structural reforms undertaken in Peru is to build up a solid and efficient
State. For such purpose the role of the State in the economy has been redefined, leaving
productive efforts in hands of the private initiative and deeply reorganizing the tax administration.

The Government has made important modifications to the taxation system, reducing the tax
burden applied to income and to consumption and has replaced a long list of taxes by a few easily
administered ones.

The purpose of tax reform is to restore public investment levels in infrastructure and public
services through expansion of the tax base and the simplification of the taxative system which at
present is composed of only four taxes: Income Tax, General Sales Tax (Value Added Tax),
Selective Consumption Tax and Tariffs. This section offers a detailed description of these four
tax groups.

1.     Income Tax

1.1     General Provisions
Income Tax is an annual tax assessing income earned by taxpayers domiciled in the country,
regardless of the nationality of individuals, the place of incorporation of business concerns or the
location of the income source. This tax also assesses taxpayers not domiciled in the country,
solely in respect of their Peruvian-source income.

In the case of business, the tax in reference applies to any gains or benefits originating from
transactions with third parties, as well as from "inflation exposure calculated as of the close of
each business year".

It is worth mentioning that as from 1994 the income accruing from dividends or any other form of
distribution of the profits of companies shall not be regarded as taxable income.

The Income Tax rates are as follows:

A)     Domiciled taxpayers:
The tax payable by a business concern is determined by applying a 30% rate on their net income.

In the case of individuals, the tax is determined by applying the following scale on their net
aggregate annual income:

                     Net Aggregate Income for 1996 (US$)               Rate

                     UP to 50,000                                      15%
                     Over the amount exceeding 50,000                  30%



B)     Nondomiciled taxpayers:
The tax payable by companies is determined by applying the following rates:

a) Interest from foreign credits, provided the entry of foreign currency into the country is duly
   substantiated and does not exceed a given annual interest rate: 1%.

b) Interest paid abroad by banking and financial companies established in Peru accruing from the
   use in the country of their foreign credit lines: 1%.

c) Technical services rendered by companies: 40% of the gross income.
d) Income accruing from the lease of vessels and aircraft: 10% (over a net income of 80% for
   vessels and 60% for aircraft).

e) Royalties: 30%.

f)   Other income: 30%.

individuals must calculate their taxes by applying a 30% rate on the pension or remuneration for
personal services rendered in the country, royalties and other income.

1.2     Minimum Income Tax
It is worth stressing that business concerns domiciled in the country, whether they obtain profits or
not, are obliged to pay as Income Tax a minimum rate equivalent to 2% of the value of their net
assets.

The following are not subject to this tax:

a) Productive companies (services and goods), from the moment the company is organised or
   established until the taxable year in which they commence operations.

b) Companies absorbed or incorporated into another company by merger during the business year
   in which merger takes place.

c) Entities not subject to Income Tax.

d) Companies rendering public energy, potable water and sewer services.

e) Agrarian companies, except those engaged in agribusiness and in poultry and pork breeding.

f) Companies under liquidation, provided the term thereof does not exceed 2 years.

g) The acquisition of real estate by companies supplying accommodation services, during the
   business year in which the acquisition is made and the ensuing year.

h) Taxpayers under the Income Tax Special Regime.

On the other hand, accommodation companies organised or expanding their operations before
December 31, 1998, are exempted from the Minimum Income Tax. They can depreciate their
real estate destined to generate taxable income, with a rate of 10% per year. Such exemption
shall be valid for 2 years for companies establishing within the Provinces of Lima and Callao and 5
years for the rest.

Moreover, in order to determine the Minimum Income Tax base, the value of new machinery and
equipment acquired by production companies must be excluded during the year in which the
acquisition is made and the ensuing one, when such machinery and equipment are, at the most, 3
years old.

Banking and financial enterprises calculate their 2% Minimum Income Tax based on 50%
of their net assets.


1.3     Tax Exemptions
The following items, among others, are exempt from Income Tax until the year 2000:
a) Capital gains obtained from the trading of stocks and securities on the Floor of the Stock
   Exchange, including those obtained in Products Stock Exchanges authorised by CONASEV.

b) Compensation for length of service, as contemplated in the Law.

c) Any type of fixed or floating interest rate, in national or foreign currency, paid on deposits with
   national financial institutions, as well as capital increase of deposits and other charges in
   national currency generating adjustable Certificates of Deposit. Interest on deposits and
   charges made by financial or banking institutions, as well as interest accruing from bonds
   acquired by banking and financial entities, are not included.

d) Interest on and adjustment of principal accruing from mortgage bonds in accordance with the
   relevant laws.

1.4    Entry of Foreign Citizens to the Country
Foreign citizens entering the country:

a) For a limited period of time with a business visa who, during their stay in the country, engage in
   activities not generating Peruvian-source income, must fill out a form, which will be regarded as
   an affidavit, and must be handed to the migration authorities upon leaving the country.

b) For a limited period of time with a business visa who, during their stay in the country, engage in
   activities generating Peruvian-source income, must fill out a form, which will be regarded as an
   affidavit, stating therein the amount of such income, and must be handed to the migration
   authorities upon leaving the country, along with the corresponding tax retention certificate
   issued by the payer of such income. Should the payer of such income fail to retain taxes for
   being a nondomiciled enterprise, the taxpayer shall be obliged to directly pay such taxes and
   attach the corresponding receipt to the affidavit in reference.

c) With a business or a non-immigrant resident visa, holding a work contract approved or
   submitted to the pertinent labour authorities, shall hand to the migration authorities, upon
   leaving the country, a letter of guaranty from their employers or the legal representatives of the
   latter, certifying thereby to have retained the corresponding taxes and that, in any event, they
   take full responsibility for any tributes due for such concept.

2.     General Sales Tax

The value added tax levies the following:

a) Sale of chattels in the country.

b) Supply or use of services in the country.

c) Construction contracts.

d) The first sale of real estate made by the corresponding building company or its related
   companies .

e) Import of goods.

The general rate is 16%, which becomes 18% by application of the Municipal Promotion Tax.

The General Sales Tax paid on the acquisition or importation of goods or services, or under
building contracts, shall constitute tax credit against the gross tax.
Companies exploiting natural resources are subject to a special regime for the anticipated
recovery of Sales Tax.

2.1    Non-taxable Items

The following transactions, among others, are not subject to the General Sales Tax:

a) Export of goods and services. The Law contains a list of operations regarded as service
   exports. It is worth emphasising among these consulting, technical assistance, temporary
   assignment of industrial property, data processing, financing, insurance and reinsurance
   operations, etc.

b) Transfer of used goods by individuals or enterprises not engaged in business activities.

c) Transfer of goods resulting from the reorganization or transfer of companies.

d) The amount equivalent to the CIF value, in the transference of foreign goods performed before
   customs clearance.

e) Royalties payable under the license contracts entered into by PERUPETRO to authorise the
   exploration and exploitation of hydrocarbons.

f) Building contracts executed abroad.

2.2    Tax Exemptions

The General Sales Tax does not assess the following:

a) Domestic sales and the import of certain goods specified in the Law, until December 31, 1996.
   It is worth mentioning, among these, fish and other fishery resources, farm produce, books and
   certain textile fibbers.

b) Supply of the services listed in the Law, until December 31, 1996. These are passenger and
   cargo transportation, life insurance policies and certain credit services.

c) Industrial enterprises established in Borderline Areas or in the jungle. In these cases, the
   Municipal Promotion Tax is 18%.

3.     Selective Consumption Tax

The Selective Consumption Tax levies the following:

a) Domestic sales by producers and import of spirits, beer, cigarettes, gambling games, slot
   machines, mineral and carbonated water and fuels.

b) Domestic sales by the importer of the aforementioned goods.

3.1    Rates

The Selective Consumption Tax rates range between 10% and 30%, depending on the type of
goods involved, excepting the rates applicable to fuels, which are higher.


3.2    Benefits

The following are exempted from the Selective Consumption Tax:
a) Imports and sales of diesel or residual petroleum to concessionaire companies providing
   electric power services and self-generating companies until December 31, 1999. In both
   cases, concessionaire and self-generating companies must be authorised by Supreme Decree.

b) Imports and sales of coal and/or natural gas, until December 31, 1999.

The aforementioned tax exemptions shall remain in force until December 31, 1996.

Moreover, the income earned by banks and financial and credit institutions is not subject to this
tax.

4.     Tariffs

Peru has implemented an open and liberal foreign trade policy to make the domestic industry
more efficient and competitive, to increase commercial flows, investment and employment and to
reduce inflation. Among the more significant measures related to foreign trade, the simplification
and reduction of a number of tariff levels, once in force, undoubtedly stand out.

At present, there only exist two CIF ad-valorem rates for import tariffs: 15% and 25%. 98% of
imported goods are subject to the 15% tariff, while the remaining 2% are subject to the 25% tariff.

In general, raw materials, inputs and capital goods are affected by the first tariff, while
consumption goods by the second one. For some selected products of the agricultural sector,
tariff surtaxes of a variable extent have been established.

Despite the reduction of the average rate, the customs collection has steadily increased, due to a
greater commercial flow.

The use of a sole 15% tariff is being considered in the medium term.

On the other hand, but also related to foreign trade, it is worth to mention here that a system of tax
drawback to exports applicable to the tax paid by the exporter when purchasing raw materials and
inputs used to manufacture goods for exportation has been implemented. This tax drawback is
made effective through a Negotiable Credit Debit system.



                                              Peru
                                A Country on the Move

                                       Peru at a Glance
Peru is on the move. From social chaos, hyperinflation and negative GDP growth in the late
1980s, today the country has achieved tranquillity, record growth and low inflation. This dramatic
change is the result of a strong anti-terrorism policy, together with a three-pronged economic
program which sought to stabilise the economy, establish an open and free market, and
reintegrate the nation into the international financial market. Today, peace has returned to Peru
and the economy is growing strongly. Now, Peru has:

Established Strong GDP Growth
From 1993 to 1995, Peru was Latin America's fastest growing economy with 8.9% average real
GDP growth. In the same time period, average real GDP growth for Chile was 6.4%, Colombia
5.3%, Brazil 4.7% and Argentina 2.9%. Peru achieved the world's highest growth rate in 1994 at
12.9% and expects to sustain an average 6% annual GDP growth from 1997 through the end of
this decade.

Achieved Low Inflation
The implementation of an austere fiscal program together with a tighter monetary policy reduced
inflation to 10.2% in 1995, the lowest in 23 years. Inflation is expected to drop to about 6% by the
end of the decade.

Increased Foreign Investment
The stock of foreign investment increased from $1.3 billion in 1990 to $11.1 billion in July 1996,
fueled by Peru's strong privatization program. Peru signed the largest contract in its history in
May 1996 -for $2.8 billion- with a consortium formed by Mobil and Royal Dutch Shell to develop
the vast Camisea natural gas fields. New measures have been introduced in order to promote
foreign investment including the recent creation of industrial, trade and export tax-free zones.

Increased International Trade
Investment and the demand for capital and intermediate goods have led to increased trade with
the international community. Exports will have grown from $3.3 billion in 1990 to an expected
$6.1 billion in 1996. Imports will have increased from $2.9 billion to an expected $7.5 billion along
the same period.

Stabilized the Currency
Strong economic growth, low levels of inflation and growing foreign exchange reserves have
produced a stable currency.

Improved Foreign Exchange Reserves
Net foreign reserves have grown from $0.5 billion in 1990 to a record high level of $8.5 billion in
August 1996.

Reintegrated Into the International Financial Community
Peru has reintegrated itself into the international financial community to allow the free flow of
capital, reschedule its debt and obtain new loan commitments through accords with the
International Monetary Fund, the Inter-American Development Bank and the Paris Club as well as
a Brady term-sheet agreement with commercial banks. As a result, Peru has secured over $5
billion in credit.

Raised the Standard of Living
Economic growth, the reduction of inflation and an active anti-poverty campaign have helped
foster a better standard of living for all Peruvians, particularly the nation's poorest. Over the last
three years, consumption and wages have grown 22% and 29.9% respectively in real terms.
More than 1.3 million jobs have been created and unemployment has been slashed from 9.9% in
1993 to 7.1% in 1995.

Increased Social Expenditure
Social expenditure has increased from 18.6% of the national budget in 1990 to 36.5% in 1995.
As a percentage of GDP, social expenditure has more than doubled, from 2.7% to 5.8%, for the
same years. Public expenditure in education and health is at its highest for the last 15 years.

Reduced Its Fiscal Deficit
The fiscal deficit dropped from 6.1% of GDP in 1989 to a 2.9% surplus in 1994 and a 0.6% deficit
in 1995.

Developed A More Diversified Economy
Reforms and the privatization process have produced a more diversified economy which will be
the basis for future economic growth. Today, Peru's GDP is fueled by agriculture, fisheries,
mining, manufacturing, construction and services. As the government reduces its involvement in
the economy through privatization, the increase in economic activity will spark even greater
diversification. Once privatization is completed, the public sector should account for no more than
5% of GDP.

Defeated Terrorism
Peru's effective anti-terrorism effort, launched in 1990, has restored peace and tranquillity to the
nation. The leader of the Shining Path terrorist organization has been captured as well as most
top leaders in Shining Path and the MRTA. The terrorist threat has been replaced by new
optimism for the future.


                                     Economic Reforms
Peru has undergone a dramatic transformation from economic disarray and hyperinflation to
achieve record high growth and low inflation. Over the last six years, Peru has opened and
deregulated its economy by eliminating price controls and restrictions on capital flows, freeing the
exchange rate and interest rates, liberalising trade, streamlining taxes, reducing tariffs, reforming
the financial and insurance systems, renegotiating foreign debt and securing agreements to insure
investments. Some of the key reforms include:

Investment Reform
Peru has enacted a number of reforms to create one of the most favourable and liberal
environments for foreign investment. The 1991 Foreign Investment Promotion Act ensures equal
treatment for national and foreign investments, allows the repatriation of capital without restrictions
and provides long-term tax stability for foreign investors. In addition, Peru has signed a number
of international agreements to insure foreign investments against commercial and non-commercial
risks, including accords with the Multilateral Investments Guarantee Agency (MIGA), Overseas
Private Investment Corporation (OPIC), International Covenant on the Settlement of Investment
Disputes (ICSID) and many direct bilateral agreements.

Foreign Trade Reform
Trade policies have been liberalized to guarantee the free flow of goods and services. Tariffs
have been simplified with more than 98% of imports subject to a 15% duty and the remaining 2%
subject to a 25% duty.

Memberships & Partnership
The Andean Community (GRAN), Andean Trade Preference Agreement (ATPA), World Trade
Organization (WTO), Generalised System of EU Preferences for Andean Countries (GSP-EU),
Generalised System of Preferences of Japan (GSP-Japan), Generalised System of Preferences of
the United States (GSP-USA) and Latin America Integration Association (ALADI).

Privatization
Since 1991, Peru has launched an aggressive and broad privatization program to increase the
competitiveness and efficiency of state-owned companies. From 1991 to August 1996, 100
publicly-owned businesses and assets in telecommunications, banking, mining, oil and petroleum,
agriculture, shipping and several other industries have been privatized for a total of US$6.3 billion
plus investment commitments amounting to US$ 3.6 billion. Approximately 50 entities will be
privatized by the year 2000.

Tax Reform
The tax system has undergone a major overhaul, streamlining taxes into four groups -income,
sales, imports and municipal- and restructuring the tax administration to improve tax collection.
Corporate income tax is 30%. Companies signing contracts with the government for certain
investments in intensive natural resource development, and/or exploration projects, are exempted
from the sales tax until related operations come on line. For individuals, the income tax is 15% to
30%. Sales tax (VAT) is 18%.
Restructuring External Debt
Since 1990, Peru has been negotiating its foreign debt and working to reintegrate into the
international capital markets. Through agreements with the International Monetary Fund, the
Inter-American Development Bank and the Paris Club, Peru has secured US$5.1 billion in credit.
The government has finalized a Brady term-sheet agreement which will make it possible to reduce
the country's commercial debt by approximately 50%.

Currency Exchange Reform
Peru's foreign currency exchange regime is entirely free and possession and redemption of
foreign currency is guaranteed. Exporters are not obligated to exchange foreign currency they
receive for exports.

Reform of Banking, Insurance and Capital Markets
The Peruvian financial system has been substantially deregulated to enhance its competitiveness,
promote growth and foster savings and diversity of services. Some of the key reforms include:
freeing interest rates, lifting quotas on commercial lending, and opening banking and financial
sectors to private investment and ownership. In addition, there are no barriers to foreign
participation in banking, insurance and reinsurance activities. Foreign investors have access to
local credit facilities under the same conditions as Peruvian nationals.

Labour Reform
Peru has substantially liberalized its labour laws to eliminate excessively constraining regulations,
strengthen competitiveness and allow companies greater flexibility. Labour relations have been
completely deregulated, thus reducing state intervention in labour disputes and expanding parties'
freedom to negotiate. These measures have increased labour productivity and improved relations
between workers and management.

Changes In Public Sector
Along with the privatization of a number of state-owned companies, the public sector has been
restructured to improve public services and finances by permitting private investment through
concessions to private enterprise of public services or works -such as roads, education, utilities-
for up to 60 years.

Pension Reform
Peru established a private pension system which eliminates the government's previous monopoly
on providing pension, disability and death benefits.

				
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