Companies still drawn to Peru, despite obstacles

By Ding Qingfen (China Daily) Updated: 2012-12-11 09:49

Rising to challenges

Despite the nearly constant presence of labor tensions, few Chinese companies, especially those in the mining industry, are eager to leave Peru.

By the end of September, the Peruvian economy had shown 37 consecutive months of growth.

The oil and gas company PetroChina Co Ltd has two oil management projects in Peru. They were started in 1993 and 2003, and the company has only needed from four to five years to recoup its investment in them, said Zhang Xuan, vice-president of SAPET Development Peru Inc - one of the two companies PetroChina has in Peru.

"Doing business far away from China is a bit hard, but we are here now," Zhang said. "Generally speaking, things are going well."

The company's Peruvian projects are due to expire in 2015. PetroChina is now planning to either seek to have that date pushed back or to enter into negotiations with the Peruvian government to bid for the projects again.

Beyond that, "we are also looking for new opportunities to sustain our expansion here", Zhang said.

Fulfilling those plans won't necessarily be easy.

"We have to meet the new demands that the local government and community have on a wide range of issues: politics, rules and regulations, finance and environmental protection," Zhang said.

Despite Chinese companies' complaints about local business conditions, Peru remains fairly attractive to investors from around the world.

A recent report by the investment and risk management service provider BlackRock Inc suggested Peru is the second-most-common destination for foreign direct investment into Latin America.

From January to June, Peru's FDI increased by 31 percent year-on-year to $5.44 billion, which was a much larger amount than that for the whole Latin American region during the same period. In 2011, Peru attracted $8.2 billion worth of FDI.

"Like us, companies from many other foreign countries are also facing problems here," Gao said.

"So we have to adjust to the conditions, and that leaves Chinese companies such as this one a lot of room for improvement."

While Chinese companies are investing more overseas, the Chinese government is reminding them to be responsible. In May, various central government departments released guidelines calling on Chinese companies to fulfill their social responsibilities and provide benefits to communities abroad.

Carlos Posada Ugaz, Peruvian vice-minister of Foreign Trade, defended Peru's investment climate.

"We open our arms to all Chinese companies," he said. "Peru's FDI policy aims to protect laborers' interests and companies' benefits as well."

Ugaz called on Chinese companies to "do more to create social welfare and create more benefits in the local community in Peru, on top of reaping profits in the country, such as building more hospitals, education centers and some other infrastructure facilities.

"Chinalco sets a good example for Chinese companies."

So far, Shougang Hierro has spent $45 million on more than 10 environmental protection projects related to wastewater, dust and atmospheric pollution, and provided $5 million in donations. The company has spent $7 million on infrastructure in Peru, and is arranging to have another $6 million go to the same purpose.

Contact the writer at [email protected]

Special Coverage