Emerging Markets / February 21, 2017

Food Markets and Agricultural Production in Peru

Peru is a mid-size Latin American country with a total territory of more than 1.2 million square kilometers, which is slightly larger than Alaska. Peru has a total population of almost 31 million citizens and is located along South America’s Pacific coast. Likewise, Peru is a member of the Pacific Alliance regional bloc, which brings it together with Mexico, Colombia, and Chile into an economic union. With an annual gross domestic product (GDP) of approximately US$400 billion, the Peruvian economy is divided into 8% agriculture, 34% manufacturing, and 58% services. However, the agriculture industry utilizes some 19% of the national territory, while another 53% is forested. Meanwhile, the Peruvian agricultural industry employs up to 26% of the working population, while manufacturing employs about 17% and services employ another 57%.

In terms of heavy industry, Peru produces minerals, steel, metal, petroleum, natural gas, fishing, cement, glass, textiles, clothing, food, beverages, and wood products. Within the agriculture industry, Peru’s most important products include artichokes, asparagus, avocados, blueberries, coffee, cocoa, cotton, sugarcane, rice, potatoes, corn, plantains, grapes, oranges, pineapples, guavas, bananas, apples, lemons, pears, coca, tomatoes, mangoes, barley, and quinoa. In terms of trade, Peru’s most important partners are China and the United States. Currently, the US-Peru Trade Promotion Agreement facilitates trade between these two countries. This article explores the status of agricultural markets in Peru.

Food Markets and Agricultural Production in Peru

Known as one of Latin America’s best culinary destinations, Peru has a very important food processing industry. During 2016 alone, the US exported over US$230 million in food processing ingredients towards Peru. Within the country, there are over 2.500 food-processing companies and, in 2016, the top fifty reported sales totaling more than US$23 billion. Similarly, within the beverages sector alone, Peru recorded sales equivalent to almost US$5 billion during 2016.

Another Peruvian market with a large US presence is that of consumer ready food products. Accounting for more than 20% of this market sector, the US exports an average of over US$200 million in consumer food products to Peru every year. This ongoing phenomenon is due to a variety of factors, including the growing middle class in Peru, the expanding consumer base that is familiar with US food products, and the increasing amount of supermarkets serving as outlets for high value foodstuffs.

Peru is also a producer and consumer of biofuel ethanol, which is mainly produced from sugarcane and corn. During 2017, Peru is expected to produce some 112 million liters of ethanol. This amount represents a step towards the progressive recovery of Peru’s domestic production after the closing of an ethanol production plant in 2015. Meanwhile, Peru’s ethanol consumption for 2017 is forecast at 177 million liters, which means that the country relies on biofuel imports to meet its domestic demand.

Peru also consumes biodiesel as a biofuel, an energy source that the country both produces and imports. In order to protect its domestic biofuel industry, Peru levies import tariffs on biofuel imports, which originate mainly from neighboring nations, such as Argentina and Brazil. Peru’s biodiesel production for 2017 is expected to reach 60 million liters, while its imports should account for up to 350 million liters.

(Read more about Rivers and Agriculture in South America)

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