18 Oct 17

Peru’s economy and its potential for fleet leasing

Peru is one of Latin America’s fastest growing and least volatile economies. Although small and yet to ripen, a fleet industry is emerging. What’s good for the fleet industry is good for corporates that need vehicles.

Alongside a stable economy, what Peru has going for it is investment in infrastructure, a cut in red tape and economic diversification. Multinational companies, attracted by its stability, are moving in, GDP growth has outpaced the rest of Latin America despite being downgraded in June by the central bank. The country also has one of the lowest inflation rates (2.8%) compared to Argentina (21.5%) and Mexico (5.1%).

Influence of Peru’s mining sector

President Pedro Pablo Kuczynski, who took office in July 2016, is aiming to boost economic growth, attract investment plus address longstanding problems and unrest in the mining sector, the country’s largest export industry. In Peru, mining accounts for 15% of tax revenue and 60% of exports.

Investments made in mining during the commodity boom have enabled production to continue growing, despite lower commodity prices. The country’s unemployment rate is decreasing (down from 7.7% in March to 6.4% in September). Until recently, a large majority of the labour force in the mining sector was employed on a casual basis and not on the company payroll. One of President Kuczynski’s pledges is to take the percentage of workers in the formal labour market from 30-60%.

Free trade opens up market for vehicles in Peru

Another advantage for corporates is that Perus has established new free trade agreements with 38 countries including the Association of Southeast Asian Nations (ASEAN), China, Europe and the NAFTA countries. This has opened up the market for vehicle acquisition and made it more competitive overall.

A number of international fleet leasing companies such as Arval Relsa, ALD and AVIS (through licensee Mareauto) have set up shop in Peru to offer more flexible ways to acquire and manage a fleet of vehicles than simply buying them outright. This is attractive for corporate customers enabling them to keep capital in the company, which they can invest elsewhere. There are other benefits too, such as reduced risk of vehicle ownership and implementation of a more standardised fleet policy.

There are still issues to overcome. Peru has one of the worst records for road safety, for example, and the mindset for buying vehicles outright is still ingrained, which makes selling the concept of outsourcing challenging but its potential is healthy. 

Authored by: Alison Pittaway