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Market Newsletter : Peru Has Resources, Needs Investors : Rebel warfare, a sluggish bureaucracy and an ailing economy discourage outsiders. But the Fujimori government appears determined to attack those problems.


LIMA, Peru — President Alberto Fujimori's fledgling administration promises more encouragement for foreign investors than they have received in Peru since the 1960s. And the rich resources of this country, nearly as large as Alaska, offer many potential opportunities for investment.

A depressed economy, infrastructure problems, guerrilla violence, labor laws and bureaucratic red tape present formidable obstacles, making it difficult for Peru to compete for scarce capital. But if the government can show progress toward solving these problems, investing in Peru may become an attractive option for some kinds of businesses.

"I hope we can make good deals with the United States," Fujimori told the American Chamber of Commerce in Lima recently. He added: "1991 should be the year of investment in Peru. . . ."

The Background

Alan Garcia, the previous president, followed the nationalist and "anti-imperialist" precepts of his party, the American Popular Revolutionary Alliance. In 1986, the government nationalized the oil interests of Enron Corp., a U.S. company. Garcia's administration also had disagreements with the two largest U.S. investors, Southern Peru Copper Corp. and Occidental Petroleum, over profit remittances, taxes and production pricing.

But government policy began to change even before Garcia left office last July. After new provisions in the country's petroleum law improved terms for investors in 1987, Occidental expanded exploration activities and other oil companies began to show interest in coming to Peru. Mobil signed an exploration contract in late 1989. . . .

The Pace Quickens

Fujimori's administration allowed the expiration of a 1986 decree that prohibited the repatriation of profits by many foreign investors. The government is pushing a bill in Congress that would lift many other restrictions on foreign investors and simplify procedures for investment.

The Peruvian administration is negotiating for an agreement with the U.S. government's Overseas Private Investment Corp. that would provide insurance for American investors against expropriation. An expected settlement between Peru and Enron Corp.'s private insurer on compensation for the company's nationalized oil interests will help open the way for an OPIC agreement.

Investment Opportunities

A summary of some potentially fertile areas for investment in Peru:

* Petroleum. Peru is self-sufficient in oil and has been an exporter in the past. In the early 1980s, Peruvian production reached 180,000 barrels a day but has sunk to about 130,000 barrels a day. Prospects for new reserves are seen offshore, where Enron made its strike, and on the eastern slope of the Andes, where Mobil will be drilling. Union Oil and Conoco also have expressed interest in Peruvian exploration contracts.

* Natural gas. British-Dutch Shell discovered a huge gas field in eastern Peru called Camisea, but no agreement was reached between the company and the Garcia administration on exploitation. Fernando Sanchez Albavera, Fujimori's minister of energy and mining, has said he wants to begin negotiations with Shell or other companies early in 1991.

* Mining. Peru has major reserves of copper, zinc, lead, silver, anthracite coal, phosphate and other minerals. The only large-scale private mining company not nationalized by previous governments was Southern Peru Copper. Mario Samame, former minister of energy and mining, has proposed a $7-billion mining investment program that he says would quintuple the annual value of Peru's mining production to $10 billion.

* Fisheries. Peru is blessed with cold, productive sea currents and once was the world's leading exporter of fish meal. Soviet factory ships are currently licensed to exploit much of the offshore area, but the Fujimori administration is expected to look for other arrangements, including foreign investment in Peru's fishing industry.

* Tourism. The famous Inca ruins at Machu Picchu are only a small part of the archeological wealth that is a potential tourist magnet for Peru. The country also boasts sunny beaches with fine surfing, Andean scenery and climbing challenges, teeming tropical jungles, and many other attractions for foreign tourists--and foreign investment in tourism.

* Agriculture. Arable land accounts for only about 6% of Peru's territory. But tropical lowlands have untapped potential for producing exportable fruits and vegetables, and some analysts say investment in wells and drip irrigation could make the southern desert bloom. Peruvian asparagus is already going to the U.S. market, and now that the U.S. Department of Agriculture has approved a hot-water method for treating fruit against the Medfly and other infestations, Peruvian mangoes will soon be on their way.

* Textiles. Peru's high-quality cotton and luxurious alpaca wool make textile production another possible target of foreign investment.

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