The economy in Peru has been significantly impacted by the COVID-19 pandemic

The economy in Peru has been significantly impacted by the COVID-19 pandemic

Rebecca Cline

The country that I chose to analyze for the Walmart expansion is Peru. Peru is located in a country in western South America near Ecuador, Bolivia, and Brazil. The capital of Peru is Lima, which is where I would recommend beginning the expansion. The economy in Peru has been significantly impacted by the COVID-19 pandemic. In 2020, there was a decrease in GDP, but the decrease in the fourth quarter of 2020 was a softer decline than the rest of the year at 1.7% (Peru GDP, 2021). For the first quarter in 2021 the GDP was 4%, which is a significant improvement from 2020 (Peru\’s BCP sticks to bullish 2021 GDP growth, 2021). Walmart’s expansion into this market is still risky due to the current economy, but with the increase in GDP over the last quarter, it is a great indicator that the economy is rebounding and will come back to pre-pandemic levels.

The trade growth in Peru is 4.5% compared to that of the world with is 3.5% (Peru trade statistics, n.d.). “Peru exports of goods and services as percentage of GDP is 25.38% and imports of goods and services as percentage of GDP is 23.54%” (Peru trade statistics, n.d.). Peru has an agreement in place called the Peru Trade Promotion Agreement Governmental, which allows for “U.S. consumer and industrial goods exports to Peru … no longer (being) subject to tariffs” (Peru – Import Tariffs, n.d.). Approximal 90% of tariffs for agricultural product US exports have been eliminated and the tariffs that remain are planned to be phased out by 2026 (Peru – Import Tariffs, n.d). For Walmart’s expansion to Peru, the lack of tariffs is great news for Walmart due to the potential exportation of agricultural produce that is a surplus for the current stores to the Walmart stores in the United States. The lack of tariffs will allow Walmart to be more profitable in their expansion.The exchange rate from the United States Dollar to the Peruvian Sol is 3.67 (Convert 1 USD to PEN, 2021). This would allow the United States to enter Peru for a cheaper rate, although if the United States decided to leave, the sale would be less valuable. Walmart would be able to make a substantial entry into Peru without investing a great deal of money.One other concept that needs to be examined when looking to expand Walmart to Peru is the average income. The average income in Peru varies greatly based on age, gender, and economic sectors (Pasquali, 2020).  While the average income for males in Peru is 2,036 Peruvian Sols per month, the average income for women is 1,485.60 Peruvian Sols per month (Pasquali, 2020). Due to the cost of labor, Walmart’s expansion into Peru could be positive not only for Walmart, but also the county due to the jobs that would be offered. Although there is some uncertainty due to the pandemic, the rebound of Peru’s GDP shows that a expansion in Peru could be profitable for Walmart.

Resources:

Convert 1 USD to PEN. Xe. (2021, May 16). https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=PEN.

Pasquali, M. (2020, June 19). Average monthly income in Lima, Peru by gender 2020. Statista. https://www.statista.com/statistics/820323/average-monthly-wage-lima-peru-gender/#:~:text=Peru%3A%20average%20monthly%20income%20in%20Lima%20by%20gender%202020&text=Between%20December%202019%20and%20February,550%20soles%20more%20than%20women.

Peru – Import Tariffs. International Trade Administration. (n.d.). https://www.trade.gov/knowledge-product/peru-import-tariffs.

Peru GDP – Peru Economy Forecast & Outlook. FocusEconomics | Economic Forecasts from the World\’s Leading Economists. (2021). https://www.focus-economics.com/country-indicator/peru/gdp#:~:text=GDP%20declined%20at%20a%20softer,21%20years%20of%20uninterrupted%20growth.

Peru trade statistics. WITS. (n.d.). https://wits.worldbank.org/CountryProfile/en/PER.

Peru\’s BCP sticks to bullish 2021 GDP growth. BNamericas.com. (2021, April 20). https://www.bnamericas.com/en/news/perus-bcp-sticks-to-bullish-2021-gdp-growth-forecast#:~:text=Peru\’s%20economy%20turned%20a%20corner,the%20same%20period%20of%202020.