Manufacturing industries are responsible for 14% of Peruvian GDP, 10% of the labor market and 8.8% of enterprises in Peru. The food industry, chemicals and ironworks represent more than 50% of this sector; although other sub-sectors such as the textile industry and wood furniture are also important because of the role they play for poor families that want to start their business as a way to overcome poverty as entrepreneurs.
In the last decades, the manufacturing sector has contributed steadily to the growth of the Peruvian GDP. In the last decade alone, the sector has increased in 50%, led by a significant increase of nearly the same rate in the chemicals industry (particularly due to investments in oil refineries) and a more moderate but still significant growth of the food industry. Other subsectors such as metal products; wood and furniture; and, ironworks have more than doubled in the same period.
Whilst food industry, chemicals and ironworks represent more than 50% of the manufacturing output; nearly one third of companies are in the clothing producing textiles in fine cotton and high-quality wool (alpaca and vicuña), but also apparels and garments for domestic and international markets.
Micro and small enterprises, this is companies with less than 10 employees, represent more than 95% of businesses registered in manufacturing activities. Success stories of textile companies such as Topitop and several companies in the “Gamarra cluster” draws the attention of entrepreneurs that see in this subsector an opportunity for self-employment and to escape poverty.
The relevance of this sector for poor families with an entrepreneurial spirit demands specific attention in social inclusion policies. Hence, the Peruvian government has designed a Production Diversification Program which focuses in three main areas: exports, investments and innovation.
In fact, new innovation policies have been in place aiming to improve the conditions for research and development with a business edge. According to the National Survey on Innovation 2012, more than 50% of companies that participated in the survey claimed to have engaged in some sort of innovation investment in the last 4 years, mostly in the food industry. However, most reported expenditure in innovation has been in acquiring new technology and training. To see a full report of this Survey click here (in Spanish only).
In order to induce new investments in R&D as part of the innovation processes, the government has improved the existing legislation. As a result, available public funds have increased 15 times compared to 2007, tax rebates have gone from 100% up to 175% of expenses in innovation, and a new program called “Innovate Peru” was launched. For more information on innovation policies, you can find a presentation in Spanish here.