PERU Trends and Developments Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
Navigating Political Uncertainty: Investment Protection in Post-2020 Peru Peru has experienced an unprecedented political cri- sis since November 2020, with six presidents suc- ceeding one another within five years. This institu- tional instability has fundamentally transformed the landscape for foreign investment, creating a regula- tory uncertainty that poses unique challenges for both current and prospective investors. Despite maintain- ing relatively stable macroeconomic indicators and a formally investment-friendly legal framework, political volatility has generated abrupt shifts in public policies, unexpected regulatory modifications, and a significant increase in perceived investment risk. This context has sparked renewed interest in protec- tion mechanisms available under international invest- ment law. Foreign investors are reassessing their cor- porate structuring strategies, while the Peruvian State faces a growing number of dispute notifications and threats of international arbitration. The intersection between domestic political crisis and Peru’s interna- tional obligations under its multiple bilateral invest- ment treaties and trade agreements creates a com- plex scenario requiring careful analysis of emerging trends and their practical implications. The political context: instability as the new normal The presidential succession that began with Martín Vizcarra’s impeachment in November 2020 marked the start of an exceptional period of political turbulence. The brief presidency of Manuel Merino, followed by the governments of Francisco Sagasti, Pedro Castillo, and currently Dina Boluarte, has created an environ- ment where policy changes can occur suddenly and unpredictably. Each administration has arrived with its own priorities and approaches to foreign invest- ment, from Castillo’s attempts to renegotiate mining contracts to Boluarte’s efforts to restore private sector confidence. This volatility has manifested in frequent changes within ministries that are crucial to foreign invest- ment. The Ministry of Energy and Mines, for instance, has seen more than ten ministers since 2020 ‒ each bringing different approaches to mining and energy projects. Similar turnover has occurred in the Ministry of Transport and Communications and the Ministry of
Economy and Finance, as well as specialised regula- tory agencies. This ministerial instability not only hin- ders policy continuity but also complicates negotia- tions between investors and the State, as agreements reached with one administration may be questioned or ignored by the next. Congress has added another layer of complexity, with a fragmented composition resulting in contradictory and often populist legislation. Legislative initiatives directly affecting foreign investors ‒ such as proposals to modify the mining tax regime or change conditions of existing concession contracts ‒ emerge frequently and unpredictably. This erratic legislative dynamic contributes to an environment where the rules of the game appear to be under constant revision. Regulatory changes and oscillating public policies Abrupt shifts in public policies have been particularly evident in key sectors of the Peruvian economy. In the mining sector, policies have oscillated between attempts to increase state participation in mining rev- enues and efforts to attract new investment through fiscal incentives. The Castillo government proposed creating a state mining company and raised the pos- sibility of renegotiating existing contracts, whereas the current administration has attempted to return to more market-friendly policies ‒ albeit with limited success in restoring confidence. The hydrocarbons sector has experienced similar volatility, with changes in exploration and exploitation promotion policies, modifications to fuel pricing mech- anisms, and recurring debates about Petroperú’s role. The Talara refinery, a flagship project with significant cost overruns, exemplifies the challenges of maintain- ing coherent policies across multiple administrations. Investors in the sector have faced unilateral changes to contractual conditions and new regulatory obliga- tions implemented with minimal prior consultation. In infrastructure, the Odebrecht scandal continues to reverberate, with each new administration adopting different approaches to existing concession contracts and PPP mechanisms. Some projects have been suspended or cancelled, while others have faced attempts at forced renegotiation. The lack of clarity regarding state policy towards existing concessions
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