Peru agricultural production rising though regional disparities persist

Peru’s agriculture sector has enjoyed consecutive annual expansion in recent times, with agricultural GDP growing at an average rate of 3.3% per year between 2000 and 2015 – above the regional average for Latin America, according to a March 2018 report by the World Bank titled “Gaining momentum in Peruvian agriculture: Opportunities to increase productivity and enhance competitiveness”. The country climbed two positions to 53rd on the 2017 Global Food Security Index, which ranks 113 countries according to the affordability, availability and quality of food for the population. The strength of Peruvian agriculture is due in part to its crop diversity, with coastal regions providing the majority of exports and inland production channelled towards domestic consumption. Agriculture currently constitutes 7.3% of GDP, according to the World Bank.

Facts & Figures

Peru has steadily increased the amount of land dedicated to agriculture over the last five decades, and it currently accounts for over 19% of the territory. A total of 314,500 ha were harvested in 2017, up from 301,300 ha in 2016 and 299,300 ha in 2013. As a result, the availability of food has increased, with the average daily protein supply at 73 grams per capita in 2013 – the latest year for which figures are available – compared to 62 grams in 2003, according to the UN’s Food and Agriculture Organisation (FAO). Over the same period, the per capita consumption of animal protein increased by 22%. Peru has also managed to more than halve its food deficit between 2007 and 2017, from an average 109 kcal per capita per day to 52 kcal per day, and cut malnutrition levels from 4.9m undernourished people in 2006 to 2.5m in 2016.

In 2017 agriculture was Peru’s second-largest generator of foreign currency after the mining industry, according to the Ministry of Agriculture and Irrigation (Ministerio de Agricultura y Riego, MINAGRI). Export volumes that year increased by 2.7% to $5.71bn, according to agricultural export data agency Agrodataperu, which was a slower rate of growth than in 2016, when exports increased by 11%. The performance in early 2018 continued to be positive, with exports for the first four months of the year totalling $1.77bn. Peru’s agricultural products are exported to some 135 countries, the largest markets being the US – which receives over 25% of the total – followed by the Netherlands, Spain and Ecuador. Growth in export volume in 2017 was driven by an 11% increase in the value of non-traditional products such as red cranberries, grapes, mangoes, avocados and fresh asparagus. The increase in production and exports occurred despite the effects of El Niño, the climatic phenomenon that caused heavy flooding and crop destruction in coastal areas during the year.

The value of agricultural output as a whole grew by 2.6% in 2017 to PEN33.44bn ($10.3bn), according to a report generated by MINAGRI’s Integrated Agrarian Statistics System. By product volume, the sharpest growth that year was seen in cranberries, up 86%, followed by olives, with an increase of 43%, artichokes (33%), coffee (21%), cacao (11%), palm oil (9%), potato (5%) and avocado (3%). The products with declines in volume were Peruvian ginseng, down by 63%, unginned cotton (48%), lemon (38%), paprika (28%), grapes (7%), paddy rice and sugar cane (4%), and alfalfa (2%).

In the livestock subsector, 2017 saw a 2.7% increase in animal rearing and their products, with chicken production and hens’ eggs both up by 4%, and cow’s milk up 3%. However, the sharpest increase was in pork, with production 6% higher than in 2016.

Products Abroad

The sector’s sustained growth has allowed many Peruvian agricultural products to become competitive on international markets. In the March 2018 World Bank report, Markus-Alexander Antonietti, Swiss ambassador to Peru, highlighted his country as one of the many global markets that is a recipient of local exports. “In Switzerland more and more delicious Peruvian products are consumed, such as mango, cocoa, coffee and asparagus,” he said.

In June 2018 MINAGRI announced the export of the first batch of organic chestnuts to Italy without the use of an intermediary by three associations of small-scale farmers from the Madre de Dios region. The one-tonne shipment of chestnuts was a public-private partnership (PPP) between the ministry and the chestnut grower associations, and sights are set on servicing more markets in this way. “What we aim to achieve is continued direct exports over the coming years to the US and Asia, improving the quality of the product within international standards,” Gustavo Mostajo, the minister of agriculture and irrigation, said in June as he visited a plant owned by one of the chestnut associations. He said the PPP model is the central pillar of the strategy to tap international markets for local products, and achieve a profitable and sustainable agricultural sector.

Also in June MINAGRI announced it was moving forward with plans to begin avocado exports to South Korea, a move that has the support of private sector players. “Asia represents a great opportunity for Peruvian agro-industrial exports,” Claudio Albarracín, general manager of Agrícola San Miguel, told OBG. “As the volume of exports grows, fewer stops will be required, leading to less transit time and lower costs.”

Although international exposure has grown, production discrepancies between the coastal, highland and jungle areas have widened, with output in the former increasing by 7.2% in 2017, while in the mountains output grew by just 0.2% and declined by 0.2% in the jungle. As a result, the World Bank recommends implementing development strategies specific to each region to boost production and prosperity. “The growth of the agricultural sector helps to diversify the economy and reduce dependence on non-renewable extractive industries, and can be a great driver of poverty reduction in Peru,” Alberto Rodríguez, the World Bank director for Bolivia, Chile, Ecuador, Peru and Venezuela, noted in the report.

Strength in Diversity

The wide variety of agricultural products is one of Peru’s major strengths, a result of the country’s differing climatic and geographical zones. The potato is the country’s most important crop, of which there are more than 4000 varieties. The International Potato Centre, a Lima-based research organisation that aims to increase food security in the developing world, has been working for many years on the Andean Potato Programme, helping smallholders in the region gain access to new markets for native varieties of the crop in a bid to reduce rural poverty.

Other significant crops are cotton, with the country producing two of the world’s finest strains, Pima and Tanguis, as well as sugarcane, coffee, avocados and asparagus. Peruvian farms enjoy a unique production window for asparagus between November and January, when almost no other country harvests the crop, providing it with lucrative export shipments. “Peru has two agro-industrial advantages: the quality of its produce and the width of its commercial window, which allows for production when other parts of the world are not growing,” Albarracín told OBG.

Peru is also an important producer of wool, thanks to the numerous llamas, alpacas, guanacos and vicuñas in the country, and the material is fed into the textile industry. Wool of the vicuña, which is a non-domesticated animal, is considered among the finest varieties in the world, as well as the most expensive. Due to hunting for the high value of their coats, vicuñas are an endangered species. However, the population is slowly recovering, with 202,000 animals counted in 2012, up 5% from 2000. In 1969, for comparison, fewer than 10,000 of the animals were counted in Peru, Argentina, Bolivia and Chile combined. Vicuñas are protected under the Convention on International Trade in Endangered Species, and Peru has pledged to increase measures to prevent vicuña wool trade.

Productivity & Competitiveness

Peruvian agriculture indeed has a strong, diversified base and is ahead of regional peers in terms of development, yet it still lags behind more developed nations, largely due to a technology gap. The sector has the potential to reduce poverty and continue driving economic growth, but emphasis must be placed on increasing productivity and competitiveness, with unique approaches for the country’s three agricultural regions.

According to Michael Morris, lead author of the World Bank report, each region is at a different stage of development and must be afforded tailored initiatives. On the surface, agricultural productivity has been rising, but large disparities persist among the various geographies of the country and classes of producers. The coastal region is characterised by dynamic, highly productive and commercially successful agricultural systems that are well integrated into local and international value chains, providing stable livelihoods for participants. However, throughout large areas of the mountain and jungle regions, the sector is characterised by static, unproductive, subsistence-oriented agricultural systems that are poorly integrated into the market and provide unacceptable livelihoods for farmers. A large number of smallholders in those regions engage in low input-low output practices, and many make limited use of technological advances, such planting modern seed varieties, spreading fertilisers and chemicals, and employing machinery and irrigation.

Heeding the World Bank’s recommendation that the country implement strategies specific to each region in order to boost agricultural production and competitiveness, the government has developed plans to increase yields through the application of new technologies. Officials are channelling efforts to both coastal and highland regions, with one such programme being the National Agrarian Innovation Programme for Andean Cultivation (see analysis). However, there are other areas of opportunity that can be developed to improve yields, such as the application of biotechnology.

According to Henri Huamán, general manager of Agronegocios Génesis, few Peruvian companies invest significantly in research and development (R&D) because they lack a long-term vision. He believes that more producers should take advantage of the PEN800,000 ($246,000) stipend provided to them by the National Institute of Agrarian Innovation and seek support through partnerships. “Through joint ventures with foreign partners, Peru’s agro-industrial sector would be able to invest further in biotechnology R&D,” Huamán told OBG. “R&D plays a key role in enhancing productivity, which leads to increased export volumes.”

Productivity initiatives are important because although agriculture’s growth is impressive within a regional context, the sector has somewhat declined in importance as the economy diversifies and the population urbanises. A decline in agricultural production would have a serious impact on foreign currency revenues and farmer livelihoods, while expanding the sector would bolster economic growth and provide a higher quality of life for many citizens.


Although much smaller than the crop segment, livestock farming was given a boost in 2017 with the incorporation of 42,000 ha of new cultivated pasture, allowing for a five-fold increase in the income of small-scale farmers, and a three-fold increase in milk and cattle production, according to MINAGRI. Furthermore, in nine livestock areas across the regions of Puno, Cajarmarca, Pasco, San Martín and Ayacucho, a genetics programme is underway with 1000 embryos and 40,000 vials of semen from cattle breeds such as Braunvieh, Fleckvieh, Brahman and Gyr.

In a bid to improve the health and productivity of livestock, in June 2018 MINAGRI delivered veterinary kits to farmers in the Acobamba, Huancavelica, Angaraes, Castrovirreyna, Huaytará and Tayacaja provinces of the Huancavelica region. The 350 kits benefit some 35,000 sheep, cattle and camelids with vaccines, while MINAGRI specialists train farmers in the proper administration of doses. The medicines will help keep the animals healthy during the freezing winter temperatures, which has led the state to call frost emergencies in 11 regions.

Forestry Products

While livestock is an established segment of the agriculture sector, the contribution of the country’s forests have not been sufficiently addressed. In a 2018 report the UN FAO highlighted the revenue potential of Peru’s forests if a sustainable plan to harvest their timber was put in place. Some argue that the full value of the country’s forests has yet to be realised, as high levels of deforestation and degradation have reduced their quality and hindered regeneration. “The formal contribution of forests to the national economy is only a small fraction of what it could be if timber were taken advantage of in a sustainable and efficient way, and with added value,” the report stated.

According to the FAO’s latest figures, forestry exports totalled $150.9m in 2015 and imports equalled $315.3m, continuing the trend of a trade deficient that has widened since 2010. Exports fell by 12% between 2010 and 2015, while imports grew by 58%. The largest deficit during that period was recorded in 2013, at $176.4m. Peru’s top-five export markets for timber are China, Mexico, the US, the Dominican Republic and France, while the country’s top-five timber importers are Chile, Brazil, China, Ecuador and Spain. More than half of Peru’s territory is forested and much of it is untouched, but there are challenges the country faces in properly capitalising on its resources.

It is estimated that 50% of the timber trade in Peru is illegal, and of the volume produced, 85% is sold on the domestic market, with demand strongest in the construction sector. Furthermore, there are currently “few efforts or public initiatives to incentivise the consumption of timber or timber products of legal origin in the local market,” according to the FAO report. One of the main hurdles to implementing such initiatives is the high level of informality in the sector and wider economy, and it is believed that informal companies are the primary purchasers of timber of unverified origin. Other challenges to addressing sustainability in the industry include informal labour, which is as high as 91% in the segment, and the significant quantity of timber being used for charcoal production, which provides little added value. However, the private sector exhibits a greater awareness of the need to purchase timber from verified resources, as many engage in green building initiatives and pursue LEED certification.

The FAO has multiple recommendations for how Peru can more fully capitalise on its forestry resources. These include preparing statistics that better reflect the reality of timber yields, promoting the standardisation of production and commercialisation of timber in the local market, enhancing the control and supervision mechanisms for timber processing, and improving access to legal timber from sustainable resources. The FAO also recommends the installation of control points along timber transport routes, a platform to enable the traceability of timber to verify its origin, and the launching of a campaign to create awareness of the consumption of illegal timber. Strengthening the management of the timber industry would in time allow companies to implement their own control mechanisms to become more competitive, and encourage them to carry out studies on timber demand and opportunities.

Reconstruction Efforts

Although the agriculture sector as a whole exhibited growth in 2017, El Niño caused flooding that destroyed crops and agricultural infrastructure along the coast in the first quarter of the year. To address the damage and rebuild communities, in September 2017 the government approved the PEN25.65bn ($7.9bn) Reconstruction with Changes (Reconstrucción con Cambios, or RCC) programme. Of the total, PEN1.34bn ($412.6m) was earmarked for agriculture, mainly in the north. The works include studies for dams, the channelling of rivers and streams, and recovering arable land. The sector will also indirectly benefit from PEN19.76bn ($6.1bn) to be spent on infrastructure and PEN5.44bn ($1.7bn) for flood prevention. For its part, MINAGRI also announced in September that it would channel PEN6.5bn ($2bn) between 2018 and 2021 into efforts to prevent damage from future adverse climatic conditions.

The majority of financial support will flow to small-scale farming operations, as 90% of Peruvian farmers own less than five ha of land, according to MINAGRI. Larger agro-industrial companies are regarded as being in a stronger position to weather such adversities and have their own capital reserves to help them bounce back. “For the small farmer, government aid becomes key to a successful recovery,” Huamán told OBG.


Armed with the strategy of tailored approaches to the country’s various growing regions, progress is being made on productivity, and growth figures for the sector reflect this. Yet, certain hurdles still need to be addressed for Peru to move from a regional agricultural leader to a global one. “Small producers are increasingly incorporating new systems and practices to improve their productivity. With more financing tools from the state, a greater number of small producers could be incorporated into global value chains,” José Quimper, general manager for Peru, Ecuador and Colombia of Netafim, told OBG.

Farmers could indeed benefit from formal financing avenues. Access to finance is currently difficult because many lack title deeds to their land, the possession of which is required for credit approval. Formalising land ownership and registration would allow farmers to obtain loans to invest in new technology to improve yields, expand their operations and access more markets. The government has recognised this barrier and is moving to award titles to farmers. One example of progress on this front was when Mostajo handed out 1600 title deeds to the benefit of 6000 rural residents in the Madre de Dios region in June 2018.

A larger hurdle that will need to be addressed over the longer term is high transport costs, which undermine competitiveness and make it difficult for products to reach international markets. “One of the main challenges for the sector is logistics,” Yoselyn Malamud, CEO at local food producer Virú, told OBG. “Given Peru’s geography and the lack of adequate infrastructure, logistics costs represent a high percentage of the expense structure of companies in the sector. However, the Port of Salaverry, which was concessioned in May of 2018, is expected to help lower logistics costs.” The palm oil industry is one example of a business that would benefit from infrastructure investment, as it is less competitive than that of Colombia, Guatemala and Honduras due to high transport costs. Greater investment in transport routes to move produce out of the highland and jungle growing regions is needed.


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The Report: Peru 2018

Agriculture & Fisheries chapter from The Report: Peru 2018

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