Compared with other second tier markets in Latin America, Peru's pharmaceutical market has generated the least interest among multinationals. Its low per capita spending on drugs, weakening currency, and local authorities' bias towards non-equivalent generic products all mean multinationals have an undesirable market position. However, as the Peruvian government has not established a comprehensive medicine pricing system, pharmaceutical companies can generate rapid sales growth, particularly from the country's out-of-pocket spending sector. In addition, Peru's investor-friendly business environment, healthcare sector investment and its ongoing liberalisation of bilateral trade arrangements will further reduce trade barriers for foreign companies.
Headline Expenditure Projections
- Pharmaceuticals: PEN4.11bn (US$1.56bn) in 2012 to PEN4.38bn (US$1.62bn) in 2013; +6.6% in local currency terms and +3.8% in US dollar terms. Local currency forecast broadly in line with Q4 2013 projection.
- Healthcare: PEN25.78bn (US$9.77bn) in 2012 to PEN27.76bn (US$10.24bn) in 2013; +7.7% in local currency terms and +4.8% in US dollar terms. Local currency forecast broadly in line with Q4 2013 projection.
Risk/Reward Rating: In BMI's RRRs for Q1 2014, Peru remains 10th out of the 18 markets surveyed in the Americas matrix. Peru's Reward and Risk scores are both viewed as being less favourable than the regional averages. A small market size and a deficient IP environment are some of the major drawbacks to the involvement of foreign companies in Peru. Nevertheless, Peru is still seen as being able to offer longer-term benefits to foreign investors, on account of the expected healthcare market development and economic growth.
Key Trends And Developments
- In August 2013, Japanese major Takeda launched a wholly owned subsidiary in Peru following its market expansion in other Latin American countries, such as Brazil, Mexico, Argentina, Venezuela, Colombia and Ecuador. According to Norbert Oppitz, senior vice-president of Takeda Latin America: 'This investment further demonstrates our commitment to Latin America and its growth potential.' In line with Takeda's emerging markets strategy, Takeda Peru is building a product portfolio tailored to local needs, such as treatments for gastroenterology, cardiology, metabolism, oncology and respiratory diseases. In addition to its established presence in other regional markets, we also expect Takeda to be successful in Peru's drug market, in part due to the strong historic/diplomatic ties between Peru and Japan.
- In October 2013, the Ministry of Health (MINSA) in Peru was reported to be planning to allocate over PEN500mn (US$182.4mn) to improve and reinforce 19 healthcare facilities in the capital Lima. According to the health minister, Midori Musme de Habich Rospigliosi, the funding will be sourced from a US$1.5bn multisectoral budget. MINSA has assured a third of the total will be used to strengthen the infrastructure of its strategic health facilities to meet international safety standards against nature disasters, such as earthquakes.
BMI Economic View: Peru's trade account will continue to be adversely affected by global market conditions, which will weigh on the price of copper and gold, although increased volumes of metal exports suggest that the downward trend in export revenues could be finally reversing. Meanwhile, strong investment will offer additional support to Peru's external accounts. Indeed, we believe that although macroeconomic headwinds - most notably the slowdown and rebalancing of the Chinese economy - will continue to weigh down on Peru's external accounts given its high exposure to international metals markets, the medium-term outlook may be starting to improve.
BMI Political View: Public opinion of the administration of President Ollanta Humala continues to slip, with approval ratings falling to new lows amid perceptions of lack of social progress, security concerns, and endemic corruption. Humala has tried to reverse the trend through a shakeup of key personnel, but we believe that - given the structural challenges facing the country - his approval rating will remain under pressure, potentially hampering the government's policymaking ability.