Navigating Peru's Political Turmoil: FDI Resilience in Mining and Agriculture Amid Institutional Fragility

Political instability has long cast a shadow over Peru's economic prospects, but 2025 reveals a paradox: while governance challenges persist, key sectors like mining and agriculture demonstrate surprising resilience in attracting foreign direct investment (FDI). Under President Dina Boluarte, Peru has endured 61 ministerial changes in 24 months, impeachment threats, and historically low approval ratings, creating an environment of institutional fragility, according to a Weles Group analysis. Yet, amid this turbulence, Peru's mining and agriculture sectors are drawing renewed interest, driven by global demand for critical minerals and sustainable agribusiness opportunities.

The FDI Dilemma: Decline Amid Resilience

Peru's FDI inflows have fluctuated sharply in recent years. In 2023, investments plummeted to $4.2 billion, down from $10.8 billion in 2022, as political unrest and social conflicts disrupted operations, according to the State Department. By 2025, however, the IMF notes a tentative recovery, projecting 2.6% GDP growth amid a fragile economic rebound. The World Bank attributes this partial stabilization to low inflation and sound fiscal policies, while Americas Quarterly highlights political uncertainty as a "significant deterrent" for long-term investment. Credit rating agencies have compounded these concerns, downgrading Peru's sovereign debt due to governance risks, as detailed in a State Department report.

Mining: A Sector of Strategic Importance

Mining, which contributes 10% of Peru's GDP and accounts for 60% of its exports, exemplifies this duality. Despite social conflicts-78 active disputes in the sector as of March 2024-the government has accelerated project approvals. Minem launched a $1.039 billion 2025 exploration portfolio, a 61.3% increase from 2024, targeting copper, gold, and lithium. Major projects like Antamina Replacement and Pampa de Pongo, valued at $8 billion combined, aim to expand copper and iron ore production.

To address delays, the government introduced a "deemed approval" system for environmental permits and a deregulation package to fast-track mining projects, according to a LinkedIn analysis. While challenges like the stalled Tía María and Conga projects persist, Minister Edith Ochoa Montero emphasizes a "new social approach" to rebuild trust with communities, LatAm FDI reports. These efforts align with global demand for minerals critical to the energy transition, positioning Peru as a key player in the copper and lithium markets, as noted by RioTimes.

Agriculture: Sustainability as a Competitive Edge

Peru's agricultural sector, though less headline-grabbing, is equally resilient. A $24 billion investment pipeline in 2025 focuses on large-scale irrigation projects like the $7 billion Trasvase Marañón, designed to expand farmland and improve water management, according to the Peru Trade Council. The government's 2025-2026 PPP portfolio includes 102 projects across agriculture, with a strategic emphasis on organic value chains and Amazonian bioeconomy products like copoazu, the FAO notes.

Public funding of $74.8 million in 2024/25 underscores state support for sustainable initiatives, including quinoa and kiwicha cultivation, silvopastoral systems, and alpaca fiber production, as laid out in Peru's investment guide. These projects align with Peru's goal to boost agricultural exports to $40 billion by 2040, a target discussed in an IMF staff report.

Mitigating Risks: Governance and Institutional Reforms

Political instability remains a wildcard. The IMF and World Bank stress that structural reforms-particularly in governance and institutional transparency-are critical to sustaining investor confidence. Peru's legal framework, including the U.S.-Peru Trade Promotion Agreement (PTPA), offers foreign investors protections, but inconsistent implementation undermines their effectiveness, according to the State Department.

For mining and agriculture to fully capitalize on their potential, Peru must address bureaucratic inertia and community tensions. The Central Reserve Bank of Peru (BCRP) has played a stabilizing role, maintaining macroeconomic discipline amid political chaos, as analyzed by The Financial Analyst. However, long-term success hinges on resolving social conflicts and formalizing informal mining operations-a priority for Minem, Allianz Trade notes.

Conclusion: A Calculated Opportunity

Peru's political instability in 2025 creates both risks and opportunities. While governance challenges deter broad-based investment, the mining and agriculture sectors offer compelling cases for resilience. For investors, the key lies in strategic alignment with government reforms, community engagement, and global market trends. As Peru navigates its institutional fragility, these sectors may yet prove to be the linchpins of its economic recovery.