Peru's Agro-Export Booming: Tax Cuts and Strategic Expansion Set the Stage for Long-Term Growth

Peru's agro-export sector is undergoing a transformative phase, driven by a confluence of tax incentives, infrastructure modernization, and strategic market diversification. For investors seeking long-term returns in Latin American agribusiness, the Andean nation offers a compelling case study of policy-driven growth and sectoral resilience.

Tax Reforms: A Double-Edged Sword for Investment

Peru's 2023 tax overhaul, Law No. 31969, has injected dynamism into the agro-export sector. The law grants a 20% tax credit for reinvesting after-tax profits in the textile and agricultural industries, alongside accelerated depreciation rates for machinery (33.33% annually for 2024–2025). These incentives are designed to spur capital investment, particularly in high-value crops like blueberries and avocados. For instance, the depreciation regime could reduce the effective cost of irrigation systems by up to 33%, directly enhancing productivity.

However, the proposed Agricultural Promotion Law, currently awaiting its second parliamentary reading, has sparked debate. While it promises tax breaks for both small and large producers, critics argue it disproportionately benefits corporate agro-exporters. The ten largest firms, which control 60% of export value, stand to gain the most from reduced tax burdens, potentially exacerbating inequality. The International Monetary Fund has flagged the law's potential to cut tax revenue by over $500 million annually, a risk that investors must weigh against its growth potential.

Infrastructure: The Backbone of Competitive Advantage

Peru's infrastructure investments are equally pivotal. The Chavimochic Stage III irrigation project, now under a government-to-government model led by Canadian firms, is a cornerstone of this strategy. By expanding irrigation to 63,000 hectares and improving access for another 48,000 hectares, the project is projected to triple agro-exports from the La Libertad region to $1.2 billion annually by 2028. This infrastructure leapfrogging is critical for crops like blueberries, which require precise water management to meet global quality standards.

Beyond irrigation, Peru is modernizing storage and logistics. The government's $74.8 million 2024/25 budget for climate-smart irrigation and digital traceability systems underscores its commitment to reducing post-harvest losses and enhancing export readiness. These upgrades are particularly vital for organic value chains, where traceability commands premium prices in European and U.S. markets.

Market Access: Diversification as a Hedge Against Risk

Peru's agro-export success hinges on its ability to navigate trade dynamics. The U.S.-Peru Trade Promotion Agreement (PTPA) has been a boon, with 90% of U.S. agricultural exports to Peru now duty-free. However, the 10% U.S. tariff on Peruvian blueberries—part of the “Liberation Day” initiative—has forced a strategic pivot. Peru is now deepening ties with India and Southeast Asia, where demand for organic produce is surging.

The Hand-in-Hand Investment Forum has spotlighted Peru's $100 million in investment opportunities across organic Andean grains and Amazonian bioeconomy projects. These initiatives, with an average internal rate of return (IRR) of 34%, align with global sustainability trends and offer investors exposure to high-growth, low-emission value chains.

Investment Implications: Balancing Opportunity and Risk

For investors, Peru's agro-export sector presents a mix of high-reward opportunities and structural risks. The tax incentives and infrastructure projects are strong tailwinds, but the concentration of benefits among large firms and the IMF's revenue concerns warrant caution.

Key sectors to consider:
1. High-Value Crops: Blueberries and avocados remain dominant, but organic quinoa and Amazonian copoazu fruit offer niche, premium markets.
2. Sustainable Infrastructure: Firms involved in irrigation technology and climate-smart storage solutions are well-positioned to capitalize on Peru's $74.8 million public funding.
3. Logistics and Trade Finance: As Peru diversifies its export destinations, companies providing cold-chain logistics and pre-season financing will see growing demand.

However, investors should also hedge against geopolitical risks, such as U.S. tariff fluctuations, by diversifying across Peru's emerging markets in Asia. Additionally, engaging with local cooperatives and small-scale producers could mitigate the social backlash risks associated with the Agricultural Promotion Law.

Conclusion: A Strategic Bet on Resilience

Peru's agro-export sector is a testament to the power of policy innovation and infrastructure investment. While challenges like tax equity and trade volatility persist, the country's strategic focus on diversification and sustainability positions it as a leader in Latin American agribusiness. For investors with a medium-term horizon, Peru offers a unique blend of growth potential and geopolitical agility—a rare combination in today's volatile markets.