Consumer Lifestyles in Peru

CONSUMER LIFESTYLES IN
PERU
Euromonitor International
September 2013

CONS UME R L I F E S T Y L E S I N P E RU P a s s p o r t I
E u r o mo n i t o r I n t e r n a t i o n a l
LIST OF CONTENTS AND TABLES

Current Top Five Consumer Trends ............................................................................................. 1
Peru Rides A Gastronomic Wave ............................................................................................. 1
Shopping Malls Are Proving To Be A Magnet for All Demographics......................................... 1
Smaller Homes Are Popular As Families Want To Get on the Property Ladder ....................... 2
Higher Expectations of the Peruvian Consumer ....................................................................... 2
Modern Retail Channels Drawing in Customers for Big-ticket Purchases ................................ 3
Consumer Segmentation .............................................................................................................. 4
Babies and Infants .................................................................................................................... 4
Kids ........................................................................................................................................... 5
Tweenagers .............................................................................................................................. 6
Teens ........................................................................................................................................ 6
Young Adults ............................................................................................................................ 7
Middle Youth ............................................................................................................................. 8
Mid-lifers ................................................................................................................................. 10
Late-lifers ................................................................................................................................ 10
Table 1 Consumer Segmentation and Population Data 2000, 2005, 2010,
2011, 2012, 2015 ....................................................................................... 12
Chart 1 Population Aged 15-64 Compared with Old-Age Dependency Ratio
2000-2020 .................................................................................................. 12
Housing and Households ........................................................................................................... 13
Home Ownership .................................................................................................................... 13
Household Profiles.................................................................................................................. 15
Running Costs ........................................................................................................................ 16
Table 2 Housing and Households Data 2000, 2005, 2010, 2011, 2012, 2015 ........ 18
Chart 2 Number of Households by Disposable Income Bracket 2005, 2010,
2015 ........................................................................................................... 19
Money and Savings .................................................................................................................... 20
Attitudes Toward Payment Methods ....................................................................................... 20
Savings ................................................................................................................................... 21
Loans and Mortgages ............................................................................................................. 22
Table 3 Money and Savings Data 2000, 2005, 2010, 2011,2012, 2015 .................. 23
Chart 3 Consumer Lending Compared with Savings and Savings Ratio 2000-
2015 ........................................................................................................... 24
Eating and Drinking .................................................................................................................... 24
Drinking Habits ....................................................................................................................... 26
Table 4 Eating and Drinking Data 2000, 2005, 2010, 2011, 2012, 2015 ................. 28
Chart 4 Real Growth in Consumer Expenditure Compared with Real Growth
in Food and Alcoholic Drinks Consumer Expenditure 2000-2015 .............. 28
Grooming and Fashion ............................................................................................................... 29
Perceptions of Beauty ............................................................................................................. 29
Female Grooming ................................................................................................................... 30
Male Grooming ....................................................................................................................... 30
Fashion Trends ....................................................................................................................... 31
Table 5 Grooming and Fashion Data 2000, 2005, 2010, 2011, 2012, 2015 ............ 33
CONS UME R L I F E S T Y L E S I N P E RU P a s s p o r t I I
in Clothing, Footwear and Personal Care Consumer Expenditure
2000-2015 .................................................................................................. 33
Health and Wellness .................................................................................................................. 34
Attitudes To Health and Well-being ........................................................................................ 34
Obesity ................................................................................................................................... 35
Attitudes To Smoking .............................................................................................................. 36
Table 6 Health and Wellness Data 2000, 2005, 2010, 2011, 2012, 2015 ............... 37
Chart 6 Chart6 Real Growth in Public and Private Expenditure on Health
Compared with Healthy Life Expectancy at Birth 2000-2012 ..................... 38
Shopping Habits ......................................................................................................................... 38
Main Household Shop ............................................................................................................ 38
Shopping for Big-ticket Items .................................................................................................. 39
Personal Shopping ................................................................................................................. 41
Shopping Online ..................................................................................................................... 42
Table 7 Shopping Data 2000, 2005, 2010, 2011, 2012, 2015 ................................. 43
Chart 7 Chart7 Index of Retail Sales Compared with Real Growth in Retail
Sales through Discounters, Hypermarkets, Supermarkets and Internet
Retailing 2000-2015 ................................................................................... 43
Leisure and Recreation .............................................................................................................. 44
Staying in ................................................................................................................................ 44
Going Out ............................................................................................................................... 45
Vacations ................................................................................................................................ 47
Public Holidays, Celebrations and Gift-giving ......................................................................... 49
Table 8 Leisure and Recreation Data 2000, 2005, 2010, 2011,2012, 2015 ............ 50
Chart 8 Percentage of Households in Possession of Cable TV; Satellite TV
System; Internet-Enabled Computer; Mobile Telephone; Video
Games Console 2000-2015 ....................................................................... 51
Getting Around ........................................................................................................................... 52
Private Transport .................................................................................................................... 52
Public Transport...................................................................................................................... 53
Commuting ............................................................................................................................. 54
Air Travel ................................................................................................................................ 54
Table 9 Transport Data: 2000, 2005, 2010, 2011, 2012, 2015 ................................ 55
in Consumer Expenditure on Transport Services and Purchase of
Cars, Motorcycles and other Vehicles 2000-2015 ...................................... 56

CONS UME R L I F E S T Y L E S I N P E RU P a s s p o r t 1
CONSUMER LIFESTYLES IN PERU

CURRENT TOP FIVE CONSUMER TRENDS

Peru Rides A Gastronomic Wave
Anybody spending any length of time in Peru cannot fail to notice the obsession that
Peruvians have developed with their nations cuisine. The evidence is everywhere. Despite
soaring prices, Limas high-end restaurants are packed every night of the week. Local
newspapers and media websites devote many columns to gastronomic stories. The countrys
television channels spend up to half an hour at a time reporting on the latest fusion dish created
by a local chef, or the success of a Peruvian restaurant that has opened up in another part of
the world. The Mistura food festival in Lima is an annual showcase for Perus cuisine. Although
the inaugural event took place just five years ago (in 2008), the 2012 event was attended by
over half a million people, with numbers expected to double in 2013.
Peruvians appreciation of their local dishes is nothing new, but it has been emphasised in
recent years as a result of the rise in disposable incomes and the international recognition that
the countrys gastronomy is receiving. The growth of Perus economy is providing a higher
proportion of consumers with the opportunity to eat out on a more regular basis. Restaurants,
particularly in the capital Lima, are catering to more sophisticated consumer tastes, both in
terms of the quality of the food and of the service. Restaurants in Peru can no longer expect to
be successful with a basic menu and minimal customer service. As well as having a wider range
of dishes to choose from, consumers are expecting an enhanced experience when they go out
to eat, such as a special ambience or dcor in the restaurant, or the way the meal is served.
In 2012, the World Travel Awards voted Peru the Best International Culinary Destination. This
has enhanced the passion that the locals have for their cuisine. During the 1990s and 2000s,
Peruvians had little to rejoice about as a nation, troubled by terrorist attacks, political corruption,
and a horrendous economic situation. Over the past decade, as the countrys situation has
dramatically improved, the population has begun to regain some self-esteem and national pride.
As part of this process, Peruvians have become interested in anything for which Peru receives
positive global publicity. As Peruvian restaurants open in far flung locations, such as New York,
San Francisco, London and Geneva, the locals are starting to appreciate the quality of their
gastronomic industry and like to hear the positive comments from foreigners about their dishes.

Shopping Malls Are Proving To Be A Magnet for All Demographics
Only eight shopping malls were found in Peru at the start of the 21st century, and few people
would have believed that close to 60 would be built by the end of 2012. A large segment of the
population did not even know what a shopping mall was, let alone have visited one.
The most important factor behind the rapid expansion of shopping malls in Peru has been the
countrys continued economic growth over the past decade. The International Monetary Fund
reports that, between 2002 and 2012, the size of the Peruvian economy almost doubled, with
real GDP growth averaging 6.3% annually. This has been reflected by a dramatic increase in
consumer spending levels.
Shopping malls have been an attractive proposition for the Peruvian consumer. Firstly, the
wide coverage has made them geographically accessible to a large proportion of the population.
Whilst the first malls were generally located in high-income areas, the new projects include
outlets in poorer neighbourhoods in Lima and outlets in the provinces. Lower- and middle-
income consumers, who historically did most of their shopping in traditional gallerias, are now
attracted by the more luxurious surroundings of modern malls. However, the arrival of malls in
lower-income areas, where crime rates are higher, has created security concerns. In a survey
by newspaper Gestion in July 2012, consumers listed personal safety as the most important
factor when determining where they choose to shop.
A visit to a shopping mall has become an enjoyable leisure pursuit for Peruvians, as opposed
to just an opportunity to purchase products. Most malls have restaurants, cinemas and bowling
alleys. Every single one of the 13 malls due to open in Peru in 2013 will have a cinema. These
features are particularly appealing to lower-income demographics because they can have an
enjoyable day out, without spending too much money. For example, a cinema ticket costing
PEN10 and a fast food meal costing PEN15 is within their budget and provides three to four
hours of entertainment. A report in Gestion suggests that 70% of women in Peru would be quite
happy to visit a shopping mall even if they had no intention of purchasing anything.
Clothing stores account for over half the stores in Perus shopping malls. Luxury global
brands are starting to become commonplace, creating an aspirational culture among the
countrys consumers. Further economic growth is predicted during the coming years, and Perus
100th mall is forecast to be built in 2015. Consequently, the attraction of shopping malls is likely
to remain.

Smaller Homes Are Popular As Families Want To Get on the Property
Ladder
The growth in consumer incomes, combined with more flexible mortgage lending from banks,
has led to a significant rise in the demand for housing in Peru. According to newspaper Peru 21
in December 2012, this trend has seen property prices almost double in some areas of the
capital Lima over the past five years.
In Lima, the problem is particularly acute. Lima is a congested city at the best of times, and
trying to find space to construct new properties in desirable areas is not easy. As a result,
construction companies try to fit more properties into less space, thereby causing a fall in the
average size of each unit. The Peruvian Construction Association (Capeco) reports that, in
January 2013, the average property size was 88m2, compared to 93m2 five years earlier.
Homes of just 30-35m2 have appeared in recent times. However, the decline in space is not a
concern for most Peruvian house buyers.
Gerardo Freiburg, from the social housing fund Mivivienda, has explained that Peruvians are
less inclined to purchase a property with a view to live there for a lifetime. They are more willing
to get onto the property ladder with a house or apartment that is of appropriate size for their
current circumstances. Freiburg has commented that, in the past, young couples rented
apartments whilst trying to save for the 3-4 bedroom houses they would need later. Nowadays,
people in this demographic are more able and willing to purchase a one-bedroom property and
then sell it when they need a larger home. Location is now even more important than the size of
the property for many, particularly for younger people. As long as they are living close to their
place of work, shops and friends, a smaller property is fine.
Consumers in modern apartment complexes in Peru are starting to enjoy the amenities within
their complexes, which are intended to compensate for the smaller size of the properties.
Features such as gyms, swimming pools and roof gardens are common in newly-built projects,
giving the owner a sense that their property does not end with their walls.

Higher Expectations of the Peruvian Consumer
The increase in consumer spending in Peru has brought a new challenge for companies: the
emergence of more demanding consumers. A decade ago, incomes were lower, the range of
brands on offer was limited, and the products in the market were not sophisticated.
Higher levels of sophistication are particularly noticeable in the personal care and beauty
sector. Basic products are no longer satisfying the needs of people on middle and high incomes.
Consumers look for items that offer more than one benefit. For example, shampoos now need to
contain a conditioning agent and be specifically designed for the hair type of the end user. In
order to retain customers, traditional hairdressers have had to add beauty services, such as nail
treatments and facials, to their offerings. Average Peruvians now have more money and less
free time, so they are prepared to pay extra for a product or service that provides them with
convenience. Peruvians desire to obtain the best products in the market can also be seen in
their technology purchases. In the past, most families were content simply to have a television
set in their home. Nowadays, people who can afford it are demanding large LED TVs with
features such as high definition.
Increasingly, Peruvian consumers are more willing to complain when they are not satisfied
with a product or service. This tendency is most widespread among younger generations. The
increased level of sophistication that consumers expect, combined with the increased value of
their purchases, makes them less tolerant when problems arise.
These trends are not yet applicable to the majority of the population in lower-income groups
because they simply do not have the financial resources to purchase high-end products and
services. However, their behaviour is also changing. They are not yet at the stage where they
require, for example, their regular shampoo to include a conditioner. They are starting to
purchase value-added products like conditioner for the first time, whereas previously they only
bought shampoo. Purchases like conditioner are at this point in time, only bought in small,
affordable sachets through traditional retail channels because larger bottles are out of their
budget range.

Modern Retail Channels Drawing in Customers for Big-ticket Purchases
Whilst the traditional channels still dominate Perus retail market, the coverage of modern
outlets is expanding and they are attracting higher numbers of customers every year. Although
the modern channels focus mainly on food and clothing, many companies have successfully
become the destination of choice for consumers making big-ticket purchases.
This trend is most evident for purchases of computers and televisions. When purchasing
computers, 50% of consumers make their purchases through modern channels and 45% via
traditional wholesalers. According to a report in the newspaper Gestion in October 2012, 66.9%
of televisions are now bought at supermarkets or department stores. These percentages are
even higher in urban areas where there is a greater density of modern retail outlets.
Various factors have combined to drive the popularity of modern retail channels for big-ticket
purchases. First and foremost, more people are visiting modern retail outlets instead of
traditional outlets to make their regular purchases. Most customers go to a supermarket to
undertake their weekly grocery shop, and most people visit a department store to acquire
clothing. However, once inside these stores, consumers become aware of the other items
available, such as computers and televisions. Many people who only use traditional channels for
their shopping would not necessarily even be aware that supermarkets stock big-ticket items.
Over time, a sense of loyalty and trust towards the store builds up in the mind of consumers
and, when they need to carry out a big-ticket purchase, they are willing to do so in a
supermarket.
Modern retail channels also offer the advantage of loyalty-card points and payment plans,
which are very important for expensive purchases. Customers are able to arrange their
payments over several months. Whilst traditional channels almost always accept credit cards for
big-ticket items, they are less able to offer the option to pay over a longer period of time.
Supermarkets and department stores have benefited from the increase in the demand for
laptops, which are smaller than traditional PCs and take less space in the store.
Other channels still retain a significant share of the purchases of big-ticket items. Consumers
who require their computers to be repaired or maintained invariably use traditional channels as
their first choice. This is due to the fact that supermarkets and department stores have to send
the computer away for the work to be undertaken, whereas staff members in traditional outlets
have the expertise to solve problems on the spot. Modern outlets are also struggling to sell
mobile phones. Telecommunications companies offer deals on phones when customers sign a
contract, so 95% of consumers obtain their devices through them.

CONSUMER SEGMENTATION

Babies and Infants
Babies and infants represent a progressively smaller proportion of the population. The 1.75
million babies and infants in 2012 accounted for 5.8% of the population as a whole, compared to
6.9% in the year 2000. This downward trend is forecast to continue with a prediction that they
will make up 5.5% of the population in 2015. Falling birth rates have been a key contributory
factor: 24.6 births per 1,000 population were recorded in 2000, against only 19.6 in 2012.
People are getting married later in life. The average age of first marriage in Peru was 27.7 for
men and 24.6 for women in 2012, against 26.5 and 23.1, respectively in 2002. Traditionally,
many women in Peru had babies at an early age. However, Peruvians are becoming more
aware of the financial implications of having children. Couples tend to plan their family situation
more carefully to ensure that they have resources to pay for educational needs, clothing and an
appropriate property. In addition, more women are participating in the formal employment
market, and many delay having children to focus on their careers.
Peru has some of the least favourable maternity leave laws in Latin America: 90 days of paid
leave. Fortunately, Peruvian mothers generally have a good support network for their babies.
This is due to the close-knit nature of Peruvian families. Children normally stay at home until
they are married, and it is common to find three generations of a family living under the same
roof. As a result, many couples are able to leave their baby with a family member and continue
to work and socialise, as they did before the birth. It is also common for Peruvians to employ a
nanny to look after the children. In properties that are large enough, the nanny often lives with
the family. Traditionally, nannies were cheap, but nowadays they are commanding monthly
salaries in excess of PEN1,500 (more than twice the minimum wage) so they tend to be
employed only by middle- and high-income families.
Many pre-school options are available for Peruvian children at two years of age. In many
cases, parents enrol their infants in these establishments out of pure necessity rather than to
give them a head start before they enter formal education. A common pre-school option for
lower-income groups are the Wawa Wasi centres, part of a scheme set up in 1993 by UNICEF
and Perus Ministry of Education. According to UNICEF, in Peru, many poor people work a ten-
hour day, away from their homes and children, and they do not earn an income sufficient to
cover basic necessities. Wawa Wasi Childrens Homes charge a small monthly fee, and children
benefit from staff trained in health care, early childhood stimulation, and basic nutrition. Middle-
and high-income families sometimes send their children to independent kindergartens at the age
of two years. Many of these establishments are desperate to promote their offerings because
they are losing business to the pre-schools of large private schools, which parents tend to
favour when their children turn three and begin formal education.

Positive developments for infant health
Some positive trends relating to the health of Peruvian babies were revealed in an article in
newspaper Peru 21 in April 2013. The number of children born in a health facility (as opposed to
in the home) stood at 85.9% in 2012, up from 83.8% in 2011. Although urban areas perform
much better in this respect (95.2%), there has been an improvement in rural areas: 67.3% of
children in rural areas are now born in an official health establishment. In addition, more infants
are receiving immunisations. The proportion of children under three years of age who received
all their mandatory shots rose to 73.9% in 2012, from 72.7% in the previous year. The
immunisations required for infants in Peru include BCG and DPT, as well as injections to
prevent measles and polio.

Kids
Falling birth rates have led to a low proportion of kids (children aged 3-8 years) in Perus
population; they represented 11.7% of the population in 2012 compared to 13.8% in 2000. In
2015, it is forecast that there will be 3.5 million kids, fewer than in the year 2000.
Starting at the age of three years, kids attend pre-school, which is comprised of three stages
upper nursery, pre-kindergarten and kindergarten. From the age of six years, they move into
primary school, the longest stage in the Peruvian educational system, where children spend six
years.
Parents typically provide food for their children to take to school, often a simple snack to eat
during the day. Pre-school classes generally finish around 1pm and the primary-school
timetable rarely goes on beyond 2.30pm, so many parents wait until their children come home to
prepare a larger meal for them. Uniforms are worn in all schools. The design of the uniform
depends on various factors, predominantly the climate of a particular location, but also other
considerations, for example, religious schools opt for a more conservative style.
The method of travelling to school varies widely across the country. Parents walk their
children to school if they live close enough. Children living farther take the bus. Buses offer
door-to-door services and are often available. Many children in middle- to high-income groups
are in private education; they often live a significant distance away from their school. Whilst
some bus services are available for this demographic, it is more common for parents to drive
their kids to school, often working on a rotation system among several families.

Pre-school requirements draining family finances
The early months of the year can often be problematic for parents as they attempt to buy the
increasingly expensive supplies required by schools. A report in newspaper Peru 21 in January
2013 found that the younger a child is, the more costly the products tend to be. Rodolfo Salas,
the commercial manager of educational supplies company Continental, estimates that spending
on the equipment required for children in pre-school can often be in excess of PEN400 and that
does not include the purchase of a uniform. By comparison, supplies for those in primary
education cost PEN280 and a mere PEN150 for children in secondary education. Newspaper La
Republica notes that typically schools require notebooks, markers, coloured pencils,
watercolours, folders, adhesive tapes, stationery and some cleaning supplies. Given the
substantial price rises, mothers are taking more time to compare the prices charged by
neighbourhood bookstores, school fairs, market stalls, and department stores.
Kids dictating what they want to wear
According to Luisa de Madalengoitia, general manager of EPK, an international chain
specialising in clothing for infants, the days are gone when children enthusiastically accepted
clothes that had previously been worn by their older siblings or donated by friends. Children as
young as four are now telling their parents what items of clothing they want. It is reported that
parents now go on six separate shopping trips every year to buy new clothes for their children,
with the average expenditure between PEN150 and PEN180. Given their demanding kids,
parents try to save money, and over 89% goes to local markets when searching for clothes.

Tweenagers
The proportion of tweens in Peru has declined over the past decade, from 9% of the
population in 2000 to 7.8% in 2012. Members of this segment were born in a period when birth
rates were still relatively high. However, as rates started to fall in the 2000s, the segments of
tweens will be smaller over the coming years, with a forecast that tweens will make up just 7.5%
of the population in 2015.
Peruvian tweens start to get their first taste of independence. Some parents allow their
children to walk to school, particularly older children aged 11-12. A report by the newspaper
Gestion in June 2012 found that some children as young as 10 are given mobile phones by their
parents. Children in this segment move from primary to secondary school. Some children are
provided with an allowance, the majority of which is spent on sweets and drinks.
A primary-school materials list typically consists of various notebooks, folders, biros, glue,
coloured pens and an eraser. Children attending some schools are required to bring their own
soap and toilet paper with them. Rather than being a cost-saving measure by the school
authorities, the primary reason for this measure is to prevent the spread of infections.

Obesity epidemic affecting Perus youngsters
According to a report by broadcaster RPP in February 2013, 23% of Perus school children
are now obese. As in other countries, this has arisen from a combination of poor diets and a
lack of physical activity. Dr Jimena Del Pozo, a nutritionist working at a hospital in Lima, says
that, whilst it is important that parents continue to encourage their children in their academic
pursuits, they must ensure that they also spend time undertaking physical activities. The
National Institute of Health (INS) reports that the average Peruvian school student is consuming
more than two kilos of sugar each month (over 30% more than the amount recommended by the
World Health Organization), noting that many have a 500ml carbonated drink and sweet cookie
in their lunchbox every day.

Expensive decisions for parents
Perus strong economic growth has given rise to higher levels of consumer spending, and
many are using this increased wealth to give their children a private education. Parents must
make decisions at an early stage of their childs life as some private educational establishments
now offer a pre-school option from the age of three years. When children go through the pre-
school section of a particular school, this gives them a better chance of being accepted into the
primary stage of that institution when they reach the age of six years. With the most over-
subscribed private schools receiving three applications for each place, parents try to grab any
advantage they can. However, private pre-school education is not cheap: Peru 21 reported in
2012 that high-income families are spending up to PEN1,000 per child per month. When the
child reaches the age of six and is set to enter primary education, a one-off entry fee (up to
US$5,000 in some schools) has to be paid, followed by monthly fees. The proportion of children
in primary education is rising, from just 16% a decade ago to 30% in 2012. Private schools are
cashing in on the demand: newspaper Gestion reported in January 2013 that the average fees
paid by parents now reach PEN750 per month, compared to PEN600 in 2010. The most
expensive establishment in the country is the Franklin D. Roosevelt School in Lima where fees
are US$1,175 each month.

Teens
Todays teens were born during an era of decreasing birth rates (26.9 per 1,000 in 1995 to
24.6 in 1999), which has resulted in a fall in their participation in the demographic composition of
Peru. Having made up 10.6% of the population in 2000, they represented only 9.6% in 2012,
amounting to 2.9 million individuals.
Peruvian teenagers spending habits were revealed in an article by newspaper Gestion in
June 2012. The largest proportion of spending was dedicated to fun and entertainment, such as
cinema tickets and amusement arcades. The second highest category was drinks and snacks.
Legislation was passed by Perus government in 2013, aimed at reducing the advertising of junk
food specifically targeting children. Money set aside for savings was the third largest outlay,
demonstrating a financially prudent side that has not traditionally existed among Perus previous
younger generations. Clothing and footwear represented the fourth highest expenditure,
followed by money spent on mobile phone costs.
The same report found that 64% of Peruvian teens already possess a mobile, with the
majority having received their first device when aged between 13 and 15. Prepaid phones are
the most common for teenagers. This is due to the fact that, to obtain a monthly contract,
Peruvians must show a proof of income, which very few teenagers have. Some parents sign up
to a monthly plan for their children, but most are unwilling to do so, fearing that their children will
use the device excessively and run up expensive bills.
Teenagers in Peru spend the majority of their free time using the internet, which now rivals
watching television in popularity. In 2010, television was still the most popular activity, but as the
number of households connected to the internet continues to rise rapidly, spending time online
has experienced a surge in popularity. Up to 80% of teenagers have created a profile on at least
one social networking site. Facebook is the most popular: 98% of social network users have
signed up to Facebook. The use of social networking sites is enjoyed by teenagers across all
economic groups, but adolescents from lower-income families often have to log on in a public
internet kiosk because they do not yet have an internet connection at home. Other web-based
pursuits are still struggling to gain popularity, with just 30% of teenagers saying that they
regularly read online blogs, and even fewer choosing to purchase items online.

Experimental and patriotic tastes
Peruvian teens are becoming more experimental, which is leading to less brand loyalty.
Rodrigo Revoredo, Strategic Planning Director of communications agency McCann Lima, says
that teenagers are now one of the leading groups for the consumption of fashion and
technology. He reveals that there is no longer a taboo about purchasing an item that may be
considered unfashionable. Compared with previous generations, this generation of teenagers no
longer fears being wrong. They are looking to experiment with their tastes and, if they make a
mistake while doing so, they still consider it 'cool'. The knock-on effect is that there is much less
brand loyalty among this age group because they always want to try something new.
The agency representative also notes that the surge in Peruvian national pride in recent years
has filtered through to teenagers purchasing habits. This has been particularly prevalent in the
areas of food, fashion and music. So, when shopping for fashion, they may look for elements of
indigenous clothing in the garments they buy. When eating at restaurants, they choose Peruvian
dishes, ahead of international ones. Some fast food chains that teens visit regularly, such as
Bembos and McDonalds, have started to increase their use of Peruvian ingredients in an
attempt to satisfy this demand.

Young Adults
The number of young adults in Peru is increasing every year, but their proportion has fallen
marginally in recent times. In 2012, the 6.49 million young people represented 21.5% of Perus
population, but this group accounted for 22.3% in 2000. It is this age segment that drives much
of the current optimism and economic dynamism in Peru.
The reportHigher Education in Latin America 2011 reveals that there has been a 69%
increase in university enrolments in Peru since 2006. This upward trend has been due to a rise
in disposable incomes: more families are able to support their children financially through higher
education. According to the communications department of the San Augustin University, the
number of establishments has also been rising. At the end of 2011, there were 50 public centres
of higher education and 78 private ones. Degrees generally last five years and consist of ten
half-yearly cycles. The cost of private university education varies depending on the course and
the institution. Some courses cost as little as PEN210 per cycle, but at some of the more
prestigious Lima-based universities, such as San Martin de Porres or UPC, fees for one cycle
are in excess of PEN3,500. Medicine is typically the most expensive subject to study.
Perus economic growth has created a buoyant employment market, particularly for those who
have completed their higher education. Some even begin to work during their university course
partly to provide a source of income but also to gain experience that can be added to their CV
when searching for full-time work. A study entitled Purchase Intentions of Lima 2013, carried
out by ISIL, a higher-education establishment, found that 9.3% of individuals aged 18-25 are
already earning more than PEN5,000 per month, with a further 20% enjoying an income of
between PEN2,000 and PEN3,000.
The age at which women give birth to their first child has risen marginally: the average age is
now 22.2 years, compared to 21.9 in 2001. Those without higher education, living in rural areas,
and from low-income families were found to give birth earlier. However, in urban areas, with
more women focusing on their careers and better family planning, the trend is to have children
later than in previous generations.

Financial institutions and the younger generation proving to be a good match
The rising incomes of Perus young adults are making them a firm favourite with financial
institutions. Patricia Foster, from BCP (the countrys largest bank), says that the average age of
people when they start to use banking institutions to either save or borrow is now 25 to 26,
compared to 30 and above several years ago. The average age when people apply for their first
loan for a vehicle is 26 and 30 when requesting a mortgage. Foster notes that, given younger
peoples affection for technology, they have adapted to the new electronic services offered by
financial institutions. She explains that young adults like accounts that can be opened with a
minimal deposit and do not charge maintenance fees. However, given their limited experience of
financial management, financial education is crucial, particularly as default rates amongst this
age demographic have risen recently.

Young adults planning to increase spending in 2013
According to a study by higher-education establishment ISIL, 68% of 18-25 year olds in the
capital Lima believe that they will spend more money in 2013 than in 2012. The report entitled
Purchase Intentions of Lima 2013 reveals that an expected rise in income was the primary
reason for individuals positive attitude towards their expenditure over the next year. With nearly
10% of this demographic already earning over PEN5,000 a month and the vast majority still
living at home with their parents, disposable income levels are high. Clothing and entertainment
are the two leading destinations of this groups expenditure. The report also notes that, while
young people look at the price when choosing a product, unlike other segments, they also
appreciate the quality and the brand. This is because they have been more exposed to
advertising than their parents and have access to more information on the internet.

Middle Youth
Perus middle youth amounted to 6.35 million people in 2012, representing 21% of the
national population, as in 2011. Their proportion has grown marginally over the past decade
(having been just 19.3% in 2000). Within this age demographic, there are significant variations
in attitudes and lifestyles. The habits of the younger segment, closer to the age of 30, tend to
align more with young adults modern tendencies. However, those above 40 typically possess a
more traditional set of values.
The countrys economic prosperity has generally been positive news for the employment of
people in the middle youth demographic. Among them, many educated to degree level have
risen to high-level positions, earning salaries that they would not necessarily have expected
upon completing university earlier in their lives. There have been success stories for those in
lower-income groups, moving into an ever-widening middle class, often through establishing
their own business. It is not all good news though, particularly for those in the older segment of
this demographic. There are no laws against age discrimination in Peru, and a maximum age for
applicants is regularly listed on job adverts, often instead of other details like requisite
experience and salary information. Employers are willing to employ people aged 35-45 at the
most, clearly indicating a preference for younger generations.
The number of Peruvian families choosing to enrol their children in private education
continues to rise each year; it grew by 30% in 2012. Therefore, a large proportion of the
spending of the middle youth is destined to education. Peru 21 reported in February 2012 that
families in socio-economic segment C pay US$29,000 to put a child through private education.
For those in segment B, the figure is US$63,000, and Perus wealthiest families pay
US$125,000 to educate their children from the age of three until the end of their school career.

Middle youth remain positive about their economic situation
A survey by government department Lima Como Vamos was released in 2013 exploring the
opinions of the citys inhabitants on a range of topical issues. When analysing their financial
situation, the middle youth demographic presented a very positive outlook. Over 32% said that
their economic circumstances had improved in 2012, with just 13.3% responding that things had
gotten worse. There was an even more encouraging view of the prospects for 2013: about
54.5% believed that their situation would improve further and a mere 6.6% predicted a decline in
their economic circumstances. Yet, the views on the quality of life in Lima were less positive.
Over 30% of respondents said that the quality of life in the city declined in 2012, with only 26.2%
noting an improvement. The leading complaint was safety, as crime is rising in many
neighbourhoods. The other bugbear was the ever-worsening road congestion in the city. Given
that people in the 30-44 age bracket have the highest level of car ownership in the city, their
irritation with traffic levels is unsurprising.

Peruvians wait longer to marry but divorce earlier
For the first time, it is in the middle-youth age demographic that is found the average age for
men and women to marry. The National Institute for Statistics & Information (INEI) reports that in
2011 on average women were aged 30 at the time of their wedding, and 33 for men. This
compares with ages of 23 and 26, respectively, in the early 2000s. Several factors have
combined to drive this trend. Upon leaving secondary education, the priorities for many women
have changed. More females are enrolling in higher education and entering the formal
employment market, thereby delaying their marriage. Peruvians no longer feel the pressure to
get married at an early age, as the tradition dictates. Couples place more focus on ensuring that
their economic circumstances are appropriate for marriage. The first financial commitment is to
pay for the wedding, particularly if parents cannot cover the full cost. The second is for the
couple to ensure that they can afford to buy, or at least rent, a property. As the vast majority of
young Peruvians live with their parents until they are married, this is the first time that the couple
will live away from home. The INEI also reveals that the average age when people divorce has
fallen: from 47.5 a decade ago to 42.5 in 2011.

Mid-lifers
Mid-lifers represent a growing segment. At the start of the 21st century, there were just 2.75
million people in this demographic, but their number rose to 4.07 million by 2012, which is
13.5% of the population (compared to 10.8% in 2000). Mid-lifers were born during times of high
birth rates. As these rates have fallen, so have the proportions of younger people in Perus
population, thereby the influence of the older generations has grown.
In the mid-lifers demographic, a very traditional set of values is evident. People in this age
bracket grew up through tumultuous times in Peru that saw a military dictatorship, high levels of
terrorism and chronic economic problems. Despite the fact that the nation is now riding the crest
of a wave, given the hardships of the past, many people in this age group do not share the
same optimistic outlook on life as the younger generations. In addition, during their formative
years, cable TV was very limited and the internet was still many years away. As a result, their
icons among singers, actors or TV personalities tend to be Peruvian. This is not to say that
people in this demographic did not know international celebrities, but their exposure was much
more limited than it is today for the younger generation.
The period approaching retirement can be a very difficult time for low-income groups in Peru.
Only 30% of Peruvians have a financial account and the vast majority of these individuals are in
the wealthier segments of society. Most low earners do not have a bank account, let alone
savings or a pension plan. Many have spent their lives surviving on a daily or weekly income,
providing for their family any way they can. However, the onset of old age can limit their ability to
work so thoughts start to turn to how their children can look after them, as opposed to the other
way around.

Mid-lifers in executive positions join the social network revolution
It is not just Perus younger people who use social networking sites. A report by the
newspaper Gestion in December 2012 found that 82% of those in executive positions (primarily
in the mid-life age range) have created a Facebook profile, with nearly 75% continuing to log
onto the site. Furthermore, this demographic uses Twitter at a level well above the national
average.

Mid-lifers are more pessimistic about the economic situation of their families
The Lima Como Vamos survey found the mid-life generation to be significantly more
pessimistic than their younger counterparts regarding their economic situation. Despite the
countrys economic success, among those aged 45 and over, more people (26.4%) said that
their families economic situation had declined in 2012 than those who stated that it had
improved (23%).

Late-lifers
Increasing life expectancy rates are leading to a growth in the numbers of late-lifers in Peru.
The 1.83 million people who were in this category in 2000 accounted for 7.2% of the countrys
population. However, by 2012, their number had risen to 2.75 million, making up 9.1% of
Peruvians. Advances in the provision of healthcare and greater knowledge of the benefits of a
good diet and exercise have seen the life expectancy of Peruvians rise every year of this
century. In 2012, members of the male population were expected to have a life-expectancy of
71.9 years and their female counterparts were expected to live to 77.3 years.
Retirement can be a financially troubled time for many Peruvians. A high percentage of
people have spent their lives working in the informal sector and have made no contributions to a
pension fund. These individuals have little choice but to live with younger generations in their
family, if that option is available to them. As pension adviser Fernando Muoz-Najar observes,
Peru lacks a pension culture. People expect their children or grandchildren to take care of them
in old age.
For those late-lifers who have been financially able to set aside money for old age, they will
have taken one of two routes: the public pension system, the Sistema Nacional de Pensiones
(SNP), or the private scheme: the Administradora de Fondos de Pensiones (AFPs). The
retirement age is 65 in Peru but it is not compulsory. Those going down the private pension
route have found themselves significantly better off in recent times. The minimum monthly
payout on the public fund is just PEN415, which is only over half the national minimum wage. In
addition, those signed up to the private fund are able to continue working whilst receiving their
pension, providing them with a double income. According to the INEI, nearly 600,000 Peruvians
over the age of 65 still work in some capacity, usually in underemployment or part time.
One of the most publicised pre-election promises of the current president, Ollanta Humala,
was to set up the Pension 65 scheme, which provides a monthly payment of PEN250 to the
elderly who live in poverty and have never been able to contribute to a pension fund. The
scheme began operating in October 2012 and, according to newspaper El Comercio, had
benefitted 247,000 people by the end of the year. However, the programme has not been
without controversy: the same report claims that up to 1,700 people were fraudulently claiming
benefits. The largest public outcry came when it was uncovered that the grandmother of the
vice-president had been receiving money from the scheme, having been classified as living in
extreme poverty.
Late-lifers enjoy getting out of the house to perform daily tasks. In many cases, leaving the
house is not necessary to complete the task. For example, they visit the bank to make a transfer
that could be carried out online, or they go to the shop to buy a snack when a family member
could make that journey instead. However, they are keen to keep active and ensure that they do
not spend all day at home. In addition, many people in old age take advantage of classes and
programmes organised by local municipalities. These are free of charge and range from arts
and crafts classes through to light workout sessions in a local park.

Perus older population heading online
In March 2012, the newspaper El Comercio reported a rise in the number of late-lifers taking
classes to learn how to use the internet. Old people are becoming aware that it is no longer
enough to simply use a phone to speak to a relative living in another country and television
alone is not enough to keep you fully connected to the world. So they are now filling up the
classrooms of municipalities to learn how to use the internet. According to Yuta Jessica Villalta,
the coordinator of the Digital Literacy Programme, the main motivation that drives seniors to
attend these classes is the need to communicate online with their loved ones who are living
abroad. "They are starting to appreciate the social inclusion that the internet provides. They
want to be able to carry out tasks without needing to enlist the help of younger relatives. They
were not born in the digital age which sometimes makes it hard, but they keep going."
The report reveals that people over 65 make up just 1% of Facebook users, but their
presence is growing. However, motivations for using the internet are not always social. Ruben
Zarate, a citizen of Lima, says, "I have an import business and use the internet to keep up with
the movement of prices and activities of competitors."

Tayta Wasi scheme proving popular with the older generation
A scheme known as Tayta Wasi, a network of activity centres for the elderly, is being
replicated throughout Perus health sector. The first centre of its kind, built in the capital Lima in
2012, benefitted 2,000 patients in its first year of operation, demonstrating the need to extend
the programme. As well as providing often life-saving medical attention, the scheme acts as a
community centre for the elderly to get together, participate in activities and meet new friends.
The Ministry of Health says that it is a comprehensive service that not only treats the ailments of
the elderly but also engages them in a series of fun activities, exercises and productive actions.
The Ministry believes that it is important for the elderly to keep up their activity levels because
health is not merely the absence of disease.

Table 1 Consumer Segmentation and Population Data 2000, 2005, 2010, 2011, 2012,
2015

2000 2005 2010 2011 2012 2015

Babies/infants (aged 0- 1,763 1,771 1,775 1,766 1,754 1,711
2) ('000)
Kids (aged 3-8) ('000) 3,516 3,504 3,520 3,523 3,525 3,508
Tweens (aged 9-12) ('000) 2,288 2,334 2,337 2,338 2,340 2,347
Teens (aged 13-17) ('000) 2,697 2,852 2,907 2,909 2,910 2,913
Young adults (aged 18- 5,671 6,037 6,352 6,418 6,485 6,666
29) ('000)
Middle youth (aged 30- 4,923 5,538 6,131 6,243 6,353 6,681
44) ('000)
Mid-lifers (aged 45-59) 2,750 3,236 3,822 3,944 4,066 4,436
('000)
Later-lifers (aged 60+) 1,834 2,156 2,559 2,652 2,750 3,067
('000)
Population: National 25,443 27,428 29,403 29,793 30,182 31,329
estimates at January
1st ('000)
- Population aged 0-14: 8,672 8,765 8,798 8,794 8,785 8,734
January 1st ('000)
- Population aged 15- 15,541 17,187 18,849 19,182 19,515 20,497
64: January 1st ('000)
- Population aged 65+: 1,229 1,477 1,756 1,818 1,883 2,097
January 1st ('000)
- Male population: 12,765 13,754 14,735 14,929 15,121 15,688
January 1st ('000)
- Female population: 12,677 13,674 14,668 14,865 15,061 15,640
January 1st ('000)
- Urban population ('000) 18,574 20,594 22,689 23,114 23,542 24,827
- Rural population ('000) 6,869 6,834 6,714 6,679 6,640 6,501
Birth rates (per '000 24.6 22.5 20.4 20.0 19.6 18.5
population)
Death rates (per '000 5.9 5.5 5.4 5.4 5.4 5.5
population)
Marriage rates (per 3.1 3.0 3.4 3.5 3.5 3.5
'000 population)
Source: National statistics, Euromonitor International

Chart 1 Population Aged 15-64 Compared with Old-Age Dependency Ratio 2000-
2020


Source: Euromonitor International

HOUSING AND HOUSEHOLDS

Home Ownership
As in the vast majority of Latin America, most Peruvian children live with their parents until
they are married, and sometimes beyond. Even young people with a well-paid job that would
allow them to move out and continue to have a perfectly comfortable lifestyle choose to live with
their family. However, there are signs that these historical patterns are gradually changing, in
line with the development of Perus economy.
More than half of Peruvians (59%) live in their own home, 27% lives with their parents or other
family members, and just 13% rents, according to a report published in December 2012 by Peru
21. The high home ownership figure is partly due to the fact that many homes stay in families for
generations. A significant number of people are able to live in a house without the need to pay a
mortgage or rent. However, according to the same report, just 46% of young families (couples
aged 25-34) own their own home. For over half of them (53%), the title of the property is in the
name of their parents because they were unable to obtain enough credit. In this age bracket,
renting is slightly more common, with 18% of people doing so.
Peruvians have a long history of building their own homes. They often do not actually do the
construction work themselves; they buy the land and then contract workers. Around 60% of
properties in the country are self-built, according to La Republica, in an article published in May
2013. According to the Peruvian Association of Estate Agents (ASPAI), 40% of people in Lima
prefer to buy a lote (piece of land divided up into squares for property construction) and build
their own property. Of the remainder, 38% aspires to own an apartment, 15% wants to purchase
some independent land to build a home, but just 2% states that renting a property is their
ultimate goal. Yet, as Gestion reported in November 2012, many people who dream of
constructing their own home are increasingly settling for the simpler option of buying an
apartment.
The Peruvian Chamber of Construction (Capeco) reported in January 2013 that the price of
apartments in most of the districts in Lima rose by 60%-98% between 2009 and 2012. The
number of homes that sold in 2012 (21,990 in Lima) was the highest in the last 17 years. The
property consultancy Tinsa Peru released figures in October 2012 showing that the average
price of a property in Lima was PEN245,508, a 5.1% increase on the same period in 2011. The
average price per square metre has reached US$1,060, although that is still lower than in some
neighbouring countries, such as Chile and Colombia. Purchases of properties valued at less
than US$20,000 halved in 2012, compared to the previous year, whereas sales of homes priced
at between US$40,000 and US$100,000 doubled during the same time period.
The countrys increasing wealth has also seen a recent growth in the number of people who
own more than one property. However, this is not a situation that Perus banking regulatory
body (SBS) is happy about. The SBS feels that the vast majority of second homes, and
sometimes even third homes, are purchased purely for business purposes, with the owner
simply looking to rent out the property and then sell it as soon as its value increases. According
to some banks, almost 20% of mortgage loans in Peru are now used to acquire a second home.
If home ownership for business purposes continues to grow, experts warn that prices will
continue to rise and properties will become unaffordable for an even higher proportion of the
population. With this in mind, the SBS is proposing stricter requirements for individuals applying
for mortgages to buy additional properties.

Prices are rising while sizes are reducing
Whilst the prices of Peruvian properties have been increasing, their sizes are continuing to
fall. Capeco reports that in 2008 the average size of a Peruvian home was 93m2 but, by
January 2013, that figure had dropped to 88m2. Analysts have pinpointed two driving factors
behind this trend. Firstly, as a consequence of the lack of land in desirable areas, construction
companies look to fit as many properties as possible into each development. Secondly, in recent
times, consumers have been less concerned about living in a small apartment. This is because
many Peruvians, particularly the younger demographic, are no longer purchasing a property
with a view to living there for their entire life. In February 2013, Gerardo Freiburg, from the
Mivivienda Fund, shed light on a number of trends in an interview with newspaper Peru 21. He
commented that independent young people in Peru are becoming more concerned with location.
For them, living in a small space is not a problem, as long as they are in close proximity to their
workplace, shops and social activities. Many young couples who feel that they will need a 3-
bedroom house as their family grows in the future believe that it is better financially to buy a
small apartment and then sell it to finance the purchase of a bigger property later, as opposed to
losing money renting whilst trying to save for a larger property. Previously, the highest demand
was for three bedrooms, but now it is two, and in the coming years it will drop to one. A high
proportion of Peruvians social activities take place outside the home, so living in smaller spaces
does not have an adverse effect on lifestyle.
To counter the discomfort that living in small environments can generate, many new building
developments include areas such as gyms, swimming pools, dance halls, internet kiosks,
barbecue areas, kindergartens, theatres, and roof gardens. Given the scarcity of land, another
recent trend in apartment construction has been to increase the height of new complexes.
However, in some areas, council regulations forbid buildings over a certain height. This
frustrates construction companies, which argue that council regulations need modernising to
accommodate Peruvians increasing demand for housing.

Construction companies catering to the middle-class, leaving unmet demand for other
demographics
The housing demand in Peru is still a long way from being met. As disposable incomes have
increased and financial institutions have relaxed their mortgage lending policies, large numbers
of people are looking to get onto the property ladder. However, an increasing lack of land in
popular areas, combined with notoriously slow planning permission procedures from local
councils, has slowed down the process of providing housing for those who want it. Estimates as
to the level of unmet demand vary, but both Wall Street Investment SAC and the property
consultancy Tinsa Peru have suggested that up to 400,000 people are currently looking to buy a
property, and only 40,000 are available. Construction companies are currently focusing their
efforts on building properties valued at between US$70,000 and US$80,000, which satisfies the
demand in the most dynamic demographics. At this point in time, these are segments B and C,
which make up 80% of the housing demand and supply, according to Manuel Garcia-Naranjo,
Director of Civil Engineering at the university UPC. Families in these demographics have the
financial ability to pay US$400-US$500 per month for a mortgage, representing 30% of
household income.
This supply is heavily skewed towards the middle-class. It affects adversely those in socio-
economic group D whose average property purchase is US$24,000. Few properties are
available for them, but the primary issue is obtaining finance. Many people in this demographic
have never had a bank account, so even though they may now be earning enough money to
pay a mortgage, their lack of credit history means that many financial institutions are unwilling to
take a risk. A survey in January 2013 by government organisation Lima Como Vamos, which
monitors the levels of satisfaction of citizens on a variety of issues, found that 29.7% of citizens
in socio-economic groups D and E believed that their chances of acquiring a home in line with
their income had diminished in 2012.

Household Profiles
There were 7.66 million households in the country in 2012, a 2.6% rise since 2011. Continued
growth is forecast to send the number through the 8 million barrier within the next three years.
The nation is increasingly going through modernisation. The most notable change is the fall in
the number of people living in each household. Homes with just one member made up 10.5% of
households in 2000, rising to 12.8% by 2012, and this is expected to increase further in the
coming years. At the other end of the scale, there has been a significant fall in the proportion of
households with six members or more. This category made up 28% of Peruvian homes in 2000,
falling to just 19% by 2012. These trends are caused mainly by two factors. Firstly, the decline in
Perus birth rate, which was 24.6 per 1,000 population in 2000, but just 19.6 in 2012. Secondly,
the increased wealth of the nation has given more people the opportunity to live on their own.
Traditionally, Peruvian children lived with their parents until they married. Whilst this is still the
status quo for the majority, many of those in the formal labour market have easier access to
loans and mortgages, giving them the option of moving into their own home at a younger age.
Given that there are fewer members per household, people live in smaller properties. In 2000,
21.5% of homes had just one room, rising to 24.1% by 2012.
Most households in Peru in 2012 consisted of couples with children (53.9%), marginally more
than a decade previously. The World Family Map project reveals that 66% of Peruvian children
grow up in a household with both parents, 24% with just one parent, and 10% with neither.
Although many couples are moving out of their parents home after getting married, less than
half is able to do so without financial assistance. Only 47% of these couples are able to fund
their own mortgage. The remainder of the couples have the title of their house under the names
of a family member. Household disposable incomes continue to rise, particularly amongst
middle-income demographics. Mapcity predicted in June 2013 that the average household
monthly income for those in socio-economic segment C would grow to PEN3,900 by 2015 and
PEN4,380 by 2020.

Dogs treated as a member of the family
Dogs are by far the most popular domestic pet in Peru, according to newspaper Publimetro in
March 2013. Dogs are found in 30% of households in the capital Lima. Dog ownership is ten
times greater that the level of cat ownership. Dr. Enrique Tello of the Veterinary Medical
Association of Lima provided some explanations for this trend. Residents prefer having dogs at
home because they perform functions that are perfectly adapted to our day-to-day lives. Among
them are those of guardianship, company, and even psychological and therapeutic support.
Dogs like boxers or bulldogs help introverted children come out of their shell." Dr Tello also
reported that large parrots, monkeys and hedgehogs are kept as pets, but he said that this was
not recommended in a city as polluted as Lima. In any case, a permit from the National Institute
of Natural Resources (Inrena) is required in order to be able to keep creatures of this nature.

Future Peruvian households will have a different profile
An insight into the Peruvian household of the future was presented by Jos Garrido Lecca
from the University of Piura. The report identifies the various household profiles that are likely to
exist by 2021. He predicts that family size will continue to fall and the number of homes will keep
rising, as more people choose to live alone. He also forecasts a growth in the number of single-
parent homes, as well as a rise in the number of households with people living together who are
not related, for instance, students sharing a house whilst studying at university. Homes with
people aged over 40 are predicted to make up a large segment of the population, with high
purchasing power and innovative needs. A group of young households will start to emerge with
members aged 25-35 who are no longer living with their parents. In many cases, these
households will not yet have children and will be able to afford an expensive lifestyle. However,
the report suggests that there will continue to be a significant proportion of children who live with
their parents well into adult life because they do not have the funds to move out. The final group
that was identified was the VIB, which stands for Very Important Baby. These households
consist of couples that have their first baby at a comparatively late age, and when the baby
arrives, no expense is spared. This is because older couples are more likely to have higher
disposable income and they have not had to dedicate funds to another child earlier in life.

Running Costs
Ricardo Izquierdo, from GE Lighting, explains that demand continues to expand in line with
the countrys economic growth. It is reflected in an increasingly large demand for energy and
lighting solutions that help reduce energy consumption. Peruvian households are becoming
more informed about their use of energy and how to save money. When purchasing light bulbs,
people are recognising the longer-term benefit of a larger initial outlay (PEN10-PEN11) for an
energy-saving model that uses 80% less electricity, as opposed to buying cheaper traditional
bulbs (PEN3-PEN4). Gas cookers are widespread in Peru. As reported in Gestion in June 2013,
the Peruvian Consumers Association (ASPEC) has been concerned that retailers of domestic
gas have colluded to fix prices at over PEN40, when they should be retailing at no more than
PEN30-PEN32. The Association has urged customers not to purchase their gas from
companies charging the higher prices.
Recycling has struggled to develop in Peru. Just 2% of waste collected nationwide is
recycled, according to the NGO Cuidadanos al Dia. The organisation claims that 61% is sent to
an open dump, 12% is openly burned, and 3% is discharged into rivers or the sea. The report
also indicates that 17% of councils in Peru do not even have a garbage collection service, let
alone any form of recycling. The Civil Association is working in partnership with some of Perus
leading private companies to raise awareness of recycling through a campaign called Recycle
Me, Help Your Planet. They released a study in December 2012 illustrating the significant
progress that Peru still needs to make. Just 11% of the population in Lima said that they actively
participate in recycling. Although 97% said they had heard of recycling, only 89% was able to
describe the process, even in its most basic form. About 57% believed that recycling had some
value, but only 29% said that they planned to recycle in the future. In terms of recycling
locations, 52% said they do it at home, 42% uses the facilities provided at supermarkets, and
27% at schools and universities. Meanwhile, 71% of those who do not recycle stated that lack of
time was the reason for not doing so, 36% said that they did not have access to the required
facilities, and 29% cited a lack of knowledge about which products can be recycled. However,
Peruvians recycle very efficiently returnable glass bottles. This is most common with beer and
carbonated soft drinks, particularly in lower-income areas. Customers are able to purchase
drinks from a retailer (usually in a crate of 12 bottles) at significantly reduced rates if they bring
back the empty bottles that contained drinks they have already consumed.
The countrys DIY industry has grown at a significant pace in recent times: spending on
hardware and DIY goods per household reached PEN170.3 in 2012. Peruvians have
traditionally liked to buy land and construct their own homes. With disposable incomes higher
than ever before, this trend has extended into extensive remodelling of household interiors. The
newspaper Gestion reported in May 2013 that 36% of the population said that any money they
can save this year will be allocated to improving their home. In 2012, 55% of all building material
sales were for DIY, and this was particularly prevalent in socio-economic segments C and D.
When undertaking the work, most people prefer to either do it themselves or enlist the help of a
family member. People are willing to contract work to individuals they do not know but only if
they are personally recommended to them. It would be extremely rare for somebody to look for
a company in a phone directory or equivalent source. People tend to be distrustful and do not
want to provide access to their home to an unknown person. A recent survey found that women
make 51% of the decisions when remodelling the home. The bedroom is the most common area
for DIY work (29%), followed by the kitchen (24%) and the living room (22%), according to
Gestion, in November 2012. The countrys growing economy has also enabled people to keep
up with interior design trends by making alterations to their home on a more regular basis. Raul
Verastegui, CEO of Arq-Studio, reports that now more Peruvians desire to modernise their
homes. People remodel their properties every five to ten years, whereas before it was every
twenty years. Interior designers are able to charge between US$2,500 and US$10,000. Whilst
the hiring of such individuals was previously limited to socio-economic segment A, in recent
times investing in this type of service has filtered through to segments B and C.

Peruvians delaying their utility bill payments
Energy costs for residential customers in Peru have generally avoided sharp increases in
recent times, and in some months have even decreased. So it is perhaps surprising that a 2012
survey by government body Lima Como Vamos found an alarming rise in the number of people
who said that if they were short of money, service bills would be the first household cost they
would postpone paying. The figure was 60.4% in 2012, against just 44.9% in 2011. The problem
is most acute in the southern districts of the capital Lima, where many of Perus poorest
neighbourhoods are located. In this region, 80.1% of inhabitants said utility bills would be the
first thing they would neglect to pay. More specifically, 38.4% said they would ignore the
electricity bill until they had the means to pay, and 29.9% indicated that water was their lowest
priority. This trend can perhaps best be explained by a rise in the urgency to respect other
financial commitments with more severe penalties for non-payment, such as interest on credit
cards. Electricity and water bills can often go unpaid for two to three months before the service
is cut and there is normally no re-connection fee. This has created a culture of lethargy towards
these types of payments.

Increased spending on home security
An article in newspaper El Comercio in March 2013 explains that, until recently, it was
sufficient to have a bar across the front door of the house and a Rottweiler dog in the garden to
scare away thieves. Yet, today, life in Lima is much more dangerous and this has led people to
use more sophisticated security solutions, including alarm systems, stronger locks, electric
fences, gates and security cameras.
Given the sharp increase in the perception of insecurity, Lima families spend, on average,
1.8% of their monthly income on private security. This means an average monthly expenditure
of PEN42 per family, according to INEI. However, levels of expenditure vary widely, with some
families spending thousands of soles and others spending nothing. While the percentage of
people aged over 15 who have been a victim of a criminal act has remained stable over the past
year (39.9%), 83% of citizens feel that the city is becoming more unsafe. The growing economy
creates an environment where criminals know that the average home now contains more items
worth stealing, and there has also been a significant rise in gun ownership. These factors have
led families to devote more resources to securing their homes.

Table 2 Housing and Households Data 2000, 2005, 2010, 2011, 2012, 2015

2000 2005 2010 2011 2012 2015

Total number of 5,692 6,432 7,276 7,465 7,660 8,277
households ('000)
- Urban ('000) 4,109 4,846 5,669 5,849 6,036 6,629
- Rural ('000) 1,582 1,586 1,607 1,616 1,624 1,648
Households by tenure
- Home owner ('000) 4,344 4,908 5,552 5,695 5,845 6,315
-- Home owner without 4,092 4,616 5,214 5,347 5,485 5,921
mortgage ('000)
-- Home owner with 252 292 338 349 359 394
mortgage ('000)
- Rented ('000) 748 945 1,173 1,221 1,269 1,419
Households by type of
dwelling
- House ('000) 4,749 5,350 6,035 6,187 6,346 6,844
- Apartment ('000) 207 229 254 259 265 283
- Other ('000) 735 852 988 1,018 1,050 1,150
Households by number of
persons
- 1 ('000) 597 733 900 938 978 1,108
- 2 ('000) 721 874 1,063 1,106 1,152 1,301
- 3 ('000) 839 1,029 1,244 1,288 1,333 1,471
- 4 ('000) 1,175 1,409 1,667 1,721 1,776 1,946
- 5 ('000) 764 834 913 931 951 1,012
- 6+ ('000) 1,596 1,554 1,491 1,480 1,470 1,439
Households by number of
rooms
- 1 ('000) 1,222 1,454 1,723 1,782 1,844 2,039
- 2 ('000) 1,421 1,645 1,903 1,960 2,019 2,207
- 3 ('000) 1,202 1,285 1,376 1,396 1,417 1,485
- 4 ('000) 879 956 1,040 1,059 1,079 1,142
- 5+ ('000) 967 1,092 1,235 1,267 1,300 1,404
Households by sex of
head of household
- Male ('000) 4,508 4,756 5,006 5,077 5,150 5,375
- Female ('000) 1,184 1,676 2,270 2,388 2,510 2,901
Households by type
- Single person ('000) 597 733 900 938 978 1,108
- Couple without 350 416 483 497 512 557
children ('000)
- Couple with children 2,928 3,404 3,908 4,017 4,129 4,480
('000)
- Single-parent family 482 530 591 605 619 666
('000)
- Other ('000) 1,335 1,350 1,395 1,407 1,421 1,465
Housing stock ('000) 6,391 7,291 8,001 8,158 8,319 8,820
Housing completions 185 147 157 163 167 168
('000)
Pet population (animals 0.7 0.7 0.8 0.8 0.8 0.8
per household)
Ownership of household
durables by type (% of
households)
- Dishwasher 0.0 0.1 1.1 1.6 2.2 3.9
- Freezer 11.8 24.3 33.4 34.5 35.5 37.8
- Microwave oven 3.7 30.5 48.3 49.4 50.2 50.9
- Refrigerator 35.9 36.6 38.5 39.1 39.6 41.1
- Telephone 23.6 28.1 28.6 28.8 28.8 28.9
- Tumble drier 3.8 4.5 5.1 5.3 5.4 5.8
- Vacuum cleaner 16.0 23.0 27.3 27.8 28.3 29.7
- Washing machine 9.3 15.5 20.5 21.4 22.2 24.5
Average household
expenditure on running
costs (PEN per
household, at
constant prices)
- Maintenance and 605.4 556.3 582.7 594.2 600.0 615.9
repair of dwellings
- Water and 551.9 522.8 550.3 565.8 577.2 601.7
miscellaneous domestic
services
- Electricity, gas and 1,714.1 1,761.5 2,038.8 2,112.2 2,163.4 2,288.4
other fuels
- Hardware and DIY 85.4 105.0 151.6 161.0 170.3 191.6
goods
- Household and 308.5 342.2 445.5 464.6 482.5 519.2
domestic services

Chart 2 Number of Households by Disposable Income Bracket 2005, 2010, 2015


MONEY AND SAVINGS

Attitudes Toward Payment Methods
Owing to the informal nature of much of Perus economy and the fact that less than half of
Peruvians have a bank account, cash continues to dominate. It is reported that 80% of
transactions are made using cash. However, the countrys recent economic growth has led to
higher incomes for much of the population. Along with the expansion of Perus banking sector,
alternative payment methods have experienced a rapid rise in popularity. Credit and debit cards
have been commonplace for several years now, with electronic payments enjoying rapid growth.
The rise of the credit card in Peru has prompted varied reactions. Large retail organisations
have used this period of economic optimism to fuel sales growth by offering unprecedented
levels of credit, of which their customers have not hesitated to take advantage. The total
number of credit cards in circulation was 3.9 million in 2012, against 3.4 million in 2011. On
average each individual has just over three financial cards. According to Asbanc, in April 2013
the use of credit cards reached its highest level for over four years (PEN16.5 billion), and the
proportion of available credit that was being used increased to 30.4%, compared to just 25% at
the end of 2011.
The sceptics of this credit revolution have concerns about individuals ability to repay the
money they owe each month. They blame financial institutions for providing people with too
much credit in the first place. Jorge Olcese (former Head of SBS, the banking regulator) has
queried whether banks have sensible strategies in place to deal with consumer credit debts. He
believes that they seem more focused on attracting new customers who do not currently
possess a credit card (particularly in the provinces) than on consolidating the backlog of debts
owed by current cardholders. Mario Gurrero from Scotiabank explains that many people have
more than one credit card and that they should ensure that only one is used for common
purchases. The other cards should only be brought out for emergencies. A greater number of
cards in peoples pockets can lead to greater use, which can lead to payment problems. The
government body Lima Como Vamos provided some positive news in a report released in
January 2013: Peruvians are starting to take their repayments more seriously. In 2010, 13.8% of
people said that monthly credit card payments would be the first thing they would sacrifice if
they were short of cash, against just 10.6% in 2012.
Transactions through virtual channels (internet, telephone/mobile banking) are growing in
popularity. However, it is still a relatively small sector, primarily due to the fact that only 30% of
the population has a bank account. Only 30% of people who possess an account conduct
transactions via the internet regularly. This figure is much higher in socio-economic segment A,
where over half of customers (53%) use the internet to make payments and transfers. About
59% of people who use the internet to conduct transactions do so to save time. Yet, another
important factor in Peru is safety: 42% of people appreciate the fact that internet transfers
eliminate the need to carry large sums of cash in the streets.
Mobile phone payments have taken a large step forward in Peru. Legislation governing and
promoting the transfer of electronic money came into force in April 2013. Congressman
Fernando Andrade, who heads the governments Economic Committee, views mobile phone
payments as essential for the future. The phone can be credited with money, in the same way
that users buy a phone card to give them credit to make calls. Users will have the ability to send
money to other bank accounts, make bill payments and receive wages from their employers. By
the end of 2013, it is anticipated that users will even be able to pay for items in shops using their
phones. The Head of Alternative Channels at Perus largest bank (BCP), Arthur Johnson, has
pointed out that the advantage of the new e-wallet system is that it does not require an
advanced smartphone to perform the transactions. Only a low-cost phone is needed. He has
estimated that over one million people will be using this payment method regularly by the end of
2013.

Savings
Peru has not traditionally had a savings culture. Factors include the informal nature of much
of the countrys economy, people in remote locations with no access to a bank, and a lack of
trust in financial institutions. Peruvians tend not to plan too far ahead in any aspect of their lives,
and looking after their finances is no exception. They are inclined to spend whatever money
they have. However, as the country enjoys unprecedented economic growth, a savings habit is
slowly starting to develop.
In 2012, it was estimated that just 2.2% of disposable income was saved in Peru. This figure
has been stable for several years now and only a marginal increase is expected through to
2015, when a figure of 2.3% is forecasted. In April 2013, a report by broadcaster RPP said that
people in socio-economic group A are the most prudent savers, with 9% of their income
destined for that purpose. There is an increased desire amongst Peruvians to try and save
money. In December 2012, it was found that 60% of Peruvians believed they would be able to
save money in 2013 (up from 56% the previous year), and 79% of those individuals aimed to
save at least a quarter of their earnings. However, current statistics suggest that there is still a
significant disparity between the levels that people intend to save and the actual amounts of
money that is saved. Another important development that has discouraged savings in recent
years has been the exponential increase in the availability of credit cards. People do not feel
that they need to save for big-ticket items because they can simply buy them straight away on
credit. This creates a situation where many individuals have high levels of repayment on their
monthly credit card bills, leaving little or nothing to save.
As the authorities are attempting to increase levels of savings in Peru, they are encountering
obstacles that have stood for many years. The RPP report found that 65% of Peruvians prefer to
keep their savings in cash in their home, with only 29% opting to put money into a financial
institution. Just 30% of the population has any kind of financial product so, until that changes,
levels of cash savings will remain high. Much of the population has a desire to try and save
money through the formal system, but there are issues to resolve first. Of those surveyed, 55%
said they did not want to open a bank account because of the high charges that some
institutions place on account holders, 54% said they did not earn enough money to make
savings worthwhile and 37% cited a lack of confidence in financial institutions. Other prohibitive
factors include the lack of bank branches in some neighbourhoods and some individuals do not
possess the necessary documentation to open an account. In addition, some very honest
individuals admitted that they work informally and putting money into a savings account would
increase the possibility of having to pay tax on their earnings.
Life insurance has become more widespread in Peru in recent times. The current participation
levels are low, at around 0.5% of GDP. Peruvians spend US$23 per capita annually on life
insurance, significantly less than in the rest of Latin America, where the average is US$75. In
Peru, the sector has grown at a rate of 15% for the last three years, as companies have begun
to dispel the myth that insurance is only available to high-income earners and more customers
in segments C and D are starting to purchase these types of products.
Gestion reported in September 2012 that, given their increased earnings, Peruvians are
entering the banking system at a younger age. Patricia Foster, from the countrys biggest bank
(BCP), revealed that now the average age of entrants to the banking system is 25 to 26,
whereas a few years ago, it was above 30. Foster points out that young people have been
attracted by accounts that can be opened with little fuss and those that do not charge
maintenance fees. In addition, young people are leading the way in the use of electronic
banking.

Loans and Mortgages
Peruvians have traditionally avoided taking out loans to fund purchases: just over half (55%)
the population has never requested finance from another source. When requiring a significant
loan, 42% of Peruvians prefer to borrow from a family member, according to an April 2013
report by broadcaster RPP. The second most common source is a financial institution (33%),
followed by 7% who would approach a friend. This is because many Peruvians work either
independently or informally, often starting each month with little or no idea of how much they are
going to earn during that period. In addition, banks are unwilling to lend money to the significant
numbers of people who have no financial history.
The Chief of the SBS (Perus financial regulatory body), Daniel Schydlowsky, has cited the
lack of education on financial matters as a potential danger to household debt. He has stated
that many Peruvians do not know how to calculate an interest rate. They only know that, when
they borrow, a high interest rate is worse than a lower one. Whilst concerns are growing over
consumer debt levels, the situation remains under control. Credit agency Standard & Poors
reports that 17% of monthly family income is used for debt repayments. This figure is higher
than in some countries in the region but still lower than in Brazil, the worst offender with 19.4%.
To the surprise of some, people in the provinces of Peru have a better record of debt
repayment than those living in the capital Lima. The most efficient locations are Puno, where
48% of people repay their debts in full every month, Cajamarca and Cusco (47%). This trend is
explained by Jorge Chavez, from financial consultancy Maximixe Peru. He reveals that,
because these rural areas are made up of closer-knit social communities, people have more
idea about what is happening in the lives of others. If an individual does not meet his/her
monthly payment obligations, he/she fears that people may start to assume he/she has financial
problems. In addition, these people often have a harder time getting a loan than those living in
large cities, so they are more careful about ensuring that they do not lose their status as being
creditworthy.
Figures released by BCP (Perus largest bank) show that the age of first-time borrowers is
decreasing. The average age for someone taking out a loan for a vehicle for the first time is now
26.
An unprecedented demand for housing and less stringent financial lending policies have
created a mortgage boom. The Bank Association (Asbanc) reports that 38,272 new mortgages
were approved in the 12 months to February 2013, over 3,000 more than during the previous
period. The bank BBVA announced in April 2013 that the number of mortgages in Peru is now
180,000, but it noted that this is low for a country of Perus size, with a population of 30 million.
There should be between 1 and 1.2 million. According to a November 2012 report in Gestion,
the average mortgage repayment term is 15 years.
Whilst more flexible lending policies have made obtaining mortgages simpler for much of the
population, some lower-income groups are no closer to owning a home. Many people in this
demographic are starting to earn enough to make mortgage payments every month, but most of
them have never had a bank account. Potential lenders have no information on them and see
them as high risk. The fact that many people in this income bracket work informally only adds to
the complications.
The younger generation has increasingly easier access to mortgages. Financial institutions
view young people as attractive because they have lower family expenses and, on average,
their earnings are increasing at a faster rate than older age groups. Juan Manuel Castro, from
BBVA, explains that 32% of the mortgages issued by the bank in 2011 were for people aged 25-
35, compared to just 22% the previous year. He notes that young people are more willing to
make higher down payments on their properties, which keeps interest rates low. Average
monthly repayments in this group are around PEN1,100. The government-assisted mortgage
fund Mivivienda has reported a fall in the average age of first-time buyers, from 40 to 36. It
expects another significant decrease in 2013, possibly to as low as 30. Traditionally, young
people rented properties whilst trying to save for a large property in anticipation of having a
family. Nowadays, they are purchasing smaller properties and selling them to buy larger
properties as and when they have children.
The proportion of mortgages paid in US dollars has fallen, from 49.6% in 2012 to 45.2% in
2013. Most new customers are taking out their repayment plans in the local currency. The
countrys government and financial institutions have implemented policies to de-dolarise the
economy so that there is less instability when the exchange rate changes. At the end of 2012,
interest rates for mortgages in dollars were slightly lower than for mortgages in the local
currency (8.2% in dollars versus 9.0% in soles). However, legislation has been passed (since
January 2013) dictating that the deposit required for a mortgage in dollars must be 20% of the
value of the property. For a mortgage in the local currency, the down payment only needs to be
10%.

Younger generation struggling with financial repayments
Eduardo Torres-Llosa, from the bank BBVA Continental, believes that mechanisms must be in
place to assess customers true ability to make their payments as indebted clients do not benefit
anyone. However, current statistics suggest that some consumers are still struggling to meet
their repayment obligations. The default rate was 5.2% in April, the highest in more than seven
years. The problem is particularly acute amongst young people. When looking at credit card
users aged 18-25, it was found that the number of customers defaulting on their payments was
93% higher in May 2013 than in May 2012. In addition, the proportion of customers in this age
group who make their payments on time has fallen, from 62% to 58% in May 2013. Given that
young people account for an increasing proportion of credit card spending, more education on
financial responsibility is required for this demographic. Yanina Caceres, from risk consultancy
Sentinel Peru, suggests that youngsters need to be more selective as to what purchases they
use their credit card for. If you buy a refrigerator, its understandable that you would need to
use instalments to pay for it. But if you start to buy your food with a credit card, then there is a
problem, because that is an everyday purchase.

Increase in womens access to financial products
In Peru, there are now more female than male credit card holders. Diego Conroy, from
Citibank Peru, explains that between 15% and 20% of that consumption is allocated to
hairdressing, shoes and fashion. The remainder is for general purchases in supermarkets. He
points out that the increasing number of women in the labour market has contributed to this
trend. More women now have the ability to earn an income, which enables them to have greater
access to the financial products offered by banks. It is generally women who control the family
budget for day-to-day purchases, which raises female spending levels on credit cards, even if
the products they buy are to be consumed by the family as a whole.

Table 3 Money and Savings Data 2000, 2005, 2010, 2011,2012, 2015

2000 2005 2010 2011 2012 2015

Financial cards in
circulation
- ATM cards (mn cards) 3.8 5.5 8.3 8.6 9.5 12.0
- Debit cards (mn cards) 2.2 3.6 4.9 5.0 5.4 6.5
- Credit cards (mn cards) 1.5 1.7 3.2 3.4 3.9 5.2
Financial cards'
Transactions (US$ mn, at
constant prices)
- ATM cards 4,276 3,725 6,410 6,463 6,554 8,242
- Debit cards 2,507 3,411 8,590 8,837 10,176 17,705
- Credit cards 3,904 2,786 4,999 4,976 5,555 8,696
Cash transactions 39,439 29,895 69,029 67,894 65,418 74,796
Other paper 5,318 2,734 4,833 4,803 3,539 2,095
transactions
Annual savings (PEN mn, 7,968 6,196 6,672 7,155 7,382 8,760
at constant prices)
Savings ratio (% of 4.3 2.8 2.3 2.3 2.2 2.3
disposable income)
Annual lending rate (%) 30.0 25.5 19.0 18.7 19.2 n/a
Consumer lending
(outstanding
balance, US$ mn)
- Consumer credit 311 459 2,066 2,289 2,408 3,348
- Mortgages/housing 348 233 2,648 3,012 3,046 3,818

Chart 3 Consumer Lending Compared with Savings and Savings Ratio 2000- 2015


EATING AND DRINKING
Food has become a national obsession due to the countrys recent gastronomic boom. Whilst
Peruvians have always enjoyed their local cuisine, the countrys dishes are now starting to be
recognised across the globe, which is a source of much national pride. Newspapers, websites
and television programmes regularly feature reports about the countrys cuisine, including
stories of a new dish that is proving popular locally or of a Peruvian chef who has opened a
successful restaurant abroad. The main annual event for Peruvian cuisine, Mistura, takes place
in Lima every September; it attracted 506,000 visitors in 2012 and, at the 2013 event, revenues
are expected to reach US$11 million, according to an article in El Comercio in April 2013. In
2012, the World Travel Awards voted Peru the Best Culinary Destination in the World.
Peruvians eating habits are modernising in line with many other aspects of the country. A
vibrant economy has resulted in many people having much less free time due to work
commitments. Therefore, fewer meals are prepared from scratch at home, particularly in urban
areas. This has driven the demand for many pre-prepared food items, particularly through
modern shopping channels. According to Gestion, the demand for packaged sauces has grown,
with spicy sauces being particularly popular. In January 2013, research by the university ISIL
reported that 82% of households in Lima now spend over PEN300 per month on food.
Rising levels of disposable income are encouraging more Peruvians to eat out. There are now
90,000 restaurants across the country, 46% of which are in Lima. According to Limas Chamber
of Commerce, 24% of Peruvians eat out once a week and, for 23%, it is a bi-weekly activity.
Unsurprisingly, spending levels vary significantly according to socio-economic demographic.
Those in segment A spend PEN62 per person when eating out, compared to just PEN10.50 for
consumers in segment D.
Chicken dishes are currently experiencing a surge in popularity, much of which is due to pollo
a la brasa, a traditional Peruvian dish, similar to blackened chicken in the United States. Pollo a
la brasa is a very special and symbolic dish, which has become the darling of Peruvian
consumers, according to Jose Vera, from the Peruvian Association of Poultry (APA). A report by
broadcaster RPP in September 2012 shows that chicken consumption has been increasing
steadily over the last decade, with 51% of Peruvians now saying they regularly eat chicken,
compared to 42% in 2000. The report suggests that chicken has been popular because
Peruvians like its taste, it has health benefits, and most importantly it is versatile. Per capita
consumption of chicken in Peru now stands at 13.7kg, but, in the capital Lima, consumption is
thought to be higher. It has been a different story for fish, with just 27% of the population now
saying they consume it on a regular basis (3% less than in 2000). This is despite the fact that
Peru has one of the largest fishing industries in the world.
Despite the modernisation of Perus food industry, the traditional men remains a firm
favourite amongst the low- to middle-income population. The menu is a three-course meal,
usually taking place in a small, traditional caf. Typically, there is a choice of two to three
starters, three to four main courses and two to three desserts. The items on offer are normally of
Peruvian origin, based around potatoes, rice, fish and meat. This is particularly popular amongst
workers who do not have the time to prepare their own lunch and cannot afford to eat at
restaurants every day. The cost of a menu varies depending on the location. Menus as cheap
as PEN4 can be found in the provinces, whereas PEN14 would be expected in a wealthy Lima
neighbourhood.
However, as the gastronomic boom picks up momentum, Peruvians are becoming more
demanding when they go out to eat. An article on Peru 21 in September 2012 shows that
around 23% of restaurants went out of business in 2011. In 60% of cases, the primary reason
was poor service, 25% of closures were a result of mismanagement, and 15% was due to a lack
of variety on the menu.
Street food continues to play a large part in Peruvians daily life. The most popular dishes
include salchipapa (hot dog and chips), ceviche, kebabs and chicken sandwiches. Only 19% of
people say that they almost never eat food purchased on the street. About 22% consumes food
through this channel once a week, 39% several times a week, 14% on a daily basis, and 6%
several times a day. The health issues that are regularly associated with this activity do not
appear to be a concern for most Peruvians: 67% says that eating food sold by street vendors
does not do any harm to the body.

Purchases of breakfast products becoming a family decision
Breakfast habits among Lima residents were reported in a study in Gestion in February 2013.
The study shows that, when it comes to deciding what products and brands to purchase for
breakfast, housewives are making fewer decisions. Other parties in the household have an
increasing influence. Housewives are the chief decision maker for breakfast products in 44% of
households, their husbands in 27%, the children in 18%, and other people in the household
(perhaps a grandparent or employee) in 11%. The average spend on breakfast in Lima is just
PEN1.80 per person, significantly less than on other meals of the day. The average person
spends 15 minutes consuming breakfast each day. Whilst 61% of people eat breakfast in their
home every day, just 4% has it outside the house on a daily basis. About 35% alternates
between the two, depending on their schedule.

New legislation puts fast food consumption under the microscope
Fast-food chains continue to grow in popularity: With nearly 560 outlets across the country,
with KFC, Pizza Hut, Bembos and McDonalds being the most popular. A report in Gestion in
June 2012 reported that fast food and snacks make up 43% of average teenagers expenditure.
These sorts of statistics have brought the issue of fast-food consumption sharply into focus. In
May 2013, legislation was passed in congress to improve education about nutrition and remove
junk food from schools. Fast-food companies are now banned from releasing advertising that is
aimed specifically at children and youths. We cannot view our children as simply a market to
generate sales and maximise profits, said the countrys President Ollanta Humala.

Drinking Habits
Expenditure on alcohol reached PEN592 per capita in 2012, a 3.9% growth on the previous
year. Beer is by far the most popular alcoholic drink, accounting for nearly three-quarters of
sales in 2012. Beer consumption reached 47 litres per capita in 2012. Wine and spirits are less
commonly consumed due to their higher cost. Yet, these categories are benefiting from
Peruvians increasing disposable incomes, and high growth is predicted for both over the next
few years.
Alcohol is associated with a variety of different occasions in Peru. Drinking in the home with
family and friends is popular, particularly at weekends. Perus urban areas have a wide variety
of nightspots, such as bars and clubs, where significant amounts of alcohol are consumed.
Younger people often drink at several locations during the same evening. Groups of people
often arrange to meet first at somebodys house (an event known as previos) before going out
to a bar or nightclub later on. This is partly motivated by a desire to save money, but also they
can enjoy each others company and converse in a relaxed environment before immersing
themselves in noisier public locations later in the night. In the summer, many Peruvians head to
the countrys beaches and consume beer whilst relaxing. Alcohol consumption is also
widespread in cafs and restaurants. A long-standing tradition amongst lower-income
demographics is to share one bottle of beer among a group of people. A large bottle of beer is
passed around and, upon receiving the bottle, each person fills his glass. People are expected
to have finished drinking what is in their glass by the time the bottle comes round again.
Alcoholic drinks consumed at home are generally bought from the closest retailer. In Lima and
other large urban centres, modern channels are popular because they sell a wide variety of
alcoholic drinks. In rural areas, the corner shop (known as a bodega) is often the only option.
Bodegas sell a more limited range of brands than supermarkets, but they have an advantage:
they offer a retornables service. This is very common in lower-income areas. It gives
consumers the ability to return glass beer bottles to the retailers once the beer has been
consumed. In return, the stores sell them an equal number of new beer bottles at a reduced
price. The retailers send the empty bottles back to the beer company and receive a new batch,
also at a reduced price. When returning a crate of 12 empty 650ml bottles, the consumer has
the option to buy a new crate, typically for around PEN40-PEN45, which is less than PEN4 per
bottle. Buying a new 650ml beer without having returned an empty bottle would cost nearly
PEN7. This practice is one of the main reasons why bottled beer continues to be the most
popular by far amongst consumers.
Part of the popularity of beer in Peru is due to its affordability, whereas wine and spirits are
beyond many consumers budget. Prices of reputable brands start at around PEN20 for wine
and PEN30 for spirits, which is prohibitive for much of the population. However, the growth in
consumers spending power has led to a rise in the popularity of these more expensive drinks.
Whisky has enjoyed a surge in consumption and now accounts for 55% of imported spirits.
Matthias Jullian from Pernod Ricard has highlighted that, whereas the consumption of premium
whisky brands had previously only applied to high-income demographics, it is now filtering
through to the middle class. He explains that a strong aspirational culture exists among
Peruvians, and the alcohol industry is no exception. The marketing of premium whisky brands
gives an image of sophistication to which middle-class demographics aspire. As long as
premium products are stocked in their local shop or bar, middle-class Peruvians will drink them,
even though their price is high.
Another recent success story has been pisco, a type of grape brandy. Peruvians continue to
claim that this drink originated in their country, despite claims from Chileans that it originated in
theirs. The increasing popularity of pisco can be largely attributed to national pride and the
growing desire over recent years to consume locally-produced products. As Gestion reported in
2012, a National Pisco Day is now celebrated on the fourth Sunday of July each year.
Underage drinking is rife in Peru. According to a September 2012 report in El Comercio,
30.3% of children aged 12-15 admit that they consume alcohol twice a week. Furthermore, 60%
of teenagers had tried alcohol at least once before the age of 14. The Centre for Information and
Education for the Prevention of Drug Abuse reveals that the main problem is that often they do
not simply have one glass of beer but embark on binge drinking sessions.
The Peruvian authorities do not have a good record in terms of enforcing alcohol restriction
laws. The Ley Zanahoria prohibits sales of alcohol in shops and gas stations beyond 11pm and
in bars and nightclubs after 3am. However, a February 2013 report by newspaper Peru 21 found
that, despite a PEN7,200 fine for offenders, less than half of Limas councils are effectively
policing these laws.
Soft drinks have always played a significant role. Carbonates dominate and are consumed on
a wide variety of occasions, such as meal times at home, in cafs, and at friends and family
gatherings. Unlike in the alcoholic beverages sector, there is little difference between the brands
of carbonates consumed by different economic demographics. Drinks such as Coca-Cola and
Inca Kola are popular with people regardless of their income. Augustine Valencia, from the Soft
Drinks Industry Association of Peru (Asbega), explains that, whilst Peruvians are price sensitive
in many areas, cost rarely determines purchase decisions for carbonates because all brands in
are considered affordable. Flavour, availability and marketing play a much more significant role.
Many Peruvians only consume soft drinks served at room temperature. This stems from a
widespread belief that consuming cold drinks that have been stored in the refrigerator causes
illnesses, particularly in winter. When ordering a soft drink in a caf or restaurant, the customer
is almost always asked whether he/she wants it at fridge or room temperature. However, beer is
invariably served cold.

Peruvian beer drinkers upgrading their preferences
Some Peruvians have had the same purchasing habits for many years. Yet, given the
increase in their spending power, they are upgrading when buying alcoholic drinks. The
consumer who previously drank an economy local beer, such as Brahma, has now moved to a
mid-level local brand, such as Pilsen Callao. The mid-level consumer is now purchasing
premium local brands, such as Cusquea Red, more regularly. The person who used to drink
premium local brands is now able to buy imported beers, like the Corona brand.

Health-conscious consumers migrating away from carbonated drinks
Sales of carbonates in Peru have decelerated over the past few years. This is because
consumers are becoming more health conscious. Sales of drinks such as bottled water, 100%
fruit juices, and iced tea are now seeing rapid growth as larger segments of the population
become aware of their benefits.

Table 4 Eating and Drinking Data 2000, 2005, 2010, 2011, 2012, 2015

(PEN per capita, at constant prices)

2000 2005 2010 2011 2012 2015

Food consumer 2,557 2,801 3,521 3,693 3,852 4,281
expenditure
- Bread and cereals 537 615 813 855 893 1,002
consumer expenditure
- Meat consumer 440 492 642 675 706 791
expenditure
- Fish and seafood 131 150 207 218 229 258
- Milk, cheese and eggs 354 394 499 524 548 612
- Oils and fats 83 85 104 109 112 123
- Fruit consumer 208 241 345 365 384 436
expenditure
- Vegetables consumer 507 524 617 645 669 732
expenditure
- Sugar and 168 155 107 107 105 98
confectionery consumer
expenditure
Coffee, tea and cocoa 73 71 69 71 72 77
Mineral waters, soft 34 35 45 47 49 53
drinks, fruit and
vegetable juices
Alcoholic drinks 407 447 546 570 592 651
- Beer consumer 326 341 415 432 446 484
expenditure
- Spirits consumer 39 50 59 63 66 75
expenditure
- Wine consumer 42 56 72 76 80 92
expenditure
Catering consumer 175 199 250 263 276 309
expenditure
Availability of fruit 134.6 133.5 151.1 154.7 157.0 163.8
and vegetables (kg per
capita per year)

Chart 4 Real Growth in Consumer Expenditure Compared with Real Growth in Food
and Alcoholic Drinks Consumer Expenditure 2000-2015



GROOMING AND FASHION

Perceptions of Beauty
In such a culturally diverse nation as Peru, making generalisations as to what constitutes
beauty is not easy. Urbanites have access to multiple forms of modern media, such as cable
television and the internet, and are influenced by celebrities from every corner of the globe. On
the other hand, some individuals in remote parts of Peru rarely see people from outside their
own village, so they have little or no aspiration to alter their own image. Many of the fairer-
skinned people living in the coastal areas believe that having a sun tan improves ones image,
so they spend significant amounts of time at the beach during the summer. On the flip side, the
darker-skinned indigenous populations living in the mountains and the jungle, with little or no
access to protective sun creams, spend their days attempting to stay out of the sun and avoid
damaging their skin.
The newspaper El Gestion reported in November 2012 that, as the countrys economy has
developed in recent years, an achievement-oriented segment of the population has emerged.
This segment is typically young, employed in the formal labour market, and living in urban
areas. For over half the people in this group (55%), looking good physically is the most
important aspect in projecting their desired image, with 85% saying that their appearance has a
direct impact on how they feel. The same report reveals an opposing trend among a segment of
the female population. Some women have re-evaluated their desired image, having grown tired
of the constant bombardment of celebrity looks, expensive fashion and cosmetics advertising in
the media. The latest tendency is for these women to create a more authentic look, which
requires lower inputs of both time and money, but projects an equally positive image.
Companies generally use lighter-skinned individuals of European descent when marketing
their products. It is rare for members of the indigenous Peruvian population to be used to
advertise beauty products or fashion items. This trend is the same for the vast majority of
television presenters, including newsreaders, game show hosts and entertainers. The website
interbasket.net reveals that Peru has one of the shortest male populations in the world, with
men aged above 20 averaging just 1.65m in height. A man who would be considered of average
height in most other countries stands out as being tall in Peru.

Female Grooming
Beauty products and personal care items are occupying an increasing proportion of the
average Peruvian shopping basket. The upward trend in disposable income levels has given
consumers the ability to purchase more products. In addition, Peruvians are becoming more
sophisticated; for example, they want beauty products that offer more than just one benefit. Per
capita spending on personal care items reached PEN214 in 2012, a 3.6% increase over the
previous year. This trend is forecast to continue through to 2015.
More Peruvian women are entering the workplace, providing them with financial
empowerment. As a result, they have upgraded when purchasing health and beauty products. A
report by Gestion in November 2012 found that, in the middle- to high-income brackets, 24% of
women generally only buy luxury brands, and many of these individuals are aged under 30. The
interest in facial care has risen, particularly anti-ageing treatments which make up 34% of
demand. A January 2013 article on the website Peru Retail notes Peruvian womens greater
willingness to spend lavishly on cosmetics, reporting that the average purchase is now PEN200.
Faical Hammoud, from Versace Latin America, describes the most popular fragrance for
Peruvian women as a combination of fruity aromas with a floral heart. The growth in
expenditure is partly due to the fact that many Peruvian women realise that fragrances are a
status symbol, not simply items that deliver a pleasant smell. Fragrances have become an
aspirational item. Consumers are using their greater financial resources to purchase larger
sizes. Those who used to only be able to afford the 30ml sizes are now upgrading to 80ml and
150ml bottles. Gestion reports that 47% of Peruvian women apply eye make-up and 54% uses
fragrances.
Hair and beauty salons are becoming more popular. Ximena Ruiz of salon Toque X in Lima
says that consumers are demanding more variety of services. A salon can no longer be
successful simply by focusing on hair services. Customers now require treatments for their nails,
feet and face. Ruiz reveals that the demand for non-hair treatments is particularly high in the
summer when women are planning to spend time on the beach. Paul Cabra Plasencia, the
CEO of Expo Beauty 2013, says that the average spend per visit to a salon in Peru is now
PEN90. High-income customers have been known to part with up to PEN600, particularly if
expensive treatments like hair colouring are involved. Middle-income demographics rarely
spend more than PEN120 during a visit and often seek out less exclusive salons if they require
potentially expensive services.
Despite Perus high levels of UV rays, very few consumers use sun protection. Long hours of
fierce sunshine on the coast in the summer (December to April) and in the mountains during the
dry season (May to November) leave Peruvians heavily exposed to the risks associated with
overexposure to the sun. However, with a per capita spend of PEN1.1 in 2012, and a small
bottle of branded sun cream costing PEN35, it is clear that very few Peruvians are protecting
themselves adequately. The usage of sun protection is confined almost exclusively to middle-
and high-income demographics, usually when they are spending time on the beach during the
summer. Low-income groups who do not have the ability to purchase sun protection tend to use
hats and cover their body from head to toe when they have to be outside in the sun.

Male Grooming
In Peru, mens personal care products appear to be breaking down the traditional walls of
machismo that have traditionally been so prevalent. Fiorella Solari, from cosmetics company
Natura, says that looking after their personal image is now not just a wellbeing issue for men. It
is also important for their professional and social life. They want to look good and perfumes and
creams have a well-earned place in their closets.
The demand for mens fragrances grew by 18% over the period 2010 to 2012, with per capita
spending (among the male population) reaching nearly PEN15. Gestion revealed in May 2012
that, while face creams and lotions for men have been relatively widespread for some time, the
interest in hand cream for men is growing. Peruvian men are also becoming more interested in
the brands of hair products they use. Traditionally, they used whichever shampoo was in the
bathroom. Men are now buying their own shampoos; they use particular brands that are specific
to their hair type or other requirements.
Peruvian males are also taking advantage of the boom in the beauty salon industry, with
attendance levels 25% higher in 2012 than in 2011. Paul Cabra Plasencia, CEO of Expo Beauty
2013, stated that, while men do not visit salons as often as females, their average spend per
visit is higher. It has been known for men in high-income brackets to spend as much as
PEN500. Aside from haircuts, the most requested treatments by men are anti-wrinkle cream
applications, massages and facial treatments.

Women taking greater care of their appearance as they join the workforce
The growth in the numbers of Peruvian women in the workplace has driven demand for
consumer products including clothing, footwear, cosmetics and personal goods. The number of
economically active women reached 7.1 million in 2012 up from 6.7 million in 2008. This number
is expected to grow to 7.4 million by 2015.
Women increased their spending on shoes by 15% over the period 2008 to 2012. Spending
on fragrances grew by a whopping 35% and spending on mass cosmetics by 22% over the
same period. Mario Iriarte, from appliances firm Oster, says that women in formal employment
are thinking more carefully and spending more time constructing the image they wish to project
in the workplace.

High-income segments demanding more, whilst low earners try products for the first time
Basic hair care products have always had a strong penetration in the country, with the
majority of Peruvians using shampoo. However, as with other personal care products, women in
Peru are becoming more sophisticated. For example, now many will not purchase a particular
brand of shampoo if it does not also include a conditioning agent, or they will look for a styling
cream that both curls and strengthens the hair. Whilst people in middle- to high-income
segments are upgrading their purchases of hair products, many people in socio-economic
segments D and E are trying these products for the first time. In March 2013, Gestion reported
that traditional retail channels are starting to sell more products, such as hair dyes and
conditioners, in small, low-cost sachets. Although consumers in this demographic are still
experimenting with these types of products, demand levels are expected to be high over the
next few years.

Fashion Trends
Money and culture continue to be the driving factors behind the fashion trends in Peru. Many
people living in the countrys mountainous regions wear garment styles that have remained
unchanged for centuries. On the other hand, high-income Peruvian urbanites are purchasing
luxury items from international designers who had not even been heard of in the country a few
years ago. In 2012, Peruvians spent PEN334.2 per capita on clothing, a 6.1% rise on the 2011
figure. This healthy rate of growth is expected to continue with a forecasted per capita spend of
PEN384.2 in 2015. Faical Hammound, from Versace Latin America, says that Peruvians dress
well, although they are conservative. There is no Peruvian style as such. Urbanites tend to
follow European fashion and set the current trends.
A study by the Ministry of Production and Chamber of Commerce of Lima, released in
February 2012, found that, when making clothing purchases, 38% of Peruvians prefer classic
and traditional items. A further 37% is influenced by styles on display in retail channels, such as
department stores. Finally, 27% looks closely at global trends when making decisions about
how they dress. Males, particularly the older demographics, are the most averse to indulging in
the latest fashion trends. Amongst this group, jeans and polo shirts are the most popular
garments, with black and white the leading colours. The study also reveals a strong preference
for local clothing products, with 59% of men and 68% of women saying that they look for items
made from Peruvian cotton. This sense of pride in local goods is also evident in alpaca
garments, such as jackets and jumpers. Broadcaster RPP reported in February 2012 that the
average cost of an alpaca item was PEN117 and, despite the cost, 70% of the demand is from
low- to middle-income groups. One third of households in Lima were found to possess an
alpaca garment.
The fashion habits of people on lower incomes are restricted by what they are able to afford.
For many people in this economic segment, how they dress is important, but many focus on
other purchases first as their resources are limited. As a general rule, Peruvians in poorer
demographics are often attracted to clothes in bright colours. Luminous yellows, pinks and
turquoise are very common. Sportswear is very popular amongst this segment, particularly as
many affordable counterfeit brands are available.
In November 2012, the newspaper Gestion reported the emergence of an achievement-
oriented group amongst Perus middle- to high-income population. These people are not simply
buying expensive clothing to look and feel good but to project an image that assists them in
making progress in their lives, from a social or professional point of view. For an office worker,
this may involve purchasing an expensive imported suit in order to give the impression of
somebody who is likely to progress in the company. For an individual going to a nightclub,
buying an original garment not commonly worn in Peru can help attract attention within that
social environment.
Peruvian consumers are spending more on diamond rings. Gerardo Zela, from Diamond Peru
says that, whilst several years ago most purchases of diamond rings were for about US$500,
60% of demand in 2012 were for items priced between US$1,500 and US$10,000. Peruvian
consumers are among the most demanding; they are very specific about the cuts, colours and
sizes that they want. Although the most expensive pieces are typically bought by those in high-
income segments, significantly more middle-income consumers are purchasing expensive
diamond items, often as an investment. In addition, Perus males are more confident to shop for
their own accessories. Gabriela Walbaum, from Hamsa Accessories, says that more men are
making decisions when buying items such as bracelets.

High-income groups indulging in luxury brands
According to Gestion, the rapid rise in spending power has led more Peruvian consumers to
shop for luxury clothing. Sandra Pizarro, from the Centre for Fashion Studies (CEAM), has
estimated that the demand for premium brands would rise by 10% in 2013. While the majority of
items come from foreign fashion houses, local designers, such as Claudia Jimenez and Sergio
Davila, are also having an impact on the latest trends. Customers making purchases in this
market still represent a small proportion of the population and come exclusively from high-
income groups. They buy on average one item per month, with the men spending US$900 per
purchase, and US$500 for women. The growth in activity in the premium sector has also seen
Peruvian consumers hire the services of a range of professionals, such as fashion consultants
and personal shoppers. One such individual is Spanish fashion consultant Laura Garcia. She
charges between PEN900 and PEN1,800 for a complete wardrobe renovation. She believes
that, when it comes to fashion, Peruvians have lost their fear and are now increasingly
concerned about their image. Two years ago, a business like hers would have been unthinkable
because Lima was a closed market. Yet, as incomes have increased, it has become
increasingly attractive for consumers searching out prestige brands.

Mens suits are closer fitting but changes need to be subtle
A tighter fit is the latest trend for mens suits in Peru. Luis Ubilius, from Samitex, notes a
subtle change in the styles of suits worn by the male population in the country. However, when
selling to the Peruvian market, he explains that it is important not to try and implement too many
changes too quickly because Peru is a conservative market when it comes to fashion. Peruvian
consumers prefer traditional suits in blue, black and occasionally cream, which is consistent with
the national personality. Demand for closer fitting suits is growing, but the market is still slow
because Peruvian consumers rarely change their habits overnight. When it comes to colours
and patterns, thin and subtle stripes have been introduced to the designs.

Table 5 Grooming and Fashion Data 2000, 2005, 2010, 2011, 2012, 2015

PEN per capita, at constant prices
2000 2005 2010 2011 2012 2015

Personal care consumer 131.8 151.1 198.3 206.5 213.9 233.5
expenditure
Colour cosmetics retail 15.2 15.8 19.1 19.6 20.0 21.7
sales
Fragrances retail sales 20.1 23.1 36.0 39.0 40.6 47.0
Hair care retail sales 26.3 29.5 34.1 35.2 36.2 40.1
Oral care retail sales 17.7 17.2 18.7 19.1 19.6 21.5
Men's grooming retail 12.0 12.6 17.0 19.1 20.2 23.6
sales
Skin care retail sales 11.0 13.7 20.3 21.2 21.9 25.0
Sun care retail sales 0.6 0.7 1.0 1.1 1.1 1.3
Clothing consumer 151.3 193.4 296.3 315.0 334.2 384.2
expenditure
- Clothing materials 5.1 5.9 8.3 8.7 9.1 10.1
- Garments consumer 143.0 183.0 280.8 298.6 316.9 364.4
expenditure
- Other clothing 2.3 3.2 5.2 5.6 6.0 7.1
- Clothing cleaning, 0.9 1.3 2.0 2.1 2.3 2.7
repair and hire
Footwear consumer 55.5 73.3 115.9 123.7 131.8 153.1
expenditure

Chart 5 Real Growth in Consumer Expenditure Compared with Real Growth in
Clothing, Footwear and Personal Care Consumer Expenditure 2000-2015



HEALTH AND WELLNESS

Attitudes To Health and Well-being
Despite the improvements to the countrys health system that have been proposed by
successive governments, Peruvians remain largely dissatisfied with the quality of the medical
care provided.
Some Peruvians have private insurance, which is available from a range of companies. The
insurance companies even have their own ambulances, so when people have an emergency,
they call the insurance company to be taken to hospital. Private health insurance allows access
to private clinics, which are generally of a good standard. However, policies typically cost a
minimum of PEN150 per month, thus this option is only available to middle- and high-income
brackets.
Some Peruvians use a system known as EsSalud. They contribute 9% of their earnings each
month, but the government also subsidises the programme. People are then eligible to receive
treatment at EsSalud clinics located across the country. Other people are part of the Integral
Social Health Insurance (SIS) programme. This insurance scheme is heavily subsidised by the
government; it provides health services to Peruvians on low incomes. Monthly payments range
from PEN10 to PEN30; the amount paid depends on peoples income. Every applicants
economic status is assessed and those deemed to be living in poverty receive the service for
free. The applicant must not already have insurance with another provider and has to go
through a medical examination to check for existing health issues.
Finally, some Peruvians have no medical insurance whatsoever. A report released by the
National Statistics Department (INEI) at the end of 2012 reveals that SIS is the most common
programme, with 32.4% of the population already signed up. About 23.6% was affiliated with
EsSalud and a further 6.6% had a policy with a private health insurance provider. About 37.4%
of Peruvians did not have any health insurance whatsoever, but that number may have already
fallen to around 33.5% in 2013, due to the expanding SIS scheme. The same report also found
that 69% of those aged under 18 had been signed up to an insurance programme by their
parents, a higher figure than the national average. The proportion of people with health
insurance is higher in rural areas (in excess of 70%) than in urban areas. In addition, more
women are affiliated to a health insurance programme than males.
As more Peruvians now have health insurance, they have been encouraged to visit medical
professionals when they have a health problem. In the first quarter of 2012, less than half
(49.5%) the people who had a medical issue sought a professional opinion. According to the
INEI, a year later, that figure had risen to 53.3%. Among those who decide to look for help, men
are likely to use a pharmacy (35.3%), whereas only 29.1% of women take this option, preferring
instead to go to a clinic and consult with a doctor. For those individuals who choose not to use
external help when they have a health problem, the most common explanation (42.9%) is that
the ailment is not severe enough to justify visiting a professional, with a further 29.4% confident
that they will be able to treat themselves at home on their own. Other less common reasons
include lack of time and not having any health insurance. In 2012, Peruvians spending on
medicines reached US$30.40 per capita, against only US$29 in 2011, but it still lags behind
other countries in the region. Broadcaster RPP reported in July 2012 that Peruvians spend 11%
of their income on health, against just 7% in 2005.

Obesity
Obesity continues to prevail across all age groups in Peru. The overall obesity rate (defined
as having a BMI of 30+) among people aged 15 and over was 26.2% in 2012, slightly more than
in 2011 when it was 25.7%. The situation is expected to deteriorate further over the next few
years with an obesity rate of 27.7% predicted for 2015.
The problems begin at a young age with a study by EsSalud in March 2013 finding that a
quarter of children aged under five are already overweight, with that figure increasing to half for
children over five. The President of EsSalud, Virgina Baffigo, blames the poor diets of many
youngsters, saying that consumption levels of carbohydrates and fried food are too high. She
thinks that parents need to take more responsibility for the eating habits of their children and
introduce more fruit, vegetables and fish into the weekly menu. Nutritionist Jimena Del Pozo,
who works at a public hospital in Lima, reveals that 23% of school children were obese in 2012
and blames high levels of sugar and fat in their diets. The National Health Institute (INS) shows
that Peruvian school children consume 2kg of sugar every month, 33% more than the
recommended amount. Del Pozo also points out that the lack of regular physical activity is a
factor. Whilst there is a relative lack of suitable locations for Peruvian children to partake in
sport, Del Pozo believes that parents must realise that their childrens academic achievement
must be supplemented with daily physical activity.
Faced with the problem of childhood obesity, the government has decided to take firm action.
One of the most hotly debated topics by politicians in 2013 has been the Law for the Promotion
of Healthy Eating for Children and Adolescents, or Ley Chatarra (The Junk Food Law). This
legislation was passed in congress in May 2013. It bans the promotion of foods high in fat,
sodium or sugar that are targeted specifically at children; for instance, a fast food chain offering
a toy with every purchase of a burger. It also bans junk food from being served in schools.
The reaction to the law has been mixed. Gestion reported that only 59% of Peruvians were
actually aware of the law. Among them, 43% was in favour, 41% said it was a good idea in
theory but improvements needed to be made, and 12% believed it was an attack on peoples
freedom to consume what they want. About 66% of the people questioned argued that
dedicating funds to promote the benefits of physical activity would have been a more effective
way to combat the countrys obesity problem.
Two very critical articles appeared in the newspaper Gestion in June 2013. The first criticised
the government for focusing too heavily on obesity while seemingly ignoring the fact that 18% of
Peruvian children suffer from malnutrition (over 50% in some rural areas). Obesity is rare in
children from low-income families. The law is seen by some as designed to help the rich. It has
also been argued that the regulations will have no effect: children will simply buy junk food
outside the schools and put it in their lunchboxes. In addition, Peruvian parents buy their
children food with a high salt content, but that is not covered by the legislation. Congressman
Jaime Delgado has argued back, saying that 7% of EsSaluds budget is spent treating kidney
failure resulting from diabetes, which is triggered by poor diet.

Attitudes To Smoking
The consumption of tobacco products is low in Peru, compared with countries like Chile and
Bolivia. Overall, just 23.1% of Peruvian adults were classified as smokers in 2012. The
prevalence was much higher in men (32.8%) than women (13.6%), and it is expected to remain
largely unchanged through to 2015. Peruvians rarely smoke in the street; they smoke in the
home and social public spaces, such as bars or nightclubs.
Today the younger generation is driving much of the consumption. In May 2012, the
newspaper Peru 21 reported that as many as 65% of 19-25 year olds smoke regularly, with a
quarter consuming more than 10 cigarettes per day. The President of the National Commission
on Tobacco Control (Colat), Carlos Farias, has warned that 300,000 Peruvian children and
adolescents start smoking ever year, with some picking up the habit from the age of 13.
Mr Farias believes that the countrys attempts to reduce smoking are ineffective. Although
Peru can boast some of the worlds most advanced anti-smoking legislations, in 92% of the
country's districts, local authorities are not enforcing these laws effectively. Smoking is
prohibited in many places, including cafs, restaurants, bars, nightclubs, sports venues,
education centres, hospitals, and workplaces. In theory, operators can be fined up to PEN3,700
if people are found to be smoking on their premises. However, the lack of policing leads many
establishments to turn a blind eye when customers smoke. This is particularly common in
nightclubs, where it is harder to enforce these laws, particularly if a venue is crowded.
In 2012, the website trabajando.com undertook a survey to find out about the habits of
smokers in Perus workplaces. About 57% of Peruvians who smoke consume at least one
cigarette during business hours. Those who smoke at work spend at least 10 minutes per
cigarette, which translates directly into lower productivity. About 65% of smokers say that their
company does not provide a specific area for smokers, so they must go outdoors. Yet, 13%
says that an area for smoking is available, but they prefer to go outside. Around 57% smokes
alone; the remaining 43% is accompanied by at least one other person. Finally, 80% of
Peruvians say that they would like to quit smoking.

Dissatisfaction is rife among Perus health consumers
Both consumers and the media have been critical of the perceived lack of progress in the
countrys health sector. In February 2013, newspaper El Gestion claimed that health takes a
back seat in the states policy making. The column suggests that, whilst there have been some
isolated examples of advancement, the lack of a coherent and comprehensive health policy has
led to poor service quality. At the same time, medical costs continue to rise at higher rates than
inflation. The government department Lima Como Vamos released a report in January 2013 that
reveals significant discontent among users of healthcare facilities. Quality of service was listed
as the biggest problem by 44.9% of respondents. Within this category, common complaints
include long waiting lists to see specialists and misdiagnosis. Among people who had received
treatment in 2012, just 33.7% of people visiting public hospitals declared themselves satisfied
with the service they had received. The figure is even lower (24%) for EsSalud facilities. Overall,
customer satisfaction has fallen since 2011. On the other hand, satisfaction with private clinics
reached 83.4%, up from 82.5% in 2011.

Peruvians are not exercising enough
Although childhood obesity continues to be the main focus in the Peruvian media, older
generations are not in great shape. In October 2012, the Peruvian Magazine of Experimental
Medicine explained that increasing urbanisation and economic development causes lifestyle
changes, as well as alterations in eating patterns and physical activity. As Perus economy
develops, more adults are entering the formal labour market. People are working longer hours,
often sitting at a desk for more than eight hours each day, giving them little or no free time for
physical activity. Broadcaster RPP reported in April 2013 that 40% of obese Peruvians are aged
over 60 and have a sedentary lifestyle.

Table 6 Health and Wellness Data 2000, 2005, 2010, 2011, 2012, 2015

2000 2005 2010 2011 2012 2015

Total health 96.3 127.2 268.8 288.8 299.6 n/a
expenditure (US$ per
capita)
Share of total health 4.6 4.4 5.1 4.9 4.5 n/a
expenditure in GDP (%
of total GDP)
- Public health 58.7 59.4 54.0 52.9 52.1 n/a
expenditure's share of
total health
expenditure (% of total
health expenditure)
- Private health 41.3 40.6 46.0 47.1 47.9 n/a
expenditure's share of
total health
expenditure (% of total
health expenditure)
Healthy life expectancy 56.8 62.4 67.9 68.2 68.4 69.0
at birth: total
population (years)
at birth: males (years)
at birth: females (years)
Average supply of food 2,379.0 2,423.0 2,572.9 2,546.3 2,543.1 2,595.0
calories per day
(calories per capita)
Average supply of 65.3 66.4 71.5 70.8 70.8 72.3
protein per day (grams
per capita)
Average supply of fat 45.0 39.8 42.1 42.4 42.5 42.4
per day (grams per
capita)
Obese population (BMI 16.3 22.1 25.2 25.7 26.2 27.7
30 kg/sq m or more) (%
of population aged 15+)
Overweight population 39.3 37.5 37.8 37.7 37.6 37.2
(BMI 25-30 kg/sq m or
more) (% of population
aged 15+)
Tobacco consumer 53.7 50.9 59.9 63.8 68.3 78.5
expenditure (PEN per
capita, at constant
prices)
Smoking prevalence 23.5 23.1 23.2 23.2 23.1 23.1
amongst adult
population (% of total
adult population)
amongst adult male
population (% of male
adult population)
amongst adult female
population (% of female
adult population)

Chart 6 Chart6 Real Growth in Public and Private Expenditure on Health Compared
with Healthy Life Expectancy at Birth 2000-2012


SHOPPING HABITS

Main Household Shop
Although modernisation is occurring throughout Perus retail sector, food and other small-
scale household goods are still predominantly bought through traditional channels, notably
bodegas (corner shops) and markets. However, modern channels continue to gain market
share. Spending in modern grocery retailers amounted to PEN1,416 per household in 2012,
8.9% more than in 2011. Sales through traditional channels fell by 1.9% during the same period,
with spending levels at PEN4,611 in 2012. Gestion reported in April 2013 that the average
grocery purchase in modern retail outlets was PEN43, nearly four times more than in traditional
channels, where it was PEN12.
When choosing where to buy food or other household products, Peruvians base their decision
on a variety of factors. Proximity is very important. The newspaper El Gestion reported in April
2013 that over half the people in Lima (51.2%) shop regularly at traditional markets, bodegas
and modern supermarkets. In Lima, significantly more options are available. The coverage of
modern channels is low in Peru, with just 0.4 supermarkets for every 100,000 inhabitants,
compared to 7.1 in Chile. In small towns and rural areas, traditional channels are often the only
choice. Outside of Lima, sales in modern stores account for just 17% of the market.
In the formal labour environment, wages are typically paid monthly into a bank account. Yet,
given the high levels of independent and informal employment, many people receive their
income on a daily or weekly basis. The people who receive their wages frequently have become
accustomed to shopping on a daily basis, spending whatever money they have. They do not try
to save it for a weekly shop. Traditional channels suit better the needs of this demographic
because the products they stock are fit for regular small-scale purchases. For example, sachets
of shampoo costing PEN0.50 can be found in bodegas but nothing less than a large bottle
costing at least PEN10 is found in a supermarket. In April 2013, the newspaper Peru 21
reported the existence of a system called fiados, which are tabs set up by bodega owners for
customers in informal employment, such as taxi drivers, who come in regularly. Store owners
are aware that people in this demographic do not always have the cash to fund their purchases,
so they keep a list of items bought and allow individuals to pay when they are able, usually later
in the week. People in middle- to high-income groups also use traditional channels, but they
normally go to a bodega to top-up their shopping or for one-off purchases. As Andres Choy from
the Peruvian Association of Bodegas has pointed out, The main advantage of bodegas is the
opportunity for impulse buying, items like cigarettes and sodas. This is not done so often in the
supermarket because the whole process takes longer.
Peruvian housewives help ensure that traditional markets, which currently represent 57% of
total food expenditure, remain in the face of growing competition from large supermarket chains.
According to a report by broadcaster RPP in October 2012, many housewives prefer to buy all
their fresh produce at the markets, such as fruit, meat and vegetables. However, many have
started to favour supermarkets for packaged goods (such as sugar, rice and oil) and non-food
household products. People enjoy the family atmosphere in the markets, as well as the lower
prices and the ability to try products to assess their taste and freshness before buying. However,
whilst good value-for-money is commonly associated with the traditional channels, Peruvians
are increasingly drawn by modern supermarkets range of promotions. In February 2013,
website Peru Retail reported that 78% of people make a purchase decision based on an in-store
promotion. Promotions are making Peruvian consumers less brand loyal and more willing to
take risks. Newspaper El Comercio reported in March 2012 that, among all the grocery
purchases in Peruvian supermarkets in 2011, 18% was accounted for by products on offer, over
three times higher than in 2008. A culture of stockpiling is emerging within Peruvian households.
When a product is on offer (particularly if it is in a 3-for-2 format) consumers buy significantly
more of that item than they would have done. As a result, purchases of some household
products have become much more spaced out over time.
The newspaper Gestion has noted that Peruvians are increasingly sophisticated when buying
non-food household items. For example, Kimberley-Clark has reported that middle- to high-
income segments are looking for luxury toilet rolls thanks to increasing disposable incomes.
Two-ply rolls are now no longer sufficient for some consumers who are looking to upgrade to
triple ply. In March 2013, it was reported that people in low-income groups are starting to try
more advanced types of cleaning products for the first time. For example, the market for
softeners has experienced a 20% growth. Consumers in these demographics are purchasing
these items through traditional channels but only in small packets because it is all they can
afford. Their usage of some goods is still experimental. They see these goods as a novelty and
do not plan to buy them regularly.

Shopping for Big-ticket Items
Given that Perus economy is growing and its middle class is expanding, purchases of big-
ticket items have grown exponentially. In particular, car purchases have seen substantial growth
in the past decade. No vehicles are locally produced so consumers rely on imports. China,
Korea and Japan are currently the three most popular countries from which Peru buys its cars.
Ivan Besich, from the Association of Automotive Representatives of Peru (Araper), has revealed
that light vehicles currently make up 65% of sales. About 40% of these vehicles are classed as
energy efficient, as more Peruvians are becoming concerned about the increasing cost of
gasoline. A report by newspaper El Comercio in December 2012 notes that sales of larger
vehicles are also progressing well. Since it is still relatively unusual for Peruvian households to
own more than one car, larger vehicles are useful because they can transport the whole family.
In addition, Peruvians lifestyles are more influenced by the United States, where the tendency
is for large vehicles, than Europe, where smaller cars are more common. Peter Gremler,
General Manager of Divemotor, reported that sales of SUVs per capita in Peru are higher than
in any other country in the region. Sales of 4x4 vehicles are also popular due to Perus
treacherous road network and the difficulties presented by its natural terrain.
According to Gestion, car sales have been boosted by increasing disposable incomes and a
shorter renewal cycle. In 1997, consumers bought a new car every six to eight years, nowadays
the average has dropped to every three to five years. Ivan Besich from Araper reveals that,
given their greater spending power, Peruvians are purchasing new cars, as opposed to second-
hand models. In 2002, just 20% of the vehicles bought in the country were new, against 95% in
2012. New cars tend to be of higher quality; they generally come with a more solid guarantee
and spare parts are more easily available. All of which appeals to Peruvians.
Computers have also enjoyed rapid growth on the back of Perus expanding economy. Nearly
a third of Peruvian households now possess a computer. Between 2011 and 2012, demand for
computers rose by 12% with Peruvians favouring laptops more recently. Department stores and
supermarkets are the most popular outlets for the purchase of computers, accounting for 50% of
sales. This is because Peruvians already use these stores to buy other products; they feel loyal
and trust them. About 45% of computers are purchased from wholesalers, with the final 5% from
telecommunications companies. However, the newspaper Gestion suggested in October 2012
that the wide variety of options has left some customers confused. For example, they find it hard
to spot the advantages of buying from a retailer as opposed to a wholesaler. Peruvian
consumers are becoming more demanding when buying computers. Ten years ago, they simply
needed a device running applications such as Word and PowerPoint; four years ago, they
simply asked for a device that connected to the internet. Now, they are asking retailers
questions about the speed of the internet connection, they are looking for the most attractive
designs, high-definition screens, and wireless audio, among other features. The average
amount spent on a laptop fell from PEN3,000 to PEN2,000 between 2010 and 2012, as the
overall cost of computers has fallen. Peruvians are not bargain hunters when purchasing
computers. In fact, they are quite willing to pay more if they believe that a particular machine is
of higher quality. As with cars, people are replacing their computers more quickly. A survey of
those in executive positions found that they now buy a new computer every two years, against
every four years in 2010. The lower prices of laptops have added teenagers to the customer
base, who previously were unable to afford these products.
Sales of televisions are rising, as is the level of sophistication. Whilst some consumers are
buying their first television set, others are upgrading and looking for bigger screens with higher
levels of definition. As for computers, department stores and supermarkets are the most popular
outlets, representing 66.9% of television set purchases in 2012, according to Gestion.
The surge in the demand for domestic electrical appliances has been caused by the real
estate boom. Peruvians are installing increasingly advanced equipment in their new properties.
Javier Ugarte, from LG Electronics, has revealed that the tradition to keep the same refrigerator
for an entire lifetime is disappearing. The average renewal period has fallen from 18 to 12 years
since 2008. Refrigeration is essential in the humid climate in Lima, but Peruvians who live in the
cool, fresh mountainous areas have less problem storing food for longer periods of time. Sales
of large cooking appliances have benefited from the countrys gastronomic boom. Grills and
stoves have experienced notable demand, often as a result of being advertised by well-known
Peruvian chefs.
Peruvians are upgrading their mobile phones more frequently. A report by Gestion found that
people in urban areas change their phone on average once a year. Different age groups have
different concerns. Peruvians aged 18-24 look for phones that are reasonably priced. People
aged 25-39 want the most attractive design. Most individuals aged 55-70 only look to replace
their phone if it breaks. An El Comercio article in 2012 reported that, although department stores
and supermarkets are attempting to sell smartphones, most consumers are still acquiring mobile
phones from telecommunications operators when they sign a contract. Just 5% of smartphones
are bought in retail stores; 95% is acquired from the operators, such as Claro and Movistar.

Personal Shopping
Owing to Perus economic growth, retailers have tried to create shopping environments to
match the increasing sophistication of their customers. Although vendors of basic goods
continue to satisfy a large segment made up of the low-income population, the shopping mall
has emerged as the driving force in Perus retail sector. With just eight malls in 2000, few people
would have foreseen that, by the end of 2012, 56 malls would be operating across the country.
Forecasts suggest that Peru will have its 100th mall by 2015. Malls received over 30 million
visitors in 2012, with 80% of Peruvians having been to a mall at least once.
Shopping malls have become the primary destination for people seeking clothing and
footwear. A report in Gestion in 2012 found that 66% of people visiting malls had the intention to
purchase clothing. According to Peru Retail, half the stores in shopping malls are dedicated to
clothing. As a result, consumers are offered a wide variety in one location. The format of malls
makes it easy for consumers to compare different brands and stores before buying. Martin
Malara, CEO of Retco Commercial Developers, has revealed that some of the traditional
stereotypes are being challenged. Many men are now visiting malls to buy clothing, whereas
women are increasingly concerned with technological products.
As more shopping malls have appeared across Peru, people in poorer neighbourhoods now
have access to new outlets. However, many of the items in malls are outside the budget range
of many people in this demographic. Whilst an aspirational culture is created, many poorer
individuals have to return to market stalls and lower-end stores when they want to purchase a
product.
When deciding which malls and stores to shop at, affordable prices and product variety have
always been high on Peruvians list of priorities. However, as new malls are opening in low-
income areas that often have relatively high rates of crime, security has recently become a key
factor. A report in the newspaper Gestion in July 2012 noted that it is not just within the mall that
people require their safety to be ensured but in the areas surrounding the facility as well, such
as car parks.
The current market for cosmetics in Peru is dominated by direct selling, which is a very
popular channel. Independent salespeople (99% of whom are women) are given catalogues by
cosmetics companies. Their aim is to build up a network of clients. Prices are lower than in
department stores, so this channel is particularly appealing to low- to middle-income groups.
The proliferation of shopping malls in Peru has helped to make shopping an event, rather than
just a functional activity. Virtually every mall includes restaurants, a cinema and other sources of
entertainment, encouraging people to stay within the facility even if they have already purchased
what they came for. Broadcaster RPP spoke to the General Manager of the Mall Aventura
Plaza, Mauricio Mendoza. The average spend in his facility is PEN120, but much of that is spent
on the additional attractions. People spend between one and a half and two hours in the centre.
Gestion conducted a survey of female customers and found that 70% is quite willing to visit a
shopping mall, even if they are not planning to buy anything. Malls have also recognised the
importance of making the mall an option for a family day out by including play centres.

Shopping Online
Online shopping has not advanced as quickly in Peru as it has in other countries in the region.
According to the National Institute of Statistics & Information (INEI), only 25.5% of households in
Peru had a connection to the internet in March 2013. That figure is higher in Lima (44.1%) than
in rural areas. However, even regular internet users have been reluctant to make purchases
online, mainly because they do not trust the companies that are advertising products and
services online. Consumers are concerned about safety, when asked to provide their financial
details. They also doubt that the products will actually be delivered as advertised.
However, online shopping is growing in Peru. Excluding sales of online travel and coupon
books, per capita spending was PEN50 in 2012, a 12.9% rise over the previous year. When
including those two categories, Gestion reports that the market grew by 43% in 2012. Fernando
D'Alessio, from e-commerce portal Linio, had bold predictions, expecting to achieve a 50% to
60% rise in sales in 2013. His optimism stems from the fact that Peruvians are already losing
their fear of buying online with their credit cards.
A study of Peruvian online purchasing habits was carried out by Linio, which arrived in Peru in
early 2012. The portal offers a payment method called contraentrega whereby the consumer
pays upon delivery of the products. This option is used for half of the companys transactions.
There is also the option to go and pay at various outlets, such as banks, kiosks and pharmacies.
This is used by 25% of consumers. The final 25% pays directly on the website at the time of
purchase using a credit card or a system such as SafetyPay. Linio has noticed that the vast
majority of customers use the contraentrega method for their initial transaction but, as they build
a sense of trust towards the website, they become more willing to provide their bank details and
pay directly for their purchases. When looking at Perus e-commerce market as a whole, most
purchases (53%) are made by credit card, largely due to the fact that many online retailers do
not offer payment upon delivery as an option.
In an article published in Gestion in April 2013, Helmut Cceda from the Peruvian e-
Commerce Trade Association has a different view. He argues that consumers are on the
internet and have been for a long time, what is not there, is the companies. As many as 63% of
Peruvian companies do not have a website and there is a general lack of understanding about
how to sell products and services online.
A survey conducted by Atrapalo (a tourism and activities website) found that Peruvians carry
out the majority of their internet purchases at night: 74% of transactions take place between
8pm and 5am. Factors include no interruptions, quiet, and the confidence provided by using
ones own PC.

Coupon book websites are encouraging Peruvians to purchase online
An emerging trend in Peruvian e-commerce is the growth of coupon books. Customers log on
to a website (such as Groupon), which presents a series of discounts offered by other retailers
across a variety of industries. Flowers, gifts, travel, clothes and electronics are particularly
common. Customers make an online payment to Groupon, or similar site, which sends them
either a voucher they can print out (if the offer involves physically going to a retailer) or a code
they can input on another website (if the offer is for an online purchase). Because the products
and services are heavily discounted on coupon websites, Peruvians traditional hesitancy
towards internet purchases tends to disappear. Peruvians who were afraid of making a
transaction have suddenly realised that they can purchase a coupon for very little money.
According to Alexander Melendez from SafetyPay Peru, 17% of all transactions made through
SafetyPay during 2012 were for coupon book purchases.
First Cyber Monday produces impressive results
In November 2012, the Lima Chamber of Commerce (CCL) organised the inaugural Cyber
Monday, an event based on the same principle as Black Friday in the United States. The CCL
worked with some of Perus leading companies, such as LAN, Saga, Ripley and Movistar, to
offer deals to consumers to stimulate growth in the local e-commerce market. A report in the
newspaper Publimetro explains that expectations prior to the event were that it would quadruple
sales, compared to a normal day. Those predictions were exceeded, with participating
companies reporting that online purchases were 21 times those of an average day. The CCL
has planned a second event, scheduled for July 2013, to coincide with Perus Fiestas Patrias
(national holiday to celebrate Independence). The reason for this timing is that Peruvian workers
are entitled to a bonus in July, equivalent to one months salary, so disposable incomes are
higher at this time of the year.

Table 7 Shopping Data 2000, 2005, 2010, 2011, 2012, 2015

PEN per household, at constant prices

2000 2005 2010 2011 2012 2015

Grocery retailers' 6,227.2 5,825.0 5,950.7 6,001.1 6,026.3 6,158.5
- Modern grocery 720.8 803.7 1,162.7 1,300.8 1,415.8 1,627.7
retailers'
-- Discounters' 2.0 5.5 8.8 7.3 6.2 6.6
-- Forecourt retailers' 35.3 37.8 42.5 41.8 41.3 42.0
-- Hypermarkets' 150.9 335.3 631.0 720.3 790.3 912.9
-- Supermarkets' 532.6 425.1 480.4 531.4 577.9 666.3
Traditional grocery 5,506.4 5,021.3 4,788.0 4,700.3 4,610.5 4,530.8
retailers'
-- Food/drink/tobacco 369.0 344.7 322.9 318.2 312.3 318.7
specialists'
-- Independent small 2,740.3 2,511.6 2,515.8 2,468.5 2,423.3 2,394.1
grocers'
-- Other grocery 2,397.1 2,165.1 1,949.4 1,913.6 1,874.9 1,818.1
retailers'
Apparel specialist 225.1 275.2 289.1 293.4 302.0 330.0
retailers'
Electronics and 249.9 281.3 440.4 471.6 509.4 575.9
appliance specialist
retailers'
Health and beauty 656.4 629.0 716.7 719.4 726.8 768.7
specialist retailers'
Home and garden 394.9 327.1 404.9 435.7 486.1 546.3
specialist retailers'
Leisure and personal 74.7 78.1 94.2 95.3 97.4 104.0
goods specialist
retailers'
Mixed retailers' 336.6 362.3 577.0 627.9 672.2 765.8
Other non-grocery 43.9 41.6 41.0 40.6 40.4 41.1
retailers'
Internet retailing 6.4 14.7 34.9 44.3 50.0 69.6

Chart 7 Chart7 Index of Retail Sales Compared with Real Growth in Retail Sales
through Discounters, Hypermarkets, Supermarkets and Internet Retailing
2000-2015



LEISURE AND RECREATION

Staying in
Traditional and modern activities are coming together under one roof. Families often take part
in activities together, such as eating, watching TV, playing games, or other popular pastimes.
This largely stems from the fact that Peruvian families are relatively large, combined with the
fact that children tend not to leave home until they are married. In addition, families do activities
together because their homes are cramped, making it difficult to do otherwise. Increasing
disposable incomes have seen technology play a more important role. While the most advanced
gadgets are generally only enjoyed by those in high-income segments, more common items,
such as basic television sets, computers or internet connections, are now found across a wider
variety of demographics. This is changing the mix of activities that are taking place within the
home.
Watching television has been a popular household activity for many years in Peru. An
increasing number of Peruvians are watching TV, with 71.1% of households now in possession
of a colour TV, which is up from 69.5% in 2011. On the local channels, game shows, soap
operas and news reports are the most popular genres. People who have cable TV are able to
enjoy entertainment from around the world. Peruvians favourites include American movies and
comedy shows. In 2012, it was estimated that 53.1% of households in Peru had cable TV,
compared to 47.7% in 2011. (Official figures state that only 23.1% had cable TV in 2012).
However, the telecommunications company Telefnica estimated in June 2013 that 45% of
cable TV connections are illegal. In some low-income neighbourhoods in Lima, local mafias
organise informal cable connections for as little as PEN20-PEN30 per month. Given that the
most basic monthly packages from an official provider start at PEN60-PEN65, the lower cost
option has been popular with many households. Whilst high-end televisions, such as LCD, LED
and plasmas, are recording high growth, their penetration is still relatively low, as they are found
in less than a quarter of households (21%).
Despite the competition from other more modern activities, television still plays a large role in
the Peruvian home. A survey by website trabajando.com in December 2012 found that, among
Peruvians in full-time employment, 51% watches between one and three hours of television per
day, and a further 40% tunes in for up to an hour. A mere 9% does not watch any television at
all, claiming that it would be a waste of their limited free time. The increased availability of 21st
century technology has failed to dampen the enthusiasm for more traditional devices, with
households in Lima still possessing on average 3.5 radios.
Internet coverage continues to expand rapidly in Peru. The National Institute for Statistics &
Information (INEI) reports that 25.5% of households had a connection in March 2013, against a
mere 17.3% a year earlier. This is being facilitated by higher levels of computer ownership:
About 30% of households in Peru now possess at least one computer. That said, public internet
kiosks are still the most common venue for people to access the internet (47.6%), with the home
currently in second place with 42.1%.
Peruvians are keen internet users. The newspaper Gestion reported in January 2012 that
they spend an average of 26.9 hours online each month, the highest level in Latin America. This
is despite the fact that the same publication reported in 2013 that Peru has among the highest
internet charges (along with the slowest connection speeds) in the region.
The newspaper Gestion reported in August 2012 that 75% of Peruvians are now registered on
at least one social networking site, a figure that had stood at just 60% in 2011. Each month, the
average Peruvian social network user connects to the internet 18 times, spending 6.9 hours
connected to these sites, with 52% of this activity taking place in the home. There has been a
notable increase in the proportion of middle-aged Peruvians creating social networking profiles,
often prompted by a recommendation from their children, who also spend time teaching their
parents how to use these sites. A survey by trabajando.com in March 2012 investigated the
regularity with which social network users log on and their motivation for doing so. A third said
that their profile is very important to them and they update their status several times each day.
About 54% thinks that, whilst their account is relatively important to them, its main value is
derived from being able to keep in touch with friends as they would do via e-mail. About 15%
places little importance on their social networking profile.
Peruvians are increasingly using their social network profiles for professional purposes, with
67% saying that these sites provide an excellent medium to search for a new job. This result
came from a March 2013 survey by website trabajando.com. Facebook is the most popular site
for job hunting (66%), followed by LinkedIn (23%) and Twitter (4%). Participants in the survey
said that social networks are cost effective when searching for work, involving minimal time. On
the flipside, many people think that using social networking sites to search for work could cause
problems if potential employers found information on an applicants profile that was either too
personal or inappropriate.

Going Out
Peruvians generally enjoy spending time outside the home in their free time. The activities in
which people participate can vary widely between different economic groups. Factors include
income levels and cultural norms.
The government department Lima Como Vamos investigates different aspects of the lives of
citizens in Perus capital. Part of a survey released in January 2013 was dedicated to
investigating how people had spent their free time outside the home. It was found that 78.7%
had visited a park or gone for a walk (at least once during the last twelve months) and 45%
had gone dancing. Whilst 28.5% of the population had been to a book fair or art exhibition in
the past year, this was the case for just 13.1% of those in socio-economic groups D and E, as
opposed to 42.2% in socio-economic groups A and B. A similar pattern was discovered when
analysing theatre goers. Visits to the theatre increased from 23.6% of the population in 2010
to 27.6% in 2012. Yet, this activity is struggling to attract lower-income groups with just 19.4%
of those in segments D and E having attended in the past year, compared to 35.2% of those
in A and B. This can be explained by the fact that the majority of theatres are located in
wealthier neighbourhoods and tickets for some productions cost in excess of PEN100.
Museums and historical sites are also mainly visited by Peruvians on high incomes. Over a
quarter of Peruvians visited these venues in 2012 but, when looking only at lower-income
families, the figure was just 16.5%.
Music concerts are gaining prestige. Increasingly high-profile performers are attracted to the
country each year thanks to a relaxation on taxes by the government. Recent performers
have included Lady Gaga, Elton John, The Killers, Noel Gallagher, Keane, Maroon 5 and New
Order. Famous international acts mostly hold their Peruvian concerts in Lima. The cheapest
tickets start at around PEN80-PEN100, with the most expensive costing well in excess of
PEN600. For this reason, concerts still tend to be the preserve of wealthier demographics,
with 32.8% of those in higher-income groups having attended a concert in 2012, compared to
just 13.4% of people on low incomes.
The popularity of the cinema continues to rise in Peru: 2012 was the first year when more
than half the population attended a movie theatre on at least one occasion. Gonzalo Ansola,
from the Association of Shopping and Entertainment of Peru (Accep), has explained that the
cinema provides cheap entertainment that can be enjoyed any day with ones family, partner or
friends. The average spend per person each time they visit the cinema is PEN22, including the
cost of admission, snacks and drinks. The number of cinema theatres across the country has
grown, with 424 nationwide in 2013. According to newspaper Peru 21, every one of the 13
shopping malls that are due to open in Peru in 2013 will have a cinema. As a result, more
Peruvians will have access to a cinema. Peruvians are also upgrading their cinema
experiences, paying PEN20 to watch a 3D movie, and in some cases PEN40 to sit on an
interactive chair whilst they watch the film. The industry continues to grow despite the significant
pirate trade in the country, with DVDs of the latest movies available for just PEN2 on street
corners and at market stalls. This is because Peruvians value the actual visit to the cinema,
including the social nature of the occasion, as much as the opportunity to see a movie.
Sport and Fitness
Soccer remains by far the most popular sport in Peru for both players and spectators.
Attendance at domestic league matches is low due to the poor quality of the soccer on show
and regular incidents of violence between rival spectators. Peruvians prefer to watch matches
on TV and have just as much interest in foreign leagues (such as Argentina, Spain and
England), as they do in games between local teams. However, it is a completely different picture
when international matches involve the Peruvian national team. The country comes to a virtual
standstill every time a game takes place. For a fixture between Peru and Ecuador at the Estadio
Nacional in Lima in June 2013, fans began queuing two days before tickets went on sale. This
was despite the fact that tickets were being sold at the highest prices ever witnessed (between
PEN80 and PEN500) for a game involving the Peruvian national team.
Volleyball is another sport that Peruvians enjoy. Enthusiasm for the sport grew on the back of
a surprise silver medal that Peru won in the 1988 Olympics, and interest has remained ever
since. Matches involving the Peruvian womens team are broadcast live on TV, and volleyball
courts are common around the country, particularly on the beaches. Sports such as tennis,
squash and golf tend to be limited to middle- to high-income consumers because the facilities
are only available in expensive members-only clubs.
Peruvians dedicate little time to sport and exercise. The Lima Como Vamos survey found that
just 40.5% of the capitals population regularly participated in any kind of sport or exercise in
2012, less than in 2010, when it was 44%. Among the respondents, 66.4% complained that
there are not enough facilities or suitable areas where to play sport in the city. This is plausible
given that the polluted and crowded streets do not create an environment conducive to running
and there are very few parks for a city that has a population in excess of eight million. The
countrys growing economy has made it possible for more people to work in the formal
employment market. Yet, as a result, people have less free time to take part in physical activity.
A report by Gestion in December 2012 revealed that 27% of people in full-time employment
admit that they do not devote any time to exercise.
Gym attendance is relatively low. The newspaper La Republica reported in March 2013 that
just 3% of Peruvians had a gym membership. However, this is a growing industry, as noticed by
Cesar Lopez, from Bodytech Peru, who points out that the figure was only 2% in 2010. He
comments that Peruvians are becoming increasingly health conscious and that disposable
incomes are growing. Many Peruvians have the desire to join a gym but with the average
monthly membership fee (in the formal chains) priced at around PEN80-PEN90, it is a luxury
that is beyond the budget of much of the population.

Twitter explosion
Twitter is the most rapidly expanding social network in Peru. The newspaper Gestion reported
in August 2012 that only 1% of Peruvians had an account in 2011, against 20% in 2012. The
three most commonly discussed topics on Twitter are politics, sports and food. The reaction to
most politically-based tweets is often passionate and normally negative. When sports are
discussed, although many people re-tweet comments, the response is usually neutral. The most
positive feedback is observed when the discussion is about food: very few Peruvians ever have
anything negative to say about their nations cuisine.

Health rather than vanity is driving Peruvian gym membership
Peruvians are now more motivated by health than vanity when deciding to go to the gym.
There has been an increase in longer-term memberships. The dominant tendency had
previously been for people to take out quarterly memberships. This is partly because customers
did not want to commit to long-term payment plans, but seasonal factors were also involved.
Jose Antonio Rivero, from Gold's Gym, notes that, until 2010, 60% of sales were generated in
the six months between August and January as people attempted to lose weight before
spending the summer on the beach. Nowadays, sales are split evenly throughout the year. He
comments that there is still a group that is only motivated to go to the gym to get ready for the
summer, but this trend is declining. Gigliola Aycardi from Bodytech Peru remarks that people
are spending less time trying to sculpt their bodies to achieve perfection through lifting weights.
They give more of their attention to machines that promote cardio-vascular health.

Vacations
Peru has always attracted tourists from around the world. Now, as the economy grows, the
locals are able to enjoy the attractions of their own country. More people are taking vacations,
they are travelling for longer, and they are spending more money when they go away. At the
same time, more Peruvians have the ability to travel abroad, although visa restrictions persist.
Vacations are typically taken at three key points in the year: Semana Santa (Easter week),
Fiestas Patrias (national holiday at the end of July to celebrate Independence), and the
Christmas and New Year period. The tourism department of PromPeru has estimated that each
of these long holidays generates US$250 million, with around two million people travelling. In
addition, more people are taking holidays in January and February, during the school summer
holidays. According to Mincetur (the government department for external trade and tourism),
34.9 million domestic vacations were taken in 2012, a 3.7% increase from 2011, with a
projected figure of around 37 million for 2013. However, Carlos Canales, President of the
National Chamber of Tourism (Canatur), notes that the holiday culture is still underdeveloped in
Peru. He comments that, Peruvians, in general, are not very good planners. They generally
travel during peak season when demand is high and everything is more expensive. He feels that
they should travel throughout the year as the country has attractions for 365 days a year. Many
Peruvians only consider taking vacations during the holiday periods. When they try to make
hotel and transport reservations, usually at the last minute (another Peruvian trait), everything is
either booked up or too expensive, so they stay at home instead. For many, a vacation trip is a
last minute decision, when they realise that they have a break from work coming up. Eduardo
Luna, from travel website despegar.com, says there has been some progress in that respect: in
2011, Peruvians booked their trips, on average, two weeks before they were due to leave, but
now they book one month in advance.
Peruvians choice of holiday destination depends primarily on their motivation for travelling.
The country has seen high levels of migration from rural to urban areas over the past three
decades. For many people living in cities, a holiday is an opportunity to go back and visit their
family in the countryside. According to a report by travel consultancy Rekrea in March 2013,
39% of vacations taken by Lima residents are to visit family in other parts of the country. Cost
and mode of transport are also important factors. With many families often limited to just 3-4
days for their vacation trip, they do not want to spend too much time travelling. A growing
percentage of the population is able to afford air travel, which broadens the possible
destinations. However, given their limited budget, many families can only afford to travel by bus.
Yet, Peru is a vast country, and some locations are simply too far away to be reached within a
short period of time. The various climates in Peru also play a vital role in the decisions of
domestic tourists. During the winter months (June to September), the mild and cloudy climate in
the nations capital Lima prompts many of its residents to head out. They opt for the heat of the
jungle in the north of the country, beach resorts, such as Mancora, or the sun-drenched
mountain towns of Cusco and Arequipa. During the summer months (January to April), the trend
is to spend weekends at the beaches to the south of Lima. Property developers have taken
advantage of Perus thriving economy with new private beach resorts opening every summer.
However, these destinations are aimed at high-income groups, with rental prices for a house for
the whole summer as high as US$30,000.
The government agency PromPeru, which promotes tourism in the country, revealed the
latest trends in Peruvian vacation habits in its Domestic Tourist Profile 2012 report. In
particular, holiday-related spending levels have risen rapidly in recent years. In 2012, the
average spend per person for a trip was PEN497, having been just PEN326 in 2009. About 39%
of domestic tourists spend over PEN500 on a trip. This rise in spending levels is partly attributed
to the rapid growth in reservations in four- and five-star hotels. When making a booking, just 3%
uses a travel agency and 97% makes arrangements independently. Once a booking has been
made, relatively few Peruvians take the time to investigate the activities on offer in their chosen
destination before they travel. In 2012, just 18% researched local tourist attractions prior to the
trip, although this had risen from 13% in 2010. Most prefer to seek the advice of the hotel or
local people once they have arrived. The PromPeru report also found that the length of vacation
trips is increasing: only 44% headed away for just 1-3 nights in 2012, from 48% in 2010. The
proportion of people taking vacations of 4-6 days in length increased from 32% to 38% during
the same period. This is because more people are entering the formal employment market and
are able to take annual leave. When these people worked independently, every extra day off
work meant potentially losing a days earnings. When on vacation, cultural activities are the
most popular for Peruvians: 64% participates in these activities during their holidays. Visits to
religious sites, such as churches and cathedrals, are particularly popular. This is explained by
the fact that many Peruvians travel during religious celebrations so a visit to a church is an
important part of their trip. Despite the significant rise in retail spending in day-to-day life,
shopping while on holiday has become a less popular pastime. In 2012, just 48% of domestic
travellers said that they shopped while on vacation, compared to 64% in 2010.
More Peruvians are travelling abroad; they are spending more money and visiting new
destinations. According to the government department Mincetur, 2,296,131 Peruvians left the
country in 2012, over 40% more than in 2004. The most common destinations are neighbouring
Chile and Bolivia. Outside of South America, the United States (in particular Miami) is the most
popular. Spain is the most favoured European destination.
Peruvians are heavily restricted by visa requirements when they wish to travel abroad. Whilst
travelling to other countries in South America requires nothing more than an identity document,
entering the United States or Europe is another matter. A lengthy and costly visa application
process needs to take place; individuals are required to provide extensive information relating to
their finances, employment and reasons for travelling. This makes family travel particularly
complex because a visa needs to be approved for each family member, as opposed to one
application covering everybody. Rising disposable incomes in Peru have created a desire
amongst a higher percentage of the population to broaden the scope of their travel beyond
South America. However, this has led to an increased sense of frustration about visa
restrictions. Chileans are now allowed into the US without a visa, and Argentines and Brazilians
can travel freely to Europe, but Peruvian citizens are still heavily limited, with no signs that the
situation will change in the near future.

Public Holidays, Celebrations and Gift-giving
The most important holidays in the Peruvian calendar are Semana Santa (Easter), Christmas
and New Year, and Fiestas Patrias (holidays at the end of July celebrating National
Independence). During these periods, up to two million Peruvians take days off work to travel
and visit family members in other parts of the country. In addition to these relatively longer
holidays, seven additional single-day holidays are spread during the year, marking various
religious and historical events.
Semana Santa broadly follows the Easter celebrations around the world. Processions and
gatherings take place in towns and cities across the country and people attend church
services to mark the religious nature of the occasion. Fiestas Patrias has no religious
significance; 28th July is the day that marks Peruvian Independence. Throughout July, the
national flag is flown outside the majority of homes and workplaces across the country. On the
day itself, fireworks displays are common and, if it falls during an election year, the new
President is sworn in on this day. Presidential elections happen every five years with the next
due in 2016.
At Christmas, family members give each other gifts, and presents are opened at midnight on
the evening of Christmas Eve. People enjoy a typically large lunch with their family, and
sometimes other families, on the following day. In 2012, higher-income demographics spent
an average of PEN650 on the family Christmas lunch, with middle-income families parting
with PEN350 for the occasion. Most people go back to work on the 26th. The recent growth in
Perus economy has led to higher expenditure on Christmas gifts. The newspaper Peru 21
reports that the average for 2012 was PEN200, compared to PEN183 in 2011. The average
person was planning to buy three gifts and the most popular categories were clothes (which
69% of people were buying) and toys (59%). A report in the newspaper Gestion claims that
52% of Peruvians would prefer to receive cash for Christmas as opposed to a gift of equal
value. Technology-based gifts have a higher share in lower-income brackets. This is because
those in higher-income segments can afford to upgrade their personal technology, such as a
cell phone upgrade, a larger television, or a new laptop, when necessary. By the time
Christmas comes around, they already possess every technology-based item they need. The
same newspaper also reveals that 73% of Peruvians made a budget for their Christmas
shopping in 2012, but 65% spent more than planned. Those working in the formal
employment market in Peru have the advantage of gratificacion in December, whereby
companies are required to pay their employees double their normal monthly wage. This also
happens before Fiestas Patrias in July.
The more commercial celebrations are also popular in Peru. According to newspaper La
Republica in February 2012, 87% of couples planned to mark Valentines Day in some way. The
average purchase for this day was PEN100, and flowers are by far the most popular gift.
Mothers Day and Fathers Day are also big business in Peru. For Fathers Day products such
as clothing, footwear and technology are very common, and the average spend is around
PEN100. Mothers Day is an even bigger commercial event: on average, PEN124 is spent on
gifts by children for their mother. Many people travel on Mothers Day to celebrate together. The
city of Lima operates extra buses to handle the additional demand. According to newspaper
Peru 21, in May 2013, 66% of people spent Mothers Day at home with their family, but, for
larger groups, going to a restaurant for lunch is another popular option.
Weddings in Peru are often lavish and spectacular. Among people in middle- to high-income
brackets, it is common to invite more than 200 guests, with a bottle of whisky provided for every
table, in addition to an open bar and large buffet. Nearly 100,000 weddings took place in 2011;
the most popular months to marry are November, December and February. The average age of
women at marriage was 24.8 in 2012, against 27.8 for men.

Family and friends influence decisions on domestic vacations
Recommendations from family and friends are increasingly influential in choosing domestic
vacations. In 2010, word of mouth was the leading influence in just 31% of vacation decisions,
but by 2012, it was responsible for 54%. Traditionally, Peruvians make many of their decisions
on the basis of recommendations from trusted sources. As domestic tourist numbers grow,
people have more contacts who can provide advice based on first-hand experience. Despite the
rapid growth of internet penetration in Peruvian households, just 14% used the web as the main
source for deciding on their vacation destination in 2012, down from 25% in 2010. People use
the internet to glean more information about a destination once they have booked the holiday,
but the initial decision on where to go is more likely to be based on a suggestion from someone
they know.

The strength of the local currency is driving Peruvians to spend abroad
Spending on international travel grew in 2012. The average was US$906 per person per trip,
compared to US$846 in 2011, according to Infotur Peru. This growth is due to the rise in
Peruvians disposable incomes and to the appreciation of the local currency (Nuevo sol) against
major currencies, such as the US dollar and the Euro.

Table 8 Leisure and Recreation Data 2000, 2005, 2010, 2011,2012, 2015

2000 2005 2010 2011 2012 2015

Ownership of household
durables by type (% of
households)
- Colour TV set 44.9 54.2 67.9 69.5 71.1 76.0
- Cable TV 7.8 9.7 21.5 22.4 23.1 24.9
- Satellite TV system 0.0 0.1 0.1 0.1 0.1 0.2
- Internet enabled 0.1 3.5 14.0 17.7 20.2 25.7
computer
- Mobile telephone 6.5 23.5 52.1 56.6 60.5 69.6
- Video games console 2.1 2.4 2.7 2.8 2.9 3.1
Consumer expenditure on
leisure and recreation
(PEN per capita, at
constant
prices)
- Audio-Visual, 35.0 37.4 44.3 46.3 48.2 53.3
photographic and
information processing
equipment
- Other major durables 1.7 1.7 1.9 2.0 2.1 2.2
for recreation and
culture
- Other recreational 30.2 31.7 36.0 37.5 38.8 42.4
items and equipment,
gardens and pets
- Recreational and 50.4 48.4 51.0 52.4 53.2 55.9
cultural services
- Newspapers, 24.6 24.0 25.8 26.6 27.2 28.9
magazines, books and
stationery
- Package holidays 9.4 10.0 11.6 12.1 12.6 13.8
Domestic tourism
receipts and
expenditure
- Accommodation 77.0 43.6 62.7 63.2 63.8 73.6
- Entertainment 41.8 44.8 40.0 39.4 41.8 48.3
- Excursions 27.1 34.2 41.5 44.3 47.8 55.9
- Food 49.0 59.7 78.3 82.6 88.3 106.0
- Shopping 36.9 49.7 42.0 42.9 43.8 48.7
- Travel within the 37.8 42.4 43.7 47.0 49.0 54.1
country
- Other domestic 18.7 57.2 55.7 62.8 67.1 64.3
tourist expenditure
Outgoing tourism
receipts and
expenditure
- Accommodation 20.1 21.4 44.1 52.1 51.3 61.7
- Entertainment 14.1 14.4 19.8 18.9 19.8 24.4
- Excursions 10.5 15.2 16.7 13.6 13.8 15.7
- Food 11.0 18.2 31.2 27.6 29.2 37.0
- Shopping 6.3 8.7 24.5 21.4 21.5 24.2
- Travel within the 23.8 22.0 16.7 17.0 18.5 22.3
country
- Other outgoing 12.6 43.0 17.0 26.2 29.1 33.8
tourist expenditure
Departures by mode of
transport
- Air ('000) 450.2 765.4 1,003.4 1,037.7 1,125.3 1,425.9
- Land ('000) 572.7 981.5 1,042.7 1,079.3 1,172.4 1,496.6
- Rail ('000) 7.3 11.4 9.5 11.9 12.4 14.7
- Sea ('000) 1.4 83.0 2.2 3.0 3.2 3.8
Demand factors
- Annual leave - 43 43 43 44 n/a
entitlement (days)

Chart 8 Percentage of Households in Possession of Cable TV; Satellite TV System;
Internet-Enabled Computer; Mobile Telephone; Video Games Console 2000-
2015



GETTING AROUND

Private Transport
Levels of car ownership are increasing in Peru, but they remain low in comparison with other
nations. In 2012, just 21.3% of households possessed a car; this figure is forecasted to increase
to 22.5% by 2015. Motorcycles are not very popular: just 4.3% of households had one in 2012.
The primary reason behind these figures is financial. With no cars manufactured locally, every
vehicle in Peru is imported. Costs are high and the majority of the population cannot afford to
own a private vehicle. There are also geographical factors. For example, the northern jungle city
of Iquitos is inaccessible by road so the sight of a car there is extremely rare.
Despite these statistics, anyone coming to the capital Lima would find it hard to believe that
there is a lack of cars in Peru. Given the rise in consumer spending power and the fact that the
public transport system in the city is heavily underdeveloped, car sales have rocketed in recent
years. Gestion reports that, in the first five months of 2013, sales were 14% higher than during
the same period in 2012. The government department Lima Como Vamos reported in January
2013 that 60.9% of Limas residents feel that congestion is the biggest problem that the
authorities need to solve.
The current trend in car ownership is light cars, which represent 65% of sales, according to
Ivan Besich, from the Association of Automotive Representatives of Peru (Araper). The rising
price of gasoline is driving the growth in the demand for economic cars, which account for 40%
of light car sales. On the other hand, newspaper El Comercio published an article in December
2012 highlighting that larger car models are still very popular in Peru. One reason is the strong
cultural influence that the United States has in Peru. Peruvians purchase vehicles such as SUVs
that they may have seen in movies or when visiting the country. In addition, a larger car is
suitable for large families that can only afford to purchase one vehicle.
Peruvians are famous for their impatient and often erratic driving style, particularly in urban
areas. The use of the horn is so common that it no longer has any effect. Driving rules are often
ignored and drink driving is common. Alcohol plays a part in a high percentage of road
accidents. Drivers who commit offences regularly pay bribes to policemen to avoid fines,
typically between PEN20 and PEN50 depending on the severity of the offence. Yet, the
newspaper PubliMetro reports that the police handed out an average of 3,475 fines daily
nationwide in 2012. The most common misdemeanours are the misuse of the horn and talking
on a mobile phone whilst driving.
The bicycle ownership level is similar to car ownership, with 22.8% of households possessing
a bicycle in 2012. Bicycles are more popular in rural areas where car ownership is lower; the
bicycle provides a useful alternative. In large cities, particularly in Lima, the use of bicycles on
main roads is rare. There are no dedicated cycle lanes and there is significant risk involved, with
many drivers having little or no concern for other road users.

Public Transport
Owing to the low level of car ownership in Peru, public transportation plays a crucial role. The
usage of transport varies widely across Peru. As the nation becomes increasingly modernised,
the lack of development in public transportation has left government authorities under attack
from its citizens. The capital Lima is one of the largest cities in the world without a subway
system, leaving other transportation services at breaking point and with little space left to
construct additional links. The Lima Como Vamos survey reveals that 60% of Limas residents
are dissatisfied with public transport. About 49.7% rated it as the citys most serious current
problem (up from 45.9% in 2011).
The most popular means of public transport in Lima is also one of the most controversial.
Small buses, known as combis, can be found on virtually every major road in the city. The
popularity of this transportation method lies in its cheap fares, with short journeys typically
costing around PEN1, and long trips rarely amounting to more than PEN4. However, combis do
not provide a pleasant travelling experience. Designed to seat no more than 25 people, in the
rush hour, some vehicles attempt to accommodate nearly double that number, with faces
pressed up against the windows. Combis are privately owned, which means that there is intense
competition to attract passengers. These vehicles do not have assigned pick-up points so they
stop anywhere they find a person who wants to board. This creates chaos on the roads. The
government has had enough, saying that combis are an embarrassment to the city. Most of
these vehicles are old and are a source of heavy pollution into the citys already polluted air. The
Andina news agency has reported that the Ministry of Transport and Communications (MTC)
has decided that combis over 20 years of age are no longer permitted to operate. According to
newspaper El Comercio in May 2013, the poor maintenance of these vehicles and the
carelessness of many drivers caused 27 deaths in 2012. From 2014, much of the citys
population will be searching for alternative public transportation, as combis are set to be banned
from operating on particular roads, in a continued effort to phase out their presence.
In recent years, Limas governing bodies have been providing the city with more public
transportation options. One of the most popular has been the Metropolitano, which opened in
2010. This is a bus service with its own lanes running services to various important locations
throughout the city, with tickets costing PEN2 regardless of the length of the journey. The
number of users doubled in the first two years of operation, with El Comercio reporting in July
2012 that 6% of Limas population is now using the Metropolitano regularly. About 67.5% of
users see the major advantage as the fact that the service has its own lanes so journeys are not
delayed by the chronic congestion in the city. In 2011, the tren electrico arrived. It is an
overground train service that has been popular with citizens living in areas that fall on the route,
but coverage is still limited. A second line has been planned and is due to be finished in 2016. It
will include an underground section, the first of its kind in Peru. Similar systems are due to open
in provincial cities, such as Huancayo, Chiclayo and Trujillo, in the near future.
Taxis are a common mode of transportation throughout Perus urban areas but particularly in
Lima, which has an estimated 200,000 taxis, one for every 40 of its inhabitants. Customers
never have to wait long to find a cab and the price is negotiated before the passenger gets into
the cab. However, Fernan Muoz, from the College of Engineers of Peru (CIP), notes that this
system creates chaos. Taxis often stop on busy roads and spend time negotiating with a
potential customer whilst vehicles build up behind, unable to pass by. Mr Muoz is a strong
advocate of having a metering system in taxis, as in many cities around the world, whereby the
price is calculated at the end of the journey based on the distance travelled. This idea has been
mooted by the authorities for several years but virtually no progress has been made. However,
the more pressing issue with taxis is passenger security. The newspaper PubliMetro estimated
in March 2013 that close to 40% of the citys taxis are unlicensed, and customers get into these
vehicles at their own risk. Whilst it would be an exaggeration to say that crimes committed by
taxi drivers against passengers are common, it is certainly not unheard of. At present,
customers have no way of ensuring that a particular taxi is safe.
In small towns and rural areas, by far the most common form of public transport is the
mototaxi, which is a three-wheeled motorbike, with a roof and two seats attached at the back. It
is much cheaper than a car, but it is bigger than a motorbike and can carry two passengers.
Perus rail network is very limited. A famous line runs from Cusco to the Machu Picchu, but
most of the users on this route are tourists. Per capita, on average, Peruvians travelled just
2.9km by rail in 2012, over 300 times less than the distance travelled by car.

Commuting
A January 2013 survey by website trabajando.com reveals that, despite the increase in car
ownership, combis and buses are favoured by 65% of commuters. This is not often a pleasant
experience, as small combis are packed beyond capacity, particularly in rush hour at the end of
the day. Many commuters have to use two or more combis to reach their final destination. About
13% of workers in Lima take advantage of the Metropolitano bus service, which is fast because
it uses its own lanes, avoiding the traffic. El Comercio reported in July 2012 that the operator of
the Metropolitano was going to add more services during rush hour to cope with the demand.
Around 13% travels to work by car, mainly people in middle- to high-income segments. Whilst
some companies are able to offer on-site spaces for their employees, parking in some districts
is a real problem. In San Isidro, Limas largest business district, some people commuting by car
arrive as early as 6.30 am (a full three hours before their working day commences) in order to
take advantage of the limited free parking available in nearby residential streets. Those walking
to work make up 5% of commuters, with a further 3% travelling by taxi. Although the taxi is a
popular mode of transport in Peru, it is rarely used every day for commuting because it would be
expensive. Finally, just 1% uses a bicycle.
The same survey found that a mere 19% of Peruvians are content with their mode of transport
to work. Nearly half (45%) said they would prefer to use a car but most cannot afford to buy one.
A further 11% said that, ideally, they would like to use a bike, but the lack of cycle lanes and the
dangerous driving habits of other road users puts them off. About 42% chooses their mode of
transportation for economic reasons and 35% due to the lack of suitable alternatives. About
31% is lucky to be able to reach their workplace in less than half an hour, 44% travels between
30 minutes and one hour, 22% commutes for between one and two hours, and 3% endures a
trip of over two hours.

Air Travel
Air travel has experienced rapid growth on the back of Perus economic success. Families,
which previously endured long-haul bus journeys when travelling across the country to visit
relatives and enjoy vacations, are now able to travel by plane. Some have even begun to travel
outside the country for the first time. Despite the rise in air travel, it is still an activity that a large
proportion of the country can only dream of being able to afford, so per capita expenditure on air
travel is still low. It stood at PEN65.3 in 2012, a 4.6% rise from the previous year. Growth is
expected to continue in the near future, with a forecasted spend of PEN73 per capita in 2015.
The number of passengers on domestic flights has grown ever year for the last decade with
the exception of 2005. This pattern shows no signs of slowing: the Civil Aviation Authority
(DGAC) reports an 18.6% rise in traffic for the first two months of 2013, compared to the same
period the previous year. The countrys only international airport is in Lima; it is the hub of the
countrys air travel. Yet, a new airport is due to open in Cusco in 2017 that will operate
international flights. Limas airport, Jorge Chavez, recently won the Skytrax award. It is South
Americas best airport for the fifth consecutive year, as reported by website Alta Voz in April
2013.
Popular air travel destinations are Cusco (a tourist magnet in the mountains, providing access
to Machu Picchu), Arequipa (Perus second largest city), Iquitos (the capital of the jungle), and
Piura (a gateway to the popular beach resorts in the north of the country). According to
government figures, the number of Peruvians flying to international destinations has also risen
significantly, with a 40% rise in numbers between 2004 and 2012.
There are no low-cost airlines in Peru, as in much of Latin America. Newspaper Gestion
reports that the market leader for domestic flights is LAN Peru, which had over 60% market
share in early 2013. Over the past decade, competitors such as Peruvian Airlines and Star Peru
have emerged. Although their fares are generally lower than those of LAN, their deals are still
not comparable to the vast number of cheap flights available in other parts of the world, such as
Europe. For example, the average price of a return flight with Star Peru from Lima to Cusco (a
journey taking 45 minutes) is around US$200. These airlines regularly offer special promotions
but, typically, they are only valid off peak, outside of the traditional Peruvian holiday seasons.

A small price to pay for peace of mind when taking a taxi
The dangers associated with taking taxis on the streets of Lima have led many of the citys
citizens to use the services provided by an expanding network of secure taxi companies. Many
Peruvians are not put off by the higher prices, which are often double the price charged by
informal taxis on the street, due to rising disposable incomes. One advantage is that the taxi
comes to the customers precise location, as opposed to the customer having to look for a taxi.
Above all, passengers value the safety that these services offer. Most companies check the
backgrounds of their drivers, the state of their vehicles and keep track of the journey whilst in
progress. Customers are taking advantage of the increasingly sophisticated levels of service
provided by safe taxis. Many companies offer an app through which people can order a taxi, and
then they send a confirmation with the licence plate details of the car that is being sent to pick
them up.

The government is struggling to get Peruvians out of their cars
Getting the countrys population to use the public transport networks on offer is a hurdle. As
the ownership of private transport is rising at record rates and many citizens are enjoying the
luxury of having their own car for the very first time, many people simply do not want to use
public transport, even if it is quicker. Jose Luis Bonifaz, a transport specialist from the University
of the Pacific, believes that people must opt to leave their car at home and ride quality public
transport to avoid congestion and loss of time. This would make the city more competitive. He
feels that a sign of a developed country is not when more people own cars, but when they leave
their cars at home and start using public transport. In April 2013, the broadcaster RPP estimated
that the lack of a subway system in Lima led to US$177 of excess fuel consumption per citizen,
and US$339 in lost work productivity.

Table 9 Transport Data: 2000, 2005, 2010, 2011, 2012, 2015

(PEN per capita, at constant prices)

2000 2005 2010 2011 2012 2015

Consumer expenditure on 642.6 717.9 872.0 916.0 957.2 1,067.9
transport services
- Consumer expenditure 13.0 15.4 19.5 20.8 21.9 25.0
on rail travel
on buses, coaches and
taxis
on air travel
on other travel
Possession of bicycle 22.0 21.6 22.5 22.6 22.8 23.3
(% of households)
Possession of 2.8 3.4 4.0 4.1 4.3 4.6
motorcycle (% of
households)
Possession of passenger 11.3 16.8 20.3 20.8 21.3 22.5
car (% of households)
Km travelled by road 645.6 838.4 893.7 903.2 911.9 n/a
(km per capita)
Km travelled by rail 4.2 4.7 2.5 3.2 2.9 n/a
(km per capita)
Km travelled by air (km 61.1 193.2 345.9 396.7 435.3 n/a
per capita)
Passenger cars in use 725 901 1,095 1,150 1,230 n/a
('000)
Passengers carried by 1,438 1,519 1,379 1,760 1,807 n/a
rail (000)
Scheduled airlines: 1,595 4,332 6,063 6,732 7,195 n/a
Passengers carried ('000)

Chart 9 Real Growth in Consumer Expenditure Compared with Real Growth in
Consumer Expenditure on Transport Services and Purchase of Cars,
Motorcycles and other Vehicles 2000-2015


Consumer Lifestyles in Peru

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What are some of the current top consumer trends in Peru?

How have shopping malls impacted consumer behavior in Peru?

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