Peru Economic Reforms Target Oil Investment and Labor Rules

Politics · Peru

Peru economic reforms are advancing on two distinct fronts under the week-old government of President Keiko Fujimori, as the executive branch targets a revival of stagnant oil and gas investment alongside a controversial push to loosen labor protections by decree.

Peru Economic Reforms: The Two-Track Agenda

President Keiko Fujimori, inaugurated on July 28, 2026, has moved swiftly to signal a pro-investment policy shift for Latin America’s fourth-largest economy.

Her administration published a draft hydrocarbons regulation for public consultation while simultaneously pursuing executive decrees to flexibilize worker benefits.

The dual approach targets two chronic complaints from business: an energy sector paralyzed by outdated rules and a rigid labor market that raises hiring costs.

International investors, particularly from Canada and the United States with existing exposure to Peruvian mining and energy, are watching the regulatory overhaul closely.

Reviving Oil and Gas: The New Hydrocarbons Regulation

The Ministry of Energy and Mines (Minem) put forward a new Hydrocarbons Exploration and Exploitation Regulation to replace Supreme Decree 032-2004-EM, a rulebook unchanged for over two decades.

Peru has drilled only three exploratory wells in the last five years, a drought the government blames on regulatory obsolescence that discouraged risk capital.

The draft regulation introduces five key changes designed to modernize oversight and attract upstream investment.

First, it grants greater regulatory flexibility by allowing the energy supervisor OSINERGMIN to approve alternative compensatory safety measures on a case-by-case basis.

The hydrocarbons directorate would also gain authority to adopt new technical standards without amending the entire regulation each time.

Second, the text expressly recognizes international drilling technologies, including directional drilling and hydraulic fracturing, aligning Peru with global industry practice.

Third, existing producers would receive a 180-day window to submit a diagnostic assessment and an adaptation schedule to comply with the new framework.

Fourth, the regulation mandates digital supervision through a national remote-metering system, moving oversight away from paper-based processes.

Fifth, the entire rulebook is structured to align with international standards, a signal to multinational operators that Peru intends to compete for exploration capital.

The public consultation period gives companies and civil society a chance to comment before the regulation is finalized and signed into law.

Labor Flexibility: Decrees Target Worker Benefits

On a separate track, the Fujimori administration is preparing decrees to make Peru’s labor benefits regime more flexible, a move that has already sparked debate among unions and legal scholars.

The proposals would allow employers and workers to negotiate directly – individually or through collective bargaining – on four specific benefits currently mandated by law.

The first is the Compensación por Tiempo de Servicios (CTS), a severance savings mechanism that requires employers to deposit roughly one month’s salary per year into a locked worker account.

The second covers legal bonuses, known as gratificaciones, which mandate two additional half-month salary payments each year around the July and December holidays.

The third targets vacation rules, potentially allowing parties to agree on schedules or compensation terms that deviate from the standard 30-day annual entitlement.

The fourth addresses dismissal protections, opening the door for negotiated terms that could modify the current indemnification framework.

The government frames the changes as modernizing labor relations and giving workers more freedom to tailor benefits to their needs.

Critics argue the decrees could erode hard-won labor rights and shift bargaining power toward employers in a country with high informality.

The proposals remain under discussion, and the final text of any decree has not yet been published in the official gazette El Peruano.

CAS Workers: Gradual Integration Through 2030

Separately, the government issued Supreme Decree 142-2026-EF, which addresses the long-standing issue of Contrato Administrativo de Servicios (CAS) workers in the public sector.

CAS is a special contracting regime created in 2008 that covers hundreds of thousands of state employees but historically provided fewer benefits than permanent contracts.

The new decree establishes a gradual phase-in schedule that will extend full CTS severance savings and legal bonuses to CAS workers by 2030.

The measure represents a significant fiscal commitment, as the state is Peru’s largest employer and the CAS regime has been criticized for creating a two-tier workforce.

By setting a 2030 deadline, the government balances fiscal prudence with a concession to public-sector unions that have long demanded equal treatment.

Fujimori’s Broader Economic Agenda

The two-front push fits within a broader economic agenda that Keiko Fujimori telegraphed during her campaign and reiterated in her inaugural address.

Her economic team, led by a market-friendly finance minister, views regulatory modernization and labor flexibility as prerequisites for lifting Peru’s trend growth above 3 percent.

Peru’s economy has struggled to regain momentum after political turmoil that saw six presidents in five years prior to Fujimori’s election.

The hydrocarbons sector is a particular concern, as falling domestic production has turned Peru into a net oil importer despite significant geological potential in the Marañón and Ucayali basins.

On labor, the government argues that high non-wage costs fuel informality, which traps roughly three-quarters of Peruvian workers outside the formal safety net.

The decrees are expected to face legal challenges from labor federations and left-wing lawmakers who control a bloc in Congress.

Investor Reaction and Next Steps

Initial investor reaction to the hydrocarbons regulation has been cautiously positive, with industry groups noting that explicit recognition of modern drilling techniques removes a layer of legal uncertainty.

Companies like PetroTal, a Canadian-listed operator that is Peru’s largest crude producer, and Argentina’s Pluspetrol have long urged regulatory updates to unlock investment in the Talara and Camisea regions.

The labor decrees, however, are generating more polarized responses, with foreign chambers of commerce generally supportive and multilateral lenders watching for social safeguards.

The public consultation for the hydrocarbons regulation is expected to run for several weeks before Minem publishes a final version.

On the labor front, the government has not announced a timeline for issuing the decrees, and negotiations with congressional allies are ongoing.

For international investors, the coming weeks will clarify whether Fujimori’s government can deliver regulatory change at the speed markets are pricing in.

Background: our argentinas economic crisis explained what it means for brazil and investors guide.

More: Peru news in English, every day from The Rio Times.

Frequently Asked Questions

What are the main Peru economic reforms under President Keiko Fujimori?

The Fujimori government is advancing a new hydrocarbons regulation to revive oil and gas investment and preparing decrees to flexibilize labor benefits like CTS, bonuses, vacations, and dismissals.

What changes does the new hydrocarbons regulation propose?

The draft regulation introduces regulatory flexibility, recognizes directional drilling and hydraulic fracturing, sets a 180-day adaptation window, mandates digital remote metering, and aligns rules with international standards.

How will the labor decrees affect workers in Peru?

The proposed decrees would allow direct employer-worker agreements on severance savings (CTS), legal bonuses, vacations, and dismissal terms, while a separate decree gradually extends full benefits to CAS state workers by 2030.

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