Peru Economic Reforms Target Oil Investment and Labor Rules

, Hydrocarbons Regulation Peru’s Ministry of Energy and Mines published a draft regulation to replace the 2004 hydrocarbons rule, aiming to revive exploration after only three wells were drilled in five years., Modern Drilling Standards The proposal explicitly recognizes international technologies like directional drilling and hydraulic fracturing for the first time in Peruvian regulation., Digital Supervision A national remote-metering system is proposed to digitize oversight of hydrocarbons operations., Labor Flexibility Decrees The Executive is seeking decrees to allow direct worker-employer agreements on benefits like severance savings (CTS), bonuses, and vacations., CAS Worker Integration Decree DS 142-2026-EF establishes a gradual phase-in of full CTS and bonus benefits for state-contract (CAS) workers through 2030.

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.

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The dual approach targets two chronic complaints from business: an energy sector paralyzed by outdated rules and a rigid labor market that raises hiring costs.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

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.

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.

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.

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 .