Economy of Peru

Economy of Peru

File:Lima - Perú.jpg San Isidro, financial center of Lima
Currency	Peruvian sol (PEN, S/)
Fiscal year	calendar year
Trade organizations	CAN, Pacific Alliance, WTO, Prosur, Mercosur (associate), Unasur (suspended)
Country group	Developing/Emerging Upper-middle income economy
Statistics
GDP	$228.989 billion (nominal, 2019 est.) $478.303 billion (PPP, 2019 est.)
GDP rank	48th (nominal, 2019) 43rd (PPP, 2020)
GDP growth	4.0% (2018) 2.2% (2019e) −12.0% (2020f) 7.0% (2021f)
GDP per capita	$7,047 (nominal, 2019 est.) $14,719 (PPP, 2019 est.)
GDP per capita rank	83rd (nominal, 2019) 87th (PPP, 2019)
GDP by sector	agriculture: 7.6% industry: 32.7% services: 59.9% (2017 est.)
Inflation (CPI)	1.9% (2020 est.)
Population below poverty line	12.7% in multidimensional poverty (2019) 20.5% (2018) 22.1% on less than $5.50/day (2018)
Gini coefficient	42.8 medium (2018, World Bank)
Human Development Index	0.777 high (2019) (79th) 0.628 medium IHDI (2019)
Labor force	18,818,406 (2019) 65.5% employment rate (2018)
Labor force by occupation	agriculture: 27.4% industry: 15.2% services: 57.4% (2019)
Unemployment	6.9% (2017 est.) note: data are for metropolitan Lima; widespread underemployment 3.6% (2012)
Main industries	mining Mineral and jewel processing steel metal fabrication petroleum natural gas fishing fish processing cement glass textiles clothing food processing beer soft drinks rubber machinery electrical machinery chemicals furniture
External
Exports	$44.92 billion (2017 est.)
Export goods	copper 27.1%. gold 14.7% petroleum 6.3% zinc 4.5% copper cathodes 3.8% (2018)
Main export partners	China 27.6% United States 16.7% India 5.2% South Korea 5.1% Japan 4.6% (2018)
Imports	$43.13 billion (2018)
Import goods	petroleum oils 15.2% transmitter equipment 3.3% automobiles 1.9% maize 1.6%
Main import partners	China 23.3% United States 21.3% Brazil 5.6 Mexico 4.5% Ecuador 4.5% (2018)
FDI stock	$98.24 billion (31 December 2017 est.) Abroad: $5.447 billion (31 December 2017 est.)
Current account	−$2.414 billion (2017 est.)
Gross external debt	$66.25 billion (31 December 2017 est.)
Public finances
Government debt	25.4% of GDP (2017 est.)
Budget balance	−3.1% (of GDP) (2017 est.)
Revenues	58.06 billion (2017 est.)
Expenses	64.81 billion (2017 est.)
Economic aid	$27.267 million (2018 est.)
Credit rating	Standard & Poor's: A- (Domestic) BBB+ (Foreign) A (T&C Assessment) Outlook: Stable Moody's: A3 Outlook: Stable Fitch: BBB+ Outlook: Negative
Foreign reserves	$63.83 billion (31 December 2017 est.)
All values, unless otherwise stated, are in US dollars.

The economy of Peru is an emerging, social market economy characterized by a high level of foreign trade and an upper middle income economy as classified by the World Bank. Peru has the forty-seventh largest economy in the world by total GDP and currently experiences a high human development index. The country was one of the world's fastest-growing economies in 2012, with a GDP growth rate of 6.3%. The economy was expected to increase 9.3% in 2021, in a rebound from the COVID-19 pandemic in Peru. Peru has signed a number of free trade agreements with its main trade partners. China became the nation's largest trading partner following the China–Peru Free Trade Agreement signed on April 28, 2009. Additional free trade agreements have been signed with the United States in 2006, Japan in 2011 and the European Union in 2012. Trade and industry are centralized in Lima while agricultural exports have led to regional development within the nation

Peru's economy is dependent on commodity exports, making the economy at risk due to price volatility in the international markets. In recent decades, the economy has begun to diversify. The extraction of such commodities has brought conflict within the country due to its environmental and social impacts. Beginning in the 1980s, Peru faced economic difficulties as a result of the early 1980s recession and the internal conflict in Peru. The government of Alan García enacted price controls that resulted in hyperinflation. In response, the armed forces of Peru drafted Plan Verde, an operation to create a neoliberal, open market economy with the "total extermination" of impoverished Peruvians. This was reportedly executed by the authoritarian government of Alberto Fujimori, beside prescriptions from economist Hernando de Soto, during a period known as "Fujishock". During this shock, price controls were discontinued, the privatization of state-run organizations occurred and the promotion of foreign investments happened through the removal of regulations. The economic measures of the Fujimori administration, alongside its brutal repression of political violence within Peru, made the country macro-economically stable. Meanwhile, these policies increased suffering among the poor and did little to change the poverty rate. They left behind a polarized legacy. The nation has more recently experienced increased development following the 2000s commodities boom, with improvement in government finances, poverty reduction and progress in social sectors. Poverty specifically has decreased significantly – from nearly 60% in 2004 to 20.5% in 2018. Inflation in 2012 was the lowest in Latin America at 1.8%, with the most recent annual rate standing at 1.9% in 2020.

Peruvian economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments. Peru's main exports are copper, gold, zinc, textiles, chemicals, pharmaceuticals, manufactures, machinery, services and fish meal. The country's major trade partners are the United States, China, Brazil, the European Union and Chile. Although exports have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive. Services account for 59.9% of Peruvian gross domestic product, followed by industry (32.7%) and agriculture (7.6%). Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, as well as rising investment and consumption.

History

Main article: Economic history of Peru

Inca Empire

The Tahuantinsuyo (the Realm of the Four Parts), popularly known as the Inca Empire was the largest civilization which arose from the highlands of Peru sometime in the early 13th century. The last Inca stronghold was conquered by the Spanish in 1572.

The Inca Empire employed central planning. Writing about the Inca tax system, Spanish chronicler Pedro Cieza de León said "the system the Incas employed was so good that the people did not feel it, and prospered ... [A]ll this was accomplished in such orderly fashion that neither did the natives fail to pay what they owed and were assessed, nor did those who collected these tributes venture to take one grain of corn in excess". Officials would travel to cities and provinces where they would be provided quipus storing data, with Inca territories contributing what was possible; whether it be labor (mit'a), textiles, food, weapons or construction materials. Regarding labor, provinces would provide men to be employed by the empire who required to be married so their wives could maintain home life. Citizens were not exposed to overwork as individuals who became ill would be returned and replaced by their home province while many days of a month were dedicated to recreation and feasts.

Viceroyalty of Peru

Bozal African in Lima, 1805

The economy of the viceroyalty of Peru largely depended on the export of silver. The huge amounts of silver exported from the viceroyalty of Peru and Mexico deeply affected Europe, where some scholars believe it caused the so-called price revolution. Silver mining was carried out using contract and free wage labourers, as well as the encomienda system of slavery. The encomienda has been described as constituting genocide. Under the Spanish system, Cieza de León wrote that "with the disorder and greed of the Spaniards, the number of the people has fallen off to such a degree that most of them have disappeared, and they will be wiped out completely as a result of the covetousness and greed". Afro-Peruvians also appeared as a result of slavery in colonial Spanish America. Silver production peaked in 1610.

Prussian explorer Alexander von Humboldt first encountered guano in 1802 and started fertilizer research Callao in Peru, with his findings being reported throughout Europe.

Nineteenth century

Independence and the Industrial Revolution Era

The Chincha Islands, a large source of guano, 1866

After winning independence from Spain on July 28, 1821, Peru was financially strapped. In addition, the economy suffered from the collapse of the silver mines. However the guano trade with Europe beginning in the 1840s flushed Peru with European investments and money. In 1840, Peruvian politician and entrepreneur Francisco Quirós y Ampudia commercialized guano exports in a deal with French businessme, and the Peruvian government, abolishing existing claims to Peruvian guano; guano was essentially nationalized and became Peru's largest revenue source. Despite the near exhaustion of guano, Peru achieved its greatest ever export of guano in 1870 at more than 700,000 tonnes (770,000 short tons).

The War of the Pacific

See also: Peruvian Salpeter Monopoly

Chile was devastated by the Long Depression economic crisis of the 1870s and began looking for a replacement for its silver, copper and wheat exports. It has been argued that the economic situation and the view of new wealth in nitrate were the true reasons for the Chilean elite to go to war against Peru and Bolivia. Chile won the war and with the Treaty of Ancón of 1884, the War of the Pacific ended. Chile obtained half of Peru's guano income from the 1880s and its guano islands, with Chile taking control over the most valuable nitrogen resources in the world. Chile's national treasury would increase 900% from 1879 to 1902 due to the newly acquired lands.

Twentieth century

Amazon rubber boom

Further information: Amazon rubber boom

Into the twentieth century, Anglo-Peruvian Amazon Rubber Co in Iquitos began to market rubber internationally. The rubber boom brought regions of Amazonia into the international market. The Government of Peru ceded to the Anglo-Peruvian Amazon Rubber Co the Amazon territories north of Loreto, after the company's founder Julio César Arana purchased the land. During the rubber boom the Putumayo Genocide was committed by Anglo-Peruvian Amazon Rubber Co. Between 40,000 to 250,000 indigenous peoples were killed, with many being sent to labor camps; ninety percent of the affected Amazonian populations were annihilated.

Mid-20th century

On October 29, 1948, General Manuel A. Odría led a successful military coup and became the new president. Thanks to a thriving economy, Odría was able to implement expensive, populist social reconstruction, including housing projects, hospitals, and schools. His government was dictatorial, however, and civil rights were severely restricted, and corruption was rampant throughout his régime.

Military juntas continued to predominantly rule Peru over the next three decades. The economic policies of the 1950s, 1960s, and 1970s in particular, were based on the substitution of imports, and had little effect on the size of the economy. General Francisco Morales Bermúdez replaced leftist General Juan Velasco Alvarado in 1975, citing Velasco's economic mismanagement, among other factors. Morales Bermúdez brought about a more conservative period, beginning the task of restoring the country's economy.

The Velasco Military Junta Government 1968–1980

The economic strategy of General Velasco's government was shaped by a conception frequently advocated in Latin America but rarely put into practice. The idea was to find a "third way" between capitalism and socialism, with a corporatist society much more inclusionary than that possible under capitalism but without rejecting private ownership or adopting any of the compulsory methods identified with communism. Under this strategy, land reform was designed to override existing property interests in order to establish cooperative ownership, rejecting both individual private farming and state farms. Promoting worker participation in ownership and management was intended to reshape labor relations. Foreign influences were reduced through tight restrictions on foreign investment and nationalization of some of the largest foreign firms. On a more fundamental plane, the Velasco government saw its mission as one of eliminating class conflict and reconciling differences among interest groups within its own vision of a cooperative society.

Land reform

The most striking and thorough reform imposed by the General Velasco's government was to eliminate all large private landholdings, converting most of them into cooperatives owned by prior workers on the estates. The reform was intended to destroy the basis of power of Peru's traditional elite and to foster a more cooperative society as an alternative to capitalism. Such socialpolitical purposes apparently dominated questions of agricultural production or any planned changes in patterns of land use. The government created a system of price controls and monopoly food buying by state firms designed to hold down prices to urban consumers.

As mentioned earlier, the cooperatives had very mixed success; and the majority were converted into individual private holdings during the 1980s. The conversions were authorized in 1980 by changes in the basic land reform legislation and were put into effect after majority votes of the cooperative members in each case. The preferences of the people involved at that point clearly went contrary to the intent of the original reform. But the whole set of changes was not a reversion to the pre-reform agrarian structure. In fact, the conversions left Peru with a far less unequal pattern of landownership than it had prior to the reform and with a much greater role for family farming than ever before in its history.

Labor and capital in the industrial sector

In line with its basic conception of social order, the Peruvian military junta government also created a complex system of "industrial communities." Under this system, firms in the modern sector were required to distribute part of their profits to workers in the form of dividends constituting ownership shares. The intent was to convert workers into property owners and property ownership into a form of sharing for the sake of class reconciliation. But in practice, the system never functioned well. The firms did all they could to avoid reporting profits in order to postpone sharing ownership, sometimes by setting up companies outside the system to which they channeled profits, sometimes by adjusting the books, and in general by keeping one step ahead of intended regulations. A small fraction of the industrial workers gained shares in firms, but as a rule workers were not so much interested in long-term claims of ownership as they were in immediate working conditions and earnings. For organized labor, the whole approach seemed an attempt to subvert any role for union action and to make organization irrelevant. The system was not popular with either side. It was quickly abandoned when the more conservative wing of the military took power away from General Velasco in 1975.

Attempted reform of labor relations in the mid-1970s also included severe restrictions on rights to discharge workers once they passed a brief trial period of employment. A review process set up to examine disputes was implemented in a way that made discharges practically impossible. Businesspeople circumvented the restrictions to some degree by hiring workers on a temporary basis up to the point at which they would have to be kept and then letting them go before the restrictions applied. Businesspeople remained unremittingly hostile to this type of regulation, primarily on the grounds that it took away their main means of exercising discipline over their workers. This form of regulation was also eliminated shortly after Velasco lost power.

Protection and promotion of industry

Along with the intention of resolving internal class conflict, the Velasco government determined to lessen Peru's dependency on the outside world. The two most important components of the strategy were a drive to promote rapid industrialization and an attack on the role of foreign firms. In contrast to the industrialization strategies of most other Latin American countries, the intention of the Velasco regime was to industrialize without welcoming foreign investment.

The preceding Belaúnde administration had started Peru on the path of protection to promote industry, and in this respect the Velasco government reinforced rather than reversed the existing strategy. Beyond the usual recourse to high tariffs, Velasco's government adopted the Industrial Community Law of 1970 that gave any industrialist on the register of manufacturers the right to demand prohibition of any imports competing with his products. No questions of exceptionally high costs of production, poor product quality, or monopolistic positions fostered by excluding import competition were allowed to get in the way. Before the succeeding government of General Francisco Morales Bermúdez Cerrutti (1975–80) began to clean up the battery of protective exclusions in 1978, the average tariff rate reached 66 percent, accompanied by quantitative restrictions on 2,890 specific tariff positions.

In addition to the protective measures, the Velasco government promoted industrial investment by granting major tax exemptions, as well as tariff exemptions on imports used by manufacturers in production. The fiscal benefits given industrialists through these measures equaled 92 percent of total internal financing of industrial investment in the years 1971 through 1975.

Investment rose strongly in response to these measures, as well as to the concurrent rise in aggregate demand. But the tax exemptions also contributed to a rising public-sector deficit and thereby to the beginning of serious inflationary pressure. In addition, the exemptions from tariffs given to industrialists on their own imports of equipment and supplies led to a strong rise in the ratio of imports to production for the industrial sector.

Nationalizations and state firms

The industrialization drive was meant to be primarily a Peruvian process not totally excluding foreign investors but definitely not welcoming them warmly. In that spirit, the Velasco regime immediately nationalized IPC in October 1968 and, not long after that, the largest copper mining company, while taking over other foreign firms more peacefully through buy-outs. The government put into place new restrictions on foreign investment in Peru and led the way to a regional agreement, the Andean Pact, that featured some of the most extensive controls on foreign investment yet attempted in the developing world.

The decision to nationalize the foreign oil firm was immensely popular in Peru. It was seen as a legitimate response to many years of close collaboration between the company, which performed political favors, and a series of possibly selfinterested Peruvian presidents, who, in exchange, preserved the company's exclusive drilling rights. Nationalization was perhaps less a matter of an economic program than a reaction to a public grievance, a reaction bound to increase public support for the new government.

Subsequent nationalizations and purchases of foreign firms were more explicitly manifestations of the goals of building up state ownership and reducing foreign influence in Peru. The leaders of the military government subscribed firmly to the ideas of dependency analysis, placing much of the blame for problems of development on external influences through trade and foreign investment. Foreign ownership of natural resources in particular was seen as a way of taking away the country's basic wealth on terms that allowed most of the gains to go abroad. Ownership of the resources was expected to bring in revenue to the government, and to the country, that would otherwise have been lost.

In contrast to its abrupt nationalization of the IPC and then of the largest copper mining company, the government turned mainly to purchases through negotiation to acquire the property of the International Telephone and Telegraph Company (ITT) and foreign banks. Partly in response to United States reactions to the earlier nationalizations, and perhaps also partly in response to the realization that foreign investment might play a positive role in the industrialization drive, the government began to take a milder position toward foreign firms. But at the same time, it pursued a policy of creating new state-owned firms, in a sense competing for position against domestic private ownership, as well as against foreign ownership.

State ownership of firms was, of course, consistent with the nationalizations but reflected a different kind of policy objective. Whereas the nationalizations were intended to gain greater Peruvian control over the country's resources and to reduce the scope of foreign influence, the proliferation of state-owned firms was meant to increase direct control by the government over the economy. State firms were seen as a means to implement government economic policies more directly than possible when working through private firms, whether domestic or foreign-owned. The goal was not to eliminate the private sector—it was encouraged at the same time by tax favors and protection—but to create a strong public sector to lead the way toward the kind of economy favored by the state.

The new state firms created in this period established a significant share of public ownership in the modern sector of the economy. By 1975 they accounted for over half of mining output and a fifth of industrial output. One set of estimates indicates that enterprises under state ownership came to account for a higher share of value added than domestic private capital: 26 percent of GDP for the state firms, compared with 22 percent for domestic private firms. The share produced by foreign-owned firms dropped to 8 percent from 21 percent prior to the Velasco government's reforms.

Contrary to the expectation that the earnings of the state firms would provide an important source of public financing for development, these companies became almost immediately a collective drain. In some measure, the drain was a result of decisions by the government to hold down their prices in order to lessen inflation or to subsidize consumers. In addition, deficits of the state-owned firms were aggravated by the spending tendencies of the military officers placed in charge of company management and by inadequate attention to costs of production. The collective deficits of the state enterprises plus the subsidies paid directly to them by the government reached 3 percent of GDP by 1975. State enterprises were not able to finance more than about one-fourth of their investment spending. The government attempted to answer the investment requirements of the state firms by allowing them to borrow abroad for imported equipment and supplies. They did so on a large scale. The external debt rose swiftly, for this and for other reasons discussed below.

Nationalizations and the creation of new state firms stopped abruptly after Velasco lost power. In 1980 the Belaúnde government announced a program to privatize most of the state firms, but it proved difficult to find private buyers, and few of the firms were actually sold. In the opposite direction, the subsequent García government, in addition to nationalizing in 1985 the offshore oil production of the Belco Corporation, a United States company, tried in 1987 to extend state ownership over banks remaining in private hands. The attempted banking nationalization created a storm of protest and was eventually ruled to be illegal. The failures under both Belaúnde and García to change the balance left the state-enterprise sector basically intact until Fujimori implemented major changes.

Macroeconomic imbalance: domestic and external

Whatever the promises and the costs of the many kinds of reform attempted by the Velasco government, the ship sank because of inadequate attention to balances between spending and productive capacity, and between export incentives and import demand. The Velasco government inherited recessionary conditions in 1968, with a positive external balance and productive capacity readily available for expansion. It maintained effective restraint on spending and deficits for several years but then let things get out of control. The central government's deficit was no more than 1 percent of gross national product (GNP) in 1970, but its own deficit plus that of the greatly expanded group of state firms reached 10 percent of GNP by 1975. Correspondingly, the external current-account balance was positive in the period 1968-70 but showed a deficit equal to 10 percent of GNP by 1975.

The external deficit was driven up primarily by high rates of growth of domestic demand and production through 1974. But in addition, the government's policy of holding to a fixed nominal exchange rate, in an increasingly inflationary context, allowed the real exchange rate to fall steadily from 1969 to 1975. The government refused to consider devaluation for fear it would worsen inflation and managed to avoid it by borrowing abroad to finance the continuing deficit. By 1975 external creditors had lost confidence in Peru's ability to repay its debts and began to put on the brakes. Whether because of such external pressure or because of growing internal opposition to the increasingly arbitrary decisions of the government, the Peruvian military decided to replace Velasco in 1975. The experiment ended on a note of defeat, not so much of its objectives as of its methods.

The 1980s

In 1980, after 12 years of military rule, Fernando Belaúnde Terry was elected president. After a promising beginning, his popularity eroded under the stress of inflation, economic hardship, and terrorism; his government's lukewarm liberalization attempt failed in the context of the Latin American debt crisis, as per capita income declined, Peru's foreign debt burgeoned, and violence by leftist insurgents (notably Shining Path) rose steadily during the internal conflict in Peru, which was launched the day before Belaúnde's election. He continued many of the projects that were planned during his 1963–1968 term, including the completion of the Carretera Marginal de la Selva, a roadway linking Chiclayo on the Pacific coast with then-isolated northern regions Amazonas and San Martín.

During the next years, the economic problems left behind by the junta government persisted, worsened by an occurrence of the El Niño weather phenomenon in 1982–83, which caused widespread flooding in some parts of the country, severe droughts in others, and decimated the schools of ocean fish that are one of the country's major resources.

Belaúnde's successor, Alan García, was elected to office in 1985. His administration applied heterodox policies through the expansion of public expenditure and limitations on external debt payments.[1] With a parliamentary majority for the first time in APRA's history, García's administration showed economic promise much as Belaúnde's had. Despite his initial popularity, García's term in office was marked by bouts of hyperinflation, which reached 7,649% in 1990 and had a cumulative total of 2,200,200% over his five-year term, profoundly destabilizing the Peruvian economy. As a result of this chronic inflation, the Peruvian currency, the old sol, was replaced by the inti in mid-1985, which itself was replaced by the nuevo sol in July 1991; the new currency had an equivalent value of one billion old soles. During García's administration, the per capita annual income of Peruvians fell to $720 (below 1960 levels) and Peru's GDP dropped by 20%. By the end of his term, national reserves were a negative $900 million.[2]

García's term was also characterized by heavy increases in poverty. According to studies by the National Institute of Statistics and Informatics and the United Nations Development Programme, at the start of his presidency, 41.6% of Peruvians lived in poverty. By 1991, this figure had increased to 55%. García also attempted to nationalize the banking and insurance industries. He incurred the wrath of the International Monetary Fund and the financial community by unilaterally declaring a limit on debt repayment equal to 10% of the gross national product, thereby isolating Peru from the international financial markets. One of his administration's most glaring failures was the ambitious multimillion-dollar Lima Metro that was completed only at the end of Garcia's second term 2011.

The Second Fernando Belaúnde Government 1980–1985

The return to democracy allowed Peruvians to choose among strongly left, strongly conservative, or middle-of-the-road parties. They chose Belaúnde and his party as the middle road, but it led nowhere. The Belaúnde government tried to return the economy to a more open system by reducing barriers to imports, implementing financial reforms intended to foster private markets, and reversing the statist orientation of the Velasco system. But the new approach never had a chance to get very far because of a series of macroeconomic problems. On one side, the government was rightly concerned about continuing inflation but made the mistake of focusing the explanation on monetary growth arising from the export surplus it inherited at the start. That position made it seem undesirable to continue trying to promote exports and desirable to raise domestic spending and imports. On the other side, President Belaúnde's personal and political objectives included using public investment actively to develop the interior of the country and to answer evident needs for improved infrastructure. Seeing the export surplus as the key macroeconomic source of imbalance, the government decided to eliminate it by removing import restrictions, slowing nominal devaluation to allow the real exchange rate to appreciate, and increasing government investment spending.

The real exchange rate appreciated through 1981 and 1982, public sector investment rose 54 percent in real terms from 1979 to 1982, and public sector consumption rose 25 percent during the same three-year period. The combination effectively turned the current-account surplus into a large deficit, as increased spending plus import liberalization practically doubled imports of goods and services between 1979 and 1981. The appreciation also turned manufacturing exports back downward, and a plunge in external prices of primary exports brought them down too. And then the mistake of focusing on the earlier export surplus as the main cause of inflation became clear: the increases in spending led to a leap of inflation despite the return to an external deficit. The rate of inflation went from 59 percent in 1980 to 111 percent by 1983.

Nothing improved when the government then tried to go into reverse with contractionary macroeconomic policies and renewed depreciation. Output plunged, but inflation once more went up instead of down, to 163 percent by 1985. By this time, pessimism about the government's capacity to solve anything, inflationary expectations turning into understandable convictions, and the price-increasing effect of devaluation all combined to give Peru a seemingly unstoppable inflation despite the elimination of anything that might be considered excess demand. The government apparently lost its sense of direction, retreated from its attempt to reopen the economy by returning to higher tariff levels, and otherwise did little except wait for its own end in 1985.

The First Alan García Government 1985–1990

With the market-oriented choice of economic strategy discredited by results under Belaúnde, Peruvians voted for the dynamic populist-reformist promise of García and responded enthusiastically to his sweeping changes. García's program worked wonders for two years, but then everything began to go wrong.

The main elements of the economic strategy proposed by the García government were full of promise. They recognized the prior neglect of the agricultural sector and called for redirecting public programs toward promotion of agricultural growth and reduction of rural poverty. Correspondingly, economic activity was to be decentralized to break down its high concentration in Lima, and within the cities resources were to be redirected away from the capital-intensive and import-intensive modern sector to the labor-intensive informal sector. A strategy of concertación (national understanding) with private business leaders on economic issues was to be used systematically to avoid disruptive conflict. Problems of external balance were to be answered both by restructuring production to lessen dependence on imports and by reorienting toward higher exports over the long-term.

These goals for structural change could have improved the efficiency of resource allocation while doing a great deal to lessen poverty. But the goals clearly required both time and the ability to restore expansion without worsening inflation and external deficits. The government initially emphasized such macroeconomic objectives as necessary conditions for the structural changes. The first step was to stop the built-in inflationary process, but to do it without adopting orthodox measures of monetary and fiscal restraint.

The first 2 years 1985–1987

The first two years of the García government gave new hope to the people of Peru, with rising employment, production, and wages suggesting a clear turn for the better after so many years of increasing difficulties. It was hence doubly tragic to see the whole process unravel so quickly, once things started going wrong again. The first sign of trouble came, as it often had, from the balance of payments. The economic boom naturally raised imports swiftly, by 76 percent between 1985 and 1987. But the real exchange rate was allowed to fall by 10 percent in 1986 and by a further 9 percent in 1987. The boom pulled potential export supply into the domestic market, and the fall in the real exchange rate reduced incentives to earn foreign exchange. Exports fell slightly in 1985 and remained below that level through 1987. The external current account went from a surplus of US$127 million in 1985 to deficits of nearly US$1.1 billion in 1986 and nearly US$1.5 billion in 1987.

Besides higher employment and living standards, the first two years of economic revival seemed to offer a break in the cycle of rising rural violence. The flow of displaced peasants from the Sierra eased, and a good many peasants began to return to the countryside.

To stop inflation, the government opted for heterodox policies of control within an expansionary program. Prices and wages in the modern sector were to be fixed, after an initial one-shot increase in wage rates. The increase in wages was intended to raise living standards of workers and stimulate production by raising sales to consumers. To offset the effects of higher wages on costs of production, financial costs of the business sector were cut by intervention in order to reduce and control interest rates. After making one adjustment of the exchange rate to minimize negative effects on exports, the government stopped the process of continuing devaluation in order to help hold down inflation. Imports were rightly expected to go up as the economy revived; to help finance them, García made his controversial decision to stop paying external debt service beyond 10 percent of the value of exports. Unorthodox as they were, all the pieces seemed to fit. At least, they went together well at the start under conditions of widespread idle capacity, with an initially strong balance of payments position.

The macroeconomic measures worked wonders for production. GDP shot up 9.5 percent in 1986 and a further 7.7 percent in 1987. Manufacturing output and construction both increased by more than one-fourth in these two years. An even greater surprise was that agricultural production per capita went up, running counter to its long downward trend. And the rate of inflation came down from 163 percent in 1985 to 78 percent in 1986, although it edged back up to 86 percent in 1987. In response to stronger market conditions and perhaps also to growing confidence that Peru's economic problems were at last being attacked successfully, private fixed investment went up by 24 percent in 1986, and capital flight went down.

The government avoided any spending spree of its own: central government spending was actually reduced in real terms each year. But because the government also reduced indirect taxes in order to encourage higher private consumption and to reduce costs for private business, its originally small deficit grew each year. The economic deficit of the nonfinancial public sector as a whole (excluding interest payments) went up from 2.4 percent of GDP in 1985 to 6.5 percent by 1987.

Although the government reduced its total spending, it managed to support a new public works program to provide temporary employment and to direct more resources to rural producers as intended in its program for structural change. Three lines of policy helped especially to raise rural incomes. The first was to use generous guaranteed prices for key food products. The second was to provide greatly increased agricultural credit, financed essentially by credit from the Central Bank. The third was to exempt most of the non-guaranteed agricultural prices from controls, allowing their prices to rise sharply relative to those of industrial products from the modern sector. From July 1985 to December 1986, prices of goods and services not under control increased more than three times as much as those under control. Wholesale prices in manufacturing increased 26 percent, but those for agricultural products increased 142 percent.

From inflation to hyperinflation, 1988–1990

The García government reacted to the growing external deficit in exactly the same way as had the governments of Velasco and of Belaúnde—by postponing corrective action while the problem continued to worsen. As ever, a major fear was that devaluation would worsen inflation. Inflationary pressures were, in fact, beginning to worsen behind the façade of control. To some degree, they were growing in response to the high rate of growth of demand and output, reducing margins of previously underutilized productive capacity. But the more explosive pressures were being built up by relying on price controls that required a dramatic expansion of credit to keep the system in place. Prices of public sector services—gasoline above all, oil products in general, electricity, telephones, and postal services—were frozen at levels that soon became almost ridiculous in real terms. The restrictions on prices charged by state firms drove them ever deeper into deficits that had to be financed by borrowing. The borrowing came from wherever it could, but principally from the Central Bank. At the same time, Central Bank credit rose steadily to keep financing agricultural expansion. Still another direction of Central Bank credit creation was the financing used to handle the government's new structure of multiple exchange rates. Differential rates were used to hold down the cost of foreign exchange for most imports, again with the dominant goal of holding down inflation, while higher prices of foreign exchange were paid to exporters to protect their incentives to export. The Central Bank thus paid more for the foreign exchange it bought than it received for the exchange it sold.

The term used for these leakages—for extensions of Central Bank credit that did not count in the government's budget deficit—is the "quasi-fiscal deficit." Its total increased from about 2 percent of GDP in 1985 to about 4 percent in 1987. Meanwhile, the government's tax revenue fell steadily in real terms, partly because of tax reductions implemented to hold down business costs and partly because of the effect of inflation in cutting down the real value of tax payments. Added together, the fiscal deficit plus the quasi-fiscal deficit increased from 5 percent of GDP in 1985 to 11 percent by 1987.

The two horsemen of this particular apocalypse—the external deficit and the swift rise of Central Bank credit—would have made 1988 a bad year no matter what else happened. But President García guaranteed financial disaster by his totally unexpected decision in July 1987 to nationalize the banks not already under government ownership. No one has yet been able to explain why he decided to do so. It would not seem to have been a move necessary for any component of his program, or needed for government control in a banking sector in which it already had a dominant position. In any case, the action underlined the unilateral character of economic policy action under Peru's presidential system and wrecked any possibilities of further cooperation with private sector leadership. Private investment began to fall, and the whole economy followed it down shortly thereafter.

The García government tried a series of major and minor new policy packages from early 1988 into 1990 to no avail. The new policies never succeeded in shutting off the rapid infusion of Central Bank credit that was feeding inflation, even when they did succeed in driving production down significantly in 1989. Manufacturing production fell 18 percent in that year, agricultural output 3 percent, and total GDP 11 percent. Simultaneously, inflation increased from a record 666 percent in 1988 to a new record of 3,399 percent for 1989. The one positive change was the external current-account deficit: the fall in domestic production and income was so steep that the current account went from a deep deficit to a substantial surplus. The internal cost was perhaps clearest in terms of real wages: the minimum wage in real terms for urban labor fell 61 percent between 1987 and 1989, and average real wages in manufacturing fell 59 percent.

Critics of García's presidency claim that his many poor decisions while in office created an environment that led to the rise of an authoritarian leader like Alberto Fujimori, who came to power in 1990. Fujimori implemented drastic measures that caused inflation to drop from 7,650% in 1990 to 139% in 1991. Faced with opposition to his reform efforts, Fujimori dissolved Congress in the auto-golpe of April 5, 1992. He then revised the constitution; called for new congressional elections, and undertook a process of economic liberalization which put an end to price controls, discarded protectionism, eliminated restrictions on foreign direct investment and privatized most state companies.[3] The reforms allowed sustained economic growth, except for a slump after the 1997 Asian financial crisis.[4]

However, by 1990 the neoliberal government of Alberto Fujimori ended abruptly the soviet minded economic policies with the so-called Fujishock of August 7, 1990.

The Fujimori Government 1990–2000

Main article: Economic policy of the Alberto Fujimori administration

Alberto Fujimori served as President of Peru from 28 July 1990 to 17 November 2000. A controversial figure, Fujimori has been credited with the creation of Fujimorism, defeating the Shining Path insurgency in Peru and restoring its macroeconomic stability. Fujimori's economic policy was largely adopted from the advice of Peruvian economist Hernando de Soto, who prescribed economic guidelines – including the loosening of economic regulation, the introduction of austerity measures and the utilization of neoliberal policies – that were ultimately adopted by the Fujimori administration and established in the 1993 Constitution of Peru. The policies utilized by de Soto and Fujimori resulted with increased misery for poor Peruvians as de Soto's prescribed "Fujishock" caused increased prices and little change to the poverty rate. Eventually, the policies resulted in Peru becoming macro-economically stable following the period of price controls and increased regulation established during the Lost Decade.

Fujimori has been criticized for his authoritarian way of ruling the country and was accused of human rights violations. Fujimori was ultimately arrested and convicted for human rights violations, murder, bodily harm, two cases of kidnapping, embezzlement of $15 million given to his intelligence service chief, Vladimiro Montesinos and bribery, being sentenced to twenty-five years in prison.

Fujishock

During his first term in office, Fujimori enacted wide-ranging neoliberal reforms, known as Fujishock. During the presidency of Alan García, the economy had entered a period of hyperinflation and the political system was in crisis due to the country's internal conflict, leaving Peru in "economic and political chaos". In a recommendation to Fujimori, neoliberal economist Hernando de Soto, who helped promote the Washington Consensus among Latin American countries, called for a "shock" to Peru's economy. De Soto convinced Fujimori to travel to New York City in a meeting organized by the Peruvian Javier Pérez de Cuéllar, secretary general of the United Nations, where they met with the heads of the International Monetary Fund, the World Bank, and the Inter-American Development Bank, who convinced him to follow the guidelines for economic policy set by the international financial institutions. The policies included a three-hundred percent tax increase, unregulated prices and privatizing two-hundred and fifty state-owned entities. This program bore little resemblance to his campaign platform and was in fact more drastic than anything Vargas Llosa had proposed. The IMF was impressed by these measures, and guaranteed loan funding for Peru.

In practice, new measures came out in bits and pieces, dominated by immediate concern to stop inflation; actions taken in the first year did not complete the program. Fujimori's initiative relaxed private sector price controls, drastically reduced government subsidies and government employment, eliminated all exchange controls, and also reduced restrictions on investment, imports, and capital flow. Fujimori's privatization campaign featured the selling off of hundreds of state-owned enterprises, and the replacing of the country's troubled currency, the inti, with the nuevo sol. Tariffs were radically simplified, the minimum wage was immediately quadrupled, and the government established a $400 million poverty relief fund. The latter measure seemed to anticipate the economic agony that was to come, as electricity costs quintupled, water prices rose eightfold, and gasoline prices rose 3000%. Those living in poverty saw prices increase so much that they could no longer afford food.

Effects

Fujishock succeeded in restoring Peru to the global economy, though not without immediate social cost. The policies recommended by de Soto and implemented by Fujimori led to the immediate suffering of poor Peruvians who saw unregulated prices increase rapidly. Over time, however, the policies caused macroeconomic stability and a reduction in the rate of inflation, foreign investment capital increased and in 1994, the Peruvian economy grew at a rate of 13%, faster than any other economy in the world.

Peru's poverty rate remained largely unchanged, however, with over half of the population living in poverty by 1998. Some analysts state that some of the GDP growth during the Fujimori years reflects a greater rate of extraction of non-renewable resources by transnational companies; these companies were attracted by Fujimori by means of near-zero royalties, and, by the same fact, little of the extracted wealth has stayed in the country. Peru would not see its largest growth until the 2000s commodities boom.

In addition to the nature of democracy under Fujimori, Peruvians became increasingly interested in the myriad of criminal allegations involving Fujimori. In the 2004 Global Transparency Report, Fujimori made into the list of the World's Most Corrupt Leaders. He was listed seventh and he was said to have amassed $600 million USD. Even amid his prosecution in 2008 for crimes against humanity relating to his presidency, two-thirds of Peruvians polled voiced approval for his leadership in that period.

The Toledo government 2001–2006

Toledo and Lima's mayor Luis Castañeda Lossio

Alejandro Toledo claimed he was a living proof of The Peruvian Miracle. Toledo began shining shoes and selling lottery tickets as a boy in the Andes. A half century later, he had ascended to become Peru's first aboriginal president, the nation's highest office, serving as president from 2001 to 2006. “I’m part of the margin of error. To come from extreme, extreme poverty, to have gone to the University of San Francisco, to Stanford, to teach at Harvard, to be part of the World Bank and the United Nations and be a president. Let me tell you, I’m the result of a statistical error. But I have millions of people who come from my own roots, millions of Amazonians, Afro-Peruvians, who don’t have the chance to have access to potable water and sanitation, to quality health care, and sanitation. No access to energy. And that’s a population that’s very discontented, and today getting together. We need to construct a society that is much more inclusive.”

During his campaign, Alejandro Toledo promised Peruvians higher wages, a fight against poverty, anti-corruption measures, higher pensions, more employment, military reform, development of tourism, and industrialization. As Peru's top economist Pedro Pablo Kuczynski noted “Toledo comes after almost 30 years of either dictatorships or governments that weren't so democratic. People expect Toledo to solve all the problems of the last 30 years, which included an enormous increase in relative poverty."

Toledo's inability to fulfill many of these promises created widespread dissatisfaction. His approval ratings were consistently low throughout his presidency, sometimes sinking into single digits. Toledo also promised open market free trade reforms, which reflected Peru's business interests while also promising to review Fujimori's privatization programs. Specifically, Toledo promised not to privatize any of Peru's public utilities. This promise, combined with lofty promises of reduced unemployment and poverty, caused Peru's rank and file to set the bar very high for his administration. Shortly after coming to office Toledo met with IMF officials and promised that he would raise $700 million in 2002, and almost one billion dollars in 2003, by selling state assets.

Toledo's economic policies can be described as neoliberal or strongly pro free-trade. He inherited a national economy which in the previous decade had experienced an unstable GDP with periods of growth and shrinkage, as well as fiscal deficits frequently amounting to over 2% of GDP. Inflation had not dropped below 23% until 1995 and was still feared by many. In response, Toledo developed policies which focused on fighting poverty, generating employment, decentralizing government, and modernizing the state.

Among Toledo's initiatives designed to generate revenue and transform the economy were plans to privatize national industries. The first major effort of this kind was the $167 million sale of two state-owned electric companies. Protests in the city of Arequipa turned violent as Peruvians reacted with anger to the prospect of layoffs and higher priced electricity. They also recalled that billions of dollars earned from privatization under the Fujimori administration had ended up filling the president's personal bank accounts. Toledo decided not to carry out the sale of electric companies, but promised to continue privatization efforts, which were a key provision of a deal struck with the International Monetary Fund. Toledo had promised to bring in US$700 million through privatization in 2001 and US$1 billion in 2002. Although he failed to meet these goals, the IMF approved a $154 million disbursement to Peru in December 2002 and allowed the country to raise the fiscal deficit target in its agreement.

To compound his problems, President Toledo faced a devastating earthquake in his first year in office. This natural disaster left much of Peru morally and fiscally devastated. With many homes and businesses destroyed, economic ills were exacerbated.

Toledo speaks in Davos, January 21, 2003.

Although Toledo originally promised tax cuts, violent protests by civil servants prompted the increase in social sector spending that Toledo had also promised, which necessitated tax increases. To tackle tax reform in June 2003, he brought in Peru's first female prime minister, Beatriz Merino who quickly submitted proposals to the congress. Among the suggestions were pay cuts for higher-paid public-sector officials, including a 30% salary reduction for Toledo himself, a 5% across-the-board cut for all agencies and ministries, tax increases on beer, cigarettes and fuel, and an extension of the 18% sales and value-added tax to, among other things, long-distance bus journeys and live entertainment. The final package also included the elimination of tax breaks, the introduction of a minimum corporate tax, the closing of tax loopholes for the rich, and the strengthening of local government realestate tax regimes.

During Toledo's five years as president, Peru's economy experienced 47 consecutive months of growth and grew at an average rate of 6% per year while inflation averaged 1.5% and the deficit sank as low as 0.2% of GDP. Between 2004 and 2006, employment grew at an average rate of 6%, the percentage of people living in poverty fell, and food consumption by the poorest segments of the population rose dramatically. Much of this growth has been credited to the free trade agreements signed with the United States, China, Thailand, Chile, Mexico, and Singapore.

Peru - United States Trade Promotion Agreement

Main article: United States – Peru Trade Promotion Agreement

The United States – Peru Trade Promotion Agreement (Spanish: Tratado de Libre Comercio Perú – Estados Unidos) is a bilateral free trade agreement, whose objectives are eliminating obstacles to trade, consolidating access to goods and services and fostering private investment in and between the United States and Peru. Besides commercial issues, it incorporates economic, institutional, intellectual property, labor and environmental policies, among others. The agreement was signed on April 12, 2006; ratified by the Peruvian Congress on June 28, 2006; by the U.S. House of Representatives on November 2, 2007 and by the U.S. Senate on December 4, 2007. The agreement was implemented on February 1, 2009.

Peru looks to the agreement are to:

• Consolidate and extend the trade preferences under ATPDEA
• Attract foreign investment
• Generate employment
• Enhance the country's competitiveness within the region
• Increase workers' income
• Curb poverty levels
• Create and export sugar cane ethanol

The United States looks to the agreement to:

• Improve access to goods and services
• Strengthen its investments
• Promote security and democracy
• Fight against drug trafficking

The U.S.-Peru agreement has faced criticism. In Peru, the treaty was championed by Toledo, and supported to different extents by former President Alan García and candidates Lourdes Flores and Valentín Paniagua. Ollanta Humala has been its most vocal critic. Humala's Union for Peru won 45 of 120 seats in Congress in 2006, the largest share by a single party, prompting debate on ratification of the agreement before the new legislature was sworn in. Some Congressmen-elect interrupted the debate after forcibly entering Congress in an attempt to stop the agreement ratification.

One controversial element of the agreement relates to land resources. Laura Carlsen, of the Center for International Policy, who is also a contributor to Foreign Policy in Focus notes that "Indigenous organizations warn that this ruling effectively opens up 45 million hectares to foreign investment and timber, oil, and mining exploitation."

However, most of the criticism of the agreement has focused on its potential impact on Peru's agricultural sector. By planting crops to similar to those subsidized by the U.S., Peru faced a competitive disadvantage in the production of agricultural products because poor farming families with inadequate tools, technology and techniques may not be able to produce crops at low enough prices to export. In response to these concerns, Peruvian lawmakers created a Compensation Fund which directed $34 million per year to cotton, maize/corn, and wheat producers for a five-year period to help them adjust to the new competitive pressures.

Toledo is therefore a market-oriented politician who continued to globalize Peru's economy and is rumored to be getting ready for another run for president. Toledo says bluntly that unless the poorest in the country are better educated, better paid, housed, and fed, the Peruvian economic miracle will stall.

Acuerdo Nacional

In November 2001, Toledo opened talks which concluded in the National Accord of July 22, 2002. In the accord, seven political parties and seven social organizations agreed upon a framework that would guide policy for the next twenty years. The accord set forth twenty-four policy goals divided into four categories: democracy and the rule of law, equity and social justice, economic competitiveness, and an institutional framework of efficiency, transparency, and decentralization. Initially, the accord opened up dialogue in Peru's political arena, but within a year, the public considered it to be less effective than had been hoped.

Maria Elena García calls the years of Toledo's presidency a transition rife with new opportunities for indigenous people, noting the “reframed state-indigenous interactions”, “increase in NGO projects and social movements”, and “proliferation of indigenous organizations.” Toledo created and first lady Eliane Karp headed a new agency for indigenous and Afro-Peruvian affairs, CONOPA (Commission for Amazonian, Andean, and Afro-Peruvian Peoples). The agency was meant to establish a development agenda for indigenous communities, provide representation of indigenous interests within the government, and lead the way for multicultural constitutional reforms. Some critics viewed these actions as a state co-optation of indigenous identity, mockingly dubbing the agency the "Karp Commission". However, Oxfam's Martin Scurrah points out the agency's good work, noting that in addition to promoting a chapter on indigenous rights in the new constitution, Eliane Karp has "intervened on numerous occasions in support of or in defense of indigenous initiatives."

Toledo also brought serious attention to bilingual education in indigenous schools, creating a new and well-staffed division within the Ministry of Education devoted to the issue. This effort gives advocates greater autonomy and opportunity to influence policy and work toward institutionalizing bilingual education.

Toledo's efforts at decentralization sought to give indigenous groups greater influence upon policy-making on a regional level. The first regional and local elections, held in November 2002, required that 15% of the candidates in regions with an indigenous presence must have indigenous backgrounds. However, decentralization has been viewed critically by some, who claim that in dividing up regions, administrators have at times ignored the distinctive cultural and historical factors that define different areas.

In a speech to the Human Rights of Indigenous Peoples in Latin America conference, Toledo expressed disappointment at the growing disparity between the incomes of indigenous people and other citizens. Despite the growth achieved by the Peruvian economy, the poverty gap has widened between the upper and lower classes. Toledo mentions the reintegration of the indigenous populations into the Peruvian social and political system as a key to sustainability and economic growth.

Advocates of indigenous rights have also criticized some of Toledo's efforts to jump-start the economy through investments, such as his support for the Camisea natural gas project and other projects that involved exploring or developing natural resources. These critics claim that companies buy land at unreasonable prices, force indigenous people off of land that is historically theirs, and exploit natural resources in ways that are harmful to communities and the environment. Peru is one of the largest producers of gold, silver, and zinc in Latin America, and some critics complain about the priority the Peruvian government gives to mining as opposed to industries like fishing and agriculture, with which indigenous peoples are more familiar. They note that mining companies may bring new jobs to rural areas, but that they are not jobs for which natives are well qualified.

Despite unprecedented, strong, and consistent economic growth under his leadership, Toledo dealt with much labor unrest during his presidency as workers demanded higher wages and the fulfillment of campaign promises. The crisis underlined a basic flaw in Peru's economy as pointed out by The Economist, which noted that "some 70% of output falls within the grey or informal" economy, and thus escapes tax. Tax-collections, at below 12.1% of GDP, are stagnant, with most coming from a handful of large, formal companies. Evasion is widespread, particularly among better-paid independent professionals." Tax collections by Toledo's government could simply not cover the wages that had been promised to civil servants.

Even as the Peruvian government was taking in too little money to pay civil servants, the country saw its cost of living increase dramatically during the early years of Toledo's administration. These hardships, combined with increasing unemployment and stagnant wages caused the general public to doubt that Toledo was living up to lofty campaign promises. By 2003, Toledo's approval rating had fallen below 10%, the lowest of any South American president at the time.

Toledo did implement some of his plans for investment in social infrastructure and institutions. The amount of paved roads increased by 20% during his presidency; medical attention to the poor doubled in rural areas, and public sector salaries increased (school teachers' pay rose by 87%) and over 100,000 new homes were built for poor Peruvians.

By 2004, Peru had a far-reaching social safety net that included food programs serving 35 percent of the population, and work programs offering temporary employment to unskilled workers. The Cooperative Fund for Social Development funded projects to construct and improve schools, health clinics, rural roads, water and sanitation systems, and electric grids. Toledo placed food and infrastructure programs under the Ministry for Women and Social Development and urged that municipalities implement decentralization. Social safety-net spending in Peru remained well below the Latin American average under Toledo even as it covered a larger percentage of the population, which means that outlays were insufficient to lift many people up out of poverty.

Toledo also attempted to improve access to healthcare in the most remote places. His Juntos program awarded a monthly benefit to poor families who agreed to get vaccinations and screenings, attend school, and obtain birth registration documents. The Toledo administration also provided financial incentives to young doctors who were willing to spend the first few years of their practices in remote areas.

Peru faced a major housing deficit in 2001, with the majority of its urban population living in slums. Toledo's administration sought to improve access to affordable housing through subsidies, loans, down payments, land titling, and encouraging financial institutions to reach further down-market. Most of these efforts were grouped under the Fondo Mivivienda, which was program started in 1999.

Under Toledo's predecessor, Fujimori, the governing authority in Peru was condensed and centralized. A Fujimori-dominated congress passed a new constitution in 1993, which consolidated the bicameral legislature into a unicameral legislature with a single national district. Under Fujimori local governments retained minimal legal authority including fees for utilities, basic civil registries, and management of public spaces and markets.

Decentralization was among Toledo's most successful institutional reforms. In addition to announcing regional elections upon his inauguration, he charged a Decentralization and Regionalization Commission with developing proposals. In 2002, a constitutional amendment was approved which established three levels of government: local, regional, and national. Over the next few years, the congress gradually passed on resources and responsibilities to the regional and municipal governments including food programs, social development projects, and health and education programs. He divided the single district up, called for regional elections, and eliminated the centralist Ministry of the Presidency that had been instituted under Fujimori. However, when Peru Possible's rival political party APRA made significant gains in regional elections, the Toledo administration halted its decentralization program by withholding power in the areas of revenue and expenditure. This left many regionally elected governors confused as to how far their authority extended. Without strong fiscal plans to support his new policy of centralization, Toledo had to continue decentralizing power and recognizing more regions. Toledo continued to assert control of regional governments, however, by withholding funding.

Toledo's plan for decentralization enjoyed widespread popular support. Most of the opposition to his program came from, and most of the difficulty in implementing his proposals was owing to, politicians and bureaucratic agencies who were accustomed to a centralized form of government.

The Toledo administration held freetrade agreement talks with Singapore and Thailand, came to an agreement with Thailand on air transport, and signed an extradition treaty with South Korea. Foreign Minister García-Sayan visited China and discussed support for multilateralism and strengthening the UN. In 2004 China declared Peru an official tourist destination, and in 2005 the countries concluded several trade agreements.

Toledo and Brazil's President Lula da Silva.

In conducting Peru's relations with Brazil, Toledo's goal was to reorient Peru from the Andean Community, toward the more economically active Brazil and MERCOSUR. In August 2003, Toledo met with President Lula. They committed to increased political and economic cooperation under the Initiative for Integration of Regional Infrastructure in South America which invests in large-scale, debt-heavy projects, aimed at developing 10 economic axes or hubs throughout South America. Construction projects, including roads, discussed. President Lula also agreed to allow Peru access to two surveillance systems which Brazil had developed in the Amazon Basin to target legal and illegal activity.

While Peru and Ecuador had been at peace for years, President Toledo worked to solidify and build upon that peace. During a 2001 visit to Ecuador, Toledo expressed support for the Brasília Accords, agreed to the demilitarization of the two countries’ common border, advocated reduced military spending, and agreed to greater energy, transportation, and police cooperation. Toledo joined Ecuadorian President Noboa at the International Advisory Committee of the Binational Development Plan, where they called for greater investment in their region, with Toledo putting forth a detailed program for international assistance. Economic activity in the region subsequently improved as the demining of the border continued, construction projects were completed, and military forces were reduced. By 2006, investment in the area had reached $1.2 billion.

President Toledo worked hard throughout his presidency on what became a very productive relationship with the U.S., and what Toledo described as a personal friendship with President Bush. He received lavish praise from the American president for his economic and domestic security policies. During a visit to Peru, Bush announced the establishment of an Andean Center of Excellence for Teacher Training, with a base in Peru, and a fellowship program to give Andean professionals access to education in information technology. In June 2002, the U.S. agreed to forgive $14 million of Peru's debt in exchange for a promise to invest $12 million in conservation projects. In September, Toledo secured a $300 million commitment from Bush to fund alternative-crop development in coca-producing areas. In 2003, the Peace Corps returned to Peru. Peru opposed U.S. efforts most visibly in the War in Iraq, refusing to support the intervention in any international arena.

In an attempt to increase remittances from Peruvians abroad, the Ministry of Foreign Affairs under Toledo sought to strengthen the link between Peruvian migrants and their homeland through the creation of advisory councils. The issue is especially important for a country which experienced a massive emigration of professionals under Fujimori and which still has 10% of its population living abroad. The councils were also part of an effort by the first Minister of Foreign Affairs, García Sayan, to professionalize the foreign service.

1991–today: the Peruvian miracle

The Peruvian economy has undergone considerable free market reforms, from legalizing parts of the informal sector to significant privatization in the mining, electricity and telecommunications industries. Thanks to strong foreign investment and the cooperation between the Fujimori government and the International Monetary Fund and World Bank, growth was strong in 1994-97 and inflation was brought under control. In 1998, El Niño's impact on agriculture, the financial crisis in Asia, and instability in Brazilian markets undercut growth. 1999 was another lean year for Peru, with the aftermath of El Niño and the Asian financial crisis working its way through the economy. Lima did manage to complete negotiations for an Extended Fund Facility with the IMF in June 1999, although it subsequently had to renegotiate the targets.

Peru's exponential per-capita growth rates has been standard the last quarter century. Peru's GDP per capita is now FY 2013 at US$12,000 PPP. By the end of 2006 the government had enacted measures that allowed the economy to improve by increasing investments, expanding production and exports. Raw materials and agroindustrial products represent half of exports with the other half being non-traditional exports such as clothing, electronics, machinery and services. By the end of the decade of 2014, investment is expected to total US$65 billion for mining activities, US$20 billion in energy and petroleum, US$12 billion for commerce, US$18 billion for agricultural industries, and US$15 billion for tourism. Thanks to the discovery and exploitation of large petroleum and natural gas reserves in southern Peru in the Cusco and Madre de Dios regions by Consorcio Camisea, Peru is expected[who?] to become an important exporter of hydrocarbons by 2015, after being a net importer for decades.

Positive results have begun to appear after 15 years, reflecting an expanding global economy; according to figures provided by the INEI, in 2007 the gross national product grew by 8.99%, exports grew by over 35% (reaching US$27.8 billion), private and public investments accounted for 21% of the GDP (24.4% in 2008), net international reserves (including gold) reached US$35.1 billion, state income from taxation increased by 33%, national debt with respect to GNP was reduced from 50% in 2000 to 34% in 2006; finally, the national budget has grown by 50% in the five years before 2007.

In 2007, the Peruvian economy experienced a growth rate of 9%, the highest in Latin America, and this repeated in 2008 with a 9.8% rate; in 2006 and 2007, the Lima Stock Exchange grew by 185.24% and 168.3%, respectively. However, in the wake of the 2008 global crisis, growth for 2009 was only 0.9 percent, but rebounded to 8.8 percent the following year. The pro-market policies enacted by Fujimori, were continued by presidents Alejandro Toledo and Alan Garcia, While poverty of Lima is 8.5%, the national average is 25.8%, while the unemployment rate is 6.5% and 74% are employed formally.

After the 2000s commodities boom began to decline, Peru was one of few Latin American countries which successfully utilized the influx of commodity funds by choosing to "fill sovereign-wealth funds, to build stockpiles of foreign-exchange reserves or to pursue broader economic reforms".

Sectors

Peru's economic activity in the 1970s

Agriculture

Main article: Agriculture in Peru

Peru is a country with many climates and geographical zones that make it a very important agricultural nation. Peru agricultural exports are highly appreciated and include artichokes, grapes, avocados, mangoes, peppers, sugarcane, organic coffee and premium-quality cotton.

Peru is one of the 5 largest producers of avocado, blueberry, artichoke and asparagus, one of the 10 largest producers in the world of coffee and cocoa, one of the 15 largest producers in the world of potato and pineapple, and also has a considerable production of grape, sugarcane, rice, banana, maize and cassava; its agriculture is considerably diversified.

In 2018, Peru produced 10.3 million tons of sugarcane, 5.1 million tons of potato, 3.5 million tons of rice, 2.2 million tons of banana, 1.5 million tons of maize, 1.2 million tons of cassava, 921 thousand tons of palm oil, 645 thousand tons of grape, 548 thousand tons of pineapple, 504 thousand tons of avocado, 481 thousand tons of tangerine, 502 thousand tons of orange, 369 thousand tons of coffee, 383 thousand tons of mango, 360 thousand tons of asparagus, 270 thousand tons of lemon, 252 thousand tons of tomato , 207 thousand tons of barley, 195 thousand tons of wheat, 188 thousand tons of olives, 187 thousand tons of carrots, 175 thousand tons of papaya, 175 thousand tons of pepper, 154 thousand tons of artichoke, 140 thousand tons of apple, 134 thousand tons of cocoa, in addition to smaller productions of other agricultural products.

Extraction

See also: Mining in Peru

Fish market in Peru

Fishing: Peru is an international leader in fishing, producing nearly 10 percent of the world's fish catch.

Mining is a major pillar of the Peruvian economy. In 2019, the country was the 2nd largest world producer of copper and silver, 8th largest world producer of gold, 3rd largest world producer of lead, 2nd largest world producer of zinc, 4th largest world producer of tin, 5th largest world producer of boron and 4th largest world producer of molybdenum. The country was once the world's largest producer of silver, but lost its position to Mexico. It was also one of the 5 largest gold producers in the world.

Manufacturing

Peru has developed a medium manufacturing sector. The sector now represents 23 percent of GDP and is tied heavily to mining, fishing, agriculture, construction and textiles. Manufacturing is mainly devoted to processing to gain a value-added advantage. The most promising sector is textiles, metal mechanics, food industry, agricultural industry, manufactures, chemicals, pharmaceuticals, machinery and services.

Services

Tourism has represented a new growth industry in Peru since the early 1990s, with the government and private sector dedicating considerable energies to boosting the country's tourist destinations both to Peruvians and foreigners.

Natural resources

Peru's natural resources are copper, silver, gold, timber, fish, iron ore, coal, phosphate, potash, and natural gas.

External trade and investment

Foreign investment and balance of payments

Foreign trade and balance of payments

Graphical depiction of Peru's product exports in 28 color-coded categories.

In 2001 the current account deficit dropped to about 2.2% of GDP (US$1.17 billion)--from 3.1% in 2000—while the trade balance registered a small deficit. Exports dropped slightly to $7.11 billion, while imports fell 2.1% to $7.20 billion. After being hit hard by El Niño in 1998, fisheries exports have recovered, and minerals and metals exports recorded large gains in 2001 and 2002, mostly as a result of the opening of the Antamina copper-zinc mine. By mid-2002, most sectors of the economy were showing gains. After several years of substantial growth, foreign direct investment not related to privatization fell dramatically in 2000 and 2001, as well as in the first half of 2002. Net international reserves at the end of May 2002 stood at $9.16 billion, up from $8.6 billion (2001), $17 billion at the end of 2006, over $20 billion in 2007, and over $35 billion in May 2008. Peru has signed a number of free trade agreements, including the 2007 United States-Peru Trade Promotion Agreement, and agreements with Chile, Canada, Singapore, Thailand and China. Under President Alan Garcia administration Peru achieved a bilateral trade agreement with U.S. since 2010 to improve exports for its country and reach in August 2011 its pick in exports of more than 4,700 MM.

Foreign investment

The Port of Callao is Peru's gateway for exports and imports

The Peruvian government actively seeks to attract both foreign and domestic investment in all sectors of the economy. International investment was spurred by the significant progress Peru made during the 1990s toward economic, social, and political stability, but it slowed again after the government delayed privatizations and as political uncertainty increased in 2000. President Alejandro Toledo has made investment promotion a priority of his government. While Peru was previously marked by terrorism, hyperinflation, and government intervention in the economy, the Government of Peru under former President Alberto Fujimori took the steps necessary to bring those problems under control. Democratic institutions, however, and especially the judiciary, remain weak.

The Government of Peru's economic stabilization and liberalization program lowered trade barriers, eliminated restrictions on capital flows, and opened the economy to foreign investment, with the result that Peru now has one of the most open investment regimes in the world. Between 1992 and 2001, Peru attracted almost $17 billion in foreign direct investment in Peru, after negligible investment until 1991, mainly from Spain (32.35%), the United States (17.51%), Switzerland (6.99%), Chile (6.63%), and Mexico (5.53%). The basic legal structure for foreign investment in Peru is formed by the 1993 constitution, the Private Investment Growth Law, and the November 1996 Investment Promotion Law. Although Peru does not have a bilateral investment treaty with the United States, it has signed an agreement (1993) with the Overseas Private Investment Corporation (OPIC) concerning OPIC-financed loans, guarantees, and investments. Peru also has committed itself to arbitration of investment disputes under the auspices of ICSID (the World Bank'sInternational Center for the Settlement of Investment Disputes) or other international or national arbitration tribunals.

Currency

The sol is the currency of Peru. The exchange rate as of March 23, 2020 is 3.53 soles to the US dollar and 3.82 soles to the Euro. It was instated in 1991, when the Peruvian government abandoned the inti due to hyperinflation of the currency; the sol has since maintained the lowest inflation rate in Latin America. The sol replaced the inti at a rate of 1 nuevo sol = 1,000,000 intis. The inti itself replaced another inflated currency, the sol, which was used between 1863 and 1985. The name sol comes from the Latin solidus, and is also the Spanish word for "sun", which the ancient Inca civilization worshiped as the god Inti.

The sol currently enjoys a low inflation rate of 2.5%. Since it was put into use, the sol's exchange rate with the United States dollar has stayed mostly between 2.80 and 3.30 to 1. Out of all the currencies of the Latin American region, the sol is the most stable and reliable, being the least affected by the downturn in the value of the US dollar; during late 2007 and early 2008, the exchange rate fell to 2.69 to 1, which had not been seen since 1997. The exchange rate is set on a daily basis by the Banco Central de Reserva del Perú (Central Reserve Bank of Peru).

The sol is divided into 100 céntimos. The highest-denomination banknote is the 200 soles note; the lowest-denomination coin is the rarely used 5 céntimos coin.

Income and consumption

Peru divides its population into five socio-economic classes, A-E, with A representing the rich; B, the upper middle class; C, the middle class; D, the working class and low income families; and E, the marginalized poor. In 2018, the segments were described as "crude" by Miguel Planas of the Ministry of Finance due to the complicated structure of the society in Peru, where some classes make money off of illegal trade which aren't counted in the GDP, and are thus falsely classified as low income or marginalised poor families.

Employment

Unemployment in Greater Lima is 5.6%, while for the rest of Peru is 7%. FY 2012-2013

Economic trends

Greater depth

The Lima Stock Exchange

From 1994 through 1998, under the government of Alberto Fujimori, the economy recorded robust growth driven by foreign direct investment, almost 46% of which was related to the privatization program. The government invested heavily on the country's infrastructure, which became a solid foundation for the future of the Peruvian economy. The economy stagnated from 1998 through 2001, the result of the century's strongest El Niño weather phenomenon, global financial turmoil, political instability, a stalled privatization program, increased government intervention in markets, and worsening terms of trade. President Alejandro Toledo implemented a recovery program after taking office, maintained largely orthodox economic policies, and took measures to attract investment, including restarting the privatization program. Nonetheless, political uncertainty led to GDP growth of 0.2% in 2001. The Lima Stock Exchange general index fell 34.5% in 2000 and 0.2% in 2001. Inflation remained at record lows, registering 3.7% in 2000.

The year 2001 saw deflation of 0.1%. The government's overall budget deficit rose sharply in 1999 and 2000 to 3.2% of GDP, the result of hikes in government salaries, expenditures related to the 2000 election campaign, higher foreign debt service payments, and lower tax revenues. The government brought the deficit down to 2.5% of GDP in 2001, and set a target of 1.9% of GDP for 2002. Peru's stability brought about a substantial reduction in underemployment, from an average of 74% from the late 1980s through 1994 to 43% in the 1995-96 period, but the rates began climbing again in 1997–2002 to over half the working population. The poverty rate remained at 54% in 2001, with 24% of Peruvians living in extreme poverty. In 2005, 18% of Peruvians were living in extreme poverty and a poverty rate at 39%. As of 2010, around 30% of its total population is poor

Outlook

The virtues of today's new multi-polar world for Peru are many. At 30 million people, Peru is neither too small to matter nor so big it is going to be a power in its own right. Midsized states, benefits from a world where it is no longer mandatory to pick a big-power patron.

With expanding ports loading up boats to China on one side, and a new superhighway to Brazil on the other, along with a free trade agreement with the United States in its hip pocket, Peru seems well-positioned to prosper in the coming years. But former President Toledo may not be hyperbolic when he worries the future stability of the state may depend on its willingness to distribute wealth more evenly.

Forecasts for the medium- and long-term remain highly positive. Peru's real GDP growth in 2007 was (8.3%) and largest in Latin America in 2008 was an outstanding 9.8%, the highest in the world. Inflation remained low, at about 3%, while the budget surplus is expected to remain at about 1% of GDP. Private investment should keep growing at a rate of 15% a year. Exports and imports are expected to keep rising. The unemployment and underemployment indexes (5.2% and 34%, respectively, in Lima) should keep coming down as the economy grows, other cities in Peru like Cajamarca, Ica, Cuzco and Trujillo are starting to show less unemployment nowadays. The country is likely to attract future domestic and foreign investment in tourism, agriculture, mining, petroleum and natural gas, power industries and financial institutions. According to the IMF and the World Bank, Peruvian GDP economic growth between 2007 and 2013 was:

In 2007 at 8.9%, in 2008 at 9.7%, in 2009 at 0.9%, in 2010 at 8.6%, in 2011 at 6.0%, in 2012 at 6,3% and in 2013 at 5.3%.

Therefore, Peruvian GDP grew in the 2007-2013 6 years period an outstanding net growth of 45.7% or a 7.61% yearly average. The IMF forecast for Peru's economic growth for the next 6 years 2013-2019 is a 7% yearly growth.

In FY 2011 for the first time since 1991 the size of the Peruvian economy surpassed the Chilean economy. Peru now is the fifth major economy in South America and is expected to become the fourth South American economy in 2018 by surpassing Venezuela.

Private investment reached 25% of the GDP in 2007, and has remained stable through 2010; and inflation is under control at an average 2% per year for the next 5 years. International Debt will reach 25% of the GDP by 2010, down from 35% in 2006, and will be only 12% of the GDP by 2015. The International Monetary Reserves of the National Reserve Bank (Dollar, Euro, Yen, Gold, and other currencies) reached US$27 billion by the end of 2007, and US$31 billion at the end of 2008. Currently reserves are at a US$73 billion level for end of FY 2013, which more than doubles the total foreign debt of Peru which is US$30 billion at the end of FY 2013.

Exports are growing at a pace of 25% and reached US$28 billion at the end of 2007 and US$30 billion at the end of 2010. In FY 2012 Peruvian exports reached a total of US$46 billion.

High technological investment is growing fast in Peru, and will be 10% of the GDP by 2010.

Narcotics

Background

Coca has a long history of cultivation in the Andes, and has always been a traditional part of Peruvian life. However, the narcotic properties of coca were known only locally until 1786, when Lamarck listed the leaf in his botanical encyclopedia. After the arrival of the Spanish, coca cultivation increased and its use became more common and widespread. Since 1543, coca has been internationally recognized for its trading value, and regulations imposed upon it have attached increasing economic importance to the plant. Exchange of the coca leaf between consumers in the highlands and growers in the low-lying hills has gone on for at least the last millennium, strengthening local economic ties. Between 1884 and 1900, coca and cocaine grew in popularity for medical purposes and mass consumption in the United States. From 1905 to 1922, anti-cocaine sentiments in the US resulted in criminalization of both coca and cocaine. It was not until the 1920s that US diplomats began to extend drug prohibitions internationally.

Current trends

The Peruvian coca and cocaine industry is as huge as it is today because of advanced industrial nations’ demand for drugs. This high demand has created a framework of dependence on "coca-dollars" and on US drug policy. Money from cocaine trafficking feeds local economies, supports inflation, and even causes social changes such as cocaine smoking among indigenous Peruvians. Coca farming today is still a significant source of income for peasants, as it accounts for 48% of total net family income in the high coca-growing Apurímac River region. In an effort to reduce drug use in America, for the past 50 years the US government together with the United Nations have been waging a war on drugs. The US Drug Control Program maintains that "eliminating the cultivation of illicit coca and opium is the best approach to combating cocaine and heroin availability in the US."

With US government cooperation, the Peruvian Government installed the National Plan for the Prevention and Control of Drugs in 1995. This government prohibition of narcotics trafficking in Peru has resulted in a 70% reduction of coca leaf cultivation since 1995. However the reduction in cultivation may not have actual effects on cocaine production, as recent advances in coca growing and more efficient processing methods allow for greater cocaine yield. The size of the narcotics industry as a part of the national economy is difficult to measure, but estimates range from $300–$600 million. An estimated 200,000 Peruvian households have economies based on the production, refining, or distribution of coca. Many economists believe that large flows of dollars into the banking system contribute to the traditional depression of the dollar exchange rate vis-a-vis the sol. The Central Bank engages in open market activities to prevent the price of the sol from rising to levels that would cause Peruvian exports to become prohibitively expensive.

Hurt economically by Peruvian Air Force interdiction efforts in the mid-1990s, drug traffickers are now using land and river routes as well as aircraft to transport cocaine paste and, increasingly, refined cocaine to consumers around and out of the country. The Air Bridge Denial program was suspended in April 2001 after the Peruvian Air Force and strength of the U.S. DEA misidentified a civilian aircraft as a drug trafficker and shot it down, killing two American citizens on board. Peru continues to arrest drug traffickers and seize drugs and precursor chemicals, destroy coca labs, disable clandestine airstrips, and prosecute officials involved in narcotics corruption.

Working with limited aid of the U.S. Agency for International Development (USAID), the Peruvian Government carries out alternative development programs in the leading coca-growing areas in an effort to convince coca farmers not to grow that crop. Although the government previously eradicated only coca seed beds, in 1998 and 1999 it began to eradicate mature coca being grown in national parks and elsewhere in the main coca growing valleys. In 1999 the government eradicated more than 150 km² of coca; this figure declined to 65 km² in 2000, due largely to political instability. The government agency "Contradrogas", founded in 1996, facilitates coordination among Peruvian Government agencies working on counter-narcotics issues. Alternative crops, however, are not economically comparable to coca. 2004 prices indicate an annual income per hectare of $600 for coffee and $1000 for cocoa, versus up to $7500 for a hectare of coca.

Effect on family economies

The anti-coca policies imposed in 1995 have had adverse effects on Peruvian's household economies. Many families dependent on coca farming have been forced to send their children to work as eradication of crops has decreased their household income. In states where coca is grown, child labour increased by 18% in 1997 and 40% in 2000. Work hours and domestic work increased as well, with girls taking on 28% more domestic work with boys doing 13% more. Wage work for adults also increased since 1995. As such, it can be inferred that the increase in child labour since eradication policies have come into effect is caused by children filling in for working parents. However, the issue of child labour in coca production is still present in Peru as reported in 2013 in the U.S. Department of Labor's report Findings on the Worst Forms of Child Labor and in December 2014, in the Bureau of International Labor Affairs's List of Goods Produced by Child Labor or Forced Labor.

Corruption

Peru is the 101st least corrupt country in the world according to Transparency International's Corruption Perceptions Index.

The Peruvian organization "Ciudadanos al Dia" has started to measure and compare transparency, costs, and efficiency in different government departments in Peru. It annually awards the best practices which has received widespread media attention. This has created competition among government agencies in order to improve.

A last case of corruption was the 2008 Peru oil scandal.

Statistics

Main economic indicators

The following table shows the main economic indicators in 1980–2019 (with IMF staff stimtates in 2020-2026). Inflation below 5% is in green.

Year	GDP (in Bil. US$PPP)	GDP per capita (in US$ PPP)	GDP (in Bil. US$nominal)	GDP per capita (in US$ nominal)	GDP growth (real)	Inflation rate (in Percent)	Unemployment (in Percent)	Government debt (in % of GDP)
1980	53.9	3,100.0	20.2	1,165	7.6%	59.1%	7.3%	n/a
1981	62.2	3,502	24.4	1,373	5.5%	75.4%	6.8%	n/a
1982	65.9	3,617	24.3	1,332	−0.3%	64.5%	6.4%	n/a
1983	62.0	3,328	18.9	1,012	−9.3%	111.1%	9.0%	n/a
1984	66.7	3,497	19.4	1,019	3.8%	110.2%	8.9%	n/a
1985	70.9	3,599	16.8	862	2.1%	163.3%	4.6%	n/a
1986	80.4	4,024	25.2	1,264	12.1%	77.9%	5.3%	n/a
1987	88.7	4,344	41.7	2,041	7.7%	85.8%	4.8%	n/a
1988	83.2	3,985	33.0	1,580	-9.4%	667.0%	4.2%	n/a
1989	74.9	3,511	40.7	1,908	-13.4%	3,398.3%	7.9%	n/a
1990	73.7	3,387	28.3	1,301	-5.1%	7,481.7%	8.3%	n/a
1991	77.9	3,508	34.0	1,531	2.2%	409.5%	5.9%	n/a
1992	79.2	3,500	35.4	1,563	-0.5%	73.5%	9.4%	n/a
1993	85.4	3,700	34.3	1,488	5.2%	48.6%	9.9%	n/a
1994	97.9	4,167	43.2	1,839	12.3%	23.7%	8.8%	n/a
1995	107.4	4,488	51.4	2,147	7.4%	11.1%	7.1%	n/a
1996	112.4	4,617	53.4	2,194	2.8%	11.5%	7.2%	n/a
1997	121.8	4,916	56.3	2,272	6.5%	8.5%	8.6%	n/a
1998	122.7	4,871	53.9	2,141	-0.4%	7.2%	6.9%	n/a
1999	126.3	4,935	48.7	1,904	1.5%	3.5%	9.4%	n/a
2000	132.6	5,103	50.4	1,940	2.7%	3.8%	7.8%	44.9%
2001	136.3	5,171	51.0	1,936	0.6%	2.1%	9.2%	43.8%
2002	146.0	5,462	54.0	2,018	5.5%	0.2%	9.4%	45.5%
2003	154.9	5,717	58.5	2,160	4.2%	2.7%	9.4%	49.4%
2004	167.0	6,082	66.1	2,408	5.0%	3.7%	9.4%	46.7%
2005	183.0	6,581	74.2	2,669	6.3%	1.6%	9.6%	40.4%
2006	202.8	7,203	87.5	3,107	7.5%	2.0%	8.5%	34.9%
2007	226.0	7,933	102.2	3,588	8.5%	1.8%	8.4%	31.9%
2008	251.4	8,727	121.8	4,227	9.1%	5.8%	8.4%	27.9%
2009	256.0	8,787	121.5	4,170	1.0%	2.9%	8.4%	28.3%
2010	280.9	9,533	148.9	5,055	8.5%	1.5%	7.9%	25.3%
2011	305.2	10,243	171.0	5,738	6.5%	3.8%	7.7%	23.0%
2012	318.1	10,555	192.9	6,400	6.0%	3.7%	6.8%	21.2%
2013	337.9	11,088	202.1	6,631	5.8%	2.8%	5.9%	20.0%
2014	348.9	11,324	202.3	6,565	2.4%	3.2%	5.9%	20.6%
2015	355.5	11,412	191.3	6,141	3.3%	3.5%	6.5%	24.0%
2016	377.5	11,988	194.4	6,191	4.4%	3.6%	6.7%	24.5%
2017	399.0	12,536	214.1	6,725	2.1%	2.8%	6.9%	25.4%
2018	424.8	13,207	225.2	7,000	4.0%	1.3%	6.7%	26.2%
2019	442.0	13,327	230.7	6,958	2.2%	2.1%	6.6%	27.1%
2020	397.6	11,871	203.7	6,083	-11.1%	1.8%	13.6%	35.4%
2021	439.3	12,984	225.9	6,678	8.5%	2.0%	9.7%	35.4%
2022	472.4	13,825	240.9	7,050	5.2%	2.0%	7.6%	36.2%
2023	506.0	14,663	255.0	7,389	4.8%	2.0%	6.5%	36.7%
2024	534.1	15,322	266.4	7,643	3.4%	2.0%	6.5%	37.2%
2025	562.3	15,972	278.1	7,900	3.3%	2.0%	6.5%	37.5%
2026	591.4	16,634	290.8	8,180	3.3%	2.0%	6.5%	37.4%

Peru's poverty rate from 2004 to 2012.

Household income or consumption by percentage share:
lowest 10%: 0.8%
highest 10%: 37.5% (2000)

Inflation rate (consumer prices): 2.08% (2010)

Budget:
revenues: $57 billion (2014 est.)
expenditures: $50 billion, including long-term capital expenditures of $3.8 billion (2010 est.)

Industrial production growth rate: 12% (2013 est.)

Electricity - production: 175,500 GWh (2013 est.)

Electricity - production by source:
natural gas: 44.53%
hydro: 54.79%
nuclear: 0%
other: 0.68% (2013)

Electricity - consumption: 133,000 GWh (2013)

Electricity - exports: 32,000 kWh (2013) mainly to Ecuador

Electricity - imports: 0 kWh (2013)

Agriculture - products: coffee, cotton, sugarcane, rice, wheat, potatoes, plantains, coca; poultry, beef, dairy products, wool; fish

Exports: 63.5 billion f.o.b. (2013 est.) of goods and products. 10.5 billion f.o.b. (2013 est.) of services. Total Exports $73.5 billion f.o.b. (2013) Exports: fish and fish products, copper, zinc, gold, molybdenum, iron, crude petroleum and byproducts, lead; coffee, asparagus, artichokes, paprika, sugar, cotton, textiles, chemicals, pharmaceuticals, manufactures, machinery, services.

Exports - partners: Mainland China 20%, United States 15%, European Union 15%, Brazil 10%, Chile 10%, Japan 5%, Mexico 5%, United Kingdom 5%, Bolivia 5% Rest of Latin America 5%, Rest of world 5%, (2013)

Imports: Total Imports $68 billion f.o.b. (2013)

Imports - commodities: machinery, transport equipment, foodstuffs, iron and steel, pharmaceuticals, electronics, petroleum and chemicals.

Imports - partners: Mainland China 25%, US 15%, European Union 15%, Brazil 10%, Japan 10%, Chile 5%, Colombia 5%, Mexico 5%, Ecuador 4%, Bolivia 1%, Rest of World 5% (2013).

Trade agreements

According to the Ministry of Foreign Trade and Tourism, Peru decided to negotiate trade agreements in order to consolidate the access of Peruvian exports to its most important markets by giving them permanent benefits unlimited in time and coverage as opposed to temporary commercial preferences given unilaterally by certain countries; a system that did not allow Peruvian exporters embark in long-term export-related investments.

Economic Complementation Agreement Integration Agreement with Andean Community of Nations: Bolivia, Ecuador and Colombia (signed and effective 1969) ACE 50 with Cuba (signed October 2000 and effective 2001) ACE 58 with Mercosur (signed August 2003 and effective November 2005)

FTA (Free Trade Agreement) currently in force FTA with United States (signed April 2006 and effective February 2009). FTA with Chile (signed August 2006 and effective March 2009) FTA with Canada(CPFTA) (signed May 2008 and effective August 2009) FTA with Singapore (signed May 2008 and effective August 2009) FTA with China (signed April 2009 and effective March 2010) FTA with South Korea (signed March 2011 and effective August 2011) Partial FTA with Thailand (last protocol signed November 2010 and effective December 2011) FTA with Mexico (signed April 2011 and effective February 2012) FTA with Japan (signed May 2011 and effective March 2012) FTA with Panama (signed May 2011 and effective May 2012) FTA with EFTA Switzerland, Liechtenstein, Iceland and Norway (signed July 2010, Switzerland and Liechtenstein effective July 2011, Iceland effective October 2011, Norway effective July 2012) FTA with European Union (signed April 2011 and effective February 2013) FTA with Costa Rica (signed May 2011 and effective June 2013) Partial FTA with Venezuela (signed January 2012 and effective August 2013) FTA with Pacific Alliance (signed February 2014 and effective May 2016) FTA with Honduras (signed May 2015 and effective January 2017)

FTA (Free Trade Agreement) concluded Guatemala (signed December 2011) Brazil (signed April 2016) Australia (signed February 2018) CPTPP (signed March 2018)

FTA (Free Trade Agreement) in negotiation El Salvador India Turkey

See also

• List of Peruvian regions by GDP
• List of Peruvian companies
• Peruvian sol

Bibliography

• Cushman, G. T. (2005). "'The Most Valuable Birds in the World': International Conservation Science and the Revival of Peru's Guano Industry, 1909-1965". Environmental History. 10 (3): 477–509. doi:10.1093/envhis/10.3.477. hdl:1808/11737.
• Cushman, G. T. (2013). Guano and the opening of the Pacific world: a global ecological history. Cambridge University Press. ISBN 978-1-107-00413-9.

References

• Mark Weisbrot, Background on Peruvian Economy, Center for Economic and Policy Research, April 2006
• CIA factbook

External links

• World Bank Summary Trade Statistics Peru
• Tariffs applied by Peru as provided by ITC's ITC Market Access Map, an online database of customs tariffs and market requirements