Economy of Peru
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| Economy of Peru | |
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| Currency | Peruvian nuevo sol (PEN) |
|---|---|
| Fiscal year | calendar year |
| Statistics | |
| GDP (PPP) | $198.1 billion (2007 est.) (49) |
| GDP growth | 9.0% (2007 est.) |
| GDP per capita | $6,970 (2007 est.) |
| GDP by sector | agriculture: 8.5%, industry: 26.4%, services: 65% (2006 est.) |
| Population below poverty line |
43% (2007 est.) |
| Gini index | 54.6 (high) |
| Labour force | 9.21 million (2006 est.) |
| Labour force by occupation |
agriculture: 9%, industry: 18%, services: 73% (2001) |
| Unemployment | 7.2% in metropolitan Lima; widespread underemployment (2006 est.) |
| Main industries | mining and refining of minerals; steel, metal fabrication; Oil well and refining, natural gas; fishing and fish processing, textiles, clothing, food processing |
| External | |
| Exports | $22.69 billion f.o.b. (2006 est.) |
| Export goods | copper, gold, zinc, crude petroleum and petroleum products, coffee, cocaine, potatoes, asparagus, textiles, guinea pigs |
| Main export partners | US 31.1%, China 10.8%, Chile 6.6%, Canada 5.9%, Switzerland 4.6% (2005) |
| Imports | $15.38 billion f.o.b. (2006 est.) |
| Import goods | petroleum and petroleum products, plastics, machinery, vehicles, iron and steel, wheat, paper |
| Main import partners | US 18.2%, China 8.5%, Brazil 8%, Ecuador 7.4%, Colombia 6.1%, Argentina 5.1%, Chile 5.1%, Venezuela 4.1% (2005) |
| Public finances | |
| Public debt | $27.93 billion (30 June 2006 est.)no no |
| Economic aid | $491 million (2002) |
| Main data source: CIA World Factbook All values, unless otherwise stated, are in US dollars |
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This article is about the economy of Peru, a country in South America.
Contents |
[edit] History
Peruvian economic policy has varied widely over the last decades, the government of Juan Velasco Alvarado introduced radical reforms which included an agrarian reform, the expropriation of several foreign companies, the introduction of a planning system and the creation of a large state-owned sector. These measures failed to achieve the objectives set by the regime, mainly the end of economic dependency and massive income redistribution.[1] Despite these results, most reforms were not reversed after the fall of Velasco.
In the 1980s, a lukewarm liberalization attempt by the administration of Fernando Belaúnde Terry failed in the context of the Latin American debt crisis. His successor, Alan García, applied heterodox policies through the expansion of public expenditure and limitations on external debt payments.[2] This ended in budget deficits, hyperinflation, and negative GDP growth.[3] In the 1990s, the government of Alberto Fujimori undertook a process of liberalization which put an end to price controls, discarded protectionism, eliminated restrictions on foreign direct investment and privatized most state companies.[4] Reforms have allowed sustained economic growth since 1993 except for a slump after the 1997 Asian financial crisis.[5]
Since 1990, 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 IMF 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 per-capita growth rates have diverged from overall growth rates over the last quarter century. Peru’s GDP per capita peaked in 1981 and is only now returning to that level. In other words, income per person in Peru – the most basic economic measure of living standards – is currently about the same as it was 25 years ago. Meanwhile, poverty has decreased but remains high, as does unemployment.[6]
[edit] Greater depth
From 1994 through 1997, 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.[citation needed] 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[citation needed], 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.[citation needed] The Lima Stock Exchange general index fell 34.5% in 2000 and 0.2% in 2001.[citation needed] Inflation remained at record lows, registering 3.7% in 2000.[citation needed]
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.[citation needed] 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 the numbers changed, nowadays 18% Peruvians live in extreme poverty and the poverty rate is now at 43%.[citation needed]
[edit] Foreign trade and balance of payments
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 2008 agreements with Canada and Singapore. It is currently negotiating the China–Peru Free Trade Agreement, which is expected to be signed in November 2008.
[edit] Foreign investment
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 during the 1980s, mainly from Spain (32.35%)[7], the United States (17.51%), the 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's International Center for the Settlement of Investment Disputes) or other international or national arbitration tribunals.
[edit] Economic outlook
Forecasts for the medium- and long-term remain highly positive. Peru’s real GDP growth in 2008 will likely be among the highest in the region, expected to be over 6.3%.[citation needed] Inflation is likely to remain low, at about 3%, while the budget surplus is expected to remain at about 1% of GDP.[citation needed] Private investment should keep growing at a rate of 15% a year.[citation needed] Exports and imports are expected to keep rising.[citation needed] The unemployment and underemployment indexes (7.2% and 54%, respectively, in Lima) should keep coming down as the economy grows[citation needed], other cities in Peru like Cajamarca, Ica, Cuzco and Trujillo are starting to show less unemployment nowadays.[citation needed] Peru's economy grew by 8.03% in 2006 and 8.3% in 2007.[citation needed] Over the next few years, the country is likely to attract both domestic and foreign investment in the tourism, agriculture, mining, petroleum and natural gas, power industries and financial institutions.[citation needed]
The government has signed an agreement with the IMF in which the perspectives of the economic growth are excellent. The GDP will grow at 7% for the next 6 years;[citation needed] private investment will reach 25% of the GDP in 2007,[citation needed] with perspectives of reaching up to 30% of the GDP by 2009; and inflation is under control at 2% per year for the next 5 years.[citation needed] International Debt will reach 20% of the GDP by 2010, down from 35% in 2006, and will be only 12% of the GDP by 2015.[citation needed] The International Monetary Reserves of the National Reserve Bank (Dollars, Euros, Yens, Gold, and other currencies) will reach US$ 27 billion by the end of 2007, reaching US$ 45 billion by 2010, which will be twice the amount of international debt by then.
Exports are growing at a pace of 25% and will reach US$ 28 billion by the end of 2007 and US$ 50 billion by the end of 2010.[citation needed] High technological investment is growing fast in Peru, and will be 10% of the GDP by 2010.[citation needed]
[edit] Narcotics
The fight against narcotics trafficking in Peru has resulted in an unprecedented 70% reduction since 1995 in the area of illegal coca leaf under cultivation. The impact of this illicit industry to the national economy is difficult to measure, but estimates range from $300-$600 million. An estimated 200,000 Peruvians are engaged in the production, refining, or distribution of the narcotic. Many economists believe that large flows of dollars into the banking system contribute to the traditional depression in the dollar exchange rate vis-a-vis the sol, and create a climate in which money-laundering can flourish. The Central Bank engages in open market activities to prevent the price of the sol from rising to levels that would otherwise hurt Peruvian exports.
Hurt economically by successful Peruvian Air Force interdiction efforts in the mid-1990s,[citation needed] drug traffickers are now using land and river routes as well as aircraft to transport cocaine paste and, increasingly, cocaine hydrochloride (HCL) around and out of the country. The airbridge denial interdiction program was suspended in April 2001 after the Peruvian Air Force misidentified a U.S. aircraft as a drug trafficker and shot it down, killing two American citizens on board. Aerial interdiction of drug traffickers may resume once adequate training and safety measures have been instituted by the U.S. and Peruvian Governments. 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. Limited terrorist groups, such as Sendero Luminoso have pledged their willingness to continue the armed fight
[edit] Statistics
GDP: purchasing power parity - $202.8 billion (2007 est.)
GDP - real growth rate: 8.03% (INEI - 2006), preliminary reports expect GDP to grow 8.2% for 2007, and 7% for the next 3 years.
GDP - per capita: purchasing power parity - $7,600 (2007 est.)
GDP - composition by sector:
agriculture: 8%
industry: 25%
services: 67% (2007 est.)
Population below poverty line: 43% (2007 est.)
Household income or consumption by percentage share:
lowest 10%: 0.8%
highest 10%: 37.2% (2000)
Inflation rate (consumer prices): 1.14% (2006 est.)
Labor force: 20 million (2007 est.)
Labor force - by occupation: agriculture 9%, industry 18%, services 73% (2001)
Unemployment rate: 7.2%
Budget:
revenues: $26 billion (2007 est.)
expenditures: $25 billion, including long-term capital expenditures of $3.2 billion (2007 est.)
Industries: mining of metals, petroleum, fishing and seafood industry, textiles, clothing, food processing, vegetables, cement, auto assembly, steel, shipbuilding, metal fabrication and transformation, wood industry, oil refinery.
Industrial production growth rate: 12% (2007 est.)
Electricity - production: 36,500 GWh (2007 est.)
Electricity - production by source:
fossil fuel: 24.53%
hydro: 74.79%
nuclear: 0%
other: 0.68% (1998)
Electricity - consumption: 33,000 GWh (2002)
Electricity - exports: 0 kWh (2004)
Electricity - imports: 0 kWh (2004)
Agriculture - products: coffee, cotton, sugarcane, rice, wheat, potatoes, plantains, coca; poultry, beef, dairy products, wool; fish
Exports: 27.5 billion f.o.b. (2007) of goods and products. 3.5 billion f.o.b. (2007) of services.
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: United States 30%, Mainland China 11%, Japan 6%, Chile 5% Switzerland, Germany, United Kingdom, Brazil (2006)
Imports: $20 billion f.o.b. (2007)
Imports - commodities: machinery, transport equipment, foodstuffs, petroleum, iron and steel, chemicals, pharmaceuticals, electronics.
Imports - partners: US 19%, Colombia 6%, Venezuela 5%, Chile 4%, Brazil 4% (1997)
Debt - external: $28 billion (2007 est.)
Economic aid - recipient: $491 million (2002)
Currency: 1 nuevo sol (S/.) = 100 centimos
Exchange rates: nuevo sol (S/.) per US$1 - 2.869 (May 2008) 2.98 (Dec 2007), 3.20 (Dec 2006), 3.303 (Oct 2004), 3.45 (December 31, 2003), 3.51 (December 31, 2002), 3.63 (2001), 3.50 (2000), 3.383 (1999), 2.930 (1998), 2.664 (1997), 2.453 (1996), 2.253 (1995)
Fiscal year: calendar year
[edit] See also
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[edit] Notes
- ^ Rosemary Thorp and Geoffrey Bertram, Perú 1890-1977. 2nd Edition. Mosca Azul, 1988, pp. 483-484.
- ^ Carlos Parodi, Perú 1960-2000. CIUP, 2000, pp. 206-208.
- ^ Carlos Parodi, Perú 1960-2000. CIUP, 2000, pp. 204-206.
- ^ John Sheahan, La economía peruana desde 1950. IEP, 2001, p. 207.
- ^ Banco Central de Reserva, Producto bruto interno por sectores productivos 1951 - 2006. http://www.bcrp.gob.pe/bcr/dmdocuments/Estadistica/Cuadros/Anuales/ACuadro_06.xls.
- ^ Center for Economic and Policy Research - "The Background of Peru"
- ^ "Foreign investment statistics (in Spanish)" .
[edit] References
- Mark Weisbrot, Background on Peruvian Economy, Center for Economic and Policy Research, April 2006
- CIA factbook
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