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Economy of Peru
Sanisidrolima.jpg
Currency Peruvian nuevo sol (PEN)
Fiscal year calendar year
Statistics
GDP $253.847 billion[1]
GDP growth 9.2% (2008 est.) 11th in the world
GDP per capita $8,723 PPP[1] (2010 est.)
GDP by sector agriculture: 8.5%, industry: 21.2%, services: 70.3% (2008 est.)
Inflation (CPI) 1.8% (2007)[2]
Population
below poverty line
35.2% (2008)[3]
Gini index 47.9 (2008) 26th in the world
Labour force 10.2 million (2008 est.)
Labour force
by occupation
agriculture: 0.7%, industry: 23.8%, services: 75.5% (2005)
Unemployment 8.4% in metropolitan Lima; widespread underemployment (2008 est.)[4] 112th in the world
Main industries mining and refining of minerals/jewels; construction, cement, machinery, automobile industry, trucks, buses, motorcycles, steel, metal fabrication; Oil well and petrochemicals refining, livestock, apparel, aluminium materials, natural gas, fishing and fish processing, textiles, sugar, milling, software, clothing, food processing, brewing, real estate, aircraft, salt extraction, shipbuilding, tourism
External
Exports $32 billion (2008 est.)[5]
Export goods copper, gold, zinc, crude petroleum and petroleum products, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, machinery, cement, textiles, coffee, potatoes, asparagus, guinea pigs
Main export partners United States 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 United States 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 $57.6 billion (2008 est.)
Revenues $38.83 billion (2008 est.)
Expenses $35.5 billion (2008 est.)
Economic aid $491 million (2002)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars

The economy of Peru is the 47th largest in the world,[6] Peru is an emerging,[7] market-oriented economy characterized by a high level of foreign trade. In 2010 Peru's per capita income (PPP) is bordering $10,000.[1] Peru has a Human Development Index score of 0.806;[8] 36.2% of its total population is poor, including 12.6% that is extremely poor.[9] Poverty has steadily decreased since 2004, when nearly half the country's population was under the poverty line.[10]

Historically, the country's economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments.[11] Peru's main exports are copper, gold, zinc, textiles, and fish meal; its major trade partners are the United States, China, Brazil, and Chile.[12] Although exports have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive.[13]

Services account for 53% of Peruvian gross domestic product, followed by manufacturing (22.3%), extractive industries (15%), and taxes (9.7%).[14] Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, and rising investment and consumption.[15] Trade is expected to increase further after the implementation of a free trade agreement with the United States signed on April 12, 2006.[16] Inflation in 2006 was the lowest in Latin America at only 1.8%, but increased in 2007 as oil and commodity prices rose; in the first half of 2008, it had reached about 5.5%.[17] The unemployment rate had increased to 8.8% by January 2009; the current average wage in the country is 1,047 nuevos soles.[4]

Peruvian economic policy has varied widely over the past decades. The 1968–1975 government of Juan Velasco Alvarado introduced radical reforms, which included agrarian reform, the expropriation of foreign companies, the introduction of an economic planning system, and the creation of a large state-owned sector. These measures failed to achieve their objectives of income redistribution and the end of economic dependence on developed nations.[18] Despite these adverse results, most reforms were not reversed until the 1990s, when the liberalizing government of Alberto Fujimori ended price controls, protectionism, restrictions on foreign direct investment, and most state ownership of companies.[19] Reforms have permitted sustained economic growth since 1993, except for a slump after the 1997 Asian financial crisis.[20] In 2007, the Peruvian economy experienced a growth rate of 9%, the largest 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% [21] and 168.3%,[22] respectively. However, with the current global crisis, growth for 2009 is estimated to close at 1.5% for the year.[citation needed]

Contents

History

Sectors

Peru's economic activity in the 1970s

Agriculture

Peru is a country with many climates and geographical zones that make it a very important agricultural nation. Peru exports potatoes (3000 varieties), sugarcane, coffee and cotton.

Industry and services

Fishing: Peru is a international leader in fishing, producing nearly 10 percent of the world's fish catch. Mining: Peru ranks fifth worldwide in gold production (first is Latin America), second in copper, and is among the top 5 producers of lead and zinc. Manufacturing: Because of its long dependence on raw material exports, Peru has never developed a strong manufacturing sector. The sector represents 15 percent of GDP and is tied heavily to mining, fishing, agriculture, and textiles. Manufacturing is mainly devoted to processing a percentage of the raw materials to gain a value-added advantage. The most promising sector is textiles. 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.

Services: Financial services, with the exception of Banco de Credito—Peru's largest financial institution (US$8.5 billion in assets)—nearly all the financial sector has fallen into foreign hands

Natural resources

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

External trade and investment

Global trade investment

Foreign investment and balance of payments

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, Singapore, and China.

Foreign investment

The seaport of Callao is the main outlet for Peruvian exports

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%)[23], theUnited 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 1996Investment 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 1 nuevo sol coin

The nuevo sol is the currency of Peru. The exchange rate as of January 26, 2010 is 2.85 soles to the US dollar, and 3.80 to the euro. It was instated in 1991, when the Peruvian government abandoned the inti due to hyperinflation of the currency;[24] the nuevo sol replaced the inti at a rate of 1 nuevo sol = 1,000,000 intis.[25] 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 nuevo sol currently enjoys a low inflation rate of 1.5%.[26] Since it was put into use, the nuevo 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 nuevo 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 nuevo sol is divided into 100 céntimos. The highest-denomination banknote is the 200 sol note; the lowest-denomination coin is the rarely-used 1 céntimo coin.

Income and Consumption

Employment

Unemployment in Greater Lima is 9.6%, while for the rest of Peru is 10%. FY 2009-2010[27]

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.[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, 18% of Peruvians were living in extreme poverty and a poverty rate at 39%.[10] As of 2009, 36.2% of its total population is poor, including 12.6% that is extremely poor.[9]

Outlook

Jorge Chavez international airport in Callao.

Forecasts for the medium- and long-term remain highly positive. Peru's real GDP growth in 2007 (8.3%) was the largest in Latin America and in 2008 was an outstanding 9.8% the highest in the whole Latin American and the world.[4] Inflation remained 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] The country is likely to attract future domestic and foreign investment in tourism, agriculture, mining, petroleum and natural gas, power industries and financial institut 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) reached US$ 27 billion by the end of 2007, and US$ 31 billion at the end of 2008. Currently reserves are at a 32 billion level while forecast to be 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]

Narcotics

Government prohibition of narcotics trafficking in Peru has resulted in a 70% reduction of coca leaf cultivation since 1995. 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 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 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,[citation needed] 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 airbridge denial interdiction program was suspended in April 2001 after the Peruvian Air Force 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.

Corruption

Peru is the 72nd most 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.[28]

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

Statistics

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

Inflation rate (consumer prices): 1.04% (2008 est.)

Budget:
revenues: $26 billion (2007 est.)
expenditures: $25 billion, including long-term capital expenditures of $3.2 billion (2007 est.)

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)

See also

Notes

  1. ^ a b c International Monetary Fund, Peru. Retrieved on April 4, 2009
  2. ^ IMF World Economic Outlook Database, October 2008
  3. ^ World Bank, "Las cifras de pobreza en Perú, 2004-2007". Retrieved on July 18, 2009
  4. ^ a b c http://www.reuters.com/article/marketsNews/idUSN1651763820090216
  5. ^ http://www.andina.com.pe/espanol/Noticia.aspx?id=TSXo+zswI8s=
  6. ^ "Rank Order - GDP (purchasing power parity)". CIA. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html. Retrieved 2009-07-22. 
  7. ^ Emerging markets, Emerging Economies Retrieved on July 22, 2009.
  8. ^ United Nations Development Programme, Human Development Report 2009. Retrieved on October 5, 2009.
  9. ^ a b Instituto Nacional de Estadística e Informática, Nota de prensaPDF (35.7 KB). Retrieved on June 12, 2009.
  10. ^ a b Alan García: En el 2015, la pobreza se reducirá a menos del 10% | El Comercio Perú
  11. ^ Rosemary Thorp and Geoffrey Bertram, Peru 1890–1977, p. 4.
  12. ^ 2006 figures. (Spanish) Banco Central de Reserva, Memoria 2006, pp. 60–61. Retrieved on July 3, 2007.
  13. ^ Rosemary Thorp and Geoffrey Bertram, Peru 1890–1977, p. 321.
  14. ^ 2006 figures. (Spanish) Banco Central de Reserva, Memoria 2006, p. 204. Retrieved on June 25, 2007.
  15. ^ (Spanish) Banco Central de Reserva, Memoria 2006, pp. 15, 203. Retrieved on June 25, 2007.
  16. ^ Office of the U.S. Trade Representative, United States and Peru Sign Trade Promotion Agreement, April 4, 2006. Retrieved on May 15, 2007.
  17. ^ https://www.cia.gov/library/publications/the-world-factbook/rankorder/2092rank.html CIA World Factbook-Inflation
  18. ^ Rosemary Thorp and Geoffrey Bertram, Peru 1890–1977, pp. 318–319.
  19. ^ John Sheahan, Searching for a better society, p. 157.
  20. ^ (Spanish) Banco Central de Reserva, Producto bruto interno por sectores productivos 1951–2006. Retrieved on May 15, 2007.
  21. ^ http://www.bvl.com.pe/english/estadist/dat_infostat_en.pdf Bolsa de Valores de Lima
  22. ^ Bolsa de Valores de Lima
  23. ^ Foreign investment statistics (in Spanish). http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaStandardsinHijos.aspx?ARE=0&PFL=0&JER=1537. 
  24. ^ San José State University Department of Economics, The economic history and the economy of Peru. Retrieved on July 11, 2007.
  25. ^ (Spanish)
  26. ^ (Spanish) Banco Central de Reserva del Perú, Inflation Report, May 2007, Central Reserve Bank of Peru. Retrieved on July 11, 2007
  27. ^ www.inei.gob.pe
  28. ^ Why benchmarking works -PSD Blog - World Bank Group

References








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