Economy of Peru

Lima, the financial centre of Peru
Currency	Peruvian sol (PEN, S/)
Fiscal year	calendar year
Trade organizations	CAN, Pacific Alliance, WTO, Prosur, Mercosur (associate), Unasur (suspended)
Country group	Developing/Emerging[1] Upper-middle income economy[2]
Statistics
GDP	$228.989 billion (nominal, 2019 est.)[3] $478.303 billion (PPP, 2019 est.)[3]
GDP rank	48th (nominal, 2019) 43rd (PPP, 2020)
GDP growth	4.0% (2018) 2.2% (2019e) −12.0% (2020f) 7.0% (2021f)[4]
GDP per capita	$7,047 (nominal, 2019 est.)[3] $14,719 (PPP, 2019 est.)[3]
GDP per capita rank	83rd (nominal, 2019) 87th (PPP, 2019)
GDP by sector	agriculture: 7.6% industry: 32.7% services: 59.9% (2017 est.)[5]
Inflation (CPI)	1.9% (2020 est.)[3]
Population below poverty line	12.7% in multidimensional poverty (2019)[6] 20.5% (2018)[7] 22.1% on less than $5.50/day (2018)[8]
Gini coefficient	42.8 medium (2018, World Bank)[9]
Human Development Index	0.777 high (2019)[10] (79th) 0.628 medium IHDI (2019)[11]
Labor force	18,818,406 (2019)[12] 65.5% employment rate (2018)[13]
Labor force by occupation	agriculture: 27.4% industry: 15.2% services: 57.4% (2019)[14]
Unemployment	6.9% (2017 est.) note: data are for metropolitan Lima; widespread underemployment[5] 3.6% (2012)[15]
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
Ease-of-doing-business rank	76th (easy, 2020)[16]
External
Exports	$44.92 billion (2017 est.)[5]
Export goods	copper 27.1%. gold 14.7% petroleum 6.3% zinc 4.5% copper cathodes 3.8% (2018)[17]
Main export partners	China 27.6%  United States 16.7%  India 5.2%  South Korea 5.1%  Japan 4.6% (2018)[17]
Imports	$43.13 billion (2018)[17]
Import goods	petroleum oils 15.2% transmitter equipment 3.3% automobiles 1.9% maize 1.6% [17]
Main import partners	China 23.3%  United States 21.3%  Brazil 5.6  Mexico 4.5%  Ecuador 4.5% (2018)[17]
FDI stock	$98.24 billion (31 December 2017 est.)[5] Abroad: $5.447 billion (31 December 2017 est.)[5]
Current account	−$2.414 billion (2017 est.)[5]
Gross external debt	$66.25 billion (31 December 2017 est.)[5]
Public finances
Public debt	25.4% of GDP (2017 est.)[5]
Budget balance	−3.1% (of GDP) (2017 est.)[5]
Revenues	58.06 billion (2017 est.)[5]
Expenses	64.81 billion (2017 est.)[5]
Economic aid	$27.267 million (2018 est.)[18]
Credit rating	Standard & Poor's:[19] A- (Domestic) BBB+ (Foreign) A (T&C Assessment) Outlook: Negative[20] Moody's:[21] Baa1 Outlook: Stable Fitch:[22] BBB Outlook: Stable
Foreign reserves	$63.83 billion (31 December 2017 est.)[5]
Main data source: CIA World Fact Book 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.^[23] Peru has the forty-seventh largest economy in the world by total GDP^[24] and currently experiences a high human development index.^[25] The country was one of the world's fastest-growing economies in 2012, with a GDP growth rate of 6.3%.^[26] The economy was expected to increase 9.3% in 2021, in a rebound from the COVID-19 pandemic in Peru.^[27] 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.^[28] Additional free trade agreements have been signed with the United States in 2006,^[15][29] Japan in 2011^[30] and the European Union in 2012.^[31] 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.^[32] The extraction of such commodities has brought conflict within the country due to its environmental and social impacts.^[32] 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.^[32] 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".^{[32][33][34][35]} 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.^[32] 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.^[32][36] 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.^[32][37] Poverty specifically has decreased significantly – from nearly 60% in 2004 to 20.5% in 2018.^[38] Inflation in 2012 was the lowest in Latin America at 1.8%,^[39] with the most recent annual rate standing at 1.9% in 2020.^[3]

Peruvian economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments.^[40] 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.^[41] Although exports have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive.^[42] Services account for 59.9% of Peruvian gross domestic product, followed by industry (32.7%) and agriculture (7.6%).^[43] Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, as well as rising investment and consumption.^[44]

History[edit]

Inca Empire[edit]

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".^[45] 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.^[45] Regarding labor, provinces would provide men to be employed by the empire who required to be married so their wives could maintain home life.^[45] 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.^[45]

Viceroyalty of Peru[edit]

The economy of the viceroyalty of Peru largely depended on the export of silver.^[46] 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.^[47] Silver mining was carried out using contract and free wage labourers,^[48] as well as the encomienda system of slavery.^[49] The encomienda has been described as constituting genocide.^[50][51][52] 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".^[45] Afro-Peruvians also appeared as a result of slavery in colonial Spanish America.^[53] Silver production peaked in 1610.^[47]

Prussian explorer Alexander von Humboldt first encountered guano in 1802 and started fertilizer research Callao in Peru, with his findings being reported throughout Europe.^[54]

19th century[edit]

Guano Era[edit]

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.^[55] 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 businessmen and the Peruvian government, abolishing existing claims to Peruvian guano; guano was essentially nationalized and became Peru's largest revenue source.^[56] 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).^[57]

War of the Pacific[edit]

Chile was devastated by the Long Depression economic crisis of the 1870s^[58] and began looking for a replacement for its silver, copper and wheat exports.^[59] It has been argued that Chile's economic situation and the prospect of new wealth in nitrates were the true reasons for the Chilean elite to go to war against Peru and Bolivia,^[59][60][61] with most historians agreeing that the Chilean government's expansionist foreign policy and its ambitions to control Atacama's mineral wealth led to the conflict .^[62][63][64]

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.^[65] Chile's national treasury would increase 900% from 1879 to 1902 due to the newly acquired lands.^[66] Peru would go on to approve the Grace Contract, which granted ownership of Peru's railroads to holders of sovereign debt, with the Peruvian government not issuing new sovereign debt until 1906.^[67]

20th century[edit]

Amazon rubber boom[edit]

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.^[68] 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.^[69][70][71]

World War I and II eras[edit]

In the early 1910s, Peru enjoyed a growing economy due to mining and crop production, with a working class developing at the time.^[72] Following the outbreak of World War I, international markets become turbulent and Peru experiences a recession and a series of coups occur through the mid and late-1910s.^[72] Augusto B. Leguía, a member of Peru's oligarchy, then takes power through a coup and essentially assumes dictatorial powers, writing a new constitution; Leguía would often ignore the constitution through his acts, however.^[72][73] Víctor Raúl Haya de la Torre founds the American Popular Revolutionary Alliance (APRA) calling for reforms, though Leguía quickly bans the party.^[72] Leguía increased spending to modernize Peru, though this also raised national debt and with the addition of the Great Depression in 1929, he is overthrown soon-after in 1930 by Luis Miguel Sánchez Cerro.^[72]

Sánchez announces a debt moratorium on $180 million USD and Peru is banned from markets in the United States as a result.^[72] The Sánchez government also continues the repression of APRA, resulting with an Aprista party member assassinating Sánchez.^[72] Óscar R. Benavides was chosen by the constituent assembly to finish Sánchez's term and intensifies persecution of left-wing groups, resulting with increased support for the Peruvian Communist Party (PCP) among indigenous and labor groups.^[72] As Peru's economy grows, a banker in Lima, Manuel Prado Ugarteche, is elected into the presidency in the 1939 Peruvian general election.^[72]

President Prado adopts a softer tone on APRA while Aprista leader Haya de la Torre also espouses more moderate policy and support for foreign markets.^[72] APRA is made a legal party in 1945 and in José Luis Bustamante y Rivero is elected the same year, making an Aprista politician the Minister of the Economy.^[72] Subsequently, the Bustamante greatly increases economic interventionism to include price controls and a foreign exchange controls, which appeared beside a slowing economy, resulting with increased inflation.^[72]

Military juntas and first Belaúnde government[edit]

Over the next two decades, military juntas control Peru. On October 29, 1948, General Manuel A. Odría led a successful military coup against Bustamante and assumes the presidency until 1956. Odría's government experienced a growing economy due to a commodity boom, though many of the government's investments remained in coastal cities while unrest increased among interior and Andean regions that remained impoverished.^[72] Haya de la Torre – whose APRA party had drifted even more to right-wing politics at this time – wins the 1962 Peruvian general election against Fernando Belaúnde, founder of the right-wing Popular Action, though Haya de la Torre is unable to take office due to a military coup opposed to APRA.

After a brief military government, Belaúnde won the 1963 Peruvian general election, with his government making modest improvements by increasing industrialization and constructing highways into the Andes.^[72] Belaúnde held a doctrine called "The Conquest of Peru by Peruvians", which promoted the exploitation of resources in the Amazon and other outlying areas of Peru through conquest.^[74] In one 1964 incident called the Matsé genocide, the Belaúnde administration targeted the Matsés after two loggers were killed, with the Peruvian armed forces and American fighter planes dropping napalm on the indigenous groups armed with bows and arrows, killing hundreds.^[74][75] Belaúnde's economic measures were received with disapproval from rural and peasant Peruvians.^[72] His government's reliance on resource exports, especially with the fishing industry, resulted with increased inflation and a growing deficit.^[72] Amid this conflict, general Juan Velasco Alvarado overthrows the Belaúnde in the 1968 Peruvian coup d'état .^[72]

Revolutionary Government of the Armed Forces[edit]

Velasco establishes the Revolutionary Government of the Armed Forces and it adopts a state capitalism economic policy amid a period of economic expansion.^[76] The government immediately instituted land reform initiatives, establishing one of the most ambitious land tenure projects in the history of Latin America.^[76] The land reform projects removed the traditional hacienda system that resembled landowners imposing a serfdom on peasants and replaced it with agricultural cooperatives called Agricultural Social-Interest Societies (SAIS).^[76] The Velasco government took a structural approach; it invested in infrastructure and began a widespread nationalization campaign of key economic production sectors, education and the media.^[72][76] A fixed exchange rate system was adopted and the national debt began to increase dramatically.^[76] A combination of debt, inflation and the 1973 oil crisis induced an economic crisis in the Velasco government, with General Francisco Morales-Bermúdez overthrowing Velasco in the Tacnazo.^[72][76]

Bermúdez in name led the Second Revolutionary Government of the Armed Forces, with his government introducing austerity measures and removing state capitalist systems.^[72][76] This government began monetary adjustment and started with negotiations on foreign debt.^[76] However, corruption scandals and widespread protests broke out and the military government agreed to transition Peru back into a democratic political system.^[76]

The Lost Decade[edit]

In 1980, after twelve years of military rule, Fernando Belaúnde Terry was elected president for a second time.^[76] On the day of the election, Shining Path launched its armed struggle in Chuschi with a ballot burning incident, essentially beginning the internal conflict in Peru.^[76] Belaúnde's used a floating exchange rate and utilized populist policies, primarily relying on key exports.^[76] His government continued to reverse Velasco's existing policies and some economic liberalization.^[76] However, Belaúnde's government could not develop a monetary policy, failed at managing state-run entities and faced a growing external debt, leaving Peru in a vulnerable state.^[76]

Alan García was elected president in the 1985 Peruvian general election and the first Aprista president in over sixty years. His administration adopted a neo-structuralist economic policy, with the government funding the private sector to enhance economic performance, increasing welfare spending and instituting price controls; this resulted with temporary economic growth, though Peru's national debt grew dramatically.^[76] By 1989, inflation reached almost 3,000 percent and 7,000 percent in 1990, with Peru experiencing a GDP loss of twenty-four percent in the last three years of García's tenure.^[76] With the growing economic crisis and Shining Path gaining territory in an armed conflict with the Peruvian government, the idea of a leader with a "heavy hand" became more attractive to Peruvians according to Gutiérrez Sanín and Schönwälder.^[76]

The Peruvian armed forces grew frustrated with the inability of the García administration to handle the nation's crises and began to draft a plan to overthrow his government.^[77][78] According to Peruvian sociologist and political analyst Fernando Rospigliosi, Peru's business elites held relationships with the military planners, with Rospigliosi writing that businesses "probably provided the economic ideas which [the military] agreed with, the necessity of a liberal economic program as well as the installment of an authoritarian government which would impose order".^[79] Thus, Plan Verde was drafted at the end of the García presidency; the objectives evolved into establishing a civilian-military government with a neoliberal economic policy, the genocide of impoverished and indigenous Peruvians in an effort to remove a drain on resources and the control or censorship of media.^[80][81][82]

Fujimori Government[edit]

During his campaigning for the 1990 election, Alberto Fujimori expressed concern against the proposed neoliberal policies of his opponent Mario Vargas Llosa.^[83] Peruvian magazine Oiga reported that following the election, the armed forces were unsure of Fujimori's willingness to fulfill their objectives outlined in Plan Verde and it was reported that the meeting held a negotiatory meeting with him to ensure that Fujimori followed their direction.^[84][85] After taking office, Fujimori abandoned the economic platform he promoted during his campaign, adopting more aggressive neoliberal policies than those espoused by Vargas Llosa, his competitor in the election.^[86] Fujimori would go on to adopt many of the policies outlined in Plan Verde.^[87][88] Fujimori ultimately served as president from 28 July 1990 to 17 November 2000.

Fujimori is often credited with defeating the Shining Path insurgency in Peru and restoring its macroeconomic stability.^{[89][90][91][92]} 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.^{[93][94][95][96]} Though the government established a $400 million poverty relief fund,^[97] 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.^[36] Rlectricity costs quintupled, water prices rose eightfold, gasoline prices rose 3000% and those living in poverty saw prices increase so much that they could no longer afford food.^[36][97][98] Peru began to experience prosperity as a result of the 2000s commodities boom.

Fujimori has been criticized for his authoritarian way of ruling the country and was accused of human rights violations.^[99][100] 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.^{[101][102][103][104][105][106]}

21st century[edit]

Alejandro Toledo claimed he was a living proof of The Peruvian Miracle.^[107] 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.”^[108]

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."^[109]

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.^[110]

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.^[111]

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.^[112] 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.^[113]

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.^[114]

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.^[115] 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.^[113]

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%,^[116] the percentage of people living in poverty fell, and food consumption by the poorest segments of the population rose dramatically.^[117] Much of this growth has been credited to the free trade agreements signed with the United States, China, Thailand, Chile, Mexico, and Singapore.^[118][119]

n 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% ^[120] and 168.3%,^[121] respectively. However, in the wake of the 2008 global crisis, growth for 2009 was only 0.9 percent,^[122] 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,^[123] 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.^[124]

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".^[125]

Peru - United States Trade Promotion Agreement[edit]

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.^[126]

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^[127]

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.^[128]

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."^[129]

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.^[130]

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[edit]

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.^[131]

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.”^[132] 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".^[133] 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."^[132]

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.^[134]

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.^[135]

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.^[136]

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.^[135]

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.^[137]

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.^[138]

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.^[117]

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.^[131]

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.^[131]

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.^[131]

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.^[131] He divided the single district up, called for regional elections, and eliminated the centralist Ministry of the Presidency that had been instituted under Fujimori.^[139] 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.^[139]

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.^[131]

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.^[131]

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.^[131]

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.^[131]

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.^[131]

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.^[140]

Sectors[edit]

Agriculture[edit]

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.^[141]

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.^[142]

Industry and services[edit]

Extraction[edit]

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^[143] and silver,^[144] 8th largest world producer of gold,^[145] 3rd largest world producer of lead,^[146] 2nd largest world producer of zinc,^[147] 4th largest world producer of tin,^[148] 5th largest world producer of boron^[149] and 4th largest world producer of molybdenum.^[150] 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[edit]

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[edit]

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[edit]

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

External trade and investment[edit]

Foreign investment and balance of payments[edit]

Foreign trade and balance of payments[edit]

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[edit]

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%),^[151] 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[edit]

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.^[152] The sol replaced the inti at a rate of 1 nuevo sol = 1,000,000 intis.^[153] 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%.^[39] 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[edit]

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[edit]

Unemployment in Greater Lima is 5.6%, while for the rest of Peru is 7%. FY 2012-2013^[154]

Economic trends[edit]

Greater depth[edit]

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.^{[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%.^[155] As of 2010, around 30% of its total population is poor^[156]

Outlook[edit]

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.^[157] 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 (5.2% and 34%, 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 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.^{[citation needed]} 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.^{[citation needed]}

Narcotics[edit]

Background[edit]

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.^[158] After the arrival of the Spanish, coca cultivation increased and its use became more common and widespread.^[159] Since 1543, coca has been internationally recognized for its trading value, and regulations imposed upon it have attached increasing economic importance to the plant.^[159] 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.^[160] 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.^[161]

Current trends[edit]

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.^[162] Money from cocaine trafficking feeds local economies, supports inflation, and even causes social changes such as cocaine smoking among indigenous Peruvians.^[163] 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.^[164] 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.^[158] 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."^[165]

With US government cooperation, the Peruvian Government installed the National Plan for the Prevention and Control of Drugs in 1995.^[164] 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.^[166] 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.^[164] 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.^{[citation needed]} 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 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.^{[citation needed]} 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.^[167]

Effect on family economies[edit]

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.^[164] 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.^[164] However, the issue of child labour in cocoa 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[edit]

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.^[168]

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

Statistics[edit]

Main economic indicators[edit]

The following table shows the main economic indicators in 1980–2019 (with IMF staff stimtates in 2020-2026). Inflation below 5% is in green.^[169]

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%

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[edit]

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.^[170]

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).[171][172] FTA with  Chile (signed August 2006 and effective March 2009)[173][174] FTA with  Canada(CPFTA) (signed May 2008 and effective August 2009)[175][176] FTA with  Singapore (signed May 2008 and effective August 2009)[177][178] FTA with  China (signed April 2009 and effective March 2010)[179][180] FTA with  South Korea (signed March 2011 and effective August 2011)[181][182] Partial FTA with  Thailand (last protocol signed November 2010 and effective December 2011)[183][184] 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)[185][186] FTA with  Costa Rica (signed May 2011 and effective June 2013)[187][188] 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[edit]

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

Notes[edit]

Bibliography[edit]

References[edit]

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

External links[edit]

• World Bank Summary Trade Statistics Peru
• Tariffs applied by Peru as provided by ITC's ITC Market Access Map^{[permanent dead link]}, an online database of customs tariffs and market requirements