Economy of Peru

Economy Of Peru

The economy of Peru is classified as upper middle income by the World Bank and is the 42nd largest in the world. Peru is, as of 2011, one of the world's fastest-growing economies owing to the economic boom experienced during the 2000s. The core of the current sound economic performance of the country is a combination of:

• Macroeconomic stability
• Prudent fiscal spending
• High international reserve accumulation
• External debt reduction
• Achievement of investment grade status
• Fiscal surpluses:

All of these factors have enabled Peru to make great strides in development, with improvement in government finances, poverty reduction and progress in social sectors.

Peru is an emerging, market-oriented economy characterized by a high level of foreign trade. The inequality of opportunities has declined: between 1995 and 2006 Peru's rating on The World Bank's Human Opportunity Index improved substantially as increased public investment in water, sanitation and electric power has sustained the downward trend in inequality of opportunities. Its economy is diversified although the commodity exports is important, the trade and industry are centralized in Lima but the agricultural exports have created development in all the regions. In 2010 Peru's per capita income (PPP) is bordering $10,000. Peru has a high Human Development Index score of 0.723. Poverty has steadily decreased in 18% since 2004, when nearly half the country's population was under the poverty line. 2011 data shows that around 27% of its total population is poor.

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

Services account for 53% of Peruvian gross domestic product, followed by manufacturing (22.3%), extractive industries (15%), and taxes (9.7%). Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, and rising investment and consumption. The USA has become Peru's largest trading partner following a free trade agreement with the United States signed on April 12, 2006 and a free trade agreement with China (2009). Currently a Free Trade agreement has been sent to the EU, and is in the process of being approved. It will most likely take effect in 2012. 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%. The unemployment rate had increased to 8.8% by January 2009; the current average wage in the country is 1,047 nuevos soles.

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. In 1990 the neoliberal government of Alberto Fujimori ended price controls, protectionism, restrictions on foreign direct investment, and most state ownership of companies. Reforms have permitted an economic growth since 1993, except for a slump after the 1997 Asian financial crisis. 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% and 168.3%, respectively. However, in the wake of the 2008 global crisis, growth for 2009 was only 0.9 percent, but rebounded to 8.8 percent the following year. The pro-market policies enacted by Fujimori, were continued by presidents Alejandro Toledo and Alan Garcia,While poverty of Lima is 18.5%, the national average is 30%, while the unemployment rate is 6.5% and 54% are employed formally.