Transcript Country Study: Peru.

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Republic of Peru
Republica del Peru
Capital: Lima
By Nitish Rajbhandary
General Information
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Government: Constitutional Republic
President: Alan Garcia Perez
Climate: Arid and mild in coastal area, temperate to frigid
in the Andes, and warm and humid in the jungle onwards.
Natural Resources: Iron ore, copper, gold, silver, zinc, lead,
fish, petroleum, natural gas, and forestry.
Currency: Peruvian Nuevo Sol (PEN)
Exports: Gold, copper, fishmeal, petroleum, zinc, textiles,
apparel, asparagus and coffee.
Major Markets: U.S., China, Chile, Canada, Switzerland,
Japan, Spain, Netherlands.
Imports: Machinery, vehicles, processed food, petroleum,
steel.
Major Suppliers: U.S., China, Brazil, Ecuador, Colombia.
Characteristics
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Country Area: 1,285,220 sq km (3rd largest in Latin
America)
Population: 28,674,757 (July 2007 est.) (5th most populous
in the region)
Population Density: 22/sq. km
Population Growth: 1.289%
Net Migration Rate: -0.99 migrant(s)/1000 population
Life expectancy: Total 70.14 / Male 68.33 /Female 72.04
Ethnic groups: Amerindian 45%, mestizo 37 %, white 15%,
black, Japanese, Chinese, and other 3%
Religions: Roman Catholic 81%,Seventh Day Adventist
1.4%, other Christian 0.7%, other 0.6%, unspecified or
none 16.3%
Economy
GDP (PPP): $181.8 billion
GDP (official exchange rate): $76.09 billion
GDP (per capita): $6,400 (half of Chile)
GDP Growth Rate: 6.5%/ ( 2002 – 2006 ) 5.7%
GDP (by sector): agriculture: 8.5%; industry: 26.4%; services: 65%
Inflation Rate: 2.1% / (2002 – 06) 1.9%
Unemployment Rate: 7.2%
Government Budget: revenues: $25.5 billion expenditures: $25.18 billion;
including capital expenditures of $1.8 billion
Debt: 33.8% of GDP
Current Account Balance: $1.515 billion
FDI inflows (% of GDP): 2.8
Fiscal Policy
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Current Account balance: ‘02 (-$1,150 m), ‘03 (-$958 m),
‘04 ($19.3m), ‘05 ($1,105 m), ‘06 ($2,456 m)
Very low tax base hence low flexibility.
Aims towards increasing tax up to 17% of GDP from current
15% by eliminating tax exemptions and altering tax code.
Tax code will be pro- contributor and pro-investor.
Cutting tariffs to encourage competition.
Increase quality of public spending by simplifying
programs.
Monetary Policy & Exchange Rate
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Compared to other Latin countries, subdued inflation at an
average of 2%. Main worry with real GDP rising.
Diversifying economy and falling debt levels.
Interest rates might increase by 25 basis points to 4.75%
from 4.5% last year.
Rapid growth in spending with concentration on dollar
lending a cause for long-term concern hence reserve
requirement of 30% for dollars as compared to 6% for sol.
Exchange rate system is free-floating since the 90’s.
Sol expected to depreciate by 1.5% next year.
Social Policies
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Suffrage: 18 years; universal and compulsory until the age
of 70.
Big emphasis on education. Over 30,000 schools
throughout the country.
Rising crime rates and illegal narcotic industry due to
penetration by the Colombians.
Plans to increase impact of social programs by emphasizing
basics like food, clean water and education.
Decrease administration costs.
External Relations
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Border conflicts with Chile have been settled but still
disputes over maritime limits in the Pacific Ocean with Chile
and Bolivia.
In October 1998, Peru and Ecuador signed a peace accord
to resolve border differences.
Member of the Andean community of Nations with Bolivia,
Colombia, Ecuador and Venezuela (in process of leaving).
Free Trade agreements with individual Mercosur nations.
Associate member of Mercosur.
Member of Asia-Pacific Economics Cooperation (APEC)
forum and also a member of UN since 1949.
Strong relations with U.S. and major trade partner.
U.S. – Peru Trade Promotion Agreement and Peru – India
Trade pact in process.
References
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Background note: Peru. (2007). Retrieved 5/19, 2007, from
http://www.state.gov/r/pa/ei/bgn/35762.htm
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Historical Exchange Rate Regimes. (2000). Retrieved 5/20, 2007, from
http://intl.econ.cuhk.edu.hk/exchange_rate_regime/index.php?cid=16/
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Country Study: Peru. (2005). Retrieved 5/19, 2007, from
http://lcweb2.loc.gov/frd/cs/petoc.html
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CIA world factbook: Peru. (2007). Retrieved 5/19, 2007, from
https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html
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The Economist: Country Briefings: Peru (2007) Retrieved 5/19, 2007, from
http://www.economist.com/countries/Peru/profile.cfm?folder=ProfileFactSheet