Economy

Peru is a developing country, as such it has a moderate per capita income and Human Development Index score. According to official sources 51.6% of the total population is regarded as poor including a 19.2% considered extremely poor as of 2004.

Since 1990, the Peruvian economy has undergone considerable free market reforms, from legalising parts of the informal sector to significant privatisations in the mining, electric/power, tourism, services and telecommunication industries. Aided by foreign investment and cooperation between the former Fujimori administration, the IMF, and the World Bank, economic growth was rapid in 1994-97 and inflation was kept low, a real accomplishment considering that just a few years before inflation was over 2,000% a year and collapse of the economy was imminent.

Some analyses indicate that Peru's reforms have not led to sustained economic progress; however it is advancing slowly but firmly. According to the Center for Economic and Policy Research, a US-based think tank, 'Income per person in Peru - the most basic economic measure of living standards - is currently about the same as it was 25 years ago. This is a remarkable long-term economic failure.'

After the 1998 crisis, the economy has began a new period of expansion. Growth up to the year 2005 has been realised by construction, investment, domestic demand and exports. Peru's economy has become one of the most liberal market economies in Latin America. The country's petroleum, natural gas and power industries are expected to increase due to relatively high domestic and foreign influx of capital in the tourism, agriculture, mining and construction sectors since 1995. In 2006 the GDP has grown at a strong rate of 7.7% and it is expected to grow 6.5% for 2007, and 6% for the next five years after 2008.

In April 2006, Peru signed a trade agreement with the United States (known as the Peru Trade Promotion Agreement, becoming the first country in the Andean Community of Nations (Comunidad Andina de Naciones,CAN) to sign it. As of June 2006, Peru's Congress has already approved the agreement and the pact awaits approval by the US Congress. Peru is currently negotiating trade agreements with Chile, Mexico, Singapore and India.

Peru has free trade agreements with the Andean Community, which is composed of Colombia, Ecuador, Bolivia and Venezuela. It also has free trade agreements with many of the countries in Mercosur as well as Thailand, and during the recent APEC summit, Peru declared intentions to sign free trade agreements with China, Japan, and South Korea.

Peru is also seeking a free trade agreement with the European Union. These negotiations will greatly expand the markets in which the Peruvian products are traded. Peru has potential to export agricultural products, textiles, clothing, shoes, petroleum derivatives, natural gas, minerals, as well as fish and seafood products, tourism and manufactured goods.

In 2005, Peruvian exports were worth US$ 17,350 million (an increase of 34.6% compared to 2004), and they reached US$ 23,500 million in 2006 accumulating a growth of 35% over the previous year. By the end of 2007 the exports will reach US$30,000 million, and US$40,000 million by the end of 2008. The goal of the production sector and the government is to reach US$100 billion by 2012. The markets of Peru have grown in all sectors (energy, construction, commerce, fishing, manufacturing, tourism, etc) in 2005 over 6.67% (one the fastest growth rates of market economies in South America) and it grew 7.7% in 2006 it is expected to grow 6.5% in 2007, leading to a 7 year in-a-row strong growth for this Andean country.

For the next five years (until 2010) the Peruvian government has registered more than US$ 10,000 million in private investment (both domestic and foreign) in the mining and energy sectors, as well as investments of US$ 15,000 million in other sectors such as industry, commerce, tourism, construction, seafood and agriculture, which will keep the economy growing annually at strong levels of 6% or more. With an intense sub-contracting policy the government has signed agreements with many oil and gas international companies to explore for new oil reserves, it is expected that in 2009 Peru will become a net energy exporter considering that the Camisea gas project will be fully developed and new oil and gas reservoirs will be put in production.

Poverty in Peru is high, with a poverty threshold level of 48% of the total population. However, the level is reducing slowly and it is expected to diminish to 20% of the population within 10 years. In 2006, a new phenomenon of rebirth of the medium class began reaching almost 50%, during 2006-2007 it is expected that the growth of employment will be stronger outside the capital reducing considerably the levels of poverty.