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Peru The Search for New Directions, 1975-90
The head of the second phase of the military
government,
General Morales Bermúdez, reoriented Peru's economic
strategy in
much more conservative directions. Many of the specific
Velasco
reforms were dropped, although land reform and the state
enterprise sector remained intact. Because of pressure
from the
IMF, average tariff rates were cut from 66 percent in 1978
to 34
percent by 1980, and the enormous battery of specific
quantitative restrictions on trade was trimmed down
greatly: the
number of tariff positions under quantitative controls
fell from
2,890 in 1978 to 124 by 1980.
On the side of macroeconomic management, the
second-phase
military government put into effect a desperately needed
correction of the exchange rate in order to stimulate
exports and
greatly reduce public-investment spending. The
exchange-rate
policy worked well, achieving the country's first
significant
growth of manufacturing exports. Peru's share of the
manufacturing exports of nine leading Latin American
countries
increased from 2 percent for 1970-74 to 10.9 percent for
1975-79.
Accompanied by better prices for traditional exports,
manufacturing exports helped create a substantial current
account
surplus by the end of the decade. But devaluation fed back
into
inflation through price increases for imports and exports,
and
continuing rapid growth of the money supply helped spread
the
inflationary effects of devaluation through the whole
economy.
Data as of September 1992
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