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Peru ECONOMY
Gross Domestic Product (GDP): US$20.6 billion in
1991,
or US$920 per capita. Real GDP per capita in 1990
US$2,622. GDP
in 1991 in new sols
(see Exchange Rate, this section) lower than recorded in 1980.
Economic growth has declined markedly
since
1950-65 period; estimated at 2.4 percent in 1991, minus
2.7
percent in 1992. Forecast for 1993: 2.5 percent real GDP
growth.
In 1990-91 symptoms of 1980s' crisis continued, with
sharply
declining per capita output, worsening poverty,
accelerating
political violence, high levels of unemployment (15
percent) and
underemployment (65 percent) and mounting external debt
(US$19.4
billion in 1991). Foreign debt rose to US$21.6 billion in
1992.
Labor force increased to 7.6 million by 1990. After
Alberto K.
Fujimori took office as president (1990-), inflation
declined
significantly to only 139 percent per year by the end of
1991, as
compared with 7,650 percent in 1990, and 56.6 percent in
1992.
Infation forecast for 1993: 47 percent.
Agriculture: Production lagging behind
population
growth. Output per capita and share of output going to
exports
declined during 1980s. Accounted for only 10 percent of
GDP in
1991. Agriculture employed 38 percent of labor force in
1991. New
agrarian law passed in April 1991 amended 1969 Agrarian
Reform
Law by allowing private ownership of agricultural land by
companies and individuals. Fish catch in 1989 totaled 10
million
tons, but output fell 13 percent in 1991. Worsened by El
Niño
warm current, output fell 31 percent in first two months
of 1992,
but increased by 52 percent in the first quarter of 1993.
Food
imports estimated to cost Peru almost US$700 million in
1992, 64
percent more than in 1991.
Industry: After only 1.6 percent annual growth
during
1980s, production, particularly basic medals, plummeted 23
percent in 1989. Mining, including petroleum, accounted
for only
9 percent of GDP in 1988 but for nearly half of Peru's
export
earnings, with copper accounting for over one-fifth.
Copper,
silver, and iron outlook remained poor in 1991, when
13,500
miners lost their jobs as production slumped because of
low world
prices, low productivity, under-investment, strikes, and
terrorism. Manufacturing accounted for 24 percent of GDP
in 1991.
Industry-commerce share of total employment 17 percent in
1991.
Informal sector accounted for considerable production and
personal services. Coca/cocaine industry added estimated 4
percent to value of GDP in 1989.
Energy: After increasing in the 1970s, oil
production
fell sharply in 1980-88 because of mismanagement,
political
violence, and price controls. Oil and gas industry
remained
moribund in early 1990s. Oil output totaled 41.8 million
barrels
in 1991, 11 percent lower than in 1990. Fujimori
government
sought new investment by foreign oil companies and ended
monopoly
by state oil firm. Resolution of disputes with two United
States
oil firms in 1991-92 improved Peru's relations with
international
community. In 1991 total electricity capacity 4,896,000
kW;
15,851 million kWh produced, with 709 kWh per capita.
Services: Government made up about 8 percent of
GDP in
1991. Construction, accounting for 6 percent of GDP in
1991,
soared 18 percent in first two months of 1992. In April
1991,
government liberalized banking system by suspending
Central
Bank's powers to set interest rates and allowing foreign
banks to
operate in Peru under same conditions as Peruvian banks.
Services
sector accounted for 45 percent of employment in 1991.
Country's
massive informal sector included more than half of total
urban
labor force.
Exchange Rate: The new sol(s), equivalent to 1
million
intis, officially established as Peru's new currency on
January
4, 1991. Replacement of inti became effective on July 1,
1991, at
S/0.79 to US$1. In 1990 inti's exchange rate had reached
187,886
to US$1. New sol consists of 100 céntimos. After remaining
heavily overvalued and unchanged against the dollar for
six
months, sol depreciated following the April 1992 coup from
S/0.94
to US$1 to S/1.03 to US$1. As of December 31, 1992, the
official
rate was US$1 = 1.605 new sols.
Imports: Totaled US$3.5 billion in 1991, US$4.0
billion
in 1992. In 1990 imported products included intermediate
goods
(45 percent), capital goods (32 percent), and consumer
goods (11
percent). In 1991 imports came from the United States (32
percent), Latin America (22 percent), European Community
(17
percent), Switzerland (6 percent), Japan (3 percent).
Under
policy changes implemented by Fujimori government in
September
1990 and March 1991, all direct quantitative restrictions
on
imports eliminated; rate of protection for industry cut
from 83
percent to 24 percent; and tariff rates consolidated at
three
much lower levels: 15 percent for inputs into production,
20
percent for capital goods, and 25 percent for consumer
goods.
Exports: Totaled US$3.3 billion in 1991, US$3.4
billion
in 1992. Metals and petroleum most important products. In
1990
leading metal, copper, accounted for 22 percent of
exports; zinc,
12 percent; lead, 6 percent; oil and oil products, only 8
percent; and nontraditional products, 30 percent. Fish
meal
exports in 1989 accounted for 12 percent of exports.
Estimated
illegal exports of coca/cocaine US$5.6 billion in 1989.
Tariff
structure and dollar's overvaluation relative to sol
exacerbated
long-running crisis for legal exporters. In 1991 legal
exports
destined to United States (22 percent), Latin America (12
percent), Japan (13 percent), European Community (28
percent),
former Soviet Union (2 percent).
Balance of Payments: Total long-term debt of
public and
private sectors estimated US$13.9 billion at end of 1988,
with 50
percent of long-term debt accounted for by public sector.
After
limiting debt-service payments to 10 percent of export
earnings
in 1985, Peru at odds with international creditors until
1991,
when Fujimori government sought to smooth relations. On
September
13, 1991, International Monetary Fund
(IMF--see Glossary)
approved Peru's economic stabilization program, securing
Peru
US$1.16 billion to clear its arrears from support group of
countries to support balance of payments in 1991-92 and
allowing
rescheduling of US$6.6 billion of the US$7 billion
external debt.
International reserves exceeded US$1.4 billion by early
1992.
Large amounts in loan funding from multilateral
institutions
delayed as a result of April 1992 coup. Trade deficit
widened
after import restrictions removed in a context of
overvalued
currency. In March 1993, Peru cleared its US$1.7 billion
in
arrears to the IMF and
World Bank (see Glossary),
clearing
the
way to an expected agreement with the Paris Club of
official
creditors.
Fiscal Year: Calendar year.
Fiscal Policy: Fujimori program implemented in
August
1990 included limiting public-sector wages in terms of
Peruvian
currency; removal of subsidies; sharp increases in gas,
utility,
and food prices; strict government spending policies; and
more
efficient tax collection. Reversing his electoral
position,
Fuijmori adopted privatization program. Government's
austerity
measures won approval of international financial
community, but
financial stability threatened. Economy remained bogged in
recession in first half of 1992. Government cut interest
rates
across the board in mid-March 1992, and borrowers in local
currency paid about 8 percent per month. Bulk of
privatization
program began being implemented in early 1992, with 150
companies
being considered for sale, including the state airline, or
dismantlement (a total of 12 enterprises were privatized
in
1992). In early 1992, government's 20 percent tax on
interest
from dollar savings deposits, designed to push down the
value of
sol, instead pushed up exchange rate and further squeezed
liquidity.
Data as of September 1992
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