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Peru Export and Import Structures
Peru's exports and imports have been so volatile, owing
both
to external fluctuations and to internal problems, that it
is
hard to define what could be considered normal structures
of
trade. Measured in terms of dollars, exports rose greatly
from
1970 to 1980, from US$1.0 billion to US$3.9 billion, but
they
then fell back to US$2.5 billion by 1986. Imports were
less than
exports in 1970, at US$700 million, but tripled in the
next five
years as a result of the heavy spending of the military
government in that period. Imports were pulled back to
US$1.7
billion by 1978, then jumped to US$3.8 billion in 1981 as
the
Belaúnde government both liberalized imports and increased
its
own spending. At the end of the decade, in 1989, the
collapse of
domestic economic activity pulled imports back down to
US$2.0
billion, exactly where they had been a decade earlier.
Because
the same collapse of domestic sales encouraged increased
attempts
to export, Peru finished the decade with a record trade
surplus
of US$1.6 billion. The surplus was not so much an
achievement as
it was the result of failure to maintain economic growth
(see
table 15, Appendix).
In a comparison of exports of goods and services to
GDP, the
country's export ratio was 16 percent in 1965 but fell to
10
percent by 1988. Imports of goods and services were 19
percent of
GDP in 1965 and 14 percent in 1988, giving the country a
net
resource inflow equal to 3 percent of GDP in the earlier
year and
4 percent in 1988.
Taking 1988 as something close to a representative year
(to
avoid the particularly strained conditions of 1989 and
1990),
exports of goods included US$1.4 billion worth of
traditional
products and US$0.8 billion of more diversified
nontraditional
products. Both of these values were, unhappily, below
their
levels as of 1980 (see
table 16, Appendix). Metals and
petroleum
were by far the most important products. The principal
metal
products accounted for 50.6 percent of total commodity
export
earnings, with petroleum and its derivatives adding 8
percent.
Copper stood out, as it has for many years, accounting for
22.3
percent of earnings in 1990, down slightly from more than
24
percent in 1970. Zinc exports climbed rapidly between
these
twenty years, reaching 12.6 percent of the total in 1990.
A
comparison of 1970 and 1990 somewhat misleadingly suggests
strong
growth for petroleum exports, from a negligible level in
1970 to
8 percent of total exports in 1990. This suggestion is
misleading
because oil exports actually reached their peak in 1980,
at
US$792 million and 20 percent of total exports. By 1990
their
value had fallen, at much lower prices, to US$263 million.
Agricultural exports were much lower than those from
the
mining sector, but the four major products--coffee,
cotton, fish
meal, and sugar--added up to 19 percent of total exports
in 1988.
They did not show much growth between 1970 and 1988,
rising only
from US$462 to US$523 million over this eighteen-year
period.
Peru's future growth prospects depend crucially on the
ability to develop new exports, preferably manufacturing
exports
and more diversified, higher-value, primary products to
supplement the traditional products. Manufacturing exports
are
free of the built-in limits of production imposed by
dependence
on exhaustible natural resources, and their markets are
usually
more stable than those for primary products. For Peruvian
industrialists who have limited their focus mainly to
protected
domestic markets, manufactured goods offer both a
competitive
stimulus and important learning opportunities. If more
Peruvian
manufacturers enter export markets successfully, the
prospects
for growth of productivity and of entrepreneurial capacity
could
greatly improve.
Peruvian industrial firms seemed to be starting this
important transition in the 1960-80 period, but then the
new
trend went into reverse. Exports of manufactured goods
were
US$743 million in 1980, but by 1987 they had fallen to
US$540
million. In 1987 the manufacturing sector's imports of
inputs for
production and of capital equipment were nearly triple its
exports.
The manufacturing sector's failure so far to raise
exports
even close to the level of its own imports is a crucial
problem
for Peru. The problem could in theory be resolved by
changing two
aspects of national economic policy that have worked
powerfully
to hold back industrial exports. One of the two key
obstacles has
been the high rate of effective protection for industrial
products. High protection increases the profitability of
selling
to the home market rather than exporting and also makes it
difficult to compete abroad because it raises the prices
of
inputs for Peruvian firms above the international prices
available to competitors in other countries. Peruvian
protection
was greatly raised in the 1960s and then again, after
temporary
reductions, in the second half of the 1980s. As discussed
below,
the Fujimori government went back the other way: it
simplified
the tariff structure and made significant reductions for
the
products with the highest rates of protection. These
changes
should help to release constraints on manufacturing
exports, but
the likely results depend on the other key policy variable
concerned, the exchange rate.
The second policy adverse to exports has been chronic
overvaluation of the currency. With the Peruvian currency
overvalued, the domestic currency equivalent of foreign
exchange
earnings by exporters is held down; for most producers,
exports
become simply unprofitable. The currency has clearly been
overvalued in the great majority of years since 1960, and
especially so at the end of the 1980s. The degree of
overvaluation was relatively low as of 1980, but the
real exchange rate (see Glossary)
fell nearly 50 percent from
1980 to
1989. Although there is room for a great deal of debate
about how
rapidly exports of manufactures could grow in response to
a
rising real exchange rate, there is no doubt that a
falling rate
can kill them off.
Imports are also responsive to changes in exchange
rates,
although they are more strongly affected by changes in the
levels
of domestic demand and economic activity, and in some
periods by
changes in degrees of import restriction. Domestic
economic
activity has a particularly direct effect because most
imports
consist of current inputs for production and capital
equipment.
The structure of imports in 1988 was fairly representative
in
this respect. Imports of consumer goods were only 10
percent of
the total, reflecting the high import barriers in effect
for
them. Imports of current inputs for production of the
private
sector were 34 percent of the total, and similar imports
by the
public sector were equal to 23 percent of the total.
Imports of
machinery and equipment by the private sector were 23
percent and
those by the public sector, 2 percent.
Imports of consumer goods became temporarily more
important
when the Belaúnde government relaxed restrictions on them
in the
early 1980s. Consumer goods imported by the private sector
more
than tripled between 1979 and 1982, increasing from 5
percent to
11 percent of a rapidly rising import total. But the trade
deficit went up so swiftly in this period that
restrictions were
quickly restored. The experience led many Peruvians to
conclude
that the country cannot afford to allow anything like free
access
to imports. An alternative view, apparently shared by the
Fujimori government, is that the trade deficit resulted
more from
excess spending than from the reduction of restrictions,
and that
a more comprehensive and sustained opening of the economy
could
do a great deal to foster more competitive Peruvian
industries.
Following this brief experiment with more open trade in
the
early 1980s, Peru returned to its preceding regime of high
tariffs and multiple forms of direct import restriction.
At the
end of the García government, in June 1990, the average
tariff
rate was 66 percent. A more significant measure for the
industrial sector is the rate of
effective protection (see Glossary)
for its products. As of July 1990, effective protection
for the industrial sector averaged 82 percent. Individual
industries had widely different levels of effective
protection, ranging up to 130 percent for clothing. And in addition to
such protection through tariffs, twenty different regulations
authorized direct restrictions to prohibit or to apply
quota limits to many products.
The Fujimori government introduced a revolution in
trade
policy in September 1990 and carried it still further with
new
changes in March 1991. All direct quantitative
restrictions on
imports were eliminated. The rate of effective protection
for
industry was cut from 83 percent to 44 percent in
September and
to 24 percent in March. The wildly dispersed tariff rates
previously in effect were consolidated at three much lower
levels: 15 percent for inputs into production, 20 percent
for
capital goods, and 25 percent for consumer goods.
Policies with respect to protection and exchange rates
can
make a great deal of difference to the evolution of
exports and
imports, and to the economy as a whole, but that is not to
deny
the independent importance of fluctuations in external
demand and
prices. A worldwide industrial boom invariably works to
raise
prices of metals and to create an export boom for Peru,
just as a
worldwide contraction acts to set it back. Peru's
terms of trade (see Glossary)
have always been highly volatile. Using 1978 as a
base year equal to 100, the terms of trade index went as
high as 150 and as low as 86 in the course of the 1970s (the
higher the index, the better are the terms of trade for a given
country). The index reached 153 in 1980 and then plunged to 66 in
1986, cutting more than half the purchasing power of a given
volume of
exports. The terms of trade then began a modest rise, to
an index
of 77 by 1989. These swings in relative prices apply above
all to
Peru's primary exports, especially metals. Their impacts
on the
Peruvian economy could be moderated considerably if the
country
manages to move toward an export structure based more on
manufactured goods and less on primary exports.
Data as of September 1992
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