PERU'S ECONOMY

The economy of Peru is the 47th largest in the world. Peru is an emerging, market-oriented economy characterized by a high level of foreign trade. Historically, the country's economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments. Peru's main exports are copper, gold, zinc, textiles, and fish meal; its major trade partners are the United States, China, Brazil, and Chile. Although exports have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive.

Peru's economy has shown strong growth over the past seven years, averaging 6.8% a year, helped by market-oriented economic reforms and privatizations in the 1990s, and measures taken since 2001 to promote trade and attract investment. GDP grew 9.8% in 2008, 8.9% in 2007, 7.7% in 2006, and 6.8% in 2005. President Alan García and his economic team have continued these policies. Recent economic expansion has been driven by construction, mining, private investment, exports, and domestic consumption. Inflation (annual average) jumped to 5.8% in 2008, due mostly to substantial global foods and oil prices increases, and the fiscal surplus (third year in a row) was 2.1% of GDP. Thanks to pre-payments, public external debt in 2008 dropped to $19.2 billion, and foreign reserves were a record $31.2 billion.

Peru's economy is well managed, and better tax collection and growth are increasing revenues, with expenditures keeping pace. Private investment is rising and becoming more broad-based. Peru obtained investment grade status in 2008. The García administration is pursuing decentralization initiatives, and is focused on bringing more small businesses into the formal economy. However, the 2008 global financial crisis will make a dent in the Peruvian economy in 2009, with GDP growth expected to drop to 3.5%.

External Statistics

Exports

$32 billion (2008 est.)

Export goods

copper, gold, zinc, crude petroleum and petroleum products, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, machinery, cement, textiles, coffee, potatoes, asparagus, guinea pigs

Main export partners

United States 31.1%, China 10.8%, Chile 6.6%, Canada 5.9%, Switzerland 4.6% (2005)

Imports

$15.38 billion f.o.b. (2006 est.)

Import goods

petroleum and petroleum products, plastics, machinery, vehicles, iron and steel, wheat, paper

Main import partners

United States 18.2%, China 8.5%, Brazil 8%, Ecuador 7.4%, Colombia 6.1%, Argentina 5.1%, Chile 5.1%, Venezuela 4.1% (2005)

Industry and services

Fishing, Peru is an international leader in fishing, producing nearly 10 percent of the world's fish catch. Mining, Peru ranks eighth worldwide in gold production (first in Latin America), second in copper, and among the top 5 producers of lead and zinc. Manufacturing. Because of its long dependence on raw material exports, Peru has never developed a strong manufacturing sector. The sector represents 15 percent of GDP and is tied heavily to mining, fishing, agriculture, and textiles. Manufacturing is mainly devoted to processing a percentage of the raw materials to gain a value-added advantage. The most promising sector is textiles. Tourism has represented a new growth industry in Peru since the early 1990s, with the government and private sector dedicating considerable energies to boosting the country's tourist destinations both to Peruvians and foreigners.

Services: Financial services, with the exception of Banco de Credito—Peru's largest financial institution (US$8.5 billion in assets)—nearly all the financial sector has fallen into foreign hands

[edit] Natural resources

Peru's natural resources are copper, silver, gold, petroleum, timber, fish, iron ore, coal, phosphate, potash, and natural gas.

Foreign Trade and Balance of Payments

Peru and the U.S. signed the U.S.-Peru Trade Promotion Agreement (PTPA) in April 2006 in Washington, DC. The PTPA was ratified by the Peruvian Congress in June 2006 and by the U.S. Congress in December 2007. The Peruvian Government passed several changes to its environmental and intellectual property laws in order to allow the PTPA to enter into force. The PTPA entered into force on February 1, 2009.

Peru’s exports reached $31.2 billion in 2008, partially as a result of high mineral prices. Peru's major trading partners are the U.S., China, EU, Switzerland, Canada, and Japan. According to U.S. Government statistics, after nine years of surpluses Peru registered a deficit in its trade with the United States of $0.33 billion in 2008, exporting $5.86 billion and importing $6.18 billion. Peru’s exports include petroleum, gold, copper, apparel, tin, coffee, non-ferrous ores, asparagus, fishmeal, zinc, and textiles. Imports include machinery, petroleum products, electrical machinery, plastics, vehicles, steel, and cereals. Peru belongs to the Andean Community, the Asia-Pacific Economic Cooperation (APEC) forum, and the World Trade Organization (WTO). Peru has limited trade agreements with Chile and Mexico; it signed more robust agreements with Canada and Singapore in 2008, recently concluded a trade agreement with China, and is negotiating one with the European Union.

Foreign Investment

The Peruvian Government actively seeks to attract both foreign and domestic investment in all sectors of the economy. The registered stock of foreign direct investment (FDI) at end-2008 was $18 billion, though Peru’s Central Bank estimates FDI was $30 billion. The U.S., Spain, and the United Kingdom are the leading investors. FDI is concentrated in telecommunications, mining, manufacturing, finance, and electricity.

Mining and Energy

Peru is a source of both natural gas and petroleum. In August 2004, Peru inaugurated operations of the Camisea natural gas project. Camisea gas has transformed Peru’s energy matrix, reducing the country’s dependence on imported diesel. The $3.8 billion Peru LNG project, currently under construction, will liquefy natural gas for export to Mexico and possibly the west coast of the United States, converting Peru into a net energy exporter in 2010.

Peru is the world's top producer of silver, second in zinc, third in copper and tin, fourth in lead, and sixth in gold. Mineral exports have consistently accounted for the most significant portion of Peru's export revenue, comprising 63% in 2008.