Traditionally the economy of Peru, was based on natural resources in fields such as mining, farming, fishing, and agriculture. Lately, though, there has been a noticeable increase in slight industries, services and high technologies. In 2007, the Peruvian economy grew 9%, the largest growth rate in all of South America. Poverty has been reduced substantially in the past decade as in 2004, it was slightly under 50%, in 2006 was at 45%, and in 2008 is at 36%. According to government sources, poverty is projected to be reduced to under 10% in eight years, and the President Alan Garcia has stated that by this time Peru will cease to be a third world nation. The Lima Stock Exchange grew 185.24% in 2006 and in 2007 grew 168.3% making it one of the fastest growing stock exchanges in the world. However, the Bolsa started falling in mid-2007 and the decline has continued through 2008, leaving the index at barely half its peak in early Aug. 2008. There was a slight recovery in the last half of August. Inflation was the lowest in Latin America at only 1.8% in 2006, but it started to increase in late 2007 with rising oil and commodity prices. For the first half of 2008, it was about 5.5%.
In 2001 the current account deficit dropped to about 2.2% of GDP (US$1.17 billion)--from 3.1% in 2000--while the trade balance registered a small deficit. Exports dropped slightly to $7.11 billion, while imports fell 2.1% to $7.20 billion. After being hit hard by El Niño in 1998, fisheries exports have recovered, and minerals and metals exports recorded large gains in 2001 and 2002, mostly as a result of the opening of the Antamina copper-zinc mine. By mid-2002, most sectors of the economy were showing gains. After several years of substantial growth, foreign direct investment not related to privatization fell dramatically in 2000 and 2001, as well as in the first half of 2002. Net international reserves at the end of May 2002 stood at $9.16 billion, up from $8.6 billion (2001), $17 billion at the end of 2006, over $20 billion in 2007, and over $35 billion in May 2008. Peru has signed a number of free trade agreements, including the 2007 United States-Peru Trade Promotion Agreement, and 2008 agreements with Canada and Singapore. It is currently negotiating the China–Peru Free Trade Agreement, which is expected to be signed in November 2008.
The Peruvian government actively seeks to attract both foreign and domestic investment in all sectors of the economy. International investment was spurred by the significant progress Peru made during the 1990s toward economic, social, and political stability, but it slowed again after the government delayed privatizations and as political uncertainty increased in 2000. President Alejandro Toledo has made investment promotion a priority of his government. While Peru was previously marked by terrorism, hyperinflation, and government intervention in the economy, the Government of Peru under former President Alberto Fujimori took the steps necessary to bring those problems under control. Democratic institutions, however, and especially the judiciary, remain weak.
The Government of Peru's economic stabilization and liberalization program lowered trade barriers, eliminated restrictions on capital flows, and opened the economy to foreign investment, with the result that Peru now has one of the most open investment regimes in the world. Between 1992 and 2001, Peru attracted almost $17 billion in foreign direct investment in Peru, after negligible investment during the 1980s, mainly from Spain (32.35%)[11], the United States (17.51%), the Switzerland (6.99%), Chile (6.63%), and Mexico (5.53%). The basic legal structure for foreign investment in Peru is formed by the 1993 constitution, the Private Investment Growth Law, and the November 1996 Investment Promotion Law. Although Peru does not have a bilateral investment treaty with the United States, it has signed an agreement (1993) with the Overseas Private Investment Corporation (OPIC) concerning OPIC-financed loans, guarantees, and investments. Peru also has committed itself to arbitration of investment disputes under the auspices of ICSID (the World Bank's International Center for the Settlement of Investment Disputes) or other international or national arbitration tribunals.
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Economy Of Peru