Peru Table of Contents
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
Peru Table of Contents