Return to: Index of "1994 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)

                                    1992      1993      1994 est

Income, Production, Employment:

Real GDP (1985 prices)            19,946    21,318    23,637
Real GDP Growth (pct.)              -2.4       6.5      10.0
GDP (at current prices) 1/        25,587    28,047    31,800
By Sector:
  Agriculture                      3,045     3,332     3,865
  Fisheries                          273       344       447
  Mining/Petroleum                 2,856     3,175     3,334
  Manufacturing                    5,696     6,257     7,195
  Construction                     1,716     2,002     2,500
  Government                       1,587     1,635     1,650
  Others                          10,413    11,302    12,809
Net Exports of Goods & Services   -2,144    -2,216    -2,500
Real Per Capita GDP (1985 USD)       888       930     1,011
Labor Force (000s)                 8,184     8,400     8,500
Unemployment Rate (pct./year-end)   9.4        9.9       9.5

Money and Prices:  (end of year)

Money Supply (M2) 2/               1,435     1,530     2,084
Discount Rate (pct.) 3/             80.3      56.8      33.0
Consumer Prices (pct. change)       56.7      39.5      18.0
Wholesale Prices (pct. change)      50.5      34.1      15.0
Exchange Rate                       1.63      2.16      2.25

Balance of Payments and Trade:

Total Exports (FOB)                3,484     3,464     4,100
  Exports to U.S.                    739       750       760
Total Imports (FOB)                4,051     4,042     5,100
  Imports from U.S.                1,002       900     1,050
Aid from U.S.                        123       146       150
External Public Debt              21,409    22,157    22,400
Debt Service Paid 4/                 725       886       900
Foreign Exchange Reserves          2,001     2,701     6,000
Merchandise Trade Balance           -566      -578    -1,000

1/ Because of recent hyperinflation, the current dollar value
of Peru's GDP is a subject of debate.  These figures represent
official Central Bank estimates.  They do not equate to nominal
GDP in soles converted at the market exchange rate.
2/ Figures are for money supply in national currency only.  The
majority of financial system liquidity consists of dollars.
3/ Annualized rate of interest commercial banks charge each
other on loans denominated in soles.  The rates on dollar loans
are significantly lower.
4/ Does not include lump-sum payments in 1993 connected with
Paris Club rescheduling.

Source:  Central Reserve Bank, National Institute of
Statistics, Ministry of Labor and U.S. Embassy estimates.

1.  General Policy Framework

    Peru has taken dramatic steps to stabilize and liberalize
its economy since the inauguration of President Alberto
Fujimori in July 1990.  Bureaucratic procedures have been
streamlined, price controls terminated, the tax system
simplified, and labor laws made more flexible.  Exchange
controls have been lifted, and there are no restrictions on
remittances of profits, dividends or royalties.  By mid-1995,
the government expects all remaining state-owned firms to have
been privatized or liquidated.

    Import licenses have been abolished for practically all
products and non-tariff barriers eliminated.  The average
tariff rate has been cut to 16 percent, compared with 80
percent in 1990.  The government plans to move to a flat
15-percent tariff in 1995.  Currently, 98 percent of imports
enter at the 15-percent rate, the rest at 25 percent.  Peru
maintains import surcharges on five basic agricultural
products, which reduces the competitiveness of U.S. farm
products.  But these surcharges are scheduled to be phased out
by 1997.

    The economy is recovering from the deep recession and
hyperinflation of the late 80s and early 90s, but it has yet to
produce significant job growth.  Real gdp growth could exceed
10 percent in 1994, and inflation is likely to fall below 20
percent (versus 39 percent in 1993 and 7,650 percent in 1990). 
In September 1994, consumer prices rose just 0.5 percent -- the
lowest monthly inflation rate in 19 years.

    The Central Bank manages the money supply and affects
interest and exchange rates through emission, open-market
operations, rediscounts and reserve requirements on dollar and
sol deposits.  Dollars still account for more than 60 percent
of total liquidity (the legacy of hyperinflation), which
complicates the government's efforts to manage monetary
policy.  The central bank does not finance the fiscal deficit. 
Current government expenditures have been in balance with
revenues since late 1990, and the combined fiscal deficit
(resulting fromdebt payment) has been financed by external
sources.  Over the last two years, a strong inflow of foreign
capital, primarily from privatizations, has more than offset
the merchandise trade deficit, and net foreign reserves have
grown to nearly USD 6 billion (they were negative when Fujimori
took office).

    Peru has ratified the Uruguay Round agreements and became 
a founding member of the World Trade Organization (WTO) on
January 1, 1995.  President Fujimori faces re-election in April
1995.  His principal opponent is former UN Secretary General
Javier Perez de Cuellar, running as an independent.

2.  Exchange Rate Policy

    The exchange rate for the Peruvian New Sol is determined by
market forces, with some intervention by the central bank to
stabilize movements.  There are no multiple rates.  The 1993
constitution guarantees free access to and disposition
offoreign currency.  There are no restrictions on the purchase,
use or remittance of foreign exchange.  Exporters conduct
transactions freely on the open market and are not required to
channel their foreign exchange transactions through the central

    Since the end of 1992, the Sol has declined 27 percent
against the dollar in nominal terms.  However, when differences
in inflation rates are taken into account, the Sol has
appreciated in real terms.

3.  Structural Policies

    In the short span of four years, Peru has been converted
from an economy dominated by a protectionist and
interventionist state to a liberal economy dominated by the
private sector and market forces.  Several major state-owned
businesses have been privatized in the past two years,
including the phone company, the national airline (Aeroperu),
electrical utilities and a number of mining properties.  By the
middle of 1995, the government intends to have sold off all
remaining state-owned enterprises, including the petroleum
company (Petroperu), the remaining electrical utilities, the
water and sewage utilities, the fish-processing operations
(Pescaperu), the ports (ENAPU), the airport authority (Corpac),
tourist hotels and the remaining mining properties, including
the largest, Centromin.  There is some public sentiment against
privatization, especially the privatization of Petroperu.  But
the government is determined to go ahead with its plans.

    Price controls, subsidies and restrictions on foreign
investment have been eliminated.  A major revision of the tax
code was enacted at the end of 1992, and the corrupt and
inefficient tax authority (Sunat) was completely revamped, as
was the customs authority.  Tax collection has improved from 4
percent of gdp in 1990 to between 10 and 12 percent in late
1994.  Customs collections in 1994 were running at a record
pace, despite the sharp cut in tariff rates.  Although income
tax collection has increased, the government still relies
primarily on consumption taxes, including an 18 percent
value-added tax.  There are also surtaxes on certain big-ticket
luxury items, such as automobiles.  As a result, the total tax
levied on an imported car, including VAT, luxury tax and
15-percent tariff, exceeds 40 percent.

    Regulatory regimes have been streamlined in most sectors. 
For example, registration of a new company now takes about a
month in most cases, compared with two years under the previous
regime.  There are exceptions for certain regulated industries,
such as casinos, which require approval of the Gaming
Commission.  Under the new automatic registration process,
companies may open for business if they do not receive a
negative reply to their license applications within 60 days. 
The 1993 constitution guarantees national treatment for foreign
investors.  However, many U.S. investors continue to have
problems because of Peru's unpredictable judicial system.

4.  Debt Management Policies

    Peru's public external debt at the end of June 1994 totaled
USD 22.4 billion -- roughly two-thirds of gdp.  Total service
payments on the debt in the first half of 1994 totaled USD 460
million, or 23 percent of merchandise exports.

    Peru cleared its arrears with the Interamerican Development
Bank in September 1991.  In March 1993 it cleared its USD 1.8
billion in arrears to the IMF and World Bank and negotiated an
extended fund facility with the IMF for 1993-95.  The Paris
Club rescheduled almost USD 6 billion of Peru's official
bilateral debt in 1991.  A second Paris Club rescheduling in
May 1993 lowered payments for the period March 1993 to March
1996 from USD 1.1 billion to about USD 400 million.

    In September 1994, the Peruvian congress voted to recognize
the government's obligation to repay the debt to Chemical Bank
and American Express dating to 1983 for the lease of two ships
-- the Mantaro and the Pachitea.  The settlement of this
longstanding dispute paves the way for Peru to renegotiate its
debt with the foreign commercial banks -- estimated at between
USD 6 billion and USD 9 billion, including arrears and
penalties.  Peru hopes to negotiate a Brady Plan agreement with
the commercial banks that will significantly lower its
debt-service obligations.  Preliminary discussions with the
banks were underway in October 1994.  The government is also
accepting cancelled debt as partial payment in selected
privatizations.  In October 1994, Peruvian debt was trading at
about 60 percent of face value.

5.  Significant Barriers to U.S. Exports

    Almost all barriers to U.S. exports and direct investment
have been eliminated over the past four years.  There are no
quantitative or qualitative ceilings on imports.  The
investment law is extremely liberal.  Customs procedures have
been simplified and the customs administration made more

    Import licenses have been abolished for the vast majority
of products.  The only remaining products requiring licenses
are firearms, munitions and explosives; chemical precursors
(used in cocaine production); and ammonium nitrate fertilizer,
which has been used as a blast enhancer for terrorist car bombs.

    Import surcharges imposed in May 1991 remain in effect on
18 categories of agricultural products, covering five basic
commodities: wheat, rice, corn, sugar and milk products.  The
surcharges on wheat (including wheat flour), rice (milled and
paddy), corn and sugar are variable import levies, based on
price bands determined weekly by the Ministry of Agriculture,
tied to world market prices.  Whole and skimmed milk powder and
milk fat are subject to per-ton surcharges. The Peruvian
government defends the surcharges as necessary to protect
Peruvian farmers from subsidized international competition and
cushion the effect of an overvalued Sol and structural
adjustment.  In March 1993, the government agreed to phase out
the surcharges over a three-year period as a condition for
disbursement of an Interamerican Development Bank trade-sector
loan.  The surcharge levels were reduced by about 5 percent in
April 1994 and by an equal amount in October 1994.  Further
cuts are scheduled to take place in January and July 1995, and
every six months thereafter until the surcharges are
eliminated.  At present, however, it is difficult for U.S.
grain exporters to effectively compete in the Peruvian market.

6.  Export Subsidies Policies

    The Peruvian government provides no export subsidies.  The
Andean Development Corporation, of which Peru is a member,
provides limited financing to exporters at rates lower than
those available from Peruvian banks (but higher than those
available to U.S. companies).  Exporters of non-traditional and
mining products can apply certain sales and consumption taxes
paid on inputs as a credit against income and asset taxes. 
Exporters also can receive rebates of the value-added tax on
their inputs.

7.  Protection of U.S. Intellectual Property

    Intellectual property protection in Peru has improved in
recent years but still falls short of international standards. 
Enforcement mechanisms are in the early stages of development
and are still unproven for the most part.  Peru remains on the
Special 301 Watch List.

    Peru is a signatory to the Berne Convention for the
Protection of Literary and Artistic Works and to the Universal
Copyright Convention and is a member of the World Intellectual
Property Organization.  In October 1994, the Peruvian congress
ratified the Paris Convention on Industrial Property.  The
government plans to implement the GATT TRIPs provisions once
the Peruvian congress ratifies the Uruguay Round agreement.

    As of January 1, 1994, Peruvian law provides patent
protection for all classes of inventions, without exception. 
This exceeds the protection provided under Andean Pact Decision
344.  Peru does not provide transitional (pipeline)
protection.  Decision 344, which went into effect on January 1,
1994, lengthened the patent protection period to a straight 20
years (compared with the 15-plus-5 regime under the old law). 
It permits member countries to improve patent and trademark
protections beyond those provided by the pact.  Decision 344
contains compulsory licensing provisions, but these provisions
are unlikely to be used in Peru because of the numerous
requirements that must first be fulfilled.

    Counterfeiting of trademarks is prevalent, because there is
only rare, disjointed regulatory enforcement.  At times the
local courts have failed to back enforcement efforts in
clear-cut cases.  Some U.S. companies have spent years in
fruitless litigation attempting to secure protection for their
trademarks in Peru.

    Copyrights are widely disregarded, but enforcement is
improving, particularly with regard to software, videos, and
musical recordings.  Textbooks and books on technical subjects
are rampantly copied, and illegal copies of audio cassettes are
widely available.  Pirated copies of motion picture videos
constitute the inventories of nearly all video rental outlets. 
As soon as a film is in general release in Lima, its bootleg
appears in local video stores.  Although computer software is
now protected by Peruvian copyright law, pirated software is
widely available.  Recently, however, authorities have raided
large-scale software users, such as computer schools and
economic consulting firms, to check for pirated software, and
pirated software has been destroyed in well-publicized public

    Peruvian law does not protect semiconductor chip layout
designs, but the Embassy is not aware of any infringement of
integrated circuits or semiconductor chips.  Private
freebooting of broadcast satellite signals may exist, but the
commercialization of the captured signals without a license
appears to have ended.

8.  Worker Rights

    Articles 28 and 42 of the Peruvian constitution recognize
the right of workers to organize, bargain collectively and
strike.  Out of an estimated economically active population of
8 million, only about 7 percent belong to unions.  Roughly
two-thirds are employed in the informal sector, beyond
government regulation and supervision.  Strike activity
increased in 1994 as the economy picked up and workers demanded
better pay and conditions.  The beginning of the campaign for
the 1995 presidential election also inspired labor actions.

    a.  Right of Association

    Peruvian law allows for multiple forms of unions across
company or occupational lines.  Workers in probational status
or on short-term contracts are not eligible for union
membership.  Public employees exercising supervisory
responsibilities are excluded from the right to organize and
strike, as are the police and military.  The amount of time
union officials may devote to union work with pay is limited to
30 days per year.  Membership or non-membership in a union may
not be required as a condition of employment.  Although some
unions have been traditionally associated with political
groups, unions are prohibited by law from engaging in
explicitly political, religious or profit-making activities.

    b.  Collective Bargaining

    Bargaining agreements are considered contractual
agreements, valid only for the life of the contract. 
Productivity provisions must be included in any collective
bargaining agreement.  Unless there is a pre-existing labor
contract covering an occupation or industry as a whole, unions
must negotiate with each company individually.  The government
has set up a system of conciliation and arbitration to resolve
disputes in collective-bargaining impasses.  Strikes may be
called only after approval by a majority of all workers (union
and non-union) voting by secret ballot.  Unions in essential
public services, as determined by the government, must provide
sufficient workers, as determined by the employer, to maintain
operations during the strike.  Companies may unilaterally
suspend collective bargaining agreements for up to 90 days if
required by force majeur or economic conditions, with 15 days
notice to employees.

    c.  Forced or Compulsory Labor

    Forced or compulsory labor is prohibitted, as is
imprisonment for debt.  There are periodic reports of forced
labor in remote mountainous and jungle areas, which the
government claims it cannot control.

    d.  Minimum Age of Employment

    The minimum legal age for employment is 16.  Workers aged
16-21 may not exceed 15 percent of a company's workforce. 
However, although education through the primary level is free
and compulsory, many school-aged children must work to support
their families, usually in the informal economy without
government supervision of wages or conditions.

    e. Acceptable Conditions of Work

    The 1993 constitution provides for a maximum eight-hour
work day, a 48-hour work week, a weekly day of rest and 30 days
annual paid vacation.  The labor code also sets a 45-hour work
week for women.  Workers are promised a just and sufficient
wage  (to be determined by the government in consultation with
labor and business representatives) and adequate protection
against arbitrary dismissal.   No labor agreement may violate
or adversely affect the dignity of the worker.  These and other
benefits are readily sacrificed in exchange for regular
employment, especially in the informal sector.  The current
minimum wage is 130 Soles per month (about USD 57 at the
current exchange rate).

    f.  Rights in Sectors With U.S. Investment

    U.S. investment in Peru is concentrated primarily in the
mining and petroleum sectors.  Labor conditions in those
sectors compare favorably with other parts of the Peruvian
economy.  Workers are primarily unionized, and wages far exceed
the legal minimum.  Oil and mining workers called a number of
strikes in 1994 to demand higher pay and to protest government
privatization plans. 

  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
              Category                          Amount          

Petroleum                                             (1)
Total Manufacturing                                    20
  Food & Kindred Products                    5
  Chemicals and Allied Products             -4
  Metals, Primary & Fabricated               9
  Machinery, except Electrical               0
  Electric & Electronic Equipment            1
  Transportation Equipment                   0
  Other Manufacturing                        9
Wholesale Trade                                        51
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                8
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  631      

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic

To the top of this page