This site presents an analysis of the Peruvian government's economic policies compared to a list of 35 economic policies as prepared by student Diana Li Sam with the Mike P. McKeever Institute of Economic Policy Analysis (MIEPA). This study was written in May of 2018. To read the analyses scroll through this site. To learn more about the background policies, click here
To learn more about MIEPA, click here
Return to MIEPA's Home Page
DIANA LI SAM
This study presents a detailed study of the economic policies of Peru, as written by Specialist Diana Li Sam. The ratings herein are based on the following rating scale:
5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2018. Used herein with permission]
RATING SUMMARY - DIANA LI SAM POLICY NUMBER RAW SCORE ADJUSTED SCORE POSSIBLE PERCENTAGE 1 5.0 15.0 15.0 100 % 2 3.0 9.0 15.0 60 3 2.4 7.2 15.0 48 4 2.5 7.5 15.0 50 5 5.0 15.0 15.0 100 6 4.0 12.0 15.0 80 7 2.0 6.0 15.0 40 8 1.5 4.5 15.0 30 9 1.5 4.5 15.0 30 10 5.0 15.0 15.0 100 11 3.8 11.4 15.0 76 12 4.0 8.0 10.0 80 13 5.0 10.0 10.0 100 14 2.0 4.0 10.0 40 15 5.0 10.0 10.0 100 16 4.0 8.0 10.0 80 17 1.0 2.0 10.0 20 18 2.0 4.0 10.0 40 19 1.0 2.0 10.0 20 20 1.0 2.0 10.0 20 21 4.8 9.6 10.0 96 22 3.5 7.0 10.0 70 23 3.0 6.0 10.0 60 24 2.8 5.6 10.0 56 25 2.0 4.0 10.0 40 26 1.5 3.0 10.0 30 27 2.5 5.0 10.0 50 28 4.0 8.0 10.0 80 29 4.7 4.7 5.0 94 30 4.9 4.9 5.0 98 31 2.8 2.8 5.0 56 32 5.0 5.0 5.0 100 33 3.8 3.8 5.0 76 34 4.9 4.9 5.0 98 35 4.0 4.0 5.0 80 TOTAL 114.9 271.7 370.0 73.4% ===== ====== ===== =====
INDIVIDUAL POLICIES - DIANA LI SAM
1. Freedom from internal control Score: 5.0
Peruvians residents are free to travel around the country without any restrictions, as long as they have their national ID. They do not need passports or special travel identifications. Since the government encourages decentralization and tourism, they have simplified the paperwork. However, when a citizen is underage and is not traveling with the parents, is recommendable to have notarized permission.
When an area gets too dangerous due to the criminal activities, -terrorism, drug dealers, violent gangs- the mayor or the president can declare a state of emergency. Citizens can not leave their home for a period of time. It happened in the late 80’s and 90’s in all the nation when the country was facing terrorism; in 2016 in the Amazon, to fight against narco-terrorists; and in 2017 in Lima, due to the intense rain.
2. Freedom of speech Score: 3.0
The rapporteur of the Inter-American Commission on Human Rights, Edison Lanza, said that in Peru there is a reasonably open climate and an environment favorable to freedom of expression. Analysts from the organization Free House, affirm that Peru is a free country, having democracy, free speech, partially free press, and open net. There are no banned websites, newspapers, magazines, radio stations, or TV channels. However, minorities and victims are often silenced because of political or religious matters.
The Constitution grants the Freedom of Thought and Expression, as well as the Freedom of Press.
3. Effective, fair police force Score: 2.4
There is one officer per 450 citizens. 65% of Peruvians do not trust the National Police of Peru. More than half of the population find disappointment and fear in the police force due to the incompetence and corruption of the institution. Officers are often not well trained. They are enrolled in the police academy for three years without any superior educational background. Mid-range police officers earn approximately $1000. Citizens caught them bribing, in a state of drunkenness, stealing, abusing their authority, and so on.
The Ministry of Interior has been working to fight the inner issues in the institution, as well as training better officers in less time. Analysts think that the Ministry’s work has given some results, but they are not enough to fight the bad reputation they have. One of the most effective forces is the social media team. They have managed to reach nearly almost a million of 19 million Peruvian users on Facebook. Their concise content with local humor has helped them to approach more young people.
4. Private property Score: 2.5
The Peruvian Constitution is the principal protector of the private property. In the article 70, the law dictates, "the property right is inviolable. The State guarantees it.” The Constitutional Court is in charge of prosecuting people who violate this right. In 2017, Peru’s International Property Rights Index score increased by 0.41 to 5.22 placing it 9th in the Latin America and Caribbean region and 65th in the world. In a scale of 1 to 10, the country is almost in the middle, meaning it is on the right track of defending private property, but it has a lot of aspects to improve. Reflecting this score, robbery is a critical issue to be solved, since the cases of this crime have increased dramatically in the last decade. Peru is the second country with the highest figures of insecurity, just below Venezuela. The percentage increases because in Peru there are more crimes such as the theft of cell phones or wallets (without aggression), followed by robbery with weapons.
5. Commercial banks Score: 5.0
The Central Reserve Bank, the Superintendency of Banking and Insurance, the Association of Banks of Peru, and the Ministry of Economy and Finance regulate the Peruvian banking system. You can find private Banking Companies, State Financial entities, private Financial Companies, Savings and Credit Municipal Savings Banks, Rural Savings and Credit Banks, Development Entities for Small and Microenterprise, and Investment Banks.
The Peruvian financial system is ranked 21 worldwide and first in Latin America regarding integrity and trust, according to the Global Competitiveness Report 2017-2018, published by the World Economic Forum.
The Central Reserve Bank asserted that the Peruvian financial system increased its level of financial strength and that, if there were an adverse macroeconomic scenario, banks and municipal funds would face them without risking their solvency.
6. Communication systems Score: 4.0
Overall, communication in Peru is good, despite the rugged geography. The government plans to have 100% of citizens with this service by 2021. Internet and phone services are available to people in the Andes, where sometimes is hard to get there. However, they do not use these tools on a daily basis as people in cities due to their habits and culture. The government seeks to take fiber optic networks to the interior of the country. It has a developing project to achieve that. Almost 50% of Peruvians have and use a smartphone. The number of households that have mobile or fixed Internet service increased from 19.8% to 66.5% between 2012 and 2016 and reached 5.7 million households. In the same period, families in socioeconomic segments D and E increased their access to the Internet by 34 and 25 percentage points, respectively. Radio services are still prevalent on citizens. It is easy to have access with cars, online, small businesses. Newspapers are still popular, as well, but now more people read news on their mobile devices, watch them on TV or hear them on the radio.
7. Transportation Score: 2.0
Traffic is chaotic in big cities like Lima, Arequipa, and Piura. The driving app Waze has cataloged Lima as the worst city to drive in Latin America. Public buses, public trains taxis, car-pools, and public bicycles are available to citizens for their mobilization. Also, there are taxi apps like Uber, Cabify, and Beat. Despite the wide range of transportation options offered, public transportation is deficient. They are always crowded, they do not have proper safety measures, and most of them are not eco-friendly. The average commute time is 1 hour and 45 minutes.
Highways are poorly built due to the corruption in the system. Daily, there are at least a dozen of car accidents in roadways because of the narrow trails, and irresponsible drivers. Interprovincial buses are known for not being safe. Every week, at least a couple of accidents involve these type of coaches. Another way to travel through the country is by plane. Flights are reasonably cheap, with an average price of $60. Lima’s International Airport has won several times Latin America’s best airport.
8. Education Score: 1.5
Initial, primary, secondary and superior are the four stages of education in Peru. The first three are mandatory by law. Initial education is given to children under five years old. Primary education has a duration of 6 years, and secondary education has a period of 5 years. Higher education is taught in schools, colleges, post-graduate centers, and universities.The A / B class, 73.2% take their children to private schools, followed by C with 55.4% and E ahead of D with 30% and 22%, respectively. By regions, Lima has the most students in private schools with 59%, followed by the north with 31% and the south with 29%.
Education has been a problem to most Peruvians due to the corruption of authorities in charge. It is one of the countries that invest the least in education in the region -teachers earn little, students do not have books and supplies, the infrastructure is poor. Students have scored one of the lowest points on the PISA test in the last decade. The current government has been trying to improve it, but the opposing party has hindered the Ministry of Education’s actions by impeaching or trying to censor the former Ministers and President. Despite the inefficient job of the Congress and Government, Peru has won several Mathematics, Chess, Engineering, and Robotics championships around the world. The country also has the oldest university in the Americas, which it is recognized worldwide by its illustrious alumni.
9. Social mobility Score: 1.5
Peru is among the countries with higher inequality in the distribution of income: its Gini coefficient (0 means equality and 1 inequality) is 0.48, and it is ranked 22 out of 160 countries. For the first time in this millennium, poverty in Peru has risen to 21.7%, that is to say, that 21.7% of Peruvians subsist with $100 or less. The most affected places were Lima, where last year, poverty climbed from 11% to 13.3%; and rural areas, where this matter rose to 44.4% (0.6 points more than in 2016). The countryside of Peru is often forgotten by the government. They do not have proper education, nutrition, infrastructure nor health. 10% of the wealthiest Peruvians - businesspeople, shareholders- can earn 18 times more than the bottom 10% -farmers.
Sociologists divide socio-economic classes into 5: A, B, C, D, and E. The middle class forms the majority of the Peruvian population. They belong to the B, C, and D categories. They have the abilities to ascend the economic ladder since most of them have a university degree or have small businesses. However, in 2017, 180,000 people descended the economic ladder.
10. Share of all jobs in small businesses Score: 5.0
Micro and small businesses conform 96.5% of the total companies in Peru. 1 to 10 workers form micro companies, and they have annual sales that do not exceed the amount of $194 531.5. 9 of 10 businesses are categorized as micro companies. Companies qualify as small businesses when they have up to 100 workers, and their annual sales are below $ 2.2 million. These companies produce roughly 26% of the Gross Domestic Product. However, 81% are informal companies -they are not registered in Public Records; they do not pay the taxes; they do not have financial backup. This is why the government has enabled easier and more beneficial policies to formalize companies. Mid-sized companies constitute 3.1%. They must have up to 250 workers and have sales of less than $2.98 million. Large companies form 0.4%; they have more than 250 workers and have annual sales of more than $2.98 million.
11. Freedom from outside control Score: 3.8
Since the country is a sovereign and independent state, citizens are only subject to the Peruvian constitution, decrees, and orders. When Peruvians are abroad, they are ruled by the country's law. Peru has multilateral and bilateral extradition treaties with 26 countries. However, sometimes these petitions can be denied or take a long time to be processed. For example, the former president Alejandro Toledo, who is investigated by the prosecution for the alleged crimes of conspiracy, influence peddling and money laundering in the Odebrecht case in mid-2017, has escaped to the United States. His extradition has been approved in March, more than half year after authorities requested his arrest.
12. Protection of domestic enterprises Score: 4.0
In 2016, Peru experienced a slight surplus of 651.5 million in the balance of trade, breaking the streak of 3 previous years of deficit. Peruvian industry is the sector with the second most significant weight in the GDP. However, in the last four years, it has accumulated a downfall of 7.3%. The Ministry of Production has created 112 new legislative decrees -simpler and faster procedures unlocking of investments- to boost industries. In the face of this slow-growing sector, renown production institutes and societies also have proposed several reforms in order to reactivate this sector. With these new laws, the new Minister of Production foresees the recovery of 3.7% by the end of 2018.
The Main productive sectors are mining, fishery, agriculture, cattle raising and tourism. After the late 80's economic crisis, the government has been trying to support these sectors. However, the corruption has had damages to citizens and the environment.
13. Foreign currency transactions Score: 5.0
Although the Sol (S/.) is the official currency in Peru, citizens and tourists often use US dollars to exchange goods and services. It is common for Peruvians to have both Soles and US dollars accounts in the bank. Most citizens know the dollar exchange rate, which is S/.3.20. In main avenues, it is frequent to see money changers, people who do a similar job as currency exchange houses. Most businesspeople think their exchange rates are lower than banks, so they choose to convert their cash to these people. However, exchanging money is generally safer in banks. Overall, it is not complicated for people to exchange foreign currency in Peru since dollars are accepted almost everywhere.
The National Institute of Statistics and Informatics (INEI) calculates the Gross Domestic Product in both Soles and dollars. Since the United States is one of Peru’s biggest business partners, imports and exports are measured in US dollars, as well as the national currency.
14. Border control Score: 2.0
In the past decade, Peru has reinforced its borders with neighboring countries, -Ecuador, Colombia, Brazil, Bolivia, and Chile- in order to fight against border crimes, such as drug traffic and illegal merchandise. SUNAT (National Superintendency of Customs and Tax Administration) is in charge to control borders, whether by sea, land or air.
The border with Ecuador is still too weak. Every day, 2,000 Venezuelans cross this border in order to find better opportunities in Peru. It is also common for illegal Cuban migrants to pass over this line. Until March 2018, 150,000 Venezuelans have migrated to the country due to the political, economic and social crisis their country is facing. The Bolivian border, especially in the Titicaca Lake, is a target for illicit merchandisers to exchange goods.
15. Currency Score: 5.0
The official currency in Peru is the Sol (S/.), previously named Nuevo Sol. Since 2017 until April 2018, one US dollar is equivalent to nearly S/. 3.22. This currency replaced in 1991, the Inti because of the country’s hyperinflation and bad economy in the late 80’s. Every 1,000,000 intis were S/.1. Economists and investors see the Sol as a strong currency, stronger than the Mexican and Colombian currencies. Peruvians and tourists also use US dollars to get paid, buy goods and services. There are no problems for businesses to accept dollars. It is common to citizens to have both bank accounts in dollars and in soles. In less quantity, Euro is also used by Peruvians and tourists. Peruvian traders use US dollars to export and import.
The Reserve Bank of Peru issues and prints notes and coins. The currency is divided into 100 cents. Currently, coins of 5, 10, 20, 50 cents, 1, 2 and 5 Soles, and bills of 10, 20, 50, 100 and 200 Soles are in circulation. By promoting numismatic and preserving Peruvian heritage, the Reserve Bank cradles a series of coins with local culture pictures. In early 2018, the Bank has increased the security measurements in the bills, due to the high rates of counterfeit in the country.
16. Cultural, language homogeneity Score: 4.0
Peru has a variety of culture due to the colonization in the 17th century and the later migration of Western Europeans and Eastern Asians. Demographically, according to Universia, mestizos make up 47% of the population. Mestizos are mostly of Spanish, Portuguese and Italian descent with Quechua and Aymara. Mulattos and Asians are to a greater extent throughout of the entire coast. Native Americans are 32% of the population, with 77 ethnic groups. European descendants make up 18.5%, while the rest are part of the Afro-descendants, Chinese, Japanese, and Western Asians. The country has 67 native languages and 3 official languages: Spanish, Quechua and Aymara. With more than 10,000 years of history, Peru has a great multicultural wealth and traditions; has a delicious and award-winning gastronomy. It has imposing archaeological complexes,12 world heritage sites of Unesco and vast natural reserves. The Ministry of Culture has worked many decades to make Peruvians proud of their heritage. It created the successful Country Brand, which encourages tourism around the nation.
Despite all the efforts of authorities and most Peruvians, racism and classism are a big problem in the country, especially in Lima. 89% of the population believe that Peru is racist. In “exclusive” restaurants, clubs, beaches people still experience some kind of discrimination, and the law is not equal to everybody.
17. Political Effectiveness Score: 1.0
Peruvian Government has demonstrated its ineffectiveness on several occasions throughout its history. In the eighties and nineties, the country suffered from terrorism. The government with an economic crisis, corruption, and tense international relationships took several years to capture the heads of the terrorist groups.
Peru is a seismic country. It did not have any security policies until the devastating earthquake of Yungay in 1970, which killed over 70,000 people. In 2007, two consecutive earthquakes of 8.0 and 7.5 left 595 dead, 2291 injured, 76 000 homes totally destroyed and uninhabitable. More than a decade has passed since the and the population affected still live without the security measures needed. In early 2017, a series of torrential rain, avalanches, and overflow of rivers left 28,245 people in all over the country affected. Highways, bridges, schools were closed.
18. Institutional stability Score: 2.0
Although Peru is facing a political crisis, in the economic view, Fitch Ratings has label the nation as a stable country. In late 2017, the Congress wanted to impeach the President. In May 2018, Pedro Pablo Kuczynski, now the ex-president resigned because of the Congress’ pressure. The country has not suffered military coups d'etat since 1968. However, the Constitution has changed 18 times since the independence from Spain in 1821. The last Constitution was written in 1993, when the president at the time, Alberto Fujimori, closed the Congress.
Peru has the oldest university of the Americas, the National University of San Marcos. The university has operated without interruption since 1551. Nevertheless, San Marcos students constantly storm the campus due to the ineffectiveness of educational authorities. As well as San Marcos, other public universities are often taken by students because of the poor administration.
19. Honest government Score: 1.0
In 2018, Peru is facing one of the worst political crisis in its history. The last six presidents are all in jail, escapees or investigated. Since 1985, the country has been involved in a deep external and internal corruption. The most scandalous recent case is the Lava Jato Operation. It is a corruption investigation carried out by the Federal Police of Brazil, which has involved several politicians in Latin America. Brazilian companies like Odebrecht and Petrobras have bribed and corrupted Peruvian politicians. Marcelo Odebrecht, the former CEO of Odebrecht, paid $ 29 millions of dollars in bribes to politicians, including the ex-presidents Pedro Pablo Kuczynski, Ollanta Humala, Alan García and Alejandro Toledo. The company also sponsored the political campaigns of the former mayor of Lima, Susana Villaran and Keiko Fujimori, leader of the majority party in the Congress.
20. Common laws Score: 1.0
Judicial power in Peru is deficient. Daily, corrupted judges set criminals free because of their power, their money or even the color of their skin. For instance, drug traffickers have a lot of control over the country, especially in the Amazon. Debased authorities liberate them in order to keep their reputation because drug dealers and their gang threaten or bribe them. The same happens with politicians. They are often absolved from their lawsuits due to their political power. For example, the congresswoman Rosa Bartra was accused of delivering gifts to capture votes in the 2016 elections. However, she has been acquitted of any charges, and in spite of that antecedent, the legislator now presides over the Lava Jato Commission.
Peruvian law also judges according to appearances and gender. Usually, lighter skin people do not have the same sentences as darker skin people. Police officers and judges understand darker skin people as less educated, so they take advantage by asking for bribes or sentencing them a harder punishment. Women are often not taken seriously by law. Harassed women do not receive justice. Little girls, teenagers, and so on are raped by their own family, by their partners or by strangers, and they do not get any sanction. For famous people like singers, tv stars and actors the law is less hard. They also get away easily from their crimes.
21. Central bank Score: 4.8
The Central Bank of Peru (BCRP) is an autonomous entity. It enjoys administrative independence and is subject to the law in matters of government. Central Reserve Bank of Peru is governed by the Political Constitution of 1993, its Statute and the Organic Law of the BCRP (Law No. 26123) since 1993. There are two fundamental aspects that the Constitution establishes in relation to the Central Bank: its purpose of preserving monetary stability and its autonomy. According to the Constitution, the Central Bank has as functions to regulate the currency and credit of the financial system, manage international reserves, issue bills and coins, and periodically report on national finances. The entity is the second most reliable institution in Peru with 65% approval of citizens.
22. Domestic budget management Score: 3.5
In 2017, the Congress approved the State spending of S/.142 millions. By the end of the year, the government collected S/. 90,7 million, reaching a deficit of nearly 3% of the Gross Domestic Product. The revenue in 2016 summed S/.121,950 millions while the public budget in 2016 was S/.138,491 millions. In 2016, the deficit totaled roughly 2.7% of the GDP. Public spending in 2015 reached S/.126 150 million, and the revenue was a total of S/. 92,730 million resulting in a deficit of 2.2% of the GDP. The annual result of 2015 is compared to the fiscal deficit of 0.3% of GDP in 2014.
23. Government debts Score: 3.0
The government debt in 2017 was 24.8% of the Gross Domestic Product, one of the lowest percentages in the region. Until June of 2017, public debt summed US $52.359 million. Peru is the third country in Latin America with the lowest ratio of public debt per inhabitant (US $1600), after Paraguay and Bolivia. However, the debt has grown by 57% in the last three years with respect to 2012, which recorded a value of S/. 3,449 (US $ 1068). César Peñaranda, executive director of the Institute of Economics and Business Development (IEDEP) explained that this increase is "due to the deterioration of fiscal accounts, the increase in current spending and the need for greater public investment".
24. Economic statistics Score: 2.8
The country has a National Institute of Statistics and Informatics (INEI) and has as purpose to standardize official statistical activities, coordinate, integrate and rationalize the official statistical activity, and promote training, research and development of statistical activity. Information such as economic data, demographics, employment, and so on can be found in their online library. This organization is one of the most credible institutes in Peru, according to several national surveys. Also, more information and statistics can be found in web pages of national entities. However, most of the web pages have a slow performance and vague information. Most data are archived in large reports.
25. Protection of public health and safety Score: 2.0
In 2016, the infant mortality rate in Peru was 11.9 deaths per 1000 births, comparing to industrialized countries like the United States with 5.7 per 1000 births and Japan with 2 per 1000. However, Peru is the leader in Latin America in reducing infant mortality. According to UNICEF, the country has reduced the rate by more than 75% in the last three decades. Peru has reduced the rate of chronic malnutrition from 28% to 13% between 2006 and 2016. The Government plans to lower the percentage to 6.4% by 2021. Studies of the World’s Health Organization have shown that 44% of children have anemia in Peru. The Ministry of Health projects a reduction to 19% by 2021.
The incidence of Tuberculosis in 2016 was 117 per 100 000 people, compared to the United States with 3.1 per 100 000. In 2017, there were 31 087 cases registered of the disease. Due to this alarming digit, the Ministry of Health will invest $45 million to reduce TBC in the next three years.
26. High wages policies Score: 1.5
The minimum wage is S/.850 PEN or $270 USD. However, since February 2018 the Congress has debated a possible salary increase to S/.1500 or $470. Farmers and informal workers usually earn less than the minimum. Almost 20% of Peruvians households live with less than $100 a month. There are many national programs to help underprivileged people. The JUNTOS program gives monetary incentives, good education, and health to poor families. Pension 65 is a program dedicated to helping elderly people without money resources. All of these programs helped eradicate poverty by 50% in the last decade.
Workers have the right to create labor unions. CGTP (General Confederation of Workers of Peru) is the biggest labor union in the country. In February 2018, the Congress approved the “Young Slave Law”. Technical students would work for 3 years without pay. Students and professors have protested against this law.
27. Environmental protection Score: 2.5
Often these laws are not enforced by citizens and the government. Most residents do not have environmental consciousness. Petroperu, a national oil company was fined with $15.5 millions for oil spills in Amazonas and Loreto. Lima, the capital, is the most polluted city in Latin America.
The country has over 9 laws and environmental standards written in the constitution. In the nineties, Peru created two environmental institutions. The National Environmental Council was created to plan, promote, coordinate, control, and ensure the environment and natural heritage of the nation. The National Environmental Fund promotes investment in environmental projects classified as priorities in six areas: clean development mechanism, energy, forestry and environmental services, transportation, mining environmental liabilities, water and waste. Peru develops several national programs in the areas of biodiversity, biocommerce, biosecurity, climate change, environmental noise quality, biofuel, environmental education, clean production and many others. In March 2018, the Peruvian Congress approved a law that will reduce greenhouse gas emissions. After the signing of the Paris Agreement on climate change, Peru is the first nation to have a law for present and future generations.
28. Strong army Score: 4.0
According to Global Fire Power, Peruvian army strength is ranked 39 of out of 133 countries, having a total military personnel of 369 330 people. The country has the fourth biggest army in Latin America, below Brazil, Mexico, and Argentina.
Military expenses in 2016 were 1.29% of the Gross Domestic Product, one of the lowest percentages in the last 50 years. On the other hand, Peru spent 7.1% of the GDP in 1979 when the country was governed by a military dictatorship.
29. Foreign trade impact Score: 4.7
According to the World Bank, merchandise trade has meant 38.1% of the Gross Domestic Product in 2016, roughly one-third of the total GDP. The total amount of imports of goods and services were $42.974 billions of dollars while Peruvian exports were a total of $43.144 billion of dollars. Merchandise trade has decreased by nearly 10% since the recession of 2008.
Peru exports mainly minerals like silver, copper and gold, grapes, avocados, mangoes, coffee, asparagus and Andean grains. Peruvians import refined oil, cars, raw oil. The biggest exports are to China, United States, Switzerland, Canada and South Korea. The country imports principally from United States, China, Brazil, Chile, and Mexico.
30. Management of foreign currency budget Score: 4.9
In 2016, Peru experienced a slight surplus over $170 millions of dollars. The exports of goods and services were $43.144 billion of dollars. The imports of goods and services were $42.974 billions of dollars. Exports report 22.447% of the Gross Domestic Product and imports were 22.358% of the Gross Domestic Product. The surplus is about 0.089% of the GDP.
In 1975, the country had one of the worst balances in its economic history, having a final balance of -10.707%. Peruvian exports registered 10.563% of the GDP, while imports registered 21.360% of the GDP. Peru experienced a deficit of $1.822 billion.
31. Layers of collective action Score: 2.8
The Ministry of Education manages public schools in Peru, however, the lack of effectiveness of the entity has obliged the creation of a parents association (APAFA). They assure the development of the academic year by providing building maintenance, buying school supplies and participating in the educational process.
The Ministry of Interior supervises the National Police of Peru. The Minister selects the authorities of the police force. Other lower ranks authorities are selected by the General or a Captain. The distribution of the police depends on the demography. Bigger and dangerous cities require a bigger organization of the police. Generally, small and isolated towns do not have the presence of the police force, they have “Rondas Campesinas” which consists of a group of farmers acting like a justice force. They have their own law and punishment as is far away from the central government.
Water and sewer are provided by the government, as they are state companies.
Citizens choose their mayors in an election. Town Hall Councilors are elected by the leaders of their political party. The number of seats for each political party is decided by the percentage of votes. There are neighboring meetings with the councilors every week to discuss matters of security, cleaning, and maintenance.
32. Pro-business climate Score: 5.0
The government has implemented a new modality of creating a company. In Peru, businesses can be created in 24 hours, while in Colombia and Ecuador can take 11 and 48 days, respectively. Less paperwork, online applications, digital process contribute to the reduction of the amount of time taken in opening a business. Before the reform, entrepreneurs took up to 26 days to register their companies. Also, the costs of opening a business were reduced with the new law. Some procedures could cost up to $500 USD, now most of them are free or have a low price. Business creation has grown 8.14% in 2017, having now 2.3 millions of companies registered.
Peru is seen as one of the best places to invest in Latin America. The Gross Domestic Product has grown 4.7% in comparison to the United States with 2.6%. This growth is one of the highest of the region, above Colombia and Ecuador. Peru is ranked as the world’s second-largest exporter of silver and copper. Also, the country has a foreign investment of $6.1 millions of dollars.
33. Government Enterprises Score: 3.8
The government owned 226 enterprises until 1990. Due to inflation, most of the state companies privatized. The Peruvian government now owns 35 companies, most of them are water, electricity, and health focussed. SEDAPAL (Potable Water and Sewerage Service), provides services to Lima and Callao, which concentrate 11 million citizens. The government subsidies nearly 60% of the bill. The state also pays for 62.5% for electricity across the country, positioning in second place in Latin America, under Argentina that pays for 80%. Peru has a housing program for poor families, “Fondo Mi Vivienda”, where underprivileged citizens can afford to buy or construct a house. The subsidy for the program stands for S/.197 500 PEN or $62000 USD.
According to The World Bank, 43% of government purchases are focussed on subsidies and other transfers, comparing to the 65% of the United States and the 62% of Argentina. Subsidies in the country spend 53.52 billions of dollars. Government Purchases conforms 13.18% of the Gross Domestic Product.
34. International security agreements Score: 4.9
Peru has 272 embassies and consulates around the world and has signed 3975 bilateral agreements and 1103 multilateral agreements, so far. The country has close ties with Latin America, North America, Europe, Asia, and Oceania. Peru is an active member of the United Nations, MERCOSUR (Southern Common Market), UNASUR (Union of South American Nations), the Andean Community and the TPP (Trans Pacific Partnership). These alliances promise a mutual defense in case of war, aside from the economic agreements. This year, 2018, Peru host the 8th Summit of the Americas, harboring, leaders of the Organization of the American States to discuss matters of Economics, corruption, and violence.
Peru has the 5th largest army in Latin America, however, they do not have any political confrontation except with North Korea and Venezuela, as they are falling into an economic and humanitarian decline. According to the Global Peace Index, Peru is the 71st most peaceful country in the world, above the United States. (114th place) Peru has improved enormously in violence records as 25 years ago, the country was facing terrorism.
35. Protection of domestic enterprises from government mandated costs Score: 4.1
The minimum wage in Peru is S/.850 PEN or $270 USD in comparison to the minimum wage in California is $1,866.88 USD per month, being the 7th country with the highest minimum wage in Latin America. However, most employees do not accept working for this amount of money. Small businesses like restaurants usually pay starting at S/.1000 PEN or $310 USD.
Small entrepreneurs pay S/.15 PEN or $4.70 USD per month for their workers’ health insurance. A medium to large company pays 9% of the employees’ salary. Comparing to the United States, the average for a coverage is $521 per month. Although health care in Peru is reasonably cheap, there were more than 1500 cases of medical negligence in the past year.
DISCLAIMERAll the information and conclusions in each country analysis are solely the responsibility of the individual student and have not been verified, corrected, checked for copyright infringement or evaluated in any way by MIEPA or Mike P. McKeever. You are solely responsible for the results of any use you make of the information and conclusions in these studies. Use them at your own risk as interesting supplemental information only instead of seasoned judgements about the policy factors contained herein. Each student has granted permission for his or her work to be displayed here under his or her own name or wishes to remain anonymous and have either created a pen name or used no name at all; if you wish to contact them for any reason, forward your request to MIEPA and the student will be notified of your interest.
To learn more about other countries, click to other files here:
Return to MIEPA's Home Page
Return to MIEPA's Home Page list of country studies
Please place the acronym MIEPA in the subject line.