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- GDP (PPP):
- $371.3 billion
- 2.4% growth
- 5.8% 5-year compound annual growth
- $11,817 per capita
- Inflation (CPI):
- FDI Inflow:
Peru’s economic competitiveness has been sustained by regulatory reforms and open-market policies. Macroeconomic and monetary management is relatively prudent, with a structural fiscal rule keeping the level of public debt among the lowest in the region.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 67.4 (down 0.3 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 49th
- Regional Ranking: 9th in the South and Central America/Caribbean Region
- Notable Successes: Trade Freedom and Management of Public Finance
- Concerns: Property Rights, Corruption, and Labor Freedom
- Overall Score Change Since 2012: –1.3
Institutional weaknesses continue. A lack of progress in addressing key structural deficiencies such as a complex tax regime and a rigid labor market undercuts productivity growth. Property rights are not well protected, and the judicial system is not efficient. Social conflicts surrounding large-scale mining projects threaten long-term economic development.
President Ollanta Humala of the leftist Peruvian Nationalist Party will finish his five-year term in 2016. He has disappointed extremists on the left by governing moderately, and his administration has been plagued by allegations of corruption. Peru has benefitted from significant foreign investment in mining and manufacturing since liberal economic reform began in the 1990s. Humala did not reverse those reforms but also has not deepened liberalization. Less than 30 percent of Peruvians live below the poverty line, down from about 60 percent a decade ago, and economic growth has been well above the regional average. The U.S.–Peru Free Trade Agreement has vastly increased bilateral trade since it was signed in 2007. Peru has entered into numerous other free trade agreements and is a founding member of the Pacific Alliance.
Corruption is a serious problem in the national government, security forces, judiciary, customs agencies, ports, and local governments, where the influence of drug traffickers has grown. One high-profile case involves charges of political espionage and money laundering against a businessman and former adviser to President Ollanta Humala and the First Lady. The dysfunctional judiciary is widely distrusted and prone to corruption scandals.
The top personal income and corporate tax rates are 30 percent. Other taxes include a value-added tax and a financial transactions tax. The overall tax burden equals 18.6 percent of total domestic income. Government spending has risen to 21.5 percent of GDP. The government budget has registered a small surplus, and public debt equals about 20 percent of total domestic output. Strong mining receipts have helped the fiscal balance.
Recent reforms dismantled some barriers to running private enterprises. With no minimum capital required, it now takes less than seven procedures to start a business. Labor regulations are evolving. The state controls domestic food and fuel prices and partially subsidizes electricity, but in late 2014, it ruled out cutting taxes or introducing subsidies to encourage investment and cushion export sectors from the ongoing downturn in commodity prices.
Peru’s average tariff rate is 1.5 percent. Peruvians are not allowed to import used clothing or cars. Foreign and domestic investors are generally treated equally under the law. State-owned enterprises operate in the banking and energy sectors. The financial sector has undergone gradual transformation. Credit to the private sector has increased steadily, and foreign ownership in the financial sector is growing.