2014 Index of Economic Freedom

Peru

overall score67.4
world rank47
Rule of Law

Property Rights40.0

Freedom From Corruption34.0

Limited Government

Government Spending89.1

Fiscal Freedom79.1

Regulatory Efficiency

Business Freedom70.6

Labor Freedom61.4

Monetary Freedom83.3

Open Markets

Trade Freedom87.0

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 30.5 million
  • GDP (PPP):
    • $326.7 billion
    • 6.3% growth
    • 6.5% 5-year compound annual growth
    • $10,719 per capita
  • Unemployment:
    • 6.8%
  • Inflation (CPI):
    • 3.7%
  • FDI Inflow:
    • $12.2 billion
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Peru’s economic freedom score is 67.4, making its economy the 47th freest in the 2014 Index. Its score is 0.8 point lower than last year, with an improvement in trade freedom outweighed by deteriorations in labor freedom and business freedom. Peru is ranked 7th out of 29 countries in the South and Central America/Caribbean region, and its overall score is above the world average.

Over the 20-year history of the Index, Peru has advanced its economic freedom score by nearly 11 points. It has achieved double-digit improvements in half of the 10 economic freedoms, most notably in monetary freedom and trade freedom, which have improved by over 35 points and provide a stable foundation to improve the economy’s engagement in global commerce. Peru’s economy continues to be rated “moderately free.”

Nonetheless, institutional shortcomings continue to undermine Peru’s chances for long-term economic development, slowing the transition to greater economic freedom. Property rights are only moderately well protected, and the judicial system is relatively inefficient.

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Background

Free-market and economic liberalization policies implemented by former President Alan Garcia (2006–2011) and continued by current President Ollanta Humala of the leftist Peruvian Nationalist Party have attracted significant foreign investment and lifted millions out of poverty. Humala, who once led a failed uprising against former president Alberto Fujimori, ran for office on a platform of more state intervention in the economy to help the poor. However, he has governed moderately and has respected the rule of law. Significant natural resources include gold, copper, and silver. Less than 30 percent of Peruvians now live below the poverty line, and economic growth has been well above the Latin American average. The U.S.–Peru Free Trade Agreement has expanded trade and employment. Peru has also entered into numerous other free trade agreements and is a founding member of the Pacific Alliance.

Rule of LawView Methodology

Property Rights 40.0 Create a Graph using this measurement

Freedom From Corruption 34.0 Create a Graph using this measurement

Corruption is a serious problem. Although corruption was rated the most negative aspect of former President Alan García’s administration, a congressional commission charged with investigating corruption among García administration officials produced few criminal accusations in 2012. Dozens of sitting members of Congress are under investigation for corrupt practices. The judiciary is widely distrusted and prone to corruption scandals.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 30 per cent. Other taxes include a value-added tax (VAT) and a financial transactions tax. The overall tax burden amounts to 17 percent of gross domestic income. The leftist government has shown a surprising commitment to prudent fiscal policies, with government spending falling to 19 percent of GDP and public debt shrinking below 20 percent of GDP.

Regulatory EfficiencyView Methodology

Starting a business now takes five procedures and slightly less than a month, and no minimum capital is required. Licensing requirements continue to be costly and time-consuming. Employment regulations continue to evolve, but more slowly than in other economies. The government partially subsidizes electricity and automotive and cooking fuels, although it reduced subsidies for gasoline in 2013.

Open MarketsView Methodology

Peru’s average tariff rate is 1.5 percent. In 2013, Peru, Mexico, Chile, and Columbia created the Pacific Alliance free-trade area. The government restricts imports of used clothing and vehicles. Foreign and domestic investment are treated equally under the constitution. Credit to the private sector has increased steadily, and banking remains stable and well-capitalized. Non-performing loans represent fewer than 5 percent of total loans.

Country's Score Over Time

Bar Graph of Peru Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Peru to other economic country groups

Regional Ranking

rank country overall change
1Chile78.7-0.3
2Saint Lucia70.70.3
3Colombia70.71.1
4The Bahamas69.8-0.3
5Uruguay 69.3-0.4
6Barbados68.3-1.0
7Peru67.4-0.8
8Saint Vincent and the Grenadines670.3
9Costa Rica 66.9-0.1
10Jamaica 66.7-0.1
11El Salvador 66.2-0.5
12Dominica65.21.3
13Panama 63.40.9
14Trinidad and Tobago62.70.4
15Paraguay 620.9
16Dominican Republic61.31.6
17Guatemala 61.21.2
18Nicaragua 58.41.8
19Honduras 57.1-1.3
20Brazil56.9-0.8
21Belize56.7-0.6
22Guyana55.71.9
23Suriname54.22.2
24Haiti48.90.8
25Bolivia48.40.5
26Ecuador481.1
27Argentina44.6-2.1
28Venezuela 36.30.2
29Cuba28.70.2
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