2013 Index of Economic Freedom

Peru

overall score68.2
world rank44
Rule of Law

Property Rights40.0

Freedom From Corruption34.0

Limited Government

Government Spending89.1

Fiscal Freedom79.9

Regulatory Efficiency

Business Freedom72.3

Labor Freedom67.1

Monetary Freedom84.3

Open Markets

Trade Freedom85.0

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 30.0 million
  • GDP (PPP):
    • $302.0 billion
    • 6.9% growth
    • 7.0% 5-year compound annual growth
    • $10,062 per capita
  • Unemployment:
    • 7.9%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $8.2 billion
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Peru’s economic freedom score is 68.2, making its economy the 44th freest in the 2013 Index. Its score is 0.5 point lower than last year, with declines in the control of government spending, labor freedom, monetary freedom, and freedom from corruption. 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.

The Peruvian economy continues to be “moderately free.” Overall competitiveness has been promoted and sustained by ongoing regulatory reforms and open-market policies that support trade and investment. Social conflict surrounding large-scale mining projects undercuts economic stability, entailing elevated risks for long-term economic development. The country’s strong economic performance in recent years has left the government with large budget surpluses, but administering these resources effectively remains a challenge.

Lingering institutional weaknesses continue to slow Peru’s transition toward greater economic freedom. Property rights are only moderately well protected, and the judicial system is relatively inefficient. Peru’s score on freedom from corruption remains significantly below the world average.

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Background

President Ollanta Humala of the leftist Peruvian Nationalist Party has tended to pursue moderate, pro-market policies while adding new government programs like the Ministry of Social Development and Inclusion to deliver additional social programs for the poor. Under Alan Garcia (2006–2011), Peru experienced a notable reduction in poverty and high levels of economic growth driven by private investment, a trend that continues under Humala. This has provoked significant unrest in some parts of the country among leftist supporters who oppose continuity in mining policy. Significant natural resources include gold, copper, and silver. Roughly 35 percent of Peruvians live below the poverty line, but that number has been coming down as economic growth is well above the Latin American average. The U.S.–Peru Free Trade Agreement has expanded trade flows and employment. Peru has entered into numerous other free trade agreements and is participating in 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

A decade of strong economic growth and orderly government transitions under two democratically elected presidents has increased stability, although a strong presidency tends to weaken the system’s checks and balances. The judicial system continues to lack independence and efficiency. An inefficient civil service and a lack of transparency reduce accountability. Corruption has been endemic throughout Peru’s history.

Limited GovernmentView Methodology

The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a financial transactions tax. The overall tax burden equals 14.5 percent of total domestic income. Government spending has risen to 19.1 percent of GDP. The budget balance has registered a strong surplus, and public debt has fallen to about 20 percent of total domestic output. Strong mining receipts (60 percent of export revenue) have helped the fiscal balance.

Regulatory EfficiencyView Methodology

Recent reforms dismantled barriers to launching and running private enterprises. With no minimum capital required, it now takes less than the world average of seven procedures and 30 days to start a business. Licensing requirements are now much simpler. Employment regulations continue to evolve, with more flexibility gradually being introduced into the labor market. Inflation remains low.

Open MarketsView Methodology

The trade-weighted average tariff rate is low at 2.5 percent, but some non-tariff barriers raise the cost of trade. Although most sectors are open to foreign investment, bureaucratic deficiencies continue to hamper investment growth. The financial sector has undergone gradual transformation. Credit to the private sector has increased steadily, and foreign ownership in the financial sector is also growing.

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
1Chile790.7
2Saint Lucia70.4-0.9
3The Bahamas70.12.1
4Uruguay 69.7-0.2
5Colombia69.61.6
6Barbados69.30.3
7Peru68.2-0.5
8Costa Rica 67-1.0
9Jamaica 66.81.7
10El Salvador 66.7-2.0
11Saint Vincent and the Grenadines66.70.2
12Dominica63.92.3
13Panama 62.5-2.7
14Trinidad and Tobago62.3-2.1
15Paraguay 61.1-0.7
16Guatemala 60-0.9
17Dominican Republic59.7-0.5
18Honduras 58.4-0.4
19Brazil57.7-0.2
20Belize57.3-4.6
21Nicaragua 56.6-1.3
22Guyana53.82.5
23Suriname52-0.6
24Haiti48.1-2.6
25Bolivia47.9-2.3
26Ecuador46.9-1.4
27Argentina46.7-1.3
28Venezuela 36.1-2.0
29Cuba28.50.2
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