2019 Index of Economic Freedom

Peru

overall score67.8
world rank45
Rule of Law

Property Rights56.1

Government Integrity31.8

Judicial Effectiveness34.0

Government Size

Government Spending86.1

Tax Burden80.6

Fiscal Health88.5

Regulatory Efficiency

Business Freedom67.8

Labor Freedom63.5

Monetary Freedom83.9

Open Markets

Trade Freedom86.4

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 31.8 million
  • GDP (PPP):
    • $424.4 billion
    • 2.5% growth
    • 3.6% 5-year compound annual growth
    • $13,334 per capita
  • Unemployment:
    • 3.6%
  • Inflation (CPI):
    • 2.8%
  • FDI Inflow:
    • $6.8 billion

Peru’s economic freedom score is 67.8, making its economy the 45th freest in the 2019 Index. Its overall score has decreased by 0.9 point, with declines in fiscal health and government integrity exceeding modest improvements in labor freedom and monetary freedom. Peru is ranked 7th among 32 countries in the Americas region, and its overall score is above the regional and world averages.

The Vizcarra government’s policy priorities include antigraft reform, pro-competition policy reform, infrastructure development, modernization of the state, and fiscal consolidation. Institutional reform efforts are expected to center on legislation to promote transparency in the public sector (for example, by mandating the publication of visitor records for public officials) and the private sector (for instance, by strengthening protections for whistle-blowers). Government corruption remains a serious problem, limiting foreign investors’ confidence in the economy. State-owned enterprises remain very active, especially in the petroleum sector.

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Background

Peru alternated between military rule and democracy in the last third of the 20th century. A violent multidecade guerilla insurgency was largely defeated in the 1990s by the government of Alberto Fujimori, an authoritarian who nevertheless implemented a liberal economic reform agenda. President Pedro Pablo Kuczynski, a center-right former World Bank economist, resigned in March 2018 under the threat of impeachment after mounting allegations of corruption. Vice President Martín Vizcarra assumed office, but political fragmentation in Congress will delay additional structural reforms. A founding member of the Pacific Alliance, Peru is rich in natural resources and has focused on implementing free-trade agreements to promote export-led growth. Peru remains the world’s second-largest producer of cocaine.

Rule of LawView Methodology

Property Rights 56.1 Create a Graph using this measurement

Government Integrity 31.8 Create a Graph using this measurement

Judicial Effectiveness 34.0 Create a Graph using this measurement

Although Peruvian law recognizes secured interests in both movable and immovable property, the judicial system is slow to hear cases and issue decisions and is prone to corruption. According to the World Bank’s Doing Business survey, it takes an average of 426 days to settle a contractual dispute. Corruption remains a problem, particularly in public procurement. The influence of drug traffickers in local governments has increased.

Government SizeView Methodology

The top personal income tax rate is 30 percent. The top corporate tax rate is 28 percent. Other taxes include value-added and financial transactions taxes. The overall tax burden equals 16.0 percent of total domestic income. Over the past three years, government spending has amounted to 21.5 percent of the country’s output (GDP), and budget deficits have averaged 2.5 percent of GDP. Public debt is equivalent to 25.5 percent of GDP.

Regulatory EfficiencyView Methodology

Recent reforms have dismantled some barriers to launching private enterprises, but the formation and operation of private businesses can still be costly. Labor regulations continue to evolve, and more flexibility is gradually being introduced. Most price controls have been eliminated, with the exception of pharmaceuticals and regulation of rates set by private companies in telecommunications, energy, public transport, and sanitation services.

Open MarketsView Methodology

The combined value of exports and imports is equal to 46.9 percent of GDP. The average applied tariff rate is 1.8 percent. As of June 30, 2018, according to the WTO, Peru had 383 nontariff measures in force. The economy is relatively open to most foreign investment, but a lack of regulatory predictability impedes more dynamic investment. About 47 percent of adult Peruvians have access to an account with a formal banking institution.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.70.0
2United States76.81.1
3Chile75.40.2
4Saint Lucia68.71.1
5Jamaica 68.6-0.5
6Uruguay 68.6-0.6
7Peru67.8-0.9
8Colombia67.3-1.6
9Panama 67.20.2
10Saint Vincent and the Grenadines65.8-1.9
11Costa Rica 65.3-0.3
12Mexico64.7-0.1
13Barbados64.77.7
14Dominica63.6-0.9
15The Bahamas62.9-0.4
16Guatemala 62.6-0.8
17El Salvador 61.8-1.4
18Paraguay 61.8-0.3
19Dominican Republic61-0.6
20Honduras 60.2-0.4
21Nicaragua 57.7-1.2
22Trinidad and Tobago57-0.7
23Guyana56.8-1.9
24Belize55.4-1.7
25Haiti52.7-3.1
26Argentina52.2-0.1
27Brazil51.90.5
28Suriname48.10.0
29Ecuador46.9-1.6
30Bolivia42.3-1.8
31Cuba27.8-4.1
32Venezuela 25.90.7
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