Peru WT/TPR/S/189 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Since its last Trade Policy Review in 2000, the performance of the Peruvian economy has 
been robust.  Real GDP grew at an averag e rate of 4.8 per ce nt between 2000 and 2006, 
notwithstanding a slowdown in 2001 due partly to  domestic political factors and an unfavourable 
international environment.  Exports of goods an d services have made a significant contribution to 
growth since 2000, with an average annual growth rate  of 8.3 per cent in real terms.  Since 2002, the 
level of economic growth has been close to its estim ated potential level of 6 per cent.  Furthermore, 
between 2002 and 2006, Peru mainta ined a low rate of inflation, improved its fiscal position and 
reduced the public debt.  This reflects prudent macroeconomic management , the implementation of 
structural reforms and a favourable international e nvironment which has facilitated growth in foreign 
investment.  Since 2002, Peru has been applying an "explicit inflation targeting system" and has 
drawn up a set of quantitative targets and rules which fiscal policy must comply with. 
2. Trade in goods as a proportion of GDP has incr eased considerably from around 27 per cent in 
2000 to approximately 40 per cent in 2006.  The rapid growth in trade in goods has been accompanied 
by changes in its composition and direction.  Mine rals have increased significantly as a proportion of 
exports, especially since 2003, largely reflecting pr ice rises.  Although the United States and the 
European Union continue to be Peru's principal trading partners, the relative importance of several 
partners in Asia and Latin America has increased considerably. 
3. Despite the good performance of the economy in  recent years, the lack of adequate 
infrastructure, shortcomings in the security and justice system and over-regulation could compromise 
the sustainability of economic growth and recent progress in reducing poverty.  Current economic 
conditions offer a favourable opportunity to meet these challenges. 
(2) MACROECONOMIC TRENDS  
(i) Structure of the economy, growth and employment 
4. Real GDP in most sectors of the economy incr eased each year over the period 2000-2006.  
Among the primary sectors, mining grew at a par ticularly high rate, reflecting the increase in 
investment and in international prices (Table I.1).  At the same time, the rate of growth in non-
primary sectors as a whole (non-primary manufacturing, construction, commerce, electricity and water, and other services) has exceeded or equalled that of the economy in recent years, partly reflecting the strength of domestic demand and its  particular impact on non-tradeable activities. 
5. Approximately 37 per cent of the economically active population (EAP) in work is employed 
in the agricultural sector.  The EAP employed in  the non-personal services sector represents some 
20 per cent of the total, and in commerce about 18 per cent.  These sectors are followed by industry and personal services, each with approximately 9 per cent of employed EAP;  construction (3.2 per 
cent);  households (3.5 per cent) and mining (about 1 per cent). WT/TPR/S/189 Trade Policy Review 
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Table I.1 
Main economic indicators, 2000-2006 
 2000 2001 2002 2003 2004 2005 2006 
Gross Domestic Product (GDP)        
 Current (millions of S/.) 186,141 189, 206 200,648 213,938 237, 769 261,606 305,847 
 Real (millions of S/. at 1994 prices) 121, 057 121,314 127,569 132,54 6 139,463 148,458 160,383 
 Real (percentage change) 3.0 0.2 5.2 3.9 5.2 6.4 8.0 
 Per capita (US$) 2,085 2,081 2,173 2,314 2,591 2,915 3,394 
By branch of industry  (as a percentage of gross added value at basic prices) 
 Agriculture and livestock 
(including forestry) 9.8 9.8 9.9 9.7 9.4 9.3 9.2 
 Agriculture 6.4 6.3 6.3 6.2 5.7 5.6 5.5 
 Livestock 3.3 3.4 3.4 3.4 3.3 3.3 3.2 
 Fisheries 0.6 0.6 0.6 0.5 0.6 0.6 0.6 
 Mining 6.0 6.6 7.0 7.2 7.2 7.3 6.8 
 Metallic and non-metallic mining 5.5 6.1 6.5 6. 7 6.7 6.7 5.9 
 Hydrocarbons 0.6 0.5 0.5 0.5 0.5 0.6 0.4 
 Manufacturing 16.5 16.5 16.6 16.5 16.9 16.9 16.7 
 Primarya 3.8 3.7 3.7 3.7 3.8 3.6 3.4 
 Non-primary 12.7 12.8 12.9 12.9 13.1 13.3 13.3 
 Electricity and water 2.3 2.3 2.3 2.4 2.3 2.3 2.3 
 Construction 5.6 5.2 5.3 5.4 5.3 5.4 5.8 
 Commerce 15.8 15.9 15.7 15.5 15.6 15.5 16.0 
 Other services 43.4 43.0 42.5 42.8 42.6 42.6 42.6 
Employmentb        
 Population of working age 
 (PWA, thousands) .. 5,730 5,821 5,925 6,033 6,142 6,254 
 Economically active population 
 (EAP, thousands) .. 3,839 3,984 3,993 4,104 4,120 4,215 
 Labour force participation rate (EAP/PWA) .. 66.9 68.5 67.4 68.0 67.1 67.1 
 Rate of unemployment 
(unemployed EAP /EAP) .. 9.2 9.4 9.4 9.4 9.6 8.5 
 Urban employment index 
(base January 2000 = 100) 90.7 89.7 91.7 103.5 107.2 113.3 123.3 
.. Not available. 
 
a Refers to primary resource processing and includes sugar refining;   production of fishmeal and fish oil, preserved and frozen  fish 
products and meat products;  refining of  non-ferrous metals and of oil. 
b Information for Metropolitan Lima.  The source of the empl oyment index was the Ministry of Labour and Employment 
Promotion (various years), Informe Estadístico Mensual  (http://www.mintra.gob.pe/peel/publicaciones/iem.htm). 
Source : Online information from the Centra l Reserve Bank of Peru (BCRP), Statistical Series  
(http://www1.bcrp.gob.pe/Variabl esFame/csm_01.asp?sIdioma=0), Historical Statistical Data  
(http://www.bcrp.gob.pe/bcr/ingles/Charts/ Historical-Statis tical-Data.html), Annual Report  (various years) 
(http://www.bcrp.gob.pe/bcr/ingles/A nnual-Report/Annual-Report.html) and information supplied by the 
authorities. 
6. Economic growth was stagnant between 2000 and 2001, partly reflecting an adverse 
international economic environment and the uncer tainty caused by the po litical difficulties which 
preceded the change of government in the mid-2000s (Chapter II).  The economy began to recover in 
2002, fuelled to a considerable extent by privat e consumption (Table I.2).  The factors which 
encouraged the increase in private growth include im proved expectations, the fall in interest rates and 
the increase in credit.1  Private investment began to recover in the third quarter of 2002, reflecting 
                                                      
1 BCRP (2003). Peru WT/TPR/S/189 
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greater activity in the construction sector and th e improvement both in co rporate profits and in 
expectations. 
Table I.2 
Structure of GDP by expenditure, 2000-2006 
(Percentages and changes) 
 2000 2001 2002 2003 2004 2005 2006 
As a percentage of real GDP        
 Domestic demand 101.9 101.7 100.7 99.6 97.2 94.6 91.7 
 Private consumption 71.2 72.3 71.7 70.6 68.3 65.9 61.2 
 Public consumption 10.6 10.7 10.1 10.2 10.0 10.1 9.6 
 Gross domestic investment 20.2 18.7 18.9 18.8 18.9 18.6 21.0 
 Gross fixed investment 20.2 18.6 17.5 17.8 17.9 18.8 19.6 
 Private  16.3 15.5 14.7 15.0 15.2 16.0 16.8 
 Public 4.0 3.1 2.8 2.8 2.8 2.9 2.8 
 Change in inventories 0.0 0.1 1.4 1.0 1.0 -0.2 1.1 
 Exports of non-financial goods and services  16.0 15.8 16.4 17.7 20.7 24.2 27.4 
 Imports of non-financial goods and services 18.0 17.5 17.1 17.3 17.9 18.8 19.1 
Real percentage change        
 Domestic demand 2.3 -0.6 4.4 3.4 4.4 5.5 10.6 
 Private consumption 3.7 1.5 4.6 3.1 3.5 4.4 6.5 
 Public consumption 3.1 -0.9 0.2 3.8 4.1 9.8 8.7 
 Gross domestic investment -2.7 -7.7 5.8 4.4 8.0 7.4 26.5 
 Gross fixed investment -4.9 -8.2 -1.1 6.5 8.6 13.6 19.0 
 Private -1.7 -4.7 -0.5 6.9 9.1 13.9 20.2 
 Public -15.8 -22.5 -4.0 4.0 5.7 12.2 12.7 
 Exports of non-financial goods and services 8.0 7.4 6.9 6.3 14.7 14.9 0.3 
 Imports of non-financial goods and services 3.8 2.7 2.8 3.6 10.6 10.6 12.3 
 
Source : Information supplied by the authorities. 
 
7. Between 2002 and 2006, the average annual growth in real GDP was 5.9 per cent (Table I.1);  
the Central Reserve Bank of Peru (BCRP) estimates the potential rate of growth in GDP at 6 per cent.2  
Investment was one of the principal drivers of growth during this period.  The phase of economic 
expansion which began in 2002 occurred against the background of a favourable international 
environment. 
8. Exports of goods and services have contributed  significantly to GDP since 2000, and have 
grown at an average annual rate of 8.3 per cent in r eal terms.  However, in 2006 exports lost most of 
their momentum, principally because of the fall in the exported volume of products such as copper, 
gold, zinc and anchoveta. 
9. The increase in economic activity was accompanie d by higher levels of employment.  The 
urban employment index has risen significantly since 2002 (Table I.1).  However, the rate of 
unemployment remained relatively high until 2005,  and fell to 8.5 per cent in 2006.  The labour 
market is characterized by a high degree of in formality, estimated at about 70 per cent of the 
economically active population in employment.3  According to the IMF, this reflects various legal 
impediments to dismissals in the formal sector, including high severance payments.4 
                                                      
2 BCRP (2007b). 
3 Information for 2002 contained in:  Ministry of Labour and Employment Promotion (2004). 
4 IMF (2007b). WT/TPR/S/189 Trade Policy Review 
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10. Labour productivity increased by 20 per cent between 2001 and 2006, pa rtly reflecting the 
higher levels of competition on the nationa l market resulting from trade liberalization.5  Wages and 
salaries also grew, but at a much slower rate than productivity. 
11. GDP per capita (in US dollars) grew at an av erage annual rate of 8.5 per cent between 2000 
and 2006, and reached US$3,394 in 2006.  However,  around 44.5 per cent of the population was still 
living in poverty in that year.6  The progress made in reducing poverty over recent years could be 
compromised by the constraints imposed on the economy by the lack of adequate infrastructure, shortcomings in the system of security and justice,  and over-regulation, which have been estimated at 
around 8 per cent of GDP.
7 
(ii) Fiscal policy 
12. The body responsible for formulating fiscal po licy is the Ministry of Economy and Finance 
(MEF).8  Law No. 27245 of 23 December 1999 (Law  on Fiscal Responsibility and Transparency) sets 
quantitative targets for fiscal policy.9  One of those targets is for the annual fiscal deficit in the non-
financial public sector to be less than 1 per cent of GDP.10  Another is for the annual increase in 
central government consumption expenditure not to exceed 3 per cent in real terms.11  The Law sets 
additional targets for fiscal policy for years when  general elections are held.  Law No. 27245 also 
establishes targets which must be complied with  in regional and local government finances. 
13. In the event of a "national emergency" or "int ernational crisis" which may "seriously" affect 
the national economy, the Congress is empowered to  suspend the application of the quantitative 
targets for a period of up to three years, upon request by the Executive.12  Moreover, the annual fiscal 
deficit for the non-financial public sector may be  up to 2.5 per cent of GDP "where sufficient 
evidence exists" that real GDP "is falling", subj ect to the submission of an MEF report to the 
Congress.13  This exceptional situation may not be maintain ed for more than three successive years.  
The fiscal deficit target has been achieved every year since the entry into force in 2003 of Law 
No. 27958, which amended the Law on Fiscal Transpar ency and Responsibility.  By contrast, the non-
financial expenditure target was not achieved in 2003 and 2005.  Peru has announced an amendment 
to the Law on Fiscal Responsibility and Transparency  to provide for penalties for failure to achieve 
the targets.14 
14. The public finances have been improving graduall y since 2000 (Table I.3).  Initially this was 
the result both of reductions in e xpenditure and of good performance in the finances of "other bodies", 
Since 2003, the improvement in government finance has in the main been due to the increase in 
current revenue, partly reflecting greater economic growth, the increase in the rates both of general 
sales tax (IGV) (from 18 to 19 per cent) and of income tax (from 27 to 30 per cent) and the 
introduction of "temporary" taxes on financial transac tions and net assets.  Similarly, since 2002, the 
National Tax Administration Supervisory Authority has been implementing various administrative 
                                                      
5 BCRP (2007a). 
6 INEI (undated). 
7 Du Bois y Torres (2006). 
8 Legislative Decree No. 183 of 15 June 1981. 
9 This law was amended by Law No. 27958 of 8 May 2003. 
10 Article 4 of Law No. 2 7245 of 23 December 1999. 
11 Law No. 29035 of 10 June 2007 states that "consumption expenditure" means "the sum of 
expenditure on remuneration plus expenditure on goods and services". 
12 Article 5 of Law No. 2 7245 of 23 December 1999. 
13 Article 5 of Law No. 2 7245 of 23 December 1999. 
14 MEF and BCRP (2007). Peru WT/TPR/S/189 
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measures intended to prevent IGV evasion.  In 2 006, the non-financial public sector recorded a 
surplus of 2.1 per cent, the first since 1997. 
Table I.3 
Transactions in the non-financial public sector, 2000-2006 
(Percentage of current GDP) 
 2000 2001 2002 2003 2004 2005 2006 
Primary result -0.8 -0.2 -0.1 0.4 1.0 1.6 3.9 
 Primary result - Central Government -0.6 -0.6 -0.2 0.2 0.6 1.1 3.2 
 Current revenue 14.9 14.3 14.2 14.8 14.9 15.7 17.3 
 Tax revenue 12.2 12.4 12.0 12.8 13.1 13.6 14.9 
 Non-tax revenue 2.7 1.9 2.2 1.9 1.8 2.1 2.4 
 Non-financial expenditure 15.8 15.1 14.6 14.7 14.4 14.7 14.2 
 Current 12.9 12.9 12.6 12.8 12.6 12.8 12.2 
 Capital 2.8 2.2 2.0 1.9 1.8 1.9 2.0 
 Capital revenue 0.3 0.2 0.2 0.2 0.1 0.1 0.1 
 Primary result - other bodies  -0.2 0.4 0.0 0.2 0.4 0.5 0.7 
 Rest of Central Government  0.2 0.2 0.1 0.1 0.1 0.0 0.3 
 Local government 0.1 0.1 0.1 0.2 0.1 0.3 0.1 
 State companies -0.5 0.2 -0.1 0.0 0.1 0.2 0.3 
Interest 2.5 2.3 2. 1 2.2 2.0 1.9 1.9 
 External debt 1.9 1.9 1.8 1.8 1.7 1.6 1.4 
 Domestic debt 0.6 0.3 0.4 0.4 0.4 0.3 0.4 
Economic result -3.3 -2.5 -2.2 -1.7 -1.0 -0.3 2.0 
Net financing 3.3 2.5 2.2 1.7 1.0 0.3 -2.0 
 External 1.2 0.9 2.1 1.4 1.5 -1.5 -0.7 
 Domestic  1.3 1.0 -0.6 0.3 -0.6 1.7 -1.4 
 Privatization 0.8 0.6 0.7 0.1 0.2 0.1 0.1 
Stock of public debt               
 External 36.0 35.2 36.3 37.0 35.1 28.1 23.5 
 Domestic 9.5 10.7 10.1 10.0 9.2 9.7 9.1 
Source : Online information from the BCRP, Historical Statistical Data  
(http://www.bcrp.gob.pe/bcr/ingles/Charts/ Historical-Statis tical-Data.html), Annual Report  (various years) 
(http://www.bcrp.gob.pe/bcr/ingles/A nnual-Report/Annual-Report.html) and information supplied by the 
authorities. 
15. The system of fiscal incentives operated by Peru  has placed a burden on the public finances.  
The IMF has noted that the system is complex and complicates the task of tax administration.15  The 
IMF is of the view that a reassessment of tax incen tives is essential to strengthening the effectiveness 
of the tax system.  One step in that direction is the entry into force of Legislative Decree No. 977 in 
March 2007, establishing a general framework fo r the award and renewal of fiscal incentives 
(Chapter III(4)(iv)). 
16. Public debt amounted to US$30,483 at the end of 2006.  External debt accounts for three 
quarters of the total amount.  Public indebtedn ess fell from 46.4 per cent of GDP in 2002 to 32.6 per 
cent in 2006 (Table I.3).  In recent years Peru has taken various actions seeking to extend the terms of 
its debt and reduce its exposure to exchange-rate risks.  As a result, the proportion of public debt 
                                                      
15 IMF (2007b). WT/TPR/S/189 Trade Policy Review 
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denominated in the national currency increased fro m about 15 per cent in 2002 to 24.4 per cent in 
December 2006. 
17. Between 2000 and the beginning of 2007, the IMF supported Peru under several 
arrangements.  The most recent of these, which was approved in January 2007, is a 25-month stand-by 
arrangement for some US$258 million.16  The authorities noted that Peru has treated all these 
arrangements as precautionary and has never drawn the funds available. 
(iii) Monetary and exchange rate policy 
18. The Central Reserve Bank of Peru (BCRP) is th e body responsible for formulating monetary 
policy.17  It is managed by a Board composed of seven members.  The Executive appoints four 
members, including the Chair (who must be approved by Congress);  the Congress appoints the three 
remaining members.  The members of the Board are appointed for a five-year period which runs contemporaneously with the mandate of the President of the Republic. 
19. The Constitution of Peru and the Organic Law on the BCRP establish that the purpose of the 
BCRP is to maintain monetary stability, wh ich is understood as meaning price stability.
18  It also 
prohibits the BCRP from financing the public purse,  furnishing guarantees or extending credit to 
specific sectors.  It also pr ohibits multiple exchange rates.19 
20. The BCRP announces inflation targets to help it in  the achievement of its task.  The Peruvian 
authorities noted that the target is measured by th e variation which has accumulated (up to December) 
over the previous 12 months in the consumer pr ice index for Metropolitan Lima.  Since 2007, the 
inflation target has been 2 per cent;  a tolerance ra nge is in place, giving a "target range" of between 
one and 3 per cent.  The BCRP is of the view that  the reduction in the inflation target from 2.5 to 
2.0 per cent will give the nuevo sol greater purch asing power in the long term, as well as boosting 
confidence in the currency, thereby encouraging a fa ll in the levels of dollarization in the economy.20  
It also indicated that the inflation target of 2 per cen t aligns the rate of inflation in Peru with that of 
the principal developed economies, thereby prev enting relative devaluation of the nuevo sol. 
21. The BCRP adopted an "explicit inflation targeting system" in 2002.21  Prior to this the BCRP 
had been using targets to expand the monetary base.   Under the explicit inflation targeting system, 
decisions for meeting the target are commensurate w ith "an assessment of a set of indicators for future 
inflation".22  The monetary policy instrument used by the BCRP is the inter-bank lending market 
reference interest rate.  At the beginning of each m onth, in line with a schedule announced in January 
each year, the Board of the BCRP determines and annou nces the level of the inter-bank interest rate.  
That rate fell between 2002 and 2003 and has gradua lly increased since then (Table I.4).  At the 
beginning of 2007 it stood at 4.5 per cent, its highest level since 2001. 
                                                      
16 See online information from the IMF, "IMF Ex ecutive Board Approves US$258 Million Stand-By 
Arrangement for Peru", Press Release No 07/15 of 26  January 2007.  Consulted at:  http://www.imf.org/ 
external/np/sec/pr/2007/pr0715.htm. 
17 Article 24 of Decree Law No. 26123 of 30 December 1992. 
18 Article 84 of the Constitution of Peru and Article  2 of Decree Law No. 26123 of 30 December 1992. 
19 Article 83 of Decree Law No. 26123 of 30 December 1992. 
20 BCRP (undated). 
21 BCRP (2002). 
22 BCRP (2002). Peru WT/TPR/S/189 
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Table I.4 
Leading monetary indicators, 2000-2006 
 2000 2001 2002 2003 2004 2005 2006 
Monetary aggregates  (percentage change, average for the period)  
Monetary base 6.0 3.2 15.8 7.4 18.8 28.3 17.2 
Currency 8.8 3.7 17.1 9.6 21.4 28.5 17.3 
Money 5.5 0.7 12.6 10.4 24.8 29.5 17.3 
Quasi money in domestic currency 1.5 8.8 18.3 4.1 14.6 40.5 20.0 
Broad money in domestic currency 3.6 4.4 15.3 7.3 20.0 34.5 18.6 
Broad money in foreign currency  5.2 2.5 0.0 2.9 0.3 1.6 14.2 
Total broad money 4.8 3.0 4.2 4.3 6.4 13.1 16.1 
Nominal interest rates (year-end, in annual effective terms) 
Average lending rate        
 Domestic currency 26.5 23.0 20.7 22.3 25.4 23.6 23.1 
 Foreign currency 12.6 10.2 10.2 9.3 9.2 10.4 10.8 
Average borrowing rate        
 Domestic currency 9.4 5.1 3.6 2.5 2.5 2.6 3.2 
 Foreign currency 4.6 2.2 1.3 1.0 1.2 1.8 2.2 
Inter-bank (domestic currency) 11.4 3.1 3.8 2.5 3.0 3.3 4.5 
Inflation  (December, percentage change 12 months)        
Consumer Price Index  3.7 -0.1 1.5 2.5 3.5 1.5 1.1 
Wholesale Price Index 3.8 -2.1 1.7 2.0 4.9 3.6 1.3 
Exchange rate         
S/. per US$ (average for the period) 3.49 3.51 3.52 3.48 3.41 3.30 3.28 
Multilateral real exchange rate index 
(December, percentage change, 12 months)a -5.4 -4.3 -0.6 7.5 -1.4 3.8 -1.7 
a Base 1994.  A positive number indicates depreciation. 
Source : Information supplied by the authorities. 
22. Since the explicit inflation targeting system was used for the first time in 2002, annual 
inflation has been within the range  announced by the BCRP, except in  2005 and 2006, when inflation 
as measured up to December (1.48 and 1.14 per cent respectively) was below the floor of the target 
range.  The Peruvian authorities noted that in both years, inflation reflected temporary supply shocks 
which had a one-off adverse effect on the change in the consumer price index.  Annual average 
inflation between 2002 and 2006 was 2.02 per cent (Table I.4). 
23. The IMF describes Peru's exchange rate regime as a managed floating exchange system.23  In 
that regard, the BCRP has noted that "while there is a high level of financial dollarization, and in the 
absence of a developed hedging market, the Cent ral Bank must … while taking account of the 
medium-term trend, provide a cushion for abrupt fluctu ations in the exchange rate, in order to prevent 
their having a negative effect on economic agents' balance sheets and consequently on the level of 
activity".24  Between the end of 2002 and 2006, net purchases by the BCRP on the currency market 
totalled US$10,000 million.  The IMF has indicated that the policy of intervention in the currency 
market could undermine the achievement of inflation targets.25  Peru does not impose restrictions on 
foreign currency. 
                                                      
23 IMF (2007b). 
24 BCRP (2007b). 
25 IMF (2007b). WT/TPR/S/189 Trade Policy Review 
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24. The real exchange rate relative to the US do llar has appreciated since 2002;  relative to the 
currencies of Peru's main trading partners, the real  exchange rate has depreciated since 2002, although 
it remains around its average level for the last te n years (Table I.4).  The nuevo sol underwent a 
nominal appreciation of 8.8 per cent compared to the US dollar between December 2002 and 
December 2006.  This reflects the improvement in the terms of trade, growing macroeconomic 
stability, improvements in productivity and a favourable  international environment which has fostered 
the flow of foreign capital to Peru. 
25. One of the policies established by the MEF's Marco  Macroeconómico Multianual  
(Multiannual Macroeconomic Framework) for the pe riod 2007-2009 is a reducti on in the levels of 
dollarization in the economy.  The proportion of broad money denominated in foreign currency 
reached "peaks" of 70 per cent in  1999 and 2000, partly reflecting political uncertainty and turbulence 
on the international financial markets.  The Peruvian authorities are of the view that the application of 
the explicit inflation targeting system, greater conf idence in the nuevo sol and the development of the 
Government bonds market are all factors which have  helped reduce levels of dollarization in the 
economy.  However, the proportion of broad money in foreign currency still stands at a relatively high 
level (53.5 per cent in March 2007). 
(iv) Balance of payments 
26. Although the balance of payments current account  has traditionally been in deficit, it has 
shown a surplus since 2004 (Table I.5).  This reflects  the surplus in the trade balance and the strong 
increase in remittances from abroad. 
Table I.5 
Balance of payments, 2000-2006 
(Millions of US$) 
  2000 2001 2002 2003 2004 2005 2006 
Current account balance -1,546 -1,203 -1,110 - 949 19 1,148 2,589 
 Trade balance -403 -179 321 886 3,004 5,286 8,934 
 Exports 6,955 7,026 7,714 9,091 12,809 17,368 23,800 
 Imports -7,358 -7,204 -7,393 -8,205 -9,805 -12,082 -14,866 
 Services -735 -963 -994 -900 -732 -834 -949 
 Exports 1,555 1,437 1,455 1,716 1,993 2,289 2,451 
 Imports -2,290 -2,400 -2,449 -2,616 -2,725 -3,123 -3,400 
 Factor income -1,410 -1,101 -1,457 -2,144 -3,686 -5,076 -7,581 
 Private -896 -550 -746 -1,275 -2,715 -4,211 -6,901 
 Public -516 -551 -711 -869 -970 -865 -679 
 Current transfers 1,001 1,040 1,019 1,209 1,433 1,772 2,185 
 Remittances from abro ad 718 753 705 869 1,133 1,440 1,837 
Financial account 1,023 1,544 1,800 672 2,154 141 708 
 Private sector 1,481 983 1,538 -105 937 1,818 2,075 
 Direct investment 810 1,070 2,156 1,275 1,599 2,579 3,467 
 Without privatization 581 803 1,970 1,265 1,568 2,548 3,388 
 Privatization 229 267 186 10 31 31 79 
 Public sector 277 372 1,056 630 988 -1,441 -738 
 Short-term capital -735 189 -794 147 230 -236 -628 
Special financing -58 -1 14 64 26 100 27 
Flow of net reserves from the BCRP 
(Increase indicated by minus sign)  193 -450 -833 -477 -2,351 -1,628 -2,753 
Table I.5 (cont'd) Peru WT/TPR/S/189 
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  2000 2001 2002 2003 2004 2005 2006 
Net errors and omissions 388 110 130 689 151 239 -571 
Current account balance as percentage of 
GDP -2.9 -2.2 -1.9 -1.5 0 1.4 2.8 
Memorandum items  
Total external debt balance 27,981 27,195 27,872 29,587 31,244 28,657 28,300 
 As percentage of GDP 52.5 50.4 48.9 48.1 44.9 36.1 30.3 
Terms of trade index (1994=100)a 88 87 91 91 100 105 134 
a An increase equates to an impr ovement in the terms of trade. 
 
Source : Online information from the BCRP, Historical Statistical Data (http://www.bcrp.gob.pe/ 
bcr/ingles/Charts/Histori cal-Statistical-Data.html), Statistical Series  (http://www1.bcrp.gob.pe/VariablesFame/ 
csm_01.asp?sIdioma=0) an d information supplied by the authorities. 
27. The balance of trade in goods was in deficit in 2000 and 2001.  Since then it has recorded a 
growing surplus, reflecting the increase both in pri ces and in volumes of exports.  Imports also grew 
between 2000 and 2006, although at a much slower  rate than exports.  Trade in services has 
traditionally posted a deficit. 
28. The deficit on the income account is to a great  extent a reflection of the increase in private 
expenditure since 2001, principally remittances of ea rnings to other countries and profits which are 
not distributed by companies with foreign involv ement.  Remittances from Peruvians living abroad 
have doubled since 2000 and are a significant sour ce of revenue to the current account, representing 
about 2 per cent of GDP. 
29. The financial account posted a surplus during th e period under review.  Direct investment 
flows are the main source of financial account re venue.  Net capital entrie s allowed international 
reserves to accumulate, except in 1999 and 2000.  The balance of international reserves stood at 
US$17,275 million in 2002, equivalent to 14 months  of imports of goods. 
30. External debt (both public and private) stood at US$28,300 million in 2006, slightly higher 
than its level in 2000.  In terms of GDP, external  debt fell from 52.5 per cent in 2000 to 30.3 per cent 
in 2006.  In 2006, about 90 per cent of external debt was medium and long-term debt, and approximately 78 per cent was public debt. 
(3) T
RENDS IN TRADE AND INVESTMENT FLOWS  
(i) Trade in goods26 
31. Trade in goods (imports and exports) accounted  for 41.4 per cent of GDP in 2006, compared 
to 26.8 per cent in 2000. 
32. Imports grew at a nominal annual average rate  of nearly 13 per cent between 2000 and 2006, 
and reached US$15,312 million (Table AI.1).  Imports of manufactures rose to US$10,394 million in 2006, some 68 per cent of which was accounted for by machinery, transport equipment and 
chemicals.  Although imports of manufactures doubled in value between 2000 and 2006, they 
remained relatively constant as a proportion of to tal imports.  Fuels rose sharply as a proportion of 
total imports, accounting for 20 per cent in 2006.  Agricultural imports account for some 10 per cent 
of total imports.  The main agricultural imports are wheat, maize, oil-cake and soya bean oil. 
                                                     
 
26 Data in this section are taken from the Unit ed Nations Commodity Trade Database (COMTRADE) 
and are classified in accord ance with SITC (rev. 3). WT/TPR/S/189 Trade Policy Review 
Page 10 
 
 
33. Exports grew at a nominal annual average rate of 23 per cent between 2000 and 2006, 
reaching US$23,765 million (Table AI.2).  Primary products increased sharply as a proportion of total exports between 2003 and 2006, from 60 per cent to almost  72 per cent.  To a considerable extent, this 
increase reflects the growth of exports of metallic  minerals and non-ferrous metals, whose value rose 
by a factor of almost 4.5 between 2003 and 20 06, reaching US$11,277 million (Chapter IV(4)).  
Although exports of agricultural products doubled in value between 2000 and 2006, they fell by 
slightly more than 10 percentage points as a proportion  of total exports.  The main agricultural exports 
are fishmeal, unroasted coffee and vegetables.  Ma nufactures also fell as a proportion of total exports, 
although their value has increased every year since 2000.  The main exported manufactures are 
articles of apparel and chemicals. 
34. Calculations by the Ministry of Foreign Tr ade and Tourism (MINCETUR) show that from 
2002 the growth in exports largely reflected the ri se in prices, whereas in 2000 and 2001 it mainly 
reflected increases in volume.
27  The same study notes that between 2003 and 2006, the growth in 
exports viewed as "traditional" is predominantly commensurate with the incr ease in prices, whereas 
the growth in "non-traditional" exports can be a ttributed equally to price rises and volumes.  The 
Peruvian authorities indicated that the number of exported tariff subheadings rose from 2,327 in 2000 
to 2,804 in 2006, and the number of exporting companies from 3,702 to 5,957. 
35. Although the United States continues to be the pr incipal source of imports, its share of total 
imports fell by 7 percentage points between 2000 a nd 2006 (Table AI.3).  The proportion of imports 
from the European Union a nd Japan also fell during that period.  Conversely, imports from China, 
Brazil and Ecuador rose significantly.  Overall, thes e three countries' share of total imports rose from 
13 per cent in 2000 to close to 28 per cent in 2006.  The Andean Community's share of total imports also grew, mainly as a result of the rise in imports from Ecuador. 
36. The United States and the European Union have traditionally been the main export 
destinations, absorbing approximately half of total exports during the period 2000-2006 (Table AI.4).  
In recent years Canada, Chile and China have also become important export destinations.  Exports to 
these three countries totalled US$5,310 million in 2006, equivalent to 22 per cent of total exports.  
The Andean Community's share of total Peruvian ex ports has remained relatively stable since 2000. 
(ii) Trade in services 
37. Peru's traditional deficit in services trade is to a considerable extent a reflection of the deficit 
in transport services, mainly freight transportation.   The strong growth in the trade in goods resulted 
in an increase in the deficit in freight trans port services of around 80 per cent between 2002 and 2006.  
Insurance services also posted a deficit.  By contrast , travel services recorded a surplus, one which has 
grown by a factor of almost 3.5 since 2002 (See Table I.6). 
Table I.6 
Trade in services, 2000-2006 
(Millions of US$) 
  2000 2001 2002 2003 2004 2005 2006 
Transport -612 -657 -618 -621 -726 -858 -934 
 Credit 243 257 266 310 360 440 525 
 Debit -855 -914 -884 -931 -1,086 -1,298 -1,460 
 Freight  -555 -587 -567 -590 -740 -917 -1,013 
 Credit 10 14 19 26 43 60 64 
 Debit -565 -600 -585 -615 -783 -978 -1,077 
Table I.6 (cont'd) 
                                                      
27 MINCETUR (2007a). Peru WT/TPR/S/189 
 Page 11 
 
 
  2000 2001 2002 2003 2004 2005 2006 
 Passengers -194 -198 -151 -146 -119 -88 -40 
 Credit 24 30 49 60 90 130 205 
 Debit -217 -228 -200 -206 -209 -218 -245 
 Othera 137 127 99 114 133 147 119 
 Credit 210 213 198 225 227 250 256 
 Debit -73 -86 -99 -110 -93 -103 -137 
Travel 414 188 181 322 499 557 620 
 Credit 837 733 787 963 1,142 1,308 1,381 
 Debit -423 -545 -606 -641 -643 -752 -760 
Communications 19 -5 -17 -34 -21 -28 -27 
 Credit 90 67 48 46 60 69 82 
 Debit -70 -72 -66 -80 -81 -96 -109 
Insurance and reinsurance -37 -57 -145 -178 -127 -115 -163 
 Credit 113 116 96 89 82 118 103 
 Debit -150 -173 -241 -267 -209 -233 -265 
Otherb -519 -431 -394 -388 -357 -391 -446 
 Credit 273 264 258 307 350 354 361 
 Debit -792 -695 -652 -695 -706 -744 -806 
Total services -735 -963 -994 -900 -732 -834 -949 
 Credit 1,555 1,437 1,455 1,716 1,993 2,289 2,451 
 Debit -2,290 -2,400 -2,449 -2,616 -2,725 -3,123 -3,400 
a Includes in particular port charges for sh ips and aircraft and transport commissions. 
b Includes government, financial and computer services as well as  royalties, equipment rental and other services to firms. 
Source : Online information from the BCRP, Statistical Series  (http://www1.bcrp.gob.pe/VariablesFame/ 
csm_01.asp?sIdioma=0). 
(iii) Foreign investment 
38. Foreign direct investment (FDI) grew each year between 2000 and 2006 at an annual average 
rate of almost 10 per cent.  FDI stood at US$19,356 million at the end of 2006. 
39. Between 2000 and 20 06, net flows of FDI to Pe ru totalled US$5,900 million.28  T h e  
communications sector accounted for approximately 45 per cent of that figure, followed by mining and the industrial sector with 21 and 14 per cent.  The financial sector accounted for 7 per cent of net 
FDI flows between 2000 and 2006.   
40. The principal sources of FDI during this period were  Spain, with close to 40 per cent of total 
net FDI flows, the United States (13 per cent) and the United Kingdom (12 per cent). 
(4) O
UTLOOK  
41. The MEF forecasts growth of 7.0 per cent in r eal GDP for 2007 and 6. 5 per cent for 2008, 
alongside an annual inflation rate of close to 2.0 per cent in both years.29  It is of the view that the 
economic result in the non-financial public sector w ill be in balance in 2007 and will show a slight 
deficit (amounting to 0.5 per cent of  GDP) in 2008.  It also forecasts that the public debt will fall to 
about 27.5 per cent of GDP at the end of 2008.  Additi onally, the MEF is of the view that the current 
                                                      
28 These data are based on registration statements which investors must present pursuant to Legislative 
Decree No. 662 of 2 September 1991, and are supplemented with information from the Comisión Nacional 
Supervisora de Empresas y Valores  (National Supervisory Commission for Enterprises and Securities).  Given 
that Legislative Decree No. 662 does not provide for either a strict time-limit or penalties for failure to comply 
with the registration requirement, the figu res may under-estimate FDI flows to Peru. 
29 MEF (2007). WT/TPR/S/189 Trade Policy Review 
Page 12 
 
 
account surplus will fall to 1.5 per cent of GDP in  2007, and to 0.6 per cent of GDP in 2008.  The 
IMF's forecasts are similar to those of the MEF.