# **REFORM HAS PRODUCED POSITIVE RESULTS**

The reform period 1990-2011 was a highly successful period of economic and social development in Peru. According to statistics of the Peruvian Central Bank, exports multiplied by fourteen, international reserves multiplied by thirty-seven. Inflation been low (average below 4% in the last decade), public external debt is only 11.4 percent of GDP today and government income has increased from 8.1% to 21% of GDP.

Social indicators show similar progress. A recent study by Richard Webb, Diether Beuermann, and Carla Revilla (2011) researching 200 poor rural districts finds that growth in rural capital income in 2000-2010 was 6.6% per year compared to an average of 0.7% in 1900-2000. Travel hours to the nearest city decreased from 14 in 2001 to 5 in 2011 due to improvements in the national road network. In return daily wages doubled and house value tripled together with a reduction of the indicators of infant mortality and extreme poverty of 50% in the same period.

# **ASIAN ECONOMIES AS EXAMPLE**

Trade reform began, on the negative side from the recognized need to move away from disaster of the old policy regime. On the positive side, it began from the Asian example. The Asian example provided a general sense of what to do, but perhaps more important, it buoyed Peruvian self-confidence that they could succeed as part of the global economy. Earlier attempts at ‘economic integration,’ had been in reality extensions of the import substitution regime. The Community of Andean Nations (CAN) was a plan for a negotiated division of which members would produce which products for the entire community; with guarantees against competition from outside the CAN, or even from other CAN producers.<sup>7</sup> This time Peruvians began to believe they could hold their own with the world.

The successes of Asian countries have had a considerable influence on Peru. Some say that in 1990 Fujimori’s Japanese background contributed significantly to his election. As President, Fujimori paid strong attention to the relationships with the Pacific Basin economies. At his initiative the government used participation in APEC (Asia-Pacific Economic Cooperation) meetings to provide Peruvian business leaders opportunities to network with Asia business leaders.

While the Asian example was in the background from the beginning, in 2001 the Ministerio de Economía y Finanzas (MEF)<sup>8</sup> prepared a study that compared Peru’s progress with that of several Asian countries, particularly Korea and Taiwan, China. In 1970 these countries had per capita incomes similar to that of Peru, but over the following three decades, theirs had increased much more than Peru’s. The study was accepted among Peruvian civil society as well as in the business community as demonstrating that a country starting from the position Peru then occupied could succeed. It became a major part in the Toledo government’s campaign to win authorization from

> 7 The plan had been minimally implemented.

> 8 In Peru, the Ministerio de Economía y Finanzas (MEF) is responsible for developing the overall objectives of economic policy and for guiding the translation of those objectives into policies.

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