Peru’s economy has shown strong growth over the past five years, helped by market-oriented economic reforms and privatizations in the 1990s, and measures taken since 2001 to promote trade and attract investment. GDP grew 9.0% in 2007, 7.7% in 2006, 6.8% in 2005, 5.0% in 2004, and 4.0% in 2003. President Alan García and his economic team have continued these policies. Recent economic expansion has been driven by construction, mining, export growth, investment, and domestic demand. Inflation averaged 1.8% in 2007, and the fiscal deficit was only 0.6% of GDP. Thanks to pre-payments, external debt in 2007 dropped to $20.1 billion, and foreign reserves were a record $27.7 billion.
Peru’s economy is well managed, and better tax collection and growth are increasing revenues, with expenditures keeping pace. Private investment is rising and becoming more broad-based. Peru obtained investment grade status in 2008. The García administration is pursuing decentralization initiatives, and is focused on bringing more small businesses into the formal economy.
Peru is a developing country with a 2005 Human Development Index score of 0.773. Its 2006 per capita income was US$3,374 with 39.3% of its total population poor, including 13.7% that is extremely poor. Historically, the country’s economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments. Although exports have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive.
A litlle of History
Peruvian economic policy has varied widely over the past decades. The 1968–1975 government of Juan Velasco Alvarado introduced radical reforms, which included agrarian reform, the expropriation of foreign companies, the introduction of an economic planning system, and the creation of a large state-owned sector. These measures failed to achieve their objectives of income redistribution and the end of economic dependence on developed nations. Despite these adverse results, most reforms were not reversed until the 1990s, when the liberalizing government of Alberto Fujimori ended price controls, protectionism, restrictions on foreign direct investment, and most state ownership of companies. Reforms have permitted sustained economic growth since 1993, except for a slump after the 1997 Asian financial crisis.
Services account for 53% of Peruvian gross domestic product, followed by manufacturing (22.3%), extractive industries (15%), and taxes (9.7%). Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, and rising investment and consumption. Trade is expected to increase further after the implementation of a free trade agreement with the United States, which was signed on 12 April 2006. Peru’s main exports are copper, gold, zinc, textiles, and fish meal; its major trade partners are the United States, China, Brazil, and Chile.
The currency of Peru is the Sol. There are 100 centavos to each sol. At the time of writing USD $1.00 was equal to S/3.00. There are a number of automatic teller machines that take credit cards and there are numerous «Casas de Cambio» where Travelers Checks may be cashed or US Cash may be changed. There are also ATM that excepts Eurocards, US Dollars can be exchanged everywhere and banks, hotels and many shops also readily accept US Dollars (although very old, torn or damaged notes are usually rejected). It is not recommended to exchange money from street vendors. . When changing money, be careful that you are not distracted with anything to make you lose count of what you have been given
Sol (PEN; symbol S/) = 100 céntimos. Sol notes are in denominations of S/200, 100, 50, 20 and 10. Coins are in denominations of S/5, 2 and 1, and 50, 20, 10, 5 and 1 céntimos.