Development Economics in Peru

1. Overview of Peru

Peru is a country in South America, surrounded by countries such as Ecuador, Brazil and Bolivia. Peru became independent in 1821, and after a period of political instability, it now boasts one of the best performing economies in Latin America. In the last decade, poverty and unemployment rates have fallen drastically. The west coastal area, which includes the capital Lima, has developed significantly, whilst the rural areas in the Amazon and mountain areas have failed to do so.

Map of Peru
HDI (1980-2011) comparison between Peru and Germany

The diagram above shows the changes in HDI for Peru and Germany. It is seen from the diagram that the HDI of Peru in 2011 has now reached the HDI level of Germany in 1980, and there still remains a large gap in the value between the two countries . However, its HDI level has been increasing every year, showing steady rate of development.

2. Comparing levels of development

Life Expectancy (Male) comparison (1950-2015) between Peru and Poland

Life Expectancy for Male was quite low in Peru in 1950, at about 42 years. During the past years the life expectancy has increased greatly, and in 2015 it is at 73 years. This increase is significant, which is shown by the comparison to the life expectancy of Male in Poland. In 1950, Poland's life expectancy for Male was 56 years. Now it has increased to 73 years. In 2015, Poland and Peru has the same life expectancy for Male, which shows the significance of Peru's development aided by the improvement of health factors.

Literacy of adult females, %, age 15+

The above diagram compares the literacy rate of adult female in Peru and Poland. Peru has yet to reach the high standard of literacy achieved by Poland. In fact, Poland has almost 100% literacy rate since 1978, and the value has not fluctuated. On the other hand, Peru has seen an increase of about 10% from 74% to 85%.

3. Domestic factors and Economic Development

Education

The Peruvian government extended free and compulsory school education from age 5 to 16 in 1996, thus raising the standard of education. However, the low enrollment in upper school education in areas such as the highlands and the Amazon rainforests remains a problem. Recently, Peru has seen an increase in the number of overseas students coming to study.

Property Rights

The use of appropriate technology

Access to credit

Women's empowerment

“Gender Inequality Index reflects gender-based inequalities in reproductive health, empowerment, and economic activity.” Peru’s GII value is 0.406, and it placed 82nd out of 155 countries in 2014. Interesting values include: 22.3 percent of parliamentary seats held by women, 56.3 percent of adult woman reached at least a secondary level of education and 68.2 percent female participation in the labour market. For neighboring countries, Venezuela ranked 103rd whilst Chile ranked 65th

Source : http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/PER.pdf

Political Stability

Peru Political Stability Index from 1996 to 2015 (http://www.theglobaleconomy.com/Peru/wb_political_stability/)

Peru ranked 139th out of 194 countries in 2014 for Political Stability Index. It recorded a value of -0.55, with -2.5 being unstable.

Degree of Corruption

According to the International Transparency Website, Peru ranked 101st out of 176 countries with a score of 35 out of 100 in 2016. Degree of corruption in Peru is higher than average. It is high compared to the average score of 44 for the countries of the Americas. It was stated on the website that any value below 50 shows that the government is failing to eliminate corruption.

4. International Trade and Economic Development

Exports of Peru in 2014: total $39.8B
Imports of Peru in 2014: total $42.3B

Peru has signed free trade agreements with a number of countries since 2006, which includes US, Canada, Singapore, and the EU. The total trade between Peru and the US doubled after the US-Peru Trade Promotion Agreement took place in 2009. Peru has also signed a trade pact Pacific Alliance with Chile, Colombia and Mexico to integrate services, capital, investment and people. (https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html)

In 2014, Peru experienced a negative trade balance of $2.46B, with its GDP at $202B and GDP per capita at $12k. It is the 55th largest importer and the 59th largest exporter in the world. Both its imports and exports have increased over the last five years. Top exports of the country include Copper Ore, Gold and Refined Petroleum, and the top imports are Refined Petroleum, Crude Petroleum and Cars. Its largest trading partner is China, with exports of $7.08B and imports of $8.84B. (http://atlas.media.mit.edu/en/profile/country/per/)

5.Growth and Development Strategies aimed at Increasing Trade

6. Aid, Trade & FDI

FDI

Peru is one of the biggest receptors of FDI in South America, behind Chile and ahead of Argentina. Its FDI influx reached 7.7 million USD in 2015. Spain is its greatest investor, followed by the United States and Great Britain. Other countries in South America such as Chile and Brazil invests in the country as well. Mining, communications and finances are some of the factors that are favored by these countries. Peru's low cost wage and "non-restrictive policy concerning dividends" attract these countries. (https://en.portal.santandertrade.com/establish-overseas/peru/investing)

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