Sample Research Paper On Economy Of Peru
It was one among the country with lowest economic level during 1980s, but with major economic reforms initiated by its government during 1990’s, Peru is now among the fastest growing economies in the world. The economic growth of Peru is attributed to the increased foreign investments after it started cooperation with international institutions such as World Bank and International Monetary Fund. In addition to that, Peru’s vast natural resources contributed to the rapid development of its economy. Being a basically agricultural nation, Peru has also improved this sector in line with its economic liberalization. The Peruvian people have successfully transformed a weak economy into a stronger one, and with the current growth of its different industries, much more is expected from this bio diverse nation.
Until the mid-20th century, Peru largely depended on agriculture and countryside living. The Peruvians has depended on traditional means of livelihood such as farming, fishing and mining productions. Their economic subsistence came from exporting of their products to other nations. During the 20th century, an economic and social reconstruction was initiated by then President Manuel Odría. Despite his dictatorial rule, his administration was able to commit changes on the economy of Peru, as exemplified by his effort not only in creating a diplomatic relations with the United States, but of initiating a noticeable increase in mineral exportation to the U.S. (Embassy, 2013). The diplomatic affair with the U.S, however, was severed on the onset of a military coup d’etat in 1962. Though the relationship was stabilized later, it was only after a decade that the country was able to re-establish its relationship with the United States as it further aimed at taking new political, social and economic programs.
Peru Economy during Year 2000
The presidency of Alejandro Toledo in 2001 came with it the re-establishment of democracy in Peru. Notable was the lessening of inflation during his term as he strongly supported foreign investments coupled with his excellent economic management. Despite the turbulent economy, the government under Toledo was able to maintain the budget deficit at about 2.5% of gross domestic products.
The economic progress of Peru today is largely attributed to the impressive development during his term. During the administration of Toledo, “the government has made an effort to achieve full reintegration into the international community and to improve Peru’s battered image as a reliable, democratically oriented partner” (Shaping). The ties made with outside institutions and nations enabled the government to receive international support which was subsequently sued to improve internal policies. The Toledo government for instance has worked closely with the International Monetary Fund, the World Bank, and the Inter-American Development Bank (Shaping). It positively gained favour form these institutions due to its unwavering commitment to provide for the requirements and the ardent use of resources as provided for by these international partners.
Other than strengthening ties with outside institutions and attracting foreign investors to Peru, the administration of Toledo was marked with agreement of the social and political actors on a stable economic democracy in their want for a reform. Further improvement was made by the next president after Toledo, as Alan Garcia who won his presidential bade in 2006. It was during his term that Peru became a major target for foreign investors in the region. His economic policy gave a more importance to the private sector in their contribution to the development of the economy (Crabtree, 2008).
With its economy being largely affected by international trading, Peru elected to enter into several free trade agreements making a majority of its exportations covered by trade agreements. The trade treaties enable export products from Peru to enter the markets under favoured circumstances of more than 50 participating countries such as Canada, China and the United States among others (World, 2013). Peru's trade policy progresses throughout was marked by its dynamic involvement not only within the regional boundary of Latin America but also to other countries. It has agreed to enter into 14 trade agreements within the region in 2014 and is willing to participate in several more trade agreements in the future.
As a result of the agreement with the United States, and in order to fully benefit
government procurement, and intellectual property rights.(). Despite its emphasis
in regionalism, Peru continues to be an active member in the WTO (World, 2013).
Peru Economy Today
The Peruvian economic status today is an indication that the country has survived well during the global economic crisis. The strength has come from the country’s diverse economic activities that largely contingent on international exchange. The combined exports and imports to GDP ratio has improved from 27 per cent in year 2000 to about 50 per cent after twelve years thereafter (World, 2013). The expansion of merchandise trading has also grown with traditional exportation as minerals and other natural products have greatly increased. It has maintained a trading partnership with China, United States and the European Union with diversified products such as coffee, copper and gold as well as oil and petroleum products (World, 2013).
Trend in Trading and Investment
Peru is a producer of a variety of natural products and resources owing to its diversified topographical area. It has three main regions when segmented by altitude: the coast, mountains and the jungle. Having a vast region from where to obtain its products, it became dependent on export income, it has relied heavily though on copper and gold that accounted to about 80 per cent of its mineral exports and 10 of its gross domestic products (World, 2013). Its agricultural produce has also an increased share in total exportation to 16.8 per cent with a 1.9 per cent increase from year 2007 to 2012, while minerals excluding that of copper and gold recorded a 32 per cent share. There was, however, a decrease in the exportation of manufactured products such as chemical and textiles during the period (World, 2013).
Most of the goods exported by Peru reached China, Europe and the United States being the largest destinations of its products. In 2012, the exportation absorbed by these countries totalled to about 48 per cent, with China reportedly increasing its consumption from 10.8 to 17.1 per cent (World, 2013). Other countries also entered into trade agreement with Peru, such as Canada, Korea and Switzerland gaining increased share from the exported goods of Peru (World, 2013).
The positive growth of the Peruvian economy from 2007 to 2012 significantly impacted the flow of foreign direct investments, with about $ 5.9 billion foreign investment increase compared to that of 2000-2006 figures (World, 2013). The capital contribution from foreign investments during the end of 2012 was reported at $22,674 million, with 20.5% coming from Spain, 19.8 from United Kingdom and 14% from United States. The investments were largely focused in the mining sector at 23.9%, finance at 18.5%, communications at 17.3%, Industry at 13.7% and energy at 13.5 per cent (World, 2013).
Effect on Family Economies
According to economic scholars, Peru is anticipated to maintain its status as one of Latin America’s most dynamic and stable economy. This is on the assumption that no global crisis such as that of the year 2008 shall occur and that the private investment in the country will grow to about 11% annually. It was also assumed that there is a continuity of mining projects that will assure an increase production of copper to 90% until the end of 2016. Basing on these assumptions, private investment is projected to reach 25% of GDP by the end of 2015, with the total investment totalling 30% of gross domestic products (World, 2013).
Crabtree, J., 2008. Alan Garcia and Peru: a Tale of Two Eras. Retrieved from https://www.opendemocracy.net
Embassy of Peru, Washington DC. Diplomatic Relations on the 20th Century. Retrieved from www.embassyofpery.org
Shaping Change. Peru. Retrieved from bit2003.bertesmann-transformation-index.de
World Trade Organization. Trade Policy Review. Retrieved from https://www.wto.org