Peru - Future trends

Peru is a nation rich in natural resources and human potential, but it has been plagued by political turmoil throughout its history. The country has had 109 presidents in less than 180 years as an independent nation. In 2000-01 alone it had 3 presidents. The past administration of Alberto Fujimori is accused of stealing as much as US$1 billion—roughly 10 percent of the government's annual budget—through bribes, kickbacks, and graft. Peru must rid its public administration of corruption if it hopes to attract foreign and local investors.

The current generation of politicians and economists are correct in pointing out that Peru needs to diversify its economy and its exports, relying less on raw materials and more on value-added goods. A decision to concentrate on the agricultural sector is sensible because it takes advantage of the country's natural wealth, exploits niches in the world market, and most importantly for Peruvians, creates jobs.

The government has hard choices to make in the coming years. The budget deficit cannot be greater than 1.5 percent of GDP as part of the agreement with the International Monetary Fund. Peru missed the target in 1999 and 2000, and another miss will not be taken lightly. The country needs to adopt a new round of reforms, including additional privatizations and reduced government spending, which will make already tough social conditions even more difficult. The government needs to find a balance where it can satisfy creditors and keep international channels open while making sure the basic needs of the population are met.