Country Report 2Nd Quarter 2000 © the Economist Intelligence Unit Limited 2000
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COUNTRY REPORT Peru The full publishing schedule for Country Reports is now available on our web site at http://www.eiu.com/schedule. 2nd quarter 2000 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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ISSN 1356-4064 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Peru 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2000-01 11 The political scene 15 Economic policy 18 The domestic economy 18 Economic trends 22 Oil and gas 22 Mining 23 Manufacturing 24 Agriculture 26 Infrastructure 28 Financial and other services 29 Foreign trade and payments List of tables 8 Forecast summary 10 Global assumptions summary 15 Opinion poll results, 2000 18 Central government operations 20 Gross domestic product growth by demand, 1999 21 Gross domestic product growth by sector 22 Consumer prices 23 Fuel production 24 Mining production 26 Agricultural output 27 Fisheries output 28 Merchandise trade 29 Current account 29 Balance of payments List of figures 11 Gross domestic product 11 Nuevo sol real exchange rates 19 GDP, domestic demand and fixed investment 24 GDP, primary and non-primary production EIU Country Report 2nd quarter 2000 © The Economist Intelligence Unit Limited 2000 . Peru 3 March 17th 2000 Summary 2nd quarter 2000 Outlook for 2000-01 A victory for Alberto Fujimori remains the most likely outcome of the presi- dential election, but it no longer appears assured, with Francisco Toledo surging up the polls and the government tainted by allegations of forging signatures. Economic policy will change little, no matter which candidate wins the election, despite some pre-electoral populist measures. Fiscal adjustment will follow in the second half of 2000, and with growth rising as investor confidence returns, prices will remain stable and the currency will appreciate slightly. As domestic demand returns the current-account deficit will widen slightly. The political scene Mr Fujimori's popularity has waned amid accusations of foul play, which have been taken up by international observers, who are also concerned about the justice system. The opposition challenge has become fragmented, but Mr Toledo has seen his support surge. Upheaval in Ecuador has not damaged bilateral relations, and the border settlement with Chile has been consolidated. Economic policy The Perú 2000 manifesto suggests pragmatism and populism; the opposition manifestos are almost indistinguishable. The fiscal position worsened in 1999 and the deterioration has continued into early 2000. A new letter of intent has been signed and cautiously received. Some privatisations and concessions have been delayed again, but the sale of concessions for Camisea has provided welcome news for investors. The domestic economy • Official growth figures have been contested, but there are signs of a real recovery. Manufacturing drove growth in the last quarter of 1999. Inflation fell to 3.7% at year-end. The nuevo sol appreciated between January and March. • The first stage of Camisea has been sold and the second delayed. Oil and gas output has fallen. Gold and copper have driven growth in mining output. • Manufacturing growth figures have been questioned, but some companies have performed well. Agricultural and fisheries output grew in 1999, but the sectors still face substantial financial problems. • Investment in telecoms continues. Concessions on mobile telephony have been agreed. The first railway concession is still being evaluated. • Bad debt levels remain high and telecoms have boosted the stockmarket. Foreign trade and Export growth in 1999 was led by traditional products. With non-traditional payments exports beginning to recover and the import bill falling, the current-account deficit narrowed in 1999. FDI inflows fell in 1999. Editor: Martin Pickering All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Full schedule on www.eiu.com/schedule EIU Country Report 2nd quarter 2000 © The Economist Intelligence Unit Limited 2000 4 Peru Political structure Official name Republic of Peru Form of state Presidential democracy The executive The president is directly elected for a five-year term and may be re-elected to a second term under the new constitution approved by referendum in October 1993; the president appoints a Council of Ministers Head of state Elected president National legislature Congress consists of a 120-member single chamber, which can be dissolved only once during a presidential term Legal system Courts of first instance are in provincial capitals; the Supreme Court sits in Lima National elections April 9th 1995 (presidential and congressional) and October 11th 1998 (municipal); next elections due on April 9th 2000 (presidential and congressional) National government Alberto Fujimori became president on July 28th 1990 and was re-elected on April 9th 1995 Main political organisations Government: Cambio 90-Nueva Mayoría (C-90/NM) Opposition: Acción Popular (AP), Alianza Popular Revolucionaria Americana (APRA), Code País Posible, Partido Popular Cristiano (PPC), Renovación, Solidaridad Nacional, Somos Perú, Unión por el Perú (UPP) President Alberto Fujimori President of the Council of Ministers (prime minister) Alberto Bustamante Belaúnde Key ministers Agriculture Belisario de las Casas Piedra Defence José Villanueva Ruesta Economy Efraín Goldenberg Education Felipe Ignacio García Escuerdo Energy and mining Jorge Chamot Sarmiento Fisheries César Luna Victoria León Foreign affairs Fernando de Trazegnies Granda Health Alejandro Aguinaga Recuenco Human development & promotion of women Luisa María Cuculiza Torres Industry, commerce, tourism, integration & international trading negotiations Juan Carlos Hurtado Miller Interior César Saucedo Sánchez Justice Alberto Bustamante Belaúnde Labour & social promotion Pedro Flores Polo Presidency Edgardo Mosqueira Medina Transport, communications, housing & construction Alberto Pandolfi Arbulú Central Bank president German Suárez EIU Country Report 2nd quarter 2000 © The Economist Intelligence Unit Limited 2000 Peru 5 Economic structure Annual indicators 1995 1996 1997 1998 1999 GDP at market prices (Ns m) 133,258 149,504 173,689 183,842 193,344 GDP ($ bn) 59.2 60.8 65.1 62.4 56.9 Real GDP growth (%) 7.3 2.4 6.9 0.3 3.8 Consumer price inflation (av; %) 11.1 11.5 8.5 7.3 3.5 Population (m) 23.5 23.9 24.4 24.8 25.2a Merchandise exports fob ($ m) 5,588 5,899 6,832 5,735 6,114 Merchandise imports cif ($ m) 9,224 9,473 10,264 9,840 8,057 Current-account balance ($ m) –4,314 –3,643 –3,282 –3,800 –2,033 Reserves excl gold ($ m) 8,222 10,578 10,982 9,566 8,731 Total external debt ($ bn) 30.9 29.3 30.5 32.4a 30.6a Debt-service ratio, paid (%) 16.1 35.2 30.5 28.8a 35.3a Exchange rate (av; Ns:$) 2.25 2.46 2.67 2.94 3.40 March 17th 2000 Ns3.44:$1 Origins of gross domestic product 1999 % of total Components of gross domestic product 1998 % of total Agriculture 13.6 Private consumption 58.3 Fisheries 0.9 Government consumption 7.7 Mining 11.7 Fixed investmentc 26.0 Construction 8.2 Exports of goods & services 29.6 Manufacturing 21.9 Imports of goods & services –21.6 Services 43.7 GDP at current market prices 100.0 Total 100.0 Principal merchandise exports fob 1999 $ m Principal imports fob 1999 $ m Gold 1,193 Intermediate goods 3,003 Copper 776 Capital goods 2,140 Fish & fish products 791 Consumer goods 1,438 Textiles 575 Total incl others 6,714 Zinc 462 Agricultural products excl coffee 420 Coffee 268 Crude oil & derivatives 247 Lead 177 Total incl others 6,114 Main destinations of exports 1998 % of total Main origins of imports 1998 % of total US 32.0 US 26.2 China 4.1 Chile 4.5 Germany 4.0 Brazil 3.4 Japan 3.8 Venezuela 2.7 Brazil 3.1 Colombia 2.6 a EIU estimate.