Peru is member of the Asia Pacific Economic Cooperation (APEC) and the Andean Community of Nations. The second one counts more than 122 million inhabitants and has a joint GDP of more than US$ 310 billion. The State is organized in the following way:

• The Executive Power, made up by the President of the Republic (elected for a five-year term)
• The Cabinet Council appointed by the President
• The Legislative Power made up by 120 congress people elected by popular vote for a five-year term
• The Judiciary, made up by judges appointed by the National Magistrates Council

Ancient Peru was the seat of several Andean civilizations, most notably the Incas. Their empire was captured by the Spanish conquistadors in 1533. Peruvian independence was declared in 1821, and remaining Spanish forces defeated in 1824. After many years of military rule, Peru returned to democracy in 1980, but experienced economic problems.

President Alberto Fujimori’s election in 1990 introduced a decade with a dramatic turnaround in the economy and significant progress in curtailing guerrilla activity. Nevertheless, the president's increasing reliance on authoritarian measures generated in the late 1990s increasing dissatisfaction with his regime, which led to his dismissal in 2000. In new elections held in 2001, Alejandro Toledo came out as the new head of government - Peru's first democratically elected president of Native American ethnicity.

The presidential election of 2006 saw the return of Alan Garcia who, after a disappointing presidential term from 1985 to 1990, returned to the presidency.

Peru's economy reflects its varied geography:

• The coastal region
• The Andes
• The tropical lands bordering Colombia and Brazil

Rich mineral resources are found in the mountainous areas, and Peru's coastal waters provide excellent fishing grounds. However, over-dependence on minerals and metals subjects the economy to fluctuations in world prices. A lack of infrastructure discourages new trade and foreign investment. After several years of inconsistent economic performance, the Peruvian economy grew by more than 4 percent per year during the period 2002-2006, with a stable exchange rate and low inflation.
Economic growth continues to be driven by exports of minerals, textiles, and agricultural products, and by expectations for the 'Camisea Natural Gas Project' and for other promising energy projects. Upon taking office, President Garcia announced 'Sierria Exportadora', a program aimed at promoting economic growth in Peru's southern and central highlands.

As a result of a good economic management, Peru still remains as one of the Latin American countries with the lowest inflation rate. Its free-floating exchange rate, determined by market forces, is among the most stable ones in Latin America.
In 2005, the ‘Nuevo Sol’ (Peruvian currency) was appreciated at 3.4% (average) in relation to the US dollar. This development is explained by the trade surplus, increase in remittances coming from Peruvian residents abroad and changes in the institutional investors’ portfolio. Likewise, the Peruvian economy shows a solid position in terms of international reserves, which to December 2005 stood at US $14,097 million, equivalent to 14 months of importation.

The latest figures released for the year 2006 indicate an extraordinary 1.0% inflation rate. Peru has among other Latin American Countries the lowest inflation rate:

• Chile, Ecuador and Brasil = 3.0%
• Colombia = 4.0%
• Bolivia = 5.0%
• Uruguay = 6.0%
• Argentina = 10.0%
• Paraguay = 12.0%
• Venezuela = 17.0%

(figures for the year 2006)

The balance of trade registered a surplus for four consecutive years and stood nearly at US$ 5 000 million during 2005 which is explained by the significant increase in FOB exports (36.7 % in dollars) in relation to traditional exports (42 %) and as well as a rise in non traditional ones (23.0% in dollars).
The result in the traditional exports heading is explained by the improvement in international prices and a greater exportation of some products (mainly gold, molybdenum, fish meal and hydrocarbons), while the result in the non traditional heading shows an important growth mostly in the export of agricultural and textile products, chemical products, iron and steel products and jewellery (Overview in the table of 'Exportation of Products'...).

The table below lists important export products from Peru (values are in Million US$). Very promising was the increase between the years 2004 and 2005.

Peru’s active export activities have resulted in surprising rankings in an international comparison. Peru has gained the following positions:

(Peru in the World Exporting Ranking 2006)

• 1st with Fresh Asparagus
• 1st with Paprika
• 1st with Fishing Nets
• 1st with Virola Wood (also known as Epená, is a tree native to the South American rainforest)
• 1st with Fishmeal and Oil
• 2nd with Organic Coffee
• 7th with Fresh Mangoes
• 8th with Cochinilla
• 8th with Artichokes
• 10th with Avocados

Peru's stability brought about a substantial reduction in under-employment, from an average of 74% from the late 1980s through 1994 to 43% in the 1995-96 period, but the rates began climbing again in 1997-2002 to over half the working population. In 2006 the statistics indicate a 9.6% unemployment rate for the Metropolitan Lima area. The poverty rate remained at 54% in 2001, with 24% of Peruvians living in extreme poverty. In 2005 the numbers changed, nowadays 18% Peruvians live in extreme poverty and the poverty rate is now at 51.2%.

In 2005, the Peruvian Gross Domestic Product (GDP) increased 6.7%. This good result goes hand in hand with an average economic growth of 4.6% during the past three years. This is an overall growth and comprises primary sectors and non primary sectors. Not only does this enable Peru for a growth in the mining and agricultural sectors but also in construction, trade and the non primary industry. With regards to demand, the boost given to the economic growth, which began in 2001, came from the private sector, mainly from investment and exports. In other words, it is not determined by a fiscal drive.

During 2005, private investment grew 13.9% especially due to the development of important mining and hydrocarbon projects, while exports increased 14.2% (in real terms). A big support for these conditions was the high international prices and the export tax-free entry to the United States provided by the US ATPA (Andean Trade Preference Act).
Regarding primary sectors, it must be pointed out that the international price recovery allowed for a 7.4% increase in mining. The hydrocarbon production reached 24% mainly due to the development of the ‘Camisea’ project (Natural Gas). The agricultural sector grew 4.6% in the year.
Likewise, the overall growth of the Gross Domestic Product (GDP) goes hand in hand with a rise in the employment level, especially in the provinces, providing greater dynamism to these areas.

For 2006, it was conservatively estimated that the Gross Domestic Product should have grown by 5.0% in real terms in relation to the previous year but it reached 7.0%. By sectors, it is foreseen that construction and mining shall head the growth during the following years. Sectors such as non primary manufacturing, trade and services would also show a significant development. Furthermore, the agricultural sector would reach growth levels of nearly 4% a year.

Economic projections are based on the fact that all Peruvians have indeed managed to take advantage of the positive external context for the past few years, the maintenance of basic financial balances and the accomplishment of important growth in the economic activity. There has been a boost in modernizing the State through important transformations in its resources and structures, such as the pension reform, the reformulation of the external debt, administrative and fiscal decentralization and transparency in government actions, not only through regulations but also through administrative systems that register and facilitate follow up. This has enabled the improvement of the expenses and the allocation of resources. A reduction in the total Peruvian public debt has been projected to nearly 30% of the GDP by 2010.

Peru's economy is expected to grow 7 to 8% in 2007, with no inflation and positive fiscal and trade balances.

Peru’s economy relies primarily on the agricultural sector, but mining and fishing industries have become increasingly important. Peru depends additionally on the export of raw materials like minerals, petroleum, farm products and fish meal to earn foreign exchange for importing machinery and manufactured goods.

As a genetic resource Peru has 25,000 plants. It has nearly 4,400 species of native plants with known use like food, medicinal, ornamental, spicing, dyeing, gynaecological, aromatic and cosmetic properties, among others.
Peru is a mega diverse country comprising 84 of the 104 life zones acknowledged in the world. Therefore, it has the advantage to grow practically any product. Among the main exportation products, other than coffee which is a traditional exportation product, Peru is specializing in growing high price products, mainly garden produce and fruit. Peru is the leading exporting country in the world of asparagus and dried paprika. Other significant exports of this type are artichokes, mangoes, pepper, grapes, avocados, chestnuts, bananas, white onion and olives.

Peru is one of the world’s leading growers of coca, from which the drug cocaine is refined. Coca leaves were used for years as a stimulant and appetite-suppressant by Native Americans of the sierra. Working with the U.S. Agency for International Development (USAID), the Peruvian Government carries out alternative development programs in the leading coca-growing areas in an effort to convince coca farmers not to grow that crop.
(Read more about this in the article about NARCOTICS)

Fishing is one of Peru’s main productive activities and generates 9.4% (US$ 1,625 million) of total exports. Peruvian waters have a great diversity of resources but nevertheless only 19% of the existing species are exploited.

Investments in processing plants during the 1960s turned Peru into a main world producer of the various qualities of fish meal and fish oil (fish meal is used in animal feed and as a fertilizer). ‘Anchoveta’ is the most widely used species in the preparation of fish meal. Other marine products are shrimp, scallops, squid, tilapia and trout.

El Niño, a climatic phenomenon that alters ocean temperatures and wind patterns, periodically disrupts Peru’s fishing industry. Besides, the government periodically imposes limits on fishing to prevent over fishing.

Forests cover 54% of Peru’s land area. Forest products include balsa lumber, balata gum, rubber and a variety of medicinal plants. Notable among the latter is the cinchona plant, from which quinine is derived (anti malaria medicine).
The Amazons' jungle forestry potential is 46 million hectares of woodland suitable for forestry management, with a production capacity estimated at 2,300 million cubic meters

Mining represents an important source of foreign currency (more than 56%) and the reason why a significant part of investments have been carried out in the country in the past few years. Worth mentioning is the ‘Antamina’ Mining project (copper, molybdenum and zinc), that represented an investment above US$ 2,000 million and a 60% increase in production in the District of Ancash as well as the constant development of the ‘Yanacocha Mine’, the main local gold exporter. During 2005, the ‘Alto Chicama’ gold production was initiated, resulting in a significant increase of exported gold.

The principal minerals extracted in Peru are: copper, gold, molybdenum, zinc, tin, silver and lead.

Peru ranks in preferential places worldwide in the extraction of these metals:
(Peru in the World Production Ranking 2005)

(Source; U.S. Geological Survey, Mineral Commodity Summaries — January 2006)

It is expected that investment will continue in the following years within the mining and hydrocarbon sectors through the concession of large projects.

Much manufacturing in Peru is on a small scale, but a number of modern industries have been established since the 1950s along the Pacific coast.
During 2005 Peruvian textile and garment exports again registered a significant growth reaching an annual level of US$ 1,274 million, according to the information provided by the Central Reserve Bank of Peru. Peru’s involvement in the international market is mainly as a supplier country of 'full package' type textiles and garments. This implies that the different steps of the exporting textile chain are developed inside the country, from growing cotton or producing other types of fiber, spinning and weaving, dyeing and finishing the fabric to finally manufacturing and exporting the finished garments.

Tourism has contributed significantly to Peru’s revenues. However, political unrest, guerrilla activity in the sierra, and cholera outbreaks slowed tourism during the 1980s and 1990s. It began to pick up again in the early 2000s.
The greatest attractions of Peru are its historical and cultural sites. Some examples are the archeological sites of Machu Picchu, Chavin de Huantar, the Kuélap Fortress and the Nazca Lines There is also a significant development of eco tourism activities. Archaeological museums in Lima and other Peruvian cities display pre-Columbian art and objects from cultures that flourished before the arrival of the Spanish conquerors.

(Please have a look at our list of museums – under CULTURE or click here to follow the link)

Scenic villages in the Andes provide opportunities for visitors to observe Native American traditions and culture today. Tourism is a very important activity for Peru, with nearly 1.5 million foreign visitors arriving in the country.

It is worth pointing out that the number of tourists coming from Europe to Peru increased 36% in 2005 against the previous year, while North American visitors increased 28%.

The fight against narcotics in Peru has resulted in an extraordinary 70% reduction since 1995 in the area of illegal cultivation. The impact of this illicit industry to the national economy is difficult to measure, but estimates range from $300 - $600 million. An estimated 200,000 Peruvians are engaged in the production, refining or distribution of the narcotic. Many economists believe that large flows of dollars into the banking system contribute to the traditional depression in the dollar exchange rate to the Peruvian Nuevo Sol.
The Central Bank engages in open market activities to prevent the price of the Nuevo Sol from rising to levels that would otherwise severely complicate Peruvian exports. Peru continues to arrest drug traffickers and seize drugs, destroy coca labs, disable clandestine airstrips and prosecute officials involved in narcotics corruption.

Working with the U.S. Agency for International Development (USAID), the Peruvian Government carries out alternative development programs in the leading coca-growing areas in an effort to convince coca farmers not to grow that crop. The government agency 'Contradrogas', founded in 1996, facilitates coordination among Peruvian Government agencies working on counter narcotics issues.

Taxes are created, modified or abolished, or an exoneration is established, exclusively by law (Congress of the Republic) or legislative decree (Executive Power) in case of delegation of powers from Congress. Import taxes (imports) and fees (administrative formalities) are regulated by Supreme Decree. Municipalities can create, modify and abolish contributions and fees, or exonerate these, within their jurisdiction and within the limits established by law. The State, by exercising the legal taxing authority, must respect the reserve principles of the law, as well as those of equality and respect of a person’s basic rights.

The following are the main taxes:

• Income Tax: The rate is 30%
• General Sales Tax IGV: 19% tax on added value that affects sales, imports, service delivery and construction...
• Selective Consumption Tax ISC: Tax that levies operations with fuels, alcoholic drinks, and luxury goods, applying fixed rates and amounts that vary from one case to another

Customs Duties:

The current rate structure includes five levels: 0%, 4%, 7%, 12% and 20%. In addition, a temporary overcharge is applied to some agricultural products included in the 4%, 12% and 20% rates. In practice this generates eight tariff levels.

The purpose of ‘Bolsa de Valores de Lima S.A.’ is to facilitate the trading of listed securities, providing adequate services, systems and mechanisms for the fair, competitive, orderly, continuous and transparent brokerage of publicly offered securities, derivatives and non-mass issued instruments traded in centralized trading mechanisms other than in the stock exchange sessions operated by the company, as set forth in the Securities Market Act and its complements and/or regulations.

The history of the Bolsa de Valores de Lima goes back to the Tribunal del Consulado, which in the 19th Century was the highest commerce court and played an important role in the creation of Lima's Commerce Exchange. The liberal policies of President Ramón Castilla's government led to the inauguration of the Bolsa de Comercio de Lima on December 31, 1860, which started operations from temporary premises on January 7, 1861.
An expansion in the volume of transactions and close ties established with European markets made it necessary for its business to be conducted at specific and precise times, from permanent premises. Right from the beginning, the main sponsors of the Exchange were the Peruvian government and the most representative businessmen of the time. In spite of the fact that during its first three decades, the Exchange did not trade in stocks of any type, it did list nominal quotations of the main markets through the Comisión de Cotización (Quotations Commission).

Serious inflation experienced by Peru between 1872 and 1880 contributed to a lack of interest in the market. Under the name Bolsa Comercial de Lima, the Exchange was vigorously launched again by President Nicolás de Piérola in 1898, when the regulations creating the Cámara Sindical, comprised of three businessmen and three exchange agents, were approved. It was in 1898 when the first edition of Boletín de la Bolsa Comercial de Lima was distributed, bulletin which is still being published.

The first Annual Report of Bolsa Comercial de Lima was prepared in 1901, document which has been uninterruptedly presented by the Cámara Sindical to Shareholders Meetings ever since. This restructured Bolsa Comercial de Lima traded in stocks, bonds and certificates, with the most prominent being those of banks, insurance companies and Peruvian debt instruments. Stock trading was the main activity of both, Cámara Sindical and the Comisión del Interior. Uncertainty and an enormous fluctuation in the prices of securities between 1929 and 1932, as well as changes occurring during and following the Second World War, led to new institutional changes.
Reforms began in 1945 culminated with the creation of the new Bolsa de Comercio de Lima in 1951. The first Centenary of its founding was celebrated in 1960. During this period, education of participants to trade in stock exchange sessions and the creation of a real securities market were its greatest concerns.

In 1971, conditions were ripe for the founding of the current Bolsa de Valores de Lima. Its historical concerns also include some operating problems, of which the most common have been those related to technical conditions for the timely reception of information, as well as the frustration due to the lack of its own telegraphic system since 1860. Significant leaps have taken place throughout the 20th Century, to the implementation of the current trading system.