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Peru's Economy

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Background Information
Peru's Competitive Advantage
Working in Peru
Peru's Economy
Meet the Culture
The Peruvian Markets
Risk Management in Peru
Social Issues and Concerns in Peru
Conclusion and Recommendations
Bibliography

Type of Economy, Taxes and Stock Market (or lack of)
The type of economy in Peru is very unestablished and is known as a "free market society". Alejandro Toledo wants to create a market economy, however they currently do not even have a stock market.
 
Taxes are often used when the government needs money. The government does charge income tax on people, especially the rich, but in Peru you are in one of two groups of people, you are either rich, or poor.
Taxes are broken down and collected as follows:
 
EMPLOYER:

- Social Security : 9%
- Extraordinary Tax : 2%

EMPLOYEE (withholding)

- Public or Private Pension Fund : 13% or 12%
- Income Tax rate1:
from $0 to $24,260 = 15%
from $24,260 to $48,522 = 21%
from $48,522 = 30%

There is also a General Sales Tax of 10% on all purchased products.

Peru's GDP
 
Peru's GDP is about 489,958,367,347 Peruvian Nuevo Sols ($146 billion - American, or about $178 billion - Canadian)
 
Their GDP per capita is about 16,940 Peruvian Nuevo Sols ($5,100 - American or $6,225.57 - Canadian)
 
The GDP Growth Rate is about 4% as of 2003, which is a very significant increase since 2001 when it was -0.3%.
 
The Peruvian GDP by sector is as follows:
agriculture: 8%
industry: 27%
services: 65%

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Note: Year-on-year growth in quarterly GDP.

Inflation Rate
 
Peru's inflation rate is 100% unstable, and will probably be completely different by the time you read this, but as of 2003, their inflation rate was about 2.3%.

Currency
 
The form of currency used in Pery is the Nuevo Sol. You can buy 2.52 Nuevo Sols for $1.00 (CAN). The Peruvian currency fluctuates often and rarely stays steady for more than one month.
 
Currency Conversion:
$1.00(CAN) or $0.82(US) = 2.6247 Nuevo Sols
1 Nuevo Sol = $0.381(CAN) = $0.31(US)

Stability of Currency and Market Development
 
Peru's economy and currency is not stable, however recent events have shown great improvements and hope for the future. In 2001, a 2.3 billion dollar copper/zinc mine was opened which is widely believed to be the world's largest deposit of these two metals.This mine will make the Peruvian economy more subject to world market prices due to their dependency on the mine which will cause even more currency fluctuation.
 
There are also many budget worries the government has been facing which has caused higher taxes, inflation and greater currency fluctuation.
 
The job crisis is also having an impact on the economy and currency. In Lima the capital, the unemployment rate is up to 30% in some areas which is having unseen effects on the entire country's economy.
 
In conclusion, although recent gains look promising for Peru's currency, the inflation and fluctuation in currency make Peru's economy unpredictable. As more international companies continue to invest, the country will become more stabalized and continue to prosper.

Importing and Exporting
 
Peru imports machinery, transport equipment, food, petroleum, iron, steel and pharmaceuticals. They mainly import from the United States, Chile, Spain, Venezuela, Colombia, Brazil and Japan.
 
Peru exports fish, gold, copper, zinc, lead, coffee, sugar, and cotton. Their exporting partners include the United States, the United Kingdom, Switzerland, China, Japan, Chile and Brazil.
 

Income Distribution
 
The income distribution in Peru is always changing, and it is extremely difficult to state any statistics. However, generally speaking, about 70% of the nation's income goes towards urban areas, while the remaining 30% goes to rural areas. Looking at income in more depth, the lowest 10% of Peru's population, receives only about 1.6% of the nation's GDP, while the highest 10% of the population, receives about 35.4% of the Peru's GDP.

Natural Resources
 
Peru's natural resources include coffee, cotton, sugarcane, rice, wheat, potatoes, corn, cocoa, poultry, beef, wool and fish.

Economic Stability
 
Peru's economy is not very stable at all. The government is very unstable and thus a lot of economic changes often occur within the nation. Dmestic problems are also a major factor with decreasing the stability if the Peruvian government.

graph_economy2.gif
The graph only reaches 2000, but it is an accurate interpretation of how Peru's economy fluctuates.

Trade Barriers
 
The largest trade barriers in Peru are tariffs. The Peruvian's government has eliminated most restrictions on products and services, although many different tariffs are still eligible for different products. Whenever Peru suffers a crisis within the country, they will often place temporary tariffs on many imported products.

Unemployment Rate
 
Peru's unemployment rate is about 9.7% as of 2003 statistics.

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Sectors of Peru's Labour and Economy
 
There are three different sectors of labour within Peru; they are agriculture, industry, and services. Most people within Peru work in the service industry, as they often do not need much skill for some of these jobs. The second largest sector is agriculture. Even though the least amount of the GDP comes from agriculture, many people work in this sector. Farmers will often hire people at certain times of the year to collect crops. The industry sector is a quickly growing sector within Peru. Not many people work in this sector, however, with the new education system being introduced within Peru, more people will be educated enough to work in the industry sector when they graduate.

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Copyright 2004 Peru-4-U