Peru’s economic environments

Nov 22nd, 2014
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 rewrite this report by own world ?


Peru’s economic environments


Peru has been one of the fastest growing Latin American economies for the past ten years. Since 2002 the Peruvian economy has grown by an average of 6.4% per year, a trend expected to continue with a projected GDP growth of 6.3% in 2013. Consumption and private investment are the main driving forces of this growth. Projections for 2013 are that investment will grow 8.3% to a value of US$33.5 billion. The Ministry of Economy and Finance (MEF) set a target of 30% growth in public investment. As the economy has grown, poverty in Peru has steadily decreased. In its November 2012 Peru Handbook, HSBC states that Peru is “the third-fastest growing consumer market globally, and set to be a bigger economy than Chile, Colombia, or even South Africa in the long term.


Limited Government:The top individual income and corporate tax rates are 30 per cent. Other taxes include a value-added tax (VAT) and a financial transactions tax. The overall tax burden amounts to 17 percent of gross domestic income. The leftist government has shown a surprising commitment to prudent fiscal policies, with government spending falling to 19 percent of GDP and public debt shrinking below 20 percent of GDP.


Open market: Peru’s average tariff rate is 1.5 percent. In 2013, Peru, Mexico, Chile, and Columbia created the Pacific Alliance free-trade area. The government restricts imports of used clothing and vehicles. Foreign and domestic investments are treated equally under the constitution. Credit to the private sector has increased steadily, and banking remains stable and well capitalized. Non-performing loans represent fewer than 5 percent of total loans.


Starting a business now takes five procedures and slightly less than a month, and no minimum capital is required. Licensing requirements continue to be costly and time-consuming. Employment regulations continue to evolve, but more slowly than in other economies. The government partially subsidizes electricity and automotive and cooking fuels, although it reduced subsidies for gasoline in 2013.

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