Latin America's surprise rising economic star: Peru
Peru's growth rate – 9.8 percent – was one of the fastest last year. It's poised to break with neighbors Bolivia, Venezuela, and Ecuador with its center-left but pro-business governments.
And these days, the Andean nation has quite a case to make.
Its 9.8 percent growth rate last year was one of the world’s fastest. And record commodities prices, coupled with China’s insatiable demand for raw materials, are helping the mineral-rich nation weather the financial crisis better than most other countries in the region.
Now, Peru predicts that the construction of a new road between its Pacific coast and Brazil will replace the Panama Canal as the main passage for trade between rising superpower China and the agricultural juggernaut – adding a full percentage point to Peru’s gross domestic product. Add to that new oil and gas projects worth billions of dollars, and you’ve got a country poised for a giant leap.
Not since the height of the Spanish Empire, after Francisco Pizarro subdued Incan Emperor Atahualpa during his quest for the mythical golden city of El Dorado, has Peru been better positioned to play a key role on the world stage. But the country has long been dogged by a “resource curse” – vast reserves of gold, silver, tin, iron, zinc, and copper that have sparked more turmoil than development. Now the question is whether Peru – pound for pound, one of the world’s richest countries in terms of resources – can avoid repeating mistakes that have stunted its growth in the past.
The country has experienced decades of extreme left-wing and right-wing authoritarian governments and a brutal leftist insurgency waged by the Shining Path. But Peru’s past two pro-business, yet center-left governments have steered the country toward record economic growth, greater transparency, and rapid decentralization. The result: Peru has matured politically to the point where analysts – and investors – are beginning to talk about another regional powerhouse creeping up alongside Brazil.
“South America in general, and Peru in particular, are the region and country of the future,” says Francisco Sagasti, a senior associate at FORO, a development think tank based in Lima. “We’ve tried every macroeconomic model, and we’ve learned from our mistakes. No one is pushing for nationalization here. Everyone here knows that you have to have sensible economic policies from top to bottom.”
Indeed, Peruvians of all walks of life seem to agree that the country is not likely to follow its Andean neighbors Bolivia and Ecuador toward the “21st century socialism” of Venezuela’s Hugo Chávez. They’ve been there, done that. And, although President Alan Garcia’s approval rating now hovers near 30 percent, few quibble with the fact that Peru has enjoyed an average annual economic growth rate of 7 percent since 2003 or that per capita income has doubled and poverty plummeted from 50 percent to 35 percent in roughly the same time.