Peru: Selected Issues
Author: International Monetary Fund
Publication Date:
15 Sep 1998
eISBN:
9781451830941
Language:
English
Keywords:
ISCR; CR; government; rate; banking system; worker; banking law; housing expenditure; income-generating capacity; public education; tax-to-GDP ratio; capacity of land; Health care
Download PDF (3.3 MB)

This Selected Issues paper reviews economic developments in Peru during 1995–98. In July 1996, the Executive Board of the IMF approved a follow-up extended arrangement in support of Peru’s program for 1996–98. After a slowdown in 1996, economic activity picked up in 1997 while inflation declined significantly. The net official international reserves position strengthened further, and gross reserves reached the equivalent of close to eight months of imports of goods and services at end-1997. During 1996–97, Peru restructured the debt owed to foreign commercial and Paris Club bilateral creditors.

Abstract

This Selected Issues paper reviews economic developments in Peru during 1995–98. In July 1996, the Executive Board of the IMF approved a follow-up extended arrangement in support of Peru’s program for 1996–98. After a slowdown in 1996, economic activity picked up in 1997 while inflation declined significantly. The net official international reserves position strengthened further, and gross reserves reached the equivalent of close to eight months of imports of goods and services at end-1997. During 1996–97, Peru restructured the debt owed to foreign commercial and Paris Club bilateral creditors.

IV. Social Expenditure and Income Distribution

75. Social expenditure can have a significant impact on the pattern of income distribution. In the short run, social expenditure can reduce income inequality by targeting resources to the poorer members of society. In the long run, social expenditure can alter the pattern of income distribution in a more fundamental manner by affecting the distribution of productive assets in a society. This chapter tries to gauge the impact of social expenditure on income distribution in Peru. It describes recent trends in, and the broad determinants of, income distribution, analyzes the impact of social expenditure on income distribution, and presents recent initiatives for reform in the social sectors.

A. Recent Trends in Income Distribution

76. Income distribution is increasingly recognized to be central to the sustainability of structural adjustment efforts as well as to long-term economic growth. In several studies, Latin America has been identified as the region of the world with the highest level of income inequality, a condition which has persisted from the 1960s to the present (Table 2). Inequality in Latin America declined throughout the 1970s, but increased slightly in the 1980s. Recent evidence suggests that the return to growth during the 1990s has contributed to reducing poverty rates. However, empirical findings on the impact of growth on income distribution in the 1990s are inconclusive, varying from country to country, and the degree of income inequality in the region has remained broadly stable.12 Although there is no firm consensus on the determinants of income distribution, recent evidence suggests that the high levels of income inequality prevalent in Latin America are due to inequality in the distribution of productive assets—land, capital, and education, particularly the latter.13

Table 2.

Decade Average of Gini Coefficient by Region 1/

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Sources: Deininger and Squire (1996); and Clements (1997).

Gini coefficients multiplied by 100.

77. Various indicators of income distribution point to a high level of income inequality in Peru. In 1994 the top 20 percent of the population received 50 percent of the national income, whereas the bottom 20 percent received only 5 percent. The distribution of income in Peru in the 1990s as measured by the Gini coefficient,14 presented in Table 2, points to a somewhat lower degree of income inequality in Peru than in Latin America on average. However, these data do not take into account differences in methodology in the measurement of income distribution. Since 1994, income distribution in Peru is measured on the basis of expenditure-based surveys, which tend to show a lower degree of income inequality than income-based data. After adjusting for differences in methodology across countries, Peru’s Gini coefficient is broadly in line with the Latin American average.

78. Income distribution in Peru has significant rural/urban, regional, and ethnic components. The prosperous areas tend to be urban and concentrated in the capital city, Lima, and the coastal areas, whereas the jungle and mountain regions are the poorest. In 1994 the average annual per capita income in urban areas was estimated at 4.4 times the average level in rural areas.15 Although only about 30 percent of the Peruvian population lives in rural areas, 55 percent of the extreme poor are concentrated in these areas. Indigenous groups also have poverty rates far above the national average.

79. The pattern of income distribution in Peru can be traced to several factors, particularly land ownership and education. Land ownership in Peru is disperse, especially in the mountain areas. The diminutive size of the average Andean plot sets strict limits to its income-generating capacity, a problem which has been compounded by the absence of well-defined property rights and access to credit. According to a recent study, access to land is not a significant determinant of income per capita in rural areas; this finding reflects the fact that nonagricultural activities are more lucrative, and usually supplement agricultural income.16 This finding also implies that land redistribution programs can only have a modest impact on the income of agricultural workers.

80. In urban areas and, more generally, among nonagricultural workers, education appears to be the single most important factor in determining income distribution. A recent study found that 40 percent of income inequality among rural nonfarm workers could be explained by differences in educational levels. Similarly, in urban areas, education-generated income differentials between skilled and unskilled workers seem to account for much of income inequality. Moreover, the rising ratio of white-collar to blue-collar wages during the 1990s (from 2 in 1990 to 2.7 in 1997) indicates a demand-driven increase in the skill premium which accentuates the impact of education differentials on income distribution.17

B. Social Expenditure and Income Distribution

81. The economic crisis of the 1980s and the process of fiscal consolidation of the early 1990s led to a decline in central government expenditure (including transfers and interest payments) from 24.6 percent of GDP in 1983 to 18.1 percent in 1990 and 14 percent in 1992.18 As a result, in real terms public health expenditure per capita declined by 50 percent between 1985 and 1990 while current education expenditure per student declined by 23 percent between 1980 and 1985, and by a further 50 percent between 1985 and 1992.

82. Social expenditure as a percentage of GDP has recovered significantly since 1992, rising from 5.2 percent of GDP in 1992 to 8.2 percent in 1997, and expenditure on poverty alleviation programs and housing programs as a percentage of GDP more than doubled between 1992 and 1997 (Table 3).19 Nevertheless, public education and health expenditure in Peru as a percentage of GDP are below the Latin American average and Peru’s relatively low tax-to-GDP ratio compared with other countries limits the extent to which social expenditure can be further expanded.20 As a percentage of general government outlays, health expenditure is also below the average level in Latin America.

Table 3.

Peru: General Government Social Expenditure 1/

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Source: Ministry of Economy and Finance.

Includes social security expenditure; includes wages, salaries, and administrative expenditures.

Health expenditure incurred by the Peruvian Institute for Social Security (IPSS); figures for 1992 are estimates.

Excluding health and education and including electrification projects.

Includes community reallocation programs, multisectoral projects, private property titling, and other social safety nets (Apoyo Social PL-480).

Includes expenditures in justice and rural development projects.

FONAVI provides credit for housing and small business development.

Education expenditure

83. The Peruvian authorities have made great strides in improving the education of the population since the 1970s. Total enrollment in public education increased by 142 percent between 1970 and 1996 and by 80 percent between 1980 and 1996. In 1995 gross enrollment rates reached 94 percent in primary education (children aged 6 to 11), 87 percent in secondary education (children aged 12 to 16), and 32 percent in tertiary education.21 Illiteracy rates have also declined, from 15 percent of the adult population in 1990 to 11 percent in 1995.

84. Public expenditure on education in Peru is currently below the average level for Latin American countries as a percentage of GDP; as a percentage of total government expenditure, however, it is well above average (Table 4a). Education expenditure as a percentage of GDP was on a downward trend from the mid-1970s to 1991 and has been increasing since then, reaching 3.5 percent of GDP in 1997.

Table 4a.

Government Education Spending

(By region—latest available year) 1/

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Source: IMF staff estimates.

Latest year available; most data are for 1996.

Excludes OECD countries.

Peru data are for 1997.

85. The composition of public education expenditure has changed slightly between 1992 and 1995, with current expenditure on pre-primary, primary, and secondary education declining as a share of the total, and current expenditure on tertiary education and infrastructure increasing (Table 4b). On a per-student basis, education expenditure is also biased toward tertiary education, although less than in other Latin American countries.22

Table 4b.

Composition of Public Expenditure on Education

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Source: Alfageme and Guabloche, Central Reserve Bank of Peru (1997).

86. Real wages in the public sector declined by 28 percent in real terms between 1989 and 1993. This decline was compensated in some sectors by salary supplements, but these did not apply to workers in the education and health sectors. As teachers’ salaries fell and terrorism spread in rural areas, qualified teachers left the public school system and some left the profession altogether. As a result, currently only 50 percent of primary school teachers have a teaching degree, and they are concentrated in the Lima-Callao area. Public sector salaries have started to recover during the second half of the 1990s; in 1996–97 they rose by 15 percent in real terms.

87. Virtual universal coverage has been achieved in primary education, with high enrollment levels across income quintiles. Differences across genders persist among the adult population, however, with a male illiteracy rate of only 6 percent and a female rate of 17 percent. In secondary education, there are still important differences across gender, rural/urban, income and ethnic lines. In 1996 net enrollment in secondary education for children in the richest 3 quintiles was 76 percent in urban areas and 51 percent in rural areas, compared with 54 percent and 35 percent, respectively, among children in the lowest quintile.

88. Educational attainment levels, particularly among indigenous groups, are still a major problem as revealed by high repetition rates and the results of the first national standardized test carried out in 1996.23 The results of this test, which covered mathematics and Spanish and was taken by a sample of primary school children, show low attainment levels with wide standard deviations. Children in private schools achieved consistently higher scores than children in public schools, and children in urban public schools fared better than children in rural public schools, despite the fact that rural schools with only one teacher were excluded from the sample.

89. Several benefit-incidence studies of public education in Peru show that, while primary school education is pro-poor, the benefits of secondary education and, especially, tertiary education, go mostly to the higher-income quintiles.24 An ongoing study on school enrollment in Peru shows that children from families in the higher income quintiles have significantly lower drop-out rates than children in lower-income quintiles. As a result, while 93 percent of the children in the higher-income quintiles reach sixth grade, only 72 percent of the children in the lower-income quintiles reach that level.25 Several studies have also found education expenditure to be progressive at the primary school level and regressive at the secondary and tertiary levels in other Latin American countries.26

90. Several reforms are being implemented in the education sector which should improve overall access, quality, and equity of education. The 1993 Constitution extended compulsory education to secondary school (bringing the total number of years of education to 11). Reforms to ensure universal access to public and free secondary education are also under way. A key problem in this regard is the cost and difficult logistics of extending secondary school access to remote rural areas with disperse population centers. The Ministry of Education is elaborating a plan to allow children in remote rural areas to follow secondary education classes from their homes through lessons aired by radio.27 The ongoing reform of the education system also includes the establishment of two further years of secondary education which, although not compulsory, will be provided free of charge in public schools.

91. The new decentralization law, which was approved in February 1998, should improve cohesion in the decision-making process in the education sector by entrusting the Ministry of Education with the task of coordinating the overall sectoral budget with the regions.28 Coordination with the Ministry of the Presidency has also improved, with a recent agreement establishing that the Ministry of Education will be in charge of elaborating the investment plan for the education sector, while INFES, an agency part of the Ministry of the Presidency, will be the only one in charge of building education infrastructure.

92. The Ministry of Education is also focusing on enhancing the participation of the private sector in the provision of education, particularly at the university level. Private institutions provide a significant share of overall educational services. In 1996 private enrollment accounted for 22 percent of total non-adult enrollment in pre-primary education; 12 percent in primary; 16 percent in secondary; 34 percent in university; and 43 percent in nonuniversity tertiary education.29 In November 1996 a law was passed to facilitate the provision of educational services by the private sector. This legislation simplified the administrative procedures for the establishment of private schools, reduced state intervention to the provision of the overall regulatory framework and minimum curricula requirements, and granted tax exemptions to private centers. Currently, the Ministry of Education is studying the possibility of establishing a scholarship system to subsidize students wishing to attend private schools, especially in rural areas where public schools are scarce.

Health expenditure

93. Peru’s health indicators have improved significantly since the 1970s, but are still below the Latin American average (Table 5). Life expectancy at birth stood at 54 years in 1970, 58 years in 1980 and 68 years in 1996. Meanwhile, infant mortality rates declined from 108 per 1,000 live births in 1970, to 81 in 1980, and 42 in 1996.30 These improvements in national average levels, however, mask a deep gap between urban and rural areas. Life expectancy is 54 percent higher in the most urban areas than in the most rural ones, while infant mortality rates in the former areas are one fourth of the level prevalent in the latter.31

Table 5.

Social Indicators in IMF Program Countries by Region 1/

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Source: IMF database.

Data are for last year available.

Peru data are for 1995–96.

94. The Peruvian health system features four main providers: the Peruvian Social Security Institute (IPSS), the insurance system for the armed forces, the Ministry of Health, and private providers. Social security enrollment is compulsory for workers in the formal economy and covers 22 percent of the population, mainly belonging to the middle and upper income groups.32 Roughly 2 percent have insurance from the police and armed forces system, and 2.4 percent have private insurance coverage, mainly in the highest income group. The Ministry of Health is in charge of providing basic universal health coverage and its services reach about 54 percent of the population, mainly the poor. The remaining 20 percent, the poor in isolated rural areas, have no access to health care.33 The percentage of the population not covered by a public or private health insurance system in the total population varies from 63 percent in the most urban areas to 85 percent in the most rural ones. Among the sick, it is estimated that 29 percent do not have access to pharmaceuticals, a national average which varies widely among regions.

95. Public health expenditure in Peru has traditionally been quite low compared with the average levels prevalent in Latin America (Table 6). Real health expenditure per capita increased slightly during the 1970s, but declined dramatically during the 1980s. Since then, public health expenditure has progressively risen, increasing from 0.9 percent of GDP in 1992 to 1.3 percent in 1997 (see Table 3). In spite of this increase, public health expenditure in Peru is among the lowest in the Western Hemisphere, where it averaged roughly 2.5 percent of GDP in 1996.

Table 6.

Government Health Spending

(By region—latest available year) 1/

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Source: IMF staff estimates.

Latest year available; most data are for 1996.

Excludes OECD countries.

Peru data are for 1997.

96. Although data on the composition of health expenditure by levels are not available, indications are that expenditure has been biased toward tertiary, and hospital-based care at the expense of primary health care. This trend rose during the 1980s and early 1990s when the deterioration of the health care system became very serious, particularly in primary health care. As a result of the scarcity of primary health care centers, hospitals often have to undertake this role, with adverse implications for the efficient use of health resources.

97. Indications are that health expenditure is heavily biased toward the more urban and richer areas, which prompted the Ministry of Health to recognize in 1995 that there was no correlation between the provision of health services and the needs of the population.34 Data for 1992 show that the most rural provinces had one doctor for every 12,000 persons, while the most urban ones had one doctor for every 800 persons. Health centers are also concentrated in urban areas, especially private health centers and the centers run by the IPSS. As a result, access to a hospital is twice as high in the most urban areas than in the most rural ones. The likelihood of consulting a physician in case of illness in rural areas is only half as high as in urban areas. Access to pharmaceuticals is also biased in favor of urban areas. The share of sick people without access to pharmaceuticals in the most rural areas is twice as high as in the most urban areas, while the sick in urban areas are almost four times as likely to receive free pharmaceuticals than the sick in rural areas.

98. Since the most rural areas are also the poorest, the incidence of health care expenditure is currently regressive. A feature of the current health system which reinforces its regressive character is the net cross-subsidization from the Ministry of Health to the social security system. Since the Ministry of Health provides universal coverage whereas IPSS rarely provides services to the uninsured, for every uninsured patient receiving services from IPSS, three insured patients use the services of the Ministry of Health. As a result, there is a net transfer of resources to the less poor (those enrolled in IPSS) from the resources available to the poor (uninsured) through the Ministry of Health.35

99. The Peruvian authorities are well aware of the shortcomings of the current system and are in the process of designing and implementing a process of health care reform. This reform is based on the two-pronged strategy of improving the efficiency and equity of the public health care system and enhancing private sector participation in the provision of health services. Important efficiency gains should result from the ongoing reform of health care financing, which will abandon historical budgeting for output-oriented budgets elaborated and managed by autonomous public health centers and monitored by the Ministry of Health. Equity should also improve as public health resources are focused on providing basic health care for the poor. A program aimed at providing universal access to basic health care services has achieved remarkable progress over the past five years. The number of primary health care centers increased by 60 percent between 1992 and 1996 while a system of wage incentives encouraging contractual health personnel to accept postings in poor rural areas has yielded very positive results.

100. The Social Security Institute was reformed in 1995. The management of the pension system was transferred to the National Pension Organization, while IPSS was left in charge of running the public health insurance system. Since then, IPSS has increased its coverage and operating efficiency. The number of personnel has been reduced by half and the ratio of administrators to other personnel has declined significantly. Despite the increased coverage and efficiency of the social security system, there still is unsatisfied demand for its services, expressed through waiting periods as well as suppressed demand. In order to improve this situation, the government has decided to encourage the role of the private sector in health care provision.

101. To encourage private sector participation in the provision of health services, workers are allowed to make a company-level decision to use 25 percent of social security contributions (i.e., 2.25 percent of payroll) to contract health care from a private provider. Workers from a participating firm will obtain primary health care from the private provider, but will continue to have access to tertiary health care through the Peruvian Institute for Social Security. In early 1998 the Peruvian government established the superintendency of health care providers, the regulatory body for private health care providers, and issued the necessary regulations for its operation.

Other social expenditure—poverty alleviation and housing programs

Poverty alleviation programs

102. Poverty rates in the 1990s have declined, mainly as a consequence of economic growth. Between 1991 and 1996, the percentage of the population living in poverty and extreme poverty declined from 55 percent to 44 percent and from 24 percent to 19 percent, respectively (Table 7).36 The standard of living of the poor has also improved owing to poverty alleviation programs, particularly those focused on the provision of basic infrastructure. The access to basic services has increased significantly since the beginning of the decade, with availability of drinking water and electricity in rural households having increased by 26 percent and 24 percent, respectively, between 1994 and 1996.

Table 7.

Peru: Social Indicators

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Sources: United Nations Development Programme (1992 and 1997); World Development Indicators (various years); INEI (1997).

The Human Development Index is a composite index constructed by the United Nations Development Programme. It is based on life expectancy, gross school enrollment ratios and purchasing-power-adjusted real GDP per capita. A higher index indicates a higher level of human development.

103. Important differences in poverty levels however remain across regions, with the share of households with at least one unmet basic need ranging from 92 percent (Huancavelica) to 35 percent (Lima). Overall, the percentage of households with electricity, drinking water, and running water in rural areas is roughly one-third of the average level prevalent in urban areas.37

104. Expenditure on poverty-alleviation programs as a percentage of GDP more than doubled between 1992 and 1997 (from 0.6 percent to 1.3 percent) (see Table 3). The fastest-growing projects include electrification projects, nutrition programs, water and sanitation, and rural roads. The government’s strategy for poverty alleviation is centered around the Ministry of the Presidency, in cooperation with the Ministries of Health and Education. The Ministry of the Presidency finances over half of all social expenditure and is in charge of coordinating the overall strategy for poverty alleviation. In this capacity, it has taken over many functions which are normally performed by the line ministries. As noted, it is an institution under the Ministry of the Presidency that is in charge of building education infrastructure rather than the Ministry of Education, and 25 percent of health expenditure is in the hands of the Ministry of the Presidency rather than the Ministry of Health.

105. The involvement of a large number of public agencies with overlapping mandates and insufficient coordination, especially between the Ministry of the Presidency and line ministries, has been a key obstacle toward improving efficiency in poverty alleviation programs. For instance, until recently, education infrastructure was provided by the Ministry of Education as well as three other institutions part of the Ministry of the Presidency; health infrastructure is provided by these same three agencies as well as the Ministry of Health; three different public institutions run school lunch programs; and four are involved in developing water and sanitation facilities.

106. The Peruvian government is making an effort to improve coordination among agencies by encouraging written agreements between agencies which clearly establish the respective sub-areas of responsibility. Although this is not an optimal strategy to ensure efficient expenditure, it should contribute to reduce duplication. A secretariat of social affairs was established in 1994 also with the goal of enhancing coordination among agencies in the social arena.

107. According to a recent World Bank study, the social programs of the Ministry of the Presidency had some difficulty in reaching the poor.38 The study found that only 17 percent of the program benefits went to the extreme poor, while 48 percent went to the poor and 35 percent leaked to the nonpoor. The study also found the programs to have an urban bias as well as a bias against the regions with the highest numbers of indigenous population.39 The key reasons for this tilt against the poorest and more rural areas were found to be the weakness of targeting mechanisms, the restrictions on participation by the poor in housing credit programs, and the urban nature of many of these programs.

108. The benefit incidence of social expenditure, however, was found to vary widely across programs. Poverty-alleviation programs run by FONCODES, an agency whose goal is the alleviation of extreme poverty, were found to be most effectively targeted to the poor, followed by nutrition and basic infrastructure programs. FONCODES and nutrition programs systematically used poverty maps and other mechanisms to target their resources geographically, as well as to ensure that beneficiaries within selected districts were indeed needy. FONCODES, moreover, encourages the participation of beneficiary communities in the design, development and implementation of projects and uses several mechanisms of ex post project evaluation. Poverty maps and ex post evaluation were not used as systematically by other agencies in the Ministry of the Presidency, which contributes to explaining their poor targeting.

Housing and basic infrastructure programs (FONAVI)

109. Housing programs are financed by the Housing Development Fund (FONAVI), which operates under the Ministry of the Presidency and obtains its resources from a 5 percent payroll tax. Since 1992 FONAVI has been operating as a lending institution to other public organizations for urban projects. In percent to GDP, expenditure on housing programs tripled between 1992 and 1997, increasing from 0.2 percent to 0.7 percent. FONAVI accounts for roughly two-thirds of total central government earmarked resources and it is the only earmarked fund that is also extrabudgetary.

110. A further problem regarding housing credit programs is their regressive nature. The above-mentioned World Bank study found housing expenditure to have been devoted to the richest areas in the country and benefit almost exclusively the nonpoor.40 Housing expenditure benefiting the two highest income quintiles was higher than the expenditure devoted to the second and third quintiles, officially the target group of these programs. The regressive nature of housing programs is linked to the fact that they are credit operations almost exclusively concentrated in urban areas. Housing loans are also biased against the poor because they are allocated through means testing to assess the repayment capacity (and not the poverty level) of beneficiaries. They include requirements such as that beneficiaries be FONAVI contributors,41 legal owners of land, and meet minimum income thresholds. FONAVI expenditure devoted to the provision of basic infrastructure (water, sanitation, and electrification) seems to be better targeted than housing expenditure. Household survey data for expenditure on basic infrastructure projects is not available and, therefore, its benefit incidence cannot be assessed. However, its geographical distribution shows a concentration in lower-middle income areas, the target group of FONAVI.

C. Conclusion

111. As noted initially, income distribution in Peru seems to be determined by a disperse pattern of land ownership and unequal distribution of educational assets. The ongoing government program of land titling and other structural reforms, such as the reform of the judiciary and a well-defined regulatory framework for property rights, should help improve access of farmers to credit and enhance the income-generating capacity of land, thereby diminishing income inequality. More important, a well-functioning land market coupled with rising educational levels and employment opportunities in nonagricultural sectors could ease the transition of the rural poor from employment in low productivity subsistence agriculture to growing modern sectors of the economy.

112. The recent increase in demand for skilled labor, reflected by the rising ratio of white-to blue-collar wages, constitutes a favorable context for the expansion of the average education of Peru’s population. After a full decade of steep decline, education expenditure has been increasing since 1992 both as a percentage of GDP and as a percentage of government expenditure. By international standards, public education spending in Peru is currently high as a percentage of government expenditure, but low as a percentage of GDP and on a per student basis. Therefore, given the relatively low level of Peru’s tax-to-GDP ratio, there is little room left for further expansion.

113. The current trend toward focusing public expenditure on the areas with the highest social returns—primary and secondary education and basic health care—is encouraging and should be further stepped up. It will contribute to improving the benefit incidence of social expenditure in the short run, as well as the distribution of educational assets, and therefore of income distribution in the long run. The current plan to ensure universal access to secondary education should significantly improve the productivity of the Peruvian labor force, the equity of public education expenditure, and the pattern of income distribution. Also, enhanced provision of educational services by private sector institutions, especially at the tertiary level, should result in increased availability of resources for public primary and secondary schooling, thereby decreasing education inequalities and, in time, lowering income inequality.

114. Although poverty-alleviation programs are currently well-targeted to the poor, there is room to improve their efficiency through consolidation and reorganization of agencies and ministries involved. Finally, regarding FONAVI programs, significant changes may be needed in their design, including refocusing expenditure from housing credit programs to the provision of basic infrastructure, to help reach its target group.

APPENDIX I Peru: Summary of the Tax System (March 1997) 1/

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Sources: Central Reserve Bank of Peru; and Ministry of Finance.

UIT refers to the indexed tax unit. These are accounting units regularly updated (once a year) for inflation by the Ministry of Finance. In January 1998 the value of the UIT was updated to S/. 2,600 (about US$906 at the program exchange rate for 1998); previous values of the UIT were S/. 2,400 for 1997, S/. 2,200 (from February 1996 to January 1997), S/. 2,000 (during 1995), and S/. 1,700 (during 1994).

UIT refers to the indexed tax unit. These are accounting units regularly updated (once a year) for inflation by the Ministry of Finance. In January 1998, the value of the UIT was updated to S/. 2,600 (about US$906 at the program exchange rate for 1998); previous values of the UIT were S/. 2,400 for 1997, S/. 2,200 (from February 1996 to January 1997), S/. 2,000 (during 1995), and S/. 1,700 (during 1994).

The rate was 2 percent in 1996. It was reduced to 1.5 percent effective January 1997 and to 0.5 percent in April 1997.

Decree 062–98 enacted on March 24, 1998.

U.S. gallons, equivalent to 3,785 cubic centimeters.

STATISTICAL APPENDIX

Table 8.

Peru: Aggregate Supply and Demand

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Sources: Central Reserve Bank of Peru; and Fund staff estimates.

Goods and nonfactor services.

Includes investment expenditure by nonfinancial public enterprises, and excludes other net public sector capital expenditure.

Computed as a percent of domestic expenditure.

Table 9.

Peru: Savings and Investment

(In percent of GDP, unless otherwise indicated)

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Sources: Central Reserve Bank of Peru; and Fund staff estimates.

Includes exceptional financing.

Includes net borrowing by the financial public sector, and errors and omissions.

Includes reserve requirements on foreign currency deposits. Excludes price effect on international assets and liabilities.

Excludes grants.

Fixed investment of the nonfinancial public sector.

Table 10.

Peru: National Accounts at Current Prices

(In millions of new soles)

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Source: Central Reserve Bank of Peru.

Includes investment expenditure by nonfinancial public enterprises, and excludes other net public sector capital expenditure.

Table 11.

Peru: National Accounts at Constant Prices

(In 1979 new soles)

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Source: Central Reserve Bank of Peru.

Includes investment expenditure by nonfinancial public enterprises, and excludes other net public sector capital expenditure.

Table 12.

Peru: Sectoral Origin of Gross Domestic Product at Constant 1979 Prices

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Source: Central Reserve Bank of Peru.
Table 13.

Peru: Manufacturing Production

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Sources: Ministry of Industry, Tourism, Integration and International Commercial Negotiations; and Central Reserve Bank of Peru.
Table 14.

Peru: Sources and Uses of Petroleum and Petroleum Derivatives

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Sources: Ministry of Energy and Mines; and Central Reserve Bank of Peru.

Since the sale on concession of oil fields, Petroperú’s production has been undertaken by private operators.

Includes own consumption by refineries and sales of bunker fuel.

Millions of barrels.

Table 15.

Peru: Population and Labor Force Statistics

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Sources: Ministry of Labor and Public Welfare; and National Institute of Statistics and Information.

Estimates based on 1993 census data.

Data based on household surveys conducted in June of each year in the Lima metropolitan area.

Workers earning less than a minimum referential income, which was equivalent to about US$170 a month for workers in Lima.

Based on a survey of firms with at least 100 employees in the Lima metropolitan area. Since 1995 the survey includes employees hired by worker cooperatives or services companies.

Table 16.

Peru: Private Sector Wages and Salaries in the Lima Metropolitan Area 1/2/

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Sources: Ministry of Labor and Public Welfare; and Central Reserve Bank of Peru.

The annual data are period averages.

Wages and salaries correspond to labor earnings of blue-collar and white-collar workers, respectively.

Deflated by the consumer price index in the Lima metropolitan area.

Corresponds to the minimum legal income, i.e., the minimum vital salary plus supplementary bonuses.

Starting in 1996, the surveys are conducted in March, June, September, and December.