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Prepared by Michele Shannon (PDR).
Trade is measured as total exports and imports as a share of GDP. Alternative methodologies, including export values or volumes, yield roughly similar results.
Peru ranks a “2” on a 1 to 10 scale in the IMF’s index of overall trade regime restrictiveness, which is based on average import tariffs and non-tariff barriers (IMF, 1998). While the index suffers from measurement problems, it provides a rough gauge of openness. Peru does maintain specific protective measures for certain sectors, leading to some degree of tariff dispersion, particularly related to agriculture, though even this sector is relatively open versus the protection given to agriculture in most countries.
This section is based on gravity models estimated by Thomas Helbling for the September 2002 World Economic Outlook (Chapter III).
In general, financial and trade restrietiveness have significantly negative effects on expected bilateral trade flows. Restrietiveness is measured by current and financial account openness, the existence of multiple exchange rate regimes for financial account transactions and the stringency of surrender and repatriation requirements (Mody and Murshid 2002). The 2002 WEO suggests that a one-point increase in trade or balance of payments restrietiveness reduces trade volumes by 5 percent.
Only about 20 percent of Peru’s merchandise exports are in manufacturing sectors.
This study focuses on the importance of a strong enabling environment, including to promote labor-intensive manufactures. The authors argue that duty-free access to inputs and capital goods are particularly important to export-based sectors.
More than 65 percent of items imported to Peru carry a 12-percent rate; 20 percent carry a 4-percent rate, and the majority of the remainder carry a 20-percent rate. Peru maintains temporary surcharges on certain sensitive agricultural products, including corn, rice, sugar and powered milk, with rates of up to 25 percent.
A comparative analysis of real exchange rate movements based on unit labor costs is difficult due to limitations in labor cost data.
For example, foreign investment in non-mining tradable sectors during the 1990s concentrated in purchases of state owned enterprises, with little new investment in sectors such as fisheries, manufacturing, or forestry.
See Chapter II for a broader discussion of Peru’s investment climate.
In a similar study by AT Kearney, which measures global integration, Peru ranks 59 in a 62-country sample.
Freight costs for Peruvian exporters are 20 to 35 percent higher than those of their Chilean counterparts.
Peru ranks 65 in the Report’s index of air transport infrastructure quality, behind Mexico (44), Colombia (48) and Ecuador (63).
The average years of education in Peru has increased to over seven, on par with Chile and Spain, and the percent of the population with secondary and tertiary education is higher than would be expected for its level of GDP.
The United States purchases almost three-fourths of all clothing exports of Peru. The FTA is critical to clarifying future access arrangements and, thereby, supporting the investment in new capacity needed to support continued growth in the sector.