Peru - Current economic position and prospects

PUB-136 International Bank for Reconstruction and Development The Current Economic Position and Prospects of Peru FILE COPY December 1973  The World Bank Group issues country economic reports in two series. This report is part of an in- formal series and is wholly based on a document prepared for use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely avail- able to scholars and practitioners throughout the world. Other titles in this series include: Employment in Trinidad and Tobago (March 1973) Current Economic Position and Prospects of Ecuador (October 1973) Chad's Economic Development: Constraints and Potential (forthcoming) The Economy of Senegal (forthcoming) Another series of country reports is published for the Bank Group by Johns Hopkins University Press. Individual studies in this series are available in clothbound and paperback editions.  CURRENT ECONOMIC POSITION AND PROSPECTS OF PERU This report is based on the findings of an economic mission which visited Peru in November and December 1972 and in January 1973. The mission was composed of Messrs. Percy Bargholtz, Michel Devaux, Jose A. Guerra (chief), Guillermo Rossel, Miguel Schloss, Kenji Takeuchi and Alberto Yanez of the World Bank Group, plus Messrs. George Pigott, Bank consultant, and Gonzalo Ruiz Ballivian, OAS. Ms. Myriam Suarez was secretary to the mission. International Bank for Reconstruction and Development 1818 H Street, N. W. Washington, D. C. 20433 U.S.A. December 1973   CURRENT ECONOMIC POSITION AND PROSPECTS OF PERU TABLE OF CONTENTS Page No. COUNTRY DATA v.........................e***.. ... V - vi CURRENCY EQUIVALENTS AND GLOSSARY ............... vii MAP ......... ,..... follows viii SUMMARY AND CONCLUSIONS ................... -- ix - xviii I. INTRODUCTION .. The Socio-Economic Setting . . II. DEVELOPMENT TRENDS. 4 Population Trends . . 4 Labor Force and Employment . . 5 Productivity and Incomes . 7 The Productive Sectors. 10 A Perspective on the Macro-Economy. 12 III. DEVELOPMENT APPROACH AND STRATEGY .15 Institutional Aspects . .15 Policies Towards the Private Sector 17 Reforms in Industry and Agriculture. 18 IV. RECENT ECONOMIC DEVELOPMENTS .20 The General Growth Experience . .20 Production Developments .................... 24 Resource Use and Savings . .25 Central Government Finances . .28 The Consolidated Public Sector . .31 Credit Policies . .35 External Accounts . .37 Public Capital and External Debt 42 V. SECTORIAL ISSUES AND POLICIES .46 A. Agriculture .46 The Agrarian Reform .48 B. Industry and Mining .52 Manufacturing .52 Mining .54 C. Fishing Processing .56 D. Transport and Electric Power .58 Transport .58 Electric Power .60 -iii-  VI. THE BIENNIAL PLAN AND BUDGET 1973-74 ........... 62 A. The 1972-74 Development Plan ..... ......... 63 The Objectives of the Plan ...... 63 The Programmed Public Investment by Sectors ... ................. 66 B. The 1973-74 Public Sector Budget .......... 69 The Central Government Budget 69 The New Revenue Measures in the Budget ................ . 72 The Budgets of Other Public Sector Agencies ..... .......... 75 The Budget and the Investment Program ...... ................. 77 Financing of the Budgeted Public Investment ............. 80 C. Financing a Total Investment Program 82 Slippage and Substitution of Projects .82 Availability of Domestic Credit 84 Conclusion .86 VII. BALANCE OF PAYMENTS AND EXTERNAL CAPITAL REQUIREMENTS 1973-76 .88 Foreign Exchange Constraint .88 Major Uncertainties .89 Current Account Projections .92 Capital Requirements .96 External Debt .102 Conclusion .103 STATISTICAL APPENDIX List of Tables ........ ........................ 105 Population and Labor Market 1 109 National Accounts ........ . ,. ........ . ........ 116 Balance of Payments ................. , ,, 123 External Debt ........... 130 Public Finance .............. , ,., 165 Monetary .......,,195 Agricultural and Fishing ........................ 204 Industrial .,,,,,.., . .... *.. .. .. . . . . .... ... .... 211 Price and Wage ............ .............. 216 - iv-  COUNTRY DATA - PERU AREA POPULATIONI/ DENSITY 2 1,280,219 km2 14.4 million (mid-1972) 11.2 per 2' Rate of Growth: 3.1% (from 1965 to 1972) 500 per km of arable land-/ POPULATION CNARACTERISTICS (1971)1/ HEALTH (1970) Crude Birth Rate (per 1,000) 42 Population per physician 2,070 Crude Death Rate (per 1,000) 11 Population per hospital bed 435 Infant Mortality (per 1,000 live births) 75 INCOME DISTRIBUTION DISTRIBUTION OP LAND OWNERSHIP2/ 7 of national income, lowest quintile .. % owned by top 10% of owners highest quintile .. % owned by smallest 10% of owners ACCESS TO PIPED WATER (1971) ACCESS TO ELECTRICITY % of population - urban 60 % of population - urban - rural 14 - rural NUTRITION (1970) EDUCATION (1970) Calorie intake as % of requirements 94 Adult literacy rate % 66 Per capita protein intake 58 grams/day Primary school enrollment % 82 GNP PER CAPITA in 19724/: US $ 476 GROSS NATIONAL PRODUCT IN 1972 ANNUAL RATE OP GROWTH (%. constant prices) US $ Mln. % 1961-675/ 1969-19725/ 1972 GNP at Market Prices 7,692 100.0 5.9 6.2 5.5 Gross Domestic Investment 915 11.9 9.4 4.5 3.0 Gross National Seving 873 11.2 4.0 .