Peru - Long-term development issues (Vol. 1 of 3) : Summary and conclusions

'Report No. 2204-PE Peru: Long-Term Developrnent issues 5 Volume I Postscript - Summary and Conclusions April 13, 1979 Coun r) I'mglvgll Dhbpdrtm'nt i Laitrn Anwri a and Car:bbean Reg,onal Offii U RN' TO FOR OFFICIAL USE ONLY OF \7aEK U Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents rnay no: otherwise be disciosed without W'orld Bank, authorization.  CURRENCY EQUIVALENTS The exchange rate is being adjusted daily roughly in line with the difference between domestic and internatioral inf'lation. The exchange rate and currency equivalents in effect on March 29, 1979, were as follows: Currency Unit - Sol (S,/.) Calendar 1978 Mirch 29, 1979 US$1 SI. 160 SI. 210 SI. 1 US$0.0062 US$0.0047  FOR OFFICIAL USE ONLY This report was prepared by Elkyn A. Chaparro based on two missions that visited Peru in March/April 1976 and September, 1977. The report was discussed with the Peruvian Government in March 1979. The following persons participated in the 1976 mission and made substantial contributions to the report: Fred Levy (IBRD) Industry Juan Carlos Gomez-Sabaini (OAS) Taxation Gregory Lazarev (FAO) Land Reform Vicente Galbis (IMF) Savings and Financial latermediation Other mission members were: Cornelius Cacho, Nicholas Carter, Ines Garcia, Carole Seppala, Gerhard Thiebach, Dirk van der Sluijs, and Damian von Stauffenberg from the Bank and Ernesto Kritz and E. Riezebos, Consultants. Susana Uristodoulakis was the mlssion secretary. Th document has a restricted distribution and may bc ued by reciplents only in the Performance of their ofii duti. its concnts nay not otherwie be i.:iosnd without Word Bnk authoriation.  TABLE OF CONTENTS VOLUME 1: POSTSCRIPT AND SUMMARY AND CONCLUSIONS Page No. POSTSCRIPT ........................................... i-ii SUMHARY AND CONCLUSIONS I. INTRODUCTION ........1....... .. TT. THE PAST DEVELOPMENT ISSUES ................... I A. Long-term Trends in Economic iiistory .... ......... I B. Recent Government Strategy: An Overview ......... 2 C. Impact on the Poor of Government Policies ........ 3 D. Macroeconomic Issues: Savings, Efficiency and Cycles ......................................... 6 1. The Fall in National Savtngs .......... ... 6 a. Long-Term Trends . ....................... 6 b. Determinants of Savings . .6 2. The Low Efficiency of Resource Use .. 9 : a. Efficiency of Public Investment ........ 9 b. Efficiency of Government Controls ....... 10 c. Efficiency in Agriculture ............... 11 d. Efficiency in Industry .. .................. 13 3. Import Dependence, Export Dependence, and, Cyclical Fluctuations ................... ... 14 III. THE FUTURE DEVELOPMENT ISSUES ..... .................... 16 A. Natural Resources,.Populatior Dynamics and Urbanization ...... .......................... 16 1. Natural Resources ........... ............... 16 2. Population Dynamics ......................... 16 3. Urbanization ................ 17 4. Conclusion ................ 18  TABLE OF CONTENTS (Continued) VOLUME 1: POSTSCRIPT AND SUMMARY AND CONCLUiSIONS PaRe No. B. Elements of a Develepment Stritegy: The Long- Term approach ............ 19 1. Diversification of Exports ............... ... 20 2. Efficiency of Resource Uiie ........... ...... 23 a. Overall Economic Management ........... .. 23 b. Government Controls, Subsidies and the Price System ................. . 24 1. Exchange Rate Policy ................ 24 ii. Interest Rate Policy and Financial Intermediation .................. .. 24 iii. Agricultural Policy ................. 25 iv. Public Sector Resource Use .......... 27 3. Mobilization of National Savings ........... . 29 4. GovernmenL.Policies and the Poor ............ 32 IV. CONCLUSIONS ................ , . ...... 34  Page 1 of 2 pages COUNTRY DATA - PERU ____ 2 POPULOATIO DENSITY AREA 2 -dlo md-97 m 1285.2 kl .thoussnd 16.5 2illion (id-1977) 13 part Sate of Growth: 2.9 (from1P70 tol977 ) 54 per kis of arable land POPULy..JN CHARACTERISTICS (19T7 HEALTE (1977) Crude Birth Rate (per 1,000) 41.0 Population per physician 1760 Crude Death Rate (per 1.000) 11.9 Population per hospital bed 500 3V Infant Mortali.y (per 1,000 live births) 65.1 INCO4IF DSTRIBUSIO 17T-72) DISTRIIIOflON OP LAND CAKERSHIP Z of national incote, hi1hBet quintile 55.6 Z owned by top 107 v of oners loset quintile 3.1 Z owned by smallest 107 of owners ACCEZS TO PIPED WATER (17i5) ACCESS TO ELECRICITY (1972) Z of population - urban 72.0 % of populstioo - urban 34.9 - rural 15.0 - re-al NUTRITION (1974) EDUCATION (1g76) Calorie intake as 7 of requirements 100.0 Adult literacy rate 7 72.0 Per capita protein intake 61.7 Primary sahool enrollment 7 111.0 GNP PER CAPITA. in 1977: 11 $ 830 GROSS NATIONAL PRODUCT IN 1977 ANNVUAL RATE OF GWTH -(. constant prices) uS Mln. % 1965-70 0o7r7zi M12:7.7 197A GNP at Market Prices 12422.1 100.0 5.4 5.6 0.0 0.1 Gross Domestic investment 1933.6 15.6 -1.5 15.8 -17.4 -15.4 Gross National Ssving 1007.4 8.1 10.3 9.8 -4.9 44.5 Current Accouat Balance -926.2 -7.5 . Exports of Goods, NS 1725.6 13.9 2.9 -7.1 7.7 17.0 imports of Goods, NFS 2164.0 17.4 -1.0 10.0 _-.6 -31.1 OUTUT, LABOR FORCE AND at 19T prces) 2 Value Added - lbot Forcer V. A. Per Worker US~~~~~~~~ S A251.i 7 7. Agriculture 1138.9 13.6 2109.4 43.4 539.9 31.5 Industry and Mining 3167.7 38.0 1019.1 21.0 3108.3 181.2 Services 4030.9 48.4 1731.6 35.6 2327.8 135.7 - Unallocated Total/Average 100.0 171S.5 n GOVERNMENT FINANCE Ceneral Government Central Government 02o1es Bn) 7ofGD?__ toles B In.) 7. of GDP _ 1977 1 19T2 _1978 L97h 1975~-7R Current Receipts 190.1 18.1 19.1 264.2 15.8 15.2 Current Expenditure 219.7 20.9 r. zo4 17. Current Surplus 129.7.5 17. Capital Expenditures - 44.9 4.3 4.9 57.6 3.1 4.3 External Assistance (net) .. .. .. 14.9 0.9 2.3 I/ The Per Capits GNP estimate is At 1977 market prices, calculated by the same convcrsio- technique as the 1978 World Atlas. All other conversions to dollars in this tablc ar- at the average exchange rate prevailing during the period coveted. 2/ Total labor force; unemployed are allocated to sector of their normal occuptlon. .: . :-. mainly of unerployed workers seeking their first job. 3/ 1975 estimate. not available not mpplicable  Page 2 of 2 psges COUNTrY DATA - PERU MONEY, CREDIT and PRICES 1973 1974 1975 1976 19277 (Million outstanding end period) Money and Quasi Honey 875o6 107012 126174 151062 198800 320900 Bank Credit to Public Sector 20811 19773 43567 104900 198900 289800 Bank Credit to Private Sector 60361 731