CHAPTER 6
Growth Diagnostic: Peru Ricardo Hausmann and Bailey Klinger*
Peru’s Growth Story By many measures, times are good in Peru. From 2005 to 2008, Peru has been among Latin America’s best performing economies in terms of GDP growth, with low inflation and a stable exchange rate. Although poverty rates remain high (above 50 percent of the population in 2004, using the national poverty line), they have been slowly falling. The country has enjoyed robust economic growth since 2002, and would appear to be in the midst of a growth acceleration. Yet it is important to put this boom into historical perspective. Figure 6.1 shows GDP per capita in Peru over the entire twentieth century. Except for a moderate output collapse and recovery in the 1930s, around the time of the Great Depression, Peru followed a steady upward trend in output per capita until the mid-1970s, when growth stopped, and then collapsed in the late 1970s and early 1980s. Considering Peru’s long-term growth history, it becomes clear that the current growth acceleration is actually a recovery from this growth collapse. Importantly, as of 2005, the country had yet to return to its historical peak GDP per capita of 30 years before, in * Center for International Development, Harvard University. The authors thank Felipe Kast, Reinier Schliesser, Alfie Ulloa, Rodrigo Wagner, and Andres Zahler for excellent research assistance.