Trade as the Cornerstone of the Development Agenda
he concept of trade addressed in this paper extends beyond the mere trade in goods, i.e. the export and import of goods. It also covers the trade in services and service exports and imports, as well as in intellectual property and investment. In the early 1990s, Peru found itself facing a dilemma between insisting on maintaining an import substitution model which, as already explained, had produced no improvement in GDP per capita in more than 30 years, or stepping up to the challenge of integrating into the dynamic world economy. This integration meant greater participation in international trade, in its broader meaning as goods, services and investment. Without question, Peru was looking for an economic and social development model that would allow it to achieve sustained economic growth based on the growth of production sectors (including the services sector), which in turn called for greater markets. The domestic market was small, not only on account of the population (21.7 million in 1990) but also because of its purchasing capacity (about 54% were poor in 1990). On the other hand, the State had failed in its function as “entrepreneurial State” and state companies were rather a source of deficit and corruption. The most progressive private sector played a critical role in this new endeavor. Even though it was already a known fact that there would be adverse effects for certain over-protected manufacturing sectors, the support given to the implementation of a new economic model was reflected not only in expressions of support but also in the active involvement of important businesspersons in the State, through the Ministries responsible for these changes. The announcement of the anti-inflation plan at first and the set of first-generation structural reforms received unprecedented support from the public opinion, in spite of the social cost of the measures involved. Peru had “reached bottom” and this was the alternative that best fitted the prevailing economic situation. The Government and main economic agents acknowledged that trade was thus a key factor in the implementation of the new development project, and that the quest for a more competitive economy was the only way to reach sustainable economic growth. Accordingly, even though the trade liberalization measures hit the least competitive sectors, they were a “sine qua non” condition for the challenge presented by the new development agenda. The most progressive business sectors embraced and supported trade opening, willing to reconvert their production system and improve the productivity and competitiveness of the products and services they offered. They got ready to face the entry of competition by imported products, but also to take advantage of the opportunities that international markets would present.
Published on Sep 14, 2007
this report was prepared by the integration and trade sector (int) as a contribution to the regional meeting on mobilizing aid for trade: la...