National Strategies Case Study
The dynamics of the events that took place at the national level in the early 1990s, the economic crisis, and the national security problems caused by the attacks perpetrated by the Sendero Luminoso terrorist group all readied the public opinion to face the challenge of a new economic order. The government understood that re-integrating into the financial community was critical for the new economic order. Financing sources were essential, not only because of the availability of the financial resources and currency required for development but also for the inflow of foreign capital to supplement domestic investment. For this purpose, Peru resorted to the International Monetary Fund (IMF), the World Bank (WB), and the Paris Club. These institutions issued recommendations along the same path toward strengthening a market economy and trade opening. 2.1. Trade Opening and International Trade Negotiations: 1991–1994 In this period, Peru laid the foundations for a market economy and trade opening. The aim was to create the conditions to provide an environment that would favor the production sectors’ competitiveness. The transformation, which was relatively fast, included the following aspects: a. Dismantling of the price control system; b. Straightening of the prices charged by State-owned utility providers (Fuels, Electricity, Water, Telephone, among other services); c. Ending of State monopolies over certain economic activities—such as the supply of foodstuffs—allowing the participation of private-sector companies; d. Elimination of State subsidies and aid; e. Liberalization of the foreign exchange rate, which had been undervalued for decades; f. Closing of fiscal gaps through a tax reform (reduction and simplification of taxes and creation of a modern and efficient revenue collection agency: the National Tax Administration Superintendency (SUNAT); g. Implementation of a strategy to integrate Peru back into the international financial community; h. Liberalization of the financial interest rate, removing restrictions on the development of the financial system; i. Relaxation of labor market regulations. As regards trade opening, this period was also marked by the adoption of measures aimed at integrating Peru into the global economy and international markets, through the following actions: a. A tariff reform consisting mainly in removing para-tariff barriers, reducing the average tariff from 70% to 16%; removing customs exemptions; and simplifying the tariff system by cutting down the tariff level dispersion from 56 to 2, with a view to achieving uniform effective protection levels; b. The free import of all types of goods;
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...