Peru may be the next rising star in Latin America
Posted on Thu, Nov. 01, 2007, Miami Herald
• Related Video | Interview with World Bank economist Marcelo M. Giugale (In Spanish)

by Andres Oppenheimer,

When I asked senior World Bank economist Marcelo M. Giugale in a recent television interview which countries will be the economic stars of Latin America over the next 20 years, I was surprised by his answer. The first country he mentioned was Peru.

''Peru?'' I asked, somewhat incredulous. When economists talk about Latin America's bright spots, the first country they usually cite is Chile, which has been growing steadily for nearly two decades and has reduced poverty from about 40 percent in the early '90s to about 15 percent today, more than any other country in the region.

When pressed for other examples of Latin American countries likely to prosper in the near future, many cite Brazil. It's a giant country that is moving toward modernity at a snail's pace, but -- with more than 50 percent of South America's GDP -- is raising high expectations because of its sheer size, and its leftist government's generally sound economic policies.

But Peru, until now, has seldom come up as a country of the future. Most often, it has been associated with political scandals, natural disasters and political uncertainty.

Last year's elections had pitted former President Alan García, whose irresponsible populism had ruined the country during his 1985-90 term, and Ollanta Humala, a leftist former military officer who was publicly backed by Venezuela's narcissist-Leninist leader Hugo Chávez. When Garcia won by a thin margin, Peru's business community welcomed his victory as the lesser of two evils.

''Making predictions for the next 20 years is somewhat risky, but I would look at countries like Peru,'' Giugale said in the soon-to-be-aired Oppenheimer Presenta television interview. [Excerpts can be seen now at].

''The countries that will succeed are those that find the right balance between economic efficiency and social solidarity,'' he said. ``That's because countries that follow that middle-of-the-road path are the ones that will have the most political feasibility to get things done.''

Giugale, who cited Colombia as another country that may surprise everybody for the better in coming years, especially if it gets its free trade agreement with the United States approved by the U.S. Congress, said Peru is already showing pretty impressive growth figures. Consider:

  • Peru's economy has been growing at about 6 percent a year for the past six years, a longer period of steady growth than most countries in the region. The United Nations Economic Commission for Latin America is projecting a 7.3 percent growth for 2007, and a 6 percent increase for 2008.
  • Poverty has fallen from 54 percent of the population in 2001 to about 44 percent, according to official figures.
  • Inflation is at about 2.8 percent, one of the lowest rates in the region.
  • Exports have risen at an average annual rate of 24 percent since 2001, including an 18 percent annual rise in nontraditional exports, mostly agricultural goods and textiles.
  • Foreign direct investment has soared from $810 million in 2000 to $3.5 billion last year.

My opinion: Peru has a long way to go, especially when it comes to competing in the global economy. Just Wednesday, the World Economic Forum's new ranking of the world's most competitive economies ranked Peru 86th among 121 countries, down eight places from its spot last year.

But people who are optimistic about Peru in the long run may be right. García has had the wisdom to continue the sound economic policies of his predecessor, Alejandro Toledo, who despite his low popularity set the stage for long-term economic growth and a reduction of poverty.

This is no small achievement in Latin America, a region long characterized by boom and bust cycles where many presidents love to proclaim themselves founding fathers of supposedly new and ''revolutionary'' economic models -- like we are now seeing in Venezuela, Bolivia and Ecuador -- that help them gain absolute powers, but most often at the cost of destroying their countries' economies and increasing poverty in the long run.

Chile, and most recently Brazil, have opened a new chapter in Latin America's modern history: They are leftist-ruled countries that pursue responsible economic policies, attracting investments and creating the base for long-term growth. Peru is a welcome addition, and it may indeed become a star economy in the not-so-distant future.