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Peru’s economy in 2009: the Good, the Bad and the Ugly

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Luis Carranza. (Photo: El País)

7. Peru’s tax authority SUNAT claimed millions in tax debts. The mining company from Puno, Media Naranja was the largest debtor, followed by Ladrillos Rex, Astros and Universitario de Deportes.

6. Peru’s central bank was flexible when facing the crisis. It aggressively reduced the benchmark rates during the first half of the year as a measure to provide cheaper credit and encourage consumption. It also reduced the reserve ratio.

5. Bond placement of the Peruvian Government stood out in a global crisis context. The demand was still higher than the offer.

Looking for a more humorous take on 2009’s economy? Click here to check out a collection of the year’s best cartoons by Molina.

4. Luis Carranza was placed in charge of the Ministry of Economy and during the first 10 days he launched the first measures of the economy revival plan.

3. Peruvian economic stability stood out in the context of the global economic crisis.

2. Peru climbed from position 65 to position 56 in the Doing Business ranking of countries with the most ease to establish and develop companies.

1. Moody’s gave Peru investment grade rating. This completed the trifecta: Peru gained qualification by the three major international rating companies.

THE BAD

10. Alan García enacted the law for the Promotion and Development of Productive Activities in the Andean highland regions. Small businesses located at 2500 meters over sea level and industries above 3200 meter are exempt from taxes for 10 years. Mining companies are excluded.

9. Forty-six percent of workers whose salaries were deposited by their employees in a bank account did not have the option to choose the financial entity of their preference.

8. There was no clear scheme to encourage investment in alternative energy sources, so much so that foreign investors opted to invest in wind energy in Chile rather than in Peru.

7. During free trade negotiations with Europe, the European team proposed that the resources extracted between mile 12 and 200 of the Peruvian sea be considered products of European origin.

6. The Civil Construction Guild increase costs and discourage investment.

5. After Pro Inversion turned over Paita’s port to the private sector, tariffs increased. The same happened with the toll rates for the Pativilca-Trujillo highway.

4. Pluspetrol did not sign any more contracts for the supply of natural Camisea gas to enterprises. Even though there is available gas, the necessary investments to guarantee is supply have not been made.

3. Fifty-five percent of Limeños placed corruption at the top of the list of the main problems for the development of the country, followed by bad governments (30 percent) and unemployment (20 percent).

2. The approval of the free trade agreement with the US included a condition that allows for genetic variations of products of Peruvian origin to be registered as foreign products.

1. The textile and manufacturing sector was badly affected by the crisis. Its exports dropped 26 percent between January and October.

THE UGLY

5. According to the Interamerican Development Bank, Peru is the fourth country in Latin America where, without taking into account labor capacity, white people are paid more money than people who are not white. Additionally, in Peru, women are paid 19.4 percent less than men of the same age and education level.

4. There was traffic of influences between an Osiptel bureaucrat  and Telefónica while determining new fixed phone tariffs.

3. The Ministry of Economy and Finances readjusted its GDP growth estimate in various opportunities during the year. The first growth estimates were close to six percent, but in December minister Luis Carranza readjusted the estimate at one percent for 2009.

2. The violent clashed at Bagua and the lack of Government management caused economic activity to drop in July.

1. The owner of the La Oroya mine, Doe Run Peru, was left without its  US $75 million credit it had with a group of banks. Finally, during the second trimester of the year, the company ceased to operate. They did not comply with the Environmental Management and Mitigation Program in the established time period in October and so the Government gave them 30 months more to get things in order.

Translated from Spanish by Diana Schwalb

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