Growth Diagnostic: Peru

Abstract

This paper presents a growth diagnostic exercise for Peru. It notes that although Peru has recently enjoyed high rates of economic growth, this growth is actually a recovery from a significant and sustained growth collapse that began in the 1970s, caused by a decline in export earnings due to the fall in international prices and an inadequate investment regime in export activities. However, the transformation of the export sector has been surprisingly small: the same activities that declined- mining and energy- are the ones that are leading the current recovery in exports. The authors argue that the lack of structural transformation is associated with Peru's position in a poorly connected part of the product space. The key policy message is that the public sector must act to encourage the development of new export activities that better utilize the human resources of the country.