Peru’s economy in recent years has been shaky at best. Peru has had to deal with challenges such as hyperinflation and unreported revenue from illegal industries. Despite these challenges, Peru has seen moderate economic growth in the last couple of years and tourism has grown substantially to play a major role in the Peru’s economy.

Peru’s estimated gross domestic product (GDP) in 2000 was $53.5 billion. Although the economy remains primarily agricultural, the mining and fishing industries have become increasingly important. Peru relies primarily on the export of raw materials-chiefly minerals, farm products, and fish meal-to earn foreign exchange for importing machinery and manufactured goods. During the late 1980s, guerrilla violence, rampant inflation, chronic budget deficits, and drought combined to drive the country to the brink of fiscal insolvency. However, in 1990 the government imposed an austerity program that removed price controls and ended subsidies on many basic items and allowed the inti, the national currency at that time, to float against the United States dollar.

Lima is Peru’s capital and is the largest metropolitan city with almost 8 million people. Lima is also the most important port and business center of Peru. Other important cities include Cusco and Arequipa in the Andes region, Trujillo, Chiclayo and Piura along the coast, and Iquitos in the jungle.

Forecasts for the medium- and long-term remain positive, even though both the economic situation and political climate remain difficult. Peru’s real GDP growth in 2002 will likely be among the highest in the region, expected to be over 3%. Inflation is likely to remain low, at about 2%, while the budget deficit is expected to fall to about 2% of GDP. Private investment should begin to pick up, mostly as a result of privatizations. Exports and imports are expected to rise. The unemployment and underemployment indexes (11% and 54%, respectively, in Lima) should begin to come down again as the economy picks up, other cities in Peru like Cajamarca, Ica, Cuzco and Trujillo are starting to show less unemployment nowadays. Over the next few years, the country is likely to attract both domestic and foreign investment in the tourism, agriculture, mining, petroleum and natural gas, power industries and financial institutions.