MercoPress. South Atlantic News Agency

Peru plans to grow 7% annually until at least 2015

Peru is planning a sustained growth averaging 7% until 2015, with minimum inflation based on the opening of the economy that has seen tariffs drastically cut in the last two years, said the country's Economy minister Luis Carranza during a visit to Chile where he was the main speaker at a trade forum.

"Growth estimate for this year is 7% with 3.5% inflation and next year, 6.5% expansion and 3% inflation" said Carranza adding that this year's trade surplus should reach 5.9 billion US dollars and next year 4.2 billion. Carranza added that "70% of all imports to Peru now are free of tariffs; in two years we've reduced the 0 to 25% scale to 0%, 9% and 17%", which has been essential for opening the economy, attracting foreign investment and boosting growth. However he admitted Peru, which has almost half the population below the poverty line, faces great challenges to keep the current rate of expansion. "Labor flexibility, infrastructure investment, capital market, education, and social reforms are some of the most pressing items the President Alan Garcia administration is facing", underlined Carranza. The Peruvian government currently invests 4% of GDP in public works which is planned to reach 6% by 2011. Carranza nevertheless said that by 2011 "we expect the trade balance to become negative to the tune of 400 million US dollars, following almost nine years of sustained surplus since 2002". Chile's former Finance minister Nicolas Eyzaguirre said that after listening to Mr. Carranza he felt a kind of "healthy envy" because of the strong Peruvian growth and development prospects. But he also mentioned two issues, the first of which he described as "nature's blessing" in direct reference to the significant natural gas deposits of Peru in the Camisea region currently developed and exploited by British companies, which is a considerable advantage over Chile's large overseas energy dependency. Secondly he mentioned the rather "porous" Peruvian taxing system which is easily evaded or eluded. Former Chilean Central Bank president Vittorio Corbo underlined the advances achieved by the Peruvian Central Bank, which has become autonomous, the improvement in government finances and the important reduction in risk rating which is crucial to attract foreign investments. But Corbo also pointed out Peru has started from zero, which gives a great advantage on advancing during the first few years, which together with the strong price for metals and commodities has given Peru a "formidable edge". And what about over heating risks for the economy? Carranza said there are no short term risks since Peru can tolerate up to 2 to 3% GDP current account deficit. However in spite of the promising prospects, the price of food for the millions of poor Peruvians is always present. To quell food price protests the Peruvian Army has been sent to the slums of Lima to distribute among heads of family and homes staple food rations.