Peru: Trade Policy and International Negotiations

Peru revamped institutions and practices that had been in place for more than three decades during the 1990s, in one of the most radical processes of economic liberalization in Latin America. Yet the reform was neither new nor unique in the region, having been largely crafted according to ‘Washington Consensus’ doctrines of privatization of public assets, state deregulation, trade liberalization, and elimination of price controls and subsidies in goods. Unlike the short-term stabilization policies of previous decades, based on draconian monetary and fiscal measures aimed at curbing inflation, the policies of the 1990s sought to overcome economic crises over the long term. Underlying this shift was evidence that policies of import-substituting industrialization, protectionism and state intervention during the 1960s and 1970s had failed to generate a sustained process of development. Macroeconomic indicators hailed the successes of the new model until the late 1990s, as it occurred in other Latin American countries following a similar policy path. The Asian financial crisis called into question the shift’s growth effect vis-à-vis the foreign capital that flooded the economy until 1997. Furthermore, questions have arisen concerning the long-term sustainability of such policies in a context of severe external financial restrictions and increasing rates of unemployment and poverty.