Peru

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PERU

LOCATION, SIZE, AND EXTENT
TOPOGRAPHY
CLIMATE
FLORA AND FAUNA
ENVIRONMENT
POPULATION
MIGRATION
ETHNIC GROUPS
LANGUAGES
RELIGIONS
TRANSPORTATION
HISTORY
GOVERNMENT
POLITICAL PARTIES
LOCAL GOVERNMENT
JUDICIAL SYSTEM
ARMED FORCES
INTERNATIONAL COOPERATION
ECONOMY
INCOME
LABOR
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
FORESTRY
MINING
ENERGY AND POWER
INDUSTRY
SCIENCE AND TECHNOLOGY
DOMESTIC TRADE
FOREIGN TRADE
BALANCE OF PAYMENTS
BANKING AND SECURITIES
INSURANCE
PUBLIC FINANCE
TAXATION
CUSTOMS AND DUTIES
FOREIGN INVESTMENT
ECONOMIC DEVELOPMENT
SOCIAL DEVELOPMENT
HEALTH
HOUSING
EDUCATION
LIBRARIES AND MUSEUMS
MEDIA
ORGANIZATIONS
TOURISM, TRAVEL, AND RECREATION
FAMOUS PERUVIANS
DEPENDENCIES
BIBLIOGRAPHY

Republic of Peru
República del Perú

CAPITAL: Lima

FLAG: The national flag consists of red, white, and red vertical stripes.

ANTHEM: Himno Nacional, beginning "Somos libres, seámoslo siempre" ("We are free; let us remain so forever").

MONETARY UNIT: The nuevo sol (ml), a paper currency of 100 céntimos, replaced the inti on 1 July 1991 at a rate of i1,000,000 = ml1, but, in practice, both currencies are circulating. There are coins of 1, 5, 10, 20, and 50 céntimos and 1 nuevo sol, and notes of 10, 20, 50, and 100 nuevos soles and 10,000, 50,000, 100,000, 500,000, 1,000,000, and 5,000,000 intis. ml1 = $0.30395 (or $1 = ml3.29) as of 2005.

WEIGHTS AND MEASURES: The metric system is the legal standard.

HOLIDAYS: New Year's Day, 1 January; Labor Day, 1 May; Day of the Peasant, half-day, 24 June; Day of St. Peter and St. Paul, 29 June; Independence Days, 2829 July; Santa Rosa de Lima (patroness of Peru), 30 August; Battle of Anzamos, 8 October; All Saints' Day, 1 November; Immaculate Conception, 8 December; Christmas, 25 December. Movable holidays include Holy Thursday and Good Friday.

TIME: 7 am = noon GMT.

LOCATION, SIZE, AND EXTENT

Peru is South America's third-largest country, with an area of 1,285,220 sq km (496,226 sq mi), extending about 1,287 km (800 mi) senw and 563 km (350 mi) nesw. Comparatively, the area occupied by Peru is slightly smaller than the state of Alaska. It is bounded on the n by Ecuador and Colombia, on the e by Brazil and Bolivia, on the s by Chile, and on the w by the Pacific Ocean, with a total land boundary length of 5,536 km (3,440 mi) and a coastline of 2,414 km (1,500 mi).

Various offshore islands, chiefly the Chincha Islands off Pisco in southern Peru, are uninhabited, but at least 21 of these are important to the Peruvian economy and are protected by the government's guano monopoly.

Peru's capital city, Lima, is located on the Pacific coast.

TOPOGRAPHY

Peru is divided into three contrasting topographical regions: the coast (costa), the highlands (sierra), and the eastern rain forests (selva). The coastline is a narrow ribbon of desert plain from 16 to 160 km (10 to 100 mi) broad. It is scored by 50 rivers, which water some 40 oases. Only a few of these rivers, which have their source in the Andean snowbanks, reach the sea in all seasons. Although the coastal region constitutes only 12% of the national territory, it contains the ports and chief cities of Peru.

Inland, the low costa rises through the steep wastes of the high costa (7602,000 m/2,5006,500 ft), then ascends abruptly to the western cordillera (Cordillera Occidental) of the Andes, which, with its ridge of towering peaks, runs parallel to the coast and forms the Peruvian continental divide. The less regular Cordillera Central and Cordillera Oriental merge in central Peru with the Cordillera Occidental. They branch off to the southeast, meeting a transverse range that becomes a crescent of peaks forming the drainage basin of the 8,288 sq km (3,200 sq mi) Lake Titicaca, the highest large navigable lake in the world (about 3,810 m/12,500 ft high), which is bisected by the Peruvian-Bolivian border. Of the 10 Peruvian peaks that rise above 5,800 m (19,000 ft), Huascarán, 6,768 m (22,205 ft), is the highest.

The intermontane basins, deep-gashed canyons, and high treeless plateaus (punas) of the Andes form the sierra and constitute 27% of the country's surface. The most important rivers draining the Andes on the Atlantic watershed, such as the Marañón, Huallaga, and Ucayali, flow north or south and eventually east to form the Amazon Basin. The selva covers 61% of Peru and consists of the low selva (the Amazon rain forest) and the high selva, a steeply sloping transition zone about 100160 km (60100 mi) wide between the sierra and the rain forest.

Peru lies near the boundary of the Nazca and South American Teutonic Plates, which is a seismically active area. An 8.4 magnitude earthquake occurred near the coastal region on 23 June 2001, triggering a tsunami that affected parts of Chile and Bolivia. Over 100 people were killed by the event and over 2,600 more were injured. It was recorded as the largest earthquake of the year worldwide. One of the countries most devastating quakes on record occurred in May 1970 when a 7.9 magnitude earthquake killed 66,000 people.

CLIMATE

Although Peru's seaboard is situated well within the tropical zone, it does not display an equatorial climate; average temperatures range from 21°c (70°f) in January to 10°c (50°f) in June at Lima, on the coast. At Cuzco, in the sierra, the range is only from 12°c (54°f) to 9°c (48°f), while at Iquitos, in the Amazon region, the temperature averages about 32°c (90°f) all year round. The cold southnorth Humboldt (or Peruvian) Current cools the ocean breezes, producing a sea mist with the inshore winds on the coastal plain. Only during the winter, from May to October, does this sea mist (garúa) condense into about 5 cm (2 in) of rain.

Latitude has less effect upon the climate of the sierra than altitude. The rainy season in the Andes extends from October to April, the reverse of the coastal climate. Temperatures vary more from day to night than seasonally. The snow line ranges from 4,700 to 5,800 m (15,500 to 19,000 ft). In the eastern rain forest, precipitation is heavy, from 190 to 320 cm (75 to 125 in) annually; rain falls almost continuously between October and April.

A warm Pacific west-to-east current called El Niño appears near the Peruvian coast every four to ten years around Christmastime (the name is a reference to the Christ child), occasionally causing serious weather disturbances.

FLORA AND FAUNA

Peru's several climates and contrasting surface features have produced a rich diversity of flora and fauna. Where the coastal desert is not barren of life, there are sparse xerophytic shrub, cactus, and algarroba, and a few palm oases along the perennially flowing rivers from the Andes. Where the sea mist (garúa) strikes against the rising slopes between 800 and 1,400 m (2,600 and 4,600 ft), a dense belt of lomas, flowering plants, and grasses (important for grazing) grows. Perennial shrubs, candelabra cacti, and intermontane pepper trees account for much of the western slope vegetation in the higher altitudes and forests of eucalyptus have been planted.

High-altitude vegetation varies from region to region, depending on the direction and intensity of sunlight. Tola grows in profusion at 3,400 m (11,000 ft) in the southern volcanic regions; bunch puna grasses may be found at 3,700 m (12,000 ft). On the brow (ceja) of the eastern slopes, mountain tall grass and sparse sierra cactus and low shrub give way at 900 m (3,000 ft) to rain forests and subtropical vegetation. As the eastern slopes descend, glaciers are remarkably close to tropical vegetation.

The 601,000 sq km (232,000 sq mi) of eastern selva, with 18 rivers and 200 tributaries, contain the dense flora of the Amazon basin. Such native plants as sarsaparilla, barbasco, cinchona, coca, ipecac, vanilla, leche caspi, and curare have become commercially important, as well as the wild rubber tree, mahogany, and other tropical woods.

For centuries, vast colonies of pelicans, gannets, and cormorants have fed on the schools of anchovies that graze the rich sea pastures of the Humboldt Current and have deposited their excrement on the islands to accumulate, undisturbed by weather, in great quantities of guano. This natural fertilizer was used by the pre-Inca peoples, who carried it on their backs to the sierra. Forgotten during the days of colonial gold greed, guano attracted the attention of scientists in 1849, when its rich nitrogen content was analyzed as 1417%. For 40 years thereafter, Peru paid many of its bills by exporting guano to exhausted croplands of Europe. Guano has since been largely replaced in the international market by synthetic fertilizers.

The rich marine plant life off the Peruvian coast attracts a wealth of marine fauna, the most important of which are anchoveta, tuna, whale, swordfish, and marlin. Characteristic of the Andes are the great condor, ducks, and other wild fowl. The vizcacha, a mountain rodent, and the chinchilla are well known, as is the puma, or mountain lion. Peru is famous for its American members of the camel familythe llama, alpaca, huarizo, and guanacoall typical grazing animals of the highlands. The humid forests and savannas of eastern Peru contain almost half the country's species of fauna, including parrots, monkeys, sloths, alligators, paiche fish, piranhas, and boa constrictors, all common to the Amazon Basin.

As of 2002, there were at least 460 species of mammals, 695 species of birds, and over 17,000 species of plants throughout the country.

ENVIRONMENT

Peru's principal environmental problems are air pollution, water pollution, soil erosion and pollution, and deforestation. Air pollution is a problem, especially in Lima, due to industrial and vehicle emissions. Carbon dioxide emissions from industrial sources totaled 26.1 million metric tons in 1996. In 2000, the total of carbon dioxide emissions was at 29.5 million metric tons.

Water pollution is another of Peru's environmental concerns. Its sources are industrial waste, sewage, and oil-related waste. The nation has 1,616 cu km of renewable water resources with 86% of the annual withdrawal used to support farming and 7% used for industrial activity. Only 87% of city dwellers and 66% of the rural population have access to improved water sources. Soil erosion has resulted from overgrazing on the slopes of the costa and sierra.

The National Office for the Evaluation of Natural Resources is the principal policymaking body for resource development, while the General Department of the Environment, part of the Ministry of Health, deals with control of pollution problems; water, forest, and wildlife resources are the province of the Ministry of Agriculture. Numerous environmental protection measures have been passed, but enforcement is lax and hampered by inefficient management and scarce fiscal resources. A major environmental challenge for Peru in the 1980s had been opening the selva for agricultural development without doing irreparable harm to the ecology of the Amazon Basin.

According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 46 types of mammals, 94 species of birds, 6 types of reptiles, 78 species of amphibians, 8 species of fish, 2 species of invertebrates, and 274 species of plants. Threatened species included the yellow-tailed woolly monkey, black spider monkey, puna rhea, tundra peregrine falcon, white-winged guan, arrau, green sea turtle, hawksbill turtle, olive ridley turtle, leatherback turtle, spectacled caiman, black caiman, Orinoco crocodile, and American crocodile. The red-throated wood rail has become extinct.

POPULATION

The population of Peru in 2005 was estimated by the United Nations (UN) at 27,947,000, which placed it at number 40 in population among the 193 nations of the world. In 2005, approximately 5% of the population was over 65 years of age, with another 32% of the population under 15 years of age. There were 101 males for every 100 females in the country. According to the UN, the annual population rate of change for 200510 was expected to be 1.6%, a rate the government viewed as too high. The projected population for the year 2025 was 35,725,000. The overall population density was 22 per sq km (56 per sq mi), with some 53% of the inhabitants living in the coastal region; 36% living in the Andean sierra; and 11% living in the eastern rain forest.

The UN estimated that 73% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 1.86%. The capital city, Lima, had a population of 7,899,000 in that year. Other important cities are Trujillo, Arequipa, and Chiclayo.

MIGRATION

In the 1860s and 1870s, the Peruvian government imported Chinese laborers to mine guano deposits, build railroads, and work on cotton plantations. Since then, Peru has not attracted large numbers of immigrants, although there are Japanese as well as Chinese enclaves in the coastal cities. In 1991, some 377,485 Peruvians left the country, and 309,136 returned. The United States was the leading country of destination (38%), with Chile second. In 1999, Peru continued to produce more refugees than it received, due particularly to human rights violations. As of 2004, there were 766 refugees recognized by the United Nations High Commissioner for Refugees (UNHCR), and 232 asylum seekers, the latter mainly from Colombia. In that same year, 1,593 Peruvians sought asylum in Canada, Ecuador, and the United States.

For decades, the government encouraged the movement of people into the empty areas of the eastern Andean slopes (the high selva) in order to bring the eastern provinces into the national economic mainstream. Since the 1950s, however, the main trend has been in the reverse, from the sierra to the coastal cities. Lima has received the bulk of rural migrants, and by the mid-1990s the metropolitan area of Lima supported nearly one-third of the total national population.

The total number of migrants living in Peru in 2000 was 46,000. In 2004, remittances were $1.3 billion, 5% of GDP. In 2005, the net migration rate was an estimated -1.0 migrants per 1,000 population. The government views the migration levels as satisfactory.

ETHNIC GROUPS

According to the latest estimates, about 45% of the inhabitants are Amerindian, 37% are mestizo (of mixed Amerindian and Spanish or other European ancestry), 15% are white, and 3% are black, Asian, or other. Small groups of Germans, Italians, and Swiss are important in commerce, finance, and industry. Chinese and Japanese operate small businesses, and some Japanese have been successful in agriculture.

Of the 47 million sierra Amerindians under Inca domination, fewer than one million were left when the first colonial census was taken in 1777. A failing food supply and new diseases, such as smallpox, scarlet fever, and measles, were lethal to the young. Despite continuing disease and poverty found among the Amerindians today, they have increased to more than eight million. The main groups are the Quechua- and Aymará-speaking tribes, but there are also some other small tribes in the highlands. Peru's lowland forest Amerindians were never subjugated by Incas or by Spaniards and continue to be fishermen, hunters, and foragers.

In the mid-1980s, at least 225,000 rain forest Indians were grouped in 37 tribes. A 20-year plan announced in 1968 called for the full social, economic, and political integration of Peru's Amerindian population. Nevertheless, in the 1980s, sociocultural distinctions based on ethnic background were endemic to Peruvian society, with whites (especially the criollos, those of early Spanish descent) at the top of the hierarchy, mestizos and cholos (acculturated Amerindians) below them, and monolingual Quechua- or Aymará-speaking Amerindians at the bottom.

LANGUAGES

Spanish is spoken, as in all Latin America, without the use of the sound represented by th in thing characteristic of Castilian. The majority of the population speaks only Spanish. At least seven million Amerindians, as well as many mestizos, speak Quechua, the native tongue of the Inca peoples, the use of which was outlawed following an Amerindian revolt in 1780. A decree of 27 May 1975 granted Quechua the status of an official language, along with Spanish. Some words in modern English usage derived from Quechua are alpaca, condor, pampa, coca, guano, Inca, llama, guanaco, vicuña, puma, and quinine. Aymará is spoken by at least 700,000 people, especially in the department of Puno and around Lake Titicaca, and various other languages are spoken by tribal groups in the Amazon Basin.

RELIGIONS

Although about 80% of the population is nominally Roman Catholic, it has been estimated that only about 15% of all Catholics actively participate in religious services. The practice of Catholicism in Peru is often imbued with Amerindian elements. Between 7% and 12% of the populations are Protestants, including evangelical Christians (Lutherans, Calvinists, Anglicans, Methodists, Baptists, Presbyterians, Pentecostals, members of the Assemblies of God, the Christian Missionary Alliance, The Evangelical Church of Peru, and the Church of God) and non-evangelical Christians (Mormons, Seventh-Day Adventists, and Jehovah's Witnesses). Approximately 2.5% of the populace are members of other religions, including Jews, Muslims, Buddhists, and Shintoists. Atheists and agnostics account for 1.4%.

The constitution guarantees religious freedom, but it also recognizes the Roman Catholic Church as an "important element in the historical, cultural, and moral development" of the country. A 1980 concordat signed with the Vatican grants special recognition, and preferential treatment, to the Catholic Church as well.

TRANSPORTATION

The system of highways that was the key to the unification of the Inca Empire was not preserved by the Spanish conquerors. The lack of an adequate transportation system is still a major obstacle to economic integration and development.

As of 2004, Peru's railroad system consisted of 3,462 km (2,153 mi) of standard and narrow gauge railway lines. Of that total, the standard gauge accounts for 2,962 km (1,842 mi). Nationalized in 1972, the system is subject to landslides and guerrilla attacks. Operation of the system was given in concession in July 1999, for 30 years, to two companies: Ferrovias Central Andina S. A. (central railway); and Ferrocarril Transandino S. A. (south and south-east railways). The two principal railway systems, the Central and Southern railways, were built during the second half of the 19th century and were at one time owned and operated by British interests. The Central Railway, the world's highest standard-gauge rail-road, connects Lima-Callao with the central sierra. The Southern Railway links Arequipa and Cuzco with the ports of Mollendo and Matarani and runs to Puno on Lake Titicaca, where steamers provide cross-lake connections with Bolivia. The Tacna-Arica Railway, totaling 62 km (39 mi) and linking Peru with Chile, is also a part of the nationalized system.

In 2002, of the estimated 72,900 km (45,300 mi) of existing roads, only 8,700 km (5,406 mi) were paved. The nation's highways are deteriorating, especially in the mountains, where land-slides and guerrilla attacks often occur. The two primary routes are the 3,000 km (1,864 mi) north-south Pan American Highway, connecting Peru with Ecuador, Bolivia, and Chile, and the Trans-Andean Highway, which runs about 800 km (500 mi) from Callao to Pucallpa, an inland port on the Ucayali River. The 2,500-km (1,550-mi) Jungle Edge Highway, or Carretera Marginal de la Selva, spans most of Peru along the eastern slopes of the Andes and through the selva. In 2003, there were 346,300 automobiles and 234,800 commercial vehicles. About 60% of inland freight and 90% of all passengers are carried by road.

The Amazon River with its tributaries, such as the Marañón and the Ucayali, provides a network of waterways for eastern Peru. Atlantic Ocean vessels go 3,700 km (2,300 mi) up the Amazon to Iquitos and, at high water, to Pucallpa. As of 2004, there were 8,808 km (5,473 mi) of waterways, of which 8,600 km (5,349 mi) consist of tributaries of the Amazon River and 208 km (129 mi) on Lake Titicaca. Peru has 11 deepwater ports and in 2005 its merchant fleet consisted of four vessels of 1,000 GRT or more, totaling 13,666 GRT. Only Peruvian ships may engage in coastal shipping. Callao, Peru's chief port, and Salaverry, Pisco, and Ilo have been expanded.

Much of Peru would be inaccessible without air transport. In 2004 there were an estimated 234 airports. In 2005, a total of 54 had paved runways, and there was also one heliport. The two principal airports are Col. Fco. Secada at Iquitos and Jorge Chavez at Lima. Faucett Airlines is the older of the two main domestic air carriers, which serve 40 airports and landing fields. The recently privatized Aeroperú, created in May 1973, provides both domestic and international services. In 2003, about 2.233 million passengers were carried on scheduled domestic and international flights. The Peruvian Air Force also operates some commercial freight and passenger flights in rain forest areas.

HISTORY

Archaeological evidence indicates that Peru has been inhabited for at least 12,000 years. Perhaps as early as 6,000 years ago, the first primitive farmers appeared. Between 500 bc and ad 1000 at least five separate civilizations developed. The Paracas, on the southern coast, produced elaborately embroidered textiles and performed brain surgeries, in spanish "trepanaciones craneanas. " The Chavín, in the highlands, were noted for their great carved stone monoliths. The Mochica, on the north coast, produced realistic pottery figures of human beings and animals. The Nazca in the south were noted for the giant figures of animals in the ground that can be seen only from the sky. The Chimú were the most developed of these groups.

The Quechua Empire, whose emperors had the title Sapa Inca, was established in the 13th century. During the next 300 years, the extraordinary empire of the Incas, with its capital at Cuzco, spread its spiritual and temporal power to northern Ecuador, middle Chile, and the Argentine plains. By means of a system of paved highways, the small Cuzco hierarchy communicated its interests to a population of 812 million. The intensive agriculture of scarcely tillable lands, held in common and controlled by the state, created a disciplined economy. The ayllu, a kinship group that also constituted an agrarian community, was the basic unit of the Inca Empire, economically and spiritually. The Incas were sun worshipers and embalmed their dead. Their highly developed civilization used a calendar and a decimal system of counting and advanced arquitecture, but never developed a wheel.

Francisco Pizarro's small band of Spaniards arrived in 1532, shortly after a civil war between the Inca half-brothers Huáscar and Atahualpa. The empire collapsed in 1533. Lima was established in 1535 and promptly became the opulent center of the Viceroyalty of Peru. It held jurisdiction over all Spanish South America except Venezuela. The Spanish imperial economy, with its huge land grants given by the crown and its tribute-collecting encomiendas, brought vast wealth and a new aristocracy to Peru. To Spain, Peru was a gold bank. Mines were exploited, and overworked Indians perished by the millions as food supplies declined.

Peru remained a Spanish stronghold into the 19th century, with modest internal agitation for independence. One notable exception was the abortive revolt led by a mestizo known as Tupac Amaru II in 1780. Otherwise, Peruvian royalists helped the crown suppress uprisings in Peru and elsewhere. In the end, Peru was liberated by outsidersJosé de San Martín of Argentina and Simón Bolívar of Venezuela. San Martín landed on Peruvian shores in 1820 and on 28 July 1821 proclaimed Peru's independence. The royalists were not quelled, however, until the Spaniards were defeated by forces under Bolívar at the battle of Junín and under Antonio José de Sucre at Ayacucho in 1824. The victory at Ayacucho on 9 December put an end to Spanish domination on the South American continent, although the Spanish flag did not cease to fly over Peru until 1826.

Between 1826 and 1908, Peruvian presidents ruled an unstable republic plagued by rivalries between military chieftains (caudillos) and by a rigid class system. Marshal Ramón Castilla, president from 1845 to 1851 and from 1855 to 1862, abolished Amerindian tributes and introduced progressive measures. Between the 1850s and the mid-1880s, Peru experienced an economic boom financed by sales of guano to Europe. A program of road building was implemented, and an American entrepreneur, Henry Meiggs, was hired by the government to build a railroad network in the Andes. In 1866, a Spanish attempt to regain possession of Peru was frustrated off the port of Callao. An 1871 armistice was followed in 1879 by the formal recognition of Peruvian independence by Spain. The War of the Pacific (187984) followed, in which Chile vanquished the forces of Peru and Bolivia and occupied Lima from 1881 to 1883. Under the Treaty of Ancón, signed in October 1883, and subsequent agreements, Peru was forced to give up the nitrate-rich provinces of Tarapacá and Arica.

Peru entered the 20th century with a constitutional democratic government and a stable economy. This period of moderate reform came to an end in 1919, when a businessman, Augusto Leguía y Salcedo, who had served as constitutionally elected president during 190812, took power in a military coup and began to modernize the country along capitalistic lines. It was in opposition to Leguía's dictatorship, which had the backing of US bankers, that a Peruvian intellectual, Víctor Raúl Haya de la Torre, founded the leftist political party "American Popular Revolutionary Alliance" (APRA). In 1930, after the worldwide depression reached Peru, Leguía was overthrown by Luis M. Sánchez-Cerro, who became Peru's constitutional president in 1931 after an election which the Apristas (the followers of APRA) denounced as fraudulent. An Aprista uprising in 1932 was followed by the assassination of Sánchez-Cerro in April 1933, but the military and its conservative allies maneuvered successfully to keep APRA out of power. Manuel Prado y Ugartache served as president during World War II, a period which also brought the eruption of a border war with Ecuador in 1941. The 1942 Protocol of Río de Janeiro, which resolved the conflict on terms favorable to Peru, was subsequently repudiated by Ecuador.

In 1945, Prado permitted free elections and legalized APRA. Haya de la Torre and the Apristas supported José Luis Bustamante y Rivera, who won the elections, and APRA (while changing its name to the People's Party) received a majority in congress. In 1948, military leaders charged the president with being too lenient with the Apristas and dividing the armed forces. A coup led by Gen. Manuel A. Odría ousted Bustamante, and APRA was again outlawed. Several hundred Apristas were jailed, while others went into exile. In January 1949, Haya de la Torre found refuge in the Colombian embassy, where he lived for the next five years. Under the rule of Odría and his military board of governors, the Peruvian economy flourished. Odría announced his retirement in 1956, and promoted his own candidate for the presidency. In a free election, the opposition candidate, former President Prado (tacitly supported by the outlawed APRA) returned to office.

Peru under the Prado regime was characterized by deep-rooted social unrest and political tension. Prado himself faded into the background, allowing Premier Pedro Beltrán to rule. Beltrán's economic moves stabilized Peru's financial picture, but the political problems remained. The election of 1962 was a three-way race between Haya de la Torre; Odría, back from retirement; and Fernando Belaúnde Terry, leader of the Popular Action Party (AP). Although Haya de la Torre got the most votes, he did not receive the constitutionally required one-third of the votes cast. The parties then went into negotiations, and a deal was struck giving Odría the presidency with an APRA cabinet. The military thereupon intervened, annulled the vote, and suspended the newly elected congress. The governing junta then announced new elections for July 1963, and the same candidates ran. This time, Belaúnde received 39% of the votes cast to become president.

Belaúnde embarked on a program of agrarian reform, as well as tax incentives to promote manufacturing. However, he was caught in a crossfire between the Odrístas, who considered him a radical, and the Apristas, who believed he was not doing enough. Belaúnde's AP formed a coalition with the Christian Democratic Party to control the senate, but APRA and the Odría National Union controlled the Chamber of Deputies. On top of all this, Belaúnde had to deal with two separate leftist insurgencies in Peru's highlands. As Peru approached new presidential elections, the AP began to quarrel, and opposition parties continued to sabotage Belaúnde's programs. Then a scandal concerning the granting of oil concessions to the International Petroleum Co., a subsidiary of Standard Oil of New Jersey, rocked the government. A military junta exiled Belaúnde on 3 October 1968 in a bloodless coup.

In 1969, the military government, under the presidency of Gen. Juan Velasco Alvarado, began enacting a series of social and economic reforms. This time, they did not worry about opposition, ruling instead by decree. By 1974 they had converted private landholdings into agricultural cooperatives, nationalized a number of basic industries, and had mandated profit-sharing schemes for industrial workers. The military also reached out to Peru's long-neglected Amerindian population, making Tupac Amaru a national symbol, and recognizing Quechua as an official national language.

In August 1975, Velasco, whose health and political fortunes had both declined, was removed from office in a bloodless coup and replaced by Gen. Francisco Morales Bermúdez Cerruti, formerly his prime minister. The new regime moved to liberalize the system, declaring a general amnesty for post-1968 political exiles and the legalization of some previously banned publications. They subsequently announced a return to civilian government and the creation of a "fully participatory social democracy." Some state-controlled enterprises were sold and worker-participation programs were scaled down. A Constituent Assembly was elected, and under the leadership of the perennial candidate Haya de la Torre they drew up a new constitution in 1979. New elections were held in 1980, and the AP and Belaúnde returned to power.

Belaúnde's second term was even less a success than his first. Adverse weather conditions and the world recession accompanied ill-conceived policies that led to triple-digit inflation. Austerity programs caused increased rates of unemployment and currency problems pinched the Peruvian middle-class. Perhaps most disturbing of all, a small Maoist guerrilla group, Sendero Luminoso (Shining Path) was operating openly in the Andes, especially around Ayacucho. Despite passage of an antiterrorist law in 1981, terrorist activities intensified. The AP's tenuous hold on the government was slipping. The AP won only 15% of the vote in the 1983 municipal elections. By 1985, with Peru on the brink of an economic collapse, the AP received a mere 7% of the vote.

The election of 1985 was historic in two ways: it was the first peaceful transfer of power in 40 years, and it brought the first president from APRA since the party's founding in 1928. Alán García Pérez, secretary-general of APRA, won with 53% of the vote and brought with him an APRA majority in both houses. The new president pursued populist economic policies aimed at controlling inflation, stimulating the economy, and limiting external debt repayments. To get inflation under control, García established a strict set of price controls, dropping inflation precipitously. Salaries were then allowed to increase, which led to a dramatic surge in the production of industrial and consumer goods. García also announced that external debt service would be set at 10% of export earnings, when several times that amount would have been required to keep up with interest payments alone.

While initially successful, these programs eventually ran aground. The IMF, a constant target of García, declared Peru ineligible for any further borrowing because of the size of Peru's external debt. After its initial boom, industrial production began to sag. Food shortages became common as suppliers refused to produce with artificially low prices. By 1990, inflation had climbed to four-digit levels.

García had some success in dealing with Peru's democratic left, but the militant left was another story. By increasing the stridency of his rhetoric, especially against the United States, García was able to capture leftist votes, seriously damaging the power of the United Left (Izquierda UnidaIU). However, Sendero escalated its attacks, coming down out of the mountains and striking at urban and suburban targets around Lima and Callao. In addition, the Tupac Amaru Revolutionary Movement (MRTA) merged with the Movement of the Revolutionary Left (MIR), and struck with increasing intensity. Although García had promised to get the military under control, it was soon clear that he could not function without them, and authorized a set of brutal counter-insurgent campaigns.

By 1990, Peruvians began to cast about for someone to deliver the country from its economic and social woes. Neither APRA nor the AP had any credibility left. In a surprise, Alberto Fujimori, the son of Japanese immigrants, defeated conservative novelist Mario Vargas Llosa by 57% to 34%. Other candidates totaled a little over 9%. Fujimori immediately imposed a draconian set of austerity measures designed to curb inflation, which he had promised not to do during his candidacy. These measures caused a great deal of economic dislocation, but did reduce inflation to pre-1988 levels.

Fujimori moved aggressively to combat Sendero and the MRTAMIR. He organized and armed rural peasants to counter the increased guerrilla presence, and gave the military a broad mandate to crack down on the insurgents. The capture of Abimaél Guzmán, leader of Sendero Luminoso, was hailed as a major blow against the movement, but the violence continued. Human rights continued to deteriorate, and the military became stronger.

Domestic opposition increased as Fujimori became increasingly isolated politically. Then, in April 1992, Fujimori shut down Congress and refused to recognize any judicial decisions. The autogolpe ("self-coup") received widespread popular approval and, most significantly, the military supported Fujimori's moves. In 1992, elections were held to create a Constituent Assembly charged with making constitutional reforms, including allowing Fujimori to run for a second five-year term in 1995. Both APRA and AP refused to participate, and Fujimori's New Majority/Change 90 party took a majority of seats. With full executive powers and a legislature full of supporters, Fujimori was able to enact whatever reforms he deemed necessary to improve Peru's economic and social situations.

A border war with Ecuador in early 1995 (in which both sides claimed victory) boosted Fujimori's popularity to a level that enabled him to win his unprecedented second-consecutive presidential election by a landslide, roundly defeating former UN secretary general Javier Perez de Cuellar. In May 1999, Fujimori and Ecuadorian President Jamil Mahuad formally ended the border dispute that dated from 1941. The accord gave Ecuador a small piece of Peruvian territory and navigation rights on some Peruvian rivers. In Ecuador, the peace treaty was considered a capitulation, turning the army against Mahuad.

Fujimori continued to rule by martial law, and took decisive steps to end terrorist opposition and violence in Peru. In 1996, the second-highest leader of Sendero, Elizabeth Cardenas Huayta, was arrested. The Tupac Amaru rebel movement was decimated in April 1997 when military commandos stormed the Japanese Embassy, where the rebels had been holding hostages since December 1996, and killed all 14 of the Tupac Amaru guerrillas who had carried out the siege (one hostage died in the raid, from a heart attack as a result of a gunshot wound).

Although the success of the embassy raid and the end of the hostage crisis at first raised Fujimori's popularity, it soon began to decline as Peruvians wearied of Fujimori's strong-arm tactics. Government attacks on the press and on certain members of the business community created a mounting dissatisfaction with the Fujimori regime. When Fujimori fired three Constitutional Tribunal judges for rejecting his claim to a third consecutive presidential term, Peruvians' tolerance was pushed beyond its breaking point and protests erupted. Continuing widespread poverty (despite recent years of economic growth), coupled with governmental abuses of power and violence eroded Fujimori's popular support. As the April 2000 elections came near, Fujimori at first remained silent on whether he would seek a third term. However, political maneuvering by his supporters had ensured that no viable candidate would rise to face him.

Opposition parties were weak and divided. Former President Alan García, who had fled the country in 1992 and faced corruption charges, became a possible candidate. Fujimori's supporters in congress quickly approved a law banning any former officeholder facing criminal charges from running for election. But Fujimori did remain vulnerable; a two-year recession and widespread unemployment had left one of every two Peruvians living in poverty by mid-1999. Fujimori also was under a great deal of international pressure to rectify undemocratic conduct. In June 1999, members of the US House of Representatives said they were concerned at the "erosion of democracy and the rule of law" in Peru. A Senate subcommittee said it should be consulted before the White House gave any more American intelligence to Peru. Later that year, the Inter-American Court of Human Rights rejected Peru's bid to withdraw from its jurisdiction, saying it would continue to summon Peruvian officials to declare on reported abuses.

Within weeks of the April 2000 elections, Fujimori seemed all but certain of winning the presidency for a third term. Yet, a virtual unknown had suddenly become a viable candidate, winning support from throughout the country. Alejandro Toledo, a 54year-old business school professor, was soon ahead of other challengers trying to defeat Fujimori. Toledo had a modest upbringing. His father was a bricklayer, and his mother sold fish at a street market. Of indigenous ancestry, Toledo quickly gained an important following in Peru's Amerindian communities, where Fujimori had found support. The election was held on 9 April, with several international organizations monitoring polling stations.

It soon became clear that Fujimori's supporters were trying to steal the election. There were unexplained delays in revealing the results, and widespread reports of voter fraud. The United States, the Organization of American States, the Atlanta-based Carter Center, and several other international organizations monitoring the election agreed that widespread fraud had tainted the elections and demanded a second presidential election between Fujimori and Toledo. Tens of thousands of Peruvians marched in peaceful protests demanding a second round. The other presidential candidates backed Toledo. Three days after the election, the electoral office said Fujimori had obtained 49.8% of the vote, not enough to capture the 50% plus one he needed to avoid a second round. Toledo received 40.3% of the vote.

The political crisis resulting from the rigged election became uncontrollable after Fujimori's chief advisor, Vladimiro Montesinos, was shown nationwide in a video, which he had produced, bribing an opposition congressman to join with Fujimori in September 2000. Dissenting politicians had leaked the tape to the media and with the knowledge that hundreds of similar tapes existed, Montesinos fled the country to Panama, which did not grant him political asylum. Montesinos then returned to Peru, but his whereabouts were unknown. Fujimori enacted a far-fetched search for the runaway Montesinos, but in the process Montesinos escaped by yacht to Costa Rica and later Venezuela. In a last hope to stabilize the political environment, Fujimori offered to hold new presidential elections in April 2001 in which he would not run. However, such gestures did not prevent the deepening of the institutional crisis and in an official APEC meeting in November, Fujimori flew to Japan and resigned via facsimile. He remained in exile in Japan, and the Japanese government subsequently recognized him as a Japanese citizen. Congress impeached Fujimori, judging him "morally unfit to govern" and selected congressman Valentin Paniagua to be the president of the interim government (after the sitting vice president also resigned). During Paniagua's presidency, Montesinos was found and extradited to Peru, and political calm was restored for a brief period.

A new presidential election was held in April 2001. Alejandro Toledo came in first with 36.5% of the vote, but he was forced into a runoff with former president Alan García (25.8%) who had returned to the country after Fujimori's resignation. Toledo went on to win the runoff with 53.1% of the vote. But García's impressive 46.9% transformed the former discredited president into a powerful actor in Peruvian politics.

Toledo became the first Peruvian of indigenous heritage to become president. Yet, his popularity and support during the first months of his administration began to fall as accusations of corruption and moral improprieties tainted his presidency. After failing to keep his campaign's main promise to create jobs for all Peruvians within 90 days after his inauguration, protests and national strikes plagued the country as people demanded better services and wages, as well as less corruption. No real advancement in the economy was perceived, and further resentment was sparked by criminal acts of Toledo's family and symbolic acts of government, such as increasing the president's salary and attempting to increase the sales tax twice in one year. Security declined as crowds in poorer areas took the law in their own hands, even lynching corrupt local bureaucrats or criminals. Toledo's efforts to prosecute those responsible for corruption and human rights violations during the Fujimori government also distracted him from the urgent social and economic challenges facing his country.

During his tenure, Toledo suffered from dismal approval ratings, ranging in the single digits. Politically, his party quickly crumbled, with many key followers leaving or beginning new parties. The political turmoil brought by his style of leadership led him to change presidents of congress five times, in vain attempts to appease the opposition and Peruvian citizens. His ineffectual leadership and the lack of discipline within his political party also hindered the process of democratic restoration in Peru.

GOVERNMENT

Prior to the military coup in 1968, Peru was governed under the constitution of 1933, which declared Peru to be a republic with a centralized form of government. Legislative powers were vested in a Senate and a Chamber of Deputies, of variable number. Both senators and deputies served their electoral districts for a period of six years. Under the constitution, executive power was held by the president, who, with two vice presidents, was elected for a six year term, with a minimum of one-third of the vote, but could not be reelected until an intervening term had passed. Voting was obligatory for all literate Peruvian citizens aged 21 to 60.

The military leaders who seized control of the government in 1968 immediately disbanded the bicameral Congress. For the following decade, Peru was ruled by a military junta consisting of the president and the commanders of the three armed forces. The return to civilian rule began with the election of a Constituent Assembly in June 1978 and the promulgation of a new constitution on 12 July 1979. Presidential elections were held in May 1980, and Peru's first civilian government in 12 years took office in July.

After the autogolpe in 1992, the constitution was suspended. A new Constituent Assembly was elected and a new constitution was written. For the most part, all the major elements of the 1979 constitution were preserved, but presidents were allowed to run for one immediate reelection. Under the 1979 constitution, the president was popularly elected for a five-year term and could not be reelected to a consecutive term. The winning candidate had to win at least 50% of the vote or face a runoff election against the second-place candidate. The National Congress consisted of a 60-member Senate and a 180-member Chamber of Deputies. All elected legislators had five-year terms. The 1979 constitution eliminated literacy as a qualification for voting and made suffrage universal at age 18. In addition, there are more than 160 locally elected government councils.

POLITICAL PARTIES

Throughout most of Peru's modern political history, personalities and power politics have counted for more than party platforms. There are nevertheless several parties with origins at least as far back as the 1950s.

The American Popular Revolutionary Alliance (Alianza Popular Revolucionaria AmericanaAPRA) was begun in 1924 by Víctor Raúl Haya de la Torre as a movement of and for Latin American workers. The five planks in its original platform were opposition to "Yankee imperialism," internationalization of the Panama Canal, industrialization, land reform, and solidarity among the world's oppressed. Controlling most of unionized labor, APRA was anti-Communist and anti-imperialist. Outlawed in 1931 and again in 1948, APRA was legalized in 1956. APRA has been historically opposed to the military, and political conditions in Peru from the 1930s until the mid-1980s have been dominated by hostility between APRA and armed forces leaders. After the death of Haya de la Torre in 1979, APRA was weakened by internal dissension. By 1985, new leadership and the failure of the Belaúnde government allowed APRA its first experience in power. Yet, the economic crisis experienced during the Alan García government severely hurt the party. Lack of leadership within APRA also hindered that party electorally. After Fujimori's demise, APRA reemerged as a strong and unified party. In the 2001 presidential and parliamentary elections, APRA obtained 20% of the vote (26 seats in the 120-member chamber), consolidating its position as the second-largest and the most disciplined party in Peru.

The Popular Action Party (Partido de Acción Popular, or AP) was founded in 1956. Originally a reform party, it competed with APRA for the support of those favoring change in Peru. After an impressive campaign in 1956, the AP won the presidency in 1963, thanks to the military's hatred of APRA. In the 1980 presidential election, Belaúnde received 45.4% of the votes cast, compared with 27.4% for APRA candidate Armando Villanueva del Campo. After Belaúnde's tenure, AP has lost electoral appeal. In the most recent election, AP only obtained 4% of the vote and three seats in the chamber.

After the dissolution of congress by the 1968 military coup, political parties continued to exist, although they were denied any role in government until the late 1970s. Ideologically, the military rulers between 1968 and 1980 reflected both strong socialist and nationalist principles.

The left has undergone a number of changes, partly as a result of military intervention, and most recently has been undermined by the activities of leftist guerrillas. The Peruvian Communist Party (Partido Comunista Peruano) was formed in 1929. Outlawed in 1948, it changed its name to the Revolutionary Labor Party (Partido Obrero RevolucionarioPOR), which split in the 1980s into a number of small factions. The United Left (Izquierda UnidaIU), which formed to support the candidacy of Alfonso Barrantes Lingán, took 21.3% of the 1985 ballot. Barrantes was mayor of Lima until APRA unseated him in 1986, whereupon Barrantes resigned as IU president and the coalition dissolved.

The largest active guerrilla party is Sendero Luminoso (Shining Path), a Maoist group founded in 1964. Its founder, Abimaél Guzmán, a former college professor, was captured by the government and is still imprisoned. Sendero's strength is concentrated around Ayacucho, in the sierra southeast of Lima. Its program includes not only attacks on bridges, power lines, and urban centers but also attempts to organize highland peasants. Sendero collects tribute from peasants in exchange for protection and encourages peasants not to sell their food crops to the cities.

A smaller group, the Tupac Amaru Revolutionary Movement (Movimiento Revolucionario Tupac AmaruMRTA), merged with the Movement of the Revolutionary Left (MIR) to form a group that has been increasingly active. The MRTA-MIR is more urban-oriented and follows a more orthodox Marxist line than the eccentric Sendero.

President Alberto Fujimori came to office in 1990 as an independent, calling his party Change 90-New Majority. In the 1995 elections, Fujimori was reelected in a landslide victory and his party took 67 of the 120 congressional seats, giving it a clear majority (the next-highest number of seats, 17, went to the Union for Peru party, led by former UN secretary general Javier Perez de Cuellar who came in second in the presidential election).

Current president Alejandro Toledo also formed his own party before the 2001 election. Peru Posible was formed in 2001 around the then-popular figure of Toledo. With 26.3% of the vote, it captured 45 seats in the Assembly. But Peru Posible has shown little party discipline and it is unlikely that the party will survive beyond Toledo's own political career.

By 2005 the Popular Christian Party (Partido Popular CristianoPPC), aligned with former Prime Minister Antero Florez Arao, led in the political arena against Fujimori's newly named party Si Cumple and APRA which came in second and third. However, with growing discontent with the more traditional political parties, several new options emerged. Business leaders from the manufacturing conglomerate commonly known as Gamarra created their own political party named Solución Nacional. Another political party growing from the small and medium business sector is Proyecto Pais and Somos Peru, started by the former Mayor of Lima Alejandro Andrade. For the 2006 elections, 28 candidates were formally registered. Because political parties represent small constituencies and have uncertain political futures, the prospect of party politics remains uncertain.

LOCAL GOVERNMENT

In March 1987, President García promulgated a regionalization law that would replace the nation's 24 departments (and the constitutional province of Callao) with 12 regions having economic and administrative autonomy. Each region was to have an assembly of provincial mayors, directly elected members, and representatives of various institutions. However, due to inadequate funding and an uncertain political picture, these regions did not function and existed alongside the departmental structure, which was never dismantled. The 148 provincial subdivisions remained intact.

The 1979 constitution confirmed the legal status of about 5,000 Indian communities. The first local elections since 1966 took place in November 1980 and occur at three-year intervals. The 1993 constitution reaffirmed those indigenous rights and divided the country into 25 departments.

JUDICIAL SYSTEM

The Peruvian legal system is based generally on the Napoleonic Code. The 1993 constitution guarantees the independence of the judiciary. Peru's highest judicial body, the 16-member Supreme Court, sits at Lima and has national jurisdiction. The nine-member Court of Constitutional Guarantees has jurisdiction in human rights cases. Superior courts, sitting in the departmental capitals, hear appeals from the provincial courts of first instance, which are divided into civil, penal, and special chambers. Judges are proposed by the National Justice Council, nominated by the president, and confirmed by the Senate; they serve permanently until age 70. Justices of the Peace hear misdemeanor cases and minor civil cases.

The 1993 constitution abolished the death penalty (except for treason in time of war) and limited the jurisdiction of military tribunals; it also established the Public Ministry, including an independent attorney general, to serve as judicial ombudsman. Despite such reforms, the Peruvian judicial system still suffers from overcrowded prisons and complex trial procedures. Many accused persons (especially those accused of drug trafficking or terrorism) may spend months or even years in prison before they are brought to trial.

Although the judicial branch has never attained true independence, provisions of the 1993 constitution establish a new system for naming judges which may lead to greater judicial autonomy in the future. The 1993 constitution also provides for a human rights ombudsman (the Office of the Defender of the People), a Tribunal of Constitutional Guarantees empowered to rule on the constitutionality of legislation and government actions, a National Judiciary Council, and a Judicial Academy to train judges and prosecutors. The Tribunal of Constitutional Guarantees has seven members; three of them are in some way associated with the president or his party. To declare a law unconstitutional, at least six of the judges must agree.

ARMED FORCES

Peru's armed forces in 2005 totaled 80,000 active personnel, supported by 188,000 reservists. The Army numbered 40,000 members, whose equipment included 275 main battle tanks and 110 light tanks. The Navy had 25,000 active personnel including 4,000 Marines, 1,000 Coast Guard members, and 800 naval aviation personnel. The Air Force numbered 15,000 personnel, with 89 combat capable aircraft, including 18 fighters, over 73 fight ground attack aircraft, and 16 attack helicopters. The Navy operated 6 tactical submarines, 1 cruiser, 4 frigates, and 13 patrol/coastal vessels. About 77,000 paramilitary troops comprise the national police force. The defense budget in 2005 totaled $1.08 billion.

INTERNATIONAL COOPERATION

Peru is a charter member of the United Nations, having joined on 31 October 1945; it belongs to ECLAC and several nonregional specialized agencies, such as the FAO, IAEA, the World Bank, ILO, IMF, UNESCO, UNIDO, and the WHO. Peru is a member of the WTO, APEC, the South American Community of Nations, the Arab Bank for Economic Development in Africa, the Andean Community of Nations, G-15, G-24, G-77, the Inter-American Development Bank, the Latin American Economic System (LAES), the Latin American Integration Association (LAIA), the OAS, and the Río Group.

Peru is part of the Nonaligned Movement and a signatory of the 1947 Río Treaty, an inter-American security agreement. The government has supported UN missions and operations in Ethiopia and Eritrea (est. 2000), Liberia (est. 2003), Burundi (est. 2004), Côte d'Ivoire (est. 2004), and the DROC (est. 1999). The country belongs to the Agency for the Prohibition of Nuclear Weapons in Latin America and the Caribbean (OPANAL) and the Organization for the Prohibition of Chemical Weapons.

In environmental cooperation, Peru is part of the Antarctic Treaty, the Basel Convention, Conventions on Biological Diversity and Whaling, Ramsar, CITES, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on Climate Change and Desertification.

ECONOMY

Since World War II, the Peruvian economy has developed rapidly, exhibiting a rate of growth that has been among the highest in Latin America. The strength of Peru's economy lies in the diversity of its natural resources. Silver and gold were the prized commodities of colonial Peru. In more recent times, lead, copper, zinc, iron ore, and since the late 1960s, petroleum have become important export earners. Fishing, including the production of fish meal, has become a major undertaking. Agriculture, which occupies about 4.9% of the work force, is sharply divided between two sectors: small-scale farming, producing food crops for subsistence and the domestic market, and export-oriented production.

Policies from 1960 to 1990 were aimed at social reform, but worsened and perpetuated poverty. Repeated experiments in social engineering created economic and institutional uncertainty and a prolonged decline in governance. Government spending grew steadily in the 1980suntil it collapsed in 1989but spending in the production of public services fell. As a result, there was a steady degradation of the civil service and the provision of public goods that undermined productivity, fostered anarchy and public turmoil, and, ultimately, made poverty reduction impossible.

By 1990 per capita income was below that of 1966; political violence was claiming 3,000 lives each year; tax collections were less than 5% of GDP; and prices had increased by a factor of 27 million over three decades. In fact, Peru's economy had all but collapsed. It was the finale of 30 years of misguided policies, economic mismanagement, and since 1980, rampant and escalating terrorism.

Since 1990 and the Fujimori regime, the government has pursued a bold reform agenda. It has strengthened the authority of the state throughout the country, defeating terrorism and fighting drug trafficking. It liberalized interest rates, the exchange rate, and international capital flows. It established the independence of the central bank and eliminated credit from the central bank to the government. It increased competition by opening the economy to trade with the rest of the world and eliminating public monopolies and price controls. It improved labor market efficiency by addressing tenure regulations and establishing more flexible terms for probationary periods and fixed-term contracts. It facilitated private ownership of land and developed a vast privatization program. It eliminated the state monopoly in social security and established the framework for a private pension fund system. And it eliminated public development banks and state intervention in the allocation of credit.

Since the reform program, Peru has enjoyed macroeconomic success, but the reforms have done little to alleviate poverty. Between 1993 and 1996, Peru's economy grew by 32%, in part due to the privatization of state companies; but thousands of Peruvians lost their jobs as a result. The rate of inflation fell steadily as a result of stringent monetary and fiscal measures. It dropped from over 7,650% in 1990 to about 40% in 1993; and 4% in 2000, one of the lowest inflation rates in Latin America. The Peruvian economy grew by 7.3% in 1997, but in 1998 and 1999 growth slowed to an estimated 1.8% and 3.8% respectively. A combination of El Niño weather that hurt the fishing and agricultural industries, and the Asian financial crisis which depressed metal prices, contributed to the Peruvian economic downturn. Growth for 2000 was forecast at over 5%.

In 2004, the economy expanded by 4.8%, up from 4.0% in 2003, but down from 4.9% in 2002; in 2005, the GDP growth rate was estimated at 4.7%. These steady growth rates contrasted with the erratic development patterns displayed by Peru in previous years. The country's overdependence on minerals and metals makes its economy susceptible to world market price fluctuations. Inflation has been fairly stable, and at 2.1% in 2005 it did not pose any major problems to the economy. In the same year, the unemployment rate has reached 8.4%, and while it is not endemic, it remained a matter of concern to policy makers.

INCOME

The US Central Intelligence Agency (CIA) reports that in 2005 Peru's gross domestic product (GDP) was estimated at $168.9 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $6,000. The annual growth rate of GDP was estimated at 5.6%. The average inflation rate in 2005 was 2.1%. It was estimated that agriculture accounted for 8% of GDP, industry 27%, and services 65%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $860 million or about $32 per capita and accounted for approximately 1.4% of GDP. Foreign aid receipts amounted to $500 million or about $18 per capita and accounted for approximately 0.9% of the gross national income (GNI).

The World Bank reports that in 2003 household consumption in Peru totaled $43.00 billion or about $1,587 per capita based on a GDP of $60.6 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 3.5%. In 2001 it was estimated that approximately 26% of household consumption was spent on food, 17% on fuel, 13% on health care, and 5% on education. It was estimated that in 2003 about 54% of the population had incomes below the poverty line.

LABOR

In 2005, Peru's labor force was estimated at 9.06 million. As of 2001 (the latest year for which data was available), 9% of the population was employed in agriculture, 18% in industry, and 73% in the services sector. In 2005, the unemployment rate in metropolitan Lima was estimated at 8.7%. However, there was widespread underemployment across the country as a whole.

About 5% of the total labor force was unionized in 2001. Although unions have played an important role in Peruvian politics in recent decades, membership has declined as the informal labor sector grows. Begun in 1944 under Communist domination, the Workers' Confederation of Peru was reorganized in 1956 as the national central labor organization, now known as the Peruvian Revolutionary Workers' Center (Central de Trabajadores de la Revolución PeruanaCTRP). In 1980, this organization was incorporated into the Democratic Trade Union Front, which also includes the Communist-led General Confederation of Peruvian Workers, the National Workers' Confederation, and the APRA-affiliated General Confederation of Peruvian Workers (Confederación General de Trabajadores PeruanosCGTP), which dates from 1944. In 1999, the CGTP called a one-day general strike, supported by 400,000 transit workers and other public-sector employees that paralyzed normal activity in Peru's major cities.

An eight-hour day and a 48-hour week are the maximum in Peru, with a weekly day of rest mandated. Legislation has been uneven, but the law requires in most cases that employers create healthy and safe working conditions. Dangerous and night work are regulated. The civil code prohibits labor by minors under 14; nevertheless, a recent study indicated that 8% of the workforce was between the ages of 8 and 16. Peru's labor stability laws provide that after three months of employment a worker may be dismissed only for a "serious offense." As of 2002, the minimum wage was $128 a month.

AGRICULTURE

Only 4.3 million hectares (10.6 million acres), or 3.4% of the total land, was under cultivation in 2003. The area of available agricultural land per capita is one of the lowest in the nonindustrialized world. The major portion of the coastal farmland is devoted to the raising of export crops, while the sierra and the selva are used primarily for the production of food for domestic consumption. In various communities, the Inca system of cooperative labor and land use still remains; fields are communally planted and harvested, and the produce or the profits divided.

The Agrarian Reform Law (ARL) of 1969 profoundly affected the whole of Peruvian agriculture. By 1973, most of Peru, except for the rain forest on the eastern side of the Andes, was brought under the reform program. Large private landholdings were abolished. Contrary to the expectations of farm workers, however, the appropriated land was not redistributed in small individual parcels. The large estates expropriated by the government were instead reorganized into cooperatives that maintained their administrative unity and were often incorporated into still larger units, known as social-interest agricultural societies, through which they were linked on a cooperative basis. By 1980, the expropriation and redistribution of land were largely complete. Out of the nine million hectares (22.2 million acres) of cropland and pasture originally expropriated, 8.8 million hectares (21.7 million acres) were allocated to 379,000 families. In addition, 2.9 million hectares (7.2 million acres) reverted to the state, and 1.1 million hectares (2.7 million acres) were distributed to 10,706 families in the selva. The bulk of land went to cooperatives, and only about 43,000 families received land, totaling 683,000 hectares (1,688,000 acres), in the form of private holdings. The government justified this program by arguing that the supply of arable land in inhabited zones of Peru is so small that equal distribution of the land would permit an allotment of less than 0.5 hectares (1.2 acres) per rural inhabitant; that community ownership of land accords with Peruvian traditions, especially the proto-socialist Inca heritage; and that improved equipment and technique are more easily implemented in larger enterprises. As it turned out, inadequate distribution systems and lack of technical expertise limited the productivity of the cooperatives, and by 1981, about 80% of them were operating at a loss. The free market policies of President Fujimori played an important role in Peruvian agriculture during the 1990s, virtually undoing the expropriative and redistibutive policies of the ARL. In 1996, the Land Tenure Law was instituted, which was a step toward allowing land to be titled and used as collateral. The Water Law no longer ties water usage with land area, and mandates that farmers must pay for their use of water. Water is an extremely expensive commodity in the coastal valleys.

Peru's agriculture is highly diversified but not well integrated. In an irrigated section of the coastal desert lowlands, more than 1,195,000 hectares (2,953,000 acres) are cultivated with cotton, sugar, rice, soybeans, pulses, fruits, tobacco, and flowers. Modern methods are widely used in this area, and as a result, output has risen at a much faster rate than population growth. The sierra, in contrast, is relatively dormant, its lands being inferior or impractical to till. The selva contributes cocoa, fruits and nuts, tea, coffee, tobacco, and forest products.

In the 1980s, a combination of weak financing, heavy overseas borrowing, poor pricing policy, bad weather, and outmoded equipment contributed to a serious deterioration in the performance of the sugar industry. In 1996, the sugar industry's twelve collective farms were forced to change their management and ownership structure. Most had been inefficient, overloaded with administrative workers, and together owed the government $250 million in back taxes and social security payments. Some of the collective farms began to sell portions of their capital to the private sector. Staples are potatoes and corn, grown throughout Peru, but with very low yields. The leading commercial crops are rice, cotton, sugar, and barley. The principal agricultural deficiencieswheat, livestock and meat, animal and vegetable fats, and oilsare covered by imports. Production of major crops (in thousands of tons) in 2004 included rice, 1,816; corn, 1,180; coffee, 145; wheat, 168; and beans, 83. Sugarcane and potato production in 2004 amounted to 7.9 million tons and 3 million tons, respectively.

Cultivation for illicit purposes of the coca leaf (the source of cocaine), which has long been used habitually and ritually by Andean Amerindians, has been a problem recognized by the Peruvian government and by the International Narcotics Control Board since the 1980s. The US government estimated there were 31,150 hectares (76,970 acres) of managed coca in 2003 (67% growing in the Upper Huallaga and the Apurimac valleys), the lowest level of coca cultivation in Peru since 1986. The total cocaine economy in Peru may amount to $1.22.4 billion annually (24% of Peru's GDP). Nearly all of the wealth derived from the cocaine economy accrues to narcotics traffickers and other criminal elements.

ANIMAL HUSBANDRY

The cattle, sheep, hogs, goats, horses, and poultry brought by the Spaniards to Peru were strange to the Amerindians, whose only domestic animals were the hunting dog and the American members of the camel familythe llama, alpaca, and their hybridswhich served as carriers and for food, clothing, and fuel. Only recently domesticated, the vicuña is protected by law, and limited quantities of its fine fleece are marketed. Most Amerindians of the southern highlands are herders.

The southern Andes contain the major cattle ranges. Brown Swiss, zebu, and Holstein have been imported, and agronomists are crossbreeding stock to attain herds of greater weight or of more milk on less feed. Although 16.9 million hectares (41.7 million acres), or 13% of Peru's land area, are permanent natural pasture and meadow, areas suitable for dairy cattle are few. In 2005, the livestock population included 14,009,000 sheep, 5,100,000 head of cattle, 2,900,000 hogs, and 2,000,000 goats. Living at altitudes of 10,000 ft above sea level, Peru has an estimated three million alpacas, or 80% of the world's alpaca population. There are also about 150,000 vicuñas, up from 5,000 in the 1960s. Production of alpaca hair fiber amounts to about 4,000 tons per year. Livestock output in 2005 included 152,000 tons of beef, 90,000 tons of pork, 34,000 tons of mutton, 650,000 tons of poultry, 180,000 tons of eggs, and 1,311,000 tons of milk.

FISHING

Commercial deep-sea fishing off of Peru's coastal belt of over 3,000 km (1,860 mi), is a major enterprise. Peruvian waters normally abound with marketable fish: bonito, mackerel, drum, sea bass, tuna, swordfish, anchoveta, herring, shad, skipjack, yellowfin, pompano, and shark. More than 50 species are caught commercially. There are over 40 fishing ports on the Peruvian coast, Paita and Callao being the most important centers.

The Peruvian fishing industry, primarily based on the export of fish meal, used in poultry feed, is among the largest in the world. Fish meal production in 2004/05 was 1.5 million tons; fish oil, 210,000 tons. Only 90 of the 110 fish meal plants on Peru's coast were operating in 2004. Peru's fishing sector led the world during the mid-1960s, although production since then has fluctuated radically. In the 1970s, over fishing nearly lead to the disappearance of the anchovy resource. The fish meal and fish-processing industry is managed by Pescaperú, which was founded in 1973.

The key to Peru's fishing industry in any given year is the presence or absence of El Niño; this warm ocean current displaces the normally cool waters deep in the Pacific, thereby killing the microorganisms upon which other marine life depends. The recurrence of El Niño causes the disappearance of anchoveta and a sharp fall in the catch of other species. The average annual catch during 19912000 was 8,515,000 tons. The total catch in 2003 was 6,089,660 tons, second highest in the world after China. That total included 5,347,187 tons of anchoveta, and 217,734 tons of Chilean jack mackerel. Exports of fish products in 2003 amounted to $1.03 billion, with fish meal accounting for 72%. The major export markets are China, Germany, Japan, and Taiwan.

To suppress invasion of their rich fishing grounds by foreign powers, Peru made formal agreements with Chile and Ecuador to extend the rights to their coastal waters out to 200 nautical mi. Violations of the proclaimed sovereignty by Argentine and US fishing fleets in 1952 and 1954 gave rise to shooting incidents. Since then, US fishing boats have occasionally been seized and fined or required to purchase fishing licenses; after eight US tuna boats were taken in November 1979, the United States retaliated by imposing a temporary embargo on Peruvian tuna.

FORESTRY

About 51% of Peru's land area, or approximately 65.2 million hectares (161.1 million acres), is covered by tropical rain forests. Most of Peru's exploitable timberlands lie on the eastern slopes of the Andes and in the Amazon Basin; the arid Pacific watershed cannot support forestlands. The trees of commercial importance on the coastal plain are amarillo, hualtaco, and algarroba (cut for railway ties and for charcoal fuel). Lumber from planted eucalyptus is used locally in the sierra for ties and for props by the mining industry. Eastern Peru, however, with its abundance of rain, consists of approximately 70 million hectares (173 million acres) of forestland (more than half the country's area), most of it uncut. A precise indication of Peru's volume of standing timber has never been ascertained. The selva contains Peru's only coniferous stand, where ulcumano is logged. Cedar, mahogany, moena, tornillo, and congona (broadleaf hardwoods) are also logged. The rain forests of the Amazon lowlands contain cedar, mahogany, rubber (wild and plantation), and leche caspi (a chewing-gum base). Commercially important are tagua nuts, balata, coca, fibers, and a wide range of medicinal plants.

Lumbering is conducted chiefly in the selva, where Pucallpa and Iquitos are the main sawmill centers. Mahogany is now the principal lumber export product, sent mainly to the United States and Europe; mahogany and Spanish cedar trees supply about half of Peru's lumber output, which falls far short of the nation's needs. In 2004, production of roundwood totaled 10,486,000 cu m (370 million cu ft).

MINING

The mining of metals was Peru's leading industry in 2003. Among the minerals exported in that year were gold, copper, zinc, lead, silver, tin, and iron. In 2003, the country's mining industry accounted for $4.6 billion or more than 51% of total export revenues, which came to $9 billion in that year. Peru was the second-largest producer of silver, after Mexico, the third-largest producer of zinc, after China and Australia, and the fourth-largest producer of lead, after Australia, China, and the United States. Peru's zinc output represented 12% of world concentrate output, almost 62% of Latin America's concentrate, and 29% of refined zinc. Other leading industries were cement, steel, and metal fabrication in 2003.

Gold output (from mines and placers) was about 172,000 kg in 2003, up from 157,530 kg in 2002. Of that total, 159,770 kg came from mines. Reserves (metal content) totaled 3.5 million tons, excluding placer deposits. The southeastern Andes had well-known gold placers on the Inambari River and its tributaries. Placer gold production, which accounted for about 14% of total gold output, was concentrated in the Inca and the Mariategui regions, and gold was also recovered from placers in rivers and streams throughout the jungle.

Copper mine output in 2003 (metal content) was 842,578 metric tons, down slightly from 844,553 metric tons in 2002. The country's copper reserves totaled 57.4 million tons (metal content). Southern Peru Copper Corp. (SPCC) remained the largest copper producer, with a total output of 326,900 metric tons of copper metal from its mine operations at the Cuajone open pits and its solvent extraction and electro winning cathode plant at Toquepala. Peru's second-largest copper producer, Compañía Minera Antamina S.A., owned the $2.3 billion copper-zinc Antamina megaproject (Huari, Ancash Department), which could become the world's third-largest producer of zinc (163,000 tons per year) and seventh-largest producer of copper (272,000 tons per year). The project included the Antamina open pit and concentrator, a 302-km slurry pipeline, port facilities in Huarmey, and a new access road, power line, and town site. The new mine had a capacity of 275,000 tons per year; the concentrator, 70,000 tons per day. Antamina's revised proven and probable ore reserves were 559 million metric tons at a grade of 1.24% copper, 1.03% zinc, 13.71 grams per ton of silver, and 0.029% molybdenum, or 1.8% equivalent copper.

Zinc mine output (metal content) was 1,372,790 metric tons in 2003, up from 1,232,997 metric tons in 2002. Mined lead output was 308,874 metric tons in 2003, up from 305,651 metric tons in 2002. Cía Minera Volcán S.A. (CMA) was Peru's largest private producer of zinc. CMA had operations in the Yauli mining district and the Paragsha property, in Cerro de Pasco. Total reserves of zinc (metal content) amounted to 16 million tons; lead, 3.5 million tons.

In 2003 Peru produced 2,921 metric tons of mined silver (metal content), up from 2,870 metric tons in 2002. Medium-sized companies accounted for three-quarters of production. Reserves totaled 36 million tons (metal content).

Production of iron ore and concentrate (gross weight) was 5,239,000 tons in 2003, up from 4,594,000 tons in 2002. Shougang Hierro Perú S.A., a subsidiary of China's Shougang Corp., continued to be Peru's sole iron ore producer. Iron ore reserves (metal content) totaled 830 million tons. Exploitation of iron ore, centered in southern Peru, was exclusively for export until the steel mills at Chimbote began operations in 1958.

The metals antimony, white arsenic, bismuth, indium, manganese, molybdenum, and tin were extracted in various parts of Peru. No cadmium or chromium was mined in 19982001, or in 2003, nor was any tungsten mined in 19992001, or 2003.

Of the 30 industrial minerals mined commercially in Peru, the most important were salt, gypsum, marble, and limestone. Peru also produced barite, bentonite, boron materials (borates), hydraulic cement, chalk, common clay, fire clay, diatomite, dolomite, feldspar, flagstone, granite, kaolin, lime, nitrogen, onyx, phosphate rock, pyrophyllite, quartz, quartzite, sand and gravel (including silica sand), marl shell, slate, sulfur, talc, and travertine. Minero Perú had proven reserves of 550 million tons of phosphate rock at its Bayóvar Project, in the Sechura Desert. The Bayóvar Project had tremendous export opportunities to the Asia-Pacific region via the port of Paita.

Peru has long been famous for the wealth of its mines, some of which have been worked extensively for more than 300 years. Through modern techniques and equipment, a vast potential of diverse marketable minerals was gradually becoming available from previously inaccessible regions. Because many of the richest mines were found in the central Andes, often above 4,300 m, their operations have been wholly dependent on the Andean Indians' adaptation to working at high altitudes. Copper, iron, lead, and zinc were mined chiefly in the central Andes, where all refining was done at La Oroya, the metallurgical center.

The government no longer had exclusive control over exploration, mining, smelting, and refining of metals and fuel minerals, although, in principle, all mineral and geothermal resources belonged to the government. The role of the government has been limited to that of a regulator, promoter, and overseer. Individuals and private companies were allowed to hold mining permits. As of 2001, the government has privatized 90% of its assets in mining, a greater rate than in any other sector, with some mining tenders still pending, and several mining prospects waiting to be privatized, which could generate $2.14 billion. The promotion of domestic and foreign private investment via a sweeping privatization process and the formation of joint ventures started off at a vigorous pace in 1991 and has continued at a slower pace. Private firms, most of which were controlled by local interests, dominated medium- and small-sized mining operations. More than 100 foreign mining companies have been established in Peru since 1990. Of the $10.02 billion of foreign direct investment in 2001, $3.32 billion was in the minerals sector, $1.67 billion of it in mining. In 2001, $1.4 billion worth of mine and facility expansions were completed, and $2.6 billion worth of mine projects were completed. In addition, $3.3 billion of investment were projected for mine projects with feasibility studies, and $1.3 billion were expected in projects with advanced exploration work. The state was expecting Minero Perú's projects pending privatization to generate $2.1 billion of investment. Mining, energy, telecommunications, and related industries were the most attractive sectors of the Peruvian economy. Privatization of Centromín, Electroperú S.A., Minero Perú, Petroperú, and the banking sector was expected to continue to generate investments in every sector of the economy, particularly in the mining and energy sectors. Future foreign investments in the minerals sector were projected to be $17 billion, the largest amount of capital committed to date, with $9.1 billion expected in the mining sector for the 20012009 period.

Peru was facing political upheavals, and the mining industry was increasingly on the defensive. Development of MYSA's Cerro Quilish gold deposit was stalled by the city of Cajamarca to protect its major watershed. The citizen group Coordinadora Nacional de Comunidades Afectadas por la Minería (Conacami) indicated that it had the right to participate and to be consulted on mineral policies that involved communities affected by mining operations.

The junta that came to power in 1968 pursued a steady program of nationalization. In 1971, state mining rights were assigned to the government enterprise Minero Perú. The General Mining Law of 1992 made legal procedures to obtain mining rights easier, and amendments in 1996 guaranteed protections to mining ventures and contracts. These laws have ensured more favorable exploration and production contract terms for investors. Within the framework of four 1990s laws promoting investment in mining and natural resources and dealing with foreign and private investment, more than 250 domestic "Stability and Guarantee" contracts have been signed since 1993.

ENERGY AND POWER

Peru, as of 1 January 2005, had proven oil reserves of 253 million barrels, a crude oil refining capacity of 192,950 barrels per day, and proven natural gas reserves of 8.7 trillion cu ft.

Oil production in 2004, was estimated at 94,120 barrels per day, with crude oil production accounting for 79,900 barrels per day. However, domestic oil demand averaged an estimated 161,000 barrels per day in 2004, making Peru a net oil importer. Net oil imports in 2004 averaged an estimated 66,880 barrels per day.

Natural gas production and domestic demand in 2002 were each estimated at 15.5 billion cu ft. However, Peru's Camisea project, when it does come fully on-stream, is seen as making Peru a net exporter of natural gas. September 2004 marked the first full month of production for the Camisea field, producing 3.68 billion cu ft of natural gas.

Peru's electric power generating capacity in 2002 totaled 5.912 million kW, of which hydroelectric capacity came to 2.965 million kW and conventional thermal capacity accounted for 2.940 million kW. Geothermal/other capacity accounted for 0.007 million kW. Electric power output in 2002 totaled 21.749 billion kWh, with hydroelectric generation providing the largest share at 17.860 billion kWh. Conventional thermal sources provided 3.705 billion kWh, and geothermal/other 0.184 billion kWh. Demand for electric power in 2002 totaled 20.227 billion kWh.

INDUSTRY

Manufacturing in Peru began with the establishment of consumer goods industries, which still dominate the sector. Smelting and refining are among Peru's most important industrial enterprises. As part of a long-term industrial program through hydroelectric power development, the Chimbote steel mills began to function in 1958; by 1965, capacity reached 350,000 ingot tons. A number of foundries, cement plants, automobile assembly plants, and installations producing sulfuric acid and other industrial chemicals have also come into operation. The expansion of the fish meal industry necessitated the construction of new plants as well as the establishment of many subsidiary industries: boatyards, repair and maintenance installations, and factories for the production of tinplate and cans, paper, jute nags, and nylon fishnet. Once a major guano exporter, Peru now produces synthetic fertilizers high in nitrogen and related industrial chemicals.

The country's sustained economic growth has been the result of a well diversified economic base. In 1996, the most dynamic area was agriculture, with crop production rising by 7% due to substantial increases in industrial crops like cotton, soy bean, tea, and asparagus. Other industries showing important growth during the late 1990s were the mining of metals, petroleum, and construction. In 1998, it was estimated that an average of 11 new oil wells would be drilled per year until 2003, but in 1999 oil exploration slowed when a couple of dry wells were drilled. There are five oil refineries operating in Peru, with a production capacity of 182,000 barrels per day. In 2000, a concession was signed to develop the 13 trillion cubic foot (Tcf) Camisea natural gas field, and the development of this field may lead to the establishment of a natural gas market in Peru. Growth in construction during 1998 skyrocketed by 12%, with projects related to the repair of an estimated $1 billion in El Niño damage, and road building projects. Revenues from manufacturing production fell by 3%, however, because of low agricultural production and low world metals prices. By 2003, the economy was recovering. Textile production was an increasingly important sector, as was the production of leather goods, shoes, and the Alpaca and Vicuna sectors. In 2003, it was expected that 150,000 new jobs would be created in textile manufacturing.

The industrial production growth rate in 2005 was 6.6%, higher than the overall GDP growth rate, and an indicator that industry was an economic growth engine. In 2005, industry accounted for 27% of the GDP and it employed less than 20% of the labor force. Services were by far the largest sector, with a 65% share of the economy, while agriculture was the smallest one, with an 8% share.

SCIENCE AND TECHNOLOGY

The Lima Academy of Exact, Physical, and Natural Sciences was founded in 1939. In 1996, Peru had 18 other scientific and technological learned societies and 15 scientific and technological research institutes. The Natural History Museum of the National University of San Marcos, founded in 1918, and the Geological Museum of the National University of Engineering are both located in Lima. In 1996, Peru had 34 universities that offered courses in basic and applied sciences. In 198797, science and engineering students accounted for 34% of college and university enrollments. According to the Industrial Law of 1982, enterprises may invest up to 10% of their income tax-free in research and development (R&D) projects approved by the National Council of Science and Technology and carried out by the national universities.

In the period 19902001 there were 233 scientists and engineers and 1 technician engaged in research and development (R&D) per million people. In 2002 spending on R&D totaled $138.196 million, or 0.10% of GDP. High technology exports in that same year totaled $24 million, or 2% of the country's manufactured exports.

DOMESTIC TRADE

A disproportionate amount of Peru's purchasing power is concentrated in the Lima-Callao area, where selling practices increasingly follow the pattern of more commercially developed Western countries. In the highlands, where more than 60% of the population lives, retailing is done at the market level. Only about 17% of Peruvians shop in supermarkets. The fiesta day, or weekly market, for the Andes Amerindian is an important social commercial affair, where objects made at home are bartered. Barter is also the method of exchange among the first Amerindians of the Amazon Basin. Cooperative retail outlets have been established in the large mining concerns and agricultural estates. Installment sales are increasing on vehicles, refrigerators, television sets, and agricultural and industrial equipment. Franchising has grown slowly in recent years, with US-based companies predominating. Direct market for services has become popular as well. An 18% value-added tax applies to most imported goods.

Shops and some businesses are open from 10:00 am to 1 pm, and 4 to 8 pm, Monday through Saturday. Banks transact public business from 8:30 am to 4:00 pm. Business hours are normally 9 am to 5:30 pm, Monday through Friday. In the provinces, openings and closing are usually one hour earlier.

FOREIGN TRADE

In general, Peru exports raw materials and imports capital goods and manufactures. The United States is Peru's largest trading partner, and exports include mineral fuel oil, refined silvery and jewelry, lead ore, and concentrated coffee. Main imports from the United States include cereals, refined oil, machinery parts, chemicals, and electrical machinery.

Peru's major export commodities are gold (17%), copper and its ores (15%), animal feed (13%), and zinc (8.3%). Other exports include refined petroleum products (4.0%), coffee (3.3%), refined silver (2.6%), and lead (2.4%).

In 2005, exports reached $16 billion (FOBFree on Board), while imports grew to $12 billion (FOB). In 2004, the bulk of exports went to the United States (29.5%), China (9.9%), the United Kingdom (9%), Chile (5.1%), and Japan (4.4%). Imports included intermediate goods, capital goods, and consumer goods, and mainly came from the United States (30.3%), Spain (11.5%), Chile (7.2%), Brazil (5.4%), and Colombia (5.2%).

BALANCE OF PAYMENTS

Peru's export earnings depend heavily on world market prices in metals and fish meal. Peru maintained a favorable balance of trade from 1966 to 1973; but a surge in the price of oil imports, a decline in world copper prices, and a drop in fishing exports reversed this trend. The trade balance began to improve in 1976 and 1977, but rising interest payments kept current accounts at a loss. An austerity program was adopted in 1978; by the end of the year, Peru had reduced the deficit on current accounts, thanks in part to IMF loans. The surplus rose in 1979 and 1980 because of an extremely favorable trade performance and an additional infusion of public-sector capital. During the 1980s, however, Peru's export posit