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NINE Against the Odds: The Paradoxes of Peru’s Economic Recovery in the 1990s carol wise The 1990 dark-horse presidential victory of the little-known, inexperienced politician Alberto Fujimori did not appear at the time to be a recipe for Peru’s sound economic recovery. The immediate context was the country’s first bout with hyperinflation and its international financial isolation that resulted from the repeated failure to stabilize the economy in the aftermath of the 1982 debt shocks and a related debt default. The traditional political parties had collapsed, civil strife was rampant, and large segments of the hinterland were governed de facto by guerrilla bands and drug traffickers (Webb 1991, 4). But despite these warlike circumstances and the worst crisis the country had faced in more than a century, Peru’s economic performance in the 1990s easily outstripped that of any of its neighbors in the Andean region (Vial and Sachs 2000). Moreover, as can be seen in Tables 1 and 2, Peru held its own along with the fastest-growing countries in the region during the 1990s, namely, Argentina and Chile, and it outperformed Argentina and Mexico in the growth of income and real wages. In retrospect, the loss of political and economic control by the country ’s entrenched elite paved the way for new actors and fresh approaches to the country’s enormous backlog of problems, some of which finally began to pay off. As made clear by Fujimori’s abrupt resignation in September 2000 and his subsequent self-exile to Japan, some of these new actors and approaches proved to be corrupt. But herein lies the main the fujimori legacy 202 Table 1 Macroeconomic and external indicators in Argentina, Brazil, Chile, Mexico, and Peru, 1991–2000 Argentina Brazil Chile Mexico Peru gdpgro 4.7 2.7 6.6 3.5 4.7 gnppcgro 5.0 1.3 6.7 1.3 4.3 inf 21.4 579.0 9.5 18.7 60.1 privgdp 16.5 15.5 18.8 15.4 16.7 pubigdp 1.6 4.4 4.9 3.5 3.7 invest 18.1 19.9 23.7 18.9 20.4 rer 57.1 91.3 78.9 83.5 75.4 tradebal ⳮ283 2,718.5 ⳮ19.0 ⳮ6,045.7 1,142.4 curacct ⳮ8,701.3 ⳮ15,223.0 ⳮ2,000.2 ⳮ14,848.9 ⳮ2,613.9 fdi 6,347.5 12,517.6 2079.7 8,793.1 1,533.3 port 6,952.2 13,752.1 565.0 9,312.5 140.1 debt 106,642.6 179,496.8 27,995.7 147,070.2 27,365.4 Source: gdp, gnp, and debt from World Bank 2000, 2001c; gdp growth and debt from Economist Intelligence Unit Country Reports, March, April 2001; gnp per capita data from idb (http://www.iadb.org), 2001. Data on investment from Bouton and Sumlinski 2000, http://www.ifc.org/economics/pubs/discuss.html. Inflation, exchange rates, and payments calculated from imf 2001. Note: Abbreviations in table are as follows: gdpgro Growth of real gdp gnppcgro Growth of real per capita gnp inf December–December inflation privgdp Private investment as percentage of gdp based on data through 1998 pubigdp Public investment as percentage of gdp based on data through 1998 invest Total domestic investment as percentage of gdp based on data through 1998 rer Real exchange rate (1990 ⳱ 100), calculated using period average exchange rates, U.S. Wholesale Price Index and domestic Consumer Price Index tradebal Trade balance (mil$) ⳱ merchandise exports ⳮ merchandise imports curacct Current account (mil$) fdi Foreign direct investment (mil$) port Foreign portfolio investment (mil$) debt Total external debt (mil$) departure point for this chapter: my purpose is to sort out the remarkable confluence of factors, both positive and negative, that contributed to Peru’s highly unexpected economic turnaround in the 1990s. My argument is largely an institutional one, as the flip side of Peru’s 1988–90 hyperinflationary crisis was the emergence of a long-overdue consensus that major reforms could no longer be postponed. In turn, the growing demand for reform fostered strong incentives for institutional renovation , as the very survival of the first Fujimori administration hinged on the president’s ability to deliver on those basic services and economic necessities that had been promised on the campaign trail. This included, for example, the renovation of long-standing financial [3.141.27.244] Project MUSE (2024...

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