The Economy of Peru

Economy & Politics

By Christopher Minster

When the Incas came to the region of Peru in the 15th century, they found several small tribes engaged in basic agriculture, notably corn and cotton. The Incas conquered the region and added limited mining and other agricultural practices to the region.

When the Spanish arrived in 1531, they defeated the Inca Empire and established their own rule in the region. Using native labor, they greatly increased mining operations. The city of Lima was founded in 1535, in part, as a port city from which gold and silver could be shipped back to Spain.

During the colonial and republican eras, the economy of Peru remained based on mining, agriculture and fishing.  In the 1840's, it was discovered that there were great deposits of saltpeter (in the form of eons of accumulated bird guano) on some Pacific islands off the coast of Peru. The guano made excellent fertilizer and saltpeter is an essential ingredient for explosives. Harvesting the guano brought in a great deal of revenue for Peru. The islands were so rich that Spain seized them in 1864: the Peruvians eventually drove them off. By 1874 the accumulated guano had been mostly harvested.

In the 1980's, inflation was rampant in Peru and the economy was in dire shape. President Alberto Fujimori instituted several reforms and encouraged foreign investment, and in the 1990's the economy stabilized. From 1994 to 1997, the economy did particularly well, and GDP increased dramatically. After a few years of stagnation, the economy is again growing under the fiscally sound policies of successive administrations. 

Today, Peru's economy is very diverse. Mining, fishing, metals, textiles, food, chemicals and tourism are all important sectors of a growing economy.  Peru's main exports include coffee, minerals and fish. The US, China and Great Britain are Peru’s largest trading partners.

Tourism is a steadily growing and increasingly important part of Peru's economy. The ruins of Machu Picchu, Cuzco, Lima, the jungle and mountaineering expeditions, among other tourism-related activities, have made Peru into one of Latin America's top tourism draws, especially now that the Shining Path has been all but eliminated.