Peruvian Economic Policy in the 1980s: From Orthodoxy to Heterodoxy and (original) (raw)

PERUVIAN ECONOMIC POLICY IN THE 1980S: FROM ORTHODOXY TO HETERODOXY AND BACK

This paper examines the dramatic fluctuations in Peruvian macroeconomic policy in the 1980s. We trace the failure of "orthodox" or neoliberal policy in the first half of the decade to external shocks, economic inconsistencies, and the erosion of the state's institutional and administrative capacities. These difficulties paved the way for the triumph of the American Popular Revolutionary Alliance (APRA) party in 1985 and the subsequent adoption of a "heterodox" economic program. This program "worked" briefly, then collapsed owing to inattention to the external sector, a flawed approach to inflation control, rising class conflict, and the state's continuing inability to implement its decisions. We close by reviewing the legacy of the decade: deepening social cleavages, highly volatile politics, international isolation, a severely weakened state, and a populace wary of new policy shifts.

Adjustment and development in Latin America: The failure of Peruvian Heterodoxy, 1985–90

World Development, 1991

I This article analyzes the failure of the Peruvian stabilization and development program, 1985-90. It critically assesses major contributions during the 1980s to a theory of heterodox stabilization strategies for Latin American countries, and articulates a more comprehensive approach to the conceptualization and study of heterodox programs. This approach revolves around three key elcments: the need to break inflationary inertia, the necessity of reconciling short-and long-term policies, and the importance of evaluating ex ante the plan's political-economic feasibility. Serious misconceptualizations with respect to all three elements are found to explain the disastrous outcome of Peru's heterodox program. Lessons for future heterodox programs are diseusscd.

The Illusion of Pursuing Redistribution through Macropolicy: Peru's Heterodox Experience, 1985-1990

1991

From the Inca empire to the viceroyalty and then to the Republic, Peru has enjoyed both international prominence and open opportunities for economic development. The "guano era" in the nineteenth century gave Peru considerable surpluses, as did mining, fishing, and petroleum in more recent times. Yet, despite its generous resource endowment, Peru has failed to find its way to a stable political, social, and economic environment in which to prompt balanced growth and equitable development. Economic decline has been particularly notorious over the last three decades, when Peru's income per capita fell from the eighth highest in Latin America in the 1960s, to the fourteenth position in the late 1980s.' At the turn of the decade, Peru's economic retrogression can be gauged by an income per capita equal to that of 1960 and by a level of exports 40 percent lower than that of 1979. Peru's frustrated economic and social expectations were eloquently described by its leading historian, Jorge Basadre, who defined Peru as a "beautiful promise yet to be fulfilled." The object of this paper is to analyze the economic process undergone by Peru during the period 1985-90 during which the legendary APRA party (American Popular Revolutionary Alliance) assumed presidential office, for the first time, under President Alan Garcia. Following closely the methodol

Neoliberal reforms and macroeconomic policy in Peru

CEPAL Review

11 The para-tariff protection system for manufacturing was totally dismantled and the system of cascading or stepped tariffs, so typical of import substitution industrialization, was replaced by a flat tariff along the lines of the Chilean system. Between 1990 and 1993, the average level of tariffs went down from 66% to 16%, and in 1993, 98% of the total value of imports was subject to a tariff of 15% (see Rojas, 1996; Ferrari, 1992; Rossini, 1991). Furthermore, Peru suspended its participation in the Andean Pact because of the stepped common tariff applied by that integration agreement (see Vega, 1997 and Fairlie, 1996). 12 Defined as the output of non-primary-commodity-based manufacturing industry, thus excluding the branches directly linked with the export of commodities (metal refining, production of fish meal, etc.). See, in this respect, Banco Central de Reserva del Perú (1996). With regard to de-industrialization, see Jiménez, 1996.

Consolidation of Economism [in Peru]

Enter Economism, Exit Politics. Experts, Economic Policy and the Damage to Democracy. Zed Books, 2002., 2002

Focus on constitutional changes and economic policies in Peru of the 1990s. Chapter 10 of the book Teivo Teivainen: Enter Economism, Exit Politics. Zed Books, London 2002 (with preface by Immanuel Wallerstein).

The Monetary and Fiscal History of Peru, 1960-2017

2018

We show that Peru’s chronic inflation through the 1970s and 1980s was the result of the need for inflationary taxation in a regime of fiscal dominance of monetary policy. Hyperinflation occurred when debt accumulation became unavailable, and a populist administration engaged in a counterproductive policy of price controls and loose credit. We interpret the fiscal diculties preceding the stabilization as a process of social learning to live within the realities of fiscal budget balance. The credibility of the policy regime change in the 1990s may be linked ultimately to the change in public opinion giving proper incentives to politicians, after the traumatic consequences of the hyperstagflation of 1987–1990.

Peru: the spiral of a never-ending crisis

Debates Indígenas, 2022

The crisis we are experiencing is not new. It would seem that we had already hit rock bottom and that we could not fall any lower. However, the days go by and the misgovernment grows stronger. After five different presidents in five years, the only permanent and lasting features in Peru seem to be police repression and an economic model based on the exploitation and export of raw materials. By Ana María Vidal Carrasco for Debates Indígenas.

Stabilization programs and policy credibility: Peru in the 1990s

2003

This paper uses a rational expectations macroeconomic model in which economic agents formulate the probability about the sustainability of the economic policy-that is, policy credibility-using current and lagged values of government expenditures and lagged values of the inflation rate. The estimation of the model is based on Hamilton's switching regime procedure. The contribution of this paper is the empirical estimation of the credibility of the stabilization program implemented in Peru in August 1990. The results of the estimation show that there are two different regimes in the government expenditure process. According to the economic agents' inferences, the stabilization program in Peru is not credible. This lack of credibility in the economic policy of the government authority explains the presence of hysteresis in currency substitution between August 1990 and June 1995. The estimation involves an expected inflation rate that includes the credibility of the economic policy in its formulation.