The document summarizes the economic and political situation in Peru in November 2005. It notes that Peru experienced high levels of migration from 2000-2004, with over 1 million exits in 2004. The economy was growing with a projected GDP growth rate of 5-6% through 2006. However, over half the workforce was informal and bureaucratic barriers remained high. Politically, former president Alan Garcia had high disapproval ratings and nationalist candidate Ollanta Humala was rising in polls, with 41% of Peruvians supporting an outsider candidate. The Institute of Free Enterprise advocated for reducing the size of government through tax and regulatory cuts and reforming sectors like justice and education.

1. Situation and outlook of
Peru’s economy and politics
November, 2005
Instituto de Libre Empresa (ILE)
Barajas 522, San Borja,
Lima 41- Perú
Tel/Fax (51-1) 475-9752
www.ileperu.org
info@ileperu.org

2. What is happenning?
PERU’S MIGRATION
2000 2001 2002 2003 2004
Entries 639,739 619,395 733,984 709,864 1’109,385
Exits 836,700 740,516 958,689 942,390 1’588,163
Balance 196,961 121,121 224,705 232,526 397,778
Daily exit average 540 332 616 634 1,089
Source: General Directorate of Migrations(www.digemin.gob.pe)
Prepared by: ILE
2 José Luis Tapia-Rocha, Executive President

3. Situation of Peruvian economy
3 José Luis Tapia-Rocha, Executive President

4. Situation of Peruvian economy
Source: IPE
4 José Luis Tapia-Rocha, Executive President

5. Situation of Peruvian economy
5 José Luis Tapia-Rocha, Executive President

6. Situation of Peruvian economy
Source: IPE
6 José Luis Tapia-Rocha, Executive President

7. Outlook of Peruvian economy
7 José Luis Tapia-Rocha, Executive President

8. Situation of Peruvian economy
Source: IPE
8 José Luis Tapia-Rocha, Executive President

9. Outlook of Peruvian economy
Source: IPE
9 José Luis Tapia-Rocha, Executive President

10. Situation of Peruvian economy
10 José Luis Tapia-Rocha, Executive President

11. Former president Alan García: One of first
presidential candidates in surveys
But, 1089
peruvians
daily
emigrate to
others
countries
11 José Luis Tapia-Rocha, Executive President

12. Size of Informal sector in Latin america
12 José Luis Tapia-Rocha, Executive President

13. Burocratic barriers
Facilitators for businesses initiation Indexes
Countries Argentina Brazil Chile Peru Venezuela
Procedures 15 15 10 10 14
Length (# days) 68 152 28 100 119
Costs (USD) 324 331 493 510 792
Source: Ciudadanos al Día, based on Index of Doing Business from World Bank.
13 José Luis Tapia-Rocha, Executive President

14. How statism works
Opposition to
privatize.
One dead and
hunred of injured in
Arequipa 2001
14 José Luis Tapia-Rocha, Executive President

15. Popularity of Peru’s Privatizations
15 José Luis Tapia-Rocha, Executive President

16. How statism works
Social
conflict in Ilave,
Puno April 2004.
The Major was killed
by “democratic”
assembly
16 José Luis Tapia-Rocha, Executive President

17. The Peruvian “Chavez” is 11% in national polls
Nationalism headed by Humala’s
brothers. They are followers of Hugo
Chavez and Evo Morales.
17 José Luis Tapia-Rocha, Executive President

18. 41% of peruvians are looking an outsider
images
28% 17% 17% 11%
Humala is raising in national polls since
April.
18 José Luis Tapia-Rocha, Executive President

19. 2006 Presidential Elections Candidates
images
Humala’s nationalism is raising
sustanaible.......would be next peruvian
president
19 José Luis Tapia-Rocha, Executive President

20. President Toledo is one of status quo
Approve 10%
Dissapprove 86%
images
alejandrotoledo1-4
Source: Apoyo, November 2005
Since two-year Toledo is below 20% of
popularity
20 José Luis Tapia-Rocha, Executive President

21. President Toledo is one of status quo
images
alejandrotoledo1-4
Source: IPE
21 José Luis Tapia-Rocha, Executive President

22. Statism hits free market with its coops
Police operations at
informal small trade
center “Fronteras
Unidas”
“The Other Path”
people hate
police and
politicians
22 José Luis Tapia-Rocha, Executive President

23. Socialists are majority
THEOLOGY Gustavo Gutierrez (Príncipe de Asturias
Award)
POLITICS Victor Raúl Haya de La Torre, Abimael
Guzmán, José Carlos Mariategui, JDC, AGP
NEWSPAPERS La Tribuna, Ollanta, República, Peru 21, El
Comercio,
THINK TANKS Universities.: Católica, San Marcos,
Cantuta, Villarreal, y estatales.
Think tanks: Desco, IEP, IDL, Cedal,
Free market: ILE and CITEL (ILD works with
foreign governments)
POLITICAL Apra, PPC, PP, AP, MNI, Patria Roja,
PARTIES Libertarian Party of Peru (incipient)
CIVIL SOCIETY CGTP, CTP, CITE, SUTEP, Manuela Ramos,
Flora Tristan, CNDH
23 José Luis Tapia-Rocha, Executive President

24. Socialism Logic
Ideology Polítics Means Objective
Socialism Estatism Law Economy
24 José Luis Tapia-Rocha, Executive President

25. Fact 1
25 José Luis Tapia-Rocha, Executive President

26. Fact 2: redistribution of wealth
Taxes Rates and others
National Government •Contribution to Senati
General on Sales •Contribution to public works
• Revenue Tax •Municipal permit
• Extraordinary of solidarity •Construction permit
• Solidarity towards abandoned infancy •Advertising permit
• Unique Simplified regime (RUS) •Street occupation permit
• Tariffs •Rights to certificates
• Selective upon consumption •Rights for weight and measurements control
• Estate Shares Tax •Cleansing tax
• Municipal promotion Tax •Park Tax
• Casinos Tax •Sanitation tax
• Machine games Tax •Sanitary carnet
• Coin machines • Fumigation services
• Driving tax •Regulation contributions
Municipal Government •Central Reserve Bank
• Real estate tax •Osinerg
• Vehicles tax •SBS
• Non-sport spectacles tax •Osiptel
• Recreative vessels tax •Indecopi
• Loteries Tax •Conasev
Advertisements Tax •Sunass
Ositran
26 José Luis Tapia-Rocha, Executive President

27. FACT 3
PERU: PUBLIC BUDGET EXPENDITURES BY FUNCTIONS
FUNCTIONS
FUNCTIONS Millions US$
Millions %
ADMINISTRATION AND PLANNING 2,697 25%
ASSISTANCE AND STATE WELFARE 2,339 21%
DEFENSE AND NATIONAL SECURITY 1,622 15%
EDUCATION AND CULTURE 1,712 16%
HEALTH AND CLAENING 886 8%
TRANSPORT 573 5% LEYEND
AGRICULTURE 422 4%
BUSINESS
JUSTICE 222 2%
REDISTRIBUTION
EXTERNAL AFFAIRS 111 1%
REGULATION
ENERGY AND NATURAL RESOURCES 111 1%
ADMINISTRATION
LEGISLATIVE 65 1%
HOUSING AND URBAN DEVELOPMENT 52 0%
INDUSTRY, COMMERCE AND SERVICES 44 0%
FISHING 29 0%
LABOUR 13 0%
COMMUNICATIONS 16 0%
TOTAL 10,912 100%
27 José Luis Tapia-Rocha, Executive President

28. Fact 4: BUSINESS POPULATION STRUCTURE
BB 10% BB 0.1%
MB 25% MB 1.9%
SB 65%
SB 98%
4 MILLIONS OF UNITS
Normal Perú
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29. Fact 5: 59% of informal economy in the world
Peru
29 José Luis Tapia-Rocha, Executive President

30. THE WAY OUT: To eliminate Bad Laws
PROSPERITY
Publica Libert. Congress Elimi. Bad Product
Opinion Movem. Majority Laws Explot.
Cultural change Institute change
ILE’s works
here
30 José Luis Tapia-Rocha, Executive President

31. ILE’S PROPOSAL
1.- State reform
2.- To reduce drastically taxes and regulations.
3.- To liberalizate and flexibility markets.
4.- To reform Judicial power.
5.- To equip police and army forces
6.- To give shares for privatisation to workers.
7.- To get back education, health services, and pensions to
victims of statism.
31 José Luis Tapia-Rocha, Executive President

32. ILE’S PROPOSAL
EXPENDITURES IN A LIMITED GOVERNMENT
FUNCTIONS
FUNCT IONS Millions US$
Milli %
ADMINISTRATION & PLANNNIG 2,697 57%
ASISTENCIA Y PREVISIÓN SOCIAL 2,339 0%1%
NATIONAL DEFENSE & SECURITY 1,622 34%
EDUCACIÓN Y CULTURA 1,712 16%
SALUD Y SANEAMIENTO 886 8%
TRANSPORTE 573 5%
LEYEND
AGRARIA 422 4%
BUSINESS
JUSTICE 222 5%
EXTERNAL AFFAIRS 111 2% REDISTRIBUTION
REGULATION
ENERGIA Y RECURSOS MINERALES 111 1%
ADMINISTRATION
LEGISLATIVE 65 1%
VIVIENDA Y DESARROLLO URBANO 52 0%
INDUSTRIA, COMERCIO Y SERVICIOS 44 0%
PESCA 29 0%
TRABAJO 13 0%
COMUNICACIONES 16 0%
TOTAL 4,717 100%
32 José Luis Tapia-Rocha, Executive President

33. ILE’S PROPOSAL
STATIST GOVERNMENT LIMITED GOVERNMENT
Expenditures [Millions US$] 10,912 Expenditure [Millions US$] 4,717
Expenditures [% NGP] 21% Expenditure [% NGP] 9%
Liberation of resources 6,195
TAXES JUSTICE
SECURITY
TAXES Business state
5% of NGP ADMINISTRATION
Regulator state
Estabilizator state
13% of NGP Redistributor state
Planner state SOCIAL
DONATIONS SOLIDARITY
33 José Luis Tapia-Rocha, Executive President

34. Thanks.
Instituto de Libre Empresa
Calle Barajas 522
Lima 41
Perú
TelFax: (51-1) 475-9752
Web: www.ileperu.org
E-mail: info@ileperu.org
34 José Luis Tapia-Rocha, Executive President