PROFILE

OFFICIAL NAME:
Republic of Peru

Geography
Area: 1.28 million sq. km. (496,225 sq. mi.). Peru is the third-largest country in South America and is approximately three times the size of California.
Cities: Lima (capital), Arequipa, Chiclayo, Cuzco, Huancayo, Ica, Trujillo, Ayacucho, Piura, Iquitos, Chimbote.
Terrain: Western arid coastal plains, central rugged Andean mountains, and eastern lowlands with tropical forests that are part of the Amazon basin.
Climate: Arid and mild in coastal area, temperate to frigid in the Andes, and warm and humid in the jungle lowlands.

People
Nationality: Peruvian.
Ethnic groups: Indigenous (45%), mixed background ("mestizo") (37%), European (15%), African, Japanese, Chinese, and other (3%).
Population: 27.2 million (2005 census). Approximately 30% of the population lives in the Lima/Callao metropolitan area.
Annual population growth rate (2005 est.): 1.46%.
Religions: Roman Catholic (90%), Seventh Day Adventist (1.4%), other Christian (0.7%).
Languages: Spanish is the principal language. Quechua, Aymara and other indigenous languages also have official status.
Education: Years compulsory--11. Attendance--92% ages 6-11, and 66% ages 12-16. Literacy--95% in urban areas, 77% in rural areas.
Health: Infant mortality rate (2005)--31.94/1,000. Life expectancy (2005)--67.77 years male; 71.37 years female.
Unemployment (2005): 9.6%; underemployment (2005): 54.9%.

Government
Type: Constitutional republic.
Independence: July 28, 1821.
Constitution: December 31, 1993.
Branches: Executive--President, two Vice Presidents, and a Council of Ministers led by a Prime Minister. Legislative--Unicameral Congress. Judicial--Four-tier court structure consisting of Supreme Court and lower courts.
Administrative divisions: 25 departments subdivided into 180 provinces and 1,747 districts.
Political parties: Alianza Popular Revolucionaria Americana (APRA), National Unity (UN), Peru Posible (PP), Popular Action (AP), Union for Peru (UPP), Solucion Popular, Somos Peru (SP).
Suffrage: Universal and mandatory for citizens 18 to 70.

Economy
GDP (2005): $78.4 billion.
Annual growth rate (2005): 6.7%.
Per capita GDP (2005): $2,806.
Natural resources: Iron ore, copper, gold, silver, zinc, lead, fish, petroleum, natural gas, and forestry.
Manufacturing (14.9% of GDP, 2004): Types--Food and beverages, textiles and apparel, nonferrous and precious metals, nonmetallic minerals, petroleum refining, paper, chemicals, iron and steel, fishmeal.
Agriculture (8.3% of GDP, 2004): Products--Coffee, asparagus, paprika, artichoke, sugarcane, potato, rice, banana, maize, poultry, milk, others.
Other sectors (by percentage of GDP in 2004): Services (55.0%), mining (6.6%), construction (4.8%), fisheries (0.5%).
Trade: Exports (2005)--$17 billion: gold, copper, fishmeal, petroleum, zinc, textiles, apparel, asparagus and coffee. Major markets (2005)--U.S. (30%), China (11%), Chile (6.6%), Canada (6.0%), Switzerland (4.6%), Japan (3.6%), Spain (3.3%), Netherlands (3.1%). Imports (2005)--$12.5 billion: machinery, vehicles, processed food, petroleum and steel. Major suppliers (2005)--U.S. (17.7%), China (8.5%), Brazil (8.2%), Ecuador (7.3%), Colombia (6.2%).

PEOPLE
Peru is the fifth most populous country in Latin America (after Brazil, Mexico, Colombia and Argentina). Twenty-one cities have a population of 100,000 or more. Rural migration has increased the urban population from 35.4% of the total population in 1940 to an estimated 73% today.

Most Peruvians are either Spanish-speaking mestizos--a term that usually refers to a mixture of indigenous and European/Caucasian--or Amerindians, largely Quechua-speaking indigenous people. Peruvians of European descent make up about 15% of the population. There also are small numbers of persons of African, Japanese, and Chinese ancestry. Socioeconomic and cultural indicators are increasingly important as identifiers. For example, Peruvians of Amerindian descent who have adopted aspects of Hispanic culture also are considered mestizo. With economic development, access to education, intermarriage, and large-scale migration from rural to urban areas, a more homogeneous national culture is developing, mainly along the relatively more prosperous coast. Peru's distinct geographical regions are mirrored in a socioeconomic divide between the coast's mestizo-Hispanic culture and the more diverse, traditional Andean cultures of the mountains and highlands.

HISTORY, GOVERNMENT, AND POLITICAL CONDITIONS

The Inca Empire and Spanish Conquest
When the Spanish landed in 1531, Peru's territory was the nucleus of the highly developed Inca civilization. Centered at Cuzco, the Incan Empire extended over a vast region from northern Ecuador to central Chile. In search of Inca wealth, the Spanish conqueror Francisco Pizarro, who arrived in the territory after the Incas had fought a debilitating civil war, conquered the weakened people. The Spanish captured the Incan capital at Cuzco by 1533, and consolidated their control by 1542. Gold and silver from the Andes enriched the conquerors, and Peru became the principal source of Spanish wealth and power in South America.

Pizarro founded Lima in 1535. The viceroyalty established at Lima in 1542 initially had jurisdiction over all of the Spanish colonies in South America. By the time of the wars of independence (1820-24), Lima had become one of the most distinguished and aristocratic colonial capital and the chief Spanish stronghold in the Americas.

Independence
Peru's independence movement was led by Jose de San Martin of Argentina and Simon Bolivar of Venezuela. San Martin proclaimed Peruvian independence from Spain on July 28, 1821. Emancipation was completed in December 1824, when Venezuelan General Antonio Jose de Sucre defeated the Spanish troops at Ayacucho, ending Spanish rule in South America. Spain subsequently made futile attempts to regain its former colonies, but in 1879 it finally recognized Peru's independence.

After independence, Peru and its neighbors engaged in intermittent territorial disputes. Chile's victory over Peru and Bolivia in the War of the Pacific (1879-83) resulted in a territorial settlement in which Peru ceded the department of Tarapaca and the provinces of Tacna and Arica to Chile. In 1929, Chile returned Tacna to Peru. Following a clash between Peru and Ecuador in 1941, the Rio Protocol--of which the United States is one of four guarantors (along with Argentina, Brazil and Chile)--sought to establish the boundary between the two countries. Continuing boundary disagreement led to brief armed conflicts in early 1981 and early 1995, but in 1998 the governments of Peru and Ecuador signed an historic peace treaty and demarcated the border. In late 1999, the governments of Peru and Chile likewise implemented the last outstanding article of their 1929 border agreement. Peru and Chile still dispute the sea boundary.

Contemporary History

Military Rule and Return to Democracy (1968-1980)
The military has been prominent in Peruvian history. Coups have repeatedly interrupted civilian constitutional government. The most recent period of military rule (1968-80) began when Gen. Juan Velasco Alvarado overthrew elected President Fernando Belaunde Terry of the Popular Action Party (AP). As part of what has been called the "first phase" of the military government's nationalist program, Velasco undertook an extensive agrarian reform program and nationalized the fishmeal industry, some petroleum and mining companies, and several banks.

Because of Velasco's economic mismanagement and deteriorating health, he was replaced in 1975 by Gen. Francisco Morales Bermudez. Morales Bermudez tempered the authoritarian abuses of the Velasco administration and began the task of restoring the country's economy. Morales Bermudez presided over the return to civilian government under a new constitution and in the May 1980 elections, President Belaunde Terry was returned to office by an impressive plurality.

Instability in the 1980s (1982-1990)
Nagging economic problems left over from the military government persisted, worsened by an occurrence of the "El Niño" weather phenomenon in 1982-83, which caused widespread flooding in some parts of the country, severe droughts in others, and decimated the fishing industry. The fall in international commodity prices to their lowest levels since the Great Depression combined with the natural disasters to decrease production, depress wages, exacerbate unemployment, and spur inflation. The economic collapse was reflected in worsening living conditions for Peru’s poor and provided a breeding ground for social and political discontent. The emergence of the terrorist group Sendero Luminoso (Shining Path) in rural areas in 1980--followed shortly thereafter by the Tupac Amaru Revolutionary Movement (MRTA) in Lima--sent the country further into chaos. The terrorists were financed in part from alliances with narcotraffickers, who had established a stronghold in the Peruvian Andes during this period. Peru and Bolivia became the largest coca producers in the world, accounting for roughly four-fifths of the production in South America.

Amid inflation, economic hardship, and terrorism, the American Popular Revolutionary Alliance (APRA) won the presidential election in 1985, bringing Alan García to office. The transfer of the presidency from Belaunde to García on July 28, 1985, was Peru's first transfer of power from one democratically elected leader to another in 40 years.

The Fujimori Decade (1990-2000)
Economic mismanagement by the García administration led to hyperinflation from 1988 to 1990. Concerned about the economy, the increasing terrorist threat from Sendero Luminoso, and allegations of official corruption, voters chose a relatively unknown mathematician-turned-politician, Alberto Fujimori, as president in 1990. Fujimori felt he had a mandate for radical change. He immediately implemented drastic economic reforms to tackle inflation (which dropped from 7,650% in 1990 to 139% in 1991), but found opposition to further drastic measures, including dealing with the growing insurgency. On April 4, 1992, Fujimori dissolved the Congress in the "auto-coup," revised the constitution, and called new congressional elections. With a more pliant Congress, Fujimori proceeded to govern unimpeded. Large segments of the judiciary, the military and the media were co-opted by Fujimori's security advisor, the shadowy Vladimiro Montesinos. The government unleashed a counterattack against the insurgency that resulted in countless human right abuses and eventually quashed the Shining Path and MRTA. During this time he also privatized state-owned companies, removed investment barriers and significantly improved public finances.

Fujimori’s constitutionally questionable decision to seek a third term, and subsequent tainted electoral victory in June 2000, brought political and economic turmoil. A bribery scandal that broke just weeks after he began his third term in July forced Fujimori to call new elections in which he would not run. Fujimori fled the country and resigned from office in November 2000. A caretaker government under Valentin Paniagua presided over new presidential and congressional elections in April 2001. The new elected government, led by President Alejandro Toledo, took office July 28, 2001.

The Toledo Administration (2001-2006)
The Toledo government successfully consolidated Peru's return to democracy, a process that had begun under President Paniagua. The government undertook initiatives to implement the recommendations made by the Truth and Reconciliation Commission (TRC), which had been charged with studying the circumstances surrounding the human rights abuses and violations committed between 1980 and 2000. Criminal charges for corruption and human rights violations were brought against former President Fujimori, who is in Chile fighting efforts to extradite him to Peru. Despite being a frequent target of media criticism, Toledo has maintained strong commitments to freedom of the press.

Under President Toledo, Peru signed a Trade Promotion Agreement (TPA) with the U.S., to replace the Andean Trade Preferences and Drug Eradication Act, which expires in December 2006. Toledo also unveiled the construction of a road that will connect Brazil and Peru's isolated interior to the Pacific coast.

Toledo's strong economic management has led to an impressive economic boom in Peru that remains strong. Poverty reduction has been uneven, however. Although poverty in some areas has decreased by up to 37% over the last five years, nationally it has only decreased by 5% and over half of Peruvians are still considered to be living below the poverty line (living on less than $2 a day). In 2005 the government implemented "Juntos," a program to double the income of people living under extreme poverty (less than $1 a day).

2006 Elections and Transition
Peru held presidential and congressional elections on April 9, 2006, and in a presidential runoff on June 4 between the two top vote-getters, former President Alan Garcia, of the APRA party, defeated Ollanta Humala, of the Union por el Peru (UPP) party, 52% to 47%, respectively. Despite the loss, Humala's UPP will have the largest block in Congress, with 45 seats, followed by Garcia's APRA with 36, the Union Nacional coalition with 17, and four other parties splitting the remaining 22 seats.

Garcia and the members of Congress will be sworn in on July 28, 2006.

Constitution and Political Institutions
The president is popularly elected for a five year term. A constitutional amendment passed in 2000 prevents reelection. The first and second vice presidents also are popularly elected but have no constitutional functions unless the president is unable to discharge his duties. The principal executive body is the Council of Ministers, comprised of 15 members and headed by a prime minister. The president appoints its members, who must be ratified by the Congress. All Executive laws sent to Congress must be approved by the Council of Ministers.

The legislative branch consists of a unicameral Congress of 120 members. In addition to passing laws, Congress ratifies treaties, authorizes government loans, and approves the government budget.

The judicial branch of government is headed by a 16-member Supreme Court. The Constitutional Tribunal interprets the constitution on matters of individual rights. Superior courts in departmental capitals review appeals from decisions by lower courts. Courts of first instance are located in provincial capitals and are divided into civil, penal, and special chambers. The judiciary has created several temporary specialized courts in an attempt to reduce the large backlog of cases pending final court action. In 1996 a human rights Ombudsman's office was created.

Peru is divided into 25 regions. The regions are subdivided into provinces, which are composed of districts. High authorities in the regional and local levels are elected. The country's latest decentralization program is in hiatus after the proposal to merge departments was defeated in a national referendum in October 2005.

Principal Government Officials
President--Alejandro TOLEDO MANRIQUE
First Vice President--vacant
Second Vice President--David WAISMAN RJAVINSTHI
President of the Council of Ministers (Prime Minister)--Pedro Pablo KUCZYNSKI
Foreign Affairs Minister--Oscar MAURTUA
Finance and Economy Minister--Fernando ZAVALA LOMBARDI
Defense Minister--Marciano RENGIFO RUIZ
Minister of the Interior--Romulo PIZARRO TOMASIO
Ambassador to the United States--Eduardo FERRERO COSTA
Permanent Representative to the United Nations--Oswaldo DE RIVERO
Ambassador to the Organization of American States--Luis Fernando DE LA FLOR

Peru maintains an embassy in the United States at 1700 Massachusetts Avenue, NW, Washington, DC 20036 (tel. (202) 833-9860/67, consular section: (202) 462-1084). Peru has consulates in Atlanta, New York, Paterson (NJ), Miami, Chicago, Houston, Denver, Los Angeles, San Francisco, Boston, and Hartford.

ECONOMY
Peru’s economy is one of the most dynamic in Latin America, showing particularly strong growth over the past five years. During the 1990s, Peru was transformed by market-oriented economic reforms and privatizations, and met many conditions for long-term growth. From 1994 through 1997, the economy recorded robust growth driven by foreign direct investment, but stagnated from 1998 through 2001. Upon taking office in 2001, President Alejandro Toledo maintained largely orthodox economic policies, and took measures to attract investment. GDP grew 6.7% in 2005, 4.8% in 2004, 4.0% in 2003, and 4.9% in 2002. Recent economic expansion has been driven by construction, mining, investment (particularly in the Camisea natural gas project), domestic demand, and exports. Inflation was 1.5% by year-end 2005, and the fiscal deficit fell to 0.6 % of GDP. In 2005 external debt decreased to 41.8% of GDP, and foreign reserves reached a record $14.1 billion by the end of 2005.

Peru’s economy is well managed, and better tax collection and growth are increasing revenues, with expenditures keeping pace. Private investment is rising and becoming more broad-based. The government has had success with recent international bond issuances, resulting in ratings upgrades.

Foreign Trade and Balance of Payments
Peru and the U.S. signed the Trade Promotion Agreement on April 12, 2006 in Washington, DC. The Trade Promotion Agreement must still be ratified by both the Peruvian and U.S. Congresses.

Peru registered a $5.2 billion trade surplus in 2005, as exports swelled to $17 billion, up 37% from 2004. Peruvian growth was propelled by high mineral prices, U.S. Andean Trade Promotion and Drug Eradication Act (ATPDEA) benefits and completion of the Camisea gas project. The trade surplus drove up reserves and caused the currency to strengthen 3.4% against the dollar over the year.

Peru's strong economic performance allowed it to buy back $2 billion in debt from the Paris Club in June 2005.

Peru’s major trading partners are the U.S., the European Union (EU), China, Chile, and Japan. In 2005, 30.6% of exports went to the U.S. and 17.9% of imports came from the U.S. Exports include gold, copper, fishmeal, petroleum, zinc, textiles, apparel, asparagus and coffee. Imports include machinery, vehicles, processed food, petroleum and steel. Peru belongs to the Andean Community, the Asia-Pacific Economic Cooperation forum (APEC), and the World Trade Organization (WTO).

Foreign Investment
The Peruvian Government actively seeks to attract both foreign and domestic investment in all sectors of the economy. The registered stock of foreign direct investment (FDI) is over $14.3 billion, with the U.S., Spain and Britain the leading investors. FDI is concentrated in telecommunications, mining, manufacturing, finance, and electricity. International investment was spurred by the significant progress Peru made during the 1990s toward economic, social, and political stability. The Peruvian government’s economic stabilization and liberalization program lowered trade barriers, eliminated restrictions on capital flows, and opened the economy to foreign investment, with the result that Peru now has one of the most open investment regimes in the world. Between 1992 and 2001, Peru attracted $10 billion in foreign direct investment, after negligible investment during the 1980s. President Alejandro Toledo has made investment promotion a priority of his government.

The basic legal structure for foreign investment in Peru is formed by the 1993 constitution, the Private Investment Growth Law, and the November 1996 Investment Promotion Law. Although Peru does not have a bilateral investment treaty with the United States, it has signed an agreement (1993) with the Overseas Private Investment Corporation concerning OPIC-financed loans, guarantees, and investments. Peru also has committed itself to arbitration of investment disputes under the auspices of the World Bank's International Center for the Settlement of Investment Disputes (ICSID) or other international or national arbitration tribunals. The Report to Congress on Expropriation Claims and Certain Other Investment Disputes (Section 527) lists 6 active investment disputes in Peru involving U.S. companies for 2005, many of which are either under arbitration or the jurisdiction of the local courts.

Mining and Energy
Peru is a source of both natural gas and petroleum, although the country is a net energy importer. Oil output has been in steady decline since the early 1980s, resulting in Peru running an oil trade deficit since 1992. Crude oil production in 2003 averaged 91,351 barrels per day (bpd), compared to 195,000 in 1982. Recent initiatives by the Peruvian Government have begun to enhance incentives for private sector investment in oil exploration, although several barriers remain in place.

In August 2004, Peru inaugurated operations of the Camisea natural gas project. Camisea gas is fueling an electricity generator and six industrial plans in Lima, with other facilities in the process of switching to gas. In a second phase, liquefied natural gas (LNG) will be exported to the west coast of the United States and Mexico. The gas and condensates from Camisea are equivalent to some 2.4 billion barrels of oil, approximately seven times the size of Peru’s proven oil reserves. The Camisea project is expected to gradually transform Peru’s economy and catalyze national development. Once the export phase is in place, the project is expected to boost GDP by 1.3% annually for 20 to 40 years, draw over $3 billion in FDI, create thousands of jobs, generate $10 billion in government revenues, and turn Peru into a net energy exporter.

Peru is the world’s second-largest producer of silver, sixth-largest producer of gold and copper, and a significant source of the world’s zinc and lead. Mineral exports have consistently accounted for the most significant portion of Peru’s export revenue, averaging around 50% of total earnings in 1998 to 2005.

Economic Outlook
Under President Toledo, Peru has had one of the best performing economies in Latin America, largely attributable to growth in the mining and export sectors. Solid growth and continued increases in tax revenues, barring severe external shocks, should allow positive macroeconomic trends to continue in 2006.

Despite Peru’s macroeconomic success, major challenges remain. The Government of Peru faces strong social pressures to reduce poverty of 52% (under $58/month) and extreme poverty of 19% (under $32/month). One-fourth of children under five are malnourished. Wealth and economic activity are overly concentrated in Lima and other major cities, with rural Andean and jungle areas suffering extreme poverty. Unemployment and underemployment levels total 64.5% nationwide. Growth is barely strong enough to generate employment faster than new entrants come into the labor force. The government lacks revenues for adequate social investment. Boosting long-term growth and reducing poverty will require strengthening the judiciary and other institutions, reducing corruption and completing other reforms to improve the investment climate.

FOREIGN RELATIONS
Peru generally enjoys friendly relations with its neighbors. Peru, however, has expressed concern over recent weapon purchases by Latin American nations, in particular Chile, citing the need to avoid a regional arms race.

In November 1999, Peru and Chile signed three agreements that put to rest the remaining obstacles holding up implementation of the 1929 Border Treaty. (The 1929 Border Treaty officially ended the 1879 War of the Pacific.) However in late 2005, a declaration of maritime borders by Peru's Congress set off a new round of recriminations with Chile, which claims that the maritime borders were agreed to in fishing pacts dating from the early 1950s.

In October 1998, Peru and Ecuador signed a peace accord to resolve once and for all border differences that had sparked violent confrontations. Peru and Ecuador are now jointly coordinating an internationally sponsored border integration project. The U.S. Government, as one of four guarantor states, was actively involved in facilitating the 1998 peace accord between Peru and Ecuador and remains committed to its implementation. The United States has pledged $40 million to the Peru-Ecuador border integration project and another $4 million to support Peruvian and Ecuadorian demining efforts along their common border.

In 1998, Peru became a member of the Asia-Pacific Economic Cooperation (APEC) forum, facilitating closer ties and economic relations between Peru and Asian nations.

Peru has been a member of the United Nations since 1949, and is a member of the Security Council. Peruvian Javier Perez de Cuellar served as UN Secretary General from 1981 to 1991.

Peru maintains 204 troops in peacekeeping operations in Haiti under the UN's MINUSTAH.

U.S.-PERUVIAN RELATIONS
The United States enjoys strong and cooperative relations with Peru. Relations were strained following the tainted re-election of former President Fujimori in June 2000, but improved with the installation of an interim government in November 2000 and the inauguration of the government of Alejandro Toledo in July 2001. The United States continues to promote the strengthening of democratic institutions and human rights safeguards in Peru and the integration of Peru into the world economy.

The United States and Peru cooperate on efforts to interdict the flow of narcotics, particularly cocaine, to the United States. Bilateral programs are now in effect to reduce the flow of drugs on Peru's extensive river system and to perform ground interdiction in tandem with successful law enforcement operations. The United States is considering whether to resume cooperation on an aerial interdiction program. The United States and Peru cooperate on promoting programs of alternative development in coca-growing regions.

U.S. investment and tourism in Peru have grown substantially in recent years. U.S. exports to Peru were valued at $2.1 billion in 2005, accounting for 17.9% of Peru's imports. In the same year, Peru exported $5.2 billion in goods to the United States, accounting for about 30.6% of Peru's exports to the world.

About 200,000 U.S. citizens visit Peru annually for business, tourism, and study. About 16,000 Americans reside in Peru, and more than 400 U.S. companies are represented in the country.

Principal U.S. Embassy Officials
Ambassador--J. Curtis Struble
Deputy Chief of Mission--Phyllis Powers
Director, USAID Mission--Hilda Arellano
Counselor for Political Affairs--Alexander H. Margulies
Counselor for Economic Affairs--Timothy M. Stater
Counselor for Narcotics Affairs (NAS)--Susan Keogh
Counselor for Public Affairs--Sam Wunder
Counselor for Management Affairs--Robert Davis
Counselor for Consular Affairs--Ray Baca
Commercial Counselor--Margaret Hanson-Muse
Naval and Defense Attaché--Capt. Lee Rivas
Army Attaché--Col. Kris Cuello
Chief, Military Assistance Advisory Group (MAAG)--Col. Jeffrey Fargo
Consular Agent, Cuzco--Olga Villagarcia

The U.S. Embassy in Peru is located at Avenida Encalada, Cuadra 17 s/n, Monterrico (Surco), Lima 33 (tel. (511) 434-3000; fax. (511) 434-3037. Home page: http://lima.usembassy.gov/

The embassy is open from 8:00 a.m. to 5:00 p.m., Monday-Friday, except U.S. and some Peruvian holidays. The mailing address from the United States is American Embassy Lima, APO AA 34031 (use U.S. domestic postage rates). The American Citizen Services section is open to the public from 8:00 a.m. to 12:00 p.m.