Peru

Peru’s strong religious faith and good family life ensure that it scores more highly on Comparative Liveability (57th) than on Economic Competitiveness (69th), leaving it ranked at 65th overall.

Previously noted for terrorism, hyperinflation and a high level of government intervention in the economy, Peru has brought these problems under control. Yet challenges of institution-building remain. Peru has a substantial informal sector, which accounts for approximately 50-60% of the total economic turnover. In the private sector competition for government favours and contracts via political connections is rife, and government effectiveness rates low.

Cumbersome regulations also impinge upon entrepreneurship, with the costs of starting a business remaining prohibitively high. Although Peru’s economy has diversified substantially in recent years, the country has not consolidated a strategy to attract investment capital. In the last few years economic stagnation, global financial turmoil, political instability and a stalled privatisation programme have led to increased government intervention in markets. This has resulted in worsening terms of trade and poor competitiveness, as represented by movements in the ratio of the consumer and wholesale price index.

Although Peru records an impressive macroeconomic performance, with growth rates reaching 8% in recent years, major challenges including low incomes remain. Almost half of Peruvians live in poverty, and a fifth in extreme poverty. Healthcare, which is an important driver of life satisfaction, suffers from a lack of funds. Peruvian health services have been under pressure from the exponential increase of HIV/AIDS transmission, which has contributed to a reduction in health-adjusted life expectancy to a mere 61 years. Overall satisfaction with personal health is low.

However, Peru’s ranking reflects a number of positive factors as well, including strong family life indicators. The level of widowhood is relatively low at 2%^g of the population. Rates of divorce are also low at a mere 0.4%^g of the population. The high degree of religious faith may contribute to this statistic.

Despite the positive influence of a moderately warm climate and the abundance of nature, there is widespread dissatisfaction with the efforts to preserve the environment, including the quality of air. Also, although some social indicators reflect positive development trends, the spread of development is uneven. Numerous rural municipalities remain isolated, with poor infrastructure and fragile institutions.