Final Study Tour Post
Question: How have the two economies in Peru, the traditional and the modern, helped or hurt the development of the country?
Peru faces two economies, the traditional and the modern. Throughout our visit to Peruvian business, we could see how these two types of economies come into play. They are important factors facing Peruvian businesses, but the impact that each has, the strength with which they influence the classes of the society, the drivers of the economies, has been rapidly evolving.
The development of communications systems increased of speed and ease of communication and decreased of cost. The more expansive communications systems brought to light some of the wealth disparities faced by the lower class Peruvians. According to the Chief of Staff for the Finance Minister, the was previously an element of “economic psychology: you’re happier if you don’t know what you don’t have.” The poor were staying poor, and now they knew it. Between the 1940’s and the 1980’s Lima’s population grew from one half of a million people to six million as people flocked to the city in search of a means of increasing their socio-economic status.
Unfortunately, a military coup and terrorist activities left the country broke in the 1980’s. Economically, the country faced unprecedented inflation and fluctuations in the value of their financial worth. As the population was anticipating and working toward economic development, the country’s infrastructure was not prepared—limiting the daily electricity use and access to telephone communications. Between the mid 1990’s and 2000, Fujimori was able to help the country level the economy and initiate growth.
Peru’s growth rate has been strong in the new millennium, a result of the harmonization of the traditional and the modern economies. The market is consolidating and the super-cycle of the commodities produced in Peru (gold, copper, zinc) has benefitted the entire economy over the last decade as the wealth trickles down through the socioeconomic classes. The development of the middle class, timed with the increasing value of gold when the global economic crisis occurred, helped to give Peru an additional boost towards becoming an even more developed nation. As Peru’s wealth increased, the middle class experienced tremendous growth as well. As was evident from our company visits, capitalizing on the purchasing power of a much larger portion of the population has created a seemingly virtuous cycle of economic development in Peru.
Following our visit to Lima, Santiago’s development seems to have completely intertwined both the modern and the traditional economies into one powerful economy. It is my hope that as Peru continues to develop, the country is able to build an economy that supports the economic development of all of its people, minimizing the wealth disparities that we see in some nations that develop quickly.