But perhaps the most surprising aspect of all this baroque dysfunction is how little it seems to have affected the economic life of the nation. Despite the tragicomic instability and the rotating cast of nobodies temporarily tasked with running the country, when seen in macroeconomic terms, Peru appears to be doing just fine, thank you. The national economy is heavily reliant on the price of gold and copper, both of which are close to historical peaks. Gold exports brought in more than twenty billion dollars last year, and copper nearly twenty-five billion. Mining investments grew by almost a quarter when compared with 2024. That’s a lot of legal money pouring into the Peruvian economy (to say nothing of illegal gains from unlicensed mining and drug trafficking, which, together, are estimated at five to seven per cent of the national G.D.P.). All of this means that Peru, unlike other countries in the region, can afford to pay its debts while borrowing money at relatively low interest rates. In mid-April, just after the first round of the election, Peru’s Central Bank announced that it had more than a hundred million dollars in foreign currency in its coffers, a record sum, equivalent to nearly thirty per cent of the country’s G.D.P. Last year, the economy grew at a rate of 3.4 per cent, one of the highest in the region, better than that of Brazil, Colombia, or Mexico. Inflation remains among the lowest in Latin America, debt is under control, interest payments are manageable, and the national credit is good, making for the kinds of indicators that Peru’s neighbors can only dream of. It’s as if the economy had simply decoupled from the malfunctioning political system.
When I put this apparent contradiction to the Peruvian economist Carolina Trivelli, she was less than convinced, and she was not particularly enthused by the country’s medium- and long-term economic outlook. “The snapshot is pretty,” Trivelli conceded. “And compared to our neighbors, we look amazing.” What concerned her, though, was not the snapshot but the movie. With global metal prices so high, she told me, “We should be flying. With such a privileged position, you would expect more growth.” In 2010, for example, when global metal prices were lower than they are now, the growth rate of the Peruvian economy was more than eight per cent. By comparison, the current growth looks anemic.
What’s more, the windfall from high metal prices has not been used to make any meaningful investments in health care, education, or infrastructure. Even when money has been allocated, there has been no capacity to manage the execution: according to a World Bank study, nearly half of the country’s publicly financed projects begun since 2012 are unfinished. “So you have a lot of projects with an approved budget—to expand a highway or build a health center or a school. Someone wins the contract, gets the down payment, moves a few stones, then takes the money and disappears,” Trivelli said. “If you spend money to build a school, but you leave it half done, then, no, you didn’t improve anything.” There’s no question that this unfortunate cocktail of corruption, inefficiency, and simple incompetence is holding the country back. This year, owing to a mixup in the congressional budget, one of the government’s most important scholarships was left severely underfunded, depriving thousands of Peru’s neediest high-school graduates of the opportunity to continue their studies at local universities. Another program, known as Beca Bicentenario, which helps Peru’s top-performing students study abroad, was simply suspended.
Given this context, perhaps it’s not surprising that, even as foreign currency accumulates in the Central Bank, none of the short-lived governments of the past several years has been able to bring poverty back down to pre-pandemic levels, something that nearly every other country in the region has managed. To make matters worse, the weak or nonexistent executive branch—in the past decade, Peru has had eighteen ministers of economy and finance and twenty-nine ministers of the interior—has ceded its budgeting authority to a Congress that represents assorted local mafias (illegal logging, illegal mining, and traffickers of all sorts), hardly the kind of interest groups that are keen on fiscal responsibility or long-term planning. Unfortunately, Trivelli told me, “we’re spending every last cent, and spending it really badly.” The question, then, isn’t why the Peruvian economy is doing so well but what investments haven’t been made because no one is around long enough to see any particular project through.
Trivelli is a member of Peru’s Fiscal Council, a government entity whose mission is to advise Congress and the executive branch on matters of economic and fiscal policy. Its advice is nonbinding, but last month the Council took the unusual step of publicly sounding the alarm regarding newly mandated permanent spending obligations on improved pensions for retired police and military. These are the sorts of commitments that the treasury may not be able to meet, should gold prices drop or foreign investment dry up. The Council’s report identified sixty-three laws passed in the last five years that had created permanent new obligations for the state, including five whose combined impact was equivalent to more than nine per cent of the country’s G.D.P.
