Growth, competitiveness and employment in Peru, 1990-2003

The growth of high-quality employment needed to reduce the share of informal
occupation and open unemployment in Peru will require an acceleration
and diversification of private investment in the tradable sector. One of
the main constraints faced is the uncompetitiveness of the
non-extractive tradable sector. In 1990-2003, competitiveness improved
in this sector essentially as a result of lower labour costs, a socially unjust
and economically ineffective route to follow. To raise competitiveness,
it is essential for the macroeconomic regime to include a competitive
real exchange rate (to which there are obstacles); and higher productivity at the
microeconomic level. This latter goal needs to be pursued through
microeconomic and mesoeconomic policies, the main obstacle being the
narrow outlook prevailing from the mid 1990s onward, which emphasized the
reduction of average labour costs as the main way to raise
competitiveness.