Peru's Economic Development and Average Income vs. OECD Countries

Economic Development of Peru
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Economic Development of Peru
Economic development is a complex phenomenon determined by different factors. It is a process whereby low-income economies constantly transform into industrial economies due to modernization (Guan, 2018). Economic development is unique from growth since it involves quantitative and qualitative improvement. It is based on economic development theory which focuses on the evolution of a poor and primitive economy into relatively prosperous and sophisticated. Peru is one of the low economy countries listed by the World Bank and has incredibly experienced rapid economic development in the last six decades. It is located in Western South America and boarded with Colombia, Chile, Bolivia, and Ecuador. It is classified as a megadiverse country composed of different habitats with a population of 33 million (BCRP, 2021). Based on its size, it is the 19th largest in the world. The paper analyzes the economic development of Peru in the last six decades, the development gap, and obstacles promoting the gap.
Economic Development over the Past 60 Years
Poverty and Inequality
Poverty and inequality are two major determinants for economic development since a growing economy should eliminate the two elements. Peru has heavily reduced poverty in the last 60 years, resulting from effective fiscal policies and positive economic indicators. In the 1960s, Peru's economy was accompanied by a high poverty level, which declined due to its dynamic by over 50%, with more than seven million Peruvians with new jobs (BCRP, 2021). However, the inequality gap has incredibly increased over the period. Currently, there is a gap between 53% and 17% inequality rate, which is a big challenge to the country. Based on the economic theory, an increase in inequality have no impact on development since the higher wages, the higher the inequality level (Guan, 2018). Therefore, regardless of the increased inequalities, its decline in poverty has enhanced its economic development.
Demographics
Peru's economic development is also based on demographics. Higher population growth is an element of economic development. Based on the Malthusian curve, higher income and food production lead to higher population growth (Guan, 2018). Over the past 60 years, Peru has heavily experienced increased population growth. In 1961, the population of Peru was 7.6 million; however, due to rapid development, the number has increased to 33 million (BCRP, 2021). The figure represents a 23% population increase in the past 60 years. Over time, the demographic change is due to development in different sectors such as agriculture, which leads to higher population growth. The higher population growth is above the global projection of 1.2 million after 20 years, as shown in figure 1. Therefore, it means that Peru has highly recorded more population growth above the expected standards.
Figure 1: Malthusian Curve
Source: (Guan, 2018)
Average Living Standards
The average living standards show the employment rate, which correlates with labor productivity. A country with higher labor productivity is likely to experience higher economic development. Over the past 60 years, Peru has recorded significant improvement in the average living standards due to emerging industries and employment opportunities, thus increasing the rate of employment (BCRP, 2021). The country has also shifted to higher labor productivity, improving standards through the enhanced agricultural sector. Lastly, the average living standards in Peru have also intensified in terms of costs. For instance, the average estimated cost of every single individual is $410 without considering their rent (BCRP, 2021). However, it is approximately lower than some heavily advanced countries, such as the United States, at 55.97%. It is necessary to justify, not justify, that regardless of the gradual shift in living standards, it relates to Peru's economic development.
Major Sectors of the Economy
A focus on significant sectors in a country enhances economic development. These are the sectors that the government must consider; otherwise, they would affect its overall economic growth. The major sectors which determine Peru's economic stability include agriculture, industry, and services. They heavily changed due to rapid technological advancement. The change has impacted Peru's GDP, thus playing an essential role in its growth. For instance, between 1960 and 2015, Peru has recorded a higher agricultural production from $20 million to $46 million, a vast transformation to its GDP (BCRP, 2021). Peru's agricultural and industrial sector transformed to macroeconomic over the past sixty years.
Economic Relations
The economic relations between the country and other countries have also intensified. Peru is perceived as a business-oriented country due to limited conflicts that may jeopardize its economic relations with other foreign countries. Economic development depends on how a country relates to others through trade openness and limited restrictions. Over the past 60 years, the economic relations between Peru other countries have heavily increased due to changes in its economic policies, allowing trade openness with other countries (Penn World Tables, 2021). The country has heavily engaged in international trade with other countries such as Columbia. The country exports petroleum, gold, copper, and zinc, amounting to $44.92 billion, while its total imports from South Korea, China, the UK, and the United States amount to $43.13 billion (BCRP, 2021). The shift in imports and exports has also enhanced its economic development and positive relations with other countries. Therefore, the high economic development of Peru in the last 60 years is based on increased international trade.
Economic Activity
The country's economic activity is organized by focusing on the socio-market economy. The market organization has not changed but heavily focused on precious metals such as copper and zinc. The organization has minimally changed in the past 60 years by considering different elements such as hierarchical marketing, and gold is hierarchically ranked and prioritized in the market process (BCRP, 2021). The shift to such economic activity enables the country to focus on rapid economic development due to increased revenues and GDP. Therefore, Peru's economic development successfully increases its rapid economic transformation and development.
Development Gap
There is a critical development gap between Peru and other OECD countries such as Australia, Canada, Belgium, and Austria. The gap is crucial since it limits its economic progress and development. The main areas that the development gap exists include average incomes, educational achievement, urbanization rates, international poverty rates, and health outcomes....