How has Peru’s export-led economic boom survived political chaos?

In the early 2000s, Herbert Vilcapoma saw a business opportunity in Peru’s mining industry. Having learned the trade while working at a drilling equipment factory, he took out a loan and founded Rock Drill. His company now provides drilling services to some of the country’s largest mining companies.

Since he embarked on this venture, Peru has transitioned from authoritarianism to a democracy marked by instability: nine presidents in the past decade, the temporary dissolution of congress, a failed coup, protests leaving dozens dead, former presidents investigated for corruption, and near-constant confrontation between congress and the executive branch.

In late July, Keiko Fujimori, the daughter of ex-president Alberto Fujimori (1990-2000), was sworn in as president. Her narrow victory of fewer than 50,000 votes marked the return to power of one of Peru’s most controversial political dynasties.

Keiko Fujimori waves after her inauguration as President of Peru on 28 July 2026. She won the presidency in a close contest after having run in four consecutive elections (Image: Presidencia Perú / Flickr, CC BY-NC-SA)

The Peruvian economy, however, has followed the opposite trajectory. GDP has maintained uninterrupted growth (3.4% in 2025) while the sol consolidated its position as one of the region’s most stable currencies.

Vilcapoma now chairs VILBRA Group, a conglomerate of Rock Drill and three other mining companies. He tells Dialogue Earth that Peruvian entrepreneurs “continue to bet on the country because of the favourable economic conditions”.

With so much political turbulence, how has the Peruvian economy managed to survive?

Macroeconomic discipline

One of the main factors behind this resilience has been economic discipline, underpinned by inflation control and the stability of the sol. The central reserve bank of Peru (BCRP) is responsible for this task. Peru’s constitution of 1993 guarantees the bank autonomy to conduct monetary policy independently of the government, although the BCRP’s board members are appointed by the senate and the executive. Since 2007 it has targeted inflation of 1-3%, in a region where bouts of three-digit inflation rates are not uncommon.

“Thanks to the BCRP’s autonomy, Peru has recorded one of the lowest inflation rates in Latin America, and even in the world, over the past two decades,” Peru’s former economics minister Waldo Mendoza tells Dialogue Earth. In 2025, Peru recorded annual inflation of 1.51%, while the region’s major economies – Brazil, Mexico, Chile and Uruguay – all hit 3.5% or more.

As the presidency has chopped and changed, BCRP leadership has remained stable, headed by Julio Velarde since 2006. Fujimori has chosen to retain him at the helm for her five-year term.

The Economics and Finance Ministry (MEF) has also sought to keep public spending and debt under control. In June the fiscal deficit fell to 1.3% of GDP, below the 1.8% target set for 2026. Public debt remains at around 29% of GDP, one of the lowest levels in the region.

An export boom intertwined with China

In 2000, Peru’s exports were at approximately USD 6.3 billion. This year, that figure could exceed USD 118 billion. That growth has been driven by more than 20 free trade agreements, which now connect Peruvian companies with some of the world’s largest markets.

“We went from having a market of 34 million people to billions,” Julio Pérez, former president of the Peruvian Association of Exporters (ADEX), tells Dialogue Earth.

According to Hugo Perea, chief economist for Peru at the banking think-tank BBVA Research, the inflow of foreign currency has boosted international reserves, helped stabilise the exchange rate and reduced the economy’s vulnerability to periods of turbulence.

Mining has been the main driver of this inflow. Copper and gold, along with zinc, silver and other minerals, account for around 70% of all Peruvian exports. According to US Geological Survey data, only Chile and the Democratic Republic of Congo produce more copper than Peru – a trend set to continue. Copper demand is being supercharged by its critical role in the global energy transition as a building block in many renewable energy technologies.

In recent years, the boom in metal prices has strengthened Peru’s mining momentum and consolidated its position as the country’s main source of foreign currency, explains Víctor Gobitz, CEO of the Lima-based copper miner Quilla Resources. “It is estimated that for every formal job, the mining industry generates eight indirect jobs,” he adds.

This has been supplemented by the rapid expansion of agricultural exports which, for 2026, were approaching USD 7 billion by the middle of September.

China has been crucial to these expansions. Since 2014, it has displaced the US as Peru’s main trading partner, driven by its growing need for copper, iron and other minerals. In the first half of 2026, the US accounted for 9.3% of Peruvian exports, China for 38.6%. Peruvian blueberries, grapes and avocados have also gained ground, now ranking among its five leading agricultural exports to China.

This relationship extends far beyond trade. According to estimates by the San Marcos Centre for Asian Studies (CEAS) in Lima, China is behind 25% of all foreign investment in Peru – the largest share. In Latin America, only Brazil receives more Chinese capital.

Avocados at the La Calera estate in the south-western Peruvian province of Chincha, a key agricultural export hub where mandarins and grapes are also grown (Image: Portal Frutícola / Flickr, CC BY-NC-ND)

That presence extends into strategic sectors such as mining, energy, infrastructure and logistics. Chinese companies control key assets such as Las Bambas, one of the world’s largest copper mines, as well as electricity distribution networks in Lima, following the acquisition of energy company Enel by the state-owned China Southern Power Grid International.

Seventy kilometres north of Lima, the Chancay megaport is among the most notable examples. It received more than USD 3.5 billion in Chinese investment, one of the largest investments in Latin America under China’s Belt and Road Initiative.

Persistent fiscal gaps

Nearly 25 years after founding Rock Drill, Vilcapoma says his companies employ more than 1,600 people, and a facility is being prepared that will double production capacity.

But Peru’s macroeconomic growth has not translated into improved living standards for everyone. Dialogue Earth consulted the economist José de Echave, a mining and environmental issues researcher from the Peruvian human rights and environmental justice NGO CooperAcción: “Growth has not been inclusive, nor has it generated greater wellbeing for the population as a whole.”

Wealth remains unevenly distributed. Poverty fell from 27.6% to 25.7% between 2024 and 2025, but remains above pre-2019 levels: as of 2025, there were 2.3 million more Peruvians living in poverty than before the Covid-19 pandemic began in 2020, despite increased private investment.

Seven out of 10 Peruvians work in the informal economy, which means they lack access to benefits such as health insurance and pension contributions. There are also major gaps in basic services: only 37.5% of Peruvians had access to safely managed drinking water services according to a 2024 government report; access to healthcare and education remains marked by deep inequalities.

This social challenge comes as the country’s economic stability faces new risks. While Peru retains fiscal strengths, public finances have deteriorated over the past five years as politicians of all stripes have made spending pledges without clear funding plans.

Dialogue Earth consulted Carolina Trivelli, a member of the economics and finance ministry’s Fiscal Council. This body is responsible for monitoring the sustainability of public finances in Peru. Trivelli points to several measures approved by congress between 2021 and June 2026: according to data issued by congress and analysed by the Fiscal Council, a total of 258 laws that will increase public spending have been approved. Of these, the 48 passed since September 2025 would generate an estimated permanent annual fiscal cost of USD 6.9 billion – 1.9% of GDP. Among them is an increase in teachers’ pensions, which would entail annual spending of USD 2.4 billion.

At the same time, congress has been approving tax exemptions. Responding to the release of the government’s 2026-2029 macroeconomic framework that underpins the public sector budget, the Fiscal Council criticised these tax cuts. In its opinion of a draft version of the framework, the council underlined the need for “measures aimed at increasing permanent tax revenues” and limiting “new tax benefits that erode the tax base”. Pointing to concerns over the tax implications of recent government policies, the opinion advised the economics and finance ministry to “conduct a comprehensive, transparent, and up-to-date assessment of the current tax situation”.

Critics of these policies say they are populist, because they seek to address social gaps while also reducing government revenues, without adequate technical support or a clear source of financing.

“We would love to solve all of the country’s problems, but if we commit the state’s resources for the next 30, 40 or 50 years without backing them with sound public policies, at some point the state will collapse,” says Echave.

“As long as the state has sufficient resources, the problem will probably not be apparent,” Trivelli tells Dialogue Earth. “But when revenues decline and the current favourable cycle for minerals moderates, that is when the real problem will emerge.”

Trivelli considers the recent ruling by Peru’s constitutional court to be a first step towards restoring fiscal discipline. It once again limits the ability of congress to pass laws that entail new government spending. It also requires any parliamentary initiative that increases expenditure to identify a source of funding.

President Fujimori acknowledged this challenge in her first State of the Nation address by naming fiscal sustainability among her priorities: “We will put public finances in order, eliminate unnecessary spending and use every sol of public money responsibly.”

Whether more Peruvians can find formal employment – and whether the country remains a viable place to invest, grow and create jobs for entrepreneurs like Herbert Vilcapoma – could depend on it.