Peru - 2007

July 2007 | Industry Forecast

At the time of the 2004 mid-year ministerial changes, Toledo promised a 13% increase in wages from US$118 to US$133 per month. This, given the fiscal deficit targets under the latest IMF Stand-by agreement (1.9% of GDP in 2003 and 1.5% in 2004), left him no choice but to introduce new taxes. The Impuesto a las Transacciones Financieras or ITF was a clear signal in that direction, complemented by a 1.0 percentage point (pp) increase in the IGV (or sales) tax, to 19%. The ITF is a new and heavily opposed tax on financial transactions (at 0.15% of all cash movements between bank accounts and in some instances applicable to operations made outside the financial system) introduced on March 1 2004. Still, growth increased in 2004 by a further 5.1% relative to 2003, projecting an increase of 3.8% in private consumption. The economy continued to grow in 2005, by almost 5%.

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