February 2010: From Machu Picchu to Puerto Rico

In the decades following World War II, Puerto Rico was hailed as a success story in Latin America (LA). The island sustained impressive rates of real economic growth and raised its domestic living standards. The transformation and modernization of this economy thru manufacturing, attracted the attention of its Southern neighbors. PR played a role model. Nowadays, it is different. PR is immersed in a deep recession with no apparent immediate light at the end of the tunnel. Two thousand miles South, Peru’s economy shines because of its strong macroeconomic performance, low inflation, and fiscal surpluses (7.3% real growth, 3.1% inflation, and $1.4b fiscal surplus). This was not always the case. Twenty years ago, Peru faced -13% growth, 7,482% hyperinflation, and huge fiscal deficits approaching 10% of GDP. Find out if Puerto Rico can learn some valuable lessons from Peru’s economic policies.