Policies for economic growth, jobs, human capital and environmental sustainability have greater impact when they recognise the different economic and social realities where people live and work. National governments are thus challenged to rethink how to harness the potential of different types of cities and regions to prepare for the future. Policies for regions and cities can generate opportunities for skills development, investment and innovation, and directly contribute to improving quality of life. Such policies actively complement traditional macro and structural approaches in enhancing national performance.

The economic performance of Peru in recent times has been impressive. Since 2000, gross domestic product (GDP) growth has averaged 5% per annum compared to the Latin American average of 3.2% per annum and the OECD average of 2% per annum. A commitment to fiscal discipline and open markets has enabled the country to take advantage of favourable external conditions. Growth has been supported by increased exports of agricultural and mining products, and foreign investment has flowed into the country. The people of Peru have benefited from this growth. Household incomes have risen and poverty rates have declined significantly. However, GDP per capita is USD 11 438, which is about 30% below Mexico, close to 40% below Turkey and significantly below the OECD average of USD 37 270.

This chapter provides a diagnosis of the main subnational trends in Peru. The analysis focuses on the performance of Peru’s regions in respect to each other and OECD countries. The first part of the chapter focuses on the key macroeconomic challenges and opportunities facing Peru. The second part goes beyond these national averages to describe the main characteristics of the country at a subnational level. The third part evaluates the performance of Peru’s regions, and assesses growth enablers and bottlenecks at a regional level.

This chapter discusses how to implement a regional approach to sectoral and innovation policies. The chapter is divided into four main parts. The first section focuses on assessing regional policies in Peru, including alignment with the contemporary OECD approach to regional policy. The second section discusses macroeconomic policies and their impacts on regions, including an overview of the productive fabric of the country. The third section discusses the importance of integrating sectoral and innovation policies with a regional agenda. Finally, the fourth section draws some conclusions and sums up key recommendations.

This chapter discusses urban and rural policies in Peru. It suggests how to design better urban and rural policies to improve regional development outcomes. The chapter is divided into three main parts. The first section focuses on urban development, and in particular steps that will need to be taken in terms of policy development and implementation, to develop a comprehensive urban policy framework for Peru. The second section discusses rural policies, and identifies principles and lessons for a rural development policy that can better link economic and social objectives. Finally, the third section draws some conclusions and sums up key recommendations.

This chapter provides a diagnosis of the main multi-level governance mechanisms of Peru, as well as an analysis of subnational governments’ finance. The chapter has five sections. The first presents an overview of the decentralisation process and its governance. The second section focuses on the distribution of competences across levels of government and mechanisms for co-ordination. The third section analyses subnational revenues and borrowing. The fourth section discusses expenditures at a subnational level, including the fragmentation of investment at a local level. The final section provides the key findings and recommendations.