How Peru Can Use a New Commodity Boom to Durably Lift Growth

As a global leader in copper and gold production, Peru has been benefitting from record-high metal prices. Confidence has reached its highest level since the pandemic, boosting consumption and investment. The commodity boom increased nominal exports and national income, strengthening external and fiscal balances. The economy expanded 3.4 percent in 2025, one of the strongest among comparable countries in the region.

With the energy transition and AI power equipment surge, global demand for copper is expected to stay high, likely boosting Peru’s economy in the coming years. This favorable environment gives Peru the space and opportunity to act before the commodity cycle turns. By using windfall revenues to strengthen public investment—and improving how that investment is selected and executed—the country can build support for reforms that reignite private investment, raise productivity, and make growth more durable and inclusive. The IMF’s annual review of the Peruvian economy shows that channeling revenues into more efficient public investment could permanently boost potential growth by up to 1 percentage point.

This is not the first time that high metal prices have fueled Peru’s economy. Between 2002 and 2014, rapid growth in emerging markets increased copper and gold prices over five-fold. Peru’s economy grew an average of 6 percent for over a decade, including significant growth in non-mining sectors such as agroindustry, tourism, and services. The high metal prices boosted national income and financed a sharp increase in public and private investment, helped by strong capital inflows (including foreign direct investment) and expanding domestic credit. More importantly, far-reaching structural reforms—fiscal responsibility rules, inflation targeting, trade and financial liberalization, privatization, and stronger public financial management—contributed to a strong macroeconomic policy framework and supported high productivity growth.

Since 2014, Peru has maintained remarkable economic stability despite a succession of political crises and social disruptions. Still, the momentum of structural reforms has stalled and the gains from the earlier boom were lost. Growth has nearly halved, productivity has declined and private investment remains subdued.

Big challenges remain. At over 25 percent, the current poverty rate is only slightly below its 2012 level. Over 70 percent of the labor force is informal. The country needs $100 billion in infrastructure investment, according to the Interamerican Development Bank.

Igniting sustainable and inclusive growth

Unlocking mining investments is an important step, but not enough to raise growth durably. Achieving that will require sustaining structural reforms that raise productivity and rebuild trust in public spending.

• Unlock mining investments: Reforms that combine streamlining investment with cracking down on illegal mining could help unlock a sizeable $63 billion (18 percent of GDP) pipeline of mining projects that has been stalled for many years due to bureaucratic complexity and social conflicts. Staff analysis shows that a post-pandemic surge in illegal mining, amid recent involvement of organized crime, threatens formal mining investment, raises security and governance risks, and has extensive socioeconomic repercussions.
• Growth in the non-mining economy: Although mining comprises over 10 percent of total private investment, this sector alone cannot deliver long-term growth. Peru needs to revitalize private investment and raise overall productivity again. Our analysis shows that distortionary labor and tax regulations have created obstacles for businesses to formalize and grow, contributing to high informality and lower productivity. Moreover, addressing the low but rising level of insecurity and persistent political instability would be essential for a stable environment that fosters private sector investment. Greater financial deepening would allow the financial sector to support new private investment.
• Rethink public investment: Peru has one of the highest public investment levels in the region, most of it carried out by local governments and financed by natural resource revenues. However, our analysis shows that local governments struggle with execution and are required to spend revenues within short political cycles, limiting the impact on economic development and weakening public trust. Improving how natural resource revenues are shared and invested at the local level would ensure that Peru’s mining wealth translates into sustainable and inclusive development for all citizens.

Peru laid important policy foundations during the 2000s commodity boom, but productivity stalled when that cycle ended. Reigniting durable growth will require decisive reforms. The real test is not whether high metal prices lift growth, but whether Peru can maintain strong and inclusive growth when commodity prices are no longer doing the heavy lifting.

Moya Chin is an economist, and Giovanni Ugazio a senior economist in the IMF’s Western Hemisphere Department, where Sònia Muñoz is an advisor.