Peru GDP to Expand on Gas Plant, U.S. Trade Accord, Toledo Says

from Bloomberg

By Karla Palomo and Alex Emery

Peru's economy, which may expand as much as 8 percent in 2007 on surging mining and agricultural exports, will receive an additional boost from a $5 billion natural gas plant and a U.S.-Peru trade agreement, the Andean country's former president, Alejandro Toledo, said.

The Hunt Oil Co.-led gas project will add 2 percentage points to gross domestic product growth by 2010, Toledo said in a Nov. 30 interview in New York. The free-trade agreement, scheduled for a final vote in the U.S. Senate today, will add 1.5 percentage points, he said.

During Toledo's 2001-2006 administration, Peru reduced debt, trimmed annual inflation to a region-low 1.5 percent, tripled exports and pushed annual economic growth to 5 percent. Peru has created jobs by diversifying away from traditional commodity exports to added-value products such as asparagus, grapes and salmon, he said.

``This makes us less vulnerable to external factors such as changes in mineral prices,'' said Toledo, 61, currently a professor at Stanford. ``The economy is on auto-pilot.''

A project to build 2,500 kilometers (1,550 miles) of roads to link the Atlantic and Pacific coasts will spur trade by providing rural communities with access to markets, he said.

In Latin America, 210 million people live on less than $2 a day, Toledo said.

That level of poverty will require over $220 billion a year in investment to ensure 8 percent average growth and cut unemployment by 2.5 percent in 15 years, the former president said, citing a World Bank report.

``Latin America has reduced its poverty in recent years, but the figures remain high,'' he said. ``The region isn't the poorest in the world, but it is the most unequal.''

The resurgence of populist governments in Venezuela, Bolivia, Ecuador and Nicaragua has slowed regional integration efforts and curtailed freedom, he said.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net ,/span>