Economic growth and the foreign sector: Peru 1821–2020.

The article focuses on applying and empirically testing the Thirlwall Model, which explains economic growth constrained by the balance of payments (BoP), in the context of Latin American countries, particularly Peru, over the period 1821–2020. It finds that Peru’s slow, volatile, and unsustained economic growth aligns with the BoP equilibrium growth rate predicted by the model, influenced by exports (mainly low value-added natural resources), imports (which reinforce technological dependence), external income, relative prices, export volatility, and institutional factors such as democracy. Using econometric methods including Auto-regressive Distributed Lag (ARDL) models and Error Correction Models (ECM), the study confirms a long-term cointegration relationship among these variables and highlights that export growth and import demand elasticities critically determine Peru’s growth rate under BoP constraints. The findings suggest that investment policies targeting physical, human, social, financial, and natural capital are necessary to reduce foreign exchange restrictions and technological dependence, thereby fostering dynamic, inclusive, and sustainable economic growth within a balanced framework involving market, state, and civil society participation.