Patterns and Potentials of Peru's International Trade: A Gravity Approach

Using the gravity model, this study examines Peru's trade patterns by analyzing a panel dataset of the country's bilateral trade flows with 186 countries for over a period of 22 years (1990-2011). The empirical results for the entire dataset are consistent with the general prediction of the gravity model (positive coefficients for economic size and negative coefficients for distance). Among its thirty main partners, Peru has an unrealized trade potential with Argentina, United States, Canada, Brazil, Mexico, Colombia, United Kingdom, France, Germany and Venezuela. Despite the fact that Peru has trade agreements in place with most of these partners, it seems that Peru has not sufficiently utilized these agreements.