Identifying the roles of agriculture in the economic growth process: The Peruvian case for the period 1896-2012

Peru, a small open economy, has experienced recurrent cycles of crisis and recovery closely linked to shifts in external demand. Its long-run growth pattern is characterised by primary commodity exports and manufactured imports. Development strategies since the late nineteenth century can be broadly grouped into: primary export diversification, import-substituting industrialisation, and, from 1990 onwards, the promotion of non-traditional exports. Against this backdrop, the paper aims to address, from a long-term perspective, the question of the role of agriculture in Peru's growth process for the period 1896-2012. To achieve this, two analyses were conducted. The first aims to identify the relationship between agricultural GDP, industrial GDP, mining GDP, and other sectors, including services and energy. It is assumed that these sectors represent the state of urban development, and it is of interest to understand their level of interaction with agriculture. The second analysis aims to empirically verify the export-led growth (ELG) hypothesis and the import-led growth hypothesis (ILG). Time-series co-integration techniques were employed. Econometric findings pointed out a negative relationship between agriculture and industry. The paper identifies bidirectional links between agriculture and urban sectors (services and energy), with food flows, migration and labour markets connecting rural households’ diversified livelihoods to city-based employment. It also finds that Peru exhibits both export-led and import-led growth dynamics: agricultural and non-agricultural exports, together with imports of inputs and capital goods, jointly underpin a feedback relationship between trade and long-run economic growth.