External Trade Competitiveness Index (ETCI): a sectoral and granular perspective on the Peruvian export basket

Building on the Competitor-Based Real Exchange Rate (CBRER) proposed by Gonzaga and Rojas (2026), this paper develops an External Trade Competitiveness Index (ETCI) that provides a more accurate measure of Peruvian export competitiveness. Unlike the Multilateral Real Exchange Rate (TCRM) -a traditional REER measure- published by the Central Reserve Bank of Peru, the ETCI is constructed from product- and destination-level export unit values and explicitly accounts for competition in third markets. The framework is further improved through a systematic treatment of unit value bias. A two-stage identification procedure first detects structural product heterogeneity using fixed-effects models and then assesses whether changes in tariffsubheading composition generate economically meaningful distortions in aggregate unit values. Affected products are subsequently corrected using two strategies recommended by the International Monetary Fund: increasing product granularity and trimming extreme observations. The corrected ETCI indicates a cumulative gain in export competitiveness of 3.7 percents between 2000 and 2024, in sharp contrast with the 6.7 percents cumulative loss implied by the conventional REER. Compared with previous versions, the proposed refinements moderate the measured competitiveness gains while preserving their overall economic interpretation. Finally, validation and robustness exercises show that the ETCI captures both the structural and cyclical dimensions of export competitiveness and remains robust under alternative weighting schemes.