Peru and Venezuela: Economic Performance and Institutions

In 1989, Venezuela implemented a program of reforms to strengthen the role of markets in allocating resources and reduce the role of the state; a year later, Peru did the same. However, Peru grew at an annual average rate of 6.3 per cent in the next two decades, while Venezuela grew at only 3.1 per cent. The purpose of this paper is to investigate, using documentary research, the causes that explain this outcome. The main conclusion is that the institutional framework is a key variable for explaining the economic performance of these two countries.