Trade liberalization was one of the central elements of Peru's economic reform programme in the 1990s, accompanied by efforts to increase the competitiveness of its export sector. This chapter analyses the policy measures adopted by Peru and their impact on the economy, employment, income levels, poverty and inequality. Exports formed the driving force of economic recovery and balance-ofpayments adjustment. Productivity also increased in the tradable sectors. In this sense, the Peruvian experience shows that a stable macroeconomic environment, a programme to modernize the institutional framework protecting private investment and the improvement of basic infrastructure services are important for attaining growth in the export sector. This strategy was based on liberalizing trade and finance and acquiring a significant flow of external financial resources through privatizations, concessions and better access to capital markets. The pattern of growth in the export sector, however, shows that growth was sustained primarily by the recovery of traditional sectors responding to new conditions of competitiveness and lower barriers for entry into other markets, and less by the diversification of non-traditional products with greater value added. In part, this was due to a delay in certain key reforms related to competitiveness (such as ports and infrastructural support services for foreign trade). The impact of this strategy on employment and income levels was not what had been hoped for, even though it was accompanied by an increase in social expenditures for poverty reduction. Though more jobs were created, there was no significant improvement in real income in tradable sectors while income inequality increased. A counterfactual computable general equilibrium model analysis shows that Peru has probably benefited from trade liberalization and export promotion. Macroeconomic indicators improve as visible in (simulated) increases in economic activity, consumption and employment and improvement in the trade and fiscal balances. These changes do not occur at the magnitude that one would hope, however. The country is vulnerable to external shocks that accompany liberalization, in part because exports per capita are very low, exports concentrate mainly on primary products and the economy is heavily dependent on complementary imports for consumer goods and productive inputs, causing a chronic tendency towards widening trade deficits. Furthermore, devaluation of the exchange rate has contractionary effects that can counteract the positive impact of other liberalization measures. Employment growth is very little, but mainly favouring unskilled workers. Outcomes in terms of labour income are mixed, differing by type of worker, but rural workers witness income declines. On balance, trade reform does not translate into a substantial poverty reduction, while it tends to increase income inequality. Integration through trade agreements like the Free Trade Area of the Americas and the World Trade Organization would allow a generalized improvement in employment levels and would lead to a more visible reduction in poverty, as the country would benefit more from a rise in world export prices.