A new measure of international trade competitiveness: Competitor-Based Real Exchange Rate (CBRER)

This paper proposes the construction of a Real Effective Exchange Rate by Competitors (CBRER) for Peruvian exports. Unlike the Multilateral Real Exchange Rate (TCRM, by its Spanish acronym) published by the Central Reserve Bank of Peru (BCRP)—which relies on trade weights of major trade partners—the CBRER incorporates product-specific implicit prices instead of the Consumer Price Index (CPI) and explicitly accounts for third-market competition conditional on export destinations. The methodology utilizes UN Comtrade data to identify, for each product, the primary destination markets, and the full list of competitors. This approach enables the estimation of the CBRER at aggregate, sectoral, and product levels using fully time-varying weights. The aggregate CBRER shows a cumulative increase of 6.1% between 2000 and 2024, driven by the performance of traditional sectors. These sectors benefited from key events in the Peruvian economy, such as the beginning of natural gas production in 2004 and the launch of major mining projects. Conversely, the TCRM suggests a 6.7% cumulative decline in competitiveness over the same period. Robustness tests using a fixed basket of competitors confirm that both sectoral and aggregate results remain consistent. Consequently, the study concludes that the CBRER offers a more granular and realistic perspective on Peruvian external competitiveness, complementing the macroeconomic outlook provided by the TCRM.