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| ECONOMY |
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Since its discovery by Europeans in the 16th century, Peru has
always been a source of wealth. The Spaniards took its gold and
silver. In the 19th century, its chief exports was guano, the
droppings from seabirds used in Europe and the United States as a
natural fertiliser. There were also booms in rubber and cotton
exports, but little of this wealth remained within the country. The
geographer Antonio Raimondi has memorably described Peru as "like a
beggar sitting on a bench of gold". This is equally true of Peru
today. Despite its gold, copper and zinc mines, depsite huge
natural gas deposits and oilfields, more than half its population
earns less than US$two dollars a day. More than 10% per cent of the
work force is unemployed, but a much higher percentage is
underemployed, works in the informal sector or are subsistence
farmers. Control of the economy is largely in the hands of the
state and a small entrepreneurial class based in Lima. Attempts to
develop a national industry began in the 1960s, based around the
primary industries and textiles. In the 1970s, the military
governments led by General Velasco attempted to nationalise many
concerns. Local industry was protected by tariff barriers, and key
export industries were nationalised. But a lack of capital led the
military govenrments to finance these ventures through heavy
borrowing abroad- the start of Peru's increasing problem of paying
its foreign debts, which increased ninefold in the decade of the
1970s.
Foreign Debts
It was in the 1980s that payment of foreign debts
started to become a huge problem for Peru. President Belaunde's
government struggled to meet its commitments and declared a
moratorium on debt repayments. But inflation soared as his
government resorted to printing money to try to get out of crisis.
When Alan Garcia and APRA came to power in 1985, he caused an
international sensation by declaring the intention of limiting its
debt repayments to 10% of export earnings and nationalising the
banks. This action caused international lending agencies to suspend
Peru, and caused foreign investment to dry up.
Neoliberalism
When he came to power in 1990, President Alberto Fujimori sought to
reverse this position. He began talks with the IMF, and adopted
their strict neo-liberal policies. This led to the privatisation of
many state companies (although a large percentage of the proceeds
from these sales ended up in his or Vladimiro Montesinos' accounts)
and the layoff of large numbers of state employees. Peru was
welcomed back into the international fold, but at the price of
higher rates of unemployment and not only increased levels of
poverty but a greater disaprity in income distribution (the poorest
fifth of Peruvians now receive less than 5% of the national
income). Fujimori was also successful in bringing in new foreign
investment, particularly following the defeat of the armed
opposition groups, but this investment was once again almost
exclusively in the primary sector. This means that the Peruvian
state relies for a large proportion of its revenues on taxing these
primary exporting industries, making it vulnerable to fluctuations
in international prices and investment flows over which it has
little control. At the same time, some 40 % of those revenues go to
pay foreign debt.
The Informal Sector
The Fujimori years were also characterised by a huge increase in
the informal sector. By 1993, it has been estimated that more than
half of women in employment were in jobs with no contracts,
bargaining rights or social security. The violence in the
countryside, allied to low prices and job cuts, meant that still
more people came to Lima in search of work, making the social
problems in the capital even more acute.
President Toledo
When President Alejandro Toledo came to power in 2001, he promised
to substantially increase social spending in health, housing and
education. But he also continued with the progamme of privatisation
of the utilities sector. In June 2002 however, mass protests
against this programme in the second city of Arequipa led him to
suspend further selloffs. Toledo has also promised to create
400,000 new jobs by promoting investment in areas such as the
construction of lowcost housing, but there have been few visible
signs that this has been successful as yet. Despite his government
being characterised by frequent cabinet changes and low popularity,
the peruvian economy continues to grow slowly but surely. Much of
this is due to mining investment, but there has been little or no
tickle down effect of this economic growth.
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DEBT |
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| The Peru Support Group, has
long argued the need for debt relief for Peru, campaigning for a
debt conversion scheme through which the UK government would
forgive debt and for the funds thereby released to be channelled to
grass-roots development schemes with the aim of alleviating
poverty. |
The external debt in Peru, both public and private stood at US
$28,037 million in June 2002. This means that in 2002 around 17.5%
of the government budget was spent on servicing foreign debt, while
just 17% and 9.3% were spent on health and education respectively.
Despite the fact that 54.8% of Peruvians live in poverty, unequal
income distruibution means that Peru is still classified as a
middle income country, which means that it cannot qualify for the
World Bank and IMF's Highly Indebted Poor Country initiative
(HIPC), which offers assistance to countries with an unsustainable
debt burden.
Peru also has a multitude of small scale projects with a long track
record and a legacy of strong involvement by civil society.
Peruvian NGOs have developed an infrastructure for dealing with
poverty, acting as effective intermediaries between organisations
and the state. The country would therefore prove an interesting
test case for what could be applied elsewhere.
Campaigning for "Debt for Development"
The Peru Support Group, has long argued the need for debt relief
for Peru, campaigning for a debt conversion scheme through which
the UK government would forgive debt and for the funds thereby
released to be channelled to grass-roots development schemes with
the aim of alleviating poverty. We addressed a debt proposal to the
Export Credit Guarantee Department (ECGD), advocating the swap of a
proportion of the outstanding debt with a view to the funds being
released providing direct benefit to the poor in Peru. The ECGD
holds nearly all of Peru's bilateral debt with the United Kingdom.
Unfortunately, at the time the proposal did not prosper. The ECGD
made it known that it was prevented by the terms of the 1991 Export
and Investment Guarantee Act from entering into deals which it
considered did not represent the best interests of the British
taxpayer. Since the ECGD benefits from the regular servicing of
these debts by the Peruvian government (and therefore the Peruvian
taxpayer), any debt forgiveness would reduce income to the british
taxpayer.
Fortunately, since 1996, the climate in the UK has changed.
Firstly, the change in government made the UK more amenable to
helping with debt relief. Secondly, because of the incredible work
of the Jubilee 2000 campaign, that commitment was sustained.
Thirdly, democratization in Peru and the end of the Fujimori
government has created a more propitious climate for social policy
in Peru. In 1999, the PSG again pressed for a review of the ECGD
position when we were invited to take part in a consultative
exercise to reconsider the workings of the 1991 Act.
Debt Conversion
In December 2002, following a meeting between Clare Short and
President Toledo, the Export and Credits Guarantee Department
(ECGD) and the government of Peru agreed a Memorandum of
Understanding (MOU) to allow the conversion of £21 million of
outstanding debt into funds for inward investment. This agreement
will allow the ECGD to sell debt owed by the Government of Peru on
to investors, on the condition that the funds are used for
investment in projects or initiatives in Peru. These projects must
meet strict criteria to prove that they generate benefits of a
social, economic or environmental nature.
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POVERTY |
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Poverty is a violation of human rights. Currently around 54.8%
of Peruvians live in conditions of poverty. This figure is up from
48.4% at the end of 2000. Those living in extreme poverty
constitute 24.4% of the population compared with 15% in 2000. In
some rural areas this figure is much higher. In the department of
Huancavelica 88% of the population live in poverty, and as much as
74% in extreme poverty . Some sections of society -- such as women,
children and indigenous peoples -- are disproportionally
represented among the poor. However Peru's problem is not just one
of poverty. Income districution is also an important factor. In
Peru the top 20% of the population earn more than 50% of the
country's wealth.
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HEALTH |
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Uneven distribution of health services means that people in
rural areas are less likely to receive adequate healthcare than in
urban areas. Generally the government has been unable to provide
satisfactory healthcare to the poor. For example in Lima, around
94% of births are attended by someone with some level of health
training while this drops to around 29% in Amazonas, Huancavelica
and other departments . As a result the maternal mortality rate in
Peru is amongst the highest in Latin America (280 per 100,000 live
births compared to 150 per live births in neighbouring and poorer
neighbouring countries such as Ecuador ). The lack of satisfactory
healthcare for the most vulnerable means that the infant and child
mortality rates stand respectively at 45 and 58 per 1000 live
births (compared, for example, with 31 and 40 in Ecuador).
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EDUCATION |
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Although access to education in rural areas has improved in
recent years with the building of new schools, there are still huge
inequalities in standards and access to education between rural and
urban areas. 50% of young people in rural areas have no access to
secondary education. The highest levels of illiteracy are found in
the poorest departments, for example in Huancavelica, where around
30% of the population is illiterate. The level of education is much
lower for girls in Huancavelica, where 50% of the female population
is illiterate. Low wages for teachers and a lack of resources mean
that teaching standards are very poor by Latin American
standards.
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