Peru: Closing the gap
Now that Peru’s government has passed a bill to establish a new Ministry of Development and Social Inclusion and increased public spending on health care and education in the 2012 national budget, the current administration’s next task is to follow through on the second phase of its campaign pledge: obtaining tangible results.
Elected in June 2011 on the back of campaign promises to tackle issues concerning poverty, health care, education and social inclusion, President Ollanta Humala’s administration is working to channel the benefits of overall economic growth to the segments of society who need it most.
Economic prosperity has seen Peru’s GDP rise an average of 5.6% per year during the first decade of the new millennium, an achievement that has had a significant impact on poverty alleviation. Indeed, during the second term of former President Alan Garcia, Peru’s headcount below the national poverty line fell from 44.5% in 2006 to 31.3% in 2010, according to data from the World Bank. The relationship between economic prosperity and poverty alleviation has not gone unnoticed under President Humala, who has continued to support Peru’s private sector and economic growth.
Federico Arnillas, the chairman of the Coordination Committee for the Fight against Poverty (MCLCP), told local press in September he believes poverty throughout the country can continue decreasing. “If Peru can maintain an average annual growth rate of 6% or 6.5% in the next five years, the goal of reducing poverty to 17% is achievable, even though the world situation is unfavourable,” he said.
While public spending on social programmes is certainly on the rise in Peru, there is some ground to cover in order to catch up with neighbours such as Chile. The last full year of data available from the World Bank indicates Peru lags behind its southern neighbour in terms of public spending (as a percentage of GDP) on education (Peru, 2.5%; Chile, 4%) and health care (Peru, 4.5%; Chile, 8.2%).
In late November 2011, Peru’s congress took another step towards closing that gap when it approved the 2012 national budget, which the executive branch announced would prioritise social inclusion and see spending on health and education rise by 25% compared to the previous year. The entire budget was increased by 8% year-on-year from PEN88.46bn ($32.76bn) to PEN95.53bn ($35.38bn).
A small portion of the national budget will likely be allocated to Peru’s new Ministry of Development and Social Inclusion, which appointed its first minister, Carolina Trivelli, in December. The new ministry, which was passed into law in August 2011, is responsible for follow-through to Humala’s campaign promises on social inclusion by centralising government social programmes.
Foreign aid programmes are also quite active in tapering Peru’s social disparities, as demonstrated by the World Bank and the UN Development Programme (UNDP), who threw their support behind Humala’s social agenda following his induction last summer. The World Bank supplied a $3bn line of credit to Peru in October 2011 to support the social programmes. Meanwhile, the UNDP has also pledged a $465m cooperation fund for Peru from 2012 to 2016, most of which will be poured into social inclusion programmes, such as addressing chronic malnutrition in children and improving education.
For its part the US Agency for International Development (USAID) has been working in partnership with several Peruvian medical institutions towards improving the human resources within the health sector. Thus far more than 5000 health professionals have participated in USAID’s training programmes.
Even with stronger federal and international support, several challenges continue to threaten Peru’s capacity to close the poverty gap and improve social services. “We have seen past governments allocate more resources to improve social indicators, but there has not been much progress on this issue, especially in the provinces,” noted Erich Arispe, the senior director of Latin American ratings at Fitch Ratings, in a statement to local press in September 2011.
According to the Plan Nacional Concertado de Salud 2007-20 (PNCS), Peru’s national health plan, population densities have dramatically altered over the past 70 years, shifting the urbanisation level from just 35.4% in 1940 to 72% in 2005. Improving social services in the mountain and jungle regions presents a more costly challenge than dealing with urban needs. Despite cities garnering an advantage thanks to their ability to pool resources, dealing with the adverse effects of urbanisation also presents an entirely different set of problems resulting from issues such as pollution and security.