Peru: Targeting inclusive growth
While figures show that the Peruvian economy has expanded annually for over a decade, assessing the extent to which growth is benefitting the people is proving more of a challenge, but one that is being explored in earnest.
Peru’s GDP has more than tripled in the past 10 years, rising from $51.5bn in 1999 to $157bn in 2010, with many key indicators, such as the percentage of the population living in poverty, showing a marked improvement.
However, data also indicates that Peru still faces challenges, led by regional poverty and decentralisation, in its bid to ensure the rewards of economic growth are distributed more evenly across the country’s population.
As Peru’s leaders step up efforts to generate a broader level of development and better living standards for the citizens from the current financial boom, the country will certainly be a point of interest for development economists, who are increasingly leaning towards the argument that examining GDP growth alone fails to provide a full picture of progress.
Many key indicators, such as markers in education, show improvement, with illiteracy rates in Peru falling from 10.1% in 2004 to 7.4% in 2010. The country has also made progress in higher education, with the number of university graduates rising from 45,133 in 1998 to 72,113 in 2007, marking an increase of almost 60%.
Income distribution is yet another area where improvement is evident, according to the Gini index, which measures equality levels on a rising scale from 0 indicating full equality to 100 representing total inequality. Peru scored 48.1 in 2010, down from 51.7 in 2008 and outperforming other regional leaders such as Chile and Brazil which were given a Gini coefficient of 52.1 and 54.7, respectively, when last measured in 2009, according to the World Bank.
Equally Peru has made progress in combating chronic malnutrition, with the percentage of children under the age of five suffering from the condition falling from 22.9% in 2005 to 17.9% in 2010.
Infant mortality rates, however, which are a key indicator for progress made in the health care sector, remain disappointing, with data indicating an incidence of 21.5 deaths per 1000 live births, putting Peru ahead of Bolivia and Guatemala, but behind Chile, Brazil, Honduras and El Salvador.
Most data shows that economic growth has led to concrete improvements in the lives of Peruvians, with figures from the country’s National Statistic Institute (INEI) supporting these findings. The institute’s data showed that the percentage of the population living in poverty dropped from 58.5% in 2006 to 27.8% in 2011.
While many statistics relating to Peru’s development are encouraging, however, the fact that more than a quarter of its population lives in poverty is an indication of the hurdles still facing the country, especially the key issue of regional poverty.
Data shows that poverty rates rise significantly in remote parts, reaching 49.1% in Peru’s mountainous interior and 37.3% in the rainforest. Poverty rates for Lima, in contrast, stand at a lower level of 15.8%.
Peru continues to suffer from a regional decentralisation, with dramatic differences in living standards determined by geographical location. The Regional Competitiveness Index produced by the Pontificia Universidad Católica indicated that little has changed in this regard despite overall economic growth. Lima and Callao remained the country’s most competitive regions, while Cerro de Pasco and Cajamarca dropped in the rankings. The only region to experience any gain was Madre de Dios.
Experts, however, remain optimistic that Peru has the means to address the disparities in its development. “A lot can be done,” economist Carlos Anderson told OBG. “We can use the current boom to finance true development.”
The federal budget increase in funding for health, education and social inclusion programmes would certainly appear to be a step in the right direction. Experts are also likely to give a nod of approval to indications that the government plans to invest in better infrastructure, including highways, airports, and fibre optic networks which should go some way towards eliminating regional differences.
The next step, and arguably the most difficult, will be increasing and diversifying the productive sectors of the Peruvian economy to include future growth markets like technology development. Current windfalls, even when used responsibly, will carry the country only so far. Observers point to the need for Peru to find a way of sustaining economic growth, even when the commodities market is not performing, which, it is widely agreed, will require greater diversification.