La dolce vita: Is Peru’s feelgood factor spreading?

By Jude Webber

PACHACUTEC, Peru, Nov 29 (Reuters) – President Alejandro Toledo boasts that more Peruvians are going to the movies — a sure sign, he says, that improving gross domestic product statistics mean la dolce vita (the sweet life) is spreading. Economists call it the trickle down effect — and trickle is the word, say residents in Pachacutec, a sprawling shanty town of straw and wood huts on the sandy hills sloping up from the Pacific Ocean at the northern fringe of Peru’s capital. “Things are gradually getting better. Two months ago I didn’t have a job. Now I have some work … It’s not great but I can pay for my daughter’s school,” said construction worker Emerson Reategui, 42, on his way with a sheaf of documents to apply for official property rights to his shanty town home.

“We’ve got to give Toledo more time to work. He’s made a lot of promises. In Pachacutec we feel he’s keeping them slowly — but he is keeping them in things like property rights, which he’s starting to give, and job projects,” said Carlos Ricaldi, 28, in his small but well-stocked store. “I see progress.” Toledo, who took office in July 2001 promising more jobs and prosperity, hails Latin America’s No. 7 economy as the region’s darling this year, saying international markets made their feelings plain by clamoring for a $500 million bond that Peru sold this week to raise cash to plug its budget deficit. Although the issue meant Peru beefing up its borrowing just as Argentina’s multiple debt defaults and Brazil’s ability to manage its $260 billion public debt have worried markets, economists were cheered by the relatively cheap interest rates it won. Peru expects its 2003 debt servicing costs to rise to $2.2 billion from around $2 billion now, but trumpets its nearly $10 billion in international reserves as a sign of solidity.

Indeed, the government is so delighted with the health of the economy — illustrated by ever rosier performance reports, including an official September growth figure of 7.3 percent — that it has jacked up its 2002 GDP growth target to 4.2 percent from a previous 3.7 percent. The acceleration comes after four years of economic woes and political strife. GDP grew just 0.2 percent last year. And the head of the government’s National Statistics Institute said this week even those glowing figures were still too low. Farid Matuk said methodology problems meant Peru had been “systematically underestimating” its data for years. Peru is hoping to parlay the good news into closer trade ties when U.S. Commerce Secretary Don Evans visits next week.

MOVIES, CELLPHONES, SHOPPING

Toledo never tires of telling voters — many of whom are underwhelmed by his progress in creating jobs in a nation where more than half the people live on $1.25 a day — that he has sacrificed his popularity for the sake of economic prudence. The U.S.-trained business school professor, whose approval rating has climbed nearly 10 points recently but is still only around the mid-20s in polls, told reporters this week that rises in the numbers of moviegoers, cellphone users and supermarket sales showed an increasing feelgood factor. “You may ask what (the economy) has got to do with the cinema? Well, if you’ve got a job, you can go to the movies more,” he said. “The economy is becoming more dynamic, people are buying more. It’s slow but things are improving.”

At Peru’s top business forum this week, a partner at a headhunting firm said trade was picking up, and executives said the labor intensive construction sector was in full recovery. But Peru is a country of big contrasts — only one in five people in Lima do their shopping in supermarkets, as opposed to local markets, and the gap between rich and poor still yawns. “The levels of inequality have increased. There is more, but notmore for everyone,” Matuk said. Elmer Cuba, economist at private consultancy Macroconsult, said things were picking up slowly “but we still need stronger and more sustained growth for real salaries to grow, and that process is going to take years.”

Back in Pachacutec, one measure of quality of life is whether residents still have plastic drums outside their homes and have to wait for the water truck to trundle past or whether they can hook up to new standpipes on their dirt streets. Residents said European aid agencies or American evangelists, not the government, had brought the water. But they credit the government — which says it has created 160,000 jobs in state temporary work schemes — with giving them jobs as street cleaners and park builders.

“I feel a bit better. Not that much, but I’m less afraid of where I’m going to get food from than I was before,” said Angelica Azteca, a 28-year-old housewife and mother-of-three, who spends 15 soles ($4.30) a day on food for her family. But others were gloomier. “I feel just the same — it seems my pockets are full of holes. Money goes in and out like water,” said Luz Malaga, 54. “I think Toledo has good intentions, and that he’s trying to do something. But don’t they say the road to hell is paved with good intentions?”

(Additional reporting by Tania Mellado, Eduardo Orozco)
((Lima newsroom, tel: +511 2…< , fax +511 221 2133, e-mail:
lima.newsroom@reuters.com))

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