Archive for inequality

20080711 – Peru’s Economic Model and Poverty Reduction: Is It Working?

Posted in 3 Cables with tags , , , , , , , , , , , , , , , , , on June 4, 2009 by Farid Matuk

The relationship between Bolivia and Peru has deteriorated rapidly over the last year, in part because of disagreements on foreign trade issuess. Recently, Peruvian President Alan Garcia and his Bolivian counterpart, Evo Morales, engaged in personal attacks which served to increase tensions between the two Andean nations. On July 2nd, Garcia attacked Morales by saying the latter was jealous of Peruvian economic growth. Maybe Garcia has a point in observing that Peru’s economic growth is more robust than Bolivia’s, but economic growth is not necessarily the ultimate objective for a country; more important may be the satisfaction of its citizens, which in Peru is trending downward because of growing inequality.

In its chronic struggle against poverty, Latin America has experimented with various economic models. These have included the neoliberal policies of the 1980s and 1990s, which have led to increased inequality. Some see neoliberal failures as responsible for the leftist wave that has spread across the region. Peru, however, is one of the two countries in Latin America that have not been tempted recently by solutions calling for the abandonment of the neoliberal development model.

The Peruvian model has produced an exceptional economic growth over the last five years. In 2007, Peru’s GDP growth rate was more than eight percent. The following year, the U.S. ratings agency Fitch gave Peru an investment-grade rating, meaning that after thorough analysis of recent economic trends, the agency now considers Peru a safe and hospitable investment venture.

Profitable policies, but largely for the elite
Unfortunately, as the country’s economy grew, so did its inequality. This trend is especially evident in contrasting Peru’s coastal region with the Andes, with most of the increase in personal income being concentrated in Lima and other coastal urban areas. This can readily be seen in the luxurious beach clubs to the south of Lima, which epitomize the often fabulous wealth of the Peruvian elites. In contrast, Peru’s National Statistics and Information Institute (INEI) recently reported that rural highlands were the least succesful areas in reducing poverty during 2007. Many communities here still practice subsistence agriculture and suffer from extreme poverty, even though the region is rich in mineral resources – Peru’s main export.

During the Alejandro M. Toledo presidency (2000–2005), Peru’s Gini coefficient increased from 49.8 in 2000 to 52 in 2003, demonstrating a considerable rise in inequality. The significance of this injustice is not just statistical or ideological, because increasing economic inequality inevitably leads to public dissatisfaction, which in turn contributes to the country’s instability. Public dissatisfaction with uneven growth was manifested in Toledo’s approval ratings, which were the lowest in South America in 2004. This apparently has been recognized by the new president, Alan Garcia, who announced in May a budget increase of S./ 203 million (around $70 million) for the social program ‘Juntos’ which originally was launched by Toledo in 2005.

The ‘Juntos’ program: squandered genius?
The ‘Juntos’ program provides subsidies to poor families on the condition that they regularly send their children to schools and health centers. ‘Juntos’ is an attempt to recreate programs taken from Mexican and Brazilian models, which were designed to increase literacy rates and decrease economic inequality. Unfortunately, objective conditions in Peru make this program unlikely to succeed, because the nation’s primary education and healthcare systems are among the most inadequate in the world. Additionally, the program has targeted urban areas and neglected rural regions, which are most in need of government assistance.

It would not be surprising if ‘Juntos’ does not fulfill its purpose because Lima has proven extremely innefficient at implementing social programs in the past. The ‘Vaso de Leche’ effort in the 1990s failed to achieve its goal of reducing malnutrition in five-year-old children, even though it was the most widespread program of its kind in the country. Such examples reaffirm the challenge that would be involved in successfully expanding the ‘Juntos’ program. Ultimately, ‘Juntos’ expansion cannot contribute to sustainable development if the country’s education and healthcare structures are not first reformed.

Still, some statistics suggest that ‘Juntos’ may be helping to decrease overall poverty. The INEI recently announced a sizeable 5.2 reduction in poverty in 2007. However, many have questioned the validity of these numbers, including Farid Matuk, an ex-president of INEI, who guesses that such numbers might be forged. They suggest a poverty reduction rate of 0.6 percent per each point of GDP growth, which is three times higher than the average of previous years. At this rate, Peru would eliminate poverty completely in about 10 years, which strains credulity. Despite the surprising results, several institutions, including the World Bank and two Peruvian universities, supervised the study’s methods and verified the validity of the statistics. If they are valid, then ‘Juntos’ may yet be the reason behind the reduction in poverty, considering it was being implemented when the purported drop began to accelerate.

Development must be sustainable
Every effort must be made to continue to promote poverty reduction. In the past, social programs repeatedly have failed to create sustainable development within the Peruvian neoliberal model. The economic expansion experienced by Peru between 1991 and 1997 in factreduced poverty by several points. However, the subsequent 1998 to 2001 recession was a huge step backwards, suggesting that the social programs in the 1990s failed to create sustainable development at the time. Will the new expansion be different, or will a future recession negate all of the advances which have been made?

Peru’s Economic Minister, Luis Carranza, optimistically has predicted that Peru will experience 10 to 15 years of economic growth starting in 2008. This would represent the longest expansion cycle in Peruvian history and would lead to a significant reduction in poverty. ‘Juntos’ could potentially play a part in Peru’s economic success, but for Carranza’s dream to become reality, the government must first take aggressive steps in favor of sustainable development and adequately address the problems of inequality, healthcare and education. Without such reforms in these areas, programs like ‘Juntos’ cannot create sufficient opportunities for the poor, no matter how carefully they are nurtured.

This analysis was prepared by COHA Research Associate Guillermo Cornejo


Tue Apr 15, 2003 7:47 pm

Posted in 2003-04 Abril with tags , , , , , , , , , , , , , , , , , , , , , , , , on January 28, 2009 by Farid Matuk

Golden Path

“(Elmer) Cuba señala que se requiere lograr tasas de crecimiento de
5% en los próximos diez años para generar trabajo”

Hola Elmer:

Disculpa el atrazo en comentar tu entrevista pero me parecio
sugestiva la discusión del crecimiento en vez de otras
cortoplacistas que he comentado previamente.

Detras de tu afirmación me imagino un Harrod-Domar, en donde
asumes salarios reales crecientes (¿o me equivoco?) y por ello el
5%, sino bastaría una tasa igual a la del crecimiento de la
población y un Gini constante.

El Instituto ha publicado hoy, por primera vez, series de masa
salarial tomadas de muestras de 19,200 hogares en Lima; por ello
creo que los números son sólidos. Queda abierta la pregunta para
provincia, pero unos resultados del PEEL con diferente metodología
muestran que los salarios medios de Lima crecen menos que los de

Si seguimos con un Harrod-Domar, mi pregunta central es que la
tasa del 5%, que implica salarios reales crecientes, nos debiera
conducir a un nuevo Gini en diez años. No recuerdo haber visto
trabajos que coloquen una meta de crecimiento en función de una
variación del Gini, aunque un trabajo reciente de PNUD donde trabajo
Jaime Saavedra con datos del 2000 tiene ese sabor.

Un abrazo, Farid

20080529 – Farid Matuk sostiene que el INEI alteró cifras con método de medición

Posted in La República with tags , , , , , , , , , , , , , , , , , , , , , , on January 27, 2009 by Farid Matuk

El ex jefe del Instituto Nacional de Estadística e Informática(INEI) Farid Matuk señaló que los porcentajes de reducción de la pobreza fueron alterados al ampliar al doble la población de referencia para elaborar las cifras.

En enlace telefónico desde Iraq, Matuk dijo que entre 1995 y 2004 se mantuvo como población de referencia a un quinto de la población total, ubicada entre el 30% y 50% de la pirámide de ingresos.

Sin embargo, agregó el matemático, con el gobierno de Alan García, se duplicó la población de referencia a los dos quintos y se la ubicó entre el 18% y 58% de la pirámide de ingresos.

“Ese cambio metodológico, desde un punto de vista matemático, necesariamente reduce la cifra porque disminuye el valor de la línea de la pobreza. Si lo cambiaron es porque lo necesitaban para algún propósito”, detalló.

Matuk negó que respirara por la herida, como dijera del Castillo.

“Hace tres semanas el premier dijo, como información preliminar, que la pobreza en 2007 se redujo en 2.5 puntos; pero al salir la información definitiva, resulta que fue el doble. Que explique por qué fallaron sus proyecciones”, finalizó.


Pedido. Matuk asegura que el INEI aún no publica las rutinas de programación para conocer el valor que se les impuso a los productos de la canasta familiar autogenerados en zonas rurales.

Sat Nov 30, 2002 2:05 pm

Posted in 2002-11 Noviembre with tags , , , , , , , , , on January 24, 2009 by Farid Matuk

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.

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 not
more 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: +511 221 2130, fax +511 221 2133, e-mail: