Garcia takes power facing Peru poverty “time bomb”

 

By Robin Emmott  |  July 26, 2006

PUNO, Peru (Reuters) – President-elect Alan Garcia takes office on Friday warning Peru is a “time bomb” that could explode into crippling protests if his government cannot combine its pro-business agenda with cutting chronic poverty.

Garcia, who is anxious to make amends for his disastrous first term in 1985-1990 that sparked economic collapse, faces the huge challenge of delivering the benefits of Peru’s unprecedented economic growth since 2002, while keeping international bondholders happy with a careful fiscal policy.

Poor Peruvians make up half the country’s 27 million population, especially in the southern Andes bordering Bolivia, and most did not vote for Garcia. They are impatient for jobs, access to clean drinking water and schools and hospitals.

“We’ll give Garcia six months to show some results. If nothing’s happened, we’ll start the protests,” said Luis Vilcapaza, who represents some 100,000 farmers in Peru’s southern Andes province of Puno.

Investors are keen to avoid the kind of political instability that almost toppled outgoing President Alejandro Toledo in 2004 and take advantage of Peru’s oil, gas and mineral wealth. Peru is the world’s No. 3 copper-producing nation and aims to export natural gas to Mexico from 2010.

Garcia’s presidential win in June was by a slim margin, giving him a weak mandate in a fractured congress.

His left-leaning American Popular Revolutionary Alliance party, known as APRA, is in the minority, while the party of losing presidential candidate Ollanta Humala has promised fierce opposition from its 45 seats in congress, nine more than

APRA.

“We face a time bomb because during Toledo’s term, the economy grew to benefit only 30 percent of the population,” Garcia said in a speech this month to residents of a shanty town on the edge of Lima.

“We will create economic progress that will allow us to confront these time bombs.”

Peruvians in the south say they want the kind of economic nationalism favored by Venezuela’s anti-U.S. President Hugo Chavez and Bolivian leader Evo Morales, not policies supported by Wall Street such as privatization.

SOCIAL PROBLEMS LOOM

They say that is the only way to ease social ills in a country where the gross domestic product per capita is lower than in 1975.

About 62 percent of young Peruvians are poor, according to a study by the U.N. Population Fund and the Peruvian health ministry.

The number of Peruvian women who die during childbirth is one of the highest levels in Latin America. One in three women in Peru’s jungle region become pregnant before age 20.

Malaria, tuberculosis and sexual violence against women also are all major problems in Peru.

“Garcia urgently needs to help the young,” outgoing Health Minister Pilar Mazetti told Reuters. “Otherwise we’ll see frustrations boil over into protests, the formation of gangs and the spread of sexually transmitted diseases.”

Farid Matuk, outgoing head of Peru’s National Statistics Institute, said the solution is not in faster economic growth, as Garcia has pledged, because the economy only needs to grow above 3.3 percent annually to alleviate poverty.

Rather, Garcia should aim to develop the economy away from its historic dependence on mineral exports by helping small businesses and improving the way public funds are spent.

Peru’s mining regions will receive a record $800 million in 2006 from royalties and taxes, equivalent to slightly more than the government’s total annual health and education budget. But locals and miners say the money is not being properly spent.

“We need to see jobs and better schools, working hospitals,” said 43-year-old rickshaw driver Gabriel Tipo, a widower in Puno with five children. “If things don’t get better, I think Humala should stage a coup and take over government.”

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PERU: Upbeat Poverty Stats Questioned

By Milagros Salazar

LIMA, May 29 (IPS) – The Peruvian government has announced that poverty fell by 5.2 percent in a year and forecasts that by 2015, less than 10 percent of the population will be below the poverty line. But experts and provincial governors cast doubt on these figures, given the unmet basic needs of peasant families.

“These poverty figures show that Peru’s economic model is working,” Finance Minister Luis Carranza said on Wednesday after announcing that according to the National Institute of Statistics and Informatics (INEI), the proportion of people living in poverty dropped from 44.5 percent of the population in 2006 to 39.3 percent in 2007.

This means that nearly 1.4 million Peruvians have escaped poverty, and is an improvement on the 42 percent poverty rate projected by the authorities. President Alan García celebrated the result, saying that he had not been over-optimistic when he promised that by the end of his term, in 2011, poverty would be reduced to 30 percent.

“I can tell the country that my aspirations go even further and that by 2015 we will have a poverty rate of less than 10 percent of the population, which means that Peru will no longer be a Third World country,” said the president, making a forecast that exceeds his five-year term of office.

Meanwhile, the proportion of people living in extreme poverty shrank from 16.1 percent to 13.7 percent of the population. The country’s Andean highlands, as opposed to the coastal and Amazon jungle regions of Peru, are home to 67.5 percent of the extreme poor.

The results of the 2007 census, to be released on Jun. 9, will give a more precise idea of how many people have been lifted out of poverty, and what extrapolations can be made, said the head of INEI, Renán Quispe.

President García did not make allowances in his calculations for population growth, which is occurring at a rate of 1.3 percent a year. According to the latest official statistics, 27.2 million people live in Peru.

But Farid Matuk, a former head of INEI, said that the figures given out by the authorities were not credible.

“In spite of the nine percent gross domestic product growth posted in 2007, the García administration could not possibly have managed to reduce poverty by nearly 10 percent in two years, when the previous government of President Alejandro Toledo only achieved a fall of six points in five years,” Matuk told IPS.

The expert also said the García administration has manipulated the figures by increasing the 2005 poverty rate by nearly four percentage points, from 44.5 to 48 percent of the population, by changing the method used to measure poverty.

“These results are completely illogical. I suspect that urban incomes have been inflated in order to show this reduction in poverty,” Matuk said.

That would explain that poverty was reported to have fallen most in urban areas, from 31.2 to 25.7 percent.

But the figures show apparent improvement in rural areas as well. Between 2005 and 2006 rural poverty fell by only 1.6 percent, but in 2007 it was reduced by 4.7 percent.

The highlands region showed the least progress in fighting rural poverty, with a total reduction of only 3.2 percent, while in coastal rural areas poverty dropped by up to 11 percent.

In Matuk’s view, the INEI experts may have overvalued the prices assigned to the food grown by rural families

Since many families, mainly in the rural areas, grow their own food or provide their own essential services, such as water, INEI assigns these goods a value which, in Matuk’s opinion, should be made public, in order to assess the reliability of their figures.

Based on this method, INEI set the poverty line at 229.4 soles (82 dollars) a month per person, and the extreme poverty line at 121.2 soles (43 dollars) a month. Persons consuming less than these amounts are considered poor, or extremely poor, respectively.

“It’s important to know what price was assigned to some foods like eggs and potatoes, and also, for example, what value was established for ‘self-rent’ in marginalised urban areas. So far none of this is known, so the poverty lines are a mystery,” he said.

In response to the criticism, INEI published this information on its web site on Tuesday, and experts are now analysing it. INEI emphasised that it had received advice from the World Bank and several research centres in drawing up its report.

“The results are in compliance with international guidelines, and most importantly, they are transparent,” said World Bank regional director Felipe Jaramillo.

Matuk said that one way of demonstrating that the economic growth achieved between 2006 and 2007 had no impact on the living conditions of the majority of the population is that hunger had only been reduced by just over one percent — “in other words, hardly at all” — over the same period.

For his part, Pedro Francke, an economist at the Pontificia Catholic University, concluded that the method used by INEI did not take into account higher food prices, and was only showing one side of poverty. He said the institute should use a much broader form of measurement that is not only monetary.

“The quality of health and education services that are provided to the population should be measured, as well as whether or not people have identity documents, and what access they have to democracy, for example,” said Francke.

Several provincial governors expressed doubts that poverty reduction in their area could have been as great as the statistics suggest, especially in provinces where historically over 70 percent of the people were considered poor.

“The statistics must have been manipulated, because people are still protesting in the streets due to the fact that they are not seeing the benefits of economic growth. INEI does not measure poverty in villages and towns in the rural areas, where the extreme poor are concentrated,” Hernán Fuentes, the governor of Puno, told IPS.

In his southern Andean region, poverty fell from 76.3 percent to 67.2 percent, according to the official figures.

The poverty rate also fell in Ayacucho, another southern Andean province, from 78.4 to 68.3 percent. “We were sure that poverty had fallen by three or four percent, but not to such an extent. I hope it’s true,” said Governor Ernesto Molina.

Loreto, in the northeast, is the province that apparently made the most progress, with a spectacular 11.7 percent drop in the poverty rate. Governor Iván Vásquez said that such a reduction was indeed possible, but mainly in large cities like Iquitos, the provincial capital, where over half of the population lives.

In Cuzco, however, the poverty rate rose from 49.9 to 57.4 percent. “The social programmes aren’t working, because out of every 10 soles the government allocates to fight malnutrition or poverty, six are swallowed up by bureaucracy,” said Governor Hugo González.

Huancavelica remains the poorest province, with 85.7 percent of the population below the poverty line, after a reduction of barely three percent. ( END/2008 )

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