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Peru: President Says Country Closer to Overcoming Poverty

Among the varied and recent controversial statements by Peruvian President Alan Garcia Perez, and one that has provoked commentary from the most diverse political sectors, not to mention ordinary citizens, is that Peru is a step away from overcoming poverty and, moreover, soon will no longer be a developing nation.

The Lima daily, El Comercio, published the President's statement:

The President of the Republic, Alan Garcia, highlighted the reduction of poverty in 2007, affirming this decrease is a sign of the country's correct economic management, and predicting that by the year 2015 poverty will be reduced to less than 10% [of the population]. “This is good news and means that Peru is on the right path, following a good economic and social model. And, if we keep it up, in 2008 and in 2009, poverty will continue to diminish (.) My goals is to go beyond so that by 2015, we will have less than 10% [of the population living in] poverty,” he said. Based on the figures [provided by] the Peruvian National Institute of Statistics and Information (INEI), he sustained that poverty had decreased by 5.2% in the last year, meaning that one million, 380 thousand Peruvians are no longer poor.

Roberto Bustamante, writing in El blog del Morsa [es], is skeptical and cautious, recalling criticism regarding the methodology employed by civil servants in the current government and, although he recognizes there is a decrease in poverty rates, he highlights that this reduction in poverty is not across the board and there still exists much inequality. Let's read more from his post, Less Poor People in Peru:

La verdad, a estas alturas del partido, no sé si creer. El anuncio de la reducción de la pobreza en de 44% a 39% se da en un contexto, marcado por una alta desaprobación presidencial, y justo cuando los precios de los alimentos se están estabilizando de una forma u otra. … desde donde tengo entendido por lo que se dice, lo que se ha hecho es bajar la valla de la pobreza. De ese modo, evidentemente, hay menos pobres en el Perú. La pobreza también tiene varias caras. Para empezar, si vemos el problema de la desigualdad en términos relacionales, podremos darnos cuenta que existen accesos inequitativos inclusive entre hombres y mujeres en espacios rurales pobres. Como se afirmó en su momento, las mujeres rurales quechuahablantes son más pobres entre los pobres. Otro tema, ya para que me acusen de derrotista, es la desigualdad económica. Como señalé, en efecto, a nivel macro Chile pudo haber crecido económicamente, pero eso no lo hace un país menos desigual que Perú, donde el quintil superior es enormemente más rico que el quintil inferior, en términos de ingreso económico per cápita. Seguimos apostando por el chorreo como modelo, pero no para acortar las brechas entre los que ganan demasiado y los que ya se están ganando alguito.

Truthfully, at this stage of the game, I don't know whether to believe it or not. The announcement of the reduction in poverty from 44% to 39% [es] is given in a context marked by a high presidential disapproval rate [es] and just when the price of the food items is becoming somewhat stable. …as far as I understand, according to what is being said, what has happened is that the threshold of poverty has been lowered. Given that fact, clearly there are now less poor people in Peru. Poverty also has different faces. To begin with, if we look at the problem of inequality in relative terms, we would see there exists inequitable access even between men and women in poor rural communities [es] . As was mentioned, rural Quechua-speaking women are among the poorest of the poor [in Peru]. Another issue, so I can be accused of being a defeatist, is economic inequality. As I mentioned, in fact, at a macro level Chile may have grown economically, but that doesn't make it a less unequal country than Peru where the top fifth of the population is enormously wealthier than the lowest fifth, in terms of per capita income. We're still betting on the trickle-down theory as a model, but not to diminish the gaps between those who earn much and those who are just now earning a little.

Dennis David in Psicosociales [es] doesn't hesitate to categorize President Garcia's declarations as demagogic and illustrates his post, Complete demagogy: By 2015 we will no longer be Third World, with explanatory photos:

Unas cuantas fotos que muestran el abandono de los niños y damnificados del terremoto, que aún esperan apoyo; mientras el presidente García, los medios de comunicación adeptos y sus instituciones celebraban la disminución de la pobreza. ¿Por qué no muestran a esas personas que dejaron de ser pobres?. ¿Dejar la pobreza significa conseguir un trabajo con un salario de 500 soles en una service? ¿Qué significa realmente la expresión de Alan García que el Perú en el 2015 dejará de ser del tercer mundo?. ¿Moriremos todos, desaparecerá, sera un territorio de otro país? ¿Cada peruano ganará la lotería?….

[Here are] a few photos showing the abandonment of children and the survivors of the earthquake who are still waiting for aid while President Garcia, [his] supporters in the media, and his institutions celebrate the decrease of poverty. Why don't they show those people who are no longer poor? Does not being poor mean finding a job that pays a salary of 500 soles a month in a service? What does Alan Garcia's statement that by 2015 Peru will no longer be a Third World country really mean? Will we all die? Will Peru disappear? Will it become the territory of another country? Will every Peruvian win the lottery?

Cesar Vasquez in his blog, Perú: Política y Economía [es], quotes statements made by Farid Matuk, former director of the INEI (National Statistics and Information Institute) during the Toledo government, (Matuk is also quoted in the post at El blog del Morsa). The post is titled Farid Matuk explains how Alan's regime manipulated the poverty figures in Peru – Calibration: Science or Art?:

El día de hoy, martes 27 de mayo de 2008, me enteré de una característica no documentada de la medición de la pobreza que explica como se logra esta acelerada reducción de la pobreza en base a un artificio matemático, que a comienzos de 2006 había documentado para un artículo de la Revista Coyuntura de la Universidad Católica. En dicho artículo explicaba que existen cinco pasos matemáticos críticos para distorsionar la medición de la pobreza, y como en la medición del año pasado y en la del presente año se ha manipulado –con absoluta certeza– dos de los cinco pasos críticos que determinan la línea de la pobreza, y por ende el total de pobres. El primero de ellos ha sido modificar el centro de gravedad de la población de referencia, es decir donde esta el centro de la sub-muestra que determina la línea de pobreza. Desde el año pasado, el centro de gravedad son los hogares ubicados en el 38% de la distribución del ingreso, mientras que todos los estudios anteriores tenían por centro de gravedad el 40% de la distribución del ingreso. El segundo de ellos ha sido modificar el rango de referencia de la población que determina la línea de pobreza. Desde el año pasado, el rango de referencia son dos quintos de la población, mientras previamente era únicamente un quinto de la población. Ahora se tiene como rango de referencia los hogares ubicados entre el 18% y el 58% de la distribución del ingreso, mientras que antes eran los hogares ubicados entre el 30% y 50% de la distribución del ingreso.

Today, Tuesday, May 27, 2008, I learned about a non-documented characteristic in the measurement of poverty that explains how this accelerated reduction in poverty is attained via mathematical artifice, which at the beginning of 2006 was documented in an article in Coyuntura Magazine, [published by Lima's] Catholic University. That article explained there are five critical mathematical steps to distort the measurement of poverty, and how last year's measurement, [as well as] this year's, has –with absolute certainty- manipulated two of the of those five critical steps which determine the poverty threshold, and as a result, the total number of poor people. The first of these [manipulations] has been to modify the center of gravity of the population in reference, that is, where the center of the sub-sample that determines the poverty threshold is. Since last year, the center of gravity has been those households in the 38th percentile in the distribution of income, while all the previous studies had their center of gravity at the 40th percentile in the distribution of income. The second one has been to modify the range of the population reference that determines the poverty threshold. Since last year the range of reference has been two-fifths of the population, while previous it was only one-fifth of the population. Currently, the range of reference is those households between the 18th and 58th percentile of income distribution, while previously it was households between the 30th and 50th percentile of income distribution.

President Garcia mentioned, among other thing, that soon Peru's growth would surpass Chile's. I would like to quote Giovanna Aguilar of El Gran Combo Club [es] who coincidentally touched on the subject recently in the post, Peruvian Growth, Chilean Worries?

La revista chilena quépasa ha publicado, en su edición del 24 de mayo, un interesante artículo de Andrés Benítez titulado Por que Perú nunca alcanzará a Chile . En este artículo se analiza la situación de Chile y Perú en cuanto al crecimiento obtenido en los últimos años y las posibilidades que tiene el Perú de superar a Chile. Luego de cuestionar si efectivamente, el crecimiento que viene experimentando el Perú (7.1% promedio anual en los últimos años) es suficiente para superar el crecimiento y desempeño de los chilenos, reconoce que Chile ha perdido ritmo, pero que Perú no está en condiciones de alcanzarlos: “La respuesta corta es simple: estamos perdiendo el ritmo, pero de ahí a que nos alcance Perú es otra cosa”

Por otra parte en su análisis revisa cifras importantes que permiten hacer rápidas comparaciones entre países como el PBI per cápita (el de Chile es de alrededor de US$ 10,000 mientras que el de Perú es cercano a los US$ 3,500), periodos que le tomaría al Perú para alcanzar a Chile con supuestas tasas de crecimiento promedio por año, etc., para concluir que a pesar de que Perú tiene un crecimiento más acelerado que Chile en estos momentos, no lo alcanzaría. Y no sólo porque el tiempo que necesitaría para ello es largo (56 años, según sus cálculos) sino por las razones que anota, y que creo que son las que más deberían llamar nuestra atención: Perú no es un país estable económicamente y El Perú no tiene una institucionalidad estable ni eficiente.

On May 24, The Chilean magazine quépasa published an interesting article by Andres Benitez titled, “Why Peru will never surpass Chile.” In this article, he analyzes the situation between Chile and Peru with regards to its recent [economic] growth and the possibility that Peru would surpass Chile [economically]. After questioning if, in fact, the growth Peru has been experiencing (on average, annually 7.1 % in recent years) is enough to surpass the growth and performance of Chile, he recognizes that while Chile has lost its rhythm, Peru is not in condition to surpass it: “The short answer is simple: we're losing our rhythm but that Peru would overtake us is another thing.”
On the other hand, in his analysis he reviews important figures that permit quick comparison between [the two] countries; for example, their Gross Domestic Income (Chile's is around US$ 10,000, while Peru's is close US$ 3,500), the time period it would take Peru to overtake Chile with assumed rates of annual growth, etc., concluding that while Peru currently is experiencing a more accelerated growth than Chile, Peru will not overtake Chile. And not just because the time needed to do so is lengthy (56 years, according to his calculations) but for the reasons he notes [below], which I think should be the ones that we [Peruvians] should notice: Peru is neither an economically stable country nor does it have stable or efficient institutions.

In conclusion, I am going to once again quote El blog del Morsa [es] , who expands on this matter, writing in a new post, Poverty and inequality:

Seguramente en los próximos días se aclarará mejor de qué trata esta singular reducción de la pobreza en el Perú. Con el riesgo de cometer algún traspié, al no ser economista, lanzaré algunas hipótesis. 1. Efectivamente la pobreza se ha reducido en la cifra que comentó el gobierno. Lo siguiente es preguntarnos en qué zonas y por qué motivos. Al parecer, según comentarios de los propios ministros, la reducción de la pobreza se ha dado principalmente en regiones como la costa rural (tal cual lo ha dicho el ministro etnotravestido, Ismael Benavides). Esto puede deberse, de hecho, no solamente a la inversión privada, sino también al buen momento que tiene el maíz y otros productos destinados a la producción de combustibles. 2. No ha disminuido la pobreza significativamente en los departamentos donde hay minería. Esto va de acuerdo al incremento de la desigualdad económica en el Perú en las últimas décadas. ¿Por qué si estos sectores van tan bien (en términos de generación de riqueza para el país), la pobreza apenas ha disminuido ahí? Aquí la hipótesis puede ir más bien por la redistribución del gasto, cómo se gasta en el país y dónde hay mayor acumulación de riqueza.

Surely, in the upcoming days it will become clearer what this singular reduction in poverty in Peru is all about. Despite the risk of making a blunder, since I am not an economist, I will throw out some hypotheses: 1. Indeed, poverty has been reduced by the figures provided by the government. What is left is for us to ask ourselves in what regions and why. Apparently, according to comments made by the Ministers, the reduction of poverty has been seen primarily in regions such as the rural coast (as the much criticized Minister Ismael Benavides has said). This can be due, in fact, not only to private investment but also the current strong price of corn and other products destined for the production of food items. 2. Poverty has not decreased significantly in the departments where there is mining. This is in keeping with the economic inequality in Peru in recent decades. Why, if these sectors are doing so well (in terms of generating wealth for the country) has poverty barely diminished there? Here the hypothesis may have to do more with redistribution of wealth, how the country consumes, and where there is the greater accumulation of wealth.

And well, another point to note is that the media harshly refuted the government of ex-President Toledo and his head of the INEI, Farid Matuk, when they announced the country was growing and poverty was beginning to diminish. It seems that not all the presidents receive the same treatment. As demonstration of this, I invite you to read the post Article in the BBC, which Carlos translates in his blog Peruanista. In any case, there are still two years of the APRA-led government. Let's hope they don't end like Garcia's previous government with rampant inflation.

Translation by Alejandro García

Thumbnail photo by Phoosh

1 comment

  • Frank Reilly

    I hope that Garcia is telling the truth , chileans will be happy that then 150.000 peruvians working in Chile can go back to the peruvian paradise and will not be working for their enemy anymore , for enemy i mean chileans.

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