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Poverty and Anti-Poverty Strategies in Peru: A Literature Review

Simon Bidwell
Victoria University of Wellington
Wellington, New Zealand
September 2008

This literature review aims to provide a broad overview of poverty and anti-poverty strategies in
Peru in the past two decades, as background to more detailed future investigation that focuses on
specific themes and regions.

The Evolution of Poverty in Peru since the 1980s

Well-known factors in Peru's national development pathway are the civil war and economic
collapse of the 1980s, and a sustained period of stagnant or negative growth that saw real GDP
per capita fail to supass its 1976 level until 2006. Yet poverty has increased proportionately more
during recessions than it has declined during periods of economic growth (Chacaltana 2006,
Tanaka and Travelli 2002, Yamada and Castro 2007). During much of the 1985—2007 period
around half the Peruvian population remained below the national poverty line, with around 20
percent extremely poor.1

Between 2004—07 poverty dropped to 39.3 percent and extreme poverty to 13.7 percent2 but this
decline was relatively small in the context of the most rapid growth in the region, driven by soaring
prices for mineral exports. In short, poverty has returned to 1985 levels, while real GDP per capita
is 30 percent larger. The national figure also disguises a long-standing inequality between urban
and rural areas. Rural poverty rose as high as 77 percent in 2001, and had returned to 64 percent
in 2007, with 32 percent of rural people extremely poor (INEI 2008).

Several authors argue that historic inequalties were compounded by the hyperinflation and
consequent structual adjustment policies of the 1980s, effecting a major drop in real wages which
has never been redressed (Verdera 2001, Yamada 2005)3. In 2002, the hourly wage in urban
areas was approximately 50 percent lower than in 1985, while working hours had increased from
50.3 to 54.8 hours per week, with an increasing proportion of people working over 60 or even 70
hours (Yamada 2005).4 Recent years have seen a slow rise in professional salaries, countered by
a continued decline in blue-collar wages, which Chacaltana (2006) describes as a 'trickle up'
phenomenon.

Nevertheless, both quantitative and qualitative studies suggest that over time a significant number
1
In Peru, poverty is measured in absolute, monetary terms, based on the income required per person to purchase a
basic basket of goods, or (in the case of extreme poverty) satisfy basic nutritional needs. This varies regionally
(INEI 2007).
2
Ther is considerable debate about methodological differences (Chacaltana 2006, Reyes 29 May 2008). Statistical
information for the 1980s and early 1990s is rawn from the National Living Standards Survey (ENNIV)
administered by private company Cuanto. Since the mid-1990s the Peruvian National Statistical Institute (INEI)
has measured poverty levels through the National Household Survey (ENAHO), but has undertaken a number of
methodological changes both in the survey itself and in statistical techniques. In 2007, the INEI undertook further
methodological changes resulting in the presentation of another new time series from 2004—07.
3
Verdera (2001) argues that real losses for workers came in the last two years of the Alan Garcia presidency (1988—
89). The government held down wages while raising prices, particularly in public services such as health and
education. The situation was exacerbated by the better-known structural adjustment policies under Alberto
Fujimori, including slow growth in the minimum wage and public sector salaries, and discouragement of unions
(union membership fell from around 50 to around 15 percent between 1988—97).
4
More people worked over 60 hours (33.4% in 2002, up from 18.5% in 1985) and over 70 hours (18.5% in 2002 from
10.4% in 1985. Those who worked over 60 hours per week were less likely to access education or training, practice
basic health care, or be involved in community activity. Yamada concludes that the tendency to work extra hours in
response to reduced hourly wages may be a successful strategy for meeting material household needs but may
exacerbate some of the effects associated with poverty and the ability to accumulate human capital.
of people manage to escape poverty, while others became poor. Panel studies across several
household survey periods (Tanaka and Travelli 2002, Chacaltana 2006) found that approximately
65 percent of the population at some stage fell below the poverty line, while in rural areas this was
85 percent. A similar dynamic was observed by Krishna et al. (2006), who used the Stages-of-
Progress methodology5 to survey 40 rural communities in the Peruvian departments of Cajamarca
and Puno.

Chacaltana's (2006) analysis of panel studies identified exerience of 'disasters' as an important


poverty-related factor. Natural disasters were correlated with 'chronic' poverty, while health and
social disasters6 were associated with 'transient' poverty. The most common reaction to these
disasters was to work more hours or sell off household assests. Krishna et al (2006) also found
that familial ill-health was the most common cause of a drop into poverty, with a standard response
being to sell off animals or other assets.

The effects of ongoing poverty and inequality are apparent in the statistics representing the
Millenium Development Goals. Child malnutrition in Peru is similar to levels in (poorer) Bolivia and
Ecuador, but much higher than in Colombia or other comparable Latin American countries
(Martinez 2005)7. More worringly, there has been little change over time: from 1996 to 2006
severe malnutrition reduced from 8 to 5.6 percent of children under five, while chronic malnutrition
was reduced from 25.8 to 24.1 percent (INEI, accessed August 2008).

In health, infant mortality improved through the 1980s and 1990s at rates similar to elsewhere in
Latin America , but remained three times higher in the sierra than in Lima, and in some regions
was comparable to levels seen in Cambodia or Uganda (Dammert 2001). Ortiz (2007) notes that
after a successful programme of tuberculosis detection and treatment during the 90s, the number
of TB cases plateaued during 2003—05, and argues that ongoing poverty, malnutrition and
overcrowding constitute an absolute barrier to further progress with the national TB strategy.

Alleviating the Symptoms of Poverty

In theory, social services should ameliorate the effects of structural adjustment and also allow
people to develop the 'human capital' required to successfully participate in the marketplace.
However, various sources concur that Peru has among the lowest public social expenditure in the
Latin American region per capita and as a proportion of GDP (Yamada 2007, Martinez 2005)8.

Overall, public education and health spending is slightly regressive (Tanaka and Travelli 2002)9.
Furthermore, education coverage has increased while per-capita spending has not, suggesting a
reduction in quality (Yamada and Castro 2007)10. In recent years, tertiary studies show easily the
highest return on investment for households, but the non-poor constitute about 80 percent of
those who access education at this level11. Several sources describe restricted access to health
services for the poor due to cost and cultural barriers (World Bank 2003, Bowyer 2004). The 2000
health survey reported that 31 percent of people requiring medical attention did not seek it for
reasons of cost, while a further 8 percent attended a pharmacy or traditional healer (Arosquipa et
al 2007).
5
This asks community members to define what consitutes an ascent out of poverty. The local view of poverty
'overlapped little' with monetary definitions, but was remarkably consistent across the communities, essentially
involving the ability to obtain a larger plot of land and larger livestock animals.
6
The latter mainly referring to crime.
7
Peru, Bolivia and Ecuador all had about twice the level of chronic malnutrition as Colombia and nowhere near the
1—6 % for both measures seen in Chile, Cuba, the Dominican Republic and Jamaica (Martinez 2005). Malnutrition
rates were higher in high-altitude areas at all income levels, in all countries except Colombia.
8
This is due to a low budget priority for social spending, and low overall public expenditure, thanks to a tax take of
just 14 percent of GDP (compared to the regional average of 18 percent.) (Yamada & Castro 2007, INEI 2006).
9
It has also been highly pro-cyclical. Yamada and Castro (2007) concude that a 1% drop in GDP has historically
resulted in a 4% drop in social spending per poor person.
10
Peru was last out of 41 countries in a test of reading comprehension measured by the OECD's Programme for
International Student Assessment .
11
The authors show an increasinly 'convex' relationship between increasing levels of education and lower risk of being
in poverty; in other words, basic levels of education are associated with a relatively 'flat' drop in poverty, but the
steps to higher education see a steeper drop off in risk of poverty.
In the wake of structural adjustment, increasing prominence was given to 'anti-poverty'
programmes that directly target the poor. These have tended to involve food transfers, in some
cases through public schools, but in many cases through local community groups or mothers's
clubs12. Tanaka and Travelli (2002) estimated that food transfer programmes were benefiting about
28 percent of all Peruvian households, including 40 percent of the poor and 57 percent of the
extremely poor . However, they had reduced poverty by at most 1 to 2 percentage points, and
were associated with a small increase in school attendance but not in school performance
(Yamada and Castro 2007).

The programmes have been criticised as overlapping, uncoordinated13, and in many cases failing
to reach their intended target (Tanaka and Travelli 2002, Vasquez 2005, Chacaltana 2006 Yamada
and Castro 2007 ). Also criticised is the distribution of assistance through 'participatory'
approaches parallel to public institutions. Entrance to these programmes has required
organizational capabilities and political connections – factors lacking within the poorest
communities – while studies suggest that mothers clubs and similar groups are often undemocratic
(Tanaka and Travelli 2002, Wright 2006.) This approach has also produced a significant urban
bias, as politicians have sought to use the programmes for clientilistic purposes.(Chacaltana 2000,
Jones et al 2007).

Some of these shortfalls are addressed by the 'Juntos' ('Together') programme, a new scheme of
conditional cash transfers to the very poor, inspired by similar initiatives in Mexico, Chile and Brazil
(Jones et al 2007, Juntos web site). A three-stage targeting process involves communities as well
as public institutions.14 Participating households receive approximately $30 USD per month, on the
condition that they compete civic identification documents for themselves and their children, and
ensure that their children access public health, education and nutrition services. Payments are
directed to mothers, who sign an agreement with the state for four years.

A study by UNICEF (Jones et al 2007) found anecdotal evidence of increased involvement of


parents in children's education, significantly increased access to health services, and
improvements in consumption of nutritional food. The authors found some surprising positive
effects on (intra-household) gender relations, but also raised concerns about the effect on
community cohesion of the divisions between participants and non-participants who may be only
marginally less poor. In addition, service quality had not kept up with the requirement to access
public health and education services.

Development Interventions

Factors associated with poverty in rural or marginal urban areas include isolation, poor land
productivity, division of plots among families, and lack of access to credit (World Bank 2003,
Escobal and Valdivia 2004, Krishna et al 2006). A number of authors discuss efforts that aim to
create economic opportunities, support accumulation of assets, and facilitate access to markets

Saveedra (2006) discusses the COFOPRI programme in Peru, which sought to award titles to
informal holdings in Peruvian cities. By 2005 the project had formalized the legal status of nearly 2
million and awarded 1.5 million titles, benefiting around 4 million people. However, the author
reports inconclusive evidence of improved access to credit15. In addition, the programme was not
coordinated with efforts to improve electricity, water and sanitation infrastructure and indeed failed
to involve local governments to any significant extent.

Local microcredit schemes have been touted as offering access to capital for the poor, but
12
While one of the most commonly-discussed topics in the literature, total expenditure on targeted anti-poverty
programmes is less than 10 percent of the government budget (INEI 2006).
13
Vasquez (2005)could identify “over forty” anti-poverty programmes associated with the ministries of Health,
Education, Women's Affairs, Labour, Agriculture, Housing, Transport, and Energy and Mines.
14
Targeting is in three stages: selection of the poorest districts and those most affected by political violence is
followed by household selection based on questionnaires, and finally validation of the first two stages through
community assemblies in which local authorities and health and education representatives participate.
15
Any increased access seemed to be through subsidized public schemes rather than the private banking system.
experiences of these schemes are distinctly mixed. Reporting on a case of embezzlement in
Cajamarca, Wright (2006) emphasizes the vulnerability of these schemes to being dominated by a
few women with existing status in the community and thus “reinforc[ing] existing hierarchies and
inequalities”. On the other hand, Gomez and Humphreys Bebbington (2006) report on a
successful programme of “village banks” set up by an NGO called FINCA in post-civil war
Ayacucho. They suggest that the success of microcredit schemes is highly contingent on the
specific social context, and the degree of trust between participants.

Surprisingly little is published on infrastructure in relation to poverty, given that collectively,


provision of roads, electricity and water is associated with a 34% increase in income among rural
households, (Valdivia and Escobal 2004), while Chacaltana (2000) found that economic
infrastructure was the only category of intervention significantly associated with a move out of
poverty between survey periods.

A review of targeted technical assistance and other development efforts in the rural sierra (Valdivia
and Escobal 2004) tells a familiar story: there have been a large number of individual programmes
run by different government departments, as well as others delivered by international agencies
such as USAID, but little effort to co-ordinate them. Very few programmes have been evaluated for
their effect on wellbeing or have even established pre-programme baselines. Technical assistance
to small farmers has been criticised as “arrogant” and not taking local knowledge into account
(World Bank 2003).

More promising is the establishment of development initiatives such as the 'Cuzco-Puno corridor'
that take an integrated approach to the circumstances of a locality, and involve community groups
in planning (Valdivia and Escobal 2004,Travelli 2005). However, according to Travelli (2005) “little
or nothing” has been written about innovative programmes that take a geographical focus and
participatory approach.

Conclusions

The literature reveals multiple dimensions to poverty in Peru. In addition to the longstanding
'structural' exclusion of the indigenous and rural poor, a broad mass of people face a precarious
existence, remaining vulnerable even when they manage to temporarily get ahead. In the last
fifteen years, targeted programmes for the very poor have been developed instead of, rather than
in addition to, a basic universal safety net. Several authors argue persuasively for the role of
macroeconomic issues: if wages had retained anything like their 1980s value poverty levels would
almost certainly be lower today. Yet the omnipresent themes are social and political: lack of co-
ordination in public agencies, dysfunctional relations between citizens and the state, and the
strange co-existence of solidarity and mistrust within communities.

The Peruvian academic literature generally takes a broad, critical perspective, but relies heavily on
aggregate survey data. International researchers are more likely to venture into the provinces and
provide narrative details of individual lives, but are frequently limited to looking at single sectors or
taking a technical, apolitical approach. There would be value in more research that looked at the
interrelation of economic, political and social factors with a geographic (rather than narrowly
sectoral or thematic) emphasis. Areas of enquiry could include district or community-level study of:

• whether bottom-up development of alternative economic niches (eg, eco-tourism) offers more
economic opportunity and greater social mobility for the marginalized
• opportunities and obstacles faced by migrants from rural to urban areas, including labour
conditions in informal and semi-formal sectors
• factors in the relationship between communities and local state insitutions, and comparison of
state and community aspirations for social services
• the progress of geographically-focused development initiatives, including the nature of
community participation.
Sources

Searches were undertaken of the Science Direct, ProQuest and JSTOR databases for peer-
reviewed articles relevant to issues of poverty in Peru. However, the most fruitful results in terms
of recent and topical research were obtained from searches in Google Scholar, which revealed a
significant quantity of 'grey' literature published by research units at Peruvian universities and
multilateral institutions such as CEPAL, the World Bank, and UNICEF. A considerable quantity of
further literature was listed in bibliographic databases including the Institut Francés d'Estudes
Andines; the Costa Rica-based Sistema de Información y Documentación Agropecuario de las
Américas (SIDALC) ; the Brazilian Biblioteca Virtual em Saúde (BVS) and the library of Lima's
Universidad Nacional Mayor de San Marcos (UNMSM), but these were not available online and
therefore inaccessible in the timeframe for the review.

References16

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The English versions of the Spanish-language references are my own translations. Spanish does not allow the use of
title case – only the first word and proper names are capitalized. For the sake of consistency, I have therefore used
sentence case for all the article titles (Spanish and English) in the references.
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