Latin America's surprise rising economic star: Peru
Peru's growth rate – 9.8 percent – was one of the fastest last year. It's poised to break with neighbors Bolivia, Venezuela, and Ecuador with its center-left but pro-business governments.
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Peru’s ruling classes are almost giddy with excitement. “Latin America has the opportunity to be a major player like never before,” says former center-left President Alejandro Toledo, the country’s first indigenous leader and who is widely expected to be a top candidate again when Peru votes in a little over a year. “Peru is a hub for Pacific countries and China’s coming like a bulldozer.”Skip to next paragraph
Barriers to a boom
But Peru’s rapid ascent is not a given. In some of its historically neglected mountain and jungle areas, social unrest lurks just beneath the surface, ready to thwart progress if people in those regions don’t feel more a part of the economic boom.
In June, clashes between indigenous protesters and armed forces killed more than 30 in the worst political violence since the Shining Path’s campaign of terror in the 1990s.
Native groups say the confrontation, which led to the resignation of Peru’s prime minister and the exile of a top indigenous leader, took place because the government refused to consult them before opening up their ancestral lands to oil and gas exploration.
Peru’s Congress quickly repealed two decrees by President Garcia that were aimed at opening wide swaths of the Peruvian Amazon to logging, dams, and oil drilling, and Garcia admitted that his failure to properly consult with indigenous groups on these matters was a mistake. Still, Garcia remains committed to the energy exploration that he and many others believe is crucial for the development of the nation. With half of the country identifying as indigenous, such conflicts are likely to come up again.
“Peru is very geographically fragmented,” says Mr. Toledo, explaining that Peru’s Andes are difficult to access and that two-thirds of the country is road-swallowing Amazonian jungle. “That’s its beauty, but also its challenge.”
The country is now in a race to spread decisionmaking power and largess from its recent boom to long-neglected rural areas.
“One of the weak points of [Peru’s economic] growth is that the interior of the country has been left behind,” says Epifanio Baca, the coordinator of the Citizen Watch Program, which has spent more than 20 years monitoring mining in Peru.
But that’s changing.
Mr. Baca says that one of the most important developments in the past few years is that the tax on mining has increased from 7 percent to 30 percent, and that half of that tax revenue is sent to Peru’s regional governments.
The fact that 15 percent of extractive industry earnings now goes to regional governments is hailed as Exhibit A in Peru’s aggressive moves to decentralize power away from Lima.
“Decentralization is vital, because [rural Peruvians] see effective governance and improvement of life at the national level – in Lima – but they don’t see it where they are,” says Vito Verna, who monitors social conflicts at the national ombudsman’s office.