Poverty And Anti-poverty Strategies In Peru: A Literature Review

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

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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). 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. 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). 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-ofProgress 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

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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. The latter mainly referring to crime. 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. 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). 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. Peru was last out of 41 countries in a test of reading comprehension measured by the OECD's Programme for International Student Assessment . 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

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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). 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. 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. 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 coordination 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 peerreviewed 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 Aguiar, Christine et al (2007). An analysis of malnutrition programming and policies in Peru. Report prepared for Gerald R. Ford School of International Development, University of Michigan. Available at: http://www.umich.edu/~ipolicy/peru/1)%20An%20Analysis%20of%20Malnutrition%20Programming %20and%20Policies%20in%20P.pdf Arósquipa, Carlos et al (2007). “La ayuda oficial al desarrollo en salud en el Perú” [Official development aid in health in Peru]. Revista Peruana de Medicina Experimental y Salud Publica 24(2), 163-78. Bowyer, Tim. (2004). “Popular participation and the State: democratizing the health sector in rural Peru”. International Journal of Health Planning and Management 19, 131—61. Chacaltana, Juan. (2000). “Más allá de la focalización: Riesgos de la lucha contra la pobreza en el Perú” [Beyond targeting: Risks in the battle against poverty in Peru]. Mimeograph, Lima:Consorcio de Investigación Económica y Social (CIES). Available at: http://cies.org.pe/node/265 Chacaltana, Juan (2006) “Se puede prevenir la pobreza?” [Can poverty be prevented?]. Mimeograph, Lima: CIES. Available at: http://www.consorcio.org/novedades/SEMA2005/MM/JCH.pdf Dammert, Ana Cecilia, (2001). “Acceso a servicios de salud y mortalidad infantil en el Perú” [Access to health services and infant mortality in Peru]. Mimeograph, Lima: CIES / GRADE. Available at: http://cies.org.pe/node/276 Escobal, Javier and Valdivia, Martin. (2004). “Peru: Hacia una estrategia de desarrollo para la sierra rural” [Peru: Towards a development strategy for the rural sierra]. Mimeograph, Lima: GRADE. Available at: http://www.grade.org.pe/download/pubs/Pobreza%20rural%20sierra.pdf Escobal, Javier. (2005). The role of public infrastructure in market development in rural Peru. Submitted for PhD thesis, Wageningen University. Available at: http://mpra.ub.unimuenchen.de/727/1/MPRA_paper_727.pdf Gómez, Arelis and Humphreys Bebbington, Denise. (2006). “Rebuilding social capital in postconflict regions: women's village banking in Ayacucho, Peru and in highland Guatemala” in Jude L. Fernando (ed.). Microfinance: Perils and Prospects . Milton Park; New York: Routledge. Herrera, Javier (2003): “Análisis de la pobreza en el Perú 2002 desde la perspectiva de los hogares y las unidades de producción” [An analysis of poverty in Peru in 2002 from the perspective of households and productive units]. Mimeograph, Lima: INEI. Available at: 16

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.

http://www.consorcio.org/CIES/html/doc/Hipervinculo_Herrera.doc Instituto Nacional de Estadística e Información (INEI) (2006). Peru: Compendio Estadístico 2006 [Peruvian Statistical Compendium 2006]. Lima: INEI. Available at: http://www1.inei.gob.pe/biblioinei.asp Instituto Nacional de Estadística e Información. (2008). La pobreza en el Perú en 2007 [Poverty in Peru in 2007]. Technical Report. Lima: INEI. Available at: http://www1.inei.gob.pe/inicio.htm Iguíñiz Echeverría, Javier M. “La pobreza: resultados provisionales” [Poverty: provisonal results]. La Republica, 29 May 2008. http://www.larepublica.com.pe/component/option,com_contentant/task,view/id,223480/Itemid,0/ Jones, Nicola et al. (2007). “Conditional cash transfers in Peru: Tackling the multi-dimensionality of childhood poverty and vulnerability”. Forthcoming chapter in Alberto Minjuin et al. (ed.) (2007). Social Protection Initiatives for Families, Women and Children: An Analysis of Recent Experiences. New York: New School and UNICEF. Available at: http://www.unicef.org/policyanalysis/files/Conditional_Cash_Transfers_In_Peru__Tackling_The_Multi-Dimensionality_Of_Poverty_And_Vulnerability.pdf Juntos: programa nacional de apoyo directo a los mas pobres [national direct assistance programme for the poorest] (Juntos web site).http://www.juntos.gob.pe/quienes_progr-juntos.php Krishna, Anirudh et al (2006). “Fixing the hole in the bucket: Household poverty dynamics in the Peruvian Andes”. Development and Change, 37 (5), 997—1021. Martinez, Rodrigo (Co-ordinator). (2005). “Hambre y desigualdad en los países andinos: La desnutrición y la vulnerabilidad alimentaria en Bolivia, Colombia, Ecuador y Perú” [Hunger and inequality in the Andean countries: Malnutrition and food insecurity in Bolivia, Colombia Ecuador and Peru]. Santiago de Chile: CEPAL. Available at: http://www.eclac.org/dds/noticias/noticias/5/20335/Presentacion_RMC.pdf Mispireta, Monica L et al. (2007). “Transición nutricional en el Perú, 1991—2005” [Nutritional transition in Peru 1991—2005]. Revista Peruana de Medicina Experimental y Salud Publica 24 (2), 129—35. Ortiz, Antonio Bernabe (2007) “La pobreza contraacta” [Poverty counter-attacks]. Revista Medica Herediana 18 (3), 2007. Plaza, Orlando and Stromquist, Nelly P. (2006). “Two decades in the life of Peru: Consequences of structural adjustment on economic and social domains”. Annals of the American Academy of Political and Social Science 606; 95—115. Reyes, Jose Carlos. “Sugiere transparencia en cifras de pobreza” [Transparency urged in poverty statistics]. La Republica, 29 May 2008. Available at: http://www.larepublica.com.pe/component/option,com_contentant/task,view/id,223569/Itemid,0/ Saavedra, Teodosio. (2006). “Experiencias emblemáticas en la superación de la precariedad y pobreza urbanas en América Latina y el Caribe: acceso al suelo urbano para los pobres” [Emblematic experiences in overcoming vulnerability and urban poverty in Latin America and the Caribbean: access to urban property for the poor]. Santiago de Chile: CEPAL. Available at: http://www.cepal.org/cgibin/getProd.asp?xml=/publicaciones/xml/3/28373/P28373.xml&xsl=/dmaah/tpl/p9f.xsl&base=/dma ah/tpl/top-bottom.xslt Tanaka, Martín and Trivelli, Carolina (2002). “Las trampas de la focalización y la participación. Pobreza y políticas sociales en el Perú durante la década de Fujimori” [The traps of targeting and participation. Poverty and social policy in Peru during the Fujimori decade]. Lima, Instituto de

Estudios Peruanos. Available at: http://bibliotecavirtual.clacso.org.ar/ar/libros/peru/iep/lastra.doc Trevelli, Carolina (2005). “Estrategia y politica de desarrollo rural en el Perú” [Rural development strategy and policy in Peru]. Mimeograph, Lima: Centro de Estudios Peruanos. Available at: http://cies.org.pe/files/ES/bol%2057/01-trivelli.pdf Vasquez, Enrique (2005). “Programas sociales. De lucha contra la pobreza?”[Social programmes: battling against poverty?]. Lima: CIUP. Available at: http://www.consorcio.org/novedades/SEMA2005/LT/QV.pdf Verdera, Francisco (2001). “Causas del agravamiento de la pobreza en el Perú desde fines de la decada de 1980 [Causes of the worsening of poverty in Peru since the end of the 1980s]. Lima: Instituto de Estudios Peruanos; Pontificia Universidad Católica del Perú; CLACSO. Available at: http://www.cipca.org.pe/cipca/pobreza/verdera.htm World Bank (2005). Opportunities for All: Peru Poverty Assessment. Lima: World Bank. Available at: http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/05/11/000012009_200605 11144754/Rendered/PDF/298251PE0rev0pdf.pdf World Bank and United Kingdom Department for International Development. (2003). Voces de los pobres [Voices of the poor]. Lima: World Bank and DFID. Available at: http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/01/04/000012009_200501 04144045/Rendered/PDF/292540PE0Voces0de0los0pobres.pdf Wright, Katie. (2006). “The darker side to microfinance: evidence from Cajamarca, Peru” in Jude L. Fernando (ed.). Microfinance: Perils and Prospects . Milton Park; New York: Routledge. Yamada, Gustavo and Castro, Juan Francisco (2007). “Poverty, inequality and social policies in Peru: As poor as it gets”. Lima: Centro de Investigación, Universidad del Pacifico. Chapter for CAF-Harvard project, “The Peruvian Growth Puzzle”. Available at: http://www.up.edu.pe/_data/ciup/documentos/20070214121715_DD%2007%2006.pdf Yamada, Gustavo (2005). Horas de trabajo: determinantes y dinamica en el Perú Urbano [Hours of work: the determinants and dynamic in urban Peru]. Mimeograph, Lima: Centro de Investigacion de la Universidad del Pacifico. Available at: http://cies.org.pe/es/node/131