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The dark side of Peru's economic success

Raúl Ferro

The death of at least 20 people, some protesters and some police, in the Amazon region of Bagua in northern Peru after fighting broke out on June 5 is a devastating reminder of one of the remaining weaknesses holding Latin America back.

This is not the first time in Peru that protests against natural resource projects and regulations have degenerated into acts of violence. The clash was the bloody culmination of seven weeks of protesting by Aidesep, an organization of Peruvian Amazonian indigenous peoples, against a series of decrees that would facilitate oil exploration, forestry activity and agricultural development in that part of the country. Never mind who is right and who is wrong (no one has a monopoly on the truth), such incidents are the consequence of a variety of factors, most importantly weak institutional networks and the lack of dialogue between conflicting sides.

In recent years Peru has been the economic star of Latin America, and has become an important destination for foreign investment, particularly in the mining and energy sectors. The economy has grown uninterruptedly since July of 2001. Only recently in April did the economy finally slow, reporting a 2.01% contraction when compared to April of last year. Decades on, poverty levels have finally started to come down thanks to almost 20 years of responsible, pro market economic policies that have held strong despite a coup d'état that overthrew parliament, a scandal over the corrupt national intelligence system, the fleeing and resignation by fax of a president and the installation of a transitional government, among other serious political crises.

However, Peruvian economic success has not been accompanied by the institutional strengthening that's necessary to sustain such long-term economic growth. Political parties are weak and public institutions are considered highly untrustworthy. In the latest study by Barómetro de las Américas from Vanderbilt University, Peru was listed as one of the countries where citizens least trust their institutions (congress, central government, the supreme court and municipal governments) in all of Latin America, coming in at 19 out of 22 nations. With so little trust, holding successful dialogues and reaching effective consensus is nearly impossible, while developing personality cults is all too easy. Peru, it could be said, has become a hyper-democracy where those who scream loudest are the only ones heard.

This lack of trust is also the result of the social exclusion still rampant in Peru. While yes, the economic situation of the very poorest has improved, the perception that economic success has not benefitted all social sectors remains equally strong. This is especially true in vast Andean regions and remote jungle areas. You only have to mix all these ingredients together, shake and, voilà! - you have yourself a lethal cocktail of ungovernability.

These problems, of course, are not only present in Peru, but it is there that economic success contrasts most dramatically with the lack of a strong institutional system. The free market model and macroeconomic responsibility Peru adheres to certainly have produced results and indeed this is the right way to improve people's wellbeing, but Peru's leaders - be they political, business or social - must step up their efforts if there is any hope that the country can develop its social and institutional framework as successfully as it has grown its economy.

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