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PERU
Poverty and inequality remain an issue
Latinamerica Press
2/15/2016
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Millions of people at risk of falling back into poverty due to economic slowdown.

“The boom and economic growth in Peru between 2005 and 2013, with 6 percent average growth rates that were supported mainly by the prices of minerals, is over, and prices will remain modest, according to projections of various international institutions,” says Oxfam in the report “Agenda contra la Desigualdad: Cinco temas críticos para cerrar brechas” (Agenda against inequality: Five critical issues to close gaps), released on Feb. 10.

In the past two years, Peru’s economy grew only by an average of 2.6 percent, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). In an effort to revive the economy, in 2013 the government of President Ollanta Humala enacted a series of controversial measures, including the reduction of income taxes for big business and the weakening of environmental regulations. But these measures did not have the desired effect; on the contrary, they have cost the treasury about 5 billion soles (about US$ 1.5 billion), an amount that is four times the budget of the Juntos program, which provides direct financial support to the population in extreme poverty.

According to Armando Mendoza, an economist and researcher at Oxfam, “the hopes of improving the collection [of taxes] have been truncated by the economic slowdown and tax cuts, creating a difficult fiscal outlook.”

The 2016 public budgets have been cut, decreasing funding for social programs such as the Juntos program and the Seguro Integral de Salud (Comprehensive Health Insurance) which will dramatically reduce the number of recipients and put most vulnerable populations at risk.

“The last decade was marked by strong economic dynamism, but somehow it was also a ‘lost decade’. We grew a lot but did not develop properly. Wealth increased but not for everyone. The economy expanded, but was not transformed. There was prosperity, but little progress in necessary reforms. Despite some progress, such as reducing the incidence of monetary poverty by half between 2004 and 2014, inequality gaps and barriers that affect millions of Peruvians persist, blocking progress,” says the report.

Investing in people
Mendoza says that countries with greater inequality, as is the case of Peru, grow less. “Trickle-down economics is questionable; it comes late, in a bad way, or never comes. The OECD [Organization for Economic Co-operation and Development, which groups the most developed countries] argues that inequality is a barrier to growth,” he says.

“Currently, 40 percent of the population is at risk of poverty. There is a vulnerable middle class that can fall back into poverty because they have no way of dealing with serious events such as illness or job loss,” says Mendoza.

Combating inequality implies continued effort and resources, but also political will. Oxfam mentions five areas that should be included in the public agenda of the new government that will begin on July 28, 2016: moving towards tax justice, preserving and prioritizing investment in people, promoting decent work, addressing rural development, and improving environmental governance.

Fair taxation, in which those who earn more pay more taxes, is needed. In 2014 alone, the government lost 17 billion soles ($4.8 billion) in unpaid taxes, amount higher than the health sector budget of that year. Oxfam suggests reducing the burden of indirect taxes on consumption, because as they are applied indiscriminately, mostly affect those sectors with fewer resources.

The report also suggests maintaining and strengthening social programs, particularly those that have a direct impact on poverty reduction, such as the Juntos program; improving labor standards, including updating and institutionalizing the adjustment mechanisms of the monthly minimum living wage, frozen since 2012 at 750 soles ($214); addressing gaps and gender barriers in employment, emphasizing the difference in earnings; and creating opportunities for youth employment through incentives for hiring young people with state support.

It also suggests boosting rural development, with emphasis on family farming and its critical aspects: collective and individual titling, access to credit and training.

Finally, in regard to environmental governance, Oxfam considers it necessary to review and remove provisions that have weakened environmental regulations, strengthen social and environmental institutions, and reaffirm the validity of the Prior Consultation Law and ensuring its proper application. —Latinamerica Press.


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