Post 2015: Global Action for an Inclusive and Sustainable Future

AnnEx 2 – COunTRy CASE STuDIES
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How external actors can support the building of
internal political stability is a complex question.
the case study pays attention to capacity-building,
particularly in the provision of social services, and
potentially paying more attention to dynamics
at the local level, where there tends to be greater
political stability, as well as efforts to support the
government’s inclusiveness.
4. Peru
4.1 Development trajectories, political
settlements and fragility
In 30 years, peru has gone through three stages,
with macroeconomic and political instability
under democratic government in the 1980s, with
increasing macroeconomic stability and greater
political stability though with massive corruption
and rent-seeking in the 1990s under president
Fujimori (1991–2000), and then democracy with
substantial growth since then. over this period, peru
developed from a lIc that was characterised by high
levels of poverty and inequality, macroeconomic
disarray, widespread emigration, weak democratic
rule, and an internal armed conflict that claimed
over 70,000 lives, to the status of an upper middleincome
country (umIc).
peru has long been one of the most inequitable
countries in latin america. under Fujimori there
was a strong drive to restore macroeconomic
stability as part of a Structural adjustment
programme. this was combined with the creation
of the peruvian Social Fund (1991), with the aim to
generate employment, alleviate poverty and improve
access to social services, although research suggests
that in practice the funds were largely channelled
to electorates most likely to support the president
(Schady, 2000). External expertise and incentives
– primarily brought in through the international
financial institutions (IFIs) – proved influential in
this authoritarian setting and helped strengthen
certain ‘islands of bureaucratic efficiency’. but these
EuropEan rEport on DEvElopmEnt 2013
policies did not contribute to reducing structural
poverty or achieving economic transformation
and resulted in the gradual loss of legitimacy and
fragmentation of the ruling coalition.
In the post-Fujimori era, along with a rise in tax
revenues, social expenditure increased substantially.
peru more than tripled its per capita social
expenditure between 1990/1991 and 2008/2009 (8%
of GDp), albeit below the latin american average
of 18.4% of GDp in the same period. there were
also qualitative improvements in social spending,
focused on needs rather than politics. there
has been a reduction of poverty, more children
go to school, there is broader coverage by health
insurance schemes, and infant mortality rates have
dropped.
Despite this rapid economic and social progress,
high levels of poverty persist, particularly in rural
areas, and income inequality remains stubbornly
high. these phenomena stem from significant
inequality of opportunities and from the poor
quality and limited coverage of public services.
owing to vertical and horizontal disparities in
opportunities and wellbeing, there are in effect two
countries within a single national territory: one is
making rapid progress, while the other lags behind
with far fewer signs of economic and social change.
this situation is reinforced through government
transfers to local authorities that fail to take into
account expenditure needs and fiscal capacity at
the local level, thus exacerbating existing regional
disparities and risking social conflict by failing
people’s expectations. the development model is
largely based on environmentally unsustainable
exploitation of natural resources, given peru’s
vulnerable eco-systems.
peru’s political governance since 2000 seems
too fragmented to tackle this middle income trap.
the past decade has witnessed episodes ending
in political stalemates, reflecting weaknesses
in the ruling coalition. these have resulted, for