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PERU
>> Regional Overview >> Peru Overview 
Introduction
The security and prosperity of the United States is closely tied to Peru, because of increasingly important U.S. political and economic interests and a host of related factors/issues (e.g. drug trafficking). USAID's Strategic Plan for 1997-2001 remains valid and is fully supportive of U.S. strategic goals in the Mission Performance Plan. The most important U.S. strategic goal in Peru is the promotion of democracy and human rights, which is central to the support the rule of law, long-term stability and economic prosperity. Other critical strategic goals include reduction of cultivation of illicit drug crops and the entry of illegal drugs into the United States from Peru; furthering regional stability by supporting the implementation of the Peru-Ecuador Peace Accord; encouraging broad-based economic growth; helping people realize their reproductive intentions, improving human health and reducing the spread of infectious diseases; and promoting sound environmental policies and sustainable use of natural resources.
The Development Challenge
Peru's successes have been particularly evident in several areas. First, its excellent cooperation with the United States in achieving shared counternarcotics goals has resulted in Peru receiving full narcotics certifications for the last four years; Peru achieved a net reduction in coca cultivation of 24 percent, or 12,300 hectares, in 1999. Since 1995, coca cultivation has decreased by a remarkable 66 percent. This outstanding result has been due to the successful U.S./Peru law enforcement effort to interdict the coca trade and USAID's alternative development assistance program, which has provided farmers with licit alternatives. Secondly, our support of the Peruvian Government's open market reforms, export promotion and encouragement of broad-based economic growth over the years has created an environment conducive to increased incomes and improved business opportunities making Peru's free market economy one of the most important ones in Latin America. The United States is now Peru's largest trading partner and foreign investor, e.g. the U.S. exports $2 billion in goods and services to Peru, and U.S. firms have invested approximately $4 - $5 billion since the early 1990's. USAID's assistance in poverty reduction, increased access to credit, improved markets and support of efforts to reduce Peru's debt burden have contributed heavily to creating this environment. Third, the resolution of the long-standing Peru-Ecuador conflict, leading to a Peace Accord, has resulted in a U.S. Government pledge to Peru of $20 million in Economic Support Funds (ESF) from FY 2000-2003. This funding will support border integration efforts, the implementation of initial activities to show tangible benefits in 50 border communities, the involvement of other donor assistance (Japan) in the same communities, and closer coordination with Ecuador.
Notwithstanding these successes, Peru remains at a critical crossroad, both politically and economically as it approaches national elections in April 2000 and continues to recover from the "El Niño" phenomenon and global financial crisis.
On the political side, actions by the Government of Peru (GOP) have resulted in a lack of political will to support key democratic reforms or even maintain the democratic status quo, and recent actions have demonstrated a further decline in support of autonomous democratic institutions. This resulted in a decision by USAID to revise the focus of its democracy strategy leading up to the April 2000 elections, and to provide no further support to strengthen certain national institutions such as the courts, Congress and the electoral organizations. Yet, in spite of this situation, USAID's support for the municipal elections in 1998 resulted in significant increases in voter participation in highland areas usually known for their high levels of absenteeism, increases in women elected to municipal office, and highly successful election monitoring and supervision efforts. In addition, USAID strengthened the Office of the Human Rights Ombudsman by supporting an expansion of its geographical coverage through the establishment of seven field offices in the provinces; supported the efforts of the Pardon Commission and non-governmental organizations (NGOs), which resulted in 640 persons unjustly accused of terrorism being released from jail; and provided conciliation services in more than 86,000 cases in 1999.
On the economic side, Peru's remarkable economic accomplishments over the past several years (when Peru's Gross Domestic Product (GDP) grew at a robust growth rate of seven percent during 1993-1997) have been sorely tested when real economic growth achieved a flat 0.3 percent in 1998. The El Niño phenomenon resulted in declines in fish exports, disrupted agriculture and damaged infrastructure. Worsening terms of trade also contributed to the poor economic performance, as prices for minerals, fishmeal and coffee dropped. Financial turmoil in Asia, Russia and Brazil only added to the problem, leading to a sharp decline in privatization related foreign direct investment and significant outflows of short-term capital. Real GDP is expected to grow an estimated 2.5% - 3.0% in 1999 as recovery from "El Niño" and the global financial situation continues. As a result of these developments, the GOP's goal to further reduce poverty and eliminate serious inequities in income distribution could be affected; this situation suggests that the total population living in poverty and extreme poverty may have increased.
The lack of growth in the Peruvian economy had an obvious negative impact on USAID's own planned results, as revealed by lower sales and employment generation under its micro-enterprise and small producer program. Yet, in 1999 this program still created over 4,000 new full-time jobs, provided credit to more than 40,000 micro-entrepreneurs (mostly women) with credit and other assistance, and generated close to $10.6 million in sales. Furthermore, USAID's food assistance program addressed the needs of 1.8 million people in over 5,800 poor communities, provided 122,000 families with temporary employment and reached over 320,000 children with needed interventions. In fact, the impact of the economic slowdown on the extremely poor could have been much worse if it hadn't been for the Title II program.
While Peru is trying to eliminate barriers to improved health of its population, the current economic slowdown has limited available resources -- resulting in some reversals of previous positive trends. In addition, a lack of confidence in the national family planning program was created by ill-advised and poorly implemented sterilization activities. However, over the past year, the GOP has carried out a number of actions, (including the adoption and implementation of new family planning standards of practice in compliance with the Tiahrt Amendment), which, when coupled with rigorous monitoring by USAID and others, reveal that there has been significant progress in resolving previous problems. Furthermore, there have been some notable achievements in the sustainability of USAID interventions, e.g. there are 89 USAID supported Ministry of Health facilities certified as "model health centers" in priority areas of the country, vaccination rates continue to be high, and USAID supported health NGOs are increasing their efforts to financially support their operations.
In addition, Peru's rich natural resource base and biodiversity constantly require protection from urban growth, industrial pollution and other factors. To respond to this threat, USAID supported efforts are improving the environmental policy and regulatory framework, for the manufacturing and fisheries sectors, promoting private sector participation, and implementing innovative, replicable activities in biodiversity, environment health, and pollution prevention.
Furthermore, USAID's response to the challenges that girls face in completing primary schools, has already resulted in some important advances, e.g. establishment of a National Network for Girls' Education to increase consciousness about the importance of girls education, which in turn led to a successful conference with increased commitment from the business community to support it; the establishment of three new local networks; and the implementation of community and school-based activities.
Peru's long and medium term public external debt at the end of September 1999 totaled $19.7 billion, less than one third of GDP. Peru has reduced its burden on external public debt steadily since 1993.
In light of Peru's substantial development needs, which have only increased in magnitude due to the slowdown of the economy, all of the areas in which USAID is currently involved will require continued assistance over the medium term.
Other Donors
The net official development assistance to Peru during 1998 was $496 million, excluding debt relief. The U.S. was the largest bilateral donor, contributing $121 million (24% of the total), followed by Japan, Germany and Netherlands, whose assistance was focused mainly on basic infrastructure, rural and urban development and environment. Netherlands' future development cooperation to Peru will be focused only on environment. The World Bank (WB), Inter-American Development Bank (IDB) and European Union (EU) provided assistance in financial sector adjustment, basic infrastructure improvement, education and social development.
Country Background Information Resources CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: December 21, 2000 |
