President Alejandro Toledo wants to give $30 a month to Peru's poorest citizens to address a major concern affecting much of Latin America: making sure that a growing economy puts more money into the hands of everyone
Peru plans government stipends to aid poorest citizens
By TYLER BRIDGES
Miami Herald
LIMA - President Alejandro Toledo wants to give $30 a month to Peru's poorest citizens to address a major concern affecting much of Latin America: making sure that a growing economy puts more money into the hands of everyone.
Peru is now enjoying the best of several years of economic growth. But the gains are barely trickling down to the poor in this country of 27.5 million people.
The number of Peruvians living in extreme poverty - defined as earning about $1.60 a day - has declined by only two points to 21.7 percent of the population even though Peru has enjoyed a near-record 42 months of consecutive growth.
"We need to accelerate the process of trickle down," Deputy Minister of Finance Fernando Zavala said in an interview.
The challenge in Peru is shared throughout virtually all of Latin America.
The region grew by 5.5 percent last year - its best rate in 24 years. But the percentage of those living in extreme poverty declined by less than 1 percent, to 18.6 percent, according to the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC). This has left about 98 million people in Latin America barely getting enough to eat or going hungry.
The poverty rate - earning $2 to $3 a day on average - has declined from only 44 percent of the population to 42.9 percent over the past two years.
"The growth is not going to the poor," said Arturo Leon, an ECLAC analyst based in Santiago, Chile.
The problem is that higher demand for exports in capital-intensive industries - like mining and mechanized farming - is driving Latin America's growth, said Eduardo Lora, an economist with the Inter-American Development Bank. "There's not much of a demand for increased labor," he said.
Latin America's average unemployment rate barely declined from 10.3 percent at the beginning of last year to 9.7 percent by the end of the year.
Peru's economy, meanwhile, grew by about 5 percent last year and is expected to enjoy similar growth this year.
This has created enough tax revenue for the treasury to be able to afford the $30 cash handout, expected to cost about $25 million this year and increase to about $100 million in 18 months, Zavala said. At that point, it would benefit 1.5 million Peruvians, he said, or about one-fourth of the 6 million Peruvians who live in extreme poverty.
The $30 a month, which still must receive the expected approval by Congress, would nearly double the income of the poorest Peruvians.
They live mostly in the Andes, with the greatest poverty rates concentrated in remote areas where the Shining Path waged a 12-year guerrilla war beginning in 1980. Critics have chided the Toledo administration for not doing enough to help that region avert another outbreak of political violence.
Jose Cerritelli, an analyst of emerging markets for Bear Stears, said by telephone from New York City that the plan to hand out cash has not provoked concern on Wall Street because Peruvian government officials have done such a good job of managing the economy.
"What they are proposing is not excessive," he said, adding, "You cannot have a healthy economy with so much poverty."
Peru's plan is modeled after similar programs in Brazil and Mexico that don't simply give out cash but require the recipients to ensure that their children attend school and are vaccinated.
Peru's plan is likely to give cash only to families with children 5 years old or younger, as well as pregnant women, Zavala said. As in Brazil and Mexico, the money would be sent to mothers, who are seen as most likely to spend the money responsibly.
Toledo's plan has been criticized as a political ploy, with the presidency and the 120-member Congress up for election next year.
But the gap between Latin America's rich and poor is the worst in the world, Lora said, and has contributed to the lack of trickle-down effect when the economies grow.
Honduras has the greatest percentage of its citizens living in extreme poverty, 53.8, followed by Nicaragua with 42.4 percent and Bolivia with 37 percent, according to ECLAC's Leon.
Uruguay boasts the lowest rate of extreme poverty, with only 3 percent, while Chile has the second-lowest rate at 4.3, Leon added.
