USAID in PeruUSAID in Peru has been an excellent success for the past two decades. Established in 1961, USAID has acted on countless programs that have directly aided the poorest in Peru. The partnership has worked so well that USAID has shifted its focus to work on supporting the Peruvian government to enact their plans, rather than directly supplying humanitarian aid to the population. This is the story of USAID in Peru.

Early History

Starting in the 1960s, USAID began supplying aid to Peru in the form of supplies and resources for citizens. However, this start did not make the impact that the U.S. government would have hoped for. 

The GDP of the country in 2001 was the same as in 1970; while the rest of South America was growing, Peru stood still. USAID began to change its focus in the 1990s to target the main issue in the country — the rate of extreme poverty.

Between 1991 and 2000, programs targeted specifically to rural communities helped lower the extreme poverty rate from 24% to 15%. Families that struggled to afford the minimal amount of food needed for a day were now able to cross the line and hope for a more prosperous Peru.

Despite Peru experiencing an economic boom in the late 90s, many low-skilled workers found that their conditions did not improve. An abundance of these categories of workers found that a lack of professional opportunities left them without options, resulting in the private sector employment rate reducing by 8% between 1990 and 1997.

The Success of the 2000s

In 2003, USAID aimed to fix a lot of the shortcomings they had experienced with their programs in Peru. Greater government structures, connecting local businesses to new markets and leveling up the central communities to match the coastlines were the main priorities for USAID. 

Improved transportation networks proved to be one of the greatest implementations of USAID. Many rural communities saw their travel time into major cities cut by over 50%, giving greater access to trade. Income for day labor roles increased 75% during this time and increased land value gave previously poor workers better assets. 

The investment from USAID proved to be money incredibly well spent. $8 million resulted in $800 million of private investment in transportation infrastructure, connecting the poorest citizens on the mainland with the exciting opportunities of trade at the coasts. 

At the beginning of the 2010s Peru’s extreme poverty rate was now 6%, less than half of the rate at the start of the millennium. USAID in Peru was proving to be a successful partnership.

The Current Situation

The COVID-19 pandemic certainly caused the attention of USAID in Peru to shift quite suddenly, focusing immediately on health care for those suffering from the virus.

Since then, USAID has committed again to several key programs that will build on the progress they have already made. In 2021, the U.S. government announced plans to supply the Peruvian government with $321 million in funds for cooperative programs until 2026

The key areas that will be targeted with this investment are the development of legitimate trading chains across the country for reliable incomes, increasing government transparency to reduce corruption and creating legislation to protect Peru’s natural resources — the Amazon rainforest in particular. 

What Does the Future Hold?

According to the International Monetary Fund (IMF), the projection for the immediate future of Peru’s economy is uncertain. Many external factors could severely impair Peru’s growth and create roadblocks in USAID’s plans. The IMF states “Key domestic risks include an intensification of political uncertainty, social unrest over political developments and natural disasters.”

However, the IMF also highlights how Peru has a very strong framework to deal with unfamiliar territories and global financial events. The public debt of the country is the lowest across all of mainland South America.

As for USAID, there is no plan to slow down. In February 2023 over $8 million was invested alongside Olam Food Ingredients (OFI) to push sustainable practices in coffee farming. Greater training and access to different markets will allow farmers to increase their revenue over a five-year period. Peru is the largest exporter of organic coffee in the world so increasing the capability of less developed systems will allow for uncapped opportunity. 

The future of Peru is uncertain, but with the partnership of USAID, the government has a powerful ally to work alongside. The entire working relationship has proved to be one of USAID’s greatest successes and future projects plan to only improve the standard that has been set. USAID in Peru is the blueprint for other countries to follow and hopefully allows millions across the globe to step above the poverty line.

– Oliver Rayner
Photo: Flickr

For the last 18 years, Peru has enjoyed an unprecedented streak of positive economic growth. Beginning in the 1990s with the government of Alberto Fujimori, legal reforms in Peru helped revolutionize the economy of the Latin American nation and began this trajectory of growth that continued into the 21st century. The reforms comprised hundreds of legal and policy changes affecting land recording, contracts, access to courts and identity records, among other topics.

Peruvian economist, Hernando de Soto, then a top adviser to President Fujimori, was the pioneer of these reforms. Because their effect was limited to within Peru, and due to the staggered timing of when and where they were implemented, the reforms operated as something of a natural experiment for de Soto’s academic theories on economic growth.

The guiding principle behind the legal reforms in Peru was the idea that the poor hold vast amounts of assets in an untapped and unproductive form. By the year 2000, estimates of this unproductive store of wealth exceeded $10 trillion worldwide in terms of land, tangible real estate and other assets held by the world’s poor. Supporters of the reforms believe that providing the owners with access to modern legal regimes creates opportunities to invest the assets in productive ventures. The result will be increased wealth and overall economic growth.

The effects of the legal reforms in Peru are difficult to measure directly, but a number of results appear to indicate some success. By 2007, 13 million residents received legal title to 3,200,000 pieces of property because of the new systems. In Lima, the capital and largest city, proper legal titles were granted for 98 percent of the city’s land. In addition to increasing the opportunity for mortgage-based credit, these new systems of record keeping had impressive effects on public infrastructure and utilities. With identifiable owners and responsible parties, public electricity is now available in the entire city.

One independent researcher also noted a significant increase in labor availability in areas of Peru where the land reforms went into effect. By 2016, Peru was ranked second among Latin American countries in the World Bank’s Doing Business report. The Economist and the Cato Institute even credited reforms to land titles in the Peruvian countryside with helping to undermine the violent rebellion of the Shining Path guerrilla movement.

Improved market conditions have attracted international attention. The Center for International Private Enterprise partnered with the Jordanian Youth Entrepreneurs Association in 2008 to assist young entrepreneurs in Peru with leadership and business training, and this initiative has continued in the years since. Due to the perceived success in his home nation, De Soto’s institution, the Institute for Liberty and Democracy, has since consulted leaders of dozens of other countries on how to institute similar initiatives.

– Paul Robertson

Photo: Flickr