PERU: President Turns Blind Eye to Price Rises

By Ángel Páez Reprint | | Print |

Ángel Páez

LIMA, Jul 29 2008 (IPS) - “War on the people by the oil producing companies and countries” is to blame for today’s soaring food prices and for the fact that poor people in Peru are not benefiting from the economic growth, said Peruvian President Alan García.

In an address before Congress marking Independence Day and the second anniversary of his inauguration, García acknowledged that his administration has made mistakes, and promised to fight harder against poverty and inflation and to create more jobs.

Speaking on Monday, just a few weeks after Peru experienced violent social protests, the president did not, however, mention specific measures to tackle these problems.

The country’s inflation rate, which stood at seven percent between June 2007 and June 2008, “is one of the lowest on the continent,” said García, although he did not clarify that the prices for consumer goods in the provinces have risen by up to 15 percent.

The president devoted most of his nearly two hour speech to describing the main achievements of his administration so far. For instance, 18.5 million people in Peru now have mobile phones, compared to just six million in 2006. Also, in the past year 700,000 new fixed telephone lines have been installed.

García also emphasised the substantial increase in revenue from annual concession fees paid by mining companies, called the “canon minero”, which the executive branch distributes to local and regional governments to be used for social spending. In 2006 the amount transferred was equivalent to 607 million dollars and this year it will reach nearly 1.85 billion dollars.

Between 2004 and 2007, “canon minero” revenues rose 10-fold, but their distribution to mainly mining areas created inequality between regions.

The tax is distributed in different proportions between the mine site and local and provincial governments with jurisdiction over the mine. Thus some very poor areas, that are close to mines but fall under a different local administration, receive little or nothing from the tax.

This system of distribution means that 61 percent of the revenue accrues to only five of the country’s 25 provinces – Áncash, Tacna, Cusco, Cajamarca and Moquegua – while barely 5.45 percent goes to Huancavelica, Apurímac, Ayacucho, Puno and Huanuco, where poverty rates range between 64 and 85 percent.

García did not specify how he would modify the distribution mechanism, which is a permanent cause of social conflicts, such as those that broke out recently in the Moquegua and Madre de Dios regions.

From January to June this year there have been 132 social conflicts, 65 percent of them active and 35 percent latent, according to a report from the Ombudsman’s Office updated to Jun. 30. “None of these has been settled during June,” the report says.

During the same six-month period, 53 social demonstrations took place, continuing a rising trend. Ombudsman Office officials have had to intervene as mediators on 78 occasions to avert violent clashes between demonstrators and the security forces.

According to the Ombudsman Office’s report, between June 2007 and June 2008, social conflicts have risen by nearly 57 percent.

“After impressive growth, we propose more redistribution and an intense fight against extreme poverty” in the year ahead, said García.

“Peru has advanced, but it is now time for the poor to advance the most,” he said.

In 2006, 57,000 households were beneficiaries of the Juntos programme, under which mothers of poor families were granted a monthly allowance, now equivalent to nearly 36 dollars, to be used for feeding the children, sending them to school and ensuring their health care.

Today this programme covers 600,000 families in the poorest areas of the country, and the state will spend 232 million dollars this year to fund it.

But the president “said nothing about taxing the mining companies’ windfall profits, increasing wages and pensions, or adopting concrete measures to deal with the rise in the cost of living,” the general secretary of the General Confederation of Peruvian Workers (CGPT), Mario Huamán, told IPS.

On Jul. 9, Huamán led a 24-hour national strike which was the largest demonstration so far against the García administration.

In his view, “García is not planning to combat inflation, therefore food prices will continue to rise, which will especially affect the poor.”

A poll published by the Catholic University’s Institute of Public Opinion (IOP) reported that 62 percent of respondents disapproved of the president’s performance, while 31 percent approved.

In social sectors D and E – the poorest strata in the sample – disapproval of García climbed to 79 percent, with only 15 percent giving him positive marks. Furthermore, 43 percent of interviewees in these strata said their disapproval was due to price rises.

“I don’t think the president’s message will have any impact whatsoever, since the average citizen doesn’t listen to him,” Fernando Tuesta, the head of the Institute of Public Opinion, told IPS.

His speech “is of interest only to the media, politicians and other experts. It won’t do García any good in terms of public opinion, and I don’t think he expects it to, especially with such a long speech, going into details that ordinary people aren’t interested in,” he said.

The head of the Congressional Budget Commission, lawmaker Jhony Peralta of the governing Peruvian Aprista Party, said that “the president has recognised the effects of inflation on Peruvian households and proposes to curb it, but without hasty or abrupt measures.

“The president has repeated his pledge to reduce the poverty rate to 30 percent by the end of his term (in 2011), which undoubtedly means that he will bring inflation under control. An effective measure would be to promote domestic agricultural production to cut dependence on food imports, which are fuelling inflation,” Peralta told IPS.

García also made some surprising remarks, saying there are other kinds of reforms that people should promote themselves: “a reform of the soul, which every Peruvian can undertake.”

“Tax evasion should not become a clever trick to play, and racism should not be allowed because it causes offence and slows national progress. These things cannot be imposed by law, but stem from each one of us,” he said.

But the president made no mention of any measures to fight corruption. One year ago he announced the creation of a National Anti-Corruption Office, under a highly respected judge, Carolina Lizárraga, who resigned a few weeks ago, leaving her post vacant.

“There was a great vacuum with respect to the measures to be taken to curb inflation, and what was also surprising was the complete absence of the issue of fighting corruption, in spite of the incidents that have occurred,” said opposition lawmaker Víctor Andrés García Belaúnde.

Neither was there room in the president’s speech to discuss the 500 million dollars that the executive branch has just decided to invest in upgrading equipment for the armed forces. All he said was that “Peru’s defence system has a high deterrent capability, which guarantees the country’s sovereignty.”