- Total external debt:$28 653 million (World Bank, 2005)
- Total external debt payments: $5 586 million (World Bank 2005).
- Population: 28.0 million (World Bank, 2005)
- Percentage of adults who can read and write: 87.9% (HDR 2005)
- Average life expectancy: 70.7 years (HDR 2005)
- HIV prevalence: 0.6% (HDR 05)
- Total health spending: 1.9% of GDP (HDR 04)
- Total spending on debt service payments: 7.07% of GDP
- Annual GDP: $79.4 billion (HDR 2005)
DROP THE DEBT FAST
Peru is the focus of the Drop the Debt Fast on Saturday 3 May.
Recent Political History
In 1542 the Spanish conqueror Francisco Pizarro defeated the Inca Empire in Peru and established Lima as the principle city of Spain’s colonial possessions in South America. The Peruvians later gained independence from Spain in 1824 after a struggle led by Jose de San Martin and Simon Bolivar. Following its independence, Peru became involved in a series of territorial disputes, firstly with Chile during the 19th Century and later in the 20th Century with Equador.
Peru’s political development in the 20th Century has been tumultuous. In 1968 General Valasco overthrew the elected President Fernando Belaunde Terry. Corruption and abuses of human rights were widespread under Valasco’s regime, which led, along with his deteriorating health, to his replacement by General Moralez Bermundez. Under Bermundez, there was a return to civilian government with a new democratic constitution. In 1985, Alan Garcia was elected as President, and during his Presidency economic and human rights problems in Peru escalated. Peru suffered from hyperinflation and massacres carried out by the military of people belonging to or suspected of belonging to the terrorist group ‘The Shining Path’. The election of Fujimori as President in 1990 did bring about an improvement to economy in Peru as he implemented drastic economic reforms, which brought hyperinflation down considerably. However, accusations of bribery and corruption within his regime caused economic chaos once more and brought about his resignation.
Since Fujimori, there have been improvements in the management of the Peruvian economy. However, although the successive President implemented reforms to bring about a boom in the economy, actual poverty in Peru only decreased by 5% and over half of all Peruvians are still estimated to be living below the poverty line,
The re-election of Garcia in 2006, has confirmed the continuation of economic reforms. Despite his disappointing term as President in the 1980s, he claimed to have learned from his mistakes, and is attempting to decrease poverty, especially in Peru’s southern highlands, where poverty is most acute.
Peru is a hugely divided society, in economic and ethnic terms. With one of the highest levels of poverty in Latin America, over half the population live below the poverty line and a large proportion of those live in ‘extreme poverty’, meaning they are unable to meet even their most basic needs. Where poverty is prevalent, so are the other classic symptoms of deprivation such as high illiteracy rates, high infant mortality and relatively low life expectancy. Although these conditions of poverty are most acute in rural areas, it is also widespread in urban areas, especially Lima. Hand in hand with this poverty, there are also substantial degrees of wealth. However, the two lifestyles are kept completely separate and there is little scope for redistribution or social advancement.
Peru also suffers from divides along ethnic lines. Although the precise boundaries between ethnicities have been blurred by inter-marriage and migration, there is a fairly close connection between skin colour and social position; the darker your skin, the lower your status. The cancellation of Peru’s external debt would allow the much needed investment in public services such as health care and education which would help break down economic and ethnic barriers causing extreme levels of poverty for some Peruvians.
Where has the debt come from?
Peru’s foreign debt increased substantially in the 1970s, like many other Latin American countries, increasing sevenfold between 1970 and 1976. During this period the Peruvian government set about financial development. However, they did so without foreign investment, a strong private sector or sufficient tax system, and thus relied heavily on borrowing abroad. The debt problem in Peru really began in 1975 as interest rates soared and was made worse by the poor use to which the money was put. Examples of the ineffective use of the money was large amounts of military spending, development projects that primarily benefited foreign firms and the growth of ineffective and poorly managed Peruvian public sector.
Debt cancellation status
Peru is officially classed as a lower-middle income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative.
The New Economics Foundation (2007) calculates that Peru requires 50% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
What the campaigners say
In 1999, 2 million Peruvians signed a petition arguing the need for debt relief. The petition was supported by the Catholic Church. According to Laura Vargas of the Church's Social Action office (CEAS) the campaign turned debt "for an issue for economists into an issue for housewives", adding that "it was much more successful than we had ever imagined, with everyone supporting it apart from the banks and the government". CEAS calculates that $16 billion left Peru in debt servicing between 1990 and 2000, while new debt totalled $13 billion (of which most went on repaying old debts).
Last updated: April 2008