Growth notwithstanding, both poverty rates and levels of inequality have increased over the past two years according to the report by Oxfam ‘Brechas latentes: indice de avance contra la desigualdad en el Perú, 2017-2018’ released last week in Lima.
The increases represent a reversal of the trend towards improved social conditions registered over the last 15 years.
According to Oxfam, the proportion of Peruvians living in poverty increased from 20.7% in 2016 to 21.7% in 2017. According to Armando Mendoza, the report’s author, growth in Peru needs to be in the region of 7% if substantial advances are to be made in reducing income inequality. He says that failure to address social inequality (not to mention corruption) endangers Peru’s application to join the OECD.
The report lays out five major policy areas in which improvements need to be made in order to reverse the current trend.
The first of these is the tax system. Peru’s tax structure is notoriously regressive, with the main accent of taxation focused on taxes on consumption. The tax system needs to become more progressive if less inequality is to be achieved. Peru also lags way behind the rest of Latin America (not to mention the OECD) in its tax take. At the end of 2018, this stood at only 14.5% of GDP.
Secondly, the report urges higher social spending. This actually fell slightly in 2018. Education spending (4.3% of GDP) is currently way below the 6% established as a target by the Acuerdo Nacional, a multi-party consensus platform. Child anaemia is in the ascendant.
Thirdly, Oxfam exhorts the government to improve what it calls ‘empleo digno’, by which it means resisting calls by business to further liberalise labour markets. In 2018, only 27% of employment was in the so-called formal sector of the economy. Ending labour stability is not the way to reduce informality, the organisation argues.
Fourthly, the report calls for a reduction in the huge gap in Peru between remuneration rates for men and women. It estimates that women’s wages can be as low as a third of the wages payable to men. The ‘gender gap’, it argues, has not changed substantially in the last ten years.
Finally, Oxfam highlights the need for much more resolute policies towards improving the environment, not least the emission of greenhouse gases. Failure to combat environmental degradation, it argues, affects the poor and vulnerable disproportionately.