The town of Palma Real, indeed most of the district of Echarati in Cuzco where it is situated (the province of La Convención), stands as a monument to how not to pursue development.
Under the canon scheme, half of the corporate income tax derived from the Camisea natural gas field is directed back to the district, province and region from which it originated. Camisea is situated in the district of Echarati and it receives huge amounts of money, as does the town of Palma Real. Between 2007 and 2018, Echarati received 13 billion soles (nearly US$4 billion) in cash transfers from the central government, money that is supposed to generate development and improve people’s living standards.
In a piece written by José Víctor Salcedo for the La República newspaper, the author describes the poverty that still afflicts this part of Cuzco and the extent of the corruption in municipal government that has meant that much of the money generated by Cuzco has simply disappeared into the pockets of corrupt local officials. He describes some of the ‘ghost projects’ approved by the government for the use of canon funds which exist on paper, but not in reality.
He calculates that if the money had been allotted to individuals, rather than to the municipal authorities, every man, woman and child would have received an income of 600 soles a month; a family of four would have received 28,000 soles a year.
Instead the legacy is one of poverty, poor education and ill health in this province of 147,000 people. People live in poor housing and their children suffer from anaemia. Although La Convención is not the poorest part of Cuzco, poverty remains a pressing problem for many of its families, especially in more rural areas like Palma Real.
Meanwhile, a succession of municipal authorities stands accused of corruption. The district mayor of Echarati is on remand in a Cuzco jail for pocketing large sums of public money. His administration came up with many projects for the people of Palma Real, often at ridiculously inflated prices, for which little or nothing is to be seen.
The canon system, most of which relates to mining and hydrocarbons production, came into being under the Fujimori government. The idea was that it would help defuse criticism of extractive industries by turning local people into beneficiaries. It was expanded during the Toledo administration when it went hand in hand with decentralisation of administrative functions to the local level.
While in principle this seemed a welcome move at the time, it did not take into account the absence of a functioning state in many parts of Peru, especially some of the remoter areas where extractive industries were based. The early years of the new millennium saw the boom in mineral prices which hugely inflated the amounts of money passing through the canon system.
Cuzco was one of the regions to benefit most from the canon, given Camisea. It also received large earnings from mining projects. However, the capacity of the region – not to mention the provinces and districts – to manage these funds honestly and efficiently meant that most of the benefits have proved ephemeral.
Meanwhile in a fourth-floor office in Quillabamba, the capital of La Convención, two public prosecutors beaver away among piles of paperwork trying to keep abreast of the large numbers of corruption cases under review. Though they may do their best, it is an uneven struggle just to keep the wheels of justice from grinding to a halt