Prime Minister quits after losing fight to raise minimum wage

25 February 2014

Peru’s Prime Minister resigned on Monday after losing a battle to raise the country’s minimum salary, currently set at £160 a month.

The refusal to raise the minimum wage contrasts to the government’s recent approval of a sharp increase in ministers’ monthly pay to £6400 (30,000 soles), forty times the minimum wage.

The premier, César Villanueva, had clashed with the influential finance minister, Luis Miguel Castilla, a strong champion of business interests. His efforts also met with hostility from the First Lady, Nadine Heredia, who is widely expected to stand for the presidency in 2016. Castilla also offered his resignation on Sunday but the outcome of the dispute has reassured investors, with business lobby Confiep calling the reshuffle a display of ‘good judgement’.

Those who were drawn to Humala’s promise of a ‘great transformation’ towards greater equality in his 2011 election campaign are likely to be disappointed. The composition of the new cabinet is overwhelmingly technocratic in nature.

The country is forecast to have the second fastest growing economy in the region this year, according to the UN Economic Commission for Latin America and the Caribbean. Yet its minimum wage is among the lowest in the region. Poverty is falling but improvements in living standards for the poorest are rising more slowly than per capita income. A recent report by the UN Development Programme found that a tenth of the country’s districts had seen stagnating or falling human development over the last decade, measured by life expectancy, educational achievement and income per capita.

Villanueva served only four months as Prime Minister and is replaced by Rene Cornejo, formerly the minister for housing and director of state investment promotion agency, Proinversion. Cornejo becomes the fifth premier of Humala’s administration. He is a close ally of Castilla and his appointment reinforces Castilla’s position in the government. 

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    The Peru Support Group exists to promote social inclusion, sustainable development and the observance of human rights in Peru. To that end the PSG highlights shortcomings in observance of established norms, whether international or local in nature, in its research, advocacy and publications. In so doing, it underscores the relationships that exist within the political system, how institutions work, and the effectiveness of policies that aim to reduce poverty and inequality within the context of sustainable development.

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