UK Development Assistance to Latin America: Lessons from Peru
Paul Spray, Head, Latin America and the Caribbean, DFID
John Crabtree, Research Associate, Centre for Latin American Studies, University of Oxford
Esperanza Castro García, Director, Centro Ideas, Peru
Enrique Mendizabal, Research Officer – Latin America, ODI
Constantino Casasbuenas, Regional Policy Adviser for Latin America, Oxfam International
Andrew Lawson, Research Fellow, ODI
His recent appointment took place in the context of a decision to close DfID's Peru office in Lima, which was the result of a general move to scale back operations in middle income countries. He said this had necessitated the shift towards a joined-up regional focus in Latin America where providing increased funding to local NGOs and trying to influence key players such as the World Bank and the Inter-American Development Bank (IDB) was the new aim. Issues of focus included market analysis and government sector reform.
Though he conceded that some programmes had been overambitious, especially due to the level of funding they had been allocated, he did point to the success of some recent projects. Work with IDB and the World Bank on governance analysis, pro-poor tax reform, and accountability issues in the health sector had been very positive for instance. He also highlighted a recent initiative where political parties and civil society groups had been brought together to work on bringing excluded people into the policy process.
In general, he said that DfID's main role had and will continue to be as an interlocutor. Specifically, it would play a facilitative role, using its established position in the region to bring different stakeholders (regional organisations, civil society groups and government) together to enable them to engage in high level policy dialogue as well as general lesson learning. It would also concentrate on enhancing the impact of regional organisations by helping them disseminate their work more widely as well as by providing networking opportunities.
Mr. Spray ended by acknowledging the weakness of this approach. He recognised that DfID's ability to play this new role depended on its legacy of bilateral programmes in the region. Therefore, work to maintain links with partners on the ground - particularly local NGOs and civil society organisations - would be key.
Esperanza Castro-Garcia began by introducing herself as the director of Centro Ideas in Peru - an organisation whose goal is to promote sustainable human development so local communities, especially the poor and vulnerable, are able to participate and benefit. In collaboration with national organisations and NGO networks, its main focus is to facilitate the transformation of government institutions; systems of agricultural production; and regional economies.
Centro Ideas works primarily in the north of the country where the economically active population is just 20% (and amongst those the average wage is $5 a day); illiteracy is 30%; infant mortality rate is high compared to the average rate in Latin America; and there are high incidences of violence again women and children. Its work focuses on basic needs and infrastructure projects and capacity building through skills training and leadership programmes. In conjunction with two congressional bodies - the National Decentralisation Commission and the National Commission to Promote Organic Agriculture - it also works to influence local and national government.
She explained that she was keen for Centro Ideas to build new European partnerships and strengthen existing ties in the European Union as she was aware of the need to develop strategic alliances with larger and more influential international actors.
She also highlighted the local challenges to Peruvian development which include:
the current unpredictable social, political and institutional environment;
the fact that state institutions are inefficient and political groups weak at fulfilling different social interests;
the popular dissatisfaction with economic results; and
the persistent climate of institutional mistrust
Ms. Castro-Gracia ended by saying that it would be a mistake to only consider macroeconomic factors when formulating a development strategy for Peru. Concerns such as satisfying stakeholder interests, income disparity, demographic factors and new issues relating to climate change should also be taken into account.
John Crabtree dealt with the variety of ways development can be measured. He prefaced his remarks saying that Latin America seems to be slipping lower on donors' priority lists and that this is misguided. His remarks were also made in light of the evaluation he did on DFID's 2002-2005 Peru programme 'Alliances for Poverty'.
He said classification of a country is critical to whether it receives support or not. Peru, along with several other Latin American countries, is now classified as a middle income country; a measurement based on per capita income ($2231 in Peru). Crabtree criticised this measurement, saying it does not say much about either poverty or inequality.
He pointed out a more nuanced method of measuring poverty is the UNDP Human Development Index (HDI) which ranks countries according to health and education indicators among others. Peru is ranked 79th in the world which is towards the upper end of the less developed countries. Again, this does not tell us much about poverty or inequality.
Moreover, poverty is an inadequately defined concept. According to the UNDP, 49% of Peru's population lives in poverty, defined as living on less than $1 per day.
He argued inequality is more important from a political point of view. Latin America's large number of wealthy people distorts the average income. Peru is less unequal than Brazil and Guatemala, looking at their gini coefficient values. However, Peru's inequality in terms of shares of income is actually worse than Brazil's. In Peru, the income of the poorest 20% is 2.8% of the income of the richest 20%.
He highlighted several types of inequality. Peru's inequalities are highly regional. There are large urban-rural disparities and between the coast and the highlands and Amazon region.
Poverty data from the year 2000 show levels of extreme poverty which are much lower in coastal areas (4.7%) compared to highland (30%) and Amazon (31%) regions.
Peru is stratified along income and racial grounds which severely restricts social mobility.
Education provision in Peru is far below the Latin American average; its health system is one of the most unequal in the region with hospitals concentrated in the coastal region. Infant mortality is higher in Peru than in Bolivia, Nicaragua and Brazil. Large numbers live without and access to health care due to the cost barrier. Social spending is only 5.5% of GDP compared to the Latin American average of 8.2%. Only Guatemala and Ecuador rank below Peru.
He went on to say that Peru has gone through significant political and social turmoil. The Commission for Peace and Reconciliation estimates 70,000 people died in conflict with Sendero Luminoso; a much higher figure than previous estimates. He said it was not a coincidence that Sendero Luminoso originated and grew in the poorest regions.
From a political point of view high levels of poverty contribute to the difficulty of building solid institutions. A growing distrust in congress, courts etc. and a lack of proper democracy make it hard to achieve lasting changes.
On the DFID 'Alliances for Poverty' programme he said it focused on politics and used a rights-based approach. It tackled some of the issues outlined above and made a modest contribution to the process of poverty reduction. Poverty can only be tackled by people when they know they have rights and how to claim them and they are able to make demands on the system.
The programme worked at several levels. At local level it used decentralisation to build an agenda with civil society; at national level it worked with political parties and national and international NGOs; and at international level it tried to persuade the World Bank and the Inter-American Development Bank to adopt a new view of how to achieve change.
He concluded that the programme sowed seeds of interesting changes and initiatives (although nowadays the climate is not so favourable). The strength of the programme was in how DFID worked with other organisations, giving smaller ones a bigger platform to stand on and providing intellectual input.
Discussion - Part One
The following points were covered in the first discussion session:
The UK seems not to have an overall strategy towards Peru. Paul Spray responded that DFID focuses on low income countries because they do not have the resources to reduce poverty but that it recognises the politics of Peru impede effective spending of its resources. DFID funds go to Peruvian regional level. John Crabtree pointed out that UK-Peru relations now seem to be based on investment.
Effort is needed to build local government capacity to spend income from high commodity prices. John Crabtree warned that over the long-term Peru's integration into the world economy through mining has been negative in terms of social outcomes, and current high prices may be a temporary boom.
What progress has the UK made getting the governance structure of the World Bank changed? Recipient countries do not have adequate representation. Paul Spray answered there was no progress yet on this issue.
How to deal with the crude methods used to classify countries as 'middle income'.
Where to focus finite amounts of development assistance. John Crabtree responded that it is necessary to look more flexibly at definitions and categories.
Efficiency of aid flows and channelling funds via small agencies, empowering people who have an interest in the local area.
Peru's diversity is both a strength and a weakness.
Institutional mistrust. Esperanza Castro Garcia argued that corruption robbed the population and led to high levels of mistrust.
How to use the 10,000 Peruvians in the UK to help Peru and build relations between the two countries. Esperanza Castro Garcia responded that the role of the Peruvian diaspora is to deepen North-South dialogue and strengthen the quality of debate. It is up to Peruvians to pressurise the Peruvian Government. John Crabtree added that remittances are becoming increasingly important in Latin America. In Peru they are at least as high as income from copper exports. The impact on poverty is difficult to discern but it is clear that most migrants are lower middle class, not the poorest of the poor.
Is DFID going to restore funding to Peru? Given this was withdrawn at the start of the Iraq conflict, will it be restored when the UK leaves Iraq?
Local level mayors function well. John Crabtree said it is not possible to generalise: local mayors are part of local power structures and some are better than others. Local government elections where restored in the early 1980s but until relatively recently the levels of spending capacity are very variable.
The potential for civil society to influence sub-national political processes.
Low levels of tax revenue: 4% compared to 12% in Chile. No money to fund development.
The knock on effects of DFID leaving middle income countries. NGOs and civil society think they are no longer being supported. Paul Spray stressed DFID is interested in middle income countries (10% of spending goes to these). In particular, they are interested in lesson learning between countries. A new division in DFID is tasked with thinking about the future policy towards middle income countries.
Constantino Casasbuenas said he sees Peru as an example of what is going on in the region. He returned to Esperanza's concept of 'interapredizaje' - countries learning from one another. He said the most important change of last the 20 years is Peru's role in globalisation process and the possibilities and problems this has created.
He said there were two big changes resulting from globalisation: changing export patterns and the pressure to sign free trade agreements.
Traditional exports such as coffee still make up about one third of exports. Minerals remain important. Yet non-traditional exports (asparagus, onions) are growing.
He said some problems are exacerbated by free trade agreements. He argued agricultural policies in favour of non traditional products for export have had an impact on investment, poverty and the concentration of wealth through, for example, the concentration of land for agribusiness in coastal areas and the failure to use non-traditional agriculture as a tool for rural development. The reform of the law on communal land has led to land going on the market.
In response, the indigenous movement is becoming stronger; a new phenomenon in Peru, unlike Ecuador and Bolivia. Campesinos see there is an international possibility of getting assistance so they are mobilising. Institutions in Peru are getting ready for agreements on water and other natural resources.
He identified two other important issues as relations with the European Union and migration.
The 2008 EU-Latin America summit will be held in Peru and the Andean nations need to decide how the will negotiate with the EU as a group.
On emigration, he said 3 million Peruvians have emigrated: 10% of the population. Polls suggest many young people in Peru would consider leaving. Remittances are higher than exports yet this influx of resources is problematic in terms of distribution. Most remittances go to coastal families (as migrants tend to be from this wealthier region). Figures show that, overall, 3% of Peruvians are receiving remittances yet this figure is 7% in Lima.
Casasbuenas concluded that Peru is important not only because of poverty and inequality but because of the moral, ethical and political responsibility to build on civil society achievements to date. Peru can contribute learning to the region.
Enrique Mendizabal presented on the role of networks in Peru (see also the RAPID paper 'Influencing policy processes in Peru: The role of networks' and other RAPID work on Networks). These are challenging the assumption that politics is reserved for politicians. Civil society is establishing a role participating in the political process using an evidence based approach. His presentation was based on work done under the Civil Society Partnerships Programme, in which Ghana and Cambodia were used as comparisons.
The networks studied in Peru include:
CIES (general economic and social policy)
Foro Salud (Health)
Foro Educativo (Education)
Participa Peru (Regional governance)
Peru 2021 (CSR)
The Mesa (on the elderly)
Challenges faced when trying to influence policy are:
High turnover of policy makers
The government is still closed to participation and receptivity depend on a few individuals with close ties to CSOs
Lack of understanding or interest of the key issues among the media
Lack of policy analysis
CSOs have no institutional memory
CSOs carry out mostly ad-hoc policy influence activities
Best practice developed includes:
Plan medium to long term communication strategies
Link the grassroots with the policymakers
Go after key individuals in the policy process
Create spaces for debate
Use the system and the spaces for policy engagement it provides
Are media savvy and employ media experts
Create networks to provide strategic support and agency
Institutional vs. individual membership - networks need to be treated in different ways
Policy influence alone vs. policy through empowerment - networks work in different ways
Partnership vs. sub-contracting relations
Centralised vs. decentralised
Legitimacy via representation vs. credibility - good research gives them credibility and access to the policy process. This is especially important for smaller networks
Creating networks to fill gaps and develop strategic partners
Research capacity at the secretariat vs. the members
Define the purpose of the network
Find the right structure for the network; given the functions is aims to fulfil
Develop living institutional memories by introducing knowledge management tools
Strengthen internal relations
Develop inter network relations
Integrate consultation with the members and policy influence
Use affordable and friendly social technologies
Make sure that members are constantly motivated to participate in the network
How to support and respond to changing context:
Civil Society Partnerships Programme (CSPP) Global Network
For lessons sharing (CIES and FARO)
For networked action (CIES)
Action Research Projects (CIES)
Improved communications (LACG)
Discussion - Part Two
Points raised in this short discussion session included:
- Negative effects of the increase in non-traditional exports and free trade agreements. Peru and several countries have negotiated an FTA with the United States to ensure access to this big market for their non-traditional exports that are key to the economy and for promoting employment. Casasbuenas responded that Oxfam is not in favour of FTAs in their current form. There is an imbalance in negotiating powers and Peru has gained little.
- Influencing consultants might be a way for DFID to influence policy with limited resources.
- Concentration of land and the fragmentation of land under the communal land law.
ODI’s Latin America and Caribbean Group organised this event to discuss UK development assistance in Latin America with a specific focus on lesson-learning from Peru.
Topics covered included:
- What ‘development’ actually means for Peru and in the Latin American context
- Raising awareness in developed countries about Peru’s poorest and most vulnerable citizens
- How development organisations operating in Peru are coping with change, and the structures and methods they are evolving to deal with this
- How the UK Government seeks to assist development in the Andean region, including in Peru
- Examples of best practice for influencing development policy
- Changes in the external environment – how these affect Latin America and its development, and what steps development organisations can take to better interpret and respond to these challenges