Saturday, September 08, 2007

Policy Good, Implementation Hard

The always-pithy Economist has had a couple of good dispatches recently on Peru. Both deal with the tough challenge facing the administration of Alan Garcia in delivering on his election promise of 'responsible change' to reduce poverty and develop a more inclusive economy.

As much as it was slightly bewildering to an outsider that Peru would elect Garcia again after his disastrous first term in the 1980s, it was hard to argue with most of his stated policies: austerity in central government, devolution of more resources and responsibility to the regions, rationalisation of overlapping social programmes, improvement of education standards, investment in infrastructure such as water and roads, warmer relations with Chile, free trade with the US (with a better deal struck for Peru), and the 'Sierra Exportadora' programme to help link highland farmers with coastal exporters.

The swift move to implement popular actions within the first 100 days, such as cutting his own and other politicans' salaries, suggested that Garcia might actually carry through with an ambitious programme of reform.

But with the best will in the world, turning policies into action can be harder than it looks. The first challenge described in the June 9--15 Economist is actually implementing the infrastructure and poverty reduction programmes. As anyone who has worked in government will tell you, availability of money isn't always the problem-- 'getting it out the door' can be the hardest part. The challenge is to balance the requirements for transparent process, and value for taxpayer dollars, with the need to get a move on.

The Economist reports that of the $1 billion 'investment shock' earmarked for water, roads, school and clinics, only 30% is on track to be spent in the first year. This is largely due to inexperience in local government, and there's apparently been a lot of argument about whether financial controls should be loosened to allow quicker spending. As much as rapid progress is desirable, giving too much scope for corruption in a place with Peru's history may be worse than doing nothing.

The more general challenge, as summed up by the July 28--August 3 Economist, is maintaining the confidence of the population while the benefits of economic growth are gradually distributed more widely. Peru has averaged 5% growth over the last six years -- the steadiest in Latin America. But much of the interior of the country has yet to see any real benefit, and while poverty rates are now slowly coming down, in the some parts of the sierra they have actually got worse.

During July the country was racked by protests, led by the powerful teachers union SUTEP, and there was controversy over a government decree that local government leaders were not allowed to incite or lead protests.

When I lived in Peru, strikes and protests were as regular as a Friday trip to the pub, and it was de rigeur to call for the resignation of president Alejandro Toledo. This was partly due to Toledo himself, who appeared muddling, technocratic, and out of touch. President 'Alan' has all the popular touch you could want -- as even his critics admit -- but a silver tongue is not enough to soothe the frustrations of people facing ongoing hardship. Prior to the earthquake, Garcia's approval ratings had plummeted from a year earlier, especially away from the more prosperous coast.

The real problem is that people in the Peruvian sierra have been poor and excluded for so long; any government is not just dealing with the legacy of the previous administration, but approximately 500 years of social division and neglect. Protest and atagonistic politics, as exemplified by the likes of Ollanta Humala, have become ingrained as the only way to engage.

This creates a vicious circle where people and businesses who do have some chance of making progress are hindered by the disorder and lack of confidence. Hence the attraction of an almost Blair-ist promise of 'responsible change'. But for the large mass of people struggling as much as always, 'responsible' is coming to be seen as a euphemism for 'too slow'.

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