Arequipita Linda

In Lima, you almost have to know what you're looking for to notice the effects of the Peru's rapid economic growth over the last few years (it's only since 2005 that the GDP per capita has exceeded that obtained in the 1970s). In Arequipa, the changes are much more obvious.

The calle Mercaderes, which runs east off the main plaza, and is the retail heart of the city for middle class shoppers, has been cleared of traffic along all its five blocks, with the sidewalks turned into flat tiles merging with the street's cobblestones. What used to be a chaotic though vibrant scene, pedestrians tipping off the pavements into the path of the congested traffic, is now an almost European-style mall.

Some of the principal avenues have been repaved with ashphalt and are near enough as smooth as those in a typical Western city, while I'm informed that upgrades for several more are scheduled. Cobblestone alleyways through the historic centre have been opened up and beautified, with the addition of bourgeois touches like flower pots and park benches.

Yet the public development is exceeded by the private. Retail has gone bigger, brighter, and more formalised. Nestled under its 6,000-metre volcanoes, Arequipa now actually has a couple of stores selling mountain gear. On the calle Mercaderes there's a menswear store, while on La Merced heading south from the plaza exotic new shops selling beds, furniture and solar water heating systems have appeared since my last visit. There's a diverse array of new cafes, restaurants, and hotels, while tourist oriented pizzerias, laundromats, alpaca-wear boutiques and, of course, travel agencies have filled in the available space on Santa Catalina, San Francisco and Jerusalen. Tasteful advertising frames most of the new businesses. Local makers of banners and signs rustically carved in wood have clearly enjoyed bonanza years.

Interspersed amongst the ubiquitous yellow 'Tico' taxi bouncing over the cobblestones are a handful of Hyundais and Toyotas and the occasional shiny 4WD. On the streets of the city, as far as I can tell, there are fewer beggars, vendors of random consumer items, or children selling sweets.

Walk from the centre into the inner suburbs and you see repaired walls, painted facades, less rubbish, even the odd private car or pitched roof. In streets such as those leading up to Hugo and Lizbeth's place there are more trees, shrubs and cacti planted along the sidewalks.

What it all adds up to is the significant expansion of that elusive entity, for Latin America, the middle class. If there's something unreflexively thought of as 'development', Arequipa has been seeing some of it. It's not as if there is exaggerated, flashy wealth sprouting up next to complete misery. Rather, the wealth seems to have been spread around moderately well -- perhaps coming down in splashes, instead of a trickle. More people have the means and the confidence to spend, and things to consume are appearing to meet their demand.

Much is still the same: the ancient, dirty kombis, the cracked and crumbling sidewalks, the pollution. But with the rough edges of decay and desperation softened, Arequipa is on its way from being a place of melancholy beauty to becoming a truly spectacular city.

I have to admit that it's surprised me somewhat. I've been used to reading the trenchant criticisms from the likes of Humberto Campodónico and other commentors, of the Peruvian government's unreformed neoliberalism and failure to take advantage of the boom times, the claimed manipulation of poverty statistics, and the lack of progress with economic diversification, health, education, pensions, or improved labour conditions.

However, the development that has occured is still consistent with those criticisms. So much money has flowed into the country, and hence government coffers, that although the adminstration hasn't done anything particularly progressive, in absolute terms it has had greatly increased resources to deploy. Arequipa is a mining region, and has benefited from the Canon Minero, a portion of the taxes paid by mining companies that goes directly to the affected regions. It's also the country's second-biggest, and most orderly, urban area, with an existing civil society and a core of educated, ambitious residents capable of developing an interconnected domestic economy if given the chance. If anywhere is going to take advantage of good times, it's here.

The question is how widepread and durable all this is. My impressions so far are all from walking and driving around the centre of Arequipa city, which has always been among the most middle class places in Peru. What is it like in outskirts and the pueblos jovenes? Have they also seen improvements? What about the rural areas? Have the beggars and street sellers really got jobs or improved their living standards, or have they been shovelled away out of sight by a government wanting to give a good impression to tourists and investors?

There's also the odd fact that for the moment, at least some Peruvians are more optimistic than those elsewhere in the world. Several people have told me that "the world economic crisis isn't really affecting Peru". Perhaps not that much so far. For one thing, at a macro level, Peru's government and major banks (like those of Chile, Brazil, Mexico and Colombia) have managed their accounts with technocratic efficency and didn't do anything stupid during the good times. There are also enough accumulated foreign reserves for the government to be able to apply an economic stimulus (through not to the same extent as Chile, which having squirreled away earnings from its copper exports, is one of the few countries to be able to act as Keynes foresaw and inject funds from its savings rather than borrowings).

At some stage, however, the world situation is going to affect Peru. The downturn of soaring mineral prices that have driven much of the economic growth, lesser demand and lower prices for the 'non-traditional' agricultural and garment exports, and fewer tourists arriving, will mean that the boom will end and export-led growth will likely slow dramatically. That's when it will become apparent just how much progress has been made with important but less visible things like the improvement of education, the recovery of civil society, the establishment of basic infrastucture in rural areas, and the integration of these areas into the wider economy.

In Arequipa, I see the growth in retail and services as being driven by an expanding middle class, rather than being just the rosy flush of a transient mining and tourist boom. But so much is directed at the international tourist that the concerns I outlined in this post still hold. Since I was last here, the number of travel agencies has increased significantly again, while tourist numbers or destinations haven't really changed. What will happen when all those people who have sunk loans or savings into their shiny new offices come up against the reality of fierce competition for dwindling numbers of clients?

Peru has seen booms before, often based around a single raw material, and generally dissolving into thin air leaving little more than social dislocation and a damaged environment. This time, will the development stick? Or will the raised expectations of the last ten years make the come down even harsher and more destabilising?