This paper looks at Peru, and discusses three fundamental problems faced by this country. The paper then compares Peru to three other developing countries, Uganda, Colombia and India, in terms of these three fundamental problems.
Peru was subjected to over a decade of military rule, which ended in 1980; since then, the country has been ruled by a succession of democratic governments, but the country has experienced major economic problems, and has also suffered from terrorism, from groups such as El Sendero Luminoso (CIA, 2002a). In 1990, President Fujimori came to power, with a hard hand, and curtailed the terrorist activities of El Sendero Luminoso. Hs government also dramatically improved the economy, through neoliberalist policies, but his use of authoritarian methods was questionable, and led to a great deal of dissatisfaction amongst ordinary Peruvians (CIA, 2002a; Youngers and Burt, 2000). Despite this, and also despite a huge economic slump in the late 1990's, Fujimori won another term of office in an election in 2000, but domestic and international pressure led him to be ousted from his seat in November 2000 (CIA, 2002a). A caretaker government was put in place in spring of 2001, until Alejandro Toledo was voted in as Peru's new President.
Peru faces many problems, many problems that are common to many developing countries around the world, including: economic difficulties, underdevelopment in it's infrastructure, including underdevelopment in its health, education, industrial, and transport sectors, environmental difficulties (including deforestation, overgrazing, desertification, pollution - including severe air pollution in Lima, and river pollution from unregulated industries). On top of all of these other problems, Peru also has the added problem (which is a problem shared with many other Andean countries) of coca, and the illicit drugs trade. This paper will take three of these issues: the struggling economy, deforestation, and the illicit drugs trade, and will discuss these three issues, and how they affect Peru, in detail. The paper will then move on to discuss these three issues in three other countries: Colombia (an Andean neighbor), Uganda (an African example of a developing country), and India (an Asian example of a developing country).
Through 1994-1997, Peru was helped a great deal by the World Bank and the IMF, and also managed to attract a great deal of foreign investment, such that the economy during this period was good, with strong growth, and inflation brought under control (CIA, 2002a). In 1998, however, following the financial crisis in Asia, and an El Nino event, the economy took a downturn. This downturn has continued until the present day, following the turmoil over Fujimori, and following the general global economic downturn (CIA, 2002a). Toledo's arrival has seen the economy pick up slightly, with a 4.8% expected growth rate for this past financial year (CIA, 2002a).
The GDP of Peru (purchase power parity) is -$132 billion; this equates to a GDP of - $4,800 per capita (CIA, 2002a). This GDP is composed of 63% from the service industries, 27% from industry, and 10% from agriculture (CIA, 2002a). It is estimated that 50% of Peruvians live well below the poverty line, with widespread unemployment, or underemployment (CIA, 2002).
The main exports of Peru are natural products, for example, coffee, cotton, sugarcane, vegetables, which generate $7.6 billion per annum, and which are exported to the U.S. (25%); to Switzerland (8%); to China (6%); to Japan (5%), and to the UK, Chile and Brazil (5% in total, combined) (CIA, 2002a). Peru's imports total $7.3 billion per annum, mainly machinery, transport equipment, foodstuffs, petroleum, chemicals, and pharmaceuticals: the imports come mainly from the U.S. (24%); Chile (8%); Venezuela (6%); Colombia (6%) and Spain, Brazil and Japan (56% combined) (CIA, 2002a).
Peru's external debt stands at $29.2 billion, and Peru has received $895.1 million in economic aid to date (CIA, 2002a). It can therefore be seen that Peru is in a terrible position economically, with a huge, crippling, external debt, that can never be repaid, and with a need to import basic materials which it needs to be able to generate income for itself: Peru is a classic case of a developing country in this respect.
As we have seen, on top of the huge economic problems that Peru faces, Peru also has major problems with illicit drugs. Until 1996, Peru was the world's largest producer of coca leaf (the Indians use it to overcome altitude sickness, and then it was exploited for bad to the rest of the world), and in 2002, 36,600 hectares of land in Peru was used for cultivating coca leaves (Peru is 1,285,220sq km in area, so this is a significant amount of land given over to coca production). Most of the coca leafs produced in Peru are transported to Colombia for the final processing, with the processed cocaine being transported all over the world for drug-users to consume.
What effects does this coca production have on Peru, its economy, its international relations? Basically, the economy becomes over-inflated, with the profits from coca leaf production being fed into communities, allowing communities to develop and to see a chance of salvation, but this is all false: the drug economy is a false economy, which ceases once coca leaf production stops, leaving the communities to revert back to their original state, often even worse, with homeowners being caught in negative equity when house prices crash downwards, etc.
It is estimated that at the peak of coca production in Peru, $600 million were earned per year, and that these 'coca dollars' represented 20% of the country's income from legal exports (Kawell, 2002). Hundreds of thousands of men were employed in the trade, and it is estimated that at least half a million jobs were created from these 'coca dollars' (Kawell, 2002): whilst there is still a significant production of coca leaves in Peru, many of these jobs have been lost, and the 'false' economy has burst, leading to a return to unemployment for these men, and to high levels of dissatisfaction with life.
The fact that Peru is associated with the drugs trade also leads to huge pressures being put on the government of Peru: indeed, U.S. troops are inside Peru at this moment, spraying coca crops in an attempt to eradicate the source of the cocaine that so many American adolescents use. Left-wing journalists have even suggested that the U.S. have used bullying tactics to be allowed to enter Peru covertly, with threats of aid being taken away if entrance is refused (Tate, 2001; Kawell, 1989; Youngers, 2000). In her article of 1997, Coletta Youngers says, "...The U.S. war on drugs (in the Andes) has failed to stem the flow of cocaine...into the United States, but has emerged as a convenient rationale for a U.S. military presence in the hemisphere" (Youngers, 1997). Further, in his article of 2001, Winifred Tate says, "....The U.S. response has not, for the most part, been a programmatic attempt to resolve these social, economic and political problems, rather, it has been increased militarization..." (Tate, 2001).
Another problem with Peru being involved in illicit drugs is that deforestation (the third of our fundamental problems to be discussed) occurs, as forested land is cleared for cultivating coca. It is estimated that 290,000 hectares of forest is lost in Peru each year, although 1997 figures (the latest available) show that only 175,000 hectares of land was under coca cultivation (http://www.rainforestweb.org/Rainforest_Regions/South_America/Peru/).
What is the extent of Peru's three fundamental problems in the other three countries: Colombia, Uganda and India?
In terms of the first problem discussed, i.e., economic difficulties, the following Table compares all four countries on some common economic pointers.
GDP (in $)
GDP (per capita, in $) of population living below poverty line
External debt (in $billions)
The information in the Table is taken from the various CIA World Factbooks, as cited in the Works Cited
As can be seen from the Table above, Peru actually appears to be more stable economically than the other developing countries with which it is being compared in this paper. A fair direct comparison, in terms of population size, and background problems, would be Colombia, and it can be seen that Peru has a lower rate of inflation, a lower rate of unemployment, and a lower percentage of people living under the poverty line than Colombia.
In terms of the problem of illicit drugs, Uganda and India are not fair comparisons with Peru, as these two countries do not suffer from such a problem: Uganda has problems with smuggling of precious stones, but not drugs. The direct comparison here will therefore again be Colombia. As we have seen, those connected with the illegal drug trade in Colombia import coca leaves from Peru for processing to cocaine, for export to drug-users in the U.S. And Europe. The same problems, i.e., falsely inflated economies, leading to unemployment and economic difficulties upon the collapse of this economy,…