Peru
In need of a new miracle
Peru’s 20th century was marked by military dictatorship, terrorism, insurgency, and economic instability. But since the turn of the century, a resurgent and democratic Peru has enjoyed two decades of peace and growth. Poverty decreased dramatically, from around 60% in 2004 to 21% in 2018 – the “Peruvian Miracle” – and a strengthened welfare state has improved the health and wellbeing of millions of citizens. But facing one of the most intense COVID-19 outbreaks in the world, Peru now teeters on the brink of an escalating economic, environmental and social crisis.
Before COVID-19, Peru’s prosperity had been built on copper, gold and zinc exports, leaving it at the mercy of global markets – with explosive growth during the 2000s commodities boom, followed by serious external shocks following the 2008 global downturn.
The lion’s share of this wealth has been captured by elites, leaving a stark divide between relatively prosperous cities and grinding rural poverty. Life expectancy is fully 20 years lower in poor provinces like Huancavelica than in the capital Lima, and 20% of rural families in the Sierra live on less than $1.90 a day.2 Symbolic of this top-heavy development, in 2018 poverty increased for the first time in two decades.3
Fast-growing mining and chemicals sectors have also begun to take a serious toll on the environment. One of the world’s most biodiverse countries, Peru is home to a dizzying array of animal and plant life across a wide range of ecosystems: arid plains, snow-covered Andean mountains and tropical jungle. But this natural wealth is under serious assault.
Copper, gold, zinc and silver mines have cut swathes out of the rainforest as the country trades its wealth of biodiversity for export income. Drilling for oil and gas has transformed coastal areas and caused serious air, water and sea pollution, as well as rapidly rising carbon emissions. Air quality in Lima is the worst in Latin America.4
Peru’s green policy framework is decidedly mixed. A 2016 national development plan lays out a broad strategy for the country’s economic and social future, and does contain several commitments towards sustainability, green growth, conservation, inequality, and the Sustainable Development Goals, despite its overall focus on traditional GDP growth. The country is also strong on inclusion and gender equality, with a dedicated ministry for women, indigenous and vulnerable populations.
But serious gaps remain. Decarbonisation and clean energy goals are ambitious (a 20% reduction in carbon emissions by 2030 and 60% renewables by 2030), but concrete legislation to achieve them remains lacking. Small steps towards reducing fossil fuel subsidies and instituting a pollution tax are seriously undermined by government moves to develop untapped oil and gas reserves. And no specific green stimulus measures, investments or wider support for a green recovery are apparent as part of the government's COVID-19 response package to date.
Policy Scores
Last updated 23 Oct 2022
Green COVID-19 Recovery
Peru has faced one of the most intense COVID-19 outbreaks in the world, with one of the highest per capita fatality rates in the world and the health crisis of acute concern for the general population. Meanwhile considerable political instability, stemming from the removal of impeached President Vizcarra, resulted in the election of Francisco Sagasti (Perus third president in a week) as interim president until the April 2021 national elections.
Over the course of 2020 and with the economy hit particularly hard (facing a 32% contraction), the Peruvian government issued more than USD$30 billion in fiscal stimulus or 16% of GDP according to the IMF's latest estimate. In March 2020, the government announced a USD$26 billion economic stimulus package, divided into three phases aimed at combating the current economic fallout, providing a lifeline to small businesses and supporting economic reactivation. Measures include cash transfers, employee subsidies, government guaranteed loans, and debt support for micro and small businesses - but no specific green stimulus, investments or wider support for a green recovery is apparent as part of the package to date. Concerns have been raised that, without green conditionality or more specific targeting of policies, stimulus is facilitating ongoing environmentally destructive activity - such as providing continued support to companies under investigation for illegal timber trafficking.
Elsewhere there are more positive signs, with government representatives advocating a 'build back better' approach taking sustainability and climate change into account, the approval of a National Programme for Sustainable Urban Transport, the submission of Peru's stronger NDC emissions reduction target and the establishment of a high-level committee on climate change all providing greener signals of intent. The government has also received USD$300 million loan from the KfW Development Bank to help informal workers (which make up more than 70% of the labour force) survive the economic crisis with a view to supporting climate-friendly investments once the economy has stabilised.
Peru has faced one of the most intense COVID-19 outbreaks in the world, with one of the highest per capita fatality rates in the world and the health crisis of acute concern for the general population. Meanwhile considerable political instability, stemming from the removal of impeached President Vizcarra, resulted in the election of Francisco Sagasti (Perus third president in a week) as interim president until the April 2021 national elections.
Over the course of 2020 and with the economy hit particularly hard (facing a 32% contraction), the Peruvian government issued more than USD$30 billion in fiscal stimulus or 16% of GDP according to the IMF's latest estimate. In March 2020, the government announced a USD$26 billion economic stimulus package, divided into three phases aimed at combating the current economic fallout, providing a lifeline to small businesses and supporting economic reactivation. Measures include cash transfers, employee subsidies, government guaranteed loans, and debt support for micro and small businesses - but no specific green stimulus, investments or wider support for a green recovery is apparent as part of the package to date. Concerns have been raised that, without green conditionality or more specific targeting of policies, stimulus is facilitating ongoing environmentally destructive activity - such as providing continued support to companies under investigation for illegal timber trafficking.
Elsewhere there are more positive signs, with government representatives advocating a 'build back better' approach taking sustainability and climate change into account, the approval of a National Programme for Sustainable Urban Transport, the submission of Peru's stronger NDC emissions reduction target and the establishment of a high-level committee on climate change all providing greener signals of intent. The government has also received USD$300 million loan from the KfW Development Bank to help informal workers (which make up more than 70% of the labour force) survive the economic crisis with a view to supporting climate-friendly investments once the economy has stabilised.
Governance
National green economy plan
Peru has a general economic development strategy, the Plan Estratico de Desarrollo Nacional Actualizado Perhacia el 2021 (2016), which lacks specifics on green economy. Some small steps towards a holistic national GE strategy have been made: Peru has signed up to the OECD Declaration on Green Growth; has established a multisectoral working group to implement the recommendations of the OECDs Environmental Performance Review; and the National Competitiveness Agenda 2014-18 includes some metrics on sustainability, inclusivity and resource use.
Peru has a general economic development strategy, the Plan Estratico de Desarrollo Nacional Actualizado Perhacia el 2021 (2016), which lacks specifics on green economy. Some small steps towards a holistic national GE strategy have been made: Peru has signed up to the OECD Declaration on Green Growth; has established a multisectoral working group to implement the recommendations of the OECDs Environmental Performance Review; and the National Competitiveness Agenda 2014-18 includes some metrics on sustainability, inclusivity and resource use.
Inclusive governance
Peru has a dedicated ministry for inclusion, the Ministry of Women and Vulnerable Populations, a Law on equal opportunity for women and men; and several inclusion programs. In addition, the Ministry of Environment has launched a Gender and Climate Change Action Plan. No public consultation or engagement platforms available, and no current worker representation on corporate boards.
Peru has a dedicated ministry for inclusion, the Ministry of Women and Vulnerable Populations, a Law on equal opportunity for women and men; and several inclusion programs. In addition, the Ministry of Environment has launched a Gender and Climate Change Action Plan. No public consultation or engagement platforms available, and no current worker representation on corporate boards.
SDG business strategy
No national SDG business strategy is currently available. Limited sub-national proposals are being considered for better aligning Limas city-level public procurement standards with the SDGs, with implications for private sector suppliers.
No national SDG business strategy is currently available. Limited sub-national proposals are being considered for better aligning Limas city-level public procurement standards with the SDGs, with implications for private sector suppliers.
Wealth accounting
The National Institute of Statistics and Informatics produces Annual Environmental Statistics, including statistics on annual costs related to environmental issues, designed to report on the contribution of natural heritage to economic well-being and enable an innovative vision of natural capital for a successful and sustainable economy. A work program is underway at the Ministry of Environment on environmental accounting, and some progress on initial pilot accounts, but little public information yet released.
The National Institute of Statistics and Informatics produces Annual Environmental Statistics, including statistics on annual costs related to environmental issues, designed to report on the contribution of natural heritage to economic well-being and enable an innovative vision of natural capital for a successful and sustainable economy. A work program is underway at the Ministry of Environment on environmental accounting, and some progress on initial pilot accounts, but little public information yet released.
Finance
Green finance plan
Peru is the first country in South America to officially implement a green bond market. COFIDE, the National Development Bank of Peru, issued a 100 million sole green bond (USD 29 million) with the support of the Inter-American Development Bank, to finance climate mitigation and renewables. In addition, the Association of Banks of Peru (ASBANC) signed the Green Protocol for the Peruvian Financial System, with the aim of generating guidelines to promote sustainable financing and support programs for environmentally responsible uses.
Peru is the first country in South America to officially implement a green bond market. COFIDE, the National Development Bank of Peru, issued a 100 million sole green bond (USD 29 million) with the support of the Inter-American Development Bank, to finance climate mitigation and renewables. In addition, the Association of Banks of Peru (ASBANC) signed the Green Protocol for the Peruvian Financial System, with the aim of generating guidelines to promote sustainable financing and support programs for environmentally responsible uses.
Green fiscal & monetary policy
No government reviews of fiscal or monetary policy yet made; some initial monetary policies in place to support green bond issuance, as described above, but largely uncoordinated.
No government reviews of fiscal or monetary policy yet made; some initial monetary policies in place to support green bond issuance, as described above, but largely uncoordinated.
Safe & accountable banks
Stress testing in place but only on financial indicators. Some Peruvian banks are voluntarily implementing the Environmental and Social Risk Management System (SARAS) for loan operations. Some workshops on environmental and social risk organised by UN-Environment.
Stress testing in place but only on financial indicators. Some Peruvian banks are voluntarily implementing the Environmental and Social Risk Management System (SARAS) for loan operations. Some workshops on environmental and social risk organised by UN-Environment.
Pricing carbon
A selective consumption tax (ISC) was updated in 2018 to disincentivise inefficient vehicles, diesel engines, and high-emissions vehicles according to their impact on public health due to air pollution. Although Peru signed a UN declaration in favour of a carbon price and joined the World Banks Partnership for Market Readiness (PMR), it has recently announced to the PRM that it does not consider a carbon price feasible, due to the countrys extensive informal sector and the costs that would result for the private sector.
A selective consumption tax (ISC) was updated in 2018 to disincentivise inefficient vehicles, diesel engines, and high-emissions vehicles according to their impact on public health due to air pollution. Although Peru signed a UN declaration in favour of a carbon price and joined the World Banks Partnership for Market Readiness (PMR), it has recently announced to the PRM that it does not consider a carbon price feasible, due to the countrys extensive informal sector and the costs that would result for the private sector.
Sectors
Green sectoral policy plan
Under the 2018 Peruvian Climate Change Law, a permanent High-Level Commission for Climate Change was created, bringing together several ministries to co-lead progress towards Perus Paris Agreement commitments; a multisectoral working group has also been created to analyse technical information on decarbonisation across the agriculture, energy, transport, housing, waste, forestry, and production sectors.
Under the 2018 Peruvian Climate Change Law, a permanent High-Level Commission for Climate Change was created, bringing together several ministries to co-lead progress towards Perus Paris Agreement commitments; a multisectoral working group has also been created to analyse technical information on decarbonisation across the agriculture, energy, transport, housing, waste, forestry, and production sectors.
Small business support
The government programme Innovate provides technical assistance, funding and stakeholder engagement for entrepreneurs and start-ups, and does include some specific support for environmental / social enterprises. Several Centres for Business Development support SMEs with legal support, guidance and group training.
The government programme Innovate provides technical assistance, funding and stakeholder engagement for entrepreneurs and start-ups, and does include some specific support for environmental / social enterprises. Several Centres for Business Development support SMEs with legal support, guidance and group training.
Carbon budgeting
Perus flagship Climate Change Law of 2018 is solid but insufficient in several respects. It includes an unconditional target of 20% carbon reductions below BAU by 2030, with a 30% target conditional on additional international finance. However, despite this ambition no carbon budget mechanisms are currently included.
Perus flagship Climate Change Law of 2018 is solid but insufficient in several respects. It includes an unconditional target of 20% carbon reductions below BAU by 2030, with a 30% target conditional on additional international finance. However, despite this ambition no carbon budget mechanisms are currently included.
Clean energy policy
Perus clean energy goals are ambitious: 60% renewables by 2025, with aspirations towards 100% in the long-term. However, solar and wind deployment is slow (only 4% of total electricity in 2018), with most clean energy capacity coming from hydropower; incentives for development are weak, and plans to achieve growth in wind and solar are unclear. The link and ambition for renewable transport and heating, including electrification, is also lacking.
Perus clean energy goals are ambitious: 60% renewables by 2025, with aspirations towards 100% in the long-term. However, solar and wind deployment is slow (only 4% of total electricity in 2018), with most clean energy capacity coming from hydropower; incentives for development are weak, and plans to achieve growth in wind and solar are unclear. The link and ambition for renewable transport and heating, including electrification, is also lacking.
People
Green jobs
Perus poverty alleviation and social welfare programmes do include some mentions of green jobs, including the National Development and Social Inclusion Policy and the Social Action and Sustainability Strategy. But no overall national green jobs programme or specific support.
Perus poverty alleviation and social welfare programmes do include some mentions of green jobs, including the National Development and Social Inclusion Policy and the Social Action and Sustainability Strategy. But no overall national green jobs programme or specific support.
Pro-poor policy
Peru has a large and well-developed social welfare programme, with several ambitious goals on poverty relief, childrens education, inequality and support for marginalised groups. However, despite this ambition and recent progress there are minimal strategic or programmatic acknowledgement of environmental risk factors, poverty-environment linkages, or sustainability.
Peru has a large and well-developed social welfare programme, with several ambitious goals on poverty relief, childrens education, inequality and support for marginalised groups. However, despite this ambition and recent progress there are minimal strategic or programmatic acknowledgement of environmental risk factors, poverty-environment linkages, or sustainability.
Participatory policymaking
Peru has a strong consultation architecture, especially with regard to indigenous groups and mining projects, and has a dedicated Ministry for Women and Vulnerable Populations. However, no explicit mention of social impact evaluations or minority focus.
Peru has a strong consultation architecture, especially with regard to indigenous groups and mining projects, and has a dedicated Ministry for Women and Vulnerable Populations. However, no explicit mention of social impact evaluations or minority focus.
Innovative social protection
No innovative social protection pilots could be found.
No innovative social protection pilots could be found.
Nature
Ocean & land conservation
Central development plan makes specific reference to SDG14 and 15, with several interconnected agencies and programmes addressing land and ocean restoration, including a Strategic Plan for the Marine-Coastal Ecosystems; a National Biological Diversity Strategy towards 2021; a National Strategy on Forests and Climate Change; and a new Forestry and Wildlife Law which regulates forest management.
Central development plan makes specific reference to SDG14 and 15, with several interconnected agencies and programmes addressing land and ocean restoration, including a Strategic Plan for the Marine-Coastal Ecosystems; a National Biological Diversity Strategy towards 2021; a National Strategy on Forests and Climate Change; and a new Forestry and Wildlife Law which regulates forest management.
Natural capital accounts
The National Institute of Statistics and Informatics produces Annual Environmental Statistics, designed to report on the contribution of natural heritage to economic well-being and enable an innovative vision of natural capital for a successful and sustainable economy. In addition, a Law on Compensation Mechanisms for Ecosystem Services (MRSE), and an official work program at the Ministry of Environment on environmental accounts has made some progress, but little publicly announced.
The National Institute of Statistics and Informatics produces Annual Environmental Statistics, designed to report on the contribution of natural heritage to economic well-being and enable an innovative vision of natural capital for a successful and sustainable economy. In addition, a Law on Compensation Mechanisms for Ecosystem Services (MRSE), and an official work program at the Ministry of Environment on environmental accounts has made some progress, but little publicly announced.
Natural capital committee
No independent commission yet established; natural capital work operates out of the National Institute of Statistics and the Ministry of Environment, which are not independent bodies.
No independent commission yet established; natural capital work operates out of the National Institute of Statistics and the Ministry of Environment, which are not independent bodies.
Nature-based fiscal reform
Some taxes in place to disincentivise particularly polluting goods and services (diesel, high pollution cars etc), but no national budget allocation towards natural capital, or natural capital sensitive fiscal or monetary policy.
Some taxes in place to disincentivise particularly polluting goods and services (diesel, high pollution cars etc), but no national budget allocation towards natural capital, or natural capital sensitive fiscal or monetary policy.
References
- https://www.economist.com/the-americas/2018/05/10/a-warning-on-poverty-from-peru
- https://www.borgenmagazine.com/decreasing-inequality-poverty-in-peru/
- https://www.reuters.com/article/us-peru-poverty/peru-poverty-rate-rises-for-first-time-in-16-years-government-idUSKBN1HV2L2
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https://knoema.com/atlas/Peru/CO2-emissions-per-capita; https://www.peruviantimes.com/08/world-health-organization-says-lima-has-worst-air-pollution-in-latam/22119/