Peru - Poverty

Poverty

Whether poverty is measured in terms of family income or in terms of social indicators, such as child mortality, it has been greater in Peru than would be expected on the basis of the country's average income per capita. Historically, this situation has been an expression of the country's exceptionally high degree of inequality. More recently, especially in the course of the 1980s, it increased even more than in the other major Latin American countries, chiefly because of the drastic deterioration of the economy's overall performance.

Measures of poverty based on family income are, of course, dependent on the particular income level chosen as a dividing line between the poor and the non-poor. Both the Economic Commission for Latin America and the Caribbean (ECLAC) and the World Bank draw two lines--one for a tightly restricted income level to define extreme poverty, or destitution, and a second cutoff for poverty in a less extreme sense. Destitution refers to income so low that it could not provide adequate nutrition even if it were spent entirely on food. Poverty in the less extreme sense takes as given the proportion of income spent on food in each society and compares that proportion to the level needed for adequate nutrition.

A comprehensive analysis of poverty in Latin America for 1970 concluded that fully 50 percent of Peruvian families were below the poverty line and 25 percent were below the destitution level. These proportions were both higher than Latin America's corresponding averages--40 percent in poverty and 19 percent in destitution. In Peru, as in the rest of Latin America, the incidence of poverty and destitution was much higher for rural than for urban families. Fully 68 percent of rural families were below the poverty line, compared with 28 percent of urban families.

A more recent ECLAC study provides new estimates of the incidence of poverty for 1980 and 1986. For Latin America, the share of families in poverty fell from 40 percent in 1970 to 35 percent in 1980 but then rose to 37 percent in the more difficult conditions of 1986. For Peru, the incidence of poverty also fell from 50 percent in 1970 to 46 percent in 1980, but then it increased to 52 percent by 1986, rising faster than the rest of the region.

As in 1970, the incidence of poverty and destitution in 1986 remained higher for rural than for urban families, but the differences had lessened. In 1970 the incidence of poverty for rural families was 2.4 times that for urban families; in 1986 the ratio was only 1.4 times. The proportion of rural families in poverty actually fell, from 68 percent to 64 percent, while that of urban families rose greatly, from 28 percent to 45 percent.

Cu�nto S.A. has developed an ongoing monthly indicator of extreme poverty in Peru, combining measures of earnings by workers paid the minimum wage with earnings in the informal urban sector and in agriculture. Taking January 1985 as the starting point, this index shows a substantial fall in extreme poverty up to December 1987, in the first years of the Garc�a government's expansion. But then it shows a dramatic increase as the economy went rapidly downhill. At the end of the Garc�a administration, in June 1990, the index was 91 percent higher than in December 1987 and 32 percent higher than its starting point in January 1985.

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