The United States and Peru’s future: The view from the Miraflores Park Hotel

On Wednesday, I attended the first annual Foro Perú – Estados Unidos (US-Peru Forum), sponsored by the US Chamber of Commerce in Peru, jointly with the University of Miami’s Center for Hemispheric Policy. Those in attendance got to hear from a quite focused panel on trade and Peru’s economic trajectory, followed by meditations, similarly economy-focused, by Peru’s ambassador to the US, Harold Forsyth, and the US ambassador to Peru (outgoing), Rose Likins. The conference was capped off by a more diffuse, but still illustrative overview of the country’s political scene, including brief discussions by Peruvian political commentator Carlos Basombrio and David Scott Palmer of BostonUniversity.

While listening intently and enjoying the better-than-average coffee and excellent pineapple juice provided by the Miraflores Park Hotel, a few key points and overarching themes jumped out at me. Various panelists provided key insights on important trends that are shaping, and will continue to shape, trajectories of economic growth and development in Peru. These are discussed in a generally timeline-oriented order below.

The Trans-Pacific Partnership is the next big thing, and the Pacific Alliance has been a great primer for some countries in the region. These intertwining issues were discussed most forcefully by Barbara Kotschwar, a Peterson Institute research fellow (and, full disclosure, a former professor of mine, and a friend). Kotschwar has written extensively on this issue, and while viewing the TPP as a potential game-changer, has argued for yet-broader Latin American involvement in the initiative. As others have additionally pointed out, many substantive deals have been made between and among various members of the Pacific Alliance (Mexico, Colombia, Peru, Chile, plus Central American aspirants to membership). This could prove a great jumping-off point for integrating these countries further into trans-Pacific trade, but the TPP as written excludes Colombia and the Central Americans. There’s a strong case to be made that current TPP power brokers, like the US, should push to bring the remaining Alliance members to the table, for increased prosperity and economic integration on the continent and across the Pacific.

Whether the TPP becomes a driver to broader Latin American economic integration or not, Peru is in a good position: it is a member of both the TPP talks and the Pacific Alliance, and has relatively long-standing ties to Asia. But to best capitalize on gains from the TPP, Peru has some outstanding business to take care of. Two key points that jump out are centered on infrastructure and education. Shortcomings in the former, Kotschwar pointed out, can account for as much as 25% of the difference in historical growth trajectories between Latin America and near-peer competitors in Asia. Fortunately, Peru, which historically has suffered from grave problems in this area, is beginning to see these addressed, particularly in the long-laggard highland interior. The latter area, on the other hand, is not such cause for excitement. The country’s public schools are so bad that private education entrepreneurs in Lima can’t build fast enough to meet demand for private and religious schools. Meanwhile, a contentious education reform bill has generated much heat but little light, with university students protesting perceived opacity in the reform-drafting process, and a generalized sense of worry over a possible rise in costs. Both of these issues need to be addressed not just to capitalize on the provisions of trade agreements and facilitate movement into value-added industries, but also for reasons of equity. The burdens of bad roads and wretched schools falls most heavily on already disadvantaged populations, indigenous highlanders and the urban poor. No one should want to see these populations excluded from the potential fruits of trade agreements.

The ambassadors focused on fascinating niche initiatives with big potential (when they weren’t speaking in glittering generalities, which is pretty normal at such gatherings!). Forsyth pointed approvingly to President Ollanta Humala’s recent visit to MIT and hopes for future cooperation on education policy reforms. Likins discussed technology exchange programs and study-abroad. The optics on these aren’t necessarily spectacular. They don’t automatically strike the casual observer as the stuff of grand bargains or sweeping diplomatic initiatives. But they are vital bits of connecting fiber that keep the driving motor forces of Peru-US relations – trade, and human exchanges of other sorts – moving forward. Furthermore, these kinds of deals are more than representative of the productive focus on “twenty-first century issues” that could well prove a virtuous template for relations between the US and Latin America in what is, indeed, the twenty-first century.

The pursuit of economic growth by no means cancels out Peru’s many deep-seated problems, and the last panel offered timely reminders of this. Basombrio’s discussion of the key roles played by corruption and a politics of institutional weakness (an unpopular judiciary and an incredibly weak party system chief among them) was an indispensable reminder of these crucial factors. The importance of his notes is highlighted, in fact, by fears about growing corruption, raised in the wake of the 2013 release of Transparency International’s Global Corruption Barometer. I’ve touched at other points in this space and elsewhere on issues of effective and ineffective decentralization; I found myself nodding involuntarily as Dr. Palmer worried aloud about gaps in capacity amidst decentralization reforms. As lower-level institutions receive more power and responsibility, but not necessarily more training, effective authority, or oversight for accountability, the effectiveness of decentralization reforms is blunted. Palmer’s argument echoes what other experts in Lima have told me; indeed, some commentators have explicitly linked low capacity for effective management and oversight at the local level to the growth of corruption. This matters, again, not just for capitalizing adroitly on economic growth, but for justice and equity as well and even more so.

There’s a limit to what one can extrapolate from events like this, but that last point perhaps contains within it the grand themes confronting Peru today: tremendous opportunities, but tremendous challenges around institutions and around the moral purpose of its state. And indeed, as suggested perhaps by Brazil’s burgeoning protest movement, and by ongoing questions about the role of the United States in Latin America, this is true not only in this country, but across the entire Western Hemisphere.

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