Pyper, Neil

Peru has been hailed an emerging market success story, with more than a decade of GDP growth in excess of 6%. While booming mining exports have been the overwhelming driver of this, the shopping malls and SUVs in Lima and other major cities are evidence that domestic demand has also been buoyant. Since the fall of the authoritarian government of Alberto Fujimori in 2000, Peru has enjoyed an unusually long period of political stability, with orderly changes of democratically elected government in 2006 and 2011, and continuity in economic policy. All of this is in sharp contrast to the economic and political chaos that characterised the country in the 1980s and 1990s. Hyperinflation, high levels of corruption and terrorist threats from the country’s communist party known as the Shining Path and the marxist Túpac Amaru Revolutionary Movement were a common feature. But the recent economic boom and political stability mask a series of other severe long-term challenges. Leaving aside the potential for economic difficulties in commodity prices and a plummet in international demand for Peru’s natural resource exports, the country’s role in the international narcotics trade is cause for concern. Publisher statement: This article is available under a creative commons Attribution NoDerivatives licence http://creativecommons.org/licenses/by-nd/4.0/ 

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How Peru’s drug trade is threatening its economic growth  Pyper, N. Published version deposited in CURVE August 2015  Original citation & hyperlink:  Pyper, N. (2015) How Peru’s drug trade is threatening its economic growth. The Conversation   https://theconversation.com/how-perus-drug-trade-is-threatening-its-economic-growth-45018   This article is available under a creative commons Attribution NoDerivatives licence http://creativecommons.org/licenses/by-nd/4.0/ .      CURVE is the Institutional Repository for Coventry University http://curve.coventry.ac.uk/open  8/18/2015 How Peru's drug trade is threatening its economic growthhttps://theconversation.com/how­perus­drug­trade­is­threatening­its­economic­growth­45018 1/3 Get our newsletter Neil PyperSenior Lecturer in Business/Management at Coventry UniversityPeru has been hailed an emerging market success story, with more than a decade of GDPgrowth in excess of 6%. While booming mining exports have been the overwhelming driverof this, the shopping malls and SUVs in Lima and other major cities are evidence thatdomestic demand has also been buoyant.Since the fall of the authoritarian government of Alberto Fujimori in 2000, Peru has enjoyedan unusually long period of political stability, with orderly changes of democratically electedgovernment in 2006 and 2011, and continuity in economic policy.All of this is in sharp contrast to the economic and political chaos that characterised thecountry in the 1980s and 1990s. Hyperinflation, high levels of corruption and terrorist threatsfrom the country’s communist party known as the Shining Path and the marxist Túpac AmaruRevolutionary Movement were a common feature.But the recent economic boom and political stability mask a series of other severe long­termchallenges. Leaving aside the potential for economic difficulties in commodity prices and aplummet in international demand for Peru’s natural resource exports, the country’s role inthe international narcotics trade is cause for concern.Coca production in PeruIn 2012, Peru surpassed neighbouring Colombia as the world’s largest producer of coca, theraw material for cocaine. This was the result of far more aggressive and successfuleradication efforts in Colombia. Peru has since stepped up eradication aggressively,meaning that coca production last year was at its lowest level since 1998, and Colombiaregained its position as the world’s leading producer. But this does not mean that theproblems Peru faces are any less serious. How Peru’s drug trade is threatening itseconomic growthJuly 28, 2015 3.03pm BSTThree tons of cocaine seized by Peru’s national police from an international gang of Peruvian andMexican drug traffickers. EPA8/18/2015 How Peru's drug trade is threatening its economic growthhttps://theconversation.com/how­perus­drug­trade­is­threatening­its­economic­growth­45018 2/3Coca production in Peru is closely linked to the remnants of Shining Path. These areconcentrated in an area known as the Valle de los Rios Apurimac, Ene and Mantaro(VRAEM) in the south central Andes. While quite aggressive military operations are targetingthe group there, authorities earlier this year decided to halt eradication, set up a no­fly zoneand encourage farmers to grow alternative crops such as coffee and cocoa. The result hasbeen a precipitous increase in coca production in the VRAEM, alongside a dramatic fall inoutput elsewhere.In the context of overall falling levels of coca production, it might be possible to argue thatcontaining Shining Light and its activities in the VRAEM is a sensible strategy. However, theVRAEM is also the scene for operations by international drug cartels, particularly fromColombia and Brazil.International operationsIndeed, a more general significant consequence of Peru’s position in the global drugs tradehas been a rise in international cartel operations there. Mexican cartels dominate, operatingparticularly in northern Peruvian coastal cities such as Chimbote, Trujillo and Tumbes. Andthis has driven a massive increase in violence.While Peru’s murder rate is relatively low by Latin American standards (at 6.6 per 100,000inhabitants in 2013), murder rates in some northern cities resemble those in the more violentcountries of Central America. In 2013, the city of Barranca saw 36.2 murders per 100,000inhabitants, while Trujillo had 25, Tumbes 24.8 and Chimbote 22.1.Organised crimeDrug cartel activities occur alongside organised crime, with extortion a growing problem.The fruits of economic boom have helped fuel this, with the huge increase in constructionactivity a frequent target for criminal groups such as La Gran Familia whose operations aretaking on an international flavour. Peripheral areas of Lima are increasingly being targeted,such as San Juan de Lurigancho, a large area where there are two large prisons from whichmany extortion operations are coordinated despite authorities’ attempts to block mobilephone and internet access.Coca cultivation in Santa Rosa, Peru. EPA/Paolo Aguilar8/18/2015 How Peru's drug trade is threatening its economic growthhttps://theconversation.com/how­perus­drug­trade­is­threatening­its­economic­growth­45018 3/3There is a lack of police capacity to combat organised crime, along with deeply embeddedcorruption. Expensive mobile phone signal blockers installed at prisons, for example, arerarely switched on as a result of corruption within the prison system. And, for as long as thewealthier parts of Lima remain largely untouched by violent crime, authorities are likely to dorelatively little to tackle it.Indeed, the relative impunity of organised criminals suggests that corruption may reachrelatively high levels, which is another frequent negative consequence of a natural resourceboom. Two recent former presidents currently face investigation for corruption, one of whomis alleged to have links to drug trafficking.All of this sets the scene for a presidential election next April, which takes place amid signsthat the prolonged economic boom may be starting to run out of steam. It is not yet clear whothe candidates will be, though a number of key contenders are starting to emerge. There willprobably be a highly competitive campaign, with candidates making plenty of accusationsagainst each other.None of this is likely to make much difference, however, with current security and counter­narcotics strategies remaining largely unchanged. This means that the status quo is likely tocontinue. Failing to deal with its drug problem in the long­term will harm Peru’s continuedgrowth and, if its economy suffers a downturn, there is potential for a major spike in violentcrime and related activity.Economic developmentSouth AmericaWar on drugsCocainePeruLawlessness in the coca producing part of Peru makes it adangerous place to live. Josh Rushing, CC BY­NC­SA

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How Peru’s drug trade is threatening its economic growth

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How Peru’s drug trade is threatening its economic growth

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