Poverty Reduction Strategy in IBRD Countries: The Case of Peru William Reuben and Annika Silva-Leander LCSSO World Bank

Context Political and economic crisis as the country entered the post-Fujimori period in 2001 and embarked on a democratic transition:  Highly centralized State weakened by low levels of legitimacy and credibility.  Weakened civil society after years of authoritarian regime.  Legacy of endemic corruption, including clientelistic use of social programs.  Weak coordination among social programs and duplication of efforts.  Poor targeting of social programs.  Insufficient accountability mechanisms and monitoring and evaluation of social programs.  Lack of a poverty reduction strategy with clear objectives.  Little space for citizen participation in policy-making processes.

Milestones Leading Up to The Poverty Reduction Strategy To help consolidate democracy, the post Fujimori Governments put in place processes and spaces of multi-sectoral dialogue and participation:  2001: Establishment of the National Roundtable for the Fight Against Poverty, a multi-sectoral, government-civil soiety forum to facilitate dialogue and participation in public policies on poverty reduction.  2002: Creation of the National Agreement Forum, to develop a long-term national development plan based on consensus-building among sectors and stakeholders.

Poverty Roundtables (Mesas) Established by Law in 2002 as an institutionalized space of dialogue between the State and civil society on issues of poverty reduction at the national, regional and local levels. Main objectives:  Facilitate multi-sectoral dialogue in the formulation of social policies.  Help institutionalize citizen participation in the formulation and monitoring of social policies.  Serve as a consultative organ in the formulation of national, regional and local development plans.  Serve as a coordinating space between the State and civil society to help achieve greater efficiency of poverty reduction programs.  Help increase transparency of poverty reduction programs.

Structure of Poverty Roundtables National, regional and local presence with a total of Mesas created between 2001 and National, regional and local presence with a total of Mesas created between 2001 and 2006.Currently:  National Executive Committee (5 Government & 5 Civil Society representatives)  26 Regional Mesas  122 Provincial Mesas  372 District-Level Mesas

National Agreement Forum A national dialogue forum composed of Government representatives, political parties with representatives in Congress (13), the National Poverty Roundtable and civil society organizations (10). Mandate: to develop - through cross- sectoral dialogue and consensus- building - a long-term (20 years) vision for the development of Peru.

Precursors to the Poverty Reduction Strategy  2001: Social Letter (elaborated by Poverty Roundtables) delineating the broad orientations of a poverty reduction strategy.  2001: Letter of Social Policy elaborated by the Toledo Government (social policy objectives of the Government for ).  2002: Signature of the National Agreement, a national development plan of which 7 of the 31 national policies are related to poverty reduction.

Main Content of National Agreement: 31 national policies and 268 sub-policies on (examples)  Democracy and State of Law: - Strengthening of political party system - Institutionalization of dialogue and participation mechanisms - Strategic planning - Decentralization - National security  Equity & Social Justice - Poverty reduction - Equality of opportunities - Universal access to education - Universal access to health services - Employment - Food security  Competitiveness - Social market economy - Sustainable development - Science and technology - Rural development  An Efficient, Transparent and Decentralized State - Role of Armed Forces - Access to information and freedom of expression - Human rights - Drug erradication

Peru’s National Poverty Reduction Plan Based on the orientations of the Equity and Social Justice pillar of the National Agreement, mixed Government-civil society commissions - with active participation of Mesas - elaborated the strategy, which was approved in August Based on the orientations of the Equity and Social Justice pillar of the National Agreement, mixed Government-civil society commissions - with active participation of Mesas - elaborated the strategy, which was approved in August Main focus:  Development of human capabilities, with a focus on children below 2 years.  Promotion of economic and productive opportunities and capacities.  The establishment of a social protection safety net for vulnerable groups.  Budget protection of 6 priority social programs.  Emphasis on civil society participation in design, implementation and monitoring of poverty reduction programs.

Some Defining Characteristics (and Challenges) of Peru’s Poverty Reduction Strategy  A more closed, technical process than in many PRSP countries.  Short-term focus ( period).  Not the main organizing framework (National Agreement was).  As opposed to National Agreement, no clear institutional framework was defined (which meant less resources and capacities to ensure its implementation and monitoring).  Lost visibility among a multitude of plans and strategies.  Difficulty of articulating plan with other social and economic policies.  Difficulty of translating plan into budget allocations given restricted fiscal space.  Difficulty of cutting across sectoral divides of the Peruvian bureaucracy.  No permanent monitoring mechanism was established.  Poverty Roundtables were not given an official mandate to monitor the Plan.

Achievements in Implementing Peru’s Poverty Reduction Efforts  Coordination of most social assistance programs under one Ministry (MIMDES).  Small reduction of poverty levels (2% between 2002 to 2004), although greater for extremely poverty, especially in rural areas.  Average income of the poorest rose 33% between 2001 and  Since 2005, implementation of a conditional cash transfer program (JUNTOS) for the first time in Peru.  Development of a National Plan of Attention to Children and Youth (Priority Actions) which has resulted in concrete budgetary allocations (at both national and local levels) as well as the protection of budgets for such programs and in the development of regional-level policies tending to this group.

Institutional Setup in Implementing Peru’s Poverty Reduction Strategy: Increased Citizen Participation in Policy Formulation Processes  Establishment of spaces at the national level to facilitate civil society engagement in social policy formulation (multi-sectoral board of conditional cash- transfer program Juntos, in addition to existing Health and Education Councils and Poverty Roundtables).  Establishment of local-level spaces (Regional and Local Health Councils and Education Councils, Regional and Local Coordination Councils, Local Management Committees of food programs, Local Conditional Cash Transfer Committees, and Local Roundtables).  Institutionalization of Participatory Budgeting in all municipalities.

Institutional Setup in Implementing Peru’s Poverty Reduction Strategy : Accountability Mechanisms  Establishment of citizen vigilance committees to monitor municipal expenditures (in progress).  Establishment of a variety of accountability mechanisms to monitor social programs.  Process of establishing a social control system of the conditional cash transfer program.  Establishment of the Dialogue on Childhood (with active participation of Poverty Roundtables) to ensure implementation and monitoring of the National Childhood Plan.  Improved targeting (now greater coverage of rural areas where poverty is concentrated).

Institutional Setup in Implementing Peru’s Poverty Reduction Strategy : Transparency and Information on Social Programs  Transparency Portal on public expenditures “Friendly Consultation” with information on social programs, including allocated and executed budgets by program and locality. Has resulted in independent civil society monitoring initiatives. Decision to decentralize the portal to local governments)  Transparency Commissions established in Coordinating Ministry for Social Assistance Programs (MIMDES) and FONCODES (Social Fund) which have led to a significant reduction of complaints about political use of social programs.  Supervision and Transparency Committees for the conditional cash transfer program which are coordinated with Poverty Roundtables.

Remaining Challenges for Peru’s Poverty Reduction Efforts  Only a small reduction of poverty levels (headcount poverty rate reduced by only 2% between ) and persistently high levels of poverty (52% of the population).  Coverage of basic social programs has expanded, but quality remains poor. Lack of clear quality standards limits the ability to monitor quality in service delivery  30% reduction of spending for social assistance programs between (from 1 to 0.7% of GDP compared to an average of 1.5% for the region).  Participatory budgets only cover capital budgets, which represent between 6-12% of sub- national budgets.  Integration and coordination of social assistance programs is still work in progress as is their decentralization.  The lack of identification documents remains a serious obstacle to accessing social programs.  Insufficient poverty reduction impact of social assistance programs (consumption deficit corresponds to 6.3% of GDP, while the current programs only cover 1% of those needs).  Only 1% reduction of chronic malnutrition in the 0-5 years population tranche in the last decade (from 25-24%).  Targeting mechanisms have improved but are still not optimal, particularly for nutritional programs.  Despite advances in strategies and programs directed to children, political will to implementation remains slow.  Vigilance committees to monitor public expenditures at the municipal level are not yet fully functional and effective in their role.  Provide a more long-term approach to poverty reduction programs with an emphasis on asset creation (for situations of chronic poverty)