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Luis López-Calva: “Low economic growth affects poverty reduction”

Luis López-Calva: “Low economic growth affects poverty reduction”

With a level of Peruvian poverty above the average for Latin America and with inequality below the regional average, the challenges facing Peru are significant, highlights the representative of the World Bank, a multilateral entity that recently revised our GDP forecast to 2.0% for 2023.

—How has the pandemic left Peru in terms of poverty?

Let’s first look at the global context. There is a similar pattern: we came from two decades falling into poverty and inequality systematically, but the pandemic marked a point where poverty would reach levels not seen since World War II. This pattern is reflected in Peru, which has been one of the most affected by the economic contraction and deaths for various structural reasons.

-Some example?

With the region accounting for just under 8% of the global population, it contributed 30% of the deaths. Peru has not been the exception. In the study we put some instruments that could help to not only recover what was lost, but also to be less vulnerable.

—So, what is the image of Peru?
The Peruvian poverty level is slightly higher than the Latin American average and in inequality it is almost 10 points below the regional average. We are talking about low inequality, but we are in the second most unequal region in the world. Peru represents some of the structural problems of the region.

—Where to turn the solutions?

The study, in a sustained manner, proposes to make the population less vulnerable, and for this it is not only important to rethink social protection, but to provide more productive opportunities. He economic growth is generated from this lower part of the distribution chain to make it more inclusive. It has to do with improving the capacity of the poor through SMEs and making the vulnerable more active in growth.

Almost a third of the Peruvian population is poor.  It is not enough to get them off that threshold, but to prevent them from relapsing.  Photo: John Reyes

Almost a third of the Peruvian population is poor. It is not enough to get them off that threshold, but to prevent them from relapsing. Photo: John Reyes

—You have reduced the expectations of economic growth for this year from 2% to 2.5%. Does it affect poverty reduction?

Indeed, low economic growth affects the possibility of reducing poverty. There is also concern about inflation, which is a phenomenon that affects the poorest the most. It is important to control the inflationary cycle to take pressure off those further down the distribution.

—Some say that the current economic model must be extended despite the fact that we see that it does not rain for everyone. Would you propose some adjustments?

We must differentiate the model from the growth engines. It is necessary to reactivate the drivers that are low, such as job creation in informal urban areas because after the crisis The work has been recovered with lower quality. For this, it is necessary to make fiscal adjustments and resilient investments and greater connectivity for the engines of growth. The model as is is a more abstract concept.

—So, you have to invite more people to pay taxes…

Yes. In areas where distribution lags behind, greater growth could be generated structurally, for example, by simplifying tax regimes. The important thing is that there are many people with a high probability of falling into poverty. It is not enough to go over the line to say that “they are in a good situation”. 7 out of 10 are in a situation of poverty or vulnerability.

—And in labor matters?

There are some companies that do not find it profitable to be formal because they are not very productive. The solution is to increase productivity, but it is also important to protect workers, not jobs. For example, a high cost of dismissal can be replaced by unemployment insurance. The worker who loses it is protected.

Source: Larepublica

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