Statements by Microsoft Chairman Bill Gates that Peru doesn’t need international assistance because it is a middle-income country have led Peruvian authorities to take a hard look at the nature of our economic growth.
In a recent meeting with Spanish President Mariano Rajoy that focused on economic cooperation to assist poor countries, Gates questioned continued aid to Peru because it is now considered a middle-income country. “When you give aid to a country with that level of wealth,” Gates declared, “then you really do have to question why you are doing aid . . . while children die of malaria and people don’t receive medicine for AIDS.”
Gates is not against international aid. Quite the contrary. In a speech to the presidents and heads of government of the Group of 20 meeting in Cannes in November 2011, he called on them not to cut assistance for the most neglected sectors, and to support research in the areas of public health and agricultural production. He went on to emphasize the importance and necessity of international cooperation and said that “the world will not balance its books by cutting aid, but it would do irreparable harm to global stability, the growth of world economy and livelihoods of millions of poor people.”
He also emphasized that the biggest problem facing the world as a whole continues to be the gap between rich and poor. The solution, according to Gates, is to “find ways of promoting greater technological innovation in the areas of food security and eradication of disease. Only by stimulating poor countries’ own capacity for innovation,” he went on, “will they be able to lift the majority of their populations out of extreme poverty and the social ills that go along with it.”
In February, at the meeting of the Governing Council of the International Fund for Agricultural Development (IFAD), Gates said it was necessary to provide assistance for small farmers in developing countries who needed it. He also urged the UN agencies responsible for combating hunger and poverty to come together to achieve sustainable growth in productivity, and announced the donation of nearly $200 million in grants, bringing the Gates Foundation’s commitment to small farmers to more than $2 billion since its agriculture program started in 2006.
Peruvian government officials have tried to explain to Gates that national averages such as per capita gross domestic product gloss over internal inequality, and that although Peru has recorded one of the highest levels of economic growth in the world in the past decade, in rural areas there are high rates of poverty, chronic malnutrition, and wide gaps in access to services, infrastructure, and other benefits. Peruvians continue to migrate elsewhere, including to other countries in the region, of which Argentina occupies first place.
Peruvian authorities have invited Gates to take a tour of the rural areas of the highlands and eastern jungle, pointing out that “he is only looking at averages. . . It is necessary to look beyond the statistical mean to see the wide variations is different areas.”
Apparently it is difficult for Bill Gates to imagine that a country with such positive economic performance, with such a good credit rating, can also have such precarious social indicators. Despite the reduction of poverty and destitution due to economic growth in the region in the last few years, the inequalities in the outlying areas, and in urban areas as well, are enormous. The quality of education and the levels social services continue to be among the worst in the region.
For example, in Peru expenditures on social services in 2008 and 2009 were lower than the regional average, which reflects the low priority given to this area in macroeconomic policy. In fact, for Latin America as a whole resources devoted to social services range from less than 10 per cent of GDP in Ecuador, Guatemala, Panama, Paraguay, Dominican Republic and Peru, up to twice that percentage in Argentina, Brazil, Costa Rica, Cuba, and Uruguay. According to data from the Economic Commission for Latin America and the Caribbean (ECLAC), this is the case even though most countries have made efforts to increase the macroeconomic priority of social spending since the end of the 1990s.
The discourse spread by local and international media focusing on economic strength and stability, the export boom and building up credit reserves—all of which is true—has overshadowed discussion of the problems resulting from the enormous social gaps that persist.
The great challenge facing the Peruvian government is to change the pattern of growth that leads to income concentration and exclusion. It should be kept in mind in debates on the bill in the National Congress to put limits on the size of agricultural holdings in the country, prompted by the process of awards made by the government under the Olmos irrigation project. It has taken 90 years to build this project, with large investment by the state, and 60 percent of the lands have been allocated to a single company.
To make use of methodologies that make social programs more efficient, cooperation for development is important. But Bill Gates has made clear that it is also necessary to redistribute the results.
Ariela Ruiz Caro is an economics graduate of the Humboldt University in Berlin, with an MA in Economic Integration from the University of Buenos Aires. She does international consulting on trade, integration, and natural resources for ECLAC, the Latin American Economic System (SELA), the Institute for the Integration of Latin America and the Caribbean (INTAL), and other organizations. She worked for the Comunidad Andina from 1985 to 1994, as an advisor to the Commission of Permanent Representatives of MERCOSUR from 2006 to 2008, and is a writer for the Americas Program.
Translation: Tom Holloway