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Peru Wage Woes: Lessons from Peru’s Wage Protests

Authors: Aaron Lionel D’cruz, Keeven Cheong Aik Wei

Region Head: Clarice Lim Hui Wen

Editor: Chok Geow


Abstract


What does inequality look like? The events surrounding December 3’s farmer protests in Peru might hint at a greater problem of inequality that persists in the labour market in Peru. Amidst the chaotic ordeal of three presidencies changing power within a week, a protest erupted among the farmers, constructing blockades to block access to the Panamerican Sur Highway. The Peru wage protest came as Peru’s wage woes, expressing the growing dissatisfaction of farmers towards the poor working standards and poor salaries received. This paper will seek to draw out these lessons learnt amid the conflict and incendiary tensions.


Introduction


After a controversial Law of Agrarian Promotion (LPA) was passed in Peru, many agricultural workers protested against it, claiming that the salary and benefits provisions were insufficient. It raises the base salaries of agricultural workers that had been as low as 39 soles (US $11) by 30% even though workers were demanding an increase from US $11 to US $18 (Aljazeera, 2020). The ensuing escalation of the Peru wage protests into one of police brutality further intensified the sentiments of inequality and unfair treatment towards the farmers. Despite all this, the national leader of the agricultural worker’s union managed to capture the sentiments of the protesters through the following quote.


“In Peru, even those who sell candy pay taxes, why do large companies that have grown over 20 years continue to enjoy tax exemptions?”


This transforms the perspectives of the wage protests as not one of violence but one of a plea for help, the last resort taken up by the farmers to stand for their rights, accorded to them in the labour laws stipulated. Amidst the fog of political instability and pro-corporate interests, these are some lessons that could be learnt from the wage woes to seek a way forward and to respond to these cries most effectively.


1. A Consistent Government is an Effective Government


An unstable political landscape creates economic and legislative uncertainty that reduces investments and hinders the steady pace of economic growth. (Elbargathi, K & Al-Assaf, G, 2019). In Peru itself, history has shown that political instability led to the stagnation of credit markets and only expanded more rapidly once stable political institutions were in place (Zegarra, L, 2017).


In the context of the wage war, the change of president 3 times in a week was a sign of significant political instability as precious time and resources were allocated to dealing with such inconveniences rather than tackling other prevalent issues of labour wages in the economy.

- Impeachment of Martin Vizcarra on the grounds of ‘moral unfitness’ over allegations of corruption

- His replacement Manuel Merino resigned 6 days after being appointed owing to massive pressure from protestors

- Francisco Sagasti took power in the same week


Vizcarra’s proposal to extend the LPA in December 2019 to consolidate Peru’s reputation as an agro-exporting country led to brewing social problems as agricultural workers claimed their benefits were cut under the LPA (Fresh Plaza, 2021). Vizcarra’s inadequacy in handling the Covid-19 outbreak, allegations of corruption during his time as governor of the southern department of Moquegua from 2011 to 2014 (LIMA, 2020), and the ticking social time-bomb he had created eventually led to conflicts between different political groups and a cycle of political instability.


2. Fair Trade as a sustainable initiative is easier said than done


While fair trade as a workable initiative, applied to a specific industry might reap certain benefits, an enactment of fair trade as a sustainable process, maintained across all the industries in Peru might be close to impossible to achieve (Raynolds, Murray and Wilkinson, 2007).


This might mean that fair trade legislation would have to face the reality that businesses that engage Peruvian farmers do not necessarily actively invest in human capital. From a Marxist approach, “ production of absolute surplus value dominates over the production of relative surplus value” (Lust, 2019). Hence, the labour costs are far too low compared to the costs borne in invested capital.


A study in the fair trade of coffee in Cafe Feminino, Peru reinforces this as the adoption of a priori moral nature of the capitalist market economies (Ruben, Ruerd and Fort 2012). While greater legitimacy was granted to female employment, the labour wages have continued to stagnate over the years to a point where the average declared income of farmers barely meets the per capita income of Northern Peru, amounting to USD$1,300.00 (McMurty, 2009).


This is further complicated by the complex supply management system even within a small sector farm where the need for intermediaries in the distribution and processing of agricultural produce makes it even more challenging for one to “stretch the dollar” and cater to the demands that Peruvian farmers might have demanded (Cabin, 2009). While there can be no immediate solution to tackle this complexity, the complexities of trade processes should be considered in the application of free trade policies.


3. Trickle-down economics: A myth or a reality?


The notion of “trickle-down economics”, while founded in economic reasoning, does not necessarily translate to the actual implementation and benefit of the farmers directly.


The trickle-down theory advocates limited reliance on governance to impose active and progressive redistribution measures but increased reliance on corporations to fuel their growth and for wealth to redistribute itself or ‘trickle-down’ to the respective workers. The rise of “Reaganomics” and Thatcherism could have carried weight into other peripheral economies such as Peru, as seen by their pro-corporate policies to drive up investment inflows. Peru’s GDP per capita has experienced exponential growth since 1960 owing to foreign investment, pro-corporate policy incentives, and the state’s unconditional support for big capital which are mostly allocated in natural resource-oriented sectors.

Figure 1


This strong growth sharply reduced income-based poverty with the poverty rate, expressed as a percentage of the population living on USD 5.50 a day, falling from 52.2% in 2005 to 26.1% in 2013, equivalent to 6.4 million people escaping poverty during that period. Extreme poverty, expressed as the percentage of the population living on USD 3.20 a day, declined from 30.9% to 11.4% in the same period (World Bank, 2020).


However, Peru’s social problems remain huge. Young women, as well as youth from poor, rural indigenous communities, lack equal access to basic health care while 43% of children under 5 have anemia and 14% are malnourished (Latin American Centre, n.d.). Education-wise, Peru has a 14% high school dropout rate, the highest in Latin America, which is not aided by poor infrastructure, inadequate learning materials, out-dated curricula, and a lack of well-trained teachers (OECD, 2019).


The concentration of wealth among the rich has led to a bottleneck effect of wealth with little flowing down for development to happen. Even though poverty rates have fallen, the lack of initiatives to solve Peru’s social problems accentuates the high inequality levels between the rich and poor in Peru, causing dissatisfaction levels among the poor to rise. Unless the Peruvian government makes a conscientious effort to ensure that wealth flows down to those who need it, lower-wage workers will continue campaigning for change to happen.


The Way Forward


It took the protests and blockade of the Panamerican Sur Highway to trigger governmental action into the current status of Peruvian farmer exploitation. Given this rising trend of protests in response to the government’s inaction, has this become the new normal for the unprivileged? However, these protests are symptomatic of a larger issue of an economic divide that has plagued the Peruvian economy and these lessons would help to shed light on these problems faced.



References


1. Al Jazeera. (2020, December 31). Peru President vows action after deaths at farm workers protest.From https://www.aljazeera.com/news/2020/12/31/peru-president-vows-action-after-deaths-at-farm-workers-protest


2. Cabin, M. (2009). Labor Rights in the Peru Agreement: Can Vague Principles Yield Concrete Change? Columbia Law Review, 109(5), 1047-1093. Retrieved February 19, 2021, from http://www.jstor.org/stable/40380398


3. Elbargathi, K., & Al-Assaf, G. (2019, February 21). The impact of political instability on the economic growth: An empirical analysis for the case of selected arab countries. International Journal of Business and Economics Research, 8(1), 14. doi:10.11648/j.ijber.20190801.13\


4. Fresh Plaza. (2021, January 11). Recent events regarding the strikes and new agrarian law in Peru. Retrieved from https://www.freshplaza.com/article/9282814/recent-events-regarding-the-strikes-and-new-agrarian-law-in-peru/


5. Latin American Centre. (n.d.). Why Peru Has Not Graduated?: From Trickle Down to Middle Out Economics. https://www.lac.ox.ac.uk/files/whyperuhasnotgraduated-fromtrickledowntomiddleouteconomicsresumenpdf


6. LIMA. (2020, November 10). Peru’s Congress topples Martín Vizcarra on its second attempt. https://www-economist-com.libproxy.smu.edu.sg/the-americas/2020/11/10/perus-congress-topples-martin-vizcarra-on-its-second-attempt.


7. Lust, Jan (2019) The rise of a capitalist subsistence economy in Peru, Third World Quarterly, 40:4, 780-795, doi: 10.1080/01436597.2018.1529540


8. McMurtry, J. (2009). Ethical Value-Added: Fair Trade and the Case of Café Femenino. Journal of Business Ethics, 86, 27-49. Retrieved from http://www.jstor.org/stable/4029485


9. OECD. (2019). Key Issues affecting Youth in Peru. https://www.oecd.org/dev/inclusivesocietiesanddevelopment/youth-issues-in-peru.htm


10. Raynolds L.T., Murray D., & Wilkinson, J. (2007). Fair Trade : The Challenges of Transforming Globalization. Routledge. Contemporary Challenges and Future Prospects p.239-250


11. Ruben, Ruerd, and Ricardo Fort. (2012). ‘The Impact of Fair Trade Certification for Coffee Farmers in Peru’. World Development 40(3):570–82. doi: 10.1016/j.worlddev.2011.07.030 Retrieved from:https://www.sciencedirect.com/science/article/pii/S0305750X11002051


12. The World Bank. (2020, October 9). The World Bank in Peru. https://www.worldbank.org/en/country/peru/overview


13. Zegarra, L. (2017). Political instability, institutions and private capital markets in Lima, Peru. América Latina En La Historia Económica. doi:10.18232/alhe.855

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