Peru in 2021 BICENTENARY PLAN

Peru in 2021BICENTENARY PLAN

EXECUTIVE SUMMARY

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Bicentenary plan:

Peru in 2021

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Bicentenary plan: Peru in 2021

Executive summary

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President of the Republic Alan García Pérez President of the Council of Ministers José Antonio Chang Escobedo Managing Board of the National Strategic Planning Centre Agustín Haya de la Torre de la Rosa, President José Antonio Arévalo Tuesta, Elena Aída Conterno Martinelli, Vladimiro Huaroc Portocarrero, Grover Germán Pango Vildoso, Víctor Javier Tantaleán Arbulú, José Fernando Valdéz Calle EXECUTIVE DIRECTOR Julio Cavero Jara National Bureau for Forecasting and Strategic Studies Joel Jurado Nájera National Bureau for Coordination and Strategic Planning Ramón Pérez Prieto (e) National Monitoring and Evaluation Bureau Elías Ruiz Chávez Supervisor of the Planning and Budget Office Carlos Loaiza Selim Supervisor of the General Administration Office Patricia Espichán Cuadros Supervisor of the Legal Advisors' Office Jacqueline Calderón Vigo Science and Technology Modesto Montoya Zavaleta Advisors Jacqueline Mori Chávez and Mariella Pinto Rocha Assistant to the President's office Cynthia Argumedo Hernández Technical team Paola Alfaro Mori, Reynaldo Aponte Fretel, Luis Ávila Ágreda, Carlos Cabrera Soto, Rosa de Fátima Díaz Díaz, Alejandro Gómez Arias, Hernán Mansilla Astete, Julio Pérez Coaguila, José Rospigliosi Ferro, Mónica Talledo Jiménez, Álvaro Velezmoro Ormeño, César Zapata Pardo © National Strategic Planning Centre Av. Canaval y Moreyra 150, Edificio Petroperú, piso 10, San Isidro, Lima, Peru. Telephone: 711-7300 E-mail: [email protected] URL address: www.ceplan.gob.pe Rights reserved First edition, November 2010 Legal deposit made at the National Library of Peru Nº 2010-15687 ISBN: 978-612-45549-5-7 Editor and publisher: Hugo Vallenas Málaga Title page and design: Luis Valera

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Printed by: Tarea Asociación Gráfica Educativa

INDEX

Presentation

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1. PRELIMINARY CONCEPTS 15 Guidelines for the Bicentenary Plan 16 Vision for the future and six strategic aims 17 Quantitative aims of the Bicentenary Plan 21 The challenge of world megatrends 22

2. STRATEGIC AXES

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STRATEGIC AXIS 1 FUNDAMENTAL RIGHTS AND DIGNITY OF THE INDIVIDUAL

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1. Diagnosis 27 2. National aim, guidelines and priorities 28

National aim 28 Policy guidelines 29 Priorities 30

3. Specific aims, indicators, goals and strategic action 30 Specific objective 1 Full and effective validity of fundamental rights. 30 Specific objective 2 Guaranteed access to an autonomous, independent, transparent, reliable, modern, efficient, effective and predictable justice system.

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Specific objective 3 Consolidation of the institution of democracy and public participation.

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Specific objective 4 Reduction in inequality, poverty and extreme poverty. 32

4. Strategic programs 33 STRATEGIC AXIS 2 OPPORTUNITIES AND ACCESS TO SERVICES

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3. Specific aims, indicators, goals and strategic action 37 Specific objective 1 Equal access to an integral education enabling full development of society's human abilities.

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Specific objective 2 Universal access to integral high-quality health services. 39 Specific objective 3 Adequate nutrition for infants and pregnant women. 39 Specific objective 4 Universal access by the population to adequate water and electricity supplies.

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Specific objective 5 Improvements in the living conditions of the population and access to decent housing for families who lack it.

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Specific objective 6 Improvements to public safety. 41 Specific objective 7 To convert the beneficiaries of social programs into producers of goods and services.

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4. Strategic programs 43

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STRATEGIC AXIS 3 STATE AND GOVERNABILITY

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1. Diagnosis 44 2. National aim, guidelines and priorities


3. Specific aims, indicators, goals and strategic action 47 Specific objective 1 Agility, transparency and effectiveness at all levels of the public administration, serving individual rights and with a career in administration highly valued.

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Specific objective 2 Equal and efficient participation by the population in the process of democratizing politics, taking public decisions and decentralizing institutions in order to ensure that citizens can rely on public institutions and governability.

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Specific objective 3 Strengthening of international peace and security, cross-border integration and cooperation at sub-regional and regional level and across the hemisphere, as well as assistance and protection for Peruvians abroad.

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Specific objective 4 A fully functioning national security and defense system to protect our territory and/or address any threat to national integrity and security.

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4. Strategic programs 51 STRATEGIC AXIS 4 COMPETITIVENESS AND EMPLOYMENT

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3. Specific aims, indicators, goals and strategic action 58 Specific objective 1 The development of a stable and far-sighted economic policy that encourages sustained economic growth through private and public investment in job creating activities.

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Specific objective 2 To develop a diversified, competitive and sustainable productive structure that produces high added value.

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Specific objective 3 To achieve sustained growth of exports based on diversified, sustainable and competitive products.

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Specific objective 4 To ensure that innovation, technological development and the application of scientific knowledge contribute to the development of productive activities that are environmental sustainable.

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Specific objective 5 To achieve adequate employment creation for inclusive modernization.

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Specific objective 6 To develop an institutional and legal framework that guarantees the security of investments.

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Specific objective 7 To develop transparent and efficient financial markets with solid institutions that facilitate finance and investment.

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4. Strategic programs 63 STRATEGIC AXIS 5 REGIONAL DEVELOPMENT AND INFRASTRUCTURE

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3. Specific aims, indicators, goals and strategic action 67 Specific objective 1 To develop an adequate, decentralized economic and productive infrastructure for use by the public.

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Specific objective 2 To develop a diversified industrial base providing high added value in the farming, fishing, mining and tourism sectors, in accordance with our comparative advantages in each region of the country.

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Specific objective 3 To develop communities in mid-sized cities based on a Planned Population Center (CPP) with basic services and a diversified economy.

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4. Strategic programs 70 STRATEGIC AXIS 6 NATURAL RESOURCES AND THE ENVIRONMENT

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3. Specific aims, indicators, goals and strategic action 78 Specific objective 1 Sustainable use of natural resources by and for the local population.

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Specific objective 2 To develop an improved environmental quality strategy managed with an integral approach at national level.

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Specific objective 3 To develop integral and efficient management of water and water resources throughout Peru.

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Specific objective 4 To bring the population and economy into line with climate change.

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Specific objective 5 To strengthen National Environmental Management System (SNGA) at the three levels of government, with the active participation of the population.

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4. Strategic programs 82 3. ANALYSIS OF CONTINGENCIES

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IMPORTANCE 85 1. Normal scenario 85 2. Contingent scenario 86 3. An additional contingent factor:

Possible interruptions in the management of the country's macroeconomic variables.

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PRESENTATION

This Executive Summary of Peru's Bicentenary Plan for 2021 will help to promote an understanding of the many subjects covered in the principal document. It includes a synthesis of the six strategic axes that are also national goals; it defines 169 policy guidelines, 29 priorities, 31 specific objectives, 263 strategic actions, 90 indicators and 66 strategic programs. Policy managers of the National Strategic Planning System have to hand in this Summary, the elements that will give them a deeper understanding of what we are proposing and will find it easier to find their own activities in the work of strategic planning. The Bicentenary Plan is not a static document, much less an imposition. It is a flexible proposal that is open to contributions and experiences that will enrich it over time. This is the first time that Peru has had a document with these characteristics, application of which will guide public policies and bring them into line in a systematic manner with the proposals and initiatives of civil society. To the extent that the Bicentenary Plan is officially recognized by the President's Office and the Cabinet of Ministers, we will continue with the task of informing the components of the System of its scope and vision.

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Peru is on the road to progress and development and it is our job to use strategic planning to give it consistency and a vision for the future. If we achieve the goals planned for 2021, Peru will be on the road to prosperity and social justice within a free and democratic state by the middle of the century. Lima, November 2021 Agustín Haya de la Torre President of the Managing Board of the National Strategic Planning Centre

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1. CONCEPTS PRELIMINARY

Why the BICENTENARY PLAN: Peru in 2021? The Bicentenary Plan: Peru in 2021 is a strategic plan for integral national development, which includes a set of goals for economic growth; the eradication of poverty; elimination of the deficits in education, healthcare and infrastructure; modernization and greater dynamism of the State and the public administration; improvements in the quality of life and environmental management; recovery and strengthening of ethical values and cultural identities; the aim is that Peru should become a society of free citizens, competitive at world level and firmly grounded on the rule of law. Which institution has drafted it? The Bicentenary Plan: Peru in 2021 has been drafted by the National Strategic Planning Center - CEPLAN, as part of its mission to conduct and develop planning as a technical instrument of government and public administration, guiding actions aimed at achieving the strategic goal of integrated development for Peru. The Bicentenary Plan is the result of two years of hard work by authorities and representatives of all sectors of the State, together with professional experts and leaders of civil society.

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Why was the year 2021 chosen as the time horizon? 2021 is the bicentenary of Peru's independence, and as such is a fundamental milestone at which to evaluate the results of our collective efforts to achieve a certain condition as a sovereign republic. 2010 saw the start of various initiatives to commemorate the founding of Peru as a republic of sovereign citizens and it is relevant to consider the period 2010 to 2021 as a period of commitment to achieving the specific goals proposed in the Bicentenary Plan. GUIDELINES FOR THE BICENTENARY PLAN What are the guidelines for the Bicentenary Plan? The major guidelines for the Bicentenary Plan are based on: • The Universal Declaration of Human Rights approved by the

United Nations Organization (UN) in 1948. • The modern concept of human development drawn up by

Amartya Sen, who won the Nobel Prize for Economics in 1998, being the result of a simultaneous search for a better quality of life and improved conditions for freedom and governability.

• The Millennium Declaration and Millennium Policies of the United Nations.

• The policies in the National Agreement signed by Peru's political and social organizations in 2002, which propose a set of economic, political, social, cultural and institutional guidelines based on the concept of social justice and governability (the real ability of citizens to influence the daily decisions of the political class with their opinions and decisions) and sustainable development (enabling citizens to manage their own lives in decent conditions, with equality of opportunities and optimum environmental management).

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What are the policies of the National Agreement? The National Agreement approved 31 state policies grouped around four thematic axes: 1. Democracy and the rule of law 2. Fairness and social justice 3. The competitiveness of the country. 4. An efficient, transparent and decentralized state These 31 policies contained in the National Agreement constitute the framework for the policies, goals and actions making up the Bicentenary Plan: Peru in 2021. VISION FOR THE FUTURE AND SIX STRATEGIC AIMS What is the future vision of Peru in the 21st Century on which the Bicentenary Plan is based? The Bicentenary Plan: Peru in 2021 sees a 21st Century Peru with the following economic, social, cultural and institutional profile: • A democratic society in which the rule of law prevails, where

living conditions are high and there is equality of opportunity. • A modern, decentralized, ethical. participatory and efficient state at

the service of its citizens. • A dynamic, diversified high-technology economy that is regionally

balanced and favors private investment and innovation, with full employment and high labor productivity.

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Figure 1 • A society in which poverty and extreme poverty have been

eliminated, with medium-high incomes and elevated human development, with redistributive measures that encourage social equality and sustainable management of natural resources.

• A nation that is proud of its identity and origins, that is creative and open to progress, optimistic about the future and where social organizations strive to turn their collective aims into reality.

What is the strategic concept of the Bicentenary Plan 2021? The Bicentenary Plan: Peru in 2021 includes six national strategic objectives: 1. A state based on fully valid fundamental rights and respect for

the dignity of its people. • A state that considers freedom, justice, peace and dignity as the

intrinsic and inalienable rights of all human beings. • That believes the universal exercise of individual rights to be the

essential purpose of every human society.

State policies in the National Agreement

Democracy and the rule oflaw

Fairness and social justice

The competitiveness of the country.

An efficient, transparent and decentralized state

A democratic regime and the rule of law

Decentralization and strengthening of political parties

Affirmation of national identity

The institutionalization of dialogue and agreement

Strategic planning and transparency

A foreign policy aimed at democracy and

Public safety and the eradication of violence

Political, economic and administrative

decentralization National security

A reduction in poverty

Equality of opportunity without discrimination

Universal access to education and promotion of culture and

sports

Universal access to health services and social security

Access to decent and productive employment

Promotion of food security and nutrition

Strengthening of the family and protection of children

Affirmation of social market economics

Competitiveness, productivity and a formal economy

Sustainable development and environment

Development of science and technology

Development of infrastructure and housing

Widening of our markets with reciprocity

The development of farming and rural areas

An efficient and transparent state

Institutionalization of the armed forces

Ethics, transparency and the eradication of corruption

Eradication of drug trafficking

Full validity of the Constitution and human rights

Access to information and freedom of expression

Elimination of terrorism and national reconciliation

Fiscal sustainability and a reduction in public debt

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• That considers different freedoms as the supreme aim of development and at the same time the indispensable means of achieving it.

2. A competitive economy based on the large-scale creation of

high-productivity jobs. • One that gives priority to private initiative as the principal source

of sustainable resources and of qualified employment. • An economy that considers international markets as the principal

source of opportunities for economic development and natural resources as the principal source of wealth.

3. An economy that offers equality of opportunity and

unrestricted access to services. • • Where development policies aim for the eradication of poverty

and extreme poverty and all social and other barriers that limit freedom and the realization by all Peruvians of their maximum potential as human beings.

• • That provides Peruvians, without exception and wherever they live with equal opportunities for access to basic services and the development of their economic, social and cultural activities.

4. Economic growth based on the sustainable use of natural

resources. • That guarantees that extractive activities are carried out under the

best environmental conditions that modern technology can provide.

• That gives priority to recovering the environmental quality of our cities.

• Growth that protects biodiversity and ensures careful management of natural resources, combining protection with selective measures to promote profitable and sustainable economic activities with high added value.

5. Development of adequate infrastructure distributed properly

among the regions. • That provides solutions to infrastructure deficiencies in the

country's interior in an orderly and coordinated manner. • That channels both public and private resources in the form of

concessions or public-private partnerships that take into account

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the sustainable use of natural resources and good environmental management.

6. The State should achieve efficient public administration, that

facilitates governability and reaches all sectors of society and every corner of the country.

• That facilitates governability and respects fundamental rights. • That helps to eradicate poverty and defends equality of opportunity

in law for everyone. • That ensures access to basic services by everyone in the country. • That provides quality education and health services. • That ensures the sustainable use of natural resources and a high-

quality environment. • That promotes private investment in infrastructure and invests

directly when there are no private offers. The six national strategic aims mentioned above are structurally linked, such that the success of the Bicentenary Plan requires them to be implemented simultaneously and in full. In accordance with this concept it is essential to put into practice a coordinated inter-sector approach to public policy that enables the actions of all of Peruvian society to contribute to the achievement of its goals.

Figure 2 Strategies for the implementation of national objectives

An efficient and decentralized State at the

service of the citizens and of development

Full validity of the fundamental rights and dignity of the individual

A competitive economy with high employment and

productivity

Equality of opportunity and

access to services

Sustainable use of natural resources

Balanced regional development and adequate infrastructure

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QUANTITATIVE AIMS OF THE BICENTENARY PLAN What are the quantitative aims of the Bicentenary Plan? We start from the idea that Peru is a partially developed country enjoying rapid economic growth. Based on this premise, in quantitative terms achievement of the national strategic objectives of the Bicentenary Plan must be translated into the following indices by 2021: • A population of 33 million Peruvians without extreme poverty,

unemployment, poor nutrition, illiteracy or infant mortality. • Per capita income between US$8000 and US$10000. • Gross domestic product that has doubled between 2010 and 2021. • Exports that have quadrupled between 2010 and 2021. • Average annual growth of around 6%. • Average annual investment rate of 25%. • Annual average tax revenue 5 points higher, with respect to

GDP. • Reduction in poverty of at least 10% of the total population. THE CHALLENGE OF GLOBAL MEGATRENDS What are the global megatrends that should be considered and addressed in the Bicentenary Plan? The development perspectives of Peruvian society by 2021 are influenced by important global megatrends in different areas of human endeavor. The most influential megatrends we should consider when designing our development policies are: 1. Globalization: Modern communications technology has been

absorbed into business relationships, enabling a wide range of direct, rapid and even mass transactions between official institutions, companies and individuals anywhere in the world.

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This economic globalization will continue to drive world business, offering unlimited opportunities for supply, demand claim and free association of producers and sellers. Every developing economy should facilitate access by its commercial actors to this expanding world market.

2. Global democracy: The globalization of economic relationships

has helped to strengthen supranational legislation to protect it. Consequently, ever larger sectors of the world's population have become convinced of the need to globalize the Universal Declaration of Human Rights and paradigms such as popular sovereignty, representative democracy and freedom to do business. Our development should strengthen this tendency.

3. The generalization of information technology and

telecommunications: The availability throughout the world of information technology and virtual communications has exponentially increased the massive and simultaneous transmission of news and knowledge from anywhere in the world. The Internet and social networking sites are playing an ever more important part in the diffusion of individual opinion, inventiveness and ideas. Our development process must help this free diffusion of knowledge and individual initiative on a worldwide scale.

4. The appearance of new economic powers:

The old hemispheric division between developed countries and developing countries and the old monopoly of technology have been superseded by increased internationalization of capital markets and radical changes in the development of technologies, and the possession of productive patents. The so-called BRIC group of Brazil, Russia, India and China, is the most representative of this new process of developing superpowers. Our development process must follow this new course.

5. New developments in international trade:

The Asia-Pacific region has become the most important economic and commercial zone of the 21st Century. Several of the most powerful economies in the world, such as the United States, China, Japan, India and Russia have their most important trading partners in this zone and in Latin America, Mexico, Chile, Colombia and Peru have high hopes of it.

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6. Aging populations and international migration: Developed

countries are experiencing lower birth rates and continue to attract large numbers of migrants from countries with lower per capital incomes. This is a problem that requires realistic solutions from each country and also jointly. Our development process must create new opportunities for recovering this human capital.

7. The growth of megacities: Many cities are growing at

unprecedented levels, with populations that exceed 10 million inhabitants. This concentration of human resources creates new challenges for energy management, productivity, safety and resource management. It also requires political foresight that encourages the growth of the rural population.

8. Climate change: The greenhouse effect caused by carbon dioxide

(CO2) emissions from fossil fuel consumption, is increasing the earth's mean temperature, melting glaciers and changing rainfall patterns. Our development process must encourage a reduction in environmental pollution.

9. Concern for the environment and a preference for natural

products: Awareness of environmental problems is also manifest in a concern for the quality of life at individual and social levels. We should encourage the trend towards the consumption of natural and organic products and health maintenance through healthier customs.

10. Biotechnology and genetic engineering: In order to achieve a

better and healthier life expectancy for the average citizen, biotechnology and genetic engineering have developed genetically modified plant and animal species, and even human organs to obtain more efficient results. Processes such as in-vitro fertilization and cloning (both subject to ethical objections) have opened the door to new scientific challenges that are within reach of the entire international community.

11. Robotics and nanotechnology: Nanotechnology enables the

manipulation of material at atomic scale to obtain fibers and other materials that are more versatile, while robotics consists of the design and production of automated tools and systems capable of

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emulating certain human actions, thus saving time and eliminating risk to humans. Our development process must incorporate experimental initiatives in these fields in order to create motor systems and cheaper products that are less damaging to the environment.

These megatrends represent not only challenges but also opportunities for achieving certain economic, social and cultural goals. To participate and take a position on these megatrends is a fundamental part of the competitiveness that any society must have to achieve its development aims.

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2. STRATEGIC AXES

STRATEGIC AXIS 1 Fundamental rights and dignity of the individual 1. DIAGNOSIS The development objectives of the Bicentenary Plan consider it essential to relate growth, high productivity and environmental quality with the full implementation of fundamental rights. Strengthening these rights implies that all citizens without exception should have access to an autonomous, reliable and efficient system of justice. Also that consolidation of the institutions of democracy and public participation should lead to a consensus to reduce inequality, poverty and extreme poverty to the minimum. The population of Peru, according to the 2007 census, is 28,221,000 inhabitants; in 2021 INEI calculates that it could rise to 33,149,000. The highest population density is to be found in Lima and Callao. The Province of Lima has 242 inhabitants per square kilometer and the Province of Callao, 5,966 inhabitants per square kilometer. However in eastern Peru the population density is 6.3 inhabitants per square kilometer. Uneven population density and a high degree of inequality of opportunities that still exists in the farthest regions from the capital indicates that the challenge of strengthening fundamental rights could face significant obstacles. Nevertheless, important progress has been made in recent years, such as the following: • Poverty in Peru has fallen from 54.8% to 34.8% of the population

between 2001 and 2009. • Equally, extreme poverty fell from 24.4% to 12.6% of the

population between 2001 and 2009. • The Gini coefficient measures inequality and poverty (on a scale of

0 for full equality to 1 for inequality); between 2001 and 2009

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Peru's coefficient changed from 0.492 to 0.475 (closer to 0 and therefore an improvement) making it no longer one of the most unequal countries in the world.

One interesting detail is that indigenous communities in the Amazon are no longer living in extreme poverty and exclusion and today have institutional channels through which to express their demands and proposals - and all without losing their organizational and cultural autonomy. In 1993 these indigenous communities had 299,218 inhabitants organized into 1,450 communities belonging to 65 ethnic groups. In 2007 there were 332,975 inhabitants in 1,786 communities belonging to 51 ethnic groups. 2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: Full validity of the fundamental rights and dignity of individuals, in accordance with the Constitution and international human rights treaties signed by the Peruvian State. POLICY GUIDELINES: Human rights: • To guarantee unrestricted respect for fundamental constitutional

rights. • To create legal instruments to further defend the fundamental

rights contemplated in the Constitution. • To eradicate the exploitation of children and adolescents. • To promote changes in the attitudes of society in order to

eradicate domestic violence and to promote ethical and moral values that aid family cohesion, peace and solidarity.

Democratization: • To strengthen the representative democratic system and guarantee

free elections, strengthening political pluralism, the search for consensus, access by different parties to power and a balance of powers.

• To affirm respect for cultural diversity through participatory processes and public policies that encourage the right to an

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identity and the preservation and diffusion of traditions and expressions.

• To give special attention to the right to cultural diversity of indigenous peoples in the Amazon and Afro-Peruvians, encouraging achievement and a "culture of success" among them.

Justice: • To strengthen institutions linked to the administration of justice. • To ensure free access to justice by communities affected by

poverty and extreme poverty. • To strengthen the independence and impartiality of the system for

appointing judges and prosecutors. • To improve the effectiveness and coordination of functions

among entities linked to the administration of justice: The Judiciary, the Public Prosecutor's Office, the Constitutional Court, the National Council of the Judiciary, the Ministry of Justice and the police.

• To reduce the burden on the courts by promoting alternative means of conflict resolution.

Promotion of fairness: • To encourage a reduction in social differences through the

eradication of poverty and extreme poverty, as well as access to land ownership for indigenous communities.

• To promote achievement among the poorest of the population in order to reduce dependence on social programs.

• To eradicate all forms of discrimination based on gender. • To establish protection networks to prevent discrimination and

all forms of prejudice affecting the most vulnerable. • To favor participatory mechanisms and development projects

that reduce the vulnerability of people exposed to unequal conditions.

PRIORITIES • To ensure the unrestricted validity of fundamental rights. • To consolidate the institutions of democracy. • To make the administration of justice more efficient. • To eradicate poverty and extreme poverty.

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3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC ACTION

Specific objective 1 Full and effective validity of fundamental rights. Indicators and objectives � People of legal age to be identified by the national I.D.

document: 2010 98.9% 2021 100%

� People of legal age to be identified by the national I.D. document: 2010 40.3% 2021 100%

Strategic action • Publish and implement a National Plan of Human rights • Strengthen the identification and civil registration system. • Develop participatory programs that help to eradicate

discrimination and inequality. • Widen the influence of the children and adolescents ombudsman at

school and municipal level. • Implement commitments acquired by the Peruvian State

concerning fundamental rights and the dignity of the individual. Specific objective 2 Guaranteed access to an autonomous, independent, transparent, reliable, modern, efficient, effective and predictable justice system. Indicators and objectives — People should have a favorable opinion on the justice system:

2010 14.2% 2021 55%

— Recommendations from international human rights institutions implemented by the Peruvian State: 2010 1.1% 2021 90%

— Number of cases resolved / 100 new cases: 2010 75.5% 2021 95%

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Strategic action • Consolidate the autonomy of the system of administration of

justice. • Assign resources to improve the operation of the system of

administration of justice. • Strengthen the legal and institutional framework to reduce the

burden on the courts by means of alternative methods of resolving conflicts.

• Strengthen the courts of first instance in rural areas. • Establish permanent systems for monitoring access to justice. Specific objective 3 Consolidation of the institution of democracy and public participation. Indicators and objectives — Number of political parties with transparent internal elections /

total number of political parties (100%): 2010 no data 2021 100%

Strategic action • Maintain the democratic context unchanged. • Promote a culture of respect for elected authorities. • Strengthen the legitimacy of the party political system. • Institutionalize mechanisms for dialogue that enable public opinion

to be consulted when public policies affect their rights. Specific objective 4 Reduction in inequality, poverty and extreme poverty. Indicators and objectives — Number of poor people / total population (100%)

2009 34.8% 2021 10%

— Number of extremely poor people / total population (100%) 2009 12.6% 2021 5%

— Gini coefficient (changes in income inequality) 2009 0.479

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2021 0.35 — Ratio between the average wage for men / average for women

2009 1.55 2021 1.3

— Ratio between the number of senior government officials who are women / total number of senior government officials (100%) 2009 26% 2021 50%

Strategic action • Improve and strengthen public programs for reducing poverty. • Articulate public and private interventions to reduce poverty. • Ensure full access by poor and extremely poor people to basic

services (water, electricity, health and education). • Increase employment and productivity in rural areas to reduce

inequality. 4. STRATEGIC PROGRAMS • Program of reforms and improvements to procedural systems and

the administration of justice. • Training program for officials and employees of entities involved

in the administration of justice. • Program of continual review and optimization of legislation. STRATEGIC AXIS 2 Opportunities and access to services 1. DIAGNOSIS The democratization of society implies basically equal access to high-quality basic services (education, health, water and hygiene, electricity, telecommunications, housing and public safety). Achieving this requires political strategies that involve the State and private sector in equal measure. The most urgent challenges before us can be summarized as follows: • We must increase annual investment in education per student; in

Peru this was US$ 432.75 in 2008 while the average in developed

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countries was between US$ 8,000 and US$ 12,000 annually per student.

• We must improve educational performance and continue to improve the rate of completion of studies (from 77.7% at primary level, pupils aged 12 to 14; and from 60.7% at secondary level, pupils aged 17 to 19)

• We must persist with the eradication of illiteracy (which has fallen from 11.7% to 8.9% between 2003 and 2009).

• We must achieve full healthcare coverage, which at present only 21.9% of the economically active population (EAP) enjoy.

• As far as food security is concerned, we should overcome the intake deficiency of the population, is around 30.1% of the general population and 42.5% for people in rural areas; we must also eradicate chronic undernourishment.

• We must improve the living conditions of the population, ensure efficient water and drainage services and improve the management and provision of public safety.

These challenges will be resolved in a sustainable manner if we consider that it is not just a matter of increasing public spending, but structuring it within projects that will help to convert the beneficiaries of social programs into producers of goods and services. 2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: Universal access to basic services (education, health, water and drainage, electricity, telecommunications, housing and safety) in order to overcome poverty, guarantee equality of opportunity and achieve a better quality of life for all. POLICY GUIDELINES: Education: • To prioritize a high-quality basic education for all citizens

without exception, with emphasis on infant education. • To eradicate illiteracy, with the Bicentenary Plan: Peru in 2021

playing a special role in marginal urban zones, emphasizing ethnic

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minorities, migrants, children and young people without schooling and the disabled.

• To eliminate quality gaps between public and private education

and between urban and rural education, while addressing cultural diversity.

• To promote the training of professional teachers in accordance with international standards.

• To promote efficient, decentralized, ethical and participatory educational management.

• To raise the quality of higher education in line with socioeconomic and cultural development.

• To ensure the provision of quality technical and vocational education.

Health and security: • Guaranteeing resources from different levels of government for

universal health insurance. • Providing universal access to reproductive health services and

achieving a reduction in infant mortality and mortality among children below the age of 5.

• Encouraging prevention and healthy habit, and ensuring control of transmissible, chronic-degenerative and mental illnesses and drug addiction.

• Introducing legislation to protect environmental health and ensure compliance with such legislation.

• Guaranteeing universal access to health services, social security, drinking water and basic hygiene, giving priority to poor and extremely poor people and applying an intercultural approach.

Food security: • Guaranteeing access by everyone, especially the extremely poor,

to decent food. • Ensuring that food aid programs for needy families are temporary

and facilitate their participation in productive activities. • Giving special emphasis to the consumption of seafood and fresh

water fish.

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• Ensuring the provision of basic foodstuffs through competitive, sustainable and diversified food supply in which private initiatives take precedence.

• Promoting the culture of Peruvian gastronomy designing regional diets in accordance with the needs of healthy eating.

• Establishing mechanisms that guarantee food security for the neediest people in the event of a national emergency.

Basic services and housing: • Promoting public and private investment to ensure full access by

the population to drinking water and drainage, electricity and telecommunications, giving priority to the needy.

• Providing more resources for housing that is accessible to poor people.

• Developing models for low-cost communities that ensure adequate family living conditions.

Public safety: • Preventing and sanctioning social conduct that affects the

tranquility, integrity and liberty of the population. • Encouraging a culture of peace and respect for the law to

counteract individual or collective violence. • Guaranteeing the presence of the State in areas vulnerable to

violence and improving operating conditions for the police. • Promoting a National Public Safety System headed by local

authorities with the participation of the population, which investigates methods of prevention and sanction.

PRIORITIES • Achieving universal and uninterrupted access to a high-quality

basic education. • Improving the professional training of teachers. • Closing the gaps in coverage between basic education, higher

education and vocational education in line with the country's priorities.

• Reducing infant and maternal mortality and eradicating malnutrition among infants and pregnant women.

• Providing universal access to adequate water, electricity and housing services.

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• Guaranteeing public safety. • Converting the beneficiaries of social programs into productive

citizens. 3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC

ACTION Specific objective 1 Equal access to integral education to development human abilities in society. Indicators and objectives — The number of pupils in second grade of basic education who can

answer a majority of the questions in the Reading Comprehension Test / the number of second grade pupils who take that test (100%): 2009 23.1% 2021 70%

— The number of pupils in second grade of basic education who can answer a majority of the questions in the Mathematics Test / the number of second grade pupils who take that test (100%): 2009 13.5% 2021 70%

— Average number of years of study approved at primary, secondary and higher education levels for the population aged 25 to 34: 2008 10.6 years of schooling 2021 12 years of schooling

— Annual cost per student of public education / total number of students in Peru: 2008 1,293.80 Peruvian nuevos

soles 2021 4,000 Peruvian nuevos soles

— Relative position of Peru in the OECD's PISA test (a test of reading, mathematics ans scientific knowledge). Average result for all Peruvian students: 2004 306 points (points below

level 1) 2021 481 points (points at level

3)

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— Relative position of Peru in the GCI world ranking of higher education and training (Global Competitiveness Index): 2009 81st out of 133 countries

evaluated 2021 45th (the best-placed

country in Latin America) Strategic action • Assign the resources necessary to provide universal high-quality

basic education. • Define national standards for priority learning and evaluate them

regularly. • Guarantee access to high-quality education by people susceptible

to discrimination and marginalization (for ethnic or cultural reasons, language, social condition, gender or disability).

• Achieve an ideal number of teachers belonging to the state school system and encourage promotion based on academic merit.

• Eliminate gaps in educational and sporting infrastructure and equipment throughout Peru.

• Give university status to arts training centers and promote specialization and scholarships that reward talent.

Specific objective 2 Universal access to integral high-quality health services. Indicators and objectives — Infant mortality rate. Number of deaths of children under one /

thousand live births: 2009 20 for every 1,000 live

births 2021 zero

— Rate of maternal mortality. Number of maternal deaths / hundred thousand live births 2009 103 maternal deaths per

hundred thousand live births

2021 46 maternal deaths per hundred thousand live births

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— Percentage of the population with access to health insurance: 2009 35% 2021 100%

Strategic action • Guarantee financing from different levels of government to

provide universal health insurance. • Improve equipment and attention at health establishments using

network logic and giving priority to the neediest people. • Increase access by pregnant women to health care that reduces the

risk of maternal and infant deaths. • Increase the use of preventive medicine in order to develop early

diagnosis of illnesses with a high mortality rate such as cancer. • Improve health provision programs for the elderly. Specific objective 3 Adequate nutrition for infants and pregnant women. Indicators and objectives — Rate of chronic under-nutrition among children. Percentage of

children under 5 with chronic under-nutrition: 2009 183% 2021 5%

— Prevalence of anemia in women of childbearing age. Percentage of women between 15 and 49 years of age suffering from any degree of anemia: 2005 29% 2021 10%

Strategic action • Use social programs for the poor to provide adequate nutritional

supplements for pregnant women and children under 5. • Encourage the adoption of nutritional practices and habits that

improve the quality of life for mothers and newborn infants. • Provide integral health care to pregnant women and women with

newborn infants. Specific objective 4 Universal access by the population to adequate water and electricity supplies.

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Indicators and objectives — Potable water availability. Percentage of the population with access

to potable water: 2007 68.6% 2021 85%

— Drainage. Population with access to the sewer network: 2007 53.3% 2021 79%

— Availability of electricity. Population with access to electricity: 2007 74.1% 2021 95%

Strategic action • Encourage public-private partnerships to increase the availability

and quality of basic services. • Guarantee the supply of potable water to the whole population. • Develop new technologies for rural electrification giving priority

to clean renewable energy. • Increase access to telephony in zones where communications are

difficult. Specific objective 5 Improvements in the living conditions of the population and access to decent housing for families who lack it. Indicators and objectives — Population living in inadequate conditions. Percentage of the

population living in inadequate housing, (made from split cane, cardboard, adobe bricks, etc.) and without regular services: 2007 11.9% 2021 5%

— Population living in overcrowded conditions. Percentage of houses where three or more people live in one room: 2007 20% 2021 10%

Strategic action • Formalize the ownership of land used for housing.

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• Development of housing programs that increase the availability of urban land for housing and help to bring equilibrium to house prices.

• Provide financial incentives for improvements to housing and house purchases for poor families with savings.

• Develop programs for decent housing in rural areas. • Incorporate multiculturalism and environmental conservation into

new housing and refurbishment programs. Specific objective 6 Improvements to public safety. Indicators and objectives — Incidence of offences. Offences recorded against liberty, property,

family, life and health per thousand inhabitants: 2008 5.3 for every 1,000

inhabitants 2021 3 for every 1,000 inhabitants

— Security in Lima and Callao. Percentage of inhabitants who say that they have not been victims of crime in Lima and Callao: 2008 70.3% 2021 85%

— Prevalence of the consumption of illegal drugs among secondary school pupils. Percentage of individual cases of drug consumption / total number of pupils registered: 2008 4.2% 2021 3%

— Area planted with coca leaves (in hectares): 2008 56,100 ha 2021 38,000 ha

Strategic action • Coordinate action between the State and civil society to reduce

insecurity, focusing on prevention and integral measures. • Strengthen collaboration between citizens and the police to

increase the efficiency of the fight against crime and threats to the security of the State.

• Improve procedural and jurisdictional regulations to make the punishment of crime more effective.

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• Implement local government programs of assistance for the victims of crime, with special emphasis on crimes against women and children.

• Develop integral programs to prevent the consumption of drugs by school pupils and other young people, including rehabilitation programs and treatment for chronic addicts.

• Discourage gang membership and vandalism by the young through temporary employment programmes, strengthening the family unit and understanding between the generations, with special emphasis on healthy recreation and sport.

• Create employment opportunities and reintegration into society for offenders, duly supervised by professionals and specialists in rehabilitation.

Specific objective 7 To convert the beneficiaries of social programs into producers of goods and services. Indicators and objectives — Percentage of social expenditure used for rehabilitation and similar

/ total social expenditure: 2009 10.7% 2021 30%

Strategic action • Develop programs aimed at the beneficiaries of social programs. • Encourage beneficiaries of social programs to join programs

developing skills. • Identify and promote productive action in poor zones of the

highlands and jungle. 4. STRATEGIC PROGRAMS • Program for developing the abilities of students at all levels. • Educational infrastructure program. • Universal health insurance program. • Programs for preventing transmissible and other illnesses. • Under-nutrition reduction program. • Construction and refurbishment of sustainable water and drainage

systems in poor urban areas and rural areas. • Electrification expansion program.

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• Housing development program. • Program for equipment, training and participatory education in

public safety. • Campaigns at all levels of the State against the consumption of

drugs. • Preventive program against juvenile gangs. • Program to prevent violence among vulnerable groups. • Project to promote achievement by users of social programs. STRATEGIC AXIS 3 State and governability 1. DIAGNOSIS The National Agreement between political groups and representatives of Peruvian society in 2002 placed great importance on a democratic, decentralized, efficient State at the service of citizens and development, which guarantees national security and defense, peace, social development and democracy. The first problem to be considered with regard to this strategic objective is the need for a reform of the State that will give us an agile, transparent and effective system serving the rights of individuals and placing value on a career in administration. An important aspect of this reform is to define the problem of the size and cost of the State. Sometimes it is not realized that: • The number of public employees changed from 15% to 8% of the

economically active population (EAP) between 1990 and 2006. • The public sector payroll has represented only 5% of GDP since

2006. • Public sector remuneration, bonuses and severance pay (CTS) are

lower than in the private sector. State activity at present is far removed from the productive sector. Public expenditure on productive sectors is proportionately lower (11.1% in 2008) compared with the increase in social expenditure (47.4% in 2008) and expenditure on administration (30.7 in 2008).

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Today a State that is effectively democratic, whose officials are efficient, is one that achieves a high governability coefficient (a concept that includes aspects such as transparency, stability, effectiveness, respect for individual rights, control of crime and corruption and participation by citizens) as well as a high degree of credibility with its citizens. A participatory, reliable, effective and technically efficient State engaged in the development process can play an equally efficient role in strengthening peace, international security and cross-border, sub-regional, regional and hemispheric cooperation, as well as protecting and assisting Peruvians in other countries. 2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: A democratic and decentralized state that works efficiently at the service of its citizens and development, that guarantee national security and defense and promotes a foreign policy of sovereignty, peace, continental integration and defense of social development and democracy. POLICY GUIDELINES: Reform of the State: • Reform of the State administration to achieve effective

nationwide coverage of its services, increasing efficiency, quality and the speed at which it operates.

• Increase the value of a career in public administration through a new service civil that is meritocratic, efficient and ethical, with a vocation for service.

• Promote national and regional connections between the different departments of the State by the use of reliable information technology systems.

Governability: • Develop mechanisms for citizen participation in public decisions

that strengthen transparency of public information, monitoring and holding to account.

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• Resolve social conflicts through dialogue and negotiation with all the parties involved, ensuring respect for the law and the authority of the State.

• Strengthen mechanisms for complaints and dealing with cases of corruption among public servants.

• Develop a monitoring and prevention system with the help of civil society, for antisocial activities and actions affecting the security of the State (terrorism, drug trafficking, organized crime, political violence, etc.)

• Strengthen state policies aimed at protecting national cultural heritage and its publication.

Foreign Affairs: • Develop a foreign policy that guarantees the sovereignty,

independence and integrity of Peru, including its seas, airspace and rights in the Antarctic.

• Promote alliances and integration between the countries of Latin America, developing strategies for border integration and interconnection at sub-regional level, such as the Andean Community of Nations (CAN) and the alliance with Brazil.

• Strengthen bilateral and commercial relationships with our neighbors, other countries on the subcontinent and MERCOSUR.

• Develop a policy of peace and security throughout the continent and hemisphere in order to discourage arms races, prevent armed conflicts and favor peaceful social development.

• Strengthen Peru's presence in international forums within norms and principles of international law, and implement the commitments assumed by it.

• Develop a policy of encouraging Peruvians abroad to return home and protection of Peruvian communities abroad.

National security and defense: • Guarantee the operational ability of the armed forces under the

principles of prevention and dissuasion of any threat to national security.

• Ensure the presence of the armed forces in areas susceptible to terrorist violence and organized crime.

• Develop programs for raising the awareness of the civilian population of the concepts of defense and national security.

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PRIORITIES • Reform of the State. • Recover the credibility of the State. • Development of a strategic alliance with Brazil and strengthening

of the Andean Community of Nations (CAN) • Optimizing the operational effectiveness of the system of national

security and defense. 3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC

ACTION Specific objective 1 Agility, transparency and effectiveness at all levels of the public administration, serving individual rights and with a career in administration highly valued. Indicators and objectives — Effectiveness of government (the result of 19 indicators based on

the World Ban's reference parameters ranked from 0 (bad) to 100 (optimal): 2008 46.4 points (out of 100) 2021 84.8 points (the highest in Latin America in 2008

— Quality of regulation (the result of 17 indicators based on the World Bank's reference parameters ranked from 0 (bad) to 100 (optimal): 2008 62.3 points (out of 100) 2021 92.8 points (the highest in Latin America in 2008

Strategic action • Improve mechanisms for coordination and connection between

entities of the public administration in order to increase efficiency, transparency and participation.

• Establish and implement mechanisms for full implementation of public policy, giving priority to matters to do with the country's development.

• Carry out an inventory of administrative procedures aimed at reform, updating and optimization, including the application of information technology and communications).

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• Establish a civil service regime based on management by abilities and in accordance with ethical principles, and efficiency to benefit the country's development.

Specific objective 2 Equal and efficient participation by the civil population in the processes of political democratization, public decision taking and decentralization of institutions, in order to ensure that citizens have confidence in public institutions and governability. Indicators and objectives — Public participation in the election of their representatives and

access to free association and a free press (the result of 21 indicators based on the World Bank's reference parameters ranked from 0 (bad) to 100 (optimal): 2008 49 points (out of 100) 2021 81.3 points (the highest in Latin America in 2008

— Validity of the rule of law (the result of 26 indicators based on the World Bank's reference parameters ranked from 0 (bad) to 100 (optimal): 2008 25.8 points (out of 100) 2021 88 points (the highest in Latin America in 2008

— Corruption perceptions index (CPI) based on surveys of business people using the reference parameters of Transparency International ranked from 0 (bad) to 10 (optimal): 2008 25 points (out of 100) 2021 6.7 points (the highest in Latin America in 2008

Strategic action • Develop mechanisms for citizens participation and public

consultation in decisions at different levels of government. • Promote collaboration between the public and private sectors in

implementing and evaluating public policy. • Reinforce the Intergovernmental Cooperation Council and

institutional checks and balances that ensure adequate formulation and implementation of public policy.

• Reinforce and promote institutional mechanisms and citizens participation in improved monitoring of the public administration.

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Specific objective 3 Strengthening of international peace and security, cross-border integration and cooperation at sub-regional and regional level and across the hemisphere, as well as assistance and protection for Peruvians abroad. Indicators and objectives — Development of frontier zones. Percentage frontier areas where

zoning and land use studies have been carried out / all of Peru's frontier territory: 2008 40% 2021 100%

— Bilateral political and diplomatic action. Number of treaties, agreements and memorandums signed with countries with which we have bilateral relationships: 2010 900 2021 1800

— Multilateral political and diplomatic action. Number of treaties, agreements and memorandums signed with multilateral organizations involved in peace and development: 2010 430 2021 600

— Income from consular legalization procedures. Number of legalizations carried out by Peruvians abroad: 2010 840,000 2021 1,020,000

Strategic action • Design and implement a National Strategy for Frontier

Development and Integration. • Consolidate an active and permanent Peruvian presence in the

Antarctic. • Make progress with the process of physically interconnecting the

countries of South America. • Deepen the policy of integration developed by Peru in the Andean

Community of Nations (CAN) among all the countries of Latin America.

• Develop a strategic association with Brazil and commercial relationships and cooperation with the MERCOSUR countries.

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Promote collaboration between the public and private sectors for implementing and evaluating public policy.

• Strengthen Peru's presence in international forums and organizations in accordance with its foreign policy principles, including multi-regional entities such as the Asia-Pacific Economic Cooperation Forum and the South America - Arab Countries Summit.

• Take part in international peacekeeping missions or operations, combined military exercises in defense of regional sovereignty and multinational training exercises in accordance with out foreign policy.

• Deepen an integral policy in defense of Peruvians living abroad and encourage links with Peru.

Specific objective 4 A fully functioning national security and defense system to protect our territory and/or address any threat to national integrity and security. Indicators and objectives — Armed forces with full operational capability for the security and

defense of Peru (training and equipment, effective vigilance of Peru): 2010 (no data) 2021 100%

— Participation by the Offices of National Defense in the National Security and Defense System. Number of public departments with operational national defense offices: 2010 24 2021 52

— Educational programs on national security and defense: 2010 (no data) 2021 100%

Strategic action • Strengthen and consolidate the National Security and Defense

System in the fields of national security. water security, energy security and environmental security, among others, with active participation by all levels of government and the population.

• Increase the effective presence of the armed forces in strategic positions guarding the security and defense of the nation in order to guarantee peace and tranquility.

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• Involve the population in the National Security and Defense System through programs aimed at combating and preventing both internal and external threats such as narcoterrorism, organized crime, people trafficking and environmental depredation.

• Improve the capacity of the State to cope with emergencies and natural disasters.

4. STRATEGIC PROGRAMS • Modernization and standardization program for maps of Peru. • Program for strengthening the presence of the State on the

country's frontiers. • Development of an “Electronic Government Master Plan”,

consisting of 16 integrated projects signed with the Republic of South Korea.

• Program for strengthening the National Security and Defense System.

• Program of pacification and economic and social development in areas where intervention is needed or where organized crime and narcoterrorism is present.

• Program of restructuring and modernizing the armed forces. • Program of monitoring and protection of the Amazon area. STRATEGIC AXIS 4 COMPETITIVENESS AND EMPLOYMENT 1. DIAGNOSIS Inclusive economic modernization is the aspiration of all developing nations. This implies developing a model of growth that generates welfare through the large-scale creation of decent jobs. Such a dynamic means increasing GDP per capita, associated with the development of human capital (better education, better use of technology and productivity at work), sustainable management of natural resources, coherent promotion of production for the domestic and export markets and the strengthening of cultural identity, solidarity and ethical values.

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The immediate position from which we seek to progress towards the strategic aim of high competitiveness with greater employment can be summarized in the following factors: • Reduction of underemployment and unemployment: Between

1998 and 2008 the percentage of unemployment and underemployment compared with the economically active population of Peru (EAP) has fallen. Underemployment fell from 50% to 46% of the EAP whilst unemployment fell from 6% to 4% of the EAP. Nevertheless, these figures are still high.

• Improvements in competitiveness: Peru has improved its position

in the international ranking of competitiveness produced by the World Economic Forum (78th place with 4 points out of a maximum of 7). Nevertheless, a persistent weakness is the low index of per capita productivity. At present 68% of the EAP work in companies with 5 employees or fewer, under conditions that are inferior to the average for Latin American.

• Improved investment: The rate of investment has risen in the

last 15 years from an average of 20% of GDP to 25%, and the trend continues upwards. Peru has moved from 20th place (out of 109 countries) in the World Bank Group's ranking of protection for investors. Nevertheless, technological standards and productivity have not made sufficient use of innovation and competitiveness with greater added value.

• Improving the tax take: The system of tax collection has

improved since the end of the 20th Century and there is regular growth in the tax take (enabling the planning and execution of public spending). Nevertheless, this income does not exceed an average of 15% of GDP and is insufficient to enable us to equal the public spending of the continent's leading countries.

• Greater macroeconomic stability: The positive evolution of

exports and the balance of payments has translated into a continual increase in net international reserves (NIR), which have exceeded US$ 31 billion since 2008. Our country risk indicators have improved substantially and inflationary pressure is under control. Nevertheless there exists a certain vulnerability caused by excessive exports of primary mineral products as a percentage of

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total exports (67,6%) and fluctuations in the price of these products could affect the public finances.

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Illustration 1 Peru's international reserves

Table 1 Annual average inflation and devaluation in Peru

(Percentages)

Year Inflation Devaluation 1990 7481,7 4545,0 1991 409,5 278,8 1992 73,5 60,8 1993 48,6 59,1 1994 23,7 10,4 1995 11,1 2.7 1996 11,5 8,8 1997 8,5 8,5 1998 7,3 10,0 1999 3,5 15,5 2000 3,8 3,1 2001 2 0,5 2002 0,2 0,3 2003 2,3 - 1,1 2004 3,7 - 1,9 2005 1,6 - 3,4 2006 2,0 - 0,7 2007 1,8 - 4,4 2008 5,8 - 6,5 2009 2,9 2,9

Net international reserves (US$ million)

Source: Central Reserve Bank of Peru, (*) as at the 13th of July 2010.

Source: Central Reserve Bank of Peru - Economic Studies Section. Annual Statistics.

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This set of factors indicates clearly that achieving high standards of productive development requires a joint effort to prioritize competitiveness goals, and particularly to solve these weaknesses: • We have a low average labor productivity index (10 times lower

than the most developed economies). • A very small number of patents is registered annually by Peruvians

(15 compared with more than 100 in Argentina and Mexico). • We have a low index of investment in science and technology

projects and in technological innovations (Chile invests 5 times more than Peru, Mexico 20 times and Brazil 50 times more).

2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: Develop a competitive economy with a high level of employment and productivity. POLICY GUIDELINES: Economic policy: • Ensure the credibility and predictability of economic policy,

with monetary and price stability, as well as stable “rules of the game” for private investment.

• Joint promotion of public and private investment (both Peruvian and foreign), to ensure a multiplier effect on all economic activity.

• Reduce the vulnerability of the economy to external events by a decentralized expansion of the domestic market.

• Adopt measures to expand the tax base while avoiding excessive taxation of economic activities that discourages and reduces confidence.

• Promote and facilitate private investment initiatives and projects promoting economic development at regional and municipal levels.

Productive structure: • Promote links between exporting activities and Peruvian

industries supplying materials and capital goods in order to develop high added value businesses based on the sustainable management of our natural resources.

• Convert the cross-continental highways into economic corridors that stimulate investment in productive and irrigation infrastructure

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and facilitate new investment opportunities at local and regional levels.

• Strengthen Peruvian industry serving the domestic market and encourage it to participate in the country's exports.

• Support research and experimentation into new technologies such as microelectronics and robotics in order to diversify national industry and increase its added value.

• Promote creativity and achievement in activities related to the promotion of our cultural identity such as tourism, handicrafts and gastronomy.

• Update antitrust legislation to prevent abuse of dominant market position and support the development of management skills and new business creation at local and regional levels, facilitating access to information, technology and credit.

Competitiveness and integration into world markets: • Promote the advantages offered by free trade agreements (FTA)

and commercial treaties and agreements with the USA, the European Union, APEC, MERCOSUR and CAN.

• Create incentives for the establishment of a logistics and information chain, based on an alliance between the public and private sectors that facilitates access by Peruvian products to the export market, with special emphasis on SMEs and regional private companies.

• Encourage exports of natural and organic products in order to increase the value of exports from rural areas.

• Encourage physical, commercial and economic integration with Brazil.

Innovation and technology: • Promote scientific and technological research aimed at

productive innovation and competitiveness. • Action to reduce the gaps in scientific and technical knowledge

between Peru and highly industrialized countries. • Guarantee that the National Science, Technology and

Technological Innovation System is a favorable factor in the development of Peru's competitiveness.

• Promote shared responsibility between the public and private sectors for the modernization and permanent updating of

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research infrastructure and the establishment of science-technology parks and innovation cities.

• Strengthen mechanisms to guarantee intellectual property rights and the defense of traditional knowledge.

Employment: • Reduce informality in urban area and subsistence farming

through integrated production complexes and business incubators, with the assistance of local and regional governments.

• Increase the competitiveness of workers to international standards through joint programs involving the State, private companies and employees themselves.

• Promote equal opportunity of access to the jobs market for sectors of the population that are susceptible to discrimination.

• Develop appropriate regulation so that SMEs and other companies with small amounts of capital operate as a third sector.

• Institutionalize continual vocational guidance programs, occupational information, regulation and certification of work skills in a decentralized manner.

PRIORITIES • To ensure Peru's continued economic growth with monetary

stability and stable “rules of the game” for private investment. • To diversify the country's productive structure and increase value

added. • To develop science and technology in order to achieve sustainable

development. 3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC

ACTION Specific objective 1 The development of a stable and far-sighted economic policy that encourages sustained economic growth through private and public investment in job creating activities. Indicators and objectives — Per capita GDP (in 2008 US$). Value of GDP divided by total

population:

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2008 4,473 US$ 2021 10,000 US$

— Investment rate (1994 prices). Gross fixed investment with respect to GDP: 2008 20% 2021 24%

— Tax take. Percentage of tax income with respect to GDP: 2008 15.6% 2021 20%

— Ratio of direct taxes to indirect taxes. Difference between direct tax income over total taxes to indirect tax income over total taxes: 2008 41% / 59% 2021 50% / 50%

Strategic action • Maintain the equilibrium of fiscal accounts, the balance of

payments and autonomy in setting monetary policy. • Accumulate an adequate reserve of public funds during positive

cycles so that a countercyclical fiscal policy can be adopted under adverse circumstances.

• Optimize the reliability of statistical information. • Increase public investment and promote private investment. Specific objective 2 To develop a diversified, competitive and sustainable productive structure that produces high added value. Indicators and objectives — Average productivity. Gross added value (in 1994 Peruvian nuevos

soles) with respect to the economically active population (EAP) in work: 2008 15.519 2021 26.000

— Position in the world ranking of countries according to ease of doing business. Ranking by Doing Business for the World Bank: 2008 56 2021 25

— Manufacturing gross added value as a percentage of total GDP: 2008 17% 2021 25

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— Annual total of international tourists (foreigners plus Peruvian tourists resident in other countries): 2008 2,139.961 2021 10,000,000

Strategic action • Agree promotional measures for productive development between

the public and private sectors. • Favor the development of competitive productive chains and

conglomerates throughout Peru and at regional and local levels. • Develop integrated quality systems in companies. • Create investment funds to take risks in productive activities. • Create incentives for businessmen, professionals and technicians

currently resident abroad to return to Peru. • Adopt measures to ensure that income tax and the recovery of

investment create productive employment. • Promote investment in tourism through specific incentives with

emphasis on ecotourism, lifestyle tourism and rural tourism. • Implement a geo-referenced information system on areas of

economic development and regional and local potential. Specific objective 3 To achieve sustained growth of exports based on diversified, sustainable and competitive products. Indicators and objectives — Exports of goods (in millions of US$):

2008 31,529 2021 124,000

— Non-traditional exports (in millions of US$):

2008 7,543 2021 28,000

Strategic action • Strengthen the position of our “country brand” internationally,

associated with the competitive advantages of Peru and its flagship products.

• Improve access for our products to international markets and strengthen the system of commercial intelligence.

• Promote bio-trade initiatives with specialist high-value markets.

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• Increase the share of ecological and organic products in Peruvian exports.

Specific objective 4 To ensure that innovation, technological development and the application of scientific knowledge contribute to the development of productive activities that are environmental sustainable. Indicators and objectives — Engineering, science, medical, biology and related professionals as

a percentage of the total number of professionals and technicians (percentage of total): 2007 22.9% 2021 30%

— Number of new technological patents granted annually: 2008 40 2021 100

— Annual rate of investment in research, science and technology as a percentage of GDP: 2008 0.15% 2021 1%

— Number of Peruvian articles published in indexed scientific journals (according to Science Database): 2008 600 2021 1,500

Strategic action • Establish a unified National Science and Technology Fund. • Determine priorities for scientific research in accordance with the

country's needs, with public finance for top priority projects. • Identify and develop the medium and high technology sub-sectors

in which national companies have a competitive advantage. • Create awards, prizes and tax incentives for the development of

science and technology projects. Specific objective 5 To achieve adequate employment creation for inclusive modernization.

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Indicators and objectives — Percentage of salaried employees over total economically active

population (EAP): 2008 46.3% 2021 60%

— Percentage of adequately employed workers over total

economically active population (EAP): 2008 53.9% 2021 75%

Strategic action • Develop a strategy of formalizing employment and recognition of

employment rights. • Simplify formalization procedures for SMEs with adequate tax,

employment and commercial regimes. • Provide SMEs with technology to increase productivity,

introducing incentives for job creation and improved training. Specific objective 6 To develop an institutional and legal framework that guarantees the security of investments. Indicators and objectives — Position in the world ranking of countries according the investor

protection index. Ranking by Doing Business for the World Bank: 2009 18 2021 15

Strategic action • Ensure compliance with legal stability agreements. • Improve the legal framework for resolving commercial disputes. • Strengthen the autonomy and technical abilities of regulatory

bodies to ensure that they act independently. Specific objective 7 Develop transparent and efficient financial markets with solid institutions that facilitate finance and investment.

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Indicators and objectives — Level of financial intermediation in Peruvian currency. Sight

deposits near-money in Peruvian currency with respect to GDP (coefficient): 2008 10.1 2021 20

— Financial intermediation index. Loans to the private sector with respect to GDP (coefficient): 2008 23.1 2021 80

— Level of financing a through the stock market. Balance of primary public debt in circulation with respect to GDP (percentage): 2008 4.45% 2021 10%

Strategic action • Take decisions to facilitate equilibrium of terms between the

sources of funds and loans granted by the financial system. • Control excessive dollarization of the financial system. • Create funds for promotional financing for the development of

small businesses where they will have an effect on urban and rural poverty.

• Improve transparency and the supply of information to borrowers, savers, investors and others in the financial markets.

4. STRATEGIC PROGRAMS • Incentives program for business innovation and investment in

scientific and technological research. • An energy supply program based on public and private projects,

with emphasis on renewable sources, energy efficiency and sustainable development.

• A national program for agricultural infrastructure and improvements in the competitiveness of the rural sector.

• Program for developing export competitiveness, to include support for small businesses building productive chains aimed at exporting.

• Program for strengthening the financial system in order to consolidate financial activity and make it available throughout the country.

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• Program for developing industrial activity through public and private projects to stimulate competitive investment and expand the domestic market.

• A development program for mining by means of public and private projects involving higher added value and responsible management of social and environmental sustainability.

• Development program for the fishing industry, concentrating on private projects involving artisanal fishing and direct human consumption in relatively undeveloped areas.

• Development program for the tourism sector, with emphasis on projects for incoming tourism involving ecotourism, lifestyle tourism and rural tourism.

STRATEGIC AXIS 5 Regional development and infrastructure 1. DIAGNOSIS A fundamental problem for the economic development of Peru is the enormous imbalance in infrastructure and the concentration of investment in Metropolitan Lima compared to the rest of the coast and the highlands and jungle. Currently Lima receives 52.6% of Peru's total gross added value (GAV), while the coast accounts for 27.3%, the highlands 14.9% and the jungle 5.2%.

Illustration 2 Gross added value broken down by natural regions of Peru, 2008 (%)

Lima 52.6

Coast 27.3

Highlands14.9

Jungle 5.2

Source: INEI Drawn up by: CEPLAN

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Lima also receives 57.2% of manufacturing GAV and 62.4% of services GAV. It is also home to 70% of the ten thousand companies that generate 98% of Peru's GDP, to 43.1% of the principal taxpayers and 58.4% of small and medium-sized taxpayers. As far as infrastructure is concerned, Lima accounts for most of the road network; its coefficient of electrification is 99.2% of the population and its fixed-line telephone density is 19.9 lines for each 100 inhabitants, double the national average. This inequality leads to a structural difficulty in reducing poverty, building adequate housing, attracting investment and developing productive activities using high technology. Indeed, the disparity between the capital and the regions can also be seen in their productivity indices. While Metropolitan Lima has an average productivity per person in work of 20.698 Peruvian nuevos soles, in the highlands and jungle this figure is 9.712 and 9.504 Peruvian nuevos soles respectively. The Bicentenary Plan considers it essential to define strategies to close the resources and capacity gaps between Lima and Peru's regions and between the regions themselves. • This strategy demands an alliance between the public and private

sectors to develop policies for promoting decentralized investment in infrastructure, within a framework of planned projects having the following aims:

• Strengthening the decision-taking capacity of regional governments and encouraging decentralized development of transverse economic corridors uniting two or more regions.

• Encouraging regional development through studies into the potential and abilities of each region.

• Development of communities in regional cities based on a Planned Population Center (CPP), with basic services and diversified productive activities.

• Effective regional infrastructure programs to provide potable water and drainage and eliminate the chronic shortages of these services.

• Prepare for an expansion of demand for electricity and other sources of domestic energy and activate policies that serve this demand adequately.

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• Develop adequate, decentralized economic and productive infrastructure for public use, with the help of the private sector.

2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: Decentralized development productive and social infrastructure in order to achieve balanced occupation of land and make regional productive activities competitive. POLICY GUIDELINES: • Development of a productive identity in different regions

through activities based on their potentials and comparative advantages complemented by those of other regions.

• Encourage public-private partnerships for decentralized investment in productive infrastructure and basic services.

• Encourage regional governments to promote investment in transport, energy and irrigation infrastructure, as well as the development of human capital and technological and productive innovation.

• Diversification of the regional productive base by means of production chains, according to available resources and existing and potential productive infrastructure, taking into account expectations for integration and exchange with other countries in the continent and the world.

• Encourage the creation of a system of intermediate cities able to retain their population and ensure basic services and diversified development of economic activities.

PRIORITIES • Ensure investment in productive infrastructure and services that are

essential for the regions. • Invest in transformation activities for regional production in a

productive, sustainable and competitive structure that also generates employment.

• Achieve a reduction in the dispersion of population and informal migration from rural to urban areas.

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3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC ACTION

Specific objective 1 To develop an adequate, decentralized economic and productive infrastructure for use by the public. Indicators and objectives — Percentage of lined irrigation channels (percentage on the total

number of channels): 2008 17% 2021 30%

— Total firm power of the national grid (SEIN):

2008 5,041.9 MW 2021 15.000 MW

— Length paved national and departmental highways (in km):

2008 12,490 km. 2021 25,500 km.

— Ratio of the competitiveness indices for the highlands and jungle

with that of the coast, excluding Lima.. Competitiveness index for the jungle plus competitiveness index for the highlands / competitiveness index for the coast (not including Lima): 2008 47,5% 2021 60%

— Investment in deep sea ports (US$ millions invested):

2008 no data 2021 US$ 4,095 million

Strategic action • Guide public investment by regional governments into the

construction of supporting infrastructure to complement private productive investment.

• Promote concessions and other means of attracting investment aimed at extending highway infrastructure both national and departmental.

• Promote the development, modernization. and expansion of the country's rail transport system.

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• Investment in the infrastructure needed in frontier areas in order to take advantage of commercial opportunities with neighboring countries.

• Facilitate private investment in infrastructure aimed at increasing the value and use of potential tourism projects at regional and local level.

Specific objective 2 To develop a diversified industrial base providing high added value in the farming, fishing, mining and tourism sectors, in accordance with our comparative advantages in each region of the country. Indicators and objectives — Percentage land area of Peru subject to land use planning:

2008 16% 2021 70%

— Percentage participation by the regional secondary sector in GDP

(gross added value of the country's secondary sector, not including Lima, with respect to total gross added value of the country's secondary sector): 2008 48.3% 2021 55%

Strategic action • Incentives for private investment in frontier zones, benefiting the

population and competitive trade. • Apply regional incentive programs for associations of producers at

different levels (SMEs, large companies) in both urban and rural areas.

• Strengthen public-private cooperation in order to plan and implement investments, joint initiatives and shared interests aimed at improving productivity and competitiveness.

• Promote the development of clusters in specific productive sectors in the regions, aimed at high added value production.

Specific objective 3 To develop communities in mid-sized cities based on a Planned Population Center (CPP) with basic services and a diversified economy.

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Indicators and obectives — Number of CPP created:

2008 0 2021 1,000

— Intermediate cities with certified 90% coverage of all basic

services (percentage of the total): 2010 0 2021 100%

Strategic action • Identify socioeconomic corridors that are potentially productive

and the infrastructure needs of the regions, within a framework of land use planning.

• Develop new, planned urban centers, guaranteeing their environmental sustainability, compatibility with the cultural traditions the beneficiaries and their connectivity to economic corridors, hydrographic basins and intermediate cities in order to reduce access times to the most important centers of production and trade.

• Assign resources for public investment and the promotion of private investment in creating the new planned intermediate cities with all basic services, aimed at attracting and concentrating people now living in communities of less than 500 inhabitants.

• Create incentives for the poor and extremely poor inhabitants of scattered rural zones to move to the planned population centers.

• Encourage the relocation of marginal settlements and economic activities located in areas subject to risks that cannot be mitigated.

• Encourage private investment aimed at improving urban infrastructure and living conditions in the planned intermediate cities.

4. STRATEGIC PROGRAMS • Program for increasing the country's electricity generating capacity

to an installed power of approximately 15,000 MW by 2021, based on environmentally sustainable sources.

• Program for developing transport and trading infrastructure, and the domestic and productive use of natural gas.

• Land use planning for the full and productive occupation of Peru's frontier zones.

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• National “Kuska Wasi” program for developing new Planned Population Centers (CPP).

• Intracontinental economic corridor program. • Highway program to aid decentralization. • Program to improve the country's highway system. • Railway development program. • Port and airport development program. STRATEGIC AXIS 6 Natural resources and the environment 1. DIAGNOSIS The world is currently concerned about care for the quality of the environment and rational use, in other words not destroying natural resources in the widest sense of the term: fauna, flora, soil, air and water. This responsible management of natural resources includes addressing the interdependence between the different ecosystems that support biodiversity and help to preserve them in optimum conditions. Its large variety of climate types, ecological floors and production zones have led Peru to be declared a world biodiversity reserve. Making use of these resources in a sustainable and responsible manner is becoming an important component in our development strategy. As is achieving an urban and rural environment free from contaminants, thus improving our quality of life and making us more productive. Let us recall that Peru possesses: • 84 of the world's 117 recognized life zones. • 28 of the world's 32 climate types. • 73 million hectares of tropical forest (equivalent to 13% of the

Amazon rainforest, giving Peru the ninth largest forest area in the world).

• 50 mountains more than 6 thousand metets high; 1,769glaciers and more than 12,000 lakes in the largest mountain range in the tropics, the Cordillera Blanca in the central Andes.

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• The world's largest river, the Amazon, which rises in Peru, and the greater part of the highest navigable lake in the world, Lake Titicaca.

• 77,534 m3 of water per inhabitant per year (one of most abundant water resources)

• 7.6 million hectares of cultivable land. • Peru is fifth in the world for the number of species of flora; 25,000

species (10% of the world total) have been classified, of which 30% are endemic (found nowhere else but in Peru).

• Peru has the most species of fish of any country in the world (2,000 species, equivalent to 10% of the world total), the most species of birds (1,816 species), the third largest number of amphibians (379 species) and the third largest number of mammals (462 species).

460 species of mammals, 1,745 species of birds, 297 species of reptiles, 332 of amphibians, 1,800 of fish, both marine and fresh water, and thousands of species of lesser taxonomic groups (mollusks, echinoderms, spiders and insects of all types) are catalogued as native to Peru. Peru has the largest number of plant species in the world known to be useful to man (4,400 species) and native domesticated species (182 species). The medicinal and nutritional value of many easily-grown native plants is of interest to the rest of the world. Nevertheless, in addition to its enormous biodiversity, Peru also occupies an important place in the development of responsible management programs for natural resources. Peru has: • Created an efficient system of Protected Natural Areas (PNA) that

includes 19,4 million hectares (15,9% of Peru) and has reduced the vulnerability of many species.

• Ensured that 56% of the PNAs are managed in an efficient and ecologically sustainable manner.

• Ensured that 38% of permanent production forest (PPF) is covered by a forest management master plan.

• Ensured that 29% of Peru's gross energy production comes from renewable non-polluting energy sources.

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• Created a National Environmental Management System (SNGA) to ensure compliance with environmental conservation regulations, involving participation by the population at local and regional levels.

These are notable advances. Nevertheless, we still suffer from important shortages at many levels. Some of which are: • Considerable informal depredation of water, flora and fauna

(informal mining, illegal logging, fishing during the closed season, illegal trafficking in endangered species, etc.)

• Considerable non-compliance with environmental quality regulations in productive activities (deficient control of emissions and industrial waste).

• The lack of a culture of careful use of water and energy. • A vehicle fleet that produces a high level of contamination. • Deficient management of substances that are hazardous to

people and the environment. • Insufficient capacity for helping people in isolated areas

suffering from climate emergencies. Strengthening our development process implies overcoming these and other limitations affecting environmental conservation and ensuring that responsible management of natural resources and preparation for climate problems go hand in hand with high standards of productivity. An important immediate problem facing the country is the need to increase electricity generation and reduce our increasing dependence on fossil fuels for this purpose. Although Peru's electricity is predominantly hydroelectricity with a low rate of harmful emissions, compared to other Latin American countries, this is under pressure from increasing demand and is affected by climate factors (such as the reduction in rainfall resulting from global warming). To this can be added the country's low oil production which obliges us to import fuel. In order to overcome this limitation it is vitally important to strengthen our reserves of hydrocarbons and develop alternative sources of hydroelectric generation to diversify the conventional pattern.

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The commissioning of the Camisea Project has made it possible to make more use of natural gas for energy generation and industrial and domestic consumption, but production is not yet sufficient to reduce the demand for electricity or oil consumption significantly. Consequently, it is important to develop alternative sources of electricity generation. The following table shows the position of our reserves of hydrocarbons.

Table 2

Reserves of hydrocarbons in Peru as at December 2007

Classification Liquid hydrocarbons ( ) as ( C ) Oil Total

Pro adas 447.4 874.1 1121.5 11.82 Pro a les 881.1 294.3 955.4 6.83 Pro adas ro a les 1108.5 988.4 2076.9 18.65 Posi les 4907.1 384.1 5291.1 11.22 Pro adas ro a les 6015.5 1325.5 7388 29.87

S B millions of barrels 10| barrels CF by xxxxxxxxxxxxxx G : Natural gas liquids Source: Ministry of Energy and Mines – Hydrocarbons Bureau. xxx Reserves 2007.

The following table shows the structure of Peru's production and reserves of commercial energy, with oil production higher although gas reserves are greater. Furthermore we need to generate more hydroelectricity.

Table 3 Production and proven reserves of commercial energy in Peru, 2008

(Terajoules*)

Source Production Reserves Structures ( ) Production Reserves

Crude oil 162,295 2,590,638 34.9 10.4 Hydroelectric energy 85,818 5,965,666 18.4 23.9 Natural gas + NGL 213,235 15,141,270 45.8 60.6 Coal 4146 1,279,200 0.9 5.1 Total 465,494 24,976,774 100 100 * Terajoules = 1012 joules (the joule is the unit of energy in the SI system). Source: Ministry of Energy and Mines. National Energy Balance 2008.

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It is important to mention that incentives have been established to encourage the building of nuclear power stations, given Peru's uranium reserves and the development of non-polluting alternative sources. Considering that the potential for wind generation on the coast is around 22,000 MW and the potential for solar power averages 4 to 6 KWh/m2 per day, and that there is a potential for geothermal power in the southern Andes, as well as biomass potential, Peru could become one of the principal producers of renewable non-polluting energy in Latin America over the next five years. This option also includes the production of biofuels, provided that this does not alter the land use priorities that guarantee the country's food security. 2. NATIONAL AIM, GUIDELINES AND PRIORITIES NATIONAL AIM: Conservation and sustainable use of natural resources and biodiversity, with an integrated, ecosystemic and environmental approach that enables a high quality of life for the population and the existence of healthy, viable and functioning ecosystems in the long term. POLICY GUIDELINES: Natural resources: • Incorporate the evaluation and valuation of Peru's natural

heritage into development planning. • Encourage the integrated management of natural resources in

the country's hydrographic basins and land use planning. • Promote the sustainable, fair and efficient use of our natural

heritage with social welfare and respect for the cultural identity of native populations.

• Strengthen the state system of Natural Protected Areas, guaranteeing the continuance of biodiversity and traditional native cultures.

• Combat illegal logging, informal mining, illegal hunting and fishing and other irregular economic activities that affect environmental conservation.

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• Incentivize the efficient use of water through integrated basin management, investment in storage infrastructure, modern irrigation techniques and re-use of treated water.

• Promote organic agriculture, ecological agriculture, forestry and aquaculture using a system of regulations and incentives in accordance with international standards.

• Develop policies to reduce vulnerability and risk management in the event of natural disasters, drought and desertification, encouraging the use of positive collateral effect of the El Niño phenomenon.

Environmental quality: • Ensure the conservation and sustainable use of biodiversity

congruent with respect for the fundamental rights of the individual. • Regulate environmental quality by ensuring the equilibrium of

ecosystems and the health and integral development of the people. • Strengthen the Climate Observation System, consisting of

weather and environmental stations using the latest technology. • Promote environmental responsibility among businesses and

create incentives for clean production, biocommerce and the use of renewable energy compatible with environmental quality strategies.

• Strengthen regional and local government programs for dealing with solid waste congruent with environmental quality and sustainability strategies.

• Toughen the regulations for authorizing and monitoring the management of chemicals and substances that are a danger to life and the environmental.

• Promote eco-efficiency in the environmental management of public and private organizations.

• Ensure compliance with Peru's international commitments in environmental matters.

PRIORITIES • Sustainable use of natural resources. • Improve the environmental quality of air, water and soil while

making sustainable use of biodiversity. • Ensure the availability of water throughout Peru. • Adapt the country's development to climate change.

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• Implement a national environmental management system. 3. SPECIFIC AIMS, INDICATORS, GOALS AND STRATEGIC

ACTION Specific objective 1 Sustainable use of natural resources by and for the local population. Indicators and objectives — Permanent production forests (PPF) under forest management as a

percentage of all PPF: 2009 38% 2021 75%

— Amazon area deforested annually (in hectares):

2000 149,632 ha 2021 0

— Number of fish species subject to measures to ensure

sustainability: 2008 8 2021 15

— Natural Protected Areas (NPA) with a master plan being

implemented, as a percentage of all Natural protected Areas: 2010 56% 2021 80%

— Regional governments that have carried out an evaluation and

valuation of natural resources a percentage of all regional governments: 2009 0 2021 50%

— Share of renewable energy as a percentage of Peru's gross energy

production: 2008 29% 2021 33%

— Environmental variables incorporated into the National Accounts:

2010 0

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2021 85% Strategic action • Guide public investment by regional governments into the

construction of supporting infrastructure to complement private productive investment.

Specific objective 2 To develop an improved environmental quality strategy managed with an integral approach at national level. Indicators and objectives — Percentage of priority cities with annual values of PM10

(emissions of particulate materials smaller than 10 microns) that meet environmental quality standards (EQS) as a percentage of all priority cities: 2010 0 2021 100%

— Monitored water resources that meet environmental quality

standards (EQS) as a percentage of total monitored national water resources (337 out of 545 monitored in 2008): 2008 61.8 2021 93%

— Percentage of municipal solid waste safely disposed of throughout

Peru. Volume of waste adequately disposed of as a percentage of all waste generated: 2007 19% 2021 50%

Strategic action • Inventory and remedial measures for environmental liabilities with

the participation of those involved. • Modernize the vehicle fleet through incentives and adequate

regulations. • Consider the use of liquid biofuels mixed with ordinary vehicle

fuels, together with other measures to reduce pollution from vehicles.

• Supervise and monitor compliance with the permissible limits (MPL) for industrial emissions that affect environmental quality.

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• Encourage a network of public and private laboratories using the latest generation of standardized systems to sample and analyze environmental quality.

• Carry out permanent environmental monitoring of water, air and soil quality that evaluates critical parameters throughout Peru.

Specific objective 3 To develop integral and efficient management of water and water resources throughout Peru. Indicators and objectives — Number of clean hydrographic basins

2010 0 2021 6

— Percentage of urban waste water treated at national level. Volume

of waste water treated with respect to total volume of waste water: 2005 22% 2021 100%

— Percentage of farm land irrigated using modern techniques. Area of

farm land irrigated using modern techniques compared with total farm land: 2008 2% 2021 27%

Strategic action • integrated basin management with the participation of local people

and strengthened irrigation councils. • Invest public resources public and create incentives for private

investment in the recovery of contaminated hydrographic basins. • Encourage investment in waste water treatment plants at local and

regional levels. • Establish adequate regulation and facilitate training and financing

in order to replace traditional irrigation methods with modern techniques and providing a portfolio of suitable crops.

Specific objective 4 Ensure that local people and production systems can cope with climate change.

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Indicators and objectives — Number of people affected by natural phenomena associated with

climate change: 2008 1,452,938 persons 2021 726,500 persons

— Number of hectares of farm land affected by natural phenomena

associated with climate change: 2008 184,987 ha 2021 92,500 ha

Strategic action • Carry out integrated local evaluations of the impact of climate

change on each basin. • For each basin design strategies for the use of groundwater from

boreholes. • Create investment mechanisms to adapt productive infrastructure

and reduce vulnerability to the effects of climate change. • Strengthen the early warning system for climate events through an

increase in weather stations throughout Peru. Specific objective 5 Strengthen the National Environmental Management System (SNGA) at the three levels of government, with the active participation of the population. Indicators and objectives — Provincial and district municipalities with a Local Environmental

Management System (SLGA) as a percentage of all provincial and district councils: 2010 14% 2021 100%

Strategic action • Strengthen the mechanisms and capabilities of regional and

municipal authorities responsible for environmental supervision and monitoring, encouraging participation by local people.

• Develop a National Environmental Information System (SNIA) at the three levels of government, with active participation by the public.

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• Strengthen the National Environmental Management System (SNGA) and its coordination and cooperation organizations.

• Improve institutions for developing policies that reduce the vulnerability of Peru's natural heritage to problems of depredation and contamination.

• Active participation in international bodies that support the protection of biodiversity and coordinate appropriate policies.

4. STRATEGIC PROGRAMS • Inventory and valuation of natural resources throughout Peru in

order to plan its conservation and rational use more efficiently. • Ecological-economic zoning program to develop sustainable

management and environmental care. • Program for the conservation and sustainable use of natural

resources. • Integrated management program for the country's hydrographic

basins. • Environmental rehabilitation plan for priority basins, including

intervention programs to control pollution by waste water, solid waste and environmental liabilities.

• Program for structuring and development of national environmental accounts, considering the contribution of Peru's natural heritage to the economy and measurement of damage to and use of the stock of natural capital, in order to provide a real basis for designing policies for environmental protection.

• “Clean Air” program based on a set of integral measures to ensure that Peru's thirteen priority cities meet national environmental quality standards.

• Prevention and adaptation of productive and housing infrastructure to the effects of climate change.

• Monitoring and surveillance program for the sustainable management of environmental quality.

• Program of environmental education and awareness raising in schools with public participation.

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3. CONTINGENCY ANALYSIS

Importance The Bicentenary Plan, being a management tool for future action, is based on a relatively favorable forecast of the future. Nevertheless, the possibility of an adverse scenario should also be considered. Consequently, the Bicentenary Plan considers four basic factors in defining these two possible scenarios: • The impact of changes in the world economy and of its current

crisis. • The relation between governability and social conflicts. • The response of the State to drug trafficking and organized

crime. • Climate change and its effect on the availability of water in Peru. Each one of these factors requires a set of strategies and measures, depending on whether the scenario is favorable or unfavorable. 1. NORMAL SCENARIO The four factors mentioned will behave as follows in a favorable scenario: • Impact of changes in the world economy and its current crisis:

The normal scenario assumes that economies of the large industrialized centers will start to grow again from 2011 onwards, favoring our traditional and non-traditional exports.

• The relation between governability and social conflicts: The

normal scenario considers that the Peruvian State will be able to manage social protests with dialogue and adequate social policies, reducing the chance of a return of subversion.

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• The response of the State to drug trafficking and organized crime: The normal scenario considers that the State can keep this negative factor under control and even reduce its activity.

• Climate change and its effect on the availability of water in

Peru: The normal scenario assumes that a reduction of the water supply on the Peruvian coast caused by climate change can be managed by existing plans for investment in hydroelectric generation.

Taken together within the normal scenario, these basic factors would not cause situations that would change the fundamentals nor the specific goals of the Bicentenary Plan. It is important to remember that the level of reserves, the growth in internal investment and exports, as well as infrastructure construction and reduction in poverty over recent years give the Peruvian State an important margin of stability without which the Bicentenary Plan would not be possible. 2. CONTINGENT SCENARIO We considered the same four factors within an unfavorable scenario: • Impact of changes in the world economy and its current crisis:

If the global economic crisis continues beyond 2011 and the prices of our exports fall, we would face serious limitations on the availability of financing for development projects. It will then be essential to restructure our exports and strengthen the free trade treaties, among other measures, in order to offset instability in the external sector.

• The relation between governability and social conflicts: If the

Peruvian State faces repeated social protests, it will have to strengthen mechanisms for dialogue and increase social compensation programs in order to create viable political solutions. Nevertheless, more important than the money required for such problems, it is the credibility of government action and transparency of economic policy that will help to reduce the reasons for protest and tension.

• The response of the State to drug trafficking and organized

crime: The unfavorable scenario assumes an increase in drug

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trafficking and “narcoterrorism". In this case the Peruvian State would call upon other countries committed to the fight against organized crime for help. And it would place greater emphasis on developing cross-continental exes and policies to promote rural development, to isolate centers of subversion and crime.

• Climate change and its effect on the availability of water in

Peru: The contingent scenario assumes a radical reduction in available water and electricity generating capacity on the coast, caused by climate change. This could be controlled through new investment in hydroelectricity generation on the eastern watershed of the Andes, complemented by adequate tunnels and aqueducts, including making use of groundwater in the Andes.

This set of eventualities forms part of the risks inherent in all large socioeconomic projects. The different projects and programs that form part of the Strategic Axes of the Bicentenary Plan enable us to foresee the cost and effects of the different anomalous and prejudicial situations. 3. AN ADDITIONAL CONTINGENT FACTOR: POSSIBLE

INTERRUPTIONS IN THE MANAGEMENT OF THE COUNTRY'S MACROECONOMIC VARIABLES.

An additional factor, hypothetical but no less important, that could change the development possibilities in the Bicentenary Plan for the worse is the possibility of a drastic change in the State's management of macroeconomic variables and the broad guidelines for social policy on which the present Plan is based. This would mean adopting a course contrary to the current consensus and, above all, contrary to the National Agreement signed by Peru's political and social organizations in 2002. This possibility may have two variants: • A suspension of the democratic management of the country's

institutions, or; • A drastic change in the consensus and national agreements

under authoritarian initiatives without actually displacing constitutional government.

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In either case, the results could include the following disruptions to the continuity of the development process we are embarking on: • Monetary instability and the discouragement of private

investment. • Excessive government interventionism in the economy. • Suspension of sustainability and environmental quality

programs. • Uncertainty regarding growth and levels of employment. • Deterioration of individual rights and governability. • Increase in insecurity and antisocial activism. • Suspension of international commitments. • Deterioration in the country's international credibility. No countermeasures are possible in such a situation, since the problem would rest with the conduct of the State itself. Avoiding this possibility depends in large measure on Peruvians, as well as their civic organizations and political parties strengthen their commitment from 2010 onwards to participation and approval of the Bicentenary Plan. If society as a whole, and especially those politicians capable of forming a government are committed to complying with these goals we will be contributing to a real, planned, democratic and consensual strategy for economic development that would show the world that we are a mature nation capable of taking a leading role in the international community in that key year, the bicentenary of our independence.

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Table 4 Summary of contingencies

Uncertainty factor Consequences Measures to be adopted

International economic situation and evolution of the crisis.

• Fall in exports. • Reduction in GDP. • Reduction in private

investment. • Fall in the tax take. • Fewer jobs. • Greater poverty.

• Economic policy to stimulate domestic demand and creation of fiscal stimuli.

• Maximum advantage of free trade agreements.

• Conservative exchange rate and monetary policies.

• Monitoring the behavior of the world economy and financial sector.

• Development of human capital. • Creation of a National Technological

Innovation Centre.

Social conflicts and governability.

• Increase in terrorism • The crisis of governability. • Suspension of projects. • Reduction in private

investment. • Fall in exports. • Reduced tax take. • Reduction in GDP • Fewer jobs

• Strengthening of mechanisms for dialogue, concentration and negotiation.

• More concentrated and effective social compensation policies.

• Strengthening the capacity of the State to prevent and manage conflicts and maintain public order.

Drug trafficking and State corruption.

• Increase in zones controlled by drug traffickers.

• Influence of drug traffickers on public authorities.

• Generalized insecurity. • Deteriorated image of Peru. • Deteriorated relations with

neighboring countries. • Reduced investment. • Reduced social cohesion. • Talent flight.

• Cooperation with countries affected by drug consumption.

• Training for the police and the use of modern technology.

• Strengthen the anticorruption system (creation of a center for anticorruption information, strengthening the intelligence available to the Comptroller's Office, improvements in transparency and accounting).

• Help in replacing coca as a crop. • Addressing the basic needs of the

population involved.

Climate change and the availability of water.

• Water shortage on the coast and in the highlands,

• Lack of water for irrigation. • Lack of water for electricity

generation. • Problems in supplying

potable water to cities. • Los of agricultural

production. • Conflicts involving water.

• Efficient use of water. • generalized use of modern irrigation

techniques and a change to crops that require less water; apply economic incentives for the efficient use of water, build reservoirs.

• Optimize potable water systems, install meters on a massive scale, rationalize tariffs and generalize the treatment of waste water.

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Changes in the management of the country's macroeconomic variables.

• Hygiene problems. • Energy crisis. • Weakened or stagnant

economic growth. • Less foreign investment,

fewer jobs and greater poverty.

• Build hydroelectric power stations on the eastern watershed of the Andes mountains and invest in non-conventional energy sources (wind and nuclear)

• Build tunnels and make use of groundwater in the Andes.

• Build specific climate models. • Political and social forces committed

to maintaining the policies of the State.

• Joint approval of the Bicentenary Plan: Peru in 2021.

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