Looking for Virtue in Remoteness: Policy Recommendations for Sustainable and Inclusive Growth in the Peruvian Amazonia

Abstract:

Loreto is a place full of contrasts. Although it is the largest department in Peru, it is one of the least populated in the country. Its capital, Iquitos, is closer to Brazil and Colombia’s border states than it is to the capitals of its neighboring regions in Peru - San Martin and Ucayali. Iquitos can only be reached by air or river, making it one of the largest cities in the world without road access. Since its foundation, Loreto's economy has depended on the exploitation of natural resources: from the Amazon rubber boom at the end of the 19th and the beginning of the 20th centuries, to the oil extraction and exploitation of forest resources that predominate today. This model has brought with it significant environmental damage and has produced a pattern of slow and volatile growth, which has opened an ever-widening gap between the economy of the region and that of the rest of the country. Between 1980 and 2018, Loreto grew at an average compound annual growth rate four times lower than the rest of Peru. Otherwise stated, while the rest of Peru has tripled the size of its economy, Loreto increased it by just under one-third.

Within the last decade (2008-2018), the region has distanced itself from its Amazonian peers in the country (Ucayali, San Martín, and Madre de Dios), which have grown at an average annual growth rate five times higher. Loreto’s average per capita income fell from three-quarters of the national average in 2008 to less than half of it by 2018. In addition to - or perhaps as a consequence of - its economic challenges, Loreto is also among the departments with the worst indicators of social development, including the highest levels of anemia and child malnutrition in Peru.

In this context, the Growth Lab at Harvard University partnered with the Gordon and Betty Moore Foundation to develop a research study that would provide inputs and policy recommendations to boost the development of the region and foster sustainable prosperity.