Government failure in Peru

September 4, 2007

Free Market Foundation

In Lima, Peru, those hit hardest by the crises in education and water poor Peruvians are not reacting with complacency, they are demanding private solutions, says Ian Vasquez, director of the Center for Global Liberty and Prosperity at the Cato Institute.

In the case of water, the poor know that the price they’re used to paying would fall dramatically with privatisation, says Vasquez:

Water they now buy from unsanitary tanker trucks costs 10 to 15 times more than piped water.

In Guayaquil, Ecuador, a privatisation carried out in 2001 has lowered the price of water by 90 per cent for 275,000 poor people because their homes became connected to the formal network.

Privately run water can also save thousands of lives, as has been the case around the developing world including in Argentina, where child mortality dropped by 26 per cent in the poorest areas that privatised water.

The rejection of state services has extended to education as well, says Vasquez:

Peru’s shanty towns are full of private, for-profit schools, and although the phenomenon has not been carefully studied, it is estimated that half of children attend these schools.

At one such school, San Vicente de Paúl, classes were offered to 30 children at a cost of about $12 per month.

Its several classrooms were clean and orderly, well supplied and even had 10 computers connected to the Internet and a small play area.

So it is that people in Lima’s squatter settlements rely on their wits to overcome any number of obstacles thrown up by government, says Vasquez. Even in a country where the government is dysfunctional and vastly larger than that of 19th century England, those values can serve as a good development guide. New spending of the kind President Alan García has begun will not do the trick.

Source: Ian Vasquez, Government failure in Peru, Wall Street Journal, August 20, 2007.

For text: http://online.wsj.com/article/SB118757388943202518.html

For more on Privatization Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=37

FMF Policy Bulletin/ 28 August 2007