The millions of Peruvians who have escaped poverty over the past decade are at risk of becoming poor again due to the slowdown in the economy, according to Oxfam, the global organization that works to reduce poverty.
Peru saw its economy boom from 2004 to 2013, driven by China’s demand for raw materials like copper. Peru is one of the world’s biggest mineral producers, with metals accounting for more than half of its total exports.
Peru’s strong economy led to a decline in poverty and a bigger middle class that spurred domestic demand. Peru’s poverty rate fell from almost 60% in 2004 to about 24% last year, according to the World Bank.
However, over the past year Peru, like many emerging markets, has seen its economic growth slow due to the international tailwinds turning into headwinds. China has eased its demand for natural resources. At the same time, the US dollar has started to appreciate against emerging market currencies like Peru’s sol as the US Federal Reserve maps out plans to stop its multi-billion dollar bond-buying program, known as quantitative easing.
So far this year, Peru’s economy has grown less than 3%, following an expansion of 5.8% last year.
Armando Mendoza, an economist at Oxfam in Peru, said that people who recently have escaped poverty are the most at risk of falling back under the poverty line.
“They are highly vulnerable,” he said, according to daily La Republica. “Their daily income is above 12 soles (US$4.10), but less than 30 soles. There are 12 million people who were able to escape poverty, but who are far from reaching stability in their income and their life conditions.”
Mendoza said that Peru needs to grow at least 3% per year in order to continue reducing poverty. “The current panorama is a call to reflect and to debate policies to reduce inequality,” he said.