Peruvian economist Elmer Cuba argues in a new book that his country’s persistent inability to turn stable macroeconomics into shared prosperity stems from an unresolved and deepening disconnect between its economic and political systems , one that he says is now costing Peru roughly two percentage points of annual growth.
Cuba, a partner at consultancy Macroconsult and a former economy minister in the government of Keiko Fujimori, makes the case in Perú: el desarrollo esquivo , Peru: the Elusive Development , that the constitutional economic framework installed nearly 35 years ago has functioned broadly well, while the political system has deteriorated for want of equivalent safeguards.
Political crisis, measurable cost
Cuba said that total factor productivity in Peru turned negative around 2015, a shift he links directly to the onset of the country’s political crisis. With that drag in place, he said, the economy is now growing at roughly 3 percent annually. Were public-sector productivity merely back to where it stood 15 years ago, he argued, Peru would be growing at around 5 percent , with no change to private investment or external conditions. Add better human capital, he said, and the country could sustain growth of 6 to 7 percent for two decades.
One indicator he cited to illustrate institutional decay: over the past ten years, the average tenure of a cabinet minister at the Interior Ministry has been three months, making any sustained public-safety policy effectively impossible.
Cuba said that Congress has also compounded the problem by overstepping its constitutional role. He argued that by design, members of Congress are prohibited from directing public finances, but that this constraint has been systematically broken over the past decade and accelerated sharply in the past five years.
Two centuries, little relative progress
Taking a longer view, Cuba said that in relative terms Peru has barely moved. Comparisons of GDP per capita against the United States, Spain and Chile show the country today at roughly the same position it occupied at independence two hundred years ago, with periods of improvement and deterioration but no sustained closing of the gap. Despite being what he called a macroeconomic star in terms of inflation and fiscal deficit, Peru’s GDP per capita remains at around 80 percent of the Latin American regional average.
He placed part of the explanation in Peru’s exclusionary republican origins. Universal suffrage, he noted, has existed for only 50 of the country’s 200 years of independence, meaning three-quarters of the republic’s history elapsed without full political participation. Inclusive economic participation, he said, is even more recent: it was only with the economic model introduced in the 1990s that any Peruvian could legally start a business and accumulate wealth.
Forced entrepreneurs and a fractured middle
Cuba pushed back on the notion that Peru has developed a culture of entrepreneurship. He said that of every ten self-employed workers, perhaps one is a genuine entrepreneur; the rest would prefer salaried employment but cannot find it. National household survey data, he noted, show the self-employed earning on average 1,000 soles a month , a level he described as leaving workers in poverty or vulnerability rather than building a middle class.
He described the current social structure as roughly 30 percent poor and 30 percent vulnerable, with only the remaining 40 percent approaching middle-class status. Poverty fell from around 60 percent to 20 percent before the COVID-19 pandemic and has since risen to about 25 percent, he said.
The country’s social fracture is visible in voting patterns, Cuba said. In recent elections, he observed, support for different candidates splits sharply by altitude above sea level and income level , a pattern he said reflects a society that has not achieved cohesion, where economic circumstances and geography still determine political choice rather than ideology.
What the next government should do
Cuba said the best social policy any government can offer is employment, because the state cannot substitute for the breadth of needs that only a wage can meet. He said Peru’s incoming administration inherits a significant advantage: a decade of political instability has depressed private investment, and merely ending that cycle of crisis , by surviving a full term without impeachment proceedings , would itself improve the growth trajectory.
Among structural reforms, he called for greater labor market flexibility, arguing that rigid employment rules have persisted as an unresolved problem since the twentieth century. He also advocated requiring all citizens to file income tax declarations, not necessarily to collect more tax immediately but to make it far harder for those in the informal and illegal economy to evade detection entirely.
He said Peru is not well positioned to pursue broad industrialization and should instead deepen sectors where it already has competitive advantages, above all mining, where he said the country holds world-class reserves but has imposed regulatory timelines that stretch a decade or more and reduce the present value of projects to the point where global investors walk away. The same logic, he said, applies to agriculture and tourism.
Cuba concluded that the country’s path forward runs through political reform as much as economic policy , rebuilding institutional architecture so that democracy, rather than authoritarian governments, delivers results for citizens.
