Photo: Tatiana Cardeal (flickr)

Peru has one of the fastest growing economies in Latin America. Over the past six years, the country’s GDP has grown more than 6 percent annually. This is largely due to high market prices for mineral exports, increases in private investment and liberal economic policies that have been put into place by President Alan Garcia and his predecessor Alejandro Toledo.

Yet Peru’s economic growth is having a limited impact on poverty rates. While the capital, Lima, and the northern and coastal regions are flourishing, over 70 percent of the Andean region still lives in poverty. A major factor in this persistent poverty is the fact that many Peruvians continue to work in the informal sector of the economy, writes the Economist:

These unwaged people are often more or less cut off from the market economy. And it is market connections that make economic growth “trickle down” to the poor, points out Richard Webb, a social researcher and former central-bank governor. Enabling that to happen is thus a job for public policy. Better roads, education and social policy are all needed.

President Garcia has worked to increase social spending on anti-poverty programs, and staunchly advocates market-based solutions to Peru’s poverty problem. However, Garcia’s ability to combat poverty continues to be hampered by his unpopularity (his latest approval rating is only 26 percent), his lack of a legislative majority, and fears of corruption in lower levels of government. Unless Garcia can find a way to make Peru's growth work for more Peruvians, his liberal economic policies may lose support from those who aren't seeing the benefits of market capitalism.