This chapter analyses Peru’s institutional and strategic framework for regional development, focusing on how territorial and sectoral policies are designed and delivered across regions. It assesses the coherence and effectiveness of place-based policy approaches, highlighting the need for better alignment between national objectives and regional realities. The chapter also explores the challenges and opportunities for urban and rural development, including high levels of informality, and persistent rural poverty that hinder inclusive growth. Particular attention is given to how regional strategies can promote productive transformation, improve access to quality employment, and support social inclusion. The chapter concludes with recommendations to strengthen Peru’s regional development policies, including through more integrated and territorially sensitive planning to ensure no place is left behind.
Regional Development Policy in Peru
Abstract
Peru’s Strategic National Development Plan (Plan Estratégico de Desarrollo Nacional, PEDN) serves as the government’s highest-level strategic planning document. The PEDN lays out the roadmap for the country's development objectives up to 2050, establishing priorities and progress measures over the next decade. It defines national strategies, which requires co-ordination between the different levels of government and the implementation of public policies.1 This strategic document contains four national objectives that include development of people’s capacities, managing the territory with sustainability, increase competitiveness and productivity and guarantee a fair, democratic and pacific society and effective service provision. Although the PEDN does not have a place-based lens nor explicit regional development policy priorities, it contains some objectives across different sectoral policies, including education, transport and the environment, that specifically target regions, urban and/or rural areas.
In addition to the PEDN, Peru has a suite of methodological documents, grouped through CEPLAN, which guide the formulation of public policies, sectoral and regional plans (see SINAPLAN and PEI below). In particular, they provide guidance to subnational governments in the design of their strategic planning documents. The co-ordination between regional and national policymaking is required by article 9 (Supreme Decree N° 029-2018-PCM), stating that regional and local governments must formulate regional and local policies, in their respective territorial areas, in accordance with the national policies.
Over the past years, Peru has also made headways in strengthening its capacity for strategic planning. In 2008, the country established the National System for Strategic Planning (Sistema Nacional de Planeamiento Estratégico, SINAPLAN) and the National Strategic Planning Centre (Centro Nacional de Planeamiento Estratégico, CEPLAN) as its governing and guiding body. CEPLAN, integrated within the PCM, has two primary functions, as outlined in Legislative Decree No. 1088: (1) formulate and disseminate a shared vision of the future of the country in the different levels and sectors of the general government, through the Strategic National Development Plan and; (2) regulate the strategic planning process in all public sector entities at national and subnational level. CEPLAN plays a leading role in the formulation of strategic planning instruments. In addition, public sector institutions can develop Institutional Strategic Plans (Planes Estratégicos Institucionales, PEI), in alignment with the PDEN.
Peru’s strategic planning framework for regional development operates at multiple levels of government, each with its own set of main documents aimed at guiding and co-ordinating regional development efforts. These documents typically outline objectives, priorities, and actions to be undertaken within a specific timeframe.
At the regional level:
The Concerted Regional Development Plans (Plan de Desarrollo Regional Concertado, PDRCs) are the main strategic planning tools of departments as required by law. With the overarching goal of enhancing the overall quality of life in departments, the PDRCs outline the main challenges and opportunities identified by each regional government in terms of jobs, access to essential services including health and education, and building and maintaining essential infrastructure. PDRCs start with a territorial assessment, analysing aspects such as geography, demographics, and economic activities. Based on this information, actions are prioritised for the short, medium, and long term, in co-ordination between the regional government, social and private stakeholders. Before 2014, the PDRCS lacked a common methodology, but are now aligned with the national policy priorities of the PEDN. The PDRCs are formulated and implemented under the leadership of regional governments, engaging the different stakeholders with the methodological support of CEPLAN that developed a formal guide, established in May 2021, to help the preparation process (formulation or updating) of the PDRC and thus the alignment of national objectives with regional objectives. Regional governments through their regional council hold the primary responsibility for approving the PDRCs but take into account the national methodological guidelines.
Each Regional Development Agency (Agencias Regionales de Desarrollo, ARD – see Chapter 3) implements a Regional Development and Innovation Strategy (Estrategia de Desarrollo e Innovación Regional, EDIR). The EDIRs are tailored to the needs and conditions of each region. These plans are developed via social consensus of the public sector, the private sector and academia at the subnational level, based on guidance from CEPLAN and the Ministry of Production in order to align with national strategies actions.
At the local level, provincial and local governments formulate local policies in their respective territorial areas (article 9 of the Supreme Decree N° 029-2018-PCM). Thus, local governments and populated cores (centros poblados), are responsible for developing various plans that align with both regional and national goals, and guide economic development, social progress, and environmental sustainability within their jurisdictions:
Local development plans focus on the medium- and long-term (between 5 and 10 years) development of a municipality or district, addressing economic, social, and environmental needs. They often cover areas like infrastructure, social services (education, healthcare), job creation, poverty reduction, and community well-being. The plans are participatory, involving input from local stakeholders such as residents, businesses, and civil society organisations to ensure the community’s specific needs are met.
Urban development plans regulate and guide urban growth and land use within municipalities or cities, focusing on the physical development of urban areas (see following section on urban development). They cover zoning regulations, housing development, public transportation, green spaces, and public infrastructure. Based on the Law of Sustainable Urban Development (República del Peru, 2021[1]), the current framework establishes a set of planning instruments, including a Territorial Development Plan (Plan de Acondicionamiento Urbano) with up to a 20-year horizon. These plans are designed to promote sustainable, organised, and liveable urban environments, preventing uncontrolled expansion and improving the quality of life for urban residents.
Territorial zoning plans focus on the sustainable use and management of land and natural resources in a municipality or district, ensuring that land is used in a way that balances development with environmental protection. They cover the zoning of areas for residential, agricultural, industrial, or conservation purposes and aim to prevent conflicts over land use and reduce environmental impacts. They are crucial in rural or semi-rural areas where land use can affect agriculture, mining, or conservation efforts.
The central government plays a leading role in helping design (through developing guides for PDRCs) and fund development plans at regional and local level. Ministries such as the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF), the Ministry of Development and Social Inclusion (Ministerio de Desarrollo e Inclusión Social, MIDIS), and the Ministry of Agriculture create national policies and provide financial resources to regional and local governments to implement specific development programs. National ministries have both their own sectoral programmes and development programmes tailored to regions. In some cases, development programmes are cross-cutting and involve co-ordination among multiple ministries. Meanwhile, agencies like ProInversión and CEPLAN help plan and promote long-term national and regional strategies, ensuring that regional development aligns with Peru’s broader goals. Regional governments often partner with local businesses, NGOs, and international organizations to ensure programs are well-resourced and effective.
Strategic planning of public investment for regional development is guided by the Multiannual Planning of Investments (Programa Multianual de Inversiones, PMI) framework (see Chapter 5). Established by the MEF, the PMI framework helps co-ordinate objectives and expenditures at national, regional, and local level according to the priorities set in the PDRCs or local development plans, and ensures projects are aligned with the budget. This process is ultimately consolidated into a draft budget law. Once approved by the MEF, it becomes the budget bill, which is debated in the PCM before being submitted to Congress. The PMI framework is managed through the National System of Multiannual Programming Management and Investments (Sistema Nacional de Programación Multianual y Gestión de Inversiones, INVIERTEPE).
Peru is also strengthening its approach to monitoring and evaluation. After the latest update of its General Strategic Directive in 2024 (Directive No. 001-2024 - CEPLAN/PCD), the SINAPLAN adopted a set of initiatives to strengthen the monitoring and evaluation phase. The directive includes methodological guidelines and indicates responsibilities, timeframes, and standard reporting structures. It provides direction for regional and local governments to assess progress and performance of their development plans in order to refine the design and implementation of their territorial strategies. Furthermore, CEPLAN, through its National Directorate for Monitoring and Evaluation, offers training and methodological support throughout the evaluation process to strengthen these efforts.
Main institutions for regional development policy
National institutions that support the co-ordination and implementation of regional, urban and rural policy in Peru include:
The Presidency of the Council of Ministers (Presidencia del Consejo de Ministros, PCM) is the central entity responsible for overseeing public administration and co-ordinating efforts between national and regional governments. Its mandate has evolved over time, especially with the decentralisation processes of the early 2000s, to include a stronger focus on co-ordinating national and subnational government action. Its role includes: (i) co-ordinating and overseeing subnational governments’ action and ensuring alignment and adherence with national development priorities and standards; (ii) managing decentralisation, giving more autonomy to regions and localities, and overseeing budget allocations; and (iii) facilitating intergovernmental relations to facilitate communication between various levels of government (see Chapter 3).
The Ministry of Housing, Construction, and Sanitation is responsible for guiding the processes of conurbation, urban expansion, creation and resettlement of population centres, the development of mobility infrastructure as well as the construction of housing in urban and rural areas in co-ordination with other national level agencies, and regional and local governments. It is the line Ministry in charge of the National Housing and Urbanism Policy (see section on urban development).
The Ministry of Agriculture and Irrigation oversees policies and programmes to foster agricultural growth, manage water resources, and promote rural development across the country. Some of its main policies and programmes include agricultural policy to support smallholder farmers, improve agricultural productivity, and promoting the sustainable use of natural resources; water and irrigation programs that support irrigation infrastructure, water conservation, and efficient use of water in rural agricultural communities; rural infrastructure and development projects to improve rural infrastructure (e.g. rural roads, marketplaces, and irrigation systems), which are essential for the development of agrarian economies; and social and economic inclusion to improve the livelihoods of rural populations, particularly small farmers and indigenous communities.
The Ministry of Economy and Finance is the main financing entity for regions in Peru through its Investment Fund for Territorial Development (Fondo Invierte para el Desarrollo Territorial, FIDT) established to reduce gaps in the provision of basic services and infrastructure and increase productivity through the financing or co-financing of investments of regional and local governments. FIDT resources are allocated to investments and pre-investment studies and technical sheets that aim to provide basic health services, child malnutrition and/or childhood anemia, education service basic, road infrastructure, sanitation services, rural electrification, agricultural infrastructure, rural telecommunications, and support for productive development.
Other key central government institutions responsible for regional development include the Ministry for Transport and Communications, the Ministry of Production, the Ministry of Development and Social Inclusion, the Ministry of Environment, the Ministry of Education as well as the National Institute of Statistics and Informatics (INEI).
National urban policy
Peru is one of the most urbanised countries in Latin America. In 2024, over 80% of the national population live in cities and it is expected that by 2050 between 85% and 88% of the inhabitants will live in urban areas.2 With such a high level of urbanisation, cities play a key role in social development and economic growth and in ensuring high levels of well-being. However, most of the population and economic activity are concentrated in the capital city as it hosts 32% of the national population and produces 45% of the country’s GDP. Lima has almost 50% of the national urban population and over 50% of the manufacturing companies followed by Arequipa with 6% (INEI, 2018[2]).
This high level of population concentration and economic activity is explained, in part, by the lack of an articulated system of cities, i.e. the absence of mechanisms that enable other cities to offer the same level of economic opportunities such as good jobs, high quality education, or the same business conditions as in Lima.3 Moreover, at city level, there seems to be a lack of medium and long-term strategic plans that guide social and economic development. Only Cusco, Juliaca and Tacna seem to grow more than Lima in terms of population and GDP per capita (Banco Mundial, 2016[3]; INEI, n.d.[4]).
To manage and improve the quality of urbanisation, in 2021 the national government adopted the National Housing and Urbanism Policy (Política Nacional de Vivienda y Urbanismo, PNVU) (Ministerio de Vivienda, Construcción y Saneamiento de Perú, 2021[5]). The PNVU represents a shift from a model of urban expansion and regularisation of land use to one of consolidation of urban areas. It is based on the concept of ‘habitat’ that considers both the physical and spatial characteristics of the dwellings and those of the neighbourhood and the environment where they are located.
The PNVU aims to ensure the sustainable growth and development of cities through urban and territorial planning; improve the dynamics of land occupation in cities; increase the access to adequate housing by prioritising vulnerable groups and households in state of poverty; and improve external living conditions within cities. The PNVU has a time horizon until 2030 and it is currently in its initial implementation phase. To facilitate the implementation of the PNVU, the government adopted the Sustainable Urban Development Law (Government of Peru, 2021[6]) and in 2022 the Action Plan for the implementation of the PNVU. To ensure vertical co-ordination across levels of government for urban development, regional and local governments must elaborate urban development plans in line with the PNVU and other strategic planning instruments in the framework of the SINAPLAN. However, there are no mechanisms of co-ordination for urban development among local governments such as metropolitan plans, voluntary co-ordination agreements, or mechanisms for data exchange.
Housing and land use
Peruvian cities are sprawling and disconnected. They face critical land use and housing challenges, which are the by-products of high levels of informality in the land market and poor planning. Land use is regulated by a complex normative framework – including the Constitution, the organic municipal law, urban development plans and the territorial conditioning plan – that tends to hinder business development and housing planning. Changes in land use require lengthy and costly processes that limit the capacity of cities to adapt to new uses, while land use planning lacks a long-term approach, with many decisions made ad hoc.
Peru has high levels of informality in the use of land. There are numerous informal settlements in cities where households lack property titles and constructions do not follow urban standards. For example, in Lima, over 80% of land use is informal and in Piura the share reaches 93%. Many informal settlements are in marginal areas that are highly exposed to floods, landslides, and other hazards. Informality can be attributed to many causes, such as low-income levels, unrealistic and poor urban planning, lack of land with access to public services and/or affordable housing, and a dysfunctional legal system. Informality incurs very high costs for its residents, such as precarious tenure, lack of public services, discrimination by the rest of the population, environmental and health hazards, and unequal civil rights. It also generates high direct costs for city governments, which must adopt improvement programmes, in addition to a substantial amount of indirect costs arising from the impact of informality on public health, criminal violence, and other associated social problems. Regularising the use of land is important as it would give certitude to households and businesses on their property.
Cities have been growing more than the population. A housing deficit and informal land use are leading to the rapid expansion of urban areas. A study from the Ministry of Housing, Construction and Sanitation (MVCS) shows that Peruvian cities have experienced not only an increase in population levels but also a considerable expansion of the urban area over the last two decades (Ministerio de Vivienda, Construcción y Saneamiento, 2024[7]). Cities such as Tacna, Yurimaguas, Arequipa, Puerto Maldonado and Ica experienced an urban expansion between 90% and 111% between 2000 and 2020. Between 1992 and 2022 Lima-Callao doubled its size from 450km2 to 900km2, while the urban area of Arequipa passed from 50Km2 to 170km2 in the same period (Ministerio de Vivienda, Construcción y Saneamiento, 2024[7]).
The Peruvian government has implemented active efforts to update the national cadastre with improved data on the state of housing and taxation, and to have reliable information on how land is used. In 1996, the government created the Informal Property Formalisation Agency (Organismo de Formalización de la Propiedad Informal, COFOPRI) to assist with the collection, maintenance, and updating of cadastral information (Official Gazette Legislative Decree No. 803, 1999[8]). Despite these efforts, only 10% of municipalities in the country have an updated urban cadastre but not all of them are well elaborated.4 Less than 20% of municipalities have updated planning instruments (Banco Mundial, 2016[3]), and thus local authorities have limited influence over urban expansion. Several institutions share responsibilities for land use at different levels of government, including the National Superintendence of State Assets, the Programme for the Generation of Urban Land (PGSU) and COFOPRI.
Peruvian cities are facing a housing shortage. Despite efforts to facilitate the access to affordable housing to mid and low-income households, cities face quantitative and qualitative housing deficits.5 In 2021, at national level 11,2% of households had a quantitative and/or qualitative housing deficit; urban areas had a 10% housing deficit and rural areas 15,6% (INEI, 2021[9]). At national level, the share of households with a quantitative housing deficit passed from 1,8% in 2018 to 2,3% in 2021 (2,8% in urban areas) and the share of households with a qualitative deficit increased from 8,6% to 8,9% in the same period (7,2% in urban areas) (INEI, 2021[9]). At local level, for example, in 2007 Lima-Callao accommodated over 360 000 households in housing deficit (45% with a quantitative deficit and 55% in qualitative deficit) and in 2017 the number of households in housing deficit increased to 430 000 (48% with a quantitative deficit and 52% with a qualitative deficit) (Ministerio de Vivienda, Construcción y Saneamiento, 2024[7]).
To address the housing deficit, Peru has implemented several initiatives. The Fondo Mivivienda aims to facilitate the acquisition of housing to the general population with particular focus on low-income households, by granting incentives to financial institutions so that they provide mortgage loans to citizens for housing acquisition of improvement.6 The Bono Salvando Vidas (Saving Lives) is a subsidy of PEN 130 000 (USD 34 400 approximately) for households in Lima, and of PEN 83 000 (USD 22 000 approximately) for people in provinces living in areas exposed to very high non-mitigable risk to relocate to safe housing through the Techo Propio (Own Roof) programme, a subsidy addressed to low-income families to buy, build or improve their housing.7
Urban mobility
Overall, Peruvian cities have limited urban transport systems. As a result of urban expansion and poor land use planning, current urban transport alternatives in Peru are generally not meeting the needs of citizens. There are different sectoral entities with a role in urban development, land use, and urban transport but the lack of established co-ordination mechanisms is having a negative impact on the development of transport systems leading to the adoption of less efficient solutions. In addition, there is a weak co-ordination among the urban and transport policies and many cities lack a proper urban mobility strategy which has resulted in some cities without massive public transport and only with mototaxis and taxis. Another clear example of this insufficient co-ordination is that accessing urban opportunities (e.g. jobs, schools, healthcare, leisure etc) requires long commutes. In Piura, 36% of commuters require between 30 minutes and almost two hours to reach destinations; in Arequipa, 63% of commuters require more than one hour; and in Lima 76% of commuters spend on average more than one hour in public transport (Ministerio de Transportes y Comunicaciones, 2020[10]).
Peruvian cities lack integrated public transport systems that facilitate intermodal transport connecting the different neighbourhoods and alleviating traffic and commuting times. A deficient public transport system, traffic congestion caused by the growing number of vehicles, the proliferation of inadequate transport modes (taxis and mototaxis), and the lack of walking and bicycle-friendly infrastructure are some of the mobility problems Peruvian cities face. Moreover, with the exception of Lima’s Urban Transport Authority (ATU), there are no specialised entities in public transport in Peru limiting the capacity of cities to plan and manage mobility strategies. Most cities do not have public policies or specific plans on urban mobility, and local governments have oversight limitations, such as a low capacity to enforce the imposed sanctions, inadequate organisation or planning for oversight, reduced inspection staff and limited use of electronic systems and devices.
Urban mobility is dependent on motorised vehicles. The number of vehicles for public and private use has been growing 6% every year since 2010 (Ciudades Cómo Vamos, 2021[11]). In Cusco, for example, the number of vehicles increased 124% in the last decade and there seems to be an excess of buses and taxis many of them old without maintenance leading to an increment of pollution and accidents (Banco Mundial, 2016[3]). Paradoxically, the largest share of trips in Peruvian cities is done by public transport. In Lima, 85% are done in public transport modes (combi, microbus, buses, or collective car/taxi), while in Arequipa and Piura the share is 68% (Ministerio de Transportes y Comunicaciones, 2020[10]).
Public investment is skewed sharply in favour of cars and against public transit and non-motorised options, even though public transport is the most widely used mobility option. The metropolitan area of Lima-Callao with 11 million inhabitants, only has one metro line and one Bus Rapid Transit system (Metropolitano) line operating. The construction of a second metro line started in 2014 but it is still unfinished due to land disputes, and lack of agreements and co-ordination among the different public agencies involved (Contreras Zuloaga, 2023[12]).
The costs of urban sprawling and the lack of investment in integrated public transport systems are borne primarily by low-income population. Most mid and low-income people in cities depend on public transport to commute. Peruvian households dedicate 11% of their income to transport (INEI, 2019[13]). The problem is that urban public transport in Peru is of low quality and operates in an informal manner in many cases. Informality in public transport services is a constant across Peruvian cities. Some transport providers lack a concession (administrative authorisation) to operate routes and deliver public transport services, and others while having the concession do not meet the technical and safety requirements, nor comply with defined routes and frequencies, and tend to compete with formal operators promoting an oversupply of transport in some routes.
In Lima, the use of massive public transport system is still rather low as only 7% of commuters use the metropolitan (BRT system) and 6% the metro (Lima Cómo Vamos, 2024[14]) although they have the highest rate of approval among users. The reason for its low usage may be its limited supply. Combis / microbuses (34%), buses (31%) and mototaxis (17%) are more widely used (Lima Cómo Vamos, 2024[14]). Collective taxis are faster and more direct, but they pose a high risk to their users. For example, Urban Transport Authority for Lima and Callao (ATU) reported that of the collective vehicles inspected in 2024, one in three did not have a technical inspection and 23.6% did not have the Mandatory Traffic Accident Insurance (COMEXPERU, 2024[15]). The use of bicycles and other micromobility devices as a means of transport is still very low (4.6%). It is worth noting that commuters are much less satisfied by the service of the traditional transport (buses and combis), whereas the service of the metro is considered to be the most satisfactory for 7 out of 10 people (Lima Cómo Vamos, 2024[14]).
The transport sector is responsible for 41.8% of the total GHG emissions in Peruvian cities (Ciudades Cómo Vamos, 2021[11]). Atmospheric emissions from the vehicle fleet, at least in Lima Callao, would contribute more than 50% of the fine particulate matter (PM2.5) present in the city's air; emissions that are mainly related to the combustion of vehicles in the diesel bus category (Ministerio de Transportes y Comunicaciones, 2020[10]). In Lima 19% of the bus fleet has more than 20 years of service and it is a source of pollution.
In 2019, the national government approved the National Programme for Sustainable Urban Mobility (Promovilidad) to implement the National Policy on Urban Transport (PNTU). Through this programme, cities receive financial and technical support for the elaboration of their sustainable urban mobility plans. Cities such as Arequipa, Trujillo, Piura and Huamanga have received this support. Promovilidad is a programme for the preparation of local mobility plans and investment feasibility studies, and not for the construction of infrastructure.
Smart Cities
The use of digital technologies for optimising public service delivery and promote sustainable environments is, at most, in its infancy in Peru. Lima is the only city that may begin the implementation of a smart city pilot project.8 The neighbourhood of Miraflores in Lima is the first in the country to launch a smart city project to improve the quality of life for citizens by strengthening security as well as efficient traffic management and making the district more sustainable. Mobility in the city is expected to improve by intelligent traffic signalization. Moreover, smart horizontal signalling for crosswalks will be implemented, with traffic lights that replicate the on-road signalling by illuminating the floor at the crossings to increase pedestrian safety. Cameras for license plate recognition, facial recognition, traffic analytics and photo fines will be installed. One of the pending tasks is the elaboration of a Smart City strategy or master plan to guide authorities in the strategic use of digital technologies to meet the different challenges it faces in areas such as security, mobility, and environment.
In Peru, the total rural population was estimated at 8 million in 2023, representing 24% of the national population. As in most OECD countries, rural places cover the bulk of land-surface in Peru, i.e. 98% according to the Degree of Urbanisation methodology (DEGURBA), despite having lower percentage of the total population.
The rural economy in Peru is mainly driven by primary activities, notably mining, hydrocarbons and agriculture. These three sectors alone have contributed to around 75% of the country’s export basket over the past 40 years (OECD, 2016[16]). During the last decades, agriculture has made an increasing contribution to the country’s exports within the framework of numerous free trade agreements, making Peru an important global player in fresh asparagus, paprika and organic bananas, fresh grapes, coffee, avocado and mangos.
Despite the growing importance of these commodities and presence of internationally competitive farms, most farms in Peru are small, and land distribution is heavily skewed towards smallholder farming, with an average size of smallholder farms of less than 5 hectares, and with approximately 83% of farms with less than 5 hectares in size. Thus, the rural economy in Peru is still largely dependent on agricultural activities that are relatively labour intensive as compared to OECD countries. Agriculture accounts for 8% of Peru’s GDP, but employs around 25% of the labour force with a higher percentage in rural regions.
Poverty rates in Peru are also more prevalent in rural areas than in urban areas, despite a closing of the gap since 2010. In 2023, rural areas still had a poverty rate close to 40%, as compared to 26.4% in urban areas (Figure 3.1).
Agriculture and poverty mitigation are therefore central to Peru’s rural development priorities. The main national policies supporting rural areas aim to address these challenges Notably, the National Agrarian Policy for 2030 focuses heavily on supporting family farming and improving competitive agrarian development. Likewise, the Educational Care Policy for the Population in Rural Areas aims to address competency gaps of men and women in rural areas, targeting their needs, characteristics, productive and sociocultural dynamics at each stage of their life cycles.
Source: INEI and ENAHO
The Ministry of Agriculture and Irrigation oversees policies and programmes to foster agricultural growth, manage water resources, and promote rural development across the country. Furthermore, because rural development in Peru is thus multi-sectorial and involves the co-ordination with other ministries including the Ministry for Development and Social Inclusion, which implements social programs targeted at reducing poverty and improving access to basic services, such as health, education, and nutrition, in rural and isolated areas. Furthermore, the Ministry of Transport and Communications is responsible for developing roads and transport infrastructure in rural regions, helping improve access to markets and services; and the Ministry of the Environment fosters the management of natural resources, combating deforestation, and addressing environmental challenges that affect rural livelihoods.
Although Peru does not have a comprehensive national policy or strategy for rural areas, the government prioritises investments in these two areas through the Invest Fund for Territorial Development (FIDT). The services considered are basic health services, child malnutrition and/or childhood anemia, basic education service, road infrastructure, sanitation services, rural electrification, infrastructure agricultural, rural telecommunications, and support for productive development.
Urban and rural places in the OECD are highly interconnected across economic, social and environmental dimensions and tend to be stronger in rural places that are closer to cities (OECD, 2019[17]). Linkages can occur in many dimensions including amongst other commercial ties, environmental goods, and population flows. Rural places near cities have stronger linkages in transportation networks, commuting flows, spatial planning and the provision of goods and services. Furthermore, these rural places can also benefit from good access to markets, services, agglomeration of talent present in urban areas and makes these places attractive places to live given their lower housing costs. Each type of interaction encompasses a different geography or “functional region”.
In Peru, the government seeks to capitalise on the benefits of taking a more integrated and functional approach to territorial development, going beyond the urban and rural dichotomy to consider the functional linkages between cities and rural places and support their complementarities. Across the country, linkages between the countryside and urban places exist in population flows, commercial ties, and environmental goods. More can be done to better measure and understand the nature of these urban-rural linkages and start developing effective programmes and policies. However, the high share of informal settlements. Clack of plans and definitions that can help better understand scope and intensity of urban and rural linkages both still make it difficult to make urban-rural partnerships happen in practice.
Peru has made important headways in recent years to improve its system for strategic planning, which has several layers of strategic planning documents and counts on CEPLAN to provide guidance on their design and alignment of strategic objectives across levels of government. Furthermore, the SINAPLAN, led by CEPLAN, has a primary role in co-ordinating public sector institutions and securing policy coherence between the different strategic planning instruments, including the PEDN and the PDRCs.
However, despite progress, there are opportunities for Peru to further strengthen its regional development policy framework. For instance, there is currently a multitude of sectoral plans and strategies in place at national level (e.g. on health, education, transport, social protection, etc.), each with their own priorities to address regional development issues, and little complementarities between them. While they may all be relevant, more can be done to co-ordinate regional development goals across sectoral policies and in turn prioritise the allocation of public funds. This would require embedding incentives in the strategic planning system for Ministries to co-ordinate, align and integrate their priorities in a way that benefit regions best. In this respect, a national policy framework for regional development could help to provide a long-term, integrated, and balanced vision of regional develop, and a clear hierarchy and structure for the strategic planning system.
Furthermore, the capacity of subnational governments to draw up high quality strategic documents can also be strengthened. While CEPLAN already has an important role in providing guidance for the design, implementation, monitoring and evaluation of subnational strategic documents, and ensuring these documents align with national priorities, it could reinforce efforts to build strategic planning capacity at regional and local level and support better co-ordination across the planning cycle.
In this regards, CEPLAN’s efforts could focus on the regional level by facilitating a partnership approach to policy-making and public investment. There is significant variation in the quality of PDCR and EDIR across regions, while ten departments still have not adopted an EDIR (nor an ARDs – see Chapter 3). There are also opportunities to better align and integrate the newly developed EDIR with the PDCR and promote more systematic co-operation amongst departments for both types of plans to avoid fragmented strategies and miss out on economies of scale for certain projects. Furthermore, departments have not yet comprehensively evaluated their 2014-20 PDCRs nor their EDIRs.
Strengthening regional capacities can complement top-down with bottom-up development approaches. For example, the 2019 National Infrastructure Plan was developed by opening dialogues on pre-existing priority projects. In 2022, this list was updated, incorporating criteria for economic, environmental, social, and governance sustainability. However, this planning still follows a centralised (top-down) approach, which needs to be complemented by a decentralised (bottom-up) vision.
Urban development
Peru has taken some steps to strengthen its urban policy framework. Notably, the adoption of the National Housing and Urbanism Policy (PNVU) in 2021 has been a positive development to ensure more sustainable urban development. It provides a vision and guidance to all urban development actions. It is a key document that has the potential to support policy co-ordination across sectors to overcome pressing urban challenges such as access to services and to affordable housing. The PNVU focuses on improving the supply of adequate affordable housing, for low-income households. It also considers the social function of the public space as part of the housing policy and gives priority to prevent informal occupation of land; and the measure to improve the planning instruments.
However, despite this progress, Peru’s urban model faces acute socially, economically, and environmentally issues in the long term. The PNVU lacks mechanisms to ensure co-ordination of planning and investment in metropolitan areas. There is no inclusion of the concept of ‘functional urban areas and all planning is made based on administrative borders which weakens any urban development plan developed at local level. Moreover, although the PNVU includes measures for urban regeneration and neighbourhoods’ improvement, there is no consideration of mobility issues to improve access to urban opportunities and to reduce pollution levels and traffic jams neither how urban policy can contribute to sustainability and climate change adaptation. A critical point is the absence of a strategy to build a system of cities that helps to boost intermediary cities potential and alleviate the concentration in the capital city. The PNVU does not identify the different cities and their socio-economic, administrative, and service delivery functions for their regions and country. It does not provide the indications on how these cities could complement each other, how to make the most of their assets and how they can be better connected.
In Peru, the poor planning and the unpredictable land use are just two factors contributing to increasing the housing deficit and urban sprawl. Moreover, the large number of public organisms at national, regional, and local level that have competence in assigning the use of land tend to elevate the transaction costs and causes confusion in the processes to acquire property rights. Urban sprawl is also the leading to reduce social cohesion and an overall decline in quality of life due to the limited access to services and jobs in the place of residence. For example, residents may have to travel long hour to go to school or work in sometimes overcrowded buses. Urban expansion is not solving the problem of lack of land for housing in central urban areas which tend to be expensive. The illegal occupation of land is the only option for many low-income households to meet their housing needs; the problem is that Peruvian cities are not able to provide with the adequate number of housing units to meet the demand. The rigid regulation, the high costs of urbanised land with access to services, the lack of incentives to private developers to build affordable housing units, and the lack of a national programme for the construction social housing and the promotion of rental housing are aggravating the social, economic, and environmental challenges observed in urban areas.
Public policies on urban mobility have largely concentrated on promoting or incentivising transport by private vehicle and thus benefiting only a minority of the population. The major investments have focused on road expansion, with less effort directed at pedestrian access and public or non-motorized transport systems. Transforming urban mobility would greatly improve quality of life, reduce pollution and GHG emissions, and disproportionately benefit the poor by connecting them to jobs, education and services that enable them to advance socio-economically. The constant expansion of urban areas will likely increase the cost of ensuring access to those residents to urban opportunities as this requires building infrastructure and operating transport services.
Many Peruvians on low incomes live in poorly constructed housing on the outskirts of sprawling cities, lacking access to basic services, and relying on patchy public transport to reach urban centres. As a result, thousands miss out on jobs and essential services such as healthcare and education. Providing better public transport services would therefore represent an important step not only for economic growth but also for social inclusion. Some cities like Lima are already taking steps in the right direction by investing in a new metro line, but this is taking long time to complete and may not be enough to solve the mobility problems residents face. Moreover, while cities like Lima or even Arequipa may face complex challenges and require ongoing support from the national government, it is also important to ensure that rapidly growing small and medium-sized cities (e.g. Piura and Cusco) that often have less capacity are not left behind.
To transform its cities, Peru needs to put urban accessibility at the centre of its housing and land use policies and realign finance flows and incentives – positive and negative – to foster development, including mixed-income housing and mixed land uses, in cities’ cores, while discouraging development in peripheral areas. The challenge for Peru is to densify urban areas while keeping land prices affordable and considering that many households already live in crowded housing. This would require promoting mixed land uses, access to affordable housing through a diversity of tenancy options (i.e. homeownership and rentals), and reliable and safe public transport.
Peru’s cities run the risk of being left behind the digital transformation. It is critical for cities to develop strategies to leverage digital technologies for well-being and deliver more efficient, sustainable, and inclusive environments. Peru may take the opportunity to learn from countries and cities that have made early progress in the digital transformation to adopt those lessons to its own context. However, Peruvian cities need to keep in mind that the smartness of a city is not about the use of technology per se, but about how that technology is used as part of a wider approach to enhance the efficiency of the city. In fact, experience suggests that it is possible to be a smart city without being a tech city.
Rural development and urban-rural linkages
Despite the importance of rural assets within the national economy and overall exports, there is scope to better tap in the potential of rural regions and increase well-being standards. Notably, Peru could improve the current rural taxonomy by recognising and measuring functional concepts and interactions with urban areas. These definitions can help articulate policies for different types of rural regions, especially those that are close to cities against those that are remote to better tailor innovation programs and strategies to delivery public services that correspond to the needs and realities of different types of regions and thus designing more targeted policy to the realities of different types of rural regions. Developing a definition based on functional concepts can also better measure rural-urban linkages and in turn help design policies to enhance their benefits.
Peru has a narrow approach to rural development that remains mainly focused on primary activities, especially agriculture and poverty eradication. This approach can be broadened to other priorities beyond agriculture, for instance through programmes that promote rural innovation, digitalisation of rural SMEs, rural digital skills, and opportunities in the green economy. Broadening the productive structure of the rural economy would also alleviate pressures of rapid urbanisation, which is often regarded as the solution to poverty eradication.
Regional development
Develop a national framework for regional policy to provide a long-term, integrated and balanced vision of regional development. The framework should provide a clear hierarchy and structure for the country’s strategic planning system, help articulate and align the priorities across different sectoral policies and between development plans at national, regional and local level, including the PEDN, PDRCs, EDIRs and PEIs.
Further strengthening strategic planning capacities at subnational level. This would facilitate a partnership approach to policy-making and public investment. This includes developing EDIRs in the 10 departments that do not yet have one, and better aligning and integrating the EDIRs with the PDRCs.
Continue strengthening the system for performance measurement and evaluation of strategic plans for regional development, to enhance accountability, encourage continuous learning, and enable the government to adjust its policy priorities accordingly. The CEPLAN for instance could continue its efforts by developing clear procedures and rules for each type of policy and strategies related to regional development, including on the roles and responsibilities of the actors involved, the timeline, the methodology and tools for monitoring.
Urban development, rural development and urban-rural linkages
Advance on the implementation of the recently approved National Policy for Housing and Urbanism (PNVU) ensuring that the different actions listed as priority have a dedicated budget; and complementing the PNVU with the development of an integrated approach to urban development by i) aligning housing, land use and urban public transport planning and policies; ii) prioritising urban regeneration over construction outside the city limits; and iii) supporting the development of metropolitan planning.
Develop a compact and connected approach to the development of urban areas to improve mobility and the pursuit of green growth agendas through i) denser, mixed-use cities; ii) new alternatives to the automobile with the implementation of the local mobility plans such as public transport and upgrading infrastructure for walking and cycling, and iii) digital technologies for accessing urban services and opportunities.
Continue implementing policies and initiatives to reduce informal settlements and disincentivise the informal use of land. This could include conducting policy evaluations and evidence-based performance reviews of the existing regularisation programmes. It is important to make sure that regularisation is financially sustainable, for instance through property taxes and/or charges for infrastructure improvements and urban services.
Establish a National Rural Policy that targets the productive potential of rural regions and better connects current programmes to alleviate poverty and policies to promote rural economic development. This would entail ensuring buy-in and commitment from different ministries to this policy agenda, including the Presidency of the Council of Ministers, the Ministry of Economy and Finance and the Ministry of Production.
Ensure that the National Policy for Housing and Urbanism and rural policy initiatives work in tandem to stimulate urban-rural collaboration. This entails setting common or integrated goals, strategies and financial mechanisms to promote the role of urban-rural partnerships in territorial development that are currently missing.
References
[3] Banco Mundial (2016), Perú. Hacia in sistema integrado de ciudades. Una nueva visión para crecer., https://www.bancomundial.org/es/country/peru/publication/peru-hacia-un-sistema-integrado-de-ciudades-una-nueva-vision-para-crecer-notas-de-politica.
[11] Ciudades Cómo Vamos (2021), Acciones prioritarias para impulsar un transporte sostenible, digno y humao para una mejorcalidad de vida en Perú, https://www.limacomovamos.org/wp-content/uploads/2021/09/Documento-de-politica-Movilidad.pdf.
[15] COMEXPERU (2024), Transporte Público en Lima en Riesgo de Empeorar (Aún) Más, https://www.comexperu.org.pe/articulo/transporte-publico-en-lima-en-riesgo-de-empeorar-aun-mas.
[12] Contreras Zuloaga, D. (2023), Moviliad Sostenible: ¿Qué desafíos y problemas enfrenta Lima Metropolitana?, INTE, https://inte.pucp.edu.pe/en/noticias-y-eventos/noticias/movilidad-sostenible-a-que-desafios-y-problemas-se-enfrenta-lima-metropolitana/.
[6] Government of Peru (2021), Ley de Desarrollo Urbano Sostenible, Ley No. 31313, https://cdn.www.gob.pe/uploads/document/file/2262482/Ley%20N%C2%B0%2031313.pdf.
[9] INEI (2021), Déficit habitacional, https://www.inei.gob.pe/media/MenuRecursivo/publicaciones_digitales/Est/Lib1855/cap13.pdf.
[13] INEI (2019), Evolución del gasto e ingreso, https://www.inei.gob.pe/media/MenuRecursivo/publicaciones_digitales/Est/Lib1699/cap02.pdf.
[2] INEI (2018), Estructura empresarial según principales actividades eocnómicas, https://www.inei.gob.pe/media/MenuRecursivo/publicaciones_digitales/Est/Lib1703/cap02.pdf.
[4] INEI (n.d.), Estadísticas Población y Vivienda, https://www.inei.gob.pe/estadisticas/indice-tematico/poblacion-y-vivienda/.
[14] Lima Cómo Vamos (2024), Lima y Callao según sus habitantes., https://www.limacomovamos.org/wp-content/uploads/2024/01/EncuestaLCV2023.pdf.
[10] Ministerio de Transportes y Comunicaciones (2020), Política Nacional de Transporte Urbano - PNTU, https://cdn.www.gob.pe/uploads/document/file/1648403/Difusi%C3%B3n%20de%20la%20PNTU.pdf.pdf.
[7] Ministerio de Vivienda, Construcción y Saneamiento (2024), Expansión urbana en el Perú: proyección del déficit habitacional en tres ciudades principales mediante el análisis espaciotemporal del cambio de uso de suelo utilizando métodos de machine learning, https://cdn.www.gob.pe/uploads/document/file/6900325/5960863-propuesta-metodologica.pdf?v=1725630672.
[5] Ministerio de Vivienda, Construcción y Saneamiento de Perú (2021), Política Nacional de Vivienda y Urbanismo, https://cdn.www.gob.pe/uploads/document/file/2262477/Resumen%20de%20la%20Pol%C3%ADtica%20Nacional%20de%20Vivienda%20y%20Urbanismo.pdf.
[17] OECD (2019), Rural well-being : geography of opportunities.
[16] OECD (2016), OECD Territorial Reviews: Peru 2016, OECD Territorial Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264262904-en.
[8] Official Gazette Legislative Decree No. 803 (1999), Law to promote access to formal property, https://faolex.fao.org/docs/pdf/per69154.pdf (accessed on 5 May 2024).
[1] República del Peru (2021), Ley de Desarrollo Urbano Sostenible, https://busquedas.elperuano.pe/dispositivo/NL/1976352-2 (accessed on 18 November 2024).
← 1. https://peru2050.ceplan.gob.pe/?utm_source=gobpe&utm_medium=btn&utm_campaign=peru2050
← 2. For further information see: https://www.gob.pe/institucion/ceplan/noticias/696847-ceplan-35-millones-de-peruanos-viviran-en-zonas-urbanas-al-2050
← 3. This is in contrast to countries like Colombia and Mexico, where manufacturing companies are moving from Bogotá and Mexico City to intermediate cities that are well connected and have more advantageous conditions in terms of land prices.
← 4. For further information see: https://elperuano.pe/noticia/105499-cofopri-solo-el-10-de-los-municipios-cuenta-con-un-catastro-urbano
← 5. Qualitative housing deficit means deficiencies in quality of the home whether material (walls and floor), living space (overcrowding) and access to services (drinking water, drainage and electricity); quantitative hosing deficit refers to the lack of housing suitable to meet the housing needs of households that do not own homes.
← 6. For further information see: https://www.mivivienda.com.pe/PortalWEB/
← 7. For further information see: https://www.gob.pe/33260-1-que-es-techo-propio
← 8. The development if this initiative is taking place with the support of the government of Korea as part of its Korea Knowledge Sharing programme, and the Inter-American Development Bank.