This chapter provides an overview of Peru’s territorial organisation and analyses regional disparities across key economic, demographic, and social indicators. It examines trends in GDP per capita, productivity, population dynamics, and access to doctors across regions, highlighting persistent territorial inequalities and structural imbalances. The chapter sets the scene for the report by identifying the main spatial development patterns and challenges and underscores the importance of a place-based approach to promote more balanced and inclusive regional development in Peru.
Regional Development Policy in Peru
Abstract
Peru’s economic performance of recent years has been among the strongest in Latin America. Solid macroeconomic institutions, including fiscal rules, an independent Central Bank and strong financial regulation, have fueled high economic growth, ensured macroeconomic stability, and substantially reduced poverty over the past two decades (OECD, 2023[1]). Peru enacted its Law of Bases for Decentralisation in 2002, establishing the framework for political, administrative, and to a lesser extent, fiscal decentralisation. This effort was supported by a political consensus (Acuerdo Nacional), among all political and societal stakeholders, which set forth a series of state policies. Among these, the 8th State Policy commits Peruvian decision makers to pursue “political, economic, and administrative decentralisation to promote the integral, harmonious, and sustained development of Peru” (Acuerdo Nacional, 2002[2]).
Peru is a semi-presidential representative democratic republic. It is a unitary country with two tiers of subnational government:
A regional tier, with 24 departments (departamentos) set as regional governments, as well as the Constitutional Province of Callao, surrounding the capital city of Lima, which has the status of a department. A referendum on mergers took place in 2005, which led to the rejection of the proposal (the programmed 2009 and 2013 referenda were postponed indefinitely). Departments' political leadership is held by Regional Governors (until 2015 known as Regional Presidents), who are elected every four years with no option for re-election. Additionally, each department has a Regional Council elected simultaneously with the Regional Governor through a proportional electoral system (República del Perú, 2002[3]). Regional co-ordination councils (Consejos de Coordinación Regional) are consultative entities composed of elected officials (60% of the council) and civil society members (40%), with a mission to co-ordinate and advise the Regional Governor on a broad range of issues, including the budget.
A municipal tier, comprising two sub-levels: 195 provincial municipalities (excluding the Constitutional Province of Callao, as mentioned above) at the upper level and 1 695 districts municipalities at the lower level. These two municipal levels are independent (Ley Orgánica de Municipalidades). However, provincial municipalities have a co-ordination role across district municipalities within the province. The municipal administration is executed by the municipal councils and the mayor’s office, which are the governing bodies of the municipality, and by the corresponding administrative bodies. The municipal council, made up of the mayor and the councillors (regidores), exercises a normative function (approve, reform, or reject norms). The mayor exercises the executive function. The mayor and councilors are elected for a period of four years, according to the same electoral system as above-mentioned for regions and may be re-elected for a subsequent period. The Metropolitan Municipality of Lima (MML), with the status of provincial municipality, has been transferred additional powers and functions close to those of regional governments since 2011 under a special regime. The MML exercises and assumes regional functions, which implies that the legislation for the regional governments is also applicable to the MML.
Municipalities in Peru are large by international comparison: nearly 16 000 inhabitants vs. 9 700 inhabitants in the OECD on average. There is a huge disparity in the distribution of the population between Lima and the rest of the country. Around 30% of the population (9.67 million inhabitants) live in the MML and more than 70% of the municipalities have less than 10 000 inhabitants. The cities of Peru, according to the National Urban Development Plan of the Ministry of Housing, are classified as minor, intermediate and major cities and their population ranges between 2001 and 500 000 inhabitants. To be considered a metropolis, its population must comprise more than 500 001 inhabitants. By 2021, 27 cities had more than 100 000 inhabitants, concentrating 60% of the population, and 10 cities were considered metropoles (Lima, Callao, Arequipa, Trujillo, Chiclayo, Piura, Huancayo, Cusco, Iquitos and Chimbote), concentrating 51% of the population.
Between 2000 and 2023, GDP of Peru grew by 4.1% per year on average, the highest among its Latin American peers (Costa Rica 3.9%, Colombia 3.6%, Chile 3%). GDP is expected to pick up to 2.3%, and 2.8% in 2025, supported by more favourable financial conditions and reduced inflation that will bolster domestic demand (OECD, 2023[1]). Peru has been able to mitigate the economic and social impact of major shocks like the COVID19-Pandemic comparatively well. However against the backdrop of lower global growth, high inflation, slowing productivity growth and political uncertainty in Peru, the economy has slowed and convergence with OECD income levels has stalled.
Peru’s economy has very high levels of informality. In 2023, 71% of Peru's workforce was engaged in informal employment, with large disparities among departments (ranging from 89% in Puno to 57% in Lima and the Province Constitutional of Callao1). This is significantly high compared to other OECD countries, particularly in Latin America (56% in Mexico and Colombia, 37% in Costa Rica and 27% in Chile).
Economic regional disparities in Peru are driven by significant differences in GDP per capita between the coastal, highland, and Amazonian regions. In 2022, Moquegua, the richest (coastal) region with just 0.6% of the population, had a GDP per capita almost seven times greater than the region of San Martín (amazonian), the poorest region in the country (Figure 1.1). Peru also shows a significant gap between the top 20% and bottom 20% of regions in GDP per capita, with a ratio exceeding 2.5 – one of the largest compared to other OECD Members and accession candidate countries, though this disparity has been narrowing since 2007 (Figure 1.2).
Overall, coastal regions dominate in terms of economic output and development, while rural and highland areas, such as the Andes and parts of the Amazon, face significant poverty and underdevelopment, expressed in large gaps in access to education, healthcare, and employment opportunities, contributing to pronounced regional inequalities.
GDP per capita in current USD, and percentage of national population
Note: Countries are ranked by decreasing order of regional disparities. 2022 or latest available year.
Source: OECD Regions, cities and local areas database, http://oe.cd/geostats.
Ratio of the GDP per capita in the 20% richest regions over the 20% poorest regions
Note: Top and bottom 20% regions are those with the highest /lowest GDP per capita until the equivalent of 20% of the national population is reached (including a fraction of the region that contains the 20% threshold). GDP per capita measured in constant prices using national deflators. 2000-2022, or first and latest available year, for Peru 2007-2022.
Source: OECD Regions, cities and local areas database, http://oe.cd/geostats
Peru experienced significant population growth of 25% between 2003 and 2023, nearly double the OECD average of 13%. This rapid growth has led to unplanned urbanisation and urban sprawl, resulting in challenges related to housing, public services, and land use management. The growth is particularly notable in the Madre de Dios department, which saw its population increase by more than 80% during this period. Conversely, the population in Huancavelica declined by 25%, highlighting Peru as having the greatest regional disparity in population growth over this time frame as compared to OECD Members (Figure 1.3).
Source: OECD Regions, cities and local areas database, http://oe.cd/geostats.
Health system capacity, including doctors and hospital beds density, is key to managing sanitary crises such as the COVID-19 pandemic (which severely affected Peru on a global scale)2, and to improving health outcomes in regions (OECD, 2022[4]). For Peru, the Arequipa and Lima Departments, which are the regions with the highest doctors density, have around 3 doctors per 1 000 inhabitants − similar to the average across OECD regions −, while the remaining Peruvian departments have significantly lower densities (Figure 1.4). This uneven distribution highlights the disparities in healthcare capacity across the country, posing challenges for equitable healthcare delivery.
Note: 2022 or latest available year. Peru: 2012 data.
Source: OECD Regions, cities and local areas database, http://oe.cd/geostats.
References
[2] Acuerdo Nacional (2002), 8th State Policy: Political, economic and administrative decentralisation to promote the integral, harmonious and sustained development of Peru, https://acuerdonacional.pe/politicas-de-estado-del-acuerdo-nacional/definicion/ (accessed on 15 October 2024).
[1] OECD (2023), OECD Economic Surveys: Peru 2023, OECD Publishing, Paris, https://doi.org/10.1787/081e0906-en.
[4] OECD (2022), OECD Regions and Cities at a Glance 2022, OECD Publishing, Paris, https://doi.org/10.1787/14108660-en.
[3] República del Perú (2002), Ley de Elecciones Regionales N.° 27683, https://www.gob.pe/institucion/mef/normas-legales/229439-27683 (accessed on 22 October 2024).
← 1. Source: INEI - tasa de empleo informal, según ámbito geográfico (link to xls).
← 2. According to the World Health Organization (WHO), Peru experienced significant excess mortality during the COVID-19 pandemic. By the end of 2021, Peru had one of the highest excess mortality rates globally, with over 133,000 excess deaths in 2020 and more than 155,000 in 2021 (WHO - https://hia.paho.org/en/countries-2022/peru-country-profile).