An Andean woman walks next to Alpacas
A woman of the Quechua community of Lagunillas in Puno, southern Peru, with a herd of alpacas © Juan Carlos Cisneros/AFP/Getty Images

Macaria Tola has sold her trio of suri stud alpacas and she is jubilant. “I got 670 soles ($177) for them — prices are much better now,” she says after wrestling the large, cream-coloured woolly animals into an auction pen for collection by the buyer.

Around the open-air ring, beneath a Peruvian flag, groups of indigenous farmers stand bidding, hats shielding them from the harsh sun. Many are speakers of Quechua, the traditional language of the region before the Spanish conquest.

The nearby town of Santa Lucía is a 19-hour drive, and a world away, from Peru’s capital Lima. Perched at over 4,000m on the dry, barren altiplano, it is a hub for communities scratching a living from subsistence farming in conditions more colonial than 21st century.

The dramatic contrast between life in the bustling, cosmopolitan capital Lima and on the high plateau has long prompted talk of “two Perus”. One is urban, modern, connected and increasingly prosperous; the other is rural, traditional, remote and mired in poverty.

This divide was starkly illustrated in the 2021 presidential election: Pedro Castillo, a smallholder and teacher from a village in the highlands, won a narrow victory with support from Peru’s rural, mainly indigenous poor, concentrated in the highlands and the south. Keiko Fujimori, his conservative opponent, swept Lima and the northern coast.

An alpaca and llama auction near Santa Lucía
Market day: the alpaca and llama auction near Santa Lucia. Many of the indigenous communities in the highlands scratch a living from small-scale farming © FT

“Pedro Castillo won with nearly 90 per cent of the votes in our region,” says Richard Hancco, governor of the southern region of Puno, which includes Santa Lucía. And, as he sits in a square in the centre of Juliaca, a provincial capital in the Puno region, he recalls the anger last year after Castillo’s deputy, Dina Boluarte, accepted the top job in the wake of the president’s impeachment.

“People here see her as a traitor because at first she had said that, if Castillo were to go, she would go with him,” the governor says. “Then, she started going against everything she had said before . . . against a new constitution, against the left.” At least 18 people were killed when security forces fired on protesters, some of them only a few streets away from where he is speaking.

Line chart of Real GDP (1999=100) showing Peru has been one of the best performing Latin American economies this century

In Lima, another view prevails. “Puno is a no-man’s-land, full of contraband, drugs and illegal mining,” says a former cabinet minister. “It could turn into a separatist region, perhaps trying to join Bolivia, which is what [former Bolivian leftist president] Evo Morales wants.”

The government is trying to heal divisions left by the turmoil. Alex Contreras, finance minister, trumpets a new plan to revive the economy, named Con Punche Perú (Peru with a punch). “The new face of poverty in Peru is an urban face, that of women and children,” he says. “There is going to be a bet made on boosting social policies — the president recognises that clearly.”

Peru’s mining industry has already become a lightning rod for social divisions. Residents of poorer regions oppose new projects because they fear environmental damage and doubt they will benefit. So they typically demand that infrastructure improvements are completed before mining projects start.

Mining executives, meanwhile, complain that they hand over tens of millions of dollars in taxes and royalty payments to the state but the government too often fails to deliver the infrastructure and services that local people expect.

“The national health system is a disaster,” says Alfredo Bustamante, president of business lobby group Confiep. “Then, there’s water and sewage services, which are totally state-run. In Puno, 60 per cent of the homes don’t have 24-hour running water and sewage services.”

Some in the government blame backward residents of rural areas. “How can you bring a $2.5bn project to a place where people live in the Middle Ages?” sighs one official in frustration. “All they want to know is, ‘What do I get out of it?’”

Line chart of Peru poverty rate* (% of population) showing The impact of Covid reversed several years of poverty reduction

Devolution of budgets to 25 regional and 196 provincial authorities has made matters worse, critics say, because they are ill-equipped to handle the responsibilities and prone to corruption.

In the first eight months of this year, for example, Peru’s regional and local governments spent only 27 per cent of the budgets assigned to them, according to the IPE, the Peruvian institute of economics. Transparency International rates Peru 101st out of 180 countries in its Corruption Perceptions Index.

But there has been some progress on healing social divisions this century. Peru has seen one of the biggest reductions in poverty and inequality in Latin America over the past two decades, with the proportion in poverty falling from 59 per cent in 2004 to 20 per cent in 2020, according to the World Bank.

Covid-19 hit Peru hard, though, killing a higher proportion of the population than anywhere in the world. Poverty has crept back up again in its wake.

That, together with the shooting of dozens of protesters during the anti-government demonstrations, fuelled a deep sense of indignation in the south, where Dina asesina (Dina the killer) is scrawled on walls. “Dina Boluarte’s government represents an assault on all of Peru,” says Edgar Chura, Aymara leader of the Puno Defence Front protest group. “We have never recognised and will never recognise this government.”

In Lima, the coast and the north, meanwhile, many citizens believe the country is being held back by an ignorant and backward south in thrall to international socialists, such as Bolivia’s Morales or Cuba’s Raúl Castro.

“You have the two Perus and one of them feels ignored and belittled so they identify with Castillo,” says José Ugaz, a human rights lawyer. “There is an impressive quantity of evidence that Castillo came to power to steal in a brazen fashion, to plunder the state, yet his supporters still believe his removal was a coup. They don’t care about the evidence. It’s a kind of blindness.”

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