In 2005, Mercedes Aráoz looked closely at Peru's ability to produce goods and services that can compete in the global market. A researcher with the Universidad del Pacífico, in Lima, Aráoz proposed a series of policy changes to improve the country's competitiveness. These changes, she understood, would create growth opportunities for small and medium enterprises and new jobs.
Hers was one of 10 studies commissioned during the country's 2006 election campaign by the Economic and Social Research Consortium (CIES), and supported by IDRC. Each study flagged key issues and recommendations to foster meaningful campaign debates and influence political party platforms.
Not only did Aráoz's research help candidates define their position on competitiveness, it also became a blueprint for her own political path. As Minister of Foreign Trade and Tourism from 2006 to 2009 and Minister of Finance and the Economy since December 2009, she has implemented many of the measures she once recommended.
Since becoming a policymaker Aráoz has appreciated the research-rich advice that CIES continues to offer the government.
IDRC senior writer Louise Guenette interviewed Mercedes Aráoz in May 2010 about her research and policy-making. Here is an abridged version of their conversation.
IDRC — Why were the competitiveness reforms you recommended necessary?
MA — There was a great need to improve our competitive position, to allow us access to international markets. We worked hard on the issue of competitiveness, looking particularly at systemic matters such as infrastructure, a solid base of human capital, ease of doing business, industry clusters, and the environmental component.
Now, this was debated and used in the election campaigns. The material allowed many political parties to create a space in which to reflect on how to improve the country's overall competitiveness.
IDRC — Could you give me an example of reforms you introduced as Minister of Foreign Trade and Tourism to improve competitiveness?
MA — The most important is having brought a significant number of trade agreements to fruition [including with the United States, Canada, and the European Union]. Secondly, we have begun to make a concerted effort to reduce bureaucratic barriers. The TUPA [universal texts for administrative procedures] — for municipal licenses or operating permits, for example — and help to reduce costs. They make it possible for small enterprises to register with authorities and thus have access to the market.
Some application processes took from 45 days to 3 months; these are now done within 72 hours. We accept sworn statements instead of asking for so many documents. Moreover, we carry out ex-post reviews. We process all tax payments, including payroll taxes, electronically.
In 2008, a special new law was enacted for small and micro-enterprises dealing precisely with reducing their tax, employment, and processing costs.
Minister Aráoz in Peru's National Congress. Photo: MEF-Perú
IDRC — Do you think a change has occurred at the small business and self-employed level?
MA — Let's just say that it has begun, but I certainly believe that small businesses are starting to have opportunities in international markets. As well, training is being offered to companies, for example, so they can become incorporated and have access to markets, to know where credit can be obtained.
In order to prevent the economic crisis from having an impact on small and micro-enterprises, the government established a plan to purchase from micro-enterprises. The "Compras a mi Perú" or "Buy Peruvian" program was very successful. Over 3,500 companies benefited, and those companies became incorporated. This led to over 45,000 direct and indirect jobs.
IDRC — As Minister, does the existence of CIES now help you make decisions?
MA — Yes, so much so that CIES has set up an advisory board made up of ministers. We attend periodic meetings in order to recommend research areas that are important for decision-making — such as public infrastructure, the growth of medium-sized cities, and waste in social spending.
CIES has been making concrete proposals in terms of how to focus on social spending. Negative experience has taught us how to prevent new products, new social support programs, from being wasted. For example, the Comprehensive Nutrition Program, where we brought 13 programs from different ministries together in order to improve child nutrition, is governed by a results-based budget.
CIES has contributed to ensuring that research is focused on public policy and helps those responsible for public policy make better decisions. It has expanded throughout the country, so that today the research being done contributes to social and economic development in the regions as well.
IDRC — Is going into government the best way to have an effect on policy?
MA — Absolutely. I am not the only example of this. Many CIES researchers have made a direct contribution to politics and public governance. Researchers who play a role as civil servants at a certain point and make important contributions come and go. It's why I think there is this continuous feedback. Support like that is so important.