The Nature and Structure of Peru Public Sector

Peru is a democratic, social, independent and sovereign republic. Its government is unitary, representative and decentralised. It is organised under the principle of separation of powers; executive, legislative and judicial branches. The president, elected for a five-year period, is head of the executive branch. The president designates the president of the Council of Ministers and, with his advice, the rest of the cabinet. The legislative branch is a unicameral congress with 120 members. The judiciary is headed by the Supreme Court, with 18 members who elect from among themselves its president for a two-year period. There is also a seven-member Constitutional Tribunal elected by congress. The central government is comprised of ministries and autonomous public institutions. The regional governments have inhered functions and functions transferred by the central government. The local governments include provincial and district municipalities. Local governments have political, economic and administrative autonomy in matters of their competence like the organisation of urban/rural development of their circumscriptions, urbanism, local infrastructure, activities related to education, health, culture, environment, natural resources, transport, etc. Size of the Public Sector in Peru, 2006, as a % of Nominal GDP and Full-Time Equivalent (FTE) Employees per 1,000 Population Indicator Central Government Local Government Total Government % of nominal GDP 14.1% 2.6% 16.7% FTE per 1000 population 15 20 35 Source: Central Bank of Peru, Ministry of Economy and Finance of Peru, Survey of Public Employees

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Developments Supporting the Principles of Good Governance

During the 1990s Peru carried out a severe stabilisation program, in conjunction with a series of market-oriented structural reforms, which restored macroeconomic stability and helped return Peru to the path of economic growth. Nevertheless, in order to combat poverty and socio-economic inequality, Peru needs to improve its capacity to provide public services to the population in general and the poor in particular, in an efficient and sustainable manner.

In this respect, Peru has initiated a process of government reform, with the objective of becoming an efficient, flexible, inclusive and articulated state that provides adequate services to its citizens. This reform is focused in three main areas:

(1) The simplification of administrative procedures, which aims to improve the quality of services to citizens as well as reduce transaction costs.

(2) The reorientation of the functioning of the state to improve “the rules of the game.”

(3) The improvement of the structure of the state to create modern and efficient entities with clear rules on organisation and responsibilities. This includes the decentralisation and reorganisation of public entities and social programs.

1. Support for the rule of law

The Peruvian government is committed to adopt policies that guarantee the respect to the fundamental rights established by the Constitution and relevant international agreements, ensuring that proper punishment is applied to those who violate them.

For this purpose, the government is working to strengthen the rule of law and to provide universal access to justice, especially for people with scarce resources

Additionally, Peru is continuously seeking to promote transparency in the designation of the judicial authorities, as well as to continually evaluate and train these authorities. Finally, the Peruvian government, in coordination with the civil society, is striving to eradicate corruption and to establish surveillance mechanisms to ensure the proper administration of justice.

2. Transparency

The Peruvian government aims to become a transparent state, one which provides public access to information on its activities and decision-making processes. Success in this regard will help improve the performance of public affairs, promote citizen surveillance of its administration and strengthen the National System of Control.

In this respect, in 2002 Peru enacted the Transparency and Access to Information Law. This law has the purpose of making available more state information through Transparency Portals of each public institution on the internet. Moreover, this law provides citizens free access to information through a simple application.

Regarding transparency measures related to public finances, since 2001 the Ministry of Economy and Finance has published the Fiscal Transparency Bulletin. This monthly document contains information on the evolution of public finances, and other economic indicators (with special attention to the performance of the central government). Additionally, this ministry elaborates the Multi-annual Macroeconomic Framework, which contains basic information on projections of several macroeconomic variables for a three-year period.

The Multi-Annual Macroeconomic Framework also contains recommendations on policy measures related to macroeconomic stability, institutional consolidation, transparency of public actions, as well as measures related to the promotion of private investment and rationalisation of public spending, that would be needed to meet the annual growth target. Consequently, this publication serves as a guide for economic agents in order to be able to make decisions on consumption, investments and savings in an informed manner.

In order to promote transparency and reduce transaction costs with respect to government procurement, the Peruvian government has established that all public entities at all levels of government, including public enterprises, must use the Electronic Government Procurement System (SEACE - www.seace.gob.pe). Through this system, public institutions publish the entire tendering information (including notices of intended procurement and invitations to tender), tender documentation (including technical specifications and evaluation criteria), awarding of contracts, annual procurement plans, business opportunities and statistic information. This database is Peru: Developments in Public Sector Governance | 105 publicly accessible and provides information about prices and conditions for participation in a tendering procedure, which can be used as a reference for future contracts.

3. Accountability, oversight and control

Peru has a democratic system of accountability which includes elections, an independent judiciary, and a legislative body that supervises the use of power of the government. In addition, actions directed to the enforcement of a transparency policy will help improve accountability and oversight systems.

Peru is beginning to develop and implement a system that allows the central government to supervise the performance of public institutions in conjunction with public spending, called “budget for performance.” Under this system, increases in the allocation of economic resources to a specific sector or institution will be conditional on a prior evaluation of the accomplishment of its objectives, measured in terms of performance indicators. This will promote accountability in the public sector and will help establish a system of performance incentives.

4. Managing for performance

The Peruvian government is beginning to implement a system of results-oriented management in the whole public administration. The system will improve the quality of public spending by
developing a surveillance system for public spending that provides timely and adequate information for decision making on allocation of resources. This will strengthen accountability, provide performance incentives and prevent inefficient utilisation of public resources.

In this regard, the Peruvian government has begun developing new initiatives such as the previously mentioned “budget for performance” system, as well as strategic budget programming, and decentralisation of the National System for Public Investment.

As part of the decentralisation process, the powers and attributions of each public institution should be well defined, avoiding the duplicity of functions. However, in the last 20 years, the number of Decentralised Public Bodies (OPDs) has been rising. Because of this, Peru plans to rationalise its OPDs, thereby more precisely defining the functions of each, increasing their efficiency, eliminating duplications and lowering administrative costs.

5. Responsiveness to stakeholders

The main objective of the Peruvian economic policy is the achievement of sustainable economic growth in conjunction with social inclusion. This implies the extension of the benefits of economic growth to the least favored social sectors.

Therefore, in addition to the goal of attaining macroeconomic stability, the Peruvian government should meet specific social targets that will reduce poverty and improve human capital.

One way to attend to the social requirements of all citizens is through decentralization. This process provides for the progressive transfer of resources and responsibilities from the central government to regional and local ones; and will help increase the participation of the citizens and reduce inequalities outside the capital.

Moreover, the Peruvian government has implemented the “Participative Budget.” This is both a policy and management instrument. It allows regional and local authorities and civil organisations to jointly define how and where to allocate resources. For this, they have to take into account the goals set out in their respective Strategic Development Plan or Institutional Plan.

This process seeks to strengthen governance through the enhanced participation of the public in the management process, the fulfillment of citizens’ tax obligations, respect for the local legal framework; and a coordinated approach that incorporates the public’s opinions and proposals in the decision making of public policies oriented to build democratic institutions and a co-responsible and proactive citizenship.

Finally, Peru has enacted a National System of Public Investment (SNIP). The system should enhance the proper and efficient prioritisation of investment projects in consideration of their social return, and also reflect the commitments assumed by the government and civil society.

6. Ethics, probity, culture and values

In accordance to the Peruvian Constitution, public functionaries are to serve the economy. In this sense, the Peruvian public sector began a modernisation process, which aims to attain higher levels of efficiency in order to give a better service to citizens while optimising public resources. As part of this process, in 2002 Peru enacted the Code of Ethics for the Public Function, which clearly states the ethics, principles, duties and prohibitions of civil servants. Thus, all civil servants should act according to the principles of respect, probity, efficiency, justice and equality. Additionally, in the performance of their functions, civil servants should act with impartiality, transparency, discretion and responsibility. The senior management of each public institution is responsible for carrying out measures that promote the culture of probity, transparency, justice and service to the public. This is achieved through the implementation of appropriate incentive schemes to guide the performance of civil servants.

7. Administrative simplification

The Peruvian state is engaged in the task of simplifying procedures in order to benefit citizens and enterprises by reducing transaction costs, and to create a business climate that promotes
investment and the creation of small and medium enterprises. In this process, the Peruvian government is promoting the use of technology by implementing the e-government. Up to now, there have been some advances in the simplification of municipal procedures, and in matters regarding procedures to obtain licenses for starting a business. This will help to reduce
bureaucratic barriers that the state imposes on business and therefore, will contribute to increase formalization of enterprises. There has also been some progress in the implementation of Single Window Systems80 and the establishment of citizen attention modules.