Spending Wisely: Helping Peruvians Manage Resource Wealth

The huge oil and mining revenues produced in Peru over the past seven years have shown the limits of the country’s decentralization. As the national government distributes larger shares of the revenues to producing areas, subnational officials and communities find they lack the capacity to manage the money. As a result, subnational governments cannot effectively spend the funds, or evenly distribute the wealth to rural, relatively poor communities. The exclusion and inequality have fueled conflict in resource-rich regions across the country.

In 2008, the Revenue Watch Institute (RWI)—in collaboration with the Open Society Foundations Local Government and Public Service Reform Initiative (OSF-LGI)—designed a project to address the enormous governance challenges facing these regional and local governments.

RWI and its partners intervened at the regional level in Arequipa and Piura and at the district level in Piura.1 Partners provided technical assistance to improve the governments’ capacity to invest resource revenues and add predictability to the central government transfers they receive. RWI’s work with municipalities in Piura focused on building the capacity of officials to manage revenues effectively and strengthen the multi-stakeholder planning processes already in place. RWI also worked to empower civil society to demand transparency and accountability and advocate for much-needed changes in resource governance at the national level.

The project achieved some clear successes. Thanks to a tool created by RWI and its partners, regional officials can now accurately forecast the revenue transfers from the central government and determine the difference between their needs and expected revenues to better plan how to spend the money. RWI and its partners improved participatory planning processes, strengthened public officials’ ability to manage and spend extractive revenues and helped create better institutional partnerships among groups of municipalities. Partners also achieved important advocacy gains, such as developing and pushing for the first fiscal decentralization proposal recommending how resource revenue will be shared with regions in Peru. The challenge now is to sustain the project’s impacts and not lose momentum when governments change at the national and subnational levels.