Peru: Poverty Allieviation

How can hoteliers help to alleviate poverty and exclusion in the countries in which they operate? Elizabeth Mistry takes a look at Peru, one of South America’s fastest growing economies, to see what the hospitality industry is doing to offer new opportunities to the country’s most disadvantaged people

While global poverty is falling, the Poverty in Numbers: The Changing State of Global Poverty 2005 to 2015 report, published by Brookings, reveals that 878 million people, nearly 16% of the total world population, still live in extreme poverty, surviving on less than $1.25 per day. The opportunities for them to improve their circumstances are either unavailable or severely constrained by a range of factors, from political exclusion to geographic isolation.

The hospitality sector has both the capabilities and reasons to help alleviate poverty and create the economic opportunities for the most disadvantaged members of society in which they operate. And rather than resting on its laurels and assuming that local communities will benefit from a “trickle-down” effect—from its contribution to gross national product and the employment it creates—hoteliers are recognising that they can play a much more direct role in poverty reduction.

Take Peru, a country with a growing economy but one still affected by poverty and other social problems. Tourism is now its third largest industry, after mining and fishing and is crucial to the upward growth of Peru’s economy. According to a recent PromPeru presentation given to representatives of international travel media organisations, more than 2.3m people travelled to Peru in 2010, while the World Travel & Tourism Council calculates that the direct contribution of tourism to Peru’s GDP will be 4.3% in 2011 and that the industry will employ 3.1% of the work force.


The 2011 centenary celebrations of the “rediscovery” of the old Inca site of Machu Picchu by US archaeologist Hiram Bingham has certainly helped put the spotlight back on the country, which had suffered badly after torrential rains in early 2010 swept across the country causing devastating floods and destroying local infrastructure.

So bad was the damage that Machu Picchu itself was closed off briefly, with the tourism industry—and by default those who rely on visitors to earn a living, down to the muleteers and handicraft sellers—suffering even greater hardship.

Today, established hotel operators such as Orient-Express, Marriott International, Starwood Hotels & Resorts and Radisson (one of the Carlson brands), and homegrown hotel businesses, such as Aranwa and Libertador, are looking to expand their Peruvian operations. And they’re not only considering the well-established Andean region or the coastal capital, Lima, but also the fast-growing city of Arequipa and north of the country, where the beaches have long-been a secret known only to surfing aficionados.

Poverty and unemployment in a booming economy

The increased activity in the hospitality sector reflects the healthy state of Peru’s economy—investment bank JP Morgan predicts it will have the fastest growing economy in South America in 2012, expanding by 5.5%. Yet against the backdrop of a booming economy, Peru has many social problems.

A 2010 United Nations (UN) Regional Report on Human Development for Latin America and the Caribbean found that extreme poverty in Peru has seen a strong decrease over the past decade. In 2009, 11.5% of Peruvians were living in extreme poverty, compared to 23% in 2002. However, it concluded that inequalities are still prevalent, particularly with regards to infrastructure, gender and ethnicity. It cited that Peru was the third most unequal country in the region for access to electricity, for example.

Findings from other international organisations also present a bleak picture. According to a recent report by Amnesty International, almost one-third of Peru’s population of 30 million lives on less than $5 a day, with the informal economy accounting for almost as many jobs as the formal sector. Meanwhile, a study of maternal mortality in 2008, published last year in medical journal The Lancet, ranked Peru at number 105 out of 181 countries, with 81.3 deaths per 100,000 live births. (The figures in the top two countries, Italy and Sweden, were 3.9 and 4.6 respectively.)
Other findings indicate that indigenous communities—especially those among the Quechua- and Aymara-speaking minorities—which live in extremely remote areas, feel marginalised and ignored by the authorities in Lima and that unemployment, which is currently at 7%, affects young people in particular. According to a recent report in Quarterly Americas, youth unemployment stands at 20% in some areas.

Poverty alleviation in action
Dr Harold Goodwin, Professor of Responsible Tourism Management at Leeds University, UK, argues that there are many ways in which hoteliers can make a difference and expand the economic opportunities of the disadvantaged in the local communities in which they operate: “Hotels can encourage their guests to buy locally produced souvenirs and crafts from centres that work with the young unemployed, the elderly, people with disabilities and the disadvantaged,” he says. “Hotels should also review their supply chain and look for opportunities to purchase from social enterprises, which employ the disadvantaged and give them a chance—or employ them. They should also consider finding a new use for bed linen and other equipment and ensuring that surplus food is distributed through appropriate charities.”

Programmes such as the International Tourism Partnership’s Youth Career Initiative (YCI), which works with the international hotel industry to provide young people with life and vocational skills, are important for giving young people the means to gain employment or to continue their education. In Lima alone, where YCI hopes, subject to funding, to begin operations in 2013, youth unemployment is three times higher than adult unemployment, according to a Millennium Development Goals Achievement Fund report from 2007.

If YCI rolls out in Peru, it may also find a more supportive climate as, five months ago, a new government headed by President Ollanta Humala took office with social inclusion as a cornerstone of his campaign manifesto. The Ministry of Tourism and Foreign Trade has now established a small team tasked to stimulate greater take-up of responsible tourism practices across the industry.

There has been a mixed response to this from accommodation providers. Some say it is too early to tell if this is “just for show” or if there will eventually be a genuine effort to work with the sector to showcase best practice and encourage uptake among providers at all levels. Currently most of the social inclusion projects are spearheaded by a growing number of four- and five-star properties—both Peruvian and foreign-owned.
One of the pioneers of social engagement is Peruvian hotel group Inkaterra. Its CEO, José Koechlin von Stein, told Green Hotelier that social engagement—or “shared values” as he calls it—“is something we have been doing for almost four decades”. Likewise Ricardo Hernandez of the award-winning trekking and lodge operator, Mountain Lodges of Peru, says that his company works in remote areas where the state has little or no presence.

Koechlin, who is also head of the Peruvian Hotel Association (SHP), is perhaps best known for his dedication to environmental stewardship. He has supported the work of conservationists, collaborated with the UK’s Natural History Museum for many years, and is proud of his company’s role in sponsoring major flora and fauna projects in the Amazon basin and preserving some of his country’s unique biodiversity hotspots.

“We do this in conjunction with local people,” Koechlin says. “We do have a moral obligation to improve the lives of the community around us, and we do that by identifying what the problems are in the areas where we work and finding solutions together that are sustainable.”

A prime example is Inkaterra’s current project to build a luxury hotel in Cabo Blanco on the north coast. The community was consulted from the beginning about the challenges they faced, particularly as a result of the dwindling fishing stocks on which the local people have relied.

“We are working to create something that will help our business and the community to grow in the long term,” Koechlin explains. “If we can work with young people, we will be able to draw on them and provide as many local jobs as possible. We also plan to create a conservation area for marlin and tuna, and to build an interpretation centre, which will also provide jobs and be a place where tourists can learn about the area.”

These sentiments are shared by Gabriel Alvarez, deputy general manager of the Aranwa Hotels Resorts and Spas, a company set up by Gabriel’s father, José, a former heart surgeon and entrepreneur, who oversees one of the largest private medical groups in the country. The group, which has four properties and is set to open another in 2013, is aiming to carve out a slice at the luxury end of the market but is also committed to giving something back to the community.

“In our case, we were looking to utilise our expertise in the medical field. There are many areas we could have chosen but we decided to build on our strengths,” explains Gabriel Alvarez. “As my father’s speciality was heart surgery we developed a programme to identify and treat niños azules—children suffering from a specific condition that leaves them with a low oxygen count. It’s something that can be especially dangerous in a high-altitude environment such as Peru. We’ve also concentrated on providing corrective surgery for children affected by cleft-palate syndrome and have carried out more than 600 operations since the company started.”

This is in addition to the building, fitting out and staffing of several rural medical posts in areas where minor ailments can quickly become serious if no nursing of healthcare assistance is available. “We want to work with the next generation, so we need to make sure it is as healthy as possible,” says Alvarez. In each location, “we have worked with local people and sought to make a meaningful contribution. We want to develop critical thinking among our staff and we try to involve them in our social outreach projects as they often have knowledge that can enable us to have a bigger impact.”

Engaging the local community
Involving staff at an early stage can be crucial to their buy-in, says Catherine Lanseros, head of communications for Orient-Express in her native Peru. She is also responsible for overseeing community engagement projects, from offering paid time-off for staff to volunteer at orphanages to providing essential tools to enable rural women to run micro-businesses giving them financial independence—and thus the ability to leave abusive relationships.

Last year, the company supported women in their attempt to diversify into chicken farming. Later, the women themselves, empowered by their successes during the pilot project, asked if they could move back into traditional guinea-pig rearing—the animal is a delicacy in Peru—but learn to do it on a larger scale so they can sell to hotels as well as to the community.

Lanseros was delighted that the relationships she has nurtured have resulted in participants having the confidence to achieve self-determination. “The biggest challenge for us was gaining the trust of the women in the first place, women who were understandably suspicious and unsure of our motives,” she explains. “Now that they know that we see them as partners, that we are looking to develop a sustainable, long-term trading relationship, they are motivated and eager to learn.”


Orient-Express, she explains, likes to work directly with local partners. They are currently supplying a range of items, including textiles, rugs and ceramics made by local artisans, for Palacio Nazarenas, the company’s newest property in Cuzco that is due to open in June 2012.

At the other end of the scale of how the hospitality industry is contributing to poverty-alleviation is an initiative started by UK-based Magda Metwally. She set up the pioneering Robin Hood Project in Máncora, an hour-and-a-half’s drive from Cabo Blanco, after visiting the country as a tourist and recognising its create need for improved education.

With the help of local partners such a Casa de Playa, a small hotel, Metwally is now providing teachers and textbooks for local children who often have a history of abuse or deprivation. Another of her initiatives is a language school where volunteers can teach English while learning Spanish. The school helps finance the numerous projects and only local staff are paid, ensuring that jobs remain in the community.

Metwally agrees that gaining the trust of those in need is a hard task. “People can be very wary. We wanted to start with the kids because they can be the ones who go on and get jobs and make a contribution,” she explains. “But we are looking to partner with more organisations so we can increase the amount we can do.”

Back in Lima, the Radisson San Isidrio is likewise working with younger generations. The hotel raises money for a local orphanage and each year organises a traditional party for the children as part of parent group Carlson’s Ambition 2015 agenda to improve its social impact.

“There are benefits for everybody, whether it’s for the kids—many of whom have been very neglected and who are now thriving and beginning to get good marks—or for the volunteers who work with us and our partner organisations,” insists Metwally. “Some companies simply see [such projects] as having a negative effect on the bottom line, but used correctly they can be a legitimate marketing tool and can attract business. People want to know if a company they are dealing with intends to make a difference to the lives of local people.”

The projects underway in Peru are evidence that the hospitality sectors can create the opportunities to empower local communities and improve their wellbeing. Of course, it also has the potential to play an even bigger role in poverty reduction and the alleviation of other social issues. The key to its future success will be not only to gain trust and engage with local communities but also to monitor the current programmes and identify what has worked and what lessons can be learnt for the future.

No one from Peru's Ministry of Foreign Trade and Tourism was available to respond to this article.

Elizabeth Mistry is a journalist specialising in travel and responsible tourism and contributes to a number of publications including New Statesman, Travel Trade Gazette and The Travel Magazine.

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