Archive for the ‘Winans, Emily’ Category

By Emily Winans, MBA Candidate, 2012

Each day we spend on the road, we have the opportunity to experience the dramatically different worlds that exist in Peru. At times, I find myself needing to adjust back to the surroundings of the neighborhood in which I live at the end of the day.

The majority of the SALTA Interns live in Miraflores, a city along the coast that offers a variety of luxuries and pleasant ways to spend free time. Perfectly landscaped parks overlooking the water are frequented by families and couples who like to stroll along the path and take in the view. There are endless opportunities to enjoy the Peru’s rich culinary arts with views of the ocean or surrounded by a pleasantly decorated atmosphere. We live near a grocery store called Vivanda that is more expensive than a street market, but is clean, has a wide selection of products, and an interior that reminds me of AJ’s Fine Foods in Arizona.

By comparison, the areas where we work have more trash on the ground, poorer infrastructure, and have a more disorganized feeling about them. Some areas don’t even have addresses. The majority of the homes have water and electricity, but not without an occasional break in service. Some homes further out into the outskirts of Lima have outhouses. In general, the homes have a dark drafty feeling to them. Homes are made of brick or wood and during the winter months tend to be very cold. Some homes do not have roofs or are not completely enclosed.

The Gini coefficient is a measurement of the income inequality of a country’s population. A high number indicates that a larger portion of the income is being taken by a small group. A Gini coeficient over 50 indicates a serious problem with inequality. Peru has a Gini Coefficient of 52. By comparison, the Gini coefficient of Nordic countries is around 25 or 26 and of the United States is 41. According to the World Bank statistics, 34.8% of Peru’s population lives in poverty. We experience what life is like for the majority of Lima’s residents when we work in districts like San Juan de Lurigancho which has a population of 591,213 or San Martin de Porres with a population of 385,759.  A smaller portion of the population, 88,344, lives in Miraflores.

According to “The Puzzle of Latin America Economic Development,” inequality in Latin America began with economies based on commodities such as sugar and policy making that favored the elite over the poor. The book also states that there is 15% excess inequality in Latin America as compared to the rest of the world. The high return generated from scarce limited capital is the source for 1% of the 15%. The fortunate owners of the capital collect the 1% premium. Another 5% can be attributed to the unequal distribution of natural resources. The majority of the excess inequality is the result of the slow growth in numbers of years of education. In Latin America, it is very difficult to move up in economic status. From my experience in Peru, it appears that a major source of the inequality is education. Lower income families cannot afford to pay tuition for a private school for their children. As a result, the children receive a poor education that does not prepare them to compete in the job market with people who have been educated in private schools.

The transition at the end of the day can sometimes be a bit shocking. After visiting women who live in neighborhoods with dirt roads and who warn me of the dangers of the area, I go for a jog in a beautiful coastal park. In the park, I see parents strolling with a nanny dressed in white behind them pushing their kids in a stroller and holding a leash attached to a fluffy dog in a sweater. At times, it feels like a nice escape from the chaotic conditions we experience during the day; however, I always reflect on the women I work with who are fighting the poverty trap every day. When do they feel any kind of an escape?

By Emily Winans

Juntas are an informal way for people to get “large” sums of money in Peru.  Several of the entrepreneurs we work with organize juntas and many others participate in them.  For some, it seems to be a way to save money when they do not have a lot of willpower to do it on their own.  For others, it is essentially a loan that is paid back without interest.  The basic concept of a junta is that you pay a certain quantity daily, weekly, or monthly.  When it is your turn, you get the entire amount invested.  Everyone puts in the same amount. 

There are three kinds of juntas.  The first kind is similar to a lottery.  Let’s say the junta requires a weekly payment of 100 Soles (the local currency) for 10 weeks.    Over a period of 10 weeks your contribution will be 1000 Soles.  Each week everyone in the junta gets together for a drawing.  The person who is selected at random, collects their 1000 Soles that week.  If it is the first week, the person will continue to pay the 100 Soles per week for the following 9 weeks.  For that person the junta acts more like a loan.

There is also a fixed number system.  Each person in the junta is given a number by the person who organizes it.  The organizer, of course, gets number one.  If it is, for example, a daily junta of one Sol for 30 days, each person will collect the thirty Soles in number order.  If your friend is the organizer, you can probably get one of the lower numbers.  You can swap numbers with someone for the right price if you need the cash sooner than someone else.

 The third type of junta is primarily based on need.  Each week, people in the junta write down the percentage loss they are willing to take on the total amount based on their current need for cash.  The person who notes the largest discount takes the cash.

 Juntas are even used to purchase vehicles!  The Association of Professional Taxi Drivers organizes a junta that lasts for three years.  One-hundred participants enter the junta with a $25 sign-up fee and $45 per week.  The organizer is an individual with access to a line of credit or savings that can be used to purchase vehicles.  In the first week, the organizer will earn $7,000, which is combined with the individual’s line of credit or personal savings to purchase five vehicles.  During the first week, the five vehicles are given out through a lottery system.  Once a person has a vehicle, they must pay $85 per week instead of $45.  The taxi drivers benefit from the junta because the cost to rent a car is so high.  Taxi drivers who do not own their own vehicle pay about $120 per week to rent.  It is somewhat similar to a rent to own payment plan. 

 The list goes on in terms of variations of juntas.  They are commonly used by entrepreneurs with businesses of all sizes to access capital in Peru.