The Inter-American Development Bank (IADB) is to approve a $50 million loan to Peru later this year that that will require municipalities to form public/private partnerships before they can receive funding. This is being done at the same time as responsibilities for infrastructure are being transferred to regional and local governments, following government agreements with the IMF and World Bank.
Critics argue that the dual privatisation-decentralisation runs ahead of the establishment of the capacity of local governments to regulate and could undermine fiscal stability. Because of Peru’s long history of corruption associated with privatisation, the plan is also angering labour unions and consumers’ groups. During the Fujimori administration, stolen public funds including World Bank loans, were charged to the accounts of the municipal water enterprises, rendering many of them bankrupt. This formed the basis for the argument that they need infusions of capital and must be privatised. Seventy-six people were arrested in Peru during a 24-hour strike 14 July against the plans of President Alejandro Toledo, a former World Bank adviser, to privatise the water industry and other sectors.