When international news is not dominated by civil wars, natural disasters and seemingly intractable financial and economic travails, the offsetting bright spot is usually the sustained economic prosperity of Brazil, Russia, India and China, commonly known as the BRIC countries.
There are, however, a small crop of up-and-coming countries whose success stories remain largely unheralded. Among them are Rwanda and Peru. Against heavy odds and tragic histories, both countries are making positive economic strides — although socially and especially politically both countries have much work to do.
To be sure, daunting challenges remain. And it may be hard to reproduce the positive results on display here. But there are nonetheless lessons that many nations and peoples can learn from the hopeful signs exhibited by these two countries.
Heavy Odds No Deterrence for Rwanda
Rwanda, about the physical size of Maryland, is a landlocked, densely populated country in east-central Africa with 11 million people and a horrifying modern history. So much so that Rwanda would scarcely be familiar to most Americans if it had not been the scene of mass killings in 1994. Estimates are as high as 1 million Tutsis killed over a four-month period in the civil war that raged between that tribe and the rival Hutus.
Since then, much has changed for the better. George Ayittey, a former American University professor, lauds President Paul Kagame as “a true liberator who saved the Tutsis from complete extermination” and oversaw a reconciliation process. But Ayittey remains harshly critical of Kagame’s dictatorial methods. After 16 years in power, Kagame, who won a final seven-year term in a suspicious election victory, suppresses dissent while his political party has consolidated power over the state apparatus that dominates “security forces, the civil service and the judiciary,” Ayittey notes.
But Callisto Madavo, a visiting professor at Georgetown University’s School of Foreign Service and a former World Bank vice president for Africa, strikes a somewhat more measured tone, saying only: “Democracy is developing much more slowly than the economic side.”
And it is in the economic sphere that Rwanda is winning kudos. According to a September 2011 report by David Nangle and his team of researchers at Renaissance Capital, a Moscow-based investment bank, Rwanda’s economy has expanded by an average annual growth rate of roughly 8 percent since 2000, outperforming Sub-Sahara Africa’s average growth performance. With a gross domestic product of $5.6 billion, Rwanda’s economy has tripled in size since 2000.
While roughly 85 percent to 90 percent of the population is involved in the agricultural sector, “almost half of Rwanda’s GDP is generated in the service sector,” the Renaissance analyst’s report notes. “Services dominance in the economy corresponds with the government’s strategy to position Rwanda as a regional trading and services hub.”
The country’s leadership has taken pains to make Rwanda hospitable to business — so much so that it recently ranked first in the World Bank’s Doing Business survey in 2010. “There’s a lot happening on the economic side that’s exciting,” says Georgetown’s Madavo.
“Rwanda,” he adds, “is attracting foreign investment thanks to things like improvements in property rights, contract enforcement, tax administration, bankruptcy laws and cutting red tape on building permits and business licenses. It’s hard for businesses to make money when there are bureaucrats saying, ‘you can’t do this’ or ‘you can’t do that.’ ”
Josh Ruxin, a public health expert, entrepreneur and consultant to the Rwandan government as head of On the Frontier Group, enumerates many of the advancements he’s seen in the 12 years he’s lived there. Every village now has a public health clinic and the mortality rate for children under five years old has fallen to less than one in 10, down from one in five in the late 1990s.
Roads that were rutted and impassable just five years ago have been transformed into modern highways, enabling Rwanda to connect to its neighboring countries and beyond.
More impressive, Ruxin says, is that with help from a Korean telecom company, Rwanda now boasts universal wireless Internet service. In a country where, according to Rennaisance, 57 percent of the population still lives in poverty and 40 percent of the government’s budget depends on external aid from donor countries and organizations, its WiFi connectedness is equal to or better than most advanced countries.
The production of coffee, an important agricultural export crop and major source of wealth, has been getting a boost as bean-washing plants and other processing operations are raising the quality of exports. Rwanda-grown coffee beans are making their way into Costco stores in the U.S. Moreover, Starbucks has gotten involved in supporting Rwanda’s coffee farmers — the Seattle-based company’s Blue Bourbon roast has been hailed in the press as an example of how business can engage in fair trade and operate with a social mission.
Rwanda’s cooperative enterprises have been winning attention from nonprofits in the U.S. and elsewhere and have gotten academic notice. Harvard Business School Prof. Kathleen McGinn wrote a November 2010 report with research associate Rachel Gordon on the Indego Africa Project. A Texas-based nonprofit, the project promotes the growth and eventual independence of some 90 women artisans making consumer goods such as handmade woven bracelets and knitted scarves for Ralph Lauren.
The case study reports measurable progress after two years in the women’s standard of living. A 2009 survey found a 96 percent increase in cooperative members eating two meals a day and a 336 percent increase among those earning more than a dollar a day. But like the country, the co-op has a long way to go. Ninety-two percent of the women “considered their income inadequate or very inadequate.”
Corruption has also lessened. In Transparency International’s Corruption Perception Index, which surveys the prevalence of bribery, embezzlement of public funds and similar nefarious activities for 183 countries, Rwanda ranked No. 49 in 2011. That compares with a TI ranking of No. 121 in 2006, leaping ahead of more than 70 countries in the past five years.
Is Peru’s Economy Ripe for Growth?
Peru is a staggeringly beautiful country and increasingly popular with tourists as its reputation for civil unrest and domestic strife subsides. The North Andean country of Peru encompasses 496,224 square miles — roughly twice the size of Texas. About a third of the country’s 29 million people live near the coast, within 300 miles of Lima. The rest of the population resides in the more remote highland and jungle areas.
About 2 million visitors a year arrive for the breathtaking mountain vistas, Incan history, jungle safaris, beaches and cuisine. That’s more than double the number of tourists of the late 1990s, reports Gonzalo Alcalde, Ph.D., an associate researcher at Foro Nacional Internacional (FNL), a Peruvian think tank.
Along with tourism, Peru’s economy is booming thanks largely to high commodity prices for the country’s rich dowry of natural resources, including gold, silver and copper.
Its growth rate — 8 percent in 2010 and a projected 6.7 percent for 2011, according to estimates by J.P. Morgan Chase & Co. — is among the highest in South America. Investment from countries like China and Brazil is fueling expansion in such industries as mining and metals extraction, fishing, natural gas production and hydroelectric-power. Agriculture exports are significant too — the asparagus at Whole Foods this winter are most likely Peruvian-grown.
One caveat: Peru’s prosperity is largely confined to Lima and environs, while the Andes and Amazon regions are not sharing in the bounty.
The outsiders are increasingly alienated, notes a February 2011 report issued by the U.S. Agency for International Development: “The absence of government (in the hinterlands) has opened space for narcotics trafficking, illegal logging and mining, and terrorist activities, and has left many rural citizens feeling excluded from government and unsupportive of democratic institutions.”
Yet the populated centers of Peru are basking in economic sunshine as the economy not only canters along but inflation — running at 4.6 percent annually in November — remains largely under control. Because of rising food prices, that’s an increase over the 3 percent inflation rate in 2010. Thus, while inflation is certainly a concern, consider that Peru’s inflation rate was a heart-stopping 7,600 percent in 1990, according to Henry Dietz, an expert on Peru at the University of Texas.
The challenge for Peru now is to expand prosperity by providing citizens with greater opportunity for education and employment. The country, experts say, must also reverse years of environmental degradation from extractive industries, improve security, reduce violence arising from social conflicts and battle corruption. Currently Peru is sitting at No. 80 on TI’s Corruption Perception Index and its rankings have been worsening; in 2007, it was at No. 72.
Facing these daunting tasks is newly minted President Ollanta Humala, a former military officer who had led the uprising against former President Alberto Fujimori in 2000 (who fled and returned only to be jailed) and was elected over Fujimori’s niece last summer. It was feared by the business community that Humala would be a wild-eyed leftist in the mold of Hugo Chavez of Venezuela.
But so far he’s shown himself to be “politically centrist” and is enjoying something of a honeymoon with a 55 percent approval rating in December, notes Dietz. “His motto is ‘growth with inclusion,’ ” says Dietz. “But he wants to keep growth going. So far there’s no sign that he wants to upset the apple cart.”
Paul Sweeney is an Austin, Texas-based freelancer who writes frequently for Financial Executive on finance, business and governance.
This article first appeared in Financial Executive magazine.