Economy & Trade, Headlines, Latin America & the Caribbean

CORRUPTION-PERU: Profiting from Misfortune

Ángel Páez

LIMA, Oct 2 2007 (IPS) - Federal, provincial and municipal authorities in Peru benefited from the disaster caused by the Aug. 15 earthquake, lining their pockets with public funds and misusing humanitarian aid sent by foreign and local donors.

Fifteen people are under investigation by anti-corruption prosecutors and judges in connection with an accusation of overpriced food purchases by the Seguro Integral del Salud (SIS), a public health scheme.

The congressional oversight committee agreed to lift banking secrecy for the SIS officials after the local press reported that the day after the earthquake left around 45,000 people homeless in southern Peru, the SIS purchased 219,000 food rations for 34 soles per unit (10.96 dollars) when each unit was really worth 24 soles (7.74 dollars).

The 30 percent surcharge cost the SIS the equivalent of more than 700,000 dollars, which could have been used to buy 64,700 additional rations. Instead, that money went to the business that arranged the purchases with high-level officials of the SIS, a division of the Health Ministry.

The rations were bought from Plamol, a company that sells shoes, not food – an indication that it was selected by a senior SIS or Health Ministry official with ties to one of the firm’s owners.

The SIS not only bought food from Plamol, but also tents and emergency equipment, for a total of 4.5 million dollars. There were signs of overpricing on all of the items.

One of Plamol’s owners is Pedro Molina Gálvez, Prime Minister Jorge del Castillo Gálvez’s nephew.

Molina Gálvez claims that he left the company four years ago and that he only found out that the firm was still operating when the corruption scandal erupted.

Opposition parties, however, have included him on the list of suspects in the case, and have demanded that banking secrecy be waived on his accounts.

The government of Alan García has lashed out at comptroller-general Genaro Matute, complaining that his office’s oversight and accusations delayed the distribution of aid to earthquake victims.

After seeing the corruption and inefficiency that plagued the rescue and reconstruction efforts in the wake of Hurricane Katrina in New Orleans in 2005 and the Indian Ocean tsunami in 2004, Matute decided to send teams of inspectors to southern Peru to make sure the emergency aid reached the people who needed it most.

But on Aug. 23, Prime Minister del Castillo introduced in Congress a draft law that would suspend the preventive oversight activities of the comptroller-general’s office for 60 days, to expedite government purchases and contracts and the distribution of donations.

But as a result of the purchase of overpriced food rations, the congressional oversight committee shelved the draft law on Sept. 25 because it would have created the conditions for further corruption.

The draft law was partly in response to a complaint by Governor Juan Enrique Mendoza of the southern province of Pisco, who said officials and agents from the comptroller-general’s office were keeping food, clothing and medicines from being distributed quickly and efficiently.

But Matute told IPS that “We simple observed what donations were received by the mayor, how they were distributed, and to whom. And we found several cases in which the public prosecutor’s office had to intervene because of suspicion of illegal activities.”

In Pisco and other provinces in the south, earthquake survivors complained to IPS in late August about the way Mendoza and other local and regional officials were handling the emergency aid.

In the case of Mendoza, the comptroller-general’s office found that a significant amount of donations had been transferred from an open-air market to a private company where the governor’s family was offering cafeteria service to the rescue workers.

When Mendoza was questioned about the relocation of the aid supplies, he claimed that the open-air market had been declared uninhabitable by the National Civil Defence Institute (INDECI).

“But we found out from INDECI that that was not true, and we decided to take a hand in the matter,” said Matute.

Irregularities have also been detected in other aid-related aspects in the areas hit by the quake, which registered seven on the Richter scale.

The head of rescue operations in the disaster zone, General Otto Guibovich, told IPS that the reconstruction work was moving ahead slowly due to a lack of heavy machinery needed to remove the rubble.

“The companies that sent machinery at the start have logically withdrawn their equipment gradually because they have to continue with their own work, which means there is a major shortage of equipment,” said Guibovich.

“Unless this problem is resolved, reconstruction is going to take a very long time,” he added.

One of the explanations for the delay is poor administration of public funds.

INDECI transferred the equivalent of 5.8 million dollars to the regional government of Ica, where Pisco and Chincha – the hardest-hit provinces – are located. Of that total, 4.5 million dollars were earmarked for hiring machinery.

But on the argument that speed was needed because of the emergency situation, no-bid contracts for reconstruction work were awarded to companies linked to regional authorities.

An Ica government official who was laid off after she criticised a no-bid contract reported that high-level regional officials pressured her to favour a specific firm.

“When the rules are ignored for any reason, things like this always happen,” Matute remarked.

“In the case of the Ica regional government, a company that did not have the machinery to remove rubble was hired, and it had to subcontract the heavy equipment, which drove up the cost of the service,” he said. “Besides, it was hired by the hour, when it should have been paid, in accordance with the simplest logic, for the amount of rubble removed.”

As complaints of irregularities have emerged one after the other, President García said in Pisco on Sept. 28 that the Ica regional government’s contracts “must be reviewed and amended in order to achieve greater efficiency in the rescue and reconstruction work. What makes more sense: to pay per cubic metre of rubble removed, or to pay per hour?”

The office of the comptroller-general has also detected irregularities in INDECI. Tomás Villanueva, the mayor of the Pisco district of Túpac Amaru Inca, complained that he had received packages of blankets from INDECI with labels indicating that they contained 100 blankets, when they actually held only 80 or even less.

Túpac Amaru Inca is largely made up of shantytowns, and local residents in the district suffered major losses.

“INDECI officials refused to give other mayors packages of donated clothing from abroad, claiming it was reserved for other purposes,” said Matute. “There are several cases that are already being investigated by the public prosecutor’s office.”

In the case of the purchases of overpriced food rations, the former head of the SIS, Julio Espinoza (who has since been removed), told the congressional oversight committee that he had reported the purchases to his superior, Health Minister Carlos Vallejos.

But the minister denied any knowledge of the transaction.

Opposition lawmakers announced that they would question Vallejos to determine the extent of his responsibility.

“The officials who committed irregularities are mid-level,” congressman Renzo Reggiardo, a member of the oversight committee, told IPS. “They couldn’t have acted alone, on their own. There must be people higher up who have backed these irregular activities.”

Republish | | Print |