Peru

This Biodiversity Expenditure Review analyzes public and private expenditures affecting biodiversity across three levels of government (national, regional, and municipal) and the private sector over the 2010-2014 timeframe. During this period, a total of USD $1,378 million was spent on projects and activities with primary objectives related to biodiversity conservation – with an average of USD $ 276 million per year. Of this expenditure, the average annual public spending was USD $199 million (72% of the total) – with 70% of that funding being used at the national government level, 14% at the regional government level, and 16% at the municipal government level. This public spending averaged 0.11% of GDP and 0.52% of the total public budget and 0.63% of total public expenditures. Upon considering projections from the Ministry of Economy and Finance (MEF), an annual increase in public spending of 2% is expected.

A closer analysis considered to what extent spending was directly aligned with the three principal objectives of the Convention on Biological Diversity (CBD): 1) conservation of biodiversity; 2) sustainable use of biodiversity; 3) fair and equitable sharing of the benefits arising from the use of genetic resources. Using these parameters, results indicated that 55% of the total public spending was well aligned with these objectives. The national government was responsible for 48% of this spending, while regional governments and municipal governments accounted for 14% and 38%, respectively. Notably, a trend of increased local government spending on biodiversity-related efforts was observed – and in fact nearly doubled from 2010 (11%) to 2014 (20%). While this coincided with a decrease in regional spending, this is in many ways a promising trend in terms of decentralized spending.

Further investigation shows that the environmental sector (including the Ministry of the Environment and the National Service of Natural Protected Areas) represents less than 1% of the national government’s budget and spending. Agriculture, Tourism and Foreign Trade, and Production (including fisheries) sectors of the government represent the largest chunks of spending geared toward conservation and the sustainable use of biodiversity – as these sectors represent just over 6% of the national budget and 5.4% of the national spending. It is worth noting here that the budget assigned to the Agriculture sector is four times higher than that assigned to the Environmental sector.

Estimations of community and family farm level efforts show that their traditional practices contribute USD $55 million annually to the conservation of potato species.

In order to analyze options to optimize and expand investment in biodiversity management, interviews with key stakeholders in both public and private sectors were carried out. This investigation identified 41 mechanisms that allow (or could allow) for the mobilization of funds to help cover the finance gap in order to effectively achieve the desired results of Peru’s Biodiversity Strategy and Action Plan. Of these, 9 were selected as having the largest potential. These included: 1) public investment though ¨SNIP Verde¨ (the biodiversity and ecosystem-focused investments of the National System of Public Investment); 2) public investment through the Budgetary Support Modality; 3) grant competitions; 4) public works tax deductions; 5) The Biodiversity and Business Initative (ByE); 6) the Green Protocol for the Peruvian Financial System; 7) Payment for Ecosystem Services mechanisms (MRSE); 8) environmental compensation (“naturaleza por naturaleza”); and 9) investment funds through Forest Plantation. 

Ultimately, findings suggested that the largest tangible benefits for biodiversity could be made by strengthening the ¨SNIP Verde¨ and Green Protocol for the Peruvian Financial System mechanisms. In terms of the ¨SNIP Verde,¨ drafting guiding methodologies, building capacity, and technical assistance will all be key moving forward. Public works tax deductions can also play an important role in environmental and biodiversity projects. In terms of the Green Protocol for the Peruvian Financial System, there exists a high potential for encouraging private sector engagement. A third area of high potential that was determined lies in public investment through the Budgetary Support Modality. Lessons learned can be gained from past experiences and efforts can be made to align future proposals with biodiversity considerations.

In order for these financial mechanisms to work, strides should be made to ensure the appropriate conditions for their implementation. These include strengthening intuitions, aligning interests, and working to make biodiversity investment and returns more tangibly understandable. It is also important to note that climate change funding is readily available – and given their complimentary interests, biodiversity initiatives might benefit from clearly articulating how they align with climate change issues in order to obtain funding and drive progress. 

Informally, the Vice Minister of Strategic Development and Natural Resources articulated the following four priorities for Peru: 1) greening the agriculture value chain, 2) tourism and protected areas, 3) private sector engagement (including public works tax deductions & public-private partnerships), and 4) the work of the new Council of Ministers and their focus on water related issues. Financing efforts geared toward biodiversity and conservation should work to stay up-to-date on national priorities and work to efficiently align efforts where possible.