Peru Bosques, a $38 million project included in the Peru Trade Promotion Authority that was meant to help the Peruvian government write a new forestry law, has not fared well, according to a 2012 audit by the U.S. Agency for International Development (USAID) inspector general.
At the time of the report, the program was significantly behind schedule—so far behind, in fact, that the audit scolded the contractor for not spending enough money. In the end, this reflected poor management by the implementing firm, Chemonics International, and could result in “many activities [being] poorly implemented…or not implemented at all.” In addition, excessive overhead expenses paid during the delay might not be recouped.
Perhaps most revealing about the audit was the difficulty that the contractor had accomplishing key administrative tasks. According to the report, the “Chemonics [office in Lima] had difficulty…registering as a business, and setting up a bank account.” This shouldn’t be surprising considering Peru ranks poorly in World Bank’s Doing Business Report. This is cognitive dissonance on the part of USAID administrators. Maybe the best application of their resources should be promoting economic and business freedom. This might help them keep their programs on schedule and maybe lead to some economic growth, too.
The study did claim some success for Peru Bosques—a strong environmental law was passed by the Peruvian parliament in 2011. But even this is perfunctory. At the time of the audit, the law had been in effect for only one year, not nearly enough time to see if it was successful. Measuring inputs isn’t the same as measuring impact.
In the future, free trade agreements should focus on promoting free trade. Muddying the waters with aid requirements and regulations only deprives oxygen from the real sources of human progress and clean environments: free markets and economic freedom.