THE POLITICAL DEGRADATION OF PERU AND THE ILLEGAL ECONOMY

 

The Political Degradation of Peru and the Illegal Economy

By Silvio Dragunsky

Introduction: the illegal economy and political crisis

The political degradation of Peru is inseparable from the sustained growth of the illegal economy and from the culture it has ultimately imposed.

In Peruvian public debate, a question charged with moral bewilderment is repeatedly asked: how is it possible that Congress keeps getting worse and that the country elects, time and again, improvised presidents? The usual answers point to voter ignorance, flaws in constitutional design, or an alleged ethical decay of politics. This article proposes a different—and less comforting—hypothesis: Peru’s political degradation is inseparable from the sustained growth of the illegal economy and the culture it has come to impose.

Over recent decades, Peru has experienced a persistent deterioration of its political life and, particularly visibly, of the quality of its congresses. Extreme fragmentation, the volatility of parliamentary caucuses, the proliferation of particularistic interests, and the delegitimization of representative institutions are not isolated or purely cultural phenomena. Rather, they constitute the political expression of a country in which large segments of the economy operate outside the law and have ceased to recognize the State as a legitimate arbiter.

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The structural growth of the illegal economy

Illegal gold mining in regions such as Madre de Dios, Puno, or La Libertad; drug trafficking in the VRAEM and other coca-growing areas; and illegal logging in the Amazon are not marginal phenomena. Today they constitute structural components of the country’s real economy.

Since the beginning of the twenty-first century, Peru has seen a significant expansion of various illegal activities linked to the direct exploitation of natural resources. Illegal gold mining in regions such as Madre de Dios, Puno, or La Libertad; drug trafficking in the VRAEM and other coca-growing areas; and illegal logging in the Amazon are not marginal phenomena. Today they constitute structural components of the country’s real economy.

These activities mobilize billions of dollars annually, employ large segments of the population, and articulate local, regional, and international networks. Various estimates place unregistered gold exports at around USD 12 billion per year, while the cocaine economy adds more than USD 2.3 billion. Adding other illegal extractive activities, it is reasonable to assume that the large-scale illegal economy reaches—at a minimum—USD 20 billion annually.

These economies thrive where the State is weak or absent. They operate in hard-to-access territories, with low institutional presence and limited oversight capacity. Their central logic is the immediate appropriation of extraordinary rents, without legal mediation, without tax payments, and without environmental or labor controls. In this sense, the illegal economy is not merely informal: it is openly anti-normative.

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A culture of illegality and the transformation of the relationship with the law

The actors involved in these economies share specific cultural and practical traits. First, a profound contempt for rules and for state authorities, perceived as obstacles to be removed, corrupted, or ignored. Second, an extractive conception of natural resources, understood as available loot rather than as collective heritage subject to regulation. Finally, a particular way of resolving conflicts based on private justice, coercion, or direct violence.

Over time, these practices generate an implicit political culture—a way of understanding power and authority. The law ceases to be a common framework and becomes a negotiable or disposable instrument. Institutions are tolerated only insofar as they do not interfere with business. Where they do interfere, they are captured, weakened, or neutralized. Resources to do so are not lacking.

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The collapse of traditional political parties

A key element explaining how easily these logics penetrate politics is the disappearance—or virtual irrelevance—of traditional political parties. Organizations such as APRA, Acción Popular, or the Christian People’s Party, which for decades articulated interests, trained cadres, and socialized their leaders into a certain institutional culture, have now disappeared from the political scene or survive only marginally.

In their place have emerged what might be called electoral shells: minimal, ephemeral structures created almost exclusively to compete in an election. These vehicles lack consistent ideology, organic life, and internal control mechanisms. They function as personal ventures aimed at maximizing immediate political returns rather than building lasting representation.

This process has been reinforced by presidential experience over the past decades. With the sole exception of Alan García’s second administration, all Peruvian presidents since Alberto Fujimori have been outsiders, detached from consolidated parties and supported by improvised movements. The implicit message has been clear: one does not need a party, a trajectory, or an institutional structure to access power.

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From the illegal economy to informal politics

In a democratic system with frequent elections, illegal economic resources seek protection, influence, and continuity. This translates into campaign financing, logistical support for local and national candidates, and direct pressure on elected authoritiesThe logic of individual entrepreneurship—so close to the informal and illegal economy—thus transfers to the political arena. Party organization ceases to be a space of collective mediation and becomes an instrumental tool, disposable once the electoral objective has been achieved. In this context, politics becomes especially permeable to illegal interests, which find it easier to capture or finance personal projects than to influence parties with identity, discipline, and social roots.

Over the past two decades, the Peruvian Parliament has shown a growing presence of representatives with direct or indirect ties to illegal or informal economies. These are not always criminals in the strict sense, but actors socialized in environments where norms are secondary and direct transactions prevail over institutional rules. This helps explain the proliferation of legislative initiatives aimed at weakening environmental regulations, limiting the State’s sanctioning capacity, or interfering with the judicial system.

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Illegal methods, political practices

Beyond material interests, what transfers into politics are procedures. The logic of the illegal economy is reproduced in political behavior: normative improvisation, contempt for legislative technique, instrumental use of laws to resolve immediate conflicts, and extreme personalization of decision-making.

Congress thus becomes a space of opaque transactions, veiled threats, and ephemeral alliances, closer to an informal market than to a deliberative forum. The resolution of political conflicts follows patterns similar to those of economic illegality: direct confrontation, censure as a political weapon, impeachment as a mechanism of pressure, and systematic delegitimization of adversaries. The result is chronic instability that erodes citizen trust and reinforces the perception that politics is a terrain without clear rules.

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The weakening of the rule of law

The impact of this dynamic on the rule of law is profound. When a significant portion of the economy and political representation operates according to anti-normative logics, the law loses its universal character. It fragments into exceptions, self-interested interpretations, and gray areas. Ordinary citizens perceive that compliance with rules is optional for the powerful and mandatory only for those who lack protection or resources.

This process feeds back into informality. If politics is perceived as corrupt and ineffective, the legitimacy of the State erodes even further, encouraging new actors to operate outside the law. Thus a vicious circle emerges in which illegal economy, institutional degradation, and political decay mutually reinforce one another.

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The paradox of the formal economy

While politics degrades, the formal economy shows indicators of remarkable stability: inflation close to 2% annually, a stable exchange rate—even with appreciation of the sol—sustained growth between 3% and 5%, and a notable increase in corporate profits. In 2025, the Lima Stock Exchange recorded growth of nearly 50%.

This paradox is not accidental. The formal and informal economies coexist without major structural tensions. Both benefit, through different channels, from a weak, fragmented State that is predictably incapable of intervening effectively. The result is a perverse equilibrium in which no actor with real power seems to have incentives to modify the status quo.

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Conclusion: the outsider as product, not anomaly

The predominance of the outsider in Peruvian politics is often explained as a temporary pathology: an error of the electorate or a passing crisis of representation. It is a comfortable explanation—and precisely for that reason, an incorrect one. The outsider is not a deviation from the political order; it is its logical outcome.

In a country where a growing portion of the economy is organized outside the law; where direct appropriation replaces regulation; where conflicts are resolved without judges or mediators; and where parties have been replaced by personal electoral shells, what would be exceptional is not the appearance of outsiders, but the emergence of solid institutional politicians.

As long as politics continues to operate as an extension of informality—improvised, transactional, and personalistic—any attempt at institutional reconstruction will be fragile. The issue is not only to reform Congress or tighten electoral requirements, but to confront the core of the problem: an illegal economy that produces not only illicit income, but also a way of understanding power.

Until the State recovers effective capacity over territory, natural resources, and economic production, politics will continue to reflect that vacuum. And while this persists, the outsider will remain not the exception, but the figure most coherent with the Peru that actually exists.

Given that no sector seems genuinely interested in changing this situation, it will be necessary to wait for the emergence of a social movement of such magnitude that it is capable of carrying out the changes that are needed.

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Silvio Dragunsky G.
sdragunsky@gmail.com
silviodragunsky.blogspot.com

Lima (Peru), January 30, 2026

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