This working paper explores public policies that would advance pro-poor development in the livestock sector, with special attention to organized actors, their interests, and the political feasibility of state initiatives. It focuses on two sub-sectors that involve large numbers of small producers: the dairy sector and the alpaca sector. Emphasis is placed on the latter, since there is a greater potential role for Peru's weak, neo-liberal state in promoting pro-poor development in the alpaca sector. The paper's main findings are that: i) key public agencies of importance for the livestock sector suffer from politically motivated turnover of functionaries, the absence of a professionalized, meritocratic bureaucracy, insufficient funding, lack of coordination, and a limited capacity to act as regulatory and coordinating agents, ii) there are few organized actors at the national level capable of advancing the interests of small producers, and iii) decentralization initiated in 2002 has created new institutional spaces for participation by the poor in politics and resource allocation, while, in practice however, numerous obstacles hinder participation and limit the overall effectiveness of these institutions. The author recommends several specific public policies that could promote pro-poor development: i) protection of the dairy sector from subsidized US dairy products in trade agreements, ii) direct marketing of alpaca fiber from producers to the industries, and iii)national standards for quality grading of alpaca fiber. The paper also identifies a number of more general strategic entry points for improving opportunities for small producers to benefit from expansion in the livestock sector: i) support to small producers associations, ii) assistance for small fiber-processing industries, iii) institutionalization and professionalization of state agencies, iv) increased funding of livestock sector agencies, v) coordination among and between donor projects and state agencies and, vi) support for decentralization.