Peru Listed in Critical Conditions

Peru is in deep trouble--deteriorating economically and physically, fragmented politically and socially, and wracked by a pervasive violence. The country’s sharp decline may be reversible, but only if a growing psychology of disintegration can be averted. That Lima’s opinion leaders are so deeply pessimistic about their country’s straits is itself a major and disturbing reality.

Declining export proceeds, disinvestment, capital flight and the government’s artificially expansionary economic policy have produced net negative reserves. Inflation has soared--at a recent rate that projects to 356% a year, a level unprecedented in Peru. Key staples, including milk and soap, are in short supply.

The government of President Alan Garcia has been forced to impose severe austerity measures but no clear and credible national economic strategy is yet in place. Recently appointed Prime Minister Armando Villanueva has promised “no more nationalizations” (the Garcia regime’s unexpected bank nationalization in 1987 badly damaged business confidence), announced the privatizing of 30 enterprises and stressed a commitment to gradual economic adjustments. But the Villanueva approach has also been undermined by the government’s continuing strong-arm tactics against one of the nationalized banks and by Garcia’s radical rhetoric; a recent “secret” speech to the governing party’s Youth Congress was tape recorded and a transcript soon made the rounds. Investor confidence, national or international, cannot soon be improved in this atmosphere of uncertainty and contradiction.

The national government has lost much of its authority during the past two years. Garcia, who won the election handily in 1985 (at age 35) and then built unprecedented support during his first year, has by now squandered most of that personal following. His mishandling of a prison revolt that led to the 1986 massacre of several hundred prison inmates, strong public repudiation of his bank nationalization initiative and the climate of violence--all have exacerbated erosion of the president’s standing. Garcia is now widely criticized as self-centered, erratic, intolerant of strong associates and more devoted to rhetoric than executive responsibility. Public speculation about his mental stability has recently begun.

Public trust in the whole government, including Congress, is low and declining. The decay of political institutions is pervasive. The governing American Popular Revolutionary Alliance Party is weak, suffering internal dissent about its next presidential candidate for 1990, when Garcia is constitutionally ineligible. The president has made clear his contempt for the logical leading candidate, and his speech to the APRA youth dripped with disdain for the party apparatus.

The center-right has been gaining strength ever since the bank nationalization provided a rallying point. The emergence of novelist Mario Vargas Llosa as the political leader of this sector, however, is more than a reflection of Vargas Llosa’s personal attractiveness; it illustrates the absence of strong parties and viable national leaders on the right.

On the left, Alfonso Barrantes faces skepticism from a significant part of his potential constituency, amid debate about the proper strategy for promoting fundamental change in an unjust and repressive society. A moderate and incremental Marxist, Barrantes is seen by some in the Izquierda Unida coalition as too closely tied to the prevailing system.

Outside the system, but ever more frequently penetrating its boundaries, the Sendero Luminoso--”Shining Path”--insurgency continues to grow. Sendero is transforming from a mountain-based and somewhat mysterious faction of dissidents into an increasingly well-organized and geographically widespread opposition force. It holds public meetings in Lima, has made a strong showing in student elections at San Marcos University and has increasing influence in some trade unions. Sendero has also demonstrated a capacity to assassinate political leaders and development agency officials, overrun provincial police stations, take over mountain towns temporarily and terrorize Peru’s major urban centers.

The Peruvian armed forces, in turn, are deeply concerned about the government’s failure to develop an effective counterinsurgency strategy, and particularly about the dramatically worsening ratio of military casualties to those suffered by Sendero in the frequent clashes that occur. About 9,000 people have died in Sendero-related violence during the past five years; lately the number of military casualties almost matches the count of suspected Sendero activists and innocent victims. There is considerable public sympathy for a tough response to Sendero and to other manifestations of arbitrary violence, but in the most-affected rural areas, there is even more fear of the armed forces than of the Sendero insurgents. In some remote regions, particularly the upper Huallaga Valley, local authority is not being effectively exercised by the civilian government, the regional military command or the Sendero opposition, but rather by the narcotics network.

Peruvians respond to this concatenation of trouble with frustration and fear. Many professionals, business leaders and members of the middle class are emigrating to Canada, Australia, the United States and elsewhere; those who stay send money abroad. Firms, trade unions and professionals push their own immediate interests . The government, too, seems to be playing for tactical advantage, not for long-term solutions. The sense that each group is out for itself fuels problems of inflation, speculation, drug trafficking, lawlessness and street violence, and worsens what is shared--a sense of fundamental insecurity.

The modern and official system is being overwhelmed by massive demand. This sense is captured by anthropologist Jose Matos Mar in his recent book about citizen discontent and governmental failures, “Desborde Popular y Crisis del Estado.” Lima’s population has multiplied tenfold in the past 45 years. The city has changed its character, its economic function and its physical appearance. The communications revolution, the educational explosion, massive migration to the cities, the mobilization of people in trade unions, church groups and neighborhood associations--all contribute to aspirations and expectations well beyond what the formal and official system can fulfill.

The popular response, argues Matos, is creative and innovative: an informal economic sector of unregistered and untaxed business; neighborhood security arrangements; popular culture of various kinds, and the creation of a new mix of Andean and coastal Peru, of the country’s Indian and its European heritage. Matos suggests that the economic, social, institutional and structural crisis that Peru is now undergoing may lead to the forging of a new, stronger and more authentic nation. That may well be, but meanwhile familiar institutions and structures are crumbling. Those who have been comfortable in Peru up to now are increasingly isolated and vulnerable.

If Peru can survive its current turmoil without a massive breakdown, long-run prospects may not be so bleak. The country’s natural-resource base is positive; its diversified primary exports provide a solid foundation for economic growth, although not an adequate base for prosperity in a changed world economy. A substantial decrease in the rate of population growth during the past 20 years and a national consensus on family planning have improved the country’s demographic picture somewhat. Investments in physical and communications infrastructures have made Peru much more of a coherent nation than it used to be. A new generation of technocrats in the private and public sectors provides at least some of the managerial competence the country has so notably lacked.

There are also some positive signs in the realm of attitudes and outlook. The urban elite is more conscious of rural Peru and its deep poverty than it used to be. The business community, most of the armed forces and much of the left appear to be committed to democratic politics, perhaps in part because the Sendero threat unites them in defense of some fundamental tenets. A pragmatic 1990 candidate with a comprehensive reform program might well have substantial national support for a frontal assault on the country’s structural problems.

Looking back, what is particularly striking about Peru is not today’s pessimism. Rather, it is the recurrence, time and again--from the first Fernando Belaunde Terry administration in 1963 through the military-directed experiment of the late 1960s and early 1970s to the Garcia presidency of the mid-1980s--of strong public support for new national leadership promising major changes. Although each effort has failed, hope for the country’s future has re-emerged every time, and this may happen yet again.

“The challenge of a Peruvian president,” Garcia told me, “is not to let his own spirit drop with public opinion, to keep pushing for improvements, to recognize the reasons for public concern but to keep his focus on the problems to be addressed.” The next president, according to probable candidate Barrantes, “must speak frankly to Peru’s people about the tough problems ahead, and must create minimal expectations.” Barrantes emphasized, “A candidate of the left must have the courage to warn the people of Peru that it will be difficult to defeat terrorism.” But such a candidate must also be “willing to punish the military and police officers who abuse their authority” and must call on the people to build themselves what they need in the way of rural schools and medical posts, “not to expect the state to provide all this without adequate resources.”

Without some alleviation of the international pressures on Peru--the massive external debt, low commodity prices and shrinking markets for the country’s legal exports--it is hard to sustain much optimism. With some better luck on the external front, however, Peru’s future may not be as bleak as Lima’s elites now perceive it. The main challenge indeed, may be to stop a psychology of decline which could all too easily feed on itself.