Peru Seeking Alternatives to Coca Crop : Drug control: The policy follows rejection of $36 million in U.S. military aid.

After rejecting $36 million in U.S. military aid to fight drug traffic, Peru is shaping a complex new policy aimed at inducing farmers to stop growing coca leaves, the raw material for cocaine.

Peru is the world’s biggest producer of coca, and an estimated 1 million Peruvians depend on it for their livelihood. In outlining his new policy last week, President Alberto Fujimori warned that the forced eradication of coca, before farmers could develop profitable alternative crops, would risk civil war.

The policy does not rule out military anti-drug aid in the future but places greater emphasis on a need for rural economic changes that could be difficult, slow and costly.

U.S. officials here were disappointed when Fujimori turned down the $36 million in late September, two months after he took office, but they appear to have no major objections to his new policy. They privately express hope that he will accept an offer of $40 million in military anti-drug aid for fiscal 1991.

A diplomatic source said the Peruvians “see a need for military assistance, but they see it in the context of a comprehensive program” and want more economic aid first.

Fujimori’s rejection of the aid also may have been a temporary concession to leftists who view U.S. military assistance as a threat to Peruvian sovereignty.

Washington is offering to train and equip Peruvian army troops for anti-drug operations in rural areas where armed traffickers and ultra-leftist Shining Path guerrillas are dominant.

Fujimori’s anti-drug policy paper said his administration wants to discuss military action in conjunction with possibilities for farmers to produce crops other than coca.

“It is imperative to accompany the eradication of coca with substitution by other crops,” the paper said. “Effective repression that left peasants without alternatives could easily unleash a civil war of unsuspected proportions.”

A cornerstone of the policy is to simplify complicated legal and bureaucratic procedures for giving peasant farmers title to the land they use. Because most coca farmers are squatters without land titles, they are unable to receive bank loans, sign contracts and form enterprises for planting, processing and marketing legal cash crops.

The government has begun to establish a “rapid, simple, economical and reliable” new system for issuing and registering land titles, according to the policy paper.

It said authorities will be better able to negotiate crop substitution agreements with farmers who have land titles.

The policy also calls for deregulation measures making it easier for farmers to form cooperatives and business enterprises, to receive loans, to transport their produce and to export it to foreign markets. The paper admits that this is “an immense task that will require a substantial change in the Peruvian political system.”

Meanwhile, Peru will intensify efforts to combat drug traffic, the paper said.