Uncertainty Casts a Pall Over Peru

Damaso Toribio and Rosa Soto de Gomez will not be part of the parade of Peruvian dignitaries called to Washington this week to discuss the political and economic repercussions of the crisis engulfing the country.

But the failed grocer turned shoe-shiner and the homemaker married to an independent contractor know quite a bit about the economic problems at the root of President Alberto Fujimori’s unraveling regime.

Five years ago, Toribio, Soto de Gomez and her husband all had steady work. Now they form part of Peru’s disguised unemployment, along with Toribio’s 18-year-old son, who cannot find his first job.

And they have a pretty good idea of what the latest scandal will mean for them and their country.

“We’re back to square one,” said Soto de Gomez. “Everything has been destabilized, and now we are living in uncertainty.”

That opinion is shared by leading economic analysts inside and outside the country, who point out that instability is the condition that foreign investors most dislike.

Outside capital was already retreating from commitments in Peru, where total new foreign investment fell to $1.5 billion in 1999, compared with $1.93 billion in 1998. In the first three months of this year, foreign direct investment, which excludes stock market trading, fell to $62 million from $499 million during the same period of 1999.

That caution, in anticipation of political problems related to presidential elections last spring, turned out to be well founded. With Peru’s economic doldrums dragging down Fujimori’s popularity, the president’s advisors are widely believed to have resorted to dirty tricks to ensure his victory.

Last month, a videotape was released that appeared to show Fujimori’s then-spy chief, Vladimiro Montesinos, bribing a legislator to shore up support for the president. Montesinos fled to Panama after Fujimori announced the dissolution of Peru’s intelligence apparatus and promised to call new elections in which he would not be a candidate.

“Now that political instability has actually happened, it is hard to know when it is going to finish,” said Ricardo Adrogue, who follows Peru for Salomon Smith Barney in New York. “It will have a negative effect on investment, and therefore employment, in even the most optimistic scenario.”

Amid rumors of a military coup, the unpredictable Fujimori made a surprise visit to Washington late last week--prompting U.S. officials to summon other Peruvian politicians to hear their take on the crisis. The president returned home early Tuesday with another surprise: the pledge of $460 million in loans from the Inter-American Development Bank.

“That is quite important,” said Adrogue, as it may be seen as a positive sign for pending loans from the World Bank and the Export-Import Bank of Japan, which Peru desperately needs to finance a budget deficit that hovers around $1 billion.

While the budget deficit is a concern, said Peruvian economist Augusto Alvarez Rodrich, “the most complicated problem is private-sector confidence . . . that has become much more serious with the recent crisis.”

The 4% economic growth expected this year is about half what Peru needs, he said. “No one is generating new jobs,” he added.

Toribio and Soto de Gomez can confirm that. “I say I’m a homemaker, but the truth is, I can’t find work,” Soto de Gomez said.

After the youngest of her three children was born eight months ago, she quit her job as a clerk in a public hospital because low government wages meant that child care, bus fare and meals cost as much as she made. Until she can find another job, the family relies on her husband’s sporadic income.

Toribio, tall and thin, wearing a black baseball cap, lost his job when the ceramics factory where he worked closed down five years ago, leaving 60 people unemployed.

He used his severance pay to start a small grocery store, but it failed in a year because it was undercapitalized, he said. So he built a wooden box with a footrest and uses it as a portable shoeshine stand.

“I’ve been trying to find a job, but at my age it’s impossible,” said the 45-year-old father of two boys. But he found that age was only part of the problem when his older son began looking for work after finishing high school. He can’t find a job either.

“There is just no way to overcome this problem,” said Toribio. “You wouldn’t know of anyone who is looking for a worker, would you?”