Peru hits the bottom

Press, 7 December 1988, Page 22

Peru hits the bottom

From

NICHOLAS ASHESHOV

in Lima for the “Daily Telegraph”

QUEUES outside bakeries in the Peruvian capital begin in the desert-dark at four in the morning. But soon the bread lines will have ended because the bakeries will have run out of flour.

Lima’s last shipment of wheat, a donation from the United States, was unloaded a month ago at the port of Callao, Bkm down the road, and the flour mills here ground to a halt 10 days later. There is already a run on substitutes like potatoes and rice, sending prices soaring yet again. By the end of the year Peru’s inflation will have passed 2000 per cent — an item that cost $1 at the beginning of the year would be costing more than $2O by Christmas.

The better-off have switched to cake, of course. But as of a few days ago the water coming out of the taps of rich and poor alike has looked, smelled and tasted as though La Atarjea, the water and sewage board founded 90 years ago by the English, had thrown the wrong switch. Indeed it had. The Shining Path, Peru’s Pol Pot-like terrorists, had yet again dynamited a set of the pylons that wander unprotected and unprotectable across the Andes, setting off a power cut that shut down threequarters of Peru’s main factories — including La Atarjea.

The water board told the newspapers that there was no threat to public health and that at worst the brownness of the water and its awful smell was “transitory.” But the mayor of Miraflores, the well-off ocean-side district where many foreign journalists live, was unconvinced. He said that tests made by a consulting firm indicated that the least his parishioners could expect from a swig of tap water would be Hepatitis B. The water and sewage board has since admitted that after the power cut, the water level at the sewage plant had dropped so low that the water supply system was

literally scraping the fetid bottom.

With neither bread nor water easily available, Lima’s six-and-a-half million inhabitants have had one of their worst weeks, and it is not going to get better in a hurry. At the beginning of the week Alan Garcia’s three-and-a-half year-old Socialist Government was forced to double prices of basics such as petrol, which now costs 15 times what it did at the beginning of September. Meanwhile the wages of most of the people who live in Lima have increased only three-fold. A cook and cleaning lady fortunate enough to have a job today will be lucky to earn the equivalent of SNZ3 for a long day’s work. Out of that shhe has to meet her bus fares and, if she’s typical, she will have three or four children to feed and send to school.

Peru is being hit not by one of the droughts or other natural disasters that regularly ravage the Third World but by a severe case of Debt Crisis, considerably worsened by an abnormal level of government corruption and incompetence. Mr Garcia, who is 39, has noisily refused to deal with the

foreign bankers, including all the British High Street banks, who lent Peru billions a decade ago. Now the money has run out, and since Mr Garcia refuses to discuss paying back old loans, the bankers refuse to lend him any new money. Mr Garcia and his Socialists did not foresee this rather basic fact of financial life. For instance, the lack of flour — there’s also no milk and cooking oil will run out in a few weeks — is a result of Government allocations of foreign exchange to a two-year consumer boom that suddenly ended this year.

Wheat and other basics like milk powder and cooking oil were ordered in time from the United States, New. Zealand and Argentina. But when it came to paying, the Government could not supply the foreign exchange even, for instance, for the SNZI2O,OOO needed to bring a ship standing offshore into the docks to unload.

Meanwhile the streets of districts like Miraflores are clogged with young money-changers buying and selling the SUSIOO bills that flow in from the jungle coca-producing region. In those same jungle regions, which supply half the world’s cocaine base, an average 17 people every day this month have been killed either by the Shining Path, the cocaine industry or the police and army.

These are the main contestants in a vicious eight-year-old backlands war which has seen upwards of 15,000 people, most of them peasants, killed.

One result of this chaos has been making big news on the City pages of newspapers in London, New York and Tokyo for the past several weeks. A strike by most of Peru’s miners since mid-October has helped send the price of copper to alltime highs. The mine owners say that this strike and others earlier in the year have lost the country up to SNZ9OO million.