President Garcia plunges Peru ‘into extreme crisis’

Press, 28 December 1988, Page 20

President Garcia plunges Peru ‘into extreme crisis’

NZPA-KRD Lima Three years ago he was the boy wonder of Latin America, the dynamic young politician whose personal magnetism and fiery populism were supposed to lead Peru to a new golden age of economic progress and social justice. Today, President Alan Garcia might well be a political has-been at 39, the discredited leader of a discredited party whose stewardship has helped make his nation the basket case of South America.

His so-called heterodox economic policies have plunged Peru into its worst depression of the century, with 1000-plus per cent inflation, rampant unemployment and a rash of violent and costly labour disputes. Already stretched to the limit by a bloody guerilla war against the Maoist Sendero Luminoso (Shining Path) rebels, who have killed 15,000 people over the last six years, Peru’s military is restless and talk of a coup is widespread.

“Alan Garcia had 90 per cent of the people with him when he took power,” said retired army General Edgardo Mercado, who served as Foreign Minister under a reformist military regime in the 19705. “Now he has at least 80 per cent of the people against him. We’re facing an extremely grave crisis.”

A dashing, charismatic figure, President Garcia was swept into power on a populist tide that marked a backlash against 12

years of military government and eight years of the conservative policies of his civilian predecessor, Mr Fernando Belaunde Terry. He came into office preaching the evils of bowing to the International Monetary Fund (1.M.F.) and western bankers. He defied Peru’s creditors and became a folk hero by imposing a partial moratorium on foreign debt interest payments, limiting them to 10 per cent of export earnings.

He nationalised private enterprises right and left and unleashed a frenzy of Government spending. Peru’s economy enjoyed explosive growth for two years before the Government’s cash reserves dwindled to nothing, and the roof fell in.

In September, 1988, President Garcia had no choice but to impose a severe austerity plan, which increased basic food and medicine prices by more than 300 per cent and led to 114 per cent inflation for the month.

That was followed by more belt-tightening, including 100 per cent increases in the cost of food and medicine and a 50 per cent devaluation of the peso that sparked a bank workers strike and widespread protest. This year the economy is expected to show 5 per cent negative growth. The President’s popularity rating has already plunged even further. His approval rating is at 16 per cent in some polls.

A shaken President Garcia has taken to

disappearing from public view for weeks at a time, and he even submitted his resignation at one point last summer.

His 87-year-old vicepresident, however, refused to accept it, diplomats say. In his more depressed moments, the young President has reportedly spoken wistfully of how he would like to go out like the late Chilean President, Salvador Allende, who became a rallying symbol for Leftists across the hemisphere after he died in a bloody military coup that toppled his Marxist Government in 1973.

But local analysts and foreign diplomats say Peru’s armed forces have little desire to make Garcia a martyr or to pave the way for his eventual return by overthrowing his Government now. “There’s a strong feeling that they want to make (him) pay, that they’re not going to rescue him by having a coup that would make him a martyr,” said a knowledgeable foreigner.

Moreover, a military take-over could serve to radicalise young Peruvians and lend a certain measure of support, even legitimacy to Sendero, the continent’s most dangerous and fanatical guerilla movement.