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After First Year, Peru President Challenged by Crises, Guerrillas

July 25, 1991

LIMA, Peru (AP) _ A year into his presidency, Alberto Fujimori faces daunting troubles in restive Peru: a deepening economic crisis, a worsening guerrilla war and crumbling public confidence.

Most Peruvians greeted Fujimori as a savior when he was sworn in July 28, 1990 amid widespread optimism for an economic turnaround.

But workers estimate that some 60 percent of Peru’s 22 million people now lack enough to eat, up from about 40 percent before a tough austerity program - known as ″Fujishock″ - was imposed.

Inflation has been held to about 10 percent a month, but overall economic activity has plunged, with the gross national product falling 10 percent in the first quarter of this year after at least three straight years of decline.

Opinion surveys indicate Peruvians are growing increasingly anxious and angry.

Fujimori’s five-year term ends in 1995, but rumors of a military coup have resurfaced. Most observers dismiss the talk, but say it shows the depth of Peruvians’ despair.

The ruthless Shining Path guerrillas have capitalized on the situation. They have strengthened their hold on coastal valleys north and south of Lima and are rapidly advancing in the capital’s shantytowns, experts say.

The rebels in recent weeks have killed aid workers from Japan, Canada, Australia and Colombia in what experts say is a campaign to scare off foreign assistance and investment.

The Maoist-inspired movement aims to create a state run by peasants and workers. Most of its support comes from the desperately poor, the group hardest hit by Fujimori’s economic austerity program.

″The guerrilla movement has become much stronger in the past year,″ says Carlos Tapia, a former congressman who is an expert on the Shining Path. ″The government’s measures obviously have favored them.″

The need for radical change was apparent when Fujimori, the son of Japanese immigrants, upset novelist Mario Vargas Llosa in last year’s presidential election. Prices were rising at a rate of 60 percent a month, the state was virtually bankrupt from high spending, and food, gasoline and cooking oil were all in short supply.

Fujimori’s austerity program ended government subsidies on fuel and food. Prices shot up.

He then instituted wide-ranging reforms designed to open up Peru’s state- dominated economy: lower import tariffs, higher taxes, curbs on state- workers’ wages and privatization of state companies.

Economists have generally praised the measures, saying they will help restart Peru’s economy in the long run.

But workers have watched the buying power of their salaries drop as much as 75 percent in a year, to less than $50 a month. The poor have seen social programs collapse.

A cholera epidemic that broke out in January made the situation worse. Though the spread of disease is in decline for now, it has already killed nearly 2,400 Peruvians.

Cholera has also ravaged Peru’s economy. Exports of fish and fresh fruits dropped by some $100 million this year, and Peru’s $400 million tourism industry has nearly collapsed.

Workers say they have been patient with Fujimori to give his program a chance, but with inflation still high and unemployment rising, many are becoming desperate.

″It’s not worth the trouble to work anymore,″ says Maximiliano Jauregui, a leader of the teachers union. ″The salaries don’t even cover one person’s needs, let alone those of a family.″

Hundreds of thousands of teachers, health workers and clerks have walked off their jobs to demand more money. Every day, police must use truncheons, tear gas and water cannons to retake downtown streets from protesters.

The International Monetary Fund continues to prescribe harsh austerity for Peru’s government, while making it pay some $40 million a month on its $20 billion foreign debt.

″Fujimori is between a sword and a wall,″ economist Augusto Alvarez said. ″The demands of the people simply do not jibe with those of the International Monetary Fund.″

The economic program itself, meanwhile, is troubled.

Economy Minister Carlos Bolona’s calls for new taxes are soundly rejected by most sectors of society, who are skeptical after years of government waste.

Privatization has gone slowly as Fujimori has hesitated to fire large numbers of workers. This has left the state burdened with dozens of inefficient, money-losing companies.

″The economic situation in the short term is very dark,″ Alvarez says.

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