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His debt-strapped nation tottering,
Peru's new leader flouts convention

By Michael L. Smith

The Globe and Mail, September 7, 1985

It was a leisurely afternoon, siesta time, at the sidewalk cafe in a residential neighborhood of the Peruvian capital. But to the surprise of waiters and customers, in walked a tall, conservatively dressed figure with a folder of papers under his arm. He sat down and ordered a cup of coffee.

It was President Alan Garcia, taking a breather from a full day's work.

On his way out, as his security guards hovered protectively around him, Mr. Garcia greeted the shoeshine boys and chatted with a couple of street vendors. An elderly lady hobbled up to him to pour out her complaints and to praise him for his new Government's efforts to better Peru's situation. Mr. Garcia inclined his head to listen to her. Then, he was back in his escorted limousine, returning to the presidential palace into which he moved only in early August.

Mr. Garcia, 36, has already shown himself to be a nonconformist in international finances as well. In his inaugural address, he declared bluntly -- brazenly, his critics said -- that Peru would break from the Latin American pack and not negotiate an agreement with the International Monetary Fund.

In another affront to convention, he stated that Peru has unilaterally decided not to pay more than about $300-million (U.S.) — 10 percent of export earnings — to service its $14 billion foreign debt during the next 12 months. Today, Peru owes $500 million in unpaid interest alone.

This political grandstanding on the international and domestic fronts, however, was more than the impulse of a newly arrived enfant terrible of Latin American politics.

Mr. Garcia, a Social Democrat with academic leanings, is a driven man. He and his party, the American Popular Revolutionary Alliance, believe that only a dramatic initiative to provide leadership and raise expectations can pull Peru back from disaster.

Peru today is probably the Latin American country that has been hurt the most by the debt crisis. The problem has been compounded by mismanagement, indecision and lack of foresight that has plagued the country for decades.

Inflation is cruising at a monthly 10 percent clip. The Government can barely scrape up enough cash to meet its payrolls, let alone service its foreign debt. Manufacturing output is 10 percent below what it was at the start of the decade. Two Peruvian workers out of three do not have a steady job. Menacingly, Maoist guerrillas haunt the Andean foothills and Lima shantytowns, breeding in unrest.

The administration of Fernando Belaunde, the first freely elected government in 40 years to complete its term in office, had drifted into a state of lame-duck paralysis. Pessimists frequently pointed to the anarchic conditions of Bolivia as a foretaste of Peru's prospects if dramatic action were not taken immediately.

As in his April presidential election landslide, Mr. Garcia decided to take the country by storm. He dazzled Peruvians with his inauguration address and proceeded to brand his first days in power with gestures and acts that set his Government apart from previous governments.

Although his performance has been cloaked in radical rhetoric not likely to please Western governments or international finance officials, it hit the mark at home.

Mr. Garcia did not put sole blame for Peru's crisis on foreign bankers, the IMF or the capitalist system. He lashed out against monopolistic business interest, speculative investors, parasitic bureaucracy, the corrosive narcotics trade, police corruption and human rights abuses. His acknowledgment of abuses marked the first time in the five-year struggle against the Maoist group Sendero Luminoso (Shining Path) that a Government authority had officially admitted that violations were more than isolated incidents.

Mr. Garcia said with Churchillian tone: "It is later in our history than we think, the crisis is graver than we believe. This imposes on all of us the audacious course of a revolution of independence, development and social justice."

By the time he had finished speaking, he had given a sweeping draft for social reform, laid before Congress six major legislative bills ready for debate, and opened up a new horizon for national pride and hope.

The principal opposition group, the Marxist United Left coalition, had originally agreed to applaud the inaugural speech politely. In the event, they found themselves giving four standing ovations. Mr. Garcia has stolen the thunder from his main contenders.

© 1985 The Globe and Mail. All rights reserved