Peru returns to civilian rule on July 28, when Senor Fernando Belaud is sworn in as President. Some people like to call the new regime the "Second Republic" to distinguish this latest attempt at democracy from the period leading up to 1968.
The past 12 years of military rule -- or "revolutionary government" as the armed forces themselves describe it -- has radically changed the country but the central issues are still there: widespread poverty, underdevelopment and fears for the future.
Unlike most military regimes in Latin America, Peru's military government was not the will of an ambitious general or clique of officers but the result of a general accord within the officer corps.
"An average officer today feels ashamed to wear his uniform in the street," according to retired Army General Edgardo Mercado Jarrin, a former Prime Minister and prominent spokesman for the first, radical phase of the revolution (196801975). "He has a guilt complex because the Government was not able to achieve the goals it had set for itself.
What did the military want to accomplish when General Juan Velasco, the revolution's first President, and his team of young colonels, staged their coup on October 3, 1968. Basically, they wanted to cut the Gordian knot of underdevelopment. As they saw it, that knot was formed by an entrenched, antiquated establishment in political and economic control of the country, in collusion with foreign investment in oil and mining which was draining Peru's resources rather than aiding progress.
One of the first and most popular steps taken by the military junta was to expropriate the holdings of the International Petroleum Company, an Exxon subsidiary, which was involved in a 50-year-old dispute over oil rights. During the next six years big mining companies were nationalized and ore-deposit rights were withdrawn from companies which did not exploit them. The state moved into an active role in this sector, either developing resources themselves or negotiating new deals with foreign investors.
The two largest state companies -- Centromin and Petroperu -- are now in a position to move ahead in the exploiting natural resources. The Government also hit at local power groups and one one of the world's largest agrarian reforms was carried out. This measure struck at the large estates on the coast and the sierra landowners who lorded over millions of illiterate peasants.
The state also expropriated the fishmeal and cement industries and established itself strongly in banking.
The military ordered a series of reforms in industry which were meant to give workers and employees up to 50 percent share in the ownership, management and profits of their firms. To compensate for this, strong tax incentives were given to encourage new investment, especially outside the capital.
The high-water mark of the revolution came in 1974, when the Government expropriated seven daily newspapers and said that they would be handed over to the "organized sectors of society, like peasants, workers and professional groups.
The military had a much clearer idea of what they wanted to destroy more than what they wanted to create. They spoke in terms of a "social democracy of full participation" that would be neither capitalist or communist, but never really defined what they meant by these words. They concentrated on redistributing property but did not change the economic structures of the country. Eventually, it was economics which led to their downfall.
The first sign of this was General Velasco's removal from the presidency by General Francisco Morales Bermudez in 1975. Soon after, the Government began to draw back from most of its reforms, modifying them in the hope that this would overcome businessmen's opposition to the Government and its policies.
The flaws in the system were beginning to show through. The companies under state control were becoming unprofitable, production was falling off, especially in agriculture. As a result, wheat, milk, rice and other foodstuffs had to be imported. The Government was also building up enormous deficits which were being financed with loans from abroad.
The breaking point came in 1978. Peru was near a financial default, inflation was approaching 100 per cent, the International Monetary Fund had it on its blacklist and the military were running out of ideas. Then the decision was made to hand the management of the economy over to a tough civilian team.
As if by magic, things began to improve. The foreign debt was renegotiated and the state deficit brought down to manageable levels.
However, inflation has been a more difficult problem. From 73 per cent in 1978 it has come down to an estimated 55 per cent this year. But the vast majority of Peruvians are as poor as they ever were.
This point leads to one of the legacies of the military regime: a protest movement which had never before been seen in Peru. Since 1977, there have been three national general strikes. Trade unions, strongly influenced by Marxist activists, have learnt to use their muscle and rally other groups to their support.
The worst worst experiences of the military regime has taught the armed forces a lesson: that it is no easy task to run a country and they would probably think twice before staging another coup.
General Pedro Richter Prada, the Prime Minister, says: "We (the armed forces) have to recognize that the popular mandate has consecrated a new order. Forty-five percent of the electorate has voted for this formula (President-elect Belaud and his Popular Action Party). We ourselves have sponsored this democratic regime and our responsibility is to support it."
The general is one of the main influences in the return to civilian rule, having personally coordinated the military's retreat from power and supervised the administration of the general elections.
"I do not think that we can simply go back to the barracks and the Popular Action leaders have let me know that the armed forces will have to collaborate in development plans," he says. "This is also the new constitution drafted by the freely elected assembly in 1978-79. The experience accumulated by the armed forces cannot be wasted so we are at the disposition of the new Government to provide this experience without political involvement."
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