PERU'S ENFANT TERRIBLE
Ambrose Evans-Pritchard on
the president who refuses to pay his debts
Lima ONE day somebody will take a pot shot at Alan Garcia. Peru's brash young president does not hide his feelings or his face. He likes to lean over the presidential balcony, microphone in hand, and chat to passers- by. When he has drawn a crowd he begins to preach, and then to accuse. We in Europe and America are rich, he says, because countries like Peru are poor. Peruvians are not responsible for their ruined economy. Oil companies, bankers, and the IMF are to blame. If only these pirates were chased out the nation would prosper.
Garcia's enemies call him a crypto- communist, a crypto-fascist, a demagogue and an hysteric. They cast him as if he were the player in a traditional Latin American drama, as if the set were Peron's Argentina or Allende's Chile. But Garcia is really a child of the Sixties. He studied at the Sorbonne and paid his way singing 'boler- os' in the cafés of Montparnasse. Like many of his generation he combines a naive idealism with cold manipulation. He is a master of the media and knows how to smile when the television cameras are on. Garcia is the only socialist — as opposed to Marxist — leader in Latin America. The United States does not usually let socialists take power in the imperial 'back yard'. But Peru is a special case. In neighbouring countries left-wing ideas do badly. The armed forces stick electrodes into teachers, or journalists, or union leaders who over- reach themselves. Not in Peru. The Peru- vian army has a pinkish streak. In 1968, General Juan Velasco seized power and began the series of reforms now known as the 'Peruvian Revolution'. The tradition has faded but not died, and there is still a degree of tolerance in the officer corps. This does not extend to captured guerrillas from the crazed 'Shining Path', who rarely survive interrogation, but it does mean that leftist parties can function. There seem to be dozens of them Trotskyist, Leninist, Maoist, pro- Albanian, anti-Russian, and of course in- digenous strains, all splintering off one from another, and each with its pamphlet of unreadable invective. It is easy to get them muddled up. The Peruvian Commun- ist Party (PCP) is legal and irrelevant. The Communist Party of Peru (PC del P) is the guerrilla movement. Still, Peruvians seem to know the difference and many of their' vote for Marxist parties. In the last year's elections the United Left coalition, led by Lima's communist mayor Alfonso Bar- rantes, came in second. The United States may not like Alan Garcia but the alterna- tive is worse. Barrantes offers a Latin American version of 'Euro-Communism' that could prove more dangerous than the military Marxism of Cuba and Nicaragua.
Garcia, at least, is a democrat. 'Without freedom there can be no socialism,' he says, reproaching Castro. 'Universal suf- frage can't be replaced by the corporate vote of the workers, nor by the messianic cult of one man who disposes of the truth and condemns his people to decades of silence. Liberty can't be sacrificed for the sake of bread . . . . That argument, where- ver applied and whatever it's called, leads only to tyranny.' Garcia's Apra party (American Popular Revolutionary Alliance) may defy Washington at every turn, may flirt with Moscow, but it stands firmly on our side of the fence.
That is small comfort for the internation- al banks. Communist governments pay their debts, late perhaps, but at least they pay. Garcia just insults them: 'The Peru- vian government has been elected by the people, and not by a circle of financiers to satisfy their appetites.' On taking office last year he announced that Peru would limit payments on its $14 billion foreign debt to 10 per cent of exports. 'When you give us more for our copper we'll pay more on the debt.'
The 10 per cent formula made Garcia famous, but little else. At first bankers were afraid it would spread to the rest of Latin America, which together has a col- ossal debt of $370 billion. But nobody wanted to upset the apple cart. It is already understood that the principal on much of the Latin debt will never be repaid. Instead the banks keep rolling over the loans, and only the interest is being covered. Big debtors like Mexico, Brazil and Argentina calculate they have more to gain by dealing with the system, at least for the time being. `Garcia misjudged the mood,' said a Latin economist, 'and now he's totally isolated.' One can hardly blame Garcia for his rebelliousness. Half of Peru's industry is closed down and living standards are back to the level of the mid 1960s. Only a third of the work force have fixed jobs. The rest get by as best they can selling cigarettes, one by one, on street corners; or turn to crime. 'Until Garcia came along the coun- try was falling apart; there was a sense of utter despair,' says economic historian Hernando de Soto. 'The English have been declining gently for 100 years; we have had it compressed into a decade.' But whatever he gained by not paying the banks has been squandered. His isola- tionist programme, supposedly inspired by the self-sufficiency of the ancient Incas, is the same vain and stubborn experiment that has failed all over the Third World. He has created the sense that things are being done when in fact he is just cluttering up the economy with more controls: price controls, import controls, exchange con- trols. As if Peru didn't have enough bureaucracy already. Hernando de Soto did a test to see how many days he and his staff would lose through red tape in setting up a small factory in Lima. It took 289 days. The same scheme took three and a half hours in Tampa, Florida. No wonder Peru is anarchic. It is hard to get anything done unless you ignore the system. Indeed it is the informal economy that keeps the country going; 70 per cent of houses, including blocks of flats, are built illegally; 87 per cent of Lima's buses run without licences and bribe the police.
`They never learn,' says de Soto. 'It doesn't matter whether they're socialists, liberals, or conservatives, they're all mer- cantilists at heart; and Garcia is as bad as the rest of them. All he has to do to make Peru rich is free the people and let them get on with it. But that, I'm afraid, is beyond him.' This has not silenced the 'enfant terri- ble'. He continues to call the IMF an agent of 'colonial subjugation' and lumps it together with terrorists and drug smug- glers. 'The IMF has no moral authority in our country since it helped build up our foreign debt in the 1970s,' he says. Barely a quarter of the money was productively invested, the rest went on weapons, or paying interest arrears, or disappeared in graft. 'The IMF was an accomplice to the great binge.' And now, says Garcia, when Peru is bankrupt, facing a guerrilla in- surgency in the mountains and terrorism in the cities, all the IMF can offer is a `starvation recipe' of austerity.
There is no reason why Peru or any other country in the Third World should submit to the IMF unless it wants fresh loans from the West. Garcia has concluded that nobody will lend Peru any more money whatever he does, so why give in? Instead he has his own recipe of abund- ance. It means taking the $500 million or so he saves each year withholding debt pay- ments and throwing a party. It was good while it lasted. 'Garcia has won the hundred-yard sprint, now what?' asks Con- gressman Fernando Sanchez. Now, perhaps, Peru will pay foreign creditors even less, and hope they don't retaliate with a trade embargo. Garcia is still waver- ing. He has shipped all Peru's bullion back from American and Swiss banks as if he was expecting a siege. But on the other hand he has made stop-gap payments, after months of defiance, to the IMF and the commercial banks. _
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