WASHINGTON — Peru is in deep trouble--deteriorating economically and physically, fragmented politically and socially, and wracked by a pervasive violence. The country's sharp decline may be reversible, but only if a growing psychology of disintegration can be averted. That Lima's opinion leaders are so deeply pessimistic about their country's straits is itself a major and disturbing reality.
Declining export proceeds, disinvestment, capital flight and the government's artificially expansionary economic policy have produced net negative reserves. Inflation has soared--at a recent rate that projects to 356% a year, a level unprecedented in Peru. Key staples, including milk and soap, are in short supply.
The government of President Alan Garcia has been forced to impose severe austerity measures but no clear and credible national economic strategy is yet in place. Recently appointed Prime Minister Armando Villanueva has promised "no more nationalizations" (the Garcia regime's unexpected bank nationalization in 1987 badly damaged business confidence), announced the privatizing of 30 enterprises and stressed a commitment to gradual economic adjustments. But the Villanueva approach has also been undermined by the government's continuing strong-arm tactics against one of the nationalized banks and by Garcia's radical rhetoric; a recent "secret" speech to the governing party's Youth Congress was tape recorded and a transcript soon made the rounds. Investor confidence, national or international, cannot soon be improved in this atmosphere of uncertainty and contradiction.
The national government has lost much of its authority during the past two years. Garcia, who won the election handily in 1985 (at age 35) and then built unprecedented support during his first year, has by now squandered most of that personal following. His mishandling of a prison revolt that led to the 1986 massacre of several hundred prison inmates, strong public repudiation of his bank nationalization initiative and the climate of violence--all have exacerbated erosion of the president's standing. Garcia is now widely criticized as self-centered, erratic, intolerant of strong associates and more devoted to rhetoric than executive responsibility. Public speculation about his mental stability has recently begun.
Public trust in the whole government, including Congress, is low and declining. The decay of political institutions is pervasive. The governing American Popular Revolutionary Alliance Party is weak, suffering internal dissent about its next presidential candidate for 1990, when Garcia is constitutionally ineligible. The president has made clear his contempt for the logical leading candidate, and his speech to the APRA youth dripped with disdain for the party apparatus.
The center-right has been gaining strength ever since the bank nationalization provided a rallying point. The emergence of novelist Mario Vargas Llosa as the political leader of this sector, however, is more than a reflection of Vargas Llosa's personal attractiveness; it illustrates the absence of strong parties and viable national leaders on the right.
On the left, Alfonso Barrantes faces skepticism from a significant part of his potential constituency, amid debate about the proper strategy for promoting fundamental change in an unjust and repressive society. A moderate and incremental Marxist, Barrantes is seen by some in the Izquierda Unida coalition as too closely tied to the prevailing system.
Outside the system, but ever more frequently penetrating its boundaries, the Sendero Luminoso--"Shining Path"--insurgency continues to grow. Sendero is transforming from a mountain-based and somewhat mysterious faction of dissidents into an increasingly well-organized and geographically widespread opposition force. It holds public meetings in Lima, has made a strong showing in student elections at San Marcos University and has increasing influence in some trade unions. Sendero has also demonstrated a capacity to assassinate political leaders and development agency officials, overrun provincial police stations, take over mountain towns temporarily and terrorize Peru's major urban centers.