Ill-serving the Poor

Will Peru’s President be the Next Andean Domino to Fall?


Is Alejandro Toledo destined to join a growing group of has-been presidents, including de la Rua of Argentina, Mahuad of Ecuador and Sánchez de Lozada of Bolivia?  Robert Altro of the Council for Hemispheric Affairs looks at his chances.


Last month, Bolivia’s Gonzalo Sánchez de Lozada joined a growing list of South American presidents who have recently lost their jobs. Might Peru’s Alejandro Toledo be the next leader to take the same tumble from office, now that Sánchez de Lozada has had to flee La Paz? The great promise of Toledo’s presidency has evaporated in the meandering and self-indulgent course he has so far charted regarding the country’s otherwise intractable problems. Large numbers of ordinary Peruvians have now resigned themselves to the belief that the Toledo presidency, at best, means nothing more than politics as usual; Toledo’s inconsistent – at times even contradictory – policies bolster this belief. Ousted president Alberto Fujimori’s authoritarian legacy, preceded by years of violent conflict with leftist guerrillas, poses a severe challenge to Toledo to restore public confidence in Peru’s political processes, since the disgraced former strongman, now in exile in Japan, is beginning to look good to many disillusioned Peruvians who couldn’t be more disappointed in Toledo’s so-far utterly failed presidency. Rather than restore democratic procedures, Toledo has managed to put them into further disrepute.



The disenchantment of Peru’s poor over their loss of control over their own working lives during the Toledo presidency, as well as their dissatisfaction with an economy that ostensibly grows but produces no jobs, increasingly has been answered by Toledo with the police and military. Toledo’s inability to govern with his ears close to the ground and his eyes open to the daily harsh reality of most Peruvians, rather than only to his own voluptuous lifestyle, is regularly being abetted by external forces, whether they originate with the IMF or the U.S. Since narrowly winning the presidency in 2001 by a 53% to 47% margin over former president Alan Garcia, the priorities established by Toledo have been hard to fathom. On the one hand, in a country where 82% of the population is either indigenous or of mixed descent, Toledo, a former shoeshine boy nicknamed the “cholo,” would seem to represent an irresistible rags to riches story, spot-lighting being only the country’s first president to share the heritage of its ethnic majority. On the other hand, as a business school professor and former minister of labor under President Fernando Belaúnde, armed with a Stanford Ph.D. in human resource economics, and with a turn at the World Bank, Toledo would seem to have the credentials to lead Peru’s poor out of their economic misery.


But, to the disappointment of his nation, this glaringly has not turned out to be his script. Since coming to power, Toledo repeatedly has flip-flopped on critical social and economic issues, been stymied by an uncooperative congress, dogged by character issues raised during his campaign (including an illegitimate daughter, prostitutes, and cocaine), while finding it difficult not to alienate potential allies, including, at times, Washington. When Toledo narrowly defeated Garcia, his own party, Peru Posible, was able to win only 41 of a possible 120 congressional seats, which obliged him to have to depend upon the backing of other political parties. Thus it should come as no surprise that his administration has been debilitated by a constant reshuffling of personnel in key ministerial posts, including the resignation of Toledo’s entire cabinet last June. That same month, Toledo saw his approval rating slip to an all-time low of 11%. How did things deteriorate to such a low point for him, and so quickly?


An Economy of Scarcity


Toledo is caught in the crossfire of his own conflicting promises. During his watch, Peru’s economy grew at a brisk 5.2% in 2002, to lead all of Latin America. But Peru’s growth figures can be misleading, as up to 70% of the country’s economic activity has occurred in the highly deceptive “informal sector.” At the very least, the vagaries of the country’s GDP are isolated from the daily experiences of immiseration suffered by most Peruvians. Clearly, Toledo has been unable to deliver on his promise of more jobs. As Latin America’s foundering experiment with neoliberal democracy has shown, economic growth has not automatically translated into more jobs and a better standard of living for a historically disenfranchised majority. Peru has been no exception: 54% of Peruvians live in poverty on $2 a day, with 24% living in extreme poverty, at $1 a day.


The public sector remains extremely cash strapped, and the fiscal deficit is at 8% and rising. Moreover, the IMF has put pressure on Lima to control its deficit, which has obligated the Toledo government to undertake the widely unpopular policy of selling off state-run enterprises to plug the ragged holes in the budget. A lack of oversight in the privatization and deregulation of state firms under Fujimori and the skullduggery of his unscrupulous counselor and co-conspirator, Vladimiro Montesino, opened multiple opportunities for fraud. But for Peru’s poor, privatization has meant the dismantling of a state structure that previously was at least a source of jobs and social services, in favor of benefiting Peru’s tiny cadre of elites while widening the gap between rich and poor.


The case of Telefónica, a Spanish company that purchased several Peruvian telecommunication firms and has since reduced its work force by three-fourths, is a case in point. Currently, 65% of Peruvians surveyed view the sale as being not good for the country, despite some improvements in national telephone service. Moreover, Toledo’s apparent lack of any overall economic development strategy has added to the urgency of Peru’s present crisis.


Anti-Globalization Protests


In June of last year, protests and riots over Toledo’s proposed $167.4 million sale of two electric companies in Arequipa spread to six Peruvian cities. The president had engineered the sale to the Belgian firm Tractebel in conformance with a recent IMF injunction to cut the deficit by raising $700 million through the sale of public assets. But public outrage mounted over the deal, since Toledo had made a campaign promise to consult with local constituencies first in such matters. In reaction to the turmoil, he declared a state of emergency and sent in his security forces, with the resulting clashes between police and protestors producing two deaths and 200 injured. Toledo was later forced to withdraw the proposed sale. This and other blunders severely hurt his prestige and reinforced the perception that the “centrist” policy he pledged while running for office had, in practice, morphed into talking out of both sides of his mouth, promising Washington and the IMF one thing, while dispensing quite another fate to Peru’s poor majority. Ordinary Peruvians, though, understood that they inevitably would lose as the result of the ultimate scenario.

For Peruvians, years of privatization have meant little more than job losses and higher utility tariffs. The proposed privatization of Arequipa’s electricity plants was a clear example of the insensitivity frequently displayed by transnational corporations and indifferent local authorities. The mistrust of foreign investors in Peru signals a broader regional turnabout in the population’s acceptance of the imperatives of the international market, which recently witnessed Bolivia’s Water War in 2000 and the fateful Gas War last month. Like Bolivia, Ecuador and Venezuela, Peru is becoming the scene of repeated protests, strikes, rallies and marches over economic issues. The most recent in Peru was a massive work stoppage by the nation’s 280,000 teachers in May. Toledo had promised to increase teachers $120 a-month salary (still not done), while he assigned himself an $18,000 a-month salary upon becoming president. Teachers demanded that their salaries be doubled, and once again, Toledo was forced to declare a state of emergency to quell the resulting violence.


Even though a shamed Toledo has since taken a 30% pay cut, frustration is growing over his inability to make good on his platform promises. Toledo’s road is now a precarious one. He must navigate between an Argentine-style collapse and an ominous growth in domestic discontent. However, he can expect little help from congress, which just rejected his new tax reform package.


Now, there is the debacle of the Camisea natural gas project. Despite the fact that the IDB recently approved a $75 million loan to Peru to develop it, the authorities have received a barrage of criticism from environmental advocates. On the edge of the Amazon, the controversial $2.7 billion project poses a menacing threat to the ecology of the region’s tropical forests and rivers, according to critics. Plans for the project include drilling inside an indigenous reserve and planning the construction of an export terminal next to a recognized marine reserve. Toledo’s gross mishandling of the matter ended up turning what should have been an economic victory into a public relations fiasco, forcing even the Bush administration to mute its support of him.


Truth Yes, but Justice?


Toledo also has been handed the unenviable task of exorcising Peru’s past demons, including skeletons in the government’s well-filled closet. Any difficulty in resolving the bloody legacy of Peru’s counterinsurgency against the Shining Path guerrillas of the 1980s and early 1990s is compounded by the authoritarian legacy of ex-president Alberto Fujimori (currently a fugitive in Japan) and his draconian anti-terrorism laws. Toledo has fully backed Peru’s Truth and Reconciliation Commission, formed in 2001, which presented its startling findings this past August. These included the eye-popping statistic of 69,000 people estimated to have either disappeared or died during the conflict (more than double prior estimates in the 30,000 range). While the commission has worked diligently to present the “truth,” whether its recommendations will ever be implemented in the name of “justice” is another question. Its findings have generated sharp political divisions, as backers of ex-president Alan Garcia and his APRA party – whose rule coincided with some of the worst human rights violations in the Shining Path conflict – have repeatedly questioned the fairness and accuracy of the commission’s work. Meanwhile, a perception of the absence of social justice on Toledo’s list of priorities is behind much of the current popular protests being witnessed.


Toledo does deserve some credit for striving to reform Peru’s anti-terrorist laws, addressing their due process shortcomings. But torture and other human rights violations have continued as a serious problem since his inauguration in 2001. Peru’s independent Human Rights Commission recently documented 53 cases of torture involving 77 victims from January 2001 to August 2002. The prosecution of government officials implicated in human rights violations during the Shining Path conflict has progressed slowly, if at all.


At the same time, the “past” continues to persist into the present. While its main leader, Abimael Guzmán, has been jailed since 1992, recent evidence suggests a resurgence of the Shining Path – which is dedicated to destroying the current Peruvian state. In March of 2002, on the eve of President Bush’s visit to Lima, a car bomb was detonated in that city. Then came the June kidnapping in Peru’s central jungle of 71 employees of the Argentine firm Techint. In July, a military patrol was ambushed in Ayacucho, in which 7 were killed and 10 wounded. The revolving door appointments of five intelligence chiefs in Toledo’s first 26 months in office have made it very difficult to deal with resurgent guerrilla and drug trafficking activity. Given these developments, Toledo’s government might lack the political will to redress the human rights shortcomings of the past, or, even more alarming, those of the present and near-future.


The Coca-Leaf Factor


Another thorn in Toledo’s side has been the increasing militancy of Peru’s coca growers. After Colombia, Peru is the second largest producer of coca leaves – the active agent in cocaine. Peru has seen a 28% jump in 2002 over the previous year in land dedicated to coca cultivation – to around 80,000 hectares. Analysts have attributed Peru’s recent increase in output to a “balloon effect,” compensating for simultaneous declines in Colombia and Bolivia. Along with its two neighbors, Peru is a major front for Washington’s war on drugs. Toledo’s administration stepped into rocky relations with Washington, which had ordered a total review of Peru’s drug program after a plane carrying US missionaries was mistakenly shot down in April of 2001.


The Bush administration is holding Toledo to his pledge in September of 2002 to almost completely eradicate coca by 2006. But mere months afterward, Toledo still emits mixed signals to Washington while attempting to placate the coca growers by giving them until 2008 to phase out their coca leaf cultivation. This adds to the existing ill-feeling between Washington and Lima over the long simmering Lori Berenson case, in which Toledo has adamantly refused to release the jailed New Yorker - allegedly complicit in underground attacks by Tupac Amaru guerrillas - even though similarly accused Peruvian defendants have long since been pardoned.


Following the lead of their Bolivian counterparts, in recent years Peru’s approximately 200,000 coca growers have begun to flex their political muscle, using blockades and marches in both 2002 and 2003 against Washington’s mandated policy of eradication. As human rights groups have pointed out, Peru’s forced eradication policy – as with its neighbor Bolivia – contributes to violations of human rights, adds to social unrest, and undermines democracy. Intense standoffs between protesting coca growers and security forces last January and February resulted in 70 injured and the arrest of cocalero leader Nelson Palomino. After a highly publicized march this past April to Lima in protest of Toledo’s eradication policy, as well as against the widespread corruption in alternative development programs, coca growers thought they had reached an agreement with Toledo on proposed revisions of existing laws affecting the cultivation of coca leaf. But they found out differently after they read the final version, which infuriated them.

In an atmosphere of growing nationalism and heightened anti-Americanism, Peru could lose the battle against narcotrafficking. It is likely that increased coca cultivation will contribute to the resurgence of the Shining Path, which has partially relied on narcotrafficking to help finance its operations. Toledo has given concessions to the coca growers out of a fear of their armed self-defense groups, which were first formed in the desperate days of the violent struggle against the Shining Path. Washington has contributed to Toledo’s dilemma by making its funding contingent upon Peru’s success in the Drug War. In fact, economic woes and drug issues converged when the U.S. reduced its 2004 aid in support of Peru’s anti-drug efforts from $135 million in 2003 to $116 million, due to Lima’s “lax efforts in fighting illegal drugs.” In any event, Toledo has managed to alienate both local coca growers as well as U.S. officials.


One senses that the noose may be tightening. If, as recently happened in Bolivia, Peru’s protesting sectors – striking teachers, globalization critics, militant coca growers and alienated indigenous leaders – find common cause by feeding their diverse grievances into a coordinated national coalition, and if Toledo’s growing list of political enemies remains determined to thwart his policies while the Shining Path makes gains, Toledo could be stuck “between the wall and the sword,” as Peruvians are wont to say.

One of COHA’s Andean specialists, Dr. Robert Albro, is available to be interviewed on today’s realities in Peru. He can be reached via email at

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