In 1990 Peru's political spectrum and party system were polarized to an unprecedented degree. In addition, the vote for Fujimori was to a large extent a vote against the shock stabilization plan that Vargas Llosa had proposed to implement. After less than a month in government, however, Fujimori was convinced--both by domestic advisers and prominent members in the international financial community--that he had to implement an orthodox shock program to stabilize inflation and generate enough revenue so that the government could operate. During his visits to the United States and Japan in July 1990, it was made very clear to Fujimori that unless Peru adopted a relatively orthodox economic strategy and stabilized hyperinflation, there would be no possibility of Peru's reentry into the international financial community, and therefore no international aid. At this point, Fujimori opted for an orthodox approach and appointed Juan Carlos Hurtado Miller as minister of economy and prime minister. Later that month, many of Fujimori's original advisers, who were heterodox economists, left the Cambio team. Thus, on August 8, 1990, Fujimori implemented precisely the program that he had campaigned against.

The shock program was more extreme than even the most orthodox IMF economist was recommending at the time. Plans for liberalization of the trading system and for privatization of several state industries were made for the near future. Overnight, Lima became a city which had, in the words of several observers, "Bangladesh salaries with Tokyo prices."

Despite widespread fears that the measures would cause popular unrest, reaction was surprisingly calm for several reasons. First of all, the measures were so extreme that they made day-to-day economic survival the primary concern of the majority of the population, including the middle class. Taking time to protest was an unaffordable luxury. Second, street protest and violence were increasingly associated with insurrectionary groups and political violence, with which the average Peruvian had no desire to be associated. Third, the benefits from ending hyperinflation and recovering some sort of economic stability were immediately evident to Peruvians at all levels, even the very poor. Even several months after the shock, the most popular man in Peru was the architect of the program, Hurtado Miller. Although Fujimori's popularity suffered a decline after his first few months in office, it was not necessarily a result of the economic program. Finally, and perhaps most importantly, most people voted for Fujimori not only because of his vague promises, but also because of the perception that, unlike Vargas Llosa, he was much more a man of the people. Thus, his implementing an "antipopular" economic program was far more acceptable politically than Vargas Llosa's doing virtually the same thing.

Prospects for the Fujimori Government

In some ways, these trends signified positive prospects for the Fujimori government. The degree of consensus on the economic approach was remarkable for a country as polarized both ideologically and politically as Peru. Fujimori's original cabinet was an eclectic and pragmatic one, which included members of virtually all political camps. Despite this diversity, a consensus eventually emerged.

Yet, there were some extremely worrisome trends as well. In addition to the economic shock program, the government promised a social emergency program to protect the poorest by providing temporary food aid and employment. However, no such program materialized over a year into the government. Although this was explained in part by resource constraints, it was also explained, in large part, by lack of political will, as no one person had any bureaucratic responsibility for the needs of the poor.

In other countries implementing shock economic programs, temporary measures to compensate the poor have played important social welfare and political roles in making economic reform more acceptable and viable. In addition, they have played an important role in providing foreign donors with a single bureaucratic entity through which to channel necessary aid. The lack of such a program on any significant scale in Peru was unfortunate, as socioeconomic indicators had already deteriorated markedly prior to the adjustment program, and in areas where the threat of increasing insurrectionary violence was a realistic one.

Despite the new political dynamics, the tradition of centralized and authoritarian presidential leadership remained intact. Fujimori had a strong tendency to attempt to control his ministers and to appoint loyalists. Some of the most talented and independent-minded ministers left the cabinet after a few months because Fujimori undermined their authority. These included Carlos Amat y León y Chávez, the minister of agriculture; Gloria Helfer Palacios, the minister of education; Carlos Vidal Layseca, the minister of public health; and even Prime Minister Hurtado himself in March 1991. After Hurtado's resignation, Fujimori separated the positions of prime minister and economics minister, presumably so that he could have more relative control than he had with the popular Hurtado. Also telling was Fujimori's insistence on the appointment of Jorge Chávez Alvarez, a young and relatively inexperienced doctoral student, as president of the Central Bank, despite the misgivings of virtually all respected economists. Chávez was seen as a Fujimori loyalist through whom the president could manipulate and control the Central Bank.

In addition, Fujimori's need to make an "unholy" alliance with APRA in Congress to get measures passed acted as a barrier to the reform of the state sector. APRA had been the only political force to back the Chávez appointment, and it was widely perceived that Fujimori would have a political price to pay for that backing in the future. Indicative of the price was a debate within the Ministry of Education, in which Fujimori supported APRA against his own minister, Gloria Helfer. She was trying to trim the size of the ministry, which had grown to unrealistic proportions during the APRA government owing to its filling of posts for party reasons. The row resulted in the resignation of Helfer and a stalling of the reform of the public education sector.

The age-old tradition of centralism also prevailed. For financial reasons and lack of political will, the regionalization process was stalled. Under existing conditions, regional governments were little more than politicized bureaucracies.

Finally, and most worrisome, was the resurgence of another tradition in Peru--government reliance on the military for power. Fujimori lacked any institutionalized base and had cultivated strong ties with the military by granting it what it wished, as demonstrated by his attempt to legalize its impunity through Decree Law 171.

There are many plausible explanations for the autogolpe. The most significant one, which has been noted here, was Fujimori's lack of organized or party-based support, resulting in his increasing reliance on the armed forces and on rule by decree. By early 1992, APRA stopped supporting Fujimori and coalesced the opposition in Congress, somewhat ironically, under the leadership targeted by government repression after the coup, indicative of the extent to which the government felt threatened by APRA opposition. In March there had been a politically damaging scandal among Fujimori's close circle of advisors, in which his wife publicly accused his brother, his closest advisor, of misuse of foreign aid donations. Another of Fujimori's close advisors, Vladimiro Montesinos Torres, the de facto head of the National Intelligence Service (Servicio de Inteligencia Nacional--SIN), had been pressuring the president for some time to free the counterinsurgency struggle from judicial interference. This coincided with a major SL assault on the city of Lima. At the same time, relations with the United States were at an all-time low owing to disagreements over counternarcotics strategy, possibly leading Fujimori to conclude that there was not all that much to lose from jeopardizing relations with the United States.

There was the possibility that Fujimori would abide by the timetable that he set out and reinstate the parliament one year later. Yet, the undermining of the constitutional system had farreaching costs. First, democratic development is not attained by rescinding the constitution and the institutions of government whenever a crisis is perceived. Second, Fujimori had been able to pass virtually all the laws pertaining to his economic program by the decree powers awarded to him by the Congress; continuing the economic program was not the reason for its closing. If anything, the program was seriously jeopardized by the international isolation that the coup precipitated, owing to the critical role that international financial support played. Third, the elimination of important constitutional rights, such as habeas corpus, for over a year was likely to result in a worsening of Peru's already poor human rights record. The coup also played into the SL's strategy of provoking a coup in order to polarize society into military and nonmilitary camps. Finally, a yes or no plebiscite is a tool that has been used to establish popular support by a number of dictators, including Benito Mussolini and Ferdinand Marcos. Given short-term popular support for almost any kind of drastic solution to Peru's many problems, there was a very high risk that Fujimori and the military would use the plebiscite as a tool to justify further undermining Peru's constitutional system.

Peru was clearly in a critical situation, where extreme economic deterioration and spiraling political violence had to be reversed as a prerequisite to democratic consolidation. Neither was a simple process, and there was no guarantee that Peru's fragile institutions would survive the challenge; they were jeopardized severely by the measures taken on April 5, 1992. In the short term, in addition to the rapid restoration of constitutional democracy, an important first step would be a more visible and tangible commitment to the poorest sectors, which were suffering the most from the economic program, had the smallest margin for deterioration in their living standards, and were the primary focus of insurgent groups as well. The outbreak of a cholera epidemic in 1991 was a prime example of the extent to which social welfare infrastructure and other needs of the poor had been sorely neglected for several years. Otherwise, despite all good intentions on the economic front, the social peace necessary to reestablish and consolidate democratic government would be unattainable.

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Source: U.S. Library of Congress