Peru Table of Contents

The emergence of highly nationalistic forces in Peru's political system during the 1960s was accompanied by a marked shift in the nation's approach to foreign relations. A desire to alter Peru's traditionally passive role in foreign affairs, which had led to what was perceived as inordinate influence by foreign countries--and particularly the United States--in the political and economic life of the nation, became a central objective of the Velasco Alvarado regime. During the 1970s, Peru's military government sought an independent, nonaligned course in its foreign relations that paralleled the mixed socioeconomic policies of its domestic reform program. Diplomatic dealings and foreign trade were thus diversified; official contacts with the nations of the communist world, Western Europe, and Asia were significantly expanded during the decade, while the United States' official presence receded from its once predominant position. Multilateral relations, particularly with Latin American neighbors that shared economic and political interests common to many Third World nations, also assumed a new importance.

Peru's foreign policy initiatives were undertaken in part as an effort to gain international support for the military government's experiment in "revolution from above." The initial success of many programs of the military government brought it considerable international prestige and thus, during the early 1970s, Peru became a leading voice for Third World nations. As the fortunes of the Peruvian experiment fell during the late 1970s, however, its international profile receded markedly. The Belaúnde government deemphasized further the nonaligned stance of the military government while working toward closer relationships with the United States and the nations of Latin America.

Foreign Relations Under García

Traditionally, Peru was an active and initiating member of regional multilateral organizations, such as the Andean Pact. Yet, the nation's economic crisis and García's loss of prestige, both within and outside Peru, forced the country to turn inward and abandon its high-profile stance. Peru's stance on the international front was influenced to a great extent by the rise and fall of García's anti-imperialist strategy. His antiimperialist and anti-IMF rhetoric, as well as his unilateral limitation of debt payments, placed a major strain on relations with the international financial community and the United States in particular.

Under Belaúnde, a de facto moratorium on debt service already had existed. By 1985 it was clear that no new capital was headed in Peru's direction, and that the country could not afford to pay its debt. García took an openly confrontational approach, with the hope that the rest of Latin America would follow. At the time, there were speculations that the threat posed by García was one reason the Ronald Reagan administration (1981-89) presented the Baker debt-reduction plan in October 1985.

Although García's debt policy limited payments to 10 percent of export earnings, in reality the government paid approximately 20 percent for the first few years, but then stopped making any payments at all. García's insistence on maintaining a confrontational stance, even after its political utility was exhausted, was counterproductive. On several occasions, accords in principle with the IMF were prepared with representatives of the APRA government and the IMF, and then cancelled at the last minute by García. García's stance initially had some appeal among Third World debtor countries, and a few even followed his example. As the limits to Peru's economic strategy became evident both at home and abroad, however, his stubborn adherence to the policy became the subject of ridicule rather than respect. Peru was declared ineligible for IMF funds in August 1986, and was threatened with expulsion from the organization in October 1989.

García also made heightening Peru's visibility in the Nonaligned Movement and in the Socialist International a priority. Ties were expanded with a number of Third World socialist nations, including Angola, Mozambique, and Zimbabwe; and García took a staunchly pro-Sandinista position in the Central American conflict. Improving Peru's relations with its neighbors, particularly Ecuador and Chile, was also a priority early on. Although some productive discussions were held with Ecuador, including a historic visit by Peru's minister of finance to Quito in October 1985, progress was limited by competition with both the Ecuadorian and Chilean military establishments. García's attempts to curb military expenditures were not reciprocated by Chile, for example.

As the economic crisis in Peru deepened, meanwhile, García took a lower profile stance on the foreign policy front. Relations with the United States remained remarkably good despite García's stances on debt and on Central America. This was in part owing to Washington's desire to maintain good bilateral relations because of the threat of instability caused by the SL. Thus, foreign aid flows were maintained despite Peru's violation of the Brooke Alexander Amendment, which makes a country ineligible for United States aid if it is over a year late in repaying military assistance. García's willingness to collaborate, at least rhetorically, on the drug issue, in sharp contrast to his stance on debt, helped ameliorate relations. Finally, relations were maintained owing to a good working relationship between United States ambassador Alexander Watson and President García.

Peru's relations with its neighbors were strained also by the extent of the economic crisis and the cholera epidemic. In late 1989, over 6,000 Peruvians crossed the border to Chile in order to buy bread, which was scarce and expensive in Peru. Chile's dictator Augusto Pinochet Ugarte (1973-90), when campaigning prior to the 1988 plebiscite, warned of the dangers of populist democracy by pointing out neighboring Peru. Contraband trade along the Chilean and Ecuadorian borders at times has been a contentious issue. Another concern were the thousands of Peruvians emigrating to neighboring countries seeking employment. The fear of the spread of subversion over neighboring borders also worried Peru's neighbors, a concern heightened by events such as the SL's assassination of a Peruvian military attaché in La Paz, and by the MRTA's support of the 19th of April Movement (Movimiento 19 de Abril--M-19), a Colombian guerrilla group.

Foreign Relations Under Fujimori

Fujimori set out to repair Peru's foreign relations, particularly with its creditors. He campaigned on, and was committed to, a strategy of "reinsertion" into the international financial community. This commitment forced him to change his adherence to "gradualist" economics and to open dialogue with the major multilateral institutions.

Peru's foreign relations situation changed dramatically with the April 5 self-coup. The international community's reaction was appropriately negative. Most international financial organizations delayed planned or projected loans, and the United States government suspended all aid other than humanitarian assistance. Germany and Spain also suspended aid to Peru. Venezuela broke off diplomatic relations, and Argentina withdrew its ambassador. The coup threatened the entire economic recovery strategy of reinsertion. In addition, the withdrawal of aid by key members of Peru's support group made the process of clearing arrears with the IMF virtually impossible. Yet, despite international condemnation, Fujimori refused to rescind the suspension of constitutional government, and the armed forces reasserted their support for the measures.

Even before the coup, relations with the United States were strained, because they were dominated by the drug issue and Fujimori's reluctance to sign an accord that would increase United States and Peruvian military efforts in eradicating coca fields. Although Fujimori eventually signed the accord in May 1991 in order to get desperately needed aid, the disagreements did little to enhance bilateral relations. The Peruvians saw drugs as primarily a United States problem, and the least of their concerns, given the economic crisis, the SL, and the outbreak of cholera.

The cholera outbreak at first resulted in neighboring countries' banning Peruvian food imports, further straining relations. Even after the ban was lifted for certain products, fear of the spread of cholera was confirmed by cases reported in Colombia, Ecuador, Chile, and Brazil.

By the early 1990s, economic trends in Latin America were moving increasingly toward free-trade agreements with the United States and regional market integration, such as the Southern Cone Common Market (Mercado Común del Sur-- Mercosur). Although the Andean Pact agreed to form a common market in late 1990, Peru's role, owing to the extent and nature of its crisis, remained marginal, at least in the short term. Fujimori was so overwhelmed with domestic problems early into his government, moreover, that he was unable to attend the Group of Eight meeting in late 1990.

Although Peru could have been eligible for special drugrelated assistance and trade arrangements with the United States under the Andean Initiative, Peruvian-United States relations were hardly smooth on the drug front during Fujimori's first year in office. Peru's eligibility for debt reduction and grants for investment-related reforms under the George H.W. Bush administration's Enterprise for the Americas Initiative, meanwhile, were restricted by its arrears with multilateral credit agencies and private banks.

On the debt front, relations with international institutions were improving, and after six months of negotiations, Peru was able to obtain the US$800-million bridge loan required to re-establish its borrowing eligibility from the IMF. Yet, Peru still had to pay US$600 million to international creditors. It seemed that for the foreseeable future, any credit inflows would merely be recycled to pay existing debts and arrears. Prior to the coup of April 5, 1992, however, almost all of the US$1.3 billion necessary to clear arrears with the IMF had been attained.

Peru had established a strong military relationship with the Soviets and Eastern Europe during the Velasco years, and was the Soviets' largest military client on the continent in the 1970s. Owing to a reliance on Soviet military equipment, this relationship has continued, although Peru has diversified its source of supply of weapons to countries ranging from France to North Korea. In addition, like its relationship with Cuba, Peru's relationship with the Soviets is certain to diminish in importance as both countries turn inward to deal with domestic crises and economic rather than strategic issues dominate the agenda. Reflecting this change is a new importance placed on relations with the United States and also with Japan, largely because of Fujimori's heritage and the emphasis that he himself placed on the Japanese role during the electoral campaign. More than anything else, Peru's foreign relations were expected to be dominated by the nation's need for foreign aid, capital, and credit, all of which hinged on the republic's solving its internal economic problems, cooperating with the United States on the drug issue, and dealing with the challenge from insurgent groups. Additionally, most of the international community remained unwilling to provide credit or aid until democratic government was restored.

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Source: U.S. Library of Congress