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Failed
Reform and Economic Decline (1968 – 1985)
The
military intervention and its reformist orientation represented changes
both in the armed forces and Peruvian society. Within the armed forces,
the social origins of the officer corps no longer mirrored the
background and outlook of the creole upper classes, which had
historically inclined the officers to follow the mandate of the
oligarchy. Reflective of the social changes and mobility that were
occurring in society at large, officers now exhibited middle- and lower
middle class, provincial, “mestizo” or “cholo” backgrounds.
General Velasco, a “cholo” himself, had grown up in
humble circumstances in the northern department of Piura and
purportedly went to school barefoot.
Moreover, this generation of officers had fought and defeated the
guerrilla movements in the backward “Sierra”. In the process, they
had come to the realisation that internal peace in Peru depended not so
much on force of arms, but on implementing structural
reforms that would relieve the burden of chronic poverty and
underdevelopment in the region. In short, development, they concluded,
was the best guarantee for national security.
The
Belaúnde government had originally held out the promise of reform and
development, but had failed. The military attributed that failure, at
least in part, to flaws in the democratic political system that had
enabled the opposition to block and stalemate reform initiatives in
Congress. As nationalists,
they also abhorred the proposed pact with the IPC and looked askance at
stories of widespread corruption in the Belaúnde government.
Military
Reform from Above – from General Velasco Alvarado …..
Velasco
moved immediately to implement a radical
reform program, which seemed, ironically, to embody much of the
original 1931 program of the army's old nemesis, APRA. His first act was
to expropriate the large
agro-industrial plantations along the coast. The agrarian reform that
followed (“Ley de Reforma Agraria No.
17716” of 24 June 1969) the
most extensive in Latin America outside of Cuba, proceeded to destroy
the economic base of power of the old ruling classes, the export
oligarchy, and its “gamonal” allies in the “sierra”. By 1975
half of all arable land had been transferred, in the form of various
types of co-operatives, to over 350,000
families comprising about one fourth of the rural population, mainly
estate workers and renters (“colonos”). Agricultural output tended
to maintain its rather low pre-reform levels, however, and the reform
still left out an estimated one million seasonal workers and only
marginally benefited “campesinos” in the native communities (about
40 percent of the rural population).
The
Velasco regime also moved to dismantle the liberal, export model of development that had reached
its limits after the long post-war expansion. The state now assumed, for
the first time in history, a major role in the development process. Its
immediate target was the foreign-dominated sector, which during the
1960s had attained a commanding position in the economy. At the end of
the Belaúnde government in 1968, three-quarters of mining, one-half of
manufacturing, two-thirds of the commercial banking system, and one-third
of the fishing industry were under direct
foreign control.
Velasco
reversed this situation. By 1975 state enterprises accounted for more
than half of mining output, two-thirds of the banking system, a fifth of
industrial production, and half of total productive investment.
Velasco's overall development strategy was to shift from a laissez-faire
to a "mixed" economy, to replace export-led development with
import-substitution industrialisation. At the same time, the state
implemented a series of social
measures designed to protect workers and redistribute
income in order to expand the domestic market.
In the realm of foreign policy,
the Velasco regime undertook a number of important initiatives. Peru
became a driving force not only behind the creation of an Andean
Pact in 1969 to establish a common market with co-ordinated trade
and investment policies, but also in the movement
of non-aligned countries of the Third World. Reflecting a desire to
end its perceived dependency economically and politically on the United
States, the Velasco government also moved to diversify its foreign
relations by making trade and aid pacts with the Soviet Union and East
European countries, as well as with Japan and West European nations.
Finally, Peru succeeded during the 1970s in establishing its
international claims to a 303-kilometer territorial limit in the Pacific
Ocean.
….
to General Morales Bermúdez
By
the time Velasco was replaced on 29 August 1975, by the more conservative
General Francisco Morales Bermúdez
Cerrutti, his reform program was already weakening. Natural
calamities, the world oil embargo of 1973, increasing international
indebtedness (Velasco had borrowed heavily abroad to replace lost
investment capital to finance his reforms), overbureaucratisation, and
general mismanagement had
undermined early economic growth and triggered a serious inflationary
spiral. At the same time, Velasco, suffering from terminal cancer, had
become increasingly personalistic and autocratic, undermining the
institutional character of military rule. Unwilling to expand his
initial popularity through party politics, he had created a series of
mass organisations, tied to the state in typically corporatist (see
Glossary) and patrimonialist fashion, in order to mobilise support and
control the pace of reform. However, despite his rhetoric to create
truly popular, democratic organisations, he manipulated them from above
in an increasingly arbitrary manner. What had begun as an unusual
populist type of military experiment evolved into a form of what
political scientist Guillermo O'Donnell calls "bureaucratic
authoritarianism," with increasingly authoritarian and
personalistic characteristics that were manifested in "Velasquismo.”
Velasco's
replacement, General Morales Bermúdez, spent most of his term
implementing an economic austerity
program to stem the surge of inflation. Public opinion increasingly
turned against the rule of the armed forces, which it blamed for the
country's economic troubles, widespread corruption, and mismanagement of
the government, as well as the general excesses of the "revolution."
Consequently, Morales Bermúdez prepared to return the country to the
democratic process.
The
Elections of 1978 and 1980
Elections
were held in 1978 for a Constituent Assembly empowered to rewrite the constitution. Although
Belaúnde's AP boycotted the election, an array of newly constituted
leftist parties won an unprecedented 36 percent of the vote, with much
of the remainder going to APRA. The Assembly, under the leadership of
the aging and terminally ill Velasco (who would die in 1980), completed
the new document in 1979. Meanwhile, the popularity of former president
Belaúnde underwent a revival. Belaúnde was decisively re-elected
president in 1980, with 45 percent of the vote, for a term of five years.
Return
to Democratic Rule
Belaúnde
inherited a country that was vastly different from the one he had
governed in the 1960s. Gone was the old export oligarchy and its
“gamonal” allies in the “Sierra,” and the extent of foreign
investment in the economy had been sharply reduced. In their place,
Velasco had borrowed enormous sums from foreign banks and so expanded
the state that by 1980 it accounted for 36 percent of national
production, double its 1968 share. The informal sector of small- and
medium-sized businesses outside the legal, formal economy had also
proliferated.
By
1980 Belaúnde's earlier reforming zeal had substantially waned,
replaced by a decidedly more conservative orientation to government. A
team of advisers and technocrats, many with experience in international
financial organisations, returned home to install a neoliberal economic
program that emphasised privatisation of state-run business and, once
again, export-led growth. In an effort to increase agricultural
production, which had declined as a result of the agrarian reform, Belaúnde
sharply reduced food subsidies, allowing producer prices to rise.
However,
just as Velasco's ambitious reforms of the early 1970s were eroded by
the 1973 world-wide oil crisis, Belaúnde's export strategy was
shattered by a series of natural calamities and a sharp plunge in
international commodity prices to their lowest levels since the Great
Depression. By 1983 production had fallen 12 percent and wages 20
percent in real terms while inflation once again surged.
Unemployment
and underemployment was rampant, affecting perhaps two-thirds of the
work force and causing the minister of finance to declare the country in
"the worst economic crisis of the century." Again, the
government opted to borrow heavily in international money markets, after
having severely criticised the previous regime for ballooning the
foreign debt. Peru's total foreign debt swelled from USD 9.6 billion in
1980 to USD13 billion by the end of Belaúnde's term.
The
economic collapse of the early 1980s, continuing the long-term cyclical
decline begun in the late 1960s, brought into sharp focus the country's
social deterioration, particularly in the more isolated and backward
regions of the “Sierra”. Infant mortality rose to 120 per 1,000
births (230 in some remote areas), life expectancy for males dropped to
58 compared with 64 in neighbouring Chile, average daily caloric intake
fell below minimum United Nations standards, upwards of 60 percent of
children under five years of age were malnourished, and underemployment
and unemployment were rampant.
The
“Shining Path” ….
Such
conditions were a breeding ground for social and political discontent,
which erupted with a vengeance in 1980 with the appearance of the
Shining Path (“Sendero Luminoso”). Founded in the remote and
impoverished department of Ayacucho by Abimáel
Guzmán Reynoso, a philosophy professor at the University of
Huamanga, the SL blended the ideas of Marxism Leninism, Maoism, and
those of José Carlos Mariátegui,
Peru's major Marxist theoretician. Taking advantage of the return to
democratic rule, the deepening economic crisis, the failure of the
Velasco-era reforms, and a generalised vacuum of authority in parts of
the Sierra with the collapse of “gamonal” rule, the “Sendero
Luminoso” unleashed a virulent and highly effective campaign of terror
and subversion that caught the Belaúnde government by surprise.
After
first choosing to ignore the “Sendero Luminoso” and then relying on
an ineffective national police response, Belaúnde reluctantly turned to
the army to try to suppress the rebels. However, that proved extremely
difficult to do. The “Sendero Luminoso” expanded its original base
in Ayacucho north along the Andean spine and eventually into Lima and
other cities, gaining young recruits frustrated by their dismal
prospects for a better future. To further complicate pacification
efforts, another rival guerrilla group, the Túpac Amaru Revolutionary
Movement (“Movimiento Revolucionario Túpac Amaru” / MRTA), emerged
in Lima.
Counterinsurgency
techniques, often applied indiscriminately by the armed forces, resulted
in severe human rights violations against the civilian population and
only created more recruits for the “Sendero Luminoso”. By the end of
Belaúnde's term in 1985, over 6,000 Peruvians had died from the
violence, and over USD 1 billion in property damage had resulted.
Strongly criticised by international human rights organisations, Belaúnde
nevertheless continued to rely on military solutions, rather than other
emergency social or developmental measures that might have served to get
at some of the fundamental, underlying socio-economic causes of the
insurgency.
The
severe internal social and political strife, not to mention the
deteriorating economic conditions, manifested in the Shining Path
insurgency may have contributed in 1981 to a flare-up of the border
dispute with Ecuador in the disputed Marañón region. Possibly looking
to divert public attention away from internal problems, both countries
engaged in a brief, five-day border skirmish on the eve of the thirty-ninth
anniversary of the signing of the 1942 Protocol of Rio de Janeiro.
Peruvian forces prevailed, and although a cease-fire was quickly
declared, it did nothing to resolve the two opposing positions on the
issue of the disputed territory. Essentially, Peru continued to adhere
to the Rio Protocol by which Ecuador had recognised Peruvian claims. On
the other hand, Ecuador continued to argue that the Rio Protocol should
be renegotiated, a position first taken by President Velasco Ibarra in
1960 and adhered to by all subsequent Ecuadorian presidents.
…..
and Drug Trafficking
Along
with these internal and external conflicts, Belaúnde also confronted a
rising tide of drug trafficking during his term. Coca had been
cultivated in the Andes since pre-Columbian times. The Inca elite and
clergy used it for certain ceremonies, believing that it possessed
magical powers. After the conquest, coca chewing, which suppresses
hunger and relieves pain and cold, became common among the oppressed
indigenous peasantry to deal with the hardships imposed by the new
colonial regime, particularly in the mines. The practice has continued,
with an estimated 15 percent of the population chewing coca on a daily
basis by 1990.
As
a result of widespread cocaine consumption in the United States and
Europe, demand for coca from the Andes soared during the late 1970s.
Peru and Bolivia became the largest coca producers in the world,
accounting for roughly four-fifths of the production in South America.
Although originally produced mainly in five highland departments,
Peruvian production has become increasingly concentrated in the Upper
Huallaga Valley, located some 400 kilometres northeast of Lima. Peasant
growers, some 70,000 in the valley alone, are estimated to receive
upwards of USD 240 million annually for their crop from traffickers -
mainly Colombians who oversee the processing, transportation, and
smuggling operations to foreign countries, principally the United States.
After the cultivation of coca for narcotics uses was made illegal in
1978, efforts to curtail production were intensified by the Belaúnde
government, under pressure from the United States. Attempts were made to
substitute other cash crops while police units sought to eradicate the
plant. This tactic only served to alienate the growers and to set the
stage for the spread of the “Sendero Luminoso” movement into the
area in 1983-84 as erstwhile defenders of the growers. By 1985 the
“Sendero Luminoso” had become an armed presence in the region,
defending the growers not only from the state, but also from the
extortionist tactics of the traffickers. The “Sendero Luminoso”,
however, became one of the wealthiest guerrilla movements in modern
history by collecting an estimated USD 30 million in "taxes"
from Colombian traffickers who controlled the drug trade.
From
Belaúnde to Alán García
As
the guerrilla war raged on and with the economy in disarray, Belaúnde
had little to show at the end of his term, except perhaps the
reinstitution of the democratic process. During his term, political
parties had re-emerged across the entire political spectrum and
vigorously competed to represent their various constituencies. With all
his problems, Belaúnde had also managed to maintain press and other
freedoms (marred, however, by increasing human rights violations) and to
observe the parliamentary process. In 1985 he managed to complete his
elected term, only the second time that this had happened to an elected
President in forty years.
After
presiding over a free election, Belaúnde turned the presidency over to
populist Alan García Pérez of APRA who had swept to victory with 48
percent of the vote. Belaúnde's own party went down to a resounding
defeat with only 6 percent of the vote, while the Marxist United Left
(“Izquierda Unida”) received 23 percent. The elections revealed a
decided swing to the left by the Peruvian electorate. For APRA García's
victory was the culmination of more than half a century of political
travail and struggle.
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