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At the
Crossroads - The García Government (1985-90)
As Alán García took office on 28 July 1985 - at
thirty-six the youngest chief
executive to assume power in Peru's history - he seemed to awaken hope among Peruvians for the future. Although he had no previous
experience in elected office, he possessed, as his decisive electoral
victory illustrated, the necessary charisma
to mobilise Peruvians to confront their problems. At the same time, the
governing APRA party won a majority
in the new Congress, assuring the new president support for his program
to meet the crisis.
The
crisis seemed daunting indeed. The
foreign
debt stood at over USD 13 billion, real wages had eroded by 30
percent since 1980, prices for Peru's exports on the world market
remained low, the economy was gripped in recession, and guerrilla
violence was spreading. The future of Peru's fledgling re-democratisation
now hinged on García's ability to reverse these trends and, at bottom,
to restore sustained economic growth and development
The
Honeymoon
By 1985 García and APRA were well-positioned to
win the presidential elections. García was a charismatic orator who was
convinced that he needed to "open up" APRA in order to win the
nation's vote. He dropped all
of APRA's sectarian symbols, such as the Aprista version of the
Marseillaise and its six-pointed star, and replaced them with the
popular song, "Mi Perú," and with slogans such as "my
commitment is with all Peruvians." His attacks on neo-liberal
economics were directed primarily at foreign capital and the
International Monetary Fund (IMF), a convenient beating board because
Peru was unlikely to get any capital inflow in the near future; he
carefully avoided attacks on domestic capital.
Thus, while cultivating the image of a radical among the poor, García
also was perceived as the “mal menor,” or “lesser evil,” by the
private sector, as opposed to the Marxist left. Finally, even
conservatives recognised the need for reform in Peru by 1985, given the
increasing presence of the maoist guerrtilla movement
“Sendero Luminoso.”
The first two years of the APRA government were a honeymoon
of sorts. García enjoyed unprecedented
popularity ratings of over 75 percent, owing in part to his populist
personality and oratorical talents, and in part to the “concertación”
strategy (i.e. a political strategy based on
“agreements” and “compromises”)
the government pursued It was
highly successful as a short-term
strategy for a severely depressed economy, but obviously had its limits
as a long-term plan. The private sector, meanwhile, gave García and his
“concertación” strategy cautious support.
By mid-1987 it was clear that “concertación”
had run its course, and a change of emphasis was necessary. At the same
time, García was also under pressure from the left and from some
sectors within his own party to implement more radical structural change.
In June 1987 he suffered a defeat within the party when his main rival,
former Prime Minister Luis Alva
Castro, was elected president of the Chamber of Deputies. García at
this point opted for a radical measure that was intended to retake the
political initiative from his rivals.
Political
Polarisation
In his annual Independence Day address on 28 July
1987, García announced the surprise nationalisation
of the nation's banks. The measure was designed with a small group of
advisers in the two weeks prior to its announcement, and few members of
the APRA party or government were consulted. For example, the
octogenarian vice president of the Republic, Luis Alberto Sánchez,
learned of the measure just prior to García's announcement, and he was
told by none other than former president Belaúnde. The measure in and
of itself may not have been all that significant because only
20 percent of the nation's banks remained in private hands in 1987.
However, the manner in which García presented it clearly indicated a
change of political course. His rhetoric pitted the rich, lazy bankers
against the poor, exploited people, and from that point on he began to
speak of the "bad"
capitalists. He launched a tirade of attacks on the domestic private
sector, using precisely the kind of rhetoric he had avoided in the campaign and for the first two years of his
presidency.
The private sector's fragile trust in García and the historically
confrontational APRA was undermined. This was exacerbated by the manner
in which APRA silently supported the measure, and those members of the
party who spoke out against the measure were expelled. Foremost among
these was the influential senator Jorge Torres Vallejo, who ironically
was the person who launched García's candidacy as secretary general of
APRA in 1983.
The measure marked the beginning of the end. Political
polarisation set in, and the government increasingly lost coherence.
The then moribund right found a cause and a candidate for its renovation,
and latched onto the protest movement against the measure that was
launched by world famous novelist Mario
Vargas Llosa and his Liberty Movement. The left had no real cause to
support the measure or to ally with the highly sectarian APRA. The poor,
who lacked savings accounts, were hardly likely to rally to García's
cause. The private sector withdrew its plans for investment as economic
policy-making fell prey to political infighting in APRA and to García's
own erratic behaviour. In September 1988, the time when an austerity
package was announced, García went into hiding in the palace and did
not appear for a period of over thirty days.
"…….
slipping away from the rest of the world."
Although reserves had run out, the government
continued to maintain unrealistic subsidies, such as the five-tier
exchange rate, funded by a growing fiscal deficit, which fueled hyperinflation.
This was exacerbated by the constant resource drain from inefficient
state enterprises, whose bureaucracy increased markedly during the APRA
government. The combination of hyperinflation and public sector debts
that could not be paid resulted in a state that virtually ceased to
function. Living standards dropped dramatically as real wages were
eroded by inflation, and services for the public, such as public
hospital staff, were curbed markedly. By the end of the APRA government,
shortages of the most basic goods, such as water and electricity, were
the norm. Harvard Economist Jeffrey D. Sachs, on a visit to Lima in June 1990, described the
country as "slipping away from the rest of the world."
To
make matters worse, a host of corruption scandals involving APRA became
publicly evident at this point. The atmosphere of chaos and economic
disorder, the virtual non-functioning of the state, and the perception
of corruption in the highest ranks of government and law enforcement all
served to discredit state institutions and political parties,
particularly APRA.
Economic decline was accompanied by a dramatic
surge in insurgent and criminal violence. In addition to violence from the SL and MRTA,
there was a rise in death squads linked to the government and armed
forces. These included the Rodrigo Franco Command. Deaths from political
violence in the 1980s approached 20,000, and in 1990 alone there were
3,384, a figure greater than that from Lebanon's civil war that year.
Peru also ranked as the country with the highest number of
disappearances in the world. In the context of political violence and
economic disorder, criminal violence also surged
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