Peru

WHEN Fernando Belaúnde Terry became constitutional President of Peru in July, 1963, the country was prosperous but deeply divided politically and socially. An ancient feud between the armed forces and APRA (American Popular Revolutionary Alliance, Peru’s labor party) had led to a military coup in 1962; the hopeless poverty of Indian communities in the high Andean valleys was provoking unrest and often “invasions” of feudal haciendas while the flourishing coast looked the other way.

Belaúnde promised sweeping reforms. Some, such as municipal elections, which had not been held for more than forty years, and the nationalization of the tax-collecting agency, an anachronism in the hands of private bankers, he was able to effect immediately. Others are proceeding more slowly. However, at midterm he is still President of Peru, and democracy is functioning in spite of inauspicious circumstances: a parliament where the opposition holds 110 of the 185 seats, and a Castro-inspired guerrilla campaign in the Andes during the latter half of 1965 serious enough to require the temporary suspension of civil rights.

The guerrilla bands are now officially “liquidated” in the mountains, although nuisance bombs still explode in Lima. It is difficult to assess their importance since the whole affair soon became a political football. When word of guerrilla activity in remote Andean valleys first reached Lima, the government dismissed it airily as the work of cattle rustlers or common bandits. The opposition blew it up into a threat to “turn the Andes into a Sierra Maestra,” and insisted on military intervention.

The military, at present politically cautious, have been very tight-lipped about their successful campaign. Whether guerrilla troops numbered in hundreds or dozens will probably never be known, but their activity has provided both an alert and a balm to Peruvians. Trained agitators identified among the slain prove that Peru is indeed a prime Communist target. Some agents are recruited among impoverished students in foreign cities such as Buenos Aires and Madrid. Peruvian universities have long been insufficient both in quality and quantity for the young people clamoring to enter; those who can scrape up a fare go abroad, where discontent festers on hunger and homesickness. A free ride to Cuba, a passport that leaves no trace, the comradeship of guerrilla schools, and the promise of leadership at home are tempting bait to dreary exiles. A recent law clamps down on any student suspected of having studied in Communist countries.

On the other hand, the miserable Indian communities have shown themselves remarkably impervious to Marxist blandishments. The guerrillas were plentifully supplied with cash; they paid the going price and more for all requisitions; yet they made few recruits and were denounced by those they sought to “liberate” whenever possible.

There is thus some time in hand for the peaceful revolution that is the burden of Belaundc’s program. Its progress, however, is hampered by various factors: he promised so much in a large family-sized package whose contents were tailored more by politics than planning that it is a fair target for the opposition; and Belaúnde himself, with a personal following rather than a party, lacks a coherent group of technical advisers and administrators to implement his program.

One of the victims of this situation is his pet project, Cooperación Popular, a self-help program in the ancient Inca tradition of communal labor; the government furnishes tools and technical advice to villages willing to provide labor and local building materials to build their own schools, roads, medical centers, and so forth. After a heartening start, this program is now withering for lack of budgetary support.

Land for those who work it

In the matter of agrarian reform, Belaúnde has had more legislative success. APRA has campaigned for it for thirty years and loyally cooperated in writing a moderate, practicable law which reconciles to a degree the need to maintain agricultural productivity and the treasury’s limited ability to compensate the owners and give the land to those who work it. The industrialized farms on the coast which produce Peru’s export crops, sugar and cotton, have been specifically excluded, but small sharecroppers, even on the coast, have been granted immediate title.

Expropriation elsewhere is to proceed by zones, depending on population pressures, use, and distribution of land — and, of course, politics. Compensation is to be paid in longterm bonds at low interest (for Peru). However, the bonds are negotiable and, in particular, may be used to obtain credit from the Industrial Bank for the financing of new factories, an ingenious device to make agrarian reform serve industrial development. The law was passed in May, 1964. So far, however, no land has been expropriated except the small sharecropper plots.

Fancy road

Belaúnde is an architect, and it is becoming increasingly apparent that his personal preoccupation is not so much with sweeping social reform as with building. His grand design is a road along the eastern slopes of the Andes linking virgin lands in Colombia, Ecuador, Peru, and Bolivia, where it would connect with the Santa Cruz railroad to Brazil. He waxes lyrical about the vast possibilities of this new frontier and is undaunted by the estimated $500 million and two decades it will take to build the road.

Peru, which imports a third of its food and has less cultivated acreage per inhabitant than India, indeed needs more land. Until now, emphasis has been on costly irrigation to make the coastal deserts bloom, usually for the benefit of large operators with the equipment to use such land to advantage. However, since Belaunde has for years been identified with this highway, the issue has become politically charged.

Work has begun on a section of road in the north, with access to the Amazon on the one hand and an existing penetration road on the other. American aid, which is substantial, was dramatized in December by an airlift across the Andes of 500 tons of road-building equipment, carried by Panama-based military planes.

Homes for the well-to-do

Other, less dramatic roads are also being built or improved, and the government is investing heavily in more traditional irrigation and hydroelectric projects. There is a boom in housing, both public and private, the greater part for the middle classes. In view of Lima’s appalling slums, this has led to some criticism. Officials maintain, however, that with high building costs due to antiquated techniques, expensive credit, and wages of a couple of dollars a day, it is difficult to build a house a laborer can afford. At least the squatters on a stinking garbage dump in old Lima are being relocated, thanks to a grant from the Social Progress Fund of the InterAmerican Development Bank. But the projected 15,000 dwellings for workers over the next three years will only begin to meet the need: in Lima alone nearly one million people, or half the population, live in slums.

While mortgage funds guaranteed by AID are channeled into lowermiddle-class homes, available Peruvian resources are concentrated at the top of the scale, particularly for a posh development called San Felipe, in the heart of residential Lima, a favorite showpiece of Belaúnde’s. In defense of this policy it can be argued that the newly emerging middle classes in this hitherto quasi-feudal country need encouragement too, since they are its most potent motor for progress.

And Peru is progressing remarkably, at least that third of it which participates in the economy. The growth rate has averaged nearly 6 percent over the past five years, and the sol has been stable since 1960. Business circles are in an expansive mood, and a trade mission of the U.S. Department of Commerce was enthusiastic about the possibilities for this free enterprise economy. Three new automobile assembly plants, investments in copper, iron, and phosphate mining, an important gas strike, and many hundreds of new light industrial plants gave vim to the economy.

However, at the beginning of 1966 certain clouds were apparent. Inflation, which had been held to an acceptable 6 to 10 percent in previous years, suddenly spurted to nearly 20 percent in 1965. The trade balance, generally favorable in the past, slipped into the red. Imports increased significantly, perhaps not only because of the demands of a growing industry but because “the dollar was the cheapest thing in Peru.” Exports suffered from low prices for sugar and cotton, compensated by high ones for expanding mineral production.

What chiefly worried Peruvians, however, was the disappearance of anchovies from their coastal waters during the fall. These small fish have provided the raw material for a $150 million fish-meal industry, the bonanza of the century and the backbone of the country’s foreign trade. Whether overfishing or simply a cyclical change in Pacific currents caused the 22 percent drop in the catch in 1965 is being hotly debated. The fish returned in December in some numbers, and Peruvians hope they will keep coming.

Not so easily wished away are the chronic deficit in the budget and the growing foreign debt. The debt has not yet reached the danger point in relation to export earnings, but bankers hold that too much of it is in small pieces, on too short terms— stopgap financing, not planned capital development.

If this is not proving to be the great reform administration that was once hoped for, there is, nevertheless, heartening progress in certain intangibles. The deep chasms that divided Peruvians seem to be gradually eroding. The ostracism of APRA, previously anathema both to the armed forces and to the propertied classes for differing reasons, is less absolute, thanks in part to APRA’s insistence on calling in the armed forces to deal with the guerrillas, but also to its parliamentary coalition with its mortal enemy, General Manuel Odría, the old dictator. This coalition may have damaged APRA among its faithful voters — the municipal elections in Dccember will tell — but it has given Peru a valuable experience in functioning parliamentary democracy of a kind hitherto unknown in Latin America. The disdain of the modern prosperous coast for the feudal Indian sierra also appears to be lessening. American Peace Corps volunteers, by living in primitive communities, may be teaching as much to upperclass Peruvians as to the Indians. Belaúnde’s own efforts to send university students to help in his Coopcración Popular have served the same purpose.

The American presence

Peru has long been one of our staunchest friends in Latin America. We could count on its vote in international councils; and anti-Yankeeism has been limited to the far left. However, in June, in the OAS, Peru voted with Mexico, Chile, and Uruguay against the inter-American force in Santo Domingo. In September, at the height of the guerrilla activity in Peru, parliament passed a unanimous resolution condemning the U.S. House resolution approving the use of force in an American nation threatened by a Communist take-over. Some observers feel that this new independence may not be altogether a bad thing. Instead of looking to the United States for aid — and prodding — in solving its tremendous social problems, Peru may be developing self-reliance and, eventually, solutions of its own.

In any case, American aid is not forthcoming as before, for reasons which have nothing to do with foreign policy but with a much dirtier subject — oil. The issue is a complicated one, involving the International Petroleum Company’s rich fields in northern Peru. These are not a concession but are held outright, with title going back to Peru’s war of independence. Because of this unusual situation, the tax position has always been difficult. It was submitted to arbitration in 1922, but this agreement, accepted then by Peru, was declared null by parliament in 1963. A new and apparently confiscatory royalty arrangement and a huge bill for back taxes have been presented to the company, in spite of the fact that I.P.C. has at times paid higher taxes than other companies with ordinary concessions, and sells almost all its oil in Peru, at the lowest prices in the hemisphere. Discussions have been going on for over two years although in 1963 Belaúnde promised to settle the matter “within ninety days.” Now each side has been backed into a corner from which it cannot gracefully withdraw.

I.P.C. is one of the most socially minded companies in Peru; its employees have demonstrated frequently against a government take-over. It is not standing on its legal rights as owner of the oil fields; on the contrary, it has been trying for years to transform these into a limited concession. However, it can neither admit that it has not loyally paid its taxes—it has—nor accept a royalty arrangement that would form a precedent in its dealings with other countries.

Belaúnde campaigned with bombastic nationalism on the oil question to woo votes from the more realistic APRA (we still need American capital and know-how in the oil business, APRA said). His long hesitation in settling the matter may indicate that he now has a better understanding of the issue, but he finds it difficult to relinquish his “anti-imperialist” posturing. APRA would gleefully gibe, and the leftwing elements in his own party might desert him.

The American government, for its part, is bound by the Hickenlooper amendment not to provide aid to countries expropriating American property without prompt and adequate compensation. Thus, in spite of sympathy for Peru’s development projects, no new grants or loans are being made.

In this situation the quiet competence of Ambassador John Wesley Jones is invaluable. In 1962 when the military annulled the elections, the then American ambassador was accused of having too openly shown his preference for APRA, whom the military wished to block; American aid was cut off entirely for several weeks. Today a less flamboyant American policy —• which many nevertheless believe to be misguided — coupled with the restraint of the Peruvian government, has prevented the issue from exploding.