https://nyti.ms/29rF8g8 ArchivE | 1989 PERU FIGHTS TO OVERCOME ITS PAST By ALAN RIDING: ALAN RIDING WAS CHIEF OF THE TIMES'S BUREAU IN RIO DE JANEIRO FROM JANUARY 1984 TO MARCH 1989. HE IS CURRENTLY BASED IN ROME and REPORTING ON THE MEDITERRANEAN REGION FOR THE TIMES. LONELY AND DEPRESSED, BROODING on the perfidy of a nation that once worshiped him, Peru's young President, Alan Garcia Perez, rarely emerges these days from his ornate, 19th-century palace in the heart of Lima. Twice last year, he tried to resign. Earlier this year, a military coup looked imminent. Several times he told friends that he hoped to be ousted. But now, condemned to serve out his five- year term, he hides out from the anger and scorn of the vast majority of Peruvians. Beyond the palace, the country is in shambles. Inflation, running at 40 percent a month, has brought hunger, mass unemployment and a rash of company bankruptcies. Strikes regularly disrupt public services. Cocaine trafficking is flourishing. And in the vast rural and mountain areas of the nation, Maoist Shining Path guerrillas and a small band of pro-Cuban rebels are causing havoc, with little resistance from the armed forces. In another time, this vacuum of power would have cried out for a coup. Yet when the opportunity arose in January, Peru's top military commanders hesitated. Not only did American officials and opposition leaders of left and right speak up for democracy but, more important, the officers seemed intimidated by the prospect of taking over. With the country already sliding into chaos, most Peruvians were convinced that a coup would only make things worse. ''An interruption of our constitutional life could result in new guerrilla groups, it could give legitimacy to the Shining Path and it could set us on the road to civil war,'' 3 warned Edgardo Mercado Jarrin, a respected retired army general. ''Further, we SIGN UP Subscriber login ARTICLS RMAINING have no assurance that a military takeover will bring a regime that can maintain order and guarantee development.'' Yet the coup scare had its uses. Until recently, with Brazil, Mexico, Argentina and Venezuela all battered by economic recessions and political discontent, Peru seemed to be just one more besieged Latin American democracy. Suddenly it became apparent that Peru was caught up in a much more acute drama, in which not simply a government but an entire society was falling apart. For 18 months, disillusioned and embittered, Peruvians had blamed President Garcia for everything - for first raising and then dashing their dreams of peace and prosperity. But given the option of supporting his removal in a coup, they recognized the more fundamental nature of the crisis. ''It's not a problem of one man but of an entire social structure,'' one Latin American ambassador noted, echoing an emerging consensus. The Andean Sierras, long ignored by the white castes that have governed from the coast, are being rocked by violence and insurgency. Lima, once known as the City of Kings, is now ringed by smoldering slums housing hundreds of thousands of Indian and mestizo migrants. On its filthy downtown streets crowded with beggars, peddlars and freelance money-changers, Peru's deepening poverty is crudely on display. ''We're feeling the movement of geological plates deep inside the country's history and society,'' explained Rodrigo Montoya, a Peruvian anthropologist. ''Unavoidably, there will be a brutal confrontation from which a different country will emerge.'' Recognition of this has plunged Peruvians into gloom. For many, the country has become ungovernable and the future is simply unthinkable. PERU WAS ALREADY deeply troubled when Alan Garcia took office in July 1985. During the previous two decades, a succession of governments - both military and civilian, leftist and conservative - had ended in failure. By 1985, per capita income was down to 1965 levels, Peru had suspended payments on its $14 billion foreign debt and only the cocaine industry was booming. Having launched its rural offensive in 1980 and resisted the ''dirty war'' tactics adopted by the armed forces, the Shining Path insurgency was also continuing to grow. Yet the sense of betrayal that Peruvians feel toward Mr. Garcia today is a 3 measure of the impact he had on the country. During his election campaign, through SIGN UP Subscriber login ARTICLcS hRaMrAisINImNG a, oratory and infectious energy, the chubby-faced 39-year-old social democrat managed to force Peruvians to look to the future with optimism. After gaining a sweeping victory at the polls, he then made good on his dramatic promises. His strategy was unorthodox but not unreasonable. During his inaugural address, Mr. Garcia said Peru would limit foreign-debt payments to 10 percent of export revenues and would cut its defense budget. The resulting savings were channeled into the domestic economy, fueling a boom that brought 20 percent growth over two years. At the same time, he ordered price controls to attack triple- digit inflation, bringing additional relief to ordinary consumers. And when foreign banks and the International Monetary Fund isolated Peru from new credits, he was handed a convenient target for nationalist drum-beating. Those were indeed heady days. Abroad, Garcia was to be heard lecturing other Latin leaders on the merits of debt moratoriums and disarmament. Such was his popularity among the region's youth that he even saw himself as a latter-day Fidel Castro. At home, buoyed by 90 percent approval ratings and exuding the enthusiasm of a student leader, he poured out ideas on everything from family planning to archeology. On many afternoons, he would appear unannounced on the balcony of his palace and in no time a crowd would gather below to hear his latest thoughts. For the best part of two years, Garcia completely dominated Peruvian public life. The United Left coalition, which had finished second in the 1985 elections, was thrown onto the defensive by his radical populism. The conservative Popular Action and Popular Christian parties accepted that Peruvians were now predominantly leftist or left-of-center. Even Mr. Garcia's party, the American Popular Revolutionary Alliance, known as APRA, was forced to play second-fiddle. It had come to power for the first time since its founding in 1924, the President liked to recall, because Peruvians had voted for him. BUT GRADUALLY, Mr. Garcia's juggling act became more complicated. Arguing that poverty was behind the Shining Path insurgency, he pumped extra resources into abandoned Andean regions. But they made little difference. He promised a ''clean war,'' but he proved unable to punish security forces responsible for the murder of 300 rebels during a prison riot in Lima in June 1986. Meanwhile, angered by budget cuts and charges of human-rights violations, the army suspended its patrolling in many rebel zones, allowing the Shining Path to recover lost ground 3 and expand to new areas. A new pro-Cuban group, the Tupac Amaru Revolutionary SIGN UP Subscriber login ARTICLMS RoMvAeINImNGent, named after an 18th-century Indian rebel, also made its appearance. Yet it was only when the economy began to falter that Mr. Garcia's image was threatened. He had been repeatedly warned that the country's hard currency reserves could not sustain indefinitely an economic boom that depended on imports. He faced a choice: either make peace with foreign banks and the International Monetary Fund in order to raise new credits, or slow domestic growth and stimulate exports. He thought he had a third option - to persuade Peruvian businessmen to invest their swollen profits in their country - but that proved illusory; the profits were converted into dollars and sent abroad. It was at that point, angry and frustrated, that Mr. Garcia made an irrevocable mistake. On July 28, 1987, during his State of the Union address, he announced that he would nationalize the country's banks. His objective, he said, was to stop capital flight and ''democratize'' credit. He was gambling that small businessmen would welcome the end of the cozy alliance between big banks and major industrial groups. Above all, he was sure the public would applaud his new revolutionary leap. But the move back-fired disastrously. The United Left and, with less enthusiasm, Mr. Garcia's APRA supported the measure, but many ordinary Peruvians were skeptical. The public sector was already renowned for its inefficiency and corruption. Besides, if Mr. Garcia was moved by ideology, what would he nationalize next? Even the taxi drivers, street vendors and small farmers who make up Peru's lively underground economy began defending the expropriated bankers. The right also saw its chance to come in from the cold. The novelist Mario Vargas Llosa founded a so-called Freedom movement and led opponents of the nationalization in huge public demonstrations to block the advance of ''totalitarianism.'' As political agitation and economic uncertainty grew, business confidence evaporated, hard currency reserves tumbled and inflation surged. Almost as rapidly as it had risen, Mr. Garcia's popularity collapsed. He abandoned his dream of winning congressional approval for a constitutional amendment permitting his re-election. Hostility toward him began to build up within APRA as his main party rival, Luis Alva Castro, saw his own chances of winning election in 1990 fade. Polls recorded the growing strength of both left and right. But still Mr. Garcia could not bring himself to turn to the ''imperialists'' at the 3 I.M.F. who, he believed, would demand he impose policies that would plunge Peru SIGN UP Subscriber login ARTICLinS RtMoA rINIeNGcession. The alternative, however, proved much worse. With his Government literally bankrupt, Mr. Garcia approved five successive price hikes that pushed inflation to 1,700 percent in 1988 and to 4,300 percent over the last 12 months.