Alan Garcia, Peru's new, young president, says that he has achieved his first month's main objective: pulling Peru out of a tailspin that had eroded government authority and increased social tensions.
"I have the satisfaction of having contributed to restoring to Peru part of its lost will," he said in an interview last week. "Now we have to make up for lost time. We've put an end to the domination of the government by the economy, which existed up until now."
At 36 the youngest president in debt-ridden Latin America, Garcia has mustered a groundswell of support for his programs. An independent poll last week gave him an approval rating of 96 percent, indicating that he is right in his assessment of the early weeks of his term.
Garcia, who caught the attention of international bankers when he came to office 45 days ago announcing a unique plan to deal with his country's foreign debt, has launched a political offensive of reform measures, frequently announced with theatrical flair from the balcony of his residence on Lima's Plaza de Armas. At times, it seems as if Garcia is still on the campaign trail.
In short order, he has set off a drastic reorganization of the national police force, purging 127 high-ranking officers this month; mounted a campaign against government corruption; carried out major strikes against cocaine trade in the Amazon jungle and enacted an emergency economic program that has frozen prices, restricted foreign exchange and lowered costs for producers. His economic team presented Congress with the first balanced budget in a decade.
Julio Cotler, a political scientist and head of the Institute of Peruvian Studies, said, "Never in my wildest dreams would I have imagined a political blitz like the one Garcia has mounted in this past month."
Garcia wants the international financial system to give Peru a chance to put its economy back on the road to recovery before the country resumes regular payments on its foreign debt. Peru has fallen 300 days behind on its interest payments to the banks and is technically in default.
On taking office July 28, Garcia said his government would not seek a standby agreement with the International Monetary Fund or pay out more than 10 percent of its export earnings -- that is, roughly $320 million -- to service its foreign debt.
"As a people, we are responsible for what has happened to us. That means we must pay our debt, but within conditions that do not sacrifice human life or our development," he said.
He said in the interview that he would be giving preferential payments to development agencies that still allow Peru to draw on its credit lines for development projects and productive investments. Once multilateral agencies and governments have received payments, there will be little or nothing left over to pay commercial banks, economists say.
"We know that the commercial banks are going to react, but we consider that their pragmatism and intelligence will permit them to wait until the situation improves and our economy gets back on its feet," Garcia said.
"I believe that it would be a grave mistake for the banks to try to force an impossible payment by using coercive measures because they wouldn't collect anything," the president said.
Last week, the government announced that Lima's cost-of-living index has risen less than 1 percent since the emergency program went into effect, compared with 11 percent in July.
Pollsters have found that the majority of Peruvians now believe inflation is becoming less of a problem.
Savers have shifted their holdings from U.S. dollars to the local currency, the sol, so quickly that the Central Bank has run out of bills. Even Lima's modest stock exchange is currently in the middle of the strongest upturn in five years.
Garcia sees the long-term prospects for his government as dependent on finding a way out of an economic development dead end. During the past 10 years, economic growth has been negative. Top-heavy income distribution, a subsidized manufacturing-public administration complex concentrated in Lima and prolonged neglect of the provinces have left no base from which to reverse these trends.
"Without changing this reality, any effort at recovery is not viable," Garcia said, "inasmuch as industry will have no consumers, Lima will not have a country to adminster, and those who hold wealth will not be able to live surrounded by misery and violence."
Garcia proposes a return to economic basics and self-reliance, partly in recognition that there will be no major net influx of capital investment or credits in the near future. Garcia has an ambitious blueprint for an economy with a broadened consumer base, driven by small farmers, peasants and shantytown entrepreneurs.
The modern sector of the economy, mainly mining and manufacturing, would produce substitutes for imports and also earn the foreign exchange to pay off the debt. But the government barely has had time to give more than a broad outline of its development strategy.
To succeed in this strategy, which will require years to implement, Garcia needs to buy time with foreign creditors. Refinancing or outright nonpayment would provide the cash flow to finance it.
Garcia seems to be in no rush to strike a deal with foreign banks, and bankers here expect the government to try to string out negotiations well into 1986.