Despite his tough public stance on restricting debt payments to foreign creditors, Peru's new leader suggested in an interview here that he still hopes his impoverished country will reach a negotiated solution with those creditors and avoid Peru's withdrawal from the International Monetary Fund.
In a speech to the United Nations General Assembly on Monday, President Alan Garcia, who at 36 is South America's youngest leader, threatened to pull out of the IMF if actions are not taken soon to distribute world funds "in a fair manner" and if efforts are not made to ease repayment of his country's $14 billion debt.
In the interview yesterday, Garcia seemed to play down that threat. He said Peru's withdrawal would be "a last-resort measure," adding that "we believe that before that comes there will be a collective effort to change things."
He said Peruvian officials were continuing to meet with creditor banks and the U.S. Federal Reserve Board. "We have not lost contact," he remarked. "It is always necessary to hold a dialogue."
The young Peruvian head of state, who has emerged since his inauguration in July as South America's most defiant national leader, has sought in private talks here this week to moderate his image as a combative, anti-American Latin chief. He indicated to Secretary of State George P. Shultz and others that he is more open to discussions on compromise financial formulas than some of his tough public statements might suggest.
Garcia said he came away from a talk with Shultz yesterday feeling they had achieved some rapport.
"The meeting was important and interesting from a human viewpoint," Garcia said in an interview afterward with Washington Post Co. Chairman Katharine Graham and this reporter. "We arrived at very important points of agreement. Mr. Shultz is a man who understands the economic requirements of my country. I was very satisfied with the meeting."
The Peruvian chief is posing a puzzle for U.S. policymakers, who are not yet sure how to interpret and deal with him.
His public remarks, accusing the United States of "Central Americanizing" all Latin issues and condemning the "hegemonic imperialism" of U.S. foreign policy, have been harsh and irksome to U.S. officials. His decision, announced at his July 28 inaugural, to limit payments on Peru's foreign debt to only 10 percent of export earnings in the first year of his term was seen as a disturbing precedent. The same judgment applied to his cancellation of contracts with U.S. oil companies on grounds they had taken unfair advantage of tax exemptions for oil exploration granted them in 1981.
Yet Garcia's nationalist message and charisma have attracted a groundswell of popular support in Peru, restoring enthusiasm and hope. Garcia has won expressions of U.S. gratitude and relief by launching a crackdown on the drug trade in Peru, something his predecessor had been reluctant to do for years.
He said Shultz began their meeting by expressing astonishment at the early gains of the antidrug drive Garcia reported in his U.N. speech. Those included the seizure or discovery of 22 airports, three helicopter landing strips, five long-range light aircraft, eight large factories and hundreds of kilograms of drugs, "all of which means that the consumption of drugs in the United States will suffer a yearly reduction of approximately 80 tons," Garcia said.
Garcia said he took the occasion to ask what the United States had done to eliminate hard drugs from its streets, adding that the use of drugs still appeared to him to be prevalent around New York's Grand Central Station and elsewhere.
"Mr. Shultz thought that was excessive on my part," Garcia recounted. "I said it was natural for me and hadn't meant it to show any lack of respect or to insult the United States."
The episode highlighted the wide room for misunderstanding between Garcia's remarks and the Reagan administration's efforts to discern his real meaning and intentions. The problem is compounded by a sense that he is still unsure of his next moves following his dramatic and provocative start.
While challenging the international banking community, Garcia is showing himself to be a monetary conservative at home, having frozen prices, limited foreign exchange and begun to dismantle part of the state-owned industrial bureaucracy. He told of firing 460 of the 500 managers at Peru's major petroleum company.
Such moves have bolstered his popularity among the country's impoverished masses. But along with an anticorruption crackdown against Peruvian police, and human rights curbs on the Army's fight against rural and urban guerrillas, they have increased the risk that his crusading presidency could be blunted by a conservative backlash.
If Garcia worries about such possibilities, he appears unwilling to let them slow him down. He said most of the country was coming to understand that Peru's economic crisis demanded drastic measures.
As an example of how industrialists were grudgingly supporting his policies, he told of recently summoning top executives of the country's largest construction firm after they had raised prices 163 percent.
"I called the owners to have them explain the increase," Garcia said. "I asked them why they had raised prices so much and they were unable to give me an answer. They rolled back their prices to the level of five months earlier, and they are still making money. They themselves knew they were doing the wrong thing. That is my authority."