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A Scary New Day In Lima


International Business: Peru

A Scary New Day in Lima

With the abrupt end of Fujimori's reign, Peru faces instability

Peruvian President Alberto Fujimori likes to describe his political moves in chess terms. His surprise decision on Sept. 16 to call new elections in which he will not stand was an acknowledgment that he, at least, felt it was finally checkmate.

The maneuver that brought an end to Fujimori's 10-year reign was the airing of a videotape on Peruvian television that showed his top adviser, Vladimiro Montesinos, pulling wads of dollar bills from his pockets and handing them to an opposition party congressman. Shortly after that transaction, the legislator defected to the government's benches. The incriminating video appears to have prompted a showdown between Fujimori and a segment of the Peruvian armed forces loyal to Montesinos. "He probably figured his best move would be to rid himself of Montesinos, but Montesinos and the regional army commanders probably said `no'," says Mirko Lauer, a columnist for La Republica, a Lima daily. The resulting compromise: The shady former intelligence chief would go--but so too would his boss.TOLERATED. Peruvians have reacted with a mixture of relief and trepidation to Fujimori's announcement that he would be stepping down. After all, this was the man who, upon first taking office in 1990, pulled the country back from the brink of political and economic disaster. Grateful for having been freed from the tyrannies of hyperinflation and terrorism, voters tolerated Fujimori's ironfisted rule. But the President's popularity has been on the wane in recent years as growth has cooled and poverty has risen. Mounting evidence that Fujimori was willing to resort to underhanded tactics to remain in power also took a toll on his popularity.

The country now faces a long list of uncertainties--the biggest being who will be its next leader. Investors, both local and foreign, will take to the sidelines until the smoke clears. That could depress growth, which the government said was set to quicken to 5% this year, from 2.4% in 1999. "The government is in `pause' mode," says Pablo Breard, head of international research at Scotiabank Group in Toronto. "Strategic investors will have to sit back, be calm and be cautious."

Still, some think that a brief period of political and economic instability is preferable to the certainty of a future with Fujimori. "We're no longer in a cul-de-sac," says Francisco Sagasti, co-director of Agenda Peru, a local think-tank. "We don't know where the road will lead us, but at least there are more options." Democracy may finally have a chance to take root in Peru.

Although no date has been set for the general elections, presidential hopefuls are already lining up. The first to throw his hat into the ring was Alejandro Toledo, who in May pulled out of a presidential run-off election, arguing that it was rigged in favor of Fujimori. The Stanford-educated economist is betting that the fragmented political opposition will rally behind him, as it did earlier this year. Trouble is, Toledo is now viewed by many as an irresponsible rabble-rouser, thanks to his role in anti-Fujimori protests that degenerated into violence. Indeed, a September survey of Lima residents by polling firm Apoyo Opinion y Mercado gave Toledo an approval rating of 25%, compared with 40% in April.

A contender may also emerge from within Fujimori's circle, even though he has groomed no successor. Although support for the President has fallen from its peaks, it is still evident, particularly among Peru's poor. Indeed, much of the population that resides outside of the capital has been blind to Fujimori's faults. Thanks to the government's vice-like grip on the media, the scandalous videotape was broadcast in full on only one open access TV station and on cable television, which just a fraction of Peruvian households subscribes to.

A big question still hangs over the Peruvian armed forces and the role they will play in the transition. Will the generals allow the disgraced Fujimori to stay on until until new elections are held or will they anoint an interim leader? The names of Jorge Santistevan, the highly regarded human-rights ombudsman, and former President Francisco Morales Bermudez have been floated as possible heads of a caretaker administration. A lot depends on Montesinos' fate. Several high-ranking army officers owe their jobs to the shady intelligence chief and could revolt if he is dealt with harshly. It's a whole new chess match in Peru. Each side is maneuvering to attack first.By Jane Holligan in LimaReturn to top


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