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Backgrounder #446 on Latin America

July 23, 1985

Peru's Fledgling Democracy Needs U.S. Help

By


(Archived document, may contain errors)

446 July 23, 1985 PERU'S FLEDGLING DEMOCRACY NEEDS Urns; HELP INTRODUCTION On April 14, Peruvians went to the polls and elected Alan Garcia their new President. This election marked Peru's first constitutional succession from one civilian government to another in 40 years. It is a considerable achievement and demonstrates strong popular support for the electoral process. democracy still remains threatened. In addition, there are qu e stions about the affect of the Garcia government on U.S. interests in the /region Yet Peru's Among'the worst enemies of Peruvian democracy are such terrorist organizations as the Sender0 Luminoso and the Tupac Amaru, which openly oppose,any form of democx a cy. Other groups such as the many Marxist parties comprising the United Left coalition inherently oppose democratic rule but participated in the election because they view it as their surest route to power Peru's prospects for maintaining a stable democra c y are also Workers' threatened by the.worst economic crisis in its history. strikes, political assassinations, and terrorist attacks, on top of a debt crisis that has brought economic hardship, could in time diminish the legitimacy of the government and p roduce an increasingly alienated citizenry. Meanwhile, there is still an intellectual and ideological legacy from the pro-socialist military government that ruled from 1968 to 19

80. Most political parties The results of the April 14 election did not give Alan Garcia the constitu tionally required 50 percent of votes; he fell short with 49 percent.

But after considerable debate, on June 2, the Electoral Board pronounced Garcia to be President, thus circumventing a costly second round of elec tions 2 and politicians advocate a statist, if not socialist, approach to the economic crisis.

The loss of Peru to undemocratic forces could have serious consequences for U.S. and hemispheric security. Peru offers the only friendly Pacific port for U.S. Navy ships between San Diego, California, and Valparaiso, Chile. Should the Panama Canal be unavailable during a global or regional crisis, U.S. ships would be forced to sail around the tip of S outh America to join Atlantic coast forces, and access to Peruvian.ports would be crucial U.S. policy toward Peru and the Andean region must derive from a strategy reflecting a long-term commitment to Latin American economic growth and political stability . At the same time, the U.S. must appreciate the varied political and cultural realities of each nation In the immediate term for Peru, however, Washington should provide assistance in the form of bridge loans to meet shortfalls of external debt payments, c redits for private sector development, and technical training and educational opportunities for Peru's students, professionals, and military personnel. The U.S. should also provide technical and financial assistance to Peru in its efforts to reform the ju d icial system and combat terrorism. Corruption in the courts and some abuses by the military in the war against terrorism should concern Washington but should not result in its denying or cutting back aid. Its economic crisis leaves Peru with few resources to manage its critical problems; to deny aid would only weaken the new government's efforts.to grapple with these issues.

In 1984, total U.S. assistance to Peru was $107 million; this year the Reagan Administration has requested and Congress should approv e $223 million. It is particularly important, moreover, that the U.S. avoid joining the creditor banks and the International Monetary Fund efforts to force Peru to pay its $13.5 billion debt without considering the political and long-term economic repercu ssions. U.S. aid and advice for Peru should aim at economic growth, not austerity.

HOW THE REVOLUTION STARTED Since the 1930s, leftist ideology has played an important role in Peruvian politics. Two major leaders in Peru's modern political development, Vic tor Raul Haya de la Torre and Jose Carlos Mariategui have greatly influenced the perceptions and actions of Peru's politicians. ism for Peru but in a form that would reflect Peruvian reality.2 Both essentially advocated social Many writers have tried to u n derstand the appeal of Marxism to many Latin American leaders that: "As a philosophical construct Marxism has made substantial Miguel Jorrin and John D. Martz are two who believe 3 Considered one of the most important Marxist theoreticians of Latin Americ a, Mariategui founded the Peruvian wing of the Communist International in 19

23. Although he was denounced just before his death by the Peruvian Communist Party because of doctrinal differences, communists and socialists in Peru today claim him as their so urce of in~piration Haya de la Torre, the founder of the American Popular Revolu- tionary Alliance APRA also advocated socialism for Peru. He felt that the most critical issue facing Latin America was North American or llYanquill imperialism and that its instrument, inter national capitalism, was to blame for the retarded development of most Latin American countries.

Haya later tempered his anti-Americanism, largely as a result of the improving U.S. image under the Good Neighbor policy of the 1930s Then in the late 1950s, desirous of official status and a chance at the 1962 presidential elections, Haya formed an alliance with the conservative Manuel Prado government in what became known as the concordancia. This shift to the right caused major defections f r om Hayals party and undercut much of its support from the left. But APRA's original revolutionary ideas continued to find fertile ground among the various leftist organizations. Although the left was barred from actively parti- cipating in Peru's politics , the influence of its ideas steadily grew, particularly among the educated.

By the 1960s some members of the-military and the Catholic Church began to accept the idea of reform and even revolution4 and to argue for a larger role of the state in achieving social and,economic equality through redistributive state economic policies. The extent to which the military embraced socialist ideology during this period surprised most observers. When the military overthrew the democratically elected government of Fer n ando Belaunde Terry in 1968, it launched a program of reform inroads upon the thinking and attitudes of Latin America of non-revolutionary emphasis upon planning and economic progess, it has been faithful to the deep rooted cultural bias favoring collecti v ization and centralized control by the state Insofar as Marxism advocates economic centralization and industrial development, its acceptance is widespread Thought and Ideology (Chapel Hill, North Carolina: The University of North Carolina Press 1970 p. 27 6 Mariategui also provided the origin for the name given to Peru's terrorist group "Sender0 Luminoso," which means "Shining Path when he wrote that Marxism-Leninism will open the shining path to revolution A leading exponent of liberation theology, Gustavo Gutierrez, is a Catholic priest of considerable influence in Peru. Adherents of liberation theology of whom there are many in Latin America, seek to give Marxist-Leninist practices legitimacy by applying to them the language of Christian theology Taken i, n terms Miguel Jorrin and John D. Martz, Latin American Political 4 so far-reaching that it was hailed by the left as a genuine revoluti~n THE MILITARY ERA Headed by General Juan Velasco, the new military government proclaimed, in 1969, a llrevolutionaryll program. It was to include the expropriation of the International Petroleum Company, a subsidiary of Standard Oil Corporation, and the establishment of state enterprises to direct the most important economic sectors, such as mining, fishing, banking, and f oreign trade. Foreign investment was subject to strict control and in many cases entire- ly prohibited. Most of Peru's arable land was confiscated and The result: in several swift steps, mainly in the form of expro- priations, state participation .in Peru 's economy increased drama tically In 1965, its share of total investment had been 16 percent; a decade later it was 50 percent.

The revolutionary military government also expropriated the major newspapers and placed all communications under strict governm ent control. Political parties were outlawed. Breaking I with traditional anti-communist foreign policy, the new military government established relations with Cuba and the Soviet Union.

These ties were enhanced when Lima turned'to Moscow for military hardware after-the Nixon Administration refused to sell Peru the spare parts needed on U.S. equipment it had already purchased.

The U.S. was upset by the leftward shift in Peru's foreign policy. In 1974, General Velasco stated that his administration sought a phased revolutioni1 that would lead to a "Peruvian socialismll that would be neither capitalist nor communist turned over to peasant cooperatives supervised by the state. 6 This revolution, not surprisingly, failed to improve the economic well-being of m ost Peruvians; in fact, by 1975 conditions had worsened considerably. Emphasis on public spending and I external financing, along with the inefficient and wasteful management of state enterprises, a stagnant export market, and the decline in private inves t ment, accounted for much of the economy's decline in 1975 in favor of a new military government led by General In the face of these problems, General Velasco stepped aside Jorge del Prado, Secretary General of the Peruvian Communist Party, wrote at the ti me By virtue of our Marxist-Leninist analysis, we Peruvian Communists hold that the changes now in process affect the socioeconomic structure, that is, possess revolutionary content World Marxist Review January 1971, p. 17.

The program for agrarian reform instituted by the Velasco government was considered by the radical left and the Communist Party of Peru to be "the most progressive in Latin America, after Cuba See Cesar Jimenez Seeking Radical Changes," World Marxist Review, March 1984, p 70 ti 5 Morale s Bermudez. Announcing a program of Ilmoderation, I' the new government removed the more radical officials in the administra- tion, although it did not attempt to undo the major policy changes of the previous government.7 Then, in recognition of the erodin g legitimacy of the military, the new government called for Consti- tuent Assembly elections, to be followed by yeneral elections in 1980 in which all parties could participate DEMOCRACY IN PERU The five years of democratic rule under the administration of Fernando Belaunde Terry, who won the 1980 presidential elections with a substantial majority, was beset with serious problems, many beyond his government's control A depressed world market for Peru's major export, copper, soaring interest rates, severe dr o ught and floods added greatly to Peru's foreign debt and the consequent economic crisis. In addition, the Belaunde government inherited a host of deficit ridden state enterprises and a massive military spending program that have compounded problems in res o lv ing the debt crisis I Under the weight of these problems, many social and economic programs had to be shelved. Belaunde's efforts to liberalize and reactivate the statist economy were plagued by the lack of govern ment resources and the scarcity of cap i tal needed for private sector investment. His policy of free trade and openness to foreign direct investment helped improve Peru's relations with the:U.S. but led to few economic benefits because of Peru's economic emergency. government efforts to control drug traffic and corruption and to reform the judiciary. Although Belaundels term was marked by only modest success, Peru for the first time enjoyed political and press freedom. These were maintained despite the steady onslaught of:vicious terrorism and c o ntinous attacks by inter national human rights organizations over government efforts to stop terrorism Lack of government resources also weakened a Although the leftists were dismayed by the "revolutionary setbacks caused by the overthrow of the Velasco g o vernment, they gave their support to the new government because "there are still enough revolutionary forces mobilized during the radical period eventually to retake political positions and continue the process in the future Luis E. Aguilar Marxism in Lat i n America (Philadelphia: Temple University Press 1978 p. 304 Members of the far left and particularly those in the Communist Party of Peru criticized this move toward elections as an effort by a "reactionary military" to institutionalize control by the ol i garchy and the domination and oppression of the masses 6 THE NEW GOVERNMENT Alan Garcia was elected President as head of the American Popular Revolutionary Alliance or APRA. It is Peru's oldest and largest political movement, but this election marked the f irst time that it won the presidency and a majority of both houses of the National Assembly APRA's bids for power in the past have been thwarted by military coups and fraud, and in 1980, it lacked political support APRA's overwhelming success this year is the result mainly of Garcia's charismatic leadership, which attracted considerable support from those dissatisfied with his predecessor's policies. In addition, he mobilized APRA's deep-rooted strength throughout Peru.

Garcia has gained control over his p arty, removed much of the old guard that surrounded Haya de la Torre, and replaced them with personally loyal younger men As such, he has created an image of a modern, forward-looking party patterned after present- day social democratic parties in Spain a n d elsewhere in Latin America. Garcia has been careful, however, to keep intact APRA's doctrines of anti-imperialism, Latin American integration, and economic planning APRA's Domestic Policy Alan Garcia's approach to domestic issues probably will reflect l e ss party ideology and more the economic realities of Peru. Like the socialist Felipe Gonzalez of Spain, whom Garcia admires, Garcia likely will have to set aside socialist goals in favor of a more pragmatic and less ideological course to solve the problem s of his country. Garcia's party in a break with much of the past, has indicated an interest in denationalizing state-owned enterprises and encouraging the private sector. The extent to which Garcia and his colleagues proceed toward a market oriented econo my and eliminate subsidies and protectionist measures will depend on their control of political and social forces.

They must proceed cautiously because the new power of the left in Congress and the huge Communist Labor Federation (CGTP) are likely to oppose free market policies. For APRA, the road to privatization and a free market system could be politically treacherous.

Garcia's majo r focus will be on,food production, rather than on the export industries, to offset Peru's substantial food imports. While he wisely has eschewed the large development projects of the previous government and promised more assistance i to small producers, he has not yet rejected the farm cooperative model established by the socialist military government.

Garcia promised during the campaign to tackle guerrilla insurgency with social, economic, and military measures. He also stated, somewhat ambiguously, that he would ban "anti-constitu- tionql" counterinsurgency measures 7 Foreign Policy Garcia has articulated three principles to guide Peru's foreign policy 1) anti-imperialism 2 Latin American integra- tion, and (3) Third World nonalignment.

Anti-imperialism forms the basis of ApRA's nationalism and is primarily directed against the U.S. While Garcia and his party accept the need for foreign capital to develop Peru's oil production, mining, and agriculture, he has stated that foreign investment will be stric t ly controlled by the government to protect Peru's perceived interests and natural resources. APRA spokesmen specifically have stated that the government will try to reduce deficits and improve revenue income by eliminating tax exemptions to foreign oil co m panies such as Occidental Petroleum and Belco. ing foreign investors and has rejected the left's immediate call for outright nationalization of foreign-owned companies in Peru the shift back to protectionist controls and a state-planned economy will disco u rage potential investors integration, this time to deal with the debt situation. Despite the repeated failure of Latin American debtor governments to form a debtor's cartel, Garcia asserts that Latin American unity is essential "to negotiate the debt on a n equal footing with the industrialized countries and the international banking system."Q Two days after his election, Garcia told foreign correspondents that his government would bypass negotiations with the Inter I While Garcia appears pragmatic enough t o avoid alienat Garcia has tapped APRA's traditional call for Latin American I I national Monetary Fund and would promote joint action by Latin American countries to seek new conditions for debt repayment.

Garcia has said that he will reject IMF policies t hat would reduce tariff barriers to imported manufactured goods. He claims that such imports would,destroy the country's industry and agricul ture and eliminate jobs. IMF monetarist and neoliberal economic policies have been, he asserts, imposed on Peru t o obtain debt payment to creditors without regard for the impoverishment and political instability such policies cause. The new government he says, will seek to negotiate separately with each creditor and will pursue the soft loans available from the multi lateral banks.

To improve Latin America's bargaining power in negotiations with the U.S. and other industrialized countries, Garcia has called for reactivated and strengthened regional organizations such as the Andean Pact and the Latin American Economic S ystem SELA An independent organization based in Caracas, SELA would serve as an intermediary in political and economic negotiations with the U.S while the Andean Group would function as a regional common market that would enhance economic independence fro m the U.S FBIS Latin America, April 23, 1985, p. J1. 8 Although he has said little so far about specific U.S Peruvian relations, Garcia has been very critical of U.S.-Latin American policy, particularly with respect to Central America He also charges that W ashington lacks long-term strategies for Latin American economic development. With regard to Nicaragua, Garcia has gone farther than any other democratic leader in Latin America in his stated support for the communist regime, which he has called the "prog r essive affirmation of democracy in Central America If The Strength of the United Left The first runner-up in the election was Alfonso Barrantes, the mayor of Lima. His party, the United Left, is a coalition of Marxist groups with strong ties to Peru's mai n Communist Party. Barrantes received approximately 22 percent of the total vote, while his party gained 16 of the Senate's 60 seats and 48 of the Chamber of Deputies 180 seats. If the United Left's seats are combined with the majority held by APRA, itself left of center, the left will have an unprecedented voice in Peru's next govern- ment proclaimed an exuberant.Barrantes just after the election tion on a number of key issues. nationalization of the banks and foreign-owned companies, especially oil and mi n eral extracting companies; higher tariffs; expansion of money supply; and a moratorium on debt interest payments to foreigners. Recog- nizing that the more pragmatic Garcia is likely to resist many United Left proposals, Barrantes has vowed that his party will be the ''democratic opposition force that will check the actions of the future APRA government The right has been erased from the scene in this country The United Left can be expected to press Garcia's administra Among them FUTURE PROSPECTS FOR DEMOC R ACY Internal Factors One of the critical issues affecting the future of Peru will be the behavior of the left, in both Garcia's APRA party and the United Left coalition. While not espousing Marxism, Garcia has acknowledged APRAIs Marxist roots emphasizing that APRA's Marxism is Peruvian. According to him, this means that it is based on I'Indo-AmericanIl realities in contrast to the European "realities" that Karl Marx originally perceived. APRA, however, still has an influential old guard within it that is m ore Marxist than democra- tic. Garcia is unlikely to be challenged by this faction, at least initially. the pressure from the left may force official policy leftward As the first party leader to bring APRA to national power Should his policies fail and Pe r u's problems worsen lo FBIS Latin America, April 29, 1985, p. 54. 9 This may provide the Marxists the opportunity to regain control of the party Peru's Institutions Are Collapsing Peru's institutions are breaking down under the weight of corruption, centr a lism, and bureaucratic inertia. This has given rise to the I'informal sectorll where commerce and trade is carried on profitably in a kind of gray underground system operating beyond the heavy-handed grasp of state control. common to all democratic nation s , created to protect the individual in the pursuit of his livelihood, have ceased functioning in Peru. The judiciary, for example, is thoroughly corrupt and ineffective; a businessman cannot hope for redress if he sues for breach of contract or if his pro perty taken from him.

A study of the'informal se'ctor by Peru's Institute for Liberty and Democracy, an independent think tank, observed The enormous informal sector, the rigid social structures, the discri- minatory use of the law to favor the privileged, the subjugation of the Andean population, the restrictions on economic opportuni ties and the lack of competition are not the result of laissez faire, but the creatures of the present pattern of [state] regula- tion I1 Unless the Garcia government reduce s state barriers to the legal economy and fully integrates the informal sector into Peruvian society, the institutions of the state could lose their legitimacy and cease functioning unable to redress this problem primarily because it was stymied in its att e mpts to reform the inflexible state bureaucracy. If Garcia fails to govern effectively, some Peruvians in desperation may turn to radical solutions, possibly even to such.extremist alternatives as the terrorists Sendero Luminoso or the arising pro-Cubanfl oscow Tupac Amaru Those institutions Peru then would be ungovernable.

The liberal democratic government of Belaunde Terry was l1 l2 Hernando de Soto, "Legacy of Mecantilism Stymies Market Creativity in Peru The Wall Street Journal, Janaury 4, 1985, p. 15 A fter nearly five years of waging a bloody terrorist campaign against the government of Peru, the Sendero Luminoso or Shining Path has shown no signs of weakening and is believed unlikely to participate in any kind of negotiation with the new government at tacking and targeting for assassination prominent citizens and officials.

See also Edward Lynch Is Peru Next The Heritage Foundation Backgrounder No 314, December 9, 1983 They have, however, changed tactics The lesser known Tupac Amaru Revolutionary Moveme nt is also staging attacks against the government; they are more orthodox Marxist-Leninist and have ties with Cuba and Nicaragua.

Luminoso has refused Tupac Amaru's overtures to form an alliance.

They more autonomous Sendero The Military Given Peru's eno rmous problems it is not likely that the military relishes the thought of governing the country. The generals admit that they have no ready solutions. Intervention may be their only option, however, if Garcia attempts to trim government spending by cuttin g the military budget, which repre- sents at least of fourth of the national budget. Belaunde recog- nized this threat and gave in to military requests for sizeable appropriations despite heavy pressure from foreign creditors and the IMF to cut public expe n ditures. There are, of course, security considerations that could keep military outlays high. While Garcia advocates Latin American disarmament, he is worried about the intentions of Chile's military government the two countries have been strained since t h e 1879-1883 War of the Pacific in which Peru lost considerable territory to Chile. Garcia also needs military support against terrorism Relations between External Threats The efforts of creditor banks, the IMF, and the Reagan Administration to extract int e rest payments out of Peru's debili tated economy without weighing the political consequences could undermine popular support for democratic governments If economic crises continue writes Alan Riding, chief of The New York Times's Rio de Janeiro bureau, Ir a familiar scenario may be repeated: the radical left will feed off the resulting frustration, demands for military intervention will grow, and the centrist option will again disappear."13 difficulties facing Peru, the U.S. and the financial community have been unwilling to extend to Peru the same flexible terms for repayment of its nearly 300 biIlion in loans that they extended to Brazil, Argentina, and Mexico Despite the immense political and economic The debt situation inherited by the Belaunde governmen t in 1980 was critically affected by natural disasters, such as drought and floods, and the escalating violence of the Sender0 Luminoso.

Making matters worse were high world interest rates and plummeting world commodity prices for Peru's copper and silver As a result, in 1984, debt service claimed 72 percent of Peru's export earnings. Peru naturally has had difficulty making these payments and meeting the economically austere conditions required by the IMF. In retaliation, Peru has been cut off from furthe r IMF and foreign bank credits, which in turn makes economic growth even more difficult, thus ensuring greater poverty and political instability.

But because Peru's foreign debt is small in comparison to the $100 billion debt of Brazil, for example, the ba nkers and the U.S. Treasury may not be worried about Peru's fate or the effect of its default on the world financial system l3 The New York Times Magazine, July 14, 1985, p. 23 11 POLICY RECOMMENDATIONS Countries such as Peru point out, with considerable j ustifi- cation, that U.S. foreign economic policy is crisis oriented and lacks a coherent long-term perspective. The result is U.S inconsistency and sporadic quick fixes that often do more harm than good. This inconsistency undercuts those leaders and gro u ps in Latin America, willing to cooperate with Washington, who share the commitment to democracy, economic growth, and hemispheric security Such inconsistency and shortsightedness is most evident in While the the U.S. approach to the Latin American debt c risis.

State Department correctly follows the Reagan agenda for long-term economic growth and democratic stability, the Treasury undermines this by reflexively backing punitive IMF measures to extract payments from already impoverished debtor nations like Peru. T he Treasury's delegation at the IMF supports programs that destabilize their political structures and weaken their productive economic sectors--the opposite of what the Reagan White House proclaims as U.S. goals in Latin ~merica.14 It is time for the U.S. to end this contradiction in its policies. With a new government about to take power in Peru, it may be possible to regain the confidence of that country and the' rest of Latin America.

First, the U.S. must -be more flexible about the- role of the IMF. It can assure Peru's new Garcia government that, while the U.S. will continue within the IMF to negotiate Peru's debt repay ment terms, Washington will not insist that IMF conditions be met before U.S. assistance is given. By balking at unconditionally supp o rting the IMF, the U.S. can induce the creditor banks to absorb some loss on the loans to Peru, which these bankers now admit were imprudent. The banks can absorb the loss on Peru's debt without collapsing. This will impose badly needed market discipline o n the banks and, more important, give Peru the chance to recover also could thwart the left's attempt in these countries to blame the U.S. and IMF for Latin America's economic ills, poverty, and underdevelopment A more reasonable U.S. approach to the debt crisis Second, U.S. Agency for International Development (AID) programs should no longer be linked to Peru's compliance with IMF conditions. The AID programs are crucial to Peru's recovery from severe drought and other debilitating circumstances beyond it s control. in the urban and rural areas. Without continued U.S. assistance Peru will be in an even weaker position to comply with IMF require AID also must assist in developing the private sector l4 See Edward L. Hudgins, "An Agenda for the IMF Conference T he Heritage Foundation Backgrounder No. 381, September 21, 1984. 12 ments and thus will not be eligible to receive the credits needed to sustain investment and long-term economic growth. private sector is the key to stable and long-term economic growth an d the best insurance against a future debt crisis A healthy Immediately following Garcia's inauguration on July 28 President Reagan should invite him to Washington to discuss these issues. Responding to Peru's concerns could defuse much of Garcia's critici s m of Washington's policies and provide the common ground for cooperation between the two countries. This is particularly important if Garcia is to be dissuaded from pursuing protectionist economic programs and embracing the rhetoric and policies of Third W orld radicals. The U.S. should stress to Garcia that cooperation is essential to make U.S. assistance programs work. For example, much of the aid going to the agricul tural sector is targeted at private sector development through financial and technical a s sistance. These programs will be undekcut if Garcia's government emphasizes large state-managed enterprises to increase agricultura1:production standing of AID programs, their rationale, and their goals may ensure the new government's support and helpful p articipation A better under Third, the U.S. must redevelop targeted military aid. In the early 1970s, the U.S. stopped giving military assistance to Peru because it opposed Peru's foreign policy. Since then, the Soviet Union has sold Peru enormous amounts of m,ilitary hardw,are such as jets, tanks, and helicopters, and provided training and 150 advisors. While the influence of Soviet advisors on Peru's military is difficult to gauge, their presence along with consid able numbers of KGB and GRU espionage ag e nts could threaten U.S security interests, particularly if Peruvian democracy should fail I er The best way for the U.S. to undercut Soviet influence would be by providing an alternative source of military training and hardware. Some of Peru's military,le a ders have indicated a new interest in Western suppliers and technical know-how. While the U.S. should encourage Garcia's attempts at regional disarmament it could, at the same time, foster closer ties through the U.S international military and educational program (IMET). This program offers Latin Americans an opportunity to participate in U.S.-sponsored training and educational programs.

And .fourth, on the political level, the National Endowment for Democracy should develop programs and grants to bolster Peru's new democratic institutions and political parties. the role of the Socialist International in influencing and assist- ing the political groups in Latin American countries, the U.S should not refrain from offering similar assistance Given CONCLUSION Without significant U.S. assistance, Peru may be the first I new democracy in the Western Hemisphere to fall. The impact I 13 would ripple far beyond Peru and affect the region's other struggl ing democracies. The failure of democracy in Peru also could h a rden attitudes against democratic rule in Chile and Paraguay where peaceful transition toward democracy seems less and less assured A breakdown in Peru surely would encourage terrorist groups throughout Latin America, many of which have been dormant for s o me time, to renew their destabilizing activities. In such a scenario, the military may feel compelled to retake power. More dangerous to the future of Latin American societies is the possi bility that in those cases where the protective role of the milita ry has lost its legitimacy there will be a vacuum of power, and terrorism and violence will go unchecked.

Support for democracy within Peru is strong. With encourage ment from the U.S. and other Western democracies, Peru's democra tic experiment could succ eed. President-elect Garcia has wide political support and is believed by'many Peruvians and American analysts to be essentially'pragmatic, despite his penchant for left-wing rhetoric. Greater U.S. interest in Peru's concerns, particularly the debt issue, could ensure that the next Peruvian administration will be a significant and dependable ally in efforts to bring economic and democratic stability to the Western Hemisphere.

Esther Wilson Hannon Policy Analyst No Note: Nothing written here is to be constr ued as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress The Heritage Foundation 214 Massachusetts Avenue N.E. Washington, D.C. 20002 (202) 546-4400

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