Welcome to Washington Peruvian President Toledo

02.33 For Immediate Release Wednesday, 9/11/02

WELCOME to WASHINGTON, Mr. PERUVIAN
PRESIDENT, ALEJANDRO TOLEDO

* Once at 85%, your popularity today with your own people is deservedly at 17% in the polls and skidding.

* Privatization initiatives, which were vehemently opposed by the population, produced violent riots, particularly in Arequipa, leading to the ultimate suspension of these projects, as well as Toledo's free-fall.

* By ineptitude, high-life style and personal indolence, you have accomplished the miraculous by managing to make your disgraced predecessor, Alberto Fujimori, look palatable.

* In fact, current polls indicate that you would lose to the discredited and corrupted Fujimori if the two of you ran against each other tomorrow.

* Tough on U.S. national Lori Berenson; meek when it comes to standing up to the State Department and the international lending agencies.

* Toledo - a technocrat trying to feign being a populist.

* How to rehabilitate Toledo

The Toledo administration - a failed presidency

In running for office, President Alejandro Toledo made many promises to the nation, but the majority of average Peruvians who once saw him as their salvation, now view him as the man who broke their hearts and as one of the worst presidents in the country's modern history. His campaign platform was full of pledges of reforms, almost all of which have not been honored: the creation of thousands of jobs, the fast recovery of the economy and the improvement of health and educational services were among the illusionary goals he once held out to his people. However, Toledo turned out to have a much greater fidelity to the structural adjustment policies of the State Department and the international lending agencies, than to his nation.

It can be argued that Toledo has always been a technocrat garbed in a populist's wardrobe. In fact, he never tried to hide this because he embraced President Fujimori's conservative economic reforms in his own campaign. In his current trip to Washington, he will be coached by these lending institutions regarding their expectations of Peru's economic policies. Similarly, the Bush administration will be more than interested in hearing what role Peru hopes to play in regional efforts to uproot guerrilla warfare in the region and in the Andean anti-drug war.

Personal shortcomings have profoundly affected Toledo's image. He has made the Peruvian presidency into a part-time job precisely when the government is still experiencing the crushing aftereffects of the Fujimori era, including dramatically high levels of common crime and an alarming degree of social disintegration. Toledo's short working hours, frequent vacations and penchant for dining in stylish restaurants have been matched only by a lack of familiarity with key issues facing his nation. This has been a result of his propensity to "wing it" rather than thoroughly ground himself on domestic issues and the diplomatic reports coming from abroad. The lack of a dynamic and caring agenda - which could draw Peruvians to him - is also due to his slavish dependence on the orthodox economic dictates of the lending international agencies to which he is so wedded, as well as to the White House.

Nationalism over justice

When it comes to the case of Lori Berenson, a U.S. national required to serve out her entire prison sentence after she had been victimized by Fujimori's, then Toledo's, corrupt judicial system, the latter has shown a rare vehemence in seeming to stand tall on an issue. However, in this instance such tenacity is ill-conceived because it perpetrates a terrible injustice against an unfairly judged U.S. citizen. Regarding Berenson, Toledo has gone to extraordinary lengths to flout U.S. as well as international public opinion to make his point. To fellow Peruvians, he pretends he is a great nationalist daring to stand up to Washington's desire to have one of its citizens returned to the U.S., rather than to be doomed to deteriorate in a Peruvian dungeon. So he carries on an essential farce that he will not succumb to White House pressure when, in fact, he has done so routinely on a host of other occasions.

What is particularly reprehensible is Toledo's recent refusal to accept a strong and clear ruling by the OAS Inter-American Commission on Human Rights that Berenson has been unlawfully detained and tried and that she should be freed as well as compensated for the years she has been illegally imprisoned.

The blind leading the blind

The overall poor quality of Toledo's cabinet appointments, along with the questionable background of several of his high-ranking advisors, have been noted by his critics, who have denounced members of his official family for their divisiveness, indecisiveness, inefficiency, poor administrative skills, venality, and a startling lack of professionalism. This includes playing tough with Toledo's critics by using a range of threats against them. No better recent example of these traits was manifested than by the country's recently cashiered minister of justice, Fernando Olivera, who unabashedly gloated at a July press conference staged for him at Peru's Washington embassy, where he arrogantly insisted that Lori Berenson would not leave her jail cell until she had served out her full sentence irrespective of the ruling to the contrary by the OAS Inter-American Human Rights Commission.

Toledo could be cynically deceiving his people when he suggests that the U.S. Congress' recent enactment of the Andean Trade Promotion Act (ATPA) is likely to dramatically improve their lives. At best, Peru's standard of living is likely only to be marginally enhanced. Moreover, Peruvians would do well to start looking within the country to find the key to solving their problems. For example, developing the fish industry could provide tens of thousands of new jobs if Toledo provided any leadership on the issue, but his administration presently remains stagnant on this possibility.

Another burning topic is whether Peru's own businesses and industrial enterprises are capable of competing with foreign multinationals that possess intrinsic advantages in terms of economies of scale, access to low interest credit and professional management. Such competition, once the FTAA comes into effect, could inevitably lead to several thousand bankruptcies and the additional forced closings of many domestic factories and other facilities.

The dangers of a weakened Toledo

Toledo, an enthusiastic collaborator in Washington's anti-drug war as well as in its economic plans for the region, was well aware that his June 28 halt of drug eradication programs in the country, after three days of particularly aggressive protesting by affected cocaleros, would not go over well in Washington. However, he may have been more concerned about the negative implications of the halt on his own political authority, especially because he also had been forced to step back in his privatization efforts.

Furthermore, in November, new reforms in Peru will decentralize authority over administrative and economic matters into the hands of regionally elected officials. The possibility of a political catastrophe for Toledo, wherein opposition candidates, who do not favor the president's economic and structural reforms, capture these new regional offices, has placed him in a possibly compromised position.

In addition to the increase in coca production brought about by the suspension of the eradication program, Toledo's weakened position with local producers creates two additional problems for U.S. policymakers. First, the prospect of newly empowered elected regional leaders, just as Toledo's political decline is accelerating, could result in the unmaking of an integrated national drug policy. In the wake of a decentralized approach, recurrent problems will doubtlessly appear in the anti-narcotics program.

Another equally disturbing scenario for the Bush administration would see Toledo being forced to sacrifice other U.S. regional initiatives-some of them even enlightened, though typically attacked by the coca farmers, including the protection of rare mahogany forests-in order to gain the farmers' backing in the war on drugs. The U.S. is in a less than ideal position as it has to cope with the legacy of Toledo's quickly fading popularity.

Strengthening Toledo and reducing the demand for cocaine

If effective drug eradication initiatives are to resume and if America's other regional goals are to remain uncompromised, politicians on both continents must take immediate action. First, Toledo would regain lost political clout and get the drug war back on track if he brought coca farmers to the negotiating table in a manner that emphasizes the necessity of coca eradication, but in an entirely palatable manner. American officials, meanwhile, could help Toledo regain control of Peruvian drug policy by being open to changes in alternative development and eradication programs negotiated by the South American president. This would add to the small victory gained by Toledo in the signing of the ATPA legislation into law. Most importantly, Toledo must be seen by the Peruvian farmer as the leader who worked to persuade Washington to own up to its own responsibility of pressuring Americans to do more to control the demand end of the drug equation.

Promises in vain

Former president Alberto Fujimori brought harsh authoritarian rule to Peru, and by the time that he hurriedly fled the country, he had alienated and disillusioned much of the population, as well as generously contributed to the tens of thousands of Peruvians murdered in the past three decades, many of them after being tortured. Upon his forced resignation and abrupt departure for his present exile in Japan after embarrassing instances of his all-pervasive corruption and his sanctioning of massive human rights violations had been firmly established. In voting for Alejandro Toledo, Peruvians wanted a very active, energetic, and above all, admirable leader who could bring some inspiration and hope to the country. Current president Alejandro Toledo was seen as the savior by a very troubled nation, with such problems as increasing poverty, corruption and unemployment needing to be addressed with a sense of immediacy. When Toledo, the leader of Peru Posible, took office in July 2001, he said he had a plan that would provide Peru with the solution to these issues and other matters of great concern to the citizenry. Their plan turned out to have been far less than meets the eye.

In what was seen at the time as a very powerful speech delivered on July 28, 2001, Toledo projected a vision in which he and his team of ministers would be the founders of a new society that was going to break with the old standards that had brought misery and disillusionment to the nation. "A frontal war against poverty," was the slogan that Toledo used to get the attention of the people. "I'm going to spend every second of my government in fighting poverty through the improvement of education, health and the creation of more jobs."

But instead of bringing more stability to the country and forthrightly dealing with the poverty issue, Toledo has brought upon himself a sea of criticism. After governing Peru for 13 months, little has changed from the Fujimori era. A population calling for radical solutions to contend with their reality of increased unemployment and rising levels of poverty has had to deal with a president apparently too busy with his mercurial private life to hear the plaints of his people. A big part of the problem was that Toledo carefully selected old guard economists and so-called finance wizards whose first loyalty was to the Washington Consensus and the foreign investors, rather than to the Peruvian nation. When they called for sacrifice, it was never Peru's tiny economic elite, but always the poorest sector of the population, who bore the burden.

To a great extent, Toledo's inability to meet his own goals has resulted in a worsening social situation. The deterioration is taking place in spite of expectations that the deficit could have been reduced from 2.5% of GDP in 2001 to 2.2% by the end of 2002. The standby agreement that Peru signed with the IMF in January was intended to achieve a fiscal equilibrium. However, the president's recovery plan was based on a privatization of public resources that could not easily be brought about, especially after ordinary Peruvians began to vociferously take issue with the process. But, there is no way that Toledo can now find the resources necessary to invest in desperately required social programs when the deficit problem must remain his foremost priority to be resolved by 2003.

Coming back but not forward

The Peruvian authorities, led by the orthodox economists, have committed many errors in dealing with the country's most pressing fiscal and budgetary issues, mainly because they never won the trust of a majority of suffering Peruvians. The favored privatization process has been shown as being conducive to bringing forth further poverty and unemployment to the country, especially among the poor and the lower middle classes. Additional preparations could have been taken with the economic system if the government cared enough to be sensitive to the conditions which later led to the protests in Arequipa just before the final agreement was scheduled to sell two of the most important electricity generating and transmission companies in the country to a Belgian combine. Due to days of angry public demonstrations that ensued once privatization was announced, the whole sell-off process was postponed at least until November, when local elections are scheduled to take place.

The Peruvian president now would be wise to carefully articulate to the public exactly what policy would be followed by his administration when it comes to electricity costs for customers before the issue worsens and the anti-privatization sentiment hardens. Characteristic of Toledo's presidential style is his self-destructive trait of not adequately discussing with Peruvians issues of importance to them. Here the question was why privatization of electrical production was important and how would the roughly $700 million in compensation from the sale would be allocated?

The projected sale is now on hold until a new agreement is signed later in the year. At this point, it's up to Toledo to find a way to convince his people that selling off the electricity companies would be good for Peru. If there are good arguments for privatization, let them be heard. Up to now, Toledo's approach on privatization has been little better than: Let the public be damned. The result was a thirty-day State of Emergency and martial law in Arequipa after the violent protests had been staged.

Without a plan to follow

After Toledo won the 2001 presidential election, a series of commissions had been set up to develop comprehensive plans that could lead to the implementation of an array of constructive public policies. Nevertheless, many of his ministers were ill-suited to be in charge of these important posts. Some of them had been nominated by Toledo simply as a payment for political favors. Also, some of the ministers didn't have the expertise needed to administer their departments capably or to implement broad social policy. Social discontent suddenly rose over the performance of several key political choices, especially against the orthodox economics of Finance Minister Pedro Pablo Kuczynski, a well-known investment banker with very little experience with poverty first hand. Toledo's drastic cabinet shake-up in July, which left untouched economically like-minded figures, showcased the president's instinctive tendency to bow to Peru's investment sources abroad, rather than put his ear to the ground to hear the demands of his people.

While his critics increasingly speak out against him and spotlight the problems he has made for himself due to his unfulfilled populist vows, Toledo continues to ply his same tired and discredited formulas that have failed to bring substantial relief to his suffering nation.

- This analysis was prepared by Research Associates Paula Neira, Britt Conroy, and Brett Kyle of the COHA research group. The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being "one of the nation's most respected bodies of scholars and policy makers." For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 216-9261, fax (202) 216-9193, or email coha@coha.org.

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