[A-List] Peru: mounting political crisis

["Michael Keaney" <michael.keaney@xxxxxx>]

Crisis raises fear of Toledo losing his grip
By Mark Mulligan
Financial Times: June 5 2003

Over the past few days Peru has seen its biggest demonstrations since the
popular uprising that helped oust disgraced former President Alberto
Fujimori nearly three years ago.

Last week, hundreds of thousands of striking teachers marched on government
buildings in Lima and regional capitals and farmers blocked national
highways and attacked trucks and buses.

This week, there has been no repetition of violence that led to the death of
one protester and hundreds of injuries and arrests, but more than 300,000
trade unionists have taken to the streets in defiance of a state of
emergency.

Protesters claim that President Alejandro Toledo - elected with a
substantial majority in 2001 - has reneged on promises to improve living
standards.

"A teacher cannot live well on 600 soles ($175) a month," says Horacio Rios,
a state school teacher and one of the organisers of Tuesday's general
strike. They claim that by clamping down on their right to demonstrate Mr
Toledo is simply mimicking Mr Fujimori's authoritarian approach.

Strike organisers are threatening to extend their actions.

"What the government will still have to face in the next few months is the
problems of the health workers and the agricultural sector [where farmers
want exemption from value-added tax]," says Juan José Gorriti, secretary
general of the 1m-strong General Confederation of Workers of Peru, that has
been at the centre of the actions.

There have been hints from protesters that police are unhappy about wages
and conditions, raising the prospect of the kind of instability that shook
neighbouring Bolivia three months ago.

Many political analysts argue that Mr Toledo could soon lose control. Pablo
Secada, economist at the Lima-based Instituto Peruano de Economia, says that
the president has simply caved in to demands from protesting groups and has
been unable to develop and stick with a long-term strategy. A year ago, for
example, the government shelved plans to privatise two electricity
generators after rioting in the southern city of Arequipa.

More recently, the authorities agreed to fix minimum rates for haulage
companies after lorry drivers blocked roads. A climbdown also looks to be on
prospect in the face of the current protests as the government examines ways
in which it can generate resources for public sector wage increases from
spending cuts.

"Mr Toledo has been putting out fires as they flare up. He has lost his
grip," says Mr Secada, who argues the lack of direction is the main factor
that has dragged the president's popularity rating down to about 15 per
cent.

In his defence, Mr Toledo's supporters say he has had to deal with the
social and political explosion unleashed by the end of 11 years of
Fujimori-style repression. There is also the legacy of a crippling four-year
recession.

Although heavy investment in mining helped the country post 5 per cent
growth last year, the highest in the region, the trickle-down effect is
still years away.

A decentralisation programme, underpinned by newly elected regional
governments, should help by ensuring more efficient allocation of central
funds to areas of most need. However, without a dramatic surge in foreign
investment and tax collection, progress will be slow.

Peru's black economy accounts for more than 60 per cent of non-agricultural
employment, according to government figures. Government income from tax is
equal to 12 per cent of gross domestic product, compared with 36 per cent in
Brazil.

Political fragmentation and institutional weakness is another difficulty and
means that whatever Mr Toledo does the street protests are likely to
continue.

Mr Fujimori's dissolution of parliament in 1992 so weakened political
organisation that the leftist Apra is the only well-established party in a
120-seat Congress. Mr Toledo himself can count on only 46 votes in
parliament, meaning policy is driven by horse-trading among disparate
interest groups.

"The average Peruvian does not feel represented in Congress," says Augusto
Alvarez, editor of Peru 21, a new daily newspaper. "As a result, when he or
she has a complaint, he takes to the street to protest."