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Foreign Relations Under Fujimori

Fujimori set out to repair Peru's foreign relations, particularly with its creditors. He campaigned on, and was committed to, a strategy of "reinsertion" into the international financial community. This commitment forced him to change his adherence to "gradualist" economics and to open dialogue with the major multilateral institutions.

Peru's foreign relations situation changed dramatically with the April 5 self-coup. The international community's reaction was appropriately negative. Most international financial organizations delayed planned or projected loans, and the United States government suspended all aid other than humanitarian assistance. Germany and Spain also suspended aid to Peru. Venezuela broke off diplomatic relations, and Argentina withdrew its ambassador. The coup threatened the entire economic recovery strategy of reinsertion. In addition, the withdrawal of aid by key members of Peru's support group made the process of clearing arrears with the IMF virtually impossible. Yet, despite international condemnation, Fujimori refused to rescind the suspension of constitutional government, and the armed forces reasserted their support for the measures.

Even before the coup, relations with the United States were strained, because they were dominated by the drug issue and Fujimori's reluctance to sign an accord that would increase United States and Peruvian military efforts in eradicating coca fields. Although Fujimori eventually signed the accord in May 1991 in order to get desperately needed aid, the disagreements did little to enhance bilateral relations. The Peruvians saw drugs as primarily a United States problem, and the least of their concerns, given the economic crisis, the SL, and the outbreak of cholera.

The cholera outbreak at first resulted in neighboring countries' banning Peruvian food imports, further straining relations. Even after the ban was lifted for certain products, fear of the spread of cholera was confirmed by cases reported in Colombia, Ecuador, Chile, and Brazil.

By the early 1990s, economic trends in Latin America were moving increasingly toward free-trade agreements with the United States and regional market integration, such as the Southern Cone Common Market (Mercado Común del Sur-- Mercosur; see Glossary). Although the Andean Pact agreed to form a common market in late 1990, Peru's role, owing to the extent and nature of its crisis, remained marginal, at least in the short term. Fujimori was so overwhelmed with domestic problems early into his government, moreover, that he was unable to attend the Group of Eight (see Glossary) meeting in late 1990.

Although Peru could have been eligible for special drugrelated assistance and trade arrangements with the United States under the Andean Initiative, Peruvian-United States relations were hardly smooth on the drug front during Fujimori's first year in office. Peru's eligibility for debt reduction and grants for investment-related reforms under the George H.W. Bush administration's Enterprise for the Americas Initiative (see Glossary), meanwhile, were restricted by its arrears with multilateral credit agencies and private banks.

On the debt front, relations with international institutions were improving, and after six months of negotiations, Peru was able to obtain the US$800-million bridge loan required to re-establish its borrowing eligibility from the IMF. Yet, Peru still had to pay US$600 million to international creditors. It seemed that for the foreseeable future, any credit inflows would merely be recycled to pay existing debts and arrears (see Foreign Trade and the Balance of Payments , ch. 3). Prior to the coup of April 5, 1992, however, almost all of the US$1.3 billion necessary to clear arrears with the IMF had been attained.

Peru had established a strong military relationship with the Soviets and Eastern Europe during the Velasco years, and was the Soviets' largest military client on the continent in the 1970s. Owing to a reliance on Soviet military equipment, this relationship has continued, although Peru has diversified its source of supply of weapons to countries ranging from France to North Korea (see Changing Foreign Military Missions and Impacts , ch. 5). In addition, like its relationship with Cuba, Peru's relationship with the Soviets is certain to diminish in importance as both countries turn inward to deal with domestic crises and economic rather than strategic issues dominate the agenda. Reflecting this change is a new importance placed on relations with the United States and also with Japan, largely because of Fujimori's heritage and the emphasis that he himself placed on the Japanese role during the electoral campaign. More than anything else, Peru's foreign relations were expected to be dominated by the nation's need for foreign aid, capital, and credit, all of which hinged on the republic's solving its internal economic problems, cooperating with the United States on the drug issue, and dealing with the challenge from insurgent groups. Additionally, most of the international community remained unwilling to provide credit or aid until democratic government was restored.

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David Scott Palmer's Peru: The Authoritarian Tradition offers a good overview of Peruvian political development through the early 1980s. The most comprehensive treatment of the development of Peru's state sector and public policy framework is Rosemary Thorp and Geoffrey Bertram's Peru 1890-1977. Cynthia McClintock and Abraham F. Lowenthal's edited collection of essays, The Peruvian Experiment Reconsidered, is a balanced description of the military years and covers a wide range of political and economic issues. Peru's transition to democracy is detailed in Stephen M. Gorman's PostRevolutionary Peru. Carol Graham's Peru's APRA is the first single-volume description of the García government and APRA in power. Hernando de Soto's detailed description of the Peruvian informal sector and regulatory framework, The Other Path, sparked an extensive debate on the role of the informal sector and its relation to the state in Latin America. A good article on Fujimori's self-coup is Eduardo Ferrero Costa's "Peru's Presidential Coup." On the challenges to the political system posed by the human rights situation, see Angela Cornell and Kenneth Roberts's "Democracy, Counterinsurgency, and Human Rights." (For further information and complete citations, see Bibliography.)

Data as of September 1992

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