Peru: Soldier in the Saddle

Peru: Soldier in the Saddle "We are building for our children. There will be difficulties, there will be problems. But our revolution cannot stop." So said Peruvian President Juan Velasco Alvarado in October 1968 after he and his fellow generals ousted the civilian government of President Fernando Belaunde Terry.

Rabbit in the Hat. The revolution's avowed purpose of creating no less than "a new Peruvian, one of dignity and responsibility" was a tall order. Peru was long overdue for a social overhaul. Only three years ago, giant foreign concerns and a few rich Peruvian families still had a hammer lock on the economy, controlling vast sugar estates that sometimes stretched for a quarter of a million acres, or running huge copper, zinc and silver mines where laborers worked for a little over $1 a day.

To accomplish its ambitious aims, the junta adopted a nationalist posture --"neither Communist nor capitalist, but peculiarly Peruvian," as Velasco put it. Unlike military regimes of the past, which usually served the oligarchy, the junta was sympathetic toward the sufferings of the lower classes simply because some of its members came from humble backgrounds. Only a few days after seizing power, it nationalized the U.S.-owned International Petroleum Co. and refused to pay compensation on the grounds that the company had illegally taken oil out of the country worth at least six times as much as the seized holdings. Loath to damage its relations with Peru, the U.S. has not pressed the issue. Though it was the only instance in which the junta refused compensation, the I.P.C. case nevertheless frightened off potential investors.

Lately, however, businessmen have been taking another look at Peru. Early this month the government signed a contract permitting the U.S.-owned Occidental Petroleum Corp. to explore for oil and split its finds fifty-fifty with Peru. The terms came as a surprise to oilmen, and may touch off a scramble among foreign companies. Says one economist: "Oil could be the rabbit in the hat for the Peruvian economy."

The economy can certainly use a magic trick. Inflation was held last year to less than 6%, and fish-meal exports rose to the highest tonnage ever. But the world price of copper, Peru's most important foreign-exchange earner, has dropped from 700 in March 1970 to 550.

Most Ambitious Ever. Velasco, an ordinary soldier who rose through the ranks to become a general, complains bitterly about the lack of U.S. support. "Washington practically demanded that the Latin American nations put land-reform programs into effect as a condition for Alliance for Progress aid," said the President. "Now that our revolution is really trying to make land reform work, not one American dollar has been lent to help us finance it."

In fact, the junta's agrarian reform program, the most ambitious ever attempted in South America, has now swept over all of Peru's 6,000,000 arable acres. Three years ago, .8% of the landowners held 83% of the arable land. Now, owners are allowed to keep only 370 acres; the rest will be paid for in 4% bonds maturing in 20 years. The junta has also passed an industrial law under which all basic industries will be state-owned. Foreign companies are not allowed to own more than 33% of any local industry. In all companies employing five or more people, Peruvian workers will share in 25% of the profits before taxes. Wages have also gone up; the average salary for mine workers has doubled to a little over $2 a day.

Preventive Revolution. Despite these changes, fewer of the rich have fled from Peru than from Chile, in part because they recognize that the junta, which has not used violent tactics, is engineering what might be termed a "preventive revolution" rather than a complete upheaval. "With the junta, I lose half of my fortune," explains an aristocrat. "With a more radical revolution, I might lose my entire fortune and my neck as well."

Yet, if the revolution has not met with much resistance, neither has it generated much fervor. One of the toughest problems, President Velasco said recently, has been "getting the people to participate." With its genuine but almost naive idealism, the junta asks the people to labor selflessly for the sake of Peru. Like most people, the Peruvians are not anxious to work all that hard until they can be sure there is something tangible in it for them.

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