Peru Mario Meets Crazy Horse

By Howard G. Chua-Eoan

As a blizzard of ticker tape fell from the skies, Peru's most famous novelist stepped onto a rickety stage in downtown Lima. Before him, a crowd of 25,000 waved red-and-white Peruvian flags and chanted "Libertad! Libertad!" ("Freedom! Freedom!"). They then began to shout his name: "Mario! Mario! Mario!"

Mario Vargas Llosa, 51, the author of such acclaimed novels as The War of the End of the World and Aunt Julia and the Scriptwriter, had torn himself away from the proofs of his new book to embroil himself in Peru's latest crisis. Addressing the crowd in Lima, Vargas Llosa warned, "A totalitarian threat is hovering over our country." The menace: a move by Peruvian President Alan Garcia Perez to nationalize private banks.

Since he led his populist party to victory in 1985, Garcia, 38, has diminished the power and influence of the country's two major conservative parties. Now Garcia's opponents have an issue over which to do battle and, in Vargas Llosa, a persuasive crusader. "If the government takes control of the financial life of this country, it is going to have such untrammeled power that democracy will become completely destabilized," argues the writer. "Crazy Horse will fall! Crazy Horse will fall!" shouted the audience at Vargas Llosa's rally, using the nickname Garcia has earned because of his penchant for the unpredictable.

Shortly after his election, Garcia unilaterally declared an annual payment ceiling of 10% on Peru's $14.5 billion foreign debt. The freed-up funds were then used to subsidize a jobs program, increase wages and cut taxes. As a result, inflation dropped from 159% to 62%.

To ensure the country's long-term growth, Garcia asked Peruvian bankers and capitalists to channel funds into local industries. Though private investment increased by 26% in 1986, the economy nonetheless is showing signs of faltering; inflation is expected to reach 100% by year's end. In May rising prices prompted a general strike that shut down most of the country.

As Peru stumbled into crisis, Garcia decided to nationalize the country's ten private banks. With Lima in charge of capital, Garcia argues, loans can be ( channeled to the small businesses and farms that the banks have traditionally ignored. Despite heated opposition from conservatives, the plan is expected to be passed by the 60-member Senate, where Garcia's party and its allies hold 32 seats.

While polls show that about 60% of Peruvians support Garcia's policy, the debate over nationalization has broken the broad consensus that sustained him through his first two years. Already there are suggestions that the right will unite behind Vargas Llosa, but the novelist denies he is seeking political office. "I'm a writer and nothing more," he says. "If this wretched law were suspended in the Senate, I would go back to my study." Few take his demurrals seriously. Vargas Llosa has himself brooded over his obsession with his homeland. "For me," he has said, "Peru is a kind of incurable disease."

With reporting by Mike Reid/Lima