IN THEIR FACE

By TIM PADGETT/LIMA

Wearing blue jeans and a contemptuous look, Peru's President Alberto Fujimori swaggers into the dank cellblock of the Castro Castro Prison, a squalid penitentiary on Lima's outskirts that houses scores of captured rebels from the Tupac Amaru Revolutionary Movement (MRTA). Seeing Fujimori, the Tupac prisoners spring angrily from the concrete beds inside their overcrowded cells. Fists raised, they hurl deafening Marxist choruses: "Fujimori, dictator, the people will defeat you!"

Fujimori hardly blinks; he is unfazed by the stench of sweat and sewage. He moves toward the cell bars, his face so close that the guerrillas would gladly put him in a choke hold if not for the armed guards, and suddenly he smiles at them. Strolling on through the cellblock, he sees an inmate weaving straw hats. "Those are good looking," the President says; "let me buy one." The inmate's reply is hardly Marxist: "Ten soles" ($4). He hands the hat through the bars, and Fujimori puts it on. "Pay the man," he tells an aide. "I don't want him to think I'm a cheat."

Across town, some 20 heavily armed Tupac Amaru militants still hold 74 hostages--including Fujimori's brother--inside the Japanese ambassador's residence, which they seized in a stunning raid on a gala cocktail party Dec. 17. Their main demand: the release of 450 comrades imprisoned in holes like Castro Castro. Turning to the reporters from Time he has taken into the prison, Fujimori waves his hand at the cells. "How do you expect me to negotiate with violent criminals like these? I can't let these people go. Never."

It was the President's most vivid rebuff yet of Tupac Amaru's demand. And given the guerrillas' own intransigence, it illustrated just how long Peru's hostage crisis could drag on. Since the well-being of the hostages keeps Fujimori from using his iron fist to rescue them, he decided last week to rely on his own steely resolve, settling into a tense staring match with Tupac Amaru.

But what the world outside thinks of Fujimori is beginning to concern him more. For three weeks he has bristled at suggestions that his reputation as terrorist buster and friend of the poor was at stake inside the Japanese residence as much as the lives of the hostages. In an interview with Time last week, his first face-to-face session with the press since the crisis began, Fujimori adamantly rejected political dialogue with Tupac Amaru, insisting that the group was "in extinction." And he seemed nettled by one criticism growing louder as a result of the crisis: that in his impressive but authoritarian crusade to end Peru's long night of guerrilla terrorism--especially the atrocities of the Maoist-inspired Shining Path--he has ended up exacerbating the poverty and human-rights abuses that helped spawn rebellion in the first place.

Peru's guerrillas "aren't guerrillas; they're terrorists," he insists. "They didn't emerge because of poverty, but as a consequence of ideology. That's why we had to get rid of them--so we could genuinely start fighting poverty, which we're now doing." He ends the hourlong session inside the ornate presidential palace by announcing he will show reporters what he means, "rather than talk about it all day."

Rising from his long mahogany table and high-backed chair, he summons a military aide who presents him with walking shoes, blue jeans and a windbreaker, which he dons at his desk. His Toyota 4Runner is waiting in a courtyard. "Take off your ties," he says, climbing behind the wheel. "You're going to get very dusty."

In addition to the mockery Tupac Amaru were making of Fujimori's claim to have vanquished terrorism in Peru, their media machine had stung the President the week before. When romantic images of Tupac leader Nestor Cerpa Cartolini, spouting guerrilla slogans from inside the Japanese residence, were transmitted around the world, the irked President called them "absurd"--and broke off all talks with the rebels for more than a week. Now, clearly, Fujimori is striking back, hoping to revive some of the shrewd antipolitician's magic that has allowed him to assume near dictatorial powers since 1992, when he dissolved Congress, emasculated the political elite and took after the guerrillas.

Lima residents are used to seeing Fujimori tool around unannounced, especially with foreign visitors. But his venturing out last week, his first real plunge into the city since the crisis started, was a big event for shantytowns like San Juan de Amancaes. It is one of the countless poor squatter communities scratched into the hillsides on Lima's outskirts, which were once urban recruiting grounds for the guerrillas.

When Fujimori drove up to San Juan de Amancaes' dusty brick homes, he got the public stroking he'd come for. To call him something as rigid as "Presidente" here seemed almost an insult: "Fuji" was the preferred form of address. In the six years since he took power, friends say, these barrios have become not only a political refuge for him but also an emotional haven. Unlike many of his personal relationships--his estrangement from his brother and onetime aide Santiago, and a marriage so nasty he is reported to have locked his wife Susana inside the presidential palace before they finally divorced recently--the pueblo joven (shantytown) denizens offer the former university official a less complicated affection.

He lowers his window to breathe in cheers of "Go, Fuji!" and his favorite nickname, "Chino," for his Asian features. Housewives run up to the Toyota and, stopping short for an instant with their heads bowed to make sure it is O.K., lean against his door to chat like neighbors. "Chino, thank you so much for the new streets," says one, wiping her hands on her apron and pointing to the small buses that now shuttle in and out of San Juan de Amancaes. "But you know, Chino, we could use some more police around here too."

Fujimori promises it--then shifts into four-wheel drive and shoots up the barrio's steep paths before she can ask when. He points to the scores of army troops swinging pickaxes and driving bulldozers for public works, an effort to soften the jackbooted image Fujimori's soldiers carry because of the nasty antiterrorism campaign. "Tupac Amaru knows it can't win," Fujimori says, "because my projects for the poor are different from what they're used to seeing from leaders here."

When Fujimori reaches the top of San Juan de Amancaes, he surveys the hillside and grabs a reporter by the arm: "You see all that color down there? These people never had painted houses before. Do you think Nestor Cerpa painted them? No, they did, with the bank credits they can get now because they own property. Cerpa doesn't have any support here--none at all." He waves his arm across the panorama: "This is my vaccine against terrorists like the MRTA ever happening again."

But with all the adoration "Chino" basks in on the streets, why is he taking such a hit in the polls? Since last January his approval ratings have dropped from the high 70s to the low 40s. Voter preference polls for the election in the year 2000 are worse: in the most recent national survey, Fujimori placed second, with only 26%, behind Lima Mayor Alberto Andrade. "I don't govern by popularity polls," Fujimori retorts.

The economy is one obvious reason for the lagging polls. Last year it registered a paltry 2.2% increase as Fujimori tried to tackle a massive debt. Economists estimate that as much as 75% of the population languishes in lower-class status. Jobs have disappeared; the cost of public services has shot up. As a result, even those close to Fujimori warn against interpreting his welcome in pueblos jovenes as blanket backing. "He shows up in neighborhoods where not many people have work," says one skeptical adviser, "and it's the day's entertainment. Of course they are going to come out and wave." Like Marcial Surco in San Juan de Amancaes: he came out to wave last week, but volunteered in front of Fujimori that he hasn't had steady work in almost a year. Or Jorge Alvarado, 24, a semiemployed accountant in Lima's lower-middle-class Pueblo Libre neighborhood. "I don't agree with Nestor Cerpa taking hostages," he said. "But the embarrassing thing about this crisis is that Cerpa has become a sort of interlocutor between Fujimori and our economic problems. Maybe Fuji will listen to us a little more after this and not be so rigid."

The prison conditions also remain a big issue. Human-rights groups estimate that as many as 1,000 Peruvians are languishing in jail after being wrongly accused of involvement with guerrillas--and convicted by masked judges sitting on anonymous military tribunals. The prisons are some of the world's most inhumane, with inmates suffering gross malnourishment and spending only a half-hour daily outside their impossibly overcrowded cells.

For all his muscle flexing in front of MRTA prisoners last week, Fujimori did take a closer look at their squalid lives, three or four men sharing 32 sq. ft. and a hole for a toilet. The President also accepted the petitions of those who say they were wrongly accused of terrorism--personally taking the smudgy pages as inmates shoved them through the bars. Fujimori promises to take them to the Belgian-born priest, Hubert Lanssiers, who heads up his commission to examine wrongful convictions. "I realize we have some incompetent judges out there," he admits. "Now that we've defeated the terrorists, we can change that." But Fujimori and Vladimiro Montesinos, his shadowy intelligence adviser and most trusted aide, were still pushing through a law that critics say tightens their grip on the judiciary.

What commands more attention in Lima, obviously, is the grip Fujimori has on the hostage crisis. Aides say that true to his nature, he is getting impatient with hostage diplomacy. Inside the Japanese compound, meanwhile, Cerpa and his comrades mulled over the government's stepped-up efforts to get them to accept safe passage to another country--perhaps to Panama. Time has learned that both Peruvian and foreign intelligence reports identify the 33 lbs. of explosives each Tupac Amaru captor has strapped to his vest as a Semtex-like substance equal to a large bomb. Multiplied by 20 guerrillas, the charges could bring the entire residence down in a flash--a chilling reminder that despite its bid for legitimate political status, Tupac Amaru has a bloody, 15-year history of terrorism behind it.

Still, if Fujimori and Cerpa didn't look poised to negotiate last week, they didn't look set to do anything rash, either--although a few stir-crazy guerrillas inexplicably fired four rifle shots into the air last Thursday night. The presidential tour of the prison and the barrio simply reinforced Fujimori's new message: he doesn't intend to be upstaged again during this crisis.

--With reporting by Douglass Stinson/Lima

With reporting by DOUGLASS STINSON/LIMA