PERU: PROSPECTS FOR CIVILIAN RULE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83S00855R000200050001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 21, 2016
• Document Release Date: August 21, 2008
• Sequence Number: 1
• Publication Date: November 1, 1982
• Content Type: REPORT

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DIA review
completed.
State Dept. review
completed
Secret
ALA 82-/0146
November 1982
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Directorate of Secret
Intelligence
Civilian Rule
Peru: Prospects for
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Directorate of
Intelligence
Peru: Prospects for
~iviliam Rule
This assessment was prepared by
the Office of African and Latin merican Analysis.
Comments and queries are welcome and may be
directed to the Chief, South America Division, ALA,
Directorate of Operations.
Secret
ALA 82-10146
November 1982
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Peru: Prospects for
Civilian Rule
Key Judgments We believe that the armed forces, which ruled Peru for a dozen years
Irt(ormation available before consenting to elections in 1980, remain the most significant
as oj15 October 1982 potential threat to democratic civilian government. President Belaunde has
was used in this report.
assuaged most of the military's concerns through personal cultivation,
adept leadership, and fairly effective policies. He has thus given himself a
better-than-even chance, in our judgment, of remaining in office over the
next 12 to 18 months. The armed forces are closely monitoring his
performance, however, and their willingness to allow him to finish his term
and transfer power to another civilian successor in 1985 will depend on his
record in all major policy areas: internal security, the economy, domestic
politics, and foreign affairs.
Terrorism-and the reaction to it-is Belaunde's most pressing concern.
The Maoist Sendero Luminoso (SL), a group of about 1,000 concentrated
primarily in southeastern Peru, lacks any realistic potential to overthrow
the government, in our view, but its capabilities are growing. In addition to
typical terrorist actions, it probably could capture and hold for several days
a small town, kidnap a prominent official, or hold its own against small
military patrols. The spreading violence, moreover, has impelled the armed
forces to seek a direct role in the struggle. The President, we believe, wants
to rely on the civilian police as long as possible, in part because he hopes to
avoid a situation similar to that which contributed to his ouster by the mili-
tary in 1968. We judge, however, that direct armed forces participation in
counterterrorism poses less risk for Belaunde than he fears, and would
dramatically reduce the terrorist threat within a year or so.
Peru's economy is suffering from many of the same ills afflicting most less
developed countries, but we and the US Embassy believe that Belaunde's
economic team has made significant progress in dismantling the initiative-
stifling structures installed by statist military rule and in laying the
groundwork for reasonable economic recovery. Peru will, we believe,
achieve real growth this year of 2.5 to 3.0 percent and the current account
deficit will rise as austerity mandated by the International Monetary Fund
begins to pinch. In the long run, however, recovery is more difficult to
forecast, because it is heavily dependent on an international economic
upswing, as well as on the correction of certain structural weaknesses in the
economy. We judge that meanwhile Belaunde will be able to continue
dealing successfully with labor and the military on economic issues,
although some concessions to these key groups will probably be made.
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ALA 82-10146
November 1982
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The President's success to date in managing Peru's political system is in
our view the result of the acquiescence of the military, the growing
institutional strength of his party and the ruling coalition, the disarray of
opposition forces, and Belaunde's impressive personal talents. We do not
foresee a change for the worse in these circumstances.
Belaunde's judicious handling of two potentially serious foreign policy
questions-a border conflict with Ecuador in 1981 and the Falklands war
this year-enhanced his domestic standing and had a favorable impact on
his relations with the armed forces,
The odds that civilian rule will survive after Belaunde's term are less sure.
The military has grown more apolitical in recent years, but also more
conservative. Its historical tendency to intervene probably would be
encouraged by a strong showing by leftist political forces during and after
the campaign and election in 1985, although we do not anticipate this
occurring.
Such intervention would have implications for US interests in several
regards:
? The democratic process, supported by the United States, would be set
back in Peru.
? Military intervention would intensify political polarization and strength-
en the radical leftists.
? A military government would be more likely than a civilian administra-
tion to undertake adventures over longstanding border disputes with
Chile and Ecuador.
? Even a politically conservative military government would be highly
nationalistic and less receptive to US investment than a moderate civilian
regime.
? A military government would probably be less amenable to reducing
Peru's dependence on the Soviet Union as an arms supplier than any
foreseeable popularly elected civilian administration.
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Peru: Prospects for
Civilian Rule
Background: Belaunde and the Military
Civilian President Fernando Belaunde governs in the
shadow of his first administration, the coup of 1968
that ousted him, and the military regime that fol-
lowed. Thus, public doubts persist that, despite his
landslide electoral victory in 1980, he will not be able
to avoid the mistakes, bickering, and political stagna-
tion that doomed him in 1968. For the time being,
however, Peruvians' relief over the end of military
rule, coupled with the armed forces' disillusionment
with governing, have given Belaunde a comfortable
grace period. To date he has adeptly avoided or
played down his previous mistakes and weaknesses
while capitalizing on public distaste for the military
regime.
When Belaunde became President in 1963, he articu-
lated avision of Peru's future that was based on the
full incorporation of the Indian into national life,
agrarian reform, and the development of the hinter-
land. He set out to draft and implement massive
programs, but these stalled in the face of inadequate
resources, the political opposition's obstructionism,
and foreign-supported insurgency. By 1968 his admin-
istration had become mired down in partisan politics,
indecisive economic policies, and a series of scandals
and disputes that undermined public confidence and
greatly diminished the President's personal populari-
ty. The military was finally impelled to move against
Belaunde when a serious dispute involving negotia-
tions with US companies over oil leases set off charges
that he had sold out the national patrimony. Con-
vinced that the President was truckling to foreign
investors, disgusted with his inability to deal with
Congress, and dissatisfied with his slow reaction to an
insurgent threat in 1965, the armed forces took over
all power.
The military regime that followed changed the tradi-
tional pattern of short-term and parochially motivated
military intervention in Peruvian public life. The
officers who overthrew Belaunde had not only imme-
diate but long-term objectives:
? To end debilitating bickering among civilian politi-
cians and to terminate the government's contract
with the US petroleum companies.
? To effect basic socioeconomic changes.
Led by the leftist, nationalistic General Velasco, the
armed forces quickly banned civilian participation in
government and expropriated the petroleum compa-
nies. Long-term social reform programs and develop-
ment projects were launched, but these eventually
overtaxed Peru's limited resources. In 1975 more
moderate elements in the military replaced Velasco
with Gen. Morales Bermudez. 25X1
During the following years, the military gradually
retreated from its commitment to create a "new
Peru," and this retreat in turn began to undercut the
rationale for indefinite military rule. Increasingly
frustrated by the intractability of Peru's ills, the
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Peruvian Provinces Under State of Emergency
---Departamento boundary
Provincia boundary
Area under state of emergency
o zoo
Kilometers
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armed forces decided by the late 1970s to draft a new
constitution, hold elections, and turn the government
back to civilians. Despite some reservations, military
officers swallowed their pride after the July 1980
elections and allowed Belaunde to take office.
The Key Issues
In view of these antecedents, Peru's armed forces
remain the most significant potential threat to demo-
cratic civilian government. This paper examines the
factors that will determine the nature and extent of
that threat over the next few years, and it assesses the
prospects for military intervention and its implications
Internal Security
Belaunde's most pressing domestic problem is terror-
ism. Despite the gradual upswing in violence, how-
ever, and the prospect of worse to come, we and the
US Embassy believe that the subversives-the Maoist
group Sendero Luminoso (SL~by themselves lack
the potential to overthrow the government. The SL
has little support outside of a few highland provinces
and has no known foreign support. Nevertheless,
escalating terrorism and the so far ineffective police
response have awakened memories of similar circum-
stances during the previous Belaunde administrati~~
. ? ., , r- --- 25X1
This has once again raised the specter
~f m>>~.tary intervention. 25X1
We believe the armed services are closely monitoring
25X1
Belaunde's performance, and their willingness to al-
Recent US Embassy reports,
low him to finish his term and transfer power to a
indicate that the terrorist group is developing
civilian successor will depend on his record in internal
into a significant guerrilla organization and is likely
security, the economy, domestic politics, and foreign
to undertake more sophisticated operations. If the ct
relations. To satisfy them, Belaunde will have to:
does expand its operations we foresee three 25X1
possibilities: 25X1
? Reconcile tough measures to combat terrorism,
presently his most serious problem, with his commit-
? Belaunde could boost further civilian police capabil-
ment to democracy. His biggest challenge will be to
ities while simultaneously working to convince the
marshal an effective counterterrorist campaign
without surrendering significant authority to the
military to lend greater support to the civilian effort
to control the terrorists. This is a difficult but
military.
? Cope with economically induced political pressures
feasible task, and one toward which the President
has already taken some steps.
from labor, the military, and the opposition parties.
? Belaunde, facing an expanding insurgency, might
Successful management of economic problems will
yield to military pressure and direct the Army to
require skill and creativity on the part of the
take over the counterterrorist effort. Despite what
administration, and an upturn in international eco-
we believe are the President's fears, we are not
nomic conditions.
? Advance the process of rebuilding the civilian politi-
cal system after 12 years of military rule while
convinced that such a move would necessarily repo-
liticize the military and open the door to a gradual
assumption of power by the armed forces.
avoiding the political paralysis that afflicted his first
? Finally, and least likely, if Belaunde fails to stem
term.
terrorist rowth, he could be ousted by a military
coup.
25X1
for the United States.
? Manage a number of contentious foreign policy
questions while avoiding blunders that might cata-
lyze political or military opposition to his adminis-
tration.
The Terrorist Danger. The Sendero Luminoso has
approximately 1,000 committed members and several
times that number of supporters, according to US
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Equis X
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The Government's Response. Even though the terror-
ists pose no immediate threat to political stability,
they have caused considerable apprehension in civilian
and, more important, in military, circles,
Belaunde has attempted to
Embassy) In the past
two years the SL has advanced from bombings direct-
ed primarily at property to attacks on police stations
and jails and assassinations of provincial officials. The
SL probably believes that its tactics will provoke
violent repression by the Army, which in turn would
lead to a rise in popular sympathy for the SL
out by small, well-trained units.
In its operations to date, the SL has not posed a
significant threat to military forces. Destruction of
electrical powerlines and assaults on isolated police
posts are typical operations, which would be difficult
to prevent even if Peru's civilian security forces were
effective in counterterrorism. Most of the SL's recent
urban operations could have been planned and carried
assuage these fears through a measured response to
the problem. He has declared periodic states of
emergency in the affected zones, ordered the military
to provide logistic support for the beleaguered rural
police detachments, and improved the inefficient and 25X1
corrupt civilian security services and the cumbersome
judicial system.
We agree with the US Embassy assessment that
Belaunde will delay involving the military as long as
possible, The
President is not only concerned that this would unduly
enhance the military's influence over government, but
as the Embassy reports, he is also worried that a
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tough antiterrorist campaign might endanger I
favorable human rights image and perhaps hell
25X1 the SL's hopes of increasing its public support.
eru's
fulfill
Plans to upgrade the police forces' training and
equipment are under way. The administration has
provided more funds and has received some assistance
from other countries
Army Gen. Oscar
Brush, the President's former military aide, is to
become Minister of War in January 1983. The Presi-
dent may hope that Brush, who is a longtime friend
and the commander of the military region containing
25X1 Ayacucho, will be more amenable than his predeces-
sor to increasing military logistic backing and intelli-
gence sharing with the police. If the police can
improve their capabilities at a pace equal with the
RI 'c arnwth they nrnhahly can contain the terrnrictc
We believe that the Army probably could shatter the
SL if it were given the unfettered authority it wants.
We believe, and US Embassy reporting confirms, that
the high command is aware that a poor performa25X1
against the SL would demoralize the troops and
discredit the Army in the public eye. For this reason,
it probably would commit its best personnel and give
careful preparation to any counterinsurgency cam?25X1
paign. rmy
genera s ave se ecte an egun to tram and equip
the crack Airborne Division for use against the terror-
25X1
Contingencies. We believe that a direct military role
would become almost inevitable in the event of one or
more of the following potential developments:
If Belaunde decides to authorize the Army to take
over the antiterrorist fight, we believe that armed
forces involvement would not necessarily undermine
his authority or inevitably lead to a military coup. 25X1
Belaunde probably could allow the Army to operate in
the isolated Ayacucho region,
? Widespread popular support for the SL.
? Evidence of substantial foreign assistance to the SL.
? The spread of terrorist activity to the northern and
eastern jungle regions.
? Larger, more sophisticated SL operations against
important government targets, especially military
25X1 units.
Recent reports indicate that two of these conditions-
popular support and more sophisticated operations-
may be developing. US Embassy reports cite com-
ments by high-ranking police officials that the SL has
either intimidated or earned the support of much of
the population of Ayacucho Department.
and still retain full authority in the capital and other
major cities, where large-scale military activity 25X1
against the terrorists would be under closer national
and international scrutiny. Although the armed forces
have asserted that they must be given complete
political-military control in the affected areas to
combat the terrorists, we believe, based on US Em-
bassy reporting, that the service chiefs would agree to
some restrictions because they probably wish to avoid
a break with the President. In addition, if General
Brush becomes Minister of Defense, Belaunde may be
able to use him to convince the high command to
accept closer civilian oversight. 25X1
Finally, a controlled Army intervention might not
pose as great a threat to Belaunde as a continuing
inability to control terrorism. The US Embassy re-
ports that most Peruvians outside of Ayacucho and,
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more important, numerous members of Belaunde's
party, favor a direct role for the military. An ineffec-
tive administration response in the face of an expand-
ing subversive movement could seriously undermine
public faith in the President, heretofore one of his
greatest assets. While we do not see it as likely in the
near term, the possibility remains that the military-
watching aterrorist group grow into a guerrilla
movement and seeing public confidence in the admin-
istration steadily erode-would consider coming out
of the barracks.
The Economy
Respectable economic performance is another key to
the administration's survival. Peru's economic prob-
lems are serious, but we and the US Embassy believe
that Belaunde will be able to cope with them over the
next 12 to 18 months, in part because the administra-
tion's talented economic team already has made
significant progress in rebuilding a market economy
in the face of a worldwide recession. Moreover,
Belaunde so far has been able to contain the political
and labor opposition to his economic reform and
austerity measures, and we believe he can continue to
do so in the short term. In the long run, however,
recovery is more difficult to forecast, because it is
heavily dependent on an international economic up-
swing, as well as correcting certain structural weak-
nesses in the economy.
Stimulating Performance. Upon taking office,
Belaunde's economic advisers moved to dismantle the
initiative-stifling structures created during 12 years of
statist military rule. Since then, the government has:
? Cut inflationary food, fuel, and export subsidies.
? Reduced the tariffs that had long protected ineffi-
cient and monopolistic local industries.
? Signed important contracts with foreign corpora-
tions to expand oil and mineral exploration and
production.
The US Embassy reports that Belaunde's administra-
tion is registering a creditable economic performance.
We project the GDP growth rate for 1982 at between
2.5 and 3.0 percent. Agriculture in 1981 attained the
highest increase in 12 years, primarily because of
more favorable government pricing policies, and the
end of a long period of drought. Certain traditionally
productive sectors-especially minerals-have suf-
fered from the dip in world demand. Manufacturing,
however, registered real growth in 1981-although
only a third of the rate of a year before. The world
recession has decreased export receipts, portending a
second consecutive large current account deficit this
year and an expected decrease in foreign reserves. The
government budget will register a large deficit, and
inflation-although decreasing-will exceed 60 per-
cent for the fourth straight year.
Retrenchment. Faced with the prospect of a major
balance-of-payments problem reminiscent of the mid-
1970s, the government asked for and received almost
$1 billion in financial support from the International
Monetary Fund (IMF)-$740 million under the Ex-
tended Fund Facility and $225 million in compensa-
tory financing-in an agreement signed in June. The
major immediate problem the administration faces is
meeting the IMF's stringent guidelines for this sup-
port. Under the loan conditions, the government must
impose a reform program of strict fiscal austerity-
with limits on government deficit and borrowing-
and aspeedup in Peru's devaluation schedule to help
reduce the trade deficit. The program set the follow-
ing targets:
? The public deficit is to be brought down to 4.2
percent of GDP in 1982 and 2 percent in 1984.
? Public-sector borrowing from the central bank is to
be limited to no more than 100 billion soles ($140
million, at current exchange rates).
? Foreign borrowing is to be limited to no more than
$1.1 billion in credits of between one and 10 years'
maturity.
? The decline in foreign exchange reserves is limited
to no more than $100 million.
As the US Embassy reports, the administration ap-
pears committed to reducing the public-sector deficit
as the IMF requires. Recently, the government made
last minute cuts of development projects from the
budget and has reiterated its commitment to elimi-
nate wheat, rice, and gasoline subsidies, also called for
by the IMF program. Even with these moves, howev-
er, we believe the government will not meet the IMF
guidelines this year. Nevertheless, in our view,
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Belaunde's economic team can probably prevent a
withdrawal of Fund support by demonstrating that it
is making an effort in good faith to comply and that
its inability to meet the targets is due to international
circumstances beyond its control.
Risks for Belaunde. The imposition of the austerity
measures entails increased political risk for Belaunde.
In particular, the removal of subsidies on two national
staples-wheat and rice-and on gasoline is political-
ly very sensitive. At a time of rising unemployment-
officially, and we believe accurately, estimated at
about 7 percent with underemployment as high as 48
percent-and continued inflation, these measures
could spark serious protests and crippling strikes. ~
We and the US Embassy believe, however, that
Belaunde has a good chance of minimizing the politi-
cal fallout of his economic policies. The US Embassy
reports that the administration already has proved
surprisingly adept at implementing and gaining
grudging popular acceptance of its reforms, even
under the adverse economic circumstances of the past
two years. As the US Embassy reports, the adminis-
tration's practice of accompanying its reforms-par-
ticularly the easing of price controls on basics-with
deftly handled wage increases which still lag inflation
has kept opposition politicians off balance and has
helped Belaunde contain labor and other public un-
rest. Although strikes have been frequent and have
included two general work stoppages, they have been
brief and have had only minimal impact.
The administration's skillful Labor Minister deserves
much of the credit for the government's success in this
regard. We believe that, with some concessions, he
probably can continue to manipulate the fragmented
labor confederations and may also be successful in
developing the new National Labor Council, an um-
brella organization, into a permanent structure for
collective bargaining. Despite its earlier refusal to
participate, the major labor confederation (General
Confederation of Peruvian Workers) may join the
others in the Labor Council, according to the US
Embassy. At any rate, the unions' inability to mount
extended strikes, as they did even under the military
regime, indicates the effectiveness of Belaunde's labor
policies and suggests that he can ride out any labor
unrest. 25X1
While we cannot discount the possibility, we and the
US Embassy do not envision that the economic
difficulties confronting Belaunde in the near term will
set the stage for a military takeover. The armed
forces' own unenviable record in the economic sphere
has made the generals reluctant to undertake the
formulation and implementation of economic policy.
Lacking an alternative program or the desire to
formulate one, the military has been content to accede
to Belaunde's free market approach. We believe that
the services by and large have returned to looking at
the economy in a more traditional light: they are
concerned primarily with the impact of economic
policy and problems on internal order and the military
budget. The President, at the same time, is reluctant
to tamper with military procurement which, while
undoubtedly causing the administration difficulties in
achieving fiscal targets, is politically expedient.
25X1
Civilian Politics
We believe that Belaunde will continue his successful
record of avoiding the political paralysis that contrib-
uted to his ouster in 1968. Most top officials in t25X1
governing Popular Action Party (AP) realize that
their future is contingent on Belaunde finishing his
term, and therefore we believe they are committed to
maintaining unity. The recent recommitment of the
AP's partner in the governing coalition-the Popular
Christian Party (PPC~to the AP-PPC alliance rein-
forces Belaunde's chances and will contribute to
political stability. Moreover, the opposition political
parties show few signs of achieving the unity neces- ,
sary to challenge seriously Belaunde's policies.
Ski11Jal Politician. Belaunde's sound performance as
a president and a politician during the past two years
is the main reason for the favorable outlook. He has
improved his ability to direct the course of govern-
ment without becoming bogged down in detail. Ac-
cording to the US Embassy, he is a visible, popular
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executive who rules while his Cabinet administers.
With only a few exceptions, Belaunde's Cabinet is
highly capable at formulating and implementing
policy
Belaunde's performance in intraparty and interparty
politics also stands in notable contrast to that of his
first administration. Mindful of the bitter dissension
that plagued his government in 1967-68, Belaunde
has worked to build a durable party structure, al-
though factionalism still tests his political acumen. He
is the preeminent figure in his Popular Action party,
but he has not used his power to impose specific
personalities or structure on the party. According to
the US Embassy, he has adopted the role of mediator,
interjecting his views only when necessary to mini-
mize damage to his programs
We believe that Belaunde is attempting to instill into
the AP sufficient institutional durability for it to
function effectively after he leaves the scene. Progress
in this direction, however, has been halting. The US
Embassy notes that despite Belaunde's capable direc-
tion, the AP continues to show public evidence of
internal strife, which could erode Peruvians' confi-
dence in the administration and in the democratic
system. Nonetheless, in allowing such public debates
by competing factions, Belaunde may be contributing
to the evolution of a truly democratic, nonpersonalis-
tic party, accustomed to the give-and-take inherent in
such organizations.
The President's effective control of the AP to date has
made possible the alliance with the second-largest
opposition party-the PPC-which in turn has bene-
fited both groups. In exchange for a few minor
Cabinet posts, Belaunde has gained a coalition that
allows him to dominate the Congress. The US Embas-
sy reports that the PPC leaders recognize that the
agreement presently affords the best opportunity for
their well-organized but small party to exert influ-
ence, albeit limited, on the national level.
The Opposition. The AP's relative strength also has
allowed Belaunde to take advantage of the disunity
that has plagued the other opposition parties, in
particular the American Popular Revolutionary Alli-
ance (APRA), the principal opposition force. The
unity that characterized APRA prior to the death in
1979 of its founder, Raul Haya de la Torre, has given
way to bitter conflict between leftist and centrist
factions. The US Embassy reports that this schism
has contributed substantially to Belaunde's initial
success in interparty politics. The split has already
curtailed APRA's ability to oppose the AP in Con-
gress. In fact, the centrist faction has occasionally
indicated a willingness to cooperate with the AP,
contrasting sharply with the situation during
Belaunde's previous administration, when APRA
obstructed the government's legislation and forced
Belaunde to reshuffle his cabinet four times in one
nine-month period.
In our view, it probably will be beneficial for
Belaunde-and the multiparty system will not suf-
fer-if doctrinal and personality disputes continue to
impair APRA's ability to oppose him in the short
term. The recent party congress, however, may have
succeeded in reducing the intense factionalism that
has afflicted APRA since 1979. As the US Embassy
has noted, Belaunde does not relish the prospect of
competing with a unified APRA, but he and other AP
officials recognize that competition from a healthy
opposition could strengthen the multiparty democracy
in the long run.
We and the US Embassy do not envision the United
Left-a loose association of some 40 parties-causing
unmanageable political problems for Belaunde in the
near term. The size and diversity of the IU-it
includes orthodox pro-Moscow Communists, moder-
ate socialists, Maoists, Trotskyists, and even Albani-
an-line Communists-has prevented it from gaining
the ground ceded by APRA and achieving the unity
tion is likely to persist in doctrinal hairsplitting and
personalistic infighting.
We believe that the military will continue to monitor
the politicians. The services will view the municipal
elections in November 1983-the only significant
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political contest before the 1985 presidential con-
test-as abarometer of political trends. Although a
leftist victory-which seems unlikely-or even a
strong showing by the left probably would not provoke
a coup, it would arouse apprehension in military
circles, particularly if it coincided with an economic
downturn or an increase in terrorism. We believe that
the armed forces probably were satisfied at the results
of the 1981 municipal elections, in which Belaunde's
party performed well and the IU fared poorly. The
military probably will expect the AP at least to
maintain its base in the provinces in the November
1983 balloting. The services also hope, we assume,
that APRA will continue its relatively moderate
performance and that its leftist elements will remain
reluctant to seek an alliance with the United Left.
Foreign Relations
We believe Belaunde recognizes that his judicious,
low-key management of foreign affairs to date has
enhanced his domestic standing in general and, more
important, has had a favorable impact on his relations
with the armed forces. We expect that he will,
therefore, continue in the same vein. Interested chief-
ly in Peru's pressing socioeconomic problems, Be-
launde has maneuvered deftly through two potentially
serious international incidents-a border conflict with
Ecuador in 1981 and the Falklands war this year-to
maintain a noncontroversial foreign policy. Indeed,
Belaunde's performance in the international arena has
served to dispel somewhat the military's doubts about
his decisiveness. We judge that Belaunde is unlikely
to undertake any controversial foreign policy initia-
tives-such as abruptly eliminating the Soviet arms
relationship or surrendering disputed border territo-
ry-that could provoke the military.
According to the US Embassy, Belaunde gained
stature by his behavior during the border clash with
Ecuador. Faced with the belated discovery of Ecua-
dorean outposts on territory long claimed by Peru, the
President ordered swift action. Overall, Belaunde
emerged looking better than did the armed forces in_
the incident. The military was embarrassed not only
by the fact that they had allowed the Ecuadoreans to
go undetected for months but by their subsequent
inability to drive out the Ecuadorean troops rapidly.
Belaunde's management of the Falklands crisis pre-
vented Peru from becoming dangerously enmeshed in
that debacle. The US Embassy reports that the
administration catered to the public's pro-Argentine
sentiments with massive rhetorical support for Buenos
Aires, while simultaneously providing only modest,
unpublicized military assistance. At the same time,
the President tempered the rhetoric with a widely
publicized personal peacemaking role. By attempting
to avert bloodshed and arrange an agreement more
favorable to Buenos Aires, Belaunde remained in the
limelight, forcing the domestic opposition to operate
in his shadow. More important, however, Belaunde's
role in the Falklands affair satisfied the military's
pro-Argentine leanings and probably saved the armed
forces from getting directly embroiled. According to
the US Embassy, senior Peruvian officers were dis-
mayed at the unprofessional and unsavory behavior of
their Argentine colleagues, and now realize that
without Belaunde's restraining influence, the Peruvi-
an military would have aided Argentina more openly
and then shared in Buenos Aires's humiliation.
In our judgment, Belaunde will continue to steer 25X1
noncontroversial course in foreign affairs. He will be
careful to defend Peru's territorial integrity in border
questions-especially with Ecuador-but without set-
ting the stage for conflict. Although pro-Western,
Belaunde realizes that he must maintain his national-
istic and Latin American credentials. For that reason,
we believe he will keep Peru in the regional consensus
in the UN. He also will support mechanisms for
consultation among the Latin nations in the Organi-
zation of American States, but he is not likely to push
for a restructuring of that organization. At the same
time, we believe he will seek to use his ties with
Western nations to obtain increased military assist-
ance, which would accelerate the process of diversify-
ing sources of arms, reduce the dependence on the
Soviet Union in that regard, and strengthen his
position with the military. 25X1
Prospects
We and the US Embassy believe that President
Belaunde has abetter-than-even chance of remaining
in office in the near term (12 to 18 months). His
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skillful cultivation of the armed forces over the last
two years and his prudence in dealing with military
budget issues have laid the basis for continued cordial
military-presidential relations. Based on this and his
creditable record so far in the key policy areas, the
President can probably continue to placate the mili-
tary
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Belaunde's personal popularity-though diminished
according to a recent poll-remains an important
additional positive factor. He has shown himself to be
a skilled politician whose popular standing deflects
much criticism; many opponents, civilian and mili-
tary, prefer to cast their barbs at Belaunde's ministers
rather than at the President. Finally, the administra-
tion's possibly greatest asset is the absence of any
obvious alternative; the military is still discredited by
its attempt at governing, and the principal opposition
groups remain fragmented.
A look at Peru's political history, however, suggests
that in the long term the potential for military
intervention will rise. In the 20th century alone, the
armed forces have removed eight incumbent presi-
dents. After Belaunde, the prospects for democracy in
Peru will depend, in addition to the socioeconomic and
political factors discussed, on the institutional evolu-
tion of the military and on the kinds of candidates and
programs that gain currency as the presidential elec-
tion of 1985 nears
integrity and professionalism of the services.
devoting its energies to rebuilding the institutional
We believe that while the armed forces have grown
more conservative in the past decade they are also
characterized by a more apolitical attitude than in
1968. The last years of the military's tenure in
government clearly diminished its willingness to re-
enter the political arena. Many officers believe that
their 12-year rule harmed the armed forces' reputa-
tion domestically and abroad and created serious
divisions within their ranks. According to US Embas-
sy reporting, this attitude may be more marked
among junior officers, who believe that the military's
takeover led to politicization of the services, reduced
professionalism, and increased corruption. At least for
now, the officer corps appears primarily interested in
This attitude makes a 1968-style military revolution
unlikely. The turning away from political and social
activism of the early 1970s indicates that the armed
forces would probably not seize power in an attempt
to reshape Peruvian society. Instead, in our view, the
generals would be more likely to stage a coup for
traditional reasons: to reestablish order, to exclude the
radical left from office, or to head off a perceived
threat to the military's institutional interest
We believe the likelihood of a future military inter-
vention will depend more on the operation of the
civilian political system during and after the 1985
elections than on other domestic or foreign affairs
issues. Despite the military's prolonged attempt to
reconstruct Peruvian politics, the system is still rough-
ly divided into equal thirds-left, right, and center.
The campaign and election could resuscitate the sharp
tensions within the Congress, among the parties, and
between the legislative and executive branches that
crippled Belaunde's previous administration. The mil-
itary will expect Belaunde to prevent partisan political
activity from hindering his ability to deal with press-
ing national problems. But more important, we believe
the armed forces will look to the electoral process to
produce amoderate-to-conservative civilian govern-
ment that has a political base broad enough to
function effectively and that will not interfere with
the military's corporate interests. 25X1
Implications for the United States
We believe that the future of democracy in Peru has
several important implications for the United States.
The advent of a repressive military regime almost
certainly would alienate many Peruvians, and the
resulting polarization would increase the potential for
internal conflict and present opportunities for the
radical left.
In addition, we believe that Belaunde and any likely
civilian successor probably would follow policies gen-
erally more acceptable to the United States than
would any military regime. For example, civilian
politicians appear less likely to undertake adventurist
actions that would endanger regional stability. As
noted, Belaunde restrained the military, which was
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We also believe that civilian administrations are likely
to be more amenable to reducing Peru's dependence
on the Soviet Union for military hardware. Since
1973 Peru has purchased over $1 billion in equipment
and services from the USSR. Belaunde, on the other
hand, has encouraged those in the military who want
to diversify Peru's sources of supply to include West
- - - -- - -- ,~ _ ,.~ r ~ ~ 25X1
Even though a complete break with the 25X1
pushing for a more direct involvement in the Falk-
lands conflict. In addition, Belaunde has worked to
play down border problems with Ecuador and Chile.
We believe that future civilian presidents would prob-
ably continue to dampen revanchist tendencies in the
armed forces.
We believe that a civilian administration also would
continue to provide a more stable atmosphere for
foreign investment. In 1981 US investment in Peru
amounted to about half a billion dollars. As noted
above, the early military regime expropriated US oil
companies and enacted other measures to restrict
foreign investment. While the armed forces are now
politically more conservative and have accepted
Belaunde's reopening of extractive industries to for-
eign oil and mining companies, they remain highly
nationalistic and have made clear their continuing
belief that he should carefully supervise foreign capi-
tal. They will continue to monitor foreign investment
policies and practices, especially in the sensitive area
25X1 of hydrocarbons production.
Soviets is not politically or economically feasible, any
likely successor civilian government probably would
continue to seek diversification. The Soviets have had
little success in attempting to use their close ties with
the Peruvian military to affect the conduct of Lima's
foreign policy. Nevertheless, we believe almost any
civilian government would be even less subject to
Soviet leverage than would be the case under military
rule. 25X1
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Appendix
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Sendero Luminoso (Shining Path or SL) is a radical, Ayacucho, recent activities and reports indicate an
leftist terrorist and insurgent group that follows the increased presence in Lima and other metropolitan
organizational and ideological model of Mao's peas- areas. 25X1
ant-based revolution. The SL's goals are to bring
down the government and to remove foreign-partic-
25X1 ularly US-influence from Peru.
The SL was formed in the rural southern department
of Ayacucho in the late 1960s by Ruben Abimael
Guzman Reynoso, then a philosophy teacher at the
San Cristobal de Huamanga National University in
Ayacucho. Guzman was also a member of the Ban-
dera Roja, apro-Chinese Communist party made up
primarily of attorneys, professors, and merchants.
Guzman and his followers-mostly craftsmen, peas-
ants, and students-charged that the Bandera Roja
was increasingly focusing on urban areas and neglect-
ing the countryside and armed struggle. Since formal-
ly breaking with the group to pursue a more violent
path, Guzman has maintained that the SL is the only
25X1 legitimate Communist party in Peru
bassy reporting indicates that the SL has no foreign
support. The Soviets, and by extension the Cubans,
would probably be reluctant to support the SL in any
event. Not only is the SL's Maoist ideology incompa25X1
ible with Soviet philosophy, but, more important,
Moscow values its arms-supplier relationship with
Peru, its only client in South America
The US Embassy reports that SL members purchase
small arms and machineguns in Peru or steal them
from police and military posts. Explosives are stolen
from mines and construction sites. Funds are obtained
primarily from robberie
Following President Belaunde's inauguration in 1980,
the SL embarked on a campaign of low-risk, high-
profile terrorist attacks consisting primarily of dyna-
miting electrical towers, public buildings, and such
symbols of authority as the Justice Ministry and
police posts. Within the last year, however, the SL has
extended its operations to include the assassination of
25X1 local officials and suspected police informants~~
Members of the SL are organized into cells that
operate independently-terrorists arrested by Peruvi-
an police apparently have little knowledge of members
or operations outside their cell. Recent US Embassy
and official Peruvian estimates place the SL's
strength at about 1,000 committed activists, although
it can probably call on three to four times that
number for logistic support and occasional acts of
violence. While the heaviest concentration remains in
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Recent terrorist operations suggest that the SL's plan
to increase its activity is being implemented. In
March, the SL mounted a highly successful attack on
the Ayacucho prison and freed 247 inmates, including
accused and convicted terrorists. More recently, nu-
merous civil guard posts and small municipalities
have been attacked. In August, the SL dynamited
electrical towers near Lima, blacking out the city for
several hours. At present, states of emergency exist in
five provinces of Ayacucho Department, and one in
Apurimac Department.
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