PERU'S MILITARY: CONVENTIONAL AND COUNTERINSURGENCY CAPABILITIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00897R000200090006-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 28
• Document Creation Date: December 22, 2016
• Document Release Date: August 16, 2011
• Sequence Number: 6
• Publication Date: December 1, 1983
• Content Type: REPORT

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Directorate of
Intelligence
Peru's Military:
Conventional and
Counterinsurgency Capabilities
A Research Paper
ALA 83-]0197C
ecem er
Copy 2 [] 4
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Intelligence
Directorate of Top Secret
Peru's Military:
Conventional and
Counterinsurgency Capabilities
ALA,
This paper was prepared by the
Office of African and Latin American Analysis. It
was coordinated with the Directorate of
Operations. Questions and comments should be
directed to the Chief, South America Division,
Top Secret
ALA 83-10197C
December 1983
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Peru's Military:
Conventional and
Counterinsurgency Capabilities
Key Judgments Over the past decade, Peru's extensive arms purchases from both the Soviet
/nformation available Union and the West have enabled it to become the dominant Andean
as ct/'10 December /983 military power, achieving conventional military superiority over its princi-
was used in this report.
pal rivals, Ecuador and Chile. We believe that Peru is now capable of
defeating either Chile or Ecuador in a strictly bilateral conflict. In the
unlikely event of a two-front war-the basis upon which Peru's military
formulates its plans and requirements-Lima probably has sufficient
strength to defend one frontier while conducting effective offensive opera-
tions on the other. Over the next two to three years we believe that,
although Chile and Ecuador may make particular purchases of combat
aircraft, warships, or armored vehicles from Western sources that could
temporarily unsettle Peru's military leaders, neither country will be
capable of challenging Peruvian superiority because of inhibiting financial
constraints and distracting domestic political concerns. 25X1
Peru's own growing financial difficulties will limit funds available to the
military for readiness, training, personnel retention, and procurement-
especially of the most advanced equipment. Nonetheless, we expect the
political power of the military will be sufficient to garner allocations for
one or two major buys for each service every year-enough to meet most
strategic requirements and maintain superiority over Chile and Ecuador.
The highest priority items are additional armor and new helicopters for the
Army, completion of the sale of 26 Mirage 2000 fighters and six Bell
transport helicopters for the Air Force, and construction of a major base
for the Navy. The two principal criteria determining what Peru buys and
from whom will be the level of technology and the degree of concessionary
Some of Peru's military needs-helicopters, for example-are made more
urgent by the threat the 1,000 to 1,500-man Sendero Luminoso (SL)
insurgent group poses. Civilian and military determination to contain the
SL is firm and, if most of the planned improvements in counterinsurgency
capabilities are implemented, the group probably can be contained in two
to three years. Significant fighting is likely to continue for the next year or
so, however, and will be an added incentive for certain classes of military
Top Secret
LJ/~ I
purchases.
ALA 83-/0/97C
December /983
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In the near term, we believe the military will look first to the West for new
purchases. the present military leadership:
? Believes that Western-and especially US-equipment is superior to
that of the Soviets.
? Is ideologically pro-Western.
Wants to diversify sources of arms to reduce the heavy dependence on the
USSR.
? Is dissatisfied with Moscow's poor logistic support for Peru's Soviet
arsenal.
Nonetheless, the combination of financial constraints and Soviet sales
efforts will inhibit diversification away from Moscow. Moreover, we
believe that if the West fails to provide attractive financing or to offer its
most advanced equipment, the Army and the Air Force could turn again to
the Soviets. Moscow has recently stepped up
efforts to sell equipment and provide training to all three services to regain
the influence it believes it has lost under the pro-Western Belaunde regime.
In addition, if Ecuador or Chile accelerates near-term purchases of
advanced equipment, such as fighter aircraft or armor, Lima might be
further inclined toward Soviet arms because Moscow's traditionally rapid
deliveries would allow Peru to reassert its numerical superiority quickly.
We and the US Embassy agree that an increasingly European or Soviet-
trained Peruvian officer corps could eventually have little in common with
the United States and thus little regard for US interests in the hemisphere.
Continued restrictions by the United States on sales of advanced arms to
Peru and the unavailability of concessionary American credit for weapons
purchases and training programs would further reduce the already limited
leverage the United States has with the highly nationalistic Peruvian
military. In fact; the present. generation of Peruvian military leaders is
probably the last to have had extensive US training.
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Conventional Military Capabilities
Efforts To Improve Capabilities 19
1. Military Regions and Major Military Installations
2. Zone of Emergency
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Peru's Military:
Conventional and
Counterinsurgency Capabilities
Introduction
In the past 10 years, Peru has clearly surpassed Chile
and emerged as the predominant Andean military
power. We estimate that between 1971 and 1980,
Peruvian military purchases totaled $2.23 billion,
including over $1 billion worth of Soviet arms. The
size of the armed forces has increased as well. Since
1973, the Army's strength has almost doubled to
75,000 while the Air Force grew from about 7,000
men to 40,000. Lima has thus achieved a substantial
numerical superiority, and an increasing qualitative
one, in many areas of conventional military power
over its traditional rivals, Ecuador and Chile. Since
late 1982, however, the Peruvian military-which
returned power to a civilian government in 1980-has
become increasingly involved in the growing struggle
against the Sendero Luminoso (Shining Path), a Mao-
ist insurgent group. Although significant purchases of
conventional equipment are still being made, the
internal threat has forced the military to partially
turn away from concern with external enemies and
boost purchases of equipment more suited for counter-.
insurgency operations.
This paper examines both the conventional and the
counterinsurgency capabilities of the armed forces. It
assesses the effects of modernization on all three
services, compares them with their counterparts in
Ecuador and Chile, highlights weaknesses, and identi-
fies purchases each service is likely to make in the
next two to three years. The paper also evaluates the
military's tactics and capabilities for dealing with the
internal security threat. Finally, it analyzes the impli-
cations for US interests resulting from the military's
desire to maintain its current conventional superiority
in the region and its determination to eliminate the
Sendero Luminoso (SL) insurgency.
Peruvian military planning has long been based on a
perceived need to~eld jorces capable oJ~ghting a
simultaneous two-front war against Chile and Ecua-
dor, countries with which Peru has continuing bound-
ary disputes. Peru sees Chile as the major external
threat, although we and the US Embassy believe
there is little chance of an unprovoked attack by
Santiago, many of'whoselorces are now deployed
against Argentina. Nonetheless, the Peruvians respect
the fighting qualities oJthe Chileans, who annexed
territory in southern Peru and captured Lima during
the War oJ'the Pack (1879-83J. Since the late 19th
century, most oj'Peru's ground jorces have usually
been deployed near the Chileanjrontier. Ecuador's
.use of troops to press its claim to large sections of
Peru's northern Amazon region led to briPJ'wars in
1942 and 1981-both won by Peru-and to numer-
ous other incidents along the poorly demarcated and
extremely rugged border. Traditionally, Ecuador's
outnumbered and underequipped military has pre-
sented little realistic threat to Peru, but, according to
the US Embassy, Lima views the Ecuadoreans as an
unpredictable nuisance and maintains sign cant
ground and airforces along the northern border. 25X1
The Military Buildup: 1967-83
With an arsenal composed of antiquated US and
European equipment, Peru's military initiated in the
late 1960s a modernization program for all three
services. Lima looked first to traditional suppliers in
Europe and the United States, and during 1967-70
purchased ground forces equipment from France,
Germany, and Belgium, and aircraft and warships
from Great Britain. That Peru was unsuccessful in
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obtaining F-5 fighters from the United States in 1967
angered many military officers and led to the pur-
chase in 1968 of 16 Mirage V's from France-the
first supersonic fighters in South America.
In 1973, the military government of General Velasco
(1968-75)-which had overthrown civilian President
Fernando Belaunde Terry in 1968-turned to the
USSR for arms. The decision to buy from Moscow
was motivated, in our view, by Washington's refusal
to sell advanced arms, the desire of the highly nation-
alistic Velasco regime to demonstrate its independ-
ence from the United States, and the military's
determination to both modernize and avoid heavy
dependence on a single supplier. Pragmatic consider-
ations-such as Soviet promises of quick delivery of
relatively advanced weapons at low cost and on good
financing terms-also were influential. The military
regime of Morales Bermudez (1975-80), although
more moderate than its predecessor, continued to
purchase heavily from the USSR, in part because of
heightened tensions with Chile during the mid-1970s.
During 1973-80 the Soviets emerged as Peru's single
largest military supplier by delivering over $1 billion
worth of equipment to the Army and Air Force, about
half of all Peruvian arms purchases. Accompanying
this equipment were Soviet military and technical
advisers, who presently number about 150, according
to the US Embassy. In addition, the US Intelligence
Community estimates that some 2,000 to 3,000 Peru-
vian military and intelligence personnel have been
trained in the USSR since the mid-1970s, a figure
based upon data periodically compiled from US atta-
che reporting
Peru continued to buy from other sources to avoid
exclusive reliance on Moscow. Major West European
manufacturers held almost 40 percent of the Peruvian
market from 1973 to 1980, but Lima also purchased
from Israel, Yugoslavia, Spain, South Korea, and
Portugal. Acquisitions from the United States ac-
counted for only about 8 percent of all Peruvian arms
agreements during this period.
By 1980, Peru had emerged as the predominant
Andean military power. During 1971-80 it had con-
tracted for over $2.23 billion in military equipment
and services, only slightly less than the combined
purchases of Ecuador and Chile. This allowed Lima
to surpass its rivals in such key categories as strike
aircraft, armor, artillery, and submarines. Chile's 25X1
need to deploy substantial forces against Argentina-
especially after the two countries almost clashed in
1978-further improved Lima's strategic position.
The return to power of civilian President Belaunde in
1980 has not halted military modernization, although
he and many senior Army and Air Force officers have
expressed a desire to reduce Peru's dependence on the
USSR-especially through purchases from the
United States. In our view, this sentiment reflects the
pro-Western orientation of Belaunde and the current
military leadership as well as the chronic dissatisfac-
tion of the armed forces with Soviet logistic support.
In addition,'the demonstrated effectiveness of West-
ern weapons in the Falklands and Lebanese conflicts
of 1982 has encouraged procurement~of the most
advanced systems available. The military has also
pointed to recent acquisitions of combat aircraft and
armor by Chile and Ecuador to justify its requests.
Since Belaunde's accession,' Peru's efforts to wean
itself away from reliance on Moscow have had mixed
success; indeed, Lima has not hesitated to purchase
increasingly advanced equipment from the Soviets.
Unable because of US export restrictions to acquire
the US AH-1 Cobra attack helicopter, Peru contract-
ed for almost $100 million worth of Soviet weapons in
1981, including about a dozen recently delivered
MI-24/25 attack helicopters, the first of their type in
South America. In a major break with Moscow,
however, the Air Force contracted in 1982 to buy 26
Mirage 2000 fighters-which .will be matched in
South America only by Venezuela's F-16As-at a
cost of over $700 million.
the US Embassy, report that Peru would
have preferred the US F-16A, but Washington's offer
of the less advanced F-16/79, along with the lack of
concessionary American financing, led to the decision
to buy the Mirage. Nevertheless, the military appears
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Peru-USSR: The Arms Relationship
We believe that Moscow's objectives in Peru are to
gain long-term influence with Peru's military and
political elites, deny the United States an ally on
international issues, complicate US regional policies,
and use the Peruvian arms link to expand military
sales to and influence in other South American .
countries, especially Argentina. Moscow has derived
some important bents to date, including: (I) earning
over $1 billion, (2) exposing Peruvian military person-
nel to Soviet training, (3J placing numerous advisers
and technicians in Peru, and (4J maintaining a market
for spare parts and services. Nonetheless, the diplo-
matic and political impact of the Peruvian-Soviet
connection has been relatively small and Soviet aims
are likely to remain out of reach for the short term
because, as the US Embassy reports, the Belaunde
administration is pro-US and hostile toward the
Soviets. After the next civilian administration takes
office in 1985, Soviet prospects for wielding greater
influence will probably improve.
falls between the other two in terms oj.attitude
toward the Soviet Union.
Soviet advisers in Peru, to our knowledge, have little
influence outside the military, and they have been
criticized by Peruvian officers for their reluctance to
share technical expertise. We believe that Soviet
influence resultingfrom intelligence liaison has been
limited; indeed, the relationship was severed last
not believe the Soviets have any ties to the Sendero
Luminoso insurgents.
Regionally, Moscow so far has been unable to capi-
talize on its Peruvian connection to induce other
South American military establishments to purchase
Moscow has had only limited success influencing
Lima's behavior in the diplomatic arena. For exam-
ple, while concern over antagonizing its arms supplier
contributed to Peru's refusal to follow the US lead in
imposing sanctions on Moscow for the invasion of
Afghanistan, Peru voted both in 1981 and 1982 in
favor of General Assembly resolutions condemning
the intervention. Similarly, according to US defense
attache reporting, Peruvian armed forces personnel
trained in the USSR have not demonstrated sign~-
cant pro-Moscow leanings, although the Air Force,
which has sent the largest number of personnel to the
USSR for extended training, is more favorably in-
clined toward Moscow than the other branches. The
Navy, the smallest service with the fewest members
trained by the USSR, retains its traditional anti-
communist stance. The Army, the dominant branch,
weapons from the USSR.
In addition; the Soviet presence in Peru has not
provided Cuba with a sign cant opening to expand
its influence. The USSR, to our knowledge, has made
no attempt to smooth relations between Cuba and the
Belaunde administration. Peru recalled its ambassa-
dor from Cuba in 1980 because of a dispute with the
Castro government over the status of Cuban refugees
in the Peruvian Embassy in Havana.
Even (f the military-which is growing more dissatis-
~ed with Belaunde-were to assume power, we expect
Moscow's political leverage would not increase appre-
ciably as a result. We believe that the Peruvian
military establishment remains basically conserva-
tive and nationalistic. As the US defense attache
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moderate elements-which currently con-
notes, the high command slated to take over in 1984
is anti-Communist and pro-Western, although it will
also be the last generation to have received US
training. Even among this group, the new Army
commander has received the bulk of his training in
Western Europe. The US Embassy reported two
years ago that ofjcers advocating radical domestic
policies had been purged from the military as it
retrenched from its revolutionary programs of the
1960s and early 1970s. While the commanding gener-
als would continue to be careful not to jeopardize the
arms relationship with Moscow, we believe they
would resist Soviet interference in Peruvian cslfairs.
Resigned to these circumstances, the Soviets,
are banking on more favorable
political prospects in the long term. Despite gains by
the Marxist United Left coalition in the November
national municipal elections, the Soviets probably
remain skeptical of the long-range political potential
of the traditionally fractured left, in particular the
Marxist from assuming the presidency. Consequent-
ly, the Soviets are establishing
contacts wit i ea ers o the major opposition party,
the American Popular Revolutionary Alliance
(APRA), which is likely to win the 1985 presidential
election. The USSR apparently is counting on
APRA's left wing to gain control of the party and
agree to cooperate with the United Left.
many APRA
leaders are receptive to Soviet overtures, but
trol the party-are opposed to strong ties. Moreover,
APRA politicians, including the leftists, are national-
istic and historically committed to steering an inde-
pendent international course for Peru. Finally, the
party, which, throughout its 60-year history has been
blocked by military coups from attaining the presi-
dency, is keenly aware of the armed forces' aversion
to Communism and longstanding suspicion of
APRA's leftist ideology.
In addition, we expect that, over the next few years,
many Soviet-trained officers-who at present are
concentrated in thefeld-grade ranks-will begin to
assume positions of ird'luence. Although we have seen
no indication that these officers are strongly pro-
Soviet-and we expect they will be equally ready to
resist foreign interference-we believe that they may 25X1
prove more willing to consider purchases from the
USSR if Western weapons are unavailable or ungJ=
fordable.
In our judgment, the Soviets will continue during the
remainder of the Belaunde administration to be able
to exert some limited it~lluence on Peruvian actions in
international forums, but very little in the domestic
sphere. For example, Peruvian officials recently ad-
mitted to the US Embassy that Lima did not impose
sanctions on the Soviets in the wake of the Korean
airliner incident because they feared such action
would jeopardize delicate, and ultimately success/'ul,
debt renegotiations with Moscow. In our view, APRA
leaders would consider even closer cooperation in the
international arena to be an appropriate trade-off for
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continued arms sales and other support from Mos- 25X1
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Table 1
Ground Forces Order of Battle
determined to acquire US equipment, and US defense
attache and Embassy reports indicate final negotia-
tions are under way for the purchase of 15 US UH-60
Blackhawk and six Bell 214 ST helicopters.
Conventional Military Capabilities
The Army
The Army has almost doubled in size since 1973 to
75,000 men so it can have forces capable of simulta-
neous operations on both ostensibly threatened fron-
tiers. Consequently, Peru's peacetime Army is now
the third largest in South America-behind Brazil
and Argentina-and almost as large as the combined
ground forces of Ecuador and Chile. Furthermore,
Soviet-assisted modernization has enabled the Army
to increase substantially its mobility, firepower, and
overall offensive capabilities. Lima's armored force,
for example, is now the largest in the Andean region
and second in South America only to that of Brazil.
Air defense and artillery support have been upgraded
as well.
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The Peruvian Army has over
100 French AMX-13 light
tanks armed with 105-mm
guns.
Ten of Peru's 14 active divisions are deployed along
the Chilean and Ecuadorean borders. These units-
which, with 2,500 to 3,500 troops each, are roughly
equivalent in strength to a US brigade-are usually
maintained at or near full strength and are equipped
with most of the Army's heavy weapons. A strategic
reserve of one parachute division and one armored
division is stationed in Lima and designated for rapid
reinforcement of either frontier.
Capabilities. In our estimation, Peru's superior forces
would quickly overpower Ecuador's poorly trained
and equipped Army in a large-scale conflict. Peru
maintains opposite Ecuador 20,000 troops equipped
with about 100 tanks, substantial heavy artillery, and
numerous antitank and infantry weapons. According
to details of Peruvian war plans obtained by US Army
intelligence sources, these units would strike north to
Guayaquil during a general war. Ecuador would
probably meet such an assault with elements of four
brigades-about 8,000 to 9,000 men-equipped with
materiel largely inferior in number and quality to
Peru's inventory.Z
' Peru also has about 4,700 combat troops-many of which are in
isolated garrisons along the border-in the 5th military region.
These forces, which spearheaded Lima's response to Ecuador's
incursion onto the disputed eastern slope of the Cordillera del
Condor in 1981, could not mount large-scale offensive operations
because of their dispersed deployment and the region's difficult
Peru's Army also would probably defeat Chile's over-
extended forces in a major war confined to northern
Chile. Peruvian war plans call for armored thrusts,
supported by motorized infantry, across the border
toward Arica and airborne assaults behind Chile's
extensive network of prepared defenses. Lima's pri-
mary objective in such a conflict would be the recap-
ture of territory lost to Chile in the late 19th century.
To carry out these operations, Peru has deployed 25X1
opposite Chile .about 25,000 men in five divisions-
including two armored. Lima also envisions the use of
another 4,000 to 5,000 men from its strategic reserve,
along with troops from the northern border, assuming
Ecuador remains neutral. Peruvian forces in the south
are the best equipped and supplied in the Army,
fielding over 200 tanks and numerous other armored
vehicles, substantial field and self-propelled air de-
fense artillery, surface-to-air missiles, and antitank
guided missiles. In contrast, Santiago has two divi-
sions (about 14,000 men) in northern Chile equipped
with about 80 tanks-largely inferior to Peru's-and
less heavy artillery than Peru.
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Although logistic shortcomings would probably pre-
clude more than one large-scale offensive at a time,
the Army is, in our estimation, capable of conducting
simultaneous operations on both frontiers. Faced with
a two-front war, we believe the Peruvians would
maintain limited forces in the north to counter Ecua-
dor's almost nonexistent offensive potential, while
concentrating the bulk of their military strength for
an attack against the more formidable Chileans.
Following what we believe would be a Peruvian
victory in the south, Lima would turn its attention to
an isolated Ecuador.
D~ciencies. Logistics are the Army's primary weak-
ness. The diverse origins of its equipment complicate
planning and maintenance. Because the Army has
armored vehicles from five nations and artillery of
various calibres from at least seven, weapons of
different types are often in the same unit. In addition,
the Army's major supplier-the USSR-has not pro-
vided acontinuous flow of spare parts. According to
the US defense attache, this has forced the cannibal-
ization of some Soviet tanks. Recent attache reporting
also indicates that about half of the Army's 24 Soviet
MI-8 helicopters-the mainstay of Army aviation-
are usually inoperable because they lack spare parts.
Army supply problems are compounded by a lack of
statistical records and centralized planning. Despite
these problems, Peru has, according to US attache
sources, usually been able to obtain an in-commission
rate of 60 to 65 percent on most Soviet systems and an
services-concerns Army leaders; many inductees
lack even elementary education, according to attache .
reporting. The current Army priority of expanding the
number of technical specialists in order to maintain
the increasingly complex arsenal will thus prove diffi-
cult. Attache sources indicated in April 1983, for
example, that Israeli technicians were pessimistic
about the ability of Army personnel to maintain
recently acquired Israeli communications equipment.
Acquisition Plans. Army procurement priorities re-
flect plans to fill gaps in the inventory, replace or
modernize aging or inadequate equipment, and reme-
dy logistic shortcomings. The US Embassy has report-
ed that Army leaders would prefer to purchase US
equipment to fulfill many of these requirements.
Reasons cited by the US defense attache and the US
Ambassador include dissatisfaction with Soviet logis-
tic support, a firm belief in the technological superior-
ity of US weapons, and generally favorable Army
attitudes toward the United States. Replacement of
the often inoperable MI-8 helicopters, which perform
poorly at Peru's high altitudes, is probably the Army's
top priority. The defense attache reported in July
1983 that the Army had accepted an offer of 15
Sikorsky UH-60 Blackhawk assault/transport heli-
copters for $110 million, although financing arrange-
ments have not et been concluded.
even higher rate on certain Western weapons.
These and other logistic deficiencies could, however,
degrade operational effectiveness significantly in any
extended conflict. The US defense attache's office has
estimated that Peru has sufficient pre-positioned war
stocks for only about two weeks of intensive combat.
Although we believe that Peru is continuing to im-
prove its support capabilities through stockpiling,
expansion of storage and maintenance facilities, and
acquisition of needed equipment, financial constraints
will undoubtedly prevent rapid progress. In addition,
the poorly organized logistic system and the lack of
certain specialized equipment would make it difficult
to supply forward elements over long distances. ~
US attache and Embassy sources report that armored
vehicles are another priority, with the Army hoping to
buy 50 US M60A3 tanks. Despite Peru's existing
superiority in armor, the Army is concerned over
Chile's recent acquisition of 20 AMX-30s from
France and 150 Super Shermans from Israel. Also
under consideration to bolster the mobility and air
defense capabilities of armored formations are up to
263 US M-113 armored personnel carriers and possi-
bly Soviet SA-6 or similar mobile surface-to-air mis-
sile systems. In addition, US defense attache
Even though conventional warfare training has im-
proved in recent years, personnel and training contin-
ue to pose problems. The low quality of conscripts-
who serve for two years in one or another of the three
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Economic Constraints on Military Spending
President Belaunde's ability to sati.~fy military
spending desires will be limited by Peru's declining
government revenues and dwindlingloreign exchange
reserves. We estimate that natural disasters have
triggered a 10 percent contraction in economic activi-
ty, which has led totalling domestic revenues and
strains on the budget. Fiscal shortfalls and a weak
export demand have combined to push Peru out of
compliance with its IMF program, complicating rela-
tions with international creditors, who have already
balked at projected military purchases.
The current severe economic decline is in large part
attributable to the EI Nino weather phenomenon that
unleashed floods in the north and drought in the
south. According to US Embassy reports, the climat-
ic disasters cost more than $1 billion in lost agricul-
tural output and additional public expenditures to
repair damages tolarms and roads. Simultaneously,
Peru's jscal position has been strained by the loss of
tax revenue because of the contractionary effects of
the IMF austerity program, inefficient domestic in-
dustry, and growth of the underground economy,
while the 130-percent irt~'lation rate pushed public
spending higher than Peru had anticipated. The slight
recovery we expect in 1984 will leave Peru's GDP
well below 1982 levels and unable to accommodate
heavy military spending.
President Belaunde cannot turn to foreign markets to
cover these shortfalls in domestic revenue. We expect
a sharply reduced fish catch and hood damage to an
oil pipeline to result in lost export earnings of some
$400 million. The declines in copper prices that most
market analysts have projected and uncertain weath-
er conditions do not augur well for a substantial
increase in export earnings next year.
Peru haslallen out of compliance with its three-year
IMF agreement. The public-sector d~cit this year,
driven by sharp declines in revenue, is likely to be
about 9 percent of GDP-double the IMF stipula-
tions. Due in part to delays in disbursement of a $200
million World Bank loan, Lima will probably see its
reserves shrink by more than the $100 million limit
established by the Fund, and this will further restrain
its ability to spend next year. The Fund has agreed to
negotiate new performance targets, but failure to
continue the program in good standing will not only
jeopardize over $800 million in external debt resche-
dulings and the disbursement of loans arranged
earlier this year, but also Lima's ability to obtain
new credits in 1984.
intends to reschedule loans maturing in 1984 and
renew trade credits totaling nearly $3 billion, in
addition to seeking at least $400 million in new loans
next year. Given Peru's precarious foreign J