Yankee Free Market
Means More Misery for Peru's People
[Inika O'Hara is an activist in the
International Emergency Committee to Defend the Life of Dr. Abimael Guzman.]
In the 16th century, Europeans told stories of
a country that was unimaginably rich, a country where there was
gold and silver for the taking. They told of galleons returning
to Spain loaded with precious metals, and of the empire that was
being built with the spoils. Five centuries later the pages of the
New York Times and slick brochures designed by US advertising
agencies sound like an echo from the past, as they trumpet promises
of the quick profits that can be made by exploiting the natural
resources and the labour of the people of Peru.
For 500 years the people of Peru have been forced
to dig the riches from their own land and to hand them over to rich
and powerful foreign countries - first Spain, later Great Britain,
and then the US. During the 20th century, as imperialism's tentacles
drew impoverished third world countries ever more tightly into its
net, Peru did not escape. By the early 1970s Peru's government had
become more and more dependent on the imperialists for infusions
of capital in a desperate attempt to modernize a country which for
centuries had seen its life-blood sucked out of it by those same
foreign dominators. The noose of foreign debt tightened around the
necks of the people, forcing them into ever deeper poverty.
During the same period the Communist Party of
Peru (PCP), led by Chairman Gonzalo, was training and preparing
itself politically, ideologically, and organizationally to wage
a protracted Maoist People's War aimed at overcoming the "three
mountains" which oppressed the Peruvian people: imperialism, feudalism
and bureaucrat-capitalism. They trained new revolutionaries, mainly
students from the peasantry in the Ayacucho area, in the basic principles
of Marxism-Leninism-Maoism, and sent them back to their villages
to carry out a detailed study and analysis of the social conditions
in Peru. Deep roots were established among the peasantry and an
organizational network was built to enable them to unite and fight
in such a way as to withstand the assaults the revolutionaries knew
When the People's War was launched in 1980, it
resonated deeply in the hearts of the people, many of whom knew
there would be no way out of their misery if they continued to rely
on the Peruvian state and the imperialists. Beginning with only
a small group of armed combatants, the People's War developed into
a flexible and mobile force, capable of preserving itself and destroying
the enemy. The Peruvian military, unable to destroy an invisible
army rooted among the most oppressed, tried to wipe it out by indiscriminately
killing the peasantry in the areas where the People's War had its
deepest roots. The crude methods of the Peruvian military exposed
the regime even further. Rather than accomplishing its aim of drowning
the People's War in blood, the massacres had the opposite effect.
More and more people recognized that there could be no peace with
the genocidal regime.
When Alan Garcia ran for president in 1985 he
promised to eliminate poverty and misery and to place the social
needs of the people of Peru before the payment of the rising foreign
debt. He promised a revolution without violence and sang the praises
of the then popular Sandinista revolution in Nicaragua. He promised
to pay the International Monetary Fund and the World Bank only 10%
of the value of all of Peru's exports - a promise which was popular
especially with the middle class. However, when Garcia became president
not only did he fail to deliver on his promises but the economic
crisis got even worse during his presidency. The multilateral lending
agencies suspended all loans to Peru. The government was deprived
of new loans which it was depending on to survive, and interest
and arrears began to accrue at a tremendous rate. Peru's junkie
economy was in a shambles. Inflation reached run-away levels and
Peru's crisis sounds remarkably like economic
crises in dozens of other Third World countries caught in the claws
of imperialist domination, except for one thing: the very existence
of the Peruvian state was being challenged by a People's War and
the laying of the foundations of a New State in areas controlled
by the PCP.
As the People's War extended throughout the country,
rural areas under revolutionary control were transformed into base
areas from which the People's Guerrilla Army could grow even stronger
and carry out successful battles against the reactionary Armed Forces.
The Peruvian military was forced to withdraw from large areas and
by 1987 one third of the country was under the control of the revolutionaries.
In these areas People's Open Committees were formed, which established
a new economy, a new politics, and a new culture. As people from
rural areas immigrated to the shantytowns surrounding the capital
city of Lima, new forms of revolutionary organizations were built
up there too which conformed to the class interests of the poor
and mobilized them to serve the People's War. The future the oppressed
were fighting for began to assume a real form, even further strengthening
the determination of the people to advance the war to destroy the
old state and take power throughout the entire country.1
Faced with the prospect of a protracted people's
war that could not be crushed by the crude methods of the Peruvian
military, the US, with its "Vietnam training", stepped up its involvement.
The People's War faced an increasingly complex and highly developed
strategy of low-intensity counter-revolutionary warfare. The US
intervened directly with their so-called "War on Drugs". The Peruvian
military and state were armed with the latest weaponry and means
of surveillance. A highly sophisticated psychological war aimed
at dividing the people assaulted the population daily and attempted
to isolate the People's War from the broad international support
The Peruvian people suffered mightily but continued
their assault. Like a wildfire, the People's War flared up in one
area, subsided and smouldered, then flared up in another. Three
governments declared it all but defeated, only to be forced to later
admit that it was continuing to gain popular support.
The People's War made it impossible for foreign
companies and investors to keep on extracting enormous profits from
Peru. Not only was the People's War a threat to the future existence
of the state, but they were threatened in the immediate sense. The
infrastructure they relied on to get their plunder out of Peru was
under continuous attack. Electrical pylons were bombed, causing
massive black-outs. Roads from the jungle over which they tried
to transport lumber to the ports were destroyed. Railways from the
mines were blown up. Agronomists attempting to develop new crops
for international agribusinesses were attacked. When Mobil Oil set
up a heavily secured base for oil exploration in the Amazon it was
attacked and destroyed along with its helicopters. When ASARCO Petroleum
discovered the immense Camisea Oil Field in 1981 they could not
exploit it because of the certainty of attack.
When Alberto Fujimori became president in 1990
his mandate from the ruling class in Peru and his Yankee masters
was to try to crush the People's War and to make the country safe
for foreign investment. To accomplish this he had to get back into
the good graces of the international lending agencies. Following
their dictates, he instituted "Fujishock" - an economic austerity
programme designed to pay back the foreign debt.2 He announced a
privatization program and promised new laws to protect foreign investment.
Faced with an increasingly urgent need for successes
in the counter-insurgency war and with the threat of collapse of
his own regime, on 5 April 1992 Fujimori took the extraordinary
measure of a "self-coup" and suspended the Constitution. While so-called
democratic countries pretended concern about such dictatorial measures,
potential investors were jubilant. It was widely revealed that the
CIA started to play a crucial direct role in the Fujimori regime.
Fujimori was clearly not held back by "human rights concerns" and
would go to any length to hold power and protect the interests of
the imperialists and reactionaries. The Fujimori regime instituted
massive house-to-house searches of entire neighbourhoods, and arrested
and imprisoned anyone even suspected of opposing the government.
When Chairman Gonzalo and some of the other leaders of the People's
War were captured in September 1992, Fujimori's triumphalism went
into high gear. The regime and its Yankee bosses boasted that Peru
was now safe for foreign investment.
Fujimori immediately announced that all of Peru's
nationalized industries would be auctioned at incredibly low prices.
Peru's privatization commission advertized:
"Look again at Peru. A breathtaking opportunity.
"Freedom to operate in a free market economy -
freedom to enjoy the same legal treatment as nationals - freedom
to invest in any business, economic sector or activity - freedom
to transfer abroad hard currency capital gains, profits, and royalties
- freedom to trade stocks and obtain tax-free returns... - freedom
to apply for concessions to build and manage public facilities and
supply public utility services - freedom to participate in the privatization
of state-owned mines, ports, banks, telecom, electricity and oil
companies. Freedom. We really mean it."3
The U.S. stepped up its economic aid to Peru
in order to prop up the Peruvian state against the danger posed
by the People's War. US spokesmen squawked a few times about their
"human rights concerns" in order to cover up that Peru received
$137 million in US aid in 1993, making it the top recipient in South
America and second in all of Latin America. The US also facilitated
Peru's reintegration into the international financial community.
Not surprisingly, the most advertized offerings
in the privatization campaign were Peru's mines. (In 1992 Peru was
the world's largest producer of lead and zinc, and the second largest
of copper and silver. It has some of the world's largest deposits
of gold and a great oil potential.) One of the first big investors
was Newmont Mines (the US's largest gold producer, which also has
mines in Indonesia and Uzbekistan). Newmont bought Yanacocha Gold
Mine for $36 million and within seven months their profits had exceeded
the initial sales price. Everything after that was sheer profit.4
This unheard of investment success caused a veritable
gold rush to Peru. Huge mining giants snatched up 9 million hectares
of land (6 times the total arable land) at $2 per hectare; within
6 months, more claims were staked out by foreign investors than
during the previous 200 years. With the success story of Yanacocha
Mine as the bait, foreign investors were assured that Peru was an
But in spite of all the media hype which advertises
that only 5% of Peru's natural resources have been mined, that there
is a huge pool of cheap labour, and that there are still untold
fortunes to be exploited, Fujimori's privatization program is not
proceeding according to plan. Many of the companies Fujimori is
trying to auction off have gone up for auction several times without
being sold. Other companies have been sold at ludicrously low prices,
and include contract clauses which allow the new owner to abandon
the investment (and promised payments) at any time. Most facilities
are old and weighted down with the legacy of the past. Many are
located in isolated areas, and the infrastructure in Peru is not
adequate to get materials to refineries or ports. Potential investors
want to be sure that Peru will make the promised improvements to
the highways, electrical system, and other infrastructure needed
to guarantee their investment. Most importantly, it has been two
years since Fujimori announced that the People's War was defeated
but instead it has continued, and, for these investors, the political
stability of Peru is still an open question.
"Attempts by the Peruvian government to attract
foreign investment could be set back by an upsurge in activity by
the country's Maoist guerrilla group... Any resurgence in guerrilla
activity... would set back government moves to draw foreign investment
back to Peru and, more immediately, would dampen investor interest
in the forthcoming sell-off of dozens of state companies."6
The centrepiece of Peru's privatization program
was to be the sale of Centromin, Peru's largest diversified mining
company and its largest producer of zinc, silver, copper, and lead.
It was opened by a US mining company in 1902 and, until it was nationalized
in 1971, Centromin was the source of direct superprofits to the
US. Even today it accounts for a full 10% of all of Peru's exports.
But Centromin has been dubbed the "sale of hell" by potential investors.
Centromin miners and their families live in one-room
company shacks, without access to clean water or basic sanitation.
The company used to provide a pair of boots and overalls each year
but now even that has been discontinued. A miner who has worked
more than 20 years makes less than $7 a day. Miners and their families
suffer from lung, skin and eye diseases. In one of Centromin's company
towns, the hospital that last year treated 40 new patients each
day is now closed. People have to travel over 30 miles of dirt road
on the back of a truck in freezing weather in order to get medical
treatment. Miners seldom live past the age of 50 years.
The hills surrounding Centromin's mining towns
are bleached white. Trees and crops can't grow there. The rivers
are dead - contaminated with acids and heavy metals. Slag heaps
cover the land farther than the eye can see. Smoke fills the sky
and copper particles are visible in the air.
To make the sale attractive, Peru's government
assumed all of Centromin's potential environmental liability for
past operations, permitted Centromin to close its hospital and decrease
its employee benefits to reduce its operating costs, and laid off
7,000 of its workers before it was put up for auction. It
has been for sale three times at auction at $280mn, and no one has
bid. In 1992 a Chilean subsidiary of Anglo-American Corporation
of South Africa paid $12mn for a copper deposit owned by the state.
In Chile it paid $190mn for a similar copper deposit.7
These are living examples of the rape and plunder
of the people and resources of Peru. International prices for copper,
zinc, and lead are going down. Many countries with huge foreign
debts have large deposits of these metals. In order to pay the debt
they are mining more than ever before. As these huge stocks come
onto the market, the prices drop. They cannot stop mining in order
to control the prices so they are forced to increase production
and sell at lower prices. This vicious cycle has the poor countries
in an iron grip.
Finally, while the government can change their
laws to make the investment climate better, they cannot change the
fact that the People's War is continuing, and investors are not
free from continuing attacks. Mining companies, as well as other
industries, operate under constant fear of attack, and the cost
of security at newly privatized industries ranks among the highest
in the world. Newmont Mines is employing two security personnel
for every miner. One of Centromin's main mines was shut
down for an entire year as the result of a single guerrilla
attack. There have been more than 300 known guerrilla attacks on
mines over the past 15 years, and miners have themselves been strong
supporters of the People's War and have appropriated large amounts
of dynamite and other material.8
Foreign investors continue to worry about whether
the government will be able to hold back the People's War and protect
their investment. At the same time, the government's plan for holding
state power depends on increased imperialist penetration and foreign
Peru's foreign debt is now estimated at $26.1
billion. Over 20% of Peru's budget ($1.28bn of $5.9bn in 1994) is
currently appropriated to pay multilateral lending agencies like
the IMF and World Bank. Yet Peru continues to borrow more from the
lending agencies than it repays them ($2.7bn in 1994), largely to
provide the infrastructure required by potential foreign investors.
In 1994 Peru's prime minister announced that
Peru will require $5-$6 billion in new foreign investment each
year in order to realize a 5% medium term growth. In 1993 (the
first year of privatization sales) total foreign investment was
$226 million and a total of $3 billion is predicted for 1994 (due
largely to the sale of Peru's telecommunications system for $2.1bn).
Most of Peru's assets are being sold at ridiculously low prices
and, once gone, will no longer be a source of revenue for the government.
Bourgeois economic analysts are openly worried.
While Peru's economy is increasingly geared toward export, and more
goods are being exported, the amount of profit Peru is realizing
from these exports has gone down due to falling world prices.
The gross national product has increased, but the areas of the economy
vital to the well-being of the Peruvian people - agriculture, manufactured
goods, and social services, are declining. The majority of the people
of Peru are so poor that overall consumer power has dropped steadily.
Economists warn that Peru's economy is stagnant.9
While a very small number of people in Peru have
been able to profit from increased foreign investment, the majority
of the people of Peru have only gotten poorer. Less than 10% are
fully employed. While the government boasts of privatization, newly
privatized companies have, on average, laid off 52% of their workers
in order to increase profits. Money appropriated for "social services"
is being used to build roads to help foreign investors get their
goods to market, and the government's budget for social services
(health, education, etc) has fallen from 4.7% of GDP in 1980 to
0.9% in 1993. Even the schools and hospitals are being privatized.
More than 26,000 schoolteachers have tuberculosis; tens of thousands
of children die each year from preventable diseases. Most of Lima's
6 million "recognized" residents live in old working class neighbourhoods
where 7-10 people live in a single windowless room opening onto
a common dirt alleyway where an average of 67 people share a single
water faucet and 85 people share a toilet.10 Another 3 million "unrecognized"
Lima residents live in "illegal" shantytowns on the outskirts of
Lima, where they have neither water nor sanitation facilities. At
the same time, increasing numbers of peasants are being forced from
their land en masse because they are unable to pay new land and
water taxes imposed by the IMF; they will join the unemployed in
Lima. With about half of all Peruvians living in critical poverty
and unable to purchase adequate food to provide for basic nutritional
needs, potential investors worry about whether the Peruvian state
can provide the workers with such essentials as basic health and
education to ensure a dependable labour force.
The "La Cantuta case" has also raised some anxiety
among investors concerning the political stability of Peru. While
it was common knowledge that the government was responsible for
the disappearance and massacre of the nine students and the professor
from La Cantuta University, the outcome of the case has had many
repercussions. Not only were "human rights violations" exposed to
the world, but Fujimori's handling of the case has been unsettling.
On the one hand, foreign investors were delighted when Fujimori
showed he was willing to protect their investment with an iron fist
with his self-coup on 5 April 1992 as part of the effort to "pacify"
the country. However, when Fujimori defied his own newly enacted
Constitution in February 1994 by moving the La Cantuta case from
the civil court to the military court, he effectively allowed the
open subordination of the judiciary to the military. Not only were
the crimes of the Peruvian regime exposed to the world, but there
could now be no question that the Fujimori regime was under the
military's control. Opposition parties in Peru and foreign investors
became worried. Both depend on Peru's laws to protect their interests.
Peru's new Constitution is extremely favourable to foreign investors,
for example, guaranteeing that foreign debts will be paid before
social needs are met. But the fact that the laws can be changed
arbitrarily and replaced with open military rule at whim does not
convey a picture of a predictable and stable situation to these
All of this also tends to divide the Peruvian
ruling class, as is evidenced in manoeuvring for the upcoming 9
April 1995 elections. Some candidates want to retain more of the
profits from Peru's resources for Peru's upper classes, and claim
that they could cut a better deal with the imperialists. Some others
promise to preserve certain "democratic" privileges for those who
do not threaten the state. Others promise tax breaks for Peruvian
industrialists, who cannot compete with the multinationals. Some
openly worry that Peru's generals will once again roll their tanks
into the street in order to guarantee Fujimori's victory in the
elections and squash their own bids for power.
But one thing every electoral candidate agrees
on is the necessity to ruthlessly attack the People's War and its
leadership, the PCP. This is nothing new. It has been the mandate
of three successive regimes in Peru over the past 15 years. When
Chairman Gonzalo was arrested the imperialists were euphoric. Everywhere
they shouted: "Mission accomplished!" "The End of the Civil War
is now Guaranteed!" "Peru is the new investor's paradise!" "Now
the military can be used for building roads!" But over the past
two years the People's War has continued, and the government's pronunciations
have been proven to be empty phrases. And as of late 1994 Fujimori
had to confess that the People's War is indeed a continuing threat
to his state.
A full year after Chairman Gonzalo's arrest,
Fujimori announced his plan to carry out what he called a "Little
Vietnam" in the jungle! International lending agencies provided
loans to move peasants loyal to the government into the Amazon.
Strategic hamlets were set up near military bases. An orchestrated
media campaign released "news" of alleged PCP massacres of indigenous
Ashaninkas in these same areas in an effort to discredit the People's
War internationally and prepare the way for even greater military
genocide against the people inhabiting the area.
In April 1994 the military launched a massive
offensive in the jungle areas. Peasant villages were bombed by helicopter
gunships. Peasants were massacred in cold blood. Women and children
were raped by the uniformed military. Bodies of peasants lined the
banks of the Ene River, and the crimes of the military were so exposed
that even the usually silent government's loyal "human rights groups"
were forced to denounce them. The desperate regime retaliated by
accusing human rights groups and International Red Cross of helping
the PCP, and claimed that it was because of them that their military
offensive had ended in defeat.
During autumn 1994, Peruvian television showed
one military offensive after another "wiping out the last remnants"
and repeatedly announced the "capture of leaders of the People's
War", only to have to later admit that they had "escaped through
tunnels" or had "disappeared among the people". Huge sections of
the country continue to be under "Emergency Control", and the forces
of the People's War and the forces of the military continue to contend
Over the past two years, foreign investors have
come under constant attack. Offices of newly privatized businesses
and banks have been bombed. For example, within days of the sale
of Peru's telecommunications system to Spain, two of its Lima offices
were attacked (one on the day of its opening). Leaflets left at
the sites denounce the government's privatization program and warn
foreign investors that they will be driven out. Railways, oil pipelines,
and electrical pylons have continued to be targeted. In October
1994, as Peru's electricity company was being prepared for privatization,
an attack on the electrical system, described by the government
as the PCP's strongest attack since the arrest of Chairman Gonzalo,
disrupted electricity for more than a week.
At the same time, more than 20,000 oil workers
staged a 2-day strike to protest the upcoming privatization of Petro-Peru,
and were joined by dockworkers. Miners joined striking electrical
workers and denounced privatization. Schoolteachers went on strike
for a 300% pay increase and students are protesting the increased
costs of education.
Factions of the ruling class in Peru have called
for a delay in the privatization program, which Fujimori promised
would be completed by 1995. They say that the prices companies are
being sold for are too low and that political stability in Peru
is still too tenuous to create a favourable investment climate.
What the foreign investors are seriously worried about is the same
thing that has hindered their investing greatly in Peru for the
past fourteen years!
For fourteen years the people of Peru have taken
up arms against the three mountains oppressing them. There is a
highly aroused peasantry. There is a protracted People's War, led
by a Maoist Party, which is continuing their resolute fight to establish
a new state encompassing all of Peru. Millions of the poor - in
both the countryside and in the shantytowns of Lima - have experienced
the beginnings of their power. They have been part of building a
new economy, a new politics, and a new culture. In the face of this,
what do the foreign investors have to offer? The continuation of
500 years of oppression, and even greater misery and impoverishment.
1. Back issues of AWTW are available, with
extensive coverage of the People's War and the PCP, including original
documents. See page 2. A good starting place is "Our Red Flag Is
Flying in Peru", AWTW no. 16.
2. See especially IEC Emergency Bulletin no. 46
on foreign domination of Peru.
3. Financial Times, 29 Sept 1993, London.
Also New York Times, 28 Sept 1993.
4. The Mining Journal, April 1994.
5. The Mining Journal, April 1994.
6. Inter-Press Service, 10 Sept 1993.
7. Los Angeles Times, 19 Jan 1994; San
Francisco Examiner, 27 Mar 1994.
8. Associated Press, 29 Nov 1993.
9. For example, Latin America Weekly Report,
7 Apr 1994.
10. Peruvian Institute for Civil Defence statistics.
11. IEC Emergency Bulletins 46, 47, 51.