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Peru's embattled Indian president

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The hemisphere's only American Indian head of state, Peru's president Victor Toledo, is caught between a rock and a hard place. Toledo, a Quechua with a doctorate in economics from Stanford and a previous career at the World Bank, came to power as a national hero who took the country back from the corrupt and authoritarian rule of Alberto Fujimori. The economic reality of these times, however, and a personal scandal over an out-of-wedlock paternity, have cost him harshly.

As the first Indian candidate ever to win the presidency, Toledo appealed to the masses in his largely Indian country. He spoke from the heart of his experience as a shoeshine boy in the streets of Lima. The people responded to his quest as an Indian politician and, two years ago, he was elected on an anti-corruption platform. Indians (45 percent) and mestizos (37 percent) make up over 80 percent of all Peruvians, with whites numbering some 15 percent.

However, while appealing to the clear majority Indian population, Toledo is a fiscal conservative who pledged to maintain the strict economic discipline demanded by the International Monetary Fund. Thus he was able to gain the confidence of the business class. The IMF measures, including a program to privatize government services, often result in a slash in the social service sector. In 2000, two strikers protesting the privatization of electric services were killed. The turmoil continues and military intervention is always likely.

Toledo is widely credited with maintaining his anti-corruption stance, and with conducting a more transparent and accountable executive branch. So far, Toledo remains committed to IMF structural reform, which, over time, is expected to attract sufficient international investment to generate high growth and job creation.

In late May, Toledo was forced to declare a 30-day state of emergency across Peru as violent strikes by transit and public service employees broke out. Unmet demands for salary hikes and tax cuts for farm goods have spiraled into a serious wave of social protest, including thousands of health workers, farmers and teachers. The strikers have occupied state buildings in various provincial cities and blocked key highways by pelting vehicles with rocks and burning tires. Schools serving millions of students have been closed and many hospitals abandoned.

Increasingly unpopular, Toledo's job approval rating has plummeted from nearly 60 percent at the time of his election to a low of 14 percent today. He was down to 11 percent only two weeks ago, but the recent appointment of a more popular Prime Minister and his decision to slash his own salary have begun to appease intense conflict over his economic policies. With his public acceptance of paternity of a young woman as a result of an affair, the price of personal scandal seems to have withered.

Not so the political and economic conflict. Protest leaders accuse Toledo of not meeting campaign promises and "bending to his knees" before the IMF. Peru is a radicalized country with many strong trade unions and a growing Indian-campesino alliance that is flexing political muscle. The Indian president argues that Peru must stay on the path of fiscal discipline if it will attract foreign investment to build its economy. The country has also endured horrible weather (due to El Ni?o in 1998-1999) and a serious political crisis (2000-2001), although Toledo's policies, slowly, appear to be achieving results. Today Peru, with better than 3 percent expansion in 2002, is the fastest growing economy in Latin America. Nevertheless, Toledo contends Peru does not have the funds to meet the demands for higher salaries by striking sectors without endangering International Monetary Fund-endorsed pledges of fiscal discipline. It is a difficult, if honest, position to hold.

Conditions on the ground are very tough. While sustaining his personal linkages with the Indian bases by stressing education programs and more recently initiating a national anti-poverty campaign, it remains to be seen if the beleaguered Toledo can withstand the agitation of popular economic desperation.

We hope the best for our relative, the Peruvian president. We sympathize that sound fiscal policy is the cornerstone of economic expansion and a more equitable democratic society. Nevertheless, the misery of the masses of people in South America, notably Peru, is nearly impossible to contemplate. Fiscal reform must be coupled to a strong dose of social justice. If President Toledo can balance and juggle those two often-conflicting tendencies, he still has a chance to provide for Peru the beacon of opportunity that the region needs and that his people would support.