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Fujimori: "Better to confront the problem now"
The Miami Herald / September 28, 1998

By Larry Luxner

President Alberto Fujimori, who has governed Peru since 1990, is widely credited with defeating the Shining Path terrorist group and restoring confidence in the nation's once-shattered economy. He was re-elected in 1995 under a constitution reformed in 1993, following a controversial "self-coup" in which the authoritarian president dissolved Peru's legislative and judicial branches.

On Aug. 27, Congress -- controlled by pro-Fujimori politicans -- rejected the idea of holding a nationwide referendum to determine whether Fujimori could run for a third consecutive term in 2000, even though polls showed the referendum was backed by 78% of Peruvians.

Earlier this month, the 60-year-old president spoke with Larry Luxner, editor of the monthly newsletter South America Report,at the presidential palace in Lima. Here are excerpts from that 45-minute interview:

Q: What are the major economic challenges facing Peru?

A: "We have attained stability that is sustainable in the long term, but of course we have had some difficulties. For example, businesses are asking to reduce tax contributions so their production costs may become more competitive. This is part of the problem. The other is that we are having a gap in our external trade, which has increased in the last few years -- particularly as a consequence of the El Niņo phenomenon."

Q: How has the Asian financial crisis affected Peru's economy?

A: "Evidently, the Asian crisis has caused a reduction in our international commodity prices, and this has affected the value of our exports, mainly mining. In the meantime, the volume of imports of footwear and textiles has increased significantly."

Q: Given all the uncertainties, why should foreign investors consider Peru when they can put their money in Argentina, Chile or other countries?

A: "I think Peru offers good, though not ideal, conditions for economic stability. There's plenty of guarantees, remittances of capital and other incentives. And because Peru is integrating into the Andean Community free trade zone and will soon will integrate into Mercosur, we are creating better conditions for investment."

Q: Will Peru become an associate member of Mercosur -- as did Chile and Bolivia -- or will it negotiate a free-trade agreement with Mercosur as part of the Andean Community?

A: I think the second.

Q: Recently, Shell and Mobil announced they would abandon plans to develop the $3 billion Camisea gas field, considered to be Peru's largest single foreign investment. How will your government save the project?

A: "It won't be very difficult to bring in investors back into the project. We're now in a more favorable position than when we signed the concession with Shell. Studies have shown even greater proven and probable reserves. This project will be maintained. The risks of an investor of this nature are less than before. There's also the possibility of utilizing gas in Lima and the coast, and the opportunity of establishing a petrochemical industry. I think that for a potential investors, the project is viable. In any case, we think it's still attractive."

Q: What is your government doing to promote tourism in the United States and assure visitors that Peru is safe?

A: "U.S. airlines are contributing notably, because American Airlines and Delta are now flying to Cuzco. This will have a multiplier effect in the medium term. The people understand that terrorism is totally under control. Three or four months ago, the government passed special legislation against crime in tourist zones. The level of security is definitely up."

Q: Are you and President Jamil Mahuad making progress toward ending border hostilities between Peru and Ecuador?

A: "There's been a lot of progress. In 1992 it would have been practically impossible to think of a peace accord with Ecuador, and in 1995 we had a war. I think there are still problems to overcome, but they're not insurmountable."

Q: What will peace with Ecuador mean for the Peruvian economy in the long term?

A: "First, I think we have to create an adequate climate to increase mutual investment. There will be a savings in defense expenditures. Nearly all of Peruvian and Ecuadorean defense spending is basically for the border. This could signify important savings that could be channeled for the struggle against poverty or investment in infrastructure. I think peace could be very positive. Also, the conflict between our two countries alarms investors, and this alarm will be totally eliminated."

Q: Many average Peruvians say that, while your policies have certainly wiped out terrorism and led to an increase in foreign investment, their basic standard of living has actually worsened in the last four years. What would you say to such critics?

A: "They are partially right, because we had to confront many stagnating problems over the years. For example, we have taken this decision to eliminate our accumulated external debt, by renegotiating it over a defined period. This means a sacrifice. The alternative would have simply been to let it fester. This would have been politically and socially easier, but I think it's preferable to confront the problem now. This has been an important component of my economic policy."

Q: Are Peru's 24 million people better off economically today than when you took office in 1990?

A: "The poor people are better off. Those in extreme poverty -- about 15% of the population -- have improved their standard of living substantially, though the middle class has faced difficulties due to the economic adjustment."

Q: Now that Congress has rejected a referendum on your possible re-election candidacy, what's your next step?

A: "I hope to continue running the government until 2000. There's absolutely no doubt about that. I will not permit what we've been able to achieve up to now -- economically, socially and in the struggle against terrorism -- to be abandoned. At the moment, it's in discussion. Here the important thing is that the aspects of uncertainty have been eliminated. With a referendum [on whether running for a third term is constitutional], there would have been a question of stability. Until 2000, I'll be in office with a strong leadership. The problem is what will happen after 2000. I have not decided what to do."

Q: How would you like to be remembered in history?

A: "I think they'll remember me as a president who confronted the country's problems. The external debt was practically unmanageable, and nobody thought we'd ever defeat terrorism. Concerning Ecuador, we've been dealing this for half a century. Now it's no longer a problem. We have taken the blinders off our eyes and have seen the reality."

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