HEREWITH SUPPORT CABLE FOR LATIN AMERICA BRIEF OCPAS LAB 90/279 FOR SATURDAY, 1

Created: 12/1/1990

OCR scan of the original document, errors are possible

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from: pas

this ombined message

pnpv

subject: herewith support cable for latin america brief ocpas9 for saturday, 1 december

contents

peru! antinabcotics cooperation threatened

peru! fujimori pursuing ambitious agenda

peru: antinarcotics cooperation threatened

public allegations of narcotics corruption in the army are prompting the military to threaten new restrictions on police counternarcotics efforts,

a recent press story implicating the military commander of the upper huallaga valley gen. osnaldo hanke > in napco'ics corruption has angered high-level defense ministry officials.

^3

2. PERU: FUJIMORI PURSUING AMBITIOUS AGENDA

PRESIDENT FUJIMORI HAS HADE SIGNIFICANT PROGRESS IN AOORESSING ERU'S SERIOUS ECONOMICCE TAKING OFFICE IN JULY!

HIS AUSTERITY MEASURES ARE MARKING LABOR UNREST, AND HE IS RELYIHG ON THE SUPPORT OF THE FORMER RULING PARTY BECAUSE HIS PARTY ONGRESSIONAL MAJORITY. HE APPARENTLY IS COUNTING ON ECONOMIC GAINS TO BLUNT OPPOSITION; HE RECENTLYIILINGNES5 TO COOPERATE HITH WASHINGTON ON COUNTERNARCOTICS POLICY, POSSIBLY TO SECURE US SUPPORT FOR PERU'S EFFORT TO IMPROVE RELATIONS WITH FOREIGN CREDIT OR S. ftfJJJJJtjk

FUJIMORI'S AUSTERITY MEASURES HAVE HADE SIGNIFICANT HEADWAY AGAINST INFLATION; THE MONTHLY INFLATION RATE. UHICH SURGED TO PERCENT IN AUGUST AFTER THE MEASURES HERE ANNOUNCED, FELL BELOW 10 PERCENT LAST MONTH. THE DECLINE IN INFLATION HAS DRAHN PRAISE FROM CREDITORS AND POTENTIAL DONORS AND PROMPTED THE GOVERNMENT TOAGES THROUGH YEAREND. LABOR LEADER5, HOWEVER. HAVE REJECTED THE FREEZE ANDAJOR STRIKE BY HEAVILY UNIONIZED PUBLIC SECTOR-NORKERS. FUJIMORI'S THREAT TO FIRE STRIKERS AND HIS BAN OH WALKOUTS IN SERVICES AFFECTING PUBLIC HEALTH AND SAFETY HAVE PERSUADED 70 PERCENT OF THI STRIKERS TO RETURN TO WORK, ACCORDING TO US EHBASSY REPORTS. F)

LIMA ALSO IS PURSUING STRUCTURAL ADJUSTMENT TO SET THE STAGE FOR FUTURE ECONOMIC GROWTH ETURN TO THE INTERNATIONAL FINANCIAL COMMUNITY. RECENT PRESIDENTIAL DECREES HAVE REDUCED IMPORT TARIFFS AND EXCISE TAXES AND REMOVED RESTRICTIONS ON CAPITAL GOODS IMPORTS TO COHBAT INFLATION AND HELP EXPORT-ORIENTED INDUSTRIES. PERU WILL PRESENT AN FCONOHIC PROGRAM TO THE IMF SOON. RESCHEDULE GOVERNMENT DEBT WITH THE PARIS CLUB IN FEBRUARY. AND MEET WITH COMMERCIAL CREDITORS IN MARCH. ECONOHY MINISTER HURTADO MILLER HAS PROMISED THAT LIMA HILL REFORM THE TAX SYSTEH. PUBLIC

(MINISTRATION, AND THE FINANCIAL SECTOR DURING THE NEXT FEW MONTHS.

TAKING CHARGE IH THE POLITICAL ARENA

SEffJET

HAD OPPOSED FUJIMORI UnTJL ITS LEADERS DECIDED LAST MONTH TO BACK HIS CONTROVERSIAL NOMINEE FOR CENTRAL BANK PRESIDENT IN RETURN FOR CONTINUED FUNDING OF AKEY DEVELOPHENT PROJECT BEGUN BY THE PREVIOUS ADMINISTRATIONe

SIGNALING CLOSER ANTIDRUG COOP RATION

AFTER INITIALLY SIDESTEPPING DECISIONS ONANDROPOSED US MILITARY AID PACKAGE FUJIMORI RECENTLY AHNDUNCFn AN AMBITIOUS

t>3

SUCCESS LIKELY IN NEAR TERM

FUJIMORI'S TOUGH RESPONSE TO STRIKERS PROBABLY HASCHALLENGE * ALLOWING HIM TO FOCUS ON NEGOTIATIONSCREDITORS AND ON HIS AMBITIOUS REFORM PROGRAM. HE APPEARS THAT DEVELOPMENT ASSISTANCE AND FAVORABLE AGREEMENTSARREARS, WHICH ARE NEEDED TO RESTART ECONOMIC GROWTH, HINGEOF STRUCTURAL REFORMS AND COOPERATION HITH

THE LONGER TERH, COUNT ON fHIHF CONTINUED COOPERATION BECAUSE THE PARTYINCENTIVESTO UNDERMINE HIS ADMINISTRATION TO BOOST ITS PROSPECTS. '

Pace vtm

Original document.

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