THE PERUVIAN COUP: REASONS AND PROSPECTS

Created: 2/12/1969

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Annex B

CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence9

MEMORANDUM

SUBJECT: The Peruvian Coup: Reasons and Prospects

Summary

The military, led by General Juan Vclasco, carriedloodless coup against President Belaundesing as its excuse the heated controversy over Belaunde's settlenent with the US-owned International Petroleum Company (IPC). Although the military waswith.'IPC settlement and several other problems, the primary motivations for the coup were probably essentially the same as those that had prompted such moves in the past, namely the ambitionarticular officer and the desire to keep Haya de la Torre and his American Popular Revolutionary Party (APRA) from gaining the presidency

The military rulers of Peru this time, however, are more radical and nationalistic than those of the past, and with Argentina as an example, they have highly ambitious plans for the country. In addition, the expropriation of the IPC has given thisegree of support never before enjoyedilitary government. It seems likely, therefore, that the armed forces will have little difficulty in sustaining themselves in powerong time.

Note; TnTs memorandum was produced solely by CIA. It was prepared by the Office of Current Intelligence and coordinated with the Office of Economic Research, the Office of National Estimates, and the Clandestine Services.

VPIOVEirailELLaSI UTHtllltl

The government will have significant problems to deal with, however, particularly economic difficulties compounded by the confrontation with the US over nationalization of IPC. Complicating its efforts to solve these problems will be the disunity in the military itself. Many of the top-ranking officers are completely disillusioned with the leadership of President Velasco. In addition, opposition to the government, particularly from APRA, will undoubtedly arise eventually to give the military additional problems.

HO I'OIXDICH

Background

Peruvian armed forces, like those ofLatin American countries, see themselves as thearbiters of the country and believe it their dutyin the political processes of the state whenis threatened. In Peru this general attitudeby the army's desire to keep itsde la Torre and his American Popular(APRA) party away from control of the government.

The enmity of the only two well-organized forces In Peru, the military and APRA, dates back2 whenpristas were massacred by the army in retaliation for APRA's killing ofoldiers. Neither group has forgotten that year, and2 it was Haya de la Torre's apparent victory at the polls that prompted the military tooup d'etat and rule the countryear.

military supported the government ofBelaunde, who defeated Haya de la Torre in theuntil economic problems and difficulties withcongress appeared to the army to beorder. Belaunde was surprisingly successful inprograms through congress in his first years7 he was stymied in congress and unable toapproval for needed programs of austerity and

tax reforms. Inflationary pressures fueled by government deficits led to increasing balance of payments difficulties ajor devaluation of the sol in7 helped the balance of payments but failed to restore business confidence and economic growth continued its decline Efforts to deal with the government deficit and improve investor confidence were made even more difficult by the impasse in congress over the election of officers in the senate. For several weeks in the late summer7 this impasse prevented congress from meeting and further disillusioned the Peruvian public and the military with the performance of politicians.

this period there were indicationsarmed forces, led by Minister of War Generalwould Intervene to correct the situation. had ordered the drawing up of contingency plansgive thelueprint for governingbecome necessary. The military looked to Argentina,

where the military had taken overodel on which to base their own plana for taking over the government and solving the country's serious problems. The expected breakdown in public order never came, however, and General Doig was eventually retired.

Events Leading tooup

78 APRA tried to show the military that it would have nothing to fear from an APRA victory in the elections scheduled for Legislation favoring the military, such as provision of funds for new equipment, received APRA support. APRA leaders believed theyood chance in9 elections and wanted to do nothing that would prompt the military to take over the government and prevent them from finally gaining power. So, in the summerith economic problems becoming even more serious and the threat of military intervention increasing, the APRA-dominated congress granted the Belaundespecial powers forays to act through decrees to meet the growing problems.

Belaunde promptly raised taxes and began an ambitious effort to refinance the country's foreign debt. The new program appeared to be what was needed and it seemed that Belaunde might be able to stabilize the economy. Thealso decided to use the special powers toolution to the long-standing and politically explosive question of the US-owned International Petroleum Company's (IPC) status in Peru. This was accomplishedbrieflyonugust in the Act of Talara by which Peru took control of the disputed Laarinas oil fields and in return dropped its claim to4 million in "unjust profits."

settlement with IPC was immediately attacked"sell-out" because it failed to obtain payment for theprofits" and because it left the refinery at Tolarahands of the company. The controversy over thesplit Belaunde's Popular Action party. who hadettlement so that they wouldto deal with the problem later, failed forto give Belaunde their full support. Instead,

they argued that parts of the contract would have to be renegotiated and that the cabinet responsible for the Act of Talara should resign. On the first of October Belaundeew but completely uninspiring cabinet.

ctober Military Coup

7. There is little doubt that top army leaders, particularly the commander of the army General Juan Velasco, disliked the Act of Talara, but it was not the only motivating factor in their decision to oust Belaunde, and very probably not even the primary one. One of the most important factors was the split in the Popular Action party, which almost assured an APRA victory in the9 elections. The army had seemed willing to allow an Aprista to be president, but only if the candidate was not the founder of the party, Haya de la Torre. APRA's announcement that Haya would in all probability be its presidential candidate apparently convinced the army's leaders that the elections should not be held. Added to this was the fact that General Velasco had serious disagreements with Belaunde over who would be named to fill the military posts in the cabinet

This situation, plus the generally

.ier in tne armed torces that the politicianself-serving lot who were lining their own pockets to the detriment of Peru, was the real basis for the coupctober.

8. elatively small group of army officers conceived the actual takeover, calling in the navy and air force only after the act had been accomplished in the early morning hoursctober. The commanders of the three services then constituted themselvesRevolutionary Junta" and named General Juan Velasco president. abinet was named from the top-ranking officers of the three services, but Velasco surrounded himselfroup of advisers made up of highly nationalistic field-grade officersew civilians. From the beginning this arrangement caused dissatisfaction within the cabinet, which found that its more moderate advice on matters such as the expropriation

of the International Petroleum Company was ignored by President velasco. Dissatisfaction with Velasco's leadership increased until it was believed by many that he would be forced to leave the presidency when he retired from active military duty at the end of

9. President Velasco was able to outmaneuver his opponents, however, by playing on the nationalism of the Peruvian public and keeping the IPC issue on the front pages, with himself as the hero of the moment forard line against the IPC and the US Government. He was kept on as President after his retirement and seems not to havereat deal of power in the process. He is still unpopular with many top ranking officers, however. Should the highly charged atmosphere around the IPC issue quiet down, the moderates led by either Prime Minister Ernesto Montagne or General Benavides, the minister of agriculture, will probably make an attempt to remove him.

Prospects for the Military Government

military government has served notice thatnot intend to bearetaker government, asjuntas have been, but will stay in power longachieve "long-overdue reforms." Leaders of theoutlined plans to streamline the bureaucracy,economy to put the country on the road torestructure the political scene. They have givenof how they propose to carry out these overlybut they have indicated that they will stay inthey do. There is, thus, little hope that thewill be returned to civilians in the near future.

Velasco government has been riding thepopularity so far because of its actions against thehas been supported by aost segments of the populationhard-line approach, but there are indications thatwill begin to develop over the next few months. supported the government in its treatment of IPC,now plans to initiate opposition after theof Haya de la Torre's birthday in the latter part APRA could bring considerable pressure onthrough its control of most of the labor unions

in the country and the consequent possibility of crippling strikes.

12. The government's decision to establish diplomatic and commercial relations with the Soviet Union and Eastern Europe is beginning to disillusion some of the more conservative and anti-communist supporters of the military takeover. If Velasco's drift to the left continues, the oligarchyarge segment of the military could well encourage more moderate elements within the governmentparticularly General Benavidesto oust the president. Ifove occurs and is successful, both foreign and domestic policy will probably be toned down somewhat, but the nationalism

will remain.

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