Peru's President calls for Latin unity to deal with region's debt
Lima, Peru — President Alan Garc'ia P'erez of Peru wants to make himself a leader among Latin nations. That much became clear during President Garc'ia's first week in office.
During his inauguration speech, given earlier this week, the 36-year-old leader of the nationalist, center-left American Popular Revolutionary Alliance party took rhetorical swipes at both the United States and Cuba. He delivered a ringing call for Latin unity, including a proposal for a regional summit without US participation.
Most particularly, Garc'ia seems to want to show the way on the issue of the region's foreign debt.
The President has outlined a novel, and risky, policy for dealing with Peru's own debt.
He has vowed to limit payments to 10 percent of export earnings for the next year and not to submit his country's repayment scheme to the approval of the International Monetary Fund.
Economically, Garc'ia's proposal is not earth-shattering, because Peru's $13.7 billion debt is relatively small by Latin standards.
It is the sixth biggest debt in Latin America.
The importance of Garc'ia's proposal is political.
It represents a model made-in-Latin America alternative to the current system of debt management in which Latin countries have had to impose belt-tightening measures approved by the International Monetary Fund in order to get the Western bank loans they need to keep their economies going.
In a press conference with foreign journalists on Tuesday, Garc'ia was careful to characterize his 10 percent solution as the middle ground between ``two extremes -- total repudiation and the starvation of the people.''
Still, whether other countries with bigger debts will follow Garc'ia's lead remains to be seen.
Initial reaction by Latin delegations to Garc'ia's inauguration was positive, but restrained.
Much depends on whether or not Garc'ia succeeds in convincing officials in the US government and the American financial community that his proposal is as ``realistic'' as he says it is.
And whether he meets with success will probably depend on the specific measures that Garc'ia proposes to back up his promise of fiscal austerity and economic reactivation.
On Tuesday, Garc'ia's Ministry of Economy and Finance ordered all of Peru's banks and currency exchanges to close until Thursday ``to facilitate the orderly implementation of the economic program,'' which may include the exchange controls Garc'ia mentioned in Sunday's inaugural speech, and again in Tuesday's press conference.
President Ra'ul Alfons'in of Argentina also closed his country's banks for a week, just before his recent announcement of a sweeping austerity plan which included a wage-price freeze and a reissued currency.