Peru's President, faced with a guerrilla insurgency and $12.5 billion foreign debt, has moved boldly to reduce these two grave challenges to his country. But support for President Fernando Belaunde Terry's efforts is fading.
Human rights advocates have strongly criticized the tactics used by government forces to bring the Sendero Luminoso (Shining Path) rebels under control. They charge that government forces used torture, kidnap-pings, and mass slayings to wipe out the Maoist guerrilla group. Many analysts think the losses incurred by the President's party, Popular Action, in mayoral elections last November are the result of unrest over this issue.
On the economic front, even the President's party is asking Belaunde to lift strict austerity measures imposed, at the request of the International Monetary Fund, to reduce the foreign debt. Many politicians say the IMF program has thrown Peru into its worst recession. Some say an immediate policy change is needed if Peru is to avoid serious social unrest.
Inflation is running at a rate of 125 percent a year. Earning power is ever dwindling. And Central Bank sources say the salaries of Peruvians have plummeted to 1964 levels in real terms.
Last month at least one-third of Peru's work force marched out on strike to protest widespread government budget cuts. Labor leaders say the strike was called to protest the IMF austerity plan as well as to demand a freeze in gasoline prices and the indexing of wages to inflation.
''The strike was an emphatic rejection of the government's economic policies which have only made the poor poorer,'' labor leader Isidoro Gamarra says.
In response, Belaunde called a nationwide three-day suspension of civil liberties, giving police broader powers of arrest and prohibiting demonstrations and meetings.
But even he hinted publicly last week that the IMF plan cannot be continued.
''Fiscal austerity measures bring with them, inevitably, the danger of severe recession,'' the President said. ''We should find a middle ground formula which, coupled with a strict austerity plan, is a plan to reactivate . . . the economy, '' Belaunde said.
And Monday the government announced that Prime Minister and Foreign Minister Fernando Schwalb has resigned, saying he wanted to leave Belaunde free to implement new economic policies.
Last month, Carlos Rodriguez Pastor, the man who negotiated Peru's refinancing with the IMF and creditor banks, resigned his post. His resignation was one of the demostrators' key demands.
But what sort of policy changes Belaunde will initiate is a question.
One alternative program being discussed calls for strict import controls, a multitiered exchange rate, and increased credits for the local private sector.
But this plan, economists say, would put Peru on a collision course with the IMF and its free market philosophies.
Meanwhile, IMF officials agreed last Friday to postpone voting on Peru's latest refinancing plan until the government sent clearer signals on what it plans to do about its economic program.
The President's party is clearly worried. ''Popular Accion leaders see the party fading from the political arena just a year before the presidential elections,'' a Lima economist says. ''They are taking a risk . . . changing economic policy to solve their political problems and at the same time colliding with the IMF.''
Whether an about-face in economic policy will help bolster the President's popularity and his party's political standing is yet to be seen. As one economist puts it, ''He may be jumping right out of the frying pan into the fire.''
''We don't want to throw over all that Rodriguez Pastor accomplished in terms of negotiations with the IMF, but we need to achieve better conditions,'' says his replacement, former Energy and Mining Minister Jose Benavides Munoz.