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After running a populist, even demagogic, campaign, Peru's new president, Alejandro Toledo, who took office last month, is finding out how hard it is to live up to the expectations he himself has created.
"We have made an important advance in recovering freedom and democracy," he said early this week in an address to the nation. "But we also we have to deal with fragility in our institutions."
Peru's $54 billion economy contracted 1.7 per cent in the first half of the year, continuing a four-year slowdown that was worsened by last year's political turmoil and a recent earthquake that wrecked thousands of homes in the south.
Reminding Peruvians that he had "pledged a responsible management of the economy so that a fiscal deficit would not be generated," he warned that "anybody who tries to prematurely set fire to the prairie will go down in history as enormously irresponsible."
But the prairie has been set on fire already.
This week the Toledo administration is spelling out its blueprint for economic recovery. But the plan has already attracted brickbats from left-wing critics, who have condemned its mixture of tax cuts, public-sector pay rises and other incentives as "timid". Analysts, on the other hand, are concerned that the measures should be financially sustainable and not widen the budget deficit.
The left has criticized Toledo for swapping his pre-election populism for the kind of policies associated with free-market reforms that in Latin America have been dubbed "neo-liberalism." But he seems ready to press ahead with steps that are likely to include raising public-sector pay by 9 per cent; cutting the payroll tax paid by companies from 5 per cent to 2 per cent before eliminating it altogether; reducing a sales tax (known as IGV) from 18 per cent to 16 per cent by 2003; and increasing company profits' tax from 20 per cent to 26 per cent. These measures are in addition to a $300 million emergency package already announced for earthquake repairs in southern Peru.
A crucial issue is Toledo's request for special powers to rush through tax reforms by circumventing Congress.
To opponents, granting such powers would amount to giving ministers a "blank check". To the government, which does not have a majority in Congress, it is a way of getting his plan under way without delay.
Congress argues that the government should trust lawmakers to pass the measures quickly. Pedro Pablo Kuczynski, the economy minister, says that without a free hand to adjust the tax system, the fiscal deficit could widen beyond its 2 per cent target and the whole recovery program could be put at risk.
Toledo reiterates that he is not seeking a "blank check" and that he trusts the legislature "will grant the special powers in very specific areas on condition that we account for things to Congress." But this brings back memories of former president Alberto Fujimori's authoritarianism.
Toledo's Peru Posible party, plus two tiny allied parties, count on 47 votes in the 120-seat Congress. Even with the 11 votes of its Independent Moralizing Front (FIM) coalition ally, it still falls just short of an outright majority.
The opposition is chiefly composed of the American Popular Revolutionary Party (APRA), with 28 seats, the National Unity (UN) party with 17 and the Decentralizing Parliamentary Union (UPD), a new cluster of three parties, which has 13 seats.
"We don't want surprises like there have been in the past when Congress granted wide powers," said from the left Mercedes Cabanillas, a senior APRA member, referring to Fujimori, who asked-and was given-those powers several times. And, from the right, Javier Diez Canseco, one of the five vice-presidents of Congress and a UPD member say that "Congress must not lose its legislative function in as important an area as the economy."
But Toledo appeals for understanding from the forces in Congress, saying he inherited an economy in deep recession. "Let's not exacerbate social expectations . . . We're not magicians, we're not going to produce results overnight."
Whatever the outcome, markets would react badly to further delays in the recovery plan or to signs of an uncooperative Congress.
"Governability is one of the points that most worries investors about Peru in the next five years," said Luis Ogaņes, vice-president at investment banker JP Morgan.
However, what worries Peruvians this week is that leftist guerrillas sabotaged two electric pylons, in the central Andean city of Ayacucho, 200 miles southeast of the capital, Lima, and two nearby towns sending them into a total blackout. Defense Minister David Waisman admitted the incident was a "subversive outbreak."
Ayacucho was the epicenter of violence during the 1980s and early 1990s, spurred by the Maoist Shining Path insurgency, which waged a campaign of assassinations, car bomb attacks and routinely sabotaged electricity towers. But, under president Fujimori (in a campaign that, ironically, was organized and led by his intelligence chief Vladimiro Montesinos, now jailed on charges of a variety of crimes against the state), guerrilla activity in Peru decreased dramatically after the capture of top rebel leaders in 1992.
Fighting has left some 30,000 dead since 1980, including security forces, rebels and civilians, and Peruvians dread its possible resurgence. As much as the economic issues are important to make or break the Toledo administration, much more important for Peruvians would be any indication that under it guerrilla violence could again dominate their daily lives.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com