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Peru Impact of the "Fujishock" Program
In 1990 Peru's political spectrum and party system were
polarized to an unprecedented degree. In addition, the
vote for
Fujimori was to a large extent a vote against the shock
stabilization plan that Vargas Llosa had proposed to
implement.
After less than a month in government, however, Fujimori
was
convinced--both by domestic advisers and prominent members
in the
international financial community--that he had to
implement an
orthodox shock program to stabilize inflation and generate
enough
revenue so that the government could operate
(see The Search for New Directions
, ch. 3). During his visits to the United
States
and Japan in July 1990, it was made very clear to Fujimori
that
unless Peru adopted a relatively orthodox economic
strategy and
stabilized hyperinflation, there would be no possibility
of
Peru's reentry into the international financial community,
and
therefore no international aid. At this point, Fujimori
opted for
an orthodox approach and appointed Juan Carlos Hurtado
Miller as
minister of economy and prime minister. Later that month,
many of
Fujimori's original advisers, who were heterodox
economists, left
the Cambio team. Thus, on August 8, 1990, Fujimori
implemented
precisely the program that he had campaigned against
(see
The Search for New Directions
, ch. 3).
The shock program was more extreme than even the most
orthodox IMF economist was recommending at the time. Plans
for
liberalization of the trading system and for privatization
of
several state industries were made for the near future.
Overnight, Lima became a city which had, in the words of
several
observers, "Bangladesh salaries with Tokyo prices."
Despite widespread fears that the measures would cause
popular unrest, reaction was surprisingly calm for several
reasons. First of all, the measures were so extreme that
they
made day-to-day economic survival the primary concern of
the
majority of the population, including the middle class.
Taking
time to protest was an unaffordable luxury. Second, street
protest and violence were increasingly associated with
insurrectionary groups and political violence, with which
the
average Peruvian had no desire to be associated. Third,
the
benefits from ending hyperinflation and recovering some
sort of
economic stability were immediately evident to Peruvians
at all
levels, even the very poor. Even several months after the
shock,
the most popular man in Peru was the architect of the
program,
Hurtado Miller. Although Fujimori's popularity suffered a
decline
after his first few months in office, it was not
necessarily a
result of the economic program. Finally, and perhaps most
importantly, most people voted for Fujimori not only
because of
his vague promises, but also because of the perception
that,
unlike Vargas Llosa, he was much more a man of the people.
Thus,
his implementing an "antipopular" economic program was far
more
acceptable politically than Vargas Llosa's doing virtually
the
same thing.
Data as of September 1992
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