International -- Int'l Business: PERU
FUJIMORI: A NEW KIND OF STRONGMAN (int'l edition)
The populist technocrat is tightening his grip on power
An enthusiastic crowd gathers as Peruvian President Alberto K. Fujimori drives a four-wheel-drive Toyota on an impromptu tour of Santa Rosa, a hillside shantytown in Lima. Soldiers with earth-moving equipment are building a paved road, sidewalks, and schools in this community of 30,000 people, just a couple of miles from the presidential palace. Kids chant "Fuji, Fuji!" and a woman blows a kiss. But what really lights up Fujimori's face is a greeting from a man who shouts: "Go for [reelection in] the year 2000!"
Fujimori, the former university rector who rode a political backlash against misrule and won the presidency in 1990, has earned the loyalty of millions of Peruvians by wiping out hyperinflation and decimating Shining Path guerrillas in six years in office. The poor are benefitting from new roads, electricity, and schools. Foreign investment is pouring in, and economic stability is persuading many young Peruvians to make their careers at home instead of emigrating.
"Being President fascinates me," the 58-year-old Fujimori said in a wide-ranging interview (page 33). He handily won a second five-year term last year, helped by torrid growth that raised gross domestic product by 12.9% in 1994. Last year, he had to slam on the brakes to avoid overheating, and GDP is expected to rise a more modest 3.7% this year (chart). "We've had a bump in the macroeconomic road, but we're starting to get over it," says ex-Economy Minister Carlos Bolona Behr.
The deeper worry, though, is that it will take years for free-market reforms to create jobs and other trickle-down benefits for Peru's vast underclass. Despite Fujimori's popularity and neighborhood public works, grinding poverty could eventually stir new unrest--and new openings for Shining Path. "People thought we were closer to enjoying the fruits of economic reforms," says Giovanna Penaflor, manager of polling organization Imasen.
More troublesome to political opponents is Fujimori's authoritarian bent. He shut down Congress in 1992, then held an election that produced a Fuji-friendly legislature. And last month, he sparked concerns that he may aspire to be President-for-life when he prodded the Congress to interpret the constitution to let him run for a third term in 2000, arguing that he served his first term under the previous constitution.
For investors, though, the prospect of political continuity is just dandy. A major vote of their confidence is the $2.8 billion, 20-year plan of Royal Dutch/Shell Group and Mobil Oil Corp. to develop a natural-gas field on the Andes' eastern slope. A bigger bonanza may be in mining, which is expected to draw $6 billion in investment within five years. One company that struck it rich is Buenaventura, which joined with Denver's Newmont Mining Corp. to mine gold high in the Andes. Since 1993, when the mine started up, Buenaventura's market value has risen from $200 million to $1.2 billion.
CAPTIVE CONGRESS. Equally encouraging is another phenomenon: the return of expatriates as well as flight capital from abroad. Hozkel Vurnbrand, the owner of a company that manufactures flooring, worried, like many Peruvian parents, that his children wouldn't return home after studying abroad. But with his son, who studied in the U.S., and a nephew, Vurnbrand has opened four Ace Hardware franchise stores in the past two years, with two more to open this year. "This kind of business would have been impossible without Fujimori's market-opening," says Vurnbrand.
With 70 of the 120 seats in Congress, Fujimori's supporters can push through whatever legislation he likes. By broaching the idea of a third term, Fujimori says, he will avoid becoming a lame duck and will be able to wield full power until his current term ends. There's another motive: "We're leaving a door open, in case there is no candidate apart from myself who could effectively compete against a potential destabilizer," he says.
But if Fujimori doesn't carry out full reforms, such as shrinking the size of the state, growth will slow, warns Bolona, who makes no secret of his own presidential ambitions. "You have to pray that he stays on the right path," he says. For now, investors and shanty-dwellers alike seem to think Fujimori has the economy and country on track.By Geri Smith in LimaReturn to top