[lbo-talk] Alan García produced hyperinflation?

Jim Devine jdevine03 at gmail.com
Thu Jun 1 10:03:03 PDT 2006



> Peruvians Face a Difficult Choice: A Distressed Politician from the
> Past or an Unqualified Man of the Future
>
> [...]
>
> García remains in the lead despite the abysmal reputation he acquired
> for the massive inflation that his policies prompted during his
> presidency between 1985 and 1990, and the humiliating circumstance of
> his having to flee the country after criminal charges (which were
> later dropped) had been lodged against him.

was it all García's fault? hyperinflation usually doesn't result from goverment or central bank mistakes as much as from civil wars, civil unrest, and the like, which make it hard for a government to collect taxes or to cut expenditures -- so that they are _forced_ to "run the printing presses," causing hyperinflation. Garcia was trying to deal with Sendero Luminoso and other social conflicts, no? isn't that what caused the hyperinflation?

I can imagine that he made a lot of mistakes, but that's common when it's hard to keep political alliances together.

Here's what the Wikipedia has to say:
>The youthful and charismatic García was elected president on April
14, 1985 with 45% of the vote during the first round. ... García was thus declared president on June 1st and officially took power on July 28, 1985. It was the first time in its sixty-year history that the populist APRA party had come to power in Peru. Aged only 36, García was dubbed "Latin America's Kennedy," becoming the region's youngest president at the time.


>Despite his initial popularity among Peruvian voters, García's term
in office was marked by bouts of hyperinflation, which reached 7,649% in 1990 and had a cumulative total of 2,200,200% between July 1985 and July 1990, thereby profoundly destabilizing the Peruvian economy.


>... During his administration, the per capita annual income of
Peruvians fell to $720 (below the level of 1960) and Peru's Gross Domestic Product dropped 20%. By the end of his term, national reserves were a negative $900 million.


>According to studies of the INEI and PNUD[1], around the start of his
presidency, 41.6% of Peruvians lived in poverty. During his presidency, more than five million Peruvians were added to the ranks of the poor. The percentage increased 23% (to 55%) in 1991.


>García also made an attempt to nationalize the banking and insurance
industries. He incurred the wrath of the IMF and the financial community by unilaterally declaring a ceiling on debt repayment equal to 10% of GNP, thereby isolating Peru from the international financial world until García's successor, Alberto Fujimori, resolved the matter in the early 1990s.


>The economic turbulence of the time excerbated social tensions in
Peru and partly contributed to the rise of the violent rebel movement Shining Path, which had begun attacking electric towers, causing a number of blackouts in Lima. The García administration unsuccessfully sought a military solution to the growing terrorism, committing human rights violations which are still under investigation. These include the Accomarca massacre, where 47 campesinos were gunned to death by the Peruvian armed forces in August 1985, the Cayara massacre (May 1988) in which some thirty were killed and dozens disappeared, and the summary execution of more than 200 inmates during prison riots in Lurigancho, San Juan Bautista (El Frontón) and Santa Bárbara in 1986. According to an official inquiry, an estimated 1,600 forced disappearances took place during García's presidency.


>Garcia left the country with hyperinflation, isolated from the
international financial community, left the country with reserves of minus US$900 Million, continuous bombing and violent attacks by a rising Shining Path terrorist group, great increase in poverty levels and an electric train multi-million investment that was never finished.


>García remains a popular public figure in Peru, largely due to his
oratorial skills. Some Peruvians have called him "Latin America's best orator with a power to convince." However, his critics claim the many poor decisions he took while in office created an environment conducive the rise of an authoritarian leader like Fujimori. Some suspect García and APRA cut a deal with Fujimori during the 1990 election, backing him in return for impunity,....<

-- Jim Devine / "Unemployment is capitalism's way of getting you to plant a garden." -- Orson Scott Card



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