The armed forces of Peru entered the 1990s with a strong institutional tradition, excellent training at both the officer and technician levels, and substantially renovated and updated equipment and matériel in each service. However, the services faced major challenges that would have seemed almost inconceivable only a decade earlier when concerns revolved primarily around how to effect an orderly transition back to civilian democratic rule and return to the barracks and bases after twelve years of military government.

The most significant of these challenges from the standpoint of the military as an institution was Peru's severe economic crisis, particularly the 1988-90 hyperinflation. The 1990 estimated defense budget of US$245 million was less than half of 1989 estimated expenditures, which totaled US$544 million. In other words, defense expenditures in 1990 dropped from 1.6 percent of gross domestic product (GDP--see Glossary), which was US$34.7 billion in 1989 current dollars, to 0.7 percent of 1989 GDP. (This compared with 3.3 percent in 1969 and 5.7 percent in 1978.)

Such a dramatic drop in available resources meant sharp cutbacks in every area of defense spending, from salaries to maintenance. Officers complained of having only about US$0.20 daily to feed each foot soldier in the field, soldiers who were being paid less than US$10 a month in 1991. Some officers and technical personnel resigned because of the financial hardships (180 officers and 370 technicians between January 1 and June 7, 1991, in the army alone and about 400 navy officers, one-fifth of the entire active officer corps, from 1990 to mid-1991) finally in mid-1991, both the army and navy temporarily halted acceptance of resignations or early retirement. With salaries sharply eroded to a fraction of their former levels as a result of the inflation (US$192 a month for a general before tax and pension deductions in July 1991, compared with US$910 for his Bolivian counterpart) and the inability of the government to keep up with tax collections (less than 4 percent of GNP in 1990) such discouragement was not surprising. One Lima news magazine, Sí, noted that the situation had gotten so bad by 1991 that a janitor at Peru's Central Reserve Bank (Banco Central de Reservas--BCR, also known as Central Bank) earned twice the monthly salary of a general. The government turned down the military's 1991 request for US$279 million in an emergency supplemental budget allocation, approving just US$75 million. One disturbing indicator of the potentially dire consequences of this pattern of underfunding was the armed forces' readiness status, which measured the level of preparedness of the military against an ideal level. In 1985 readiness status was determined to be 75 percent in July 1990, it was only 30 percent.

The other quite unanticipated and unwanted challenge was that posed by the guerrillas. The SL timed the start of its "peoples' war" to coincide with national elections in May 1980, calculating correctly that neither the outgoing military regime nor t 126d the incoming civilian government would be anxious to take it on or even willing to recognize a problem. The circumstances of returning to civilian rule and opening access to both local and national government by multiple parties of the Marxist left did not support the SL's own analysis at the time that worsening conditions were conducive to guerrilla war. Nevertheless, the SL's dogged pursuit of the peoples' war soon created conditions favorable to its continuance. Sabotage and destruction of infrastructure slowed economic growth and contributed to individual hardship. Selective assassination paralyzed many local governments and led to withdrawal of police, military, and rural development personnel (Peruvian and foreign), particularly in more remote rural areas.

Military responses, beginning late in December 1982 in the region encompassing Ayacucho, Huancavelica, and Andahuaylas, slowed the SL's progress but also displaced the SL to other areas. The armed forces' detachments also intimidated many of the citizens whom they were supposed to protect, with hundreds of human rights violations recorded. Furthermore, over 500 military personnel at all levels and 1,000 police personnel lost their lives between 1982 and 1990. Although the military's response to the insurgent challenge--first against the SL and later against the MRTA as well--often included important successes, the guerrilla problem was much more widespread at the end of the decade than it was at the beginning.

The economic crisis fed the flames of the insurgency in at least four ways: it made daily existence much more precarious for the civilian population and thereby increased its susceptibility to the SL's revolutionary appeal it reduced sharply the resources available to the armed forces to combat the SL at the very moment they were most needed it made military personnel more susceptible to corruption by drug traffickers and it severely limited the state's capacity to provide the economic aid for development programs designed to address popular needs, particularly in the economic, social, and geographical periphery. Given this situation, new economic resources from abroad were viewed as crucial to keep matters from deteriorating further.

Peru successfully reinserted itself into the international financial community with a US$2.1-billion negotiated debtrefinancing package in September-October 1991, along with several hundred million dollars in economic assistance from a support group of developed countries, including the United States. For 1992 the United States Congress approved a US$95-million executive branch request, including US$30 million in counternarcotics assistance. These resources were expected to help Peru achieve net economic growth in 1992 for the first time in five years. However, Fujimori's autogolpe of April 5, 1992, resulted in the temporary suspension of most of the funds, including all but humanitarian and counternarcotics aid from the United States. This postponed by at least a year Peru's domestic economic recovery.

The substantial buildup and strengthening of the military's forces in the 1970s and 1980s gave it reserves from which to draw when forced to face both the economic and guerrilla challenges. However, much of the new capability of the FF.AA. was designed for more conventional purposes, such as border and ocean defense, and it was difficult if not impossible to adjust sufficiently to the insurgency problem. In 1992 most of the equipment and over 80 percent of the military personnel remained positioned on the borders or at sea where they could do little to affect the course of the insurgency. Although the military had shifted more personnel into conflicted areas by that May, more than two-thirds continued to be posted at border bases.

Data as of September 1992