Belaúnde inherited a country that was vastly different from the one he had governed in the 1960s. Gone was the old export oligarchy and its gamonal allies in the Sierra, and the extent of foreign investment in the economy had been sharply reduced. In their place, Velasco had borrowed enormous sums from foreign banks and so expanded the state that by 1980 it accounted for 36 percent of national production, double its 1968 share. The informal sector of small- and medium-sized businesses outside the legal, formal economy had also proliferated.

By 1980 Belaúnde's earlier reforming zeal had substantially waned, replaced by a decidedly more conservative orientation to government. A team of advisers and technocrats, many with experience in international financial organizations, returned home to install a neoliberal economic program that emphasized privatization of state-run business and, once again, export-led growth. In an effort to increase agricultural production, which had declined as a result of the agrarian reform, Belaúnde sharply reduced food subsidies, allowing producer prices to rise.

However, just as Velasco's ambitious reforms of the early 1970s were eroded by the 1973 worldwide oil crisis, Belaúnde's export strategy was shattered by a series of natural calamities and a sharp plunge in international commodity prices to their lowest levels since the Great Depression. By 1983 production had fallen 12 percent and wages 20 percent in real terms while inflation once again surged. Unemployment and underemployment was rampant, affecting perhaps two-thirds of the work force and causing the minister of finance to declare the country in "the worst economic crisis of the century." Again, the government opted to borrow heavily in international money markets, after having severely criticized the previous regime for ballooning the foreign debt. Peru's total foreign debt swelled from US$9.6 billion in 1980 to US$13 billion by the end of Belaúnde's term.

The economic collapse of the early 1980s, continuing the long-term cyclical decline begun in the late l960s, brought into sharp focus the country's social deterioration, particularly in the more isolated and backward regions of the Sierra. Infant mortality rose to 120 per 1,000 births (230 in some remote areas), life expectancy for males dropped to 58 compared with 64 in neighboring Chile, average daily caloric intake fell below minimum United Nations standards, upwards of 60 percent of children under five years of age were malnourished, and underemployment and unemployment were rampant. Such conditions were a breeding ground for social and political discontent, which erupted with a vengeance in 1980 with the appearance of the Shining Path (Sendero Luminoso--SL).

Founded in the remote and impoverished department of Ayacucho by Abimáel Guzmán Reynoso, a philosophy professor at the University of Huamanga, the SL blended the ideas of MarxismLeninism , Maoism, and those of José Carlos Mariátegui, Peru's major Marxist theoretician. Taking advantage of the return to democratic rule, the deepening economic crisis, the 1000 e failure of the Velasco-era reforms, and a generalized vacuum of authority in parts of the Sierra with the collapse of gamonal rule, the SL unleashed a virulent and highly effective campaign of terror and subversion that caught the Belaúnde government by surprise.

After first choosing to ignore the SL and then relying on an ineffective national police response, Belaúnde reluctantly turned to the army to try to suppress the rebels. However, that proved extremely difficult to do. The SL expanded its original base in Ayacucho north along the Andean spine and eventually into Lima and other cities, gaining young recruits frustrated by their dismal prospects for a better future. To further complicate pacification efforts, another rival guerrilla group, the Túpac Amaru Revolutionary Movement (Movimiento Revolucionario Túpac Amaru--MRTA), emerged in Lima.

Counterinsurgency techniques, often applied indiscriminately by the armed forces, resulted in severe human rights violations against the civilian population and only created more recruits for the SL. By the end of Belaúnde's term in 1985, over 6,000 Peruvians had died from the violence, and over US$1 billion in property damage had resulted (see Changing Threats to National Security , ch. 5). Strongly criticized by international human rights organizations, Belaúnde nevertheless continued to rely on military solutions, rather than other emergency social or developmental measures that might have served to get at some of the fundamental, underlying socioeconomic causes of the insurgency (see Shining Path and Its Impact , ch. 2).

The severe internal social and political strife, not to mention the deteriorating economic conditions, manifested in the Shining Path insurgency may have contributed in 1981 to a flareup of the border dispute with Ecuador in the disputed Marañón region. Possibly looking to divert public attention away from internal problems, both countries engaged in a brief, five-day border skirmish on the eve of the thirty-ninth anniversary of the signing of the 1942 Protocol of Rio de Janeiro (Rio Protocol). Peruvian forces prevailed, and although a ceasefire was quickly declared, it did nothing to resolve the two opposing positions on the issue of the disputed territory. Essentially, Peru continued to adhere to the Rio Protocol by which Ecuador had recognized Peruvian claims. On the other hand, Ecuador continued to argue that the Rio Protocol should be renegotiated, a position first taken by President Velasco Ibarra in 1960 and adhered to by all subsequent Ecuadorian presidents.

Along with these internal and external conflicts, Belaúnde also confronted a rising tide of drug trafficking during his term. Coca had been cultivated in the Andes since pre-Columbian times. The Inca elite and clergy used it for certain ceremonies, believing that it possessed magical powers. After the conquest, coca chewing, which suppresses hunger and relieves pain and cold, became common among the oppressed indigenous peasantry to deal with the hardships imposed by the new colonial regime, particularly in the mines. The practice has continued, with an estimated 15 percent of the population chewing coca on a daily basis by 1990.

As a result of widespread cocaine consumption in the United States and Europe, demand for coca from the Andes soared during the late 1970s. Peru and Bolivia became the largest coca producers in the world, accounting for roughly four-fifths of the production in South America. Although originally produced mainly in five highland departments, Peruvian production has become increasingly concentrated in the Upper Huallaga Valley, located some 379 kilometers northeast of Lima. Peasant growers, some 70,000 in the valley alone, are estimated to receive upwards of US$240 million annually for their crop from traffickers--mainly Colombians who oversee the processing, transportation, and smuggling operations to foreign countries, b49principapally the United States.

After the cultivation of coca for narcotics uses was made illegal in 1978, efforts to curtail production were intensified by the Belaúnde government, under pressure from the United States. Attempts were made to substitute other cash crops while police units sought to eradicate the plant. This tactic only served to alienate the growers and to set the stage for the spread of the SL movement into the area in 1983-84 as erstwhile defenders of the growers. By 1985 the SL had become an armed presence in the region, defending the growers not only from the state, but also from the extortionist tactics of the traffickers. The SL, however, became one of the wealthiest guerrilla movements in modern history by collecting an estimated US$30 million in "taxes" from Colombian traffickers who controlled the drug trade.

As the guerrilla war raged on and with the economy in disarray, Belaúnde had little to show at the end of his term, except perhaps the reinstitution of the democratic process. During his term, political parties had reemerged across the entire political spectrum and vigorously competed to represent their various constituencies. With all his problems, Belaúnde had also managed to maintain press and other freedoms (marred, however, by increasing human rights violations) and to observe the parliamentary process. In 1985 he managed to complete his elected term, only the second time that this had happened in forty years.

After presiding over a free election, Belaúnde turned the presidency over to populist Alan García Pérez of APRA who had swept to victory with 48 percent of the vote. Belaúnde's own party went down to a resounding defeat with only 6 percent of the vote, while the Marxist United Left (Izquierda Unida--IU) received 23 percent. The elections revealed a decided swing to the left by the Peruvian electorate. For APRA García's victory was the culmination of more than half a century of political travail and struggle.

Data as of September 1992