New Peru leader takes office today

 BY KEVIN G. HALL
 Herald World Staff

 LIMA, Peru -- Last July 28, Alejandro Toledo donned a gas mask, put his life on the line and marched into street chaos. Peru's capital was ablaze in protest of President Alberto Fujimori's third inauguration after an election opposition supporters said was rigged.

 One year to the day later, Toledo will don the presidential sash as the first elected Indian-blood president of an Andean nation, after Fujimori resigned and left the country last fall. ``What we said in the campaign is true. After 500 years, a person of this ethnicity is elected to lead the destiny of Peru,'' Toledo said at a news conference this week.

 But Toledo may soon discover that, while bringing down a corrupt government was difficult, building a new Peru is likely to be harder. The economy has stagnated for four years, almost half the country lives in poverty and nearly every government institution suffers from serious corruption.

 An interim government has brought government spending under control. ``We are starting out, in financial terms, with a good slate,'' said Pedro Pablo Kuczynski, Toledo's pick as economy minister. ``The real thing we now need is to create employment.''

 A Stanford-educated economist, Harvard lecturer and former World Bank consultant, Toledo, 55, is an unknown quantity in government. He has never managed anything more complicated than a classroom. In campaigning, he proved to be loose with the truth and to have an ability to inspire affection in some and hatred in others. Diplomats privately call his frequent changes of position maddening.

 ``We still don't know what the sash is going to do to him when he puts it on and where he is going to go. His reactions have not been tested,'' said a U.S. official familiar with Peru, who spoke on condition of anonymity.

 The United States hopes Toledo will continue his predecessor's close relationship on anti-drug efforts. In the 1990s, Peru was a regional leader in thwarting cultivation of coca, the plant from which cocaine is made. Its success effectively pushed coca cultivation next door to Colombia.

 But with more than $1.3 billion in U.S. military aid already spent on Plan Colombia to combat drugs there, fears are that drug traffickers will be pushed back into Peru unless the government has a plan and takes a tough stance.

 During his campaign, Toledo told American journalists that he supports U.S. anti-drug efforts.

 But he told Peruvian farmers that growing coca did not make them criminals, a message U.S. officials thought was at odds with the high-profile goals to eradicate coca Washington was promoting.

 ``He must understand that the drug theme is a fundamental theme of our foreign policy and relations with the United States,'' said Hugo Cabieses, a Peruvian drug policy expert.

 The chaos in the command structure of Peru's military, which plays a lead role in the drug war, poses another problem for relations. Four heads of branches of the armed forces are in jail, facing corruption and drug charges. Numerous other top military officials also face charges.

 Immediately after his election, Toledo took a conciliatory tone toward the military, a powerful institution with a history of meddling in Peru's politics. Military analyst
 Enrique Obando said Toledo understands that it is easier to change the armed forces if he has their help.

 ``The first challenge is to create a system of control over the armed forces,'' Obando said, adding that campaign promises to cut military spending may prove difficult, since Peru's caretaker government already cut military spending by 20 percent.

 The most immediate challenge for Toledo is quickly making a difference in the pocketbooks of the poor and disenfranchised. About 49 percent of Peru's 26 million people live below the poverty line, and 15 percent of them earn less than $1 a day.

 Because Toledo campaigned with pride as a cholo, or mixed-Indian blood Peruvian, the simple fact that he looks like them has furthered already enormous expectations.

 ``I think anything he does will fall short of expectations,'' said Elmer Cubas, a political and economic analyst in Lima. Toledo will have to compensate for the lack of
 immediate gains by emphasizing symbolic gestures that show the large mixed-race masses he has their interests at heart, Cubas said.

 Kuczynski said the incoming government will immediately seek emergency measures from the legislature to raise corporate taxes to international levels, and to offset
 those new taxes with cuts in taxes on sales and wages to spur consumption.

 Kuczynski will propose a mortgage-guarantee system like that used by the U.S. Federal Housing Administration to boost the construction sector and create jobs.

 Peru also will seek to reschedule payment of its $2 billion in foreign debt, he said.

                                    © 2001 The Miami Herald