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ECONOMIC AND SOCIAL REFORMS UNDER JUAN VELASCO

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ECONOMICAND SOCIAL REFORMS UNDER JUAN VELASCO

Theimportance of the comprehension of the history of any country cannotbe gainsaid as far as understanding the current position and thefuture of the nation is concerned. Needless to say, every country inthe entire globe has undergone fundamental stages that have shapedits status and influenced the manner in which it is seen. Revolutionsand reforms are, in most cases, the key determinant of the coursethat any country takes. These revolutions are, more often than not,driven by particular people usually leaders, of course, after beingpushed by the lower classes of people. This is the case for Peru, aLatin American country whose economy has been historically founded onits geographical conditions such as the varied climate zones thatfacilitate widespread agriculture. While there may be quite a numberof fundamental changes in the Peruvian economy, the coming to powerby Juan Velasco Alvarado in 1968 may have marked one of the mostcrucial steps for the countryi.Velasco came to power after the first elected government of Belaunde, which stayed from 1963 to 1968 and which had been supported andmade possible by the military during its junta from 1962 to 1963faltered in its efforts to reform the economy and mismanaged thenationalization of the International Petroleum Company (IPC). Indeed,this set the stage for the coup in October 3rd1968 by the military with the immense support of the peasants. For alarge proportion of the twelve-year rule by the military underGeneral Juan Velasco Alvarado Peru experienced fundamental reforms inits economy. Scholars have noted that the FF.AA, led by the armedforces, evolved into agents of state expansion and change on thebasis of a concept of security that have been steadily developedii.This concept defined the national defense on the basis of nationaldevelopment. However, questions emerge on whether the economic andsocial reforms that Juan Velasco Alvarado propagated were any good tothe country. While there may be varied opinions in this regard, it isevident that&nbspJuan Velasco Alvarado’s innovative economic andsocial reforms strengthened Peru’s independent state bothnationally and internationally.

WhatReforms did Juan Velasco Alvarado’s Government Introduce?

Velascoheld the belief that fundamental results were a necessity in Peru. Hewas afraid that if such reforms did not come by peaceful means, thefrustrated and impoverished masses may support a Marxist (andviolent) revolution, which the armed forces dreaded. In essence, whena reform program that President Fernando Terry had proposed wasblocked by the congress, Velasco could no longer respect the civilianpoliticians in Peruiii.The controversial agreement between the president and IPC in August1968 made the president extremely weak and gave Velasco anopportunity to launch his attack. He, alongside eight likemindedcolonels and generals ousted Terry. He obtained popular supportthrough seizing IPC’s properties and nationalizing other businessesin North America.

In1969, Velasco’s government kicked off varied fundamental reformsthat were aimed at creating a society that was neither communist norcapitalist. In June 1969, Velasco announced an agrarian reform thateliminated large private estates that had controlled the countrysidefor centuries. These properties were transferred by the militarygovernment to cooperatives owned by plantation workers, individualland-poor farmers and peasant communities. In addition, the militaryregime nationalized the railroads, public utilities, banking system,crucial fishmeal industry, as well as the country’s iron and coppermines. On the same note, the government closely controlled theforeign investors with a number of basic industries being placedunder state monopolyiv.Other reforms involved the assumption of control over the country’sinternational trade by the state, which also financed a large numberof the enterprises.

Velasco’sgovernment’s reforms also extended to the social realm where theregime undertook immense expansion of the national pension programand school system, offered low-cost medication to the poor, and tookelectricity and water to the squatter shantytowns that surroundedLimav.On the same note, the regime fostered equality of women and gaveQuechua language by the Indians in Peru an equal status to Spanish asthe national languagevi.Further, the regime established profit-sharing in every other keyindustry and even tried to institute worker-managed enterprises.

Effectsof these reforms

Oneof the key effects of the reforms by the Velasco’s government wasto avert the possibility of a peasant revolt. This was especiallyconsidering that the emotive nature of the land issue in the country.Scholars have noted that one of the most strikingly radical elementsof the new laws revolved around the boldness of the government intackling the hitherto influential and untouchable sugar estates.Prior to the 1969 Agrarian reforms, more than 80% of the arable landin the coast was under the ownership of 1.7% of property owners. Thisland was under the control of a hacienda system that split thepeasants into comuneros and trabajadores, all of whom relied on thehacienda’s landlords (hacendado) for seeds, political brokerage,tools and emergency loans. Trabajadores worked permanently in thehacienda and were expected to work for 150-200 days for free inexchange for restricted grazing rights in the hacienda andutilization of subsistence plotsvii.On the same note, the hacendado not only determined the crops thatwould be planted but were also entitled to 50% of the produce asrent. Trabajadores were prohibited from selling surplus crops byinstead sold it to the hacendado at prices that were way below themarket. Comuneros, who made up a large proportion of the peasantryowned land communally but undertook individual cultivation. Whilethey made up two-thirds of the area’s population, they only had10-15% of the land under their control, which was significantly lessfertile than that of the haciendas. This forced them to work in thehaciendas so as to supplement their incomeviii.However, this seemed to change after the Agrarian Reforms by theVelasco’s government, which were aimed destroying the foundation ofpower for the conventional elite in the country. Scholars have notedthat the conversion of the large haciendas into trabajadores-ownedcooperatives calmed the rural uprisings thereby averting thepossibility of civil war and setting the nation on a trajectory foreconomic development in the long-termix.As much as the reform did not solve issues pertaining tolandlessness, it played an enormous role in modernizing theagricultural sector and establishing the conditions necessary forindependent industrial development such as the creation oftechnologically-responsive and market oriented rural middle class,the conversion of former hacienda owners and oligarchies intoindustrial bourgeoisie through eliminating their connection withland, as well as the transfer of the agrarian capital to theindustrial sectorx.

Inaddition, the reforms changed the balance pertaining to the use ofland in Peru. Prior to the Agrarian Reforms, the country struggledwith immense polarization in land distribution, which had a directeffect on the patterns of land utilization that featuredunder-utilization and over-utilization of land in large and smallfarms respectively. There was a strong inverse relationship betweenthe size of farms and the proportion under cultivation. About 65% ofsmall farms was under cultivation compared to only 6% of the largefarmsxi.On the same note, small holders dedicated 72% of cultivated area tofood and temporary crops, while only 47% was devoted to temporarycrops in large farms. This resulted in stagnation of agriculturalproductivity as a result of the reduction in labor and landproductivity in small farms as a consequence of soil exhaustion anderosion, as well as decreased land productivity in large farmsemanating from under-utilization of land resources. However, thisseems to have changed after the Agrarian Reforms as the pieces ofland that were previously under-utilized despite being fertile becameoccupied by peasants who actually needed them, thereby enhancing thefood security of the country.

Oneof the most ignored effects revolves around the non-alignment of thecountry to any superpower. Once the military regime by Velasco gainedpower, it came up with reforms that were based on alignment toneither the capitalist west nor the communist eastxii.As much as a large proportion of the reforms were closer to communismthan capitalism, the non-alignment allowed the country to receive aidand assistance from any superpowerxiii.Of particular note is the fact that the reforms were taking place ata time when the United States and Soviet Union were still in the ColdWar, in which case they needed allies from any side that they could.The non-alignment of the Peruvian government reforms allowed thecountry to receive aid from Russia and the Soviet Union, whichessentially put the country on the world map.

Lastly,the education reforms had far-reaching effects on the wellbeing andstability of the Peruvian economy. The decision to establish a “basiceducation” system was a fundamental break from previousconventionsxiv.The changes were based on two factors including the general pushtowards the educational democratization, which resulted to enhancedpressure for the elimination of inequalities and provision of diverseeducational experiences that were well suited to different groups’needs including those that were socially disadvantagedxv.The “knowledge explosion” enhanced the necessity for extendingthe schooling duration and recognized that knowledge acquisition wasa continuous and lifelong process. All in all, it allowed for theaccess of education by individuals that were disadvantaged therebyenhancing economic wellbeing of the group and the country at large.

EndNotes

i Weyland, Kurt Gerhard. 2006.&nbspBounded rationality and policy diffusion social sector reform in Latin America. Princeton, N.J.: Princeton University Press.&nbsp

ii Roberts, Kenneth M. 1998.&nbspDeepening democracy?: the modern left and social movements in Chile and Peru. Stanford, Calif: Stanford Univ. Press.

iii Robert Jackson Alexander Eldon M. Parker (2007).&nbsp&nbspA history of organized labor in Peru and Ecuador. New York: Greenwood Publishing Group.

iv Sanders, Elizabeth. 1999.&nbspRoots of reform: farmers, workers, and the American state, 1877-1917. Chicago, Ill: University of Chicago Press.

v Ambinder, Marc, and D. B. Grady. 2013.&nbspDeep state: inside the government secrecy industry.

vi Ewig, Christina. 2010.&nbspSecond-wave neoliberalism: gender, race, and health sector reform in Peru. University Park, Penn: Pennsylvania State University Press.

vii Mayer, Enrique. 2009.&nbspUgly stories of the Peruvian agrarian reform. Durham: Duke University Press.

viii Christensen, Tom, and Per Lægreid. 2006.&nbspAutonomy and regulation: coping with agencies in the modern State. Cheltenham, U.K.: Edward Elgar.

ix Paz, Guadalupe, Riordan Roett, and Carol Wise. 2003.&nbspPost-stabilization politics in Latin America: competition, transition, collapse. Washington, DC: Brookings Institution Press.

x Fisher, John R., Allan J. Kuethe, and Anthony McFarlane. 1990.&nbspReform and insurrection in Bourbon New Granada and Peru. Baton Rouge: Louisiana State University Press.

xi Lora, Eduardo. 2007.&nbspThe state of state reform in Latin America. Stanford, CA: Stanford University Press.

xii Cameron, Maxwell A. 1997.&nbspThe Peruvian labyrinth: polity, society, economy. University Park, Pa: Pennsylvania State Univ. Press.

xiii Hunefeldt, Christine. 2004.&nbspA brief history of Peru. New York: Facts on File.&nbsp

xiv Giugale, Marcelo M., Vicente Fretes-Cibils, and John L. Newman. 2007.&nbspAn opportunity for a different Peru prosperous, equitable, and governable. Washington, DC: World bank.

xv Williamson, John. 1994.&nbspThe political economy of policy reform / Edit. John Williamson. Washington: Institute for international economics.

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Brooks, Richard, and John Denham. 2005.&nbspThe Politics of Pension Reform. London: Fabian Society.

Cameron, Maxwell A. 1997.&nbspThe Peruvian labyrinth: polity, society, economy. University Park, Pa: Pennsylvania State Univ. Press.

Christensen, Tom, and Per Lægreid. 2006.&nbspAutonomy and regulation: coping with agencies in the modern State. Cheltenham, U.K.: Edward Elgar.

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Fisher, John R., Allan J. Kuethe, and Anthony McFarlane. 1990.&nbspReform and insurrection in Bourbon New Granada and Peru. Baton Rouge: Louisiana State University Press.

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