Danielle Garcia

Eco 357L

“State of Emergency in Peru Shows Costs of Austerity Policy,” Wall Street Journal, June 11, 1984

Summary:

Peru’s declaration of a state of emergency is yet another case of the political cost endured by Latin American countries that impose IMF austerity measures. The Peruvian government has striven to comply with the austerity policies of the IMF at the expense of unpopular measures designed to control a civil servants strike. The inflation-adjusted wages of civil servants has been depressed to one-third of their 1978 levels as a result of IMF policies. More than 80% of the nation’s civil servants walked off their jobs in an attempt to restore lost buying power and to demand a 150% increase their monthly salaries.

Before the decree, Prime Minister Sandro Mariategui had ruled out any immediate wage increases until the country’s tax revenue had been evaluated. Peru expects to meet all IMF economic targets for June and July unless U.S. interest rates rise again, at which point Peru would need more commercial bank loans.