In Peru, hard-won economic and political freedom is in jeopardy from foreign interests bankrolled by Venezuela. Although Venezuela's immense oil wealth should belong to all Venezuelans, their far left, neo-populist, and authoritarian President Hugo Chavez is siphoning off much of it to enhance his own political power and spread his toxic "21st Century Bolivarian Socialism" throughout the Andean region.[1] Chavez has been aided in this effort by Bolivian president and populist soul mate Evo Morales. Together, they are busy establishing "ALBA houses" (Casas de ALBA) in the poorest areas of rural Peru in an attempt to chip away at market-based democracy and destabilize the center-left government of Peruvian president Alan Garcia. The Chavistas hope to set the stage for a far-left victory in Peru in the 2011 presidential election.

ALBA is the Spanish acronym for Chavez's vaguely defined "Bolivarian Alternative for the Americas" cus­toms union scheme. It is the vehicle Chavez is using to try to undermine the globalized trading system that would be enhanced by the U.S.-led efforts to create a Free Trade Area of the Americas (FTAA). The ALBA houses are the Peruvian version of Chavez's "Bolivarian Circles" in Venezuela and Morales's "Militias" in Bolivia,[2] both of which were established to create potential parallel government-like structures that could be used to destabilize existing decentralized democratic mech­anisms and construct new hierarchic and autocratic political regimes. Sandinista president Daniel Ortega, who returned to power in Nicaragua in 2006 with finan­cial help from Chavez, is following suit in Nicaragua.[3]

Alba means "dawn" in Spanish, but the people of rural Peru are learning that, for them, it might mean a return to the dark nights of tyranny they experi­enced in the 1980s when guerilla groups such as the Maoist Sendero Luminoso (Shining Path) and the Communist Tupac Amaru Revolutionary Movement (MRTA) terrorized the Peruvian countryside.[4] The Bolivarians intend for ALBA houses to be the next generation of engines for revolutionary change in the 21st century. Unlike the FARC (Revolutionary Armed Forces of Colombia) guerillas of the 20th century, who have attacked the institutions of Colombia's democracy from their bases in the mountains for the last 40 years, the ALBA houses are right in the middle of cities and towns. Their activists undermine democracy from within (as Chavez and Morales have already demonstrated) by taking power through democratic elections and then methodically changing laws to subvert it. ALBA houses are potentially even more destructive and dangerous than the FARC.

Attack of the Carnivores

In their recent book, The Return of the Idiot,[5] Plinio Apuleyo Mendoza, Carlos Alberto Montaner, and Alvaro Vargas Llosa describe the backward slide to socialism in Venezuela, Bolivia, and other Latin American countries. They divide the new wave of leftists into two camps: "vegetarians" and "carni­vores." The vegetarians are democratic socialists such as Presidents Garcia, Michele Bachelet of Chile, and Luiz Inacio Lula da Silva of Brazil. These leaders have demonstrated through their policies and actions that they see the many benefits of capi­talism and know that the best way to develop their countries economically is to take advantage of the global market system to create good and sustainable private-sector jobs for their citizens. Although the vegetarians lean toward excessive regulation, rigid labor markets, and bloated bureaucracies, they do not pose a fundamental threat to market-based democracy or to the United States and its allies.

On the other hand, some Latin countries are now ruled (yet again) by despotic leftist and popu­list caudillos (strongmen). Totalitarian dictators Fidel and Raul Castro of Cuba and the resurgent Daniel Ortega have been joined by younger "carni­vores," such as Chavez and Morales, as well as former President Néstor Kirchner and his wife, cur­rent President Cristina Fernandez de Kirchner, of Argentina. All of these leaders (to varying degrees) oppose the "hegemonic" United States and appear determined to tear apart market-based democratic capitalism and anyone who stands in their way. In place of the "neo-liberalism" they despise, the car­nivores would substitute "neo-communism" or "authoritarian fascism."

Bolivarians of the World, Unite!

With the support of his Bolivarian network and flush with oil cash, Hugo Chavez aims to extend his influence in the Andean region. The main obstacles he faces are the democratic governments in Peru and Colombia, and it is upon them that he has targeted his rhetorical fire and propaganda efforts. Chavez is recruiting the most dangerous activists and fighters he can find in southern Peru and aims to use them and the ALBA houses to sabotage democratic institu­tions so that he can advance the idea that democracy in Peru is not working. Once this is accomplished, Chavez and his Bolivarians will try to bring the extremists to power through the ballot box.

Unlike his economic model, which has been a disaster for Venezuela, Chavez's political strategy is already a proven winner. It is how the Chavistas suc­ceeded in engineering the fall (through the "Gas Wars") of the democratically elected governments of former Bolivian Presidents Gonzalo Sánchez de Loz­ada and Carlos Mesa[6] after inciting violent protests in what amounted to two coups d'état in 2003 and 2005 that paved the way for Evo Morales to win the election as president of Bolivia in December 2005.[7]

Chavez's "Bolivarian" movement has followed a well-planned strategy with simple objectives. "Pet­roCaribe" was the first Bolivarian project, using offi­cial Venezuelan government "oil diplomacy" through discounted oil shipments to Caribbean and Central American countries to win friends and influence people.[8] Then he began a series of bond purchases (more than $7 billion to date) to bail out his fellow populists--Peronist Presidents Nestor and Cristina Kirchner--as they face growing prob­lems stemming from their mismanagement of the heavily indebted economy of Argentina.[9] Chavez has also supplied financial aid for energy projects in Ecuador and Nicaragua.[10]

Chavez enjoyed a quick political payoff from these "investments" (at least initially) during the March 2008 Colombia-Ecuador border crisis. The Colombian military attacked a FARC guerilla base just across Colombia's border with Ecuador, result­ing in the killing of the FARC's No. 2 leader Raul Reyes and the seizure of valuable intelligence on three FARC laptops. They showed significant and ongoing connections and funding between the FARC and Hugo Chavez. At an emergency meeting of the Organization of American States (OAS) to resolve the crisis, however, the vast majority of democratically elected Latin American governments remained disappointingly silent rather than con­demning Hugo Chavez's support for the FARC's efforts to defeat President Alvaro Uribe's democratic government in Colombia.[11]

The Peruvian Economy is Strong----at the Macro Level

President Alan Garcia's first term as president in the 1980s ended in disaster for Peru's economy when he pursued leftist and statist policies. Although the trade liberalization begun under President Alberto Fujimori (1990-2000) helped to reduce poverty, as of 2004, the World Bank estimated that half of all Peruvians remained poor and "20 percent were extremely poor."[12]  The "poorest departments [provinces] in Peru are [in the south]: Huancavelica (88.7 percent poverty rate), Ayacucho (78.4 percent), Puno (76.3 percent), Apurímac (74.8 percent), Huánuco (74.6 percent), Pasco (71.2 percent), Loreto (66.3 percent), and Cajamarca (63.8 percent)."[13]

Sound economic management under former Peruvian President Alejandro Toledo (2001-2006) resulted in annual real economic growth of nearly 5 percent from 2002 to 2004. Garcia later saw the error of his ways, committed himself to market-based policies, and narrowly defeated Chavista Ollanta Humala to win a second five-year term in 2006.[14] He has continued most of Toledo's eco­nomic policies but, facing a congress dominated by the opposition populist party, has not deepened the reforms. Nevertheless, economic growth has been impressive in recent years, aided by the huge increase in commodity prices for Peru's rich min­eral resources.

Peru's economy received a score of 63.5 in the 2008 Index of Economic Freedom, published by The Heritage Foundation and The Wall Street Journal, which ranks it the 55th freest economy out of 162 countries surveyed. Peru's score reflects improve­ments in 2007 under the Garcia administration in five of the 10 economic freedoms. Peru is ranked 13th out of 29 countries in the Americas, and its overall score is higher than the regional average.[15] Inflation is also low, and prices are not significantly influenced by the state. Privatization is moving for­ward, particularly in infrastructure.

President Garcia advocated successfully for rati­fication of the U.S.-Peru Free Trade Agreement (FTA) by both the Peruvian and U.S. congresses and has painted himself as the market-friendly alterna­tive to Chavez in the Andes. Eric Farnsworth of the Council of the Americas has reported that, thanks to Peru's FTA with the United States, its sovereign debt has recently been upgraded to investment grade.[16] This will make it easier and less expensive for Peru to borrow from lenders in developed countries and invest to upgrade its infrastructure. Foreign direct investment in Peru also rose with the FTA.

Massive Improvements in Rural Peru's Infrastructure Needed----Fast

Peru continues to face significant economic chal­lenges, particularly in labor freedom, property rights, and freedom from corruption. The Peruvian judicial system is slow, unpredictable, and vulnera­ble to fraud. Economic development is impeded by a restrictive labor market that regulates costly employee dismissal procedures and inflexible work­ing hours.

These problems are magnified in the less densely populated, poorer regions of Peru, mainly in the high Andes and the southeast, where the majority of people (if employed at all) work in the informal sec­tor. The structural flaws in the Peruvian economy are especially aggravated by the need for extensive development in rural areas. Some facts about current infrastructure needs in Peru illustrate this point:

• 78 percent of cities, towns, and villages in Peru currently have at least some electricity. That figure includes the 208 rural towns that have been elec­trified since President Garcia took office in 2006. Garcia's goal is to deliver electricity to 6,000 more rural towns and villages by the end of his term in 2011, thus providing access to electricity to more than 90 percent of Peruvians.[17]
• Across Peru, 68 percent of children from ages three to five are in school, and nearly all children are in primary school. However, by the time they reach secondary school age the rate drops to 72 percent.[18] The literacy rate of the whole popula­tion is 87.7 percent;[19] among youth it is 97.8 percent.[20] Girls are educated at the same rate as boys,[21] but female literacy trails behind.[22] His­torically, decisions by the government on where to construct new education facilities have been strongly skewed toward Lima and a few other large cities, so it is likely that literacy statistics for rural Peru are far lower than the national average.
• According to U.N. and World Bank statistics, in 2004 only 13 percent of Peru's roads were paved.[23] President Garcia is devoting 90 percent of the budget of the Ministry of Transport and Com­munication in 2008 to road construction. Every day, an additional 2.8 kilometers are paved.[24]
• Among Peru's population of 28.2 million people, about 70 percent live in urban areas and 30 per­cent in rural areas.[25] Nationwide, 83 percent of the population has access to potable water; sew­erage coverage is 63 percent. In the rural areas, however, potable water coverage is only about 62 percent and less than one in three rural Peruvi­ans has access to sewerage.[26] According to the World Bank, "Peru's famously high levels of infant mortality are concentrated among the poor...two-thirds of infant deaths occur in the 40 percent poorest households."[27]
• In Peru there is approximately one doctor for every 1,200 people and there are just 5,768 obstetricians in the entire country to serve more than 11 million women. The United States has 2.4 doctors per 1,000 persons and the training U.S. health professionals receive is significantly more extensive.[28] There is only one dentist for every 10,000 Peruvians versus 16 per 10,000 in the U.S.[29]
• Peru has 1.8 hospital beds per 1,000 citizens[30] (3.6 per 1,000 people in the U.S.),[31] 1,448 health care centers, and 5,548 smaller health care clinics. Availability of health care profes­sionals and health care facilities is strongly skewed toward Lima and a few other large cities, indicating that statistics for rural Peru are far worse. Annual spending in Peru on health care equals 4.4 percent of gross domes­tic product (GDP)[32] (15.3 percent of GDP in the U.S.).[33]

Unless these problems are ad­dressed, and quickly, poorer Peru­vians (particularly in the south) may be tempted by the false promises of 21st-century Bolivarian Socialism.

ALBA Houses: Breeding Ground for 21st-Century Caudillos?

The latest front opened in Chavez's Bolivarian struggle against democratic capitalism is the estab­lishment of the ALBA houses. On the surface, they appear to be simply benevolent local associations offering literacy pro­grams and delivering health care with Chavez-paid, Castro-supplied Cuban doctors. Local Peruvian Chavistas who operate the ALBA houses claim that they are merely engaged in charity work and point to the 5,000 impoverished Peruvians they have sent to Venezuela for eye surgery.[34]

What the ALBA house landlords fail to mention is that, at the same time, they are indoctrinating poor, mostly young Peruvians in the ideology of the extreme left and terrorism. The Cuban doctors fre­quently operate as Cuban intelligence officers. Although the Chavez government insists that it is not supporting the ALBA houses, Peruvian officials have said that Chavez's financial support for the houses is being funneled through Bolivia. In the Bolivian capital of La Paz, Chavistas are building a large "Bolivarian Common Embassy." There they have assembled a group of young Peruvians from the main cities in the south (Cuzco, Puno, and Tacna) to receive indoctrination and military train­ing. They have made no secret of it: Its address is 107-109 Costanerita Avenue in the Obraje neigh­borhood of La Paz.[35]

The unimaginative and retrograde collectivist socialist models aggressively peddled by Chavez, Morales, and others are proven failures, but getting the positive message of prosperity through market-based democracy to the poor in rural Peru is in­creasingly difficult when that message is drowned out by the well-funded ALBA houses. In order to counter ALBA propaganda, the question is: How can the gains that Peru has realized (mainly in Lima and the other large cities) be translated into better living standards and infrastructure improve­ments that poor people in rural Peru can see and experience?

President Garcia says that there are 200 ALBA houses operating in Peru, most of which are located in the mountainous southern highlands region where the majority of the pop­ulation is indigenous.[36] The Peru­vian congress is currently conducting an investigation to determine the extent of political interference com­ing from ALBA, but personnel at Andes Libres (a conservative think tank based in the highland town of Cuzco near Machu Pichu) do not need the congress to tell them how much trouble ALBA is causing; they live with it every day.

The View from Cuzco

There are numerous ALBA houses operating in Cuzco. Mimicking the modus operandi of the FARC's "boy soldiers" in Colombia,[37] ALBA houses recruit and subsequently exploit "poor, uneducated children and young adults,"[38] recruiting them for ideological indoctrination. To offset the inroads being made among these poor citizens, the Peruvian govern­ment and supporters of market-based democracy must take the ideologi­cal fight to the same people being re­cruited by ALBA. This is a war of ideas, and groups such as Andes Libres are engaged in the battle on the ground every day--promoting free trade and free market principles among the rural population.

To reach the young people tar­geted by ALBA, Andes Libres and other conservative groups in Peru conduct programs to offset leftist indoctrination and teach local high school and university students through courses in economics, polit­ical science, law, health care systems, education policy, and environmental issues from a pro-democracy and free-market view­point. They also organize workshops, seminars, and forums to develop future leaders who are already in the workforce. The groups also seek to strengthen the financial systems of the local governments by advocating for more local control of tax revenues and they track the positions taken by local officials and politicians on local issues so that they can inform the citizenry to widen the public policy debate.[39]

Political Opponents on the Ground

With their free-market, pro-democracy mes­sage, Andes Libres and the other center-right groups in Peru encounter strong opposition from the Chavistas, particularly when they have an espe­cially popular program. The ALBA houses are just one of the very visible parts of the international left­ist network, known as the "Sao Paulo Forum,"[40] that opposes market-based development in Peru and the entire Andean region. These leftist groups are supported not only by the Venezuelan govern­ment, but also by powerful international non-gov­ernmental organizations (NGOs), a fact that was underscored by the recent rescue of FARC hostages in Colombia. As Mary Anastasia O'Grady of The Wall Street Journal has noted, when Colombian mil­itary personnel posed as representatives of a ficti­tious leftist NGO in order to trick the FARC into releasing their hostages, FARC guerillas had not been the least bit suspicious. That indicates that the FARC has had friendly dealings with international leftist NGOs in the past.[41]

ALBA houses and leftist NGOs organize many protests against the government, private corpora­tions (especially international mining companies hoping to extract Peru's rich mineral resources), and other potential foreign investors. Their advertise­ments for protests appear in local newspapers, TV and radio programs, and through news reports of leftist politicians spreading outright lies and exhort­ing people to oppose Peru's democratic system.[42]

In many poor communities throughout rural Peru, the radio is the only means of receiving infor­mation and is, therefore, an important resource for reaching the poorest Peruvians in the battle of ideas. Hernan Fuentes, the leftist governor of Puno province on the border with Bolivia, "gained prominence locally...[through a radio show where his] on-air perorations feature[d] anti-U.S. tirades and bouquets for Chavez and Morales."[43] To reach the poor, the broadcasts must be presented in Que­chua (the indigenous language). Conservative think tanks and NGOs working in those communities could do broadcasts in Quechua if they received additional funding.

More Protests and Disruptions Planned

In addition to local protests, the left also orga­nizes protests nationwide. The next big national pro­test is set for November 2008 when the Peruvian government will host the annual summit meeting of member nations of the Asia-Pacific Economic Coop­eration (APEC) Forum.  To "staff-up" for the APEC demonstrations and the planned national protests in 2009, the Chavistas aim to establish additional ALBA houses. "They [the ALBA houses] are beachheads for ideological indoctrination of people of low incomes, driving the message that their situation has not improved despite recent economic growth," says Peruvian Defense Minister Antero Florez.[44]

At least five of the principal Peruvian Chavista leaders who are affiliated with leftist groups in Peru and are planning future national protests traveled to Bolivia in 2007 and 2008. Miguel Palacin, a top offi­cial at the Cordinadora Indigena de Naciones Andi­nas (CAOI--a leftist group that purports to speak for poor indigenous Peruvians) and former presi­dent of the anti-mining NGO "Conacami," traveled to Bolivia three times in the last 12 months. Mario Palacios, current president of Conacami, was also in Bolivia three times in the first four months of 2008. Antolin Huascar, president of the Agricultural National Confederation, was in Bolivia in January 2008 and also visited Venezuela (August 6, 2007) and Cuba (April 10, 2008). Alberto Pizango, an offi­cial with the Interethnic Association of Develop­ment of the Peruvian Jungle, arrived in Bolivia on August 20, 2008, where he stayed three days. Melchor Lima, General Secretary of the Peasant Confederation of Peru, also made the pilgrimage to Bolivia.[45] All of these leftist Peruvian officials are closely identified with the ALBA houses network.[46]

Neighboring Governments Should Support President Garcia

While watching from the sidelines as the Venezu­elan government interferes in domestic Peruvian politics, Brazil and Chile have inexcusably main­tained impartiality to avoid conflict with Chavez and to stay close to the principles of Chilean and Brazilian leftist parties that see Hugo Chavez as a member of their ideological family. These govern­ments, however, have a higher responsibility to pro­mote democratic institutions and should come to the aid of Peru.

In addition to the threat they pose to the stability of Peru and the Andean region, the ALBA houses and the Bolivarian movements are also, in the wid­est sense, part of a campaign by the Chavistas to reduce U.S. influence in Latin America. In Ayacu­cho--one of the poorest cities in Peru--the U.S. government is helping to build health care facilities. But ALBA and other leftist groups are spreading lies about the project, claiming that the facilities are not really being built with U.S. funding, but instead with ALBA money. They are also propagating other lies (e.g., that the U.S. is trying to take the water from the poor "to fight global warming").[47] This agitprop is reminiscent of the old Soviet disinforma­tion "baby parts" rumor-mongering[48] scare tactics that the international left has used in the past against U.S. interests in Central America and other parts of the world. The U.S. government should redouble its efforts to counter these ongoing leftist propaganda attacks.

What Should Be Done?

How can the poorest Peruvians recognize the benefits of continued strong economic growth in Peru? How can they be taught to appreciate the value of market-based democracy? How can they begin to see it working for them?

In order to confront the challenges posed by the ALBA houses and to reduce the appeal of Chavista demagoguery, the Peruvian government should:

• Ramp up efforts to reach the rural poor in iso­lated highland areas by focusing funding on road construction, health care, and education facilities, as well as improving other infra­structure in those areas to draw the people of southern Peru into the formal economy and democratic systems.
• Unleash the entrepreneurial spirit in poor com­munities by reforming and making transparent procedures to assure property rights and land titling as well as reforming rigid labor laws in order that small and medium-sized companies can become more competitive.
• Continue governmental public relations efforts to establish in the public's mind the link between the ongoing anti-democratic protests and the Chavista ALBA houses and leftist NGOs (as President Uribe has carried out in Colom­bia). The Peruvian foreign ministry should denounce the interventionism in domestic Peruvian affairs by the governments of Bolivia and Venezuela.
• Prosecute offenders to the fullest extent of the law if the current investigation by the Peruvian Congress proves a connection between the Chavez/Morales-funded ALBA houses and potentially violent protests in Peru.

The international community of pro-market democracies should also come to the aid of Peru. Specifically,

The Chilean, Brazilian, and Colombian govern­ments should publicly and clearly affirm Peru­vian democracy and expand their countries' trade links with Peru.

The Bush Administration, through the U.S. embassy in Lima, should aggressively counter ALBA propaganda and disinformation, as well as expand other public diplomacy efforts to com­plement ongoing U.S. development assistance projects in Peru.

To encourage continued economic progress and stability in Colombia, which would directly ben­efit Peru, the U.S. Congress must approve the U.S.-Colombia Free Trade Agreement (FTA).

James M. Roberts is Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics (CITE) at The Heritage Founda­tion, and Edwar Enrique Escalante is the Executive Director of ANDES LIBRES in Cuzco, Peru. CITE Re­search Assistant Caroline Walsh and Intern Alexandra Canulli made valuable contributions to this report.