ABSTRACT
This chapter analyzes the interplay between the economic and political factors and how they affected state power. It examines the conflicts that resulted from the implementation of neoliberal policies and the responses of the state. Morales' attempt to implement austerity programs, beginning soon after the 1975 coup, failed to resolve the economic problems facing the country and accentuated social conflicts. The Belaunde administration's inability to reduce social tensions or significantly ameliorate the living conditions of the popular sectors led to growing polarization. As Peru entered the late 1970s, it faced a major economic downturn and rising social conflict. The linkage between policy makers in Peru and the international financial community was very strong and gave international actors a privileged position within the decision-making circles of both the Morales and Belaunde governments. The economic crises which plagued Peru from the mid-1970s through the early 1980s significantly weakened both state organizational capabilities and leverage in the international arena.
