June 17, 2002

Southern Peru still tense, more protests

AREQUIPA, Peru (Reuters) --Police fired tear gas on Monday to try to disperse
hundreds of residents of Peru's second city, Arequipa, who staged a fifth day of
protests against the privatization of two power generating firms.

The government sent 1,700 police and soldiers in to secure the city, which is under
a state of emergency and an overnight curfew after clashes that killed one man and
injured 122.

Witnesses said police had used clouds of gas to break up crowds all morning, but
clusters of protesters remained in the city center and soldiers patrolled the outskirts
to keep order.

Officials said 10 people were hurt on Monday, and seven were reported arrested.
Protests looked set to continue as mayors planned strikes across southern Peru for

The protests against Friday's sale of Egasa and Egesur, based in the southern
departments of Arequipa and Tacna, are the biggest challenge to President Alejandro
Toledo since he took office 11 months ago.

Residents say the already deeply unpopular Toledo lied by privatizing the power
generators despite signing a pledge not to sell while campaigning for last year's

They fear higher bills and job losses filtering down to them from the $167.4 million
sale to Belgium's Tractebel, a unit of French utility Suez.

"This is a deception on the part of Mr Toledo. He treats us as if we were ignorant,"
said Arequipa resident Luis Huaranga.

Meanwhile, there were clashes all morning in the town of Tacna, near the border
with Chile, which briefly shut the airport. Hundreds of vandals wrecked phone
booths and smashed windows of banks and official buildings and two police officers
were hurt and 30 people were arrested, authorities said.

"It's very urgent for Tacna that the state of emergency is declared here [too],"
Wilson Mazuelos, the prefect or central government representative in Tacna, told

In Arequipa, locals banged pots and pans for an hour at lunchtime -- a traditional
Latin American peaceful protest.

Privatizations are a key plank of the cash-strapped government's economic policy,
vital to plug the deficit and fund infrastructure projects that Toledo has promised in a
country where half the people live on $1.25 a day or less. The government is seeking
up to $800 million this year from sales.

Government ministers say the protests will only worsen poverty by scaring away
investors and tourists, for whom Arequipa's colonial architecture, snow-capped El
Misti volcano and nearby Colca Canyon are big lures. Scores of tourists were

stranded after vandals wrecked landing lights at Arequipa airport at the weekend, but
daytime flights resumed on Monday.

Peru's sol currency eased slightly but bonds in New York were little changed in thin
trade. "The important thing is that they finally got the privatization through," said
Siobhan Manning, Latin America debt strategist at bank Caboto.

Officials said there would be no backtracking on the sale. Meanwhile, the cabinet
met in Lima to discuss the situation.

Officials said a man hit in the head by a tear gas canister had become the first death
since protests flared on Thursday.

Toledo said on Sunday night that vandals had caused $100 million worth of damage
in Arequipa, which, together with Tacna, was severely hit by a huge earthquake a
year ago.

From Lima, Tacna Mayor Luis Torres told RPP radio mayors from southern Peru
would go to Arequipa on Wednesday "to demand revision [of the sale]...or things
will get more difficult."

In a message to the nation on Sunday, Toledo made no mention of his vow not to
sell Egasa and Egesur, but scolded opponents, saying the sales meant Peru could
spend $85 million this year on road, electricity, education and health projects.

All that would translate into giving 60,000 people electricity and creating 5,000 new
jobs in Arequipa, he added.

Toledo admits he has failed to explain the merits of privatization to a public wary
after ex-President Alberto Fujimori raised $9 billion but much of the cash was

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