SALON Daily Clicks: Newsreal

the standoff between Peru's government and Tupac Amaru guerillas intensified Friday after the government refused demands that it release the guerillas' jailed comrades.

An estimated 409 hostages -- including high-ranking foreign diplomats, government officials and businessmen -- were still being held in the Japanese ambassador's residence in Lima. Negotiations mediated by the Red Cross were continuing and both sides were said to be exercising "restraint."

The seizure by the Tupac Amaru Revolutionary Movement (MRTA) was one of the more spectacular terrorist actions in Latin America in recent years. Reports today that there had been advance warnings of such an action further embarrassed the government of President Alberto Fujimori, who had boasted of defeating Peru's terrorist groups.

Who are the Tupac Amaru guerillas? How big a threat do they present to Peru? And what is the likely outcome of the hostage drama? Salon spoke to Peruvian-born Carol Graham, a specialist on Peru at the Brookings Institution in Washington D.C.

President Fujimori was supposed to have broken the back of the guerrillas in Peru. This action seems to suggest they are still a major threat.

Despite the spectacular nature of this hostage drama, we shouldn't overestimate the strength of the MRTA guerrillas. They were never a particular threat, and they're still not. Yes, they're capable of wild and flashy stunts, but they have no broad social backing.

How big is the MRTA?

They're small in number, around 1,000 altogether. They're much less fanatical and dedicated than the Shining Path were.

But clearly they still pack a punch.

The reason why everybody thought the guerrillas' back was broken was because both the head of MRTA and the head of Shining Path are in jail. But both groups, in the years since the 1992 capture of [Shining Path leader Abimael] Guzman, have launched some sporadic attacks. In the past year there have even been some Shining Path attacks in Lima itself. And the conditions for a guerrilla movement still exist in Peru.

The economy was supposed to be getting better.

Yes, but there are very high levels of poverty. After years of economic crisis, there is now a growth boom, but it's still fairly concentrated in fisheries, mining and now some construction. It's not broadly shared growth.

Even though unemployment, officially, is way down?

Open unemployment is about seven percent, but underemployment, which means you work 15 hours a day selling matches on the street, is about 75 percent. The average monthly wage is about $150. And Peru has become pretty expensive, now that they've stabilized their currency.

Classic conditions for a guerilla movement to thrive.

But the average Peruvian is not particularly interested in joining a guerrilla movement. What most Peruvians say they need most is education. It's a very entrepreneurial and hard-working society. Everyone assumes that the poor want to join a guerrilla movement, but I did a fair amount of work in Peru at the time when the Shining Path was stronger, and I can tell you that the poor are the ones who suffer most from the guerrilla movements. Why? Because the government pulls out of their areas and they're left on their own. What you're seeing now certainly makes big headlines, but this does not mean that the average guy on the street in Lima is happy about it.

Given President Fujimori's efforts to stabilize Peru politically and economically and to attract foreign investment, how big a setback is this hostage situation for him?

It's not a great setback. The people who are now investing in Peru -- in its recently privatized businesses, in mining, fisheries, oil production and agricultural exports -- know very well the risks of investing in an emerging market. They're also aware that there is a high potential for big profits. I don't think many of them will pull out because of this.

The other thing is that in the region, these kinds of big, splashy events have happened before. Not to seem glib about it, but the guerrillas haven't killed anybody, have they? If Shining Path had done this, everybody would be dead by now, including the guerrillas. These MRTA guys are not eager to kill themselves. It's a very different dynamic.

Is it possible to predict how this hostage drama might be resolved?

I see two possible scenarios. The first is that the negotiations drag out, and there is some kind of negotiated solution that is far short of the government releasing all the MRTA prisoners. There's no way they are going to do that, I can assure you.

Why not?

Because Fujimori has a lot more to lose, both internationally and domestically and in terms of investment, by appearing soft on terrorism than he does if a few people get killed. But some sort of negotiated solution short of that, maybe.

And the other scenario?

The second scenario is the guerrillas kill one or two people, at which point the army and police will move in and there will be bloodshed. Then there's always the possibility of a third scenario, which no one can anticipate. Either the whole place blows up or the guerrilla give up and walk out.

Of the three scenarios, which would be the best for President Fujimori?

The second. I have some good friends that are being held hostage, so that's not one I'm hoping for, but I think that's the harsh reality.