Pressure is increasing on Peruvian President Alejandro Toledo to deliver on promises to produce jobs, increase wages, and improve basic services for Peru's poor. But Toledo must also listen to the demands of the business community, which is leery of any change to the neoliberal economic policies in place for the past decade.

Toledo's support has slipped noticeably since he took office July 28. In a poll of Lima residents by Apoyo Opinion y Mercado published Sept. 17, 50% of respondents said they approved of the job Toledo is doing, while 24% said they did not, and 26% did not give an opinion. In a similar poll published Aug. 10 by Datum Internacional, 75% of respondents approved of Toledo, while 12% disapproved.

During his campaign, Toledo made expansive promises to improve the lot of the poor. But he took office inheriting a severe social crisis that is, in part, the result of a four- year recession that has brought escalating unemployment and underemployment.

Toledo's principal economic goal is to achieve economic reactivation that benefits the poor majority among Peru's almost 26 million people.

About 52% of the economically active population (EAP) earn less than US$180 a month. Some 12.7 million Peruvians live in poverty, 48.4% of the population, and nearly 4 million, or 15% of the population, live in extreme misery, government sources estimate.

"No less than 72% of Peruvians who want to work are unemployed or underemployed; that is, their jobs don't allow them to earn enough to cover their basic needs," Prime Minister Roberto Danino told Congress in late August. "That has to change."

But the employment situation is daunting. "Peru needs to create 300,000 jobs every year to meet demographic growth," said Jaime Garcia, general manager of the American Chamber of Commerce of Peru. That means, he said, growth would have to be 6% per year to improve living standards in real terms.

To get Peru's economy moving, fight poverty, and strengthen democracy, Danino first proposed that Congress grant Toledo special powers to implement his program. But when opposition lawmakers balked, recalling the frequent abuse of such powers by ousted former President Alberto Fujimori (1990-2000), Danino instead asked Congress for immediate debate on the measure, which Congress agreed to.

Toledo presents his economic plan

In early August, Toledo presented his package for economic recovery (paquetazo reactivador), which included a salary increase for 200,000 public employees, many of whom have not had a wage increase in 20 years. Most public sector workers earn US$170 to US$460 a month.

"We know there are many people whose salaries have been stagnant for a long time," said Toledo. "We are making an extraordinary effort to make a modest but important increase in the salaries of teachers, health workers, police, the armed forces, and university professors."

But teachers dismissed the proposed US$14 a month pay raise. "No way, this is just a tip," said Olmedo Aurich, head of the teachers' union.

Toledo's economic plan, which was easily passed by Congress, also proposes to:

* Cut the solidarity tax to 2% from 5%, and eliminate it altogether in a year; to gradually cut an 18% sales tax as far as the economic situation permits (Toledo has pledged a two- point cut in two years); to raise income taxes (now up to 20% for individuals and 30% for companies) to "international levels."

* Reduce the electric bill for poor households while increasing the rate for the middle class by 2.5%.

* Guarantee US$500 million in loans for home purchases and expand a program to build low-cost housing to promote new construction.

* Set up a bank with mixed state and private funds to offer cheaper loans to the agriculture sector.

* Spend US$600 million on an "emergency social productivity program" over two years. …