Stakes are high for Peru's popular, swift-acting leader. Failure of reforms could bring violent reaction from left and right

Six months ago many Peruvians looked at the ragged condition of their impoverished, seemingly ungovernable society and sighed ``no hay salida '' -- ``there is no way out.'' Today, five months after the inauguration of 36-year-old President Alan Garc'ia Per'ez, life is still basically the same for the country's poor majority. But hope for a better future has been instilled by the new leader's swift policy changes and dynamic personal style.

Mr. Garc'ia dealt with rampant police corruption and incompetence by firing hundreds of high-ranking officers. He imposed wage-and-price controls that have sharply decreased the previous inflation rate of 200 percent. Most dramatically of all, he refused to negotiate Peru's $14 billion debt with the International Monetary Fund and declared that he will dedicate only 10 percent of Peru's export earnings to debt repayment. The educational and health needs of Peru's poor come before the demands of creditor s, says Garc'ia.

The rapid-fire pace of policy experimentation has earned the Garc'ia administration comparisons with the New Frontier of John F. Kennedy and the first 100 days of Franklin D. Roosevelt.

``This society was falling apart,'' says sociologist Julio Cotler. ``But he [Garc'ia] established the idea of authority, credibility, and optimism in 24 hours. He has changed the psychological climate.''

A poll taken recently by the Lima newsweekly Caretas gave Garc'ia an 85 percent approval rating. ``Everybody in Peru thinks everything Alan Garc'ia does is right,'' says a Peruvian diplomat.

Whether Garc'ia's hot streak will last, however, is very much an open question. The stakes are high, both for Peru and the United States. Observers here say the Peruvian administration will be a test case of whether a Latin country can carry out far-reaching reforms within a democratic framework. Success would set an example for the continent; failure risks leaving Peru to choose between left-wing revolution and military reaction.

Garc'ia's most pressing task is to shore up a crumbling economy. When he took over, Peru was wracked by triple-digit inflation. Real wages still stand at 1964 levels, and only one Peruvian in three has a steady job. The situation is compounded by falling prices for Peru's two leading exports -- oil and copper -- and by foreign debt. Poverty feeds the political radicalism of groups like the Maoist ``Shining Path'' guerrillas.

Garc'ia moved quickly to turn the situation around. In his first week in office, he enacted an ``austerity without misery'' program designed to break inflationary psychology by freezing prices of basic goods, cutting interest rates, and tightening exchange controls. For the month of August, inflation was at 10.8 percent. In November, it was just under 3 percent.

At the same time, Garc'ia brought a new tone of ``moralization'' to government institutions, not only by firing police officials, but also by launching raids on the country's $600 million-a-year drug industry and by firing three top-ranking military officers after revelations of Army massacres in the guerrilla-infested province of Ayacucho. He has since put troops to work building a public sports complex in one of Lima's slums.

Garc'ia's backers say that, by halting inflation and attacking corruption, he has restored public confidence in the national government's authority. They argue that, although his measures may unsettle some interest groups, he is the only hope left for pulling Peru out of its worst depression in 50 years and for preserving the nation's five-year-old democracy.

Critics say Garc'ia may be going too far too fast. They say that, by raising expectations so high, the President may be setting himself up for one of the biggest falls in Peruvian political history.

More important, some critics worry that while Garc'ia may be good at creating public excitement, he has made potentially costly economic decisions that could deprive Peru of the very foreign investment that even Garc'ia himself says is key to the nation's prosperity.

Garc'ia surprised many here by summarily rescinding contracts of foreign oil producers in a quarrel over back taxes. That move, combined with his maverick position on the foreign debt, has undermined the business confidence necessary to get it rolling again, critics say.

Others see the signs of an authoritarian personality in the young leader's impulsive style.

``He already governs by supreme decree,'' observes one analyst who so far has resisted the Garc'ia magic. ``Basically he's setting himself up for a dictatorship.''

Nearly everyone agrees that Garc'ia is playing a risky game. By raising public expectations, prescribing austerity for an already depressed economy, and by simultaneously taking on interests ranging from the military to labor unions, Garc'ia could be putting himself in a vulnerable position.

One widely held view here is that Garc'ia has a year to 18 months at most. If he doesn't meet the expectations he's raised by then, the argument goes, he could be living on borrowed time for the balance of his five-year term.

``There's a limit to hope,'' says Enrique Zileri, editor of Caretas. ``Pretty soon, people start looking for new solutions. After five years, Peruvian presidents have a way of looking like mincemeat.''

But for now, the consensus here is that Garc'ia has achieved a significant change in Peruvian politics.

Says Peru specialist Cynthia McClintock of George Washington University, ``There may be limits to what he can do about the economy, but he has set a tone that's very different and suggests that democracy matters.''