PERU'S MILITARY BATTERED BY SCANDAL, CUTBACKS

Demoralized Troops Face A Cloudy Future

LIMA, Peru -- On the same day earlier this month:

* A former head of Peru's Joint Chiefs of Staff was jailed on accusations
of drug trafficking.

* Police exhumed the bodies of 14 terrorists to determine whether army
commandos killed them after they had surrendered.

* A Russian-made MiG fighter sold to the Peruvian air force crashed during
a demonstration flight for lawmakers investigating whether the plane was
airworthy.

All three events illustrate the hard times that seem to have befallen
Peru's military, retired officers and observers say. They say many junior
officers and enlisted personnel have been demoralized by sharp budget cuts
and a kickback scandal that has landed dozens of generals behind bars.

Now, the military is bracing for major changes after the April 8
presidential election. While the three main candidates dismiss the idea of
abolishing the armed forces, they agree that the military will have less
money, fewer soldiers and, for the first time in Peru's history, a civilian
defense minister.

"There's no doubt that morale is low and the rank-and-file is uncertain of
the future. There have been changes, but the military is realigning itself,
which is not a positive sign," says Fernando Rospigliosi, author of two
books about the Peruvian armed forces.

"There needs to be more civilian control," says Rospigliosi, who is
advising presidential front-runner Alejandro Toledo.

The apparent collapse of Peru's military elite began in September when a
videotape was released to local television stations. It showed
then-President Alberto Fujimori's notorious spymaster, Vladimiro
Montesinos, handing what appeared to be a $15,000 bribe to a congressman.

Over the next few weeks, the scandal mushroomed with the release of more
and more videos that showed Montesinos apparently handing out wads of money
to members of Peru's elite.

Finally, in November, Fujimori, the son of Japanese immigrants, fled to
Tokyo to escape accusations of corruption and resigned. He remains holed up
in Japan, and faces the possibility of extradition to Peru. Montesinos, who
is accused of bribery, election rigging and of illegally amassing a fortune
of up to $1 billion, fled Peru in October and remains at large.

Besides the initial video of Montesinos, investigators have uncovered about
2,400 videotapes, many filmed in Montesinos' office in the National
Intelligence Service. In some of the videos shown on television, Montesinos
is seen giving cash to politicians, judges, generals and media owners. In
others, he talks about rigging court cases or plotting to orchestrate smear
campaigns against Fujimori's opponents in the 2000 presidential elections.

In one video, filmed in April 1999, Montesinos tells Genaro Delgado Parker,
the owner of a television station, "Let's not fool ourselves, the destiny
of our nation passes through the armed forces. Whoever is president will
have to negotiate with the armed forces."

Montesinos' videos apparently changed that prophecy. The list of officers
behind bars on accusations of accepting kickbacks or abuse of authority
includes the former commanders of the army, navy and air force, as well as
division commanders and Montesinos' lieutenants in the intelligence
service. Another 300 military and police officers have been cashiered in
the scandal.

Now, Defense Minister Walter Ledesma is trying to assure the country's
congressional leaders that the armed forces will stay out of politics. He
has accepted $300 million in budget cuts -- roughly one-fourth the annual
budget -- without protest to signal that the military is subordinate to
civilian control.

The continuing arrests of former officers and the justifications some give
for the fortunes they have amassed while in uniform, however, has done
little to improve the military's image.

Former Defense Minister Gen. Victor Malca, for instance, claims to have
made a fortune from an inheritance, keeping $14 million under a mattress
until he retired. Rear Adm. Antonio Ibarcena, who headed the navy, says he
got rich because of his wife's good luck at a local casino. Ibarcena is in
prison on charges of illicit enrichment. Gen. Jose Villanueva, in jail on
the same charge, first denied owning six houses and the Longview Corp., a
real estate company. He later admitted ownership, but said Longview was broke.

Now, the three recent events -- the general's arrest, the terrorists'
exhumations and the MiG's crash -- seem to have brought more embarrassment
to the armed forces.

"This is a terrible situation that is affecting every institution," says
retired Rear Adm. Luis Giampietri. "The majority of our officers are
honest, but no one believes that now because of the scandals. It is hard to
remain proud, even though you know it's a few men and not the institutions
that are corrupt."

Police arrested Gen. Nicolas Hermoza, who headed the Joint Chiefs of Staff
for seven years, on charges of allowing cocaine to flow out of Peru during
the 1990s. Hermoza's co-defendants include Montesinos and Gen. Eduardo
Bellido, a division commander.

The MiG-29 that crashed was one of 18 purchased by Fujimori's
administration from Belarus in 1996. Congressional investigators say
Fujimori and Montesinos received at least $30 million in kickbacks from the
sale and that the planes never worked properly.

Police exhumed the bodies of 14 members of the Tupac Amaru Revolution
Movement who were killed after holding 72 hostages for 126 days at the
Japanese ambassador's residence in 1997. The action was ordered after a
former hostage testified that he saw soldiers shoot and kill three of the
rebels after they had put down their arms and surrendered.

The exhumations have raised the heaviest fire from Fujimori's supporters.
They say the interim government of President Valentin Paniagua is using the
exhumations in an attempt to destroy the armed forces.

"We were at war. Of course, there were casualties. This isn't about the
terrorists, but destroying the reputation of our brave soldiers," says Rep.
Luz Salgado.

But Jose Ugaz, the special prosecutor in charge of the Montesinos
investigation, dismissed Salgado's argument. He says that far from
demonizing the armed forces, his office is concerned about the truth and is
following every lead.