Fish and Oil

The already unhappy relations be tween the U.S. and Peru took another turn for the worse last week. The latest trouble was caused by the seizure of an American fishing boat. The boat -- the fourth U.S. tuna clipper taken captive this year -- was fined for having violated the 200-mile limit claimed for Peru's territorial waters (the U.S. recognizes only a 12-mile limit for fishing rights). In some exasperation, Administration officials in Washington leaked the news that the U.S. was suspending arms sales to Peru.

Actually, the sales had been suspended last February with the seizure of the first U.S. boat. Peru's Dictator General Juan Velasco Alvarado was informed privately that the Pelly amendment to the Foreign Military Sales Act of 1968 left Washington no alternative. For some reason, Velasco had neglected to inform his countrymen, and last week's disclosure from Washington brought a rush of questions in Lima. Velasco held a twelve-hour huddle with his Cabinet and produced a six point communique. If the ban on shipments is officially confirmed, it read, then the U.S. military missions currently in Peru might as well go home. It also charged that the ban violated the terms of the bilateral military aid pact existing between the U.S. and Peru as part of the Inter-American Treaty of Reciprocal Assistance. As an afterthought, the communique added that the visit to Peru by Nelson Rockefeller, scheduled for this week, was now "inopportune."

The fishing-boat row distracted attention from the more serious dispute between the U.S. and Peru--the seven-month wrangle over oil. Just six days after overthrowing the government last October, Velasco and his junta confiscated most of the available assets of the International Petroleum Co., a subsidiary of Standard Oil Co. (New Jersey). This should have brought into force the Hickenlooper amendment to the Foreign Assistance Act, which would cancel all aid funds, but Washington held off because the matter was still in litigation, with I.P.C., backed on principle by the State Department, demanding just compensation. The Peruvians maintain that they will pay such compensation once they collect the far larger amount that they claim is owed by I.P.C. for "illegal" extraction of oil.

Hopeful Gleams. Velasco may well have found foreign embroilments a relief from domestic affairs. After overturning the Fernando Belaunde Terry government last year, the junta found the treasury drained by Belaunde's freehanded spending and borrowing. Currently, construction is down 40% from 18 months ago, and sales of dry goods, medicines, cars and appliances have dropped 25%. Unemployment has risen to 10% of the working force. Velasco has resorted to ruling by decree, and hopes to lure investment through a policy of incentives and the easing of bank credit rates.

Velasco continued to breathe fire. The U.S. "has us by the throat," he told an interviewer. "Let the Americans occupy us if they want to. Let them send the Marines as they did in Santo Domingo. We will defend ourselves with rocks, if necessary." Such oratory seldom fails in Latin America, and the newspaper El Comercio praised Velasco for defying the "force and pressure of the State Department," as did Peru's Landzuri Cardinal Ricketts. By shrewdly turning the arms ban into an issue of patriotism and emotion, Velasco continued to draw on the ready supply of anti-Americanism in Latin America to win support for himself and his junta.

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