The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. I'm Robert MacNeil in New York.

MS. WOODRUFF: And I'm Judy Woodruff in Washington. After the News Summary this Wednesday, we turn to the decision by the auto workers union to call off their strike against Caterpillar. Then an update on the temporary truce in the battle between Russian President Boris Yeltsin and his parliament. We also look at the government crisis in Peru, the Peruvian ambassador to the U.S. A Peruvian Congressman and two experts on the country join us. NEWS SUMMARY

MR. MacNeil: The international isolation of Libya began today. U.N. sanctions went into effect because of the Gadhafi government's refusal to hand over two suspects in the bombing of Pan Am 103. We have a report narrated by Louise Bates of Worldwide Television News.

MS. BATES: With nations around the world heeding the sanctions, it was markedly quiet at the U.N.'s mission in the Libyan capital. Life was continuing normally after Libyans had spent a day of mourning for those called in the U.S. bombing of Tripoli exactly six years ago. At the airport too, things appeared deceptively normal. But many of these passengers face the prospect of nightmare journeys. The Italian air force has already intercepted one Libyan airliner and forced it to turn around. Neighboring Egypt is presented with a dilemma. Cairo granted Libyan flights in line with the sanctions. But they're a close ally and some papers denounce the U.N. measures as a new crusade against the Arab world. While President Hosne Mubarak briefed his government on the crisis, Libyan coaches were bussing people across the Egyptian border to catch planes. Security is being considerably tightened along this frontier, not least to protect the interests of thousands of Egyptian workers stranded in Libya. As news of the sanctions hit home in Tripoli, there was a mood of defiance and support for Col. Gadhafi's refusal to hand over the two accused Lockerbie bombers. The 1986 attack on Tripoli may have united people here. They've also seen the worst of the West's retribution in Iraq. Now, they can only wait and see what happens next.

MR. MacNeil: The sanctions also include an arms embargo and the expulsion of Libyan diplomats from U.N. member countries. United Nations officials said they have cut the heart from Iraq's nuclear weapons program. They released pictures today of the destruction of buildings at the Al-Atir Nuclear Complex on Monday. They show the dynamiting of a metal casting plant and other manufacturing buildings. Until this month, Iraq had denied that the facility was devoted to weapons production. U.N. officials said continued vigilance would be necessary to prevent Iraq from rebuilding its nuclear program. Judy.

MS. WOODRUFF: Back in this country, thousands of United Auto Workers were turned away when they tried to report for work today at Caterpillar plants in Illinois. Last night, UAW and Caterpillar negotiators agreed the strikers should return to work while contract talks proceeded. But they were sent home today because Caterpillar officials said they needed more time to decide how many would be rehired and 12,000 workers have been on strike for five months. We'll have more on the story right after the News Summary.

MR. MacNeil: Some 20 million Americans faced a last minute choice today between filing a 1040 form to pay their taxes or a 4868 form to get a four-month extension. President Bush has already paid his taxes. The White House reported that Mr. and Mrs. Bush earned $1.3 million in 1991, including a $790,000 book royalty, most of which was donated to a literacy foundation. The Bushes paid $204,841 in taxes. Hotel executive Leona Helmsley went to prison today for tax evasion. She reported early this morning to a minimum security federal facility in Lexington, Kentucky. Mrs. Helmsley is 71 years old. She's serving a four-year sentence, but will be eligible for parole after 16 months.

MS. WOODRUFF: News of strong corporate earnings helped send the stock market to its second straight high today. The Dow Jones Average rose nearly 48 points to a record 3353.76. In the broader market, advances outpaced declines by a three to two margin. Workers in Chicago today used sand bags and concrete to try to plug up the leak in an underground tunnel system. So far, they've been unsuccessful. Much of the business district was shut down Monday when river water began flooding into the tunnels and basements of buildings. Electricity still has not been restored to sixty of some two hundred buildings in the downtown area. Many people were able to go back to work, although crews continued to pump out the water. This afternoon, President Bush declared a federal disaster, making the area eligible for federal relief money.

MR. MacNeil: The Russian parliament today gave its final approval to Boris Yeltsin's radical economic reform program. The vote was a clear victory for Yeltsin, who was absent from today's parliamentary session. He fought back a series of attempts by the lawmakers to curb his powers and his free market reforms. The congress is dominated by former Communists, many of them opposed to radical reforms. We'll have more on this story later in the program. Cyrus Vance, the United Nations envoy to Yugoslavia, met in Belgrade with the head of the U.N. peacekeeping force. He appealed for calm in the former Yugoslav republic of Bosnia- Herzegovina, saying war is not the answer. But in the capital, Sarajevo, and elsewhere, sporadic fighting continued, despite a three-day-old cease-fire. There was a warning to Yugoslavia's Serbian leaders today from the U.S. State Department.

MARGARET TUTWILER, State Department Spokeswoman: One, the conduct of the Serbian leadership in Belgrade and of Serbian armed forces is completely outside the bounds of civilized behavior. Two, we need to see immediate and concrete steps to reverse this behavior and not lip service to peaceful principles while Serbian aggression continues. Three, the United States is consulting closely with the EC and other friends and allies on further steps to bring the international community's strong concerns to bear on Belgrade. A message to Serbian civilian and military authorities is that if they continue their aggression against Bosnia and to deny him rights to Serbia's own citizens, Serbia will very quickly become an international pariah.

MR. MacNeil: Deputy Sec. of State Lawrence Eagleburger called the Yugoslav ambassador to the State Department to deliver the third formal U.S. protest in six weeks.

MS. WOODRUFF: In Johannesburg, Winnie Mandela announced that she is resigning from her post in the African National Congress, South Africa's main black opposition group. She said she is doing it for the good of the organization. We have a report from Jeremy Thompson of Independent Television News.

MR. THOMPSON: It's been the most shattering week of Winnie Mandela's extraordinary and tempestuous life, first separated from her husband, now stripped of her leading role in the ANC. The announcement followed new criminal accusations against her.

WINNIE MANDELA: The step that I am taking is not because of the force allegations being made against me, but because of the devotion that I have for the ANC and my family.

MR. THOMPSON: Just 48 hours after Nelson Mandela announced their separation, Winnie swore undying devotion to her husband at an equally emotional news conference.

WINNIE MANDELA: My husband has been the focus of my life and my love throughout our marriage and continues to be so. I say to my people, I love them, I love them all. And the struggle continues.

MR. THOMPSON: The woman, once known as the mother of the nation, looked shocked and tearful, suddenly aware that she'd been sacrificed by the movement she'd served for 40 years.

MS. WOODRUFF: The twin specters of war and famine are again hanging over the African nation of Sudan. Relief workers in the war ravaged Southern half of the country said today emergency food supplies are dwindling, and some towns have been without food since early March. About 1 1/2 million people inhabit the region. The Sudanese government banned United Nations relief flights there six weeks ago. Yesterday, the U.N. announced it was halting its over land efforts to distribute food due to a government military offensive. The Moslem government has been locked in a civil war with rebels in the non-Moslem South since 1983. That's it for the News Summary. Ahead on the NewsHour, labor peace in Peoria, a truce in Moscow, and democracy suspended in Peru. FOCUS - CATERPILLAR - HARD BARGAIN

MR. MacNeil: First up, the latest turn of events in the Caterpillar strike. For the past five months, the nation's largest maker of construction equipment has been pitted against one of the nation's largest labor unions, the United Auto Workers. Yesterday, the union decided to resume work, after a week where permanent replacement workers emerged as the key issue. A week ago, hundreds of defiant strikers lined up outside the gates of the big Caterpillar factory in East Peoria, Illinois. They were determined to stay out and to try and stop any members who heeded the company's threat to hire replacements for those who didn't return to work. Today that same crowd was at the same gates. This time they tried to get in, but couldn't. The company and the union agreed last night that strikers should return to their jobs after five months on the bricks. But when the workers arrived at the plant gates today, they were turned away.

1ST CATERPILLAR EMPLOYEE: They said I could go to work. I figure I'm owed a day's pay. I'm here to work. They've been saying all along they want us back. I'm back.

2ND CATERPILLAR EMPLOYEE: Well, I don't know what to do. I've went to the union. I've went to the management, and nobody knows what's going on now. They won't let us return to work. They've locked everybody out.

3RD CATERPILLAR EMPLOYEE: Well, I think the company's doing this wrong, you know. They're supposed to be negotiating, you know, in good faith and here they're not.

MR. MacNeil: The problem appeared to be miscommunication. The union had told 12,000 workers to report to work this morning after last night's agreement, but Caterpillar said it needed another week to decide how many workers to call back. Since the strike began, the company has said it can run its plants with 10 to 15 percent fewer workers. The strike drew wide attention because of Caterpillar's warning last week to workers: Return to work or risk placement by newly hired non-union workers. It's one of the few times a major industrial company has tried to break a strike by a union the size of the 900,000 strong United Auto Workers. While last night's agreement ends the walkout, it doesn't end the underlying dispute. One union negotiator explained why bargainers agreed to accept a mediator's recommendations to return to work.

JERRY BAKER, Union Negotiator: Well, we thought it was the best thing to do at this time. Now, that's not to say that this battle's not over -- this war is not over. It's just merely a battle and we have to fight on. That's all.

MR. MacNeil: To discuss the latest developments, we're joined now by Stephen Cabot, senior partner at Harvey, Pennington, Hurtingon, and Renison, a law firm based in Philadelphia, where he joins us. Mr. Cabot has represented Caterpillar in the past and currently represents several companies that deal with the United Auto Workers Union. Harley Shaiken is a professor of work and technology at the University of California at San Diego. He's also a visiting professor this year at the Institute of Industrial Relations at the University of California at Berkeley. He joins us from San Diego. Mr. Cabot, is this a clear defeat for the UAW?

MR. CABOT: Well, I would say it's clearly a strong setback, if not a defeat. The UAW said initially that it would demand and somehow obtain its pattern agreement like it obtained it here. And since it has decided as of last night to return to work and Caterpillar has steadfastly said it would not agree to that pattern agreement, it would appear that the UAW has lost.

MR. MacNeil: Do you agree with that, Harley Shaiken?

MR. SHAIKEN: No, I don't. Certainly it's a setback for the UAW, but the conflict is far from over. It's just in a different terrain. What the UAW did, it seems, is stage a strategic retreat. And the real question now becomes the issues that were on the table, what divided the parties and perhaps most importantly, how Caterpillar chooses to compete for the 1990s. Those issues are really still before us.

MR. MacNeil: But strategic retreat is only a sign of success if you can later make some advance from that, I mean, using military analogies. Is there any hope of the UAW being able to gain from this retreat?

MR. SHAIKEN: Well, I think there is. I mean, first, it's important to understand what the UAW has retained. They've avoided the use of replacement workers so their members haven't lost jobs to that. And the union survives intact. Now, this was a terrific blow and a very bitter five and a half-month-old strike in the midst of a very deep recession. So under those circumstances, the fact that the UAW is now in collective bargaining without conditions represents a certain modest victory for the union. There's no question that this was a blow, however, and that this results or is the end result of very hard ball tactics underscored by the threat of using replacement workers, which I think breaks new grounds in a rather unfortunate way.

MR. MacNeil: Mr. Cabot, why do you think the UAW gave in?

MR. CABOT: Well, I think they saw that their very existence was at stake. The UAW had said, as I mentioned earlier, that it was going to demand this pattern agreement. And it didn't realize -- it underestimated Caterpillar's ability and commitment to do what it needed to do to be competitive. And the UAW saw that Caterpillar was prepared and was able to replace the entire work force. And that not only would have been a major blow to the UAW, but I think the UAW saw that it would have had far reaching consequences to unions throughout the United States.

MR. MacNeil: I'll come back to those wider consequences in a moment, but Harley Shaiken, how do you react to Caterpillar saying they need 10 to 15 percent fewer workers? I mean, does this represent toughening or hardening of their position?

MR. SHAIKEN: Oh, I think it does and I think it's very, very ill timed. A key issue is: How are the parties going to negotiate the issues that divide them at the bargaining table? For Caterpillar to come at this time and say they want to replace a significant amount of the work force is the equivalent of kicking someone when they're down. I think it sets a very poor tone for the negotiations and indicates that Caterpillar really intends to play hard ball and continues to intend to play that. An underlying issue here, however, is once this dispute is settled, how is Caterpillar going to regain the commitment of the work force? On what basis will it compete in the 1990s? Is it going to compete by threat and coercion, or is it going to compete by seeking a work force that is anxious and willing to contribute to the firm? And this is a very poor start in a direction of seeking greater work force commitment.

MR. MacNeil: How do you interpret the announcement that they need fewer workers, Mr. Cabot?

MR. CABOT: I am listening to Mr. Shaiken and I really am somewhat amazed by his use of hard ball tactics, bad timing, poor judgment, and words that identify that type of feeling or situation. It was the union who went out on strike. Caterpillar didn't go out on strike. And I think Mr. Shaiken is just absolutely missing the issue. Caterpillar is saying that it has to compete in the worldwide marketplace. It lost over $400 million last year. It's facing a very tough competitor in Komatsu. They're not able to compete as effectively as they need to to survive in the future if they don't take a position to control cost. Komatsu operates in the United States, also head to head with Caterpillar with a UAW agreement that is better than what the UAW is trying to ram down Caterpillar's throat right now. Now, when we look at "hard ball," I think we need to look at who's playing hard ball and whether or not Caterpillar is merely trying to do whatever it can to survive and compete in the worldwide marketplace.

MR. MacNeil: Mr. Shaiken.

MR. SHAIKEN: I think that's quite misleading. Caterpillar is one of the U.S. success stories of the 1980s. It's the second largest U.S. exporter of manufactured goods. And while it did lose money last year for very specific recession-related reasons, two years or so ago it made $660 million. It achieved stunning success in the 1980s by a very effective use of technology and far more important by the contributions of its work force. Caterpillar was able to compete because it had a committed work force that was willing to not simply respond to change, but really to initiate it. So in a sense, Caterpillar may be undermining its most valuable asset, particularly its most valuable asset against its Japanese competitors, Komatsu, in particular. Komatsu has a loyal, effective work force. For Caterpillar to seek to use a stick -- really an economic night stick -- to get its workers back on the job, without acknowledging the extraordinary contribution they can play, may be the thing that most undermines their competitiveness. And, in effect, the threat to use replacement workers demeans the enormous value of skill and experience. And I'm taken by an add that Chrysler Corporation has run the last few days, where Lee Iacocca said the key for competitiveness in the '90s is the loyalty, the experience, and the skill of the work force. And I would question if these were really the tactics that will engender that for Caterpillar or for any firm in the coming decade.

MR. MacNeil: Mr. Cabot, are you saying that it makes Caterpillar more competitive overseas to weaken a major industrial union?

MR. CABOT: No, not at all. I don't think that is at all the issue. I think Mr. Shaiken is trying to make it the issue. And it's not at all. Caterpillar, for example, by trying to operate more efficiently and making a determination that it needs 10 or 15 percent less employees is merely saying what reality is, that it doesn't want to have a type of featherbedding situation. It wants to pay top dollar to people who it needs and people who will perform. And it's not a question of union versus management. It's a question of pure and simple competition. And with a company like Caterpillar where approximately 60 percent of their gross sales are due to exports and when they're battling an international giant like Komatsu, and when the U.S. dollar is rising, which makes exports less effective, less desired by foreign governments and foreign companies, Caterpillar has to do everything it can to operate efficiently and to do that to compete.

MR. MacNeil: Let me phrase my question differently. Caterpillar, as you said, was trying to break the pattern bargaining, thereby, the UAW would try and get the same deal at John Deere for Caterpillar and then go on from there to the big three automakers. By breaking pattern bargaining, if it succeeds in doing that, will it make itself more competitive? Do you agree with that?

MR. CABOT: If it breaks pattern bargaining it will. And pattern bargaining merely means that a generic contract, because one company saw fit to agree to it, should be swallowed by another company when that agreement may not apply to it. And if history tells us anything, pattern bargaining failed in the steel industry, it failed in the tire industry, it failed in the trucking industry, and it's going to fail here too, because Caterpillar is a different company than Deere. Caterpillar exports significantly more than Deere. It's structured differently than Deere. It may be a wonderful contract that Deere has accepted and agreed to. It is simply not what Caterpillar needs and it's not what is necessary for it to compete in the future in the worldwide marketplace.

MR. MacNeil: Harvey Shaiken, how do you see pattern bargaining affecting the competitiveness of a big company like Caterpillar overseas?

MR. SHAIKEN: Well, pattern bargaining has been a source of stability in many U.S. industries for much of the last 40 years. Pattern bargaining, to the extent that it guarantees job security and provides the stability could be a very important competitive advantage. In a sense, what's at issue here isn't pattern bargaining, but whether the pattern is set by John Deere in Waterloo, Iowa, or whether it's ultimately set by companies in South Korea, Mexico or Taiwan, where wages are much lower. That becomes a third world pattern, essentially setting the stage for competitiveness in the U.S. In a way, Caterpillar would be exporting earth moving equipment and seeking to import wages. But I'm rather incredulous that Mr. Cabot raises the issue that Caterpillar has to cut at this point in time 10 to 15 percent of the work force to compete with Komatsu. The very secret of Komatsu and other large Japanese firms has been lifetime job security, the fact that they don't cut at the first sign of trouble, let alone engage in this kind of real hard, knock down, drag out struggles with their unions. So, rather than increasing Caterpillar's competitiveness, I think this is the most short-sighted approach to competitiveness. It seeks to drive wages down. It seeks to weaken unions. And ultimately it's going to sacrifice Caterpillar's ability to use the $2 billion in new technology which it's purchased in the last several years.

MR. CABOT: Mr. Shaiken --

MR. SHAIKEN: It's a combination of that technology and experience of the workers that could be very important.

MR. MacNeil: Let me ask you this. Can there be -- if U.S. wages are going to be driven down, manufacturing wages are going to be driven down by foreign competition where people are paid less, where the wage structure is less, can there be what we've known up till now as a social contract between management and labor here, or is that just going to go out the window?

MR. CABOT: Well, if what you mean --

MR. MacNeil: With the low wage competition from overseas.

MR. CABOT: Well, I'm not entirely certain what you mean by a social contract. If what you mean by a social contract is that the parties will be trying to work together as harmoniously as possible --

MR. MacNeil: Yes.

MR. CABOT: -- I don't think that that's at issue here. I think that Caterpillar, as I know that company and as I know the industry, is more than willing to have a harmonious relationship with the UAW. But there is a concept that's emanating from the UAW that apparently Mr. Shaiken is espousing. And that is that a company, for example, like Caterpillar, who says that it doesn't need 10 percent of its current workers because it simply doesn't need them, has to still keep them just because they were a worker. And that is an added cost. It's like featherbedding that went out in the 1920s and the 1930s. So that what we're really talking about is not killing unions, not trying to destroy this social contract. I mean, what we're really dealing with is Caterpillar is saying, I have competitive problems, I am a company different than Deere, I am a company different than Komatsu, I simply need to have a contract that deals with my needs.

MR. MacNeil: What's your response to that, Mr. Shaiken?

MR. SHAIKEN: Caterpillar has gained market share against Komatsu in the 1980s, one of the few U.S. companies to best its Japanese competitors eyeball to eyeball. It has a lot of similarities to Deere, but the similarities or differences really aren't at issue. The question is: Is how effectively will Caterpillar utilize its work force, and what message does it send to these workers on the day of them going back to work, saying, wait a minute, we don't want you all? These are people whose average seniority level is 24 years. They've built this company. They have invaluable skill and experience that could be used to expand that market share even further. This is hardly a message that is going to get people to sing the company song the day after. It's hardly something that's going to increase commitment. It's basically using the labor relations of the '30s to compete with the technology of the '90s.

MR. MacNeil: Well, gentlemen, I don't think we're going to see totally eye to eye tonight, but can we leave it there. Harley Shaiken, Stephen Cabot, thank you. Judy.

MS. WOODRUFF: Still to come, a truce in Russia and a crackdown in Peru. UPDATE - VOTE OF CONFIDENCE

MS. WOODRUFF: Next, an update from the Russian parliament which has been debating the economic and political reforms of President Boris Yeltsin. The parliament came close to overturning parts of Yeltsin's program, but then backed off a direct confrontation. Now, the parliamentarians are wondering what their session has accomplished, while outside parliament, Muscovites are trying to adapt to capitalism. Ian Williams of Independent Television News filed this report.

MR. WILLIAMS: A portrait of Lenin looked down on deputies hurrying to the latest crucial session of congress today. In the view of reformers, his spirit has been all too evident this week. And they arrived this morning confident of turning back the hard liners and saving the economic reforms. Ministers, huddled in anxious groups at the front of the hall, had to wait until a stormy session at the end of the day before a declaration of support for them and their economic reform program was finally put to a vote, apparently overturning earlier critical resolutions that had led to the government offering to resign. Not everybody liked the result. Among reformers though, there was a sense of relief.

IONA ANDRONOV, Russian Deputy: For me, for me personally, the democracy is still living. It's still living. It's still kicking.

SERGEI STANKEVICH, Yeltsin Adviser: The main fact for me after this battle is over is that the damage to reforms was very limited and in principle, this congress endorsed continuation of reforms. It's okay.

MR. WILLIAMS: One man who missed it all again was President Yeltsin. He'd cancelled all engagements for the fourth day, including an awards ceremony for cosmonauts. He already rearranged that for today and his place was taken by Vice President Rutskoy. In the Kremlin corridors, talk was of what a shambles the congress had become, a view shared by Yelena Bonner, the widow of Andrei Sakarhov.

YELENA BONNER, Human Rights Campaigner: [Speaking through Interpreter] It just looks like the congress is working. Congress is not working, has not done any work. It has passed empty, purely decorative declarations about reform without any substance.

MR. WILLIAMS: When you look towards the future in Russia, what are your feelings? Are you optimistic?

YELENA BONNER: [Speaking through Interpreter] Russia is a wonderful country with a future. But whether this future come this year, next year or in 10 years depends on how closely the people support the government in this difficult time when the people are suffering. Life is really difficult now. Whether the people can understand that reforms are necessary and that we have to go through shock therapy I don't know. But even so, Russia still has a future.

MR. WILLIAMS: Away from the political wrangling over reform, the packed pavements of Moscow show one of its realities. With the new right to sell anything, anywhere, at any price, Muscovites have turned parts of the city into a giant flea market. And for days, this less than subtle television advertisement has invited would-be buyers to one of the first auctions of state-owned offices and apartments which took place today. Less than a hundred people turned up to a hall near the old KGB building to be greeted with champagne and snacks. There were around 30 lots. In the event, only two were sold. [AUCTION]

MR. WILLIAMS: The buyers were both small cooperatives paying around 15,000 pounds each for a small office. And the organizers seemed happy enough.

KONSTANTIN APRELEV, Director, Auction House: [Speaking through Interpreter] We're trying now to expand our market. We think this will be successful. If we can sell 10 or 15 percent of our apartments, we'll make a good profit.

MR. WILLIAMS: And tonight from the Kremlin, it was reported that President Yeltsin has broken his silence, and in a telephone conversation with Prime Minister Gaidar, has expressed total support for the Russian government, whose resignation he will not now accept. FOCUS - PERU CRACKDOWN

MS. WOODRUFF: Next tonight: What can and should the United States do to help promote democracy in a South American country fighting a three front war on poverty, drugs and Maoist guerrillas? The country is Peru, the third largest in South America, and also among its poorest. Nearly half of its 22 million people live in extreme poverty. Peru's biggest export is coca leaves, which neighboring countries process into cocaine for sale in the United States and Europe. Meanwhile, a guerrilla movement has been fighting Peruvian governments for years in conflicts that have cost 25,000 dead. Tens days ago, Peru's elected President, Alberto Fujimori, called for an offensive against the guerrillas and the drug dealers. He declared a state of emergency and suspended the constitution. We begin our coverage with a background report. Fujimori, a university president of Japanese descent, surprised most people when he won Peru's presidential election two years ago. He came to office promising market-based economic reforms to lift the country from poverty, and aggressive programs against drug traffickers and against the guerrillas. The guerrilla movement, called the Shining Path, or Scendaro Luminoso, has been among the most durable and vicious in South America. In the past few years, it has spread from the countryside into Lima and other cities, promising economic justice and carrying out bombings and assassinations, like this car bombing in February at the U.S. ambassador's residence. The guerrillas are especially strong in the Yiyaga Valley, where much of Peru's coca leaves are grown. With U.S. aide, with a Drug Enforcement Agency task force, and with a special forces training mission, Peruvian forces have been trying to suppress drug trafficking. But President Fujimori at the recent drug summit in San Antonio, Texas, said suppression alone would not work and he called for more money to pay for crop substitution to give Peru's farmers an economic incentive to give up their biggest money earning crop. In an interview in San Antonio with NewsHour Correspondent Charles Krause, Fujimori spoke directly of his differences with the United States on drug policy.

CHARLES KRAUSE: [February 27] Do you think the United States is, in fact, committed to this idea of yours that crop substitution can decrease the coca crop much faster than eradication? I ask you because Assistant Secretary of State Bernard Aronson testified before Congress last week and what he said is that "crop substitution is a dangerous fantasy that simply will not work."

ALBERTO FUJIMORI: We have signed an agreement between Peru and the United States where we state very clearly our objective of substitution, one of the objectives. And this position of dangerous fantasy I consider as dangerous position from the point of the United States to take with respect to this agreement. I am afraid that maybe the repression of thinking is coming back again when 10 years of experience has given us this complete fable.

MS. WOODRUFF: A month after that interview, as the drug and economic and guerrilla problems kept pressing on the President, he declared the state of emergency. Many members of the Peruvian parliament protested, but several polls indicated that the city populations were supporting the Fujimori measures. In any event, within days of the coup, the guerrillas showed they would not be cowed, launching new attacks in urban areas. In Washington, the Organization of American States met to consider measures to protest the suspension of Peruvian democracy. The United States has suspended nearly $300 million in economic aid and yesterday it withdraw Green Beret military advisers. Sec. of State James Baker expressed sympathy with Fujimori's problem but not with his methods.

JAMES BAKER, Secretary of State: [Monday] There is no alternative. You cannot destroy democracy in order to save it.

MS. WOODRUFF: The American nations at the OAS voted to deplore the coup but not to take the stronger step of imposing economic sanctions, as they did after the coup in Haiti last year. We get four views on the Peru story. Roberto MacLean is Peru's ambassador to the United States. Ricardo Letts is a member of one of the opposition parties in the Peruvian parliament. He was outside the country when the president shut down parliament. Tina Rosenberg is an author who has spent several weeks with the Shining Path guerrillas, the only non-Peruvian to have done so. She is the author of "Children of Cain, Violence and the Violent in Latin America." She is now a visiting fellow at the Overseas Development Council. And Mark Falcoff is a resident scholar specializing in Latin American policy issues at the American Enterprise Institute. Mr. Ambassador, the OAS and the United States are both saying your president made a mistake. Did he make a mistake?

AMB. MacLEAN: Well, what has happened there now is a tragedy. It is a big tragedy, without any doubt. But my impression is that it is the least of the tragedies that could have happened.

MS. WOODRUFF: What do you mean by that?

AMB. MacLEAN: That the alternatives were perhaps even worse, because what President Fujimori has been complaining is that for, in one hand, he has been assailed by the -- not guerrillas but the terrorist movement -- and in the terrorists, in the fight with government and society has caused in 12 years about 25,000 deaths. The destruction of the -- of loots and properties by the Shining Path is of a value that would have been enough to pay the external debt of Peru. And when the peasants' rounds and the army in the countryside forced the terrorists to move into the cities, they are beginning to attack not precisely government officials, government properties, but grassroots organizations. They are murdering grassroot leaders. For instance, not long ago, one of the most popular root leaders of Peru, Marielena Marano, was not only killed savagely but also after being shot with five shots, her corpse was put to the dynamite and exploded. I mean, that is trying to really impose a reign of terror and to frighten people. That is one alternative that could happen to Peru.

MS. WOODRUFF: Mr. Letts, you hear what the ambassador's saying your country was facing. Does that justify what the President has done there?

MR. LETTS: Absolutely not. It doesn't justify it and the terrorist assail that he mentions and not either on the economic crisis, which was of course another reason, and not either on the corruption in government and military levels, and not of course of what has been blamed, parliament doing obstruction in Peruvian politics. That is, of course, not true.

MS. WOODRUFF: All right. You've thrown out three or four things there. Now, let's go back to the first point though that the ambassador mentioned. These terrorists killed 25,000 people, enormous values --

MR. LETTS: Thirty-five thousand people were killed during this subversive war. Those people have been killed, of course, by Scendaro and its terrorist methods, which we condemn absolutely. But they have been killed also by violation of human rights from the military. Peru is a country that during the past five years has been condemned by the United Nations' Human Rights Committee in Geneva, because it's a country where the human rights violation is worse. And now, the military will run Peru without any control from parliament or from the attorneys initially.

MS. WOODRUFF: Mr. Ambassador, what about that?

AMB. MacLEAN: Yes, it is true. There have been many human rights violations and the government of President Fujimori --

MS. WOODRUFF: By the military.

AMB. MacLEAN: Yes, I mean, by the military and by the police, yes, and the government of President Fujimori is trying -- has been trying for the past year to reduce it. According to United Nations figures, the number of "disappearances" had been reduced to less than 50 percent in the last year than the previous year.

MS. WOODRUFF: But you're saying the situation's bad but it's gotten better?

AMB. MacLEAN: That's right, yes.

MR. LETTS: Not so. It happened from August to September, October of the past year, because the North American congress was very firm on principles and on stopping military aid to Peru, but then again when the end of the year came about, over 300 people in Peru had disappeared after the tension from security forces. So Peru still stands the worst country in the world where human rights are violated.

MS. WOODRUFF: Let me ask you, Mr. Ambassador, why was it necessary to suspend democracy, to put legislators in jail, to suspend the court system, in order to deal with the terrorists?

AMB. MacLEAN: Well, I was trying to explain that. First, it was the terrorists. Then it was the pressure of the danger due to the opposition in congress, the economic program of the government could fail and so as a result of that, the obstruction for the economic program, the danger of the drug traffic, the terrorist, it left the government with no other alternative than to do that. I don't think this is a happy thing. I don't think this is something that one could defend, but I mean it is a tragedy, but, nevertheless, if you study, analyze the alternatives, it is the least tragic of all. And what is important is that the actors of this drama, of this tragedy, the people of Peru, apparently from all -- one reason -- coming from Peru -- is supporting massively - -

MS. WOODRUFF: Based on some public opinion polls that have been done?

AMB. MacLEAN: Yes, yes.

MS. WOODRUFF: Well, Mr. Letts, what about that? There have been polls that show, particularly in the cities, that people are supporting the President's action.

MR. LETTS: Okay. The ambassador says it's a tragedy; it's not a happy thing. So let's ask ourselves what is Mr. Fujimori laughing about when he's shown in the media, as you have shown him a minute ago? Now, I think it is a big tragedy.

MS. WOODRUFF: I don't know what you're referring to. Did we see him laughing at --

MR. LETTS: Oh, yes. Oh, yes. You did. You could go back and show it again and everybody would see it here in the United States. Now, the polls, the military's out. The avant gardes are out. The bayonets are out. They have taken the streets. They have taken people into jail. They have intervened the media. They taken journalists and lawyers into jail, arrested. And now are those conditions to have polls? Are those conditions to take a public opinion? We have mentioned that Duvalier, Pinochet, Ferdinand Marcos, and Mussolini --

MS. WOODRUFF: These are dictators --

MR. LETTS: They all did have faults and they all did have for a moment public opinion in their favor. Garcia after the killings in the prisons in 1986 had 95 --

MS. WOODRUFF: This is your former President?

MR. LETTS: Yes. Garcia Perez.

MS. WOODRUFF: Yes.

MR. LETTS: -- had 95 percent of approval after killing around 300 prisoners of Scendaro Luminoso in 1986, but he finished with 15 percent approval. If we are going to change governments or take military coups just because what the polls say, democracy is finished the world over.

MS. WOODRUFF: Let me -- let's look -- let's take these three points. I want to deal first of all with the terrorists, with the Shining Path, and turn to you, Ms. Rosenberg, because you've written about them. Is this the growing threat, the beginning to be uncontrollable threat that President Fujimori has painted?

MS. ROSENBERG: Sure. I agree completely with the diagnosis that the ambassador has given on the threat of the terror of the Shining Path. The question, however, is: How do you best defeat the Shining Path? There's only two places in Peru where the Shining Path was being beaten. And in both places, the reason was that they were places that were characterized by more democracy. There were fewer human rights violations on the part of the military and people -- peasants could organize -- people could organize soup kitchens. Ordinary Peruvians could get what they wanted under the current system, and, therefore, they rejected the Shining Path. The problem with the coup is that's going to shut down now and they're going to go back to a strategy of total militarization and indiscriminate repression which has failed.

MS. WOODRUFF: Their attacks, in fact, have stepped up in the 10 days or so since this took place.

MS. ROSENBERG: That's right.

MS. WOODRUFF: What about that, Mr. Ambassador?

AMB. MacLEAN: I agree with Mr. Letts that public opinion is not enough. Of course it's not enough. Public opinion is indispensable but it's not enough. The other thing is the respect for human rights. The foreign ministry of Peru the other day in the OAS invited the Secretary General of the OAS, the president of the conference, into American Commission of Human Rights to go to Peru and to prove that what he said that at this moment there are no - - civil liberties, except the parliament -- I mean, they can conclude -- they can see that.

MS. WOODRUFF: I understand you wanted to respond to his point, but what about moving on to Ms. Rosenberg's point that, if anything, this is going to make the Shining Path more militant, their attacks have stepped up since the coup has taken place?

AMB. MacLEAN: I have read Ms. Rosenberg's book and I agree entirely with her, of course. But I mean, the whole purpose of this -- the third thing I was going to say is that these measures are temporary and the purpose of these, the declared purpose, is to move for more democracy. I subscribe every word of what Ms. Rosenberg has said in her book. I entirely agree with her.

MS. WOODRUFF: When you say temporary, how temporary?

AMB. MacLEAN: She has -- I think six months.

MS. WOODRUFF: Before they'll be a plebiscite of voting?

AMB. MacLEAN: Yes, yes.

MS. WOODRUFF: Mr. Falcoff, where do you come down on whether President Fujimori has done the right thing or not?

MR. FALCOFF: Well, I don't agree that he has done the right thing. When a country is at war, as Peru is and has been, you have to have the maximum amount of moral legitimacy in the world community. And that's particularly true for a country like Peru, which has needed international assistance of the most basic humanitarian variety, leave aside military assistance, DEA, et cetera, for a number of years. You cannot disarm yourself as Fujimori has done and expect to win a great moral victory, even if in six months he is able to win his plebiscite, even if -- which is a big if -- he still has the problem of what I would call institutional itinerary. All right, you've won your plebiscite, what next? How do you march back? Do you just call people like Mr. Letts back to session? I mean, he's broken with the fragile institutional frame work of Peru and now he's out there all by himself, alone, and he'd better succeed. But even if he wins a plebiscite, he's still out there on a limb.

MS. WOODRUFF: What does the President have to do, Mr. Ambassador, or anyone else, in the next six months or so to make this successful? I mean, how far does he have to get to defeat the Shining Path, to bring the economy back on course, to defeat the drug trafficking?

AMB. MacLEAN: I don't think that that can be done in six months. But I think that what he has to do now is to democratize and to make more flexible an expedition and to allow public opinion to be reflected in congress, in the judiciary, in the tribunal --

MS. WOODRUFF: But parliament's been suspended. How do you do that in --

AMB. MacLEAN: I mean -- because he has the -- he's going to call for new parliamentary elections.

MS. WOODRUFF: So you're saying that when the next parliament comes along. Mr. Letts, is that possible? I mean, could that work?

MR. LETTS: Has anybody of us ever seen in history a dictator that then after he's taken power, closed parliament and every other organ of control in the next three months, or six months, or four weeks, or six weeks, can set out again? Has anybody ever in history seen this? Isn't it always that after he takes power -- Fujimori is a Peruvian gentleman who said before publicly Peru needs an emperor, he needs a 10 year emperor at least, I'm not proposing myself, but I'm stating the idea. He said that in a speech a few months ago.

MS. WOODRUFF: Mr. Falcoff.

MR. FALCOFF: Well, what's not being said in Peru right out loud, and it certainly hasn't been reported in the United States, but there is in Peru a dangerous tendency to look South to Chile, to the Pinochet experiment and for years I've heard people saying in Peru, we need another Pinochet.

MS. WOODRUFF: When you say people, which people are you talking about?

MR. FALCOFF: Well, business people.

MS. WOODRUFF: Educated --

MR. FALCOFF: Educated people of some affluence but also cab drivers and shopkeepers. There's a frustration with the system and in societies of this type there's always a potential for a certain authoritarian streak in the culture. But the problem is that Chile isn't Peru and Peru isn't Chile. And let's not forget that what happened in Chile happened at an enormous human cost, an enormous moral cost, which that country is still sorting out. But even so, I don't see Mr. Fujimori as replicating the Peruvian - - the Chilean experiment.

MS. WOODRUFF: Ms. Rosenberg.

MS. ROSENBERG: One of the dangers of this coup is that the people behind it -- Mr. Fujimori is being controlled by certain military and ex-military officers. And the two most important people behind the coup -- one of them was a lawyer for many years for drug traffickers. And the other is a man with a serious record of human rights violations. He was in charge of his own -- where a very notorious massacre was committed. These are not people with a commitment to human rights. They are not people with a commitment to ending drug trafficking. And even though those are serious problems, this coup is going to do anything to help solve this.

MS. WOODRUFF: And you're saying they are controlling what he is doing?

MS. ROSENBERG: Yes.

MS. WOODRUFF: Is that what you're saying?

MS. ROSENBERG: I am saying that.

MS. WOODRUFF: Mr. Ambassador.

AMB. MacLEAN: My impression is that it is not, however, I think that the important thing for public opinion is to keep a watch because, indeed, there is a danger when the congress disappears then there is no control. I mean, then public opinion, both at home and abroad, have the duty to control and survey that no human rights are committed and that no excesses are committed and the speed to go back toa constitutional government is as quickly as possible.

MS. ROSENBERG: How can you keep watch? There's no judicial system anymore. You can't file a habeas corpus petition. Where are people going to report these things to? All the institutional mechanisms to control the government and the military have been removed.

MS. WOODRUFF: Where does -- where was the military in terms of fighting the drug war. There were so many allegations that were out there about the military supporting -- at least certainly not fighting the drug trafficking that Fujimori's administration was going after. Mr. Letts.

MR. LETTS: When Fujimori's most important adviser on drug trafficking resigned last January, Mr. Armando Desoto, who is well known in this country, he accused the government, Mr. Fujimori and the military, of being responsible for running the five airports that legally receive and let go small planes from Colombia that take, bring money and take drugs. And everybody knows about that. The military are involved. And if corruption is now the thing we are discussing about around Fujimori's own family there was a big public issue on corruption. What I would like to say, please, is what is Mr. Ambassador doing representing that government? He is in total agreement with the lady that has said more democracy is what we need. He is in total agreement with what I have said as far as human rights is concerned. So why is he representing that government?

AMB. MacLEAN: I can answer this, because what are the alternatives? I mean, we are talking about evils, yes; evils do exist. But let me tell you something which is very important. First, we are talking about a trespassing on the law and this is a very serious matter. But, I mean --

MS. WOODRUFF: Trespassing on which law?

AMB. MacLEAN: I'm sorry, breaking the law -- I mean, that the constitution has been broken --

MS. WOODRUFF: Yes.

AMB. MacLEAN: -- I mean by these tragic events. But on the other hand, what has happened is that we live in a country in Peru in which at least half of the population -- and I don't mean the drug traffickers -- are outside and against the law. I mean, for instance, one-third at least of the Gross National Product is produced by people who don't obey the legal codes, the industrial codes. They produce outside and against the law.

MS. WOODRUFF: You mean people, the farmers and others who are involved in the coca --

AMB. MacLEAN: No, no, no, not the coca. I mean industry. I mean what people call the informal movement in Peru. About 40 percent of the housing in Lima is built against the laws and 60 percent of the transport, so we are talking of a country in which the social prestige of law is very low. So I mean the answer is, what is the alternative. I am not happy with the situation as it is, I mean, but what -- is there any other valid alternative in this moment?

MS. WOODRUFF: Mr. Falcoff, what about that? The President was under enormous pressure.

MR. FALCOFF: Well, I think that you don't establish the rule of law at the lowest levels of society by breaking it on the highest levels of a society. You have to start somewhere and I think that the government has put itself -- what worries me is that the Peruvian government has put itself in a position where it's very difficult to back pedal now. What institutionality is it going to go back to?

MS. WOODRUFF: But that sounds fine, but in reality, wasn't this a President who had moved pretty far down the road of creating a capitalist open market system -- certainly farther than --

MR. FALCOFF: Well, that would be the subject for another program. I'm less impressed with that than some, but --

MS. WOODRUFF: But there have been reforms, economic reforms, let me put it that way.

MR. FALCOFF: There have been some macroeconomic structural reforms, that's correct.

MS. WOODRUFF: Facing enormous obstacles from the terrorists, from the Shining Path, the drug trafficking and so forth, backed into a corner, what else should this President have done?

MR. FALCOFF: Well, it seems to me that if in the frame work of a democratic political community you can't -- I'm talking about the congress -- you can't sell a program of economic reform, then obviously the society's not ready for an economic reform. And that's all there is to it. It's not an inevitable thing. People have the right to fail democratically, if that's their right. But they have the right to make these choices.

MS. WOODRUFF: And has the United States response been the correct one, Tina Rosenberg?

MS. ROSENBERG: I think I would like to make one point about the economic program which is that it's depended greatly on international loans which are now going to be cut off. I think the economic gains that were made under Fujimori are now in peril. I think the United States has responded strongly, that's very good. I think it should respond more strongly yet. It should advocate the cutting off of these loans.

MS. WOODRUFF: With sanctions.

MS. ROSENBERG: With sanctions. Because you have a very great danger in Latin America of this spreading, and I think the message needs to be clear that the solution is more democracy.

MS. WOODRUFF: All right, well, Ms. Rosenberg, Mr. Falcoff, Amb. MacLean, and Mr. Letts, we thank you all for being with us. RECAP

MR. MacNeil: Again, the main stories of this Wednesday, an air and arms embargo went into effect against Libya, the United Nations approved the measures to force the Gadhafi government to hand over suspects in the bombing of Pan Am Flight 103. President Bush declared downtown Chicago a disaster area, releasing federal funds to help pay to clean up the flood damaged business district. Good night, Judy.

MS. WOODRUFF: Good night, Robin. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.