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The Peruvian government intends to compensate owners for the expropriation by paying cash for installations and issuing 20-year local-currency bonds for the land. It hopes that the bonds will be reinvested in either private or government industrial projects. Some cynics, unable to quite believe in genuine reform emanating from a military regime, contend that Velasco aims only at boosting the prestige of his military government and breaking the rival power of the oligarchy. They also worry that his program is concerned more with property rights than with production and productivity.
Undoubtedly, large estates operate more productively than a group of small farmers, unless the peasants form successful cooperatives. A fall-off in production would likely increase Peru's economic squeeze. Food imports may well increase while earnings from sugar and cotton could now shrink. That would be all the more painful; Peru has already lost U.S. aid and scared off private investment with its seizure of the
American-owned International Petroleum Company.
Still, most Peruvians seemed at first look to feel that the junta, for better or for worse, had taken a significant step in the effort to solve a problem that besets not only Peru but most of Latin America.