How to Steal a Democracy: The Peruvian Example

February 20th, 2006 - by admin

John McMillan, Pablo Zoido / San Francisco Chronicle – 2006-02-20 09:07:21

(January 22, 2006) — In the 1990s, Peru was run, in the name of President Alberto Fujimori, by his secret-police chief, Vladimiro Montesinos Torres, who methodically bribed judges, politicians and the news media.

Montesinos kept meticulous records of his transactions. He required those he bribed to sign contracts detailing their obligations to him. He demanded written receipts for the bribes, and he had his illicit negotiations videotaped. Meanwhile, Montesinos and Fujimori maintained the facade of democracy — the citizens voted, judges decided, the media reported — but they drained its substance.

The size of the bribes indicates how much Montesinos was willing to pay to buy off those who could have checked his power. The typical bribe paid to a television-channel owner was about 100 times larger than that paid to a judge, which was about the same as that paid to a politician. That’s because television was the most forceful of all the checks and balances on the Peruvian government’s power.

Today, Fujimori is in custody in Chile, awaiting possible extradition to Peru for trial, but he also says he wants to return and run again for his old job as president.

In 1990, Fujimori, a political novice, was elected president of Peru, a country in turmoil. Economic mismanagement had brought hyperinflation and negative growth. An insurgency driven by the Shining Path, a band of Maoist guerrillas, would by its end bring 69,000 deaths.

Fujimori appointed Montesinos his adviser and ad hoc head of the Servicio de Intelligencia Nacional, the national intelligence service. Montesinos had had a checkered career. Starting out as an army officer, he was expelled from the army on charges of selling secret documents to the United States; then, in the 1980s, he had been a lawyer for Colombian drug dealers.

Fujimori claimed two major early successes: ending the terrorist insurrection, and sparking economic growth. Mario Vargas Llosa, the novelist who had been the losing presidential candidate in 1990, noted, “Fujimori was very popular. Though dirty things were going on — torture, killings and corruption — his image was of a strongman who would defend people against the terrorists.”

In 2000, it all unraveled after one of Montesinos’ videotapes was broadcast on television. Montesinos was seen paying opposition politician Alberto Kouri $15,000 per month to switch sides and support the president. Other videotapes were subsequently broadcast, becoming Peru’s own distinctive form of reality television.

The tapes, which came to be called the vladivideos, revealed the breadth of Vladimiro Montesinos’ reach. They showed him offering Alipio Montes de Oca, a Supreme Court justice, the presidency of the National Elections Board plus an extra $10,000 monthly salary, medical care and personal security; bribing Ernesto Gamarra, a member of a congressional committee investigating Montesinos’ sources of money, to direct the investigation away from Montesinos; and assuring the owner of Lucchetti, a Chilean pasta company, of a favorable judgment in a legal dispute over construction of a factory.

The Fujimori government fell. Montesinos and Fujimori fled the country. Fujimori obtained asylum in Japan and resigned the presidency by fax. Montesinos was arrested in Venezuela and returned to Peru to be charged not only with corruption but murder, arms running and drug dealing.

While it may seem peculiar that Montesinos taped meetings where he was the corruptor, there is logic to it. By videotaping his negotiations, Montesinos had proof of the others’ complicity. He made sure the vladivideos recorded the bribe-takers accepting his cash.

One video shows Montesinos pulling wads of bills from a plastic bag and putting them into a briefcase. Another shows him beginning to count the money: “And now comes the good stuff. One, two, three, four, five, six.” His counterpart said, “Here there is a million. Better this other little briefcase, no?”

Montesinos replies, “Which one? No, no, this is great because you can close it. … You can keep it as a gift. Look: one, two, three, four, five, six, seven, eight, nine, ten, a million. One, two, three, four, five, six, seven, eight, nine, ten, 2 million.”

Montesinos told some people he was taping their meetings. On one occasion he said, “It is already filmed.” On another, his interlocutor asked, “Do you have that recorded?” and he responded in the affirmative. In the event that the whole network collapsed, the tapes gave him a threat he could use against anyone who turned against him.

The politicians’ bribes were mostly between $5,000 and $20,000 per month. Bribes went not only to opposition congressmen but also to Fujimori’s Cabinet.

A prominent example is Federico Salas, Fujimori’s last prime minister, who confessed to accepting an extra salary from Montesinos of $30,000 per month. The bribe price for ordinary judges was $2,500 to $10,000 per month. Supreme Court judges got bribes of around $25,000 per month, and the president of the Supreme Court got $35,000.

The director of Expreso, a broadsheet newspaper, received a lump sum of $1 million, ostensibly so he could buy a controlling block of the newspaper’s shares.

El Tio, a tabloid newspaper, got an incentive contract, being paid over about two years a reported total of $1.5 million based on content: $3,000 to $4,000 for a front-page headline, $5,000 for a full-page article and $500 for a shorter article.

In an attempt to discredit the journalists who dared investigate the government, the tabloids carried hundreds of stories defaming them with bizarre labels: “a mental midget,” “a she devil,” “undercover terrorist,” “paid coup provocateur.”

Among television channels, one was state-owned, Channel 7, and Montesinos had control over its content. The five privately owned television broadcasters, Channels 2, 4, 5, 9 and 13, were bought off, as was a cable service, CCN. One alone offered independent investigative journalism: the other cable channel, Channel N, owned by El Comercio. (It was on this channel that the Kouri videotape that brought everything down was first aired).

Channel 4, with the largest viewership, got $1.5 million per month in bribes, and Channel 2 got $500,000 per month. In the contract between Montesinos and Channel 2, Montesinos purchased full control over news broadcasts. The channel agreed to allow Montesinos to review each day’s news programs before they aired, and not to broadcast anything about presidential or congressional candidates or any program referring “explicitly or implicitly to political issues,” without Montesinos’ written approval.

The contract was drawn up as a legal document. Montesinos, who held the sole copy, is not named, but just called the “Contractor.”

The contract adds that this “does not however nullify the legal value of this document” (oddly, since it clearly had no legal value at all). At the start of each month, Montesinos was to pay Channel 2 its half-million dollars.

At the same time, the channel was to give him a letter of credit equal to this amount, which he was supposed to destroy after the channel fulfilled its duties. If he was late with a payment, he incurred a penalty of 1 percent per day, rising to 5 percent after seven days.

The videos show Montesinos crowing about his control of the media. “Each channel takes, damn, $2 million monthly, but it is the only way, that is why, damn, we have won, because we have sacrificed in this way.”

Talking to some associates about the television owners, he said, “We have made them sign on paper and all. Now we are playing with something very serious. They are all lined up. Every day at 12:30 p.m., I have a meeting with them. … We plan what is going to be aired in the evening news.”

At one point, Montesinos even offered the owner of one of the television channels a team of intelligence service agents who could work for him as an “investigative unit.”

The television channels also received various favors. Montesinos helped Channel 5 maneuver through a difficult lawsuit by interceding with the judiciary.

To support the owner of the cable channel CCN, he arranged the purchase of shares in his company by the Military Police pension fund. He arranged a complex deal involving Channel 2, Channel 4 and Peru’s second-largest bank, Wiese Sudameris Bank.

The two channels owed the bank $13 million or $14 million. Montesinos persuaded the bank’s managing director to refinance their debts. In return, he resolved a tax problem for the banker.

Judges and politicians also got noncash bribes, such as a car or a house. A judge on the National Elections Board, Rómulo Muñoz Arce, negotiated jobs for his wife and son, as well as payment for his daughter’s education in the United States. Montesinos threw in a first-class airfare for her, exclaiming, when the judge remarked on this, “First class? Of course I wouldn’t send her coach!”

Montesinos exerted control not only by bribery but sometimes by blackmail. He would obtain video proof of sexual indiscretions and use these tapes for persuasion.

Some were filmed in a brothel where intelligence service agents had installed hidden cameras. (After he was imprisoned, the judges handed dozens of these videos over to the Roman Catholic Church, to be returned to those featured in them.)

As a last resort, Montesinos had the option of silencing a television channel if it refused to fall into line. He did it once and the episode is revealing. Frecuencia Latina, or Channel 2, was majority-owned by Baruch Ivcher, a naturalized Peruvian citizen of Israeli origin.

After initially being loyal to the government, in 1997, the channel began broadcasting investigative reports: one on intelligence service agents being tortured for talking about the intelligence service to the press; another on Montesinos’ tax returns, showing that his income far exceeded his government salary. In retaliation, the Interior Ministry stripped Ivcher of his citizenship.

A straightforward explanation for why the television owners were more expensive to bribe than the politicians and judges is simply that they were richer. The judges’ bribes were one-and-a-half times to four times their official salaries.

The politicians’ bribes were multiples of their official income. By contrast, a few thousand dollars a month might not have impressed a wealthy television-channel owner.

The difference between the news media and the other checks and balances in a democracy is that television, by informing the citizenry, can bring forth the ultimate sanction of citizen reaction. In the absence of citizens’ oversight, there would be little to prevent the government from buying off politicians and judges.

“The addiction to information is like the addiction to drugs,” Montesinos declared. He considered information the basis of his power. “Here you feel the need for information. … We live on information. I need information.”

He tapped the telephones of enemies and of allies. On a wall of his intelligence service office, 25 television screens showed scenes beamed live from hidden cameras in the presidential palace, the Congress, the courts, downtown Lima and the airport.

Information was needed to identify opportunities and to ensure deals were kept. He carefully monitored the media’s news reports to verify that the owners did comply with what they had agreed.

What political harm came from what has been called the Montesinos virus? “The accumulation of all powers, legislative, executive and judiciary, in the same hands,” said U.S. Founding Father James Madison, “may justly be pronounced the very definition of tyranny.”

The Fujimori regime, by stealth, accumulated all of these powers, plus power over the news media. While Fujimori’s government did not own the media, it controlled them.

“If we do not control the television, we do not do anything,” said Gen. Elesván Bello at a 1999 meeting involving Montesinos, high-ranking members of the armed forces and television executives.

Demonstrating its power, it was television that finally toppled the Fujimori regime. Following the broadcasting of the videotape of Montesinos bribing Congressman Kouri, a flood of videotapes were aired, first on cable, then on nationwide broadcast.

In a democracy, the news media provide the most potent checks and balances against government abuse. Measured by the bribes Montesinos paid, the Legislature and the judiciary are far weaker constraints on potential tyranny than television, which has the greatest power to expose government wrongdoing.

Alberto Fujimori
Peru’s former president had been living in Japan since his ouster in 2000. He was on his way back to Lima, to run for president again, when he was detained in Chile for possible extradition to Peru and trial on charges of murder, human rights abuses and corruption.

Vladimiro Montesinos Torres
Chief of Fujimori’s secret police, who was in charge of bribing judges, politicians and media figures. After Fujimori’s fall, Montesinos was returned from Venezuela and charged with corruption, murder, arms running and drug dealing. He is imprisoned in Peru.

John McMillan is a professor of economics at the Stanford Graduate School of Business. Pablo Zoido is a consultant in Madrid. A longer version of this article was published in the Journal of Economic Perspectives. Contact us at

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