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The following is a complete transcript of CNN's Lucia Newman's interview with Peruvian President Alberto Fujimori.

January 8, 1997
Web posted at: 10:00 p.m. EST (0300 GMT)

Q: I'd like to ask you first, the MRTA rebels have spent a lot of time talking, but you haven't said much throughout this crisis. Why is that?

A: At the beginning, because the lives of the hostages were at stake, then during this silent period we have taken several measures like not accepting the ultimatum of the terrorists threatening to kill our foreign affairs minister.

Q: Why is it then that the man you designated to talk to the rebels, minister Domingo Palermo, has not gone back inside the diplomatic residence for nearly two weeks? Does this mean that all the talks are at a stalemate?

A: I wouldn't say that it's in a stalemate. We're waiting for a favorable condition for, beginning again, the talks. In fact, sometimes there is direct dialogue between (Nestor) Cerpa Cartolini and Domingo Palermo through the radio.

Q: There are talks still going on? There is high-level contact between the government and Cerpa Cartolini, the MRTA leader, inside the residence?

A: Not in the last four or five days. Unfortunately, the press conference that happened stopped this contact.

Q: What will it take for the contact to start up again?

A: We are waiting for favorable conditions, a favorable scenario for this contact.

Q: The rebels have said they can wait all the time in the world to get what they want. How long can you wait, Mr. President?

A: In fact, this is a blackmail of the terrorists at the expense of the suffering of the hostages. We are going to evaluate day by day and, anyway, we are going to treat all the pacific solution we may find.

A: What happens if you exhaust all the pacific solutions? Does that mean that your government will consider using force as a way to end the standoff?

A: We discount the use of force as far as they don't hurt the hostages.

Q: So can you wait as long as they can wait?

A: We will evaluate the situa9tion day by day.

Q: Why have you refused, point blank, to meet the main demand of the rebels and that is for the release of some or all of their imprisoned comrades?

A: This is unacceptable. We were not going to liberate, release those terrorists because of our law and because of our national security and also the regional security.

Q: In October, you said fighting terrorism was papaita which means, in English, something like a peace of cake. Do you still think so?

A: We have shown, given these last three years, that we were succeeding in fighting terrorists. While during the first 30 years of the former governments they didn't. Now we are showing to the world that this fighting against two terrorist groups was feasible and now we have an isolated case which doesn't mean that terrorism is alive, as it was before.

Q: In the last year, Peru's economy has been in a recession, discontent has grown, unemployment has grown, unemployment has grown, so has the poverty here. Are you concerned that this is a breeding ground for rebel groups like MRTA to exist in this country?

A: Poverty doesn't imply necessarily violence. In many countries there (is) more poverty than here. But we're conscious about poverty, which we hate, and it's not a problem of the last five years.

So we are (attacking) poverty through several measures, and that's one of the main goals of my government. We expect that in the next years, the economy will improve. And we expect that extreme poverty will drop from 22 percent to 11 percent by the year 2000.

Q: How can you guarantee the economic recovery that you're speaking of in view of this hostage crisis?

A: The investor knows quite well that we don't have anymore the widespread terrorism here in Peru. The investor (unintelligble) that this is ... an isolated case in the Japanese embassy, so they are confident that Peru's economy will grow with stability. And we believe in that trend also.

Q: You have spoken for the need of judicial reform in this country. Does that include changing some of your anti-terrorist legislation which you yourself have admitted has led to a great deal of injustice, especially of innocent people being thrown in jails for years, sometimes for life.

A: We corrected some hundred cases -- 225 with a presidential representative following the judiciary process. And we formed a special group for presidential pardon, also, which gave this freedom for another 100.

Now we are in this situation where we're now evaluating again. We have to give out stiff measure in our legislation, anti-terrorist legislation, because we are concerned that terrorism must be eradicated from Peru and from the region. Anyway, if there are some unjust cases, we will follow through one of these means.

Q: Are you considering relaxing some of your anti-terrorism legislation to make it conform more with international norms? Peru has been severely criticized by the United Nations and other human rights organizations for this.

A: We consider it -- that we were in an emergency situation and that's why we approved this kind of law. We're going to evaluate what's coming in the next few months, if it's sufficient that the guarantee of the situation allows us to change this legislation.

Q: Some people are saying in Peru that this is perhaps the ideal opportunity for you and the government to try to bring about an integral peace solution -- to enter into peace talks with the MRTA rebels -- so you can put an end to all these problems just as Guatemala has just finished doing.

A: This proposal is made by very, very few people from the opposition side. The majority of the opposition are supporting the government measure. We don't agree in making an agreement in Peru, becuase MRTA or any terrorist group -- they are isolated groups.

It's completely different like those in central American countries, where many people involved are following the guerrillas. Here it's completely different. That's why we're not accepting one or going to accept this kind of solution. It's a completely different situation here.

Q: Is there any concession you're willing to make to the MRTA rebels to end this hostage siege?

A: The framework was given in the message to the nation that means that liberation is not acceptable, and we have offered some pacific way out with persons of guarantors. So this is the kind of way that we can work out for the solution of this crisis.

Q: In other words, giving the rebels safe passage to another country, that would be the maximum of what you'd be willing to give?

A: That's one of the ways out. We may find another way out of this problem.

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