Mario Vargas Llosa.(Interview)

Widely regarded as one of the world's top novelists, Mario Vargas Llosa is also a self-proclaimed "radical liberal" who extols the virtues of the free-market economy. That view has fallen out of favor throughout much of Latin America--most recently contributing to the civil strife that toppled Bolivian president Gonzalo Sanchez de Lozada--but the award-winning Peruvian writer insists that economic freedom and political liberty must go hand in hand. Vargas Llosa, 67, has taken up temporary residence in Washington, where he is spending the fall semester at Georgetown University as a writer-in-residence. His latest book is "The Way to Paradise," a novel about the lives of French post- impressionist painter Paul Gauguin and his half-Peruvian feminist grandmother Flora Tristan that will be published in English in November. Vargas Llosa spoke to NEWSWEEK's Joseph Contreras earlier this month about democracy, Fidel Castro and the state of civil liberties under George W. Bush. Excerpts:

CONTRERAS: Latin America is witnessing a major backlash against neoliberal economic policies. Why do you continue to support those policies?

VARGAS LLOSA: Those policies work quite well when they are properly implemented. Chile is a typical case; it is a country that is growing and opening [new] opportunities. But that hasn't happened in the rest of Latin America. You cannot describe as liberal the policies that [former Peruvian president Alberto] Fujimori adopted or those of [Carlos] Menem in Argentina. They privatized [state-owned] companies to hand over to their cronies and line their pockets.

But El Salvador embraced the free-trade model 15 years ago and large numbers of Salvadorans are still going to the United States in search of jobs.

Reform doesn't always produce benefits as quickly as one would like. It isn't a magic wand.

You endorsed Alejandro Toledo for president, but his approval ratings in Peru have plummeted since taking office two years ago. Do you still back him?

Yes, I am his friend and I support his government, even though I have criticized him for some things. We Peruvians should be grateful to Toledo because he played a decisive role in bringing down the Fujimori regime. He has been ferociously attacked from the very outset in ways that few presidents of Peru have ever been. There are Peruvians who simply don't accept the notion of having an indigenous person as their president, and that strikes me as a great injustice.