I feel at home in many cities and countries, but if I had to choose somewhere to live permanently, I think I would probably choose London. The city allows me a freedom that I cannot find in any other place. I have complete anonymity there; I have more time to do exactly as I choose. Elsewhere, I have too many obligations that I cannot avoid. In London, I see only those people I wish to see and I move freely. But English friendships are always unusual. Jorge Luis Borges, the poet, once said that an English friendship begins with the elimination of confidence and ends with the abolition of dialogue. What he meant, and I think he is right, is that an English friendship establishes certain rules from the beginning: there are certain things you must not talk about, certain excesses to be avoided. In Latin America, friendship is obscene: passionate and without secrets or distances. An English friendship is at once stable and more formalised.

This respect for forms and rules of behaviour has fascinated me ever since I first arrived in London as a young man. And the city is still so civilised. I'm always amazed at how courteous people are. Taxi drivers are invariably polite. Cars stop in the road to let you cross, which doesn't happen anywhere else, certainly not in Paris, Madrid or Lima. Which means, I guess, that thousands of English tourists must be killed on the roads every year.

Britain is moving forward rapidly under Tony Blair. The country is modernising impressively - yet at the same time the social institutions remain stable. I do not have the same impression about France, which, despite all its resources, remains mired in the past. What I like most about Blair is that he is a true disciple of Margaret Thatcher. He is the Margaret Thatcher of our times. As Thatcher moved from Conservatism to liberalism, so Blair has moved from socialism to liberalism, in the classic sense of the great liberals such as Adam Smith, Isaiah Berlin and Karl Popper. I was once an admirer of Margaret Thatcher, of the liberal reforms that transformed the country: encouraging ordinary people to buy private property, for example.

But I have become disenchanted with the Conservatives. Labour has inherited all that was once new, modern and innovative in the old Tory party. As a result, the Tories have no policies and no new ideas. Margaret Thatcher herself is a bitter woman, hostile to Europe and nationalistic in the worst way. I found her support of Pinochet intolerable. A democratic leader should not defend a dictator who tortured and killed thousands of people.

My return to London coincides with the publication of my latest novel, The Feast of the Goat (Faber and Faber), which recreates the last days of the Rafael Trujillo dictatorship in the Dominican Republic. I have long been fascinated by Trujillo, who was assassinated in 1961, and by the violent excesses of his regime. During my research I interviewed many of his victims and collaborators. Among these was the former president, JoaquIn Balaguer, now in his nineties and blind. I asked him how he could have worked for a gangster like Trujillo. Politics, he said, was his vocation, and the only way to be a politician in the Dominican Republic was to work with Trujillo. I was poor, he said, I had to provide for my family. He decided from the beginning that he would not steal and he would not participate in Trujillo's orgies. That he did, and as a result he has been president of the country seven times. Politics, after all, is about being pragmatic. It is the art of manipulation.

I was delighted when my old friend V S Naipaul won the Nobel Prize for Literature. What an amusing character! I once spent an enjoyable weekend with him and his wife in the country. I then called to invite them to dinner in London. He said: "Well, I'll let you know." Three days later, he called to ask about the other guests. I told him who they were, and then asked if he would be coming for dinner. He said that he would call back. A couple of days later, he called again. He wanted to speak to my wife, Patricia. He wanted to know the menu. He said that he was a vegetarian and that Patricia should find a pen and paper so that she could write down what he wanted. Then he said: "I always drink champagne at dinners." I was convinced that this was going to be one of the worst experiences of our lives. In the event, he came for dinner and was the perfect English gentleman. He charmed everyone.

I have recently returned from a three-month stay in Peru. Peru is not one country, it is many. As a middle-class Peruvian, I had a very restricted idea of my country: I knew very little about the millions of Indians living in the Andes or in the countryside, about their traditional ways of life. There were great inequalities and distances between the groups and classes. Today, I am more optimistic about the country, certainly because we now have a democratically elected president. The different cultures and peoples of Peru - the ancestors of the European elite, the blacks they brought with them, the Indians, the Chinese - are not as integrated as they should be and there are enormous economic difficulties. But in many ways, Peru is a microcosm of the world. In an era of globalisation, we are already globalised, which may prove to be to our future advantage, especially if we succeed in integrating all our different cultures in an open and democratic society.

See Sebastian Shakespeare's review, page 57