A constitutional republic since 1860, Peru enjoys strong economic growth. A large export industry in sugar, cotton, and mining creates modern agro-industrial plantations and mining enclaves, and a large industrial working class. Frequent clashes over social legislation and border conflicts lead populist President Guillermo Billinghurst to threaten to dissolve congress.
The armed forces seize power under Col. Oscar Raimundo Benavides; Jose de Pardo y Barreda then defeats him in elections. World War I disrupts international markets and Peru's externally oriented economy, bringing recession. Social unrest and the Mexican and Russian revolutions' ideas spawn an increasingly militant labor movement. Victor Haya de la Torre leads a new generation of radical reformers.
Former President Augusto Leguía stages a coup and assumes the presidency. In 1920 a new constitution enhances the state's power to carry out social and economic reform. Essentially a dictator, Leguía develops Lima and modernizes Peru, increasing national debt. He quells labor and student militancy, suppresses opposition, and amends the constitution to allow him to run unopposed for reelection.
During Leguía's second term, Haya de la Torre founds the American Popular Revolutionary Alliance (APRA) as a regional party calling for social reform. Leguía bans APRA. At the dawn of his third term, Leguía's rule collapses under the weight of economic depression, a border dispute with Chile, corruption, and a massive buildup of foreign debt. Lt. Col. Sánchez Cerro overthrows him in 1930.
Having deposed President Leguía, Col. Cerro barely defeats Haya de la Torre in the 1931 elections. Peru declares a moratorium on its US$180 million debt and is barred from U.S. capital markets. Cerro's brutal suppression of Haya de la Torre's APRA party leads a militant Aprista to assassinate him in 1933. Congress elects former President Benavides to complete his five-year term.
Benavides nullifies a disputed 1936 election to extend his term. His repression of the left spawns the Peruvian Communist Party (PCP), which links its cause to those of the native Indian and labor movements. Apristas are implicated in acts of political terror. Bolstered by a range of exports, Peru's economy grows. Manuel Prado y Ugarteche, a Lima banker, wins the 1939 presidential elections.
President Prado softens official opposition to APRA while its leader, Haya de la Torre, moderates its reform program, calling for democracy and foreign investment. Prado allows the return of free elections, and in 1945 APRA is legalized and backs the victorious moderate José Luís Bustamente y Rivero in a coalition. Bustamente appoints an Aprista minister of economy.
Under Bustamente, the state increases its intervention in the economy in an attempt to stimulate growth and redistribution. But price and exchange rate controls do not mix well with sagging exports. The resulting inflation and labor unrest destabilize the government. Gen. Manuel Odría leads a coup. The incoming military junta bans the APRA, and Odría becomes president.
Odría returns Peru to dictatorship. World prices for Peru's commodities rise and lead to strong, export-led growth but uneven development. Two new political parties form out of a growing urban middle class: the Popular Action (AP) and Christian Democratic Party (PDC). Former President Prado defeats AP founder Fernando Belaúnde Terry with APRA support in the 1956 elections.
Uneven development, confined to the coast, sparks social mobilization in the interior highlands (the Sierra), rural-urban migration, and peasant/landowner confrontations. APRA veers to the right, and disillusioned Apristas join the AP. Haya de la Torre wins the 1962 elections but lacks the required one-third of the vote to become president. The military seizes power and conducts new elections.
Military rule ends as Fernando Belaúnde Terry, joint candidate of the AP and the PDC and moderate reformer, wins the presidency. Belaúnde effects social, educational, and land reforms, encourages industrial development, and opens up the interior with a new highway system through the Andes. His reforms, however, are insufficient to quell peasant discontent.
The cycle of export-led economic expansion, relying heavily on fishmeal exports, wanes amid budgetary deficits and spiraling inflation. The Castro-influenced, Aprista-led Movement of the Revolutionary Left (MIR) is born. Belaúnde orders the army to put down the movement. The army complies, but subsequently deposes Belaúnde in a bloodless coup. Gen. Juan Velasco Alvarado assumes the presidency.
Velasco suspends the constitution. Under an import-substitution industrialization policy, the state takes control of most industries, including mines, infrastructure services, banking, and the media. Velasco's dictatorial rule is beset by an earthquake, the Maoist guerilla group Shining Path, the '73 oil embargo, inflation, and debt. Gen. Francisco Morales Bermúdez heads a junta and stages a coup.
Gen. Bermúdez implements an austerity program to aid the failing economy. The state accounts for over 35 percent of national production. Continued economic troubles and corruption charges turn public opinion against the military. A new constituent assembly, elected in 1978, drafts a new constitution, adopted in 1979. A year later, former President Belaúnde, turned more conservative, is reelected.
Belaúnde's neo-liberal economic program, emphasizing privatization and exports, fails to bring economic growth. Natural catastrophes and dropping international commodity prices worsen the situation. Soaring inflation leads to civil unrest among the Shining Path and the emerging Túpac Amaru Revolutionary Movement (MRTA). International demand for coca fuels a rising tide of drug trafficking.
Peru experiences an economic crisis. The government responds by borrowing heavily in international markets. Military counterinsurgency techniques against the Shining Path (who reap financial benefits from defending coca growers) and the MRTA lead to human rights violations and only serve to increase the size and influence of the two groups.
Social Democrat and APRA leader Alan García Pérez is elected president. Political violence by guerilla groups continues to spread. García's economic reforms, including price and exchange controls, bring growth and decreased inflation and usher in a brief period of optimism. The political arena becomes polarized after García's controversial decision to nationalize commercial banks.
With the Central Bank overextending its credit and the external current account in deficit, the economy is a shambles. The government comes under fire for the economic woes, political scandal, and failure to stem guerrilla violence. Peru is cut off from international financial markets after it ceases to make debt payments above 10 percent of the value of exports. Support for García and APRA slips.
Political newcomer Alberto Fujimori, son of Japanese immigrants and leader of a new "Change 90" party, wins the presidential election. Once in office, Fujimori reneges on his promise to revive the economy without "shock therapy" and implements a shock package that includes labor, trade, and financial deregulation and courts foreign investment and privatization. Import substitution is abandoned.
Facing mounting opposition, President Fujimori suspends the Constitution, allies himself with the army, and cracks down on the Shining Path. Social conditions decline despite nascent economic revitalization.
Under international pressure, Fujimori reinstitutes an amended constitution and appoints a council of ministers. The government remains highly centralized. Peru experiences robust economic growth driven by foreign direct investment in the form of privatization in several key industries. Favorable economic development brings increased social spending by 1995, but regional disparities grow.
Peru suffers a triple blow: Fujimori's administration weakens; financial turmoil in Asia, Russia, and Brazil scares off investors; and damage from the El Niño weather phenomenon brings a sharp decline in fishmeal and agricultural production and exports. Storms and mudslides cause environmental damage and sanitation challenges. Inflation, however, drops steadily, and the currency remains stable.
Fujimori seeks a third term, but fraud taints his victory. He flees Peru and resigns. Valentín Paniagua Corazao presides over a caretaker government until the election of centrist Alejandro Toledo of the new Peru's Potential party. Toledo launches a national reconciliation and ends antiterrorism laws, but his economic policy disappoints his low-income constituency, and his popularity plummets.
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