1886-95 - The New Militarism
After a period of intense civil strife similar to the political chaos during the immediate postindependence period half a century earlier, the armed forces, led by General Andres Avelino Caceres (1886-90, 1894-95), succeeded in establishing a measure of order in the country. General Caceres was the constitutional head of the state, and the whole interior of Peru desired that he should restore the reign of law.
From 1881 to 1884 the political developments in Peru are more particularly connected with the occupation of the country by the Chilians as the immediate consequence of the war, and as such are described in the account of that struggle. The thread of the present story, therefore, is picked up at the point where the evacuation of Peruvian territory by the Chilian forces took place. General Miguel Iglesias had been installed as President by the assistance of the Chilian authorities, although he was not recognised by a dissentient section of the population of which General Caceres was the leader.
Caceres, after fighting the enemies of his country with untiring energy and distinguished valor, during six weary years, finally restore peace to Peru. A decree was issued calling for elections of a president, vice-presidents, senators, and deputies, and congress was ordered to meet at Lima on the 30th of May, 1886. With some reluctance General Caceres accepted the candidature that was pressed upon him.
After Caceres, a Creole and hero of the guerrilla resistance to the Chilean occupation during the War of the Pacific, won the presidency in 1886, he succeeded in imposing a general peace, first by crushing a native rebellion in the Sierra led by a former ally, the respected native American varayoc (leader) Pedro Pablo Atusparia. Caceres then set about the task of reconstructing the country after its devastating defeat.
President Caceres entered upon a most difficult and distressing task. Everywhere there was ruin, misery, and sorrow. The slaughter, and repeated massacres of Indians, had materially reduced the population. The treasury was empty. The country had been robbed almost to the last dollar. Yet hope and energy were left. With peace and sufficient time the people would take heart, and industries would revive. Meanwhile the strictest economy was necessary in every department.
The army was reduced to an effective force of 3,500 men, and a police force of 1,500, six battalions of infantry of four hundred men each, two bands, two regiments of cavalry besides a squadron as an escort. four batteries of mountain guns, and some horse artillery. In subsequent years this little force was made thoroughly effective, and supplied with the best and most improved weapons. The Peruvian navy was reduced to two small steamers, the "Peru" and the "Santa Rosa." But it had traditions of the past, a staff of officers with professional experience and distinguished services, and hopes for the future. Officers would find employment in various ways. The nucleus of a navy was entrusted to Captain Villavicencio, the gallant hero of the "Union," and to Jose Galvez, the young lieutenant who sank the Chilean torpedo boat.
The Administration of President Andres Caceres from 1886 to 1890 was barren of historical events. The people of Peru were wearied with a condition of warfare that had existed first with Chile and afterwards against the authority of Iglesias, and little energy was left to foment disturbances against the authorities. Everywhere was misery and poverty, for Peruvian industrial enterprise had been ruined in the struggle against Chile, and the spirit of the inhabitants was so far broken that small scope remained for the establishment of new undertakings. The national resources dwindled away to insignificant proportions, the revenue was barely sufficient for the maintenance of the Government, and no funds were available for the assistance of the sufferers in the recent defence of the country against the Chilian invasion or the internal disturbances occurring between 1884 and the end of 1885.
In such circumstances the Administration of Caceres lived from 1886 to 1890. Towards reconstruction nothing was attempted, and public affairs were allowed to drift in haphazard fashion. The national income supported a small favoured clique, but when this limited circle was satisfied nothing was left for the alleviation of the general distress. When the term of Caceres ended in 1890, the official candidate, Colonel Morales Bermudez, was declared elected, and no opposition to this arrangement was suggested.
The centerpiece of his recovery program was the Grace Contract, a controversial proposal by a group of British bondholders to cancel Peru's foreign debt in return for the right to operate the country's railroad system for sixty- six years.
The impossibility of meeting the obligations of the foreign debt with no other resources than are shown by the above financial statement was obvious, even after the former prosperity of the country has been restored by long years of frugality and industry. Mr. Michael Grace of New York, representing the foreign holders of Peruvian bonds, nevertheless submitted a proposal to the government of President Caceres which received serious consideration. It was referred to a committee consisting of the Vice President Denegri, Dr. Garcia Calderon, and Dr. Rosas, who reported in favor of its acceptance. The scheme was that the bondholders should form a company to receive from the Peruvian government all the railways for a long term of years, mining privileges, and grants of land for immigration. In return the bond holders were to deliver over to Peru one-half the obligations issued by her abroad, looking to Chile for settlement of the other half. The foreign debt would thus be cancelled.
The contract provoked great controversy between nationalists, who saw it as a sellout to foreign interests, and liberals, who argued that it would lay the basis for economic recovery by restoring Peru's investment and creditworthiness in the West. Finally approved by Congress in 1888, the Grace Contract, together with a robust recovery in silver production (US$35 million by 1895), laid the foundations for a revival of export-led growth.
Between 1890 and 1894 the power behind the Government was Caceres, and under his guidance the Bermudez Administration conducted public affairs in uneventful fashion. No effort at improvement was made, nor was there any attempt to check the corruption rampant in every official department. It was only natural that discontent arose among a large section of the inhabitants, and this feeling became more marked as the population began to recover from the state of depression which prevailed at the close of the war with Chile. Under Caceres the Government had been practically a military dictatorship, and small change in the system occurred under Bermudez because of the influence of his predecessor over the Administration; but the civilian element recognised that a continuance of dictatorial methods was a direct obstacle to substantial progress, and an agitation was set afoot to secure the election of a civilian to the Presidency when the term of Bermudez expired. It was not the intention of Caceres to allow the control of affairs to slip through his hands, and he handled the situation in such manner as to prevent his opponents obtaining their object by constitutional means. At the commencement of 1894 it was evident that he had so manipulated matters that he would be proclaimed President when the formal result of the election was announced.
President Bermudez died suddenly on April 1, 1894, three months before the expiration of presidential term, and the first Vice-President, Senor Pedro del Solar, should have succeeded. Senor Solar represented the civilian element, and his advent to office did not accord with the views held by General Caceres; so, to avoid the complications likely to arise if he did, Caceres induced Colonel Borgono, the second Vice-President, to seize control of the Government. This illegal proceeding provoked a revolutionary rising in the south, which was nominally headed by Seflor Solar, but in reality directed by Pierola from Chilian territory. The Chambers were opposed to the course taken by Colonel Borgono, and in view of this hostility he dissolved the Congress and ordered elections to be held to secure representatives to support the new Administration. In due course the Chambers constituted under these conditions met in Lima, and shortly afterwards Caceres was proclaimed President, assuming office formally on August 10.
The Earl of Donoughmore, who proceeded to Lima as representative of the bondholders in August, 1888, and returned in 1891, submitted a report to the directors of the Peruvian Corporation, in which he attributed the success of his mission to the firm and wise administration of General Caceres and his successor. All the railway lines had been restored to efficiency and were working with regularity by the beginning of 1891. Peru was thus relieved of all foreign debt.
Indeed, economic recovery would soon turn into a sustained, long-term period of growth. Nils Jacobsen has calculated that "Exports rose fourfold between the nadir of 1883 and 1910, from 1.4 to 6.2 million pounds sterling and may have doubled again until 1919; British and United States capital investments grew nearly tenfold between 1880 and 1919, from US$17 to US$161 million." However, he also notes that it was not until 1920 that the nation fully recovered from the losses sustained between the depression of 1873 and the postwar beginnings of recovery at the end of the 1880s. Once underway, economic recovery inaugurated a long period of stable, civilian rule beginning in 1895.
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