When the Spanish landed in 1531, Peru's territory was the nucleus of the highly developed Inca civilization. Centered at Cuzco, the Incan Empire extended over a vast region from northern Ecuador to central Chile. In search of Inca wealth, the Spanish conqueror Francisco Pizarro, who arrived in the territory after the Incas had fought a debilitating civil war, conquered the weakened people. The Spanish captured the Incan capital at Cuzco by 1533, and consolidated their control by 1542. Gold and silver from the Andes enriched the conquerors, and Peru became the principal source of Spanish wealth and power in South America.
Pizarro founded Lima in 1535. The viceroyalty established at Lima in 1542 initially had jurisdiction over all of the Spanish colonies in South America. By the time of the wars of independence (1820-24), Lima had become one of the most distinguished and aristocratic colonial capitals and the chief Spanish stronghold in the Americas (along with Mexico City).
Jose de San Martin of Argentina and Simon Bolivar of Venezuela led Peru's independence struggle. San Martin proclaimed Peruvian independence from Spain on July 28, 1821. Emancipation was completed in December 1824, when Venezuelan Marshall Antonio Jose de Sucre defeated a Spanish army at Ayacucho, ending Spain's rule in South America. Spain subsequently made futile attempts to regain its former colonies, but in 1879 it finally recognized Peru's independence.
After independence, Peru and its neighbors engaged in intermittent territorial disputes. Chile's victory over Peru and Bolivia in the War of the Pacific (1879-83) resulted in a territorial settlement in which Peru ceded the department of Tarapaca and the provinces of Tacna and Arica to Chile. In 1929, Chile returned Tacna to Peru. Following a clash between Peru and Ecuador in 1941, the Rio Protocol--of which the United States is one of four guarantors (along with Argentina, Brazil, and Chile)--sought to establish the boundary between the two countries. Continuing boundary disagreements led to brief armed conflicts in early 1981 and early 1995, but in 1998 the governments of Peru and Ecuador signed an historic peace treaty and demarcated the border. In late 1999, the governments of Peru and Chile likewise implemented the last outstanding article of their 1929 border agreement. Peru and Chile still dispute the maritime boundary.
The military has been prominent in Peruvian history. Coups have repeatedly interrupted civilian constitutional government. The most recent period of military rule (1968-80) began when General Juan Velasco Alvarado overthrew elected President Fernando Belaunde Terry of the Popular Action Party (AP). As part of what has been called the "first phase" of the military government's nationalist program, Velasco undertook an extensive agrarian reform program and nationalized the fishmeal industry, some petroleum and mining companies, and several banks.
Because of Velasco's economic mismanagement and deteriorating health, he was replaced in 1975 by General Francisco Morales Bermudez. Morales Bermudez tempered the authoritarian abuses of the Velasco administration and began the task of restoring the country's economy. Morales Bermudez presided over the return to civilian government under a new constitution, and in the May 1980 elections President Belaunde Terry was returned to office by an impressive plurality.
Nagging economic problems left over from the military government persisted, worsened by an occurrence of the "El Nino" weather phenomenon in 1982-83, which caused widespread flooding in some parts of the country, severe droughts in others, and decimated the fishing industry. The fall in international commodity prices to their lowest levels since the Great Depression combined with the natural disasters to decrease production, depress wages, exacerbate unemployment, and spur inflation. Bloated state-owned companies compounded the deteriorating fiscal situation. The ensuing economic collapse was reflected in worsening living conditions for Peru's poor and provided a breeding ground for social and political discontent. The emergence of two terrorist groups--Sendero Luminoso (Shining Path) in rural areas in 1980, followed shortly thereafter by the Tupac Amaru Revolutionary Movement (MRTA) in Lima and the Amazonas--sent the country further into chaos. The terrorists were financed in part from alliances with narcotraffickers, who had established strongholds in the Peruvian Andes and Amazon basin during this period. Peru and Bolivia became the largest coca producers in the world, accounting for roughly four-fifths of production.
Amid inflation, economic hardship, and terrorism, Alan Garcia Perez of the American Popular Revolutionary Alliance (APRA) won the presidential election in 1985. The transfer of the presidency from Belaunde to Garcia on July 28, 1985, was Peru's first transfer of power from one democratically elected leader to another in 40 years. The Garcia administration’s economic mismanagement led to hyperinflation from 1988 to 1990. Concerned about the economy, the increasing terrorist threat from Sendero Luminoso, and allegations of official corruption, in 1990 voters chose as President a relatively unknown mathematician-turned-politician, Alberto Fujimori.
Although he ran on a populist platform, promising not to implement the macroeconomic shock package proposed by his opponent, novelist Mario Vargas Llosa, the severe economic situation forced Fujimori to carry out radical changes. He immediately implemented drastic economic policies to tackle inflation (which dropped from 7,650% in 1990 to 139% in 1991), but encountered opposition to further economic reforms, including dealing with the growing insurgency.
On April 5, 1992, Fujimori dissolved the Congress in an "auto-coup," set aside the 1979 constitution, and carried out a mass firing of judges and “reorganization” of the courts. Later, pressured by the international community, Fujimori called new congressional elections. With a large majority in Congress, Fujimori proceeded to govern unimpeded, and in 1993 pushed through a new constitution with a strong executive function. Fujimori's security advisor, Vladimiro Montesinos, used bribes and intimidation to co-opt large segments of the judiciary, military, and media. The government unleashed a counterattack against the insurgencies that resulted in numerous human rights abuses on both sides and eventually quashed the Shining Path and MRTA. During this period Fujimori introduced far-reaching legal and economic reforms, privatized most state-owned companies, removed investment barriers, and significantly improved public finances. After a short but intense border war, Fujimori reached a milestone peace accord in 1998 with Ecuadorian President Jamil Mahuad related to the common border, ending decades of hostility between the two countries.
Fujimori mired Peru in political and economic turmoil with his questionable decision to seek a third term and his subsequent tainted electoral victory in June 2000. The Organization of American States (OAS), as well as the U.S. and many other states, refused to recognize the election results. A political bribery scandal broke just weeks after Fujimori began his third term in July, forcing him to call new elections in which he would not run. Fujimori fled to Japan and resigned from office in November 2000. A caretaker government under Valentin Paniagua presided over new presidential and congressional elections in April 2001. In the presidential contest, Alejandro Toledo defeated Alan Garcia in a runoff and took office on July 28, 2001.
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