Modern Peru is generally considered to have been born in 1895 with the forced resignation of General Caceres. However, the seeds of industrial development had been laid under his rule, albeit by foreigners. In 1890 an international plan was formulated to bail Peru out of its bankruptcy. The Peruvian Corporation was formed in London and assumed the $50 million national debt in return for “control of the national economy”. Foreign companies took over the rail lines, navigation of Lake Titicaca, vast quantities of guano, and were given free use of seven Peruvian ports for 66 years as well as the opportunity to start exploiting the rubber resources of the Amazon Basin. Under Nicolas de Pierola, some sort of stability had begun to return by the end of the nineteenth century.
In the early years of the twentieth century, Peru was run by an oligarchical clan of big businessmen and great landowners. Fortunes were made in a wide range of exploitative enterprises, above all sugar along the coast, minerals from the mountains, and rubber from the jungle. Meanwhile, the lot of the ordinary peasant worsened dramatically.
One of the most powerful oligarchs, Augusto Leguia rose to power through his possession of franchises for the New York Insurance Company and the British Sugar Company. He became a prominent figure, representing the rising bourgeoisie in the early 1900s, and in 1908 he was the first of their kind to be elected president. Under his rule the influence of foreign investment increased rapidly, with North American money taking ascendancy over British. It was with this capital that Lima was modernized – parks, plazas, the Avenida Arequipa and the Presidential Palace all date from this period. But for the majority of Peruvians, Leguia did nothing. The lives of the mountain peasants became more difficult, and the jungle Indians lived like slaves on the rubber plantations. Not surprisingly, Leguia’s time in power coincided with a large number of Indian rebellions, general discontent and the rise of the first labour movement in Peru. Elected for a second term, Leguia became still more dictatorial, changing the constitution so that he could be re-elected on another two occasions. A year after the beginning of his fourth term, in 1930, he was ousted by a military coup – more as a result of the stock market crash and Peru’s close links with US finance than as a consequence of his other political failings.
During Leguia’s long dictatorship, the labour movement began to flex its muscles. A general strike in 1919 had established an eight-hour day, and ten years later the unions formed the first National Labour Centre. The worldwide Depression of the early 1930s hit Peru particularly badly; demand for its main exports (oil, silver, sugar, cotton and coffee) fell off drastically. Finally, in 1932, the Trujillo middle class led a violent uprising against the sugar barons and the primitive conditions of work on the plantations. Suppressed by the army, nearly five thousand lives are thought to have been lost, many of the rebels being taken out in trucks and shot among the ruins of Chan Chan.
The rise of APRA – the American Popular Revolutionary Alliance – which had instigated the Trujillo uprising, and the growing popularity of its leader, Haya de la Torre , kept the nation occupied during World War II. Allowed to participate for the first time in the 1945 elections, APRA chose a neutral candidate – Dr Bustamante – in place of Haya de la Torre whose fervent radicalism was considered a vote loser. Bustamante won the elections, with APRA controlling 18 out of 29 seats in the Senate and 53 out of 84 in the Chamber of Deputies.
Post-war euphoria was short-lived, however. Inflation was totally out of hand and apparently unaffected by Bustamante’s exchange controls; during the 1940s the cost of living in Peru rose by 262 percent. With anti-APRA feeling on the rise, the president leaned more and more heavily on support from the army, until General Odria led a coup d’état from Arequipa in 1948 and formed a military junta. By the time Odria left office, in 1956, a new political element threatened oligarchical control – the young Fernando Belaunde and his National Youth Front (later Acción Popular) demanding “radical” reform. Even with the support of APRA and the army, Manuel Prado barely defeated Belaunde in the next elections: the unholy alliance between the monied establishment and APRA has been known as the “marriage of convenience” ever since.
The economy remained in dire straits. Domestic prices continued to soar and in 1952 alone there were some two hundred strikes and several serious riots. Meanwhile much more radical feeling was aroused in the provinces by Hugo Blanco , a charismatic mestizo from Cusco who had joined a Trotskyist group – the Workers Revolutionary Party – which was later to merge with the FIR – the Revolutionary Left’s Front. In La Convencion, within the Department of Cusco, Blanco created nearly 150 syndicates, whose peasant members began to work their own individual plots while refusing to work for the hacienda owners. Many landowners went bankrupt or opted to bribe workers back with offers of cash wages. The second phase of Blanco’s “reform” was to take physical control of the haciendas, mostly in areas so isolated that the authorities were powerless to intervene. Blanco was finally arrested in 1963 but the effects of his peasant revolt outlived him: in future, Peruvian governments were to take agrarian reform far more seriously.
Back in Lima, the elections of 1962 had resulted in an interesting deadlock, with Haya de la Torre getting 33 percent of the votes, Belaunde 32 percent, and Odria 28.5 percent. Almost inevitably, the army took control, annulled the elections, and denied Haya de la Torre and Belaunde the opportunity of power for another year. By 1963, though, neither Acción Popular nor APRA were sufficiently radical to pose a serious threat to the establishment. Elected president for the first time, Belaunde quickly got to work on a severely diluted programme of agrarian reform, a compromise never forgiven by his left-wing supporters. More successfully, though, he began to draw in quantities of foreign capital. President de Gaulle of France visited Peru in 1964 and the first British foreign secretary ever to set foot in South America arrived in Lima two years later. Foreign investors were clamouring to get in on Belaunde’s ambitious development plans and obtain a rake-off from Peru’s oil fields. But by 1965 domestic inflation had so severely damaged the balance of payments that confidence was beginning to slip away from Belaunde’s international stance.

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