Modern Peru is generally considered to have been born in 1895 with the forced resignation of General Andrés Avelino Cáceres. 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 USD 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 Nicolás de Piérola (President from 1879-81 and again from 1895-99), 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 Leguía 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 modernised – 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, Leguía 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 less than others, but the demand for its main exports (oil, silver, sugar, cotton and coffee) fell off significantly.


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