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Peru Failed Development
The guano bonanza also set in motion more negative
trends.
Castilla "nationalized" guano in order to maximize
benefits to
the state but in so doing reinforced aspects of the old
colonial
pattern of a mercantilist political economy. The state
then
consigned the commercialization of guano to certain
favored
private sectors based in Lima that had foreign
connections. This
created a nefarious and often collusive relationship
between the
state and a new "liberal" group of guano consignees.
Soon, this increasingly powerful liberal plutocracy
succeeded
in reorienting the country's trade policy away from the
previous
nationalist and protectionist era toward export-led growth
and
low tariffs
(see Historical Background
, ch. 3). Capital
investment derived from the guano boom and abroad flowed
into the
export sector, particularly sugar, cotton, and nitrate
production. The coast now became the most economically
dynamic
region of the country, modernizing at a pace that
outstripped the
Sierra. Coastal export-led growth not only intensified the
uneven
and dualist nature of Peruvian development, but subjected
the
economy to the vicissitudes of world trade. Between 1840
and
1875, the value of exports surged from 6 million pesos to
almost
32 million, while imports went from 4 to 24 million pesos.
On the
face of it, the liberal export model, based on guano,
pulled Peru
out of its postindependence economic stagnation and seemed
dramatically successful. However, while great fortunes
were
accruing to the new coastal plutocracy, little thought was
given
to closing the historical inequalities of wealth and
income or to
fostering a national market for incipient home
manufacturing that
might have created the foundation for a more diversified
and
truly long-term economic development.
What proved a greater problem in the short term was the
state's increasing reliance and ultimate dependence on
foreign
loans, secured by the guano deposits which, however, were
a
finite and increasingly depleted natural resource. These
loans
helped finance an overly ambitious railroad and
road-building
scheme in the 1860s designed to open up Peru's natural,
resourcerich interior to exploitation. Under the direction of
American
railroad engineer Henry Meiggs (known as the "Yankee
Pizarro"),
Chinese coolies constructed a spectacular Andean railroad
system
over some of the most difficult topography in the world.
But the
cost of constructing some 1,240 kilometers of railroad,
together
with a litany of other state expenditures, caused Peru to
jump
from last to first place as the world's largest borrower
on
London money markets.
Peru also fought two brief but expensive wars. The
first, in
which Peru prevailed, was with Ecuador (1859-60) over
disputed
territory bordering the Amazon. However, Castilla failed
to
extract a definitive agreement from Ecuador that might
have
settled conclusively the border issue, so it continued to
fester
throughout the next century. More successful was the
Peruvian
victory in 1866 over Spain's attempts to seize control of
the
guano-rich Chincha Islands in a tragicomic venture to
recapture
some of its lost empire in South America.
By the 1870s, Peru's financial house of cards,
constructed on
guano, finally came tumbling down. As described by
Gootenberg,
"Under the combined weight of manic activity, unrestrained
borrowing, dismal choice of developmental projects, the
evaporation of guano, and gross fiscal mismanagement,
Peru's
state finally collapsed ..." Ironically, the financial
crisis
occurred during the presidency of Manuel Pardo (1872-76),
the
country's first elected civilian president since
independence and
leader of the fledgling antimilitary Civilista Party
(Partido
Civilista--PC).
By the 1870s, economic growth and greater political
stability
had created the conditions for the organization of the
country's
first political party. It was composed primarily of the
plutocrats of the guano era, the newly rich merchants,
planters,
and businesspeople, who believed that the country could no
longer
afford to be governed by the habitual military "man on
horseback." Rather, the new age of international trade,
business,
and finance needed the managerial skills that only
civilian
leadership could provide. Their candidate was the dynamic
and
cosmopolitan Pardo, who, at age thirty-seven, had already
made a
fortune in business and served with distinction as
treasury
minister and mayor of Lima. Who better, they asked, at a
time
when the government of Colonel José Balta (1868-72) had
sunk into
a morass of corruption and incompetence, could clean up
the
government, deal with the mounting financial problems, and
further develop the liberal export-model that so benefited
their
particular interests?
However, the election of the competent Pardo in 1872
and his
ensuing austerity program were not enough to ward off the
impending collapse. The worldwide depression of 1873
virtually
sealed Peru's fate, and as Pardo's term drew to a close in
1876,
the country was forced to default on its foreign debt.
With
social and political turmoil once again on the rise, the
Civilistas found it expedient to turn to a military
figure,
Mariano Ignacio Prado (1865-67, 1876-79), who had rallied
the
country against the Spanish naval attack in 1865 and then
served
as president. He was reelected president in 1876 only to
lead the
country into a disastrous war with its southern neighbor
Chile in
1879.
Data as of September 1992
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