Hunefeldt C., Harris B. A Brief History of Peru

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A BRIEF HISTORY OF PERU

134

Historical Processes in the Regions

While historians have devoted much energy to explaining Peruvian

national development during the 19th century, the historical processes

and economic development of the distinct regions have been much less

examined. Much is known about the overarching economic cycles in

250 kilometers

250 miles

Pacific

Ocean

Huallanca

1857

Lima

CallaoCallao

Chancay

Pisco

Ica

Juliaca

Puno

Arica

Pisagua

Iquique

Mollendo

Islay

Tacna

Puerto

Maldonado

Moquegua

Tumbes

TalaraTalara

Sullana

1876

Piura

Paita

Chiclayo

Guadalupe 1874

Cajamarca

Guadalupe 1874

Tarapoto

Iquitos

CuzcoCuzco

Quillabamba

Machu Picchu

Huancavelica

Ayacucho

Lurín

Arequipa

Huacho

Paramonga

Trujillo

Pacasmayo

Puerto Chicama

Chicama

Pimentel

Eten

Chilete

Ascope

Salaverry

1874

Chimbote

Huánuco

Tingo

Cajamarca

Moyobamba

Cerro de Pasco

Goyllarisquizga



Huaráz

Huallanca

HuancayoHuancayo

La Oroya

1871

1874

1871

1920

1892

1904

1875

1857

1872

1870

Lambayeque

1871

Ilo

1877

Lake



Titicaca

añ

CHILE

BRAZIL

ECUADOR

BOLIVIA

PERU

Railroad Construction

Railroad lines

constructed before 1879

Railroad lines constructed

after 1890, the majority by 

the Peruvian Corporation

Contemporary national

boundary

10 kilometers

10 miles

AncónAncón

Lima

Callao

Vitarte

Magdalena

Chorrillos

Pachacamac

Lurín

Pachacamac

Lurín

Pachacamac

Lurín

1858

1871–75

1852

1875

1870

these regions, but the repercussions of these cycles within the regions

remains relatively obscure.

Three economic regions in Peru are discernible during the 19th cen-

tury. The economy of Peru’s Andean south revolved initially around

sheep and alpaca wool exports but eventually came to include copper

and iron. The central highlands depended ﬁrst on silver production,

but by mid-century cattle production became important, as did pro-

duction of aguardiente (brandy) by the 1890s. The third region, com-

prising Lima and Peru’

s central and northern coasts, rested on two

pillars: guano exports and sugar and cotton production.

The Andean South

During colonial times before the establishment of the Viceroyalty of Río

de la Plata in 1776, the cycles of the Andean south were closely knit to

the mining industry. The loss of Potosí to the new viceroyalty launched

the southern provinces into several decades of economic depression until

a new product—sheep and alpaca wool—pumped money into the region.

In step with the British industrial revolution, which created demand for

the raw materials, exports of sheep and alpaca wool grew steadily.

Wool exports brought about dramatic changes in the region but did

not beneﬁt everyone. Indian peasants, for example, did not voluntarily

participate in the wool trade. More often than not, a wool merchant’s

agent, called a rescatista, visited a peasant’s hut, left a “loan,” and spec-

iﬁed how much wool he expected to collect during the next shearing

season. When collection day came, these agents, sometimes backed by

armed mestizo guar

ds, returned to the peasant’s hut and conﬁscated the

wool. The agents often fabricated loans or attached astronomic interest

rates to the amounts of money left with the peasant. Consequently

peasants found themselves unable to repay a loan and often lost their

animals and land. The wool trade, therefore, became a mechanism by

which much peasant-owned land was acquired by aggressively expand-

ing haciendas. Merchants, hacienda owners, and political and ecclesi-

astical authorities were conveniently silent witnesses to these

extortions. Merchant capital obtained high returns, and Peru’s pattern

of servile, forced labor relations was perpetuated. The higher the prices

of wool went on the international market, the hungrier for land hacen-

dados became. This pattern also explains the almost complete absence

of important technological innovations.

As happens with most raw material exports, the beneﬁts derived from

south Andean wool exports did not necessarily return to the region and

135

THE AGE OF GUANO

A BRIEF HISTORY OF PERU

136

the people who produced it. Moreover, single-commodity exports make

regions highly dependent on international price ﬂuctuations. The south-

ern Andes curve of growth and decline depended more on price ﬂuctu-

ations on the international market than on the ups and downs of the

Lima-based economy or events in other Peruvian regions. A telegraph

installed in Arequipa brought price ﬂuctuations into Puno’s hinterlands,

and wool was traded day to day accordingly. A price drop in Liverpool,

therefore, had larger regional repercussions in the Andean south than a

change of presidents in Lima or the ﬂooding of a copper mine.

Until 1854, during Rámon Castilla’s second presidency, Indians con-

tinued paying tribute to the republican state. Tribute payments meant

that Indian peasants had to participate—in one way or another—in mar-

ket relationships to obtain money to pay the tribute. The abolition of trib-

ute payments in 1854 meant that Indian peasants could revert to a

Raw Materials and

Investments

tudy of the historical processes in the southern Andes raises an

important question: Can the successful export of raw materials

promote development?

Peasants of the Andean South—a large majority in the production-

commercial cycle (via the wool trade)—earned no beneﬁts and were

unable to accumulate money.With no money in their pockets, peasants

had no purchasing power and, thus, could not participate as buyers in

the internal market. On the other end of the wool cycle were those

who did beneﬁt from international trade: the landowners, merchants,

and British buyers. More often than not, beneﬁciaries of the wool trade

spent their money on luxury goods and on travel.

Reinvestment of this money in the region could have spurred eco-

nomic growth or development—for instance, by developing a textile

industry.This did not happen.The only textile factory opened, the Nadal

Garmendia, was the single-handed effort of one Cuzco family in 1861.

The imported French machinery to open this factory had to be carried

on mules and llamas from the coast to Cuzco. However, even this “mod-

ern” industry did not have salaried laborers; it used the hacienda’s

servile labor force. Exports alone could not promote development, and

in the end the experiment failed for lack of buyers, a salaried labor

force, roads and transport, and demand.

natural economy—that is, to self-sufﬁciency. This also meant that hacen-

dados and wool merchants were left with no arguments to coerce Indian

peasants to produce or sell wool. Landowners responded by expanding

their haciendas still further to incorporate entire peasant communities

and then forcing Indian peasants to work on hacienda lands.

Peasant Reaction

Indian peasants, with no salaries, even if they had wanted to, were

unable to buy textiles to clothe themselves. Cuzco, the city that during

colonial times was an important center of textile production, had lost

its preeminence within the southern Andes, and Arequipa became the

new regional center. Between the end of the 18th century and the end

of the 19th century, Cuzco’s population dropped from 40,000 to around

13,000. Thus, the wool trade produced not only a higher level of social

demarcation between the haves and have nots—merchants and

landowners versus Indian peasants—but also stark inequalities within

regions. Cuzco’s large markets (ferias) to which thousands of people

had come fr

om all over the south of Peru as well as Bolivia, Chile, and

Argentina simply disappeared. Prominence had shifted to the city of

Arequipa and to British merchants.

These economic developments had a dramatic social counterpart.

Indian peasants did not sit back and watch when landowners and mer-

chants intensiﬁed their attempts to expropriate peasant land. Peasants

responded. During the 1850s and 1860s, rapidly spreading peasant

revolts arose in several communities in the department of Puno. The

center of this revolt was the province of Huancané. Beginning in

October 1866, the revolt spread to the districts and communities in

Taraco, Caminaca, Samán, Achaya, Vilquechico, and Moho. In 1867

Indian peasants fought against state troops in Capachica, leaving 57

soldiers dead. After this initial success, Azángaro’s subprefecto and

Puno’s military commander-in-chief, Andrés Recharte, requested mili-

tar

y help from neighboring Bolivia. The Bolivian troops never arrived,

in large measure because government leaders in Lima soon recognized

the international implications of Recharte’s request. Instead reinforce-

ment troops came from Lima under the command of General Baltazar

Caravedo, who succeeded in avoiding more bloodshed through negoti-

ations. As soon as Caravedo left, however, Puno’s mestizo elites

renewed the conﬂict in order to punish what they perceived as Indian

insolence. These episodes resonated in Lima when Puno’s three

deputies to congress called for a punitive expedition to Puno to capture

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THE AGE OF GUANO

A BRIEF HISTORY OF PERU

138

and punish the leaders of the peasant movement and conﬁscate the

land from those communities involved in the rebellion. The expedition

never left Lima, but the attempt to use state power to repress Indians

and take their lands deﬁned the objectives of landowners and local

power holders and the growing ethnic-racial conﬂicts in the region.

Colonel Juan Bustamante, an itinerant merchant, became the leader

of Puno’s Indians. He was also the founder in Lima of the Pro-Indian

Society (Sociedad Amiga de los Indios), an organization that sought to

improve Indians’ living conditions. Bustamante was a supporter of the

new president Mariano Ignacio Prado, whose presidency had been chal-

lenged by an Arequipa-based caudillo, General Diez Canseco amid the

Spanish siege of Callao in 1866. Bustamante’s participation in the Puno

peasant upheaval was therefore probably motivated by both national

and local issues. Accused by local power holders of fomenting a caste

war, Bustamante had to face Recharte’s troops in January 1868. His

poorly armed and equipped Indian troops were defeated, and he was

taken prisoner and decapitated. Sixty Indians were executed with him.

The Central Highlands

During colonial times Huancavelica, located in the central highlands,

was the source of mercury and therefore the key to silver production in

Potosí. By 1840 Huancavelica was a ghost town. The mines of Cerro de

Pasco became the economic focus of the central highlands in the 19th

and 20th centuries. Silver in Cerro de Pasco was ﬁrst discovered in the

17th century, but it was in the 18th century that silver production grad-

ually increased. At the end of the 18th century Cerro de Pasco had

already surpassed silver output in Potosí.

Silver Production in Cerro de Pasco (In Pesos)

Years Amount

1784–1788 531,921

1804–1808 1,472,543

1814–1818 837,716

1839–1843 1,690,328

1879–1883 761,075

Source: Manrique (1995, 104)

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THE AGE OF GUANO

Between 1820 and 1840 Peru’s economy largely depended on silver

exports from Cerro de Pasco. Without the silver from Cerro de Pasco,

Peru would have been unable to engage in international trade. In con-

trast to the merchant houses in Arequipa, the silver mines belonged to

Peruvian owners, and Cerro de Pasco, in spite of its inaccessible loca-

tion, became by contemporary standards a large city. Outlying areas—

from Huanuco and Tarma to the fertile Mantaro Valley and Lima—were

integrated into Cerro de Pasco’s economic life. Laborers from these

adjacent departments became the permanent and seasonal laborers in

the mines. Tayacaja was the only province in Huancavelica that main-

tained some economic link with the new mining site by selling, toward

the end of the 19th century, large numbers of llamas to Cerro de Pasco

mine owners. When the rail line between Pasco and La Oroya was ﬁn-

ished in 1893 and the minerals could be transported directly from

Cerro de Pasco to Callao, even this small trade between Huancavelica

and Cerro de Pasco was doomed to disappear. Huancavelica and nearby

British Investment

n the early 19th century Peru’s image in Europe was one of unlim-

ited wealth based on vast reserves of silver and gold. British

investors were therefore eager to see the dissolution of colonial links

between Spain and its colonies and became aggressive investors in min-

ing shortly after Peru’s independence.

Five British enterprises invested a total of £4.6 million in Peruvian

mining ventures. However, these enterprises failed. British investors

found it difﬁcult to obtain labor for their mining enterprises, and with-

out a labor force the initial investments promptly collapsed.When they

tried to bring in laborers from the United Kingdom, British investors

soon found out that these laborers were very unwilling to work under

the hard conditions and for the low pay Indians usually received.

These investment disasters provoked a ﬁnancial crises in London

that had international repercussions.These early experiences curtailed

further direct British investment in Peruvian mining until the late 19th

century. Even then, the British were more cautious and decided to

engage in commercial transactions rather than direct investments.The

great and unexpected opportunity to expand commercial activities

came with guano, a natural fertilizer much needed to improve agrarian

output in the United Kingdom and the rest of Europe.

Ayacucho were left out of the surging economy of the central highlands

and forced to revert to self-sufﬁciency.

Throughout the 19th century mining witnessed only minor techno-

logical improvements and was basically a small-scale activity, each mine

owner working together with four or ﬁve workers in thousands of small

sites stretching over hundreds of square miles. Among other things this

dispersal avoided a concentrated destruction during periods of political

unrest. But it also required a complex logistical and transportation sys-

tem to carry the ore to the smelting sites. Thousands of mules crossed

the Andes coming from as far away as Jujuy, Salta, and Tucumán in pre-

sent-day Argentina to solve the transportation problems.

The fertile lands in the Mantaro Valley ﬂourished in tandem with the

expansion of mineral production in Cerro de Pasco and the growth of

Lima. From the Mantaro Valley came the food for an increasing num-

ber of people in both cities. Contrary to what happened in other

regions, this rich 40,000-acre landscape had few haciendas and many

peasant communities. This land tenure pattern was probably a result, of

the initial alliance between Francisco Pizarro and the local ethnic

group, the Huancas, to ﬁght against the Incas. In the wake of this

alliance, curacas obtained privileges and land that they were able to

keep thr

oughout the colonial period. Also unique to the Mantaro Valley

was the high level of market involvement of its indigenous populations.

The Huancayo market began as early as 1572 and promoted a highly

developed labor specialization in the region, including a rich tradition

of artisan textile production. Agrarian and artisan produce from the

Mantaro Valley went to distant places all over the region. Still, agrarian

and manufacturing tools were little developed. Peasants still used the

Incan hoe and, not having irrigation systems, heavily relied on rainfall.

The wars of independence had relatively little damaging effect on

Cerro de Pasco’s mining, in spite of the fact that patriotic and royalist

armies alternatively occupied this region and the ﬁnal battles for inde-

pendence took place here (precisely because it was where the silver

mines were located). Agrarian production suffered much more from

these military incursions, as communities and haciendas lost cattle and

crops to feed the armies. Many Spanish hacienda owners left the region

following the defeat and withdrawal of royalist soldiers. Land became

cheap and an easy acquisition for those who had the money to buy it:

merchants and mine owners.

Thus, as opposed to land patterns in the southern Andes, haciendas

expanded not at the expense of peasant communities but at the expense

of other haciendas while maintaining an independent and market-ori-

A BRIEF HISTORY OF PERU

140

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THE AGE OF GUANO

ented peasantry. Such an equilibrium of social forces explains the rela-

tive peace in the central highlands, at least until the end of the 1870s.

When silver prices dropped on the international market, mine

owners shifted their investments toward agriculture, showing a great

flexibility in terms of entrepreneurship and in the ability to manipu-

late capital and investments. This turnaround went hand in hand with

an improvement of stocks and seeds and improved labor productivity

(levels of specialization according to ecological requirements).

Confronted with an independent peasantry, land and cattle owners

had to adjust to labor scarcity. The success of this endeavor went

beyond technological and labor organizational improvements.

Independent of international price fluctuations, the agrarian produce

from the central highlands fed an internal market, especially Lima,

where prices for food kept rising following the guano boom, to the

benefit of food producers.

The region’s economic success was further boosted with the acqui-

sition of land in the Amazons, east of Cerro de Pasco. In 1848

President Ramón Castilla sent a military expedition under the com-

mand of Junín’s prefecto, Mariano Eduardo Rivero y Ustarriz, to “r

econ-

quer” the Chanchamayo Valley and its surroundings. This territory

had been ruled by a local tribe, the Ashaninka, ever since Juan Santos

Atahualpa retreated to this area in the mid-18th century. After mas-

sacring the indigenous inhabitants, Castilla’s government promoted

the settlement of colonists in this area and established a fort in San

Ramón to prevent further incursions by Amazonian Indians. Soon,

tropical products such as coffee, fruit, and sugarcane from the

The Valladares

anuel Valladares Pérez was a successful mine owner in Cerro de

Pasco. In the 1830s he migrated to the Mantaro Valley and mar-

ried a local woman. After settling in, he began purchasing land, and his

sons continued to do so well into the 1850s.Valladares managed to con-

centrate 19 haciendas in his hands, covering 121,000 acres, from

Tayacaja to Cerro de Pasco.This pattern was followed by other families

in the region and led to the formation of a new economic elite that

based their fortunes on a combined mining-merchant-landowning

enterprise (Manrique 1995, III).

Chanchamayo Valley enlarged the agrarian regional exports from the

central highlands. Sugarcane production led to the building of distil-

leries that supplied liquor to workers on coastal plantations and to

Peru’s growing urban populations. Based on these diversiﬁed regional

exports, central highland elites successfully participated in new, often

Lima-based, economic ventures.

Beyond Guano

It is through the lens of state expenditures that one can view the failure

of the Peruvian government to use to advantage the large revenues

obtained from guano exports, in spite of substantial shifts in govern-

ments. A more stable, more liberal, and more development-oriented gov-

ernment had envisaged Peru’s path toward development, had observed

those developments in other countries (especially in the United States),

and had shown a willingness to engage in large national projects.

A local cultural elite emerged during the guano boom, some of

whom had studied in Europe with scholarships provided by the

Peruvian government. Many of these intellectuals promoted the cre-

ation of a national identity through their various works. For example,

some of them drew the ﬁrst territorial maps of Peru. Others studied and

wrote about key events in Peru’s history or about Peruvian customs and

landscapes. Enterprising archaeologists uncovered pre-Hispanic ruins.

The knowledge and art of this group reached audiences in Europe and

the United States.

This ﬂourishing of culture was paralleled by the expansion and con-

solidation of universities and the secularization of Peruvian society. In

the wake of the guano boom priests began to receive salaries from the

state, an arrangement that subordinated the Catholic Church to the

state. Overall the visibility of the state increased, laws were debated in

congress and in journals, and more people participated in elections.

Similarly the state expanded its hold on Peruvian territory through

colonization projects into the central Amazon basin. Most colonists

were central European immigrants. The colonies of San Ramón and La

Merced were inaugurated in 1847 and 1869, respectively. Pozuzo, a

German colony, was founded in 1857. By 1876 Peru had increased its

population with 18,078 Europeans (mostly from Italy, France, Spain,

and Germany) and 92,130 Chinese.

In spite of the misuse of guano revenues, these were signs and symp-

toms of progress in a country that had struggled hard to come to grips

with its political, economic, and social future after independence.

A BRIEF HISTORY OF PERU

142

Unfortunately in 1879 once more a war brought all indicators of

progress to a disturbing standstill, if not reversal.

The Collapse

When it ﬁnally came, after four decades of prosperity, the collapse of

the guano boom was rapid and devastating to the national economy. In

1872 Peru received loans in the amount of 21.167 million soles; the fol-

lowing year it received only 6.936 million soles. Two reasons explain

this abrupt change: a decline in the overall European need for agricul-

tural fertilizer and the discovery of synthetic fertilizers that began

replacing Peru’s bird droppings. Moreover, guano prices plummeted at

a time when state debts had multiplied by eight. In 1876 the Peruvian

state announced bankruptcy.

However, well before 1876, the Peruvian government had antici-

pated the need to replace guano with exports of nitrate. Nitrate mines

were located in what still was Peruvian territory in the southern

province of Tarapaca. Nitrate was a promising export product as it was

a key ingredient in the production of synthetic fertilizers and gunpow-

der. The nitrate mines were owned by Peruvian, Chilean, and British

citizens. In 1873 President Manuel Pardo created the state nitrate

monopoly (Estanco del Salitre), and signed a mutual defense treaty

with Bolivia. From then on, nitrate producers were forced to sell their

produce to the Peruvian state. The defense treaty with Bolivia was

meant to restrain Chile from interfering with the saltpeter mines in

southern Peru. Two years later Pardo’s government expropriated the

nitrate bureau (oﬁcinas salitreras), and the need to pay for this expro-

priation led to unplanned issuance of paper money and to inﬂation.

Chile, on the other hand, in association with British and other

Eur

opean enterprises, was unwilling to comply with the new taxes

imposed by the Peruvian state. When the Peruvian government

announced its intention to nationalize the nitrate mines, Chile—prod-

ded by British and Chilean producers and merchants—declared war on

Peru. The War of the Paciﬁc that confronted Peru and Bolivia on one

side, and Chile on the other, lasted for ﬁve years and had devastating

effects on Peru.

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THE AGE OF GUANO