Lying just south of the equator, on the Pacific coast of South America, Peru became independent of Spain in 1824. It rises from an arid coastal strip to the Andes, dominated in the south by volcanoes; about half of Peru's population live in mountain regions. Peru's border with Bolivia to the south runs through Lake Titicaca, the highest navigable lake in the world. In 1995, Peru was involved in a brief border war with Ecuador, its northern neighbor, and the issue was finally settled in 1998.

Most Peruvians are Amerindian or mestizo (mixed race). The small elite of Spanish descendants retain a strong hold on the economy, power, and social standing. A few Chinese and Japanese live in the northern cities.

Previously remote Andean Amerindians are increasingly informed of events in Lima and the coastal strip by radio and by relatives in cities. This has compensated for problems associated with the marginalization of their native Quechua and Aymará languages in a Spanish-speaking culture. A further 250,000 Amazonian Amerindians live in the eastern lowlands. Together with the small community of Africans (descendants of plantation workers), they tend to suffer the worst discrimination in towns.

The extended family remains strong. A part of traditional native Amerindian traditions, its role as a social bond was strengthened by Roman Catholicism. In recent years, economic difficulties have raised its profile as the key social support system for most Peruvians.

Strengths

Abundant mineral resources, including oil. Rich fish stocks in the Pacific. Wide climatic variation, allowing diverse and productive agriculture; cotton and coffee are important. Well-developed textile industry.

Weaknesses

Overdependence on metals and commodities whose fluctuating prices undermine trade and investment. Stalled privatization. Corruption and poor infrastructure deterring investment. Weak banks.

Profile

Wealth and economic activity are largely confined to the cities of the coastal plain. The inhabitants of the Andean uplands are subsistence farmers or coca producers.

Peru's strict fiscal and monetary policy continued under Fujimori. Growth was hit hard in 1998 by the disruption of fishing by El Niño-generated storms, the Asian economic crises, Russian-provoked turmoil in emerging markets, and depressed world commodity prices. In 1999 the IMF granted a three-year loan package, extended in 2002, to support comprehensive structural reform and fiscal restraint, with the aim of gradually reducing the public sector deficit. Meanwhile public belief in Toledo's promises on jobs and poverty waned.

Peru is a multiparty democracy in which the president holds executive power.

Profile

The long tradition of large parties dominating politics ended with President Alberto Fujimori's election in 1990. His "self-coup" created a compliant legislature and judiciary, and the approval of a new constitution permitted his reelection in 1995. His popularity was greatly boosted by successes against hyperinflation and the Sendero Luminoso (Shining Path) guerrillas. It faded in the late 1990s as he tightened his personal control of the government, and appeared increasingly reliant on the army. Few checks on the executive remained, and Fujimori was able to obtain his third term in 2000. However, blatant electoral fraud and the corrupt use of power were exposed when his security service chief Vladimiro Montesinos was videoed bribing opposition legislators. Fujimori's position was irrevocably damaged, and he resigned in November, having fled to Japan. Fresh presidential and legislative elections in April 2001 were won by populist Alejandro Toledo and his Peru Posible party.

Main Political Issues

Disenchantment with Toledo

President Toledo promised a new start for Peru, but his low ratings in opinion polls testified to early impatience with his administration. Respondents expressed disappointment that he had failed to fulfill election promises, especially on job creation, as the government committed itself to IMF goals on structural reform and fiscal restraint. Polls also pointed to public unease at the continuation of nepotism in high places, a much resented aspect of the Fujimori years. The dismissal of three cabinet ministers revealed discontent in the ruling PP congressional bloc with the defection of the highly popular Cecilia Tait, a former sporting star.

Corruption

The public endorses investigations into widespread corruption during the Fujimori era, but is growing fatigued by endless rounds of legislative commissions and probes. Many would prefer politicians to refocus on sorting out the economy.

Reform of military

Senior officers loyal to Fujimori and Montesinos have been sacked, but the military, and the militarized police, need reforming to make them professional forces. The likelihood of this happening soon is slim.

Cooperation with the USA, the main source of aid, extends to the war on cocaine, although Peru remains one of the world's largest coca producers. Reported incursions by guerrillas, paramilitaries, and drug-traffickers make the security of the border with Colombia a problem. Peru competes with Chile for an alliance with Bolivia to process and pipe natural gas.

The military, in power from 1968 to 1980, supported President Fujimori's 1992 presidential coup. A quarter of national territory remained under states of emergency until early 2000, despite the apparent defeat of the Sendero Luminoso guerrillas. Fujimori's control over promotions and the National Intelligence Service (SIN) guaranteed a loyal armed forces leadership. After his resignation and the dissolution of the SIN in late 2000, the interim government moved to cut back military influence. Bomb attacks in Lima prior to US President Bush's 2002 visit were widely blamed on guerrillas, but an option studied by the Interior Ministry was that elements within the intelligence, military, or police still sympathetic to Montesinos were responsible.

Peru is an important exporter of copper and lead. Development of the huge Antamina copper and zinc deposit is under way. Development of the $3 billion Camisea hydrocarbon project is ongoing. The full extent of the large oil reserves still needs to be explored. A priority is the further development of hydroelectric power.

Environmentalists have long been concerned about coastal industrial pollution and the activities of the fishing industry. Overfishing of anchovies almost resulted in their extinction in the 1970s. Today, attention has switched to the rising number of dolphins being caught in drift nets. Unchecked urban and industrial pollution, especially in Lima, is a major problem.

Environmentalists fear that Peru's and the USA's policy of using powerful air-sprayed herbicides to destroy coca crops is adding to river pollution in the Andes, where mining also causes severe environmental problems.

The World Bank in 2001 estimated that Peru had a public infrastructure deficit of $7 billion. Most roads remain unpaved. Work on a transcontinental highway from Ilo, a free port on the Pacific, via Puerto Suárez in Bolivia, to the port of Portos in Brazil is ongoing. The two rail networks, the Central and Southern, are as yet unconnected. The La Oroya–Huancayo line is the world's highest stretch of standard-gauge railroad. River transportation provides major access to Iquitos in Amazonia. As well as four important international airports, there are more than 130 airstrips scattered throughout the country.

The poor public health system almost collapsed in the 1980s. In many areas primary care is nonexistent. Advanced treatment is available only to private patients in city clinics. Goiter, a thyroid abnormality, is widespread, especially in mountain areas. Infant mortality is rising due to social deprivation, diarrheal diseases, and tuberculosis. Malaria is again widespread, and cholera reached epidemic proportions in 1994. Thousands of poor women were forcibly sterilized in the late 1990s as part of a government program to lower the birthrate. Social welfare is compulsory, and benefits cover sickness, disability, and old age.

Education is based on the US system; spending has been declining. The provision of state education, especially for the poor, remains a major challenge. State and private universities are accessible to a small minority.

Kidnappings, murders, armed robberies, and drugs-related crime remain serious problems, especially in Lima. Corruption is deep-seated in the police and security forces. Despite the near-destruction of the left-wing Sendero Luminoso guerrillas, main cities frequently have curfews, and those who can afford it protect themselves with high-security homes and armed guards.

Most wealth and power in Peru is still retained by old Spanish families. Indigenous peoples remain excluded from both. The rich live in a state of siege; a key status symbol is the number of armed guards and security cameras protecting family property. Overpopulation and rural migration accentuate poverty in Lima, where some 2.7 million people live in shanty towns, many of them lacking such basic utilities as running water and electricity. The UN estimates that over 30% of Peruvians live below the poverty line.

Tourism is gradually recovering, after being plunged into crisis in the early 1990s by guerrilla activity, crime, and cholera fears. The heavily indebted industry has been unable to take full advantage of new investment opportunities, but privatization programs have seen the sale of state hotels. Visitors face poor infrastructure and accommodation to see incomparable sites such as the Inca ruins at Machu Picchu in the Andes. Tourism to the Amazon is also growing, but environmentalists are concerned about the impact on indigenous people. The patterns in the desert made by the Nazca people (known as the Nazca lines), dating from the 2nd century B.C.E., are also a major attraction. Lake Titicaca and the Spanish colonial architecture of Lima are other draws.

Francisco Pizarro's arrival in 1532 during a war of succession between two Inca rulers marked the start of the Spanish colonization of Peru, and the end of the Inca empire.

• 1821 Independence proclaimed in Lima after its capture by Argentine liberator, José de San Martín, who had just freed Chile.
• 1824 Spain suffers final defeats at battles of Junín and Ayacucho by Simón Bolívar and Gen. Sucre, liberators of Venezuela and Colombia.
• 1836–1839 Peru and Bolivia joined in short-lived confederation.
• 1866 Peruvian–Spanish War.
• 1879–1884 War of the Pacific. Chile defeats Peru and Bolivia. Peru loses territory in south.
• 1908 Augusto Leguía y Salcedo's dictatorial rule begins.
• 1924 Dr. Víctor Raúl Haya de la Torre founds nationalist APRA in exile in Mexico.
• 1930 Leguía ousted. APRA moves to Peru as first political party.
• 1931–1945 APRA banned.
• 1939–1945 Moderate, pro-US civilian government.
• 1948 Gen. Manuel Odría takes power. APRA banned again.
• 1956 Civilian government restored.
• 1962–1963 Two military coups.
• 1963 Election of Fernando Belaúnde Terry. Land reform, but military used to suppress communist-inspired insurgency.
• 1968 Military junta takes over. Attempts to alleviate poverty. Large-scale nationalizations.
• 1975–1978 New right-wing junta.
• 1980 Belaúnde reelected. Maoist Sendero Luminoso (Shining Path) begins armed struggle.
• 1981–1998 Border war with Ecuador over Cordillera del Cóndor, given to Peru by a 1942 protocol. Ecuador wants access to Amazon.
• 1982 Deaths and "disappearances" start to escalate as army cracks down on guerrillas and narcotics.
• 1985 Electoral win for left-wing APRA under Alán García Pérez.
• 1987 Peru bankrupt. Plans to nationalize banks blocked by new Libertad movement led by writer Mario Vargas Llosa.
• 1990 Over 3000 political murders. Alberto Fujimori, an independent, elected president on anticorruption platform. Severe austerity program.
• 1992–95 Fujimori "self-coup." New constitution. Fujimori reelected.
• 1996–1997 Left-wing Tupac Amarú guerrillas seize hundreds of hostages at Japanese ambassador's residence in four-month siege.
• 2000 November, Fujimori resigns amid corruption scandal despite having won controversial third term in May; seeks refuge in Japan.
• 2001 Fresh presidential elections, won by Alejandro Toledo in run-off against García.