|Peru Table of Contents
Consolidation of the State
The guano boom, made possible by the droppings from millions of birds on the Chincha Islands, proved to be a veritable bonanza for Peru, beginning in the 1840s. By the time that this natural resource had been depleted three decades later, Peru had exported some 12 million tons of the fertilizer to Europe and North America, where it stimulated the commercial agricultural revolution. On the basis of a truly enormous flow of revenue to the state (nearly US$500 million), Peru was presented in the middle decades of the nineteenth century with a historic opportunity for development. Why this did not materialize, but rather became a classic case of boom-bust export dependence, has continued to be the subject of intense discussion and debate. Most analysts, however, concur with historian Magnus Mörner that "guano wealth was, on the whole, a developmental opportunity missed."
On the positive side, guano-led economic growth--on average 9 percent a year beginning in the 1840s--and burgeoning government coffers provided the basis for the consolidation of the state. With adequate revenues, Castilla was able to retire the internal and external debt and place the government on a sound financial footing for the first time since independence. That, in turn, shored up the country's credit rating abroad (which, however, in time proved to be a double-edged sword in the absence of fiscal restraint). It also enabled Castilla to abolish vestiges of the colonial past--slavery in 1854 and the onerous native tribute-- modernize the army, and centralize state power at the expense of local caudillos.
Source: U.S. Library of Congress