The War of the Pacific (1879–83)
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Another untoward event was the War of the Pacific with Chile, caused mainly by rivalry over the exploitation of rich nitrate deposits in the Atacama Desert (then part of Peru, now in Chile). Chile’s superior resources and military discipline brought overwhelming defeat to Peru and its ally Bolivia.
At the Battle of Iquique (then in Peru, now in Chile), on May 21, 1879, the Peruvians suffered the loss of one of their best warships, the Independencia; then the Huáscar was captured on October 8, and this eventual surrender of control of the sea permitted a Chilean army to land on the Peruvian coast. On January 17, 1881, Chilean forces captured the capital, Lima. Looting and pillaging followed, and the National Library was destroyed. According to the terms of the Treaty of Ancón (October 20, 1883), Peru turned over to Chile full possession of the province of Tarapacá and the administration for 10 years of the provinces of Tacna and Arica, after which a plebiscite was to determine their future sovereignty.
Peru from 1884 to 1930
Expenditures for the war, and the consequent loss of revenue from the nitrate fields, created the possibility of imminent bankruptcy. To avert this disaster, the Civilian regime accepted in 1889 a plan proposed by the bondholders for handling the debt. The Peruvian Corporation, representing the creditors, with headquarters in London, was to control the railroads for 66 years, to mine up to three million tons of guano, and to receive 33 annual payments of £80,000 each. The plan worked satisfactorily but was hated by the Peruvian people.
Social reforms and economic development
The decline in national prestige created an atmosphere conducive to political change. The Democratic Party was formed, and in 1895, under the leadership of Nicolás de Piérola, it won the presidential election. Having a broad, popular base, it championed direct suffrage and the restoration of municipal elections. Public education was fostered, but schools for the children of the poor were lacking.
An orderly political scene, marked by rivalry between the Democratic and Civilian groups, accelerated economic development. There was an increase in the production of minerals, notably copper, and of such agricultural commodities as cotton, sugar, and wool. In the mining of copper, U.S. capital acquired important interests.
Augusto Bernardino Leguía y Salcedo, chief spokesman for the Civilians, assumed the presidency in 1908. His first term in office (1908–12) was marked by the expansion of sugar and cotton production and the settlement of the boundary dispute with Brazil. During Leguía’s second term (1919–30), he embarked upon expensive public works projects, financed by loans from U.S. banks. Rights to the oil fields of La Brea-Pariñas were given to the U.S.-owned International Petroleum Company, which built a refinery to supply the country with gasoline and oil.
Leguía supported the adoption of a new constitution in 1920. Among its progressive provisions was Article 58, which protected the communal lands of the Indigenous people from sale and seizure. Failure to implement this provision, however, gave rise to a significant development of Indianism. While most intellectuals urged gradual reforms, more radical measures were advocated by the Peruvian Communist Party and others.