History, Military Rule
Standard Oil Company, military junta, economic aid, economic system, private industry
A long dispute over the claims of the International Petroleum Company (IPC), a subsidiary of the Standard Oil Company (New Jersey), in the operation of the rich La Brea y Parinas oil fields was finally settled by the Belaunde government in August 1968. Widespread disapproval of this settlement, however, forced the resignation of the Cabinet on October 1, and two days later the armed forces ousted Belaunde and suspended the constitution. A military junta formed, headed by General Juan Velasco Alvarado. His government expropriated the IPC’s assets, seriously straining relations with the United States. Relations deteriorated still further in February 1969, when a Peruvian gunboat accosted two U.S. fishing vessels off the Peruvian coast, claiming they were poaching in Peruvian waters. In 1970, despite these differences, U.S. relief supplies were quickly sent to Peru following an earthquake that killed about 67,000 people and left some 600,000 homeless.
In the early 1970s the Velasco government began a radical reform of the social and economic system. Among the major actions were seizure of foreign-owned ranchlands, the imposition of price controls on basic goods and services, and a sweeping land-reform law. The anchovy fishing industry, seriously hurt in 1972 by alteration of ocean currents, was nationalized in 1973. The 1973-1974 budget provided a 35 percent increase in spending to build up and diversify private industry. In June 1973 the World Bank extended credits of $470 million to Peru, and the Inter-American Development Bank lent Peru $30 million. Relations with the United States and with U.S. investors were largely normalized, but U.S. economic aid was sharply reduced.
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