The Peruvian debacle: economic dynamics and political causes?

Abstract

Alan Garcia's administraron began with great promise. The economic policy implemented in the first two years was based on a pragmatic evaluation of the country 's circumstances. The economic activation pursued was successful, however timely export promotion was not undertaken;asa result, problems began toappear in late 1986. The situation could still be saved in mid 1987, however Alan García decided to expropriate the prívate banks. He thereby rent asunder the fundamental social contract of the country and made the economy basically unmanageable. Economic policy from that point on also left much tobe desired in terms of coherence and technical design. The result has been the worst economic crisis in recent history, and an avoidable one to boot.