In 1980, as promised, presidential elections were held. The winner, former president Belaúnde, took office in July, when a new constitution came into effect. Belaúnde immediately adopted a conservative program that aimed to reverse many of the reforms of the Velasco era, and he began a series of extravagantly costly large-scale construction projects in the rain forest region. Belaúnde was immediately overtaken by political crisis and economic disaster. An extreme left-wing guerrilla movement, Shining Path (Sendero Luminoso), began activity in the highlands and gained strength. At the United States’ behest the government tried to suppress production of coca, further alienating the Native Americans whose main source of income it was.

Output of the anchovy fisheries collapsed as a result of ecological devastation from earlier overfishing. The country entered a deep depression accompanied by runaway inflation, and it had to suspend payments on its enormous foreign debt. By the time presidential elections were held in 1985, Belaúnde and his government were completely discredited. His party got only 5 percent of the vote. In the 1985 presidential elections, voters chose the APRA candidate, Alan García Pérez. García tried to reverse the economic decline. He introduced policies that attempted to reduce imports and limit annual payments on foreign debts.

Image of Peru. travelphoto.net

Despite some temporary success, by 1987 Peru had been cut off from international financing, and inflation again began to increase. In an attempt to limit inflation, García nationalized private banks and insurance companies and tightened government controls over the economy, but by 1990 the annual rate of inflation was approaching 3,000 percent. Meanwhile, despite unabated repression by the security forces, the Shining Path remained powerful. Encarta