Catalina Vizcarra

Guano, Credible Commitments, and Sovereign Debt Repayment in Nineteenth-Century Peru

Perus experience with sovereign debt during the guano boom is one of the most remarkable in the nineteenth century. Despite the countrys ongoing political instability and poor capital market reputation, the price of Peruvian bonds soared shortly after settlement in 1849, and the country enjoyed relatively low credit risk until the 1870s. This article discusses the incentives Peru and its creditors faced, and explains how Perus extraordinary performance in financial markets was founded on its credible commitment to service its debt with the guano proceeds.

Bourbon Intervention in the Peruvian Tobacco Industry, 1752–1813

During the second half of the eighteenth century the Spanish Crown monopolised the tobacco industry in its American colonies, creating vertically integrated organisations which included factories for the production of cigars and cigarettes. A detailed analysis of the regulations, organisation and policies applied during the Peruvian viceroyalty suggests that Bourbon officials were effective managers. The monopoly was successful at curbing contraband and extracting rents. The evolution of monopoly policies, however, reflected political constraints on the Crowns efforts to raise revenues. The archival evidence suggests that Bourbon officials closed the tobacco factories in Peru in 1791 as a result of public opposition.

War and Foreign Debt Settlement in Early Republican Spanish America

Upon gaining independence, most Spanish American countries had accumulated a substantial external debt, and by 1829 each defaulted. It took decades for these countries to settle their debts and even longer for them to access new loans. We argue that a major factor influencing the pattern of debt service was the incidence of war. War created incentives for governments to channel scarce resources to «emergency» spending and domestic debt service, rather than to the repayment of the foreign debt. Interestingly, we detect an asymmetry between countries long in good standing with creditors and those that had only recently settled. Countries that had established a longer record of continuous debt service were far less likely to default in times of war. We also find that international wars were responsible for the largest effects.