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

Published online by Cambridge University Press:  01 June 2009

Catalina Vizcarra
Catalina Vizcarra*
Affiliation:
Assistant Professor, Department of Economics, University of Vermont, 332 Old Mill, 94 University Place, Burlington, VT 05405. E-mail: Catalina.Vizcarra@uvm.edu.
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Abstract

Peru's experience with sovereign debt during the guano boom is one of the most remarkable in the nineteenth century. Despite the country's 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 Peru's extraordinary performance in financial markets was founded on its credible commitment to service its debt with the guano proceeds.

Type
ARTICLES
Information
The Journal of Economic History , Volume 69 , Issue 2 , June 2009 , pp. 358 - 387
Copyright
Copyright © The Economic History Association 2009

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