Case | HBS Case Collection | July 2002 (Revised February 2003)

Fresh Start? Peru's Legacy of Debt and Default (A)

by Julio J. Rotemberg and Lisa Lewis

Abstract

Considers the situation facing Alberto Fujimori as he takes office in 1990. Pays particular attention to Peru's long history of international borrowing, default, and renegotiation. This history suggests that the costs imposed by foreigners on Peru when it failed to meet its contracts with foreign lenders have been relatively mild. Discusses the administration of Alan Garcia, who limited payments on Peru's international debt while also leading his country into an inflationary spiral. Also discusses some of the challenges posed by a bloody insurgency group named Sendero Luminoso.

Keywords: History; International Finance; Sovereign Finance; Economy; Borrowing and Debt; Peru;

Citation:

Rotemberg, Julio J., and Lisa Lewis. "Fresh Start? Peru's Legacy of Debt and Default (A)." Harvard Business School Case 703-001, July 2002. (Revised February 2003.)