During World War II, Peru broke relations with the Axis powers once the United States entered the war and deported Japanese living in Peru to the United States. Mineral exports greatly benefited the Peruvian economy during the war. Peru's foreign policy after World War II shifted from a traditional anti-imperialist mind-set to a pro-Western outlook in which free market policies became a priority.
By 1950 foreign investments in mining, sugar refineries, and fishing further revitalized the Peruvian economy. The nation became the first world exporter of fish meal, and a mining law passed in 1950 granted tax exemptions to foreign investors. Following the outbreak of the Korean War, Peru solidified its ties to the United States by signing a Mutual Defense Assistance Pact. Peru did not, however, send troops to the conflict.
While the Peruvian government distanced itself from the new government of Fidel Castro in Cuba in 1959, the ideology of the Castro revolution soon extended into Latin America, and Peru was no exception. Indeed, the 1960s witnessed the emergence of revolutionary groups with pro-Castro sympathies. This revolutionary fervor was particularly prevalent among the campesino movement, students, and intellectuals. However, these groups were unable to gain power or significant influence in Peru's decision-making processes. Nevertheless, they tilled the ground for future guerrilla movements that became notorious in the 1980s: Sendero Luminoso (Shining Path) and the Túpac Amaru Revolutionary Movement. The latter was the precursor of the Movimiento de Izquierda Revolucionario (MLR, Left Revolutionary Movement). Not until the early 1980s, however, did the Shining Path become publicly known for its terrorist attacks.
U.S.-Peruvian relations changed in 1968 when General Juan Velasco Alvarado took power via a coup that overthrew President Fernando Belaúnde Terry. Alvarado's regime sought a more independent foreign policy aimed at strengthening the country internationally and inviting more economic development. Alvarado initiated relations with communist nations, restored relations with Cuba, and joined the Non-Aligned Movement in 1974. Peru signed trade agreements with the Soviet Union in 1969 and with the People's Republic of China (PRC) in 1971.
Alvarado's strong advocacy of developing-world nations was combined with economic nationalism at home. His regime nationalized the American International Petroleum Company (IPC), industrial plants, and sugar refineries. It also undertook long-delayed agrarian reform and nationalized the press as well. This so-called revolution from above brought modest benefits to Peruvian population, but by 1975, with mounting foreign debts and a paucity of foreign credit, Velasco's reforms all but ended.
During the 1980s, popularly elected President Belaúnde continued a nonaligned foreign policy, although his sympathy for the Sandinistas in Nicaragua put him at odds with U.S. President Ronald Reagan's administration. Belaúnde became an important mediator in the 1982 Falklands (Malvinas) War, offering not only military support to Argentina but also a peace proposal for Argentina and Great Britain, which the British rejected. This diplomatic approach was also supported by the Peruvian Javier Pérez de Cuéllar, who was secretary-general of the United Nations (UN) at the time.
Domestically, Belaúnde's neoliberal market-oriented economic policies did not gain the support of the population but instead contributed to significant social discontent. The growing presence of Shining Path and Túpac Amaru presented another obstacle for Belaúnde's regime, which was accused of committing human rights abuses against civilians during 1983–1985.
Peru's diplomacy was nonetheless vital in Central American conflicts. In 1985 Peru, Argentina, Brazil, and Uruguay created the Contadora Support Group in an effort to negotiate a peace agreement for Central America. Despite its active diplomacy toward Central America, Alan García's government during 1985–1990 was unsuccessful in bringing economic improvement to the country. Toward the end of the Cold War, Peru's economy was in chaos, the drug business had grown rapidly, and guerrilla movements continued to challenge the government. With the presidency of Alberto Fujimori (1990–2000), Peru's relations with the United States improved, especially in the area of drug enforcement and the implementation of new economic programs.
Nieto, Clara. Masters of War: Latin America and U.S. Aggression from the Cuban Revolution through the Clinton Years. New York: Seven Stories, 2003.; Rochlin, James. Vanguard Revolutionaries in Latin America. Boulder, CO: Lynne Rienner, 2003.; Sicker, Martin. The Geopolitics of Security in the Americas: Hemispheric Denial from Monroe to Clinton. Westport, CT: Praeger, 2002.