This article is part of a series titled The History
of Money being produced by DollarDaze.org.
Peru is the nineteenth largest country in the world and is a diverse land,
both in terms of people and geography. It is populated by over 29.2 million
people (July 2008 estimate), largely descended from Spanish settlers, native
Inca, and pre-Inca cultures. Peru has three national languages: Spanish,
Aymara, and the native Quechua, reflecting the native Indian and Spanish
roots that cultivated modern Peruvian society.
Three distinct geographical terrains - coastal, sierra and tropical rain
forest - give Peru a wide variety of both climatic and natural variation.
Traditionally the Peruvian economy was based on natural resources such as
mining, farming, fishing, and agriculture.
Pre-Inca History
Andean Peru is recognized as one of six global areas that saw the indigenous
development of civilization.1
The Norte Chico civilization (also known as the Caral-Supe after a
well-studied archaeological site) is the oldest known complex society in the
Americas. It flourished along the north-central coastal area of modern-day
Peru between 3000 and 1800 BCE. Several perplexing questions surround the
Norte Chico civilization:
- No evidence of ceramics
- Settlements were non-defensive in design with no signs
of military violence2
- No evidence for existence of a cereal staple
- Very little evidence of art (such as paintings,
drawings, or sculptures)
Before the discovery of the Norte Chico, the Chavin culture was believed
to be the first civilization in South America dating from 900 BCE to 200 BCE.
The Ruins of Chavín de Huántar, located in the Andean highlands north of Lima
are the most well-known archaeological evidence from the Chavin. The Chivan
began the practice of camelid husbandry in South America through
domestication of the llama.
Many additional civilizations later existed in the Andes - the Mochica
(100 CE - 750 CE) built the 41 metre stepped pyramid known as the Temple of
the Sun at Moche. Contemporary to the Mohica was the Nazca, perhaps best
known for being the creators of hundreds of large geoglyphs in the Nazca
Desert visible only from the air. The Nazca also developed an impressive
underground aqueduct system known as puquios which are still functioning to
this day.
The Wari Empire (500 CE - 900 CE) of south-central coastal Peru expanded
through military means instead of religious and artistic influence as did
previous cultures of the region. The Wari developed terraced agriculture and
initiated major roadwork projects.
The Rise of the Inca
In 1197, the Quechua speaking Incas establish their capital in Cuzco under
Manco Capác.3
The area had been previously occupied by the Killke culture responsible for
building the megalithic structure of Sacsayhuamán during the 12th century.4
The first ruler of the Inca established a code of laws and possibly abolished
the practice of human sacrifice.
After leading a successful defence against the Inca's traditional tribal
enemy, the Chankas, the ninth ruler of the Incas, Pachacuti Inca Yupanqui
(1438-1471) began the transformation of the Kingdom of Cuzco into what would
become within three generations Tahuantinsuyu - the Empire of the Incas.5
It was traditional for the son of the ruler to lead the army. In 1463,
Túpac Inca Yupanqui was appointed to lead the Inca army into neighbouring
Chimor, a moon-worshipping culture descended from the Mochica. The Chimor
were defeated in 1470. The conquest of their nearest rival solidified Inca
dominance in the region.
Túpac Inca Yupanqui became ruler in 1471 upon his father's death. His son
Huayna Capac led successful campaigns in the south adding significant
territory to the Empire. In 1493, Huayna Capac inherited the throne and began
a series of campaigns to expand the northern frontier.
At the height of its existence the Inca Empire was the largest indigenous
civilization of the New World stretching some 4,000 kilometres along the high
mountainous Andean range from Colombia to Chile, and extending from the
western coast to the headwaters of the Amazon. It is estimated that at its
height, the Inca Empire exceeded six million people from many different
Andean cultures.
The Inca expanded upon the existing roads creating a network measuring
over 22,000 kilometres. One road ran nearly the entire length of the South
American coast. However, all travel was conducted by foot as the wheel had
not been invented.
Like all previous Andean societies, Inca
society was also based on agriculture, using developed techniques such as
irrigation and terracing. Among the crops cultivated were maize, potato,
squash, lima beans, chilli peppers, peanuts, cassava and quinoa.6
Camelid husbandry (llamas, alpacas and vicuña) and fishing were also vitally
important.
While the Inca developed a basic system of counting using bundled knotted
strings known as quipu and an elaborate calendar, they did not use writing.
Historical events were passed along through oral tradition.
The Incas did not use money, instead they developed upon the system of
barter whereby all citizens were required to labour for a set number of days
per year known as mita. Gold ('Sweat of the Sun') and silver ('Tears of the
Moon') were used only for aesthetical purposes to adorn temples and create
artwork.
Demise of the Inca Empire
In 1507, Spanish settlers on the Caribbean island of Hispaniola (shared by
modern-day Haiti and the Dominican Republic) introduced small pox to the New
World. By 1520, it had spread to the mainland. The disease devastated the
native Amerindian populations. In 1527, small pox killed Huayna Capac, his
successor, and most other Inca leaders.7
His death split the empire between two sons, Atahualpa who had control of the
armies in the north, and his legitimate heir, Huáscar who was crowned in the
Inca capital of Cuzco.
Tensions escalated into civil war as the brothers fought for control of
the Inca throne. From 1531 through 1532, their armies participated in
numerous battles. Atahualpa defeated Huáscar's forces, but his victory was
short-lived with the advent of Spanish conquistadors, led by Francisco
Pizarro.
Francisco Pizarro and the Spanish Conquistadors
In 1513, Francisco Pizarro accompanied Vasco Núñez de Balboa in crossing
the Isthmus of Panama to become the first Europeans to view the Pacific coast
of the New World. Pizarro launched several expeditions southward from Panama
in search of a great land to the south rich with gold (thought to be the
legendary El Dorado) known as "Pirú".
In July 1529, Queen Isabel of Spain signed a charter allowing Pizarro to
establish a viceroyalty in the region. Pizarro established San Miguel de
Piura in July 1532 as the first Spanish settlement in Peru. Pizarro then led
a small force of less than 200 men into Cajamarca to intercept the Inca ruler
Atahualpa who had just defeated his brother and had been resting in the
thermal baths in the Sierra of northern Peru known today as Baños del Inca.
On November 16, 1532 Pizarro and his men captured the new Inca ruler and
charged him with twelve crimes, the most important being attempting to revolt
against the Spanish, practicing idolatry and murdering Huascar, his own
brother. The Inca ruler attempted to buy his freedom by filling one room (7
meters by 5 meters to arm height) with an estimated eight tons of gold and
another two similar rooms with silver. However, instead of satiating the
Spaniards appetite for treasure, this tremendous act only confirmed the
wealth of the Inca Empire.
Atahualpa was executed on July 26, 1533. Spanish forces continued onwards
and captured the Inca capital of Cuzco on November 15, 1533. On January 18,
1535 Pizarro founded the city of La Ciudad de los Reyes ("The City of
Kings"), known today as Lima to serve as the Spanish capital of Peru.
Against the Spanish steel swords, cannons and armoured mounted
Conquistadores, the Inca clubs, bronze tipped spears and serrated wooden
short swords were out-matched. Some parts of the Inca Empire revolted and
joined the small number of Spanish forces thinking they would soon regain
their freedom, not foreseeing the massive waves of Spanish immigrants that
would soon be arriving.
The Inca attempted on many occasions to regain their empire - including an
unsuccessful ten month siege of Cuzco. For nearly four decades, successors to
the Inca throne continued raids against the Spaniards and incited revolts.
However, in 1572, the final Inca stronghold of Vilcabamba was discovered, and
the last ruler, Túpac Amaru, was captured and executed, bringing the Inca
Empire to an end.
In addition to the military conflicts, epidemics continued to ravage the
remains of the Inca Empire, including measles, pneumonic plague, typhus,
influenza and diphtheria. In 1546, as much as two-thirds of the vitally
important llamas and alpacas begin dying from carache (llama mange). These
diseases further demoralized the Inca causing them to reject their gods and
traditions as the recent European settlers showed relative immunity.
Relatively few golden artifacts from the Inca Empire exist today as most
were melted down and shipped back to Spain. Perhaps the most familiar symbol
of the Inca Empire is Machu Picchu. The "Lost City of the Incas"
was built around 1460 and later abandoned due to devastation of the populace
from small pox a hundred years later.
There is no evidence that the Spanish conquistadores ever visited the
remote city. Machu Picchu was 'rediscovered' on July 24, 1911 by Hiram
Bingham, an American historian.8
Peru Independence
In the 18th Century, the area of the Viceroyalty of Peru was reduced from
the creation of two new jurisdictions - New Granada (founded on May 27, 1717
consisting of much of north-western South America and parts of Central
America) and Rio de La Plata (founded in April 1776 comprising of the area
east of the Andes in southern South America).
Amidst the Napoleonic Wars in Europe, presence of Spanish forces in
overseas colonies diminished and lead to growing movements for independence
in the South American viceroyalties. A declaration for Peruvian Independence
was made on July 28, 1821. Less than four years later, victorious
Peru-Bolivian forces under Simón Bolívar's lieutenant, Antonio José de Sucre,
defeated Royalist forces at the Battle of Ayacucho on December 9, 1824 thus
establishing their independence from the Spanish.9
The newly freed nations of South America quickly turned on one another
over numerous territorial disputes. Peruvian forces fought against Gran
Colombia over border lands from 1828-9.10
The Chilean-Confederation War (1836-1839) between the Peru-Bolivian
Confederation against the forces of Chile, Argentina, and Northern Peru ended
with a Confederate defeat and the creation of Peru.
The discovery of using guano as a high-nitrate source for explosives and
fertilizer during the 1840's resulted in two wars - the Chincha Islands War
against Spain (1864-1866) and the War of the Pacific (1879-1883).
First Fiat Currency - The Peruvian Soles de Oro
In 1863, Peru introduced the Soles de Oro (PEH) replacing the circulating
Bolivian Peso at a rate of 1 PEH to 1.25 Bolivian Pesos. In 1930, Peru left
the gold standard and established an official rate of 2.5 PEH = 1 USD which
lasted until 1946. Over the next fifty-five years, the PEH was repeatedly
pegged to the USD with a lower valuation. After 1975, multiple official
exchange rates were often established within a single year.
Beginning in 1979, larger demoninations of banknotes were issued by the
Central Reserve Bank of Peru. These notes included the 10,000 Soles de Oro
banknote, released in 1979, the 50,000 Soles de Oro banknote in 1982, and the
100,000 Soles de Oro banknote in 1985. By this time the exchange rate to the
USD was 5,965.98 to 1.
Second Fiat Currency - The Peruvian Intis
The chronic inflation of the PEH resulted in its replacement with the
Peruvian Inti (PEI) named after the Inca sun god. On February 1, 1985 old
soles notes could be exchanged for new inti banknotes at a rate of 1000 PEH
to 1 PEI. The initial value of the new currency was 11.65 PEI to 1 USD. Coins
denominated in the new currency were put into circulation starting in May
1985 and banknotes followed in June of that year.
In 1986, the highest denomination was 1,000 intis. However in September
1988, amidst excessive printing of the currency by the government to fund
expenditures (a practice known as seigniorage) monthly inflation soared to
132%. In August 1990, monthly inflation was 397%. At the end of that year, it
took 516,989 PEI to purchase 1 USD. The highest denomination was 5,000,000
intis, released in 1991.
Third Fiat Currency - The Peruvian Nuevo Sol
After only six years of circulation, the Peruvian Intis was abolished. In
the July 1, 1991 currency reform, 1 Peruvian Nuevo Sol (PEN) replaced
1,000,000 intis. Coins denominated in the new currency were introduced on
October 1, 1991 and the first banknotes appeared on November 13, 1991.
Overall Effect of Currency Revaluations
Since leaving the gold standard in 1930, Peru is now on its third paper
currency. The overall hyperinflation has been a one billionfold revaluation
of the original Soles de Oro:
1 Nuevo Sol = 1,000,000 Inti = 1,000,000,000 Soles de Oro
The Peruvian Nuevo Sol has been the most stable and reliable currency of
the Latin-American region in recent years.
