The International Monetary Fund and World Bank representatives that will gather in Lima, Peru this week will likely laud the host country’s economic success over the past 15 years and with good reason. That success, which has made Peru’s economy one of the fastest growing in the region, has been built both on responsible macroeconomic policies and the respect for the rule of law.
Left out of that praise and good feelings about the success of institutions and the law will be a long-standing default that the government of Peru has yet to resolve.
The default stems from the bonds that the then leftist-military government gave to landholders from whom it seized their property from 1969 to 1981 in a land redistribution program. Even the socialist military government at the time, though, wanted to avoid being accused of stealing property, so it issued bonds intended to provide compensation for the expropriated property. Those bonds were never paid in full, however, and the landholders remain uncompensated.
Christopher Sabatini is an adjunct professor at the School for International and Public Affairs at Columbia University and the director of Global Americans and LatinAmericaGoesGlobal.org