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

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  • Vizcarra, Catalina

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.

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  • Vizcarra, Catalina, 2009. "Guano, Credible Commitments, and Sovereign Debt Repayment in Nineteenth-Century Peru," The Journal of Economic History, Cambridge University Press, vol. 69(2), pages 358-387, June.
    • Handle: RePEc:cup:jechis:v:69:y:2009:i:02:p:358-387_00
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    Cited by:

    1. Luis FELIPE Zegarra, 2016. "Political instability and non-price loan terms in Lima, Peru: evidence from notarized contracts," European Review of Economic History, European Historical Economics Society, vol. 20(4), pages 478-525.
    2. David R. Mares, 2022. "Understanding Cartel Viability: Implications for a Latin American Lithium Suppliers Agreement," Energies, MDPI, vol. 15(15), pages 1-26, July.
    3. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
    4. Mitu Gulati & Ugo Panizza & W Mark C Weidemaier & Gracie Willingham, 0. "When Governments Promise to Prioritize Public Debt: Do Markets Care?," Journal of Financial Regulation, Oxford University Press, vol. 6(1), pages 41-74.
    5. Kim Oosterlinck, 2013. "Sovereign Debt Defaults: Insights from History," Post-Print CEB, ULB -- Universite Libre de Bruxelles, vol. 29(4), pages 697-714.
    6. Christiaan Bochove, 2014. "External debt and commitment mechanisms: Danish borrowing in Holland, 1763–1825," Economic History Review, Economic History Society, vol. 67(3), pages 652-677, August.
    7. Carlos Marichal, 2014. "Historical reflections on the causes of financial crises: Official investigations, past and present, 1873–2011," Investigaciones de Historia Económica - Economic History Research (IHE-EHR), Journal of the Spanish Economic History Association, Asociación Española de Historia Económica, vol. 10(02), pages 81-91.
    8. Mitchener, Kris & Trebesch, Christoph, 2021. "Sovereign Debt in the 21st Century: Looking Backward, Looking Forward," CEPR Discussion Papers 15935, C.E.P.R. Discussion Papers.
    9. Tunçer, Ali Coşkun & Weller, Leonardo, 2022. "Democracy, autocracy, and sovereign debt: How polity influenced country risk on the peripheries of the global economy, 1870–1913," Explorations in Economic History, Elsevier, vol. 85(C).

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