The year 1879 was nothing short of catastrophic for the Peruvian people. It marked the outbreak of the War of the Pacific which would bring untold travail, humiliation and ultimately national defeat. At the same time the widespread destruction engendered by the conflict cleared the path to economic modernization. During the next 50 years Peru, the quintessential ‘fẹudal’ Latin American society, would be pulled into the developing world economy, its modes of production reshaped by the special demands of Western industrial capitalism in the age of imperial expansion.

The half century after 1879 may be characterized as the dawn of modern Peru, a time not only of rapid economic modernization but also of social and political change. New elites emerged along the coast and coalesced to form a powerful oligarchy, whose political expression, the Civilist party, had before the close of the century seized control of the state. Under its paternalistic aegis and guided by the doctrines of liberal, laissez-faire positivism, currently in vogue throughout the continent, what Jorge Basadre, the dean of Peruvian historians, has called the ‘Aristocratic Republic’ (1895–1919) was born. The military was reorganized, professionalized and, at least temporarily, brought under civilian control for the first time since Independence. The machinery of government, although not entirely divorced from the traditional empleomania characteristic of the structures and forms of the colonial past, was overhauled, modernized and expanded to conform better with the demands and growing complexities of the modern export economy. It was, in short, a period marked by economic prosperity, political stability and relative social peace unmatched in the country's post-colonial history.

In the late nineteenth and early twentieth centuries, Peru – not unlike other Latin American countries – saw a large segment of its economic structure converted into a modern, export-oriented agro-industrial complex, designed to fill the basic raw-material needs of the rapidly industrializing nations of the northern hemisphere. Although Peru did not have a Porfirio Díaz to speed this process along, it nevertheless counted on a ‘científico’ ‘-like Qvilist Party, which steered an economic course rather similar in its broad outlines to the Porfiriato in Mexico. Moreover, Peru, like Mexico, had experienced the economic ravages of a recent foreign occupation, which made it equally vulnerable to the penetration of foreign capital. With its economy languishing in ruins from the Chilean occupation, the nation's entrepreneurial class believed that Peru had little choice but to open its doors and seek out the investment capital that was already accumulating in the north.

And if the time to receive foreign capital in the Latin American periphery seemed right to the ruling class, it was equally propitious from the standpoint of the European and North American metropolis where a second industrial revolution was propelling businessmen abroad in search of markets and raw materials. The upshot for Peru was an ever-increasing flow of foreign investment capital between 1890 and 1930. By 1913 British investments in Peru stood at a high-water mark of $166,000,000 – a figure that was soon surpassed by American capital, which rose from a modest $6,000,000 in 1897 t 0 $63,000,000 in 1914, and again to $200,000,000 in 1930.