Historical Sketch

The Spanish conquest of the Inca Empire began in 1524, and the possessions were consolidated into the Viceroyalty of Peru. In the 18th century, the Viceroyalties of New Granada in the north and Rio de la Plata in south were split off. The Peruvian war of liberation against Spanish rule began in the 1810s, and in 1821 Peru declared independence. In 1836 Bolivia conquered neighboring Peru and formed the Peruvian-Bolivian Confederation, within which Peru was divided into a northern and a southern state. It disintegrated already in 1839 and Bolivia and Peru were restored. Throughout the 19th and until the mid-20th centuries, Peru was engaged in numerous wars with the neighboring states to settle claims for border territories.

Monetary History Overview

With the Spanish conquest in mid-16th century, the Viceroyalty of Peru became a centre of mining and explitation of precious metals and therefore also the colonial coin production. The so-called "Spanish Dollar", the 8 Reals in silver, and the "Spanish Doubloon", the 8 Escudos in gold, were produced here and became the most prominent trade coins worldwide, rivalled only by the Austrian Maria Theresia Thaler of the late 18th century. After the Peruvian independence in 1821, the provisional Peruvian government immediately nationalised the mint and started issuing coins in the name of the new country. The 1825 coinage law for the Peruvian Peso took over the Spanish bimetallic standard. In daily payment transactions, however, specie coins were the exception, the majority of the circulating medium consisted of debased silver, a large portion being crudely hammered and of irregular shape, the so-called "Macuquina". In the 1840s, practically all specie coins had disappeared from circulation. In the mid-1850s, the Peruvian government passed several coinage laws to remedy the circulating medium but, however, could not implement them as it had not the means to withdraw the debased coins. In February 1863 finally, another currency law was enacted to create the 1st Peruvian Sol in the French bimetallic standard. All foreign and debased coins were demonetized within four years. Bimetallism could, however, never be upheld so that the Sol was in fact a silver currency. In the late 1870s, a large number of commercial banks began issuing paper money. The state did not regulate the private issuance and even added state paper money from 1879 onward. Recurrent warfare with neighbouring states added to the deterioration of the monetary situation. In 1880, a reform was attempted by creating the "Peruvian Inca" a new national currency in the gold standard pegged to the Pound Sterling. Due to the political and economic instability, this did not go beyond the production of some subsidiary coins in silver coins and was abandoned in 1884. A second attempt at remedying the currency was done in 1897. The Peruvian Libra became the new currency unit. It was at par with the Pound Sterling, and British gold coins got legal tender status, circulating alongside the national gold coins. The Sol remained in circulation at a tenth of a Libra. In 1930, the Sterling parity could no longer be kept, and Great Britain was about to leave the gold standard. In February, the Libra was abolished, and the 2nd Peruvian (Gold) Sol became the national currency. It was devalued by 18% against the Sterling and repegged to the US Dollar. In April 1931 already, the Sol was devalued by another 30%, and one year it unpegged from the US Dollar and abandoned the gold standard. In the same year, in September 1931, the Central Reserve Bank of Peru was finally established as central bank and took over the paper money issuance. The Sol stabilized in 1940 and subsequently repegged to the US Dollar. In the late 1940s already, the official rate became partly inoperative, and transactions were done at parallel rates. Since November 1949, the Sol's exchange rate was most time floating with intermittent periods of currency stability. In 1976, when 90% of the currency value of the 1940s had already gone, exchange control was abandoned completely, and the Sol began declining at annual rates of around 40%. In February 1985, the currency was reformed, three zeros were cut, and the Peruvian Inti became the new unit. The economic situation had not changed, however, and the currency depreciation accelerated further and even turned into hyperinflation at the end of the 1980s. In July 1991, another currency reform was carried out. This time, six zeros were cut, and the 3rd Peruvian (New) Sol became the new unit. Depreciation slowed down, and the currency stabilized at the end of the 1990s. The Sol has remained more or less stable since then.

Peru joined the International Monetary Fund (IMF) on 31.12.1945 as a founding member.

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