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Peru at a Hydrocarbons Crossroads

Analysts searching for leading indicators of Peru's political direction need look no further than the country's oil sector. Recent events have demonstrated that, like many of its neighbors, Peru is at a crossroads between sustainable democratic development and economic growth. The country's management of its hydrocarbon resources may well serve as a microcosm of things to come.

From the 1968 expropriation of the International Petroleum Company's assets in Peru under the left-wing military dictatorship of Juan Velasco Alvarado well into the 1990s, Peru's oil sector was concentrated in the hands of Petroperú, the state-owned oil firm. The company held a monopoly on all oil and gas industry activities. The limits of this model became apparent in the late 1980s as the firm's revenues declined and Peru became a net oil importer.

With the election of the conservative Alberto Fujimori in 1990, the sector changed dramatically. Fujimori shook up the firm's management and opened the country's resources to private firms. In 1993, Fujimori created Perupetro (henceforth the National Hydrocarbon Agency, NAH, to avoid confusion) a state-owned enterprise dedicated to the administration of oil and gas resources and the maintenance of contracts with private firms.

The neoliberal model of the Fujimori years, both broadly speaking and in the oil sector in particular, remains the dominant paradigm in Peru. Driven by the primary commodities export sector, it has brought…

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