Peru Expropriates the International Petroleum Company

American officials worried that imposing statutory penalties for Peru's expropriation would look like intervention throughout Latin America. Peru's military government rejected threats of sanctions as an intrusion into domestic affairs. [1]

Six days after taking power, General Juan Velasco Alvarado’s military government seized the International Petroleum Company’s oil installations on 9 October 1968. Taking the American owned property was an early test of his government’s determination to extend national control over Peru’s economy. [1]

In Washington, the seizure triggered a six month deadline. U.S. legislation required aid to be suspended unless an expropriating government returned the property, arranged compensation, or took appropriate steps toward settling the dispute. A separate law threatened Peru’s access to the American sugar market, so enforcing the provisions risked widening the confrontation beyond the company’s property. [1]

Peru took the company’s remaining assets in January 1969. The Nixon administration deferred the formal penalties on the grounds that negotiations continued, although it withheld new development loans. The dispute was still unsettled when the earthquake of May 1970 created an immediate need for relief and reconstruction, shifting Washington’s priorities without resolving the compensation claim. [1]

Washington recalled its ambassador for consultations, approached World Bank President Robert McNamara, and sent a special emissary to senior Peruvian officials. Treating ongoing negotiations as evidence of appropriate steps toward compensation allowed the administration to defer statutory penalties. [1]

Related Diplomats

1. Celso Pastor de la Torre [2]
2. Fernando Berckemeyer Pazos [3] [4]

Related Reading

• Peru and the United States