Peru's Economy
Hyperinflation and the Fujishock
How Peru suffered hyperinflation of over 7,000% in 1990 under Alan García, and how Alberto Fujimori's shock therapy ended it with price liberalisation.
Peru suffered hyperinflation in the late 1980s.
Cause
Alan García’s government (1985-90) printed money, controlled prices and limited foreign debt payments, cutting off credit.
Scale
Inflation exceeded 7,000% in 1990.
Fujishock
Alberto Fujimori, elected in 1990, launched a shock:
- Freed prices.
- Cut subsidies.
- Raised fuel prices dramatically overnight.
Results
Inflation fell sharply over the next few years.
Dark side
Fujimori later closed Congress in 1992 and was convicted of human rights abuses and corruption.
The price shock
Overnight in August 1990, the price of petrol rose many times over as subsidies ended.
Thinking stabilisation is painless
The Fujishock caused hardship.
Key takeaways
- Peru's inflation exceeded 7,000% in 1990.
- García's policies caused it.
- Fujimori's shock ended it.
- Fujimori later became authoritarian.
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