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5 The Symbiosis of Exports and Regional Trade
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Imports, Domestic Production, and Regional Trading Circuits

Southern Peru's balance of trade with foreign countries conducted through Islay and Mollendo stayed positive for most years between the mid-1850s and 1919.[52] Trade surpluses were especially impressive during the mid-1860s and the years of World War I but were large in most years since the 1890s. In part such surpluses flowed out of the region to Lima in the form of import duties and direct and indirect taxes. The south, like other provincial regions of Peru, helped to pay with its balance-of-trade surplus for the higher level of imports consumed in the capital, whose port, Callao, consistently garnered a share of imports much beyond its hinterland's share of national population and its export capacity. But part of these surpluses must have been retained in the south and contributed to the growth of expenditures for consumption or investment satisfied with regionally produced commodities.

"At least 60 percent of the population of Peru is practically negligible so far as the purchase of foreign goods is concerned," wrote William E. Dunn, the commercial attaché of the United States embassy in Lima, in 1925. In his opinion the Indian peasants, living in their "bare and desolate mud or stone huts in the Andean heights" and lacking "the remotest ideas of comfort in life," limited their purchases of manufactured goods to "a few cheap tools or an occasional novelty that strikes their fancy." They spent the "petty sums" they earned from the sale of wool and other products on the purchase of alcohol and coca leaves. Dunn viewed "mestizos of the lower class," with their "dilapidated houses, . . . furnished with only a few indispensable household articles," as only slightly better customers of imported goods. In fact, he thought that "the combined purchasing power of the Peruvian people might well be compared with that of the average American city of about 650,000." (Peru had about five million inhabitants at the time.) Demand for a broad range of upscale consumer goods, especially important for U.S. foreign trade by the early twentieth century, was concentrated in Peru's major cities, especially Lima.[53]


Although Dunn's cultural prejudices are striking, there is no reason to accuse him of underestimating the Indian peasants' propensity to consume imported goods. It was, after all, his job to identify potential markets for U.S. products. Southern Peru, with its great concentration of Indian peasants, consumed relatively few imports in relation to its population. During the first two decades of the twentieth century the region, with close to one-third of the country's population, accounted for 10 to 15 percent of Peru's total imports.[54] Without major urban centers the disproportion between population and consumption of imports was, of course, greater yet in the altiplano. As early as 1850, a few years after the terminal crisis of southern Peru's textile manufactories, the important trade fair at Vilque saw wholesale purchases of regional products for export of 490,000 pesos, while the sale of imported wares to altiplano traders and consumers amounted to only 300,000 pesos.[55] And for the period between 1920 and 1935 the Arequipa export and import house of Guillermo Ricketts y Compañía "bought much [primarily wools for export] and sold little [imports]" in Puno.[56]

Among the fifty-two different articles of wearing apparel imported into Peru in 1913, imports through Mollendo accounted for 10 percent or more of national imports for only fifteen articles.[57] Ready-made imported apparel did not sell much in southern Peru, either because its high price limited demand to two or three retail stores in Arequipa, or because the cheapest grades of standard clothing items were already being produced in small domestic clothing manufactories, or because most of the "better" families in the provinces continued to rely on seamstresses and tailors for major items of their wardrobes such as dresses and suits.[58] Similar problems were faced by a wide range of imported consumer goods in southern Peru. Domestic and artisanal production continued to supply many of the traditional items of consumption. At the same time, many items in the broadening range of commodities newly added to consumption patterns in southern Peru, especially since the 1890s, were produced by a growing number of small factories and artisanal shops in Arequipa and Cuzco or in Lima and other coastal towns.

To be sure, an ever-broadening range of imported goods did circulate throughout the southern highlands, integrating the remotest hamlet and the humblest peasant family into a commercial chain that had its other end in mighty factories in Bradford, Limoges, or Essen. As early as the 1830s and 1840s certain imported textile materials, hardware, glassware, and foodstuffs were consumed in altiplano provinces. Consumption patterns changed considerably after the coming of the railroad, and especially after the late 1880s.[59] The range of goods available in altiplano stores and


markets expanded rapidly, and many of the newly offered items were imports. The dry-goods store of José Pantigoso Chavez on the Plaza Mayor of Puno town in 1858 carried a total of 74 items, of which 21 can be identified as likely imports, 36 as domestically produced, and 15 as either imported or domestic goods.[60]

By comparison, in 1890 the Casa de Comercio de Efectos Ultramarinos y de Abarrote Moller and Compañía, also located in Puno town, carried 241 different articles, of which 148 were probable imports, 35 were domestic goods, and a further 58 were of uncertain origin.[61] The more affluent of Azángaro's hacendados purchased imported furniture, household goods, apparel, and luxury food items. For example, in February 1873 the hacendado Manuel E. Paredes from Azángaro received special foods, beverages, and glass and china were from a general and dry-goods store in Puno. Of the bill, which came to 142 pesos, 5 1/2 reales, items amounting to at least 56 1/2 pesos corresponded to imported goods, among them Norwegian beer and Spanish canned fish.[62] In the 1909 will of the hacendado Mariano Wenceslao Enríquez, long-time parish priest of Azángaro, appear such imported items as "one new French piano," a typewriter, and a sewing machine.[63]

Indian peasants also spent some money on imported goods. In the early 1860s, probably the apex of the relative strength of imports in southern Peruvian markets, the English traveler Clements Markham claimed, with considerable exaggeration, that "almost all the woolen clothing of the Peruvian Indians is now imported from Yorkshire, and their shirtings from Lowell."[64] Beginning no later than the last decade of the nineteenth century, peasants and poorer urban folk in the altiplano purchased such imported wares as basic tools (e.g., scissors and plowshares), needles, mirrors, and aniline dyes.[65] For southern Peru as a whole, the composition of imports underwent a major shift between the 1860s and the 1910s. In 1863 at least 52.3 percent of total imports through Islay were textiles, but their share had declined to an average of 34.9 percent between 1913 and 1916. By the mid-1910s, 40.5 percent of imports through Mollendo consisted of metal goods, ceramics, glass, cement, timber, paints, oil, rubber goods, tools, and machines, a broadened range of consumer and investment goods difficult to disentangle.[66]

But the weight of such imports in the overall expenditures of the altiplano's population, from community peasants to large, hispanized landholders, should not be exaggerated. With the exception of certain textiles, purchases of imports by hacendados or Indian peasants constituted occasional, extraordinary expenditures and did not belong to their day-to-day consumption. The items of the normal diet not only of peasants but also


of hacendados, when they did not stem from the livestock growers' own production, originated mostly in regions adjacent to the altiplano.[67] Outlays for domestically produced maize, rice, noodles, flour, salt, fresh and dried fruits, and sugar occasioned considerable expenditures, particularly for the peasants. A great deal of income was spent on stimulants such as coca leaves and alcohol (aguardiente de caña for the peasants, pisco [brandy from Peru's coastal vineyards] and wine for the hacendados). Candles and fuel (if the dung of one's animals was insufficient), locally produced pots and silverware, and other domestically produced household items had to be purchased on a regular basis. Although the construction of a peasant's adobe hut required the purchase only of timber—not a cheap item in the woodless altiplano—the building of a hacendado's urban residence and, more generally speaking, investments in urban real estate swallowed up much money. Both hispanized hacendados and indigenous peasants invested savings from the sale of wool or other livestock products in land and livestock. There were expenditures for transportation, for the education of children in the case of more affluent landholders, and, last but not least, for numerous national, municipal, and church taxes and fees. In short, altiplano wool producers, after selling their wool to merchants, did not immediately turn around and spend all their returns on imported goods. This fact was obvious to Clements Markham, who wondered what alpaca herders did "with the enormous sums of money thus received." He suggested that they routinely buried such cash income.[68]

Among the altiplano peasantry, burial may indeed have been a common method of saving money for large, special expenditures (e.g., baptisms, marriages, and funerals), a type of deferred consumption. More generally, the increasing revenue brought into the region by wool exports and associated activities stimulated regional trade with domestically produced goods. Since the 1850s the export of wools had become the lead sector of the southern Peruvian economy. As export earnings grew, demand for regionally produced goods rose. Wools were now fueling the economies of the southern highlands just as silver had during much of the colonial era. As Manuel Burga and Wilson Reátegui observe, wool exports helped to form an economic region that became dynamic through that trade.[69]

What had changed since the mid-eighteenth century was the spatial definition of the economic region, the social composition of commercial networks, and the distribution of benefits from trade. The symbiotic relationship between the conjuncture for the major export commodity and the conjunctures for a broad range of regionally exchanged goods did not change, however. The strengthened foreign trade nexus had undermined or even destroyed specific processing activities and commercial flows by the


TABLE 5.6. Wool Production in Southern Peru  (Estimates) and Exports From Islay and Mollendo,
                      1840–1917 (1,000 metric tons)




% Retained





























Sources: Exports based on Jacobsen, "Cycles and Booms," 490–500, tables 3–6; Jacobsen, "Land Tenure," 815–33, app. 1. For wool production, I constructed baseline estimates for 1830 and 1929. For 1830 see chap. 2, n. 76. In the other baseline year, 1929, the first national agricultural and livestock census was carried out; see Dir. de Agricultura y Ganadería, Estadística general agro-pecuaria. Its figures are unreliable. For the department of Puno, it calculates a sheep population nearly identical to that for 1959, while for cameloids it indicates about one-fifth of the 1959 population. Given that by 1959 southern Peruvian livestock herds had just been decimated by the catastrophic drought of the mid-1950s, I have estimated net growth of livestock populations and wool production between 1929 and 1959 of 10 percent. I arrived at estimates for 1840, 1867, and 1917 by calculating the linear absolute growth between the two base years. Of course, this renders only rather rough estimates.


In the title of table 5.6 (page 173) the units of measurement should read "metric tons," not "1,000 metric tons."

mid-nineteenth century, but over the next seventy years it did not have the strength or the explosive impact to completely eliminate trade in artisanal goods and other regionally produced processed commodities. On the contrary, indications are that the share of regionally or nationally produced goods among the total goods consumed in southern Peru rose after about 1870.

Take the crucial case of wools. As late as 1840 close to 60 percent of sheep wool and over a third of alpaca wool produced in southern Peru was not exported but was processed in the region, either on looms in peasant households or in the remaining obrajes. Most obrajes finally collapsed during the mid-1840s, a new wave of cheaper imported textiles entered the region, and the price for wool rose dramatically during the 1850s and 1860s. Because of these developments, the share of wools that was exported appears to have risen sharply. By 1867 only about 42 percent of sheep wool and 20 percent of alpaca wool may have been retained domestically (table 5.6), confirming the frequent complaints by British consuls that the exports of alpaca wools were limited by tight supply. But over the following fifty years this trend was reversed as livestock herds grew faster than wool exports. For the whole period 1830–1917, southern Peru's sheep population may have grown nearly three and a half times, whereas sheep wool


exports grew 2.8 times between 1840 and 1917. Alpaca herds may have grown more than four and a half times, with exports expanding by a factor of 3.7 between 1840 and 1917.[70] Between 1867, when the ratio of wool exports to wool production probably reached its highest point, and 1917, sheep wool production may be estimated to have grown by nearly 70 percent, while exports increased by only 30 percent. The share of domestically retained wool thus was elevated to at least 55.9 percent in the case of sheep wool and a more modest 25.9 percent in the case of alpaca wool.[71]

Two reasons account for the growing domestic consumption of raw wools. One is the opening of modern woolen mills in southern Peru that processed the regionally produced raw materials. The first opened in 1861 on Hacienda Lucre, site of an old obraje close to Cuzco, by the Garmendia family, a prominent family of large landholders since colonial times. After a mere twenty years of nearly complete prostration of elite-controlled textile production, this was the first step in the reversal of that trend. But southern Peru's modern textile industry grew very slowly. Between 1895 and 1910 two more mills began operations in Maranganí and Urcos, in the colonial centers of Cuzco's textile production in Canchis and Quispicanchis provinces, and one opened in Arequipa. The Maranganí factory, "one of the most progressive and up to date enterprises in South America," had modern English, German, and Belgian machinery installed. It relied on Indian community peasants and colonos as workers, something that remained true for all textile factories in Cuzco before 1920.[72]

These factories were small in terms of capital, installed capacity, and work force in comparison with the woolen mills in Lima and especially with the cotton mills in the capital, owned by powerful foreign enterprises such as W. R. Grace and Duncan Fox and Company. The south Peruvian market for manufactured woolens was now disputed by three sets of producers: factories located in the region itself, in Lima, and in Europe. By the second decade of this century more nationally produced textiles were sold in the region than imports. And although the large Lima factories dominated the market for cotton goods, the southern factories were relatively strong in woolens up to the end of World War I, especially in highland departments such as Cuzco, Apurimac, and Puno, but briefly also in Arequipa. The Cuzco factories specialized in baizes, cashmeres, flannels, and blankets aimed at peasants and other downscale consumers, a market segment for which their lower transport costs and intimate knowledge of regional styles and marketing arrangements gave them the edge.[73]

Nevertheless, according to one report, by 1918 Peru's factories still absorbed only some 680 metric tons of sheep wool, below 10 percent of national production and just under 20 percent of exports.[74] Although this


industrial use of wools clearly contributed to the shifting balance between exports and domestic consumption, the surprising fact is the continued weight of wool processing in peasant households. Even during the height of the wool export boom toward the end of World War I, nearly one hundred years after the opening of direct foreign trade with England and more than fifty years after the installation of the first modern woolen mill in the country, cloth woven on the simple looms of the peasant households must have consumed between 45 and 55 percent of all sheep wool and close to one-fourth of all alpaca wool produced in southern Peru.[75] Estimates are too rough to indicate with confidence whether the relative share of peasant household production in the disposition of southern Peru's total wool clip had begun to decline during the first century after independence, when consumption of wool by obrajes was replaced by wool exports and modern factory processing. But it is clear that with the strong growth of livestock populations the absolute quantity of wools processed in peasant households continued to increase until 1920. Although southern Peru's rural folks and the poorer strata of the towns had purchased certain imported textile items since the 1830s or 1840s and had begun to use domestically manufactured woolens since the 1860s, the attendant reduction in the per capita consumption of household-produced textiles was more than offset by the increase in the region's population that continued to rely on some homewoven fabrics. To reiterate this crucial point: the absolute amount of woolens produced in peasant households continued to grow during the century after independence, even if per capita consumption began to decline.

This increased output of homespun woolens would not have been unusual as a relatively brief transitional phenomenon accompanying the formation of an integrated domestic market in conjunction with the emerging dominance of the capitalist mode of production, as Emilio Sereni has shown for the Italian case. For a period of some thirty years following the onset of the formation of a large-scale textile industry in the 1860s, the processing of linen and hemp in rural households in Italy continued on a high level, and the number of looms in the countryside continued to increase even until the early 1890s. But the opening of Italy to massive foreign trade, the liberal policies of the resorgimiento , and, after 1880, a policy of industrial protection created a national market in which rural producers increasingly succumbed to the large factories in the northern cities, industry and agriculture became thoroughly separated, and the mezzogiorno was made into a "dependent territory" of the northern industrialists.[76]

In the comparative perspective of Western Europe, Sereni considered the Italian transition toward a capitalist national market excruciatingly slow, held back by "feudal remnants." But the Peruvian case was quite different.


Before 1930 no national market emerged; foreign trade and modern industry, rather than functioning as battering rams bringing down the walls of southern Peru's traditional modes of production and exchange, accommodated themselves to regional interests; agriculture and industry remained highly linked, and domestic household production grew along with foreign trade and modern industry, whose capacity to expand thus remained limited.[77] Low productivity in agriculture and artisanal production, as well as the neocolonial structure of the society, made the southern Peruvian highlands resilient to the forces of change.

The money circulating in southern Peru through export activities thus stimulated a broad range of domestic production and processing for regional trade without drastically changing the mode by which these commodities were produced. The demand for many of these commodities moved together with the export economy. Maize in Cuzco became scarce in 1917 when demand from the core livestock area between Sicuani and Lake Titicaca rose in conjunction with the wool export boom.[78] Sheep and cattle on the hoof from Puno and maize from Cuzco briefly encountered strong markets in Chilean-occupied Tarapacá during the 1910s, when that region's nitrate export peaked.[79] Since the 1850s the consumption of grape alcohol from the valleys of Moquegua and around Arequipa had increased in the rural areas of the altiplano. After the railroad facilitated access from the coast to the southern highlands, cane alcohol from the rapidly modernizing north coast sugar estates pushed out the southern grape alcohols, and peasant consumption of aguardiente de caña grew in close relation to conjunctures of the wool market.[80]

Besides the various woolen goods, a broad range of artisanal products found strong demand throughout southern Peru. Artisans from the altiplano and workshops in Arequipa or Cuzco did not merely continue to produce standard items of long-standing demand but adjusted their production to shifting urban consumption patterns. Potters in Santiago de Pupuja and Pucará diversified from the plain jars and pots used for cooking in most of the altiplano, creating vases, ashtrays, and ornamental pieces sought after by urban middle-class families. Leather workshops, especially in Arequipa, also adjusted their production to new urban demands in footwear, clothing accessories, and household furnishings.[81]

Southern Peru took on its contours as a distinct trading region during the second half of the nineteenth century as a consequence of this articulation between foreign and regional trade. From Desaguadero to Abancay, from Huancané to Camaná, and from Quillabamba to Moquegua, dozens of trading circuits transmitted the impulses from the export activities to remote valleys and mountain slopes that produced commodities for the


regional market. While regional interchanges intensified along with foreign trade, commerce with Bolivia, which had been the major pole of the erstwhile colonial pattern of exchange, lost in relative weight. Southern Peru became a distinct region for which the links with Liverpool were more important than those with Lima. Since the early 1870s the railroad line connecting the port of Mollendo and the entrepôt Arequipa with the highland zone had become the backbone of this trading region, erecting new commercial hierarchies, fostering new urban centers, and relegating others to a marginal position within those hierarchies. The creation of a new spatial hierarchy in southern Peru's commerce as a result of the rise of the wool exports and the construction of a modern transport funnel went hand in hand with the renovation and intensification of social hierarchy in trade: the growing centrality of the import and export merchants, benefiting most from the advantages of improved means of transportation and communication; the establishment or, in some towns, the expansion of several layers of middlemen, from wholesalers, regional bulkers, and owners of well-stocked general stores in important centers along the rail line to itinerant peddlers and wool purchasers; and the dependent incorporation of mestizo and Indian traders into the bottom rungs of these hierarchies. As Gordon Appleby has argued persuasively, trade in southern Peru became organized into a "dendritic" model, akin to a tree in which the life of even the remotest twig in the crown depends ultimately on the main stem.[82]

But this was not the whole story. Much of the regional trade continued to flow outside of the channels of this "dendritic" system, even if it did not escape its influence in terms of demand fluctuations. Many points of conflict and tension marked the attempts by merchants entrenched in the export- import hierarchy to impose their trade routes, their prices, and their commercial intermediation on peasants, muleteers, and others who continued to ply older, more autonomous trade circuits based on intraregional complementarity. The conflicts erupting in southern Peruvian trade since the late nineteenth century were not primarily between groups attempting to impose foreign trade against the maintenance of intraregional exchanges or vice versa. Especially in the altiplano there were few traders who did not have a foothold in both types of activity. At stake was the social distribution of benefits within a regional trading system made up of heterogeneous elements.

Two studies on other Andean regions have emphasized that between the 1870s and 1880s regional commercial circuits were disrupted through the corrosive effects of economic liberalism and war. Tristan Platt has pointed to the "internal market" for maize and wheat in Upper Peru and Bolivia up to the 1860s. Cochabamba and, after independence, Chayanta supplied


the northern Bolivian altiplano and adjacent regions in southern Peru with these staples. The community peasantry of Chayanta played a prominent role in the "internal market" as long as the Bolivian state pursued a protectionist trade policy and maintained its alliance with the Indians symbolized by the tribute nexus. This "internal market" was destroyed within little more than a decade, when between the late 1860s and early 1880s the Bolivian national elite turned to a free-trade policy, allowing Chilean grains to flood the national market, and simultaneously attempted to institute a liberal land policy, which, had it been successful, would have destroyed the Indian ayllu and replaced it throughout the republic with large estates.[83]

The other case concerns the central Peruvian sierra, analyzed by Nelson Manrique. Since the 1840s a dynamic, relatively autonomous regional market had developed, based on the rising demand for livestock products in Lima and an intensive trade in locally produced cane alcohol. This regional market conjuncture, in contrast to the picture drawn by Platt for Chayanta, primarily benefited large landholders and merchants. It entered into crisis through the destruction and social mobilization wrought on the region by the War of the Pacific. As most families of the central sierra's regional oligarchy saw their properties destroyed, sources of credit withdrawn, and markets challenged, they lost control over the regional economy first to better-capitalized businessmen from Lima and, after 1900, to "imperialist capital" taking over the copper-mining industry. In Manrique's view the formation and demise of the central sierra's regional market were inevitable steps toward the formation of Peru's national market.[84]

Southern Peru underwent a different development. After painful adjustments to the displacements of certain domestic goods by imports between the 1780s and 1850s, the regional market became tied to the growth of foreign trade. The liberalization of imports during the 1850s and 1860s helped to establish foreign trade as the strategic, lead sector of southern Peru's economy, favored the formation of new mercantile hierarchies dominated by the foreign houses of Arequipa, and in this way fostered the growth of the "dendritic" trading pattern that defined the south as a region in and of itself. But this trade liberalization did not lead to a general crisis of intraregional trade, as Platt has described for Chayanta. The crucial difference between the two cases concerns the commodities involved and the producers. In Chayanta the strategic products for peasant participation in the "internal market"—cereals—could easily be replaced by imports once the tariff and transport conditions favored such replacement. In southern Peru the strategic export commodity was produced to a considerable part by peasants. The same activity of livestock raising that involved the peasantry in the export nexus simultaneously produced a broad range of goods for regional trade, from wool and hides to meat, tallow, butter,


and cheese. Wool bulkers could hardly have wanted the peasants to cease barter and trade in such commodities, as it would have made them totally dependent on income from wool sales for export, inevitably leading to demands for higher prices for peasants' wool.

Other commodities from different parts of southern Peru, such as coca leaves, tea and coffee, cane and grape alcohols, chile peppers, raisins, and olives, had little to fear from overseas imports. Between 1888 and 1897 higher import tariffs and exchange rate devaluation led to increased levels of effective protection, but this situation did not automatically benefit regional trade controlled by peasants; rather, it led to modest import substitutions through a few new factories, such as the woolen mills discussed above, iron foundries, and breweries, which merely shifted the origin of manufactured goods confronting some of the peasants' domestic goods. Industrialists and merchants were either identical or the former were highly dependent on the latter before 1920. For this reason the national debate over import tariffs during the 1890s does not appear to have split the region's business elite. Until the end of the World War I export boom most members of that elite, in Cuzco and Puno as much as in Arequipa, remained free traders.[85]

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