The objective of this paper is to describe Peru's great depression and discuss possible hypotheses that may explain the deep collapse and slow recovery of the Peruvian economy. The main finding of the paper is that it is very hard to find a single explanation for Peru's great depression. Very much like a perfect storm, so many things went wrong at the same time, with the effects of each negative shock amplifying those of the other shocks. In particular, our findings suggest that the external shocks that hit the country in the 1980s were amplified by a weak and fractionalized political system (for a discussion of the interaction between external shocks and ability to recovery from external shocks, see Rodrik, 1999), limited domestic entrepreneurial capacity, and lack of a coherent industrial policy that could lead to the discovery of new productive activities.

ACCESS PAPER