With the increase of the U.S. economic influence in Peru during the 20th century, the level of the political and diplomatic relations between both countries also increased. Converging regional interests also strengthened bilateral relations.
In the two first decades of the 20th century, the objective of U.S. foreign policy in the region was to maintain peace and stability.
The inauguration of the Panama Canal in 1914, the establishment of new shipping companies between New York and South American ports, and the creation of a Latin American office in the U.S. Department of Commerce, contributed to a greater exchange with Peru. The effects were immediate. In 1916, bilateral commerce between the two countries increased 60%.
It was not until 1920 that the U.S. Congress elevated its Diplomatic Representation in Peru to the category of Embassy.
During the eleven-year term of President Augusto B. Leguía (1919-1930), the influence of the United States was significant, a result of the confluence of economic values between both nations, inspired by the importance of free enterprise and commerce. For the first time, U.S. private capital eclipsed British investments in Peru, and trade increased significantly.
With the government of Manuel Prado, Lima and Washington developed a much closer relationship.
While the U.S. Government was participating in World War II, it was allowed to build an airport in Talara and both countries agreed to increase cooperation between their navies.
The administration of President Odría, who privileged U.S. investment, was one of first governments in the Western Hemisphere to sign a Treaty of Assistance and Mutual Defense with the United States in 1952. With this agreement, Peru tightened it cooperation with the United States in military affairs, which included the sponsorship of visits of Peruvian officers to U.S. military installations. Another characteristic of relations between Peru and the United States during the Government of Odría was the significant increase of mineral exports to the U.S. market.
The military coup d’etat in 1962 that overthrew President Prado caused an adverse and immediate reaction by the U.S. Government, which broke off diplomatic relations with Peru and denounced this act as a step backwards for the Alliance for Progress.
With the first Government of Architect Fernando Belaúnde in 1963, diplomatic relations between Peru and the United States were normalized. Later on, the problem of La Brea and Pariñas, nevertheless, emerged as a serious controversy between Peru and the United States.
The “Revolutionary Government of the Armed Forces,” in power between 1968 and the mid 1970s, observed a greater neutrality towards U.S. leadership in the context of the Cold War. Peru established a new political, social and economic agenda, nationalizing foreign properties. The spectrum of Peru's diplomatic relations was broadened under the principle of ideological pluralism and universality of diplomatic relations.
The decade of 1980, Fernando Belaúnde’s second term and Alan García’s first, was marked by the Debt Crisis that affected Latin American countries and the emergence of the terrorist groups “Shining Path” and “The Revolutionary Movement Tupac Amaru”. Both Presidents looked for a more positive relationship with the United States, particularly the increase of economic cooperation and counternarcotics.
Alberto Fujimori’s Government (1990-2000) had as a priority the improvement of the Peruvian economy and the combat against the aforementioned terrorist groups. Among other measures intended to attain macroeconomic stability, the liberalization of commerce and the promotion of foreign investment; Fujimori looked for strengthening the economic bilateral relations with the United States.
Another particular area of improvement was the counternarcotics cooperation. Fujimori's approach included the establishment of a market economy in coca-growing regions, the increase of the Government’s presence and crop substitution (coffee and cacao), as well as the distinction between the coca leaf growers and the drug traffickers. The Peruvian initiative was expressed in the counternarcotics bilateral agreement (1991) and the Andean Trade Preference Act (ATPA) that included Bolivia, Colombia, Ecuador and Venezuela, being the latter replaced in 2002 by the new Andean Trade Promotion and Drug Eradication Act (ATPDEA).