International Petroleum Company (IPC)

The International Petroleum Company (IPC) is a foreign oil concern active in Peru. Breaking Latin American legal precedent, Simón Bolívar granted to one of his followers outright ownership of the subsoil of the oil fields on the haciendas La Brea and Pariñas in the department of Piura in 1824. They were later developed by the London and Pacific Petroleum Company, which was sold to the Standard Oil Company—which became the International Petroleum Company (IPC) in 1913. While the legal ownership of the La Brea and Pariñas fields became a long-standing matter of dispute between the government of Peru and IPC, the company expanded its holdings and profits over the years. Because of the enclave nature of the industry, among other things, those profits amounted to around 70 percent of gross income from oil exports. The government consented to such high profit rates largely because of the company's repeated willingness to provide for its short-term financial support, particularly at times of severe deficit crises. Continued high-profit repatriation and charges of company intervention in Peru's internal and external affairs, as well as corruption and the legal dispute over ownership, all combined to intensify public resentment against IPC, which became a focal point of nationalist sentiment. The government's complicity in the company's abuses became the pretext for the military overthrow of the Belaúnde Terry regime in 1968 and the subsequent nationalization of the company that same year.

The expropriation of IPC, among other things, roiled the relationship between the United States and the revolutionary government of General Juan Velasco Alvarado (1968–1975). The company demanded $120 million in compensation; Peru claimed IPC owed $690 million in back taxes for the petroleum that it had extracted illegally over the years. As a result, U.S. foreign aid effectively dried up, as did loans from international agencies such as the World Bank. Negotiations continued as both the Peruvian and the U.S. governments pragmatically sought to defuse the issue. Peru needed outside aid, and the Nixon administration was concerned about a looming worldwide shortage of oil and other minerals abundant in Peru in real and potential supplies.

The issue was creatively resolved in February 1974 when Peru agreed to compensate a list of U.S. companies that had lost assets through nationalization. Although IPC was not on the list, it received compensation funds from the U.S. government, thus providing political cover for the Velasco government in such a long festering and explosive nationalist issue.

See alsoBolívar, Simón; Petroleum Industry.

BIBLIOGRAPHY

McClintock, Cynthia, and Fabian Vallas. The United States and Peru: Cooperation at a Cost. New York: Routledge, 2003.

Thorp, Rosemary, and Geoffrey Bertram. Peru 1890–1977: Growth and Policy in an Open Economy. New York: Columbia University Press, 1978.

                                        Peter F. KlarÉn