Juan Velasco was born in Castilla, a city near Piura on Peru's north coast. He was the son of Manuel José Velasco, a medical assistant, and Clara Luz Alvarado, who had 11 children. Velasco described his youth as one of "dignified poverty, working as a shoeshine boy in Piura."
He was married to Consuelo Gonzáles Arriola, and had four children.
In 1929, he stowed away on a ship to Lima, Peru, falsified his age, and tried to enlist as an officer in the Peruvian Army. However, he arrived late to the exam, so he joined as a private on April 5, 1929. A year later, he took a competitive exam for entrance into the Escuela Militar de Chorrillos ("Chorrillos Military School"), and got the highest score of all applicants. In 1934, he graduated with high honors and at the head of his class.
During the Belaúnde administration (1963–1968), political disputes became a norm as he held no majority in Congress. Serious arguments between President Belaúnde and Congress, dominated by the APRA-UNO (Unión Nacional Odríista) coalition, and even between the President and his own Acción Popular (Popular Action) party were common.. Congress went on to censor several cabinets of the Belaunde administration, and a general political instability was perceived.
Also, between 1964 and 1965 the army had been sent to deal with two military uprisings inspired by the Cuban Revolution. Through the use of guerrilla tactics, both the Ejército de Liberación Nacional (ELN) and Movimiento de Izquierda Revolucionaria (MIR) tried to instigate a revolution, but those movements were quickly crushed by the armed forces. Nevertheless, these conflicts led several military officers to the most impoverished parts of the country, and after witnessing the reality of the country-side and studying the reasons which led to the uprisings, they began to consider social inequality and poverty as a danger to national security.
A dispute with the International Petroleum Company over licenses to the La Brea y Pariñas oil fields in northern Peru sparked a national scandal when a key page of a contract (the 11th) was found missing. The Armed Forces, fearing that this scandal might lead to another uprising or a takeover from the APRA party, seized absolute power and close down Congress, almost all of whose members were briefly incarcerated. General Velasco seized power on October 3, 1968 in a bloodless military coup, deposing the democratically elected administration of Fernando Belaúnde, under which he served as Commander of the Armed Forces. President Belaúnde was sent into exile. Initial reaction against the coup evaporated after five days when on October 8, 1968 the oil fields in dispute were taken over by the Army.
The coup leaders named their administration the Revolutionary Government of the Armed Forces, with Velasco at its helm as President. Velasco's rule was driven by a desire to give justice to the poor and became known as Peruanismo. Velasco's rule was characterized by left-leaning policies, which aimed to create a strong national industry to increase the international independence of Peru. To that end, he nationalised entire industries, expropriated companies in a wide range of activities from fisheries to mining to telecommunications to power production and consolidated them into single industry-centric government-run entities (PescaPeru, MineroPeru, Petroperú, SiderPeru,Centromin Peru, ElectroPeru, Enapu, EnatruPeru, Enafer, Compañia Peruana de Telefonos, EntelPeru, Correos del Peru, etc.), and increased government control over economic activity by enforcing those entities as monopolies and disincentivized private activity in those sectors. Most reforms were planned by left-leaning intellectuals of the time, and some of them were well crafted attempts to improve the Peruvian quality of life.
A root and branch education reform was in march looking to include all Peruvians and move them towards to a new national thinking and feeling; the poor and the most excluded were vindicated and the Día del Indio or Peruvian Indian's day name was changed to Día del Campesino or Peruvian Peasant's day every June 24, a traditional holiday of the land, the day of winter solstice.
The education reform of 1972 provided for bilingual education of the indigenous people of the Andes and the Amazon, which consisted nearly half of the population. In 1975 the Velasco government enacted a law making Quechua an official language of Peru equal to Spanish. Thus, Peru was the first Latin American country to officialize an indigenous language. However, this law was never enforced and ceased to be valid when the 1979 constitution became effective, according to which Quechua and Aymara are official only where they predominate, as mandated by law – a law that was never enacted.
It was also characterised by the increasing use of authoritarian powers, as the administration grew away from tolerating any level of dissent, periodically jailing, deporting and harassing suspected political opponents and repeatedly closing and censoring broadcast and print news media, finally expropriating all of the newspapers in 1974 and sending the publishers into exile.
A cornerstone of his political and economic strategy was the implementation by dictate of an agrarian reform program to expropriate farms and diversify land ownership. In its first ten years in power General Juan Velasco Alvarado's Revolutionary Government of the Armed Forces (GRFA) expropriated 15,000 properties (totaling nine million hectares) and benefited some 300,000 families. The former landlords who opposed this program believed that they did not receive adequate compensation for their confiscated assets and lamented that the state officials and peasant beneficiaries mismanaged their properties after the expropriation. The owners who opposed his program also claimed that the expropriation was more akin to confiscation, as they were paid in agrarian reform bonds, a sovereign debt obligation of which the government defaulted payment due to the hyperinflationary period that affected Peru's economy in the late 1980s, leaving the current value of the bonds up for debate. Peru has the lowest amount of arable land per capita in South America. Less than 2% of the Peruvian territory is arable land, with 98% of the territory composed of arid desert with little rain, harsh mountains with very steep terrain, or wild Amazon forest.
The deposed Belaúnde administration had attempted to implement a milder agrarian reform program, but it had been defeated in Congress by the APRA-UNO coalition with support of the major landowners. Within this framework, the Velasco administration engaged in an aggressive program of import substitution industrialization, imposing tight foreign exchange and trade controls.
Economically, the Velasco administration's policies were ultimately unsuccessful.. The Peruvian military government ran deeper into debt and was forced to devalue the currency and ran inflationary policies. This however, was in part due to the 1970s Energy Crisis, which also affected Peru and made it impossible for the Velasco administration to fund some of its most ambitious reforms.
Fisheries and agriculture were particularly visible failures. PescaPeru aggressively overfished the anchoveta, a fish used primarily as material for fishmeal production and a key element in the Peruvian sea ecosystem, which resulted in record production for a couple of years but combined with an El Niño event in 1972 led to an absolute collapse that would take over a decade to partially recover. The badly mismanaged agrarian reform resulted in the creation of thousands of capital-poor and mostly uneducated small farmers whose production and distribution capacities fell substantially short of the pre-reform production. This, coupled with the trade restrictions, led to periodic shortages, rationing, and increased social unrest..
In foreign policy, in contrast with his 1970s Latin American contemporaries, which were mostly right-wing military dictatorships, he pursued a partnership with the Soviet bloc, tightening relations with Cuba and Fidel Castro and undertaking major purchases of Soviet military hardware.
Relations between the United States and Peru were tense and even hostile, as soon as General Velasco and his junta took power.
Just five days after Velasco seized power in 1968, the General began the nationalization of the Peruvian Economy with the expropriation and nationalization of the American International Petroleum Company (IPC) oil fields located in the northern Peruvian oil port and refinery of Talara, Piura, near the Peruvian border with Ecuador, Piura, being the region where Velasco was born.
IPC was a subsidiary of Standard Oil, and although the claims over the IPC were ultimately resolved in negotiations between the two governments, the US after this seizure no longer considered Peru an ally or a friendly country. Instead, the US started considering that Peru was leaning towards the Soviet-bloc; therefore, the CIA started to organize plans to destabilize and to overthrow General Velasco.
US-Peru disagreements continued over a broad range of issues including even Peru's claim to a 200-mile fishing limit that resulted in the seizure of several US commercial fishing boats and the expropriation of the American copper mining company Cerro de Pasco Corporation.
However, in spite these provocations, the U.S. responded immediately with humanitarian aid in 1970, when an earthquake killed about 50,000 persons and left over 600,000 homeless.
Still, the U.S. efforts at good relations were rebuffed. In a 1973 press conference, in response to a question about Soviet military advisors in Peru, Velasco announced that the United States Peace Corps was being expelled from Peru. General Velasco's other main goal besides the nationalization of the main areas of the Peruvian economy and the agrarial reforms, was to militarily reconquer the lands lost by Peru to Chile in the War of the Pacific.
It is estimated that from 1970 to 1975 Peru spent up to 2 Billion USD (roughly 20 Billion USD in 2010's valuation) on Soviet armament. According to various sources Velasco's government bought between 600 and 1200 T-55 Main Battle Tanks, APCs, 60 to 90 Sukhoi 22 warplanes, 500,000 assault rifles, and even considered the purchase of a British carrier Centaur-class light fleet carrier HMS Bulwark.
The enormous amount of weaponry purchased by Peru caused a meeting between former US Secretary of State Henry Kissinger and Chilean president, general and US-backed dictator Augusto Pinochet in 1976.
Velasco's military plan was to launch a massive sea, air, and land invasion against Chile.
In 1999, General Pinochet claimed that if Peru had attacked Chile during 1973 or even 1978, Peruvian forces could have penetrated deep south into Chilean territory, possibly military taking the Chilean city of Copiapó located half way to Santiago.
The Chilean Armed Forces considered launching a preventive war to defend itself. Though, Pinochet's Chilean Air Force General Fernando Matthei opposed a preventive war and responded that "I can guarantee that the Peruvians would destroy the Chilean Air Force in the first five minutes of the war".
Some analysts believe the fear of attack by Chilean and US officials as largely unjustified but logical for them to experience, considering the Pinochet dictatorship had come into power with a coup against democratically elected president Salvador Allende. According to sources, the alleged invasion scheme could be seen from the Chilean's government perspective as a plan for some kind of leftist counterattack. While acknowledging the Peruvian plans were revisionistic scholar Kalevi J. Holsti claim more important issues behind were the "ideological incompatibility" between the regimes of Velasco Alvarado and Pinochet and that Peru would have been concerned about Pinochet's geopolitical views on Chile's need of naval hegemony in the Southeastern Pacific.
Economic difficulties such as inflation, unemployment, food shortages and increased political opposition after the 1974 crackdown on the press ultimately increased pressures on the Velasco Administration and led to its downfall. On August 29, 1975, a number of prominent military commanders initiated a coup in the southern city of Tacna, nicknamed El Tacnazo.
The military commanders of the 1st, 2nd, 3rd, 4th, and 5th military regions declared that Velasco had not achieved most of what the "Peruvian Revolution" had stood for and was unable to continue in his functions. Prime Minister Francisco Morales Bermúdez was then appointed president, by unanimous decision of the new military junta.
Prior to being deposed, Velasco had been seriously ill for at least a year. He had lost a leg to an embolism, and his cognitive abilities and personality were rumoured to have been affected by related circulatory problems. At the time of the coup, he was convalescing in the Presidential winter residence at Chaclacayo, countryside 20 kilometers east of Lima.
General Velasco immediately called for a meeting with his council of ministers, at Government Palace in downtown Lima, where he discovered that there was little or nothing to do. He made a last speech to the nation on the evening of August 29, 1975, announcing his decision not to resist the coup because "Peruvians cannot fight against each other".
General Velasco kept a low profile in Peruvian politics until his death in 1977. Following his death, Velasco was carried on the shoulders of campesinos for six hours around Lima, to show their respect and gratitude for his efforts on their behalf.
Although General Velasco is still remembered fondly by small left-leaning circles, his legacy remains largely controversial.
In 1974, a then relatively unknown Hugo Chávez and around one dozen fellow cadets and soldiers, all youths, traveled to Ayacucho, Peru to celebrate the 150th anniversary of the eponymous Battle of Ayacucho. There, they were personally greeted by General Velasco. Velasco gave each of them a miniature pocket edition of La Revolución Nacional Peruana ("The Peruvian National Revolution"). The cadets also noted Velasco's perceived close relationship with both the Peruvian masses and the rank and file of the Peruvian military. Chávez became attached to this book, and would both study its contents and constantly carry it on his person. However, Chávez later lost it after his arrest for leading the 1992 Venezuelan coup attempt.
Twenty-five years later, as president, Chávez ordered the printing of millions of copies of his government's new Bolivarian Constitution only in the form of miniature blue booklets, a partial tribute to Velasco's gift.
"Que los chilenos se dejen de cojudeces o mañana desayuno en Santiago" ("Chileans better stop with the bullshit or tomorrow I shall eat breakfast in [that is, invade] Santiago"
"¡Campesino, el patrón no comerá más de tu pobreza!" ("Countrymen, the land owner will never again feed off your poverty!")