As negotiations between the government and representatives of Indians in response to Indians’ movement of safeguarding their homeland and protesting against over exploration of natural resources resulted in vain，conflicts escalated and casualties were reported. President Garcia was forced to depose the president of the Ministerial Council and to restructure the Cabinet. Affected by the international financial crisis，Peru’s economic growth rated dropped from 9.8% to 0.8%. Nevertheless the country’s economy started to bounce back in the fourth quarter as a result of the implementation of industrial adjustment and fiscal stimulus policies by the government. Social indicators deteriorated significantly although social policies on poverty reduction and education were continued. Peru attached great attention to developing cooperative relations with neighbor countries and is planning to build an “Inter-ocean Road Corridor” with Brazil，its relations with US，EU，China and Japan gained further progress.