Santa Cruz continues his political ambitions in Peru while president of Bolivia.

He establishes the Peru-Bolivia Confederation in 1836, justifying his act with the threat of Chile's expansion to the north.

This threat, together with the constant turmoil in Peru and repeated attempts by Gamarra to invade Bolivia, had made Sucre's military intervention in a Peruvian civil war in 1835 a matter of life and death for Bolivia.

After winning a number of battles in Peru, Santa Cruz had reorganized that country into two autonomous states—Northern Peru and Southern Peru—and joined them with Bolivia in the Peru-Bolivia Confederation with himself as protector.

The potential power of this confederation arouses the opposition of Argentina and, above all, Chile; both nations declare war on the confederation.

Although Santa Cruz repels an attack by Argentina, he fails to stop the Chilean expansion into the disputed territories on its northern frontier.

His decisive defeat by Chilean forces in the Battle of Yungay in January 1839 results in the breakup of the confederation and ends the career of Bolivia's ablest nineteenth-century president.

Santa Cruz goes into exile in Ecuador.