The word Peru may be derived from Birú, the name of a local ruler who lived near the Bay of San Miguel, Panama, in the early 16th century. When his possessions were visited by Spanish explorers in 1522, they were the southernmost part of the New World yet known to Europeans. Thus, when Francisco Pizarro explored the regions farther south, they came to be designated Birú or Peru.
An alternative history is provided by the contemporary writer Inca Garcilasco de la Vega, son of an Inca princess and a conquistador. He says the name Birú was that of a common Indian happened upon by the crew of a ship on an exploratory mission for governor Pedro Arias de Ávila, and goes on to relate many more instances of misunderstandings due to the lack of a common language.
The Spanish Crown gave the name legal status with the 1529 Capitulación de Toledo, which designated the newly encountered Inca Empire as the province of Peru. Under Spanish rule, the country adopted the denomination Viceroyalty of Peru, which became Republic of Peru after independence.

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