The Falklands’ early history is murky. In pre-Columbian times, Fuegians may have reached them in bark canoes, but there is no evidence of permanent occupation; an unidentified ship from Magellan’s 1520 expedition may have wintered here after being blown off course. Various Spanish, Dutch, British, and French navigators frequented the area over the next two centuries.

Nobody established a settlement, though, until the Frenchman Louis de Bougainville brought colonists to Port Louis, East Falkland, in 1764 (the Islands’ Spanish name, Malvinas, is an adaptation of St. Malo, the English Channel home port for many French vessels).

In 1766, unaware of the French presence, Britain built its own garrison at Port Egmont on Saunders Island, West Falkland. In 1767, meanwhile, Spain replaced France at Port Louis after invoking the Treaty of Tordesillas (1494), under which the Pope had divided the New World between Spain and Portugal. In 1770, after happening upon the Port Egmont settlement, the Spaniards ejected the British but, under threat of war, permitted them to return.

In 1774, the British left Port Egmont without relinquishing their claims. A desolate penal settlement for nearly four decades, the Falkland Islands became a haven for whalers and sealers after Spain’s departure in 1811.

A decade later, the newly independent United Provinces of the River Plate sent a governor whose tenure was short, while Buenos Aires businessman Louis Vernet asserted rights to the seal fishery and the feral livestock, cattle, and horses that the Spaniards had abandoned. When Vernet attempted to enforce his rights against American sealers, though, a U.S. naval officer wrecked the Port Louis settlement and forced Vernet’s return to Buenos Aires.

In early 1833, a British naval vessel evicted the United Provinces’ remaining forces, but its Argentine successor state has steadfastly maintained its claim to the Islands, usually diplomatically—but it never became an overt issue until Juan Perón took power in the 1940s and, more aggressively, when a military dictatorship launched a surprise invasion in 1982.

After the British takeover, Montevideo-based Englishman Samuel Lafone created the Falkland Islands Company (FIC) to commercialize the cattle herds and then transformed the economy by introducing wool-bearing sheep. For well over a century, the FIC owned nearly half the property in the Islands and dominated shipping as well, though other immigrants created similar large sheep farms with a resident labor force.

About half the population, which grew slowly and has never exceeded about 2,500, lived on the farms; the other half resided in the port capital of Stanley, established in 1844. Starting in the 1970s, though, political uncertainty and the wool industry’s decline led farm owners to sell off their properties; nearly all of them are now family farms, but the population has shifted dramatically toward the capital for reasons that have only partly to do with the wool industry.

The South Atlantic Conflict

The Falklands’ peculiar political status, as an isolated British possession in the decolonization era that followed World War II, led to negotiations that might have resulted in their absorption by Argentina—despite Islanders’ determination to remain British (perhaps a dozen Argentines, nearly all of them married to Islanders or other British citizens, resided on the Falklands). Granting Argentina’s military airline LADE the first regular routes from the continent to the Islands, a 1971 communications agreement also gave Buenos Aires a de facto say in immigration and other matters.

The 1976–1983 military dictatorship, which increased Islanders’ misgivings about Argentine instability, was collapsing beneath the weight of its own brutality, corruption, and ineptitude when it made a last-gasp grab for domestic popularity by invading the Falklands on April 2, 1982. The Argentine generals and admirals, though, underestimated British prime minister Margaret Thatcher’s resolve; even worse, they misjudged her military’s ability to organize the force that retook the Islands within 10 weeks (Argentine forces, for their part, had not fought a real shooting war since 19th-century conflicts with Paraguay and the Mapuche).

The Post-War Period

In the conflict’s aftermath, Britain’s declaration of a fisheries protection zone and licensing regime made the Islands in general, and Stanley in particular, one of the world’s most prosperous places on a per-capita basis. While the Islanders themselves did not crew the ships that came from Europe and Asia, the revenue from squid licenses and joint ventures enabled local government to invest in schools, medical care, and roads, and individuals to improve their living standards. Tourism revenues also increased dramatically, as ’round-the-Horn and Antarctica-bound cruise ships called to visit the Islands’ capital and enjoy the spectacular coastal wildlife.

Meanwhile, relations with the continent remained distant through the 1980s but improved in the 1990s as Argentine president Carlos Menem’s administration attempted to persuade skeptical Islanders of its goodwill. The biggest step forward was a communications agreement that allowed the Chilean airline LAN to fly weekly from Santiago and Punta Arenas to the Islands’ Mount Pleasant International Airport. That remains the only commercial international air link, and subsequent Argentine governments have taken a harder line—in 2003, President Néstor Kirchner’s administration revoked LAN’s permission for Mount Pleasant–bound charter flights that simplified cruise-ship passenger exchange. In 2010, Kirchner's wife, current president Cristina Fernández, even ordered that ships en rute to the Falklands could not pass through Argentina's 200-mile maritime economic zone without permission- a flagrant violation of international law that no vessel has yet seen fit to challenge.

Stanley benefited most from the newfound prosperity and the population shift, as family- owned farms did not need—and could not afford—the large labor force employed by traditional sheep ranches. More recently, there has been offshore exploration for oil—probably the main reason for Argentina's maritime embargo—though there is not certainty that oil is present in commercial quantities.