The place was founded about 1884 by Jose Manuel Pereira after the Pacific war by a group of Italian immigrants.
Before that period there were many attempts to colonize Chanchamayo's valley but those were repelled by the local Ashaninkas, especially under the leadership of Juan Santos Atahualpa.
The Peruvian army protected the colonists with a small garrison in Kimiri in front of the actual barracks.
Despite the long distance from Peru's capital city, Lima, and due to its pleasant weather and exotic scenery, La Merced and its surrounding countryside remains a popular destination for domestic tourists.
The surrounding areas of the city feature waterfalls, whitewater creeks, jungle-like forest, tree-covered hills, rivers, traditionally living indigenous tribes, plantations and an abundance of wildlife and species of birds.