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States of emergency and martial law have been commonly used to address insurgency and terrorism in the developing world. This paper explores the long-term consequences of this counter-insurgency strategy on local governance. To identify these effects, we take advantage of the fact that, during the fight against terrorism in Peru in the 1980s and early 1990s, the Peruvian central government based its emergency and martial law declarations on provincial rather than district levels of violence, and on political rather than natural boundaries. Using a geographic regression discontinuity design, we find long-term impacts on public goods provision, the local political landscape and institutional trust. Areas subject to martial law amid a state of emergency have more and stronger regional political movements. The lack of support for national parties reflects a broader mistrust of national institutions closely linked to the fight against terrorism, as these areas exhibit lower trust in the armed forces, the justice system, and the press.