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The relative importance of the processes responsible for the annual cycle in the upper-ocean heat content in the Peru Current, in the southeastern tropical Pacific, was diagnosed from an oceanic analysis dataset. It was found that the annual cycle of heat content is forced mainly by insolation. However, the ocean dynamical processes play an important role in producing different regional budget characteristics. In a band 500 km from the coast of Peru, the annual heat content changes in this region are relatively large and can be approximated as sea surface temperature (SST) changes in a fixed-depth mixed layer. The annual cycle of the albedo associated with low-level clouds enhances the annual cycle in insolation, which explains the relatively strong annual cycle of heat content. These clouds, to a large extent, act as a feedback to SST, but a small additional forcing, which is proposed to be cold air advection in this paper, is needed to explain the fact that the maximum cloudiness leads the lowest SST by around a month. Ocean dynamics is important closer to the coast, where upwelling acts partly as damping of the heat content changes and forces it to peak earlier than farther offshore. In a band farther to the southwest, locally wind-forced thermocline motions, which become shallower (deeper) in the warm (cool) season, partially cancel the effect of net surface heat fluxes, whose annual cycle is comparable to that in the region previously mentioned, producing a relatively small annual cycle of heat content. The local forcing appears to be associated with the annual meridional displacements of the South Pacific anticyclone. The annual cycle in SST is also relatively small, which is probably due to the changes in the temperature of the water entrained into the mixed layer associated with the thermocline motions, but also to a mixed layer deeper than that closer to the coast. [ABSTRACT FROM AUTHOR]