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Those in relatively good shape can definitely see the best of Cusco on foot. Upon arrival, however, give yourself at least one full day to adjust to the elevation. And even after that, carry water on long walks and be prepared for some steep hills. If you do get altitude sickness (nausea, headaches, or shortness of breath) try the local remedy of drinking coca-leaf tea.
Once you’re ready to explore, use the Plaza de Armas as a homebase. This is both the old center of the city and the current bustling center of activity. From there, the adjacent streets (Procuradores, Mantas, Loreto, Plateros, Triunfo) are packed with everything you might need, including bars and restaurants, hotels and shopping, and travel agencies. To get from the Plaza to the modern part of the city, walk southeast along Avenida El Sol. This is also the street to visit if you need a bank. Those willing to break a sweat can even walk from the Plaza to the major Inca ruins—Sacsayhuaman and Qenko—just outside the city.
If you prefer to sit back and relax, hop aboard a tranvia. These vehicles look like the old streetcars that were once pulled by mules through Cusco. Today they run set tourist routes, and depart right from the Plaza de Armas several times each day.