As Western Europe entered the mature stages of the industrial revolution in the second half of the nineteenth century, Latin America was encompassed and deeply affected by its capitalist development. The capital reserves, entrepreneurial expertise, and technological advances of Europe entered that region on an unprecedented scale and drew upon its natural resources. Contemporary dependency theorists perceive in this process a distinct form of capitalism to which they attribute many of Latin America’s current economic agonies. Central to this phenomenon, termed peripheral capitalism, was an alliance of a cooperative domestic bourgeoisie and more powerful European capitalists. This alliance, it is reasoned, provided foreign investors access to national decisionmaking processes and allowed them to foster policies which advanced their interests but had detrimental effects on national development. It left the domestic bourgeoisie with an ambivalent attitude toward economic nationalism. Furthermore, its exploitation of the region’s surplus labor supply created conditions of unequal exchange leading to transfers of value to the European core which steadily impoverished the Latin American periphery. Through the importation of factors essential for modern economic enterprises, it also precluded the necessity for a fundamental reordering of Latin America’s traditional economic and social structures. As a result, when industrialization did take place it failed to serve as a growth pole initiating changes characteristic of development.1
Perhaps no nation’s history more closely approximates this process than that of Chile. Between 1880 and 1919, Chile’s nitrate industry employed advanced technology and foreign expertise to produce fertilizer to satisfy Europe’s need for increased agricultural output. The Nitrate Age brought an era of prosperity unparalleled in Latin America. Yet in this period, “[Nitrate] Mining did not serve as a ‘growth pole’ for economic development, much of the new wealth was spent on rural estates and too often the money was used to buy status or a still coveted way of life rather than invested to obtain higher yields.”2 The process of industrialization which ensued failed to produce “the critical elements by which national change in the direction of an acceptable and viable style of development is appraised. . . .”3
Peripheral capitalism and dependency analysis in general are essentially hypothetical explanations of Latin America’s economic history and development woes. The historical evidence to test and modify the perspectives which these constructs offer remains inadequate. The history of the Antofagasta Nitrate and Railway Company affords an opportunity to test, within a microeconomic framework, the applicability of hypotheses concerning the dysfunctions of peripheral capitalism. Such an examination carries broader implications since the history of the company also captures in microcosm many of the basic forces shaping Chilean development in the crucial Nitrate Age. The company’s primary Chilean element, the Edwards family, has played a leading role in every sector of the Chilean economy. The family’s partner in the enterprise, Antony Gibbs and Sons Ltd. of London, was one of the most important foreign merchant houses in Chile. The Antofagasta Company played a crucial role in the War of the Pacific (1879-1883) which marked a turning point in the nation’s economic history. Its principal endeavor, nitrate exploitation, was the most important economic activity in Chile between 1880 and 1930, as it regularly supplied over fifty percent of government revenues and employed tens of thousands of workers.4 The interaction of the domestic elite and foreign investors, exploitation of natural resources and cheap labor, as well as crucial national policy decisions, represent basic variables which are said to characterize peripheral capitalism in nineteenth-century Latin America.
The site of the company’s activities was the Bolivian department of Cobija. This area, and the Peruvian province of Tarapacá immediately to its north, provided the world’s only commercially exploitable sources of nitrate of soda in the nineteenth century. Refined from a detrital conglomerate known as caliche, nitrates were first exported to Europe in the 1830s. Exports grew steadily through the 1860s with the industry’s output coming exclusively from oficinas (nitrate refineries and their grounds) located in Tarapacá and controlled by European and Peruvian investors.5 A number of Chileans, however, had launched expeditions into the deserts of Cobija in search of mineral and nitrate riches. The most notable of these explorers was José Santos Ossa.
Ossa first discovered nitrate deposits in the interior of the Bolivian department in 1860. The explorer sent samples of the caliche for analysis to Francisco Puelma, a Chilean lawyer and engineer. In succeeding years Ossa and Puelma repeatedly petitioned the Bolivian government for a concession to develop nitrates in Cobija. Finally, in 1866, a decree granted Ossa and Puelma the right to exploit nitrates in a five-square-league area of the department. At the end of that year Ossa discovered additional deposits at a site called Salar del Carmen which provided the basis for his nitrate enterprise.6
The concession was of vital importance to Ossa and Puelma. The two Chileans were attempting to establish a business enterprise in a region which lacked the most rudimentary economic infrastructure. As late as the 1840s the entire department contained no more than 5,000 people. Minerals exported from Bolivia had to be transported across the desert in carts, a journey requiring nearly three weeks.7 In addition, Ossa and Puelma faced immediate competition from the well established Tarapacá oficinas. The concession was the one solid prospect which they could offer potential investors in their undertaking. In fact, the question of state-granted privileges became a continuing theme in the development of their enterprise for the next two decades.
Even with the concession, Ossa and Puelma were unable to attract the necessary investment capital until 1868 when Bolivia amplified the provisions of the decree. The new agreement gave them an exclusive privilege to produce and export nitrate tax-free anywhere in Cobija. The tax exemption was particularly important since Peru had just imposed the first significant tax on the Tarapacá oficinas.8 Their efforts now drew the attention of a Chilean capitalist who was fast becoming a leading figure in the business community of Valparaiso, Chile’s principal port.
Agustín Edwards Ossandon was the son of a British doctor who had settled in northern Chile in 1807 and married the daughter of a local family. The absorption of dynamic foreign elements by the closely knit Chilean elite was a common occurrence in the nineteenth century. However, it was left to Don Agustín to amass the fortune, which together with personal and familial linkages, would propel his family into the elite by the end of the century. Edwards began his career advancing supplies and credit to miners in the north of Chile. In 1851, he transferred his base of operations to Valparaiso. During the early 1870s he increased his fortune substantially by establishing a monopoly on the marketing of Chilean copper.9 But this coup lay several years in the future when Edwards was approached by Ossa and Puelma with the nitrate proposition.
Although Agustín Edwards was a merchant banker rising to prominence within a prosperous export economy, serious obstacles stood in the path of ventures such as nitrate production. Edwards was operating in a society conditioned by a traditional agrarian sector based on service tenantry. That sector was responding to the world market primarily through increased exactions upon labor rather than improved productivity.10 The implications of this reality were apparent throughout Chile’s economic infrastructure. While the national credit market was well developed by Latin American standards, it was geared to the needs of the landed oligarchy, relying on land mortgages as the surest guarantee of loans. Financing of mining undertakings was generally restricted to the commercial houses which handled their products. This source was further restricted in the case of nitrates which constituted an even higher risk foreign investment.11 There was a rudimentary industrial base, but it was inadequate to meet even the needs of existing mining operations which were forced to import most of their capital goods.12 Technical skills for such an enterprise were also in short supply since the educational system emphasized the humanities for the children of elite families.13 As for marketing services, Chile’s international commerce was dependent on a small group of European merchant houses. The state’s establishment of the Caja de Crédito Hipotecario, the national land mortgage bank, its development of railroads to the almost exclusive benefit of agriculturists, and the nature of the public education system reflected its domination by traditional landed interests. Thus, despite the existence of an effective centralized state, successive governments were unlikely to serve as agents in radically reducing such obstacles. In view of these conditions, it is not surprising that Agustín Edwards found it essential to include a partner who possessed adequate capital resources and access to European technology and marketing facilities. He recommended a British merchant house as a partner with the necessary resources.14
In the first flush of Latin American independence, Antony Gibbs and Sons Ltd. of London, like other British merchant houses, had rushed to fill what appeared to be an enormous consumer market. As the limitations of that market became apparent, the firm diversified its investments. In 1842, the Lima branch entered into the first of a series of profitable contracts with the Peruvian government for consignment of the fertilizer guano to Europe. Gibbs also began financing nitrate operations in Tarapacá. In an effort to recoup a loan to a British nitrate producer, the firm became the principal partner in the Tarapacá Nitrate Company in 1865.15 Operating two of the most important oficinas in the province, the house possessed the technical knowledge, marketing skills, and capital required to launch a major venture in the Bolivian desert. Gibbs reached an agreement with the Chileans in March 1869.16
Melbourne Clark and Company, the new firm which emerged out of the agreement, was capitalized at 300,000 pesos with its shares distributed as indicated in Table I. Although the Chilean partners held a majority of the stock, Gibbs’ contributions were essential to the company’s operation. The house was placed in charge of running the firm and extended it a credit of 150,000 pesos at 8 percent annual interest. This credit account combined with Gibbs’ shareholdings established the house as the company’s principal source of capital. The importance of Gibbs’ capital contributions is further emphasized by the fact that Ossa and Puelma’s shares represented payments to them for the Bolivian concessions. Gibbs was also the company’s exclusive agent for sales of nitrate and purchases of supplies and equipment, receiving a 2.5 percent commission for these services.17 The firm was composed of three functional elements : Ossa and Puelma providing the exclusive government concession, Edwards serving as an intermediary and as a secondary source of capital, and Gibbs supplying most of the capital as well as the technology, marketing network, and management personnel. The predominance of Gibbs would become all the more apparent when the company expanded its operations.
The firm’s manager in Cobija was a Gibbs employee, George Hicks, who supervised construction of the refinery at the Salar. The British engineers soon discovered that the low-grade caliche at the Salar doomed it to a short effective life. Seeking alternative deposits, Hicks began exploring further inland in 1870 and uncovered promising traces of caliche at a location known as Salinas.18 In 1873, the Bolivian government issued a revision of the company’s privileges which limited its operations to the Salar and Salinas but included the right to build a railroad and reaffirmed its tax-exempt status. Although the geographic size of its concession was now severely limited, its prospects were sufficiently encouraging for the firm to reorganize itself as the Antofagasta Nitrate and Railway Company and increase its nominal capital to 2,500,000 pesos. The new enterprise had only three stockholders, Francisco Puelma and Agustín Edwards with 848 shares each, and William Gibbs and Company with 804.19
Control of the company by Edwards and Gibbs was reflected in Don Agustín’s position as president and a Gibbs partner as vice-president. But Gibbs still dominated the enterprise’s operations. The house no longer held an exclusive agency for Antofagasta’s nitrate, but it continued to serve as its supply agent in Europe. Such services were vital since all the equipment for the railway and the refinery, as well as the mechanics and engineers to run them, had to be brought from Europe. Significantly, twelve of the top sixteen administrative and technical posts were filled by Englishmen.20
Several different factors thrust the nitrate industry into a process of productivity improvement equaled by few other industries.21 During the 1870s, the steady exhaustion of caliche deposits with the highest nitrate content and the increasing cost of coal were counteracted by rapid technological advances. The introduction of Marsden roll-and-jaw crushers in 1873 was followed by a series of modifications in the refining process culminating in 1879 with the Shanks system which dramatically lowered production costs.22 These refinements involved importation and adaptation of technology from the European chemical industry. It was thus imperative that the Antofagasta Company employ technicians with up-to-date knowledge of developments in Europe in order to keep pace with these changes and overcome specific production problems. Drawing on their experience in the British chemical industry, the company’s engineers modified the firm’s machinery, making it possible to process the caliche at the Salar and Salinas which had proven impervious to conventional refining methods. The company’s success in this area contrasts sharply with the experience of ten Chilean nitrate companies, operating in Tarapacá, which did not have direct partnerships with foreign concerns. Crippled by the ineptitude of their oficina staffs, six of the firms had already ceased operations by 1874.23 The importation of machinery and technicians from Europe was also essential since labor costs could not be readily reduced.
Chilean workers who were considered more “robust and intelligent” were generally preferred over Bolivian and Peruvian laborers for work in the nitrate industry. Although there was an enormous labor surplus in the Chilean countryside, migrations by peons to work on Peruvian railway projects, which averaged approximately 5,000 men annually between 1868 and 1872, caused a public outcry from landowners. Chilean agriculture was labor intensive and the hacendados feared that any reduction in the surplus labor pool would force up agricultural wages.24 Labor scarcity and high wages were persistent problems for the Antofagasta Company.
Chilean peons were not, of course, formally enslaved or enserfed, and a steady rural to urban migration had begun by mid-century. Nevertheless, the extension of the inquilinaje system insured retention of a rural population sufficient to man a labor intensive agrarian system and prevent any rise in real wages. Conversely, the migration was not sufficient to prevent labor shortages and the accompanying problem of high wages which plagued nitrate producers throughout the Nitrate Age.25 The producers responded with efforts to reduce real wages such as the use of ficha (company scrip). But the labor scarcity itself curtailed deliberate reductions in real wages since they were often met with mass resignations or work stoppages. The Antofagasta Company engaged in the most common of these practices, the raising of prices at company stores, but found the tactic limited by competition for workers from local mining operations.26 The most effective alternative was improved productivity. A partial answer was the acute division of labor that characterized nitrate production. This itself required qualified supervisors, further highlighting the importance of the experienced staff which Gibbs provided. More significant was upgraded technology. The company, with the importation of British crushing machinery, elevators, and other devices, plus their modification by British engineers, steadily improved its productivity. Despite the continuing deterioration in the quality of its caliche and high costs for labor and coal, the two largest items in its production costs, Antofagasta lowered its cost of production by twenty percent between 1873 and 1876. Statements by the company’s managers at this time and over the next two decades pointed directly to the importation of European technology as the basic factor in reduced costs and subsequent improvements in efficiency.27 Technological improvement and market conditions combined to necessitate further reductions in production costs.
Throughout the nineteenth century the nitrate industry was trapped in a fundamental contradiction. It utilized industrial technology which provided spectacular short-term increases in output to supply European agricultural markets where traditional production methods predominated.28 Modern production facilities supplying traditional markets intensified the severity and frequency of oversupply crises which characterized nineteenth-century economic enterprises and contributed to a long-term decline in nitrate prices. One such crisis struck between 1872 and 1875 when nitrate prices fell by over twenty percent (see Table II). To improve the disappointing profit performance caused by the price decline (see Table III), Antofagasta required additional capital outlays for further improvement of overall productivity. In addition, a lack of water at Salinas prompted the decision to extend the rail line to Salinas, but to build the refinery in the new port of Antofagasta. Raw caliche would be shipped down from Salinas and refined at the new plant. Such undertakings would necessitate an additional expenditure of at least 950,000 pesos.29 The need for further long-term capital investment sparked an attempt by Gibbs to increase its control over the company and led to its open politicization.
In 1874 Antofagasta’s directors concluded that 450,000 pesos of the needed funds could conceivably be obtained by a call on existing stockholders. Francisco Puelma, however, lacked the requisite funds to meet such a call. Moreover, Chile was experiencing a recession which made it unlikely that new Chilean investors could be found.30 Gibbs offered to open a credit account of 1,000,000 pesos at ten percent annual interest. The price, however, would be high. In addition to the interest, the house would hold a mortgage on the company’s property, receive twenty-five percent of its profits, and return to its position as sole agent for nitrate sales. Edwards preempted this attempt by Gibbs to expand its hold on the corporation by loaning it 450,000 pesos while efforts to attract new shareholders continued.31 By June 1875, twenty investors had been found to purchase half of Puelma’s stock. While Antofagasta’s prospects may have encouraged their involvement, it is notable that many of them such as Cornelio Saavedra and Rafael Sotomayor were political allies of Edwards in Chile’s National party.32 Edwards had begun to balance off Gibbs’ pivotal position in the firm based on capital, technology, and a marketing system with his own command of capital and ties to the domestic power structure. The political ties thus created would one day prove crucial in preserving the company’s existence.
After 1875 Antofagasta’s prospects improved markedly. In August 1876, the Salinas rail extension was completed, and in July 1877 the Antofagasta refinery began production. One month later Bolivia removed a restriction in the 1873 decree which limited the railway to carrying only the company’s freight. This revision improved the line’s profitability by allowing it to service silver mines in the interior.33 Nitrate prices began to stabilize in 1875 and climbed to £14 per ton by 1877 (see Table II). This development, coupled with reduced production costs, brought profits of 507,435 pesos between January 1875 and June 1877 (see Table III). The sharp price increase was due in part to a nationalization of the industry in Tarapacá launched by the Peruvian government. The nationalization stabilized output and raised prices, but it would also put new strains on the Edwards-Gibbs alliance as the nitrate investments of the two partners took divergent courses.
Gibbs originally joined the Antofagasta venture as a hedge against the erratic policies of the Peruvian state which might damage its Tarapacá operations. In 1876 its investment in the Tarapacá Nitrate Company totaled £228,757 versus £141,804 invested in Antofagasta.34 Furthermore the house benefited significantly from the expropriation. It received interest-bearing certificates for the titles to its oficinas. It remained in possession of the refineries and was awarded highly profitable production contracts by the Peruvian government. Between 1876 and 1878, the house was the consignment agent for all nitrate produced under government contracts.35 As a result of these developments, the Tarapacá nitrate enterprises became the dominant concern in Gibbs’ investment strategy. The house came to view Antofagasta as a subordinate enterprise and tried to shape the company’s policies to serve the needs of Gibbs’ Peruvian nitrate interests. This emerging perspective was reflected in the house’s efforts to link Antofagasta to the Peruvian expropriation.
Peruvian President Manuel Pardo urged the house to insure the success of the nationalization by limiting Antofagasta’s production. This would assure a further increase in nitrate prices and the financial success needed to complete the expropriation. The Gibbs partners in Lima urged their counterparts in Valparaiso not only to limit the company’s production but also consign its output to Gibbs. The Valparaiso partners were justifiably pessimistic about Don Agustín’s acceptance of either a reduction in output or Gibbs as sole consignment agent.36
With his wealth greatly enhanced by the copper trade and with Gibbs’ increasing attention to Tarapacá, Agustín Edwards’ financial commitment to the corporation rapidly outstripped that of his British partners. In 1876, when the firm raised its capital to 3,300,000 pesos, to cover the increasing cost of the rail extension and refinery, Edwards purchased additional shares while Gibbs made no effort to expand its holdings. Don Agustín’s stock in 1876 was valued at 1,400,000 pesos or forty-two percent of the company’s fixed capital compared to twenty-six percent held by Gibbs. When the new works absorbed these outlays, Edwards increased his credit extensions to the company until it owed him over 800,000 pesos by 1877.37 From his perspective there was no reason to enter into any agreement concerning Antofagasta’s production or consignment. The Peruvian nationalization was bringing higher prices for Antofagasta’s nitrate, and a consignment agreement would only restrict its freedom to sell to the highest bidder.38 The Gibbs partners made repeated unsuccessful efforts during 1876 and 1877 to convince Edwards of the soundness of production and consignment agreements.39 The Edwards family’s resistance, which was based on its substantial investment in the corporation, was soon reinforced with an alternative marketing agent and by familial linkages in the firm.
Don Agustín’s death early in 1878 did not facilitate the house’s attempts to alter Antofagasta’s policies. Thomas Comber as vice-president found he had only one ally, Ricardo Escobar, on the five-man board of directors. Edwards’ son Agustín Edwards Ross, who now served on the board, was as opposed as his father had been to production limitation or exclusive consignment. He had the full support of the company’s new president, Miguel Saldías, who was married to Edwards’ cousin and was little more than a figurehead representing the Edwards family.40 The fifth member of the board, Ernest De Combe, not only supported the Edwards position but represented a competing foreign interest.
De Combe came to Chile in 1848 as manager of the French shipping company LeQuellec and Bordes. The firm exported Chilean copper, and its surviving partner Antoine Bordes and the elder Edwards had been partners in copper marketing ventures in Europe. In 1870, Bordes established a marketing network for nitrates in France. Since Bordes and De Combe held only thirty shares in the company, De Combe’s presence on the board clearly represented the importance of Bordes as a marketing source. The selection of yet another European merchant house as a marketing agent reflected the critical importance of the information they provided on European nitrate prices and market conditions. At the same time, De Combe’s interest lay in maintaining unlimited production and open consignment of the company’s nitrate to insure full cargoes for Bordes.41
In the face of this formidable opposition, Comber had to settle for the board’s production limitation of 7,000 tons per month. Since this was the maximum which Antofagasta’s facilities could produce, it was a concession which conceded nothing.42 The issues of production and consignment were not the only points of conflict between Gibbs and Edwards at this time.
At the end of 1878, George Hicks prepared to leave his post as Antofagasta’s manager. The candidates to replace Hicks were John Isdail Smail, an employee of the Tarapacá Nitrate Company, and Charles Green, the candidate backed by the Edwards family. As Agustín Edwards made clear, Green had one particularly notable qualification—his wife was a first cousin of Edwards’ late father. Despite Gibbs’ disdain for this blatant nepotism, the board selected Green over Smail. The firm’s need for British technical skills made the victory a brief one. In June 1881, Green was replaced by Thomas Powell, an English engineer selected for the post by Gibbs, and Antofagasta continued to rely on British managers for the next decade.43 But the growing antipathy between the Gibbs and Edwards interests had temporarily receded into the background as the two joined forces to confront a threat to the company’s very existence.
Chile and Bolivia had been involved in intermittent disputes over control of the deserts of Cobija since the 1840s. Chile claimed a boundary at 23° south latitude while Bolivia asserted the border lay at the region’s southern fringes about 25° south latitude. Under the terms of an 1874 treaty, Chile recognized a border at 24° south latitude while Bolivia guaranteed tax-exempt status for Chilean industries in the area.44 Bolivia, however, became increasingly concerned over what it viewed as the denationalization of its desert province.
Silver discoveries made in the interior of Cobija in the early 1870s set off an influx of Chilean miners and capital into the region. By 1874 ninety-three percent of the population of Antofagasta, now the capital of the department, was Chilean. Bolivia faced the prospect of retaining control over a region which was becoming economically and demographically Chilean. Even its formal control was being challenged by Chilean secret societies whose goal was union with Chile.48
An uneasy truce prevailed between the two nations until February 1878 when the Bolivian National Assembly approved an export duty on the Antofagasta Company. The amount of the duty was trifling, but its passage appeared to violate both the company’s 1873 concession and the 1874 treaty. When the decree was published in Antofagasta on March 10, Hicks pleaded with the Bolivian prefect for time to consult with his superiors. Informed of the attempt to enforce the duty, the company’s directors rushed to meet with Chilean President Aníbal Pinto. They urged Pinto to protest vigorously against the duty to protect the interests of their Chilean stockholders.46 The political ties which Edwards provided for the firm were about to play a crucial role.
In addition to Pinto’s assurance of a vigorous protest, the Gibbs partners felt confident of a favorable response since as they noted:
. . .we have several very influential Chileans amongst our shareholders and should the Government not carry out the promise made to take immediate action in the matter, strong pressure will be brought to bear on them in Congress & no doubt they will find themselves compelled to act & act energetically.47
The comment was no idle boast. Eleven of the company’s shareholders were members of the Chilean congress and two of them were members of Pinto’s cabinet.48 The need to use these influential connections seemed to be precluded by a strong Chilean diplomatic protest which delayed enactment of the decree.49
Bolivia’s decision in April 1878 to delay enforcement of the export duty had done little to assuage Antofagasta’s directors. They insisted that Bolivia provide formal recognition of both the 1873 concession and the 1874 treaty. With Francisco Puelma serving as their intermediary, the directors continued to press for stronger government action. Finally in November, the Chilean government warned Bolivia that the duty would constitute a violation of the Treaty of 1874 and demanded permanent suspension of the export duty. Puelma reported that this action represented a major victory for the firm because the government issued the warning in its own name and not on behalf of the company. It thus raised the significance of the issue from a questionable squabble over a private concession to the more serious level of a treaty violation. In its anxious effort to aid the firm, the state actually overstepped the bounds of international law since the treaty had never been ratified by the Bolivian National Assembly.50 The following month Bolivia announced its intention of enforcing the tax. On January 14, after their refusal to pay the duty, Antofagasta’s directors learned that Bolivia had ordered the company’s property embargoed.51
In a meeting to discuss the crisis, the directors agreed that more forceful action by the Pinto administration was by no means certain. A number of prominent Chileans had business interests in Bolivia which would be jeopardized in any conflict. They included the head of the Chamber of Deputies, Melchor Concha y Toro, president of the Huanchaca Mining Company, and Senator Gerónimo Urmeneta, president of the Coro-Coro Mining Company. To overcome this opposition the directors hired writers to publish newspaper articles which presented the company’s cause as a matter of Chilean patriotism. In addition, Isidoro Errázuriz, editor of the influential daily La Patria, agreed to publish a supportive editorial.52 As the propaganda barrage got under way, Brice Miller, Antofagasta’s vice-president, confidently reported, “that so far as press warfare goes, our adversaries seem completely overwhelmed. . ..”53
On February 7 the directors learned that Bolivia had scheduled an auction of the company’s goods for February 14. Miller, Escobar, and De Combe immediately went to see President Pinto. His hesitancy to act convinced them that he intended to use the firm as a sacrificial lamb, with the auction providing the ultimate justification for Chilean occupation of the area. The very next day the directors met and agreed to apply additional pressure on Pinto. The Gibbs partners reported that Pinto succumbed to the intensified pressure and agreed to deliver an ultimatum to the Bolivian government. Bolivia was informed that it had three days to respond to an earlier Chilean request for arbitration.54 No response was forthcoming and on February 14 Chilean naval forces occupied the port of Antofagasta; the War of the Pacific had begun. Peru, tied to Bolivia by a defensive alliance, was soon drawn into the conflict, and by the end of 1879 Chile controlled both Cobija and Tarapacá.
The actions of the Antofagasta Company were not the only forces propelling Chile toward war. The three nations were long and bitter rivals and a serious economic decline in Chile since the mid-1870s had conditioned the nation’s elite to accept warfare as a possible escape from the crisis.55 Nevertheless, the company not only provided a justification for war, but its directors actively campaigned to overcome domestic opposition and, at crucial junctures in the dispute, exerted pressure on Pinto to assume a more aggressive posture. Their ability to influence the government resulted in large measure from the presence in the company of influential members of the elite such as Francisco Puelma.56 The Gibbs partners actively supported the efforts of their Chilean colleagues. The defense of Gibbs’ interests, however, relied primarily upon the positions of its Chilean partners in the domestic power structure.57
Chile’s defense of the company did not come without a price. With the nation involved in a life-and-death struggle at a time when the national economy and state revenues were in crisis, the bill for those services was soon rendered. The continued increase in nitrate prices made Antofagasta a tempting target. The company’s profits sky-rocketed to 1,729,766 pesos in 1878, and the war’s disruption of production in Tarapacá extended the boom through 1879 (see Tables II and III). By June of that year, the Chilean congress was considering several different proposals to tax the company.
The two major tax plans differed drastically in terms of their potential impact on the firm. The Pinto administration recommended a ten percent tax on profits. Deputy Ramón Barros Luco, however, suggested a tax of one peso per metric quintal (100 kilograms) of nitrate produced. As Table IV indicates, the tax burden under the Barros Luco plan would have been three times greater than under the Pinto administration’s proposal. While the budgetary needs of the state made some type of tax inevitable, the more onerous tax plan was the work of a special interest group.
Ramón Barros Luco was a friend and political ally of Melchor Concha y Toro whose Bolivian mining interests had suffered at the hands of the Antofagasta Company. But Concha y Toro had more than revenge in mind. He and his brother-in-law, Francisco Subercaseaux, were providing credit to a German firm which was the fourth largest nitrate producer in Tarapacá. Furthermore Subercaseaux himself owned oficinas in the Peruvian province.58 Their interests would certainly benefit from a tax on Antofagasta. Not only could they count on the support of Barros Luco and his allies in the Chamber of Deputies, but Concha y Toro headed the Senate commission which was to report on the tax. The second member of the three-man commission was Gerónimo Urmeneta whose Bolivian mining interests had also been dealt a setback by the war. The third was Maximiano Errázuriz whose daughter had recently married Subercaseaux’s brother and who was in debt to the estate of Urmeneta’s late brother.59
To meet this latest threat, Antofagasta relied once again on propaganda and its ties to the elite political structure. An article in La Patria denounced the one-peso tax as a plot by Barros Luco and his Conservative party allies to destroy the National party whose members were so heavily represented in the company.60
The company’s political ties had indeed remained strong. Eleven of its shareholders were still deputies or senators including two members of the cabinet.61 But the visibility of this political strength limited its use. The issue at hand could not be couched in patriotic terms as had been done with the Bolivian dispute. If Chilean politicians denounced and voted against a bill affecting an enterprise in which they had a direct interest, they would violate congressional regulations and leave themselves open to devastating political attacks.62 With its political representatives limited to covert pressure, the firm was able to defeat the Barros Luco proposal but the bill passed by the Chamber of Deputies was still an onerous one (see Table IV). As the battle moved to the Senate floor, even the outspoken Senator Francisco Puelma felt compelled to remain silent. But as Gibbs reported:
. . . the shareholders in the Company have brought to bear all the influence they could on the members of the Senate in order that the law should not be passed by them. . ..63
Because of these efforts, the law as passed approved an export duty of only forty centavos per metric quintal (see Table IV). The Edwards’ ties to the elite political structure had successfully stymied the more extreme taxation efforts as well as the Bolivian expropriation, and the firm continued to enjoy a high profit margin. But a far more serious threat soon emerged.
In 1880, with Chile in full control of both Antofagasta and Tarapacá, the firm suffered a crippling blow when a much higher nitrate export duty was imposed on both areas (see Table IV). The new tax marked a turning point in Chilean economic history and the fortunes of the Antofagasta Company.
By 1878 declining world prices for mineral and agricultural products complicated by adverse weather conditions in Chile’s agricultural regions plunged the nation into a severe economic crisis. Chile’s mining and agricultural sectors characterized by labor intensive practices and high costs were unable to cope with the drop in world prices and entered a long-term decline as export revenue producers. While the protracted nature of the crisis was not apparent to contemporary observers, the elite was alive to the immediate solution offered by the conquest of the nitrate provinces. This solution, however, was threatened by claims on the industry lodged by Europeans involved in nitrate production and others who held Peruvian bonds. These claims and the accompanying diplomatic pressure led Chile to dismantle the Peruvian expropriation. The decision reaffirmed the dominant role which British and German producers had established in Tarapacá in the 1870s.64
Leading the fight for the British nitrate producers and instrumental in gaining the support of the British Foreign Office was Antony Gibbs and Sons Ltd. When the first tax on the Antofagasta Company was under consideration, the Gibbs partners had noted that for all the damage it might do to Antofagasta nothing could be of greater benefit to their Tarapacá interests.65 With their principal nitrate investments now free of the vagaries of Peruvian policy, Gibbs viewed the new tax in 1880 as an imposition, but one which worked in their interests by crippling the competition from Antofagasta. The Chilean seizure of Tarapacá thus confirmed Gibbs’ commitment to the former Peruvian province and further decreased their interest in the Antofagasta Company. The tax itself, however, was the work of domestic interests.
Any impost which could stabilize the state’s shaky finances without taxing the principal domestic economic sectors was certain to be popular. But a uniform nitrate duty had particular appeal. Domestic commercial, financial, and agricultural interests viewed Tarapacá, which accounted for ninety percent of all nitrate production, as a large and immediate market for agricultural goods and thereby a profitable coasting trade, as well as a source of remunerative banking operations. By comparison, the opportunities represented by Antofagasta and other nearby Chilean oficinas were insignificant. Based on this perspective, these interests promoted a uniform duty which clearly favored the foreign producers of Tarapacá over the Antofagasta Company since its production costs were much higher. The elite had found its traditional economic sectors, characterized by low productivity, unable to deal with the decline in world prices. In response, it supported a tax which encouraged the rapid redevelopment of foreign-owned oficinas at the expense of the Antofagasta Company in order to rejuvenate the domestic economy.66
In the House of Deputies the fight for uniform taxation of both areas was led by Concha y Toro’s ally, Ramón Barros Luco. In the Senate Melchor Concha y Toro, whose Banco Mobilario was already supplying credit to Tarapacá oficinas, headed the tax commission, and his ideas provided the substance of its report in favor of a uniform duty. With the majority of domestic economic interests favoring the resurgence of Tarapacá, the measure was passed by wide margins in both houses.67
Antofagasta’s directors had once gloated over their ability to undersell the Tarapacá oficinas.68 That boast, however, was based on the company’s complete freedom from taxation. The firm actually suffered from a number of competitive shortcomings. The lower grade of its caliche and the necessity of shipping raw caliche rather than refined nitrate to the port made its production costs fifty-four percent higher than those of the Tarapacá oficinas.69 Forced to pay the same export duty as its northern rivals, the company was at a distinct disadvantage. To add to its woes, the return to production of the Tarapacá refineries sent exports shooting up and world prices tumbling down in 1882 (see Table II). By 1883 the firm’s spectacular profits had evaporated (see Table III). Its losses on nitrate production totaled 334,833 pesos that year. This was offset in part by profits of 134,871 pesos from the railroad which was carrying freight for the mines in the interior.70 The directors quickly became convinced that the company’s future depended on increasing such traffic by an extension of the rail line to the Bolivian border. Such a venture required capital which Antofagasta simply did not have. Its shares were selling at fifty-two percent of face value, and its indebtedness had grown at an alarming rate.71 The company once again turned to Gibbs for assistance.
In August 1882, the firm asked Gibbs to purchase a major portion of a railway bond issue, certain that Gibbs’ participation would insure the success of the bonds. Gibbs declined and the bonds never materialized.72 The house’s refusal reflected the continuing shift in its investment strategy.
Since 1876 Gibbs had subordinated the interests of Antofagasta to those of its Tarapacá oficinas. That strategy, as Brice Miller noted, had created the impression “that W. G. & Co. are always pushing after some private advantage and that my character as a Director is quite subordinate to that of a Delegate appointed by W. G. & Co. for that purpose.”73 The Edwards family’s antipathy was also motivated by a degree of nationalistic chagrin at English domination of the firm’s management positions.74 Meanwhile, although Antofagasta provided stock dividends and a profitable supply contract, Gibbs made no attempt to purchase additional shares or extend further credits to the firm. In August 1879, Gibbs concluded that the imposition of taxes, the exhaustion of the company’s caliche, and deterioration of its plant would either decrease its profits or require new investments. These factors combined with the antagonistic attitude of the Edwards led the house to reduce its holdings in the company and expand its investments in Tarapacá, now all the more appealing because of Antofagasta’s difficulties. Between 1879 and 1880, Gibbs reduced its shares in the company from 2,000 to 696. Finally, in 1881, the London office concluded that all future investment should be channeled to Tarapacá.75 With Gibbs no longer available as a source of capital, the company’s fate was again closely tied to developments in the political process.
Since the passage of the first tax law in 1879, Antofagasta had paid under protest. It asserted that the tax violated its original agreement with Bolivia. That protest was the opening shot in a long legal and political battle to secure compensation for its lost privileges. In 1883 the company requested an indemnity from congress in the form of a state guarantee of six percent annual interest on the capital invested in the rail extension. The proposal also included an exclusive privilege to build the line and duty-free importation of rail equipment.76 The importance of the indemnity to the company was made clear by the Gibbs partners who observed:
It is our impression that it is hardly possible for the Company to avoid becoming involved in serious financial complications ending perhaps in a collapse for there seems very little prospect of its being able to compete with Tarapaca [sic] in its fundamental and most legitimate business of producing Nitrate . . . its only hope seems to be in obtaining from Government some indemnization for the loss of its Bolivian privileges. . ..77
The company’s most recent experience with congress, however, left little prospect of the bill’s passage. But in this case economic interests were to make for strange political bedfellows.
Among the advocates of a state guarantee for the Antofagasta rail extension were Ramón Barros Luco and Melchor Concha y Toro.78 Their change of heart toward the firm had a practical motive; Concha y Toro’s Huanchaca Company would benefit enormously from the extension. It would provide it with a rail Enk from the Bolivian border to the coast for exporting its silver. This support alone could not guarantee passage of a bill on which Antofagasta’s future apparently depended. The shareholders now overstepped the bounds of accepted political practice in a desperate effort to assure passage of the guarantee.
The company’s representation in congress was greater than ever, with fifteen stockholders serving as deputies or senators. Deputies such as Rafael Bazarte voted on the measure which directly affected their economic interests.79 While abstaining in the actual voting, Francisco Puelma broke the silence he had maintained on the tax issues and led the floor fight for the bill in the Senate. Senators who owned stock in the company faked transfers or sales of their shares in order to vote on the bill and yet avoid conflict of interest charges. President Domingo Santa María concluded an outraged description of these maneuvers by stating that “The scandal makes one cover one’s face in shame; we have never witnessed a similar affair.”80 Antofagasta’s old adversary and new ally Ramón Barros Luco was amused by the sight of congressmen rushing to sell or transfer their stocks only long enough to cast their votes. He recommended speedy action on the railway bill in order “to put an end to this stock market game that is being played with the Antofagasta railway’s shares. . . .”81
The company’s tactics were effective. The state loan guarantee and exclusive concession to build the line were granted on January 17, 1884.82 Less than a year later, Concha y Toro’s Huanchaca Company and Antofagasta reached a partnership agreement. The two firms shared responsibility for the rail extension with Huanchaca providing the capital for construction.83 In contrast to this new merging of interests, the company’s remaining Enks to Gibbs had once again become a point of conflict.
Antofagasta’s Chilean directors had responded to Gibbs’ steady reduction of its shareholdings when the house’s contract as supply agent was renegotiated in 1881. The directors demanded and received a twenty percent reduction in the service charges made by Gibbs.84 But the Edwards family had good reason for not breaking completely with the house. At the time of the renegotiation, word had spread that James F. Humberstone, a British chemical engineer in Tarapacá, had developed a new refining process (the Shanks system) that provided savings of up to fifty percent in production costs. Nitrate producers were already scrambling to uncover some clue to its method of operation and implement it in their own oficinas.85 Furthermore the reopening of the Tarapacá oficinas increased demands for workers and coal, sending labor and fuel costs upward. Through Gibbs, the firm imported the more efficient machinery to combat rising costs and falling prices by reducing production costs twenty-two percent between 1883 and 1885. As the Edwards were well aware, Gibbs served as more than a simple supply conduit for mass-produced items. The house’s London office supervised manufacture of the equipment to exacting specifications drawn up by the company. Proper performance of this quality control function was essential to insure the success of the large fixed capital investment represented by the machinery.86 And events soon provided the Edwards with a more compelling reminder of their dependence on Gibbs.
In April 1883, when Miller was not reelected as vice-president of the firm, Gibbs sold its remaining shares in the company. The Edwards responded by periodically threatening to jettison Gibbs as their European supply agent. The directors’ ability to carry through on the threat was now crippled by the company’s deteriorating position which made it an unappealing client for other merchant houses.87 As the firm’s position crumbled, its account with the London office fell into arrears. By the end of 1883, it owed the house over 100,000 pesos. Pressed for payment, the directors urged Gibbs to wait until the railway guarantee was approved. Disputes over the debt dragged on into 1884. The house finally withheld a shipment of supplies which forced the company’s operations to a halt. The directors immediately agreed to begin payments on the debt.88 While Antofagasta’s reliance on Gibbs as a supply agent now began to decline, the company continued to rely on imports of British machinery and technicians to combat problems of labor and fuel costs and the downward trend of nitrate prices.89 The direct merger of British and Chilean interests that had built the Antofagasta Company was at an end, but the firm’s dependence on foreign factors of production persisted.
Meanwhile the company underwent several changes in its development. In partnership with Huanchaca the rail extension was successfully begun. When difficulties arose between the two firms, Antofagasta sold its interests in the railway to Huanchaca in 1886.90 The company’s sudden about-face regarding the railway was made possible by its improved position in the nitrate industry.
The rapid increase in exports and decline in price which had damaged the company’s interests before 1884 finally affected the Tarapacá producers. In August 1884, producers throughout Chile organized a trust known as the First Combination which set output quotas for the industry.91 The combination, which endured until December 1886, provided Antofagasta with two years of financial and operating stability (see Table III). But the firm’s dependence on European capitalists persisted since the combination was controlled by a handful of British producers including Gibbs.92 The company’s success within the combination was also dependent on its imports of more efficient European machinery to achieve cheaper production since the effect of the trust was to stabilize rather than increase prices at significantly lower levels of production (see Table II). Without its imports of European technology, the company would have continued to operate at a loss during the first and subsequent nitrate combinations.
In later years the company’s fortunes rose and fell with the initiation and collapse of new combinations. The industry entered a permanent era of decline after 1919 due to the production of synthetic nitrate, and in 1925 Antofagasta was sold to the U.S.-owned Lautaro Nitrate Company.93
Despite the company’s “demise,” the pattern of interaction between foreign investors and the domestic elite which its operations reflected became increasingly important in the Chilean economy. During the 1920s the Edwards clan established a partnership agreement with a British bank which was strikingly similar to their arrangement with Gibbs. This partnership facilitated a rapid expansion of the Edwards’ interests in Chile’s industrial sector. At the same time British trading houses including Gibbs led the way for further penetration of foreign capital into industry. A sample of forty-two major Chilean enterprises as of 1932 revealed that twenty-six of them utilized foreign capital. In nine of the concerns, foreigners enjoyed majority stock control, and in five others their ownership ranged from 20 to 49.9 percent of the stock. Chilean industry was characterized by “complete dependence on foreign technology and investment . . .,” while the political influence of interested members of the Chilean elite played a vital role in assuring the success of industrial concerns.94
As Fernando H. Cardoso has suggested, the strength and cohesion of domestic forces played a decisive role in shaping dependent relationships.95 In Chile, domestic control of the means of production in an expanding export economy, reinforced by an effective centralized state, provided domestic interests with wide latitude in their dealings with European capitalists. This fact is reflected in the Edwards-Gibbs alliance.
In the decade 1874 to 1883, the Edwards family equaled and then surpassed Gibbs as a power in the Antofagasta Company. With their wealth greatly enhanced by the copper trade, the Edwards replaced Gibbs as the firm’s principal source of capital. Ties to Bordes established in the same trade provided them with an alternative marketing network. As a result, the family successfully rejected Gibbs’ efforts to limit the company’s production and control its marketing. Their Enks to the elite assured them of access to state power. Through this poEtical influence, the Edwards prevented the Bolivian expropriation, stymied some of the more extreme taxation efforts, and secured the railway concession which partially compensated for taxation and the capital that Gibbs would no longer provide. The role of Gibbs offers further evidence of the limited capacity of external forces to shape events.
Gibbs’ Enk to Edwards provided the house with access to the Bolivian nitrate concession and local defense of its nitrate investments where they coincided with those of their domestic partners. When the house perceived a threat to its Tarapacá investments, it brought direct and effective pressure to bear on the Chilean state. Yet Gibbs could not impose important policy decisions on the company or prevent taxation of either its Antofagasta or Tarapacá interests. The history of the company then calls into question those aspects of the dependency hypothesis which emphasize external domination of the domestic bourgeoisie and external compulsion toward policies detrimental to national development. Nevertheless, important aspects of the Edwards-Gibbs alliance carried inhibitive consequences for Chilean development.
The Edwards were dependent on Gibbs for the initial infusion of risk capital and the technology to launch the Antofagasta Company. The firm’s continued dependence on the house for European technology as well as managerial and technical skills became apparent time and again in the reinstatement of a Gibbs appointee as manager in 1881, the introduction of the Shanks system, and the 1884 production shutdown. Despite growing antagonism as the nitrate interests of the two partners diverged, the Edwards family was unwilling to make any sudden break with the house. As the ties to Gibbs weakened, the company shifted to other foreign sources for factors of production. Furthermore, the firm’s European marketing was dependent on foreign interests and its success in the nitrate combinations depended on foreign technology. This external supply of factors is crucial to understanding the nature of the Edwards’ dependence on Gibbs and the significance of the relationship for Chilean underdevelopment.
The ability of the Edwards family to launch and maintain an enterprise requiring rapid increases in productivity in the environment of a traditional agrarian society depended on foreign inputs. Foreign factors of production were essential to overcome obstacles raised by a society with a limited capital goods capacity, an educational system focused on the interests of the landed oligarchy, a credit and labor market geared to the needs of the traditional agrarian sector, and a state whose policies reinforced these institutions. Without such factors, domestic development of enterprises such as the Antofagasta Company would have required direct challenges to many of the basic institutions of Chilean society. Instead, the company, due to foreign inputs, held the distinctive position of a modern economic enterprise functioning in relative harmony with a traditional society. Even when a crisis in the traditional economy resulted in burdensome taxation, the state provided compensation and European technology insured further improvements in productivity.
While precluding the necessity of radically altering the traditional order, the external supply of factors enhanced the fortunes of nouveau riche elements such as the Edwards clan. The dual effects of the process facilitated the absorption of such elements into the elite. This is exemplified by the career of Agustín Edwards Ross who, by the time of his death in 1898, “had bought himself into the traditional society . . .” with the marriage of his daughters into prominent families and the purchase of extensive landholdings.96
The Edwards-Gibbs alliance points to an important causal factor in the failure of nitrates to promote authentic development.97 Foreign factors of production overcame the seemingly inevitable conflict between modern capitalist enterprises fueled by productivity increases and a traditional socioeconomic system. The process facilitated the absorption of dynamic elements into the elite, inhibiting formation of the societal consensus for progressive reform that precedes the emergence of mature capitalism.98
Verifying such a causal sequence in the process of industrialization lies beyond the scope of this study. However, Henry Kirsch has concluded that during Chilean industrialization, “A separate group united by a new economic activity and by the same aspirations did not emerge to make demands upon society which would imply transformation of traditional institutions.”99
In Chile the dysfunctions of peripheral capitalism did not lie in foreign domination of domestic interests, promotion of policies which compelled Chile toward underdevelopment, or the exploitation of readily available surplus labor. In fact foreign capital played a critical role in overcoming obstacles to economic growth such as the scarcity of labor, technology, and technical skills inherent in Chile’s traditional agrarian society.100 Rather, the history of the Antofagasta Company suggests that the dysfunction of peripheral capitalism lay in the capability to promote economic growth while curbing those challenges to the traditional order that open the way to economic development.
For a selective survey of dependency literature, see Ronald H. Chilcote and Joel C. Edelstein, eds., Latin America: The Struggle with Dependency and Beyond (New York, 1974), pp. 1-87; Philip J. O’Brien, “A Critique of Latin American Theories of Dependency” in Ivor Oxaal, Tony Barnett, and David Booth, eds., Beyond the Sociology of Development: Economy and Society in Latin America and Africa (London, 1975), pp. 7-27. Among the more notable theoretical treatises are Fernando H. Cardoso and Enzo Faletto, Dependencia y desarrollo en América Latina (México, 1969) and Samir Amin, Unequal Development, trans. by Brian Pearce (New York, 1976).
Arnold J. Bauer, Chilean Rural Society from the Spanish Conquest to 1930 (Cambridge, England, 1975), p. 229.
Henry W. Kirsch, Industrial Development in a Traditional Society (Gainesville, 1977), p. 157.
On the impact of the nitrate industry upon the Chilean economy, see Markos J. Mamalakis, “The Role of Government in the Resource Transfer and Resource Allocation Processes: The Chilean Nitrate Sector, 1880–1930” in Gustav Ranis, ed., Government and Economic Development (New Haven, 1971), pp. 181-210.
Oscar Bermúdez Mirai, Historia del salitre desde sus orígenes hasta la Guerra del Pacífico (Santiago, 1963), pp. 91-174.
Details of Ossa’s career are contained in Samuel Ossa Bourne, “Don fosé Santos Ossa,” Revista Chilena de Historia y Geografía, 67 (1931), 43-90; 68 (1931), 112-141; 69 (1931), 186-215; 72 (1932), 176-228. Additional information is contained in Bermúdez Mirai, Historia del salitre, pp. 177-238.
J. Valerie Fifer, Bolivia: Land, Location and Politics since 1825 (Cambridge, England, 1972), pp. 42-49; Santiago Marín Vicuña, Los ferrocarriles de Chile, 3d ed. (Santiago, 1912), p. 38.
Bermúdez Mirai, Historia del salitre, p. 313.
Virgilio Figueroa, Diccionario histórico y biográfico de Chile, 5 vols. (Santiago, 1926-1935), III, 16-19.
Bauer, Rural Society, pp. 145–166. On the relationship between agrarian structures and development, see Robert Brenner, “The Origins of Capitalist Development: A Critique of Neo-Smithian Marxism,” New Left Review, 104 (July-Aug. 1977), 66-77.
Kirsch, Industrial Development, pp. 58-60. A number of mercantile partnerships recorded in the Archivos Notariales de Valparaíso at this time specifically excluded credit extensions to nitrate oficinas from their sphere of business. See, for example, Archivo Nacional, Santiago, Chile (hereafter cited as AN), Archivos Notariales de Valparaiso, vol. 179, Dec. 1, 1873, fols. 875-878.
Kirsch, Industrial Development, p. 14.
La Epoca (Santiago), June 6, 1884; Mamalakis, The Growth and Structure of the Chilean Economy: From Independence to Allende (New Haven, 1976), pp. 74-78.
Ossa Bourne, “José Santos Ossa,” 69:194-215; 72:197-215; Bermúdez Mirai, Historia del salitre, pp. 197-198.
D. C. M. Platt, Latin America and British Trade, 1806-1914 (London, 1972), p. 136; Robert G. Greenhill and Rory M. Miller, “The Peruvian Government and the Nitrate Trade, 1873-1879,” Journal of Latin American Studies, 5 (May 1973), 119; Bermúdez Miral, Historia del salitre, pp. 167-169, 265.
Ossa Bourne, “José Santos Ossa,” 72:218-221.
Bermúdez Miral, Historia del salitre, p. 204.
Issac Arce R., Narraciones históricas de Antofagasta (Antofagasta, 1930), p. 81; Bermúdez Miral, Historia del salitre, pp. 207, 213.
Carlos Aldunate Solar, Leyes, decretos i documentos relativos a salitreras (Santiago, 1907), part 2, pp. 37-40; Bermúdez Mirai, Historia del salitre, pp. 221, 223.
Compañía de Salitres y Ferrocarril de Antofagasta (hereafter cited as CSFA), Memorias, 2-3 (1873); Arce, Antofagasta, pp. 120, 131.
Enrique Kaempffer, La industria del salitre y del yodo: Anexos y glosario (Santiago, 1914), p. 244.
The Shanks system was invented for use in the British chemical industry. The process was patented in 1863 and the first oficina to adapt it to nitrate refining was under construction in 1878. This compares quite favorably with the time required for the adoption of technological improvements such as the Solvay process in the European industrial community. M. B. Donald, “History of the Chile Nitrate Industry,” Annals of Science, 1 (Jan. 1936), 44-47; 1 (Apr. 1936), 195; David S. Landes, The Unbound Prometheus (Cambridge, England, 1969), pp. 271-272.
CSFA, Memorias, 1–7 (1872–1875), Guillermo E. Billinghurst, Los capitales salitreras de Tarapacá (Santiago, 1889), p. 103. For further information on the ten Chilean companies, see Thomas F. O’Brien, “British Investors and the Decline of the Chilean Nitrate Entrepreneurs, 1870-1890” (Ph.D. Diss., University of Connecticut, 1976), pp. 24-58.
Bauer, Rural Society, pp. 152-154.
Ibid., pp. 155-157. The prevalence and persistence of the problem is captured in a statement by the manager of the most important oficina in Tarapacá, that in terms of wages, refinery workers “have for years had things pretty much their own way,” Smail to Read, Oficina Limeña, Feb. 3, 1879, Guildhall Library, London, Archives of Antony Gibbs & Sons (hereafter cited as GMS), 11, 472/11. See also E. Semper and E. Michels, La industria del salitre en Chile, trans. and augmented by Javier Gandarillas and Orlando Ghigliotto Salas (Santiago, 1908), pp. 80-81, 100. On conditions creating a scarcity of Peruvian workers, see Jonathan V. Levin, The Export Economies (Cambridge, Mass., 1970), pp. 85-87.
Semper and Michels, La industria del salitre, p. 92; CSFA, Memorias, 1-3 (1872-1873).
CSFA, Memorias, 2-9 (1873-1876); 22, 27, 43, 48 (1883, 1885, 1893, 1896). On the division of labor, see William Howard Russell, A Visit to Chile and the Nitrate Fields of Tarapacá (London, 1890), p. 184; Semper and Michels, La industria del salitre, p. 69. Labor represented fifty percent and coal twenty-five percent of production costs prior to shipment. The existing state of technology, the high cost of coal, and conditions in the desert which damaged machinery with moving parts inhibited the direct displacement of labor through mechanization. This was particularly true in the most labor intensive aspect of the operation, extraction of the caliche from the desert floor. Productivity improvements, therefore, were focused on more efficient use of coal and techniques to recover a higher percentage of nitrate from the caliche. See Semper and Michels, La industria del salitre, pp. 80-81; Kaempffer, Salitre y yodo, p. 244.
On the persistence of traditional production techniques in Europe, see E. J. Hobsbawm, The Age of Capital, 1848–1875 (New York, 1975), pp. 179–181.
CSFA, Memorias, 2 and 4 (1873-1874); Untitled document, Valparaíso, Apr. 24, 1874, GMS, 11, 128.
William Gibbs & Company (hereafter cited as GC) to Antony Gibbs & Sons (hereafter cited as AGS), Valparaiso, May 24, 1874, GMS, 11, 128. The West Coast branches of Antony Gibbs & Sons Ltd. were known as William Gibbs & Co. until 1880 when the name was changed to Gibbs & Co.
GC to AGS, Valparaíso, July 7, 1874, GMS, 11, 128; CSFA, Memoria, 8 (1876).
CSFA, Memoria, 6 (1875); Figueroa, Diccionario, V, 857-869. The list of stockholders included other such distinguished members of the elite as Antonio Varas, Julio Zegers, and Julián Riesco.
CSFA, Memorias, 8 and 10 (1876 and 1877); Arce, Antofagasta, pp. 157-158.
Miller to Hayne, Valparaiso, July 13, 1877, GMS, 11, 470/1. Annual Accounts of the Tarapacá Nitrate Company, Apr. 30, 1876, fol. 36, GMS, 11, 049/A; CSFA, Memoria, 9 (1876). Brice Alan Miller, James Charles Hayne, Alfred Bohl, and Thomas Comber were all partners in William Gibbs and Company; see C. W. Maude, Antony Gibbs & Sons Limited: Merchants and Bankers, 1808-1958 (London, 1958), p. 130.
Greenhill and Miller, “Nitrate Trade,” pp. 117-128.
Bohl to GC in Valparaíso, Lima, May 30, 1876, June 21, 1876, GMS, 11, 121; Comber to GC in Lima, Valparaíso, June 14, 1876, GMS, 11, 120.
Hayne to AGS, Valparaíso, Feb. 2, 1877, GMS, 11, 470/1; Miller to Hayne, Valparaíso, Aug. 1, 1877, GMS, 11, 470/3; CSFA, Memorias, 9 and 10 (1876 and 1877).
Comber to Hayne, Valparaíso, July 18, 1876, GMS, 11, 120; Miller to Havne, Valparaíso, July 13, 1877, GMS, 11, 470/1; Comber to Hayne, Valparaíso, Nov. 16, 1877, GMS, 11, 470/3.
Miller to Hayne, Valparaíso, July 13, 1877, GMS, 11, 470/1. The efforts to persuade Edwards were not helped by the house’s decision to close his credit account of over £400,000 held by the London office. Gibbs had become fearful of the speculative nature of Edwards’ copper marketing ventures which he financed through the account. See Comber to Hayne, Valparaíso, July 18, 1876, GMS, 11, 120; Hayne to AGS, Valparaíso, Aug. 15, 1876, GMS, 11, 470/1; AGS to GC, London, June 30, 1876, GMS, 11, 471/2; AGS to GC, London, Oct. 16, 1876, GMS, 11, 271/3.
GC to AGS, Valparaíso, Apr. 16, 1878, GMS, 11, 470/3; Comber to Hayne, Valparaíso, May 6, 1878, GMS, 11, 120; Figueroa, Diccionario, V, 716; CSFA, Memoria, 14 (1879).
Basil Lubbock, The Nitrate Clippers (Glasgow, 1932), pp. 111-114; Figueroa, Diccionario, II, 549; Comber to Hayne, Valparaíso, May 6, 1878, May 28, 1878, GMS, 11, 120; Hayne to Comber, Lima, June 15, 1878, GMS, 11, 121; GC to AGS, Valparaíso, Jan. 27, 1879, GMS, 11, 470/3; Maude, Gibbs, p. 38.
Comber to Hayne, Valparaíso, May 6, 1878, GMS, 11, 120. The company never did exceed the 7,000-ton figure (see Table II).
Miller to Hayne, Valparaíso, Nov. 12, 1878, Nov. 26, 1878, GMS, 11, 120; Comber to Hayne, Valparaíso, Mar. 8, 1881, GC to AGS, Valparaíso, July 6, 1881, GMS, 11, 470/4; CSFA, Memorias, 27 (1885), 44 (1894).
William Jefferson Dennis, Tacna and Arica: An Account of the Chile-Peru Boundary Dispute and of the Arbitrations of the United States (reprint ed., Hamden, Conn., 1967), pp. 1-9, 40; Gonzalo Bulnes, Guerra del Pacífico, 3 vols. (Valparaíso, 1911-1919), I, 37-39; Robert N. Burr, By Reason or Force: Chile and the Balancing of Power in South America, 1830–1905 (Berkeley, 1965), p. 130.
Bulnes, Guerra, I, 52-53; Fifer, Bolivia, p. 57.
Bulnes, Guerra, I, 83-84; GC to AGS, Valparaíso, Mar. 26, 1878, GMS, 11, 470/3.
GC to AGS, Valparaíso, Mar. 26, 1878, GMS, 11, 470/3.
CSFA, Memoria, 14 (1879); Figueroa, Diccionario, I-V, passim; Cristián Zegers A., Aníbal Pinto: Historia política de su gobierno (Santiago, 1969), p. 48.
Bulnes, Guerra, I, 84.
Francisco Puelma to Miguel Saldías, Valparaíso, Nov. 8, 1878, GMS, 11, 470/3; Fifer, Bolivia, pp. 59-60.
Bulnes, Guerra, I, 83-86; Puelma to Saldias, Santiago, Nov. 8, 1878, GC to AGS, Valparaíso, Jan. 14, 1879, GMS, 11, 470/3.
GC to AGS, Valparaíso, Jan. 14, 1879, Jan. 27, 1879, Miller to AGS, Valparaíso, Feb. 14, 1879, GMS, 11, 470/3.
GC to AGS, Valparaíso, Jan. 27, 1879, GMS, 11, 470/3.
GC to AGS, Valparaíso, Feb. 10, 1879, GMS, 11, 470/3.
Thomas McLeod Bader, “A Willingness to War: A Portrait of the Republic of Chile during the Years Preceding the War of the Pacific” (Ph.D. Diss., University of California, Los Angeles, 1967), pp. 194-506.
Indicative of the depth of Puelma’s involvement was the fact that the Chilean Foreign Minister Alejandro Fierro Pérez reviewed the government’s secret diplomatic correspondence with him; see Puelma to Saldías, Santiago, Nov. 8, 1878, GMS, 11, 470/3.
While maintaining official neutrality during the war, Gibbs’ London office did everything possible to advance the Chilean cause. It arranged credit facilities for the Chilean diplomatic representative in Paris who was purchasing war materials and allowed him to use its telegraphic cypher to communicate with his government; see AGS to GC in Valparaíso, London, May 30 and Aug. 1, 1879, GMS, 11, 471/8.
AN, Archivos Notariales de Valparaíso, vol. 209, Mar. 25, 1878, fols. 239-240; AN, Archivos Notariales de Iquique, vol. 69, Sept. 20, 1882, fols. 642-645; AN, Archivo del Ministerio de Hacienda, vol. 1091; Hayne to Bohl, Valparaíso, Aug. 17, 1878, GMS, 11, 120; Hayne to George Gibbs, Valparaíso, Feb. 14, July 28, Aug. 12, 1879, GMS, 11, 470/3.
Hayne to George Gibbs, Valparaíso, July 14, 1879, Aug. 12, 1879, GMS, 11, 470/3; Chile, Congreso, Boletín de las sesiones ordinarias de la Cámara de Senadores de 1879 (hereafter cited as SOCS with year) [Santiago, 1879], p. 153.
La Patria (Valparaíso), July 9, 1879.
Zegers, Pinto, pp. 68-69; CSFA, Memoria, 15 (1879); Figueroa, Diccionario, I-V, passim.
Hayne to George Gibbs, Valparaíso, July 14, 1879, GMS, 11, 470/3; Chile, Congreso, Boletín de las sesiones ordinarias de la Cámara de Diputados de 1879 (hereafter cited as SOCD with year) [Santiago, 1879], p. 150.
Hayne to George Gibbs, Valparaíso, July 28, 1879, GMS, 11, 470/3.
O’Brien, “Chilean Elites and Foreign Investors: Chilean Nitrate Policy, 1880-1882,” Journal of Latin American Studies, 11 (May 1979).
Hayne to George Gibbs, Valparaíso, July 14, 1879, GMS, 11, 270/3.
O’Brien, “Nitrate Policy.” Mining interests perceived an advantage in the tax since consideration of a measure to abolish duties on mineral exports had been postponed until the question of the nitrate duty had been resolved; see SOCD, 1879, pp. 157-158. The interest of Chilean banks in Tarapacá did not mark a radical alteration in the national credit market. The financial institutions were strictly interested in short-term loans to established producers; see El Veintiuno de Mayo (Iquique), Dec. 15, 1887.
SOCD, 1880, p. 363; SOCS, 1880, p. 271; Boletín de las sesiones estra-ordinarias de la Cámara de Senadores de 1879-1880 (hereafter cited as SECS with year) [Santiago, 1880], pp. 93-94.
Agustín Edwards to James Hayne, Valparaíso, Apr. 1, 1874, GMS, 11, 128.
Observaciónes al informe de la comisión consultiva de salitres (Santiago, 1880), pp. 11-13.
CSFA, Memorias, 22 and 23 (1883).
CSFA, Memoria, 24 (1884); Comber to Hayne, Valparaíso, Aug. 17, 1882, GMS, 11, 470/5; GC to AGS, Valparaíso, Nov. 7, 1882, GMS, 11, 470/6.
Comber to Hayne, Valparaíso, Aug. 17, 1882, GMS, 11, 470/5.
Miller to Hayne, Valparaíso, Dec. 6, 1878, GMS, 11, 120.
Comber to Hayne, Valparaíso, Mar. 8, 1881, GMS, 11, 270/4. GC to AGS, Valparaíso, June 21, 1881, GMS, 11, 470/4.
GC to AGS, Valparaíso, Aug. 18, 1879; Comber to George Gibbs, Valparaíso, Nov. 13, 1879, GMS, 11, 470/3; Smail to GC in Valparaíso, Oficina Limeña, July 19, 1880, GMS, 11, 472/4; CSFA, Memorias, 15-17 (1879-1880); AGS to GC, London, Sept. 22, 1881, GMS, 11, 471/12.
SECS, 1883-1884, pp. 469-470.
GC to AGS, Valparaíso, June 11, 1883, GMS, 11, 470/7.
Boletín de las sesiones estraordinarias de la Cámara de Diputados de 1883-1884 (hereafter cited as SECD with year) [Santiago, 1884], p. 113; SECS, 1883-1884, pp. 469-471, 491, 494.
CSFA, Memorias, 23-25 (1883-1884); Figueroa, Diccionario, I-V, passim; SECD, 1883-1884, pp. 120-143, 220-232, 243-254; SECS, 1883-1884, pp. 469-498.
Domingo Santa María to Jovino Novoa, Santiago, Jan. 15, 1884, Santiago, AN, Fondo Nuevo “Varios,” tomo 414, pieza 8.
SECO, 1883-1884, p. 113.
Marín Vicuña, Ferrocarriles, p. 39.
Negociación en participación entre las compañías de salitres y ferrocarril de Antofagasta y Huanchaca de Bolivia (Santiago, 1885), pp. 5-6.
Comber to Hayne, Valparaíso, Mar. 8, 1881, GC to AGS, Valparaíso, Mar. 8, 1881, GMS, 11, 470/4.
Bohl to Hayne, Lima, Aug. 16, 1878, GMS, 11, 121; Hayne to Smail, Valparaíso, Aug. 29, 1879, GMS, 11, 122.
CSFA, Memorias, 20-27 (1882-1885); AGS to GC, London, Feb. 16, 1883, GMS, 11, 271/16.
GC to AGS, Valparaíso, Apr. 31, 1883, May 1, 1883, May 15, 1883, GMS, 11, 470/6; GC to AGS, Valparaíso, June 11, 1883, GMS, 11, 470/7.
GC to AGS, Valparaíso, Apr. 13, 1883, GMS, 11, 470/6; GC to AGS, Valparaíso, Dec. 24, 1883, Mar. 14, 1884, May 26, 1884, GMS, 11, 470/7; GC to AGS, Valparaíso, July 8, 1884, GMS, 11, 470/8.
CSFA, Memorias, 31, 43, 48 (1887, 1893, 1896).
CSFA, Memoria, 29 (1886); Marín Vicuña, Ferrocarriles, p. 39.
J. R. Brown, “Nitrate Crises, Combinations, and the Chilean Government in the Nitrate Age,” HAHR, 43 (May 1963), 230-233.
O’Brien, “Chilean Nitrate Entrepreneurs,” pp. 150-152.
CSFA, Memorias, 28-54 (1886-1897) ; Arce, Antofagasta, p. 408.
Kirsch, Industrial Development, pp. 68-70, 77-87, 128-151.
Cardoso and Foletto, Dependencia, pp. 42-47.
Bauer, Rural Society, pp. 194-195.
Despite the emphasis placed on the British nitrate monopoly of the 1880s and linkages of the nitrate enclave to the domestic economy through state taxation, the Antofagasta Company was by no means an exceptional case. By 1908, Chileans accounted for thirty-eight percent of the capital invested in the nitrate industry; see J. R. Brown, “The Chilean Nitrate Industry in the Nineteenth Century” (Ph.D. Diss., Louisiana State University, 1954), p. 120.
On the conflict between traditional agrarian sectors and modern capitalist enterprises, see Brenner, “Capitalist Development,” p. 77. Concerning the preconditions for the emergence of mature capitalism, see Ben Fine, “On the Origins of Capitalist Development,” New Left Review, 109 (May-June 1978), 88-95.
Kirsch, Industrial Development, p. 157. Kirsch attributes this phenomenon to the fact that; “From the outset the industrialists were intimately involved with the homogeneous economic elite which composed the dominant element of national life.” The present study points to a causal factor in this harmonious relationship between contradictory economic interests.
Local labor scarcity does not preclude the possibility of unequal exchange based on unequal rewards to labor. Its significance, however, must be tested through macroeconomic studies of conditions in the core and periphery which take into account secular trends in the terms of trade. What is apparent in the case of the nitrate industry in this period is that any such phenomenon was not based on readily available surplus labor.
Author notes
The author is Assistant Professor of History at the University of Houston. Research for the article was made possible through grants from the American Social Science Research Council and the Danforth Foundation.
