Prosperity and bankruptcy Peruvian nitrate monopoly

peru rich in guano, highly effective fertilizer because of exceptionally high content of nitrates, phosphates , potassium, had since 1840s provided government dramatically increasing revenues. obtain best possible price guano, peruvian state established system of consignment private companies, sell product in europe , united states. consignees important elements in government s finances, because delivered cash , credits government s spending. beginning of guano exports until 1869, consignees peruvian traders.

in 1865 coup d etat brought new peruvian leader, mariano ignacio prado. during first administration (1865-1868) finance minister, manuel pardo (later president of peru 1872-1876), needed fresh revenues replace declining guano income, , imposed new taxes on saltpeter, wool, sugar, cotton, etc., inheritance , property transfer tax. opposition new taxes (see cartoons), combined weak peruvian economy , bureaucratic inefficiency, new taxes yielded less expected. prado resigned in 1868 , of new taxes subsequently abolished.

in july 1869 new government contracted french businessman, auguste dreyfus sell 2 million tons of guano on six-year period. contract gave peru access international financial markets , enabled president josé balta (1868-1872) raise loans of ₤36 millions in europe. however, proceeds spent on unprofitable public undertalings , prestige projects such sumptuous peruvian exposition of 1872. result, peru accumulated large internal debt , serious budget deficit. quality , quantity of guano exports declined on these years, , 1860s saltpeter exports competed guano in international markets. unlike production , marketing of guano, in hands of government, saltpeter industry privately owned , operated. in june 1876, peruvian guano company, owned peruvian raphael holding, became consignee europe through raphael contract.

there several benchmarks or dates crisis. second administration of president prado (1876-1879) had 6 finance ministers, none of whom lasted year. contreras carranza cites 1873 marking crisis. dreyfus organisation suspended payment of guano export revenues peruvian state, because money spent in debt service. guano exports fell 575,000 tons in 1869 less 350,000 tons in 1873, , chincha islands , other guano islands depleted or depleted. also, quality (nitrogen content) of guano fell. contrast, saltpeter increasing share in export market: while 1.7 million metric tonnes had been shipped tarapacá between 1860 , 1870, in following decade figure rose on 4.4 million tonnes.

the falling income guano outweighed increasing volume of saltpeter sales , increasing sugar exports; contreras states real cause of crisis debt contracted in 1870-1872. specifies failure of balta s railroad plans origin of disaster: 1868 1875, 130 million soles invested in eleven railroad lines, 4 completed between places of commercial importance, , 1 of these according plan. annual revenue of 600,000 soles represented yield of one-tenth of usual 5% or 6% per annum interest on south american investments @ time.

proposals

by 1872 declining income guano insufficient service state debts. on 28 september manuel pardo, peru s president, announced in inaugural address state bankrupt , had apply long-term solutions: administrative decentralization, increase in customs duties, , export duty on nitrate. began administration in conditions had warned in 1866 when finance minister: rising debts , falling guano revenues.

the discussion of pardo s proposals produced 2 options increasing revenue. nitrate producers, wanted keep control on production volume , costs, favored new tax on exports depending on international price. second idea, promoted guano traders eager participate in nitrate business, create state monopoly on nitrate sales. ad hoc senate committee advocated export tax or, alternatively, nationalization of nitrate fields, stop competition between 2 fertilizers , bring nitrate profit directly government treasury.

the guano traders, had been displaced guano commerce dreyfus contract, interested in state control on nitrate industry – control of production , output quotas, or expropriation of salitreras, in hope of earning greater part of new lucrative business. therefore supported civilista party, , state control law (ley del estanco). nitrate producers represented nicolas de pierola, voiced prevailing public mood against guano traders , elite of lima. carlos contreras writes:

surgió una especie de odio social contra los consignatarios guaneros, los miembros del alto comercio y los dueños y directores de los bancos, personajes que solían entrelazarse o ser los mismos y estar vinculados casi todos ellos al partido civil cuyos integrantes se les conoció como la argolla . el caudillo arequipeño piérola logró capitalizar el descontento contra esta oligarquía básicamente limeña ...
(transl.) arose kind of social hate against guano consignees, mighty traders, owner , directors of banks, related each other or same persons, of them members of civilista party, members known la argolla (span. ring ) caudillo arequipa pierola reap benefits dissatisfaction against oligarchy lima ...

henry meiggs secretly supported pierola s uprising against government of prado. (which provoked battle of pacocha on 29 may 1877 between peruvian ship huáscar , british ship hms shah.)

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