Chile’s Nitrate Boom: Wealth, Oligarchy, and Modernization
Summary History
Wealth from Nitrate: The oligarchy held economic power in Chile. This class formed from the merger of the colonial landed gentry and emerging mining, industrial, and financial sectors.
Between 1880 and 1920, Chile experienced a period of wealth from nitrate production in the Tarapacá and Antofagasta provinces.
The state profited greatly by taxing nitrate exports. Successive governments used these resources to modernize the country’s poor infrastructure.
The gap between the ruling oligarchy and the popular sectors widened visibly. Problems arose from the nitrate boom, including social issues between owners and workers.
In the political arena, after a bloody civil war, a parliamentary system was established, where money and nitrate interests played a leading role in guiding the country’s progress.
Nitrate
Nitrate, or caliche, is an unprocessed ore found as thin crusts on rocks in the Atacama Desert. It is used as fertilizer and in gunpowder production.
Tarapacá had abundant sodium nitrate deposits, but this compound wasn’t suitable for mass gunpowder production.
In 1809, Tadeo Haenke, a German scientist hired by the Viceroyalty of Peru, formulated a method to convert sodium nitrate to potassium nitrate, enabling industrial exploitation.
Early nitrate extraction centers emerged in places like Zapiga, Pampa Negra, and Negreiros, near Pisagua.
Nitrate Boom
From the 1840s, Europe and the United States focused on Tarapacá’s nitrate after discovering that mineral fertilizers were superior to natural guano, which depleted soil.
The quality and abundance of nitrate deposits stimulated development and export growth. Production also boosted trade through the ports of Iquique and Pisagua.
Most incoming businessmen were foreigners, notably Englishman George Smith (1850s-1860s) and German Juan Gildemeister (1870s). Chilean Pedro Gamboni (1853) introduced a new nitrate processing technique and a system to extract iodine as a byproduct.
In 1866, José Santos Ossa discovered large nitrate deposits in Salar del Carmen, near Antofagasta, then Bolivian territory. After negotiations, he obtained a 15-year permit to exploit the nitrate.
Chilean laborers, many abandoning agriculture in the central zone, worked in the nitrate fields. Over half of Iquique’s and 84% of Tarapacá’s workforce were Chilean.
Monopoly and Nationalization
A monopoly is the exclusive control of an activity, preventing competition.
In 1875, Peru nationalized two-thirds of its nitrate production. Lacking funds to compensate owners, Peru issued certificates to expropriated companies. This created problems with Bolivia and increased taxes on Chilean companies in Antofagasta, violating the 1874 agreements.
After controlling the Tarapacá and Antofagasta nitrate fields, Chile proposed a fiscal monopoly, buying certificates issued before the war with Peru.
Presidential Contributions to Modernization (1886-1920)
José Manuel Balmaceda (1886-1891):
- Founded the Ministry of Industries and Public Works
- Built railways
- Created Malleco and Cautín provinces
- Improved roads and ports
- Built educational establishments, criminal precincts, and prisons
- Improved paving and streets in Santiago, Valparaíso, and other cities
- Channeled the Mapocho River
- Provided drinking water to cities
- Built hospitals
Jorge Montt (1891-1896):
- Expanded the navy
- Inaugurated the Victoria-Temuco railway
- Created the Talcahuano and Magellan naval bases
Federico Errázuriz Echaurren (1896-1901):
- Founded vocational schools
- Boosted tram service in Santiago, Valparaíso, San Felipe, and San Bernardo
- Began construction of sewerage and Forestal Park in Santiago
- Built the Peñuelas reservoir for Valparaíso’s water supply
Germán Riesco (1901-1906):
- Founded high schools
- Began constructing the Palace of Justice in Santiago
- Built the electric tram between Santiago and San Bernardo
Pedro Montt (1906-1910):
- Extended the Ancud-Castro railway
- Inaugurated the Chilean section of the Trans-Andean Railroad
- Built port facilities and public buildings in Valparaíso
- Built the Museum of Fine Arts, School of Pharmacy, and teacher training schools
Ramón Barros Luco (1910-1915):
artificial harbor of San Antonio-edification of the school of engineering-creation of the central statistical office – purchase of land for the library and national archives-continuation of the road works and water and sewer to the entire country-creation of military service Aeronautics and Legal Medical Institute.
Juan Luis sources (1915-1920): – construction of buildings for public schools in stgo, serene, Valpo, Viña del Mar and Concepcion-rail network reaches to 4579 km and a chile between Iquique and Puerto Montt.