Panama to Patagonia

by Charles M. Pepper

The Chilean government is seeking more especially immigrants from northern Europe, Scandinavians, who would find the climate cold enough for them but much less severe than that of their own country. The climate of Chile has its eulogists, and the eulogies are not undeserved. There are, as the books say, the three climates,—the dry heat of the North, the tropical warmth of the Central region, and the temperate climate of the South. Actually two-thirds of Chile might be called temperate, and the South, even in the Straits of Magellan, is not frigid, for the warm winds of the ocean, not having a whole continent but only the tapering end to sweep over, modify what otherwise might be Antarctic cold.

Whether the Boer colonies which were established after the war in the Transvaal will spread is uncertain. The first colonists were pleased with their surroundings. But there is no veldt in southern Chile, no limitless stretch of level country, and the probability is that the Patagonian plains and the pampas of Argentina will absorb most of the Boers who elect or who have elected to leave South Africa for good.

Hitherto colonization has been conducted by Chile as a government project, but it is an open question whether better results would not be obtained by making the state ancillary to private enterprise. It also may be assumed that universal education in hygiene and observance of sanitary principles, along with the improvement in the physical condition of the working-classes, by lessening the mortality, in a single generation would result in a large addition to the permanent population through the simple processes of natural increase.

The foreign debt of Chile in 1905 was £16,650,000, or $222,000,000 in Chilean currency. This debt was created under refunding and other laws passed subsequent to 1885. Of the total, 83 per cent is held by the Rothschilds and 8 per cent by the Deutsche Bank of Berlin, the balance being distributed among various creditors. Chile has paid very liberal commissions in securing loans, whether they were temporary or for refunding purposes. She always has preserved her credit, but this credit often has been a too ready excuse for further borrowing.

In the period of unlimited naval expansion and war preparations, in spite of the regular income from the nitrates, Chile kept piling up her obligations, and, abandoning the gold standard, began issuing paper notes. The latest issue of $30,000,000 made under the law of December 29, 1904, brought the outstanding paper up to eighty million pesos, the value of the peso being 36.5 cents United States currency. With the view to getting back to the gold standard, a conversion fund had been established, and when this paper issue was authorized the gold redemption reserve was close to $13,500,000. The hope had been to reëstablish the gold basis in 1907, but this law specifically fixed the date for the conversion of the paper currency at January 1, 1910. The gold reserve is to be strengthened from the proceeds of the sale of nitrate grounds, the sale of public lands in the Straits of Magellan territory, and a reserve of $500,000 in gold monthly, which the government undertakes to hypothecate for the conversion scheme, all of which is to be deposited in first-class European banks and in those of the United States. To these deposits will be added the interest as it accrues.

The Chilean Minister of Finance, at the time of the passage of this law, estimated that on January 1, 1910, the supply of gold would amount to $86,000,000, which would leave the government a surplus of $6,000,000 after the retirement of the paper notes; but there is no assurance that further issues of currency may not be made in the interval; and this keeps foreign capitalists and investors nervous, although, since the nitrate taxes are payable in gold, as are also the customs receipts, the position of the country is not a perilous one financially.

The basis of further debt on the part of Chile may be found in providing funds for the Valparaiso harbor improvements and also for the railroad from Arica into Bolivia. The latter project and the guaranty of the payment of interest on other railroads to be built by the Bolivian government, may be considered justifiable, because these railroads are expected to make Chile commercially dominant in Bolivia and to increase her trade very largely.

Notwithstanding the conditions which were held to justify the country in increasing the amount of paper currency, the system, while very profitable to the banks and the money-changers, is unequivocally bad for the merchants. They have to buy abroad in gold and also to pay the customs duties in the same manner, while they must sell on a fluctuating paper basis. With decreasing naval and military expenditures, with improving industrial conditions, and with widening commerce, Chile should return to the gold basis and maintain it.

After this outline sketch of the resources, industries, commerce, and finances of Chile, I am brought back to the question of the nitrates. They form more than 75 per cent of the exports, and they contribute more than 85 per cent of the government revenues. Because their exhaustion is foreseen and the time calculated, does it follow that the Republic rests on quicksand, that the foundation will disappear and leave no solid national superstructure behind? One answer might be found in an historical review of the growth and consolidation of the national life during the seventy-five years before the nitrate provinces were acquired.

Another answer may be found in the newer industrial and commercial life on which the country is entering. The fertilizers have yet in them the means of internal development—roads and railways, harbors, municipal improvements—sufficient for a century’s growth. The central valley, the forests of the South, the sheep pastures of the Magellan territory and Tierra del Fuego, the coal of Arauco and Concepcion, the copper and silver of the northern provinces, all have potencies of production while the nitrate exhaustion goes on, and their development may be contemplated with equanimity while awaiting the advance of scientific irrigation to make green at some future period the white refuse of the saltpetre beds. Closer commercial relations with the neighboring countries of South America and wider trade with all the world, the expansion of the native merchant marine until it becomes an international factor in the ocean transport trade, offer the natural outlet for the national energies while assuring the national integrity. With these economic forces recognized and given their proper sphere, the collisions and the cross-purposes of domestic politics need have no deterrent influence on the industrial future of Chile. Agriculture, mining, and trade are better for her than battleships.