The sales of guano and the production of gold and silver made Peru a proud and wealthy nation. Everything prospered until the war with Chili, from 1879 to 1883, ending in the defeat of Peru and the loss of a portion of her territory, including a large part of her guano deposit. She was unable to keep her railroads in operation, much less to extend them, or to pay the interest on her bonds; and thus bankruptcy followed defeat. At last, after fourteen years of default and six years of negotiation, a contract was concluded with Peru by Mr. M. P. Grace, of New York, in January, 1890, on behalf of the bondholders. The bondholders became concessionaires, and in consideration of the release of the bonded debt due to them by Peru, receive valuable concessions, of money, of mines, of railroads, of lands and of guano. These concessions include among other things a government subsidy of $400,000 a year, secured from the customs of Callao; the mines of Cerro de Pasco, which have yielded a yearly average of $2,000,000 for over one hundred years; the entire railway system (769 miles in length) of the state; a grant of 5,000,000 acres for the extension of the Lake Titicaca railroad; a grant of 4,500,000 acres for the extension of the Central or Oroya railroad to the navigable waters of the Ucayala, one of the main tributaries of the Amazon; the exclusive control of the guano deposit until 2,000,000 tons have been sold, from which they expect to sell at least 80,000 tons a year, which will net $1,000,000. The concessionaires on their part agree to liquidate the Peruvian debt, to repair the railroads, and construct 974 miles in extension of the existing system at an estimated cost of $16,000,000, and to assume certain other obligations to a limited amount.
This, perhaps the most remarkable settlement ever made between a bankrupt nation and its creditor, is due largely to Mr. Grace, and cannot fail to develop the resources of Peru and restore her days of prosperity.
TRADE RELATIONS WITH THE UNITED STATES.
It appears from the foregoing statement that all the carrying trade to and from South America, by water, is by foreign steamers; that only four of these are American lines; that the railroads are generally owned and operated by Englishmen; that the bankers and merchants are Englishmen or Germans; that many of the mines, cattle ranches, coffee plantations and other estates are owned by non-resident foreigners; and that the largest consumer of South American products is the United States, although this country sells few of its manufactures and products to South America.
The English steamers, in the usual course of trade, load with English dry-goods consigned to English houses in South America, where they are sold and the proceeds invested in coffee and other products, which are sent in the same vessels to the United States; there sold, and the money invested in our produce for carriage to England. The English therefore obtain the profits on manufacture, on the freight to South America, on the sale of the goods in South America, on the freight from South America to the United States, on the sale of those goods, and finally on the freight of the American breadstuffs carried to Europe. For the successful prosecution of any trade between two countries, it is essential that each shall produce what the other wants: Thus, we raise breadstuffs which are not grown on the Caribbean sea nor in the valley of the Amazon, nor in Peru or upper Chili, and we also manufacture goods required in all parts of South America, where they have few factories; there, coffee, wool, India rubber, cacao and other articles are produced, which we require. Here, therefore, are the factors necessary for a prosperous trade. Such a trade we formerly enjoyed with South America: In 1852, six hundred United States vessels entered the harbor of Buenos Ayres, or more than twice as many as those of all other nations combined; now only two per cent. of the shipping entering that harbor belongs to us. Our war came, iron steamers took the place of wooden sailing ships, we levied a duty on coffee and rubber, South America levied a duty on our manufactures, other countries subsidized lines of steamers, while we refused all subsidies; and our trade with South America rapidly fell off, as freights were carried cheaper in foreign than in American ships, and the trade of South America passed from the United States to England, Germany and France.
It is said that we cannot regain this trade, because we cannot, without protection maintain our own manufactures, much less compete with the Europeans in an open market; and therefore that it will be a waste of money to subsidize our vessels. But the larger the market the cheaper we can manufacture, and we can surely find a large and new market for our breadstuffs. It is worth while to make the experiment at least, to give our vessels the same subsidy and protection that has been given to the European lines, and to our merchants and bankers, an opportunity to regain the trade with South America. At first the odds will be greatly against us; but if we show the same energy and ability in cultivating trade with South America that our fathers exhibited, and that we have shown in other directions, we must ultimately succeed.
It is now proposed to tax the products of South America, unless the South American states reciprocate and admit our breadstuffs and manufactures free. If this scheme can be carried out, a large and prosperous commerce will be established between North America and South America, and American houses will be started in the large cities to dispose of our manufactures and ship the products to South America. By this interchange, our manufacturers and farmers will find a market for their goods and products, our mercantile navy freight for its vessels, and our bankers and merchants a profitable business in the large cities of South America.
RAILROADS.
We have already referred to the several railroads which start from the little ports on the Pacific coast and run up the valleys toward the Andes. Three of these, among the most remarkable roads in the world, ascend to a greater elevation than any others, and to a height which in Europe or the United States, would be above the snow level. They were intended to reach the gold and silver mines between the Andes and Cordilleras.
The first, called the Oroya or Central railroad, 111 miles in length, starts from Callao on the Pacific, and crosses the Andes, at an elevation of nearly 15,000 feet, to the plateau between the Andes and the Cordilleras. It is expected that this road will be extended to the navigable waters of the Amazon.