When the writer last visited the Antofagasta Pampas, the nitrate business was just recovering after a period of post-war depression and the series of big works were getting back into the full swing of activity. The industry had been enormously prosperous just before the outbreak of war in 1914, but experienced very sudden reverses when the dislocation of shipping checked shipments. At the beginning of 1915 only 35 oficinas were in operation. A certain confusion was also occasioned by the fact that several big producers were German, but the accumulated stocks of these firms were eventually taken over and sold by the Chilean Government. At the time when the future looked gloomy, with oficinas idle and large stocks piled up in the warehouses of the nitrate ports, the great war call for nitrate in the manufacture of high explosives began, resulting in a new wave of prosperity. Shipping had to be found by the Allies for the transport of the chemical, and the ports of the pampa regions showed tremendous activity. But with the cessation of hostilities the urgent demands of manufacturers of explosives in the United States and Europe came to an end and the pre-war market offered by farmers did not immediately resume its calls. Shipping gradually returned to ordinary commercial channels, the scarcity of freight for normal commerce was at once apparent, and the rates that consequently prevailed were too high for profitable shipment of nitrate at the prices to which it fell. Many oficinas closed down. But in early 1920 a healthy reaction set in. Agriculturists began buying again, and added to this cheerful effect the industry was reassured by the non-materialisation of many threatening prophesies of the serious nature of the competition to be offered by artificially-produced nitrate.
The work of the active Asociación de Productores de Salitre de Chile first made itself felt in 1920. As its name implies, the group comprises firms engaged in Chilean nitrate production, practically every company subscribing with the exception of the two North American operators and a few small oficinas. Formed by the same energetic firms who previously organised, in 1889, the widely-spread Committee of Nitrate propaganda, the Asociación goes farther in that it controls the output of nitrate of soda and of iodine, agrees upon a price, f.o.b. in Chile, for these products, and deals with international distribution. Maintaining committees in London and Berlin, the Association has also opened branches in France, Belgium, Holland, Italy, Spain, Scandinavia, Egypt, Yugo-Slavia, India, South Africa, Japan, China, and all over North and South America, these delegations being added to wherever prospects for the consumption of nitrate are presented. The Association’s main object is to obviate the violent fluctuations of price that have threatened the industry from time to time; to watch markets closely and to avoid overloading them by retaining a check upon output. The Association’s headquarters are in Valparaiso, in constant cable communication with international centres. The effect of the work of this voluntary combine, upon which such other powerful groups as the Eastern rubber planters look with something like envy, has been undeniably beneficial although no efforts can counteract the adverse results of slackened demand.
In 1913 the price per Spanish quintal was eight shillings f.o.b. in Chile, or about $2 United States currency, while freight to British ports cost twenty-three shillings per ton, New York charges running about $6. Nitrate is packed into bags of two quintals each, ten bags thus weighing a little more than an English ton. During the war the price rose to thirteen shillings per quintal, but fell to between nine and ten shillings in 1919. Owing to a strong reawakened demand, plus the work of the Association, the price rose in 1920 until about the middle of the year it stood at seventeen shillings per quintal for deliveries in the spring of 1921, and even with freights ranging from £5 to £12 a ton to London, and $30 to $50 to New York, a handsome profit remained to producer and distributor. This prosperous period lasted until the general world paralyzation of markets was felt, and the big Government nitrate stocks of the United States and Europe were released. In 1921 the international dealers, with stocks of high-priced nitrate on their hands, faced the delayed post-war slump, and formed a pool to maintain prices at fourteen shillings per quintal. Sales were reduced to vanishing point, and the way was opened for more extensive rivalry from the sulphate of ammonia trade; eventually the pool agreed to lower prices upon an arrangement with the Nitrate Producers’ Association, by which £1,500,000 was accepted as part compensation. This sum is collected by a small levy upon all nitrate exported. Prices were then reduced to eleven shillings per quintal up to December, 1921, and to 10s. 3d. for deliveries in the spring of 1922. At these prices trade revived appreciably, and the world’s need for nitrogenous fertilisers set freights moving again.
Continuing for more than a year, the nitrate crisis affected no one more acutely than the Government of Chile, for in addition to finding themselves suddenly deprived of the most substantial part of their national revenues, they were faced with a staggering amount of unemployment. The oficinas, of which all but 45 were forced to close as a result of the moribund market, discharged some 40,000 men. There is no work in the Desert of Atacama apart from nitrate and copper industries; the land produces no food and there is nowhere to live. A stream of unemployed workers was almost immediately directed southwards, and while a proportion was absorbed by the farming and milling industries of the agricultural zones, numbers remained in the vicinity of the capital, a source of considerable anxiety. At one time it was reported that 10,000 men were camped out near Santiago, a charge upon the Government, and although the authorities were active in seeking to find employment on a series of public works, these plans were rendered difficult by the financial straits of the nation. The administration of Sr. Arturo Alessandri went into office with many schemes for the betterment of living conditions in the working classes, but has been seriously hampered by the economic trials that beset Chile within a few months of the change of government.
It is scarcely to be expected that the Government should see eye to eye with the nitrate producers in the question of sustained export at a time of market depression. The nitrate companies argue that it is useless to produce and attempt to export a commodity for which there is no demand, with immense stocks already choking international warehouses: that any such action would lower the price of nitrate to a level ruinous to the holders of the existing stocks and be bound to react disastrously upon nitrate producers. The Government rejoins that they desire a general lowering of nitrate prices, so that the fertiliser should be bought in larger quantities; they want to see a continuation of large quantities produced and exported, in order that workmen should not be, as during the 1921 crisis, thrown upon the country’s hands, and also in order that export dues should continue to fill national coffers. To this the producers reply that there is one ready means of lowering nitrate prices, and that is to take off or to substantially reduce the Government export taxes, amounting to £2.11. 4. per ton. As a matter of fact, there has been serious consideration of a governmental project to purchase the nitrate output direct from producers, reselling it to world markets free of tax, or with a very light duty. Here again plans are stultified first by lack of funds and secondly by lack of public enthusiasm for nationalisation of industries in the face of the world’s experience during the last ten years. There is a wide recognition of the fact that the nitrate industry has been built up by private enterprise of a kind invaluable to young countries.
He who tries to understand the nitrate situation is much hampered by different calculations of weights and costs, and will sympathise with the complaint of Don Alejandro Bertrand, who remarks that in statistics of the industry one finds “production and export of nitrate expressed in Spanish quintals of forty-six kilograms; prices quoted in pounds sterling per English ton of 1015 kilograms; while the British financial reviews vary, some giving the prices in shillings and pence per English hundredweight, while others quote pounds, shillings and pence per English ton. The Latin countries quote in francs, liras or pesetas, whose sterling exchange value varies, while Hamburg quotes in marks per zentner of 50 kilos.” Quotations also vary, continues the Inspector for the Chilean Government of Nitrate Propaganda services, according to whether the chemical is sold in Chile, where prices are always “free on board,” or free alongside vessel, or whether they are sold including ship freight to Europe or when placed in wagons at the port.
There are today 173 oficinas upon the pampas salitreras of Chile. At the commencement of the commercial development of the fields, British capital and technique was foremost in the work, the efforts of the well-known Colonel North contributing largely towards the active interest of British investors. Chileans themselves have long been keen developers of nitrate properties and considerable investors; today their share is higher than that of any other nationality—a situation unusual in Spanish American countries, where industries are frequently left to foreign companies to a degree unhealthy for everyone concerned. The Chilean’s enterprise and business sense have indeed carried him far afield, his interests in Bolivia covering 60 per cent of the silver and tin mines.
The social system upon all oficinas is necessarily the same: dwellings and food supplies for the workers must be the consideration of the company, and in consequence large camp stores (despachos) are always maintained in which goods are sold to employés. Certain objections to this system are always heard, but it is here unavoidable; in all good and well-managed oficinas these stores are stocked amply, prices being kept down to a limit at or just above cost price. There is always a keen demand for workers, and no nitrate camp would retain its employés if conditions were not those uniformly regarded as just. The chief social difficulty of the oficinas is in keeping off company lands the enterprising piratical provision and liquor sellers who are likely to demoralise and rob. The only remedy is enclosure of the properties and fencing is becoming more usual. At one time the boundary of a nitrate grant was fixed by a string and a heap of stones, but since the Chilean Government has taken steps to regularise estates there has been less of the happy-go-lucky system of limits.
The acute interest of the authorities of Chile in the nitrate industry is due to the fact that it constitutes the chief source of national income. Over 60 per cent of Chilean revenues are derived from the export tax of two shillings and four pence per quintal, paid partly in paper and partly in gold, the total sum amounting in prosperous years to £7,000,000 or £8,000,000 sterling, or between $35,000,000 and $40,000,000 United States currency.
The tax is a heavy one, and equally weighty imposts are placed upon iodine, also a product of the nitrate oficinas. The product of the wonderful borax lake, in upper Antofagasta, on the edge of the Bolivian boundary, pays a similar tax, yet the considerable export of copper from Chile goes free. This unequal treatment of the different natural riches of the soil is frequently explained by the fact that copper is mined in many parts of the world and therefore the Chilean product must meet competition, an impossible feat if its cost were raised by the imposition of export dues. If, however, the cost of production of Chilean bar copper by the Guggenheim group is correctly estimated at eleven cents per pound, it is fairly plain that at the time during the war when Europe was paying twenty-six or twenty-seven cents per pound for this commodity it might have yielded a return to the country of origin.