Currency
Exchange values of Chilean currency, as well as several other forms of financial statistics, are officially given in sterling, the use of English monetary terms resulting from the establishment of financial and commercial relations with the United Kingdom in the earliest days of Independence, and from the fact that Chile’s first exterior loan was obtained from London. The “gold peso” is fixed in exchange value at eighteen pence, while the paper peso reflects economic conditions from day to day.
Since 1871 the average value of the Chilean peso in comparison with sterling has fluctuated from just over forty-six pence in 1872 to seven pence in the worst days of 1915 and a drop to nearly sixpence in the slump of 1921–2. For the last fifty years the exchange value has tended to decrease, due chiefly to repeated issues of the paper money which replaced the gold and silver coinage of the Spanish colonial régime, when a peso was worth (1800) the equivalent of four English shillings. The creation of paper money was, however, unavoidable in the circumstances, and so long as a country possesses a sufficient quantity of some recognised form of currency, the material of which it is composed is not a matter of local importance, although exchange values may be grievously affected.
All the gold minted into Chilean money has disappeared from circulation, the finely designed little coins being retained only as curios or mementos since 1875, when severe depreciation of silver values rendered gold higher priced as bullion than as currency. The gold peso is today no more than a financial term. Officially, gold coin has an existence, as the condor, of 20 pesos; the doblón, of 10; and the escudo, of 5, but the currency actually in use is paper, well printed, in denominations from one peso upwards, with silver coins of 1 peso, 20, 10 and 5 centavos, and nickel coins of 20, 10 and 5 centavos. From more than one country of the Americas, silver has disappeared entirely when the depreciation of paper has borne down the purchasing power of the peso or other unit to a point below the market price of the metal, but Chile has so far escaped this denudation in difficult times. At the beginning of the present century the value of the Chilean peso stood at 15 to 16 pence until 1906, when the tragic effects of the earthquake that temporarily destroyed Valparaiso reduced credit.
Between 1907 and 1914 it fluctuated about ten pence, went down to an average of eight pence during 1915, rose to nine pence in 1916 when demands for nitrate increased, to about thirteen pence in 1917 and nearly fifteen pence as the average in 1918; in June of 1918 the peso soared to an exchange value of over seventeen pence, but dropped quickly when the Central Powers signed the Armistice. During 1919 the average remained at about eleven pence, rose to over fifteen pence during the early part of 1920, and subsequently experienced the falls that disturbed the Chilean market in 1921, when the peso touched an exchange value of between six and seven pence.
Despite, or perhaps on account of, the wealth of Chile in copper ores, no coins made of this metal are actually in use, although they make an appearance in official records. The reason for this abstention is found in popular prejudice against a commonly known metal. During the sixteenth century an attempt was made to introduce copper coinage, a large quantity of the metal was minted in Santiago, and the objections of the peasantry were so strong that more than a million piastres’ worth of the coins were buried or thrown into the rivers in contempt.
Employés in most of the nitrate fields receive at least a proportion of their wages in special token-money, distributed by various companies with the chief object of circumventing the underground liquor traffic. These large discs, specially tinted, and stamped with the name of the issuing oficina, pass as currency in camp stores and upon the contiguous railroads, but are without more than curio values outside the nitrate areas. Such tokens help to relieve the need for quantities of small money, for Chile, like every other land with a paper currency making conscientious efforts to reduce inflation, is perennially short of change in industrial regions.
Chile has in circulation about 4,000,000 pesos in silver coinage, and a Government note issue of 150,000,000 pesos, which on the basis of eighteen pence to the gold peso is covered to the extent of 75 per cent by the Conversion Fund; at twelve pence, the issue is fully covered. But there is other paper outstanding—treasury “vales,” to the amount issued to banks and nitrate producers, totalling at the beginning of 1921 about 107,000,000 pesos, as well as 45,000,000 pesos in round numbers, issued against the gold guarantee. The total paper currency of Chile is therefore over 300,000,000 pesos, or 75 pesos to each inhabitant, with one peso of silver and with a quantity of nickel: let us say, about four pounds sterling, or $20 U. S. currency.
No one is more acutely aware of the dangers of inflation than Chileans, a people with a marked aptitude for finance. That fine journalist and courageous editor, Carlos Silva Vildósola of the Mercurio, has repeatedly drawn public attention to important aspects of the monetary situation, and has declared that Chile is “desperately ill of the disease of paper money”; a comprehensive study of fiduciary issues has also been made by Dr. Guillermo Subercaseaux, a Chilean economic expert, and one of the planks of the Alessandri platform was a promise to proceed with the fixation of exchange, “so that we can know what we really possess, and how much we can buy tomorrow with the money we earned yesterday.”