Chile’s public debt was augmented in early 1921 when $24,000,000 United States currency was borrowed in New York, but prior to this loan the exterior obligations of the country had not been heavy in comparison with its vigorous economic growth; later in the year, another $20,000,000 (U. S.) was borrowed in New York, and in the first weeks of 1922 the financial markets of London readily took up a Chilean loan of £1,657,000.
The first Chilean loan was made in 1822, after Independence, by the Supreme Director, Don Bernardo O’Higgins, through his representative in London, Don Antonio de Yrisarri. One million pounds sterling was obtained through the medium of Hullett Bros. & Co., the loan bearing interest at six per cent; a Sinking Fund of £20,000 the first year, and £10,000 in succeeding years was arranged for, any bonds remaining unredeemed in thirty years to be paid off at par. The security agreed upon was a mortgage upon all revenues of the State, estimated at 4,000,000 pesos or £800,000 annually; also specially pledged were the net revenues from the Mint and from the Diezmos or Land Tax, expected to yield 250,000 pesos annually.
Of this premier loan Peru had a share amounting to three-tenths of the total, or 1,500,000 pesos.
Successive borrowings brought Chile’s exterior debt to £1,500,000 in round numbers by 1850, and £5,500,000 by 1870. Between 1876 and 1893, when the war with Peru and Bolivia had been followed by the revolution against Balmaceda, these obligations rose to nearly £12,000,000 sterling. In 1901 the account had mounted to £17,000,000, and to £23,000,000 in 1909.
Two years later external loans stood at £35,000,000, but were reduced to about £34,000,000 in 1913; by the middle of 1921, according to the Official Message of President Alessandri, this debt had been brought down to about £28,000,000. The detailed history of Chile’s financial years since 1884 shows new loans, although as a rule of extremely moderate sums, occurring almost annually with the exception of a gap of eight years between 1896 and 1905, when not a penny was borrowed; nor was any fresh exterior debt incurred between 1912 and 1921. Most of the Chilean loans bore the modest interest of 4½ per cent.
In 1919 Chile began to negotiate for a new loan, to cover the needs of the State railways; there was a deficit of 40,000,000 pesos upon the operation of these lines in 1918, and in addition to another large deficit, expected in 1919, money was wanted for supplies and equipment for new work upon the lines, and especially for construction on the southern part of the “Red Central.” The law passed by the National Congress authorising the loan also permitted the State railroads to raise tariffs by 20 per cent. Eventually, in February, 1921, the first New York loan was made through the agency of the Guaranty Trust for $24,000,000 United States currency; it bears interest at 8 per cent, and was issued at 99, a considerable proportion of the sum raised being spent by arrangement in the United States.
Public Revenues
Public revenues in Chile are large in proportion to the population, the great bulk of the national income coming from import and export dues and, since the acquisition of Antofagasta and Tarapacá, especially from the nitrate industry, in the form of exportation taxes, and leases of deposits, as well as less directly from the entry of immense quantities of machinery, stores and personnel. In considering the statistics of Chilean revenues, it must be remembered that taxes are partly paid in “paper” and partly in “gold”; no gold coin, nor, necessarily, gold-backed paper actually passes, but what happens is that a proportion of the dues are paid in paper of a fluctuating exchange value, while the remainder is paid at the fixed exchange rate of eighteen pence to the peso.
Since the Chilean Government’s excellent statistical departments figure out the totals reduced all together in pesos of eighteen pence, however, or in pounds sterling, the student of Chilean economics is considerably aided; but in surveying past years one is confronted with the fact that between 1885 and 1897 the peso was reckoned as being worth thirty-eight pence. For the reason, therefore, that comparisons with external currencies would frequently be misleading, it is preferable to retain the majority of revenue and trade figures in Chilean denominations only.
In 1850 Chile’s national income was still below 5,000,000 pesos yearly: there was almost invariably a small balance over expenditure in these early years, and in 1865 this excess rose to the respectable figure of 6,000,000 pesos. It was not until 1868, when revenues had grown to 13,000,000 pesos, that a deficit so large as a million pesos was recorded, and this was the fourth occasion only, in 65 years, that expenses had exceeded income.