Panama to Patagonia

CHILE’S INDUSTRIAL FUTURE

Agricultural Possibilities of the Central Valley—Its Extent—Wheat for Export—Timber Lands of the South—Wool in the Magellan Territory—Grape Culture—Mills and Factories—Public Works Policy—Longitudinal and Other Railway Lines—Drawbacks in Government Ownership—Trans-Andine Road—Higher Levels of Foreign Commerce—Development of Shipping—Population—Experiments in Colonization—Internal and External Debt—Gold Redemption Fund—Final Word about the Nitrates.

TRADE and industry in the future will have a broader scope in Chilean national policies. The passing of the era of unlimited naval expansion assures this result. After the peace pacts with Argentina were made effective, and the building of new battleships was stopped, it was estimated that $1,000,000 went into industries of the soil. By the sale of other superfluous naval armament to European Powers, more funds can be released for public works and agricultural development.

The basis of the agriculture of Chile is the great central valley. This lies between the Cordillera of the Andes and the Coast Range. It begins at the hill of Chacabuco in latitude 33°, and extends to the estuary at the head of the Gulf of Ancud known as the Bay of Reloncavi, latitude 41° 30′. Santiago is in the plain at the upper end of the valley. At the lower end is the bed of lakes and gulf channels. The central valley is 580 miles long, and has an average of 31 miles in width, though in the northern section it is not more than 15 miles across, and at the Angostura de Paine in latitude 34° a stone may be tossed from one side to the other. The area is approximately 18,000 square miles.

In this valley are the chief centres of permanent and growing population, as distinguished from the floating population of the nitrate provinces. The region favors all kinds of farming, both temperate and semi-tropical, for the grape, the orange, and the apple are found together. It grows the products which supply the inhabitants of the whole country, and it also has a surplus for export. Wheat and barley are regularly shipped to England in steadily increasing quantities, the £250,000 worth of wheat which Great Britain received from Chile in 1904 having come from this district. Corn, or maize, and linseed also are exported, and some wool is sent abroad. The live-stock industry is a successful one, but its products are chiefly utilized for home consumption.

The central valley is capable of a very large extension of the area under cultivation. The total of land given over to the production of the cereals, alfalfa, and vegetables, is about 9,000,000 acres. One drawback to increase is the tendency of the land-proprietors to keep their holdings intact and to prevent a material addition to the number of small farmers. There are no vast single estates, as in the wheat-growing regions of the United States. But there are many large haciendas, whose owners are content to receive a relatively small return from them rather than sell a part in order to secure capital for developing the remainder. This question enters into the relation of the roto or peon to the State, though not in an acute degree.

When the government and the individual Chilean land-owners succeed in bringing a larger area under cultivation, it will be by means of the small farmers. They will add enormously to the productive resources. While the central valley may not be said to have anything like the present wealth of the deserts of Atacama and Tarapacá, with their saltpetre deposits, yet its founts of production are enduring, and they will broaden and spread while the nitrate beds are being exhausted. This is both an economic and a political fact of vast importance to Chile.

The forest lands in the southern provinces are being gradually developed. Here is another source of national riches, for timber on the Pacific coast is not plentiful, and southern Chile has forests which are capable not only of supplying her own demands, but also of supplementing the needs of neighboring countries. In the Provinces of Arauco, Valdivia, and Llanquihue, the exploitation of the native timber has caused a lessening of the quantity imported from Oregon and California.

Below the central valley is the territory of Magellan, stretching to the Straits and across to the Chilean section of Tierra del Fuego. It comprises 47,500,000 acres, a large portion of which is unusually well adapted to sheep-raising. At the close of 1904 there were 4,250,000 head of sheep in this region. The animals furnish a strong, silky white wool, and there is some commerce in sheepskins. The wool exports range from 120,000,000 to 140,000,000 pounds annually. Great Britain and the United States take the bulk of the merinos, while France shares with them the common and mixed wools. The value of the annual commerce in wool, hides, and skins is about $2,000,000. In a recent year the estimate was that $24,000,000 was invested in new enterprises, chiefly mining companies and cattle-ranches in the Magellan district.

Grape culture is both a profitable and a promising agricultural industry. The capital invested in it is estimated at $17,000,000 to $20,000,000 gold. The area under cultivation is 60,000 acres, and the vineyards have a production of 1,062,000 hectolitres. In a twelvemonth the value of the product was $3,250,000. The government encourages the industry by an export bounty on wines and grape alcohols.

Efforts have been made to introduce the cultivation of beet root into Chile, and government favor has been shown these projects. Yet it is very doubtful whether the outcome is worth the forced aid necessary to nurture the beet-root industry. It is more profitable for Chile to follow along the lines of the agricultural products which do not require a highly artificial stimulus.[14]

Agricultural exports, in the decade from 1893 to 1902, ranged from $2,000,000 to $4,500,000 annually. The latter sum seems likely to prove the minimum basis for the future.

The industrial resources of Chile are mirrored, though not with completeness, in the Permanent Industrial Exhibition which was opened in 1904. This covers not only the products of the soil, but also the home manufactures that are fabricated either from imported raw material or from half-manufactured products brought in to encourage the home industries. The Chilean policy is protective both by bounties and by duties. The sugar refineries, which import the raw cane sugar from Peru, are among the most stable of the industries. The flour-mills are also profitable enterprises. They grind the native wheat, and have a market for the flour for export in Bolivia and Peru, as well as farther up the coast.

The country has about 8,000 industrial establishments. Among these are 400 engaged in tanning and curing hides, 430 in various kinds of wood-working, 308 in metallurgy, 268 in chemical products, 560 in ceramics or pottery, 1,900 in food products, 1,920 in cloth manufacture and tailoring, 700 in building, and so on. Car-shops are maintained in connection with the State railways. A disposition on the part of foreign capital to engage in textile manufactures has received encouragement, and woollen and cotton mills may result. The native labor, judged by the experiments, is competent.

The public works policy has become the programme of all political groups, though the Congress sometimes is laggard in voting the appropriations recommended by the Executive. Railways are its most important feature. No chapter in Chile’s history is more creditable to her people than the sacrifices made for building railways, and nothing shows the national instinct better than the perception that was demonstrated of the part which railroads play in both the industrial and the political development of a nation. In 1905, 3,100 miles were in operation, with many new lines under way. The majority of the lines are owned by the government, with the exception of the nitrate roads and the Chilean section of the Antofagasta and Bolivian Railway.

This State ownership is at once an advantage and a drawback. The policy of government proprietorship has made possible the building of links that have been of great value in internal development, and that will be of greater value when they become joined together as parts of one system. The disadvantage is in operation. When a Buenos Ayres railroad president was considering the extension of the Southern Railway of Argentina through the lower Andes to a junction with the Chilean roads,—all of which will come some day,—he made inquiries about the earnings of the Chilean system under government control. He was told that they had amounted to $18,000,000. That was very good indeed, considering the mileage and rolling-stock. “And how much did it cost to operate them last year?” he inquired. “$20,000,000,” was the reply. This meant that under State management roads which would have paid dividends showed a healthy deficit. The deficit is not invariable, for in 1903 the government railways showed a surplus of $1,360,000 Chilean currency.

This government administration illustrates the evils of the use of patronage. The management is expensive; there is favoritism, discrimination, losses, unnecessary employees by the hundred. When the national policy is matured, and the country has the railways which are necessary and which would not have been constructed except by the government, the political evils can be overcome easily. The lines can be leased to private companies under a rental which will insure profit to the lessees and a steady revenue to the government. The State railways have an annual traffic of 3,000,000 to 3,500,000 tons of freight, and carry from 7,000,000 to 7,500,000 passengers.

The Chilean aspiration has been shown very clearly in the dogged determination with which the longitudinal line paralleling the coast and the Cordilleras has been carried forward. This policy already has given a section of the central valley the benefits of railway transportation, and in a few years undoubtedly the gaps will be closed so that the through journey can be taken from Santiago to Puerto Montt at the entrance of the Chiloe Archipelago. Also it will bring Iquique and the nitrate provinces of the North into through railway communication with the capital and the South. These northern links will be of marked value in reviving copper and silver mining.

The trans-Andine road, completing the gap from Los Andes through the Uspallata Pass to the Argentine boundary, when completed, will open a new chapter of intercontinental transportation. Promise is held out that the line may be in operation by the end of 1907, but the great spiral tunnel, which is the engineering device for breaking the back of the Cordilleras, may require a longer time. The important fact is that after delays of forty years the Chilean government guaranteed capital to the amount of $7,500,000 an annual return of 5 per cent for twenty years, and let the contract. A colossal bronze statue, resting on a granite column, the Christ of the Andes, at the very pinnacle of the Cordilleras, is a striking monument along this railway line. It is just on the boundary between Chile and Argentina, and commemorates the peace treaty without which the railroad systems of the two Republics would not have been joined. The idea of the commemorative statue was due to Señora Angela de Costa, of Buenos Ayres. The influence of this trans-Andine railway on the mutual commerce of Chile and Argentina by establishing through communication between Valparaiso and Buenos Ayres will be considerable, but it promises to be even more beneficial in bringing the western pampas of Argentina to the Pacific and to Panama.

Chilean foreign commerce reaches to higher levels with each year. Naturally the nitrates form the bulk of the exports, and assure a balance of trade in favor of Chile. On this account, by England and Germany an advantage is maintained; but since the United States is not a large consumer of the saltpetre, the balance of trade is in its favor. For the ten years from 1895 to 1904 inclusive, the United States products imported into Chile aggregated $41,610,000, while her exports to the United States amounted to $26,100,000.[15] Farm implements, builders’ hardware, machinery, and mineral oils composed the larger part of the shipments.

This commerce is likely to grow to much larger proportions in the degree that railway building, municipal improvements, and harbor works are carried forward by Chile. A government agent who visited Europe and North America in 1905 in connection with contracts which were to be let, suggested to Pittsburg manufacturers the formation of a company that should give special attention to iron and steel products, railway and road supplies, for the Chilean market. The commerce is certain to grow after the Canal is constructed, because the agricultural machinery, mineral oils, and other products of which Chile is a heavy importer, will best be furnished by the United States, more especially in view of the cheapened transportation. An American bank in Valparaiso, in order to make the United States trade independent of English banking relations, is one of the probabilities of the future.

Chile’s dependence on the sea makes foreign trade a vital element of her growth and prosperity. She has an encouraging future in the development of her own shipping. With the hardy marine population of the Chiloe Archipelago and the other seafaring population of the coast as the basis, her advantage on the Pacific is manifest. She will have in the future a much larger share in the coast-carrying trade which will result from the Panama Canal. Efforts to run Chilean vessels as far as San Francisco failed a few years ago, because of obstacles which competitors were enabled to throw in the way. This was a temporary check. The shipping along the coast as far as Vancouver will not always be denied her, but after the Canal is opened there will be a more pronounced advantage in passing through it to the Atlantic, and the flag of the Chilean merchant marine will be seen in New Orleans and New York.

The existing navigation has a substantial base for developing the maritime commercial movement. In a recent year the number of sailing-vessels calling at the Chilean ports was 549, and the total registry of these vessels was 797,000 tons. Most of them were British, the number being 302, and the tonnage 447,000. After that came Germany, with 92 ships and 146,000 tonnage. The United States sailing-ships numbered 17, and their aggregate tonnage was 15,000. Chile had the same number, but with a tonnage of 13,000.

The steamships numbered 1,255, with a total registry tonnage of 2,741,000. Of these Great Britain contributed 685, whose total tonnage was 1,477,000; Germany, 381, with a tonnage of 946,000; the United States, 15, with 39,000; and Chile 149, with a tonnage of 224,000. The Chilean government pays a small subsidy to the companies which carry the mails along the coast and to and from Panama. The Chilean merchant marine consists of 136 vessels, with a total registry of 67,936 tons. Next to Chile herself, the greatest volume of the coast trading is done by ships under the English flag.

The population of Chile is between 3,000,000 and 3,100,000. In 1796 an enumeration showed 350,000 inhabitants. In 1810, almost at the threshold of the struggle for independence from Spain, the number was 500,000. In 1866 it was estimated at 2,000,000. The census of 1895, which was taken with care, gave 2,712,000 inhabitants, nearly equally divided between town and country. The urban population was 1,250,000, and the rural 1,472,000.

Measures for adding to the number of inhabitants by means of colonization and other forms of stimulated immigration have not given very encouraging results. The public men and political economists who analyze the causes which prevent the natural increase of population from being normal, also find that the artificial propagation is unsatisfactory. During the ten years ending in 1902 the government spent $100,000, Chilean money, a year in its colonization efforts, and maintained an agency in Paris. The result of that work and the expenditure of half a million dollars was the arrival of 7,000 persons, some of whom went back and many of whom drifted to other countries. During the same period the Manufacturers’ Association, the Fomento de Fabrica, secured 2,000 individuals. That is to say, in ten years government agency and private enterprise did not succeed in bringing 10,000 permanent immigrants to Chile.

Yet colonies have not always been failures. The German revolutionists of 1848 who settled around Valdivia, Osorno, and Lake Llanquihue, took root and flourished. With their tanneries and breweries they have made Valdivia the industrial centre that it is. After the war with Peru the Colonial Department sought to establish frontier colonists on the lands south of the river Bio-bio and also in the archipelago of Chiloe, where cereals grow in spite of the ceaseless rain. It is doubtful if large groups of foreigners ever can be settled permanently among those islands, but on the mainland there is no reason why colonization should not succeed. The forest clearings in the South and the opportunities for sheep-raising and wool-growing should induce an appreciable immigration in those localities.

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.