Panama to Patagonia

ECONOMIC EFFECT OF THE CANAL

Philosophic Spanish-American View—Henry Clay’s Mistaken Population Prophecy—The Andes Not a Canal Limitation—Intercontinental Railway Spurs—Argentina and the Amazon as Feeders—Centres of Cereal Production—Crude Rubber—Atlantic and Pacific Traffic—Growth of West Coast Commerce—North and South Trade-wave—Distances via Panama, Cape Horn, and the Straits of Magellan—Waterway Tolls and Coal Consumption—Ecuador and Peru—Bolivia and Chile—Isthmian Railroad Rates—Value of United States Sanitary Authority—American Element in New Industrial Life.

THE effect of the Panama Canal on the West Coast industrial development and the reciprocal influence of this South American progress on the waterway are economic facts. The citizen of the United States who would know the subject in a wider range than the mere gratification of his patriotic impulses and his national pride, should turn to the study of commercial geography, the potential political economy of unexploited natural resources. The European statesman, jealously watchful of trade conditions in the New World and the causes which modify them, will follow these channels without suggestion.

Whether the digging of the Canal take ten, fifteen, or twenty years, does not affect its industrial value. The Spanish-American, with his inherited inertia and his lack of initiative, in waiting for to-morrow would be content if the work consumed half a century. What Humboldt prophesied of the Southern Continent as the seat of future civilization, what Agassiz predicted of the Andean and the Amazon populations, he is sure now will be realized. He even reverts to his favorite method of comparing the square miles of Belgium with the square miles of his own South American country, whichever one it may be, and exhibits the latter’s possibilities for the human race by explaining the number of people it can sustain when it shall have as many inhabitants to the square mile as has Belgium. Yet while he believes that the destiny of the Southern Continent is at the threshold of realization, Yankee impatience only would amuse him. Since the interoceanic waterway and all its benefits are to be, what matter a few years? Time, says the Castilian proverb, is the element. This philosophic Latin view may serve as a curb to fault-finding if the construction work on the Canal seems to halt while the engineering obstacles are studied and experiments are made in order to determine the best means to overcome them.

But though the Spanish-American, who is of the race that controls the West Coast countries of South America, is patient in his waiting for ultimate results, he does not fail to grasp the immediate effect. All the processes of the economic evolution unroll before his mental vision. For Colombia, Ecuador, Peru, Chile, and Bolivia, the standard already has been set, and the goal towards which they must work has been fixed. Their national policies and their commercial and industrial growth at once come under the stimulus of the waterway. “The Panama Canal,” said the leader of public thought in one of the Republics, “will precipitate our commercial evolution.” It is the spring from which will gush the streams of immigration.

In the present volume I shall have little to say of Colombia, for though the Isthmus of Panama is the reception-room of that country, the Canal is to be considered jointly with relation to the Caribbean and the Pacific shores. I include Bolivia because, while as a political division it is not ocean-bordering, geographically it is a Pacific coast country on account of its outlet through Chilean and Peruvian seaports.

Population in South America is not marked by periods of phenomenal increase. Henry Clay, in his generous pleas for the recognition of the struggling Republics, was led in the warmth of his imagination to foresee the day when they would have 72,000,000 and we would have 40,000,000 inhabitants. The population of the United States was then less than 10,000,000. Clay spoke when the resources of the Louisiana Purchase were still distrusted by many conservative public men, and long before Daniel Webster had delivered his celebrated philippic against the Oregon region as a worthless area of deserts and shifting sands. Mindful of the slow growth in the Southern Hemisphere, I make no predictions of sudden leaps, but merely seek to indicate what proportion of the present and future inhabitants comes within the sphere of the Canal.

The population of western Colombia and of Ecuador, Peru, Chile, and Bolivia is approximately 11,000,000, dwelling chiefly along the seacoast. It has been assumed that only this long slope of almost continuous mountain wall from Panama to Patagonia is subject to the direct influence of the Canal, and that the barrier of the Andes makes all the rest of the South American continent dependent on Atlantic outlets. The assumption is presumptuous. It is based on an unflattering lack of geographical knowledge and on a complete ignorance of political and economic conditions.

The primary mistake is in considering the Coast Cordilleras as the principal chain. The great rampart of the Andes in places is hundreds of miles across. Productive plains and fertile valleys lie on the western side of the Continental Divide as well as on the Atlantic slope. Besides, there are many bifurcations of these lofty ranges which must be pierced toward the Pacific. The mineral belt with its incalculable wealth, after centuries only partially exploited, has its basis of profitable production and export by means of the water transport of the Pacific. And greatest of all the facts is the certainty that railways will bore through the granite ramparts in a westerly direction. The central spine or backbone of the Intercontinental or Pan-American trunk line is not all a dream, and from its links spurs will shoot out toward the Pacific. It would have been as reasonable to imagine that the Rocky Mountains could forever shut in the region between them and the Sierra Nevadas, barring all outlet to the Atlantic and the Gulf of Mexico, as to suppose that the Pacific Ocean from Panama south is everlastingly restricted to the fringe of coast for its commerce. This is in the industrial sense and aside from the reasons of national polity which by railway enterprises on the part of the various governments are causing the Andes to disappear.

The grain fields and pastures of Argentina lie close to the Pacific. How close? Within less than 200 miles. The pampas of the western and northwestern provinces are from 500 to 1,200 miles distant from the Atlantic seaboard. The pressure of the agricultural population is westward. A generation—perhaps a decade—will bring it to the slopes of the Andes. The first railway to join the Atlantic and the Pacific, that from Buenos Ayres to Valparaiso, will be completed by means of a spiral tunnel long before vessels are propelled through the Canal.

But Valparaiso is far south, so far that, in the opinion of some authorities, it is the limit of the Canal radius. Let this be granted momentarily while the map is scanned. Place the thumb on the Chilean port of Caldera, 400 miles north of Valparaiso; the index finger on Tucuman, and the middle finger on Cordoba. The lines forking from these Argentine cities forecast the next chapter of railway expansion. Let it be known also that Nature, in kindly mood, has formed a saddle in the mountain range in this section, and that engineering surveys of routes through the depression are the basis of projects which only await a larger agricultural area under cultivation in order to become railway enterprises with an assured commercial basis. Both Cordoba and Tucuman will be in rail communication with the Pacific coast some years before the waterway is finished. Nor are these the only trans-Andine lines in prospect. They serve the purposes of illustration, so that a description of the others may be omitted. I cite the first two in order that it may be known there is an Argentine relation to the Canal, and a highly important one as to population and as to the exports and imports which are the foundation of maritime and rail traffic.

If this suggestion is new and strange, I follow it by a more startling proposition. As one result of the Panama Canal, a measure of Amazonian commerce will flow to and from the Pacific.

To begin with, there is the nearness. By several trans-Andine routes the navigable affluents of the Amazon are less than 300 miles from the coast. Steamships of 800 tons navigate as far as Yurimaguas on the Huallaga River, which was the historic route of the Spaniards over the Continental Divide. Steam vessels also go up the Marañon from Iquitos, 425 miles to the Falls of Manserriche, which by several practicable railway routes are within less than 400 miles of the Bay of Paita. Minor Peruvian ports below Paita are able to offset its shipping advantages by shorter trails. Not more than 225 miles of difficult railway construction are necessary to open to a large section of the vast Amazon region the commerce of Callao, Peru’s chief port.

In relation to the Amazon as a feeder, it has to be recognized that the Andes form a greater obstacle than in Argentina, and that the river basins will be populated much more slowly and never so densely as the Argentine pampas and sierras. But the mighty stream is within the sphere of the Canal, as I shall have occasion to explain more fully in subsequent chapters. For the present purpose a single illustration, perhaps fanciful, will answer.

It may seem a far cry from the 200,000 telephones used by the farmers of Indiana, the trolleys which tangle their way through that State, and the automobiles and bicycles which traverse the country roads, to the gum forests of South America. But the world’s hunger for crude rubber is a growing one. Bicycles, the infinite variety of motors, electric lighting, and telephones, all demand more of this article; and the 55,000 tons, which was substantially the world’s production in 1905, is insufficient for future needs. This increasing demand will stimulate the rubber production of an extensive region in northeastern Peru, and Peru has imperative reasons of national policy for wanting to turn that traffic down her own rivers, and across and over the Andes to the Pacific, instead of letting it flow out through Brazilian territory. Iquitos, the centre of this commerce, is 2,300 miles up the Amazon from Para, and Para is 3,000 miles from New York, a total of 5,300 miles by the all-water route. By river and future rail Iquitos is, at the furthest, 800 miles from Paita, and Paita, via Panama, is a little short of 3,100 miles from New York; so that the total distance is less than 4,000 miles. New Orleans by the isthmian route is within 3,300 miles of the Peruvian rubber metropolis.

Instead of the Pacific commerce being limited to the seashore strip after the Panama Canal is dug, the view which receives attention in South America is the probable influence of the waterway in diverting traffic from the Atlantic to the Pacific. Trade may not be turned upstream, and commerce is slow to leave established lines of transportation, but trade-waves are not so fixed as isothermal lines. They may show variations until the current finds its natural course to the newer markets created.

I do not mean from this to infer that the aggregate commerce of the Atlantic coast countries of South America will be lessened by the Panama Canal. Tropical Brazil, for an indefinite period, will continue to supply the bulk of the coffee consumed, and the maritime movement will follow the existing courses of navigation. Temperate Brazil, the Argentine Republic, and Uruguay will develop as the granary and the grazing-ground of the world in proportion as the United States consumes its own wheat and beef. Their exports increase with the widening of the market for these staple products. Political economists and crop statisticians have been slow to perceive that the extension of the area of agricultural cultivation and the growth of population in this great cereal region depend more on the ability of Europe to take the surplus grain, beef, and mutton than on the demands for home consumption. Public men, especially in the Argentine Republic, in their measures for encouraging immigration also have neglected to take into account this overshadowing economic factor. But it explains why during certain periods immigration has been almost stationary, while at other periods the incoming of settlers for the field and farm has been a rushing one. As a natural balance, therefore, for the diversion of traffic to the Pacific coast through the agency of the artificial waterway, the Atlantic slope has the certainty of steadily growing exports of agricultural products.

As regards Argentina, the coming railways to the Pacific, of which I have made mention, mean that a quantity of the cereals, wool, and hides will find their outlet by these routes; and a larger volume of the exchange for them—farm tools, cottons and woollens, mineral oils, and miscellaneous merchandise—will obtain the cheaper and shorter transit through the Canal and down the West Coast. Thus, without damage to the Atlantic commerce, the Pacific coast traffic will form a larger proportion in the total of South American commerce than in the past. This is especially true with reference to the United States. The trade-wave north and south may be accounted one of the phenomena of international intercourse. It is not tidal, but a brief comparison shows its growing volume. In 1894 Argentina took from the United States goods to the value of $4,863,000, and sent in return products worth $3,497,000. In 1904 the exports were $10,751,000, and the imports $20,702,000, and in the following year they were increasing.

The commercial relation of the West Coast countries may better be exhibited by tabulation in the following form:

Here, within the extremes of the eleven years, is an increase in the foreign commerce between the West Coast countries named and the United States from $8,467,000 to $26,235,000 as measured by the annual volume. The growth continued in the subsequent twelvemonth. It is a forcible illustration of the north and south trade-wave movement. Under the further stimulus of the Canal for industrial development and commercial growth the contribution to traffic for the waterway will be not inconsiderable.

An analysis of the West Coast foreign commerce for a given year shows it to have exceeded $211,000,000, with a rising tendency. The intercoast trade, which is included under the foreign head, may be placed at $11,000,000 to $12,000,000. There is left, therefore, approximately $200,000,000 of international traffic for Europe and the United States.

If the international traffic were to remain stationary, the amount that would be diverted from the Cape Horn or the Magellan route through the Canal would be important, but the overshadowing element in the waterway as an economic factor is the certainty of an increase in the foreign trade. The marked feature of the West Coast countries in recent years is the growth in consumptive capacity as shown by the imports, for the increase in population has not been large. Oriental trade may be diverted from other channels through the Canal, but western South American commerce may look for growth in volume on account of internal development of the countries which are tributary to it. In this view it may be doubted whether the estimate that 75 per cent of the Canal traffic will be between ports north of the same parallels of latitude will prove correct. The north and south trade-waves may be watched for an indication of the proportion of waterway freight that will go south, keeping in mind that New York is almost on a direct line north of the western South American ports.

These West Coast markets may be studied with reference to the shortening of distance. We may take the fact that from Colon to New York is 1,981 miles, and from Colon to New Orleans 1,380 miles; add the 48 miles of future waterway and then make our comparisons of the ports along the coast—Guayaquil, Callao, Valparaiso—with the distance through the Straits of Magellan or around Cape Horn. We also may figure on the national policy of the United States, which will not be to treat the Canal as strictly a commercial proposition. The fixing of the toll rates is not near enough to furnish the basis of definite calculation any more than is the possibility of estimating the total prospective tonnage each year, though the guesses have ranged from 300,000 to 10,500,000 tons.

The steamers which ply between New York, Hamburg, or Liverpool and the Pacific coast ports vary from 3,000 to 6,500 tons. That hardly may be taken as the measure of carrying capacity of the major part of the vessels which will pass through the Canal, but on such a basis the estimate may be made of the saving in coal consumption, and the radius within which it will be cheaper to use the Canal than to double Cape Horn or thread the difficult and dangerous passage through the Straits. For New Orleans, Mobile, and the other Gulf ports, the element of distance is not comparative, because heretofore no direct maritime movement between them and the West Coast of South America has been maintained. With the waterway once open the whole Mississippi Valley becomes the beneficiary. Nor does the talk of carrying coal and other cargoes from Pittsburg through Panama to Patagonia without breaking bulk appear fantastic.

Variations in the steamers’ courses are responsible for the differences in the tables of distances usually given, but they are not important.[1] The relation in nautical miles of the chief shipping-ports on the West Coast to trade centres may be set forth as follows:

This brings Valparaiso within 5,100 miles of New York by way of Panama; but with the omission of all the intervening ports except Iquique, Callao, and Guayaquil, it would be less than 5,000 miles. By way of the Straits the distance from Valparaiso is usually accounted 9,000 miles, touching at Montevideo and the Brazilian ports. When the Straits are avoided and Cape Horn is doubled, from the Cape to Pernambuco is 3,468 miles, and from Pernambuco to New York 3,696 miles. Either by the Straits or around the Cape the total is almost twice the distance via Panama.

Colon is 4,720 miles from Liverpool, and the relative advantages of the West Coast ports between Valparaiso and Panama may be calculated in the proportion of their respective distances. From Valparaiso to Liverpool via Panama is 7,600 to 7,800 miles according to the vessel’s schedule of wayports on the Pacific. From Valparaiso to Liverpool, through the Straits of Magellan, is 9,800 miles, touching at the Falkland Islands, and about 300 miles shorter by omitting them.

For Hamburg the saving in distance by the isthmian route may be placed at 2,400 miles. Proceeding north from Valparaiso, the loss by Cape Horn is in inverse proportion. Fifteen hundred miles north of Valparaiso is the central Peruvian port of Callao, which therefore has 3,000 miles’ gain in distance by Panama to Hamburg instead of by Cape Horn.

I have given these general figures before reciting details on the maritime commerce of the various countries. They show how the economic value of the Canal to them is primarily a question of subtraction,—the difference between the coal needed on the longer sea voyage and the Canal tolls. But the question of the return cargo also enters into the calculation and is distinctly in favor of the waterway, as is also that of the duration of maritime insurance.

No statistics are available which show the commerce of the western departments of Colombia; and the unsettled state of that country for years past gives no index of what its potential traffic may be. But the valley of Cauca in its variety of agricultural and mineral resources is a kingdom in itself. It is a future commercial feeder to the Canal.

The foreign trade of Ecuador amounted in the latest available year to $19,000,000.[2] Substantially all of it constitutes what might be called light freight, and a part of it now goes across the Isthmus by transshipment. Yet the portion which follows the longer route around Cape Horn or through the Straits is not small. The traffic flows through Guayaquil as in a single stream. Guayaquil, by way of Panama, is 2,864 miles from New York and 2,263 miles from New Orleans; by the Cape Horn route it is 11,470 miles to New York. The entire foreign commerce of Ecuador in the future is for the Panama Canal, except the excess which follows up the coast to San Francisco and beyond.

The foreign commerce of Peru may be placed above $40,000,000 annually.[3] The bulk of the traffic is now via the Straits of Magellan and Cape Horn. From Callao to New York, by way of Cape Horn, is 10,700 miles. By way of Panama it is 3,600 miles, only a little longer than from New York to San Francisco or from New York to Mexico City by the transcontinental railroad lines. In reference to Peru, it also is to be noted that the heaviest exports are from the ports north of Callao. Sugar is the largest marine freight in quantity, and this comes from Salaverry and other ports fully 500 miles north. Much of this raw sugar is now carried around Cape Horn, though some of it is left at the Chilean ports to be refined for the West Coast consumption. When the Canal is opened, with the exception of this Chilean traffic, all the raw sugar of Peru will be shipped through it to New Orleans, New York, or Liverpool.

Through the port of Mollendo, 360 miles south of Callao, come the ores, the metals, and the wools, both of southern Peru and of Bolivia. Some of the minerals may continue their course around the Horn, and also the guano which Peru in the future may export, but not all of these cargoes will find the longer route cheaper. All the wools will take the shorter route. Some wool is sent up the coast and transshipped across the Isthmus by the railways. This method is also followed in the shipment to Liverpool of some of the raw cotton raised in southern Peru. The whole of this light freight is traffic for the interoceanic waterway.

Bolivian commerce finds its outlet and inlet, chiefly through Chilean and Peruvian seaports, to the amount of $18,000,000 a year. Small as this is, the bulk of it follows the Cape Horn and Magellan routes, though some of the European merchandise is imported on the Atlantic slope through Argentina. The silver and copper ores are transported principally through the port of Antofagasta, which is 650 miles north of Valparaiso. For the mineral freights, Canal tolls may neutralize the advantage of the shortened distance via Panama to Liverpool, or may not compensate for the lessened coal consumption. But whether they do or not, the general merchandise from England and from Germany, not being bulky, will have the shorter course and probably the cheaper one on the return voyage through the Canal.

But Antofagasta, though of growing importance, is not likely to be indefinitely the chief port of export for Bolivia. The building of a railway from the great central plateau to Arica makes it certain that the copper output of Bolivia, much of the tin, and part of the silver product in time will be shipped through that port, while it will be a natural inlet for imported merchandise. Arica is so close to Mollendo—only 233 miles—that with regard to distances it may be considered on the same basis. The mineral and other internal developments, which are to fix the industrial status of Bolivia and which I shall have occasion to discuss in subsequent chapters, have a very direct relation to the facilities that will be afforded by the isthmian waterway.

Formerly it was thought that Chile would be seriously harmed by the Panama Canal. In the commercial sense this supposition does not bear scrutiny. Chile’s foreign trade is approximately $130,000,000 annually, with a tendency to reach $150,000,000. By far the heaviest proportion of this commerce is the shipments of the nitrates of soda or saltpetre fertilizers. Iquique is the principal shipping-point. The sailing-ships are the cheapest carriers for these bulky cargoes, and tolls based on tonnage may make it unprofitable to transport a large portion of them through the interoceanic channel. There is also the other consideration that the vessels which bring coal to the Chilean ports from Australia and from Newcastle secure their return cargoes of nitrates. These fertilizers being a natural monopoly, Chile will have the benefit of the industry, and the Panama Canal in no way can lessen this traffic. In its permanent effect the waterway can have little influence on the nitrates, because the deposits will be worked out not many years after its completion. Within a third of a century, or forty years at the furthest, the exhaustion of the saltpetre beds will have begun, and the cargoes of fertilizers will be lessening before that time.[4] In any aspect of the broad future of the Canal and its effect on the West Coast, the nitrates of Chile need not be considered as an influencing factor.

But it may be said that until the interoceanic canal is actually open these subjects are too remote to call for immediate consideration. This view does not hold when analysis is made of the swift recognition of its effect by South American countries. There are present-day influences which are clear enough to be taken into account.

For the entire West Coast there is at once a beneficial result in having the Canal an enterprise of the United States government. This is the equal treatment which must be accorded all the steamship companies in transshipping freight over the Panama Railway. The line was operated in the interest of the transcontinental railroads to prevent competition. Under this arrangement little regard was shown for the traffic from the coast south of Panama. The result of the control of the isthmian railway line by the transcontinental roads was against encouraging the steamship lines to seek to increase their freight between Valparaiso and the intervening ports to Panama for transshipment, because the Panama Railway exacted what it pleased.[5] With the stock of the company vested in the United States, hereafter all traffic agreements must be made on the basis of equality. This is a very important factor in the tendency of the West Coast countries to mould their national policies for industrial development and commercial expansion. It enables them to enjoy some of the benefits of the Canal without waiting for its completion. It means more shipping from the year 1906 on.

An international good also comes from the presence of the United States on the Isthmus in the capacity of a sanitary authority. It will not be hampered, as at home, by state quarantine systems. The example of what it is doing at Panama will be of immense benefit to all the ports south to Valparaiso. Its resources and its assistance will be at the disposal of the various governments which may seek its aid. With them power is centralized, and they will be able to coöperate effectually. The International Sanitary Bureau, with headquarters in Washington, for which provision was made by the Pan-American Conference held in Mexico, may become a vital force through this means. Epidemics and plagues, of which the most malignant is the yellow fever, may never be entirely wiped out, but that their area can be restricted and their ravages infinitely lessened will be demonstrated by a few years’ experience. Commerce will be immensely the gainer, and the trade of the West Coast may look for a steady and natural growth in proportion as the epidemic diseases of the seaports are controlled.

The influence of the gold standard of Panama will be helpful to commerce, though it will not in itself cause the several Republics which are on a silver or a paper basis to change to gold. But they will be benefited by being neighbors to financial stability. Uniformity of exchange will be promoted, and the inconveniences of travellers will be lessened. The fact that the currency of the United States is legal tender in the Panama Republic will help merchants and shippers at home, who heretofore have had to make their transactions entirely on the basis of the English pound sterling or the French franc.

In an outline of the general subject some attention should be paid to the inevitable overflow of energy and capital after they once become engaged in building the waterway and in supplementary projects. No one who understands the constructive American character doubts that the capitalists and contractors enlisted in the work will fare forth to seek other fields. It happens that coincident with the beginning of the Canal construction by the United States, the West Coast countries are entering upon definite policies of harbor and municipal improvements and other forms of public works, including railway building. There is also the new era of the mines. The industrial impulse is one of the immediate economic effects of the Canal. It appeals to the American spirit. It will find a quickening response. In subsequent chapters I therefore venture to indicate its field of activity, with such suggestions as may be of practical worth.