The Chilean age of expansion
How mining capital pushed Chile’s borders to the north and the south
By the time of Allende’s election, Chilean capitalism had been fully subjugated to first Great Britain and later the United States for over 80 years.
The Popular Unity government which came into power in 1970 in Chile and the movement that propelled it there saw the capitalism that they were opposed to and imperialism from the US and Great Britain as intrinsically linked.
The origin of this subservience to foreign capital is directly tied to Chile’s late 19th century expansionism, a period in which an incipient Chilean capitalist class, flush with capital from copper, silver, and gold mining in the “Norte Chico” region, brought Chile into the global market and reorganized the political economy of the entire nation.
When the global market for copper and silver collapsed, this forced Chile into a phase of territorial expansion that brought the country into direct conflict with its neighbors to the north — Bolivia and Peru — and the south — the “unconquered” Mapuche territory of Araucanía.
But precisely this expansionism is what ultimately drove the political economy of Chile into subservience to Imperialism.
Chilean political and economic geography in 1860
Since the 1700s, Chile had been bounded to the East by the cordillera of the Andes, situating the territory of Chile between the dries desert outside the poles to the North, the tallest mountain range outside of Asia to the East, the largest ocean in the world to the West, and a military border to the South.
Chile’s central zone, the area surrounding Santiago, comprised the fertile central valley and the original agricultural heartland of Chile.
Aside from a few coastal outposts and the Chiloé archipelago (under Spanish possession past Chilean independence — until 1826), Chile hadn’t expanded much into the present day southern and not at all into the extreme southern zones since the Arauco War in 1546, in which the indigenous Mapuche people curtailed Spanish expansion into territory south of the Biobío River.
The Republic of Chile inherited this permanent, militarized border from the Viceroyalty of Chile when it gained independence from Spain, and through the first part of the 19th century, the border between Mapuche territory (known as Araucanía) and Chile, remained stable, though porous.
Central Chile extended northwards to the semi-arid Norte Chico — or “little North” — zone, which was the principal mining region in the country. The Norte Chico borders the Atacama Desert, the driest desert in the world, deemed a barren wasteland of little interest by Spanish colonizers. It was so sparsely settled that at the time of Spanish American independence, it was unclear how much of it belonged to which new Spanish American republic, between Peru, Bolivia, Argentina, and Chile.
How Chilean capital “settled” the Atacama and Araucanía
The mining boom in the Norte Chico zone brought on by Chile’s entry into the global, capitalist market pushed Chile to expand its borders. Flush with funding from silver exports and seeking new sources of mineral wealth, Chilean adventurers began pouring into the Atacama to try to strike it rich on a new mineral vein, indifferent to whether territory was claimed by Bolivia, Peru, Chile, or Argentina.
At the same time, supplying a growing mineral extraction industry in the North was no longer possible within the existing territory of Chile, and Chilean capitalists sought new agricultural territory south of the Biobío. More intensive exploitation of agricultural labor drove a growing rural surplus population both to the mining north, further south, and into Argentina.
It was the excess capital generated in the silver and to a lesser extent copper trade that “settled” the Atacama and Araucanía, but in contrasting ways.
The Atacama
In the first instance, Chilean bankers in Valparaíso, who made their fortunes exporting silver and copper, funded expeditions to explore the untamed Atacama for further mineral deposits.
These early explorations didn’t yield much in terms of gold, silver, and copper, but what they did find was a resource that would ultimately prove much more valuable: nitrate salts.
Jose Santos Ossa, for example, set out in search of silver in the Atacama near the Chilean and Bolivian borders, funded by his backers in Valparaíso, Francisco Puelma, Augustin Edwards, and Antonio Gibbs and Son. What he found instead was the salar de Carmén, a major nitrate field in the desert near Antofagasta.
Along with his funders, Ossa founded a company and began exploiting the nitrate resources in the salar de Carmén.
Nitrate from the Atacama had been known for generations, but as was the case with silver and copper, Spanish monopolization of the export economy meant this resource went vastly underdeveloped.
During the colonial era, the primary commercial use for nitrate was in the production of gunpowder, and Spain had a vested interest in ensuring that gunpowder production remained centralized within the Spanish Empire in Iberian Spain.
It was the use of Peruvian guano and the subsequent development of a more intensive form of agriculture in Europe it facilitated that created a market for nitrate as fertilizer in Europe.
Nitrate deposits spanned the Atacama Desert in a North-South line, and prospectors — mostly Chilean and English — discovered major deposits, placed their claims, and developed large-scale extraction in the Peruvian region of Tarapacá, the Bolivian region of Litoral, and the Chilean region of Atacama. Of the three, Tarapacá’s deposits were the most easily accessible, being both a much larger area and relatively close to the coast and easily exportable down to Valparaíso and then out to the world via the port town of Iquique. As the North-South string of nitrate districts goes South, though, it also bends away from the coast and further inland, so that Chile’s nitrate deposits are relatively far from the coast, and closer to the Bolivian city of Antofagasta than the nearest Chilean port of Taltal.
Across all three regions, Chilean capital funded mining operations. The majority of the owners were Chilean, Peruvian, and English, with a smattering of other foreign owners. Above all, Chilean capital dominated the Bolivian nitrate market.
As Hernán Ramírez Necochea records in History of the Worker’s Movement in Chile:
“The participation of Chilean capitalists in Bolivia was so significant that they were the main backers of the Banco Nacional de Bolivia, which had a double legal headquarters: Valparaíso and La Paz; the initial capital of this bank was entirely underwritten by commercial houses in Valparaíso and among its shareholders, in addition to foreign firms that existed in the city, were Agustín Edwards, Buenaventura Sánchez, Blas Segundo Cuevas, Rafael Waddington, etc.” (p. 39).
Chilean capital dominated in the Peruvian nitrate industry as well, though to a lesser extent.
And not only did Chilean capital fund the nitrate “oficinas” as the production facilities were called, but most especially, Chilean workers mined the mineral, worked the machines that refined it, and transported it to market.
And the majority of the workers across all three nitrate regions were Chileans shipped north from the agricultural Central Chile zone on the promise of better wages.
Overall, the Atacama in the later half of the 19th century has an Old West feel, with opportunistic Chileans, Boilvians, and Peruvians swelling the populations of dusty frontier towns on the edge of nowhere along with a smattering of European adventurists, but especially and increasingly British ones. For them in particular, in contrast to the Chilean workers arriving on contract from central Chile, real rags-to-riches opportunities abounded for any enterprising young man with a smattering of engineering experience, whether by providing water through desalinating ocean water, or working in railroad workshops.
While privatized profits from silver drove the expansion of Chilean interests north and into the nitrate extraction industry, the Chilean state derived an increasing amount of its funding from taxation — usually via export rights — on silver exports.
While privatized profits from silver drove the expansion of Chilean interests north and into the nitrate extraction industry, the Chilean state derived an increasing amount of its funding from taxation — usually via export rights — on silver exports.
Landholding remained the prestige position within Chilean society, and landholders and their interests maintained control of the State and its funds throughout the 19th century. This meant that profits gleaned by the state were reinvested in support for the interests of the agricultural bourgeoisie.
The principle problem for the agricultural bourgeoisie was a lack of land.
In addition to various public works like canals and irrigation systems that brought more land into arability, the Chilean state became increasingly interested in southward expansion into the territory of the Mapuche.
Providing land in the south to Chilean campesinos would undermine the system of exploitation in the rural Chile, and so the Chilean state invested in a colonization project, paying agents to entice particularly Germans to settle in and around Valdivia, notably founding the city of Puerto Montt. This German settlement started to the south of Araucanía — the alternate name of Mapuche territory — and gradually pushed northwards.
Just like the Atacama was a haven for British adventurists and opportunists, the Araucanía was a place where German emigré families to get an industrious leg up on their old world lives, unhindered as they were by the system of labor exploitation and tenancy that dominated the agricultural lands further north and kept Chilean campesinos in a state of subjugation.
Meanwhile, the Chilean Army began slowly advancing the militarized border further south while industrialization in the north linked to silver mining drove the development of coal exploitation in Lota and Coronel on the border with Mapuche territory (and actually south of the Biobío).
In The History of the Chilean Economy — 1830 and 1930: Two Essays and a Bibliography, Cariola Sutter and Osvaldo Sunkel note the objectives of this slow creep into Araucanía in the middle of the 19th century:
“ … (a) the subjugation of the Araucanians, in order to allow passage to the south, the unification of the territory and the incorporation of their lands into national agriculture [25], (b) the colonization of the provinces of Validiva and Llanquihue by European settlers, also with the purpose of incorporating these regions into the country’s agrarian economy, © the definitive linking of the region of Chiloé, and its important potato production to the country’s agrarian economy; and d) the control and incorporation of Magallanes, the southernmost region of the country, into the national territory and economy. During the decades from 1850 to 1870 the bases were created to achieve these objectives and considerable progress was made in their fulfillment, in such a way that, as will be seen later on, the saltpeter expansion of the Norte Grande following the War of the Pacific will be followed by a no less significant agricultural expansion in the regions south of Concepción,” (p. 79–80).
Open hostilities between various Mapuche tribes and the Chilean Army flared throughout the 1860s and 1870s.
In 1873, the Peruvian state started the process of monopolization and nationalization of the Tarapacá nitrate district (see the map above), partially completing the nationalization of all nitrate oficinas under the control of the Compañía Salitrera del Perú in 1878 (‘salitre’ is the common Spanish word for potassium or sodium nitrate, etymologically closer to and sometimes translated as ‘saltpeter,’ a term which is a far more obscure term in English).
In 1873, the Peruvian state started the process of monopolization and nationalization of the Tarapacá nitrate district (see the map above), partially completing the nationalization of all nitrate oficinas under the control of the Compañía Salitrera del Perú in 1878 (‘salitre’ is the common Spanish word for potassium or sodium nitrate, etymologically closer to and sometimes translated as ‘saltpeter,’ a term which is a far more obscure term in English).
Peru, however, wasn’t able to fully expropriate all owners, and Chilean capital still maintained ownership in Tarapacá. British interest in the nitrate extraction industry was also strong, typified by the naming of one Robert Harvey — an Englishman well connected to British interests in Peru, Bolivia, and Chile — as the inspector of state-owned nitrate production.
The bigger thorn in the side of the Peruvian nitrate monopoly, though, was the continued production of nitrate by Chilean capital in Bolivia near the city of Antofagasta, which had negotiated a sweetheart deal with the Bolivian government that capped taxes.
A series of natural disasters starting in 1877 with an 8.8 magnitude earthquake off the coast of Antofagasta and the subsequent tsunami that devastated the coast, and perhaps more importantly, continuing with a major drought in 1878, and possibly pressure from Peru, with which Bolivia had formed a secret military alliance in 1873, led the Bolivian government to retract its tax shelter of the nitrate industry.
Competition with Peru in nitrate production, though, was the lifeline for Chilean capital with the failure of the world market for Chilean silver and copper.
The Compañía de Salitres y Ferrocarriles de Antofagasta (The Antofagasta Nitrate and Railroad Company), based in Valparaíso, operating in Bolivia, and owned largely by Englishmen with Chilean capital and central player in the initial drama of the War of the Pacific, was a case in point.
As Luis Ortega notes in Businessmen, politics, and the origins of the War of the Pacific, for majority shareholder Agustín Edwards:
“… the effects of the economic crisis had been strongly felt since 1877 on the main area of business: the export of copper. Effectively, the price of the metal in London had fallen by more than 50% in two years, and in Edwards’s specific case, that meant abandoning an ambitious plan which included opening a trading house in Great Britain with a capital of 250,000 pounds … For Edwards as for many others, nitrate was the way to maintain his link with the world market.”
But owning Bolivia’s nitrate industry wasn’t enough to compete with Peru. The distance of Bolivian and especially Chilean nitrate from the coast and hence the increased cost of development as well as bringing the nitrate to market made Bolivia’s tax exemption for Chilean nitrate a necessary subsidy of the industry in order to compete with Peru.
On February 14, 1878, Bolivia enacted a tax increase on nitrate exported from Antofagasta.
The Compañía de Salitres y Ferrocarriles de Antofagasta refused to pay the 10 cent tax increase. A year later, Bolivia withdrew the company’s license and confiscated its property in Antofagasta.
Chilean capital scrambled within the halls of power in Santiago to gain support from the Chilean government for the argument that this tax was tantamount to a breach of the 1866 treaty establishing the border at the 24th parallel.
In fact, the lines between the financiers of Chilean nitrate extraction and the ruling oligarchy were blurred. Many deputies, senators, and ministers were shareholders in the Compañía de Salitres y Ferrocarril de Antofagasta, including Domingo Santa María, an “influential congressman, future Minister of Foreign Affairs and President of the Republic, and a shareholder in the ‘Compañía,’ [who] wrote to President Pinto demanding the permanent occupation of the territory of Antofagasta,” (Luis Ortega, 40).
When they landed, Antofagasta’s majority Chilean residents welcomed Chilean troops as they entered and occupied the city.
Thanks to the secret military pact between Peru and Bolivia, by early April 1879, Chile was at war with both countries.
By all accounts, the Chilean military was more modern, better equipped, and executing a superior strategy and they made easy progress into Peruvian and Bolivian territory, occupying the Bolivian Litoral as well as the Peruvian Tarapacá regions and advancing on Peru so far as occupying Lima by 1881, liberating thousands of Chinese slaves in Peru.
While Chile was able to move quickly when the fighting was in the desert with constant supply from a strong and nimble navy and novel amphibious combat techniques, once the war came to Lima and the sierras.
Turn to Araucanía
Chile was also slow to crush the Peruvian resistance because with decisive wins in Peru, Chile moved troops to the south to put down mounting resistance in Araucanía.
Pushed from the north by Chilean forces and from the south by German settlers, the Mapuche faced pressure from the east as well with the Argentine army’s major offensive against the Mapuche pushing refugee populations across the Andes into Araucanía.
Several Mapuche tribes planned an uprising for January 1881 which was put down and led to Chile’s full military occupation of Araucanía.
By June of 1883, Chilean president Domingo Santa María declared the “Araucanía problem” solved and the Mapuche people were relegated to reducciones, or reservations.
Aftermath
In the north, unable to maintain the occupation of Lima, Chile made peace with Peru and Bolivia in 1884, annexing the Peruvian province of Tarapacá and the Bolivian province of Litoral, effectively consolidating all nitrate and guano production in South America in Chilean territory.
The nitrate king
Peru’s goal of a state monopoly on nitrate, far from representing any intent at really socializing nitrate profits and providing real democratic control over the industry, was more akin to a mercantilist holdover intended to engage in the nitrate market as a mercantilist client state to European powers, specifically Great Britain (though during the war, Peru courted United States interference). Peru’s inability to achieve a monopoly in Tarapacá was due in part to competition from nitrate fields near Antofagasta and Taltal in Chile.
The consolidation of nitrate into the territory of a single state — Chile — was the situation that would have enabled something like Peru’s state monopoly on nitrate to actually thrive. But the idea that the state would have a direct hand in production was antithetical to Chile’s more advanced bourgeois elite, who had a decidedly liberal and comparatively modern view of the role of the state. To them, the Chilean state and military could be mobilized to defend business interests, and was certainly within the clutches of those interests, but could not be involved directly in industry itself.
So when Chile came into possession of the Peruvian state-owned nitrate fields in Tarapacá, the only ideologically consistent solution was to return Peruvian-expropriated property back to the hands of its “rightful” owners.
But there was a problem with this. The certificates the Peruvian government had provided to prove claims on nitrate facilities were not non-transferrable, and particularly during the war, the certificates’ value plummeted.
Robert Harvey, the Englishman who Peru had named inspector of the state-owned properties, saw an opportunity, and together with his compatriot, John Thomas North, began buying up the relatively valueless certificates with credit from English capital back in London.
When Harvey was captured by Chilean forces, he was able to convince the Chilean government that his expertise, knowledge, and connections as inspector of the state-owned nitrate facilities made him the ideal person to carry on in this role under the Chilean government until the nitrate facilities could be returned to their rightful owners.
Along with North, Harvey used his position in the Chilean government to harass and intimidate those claimants who would not sell their certificates into selling off to North and Harvey.
North, the connecting point between Harvey and British capital, monopolized Chilean nitrate production in Tarapacá, becoming the toast of the town in London and being dubbed the “nitrate king.”
And business was extremely lucrative, for North as well as for his English investors. As Roberto Hernandez notes in El Salitre:
“It won’t be difficult to understand Mr. North’s reputation with England’s capitalists, when it’s known that one of the nitrate companies that he formed, the Primitiva Nitrate Co., disbursed an eighty percent dividend to its shareholders in the first year of production,” (p. 128).
Chile fought a war to block the Peruvian nitrate monopoly and secure the nitrate fields for itself only to have these resources immediately transferred to the hands of British capital.
This was more than a mere national tragedy for Chile, but a critical turning point in the history of the Chilean political economy. It marked the moment when Chile’s bourgeoisie ceased to be the owners of the principle means of production in the country and was relegated definitively to a subservient role to a foreign, imperialist bourgeoisie through British ownership and monopoly of the nitrate industry.
Chilean capital had funded the majority of the mining operations throughout most of the 19th century, but only the internationalized machine of British capitalism was able to provide sufficient, cheap funding to fully monopolize nitrate production.
Conquest of the South
Concurrently with the Chilean annexation of Tarapacá and Antofagasta in the north, Chile put down the last open revolt in Araucanía.
The form of settler colonialism Chile induced German immigrants to carry out in the south served a particular function in the process of the conquest of Araucanía, but as the territory was more fully incorporated into the nation of Chile, the contradiction between this form of land exploitation and the latifundia system led to a greater consolidation of land under large agricultural owners, and more inquilinos and peones were brought south from Central Chile to work the new latifundia.
The German presence was certainly not eliminated. To this day in Southern Chile, German architecture, culture, and in some instances even language survives to this day.
What really brought southern Chile under the thumb of the Chilean state, though, was the full incorporation of the area into the global market. The 1880s and 1890s saw new railroad lines and infrastructure projects as well as the founding of new cities to concentrate the wealth being produced and channel goods to markets in the north and in Europe.
The Malleco Viaduct — at time of construction the tallest railroad bridge in the world, resembling the Eiffel Tower — is emblematic of the transformation, modernization, and industrialization that brought Araucanía definitively under the control of the Chilean state.
Further south, some Chilean campesinos who had migrated out of Central Chile into Argentina had continued their migration southwards, coming to settle in Chilean-claimed territory in the far south in Patagonia and Tierra del Fuego, where they found themselves once again tenants, this time as shepherds in the extreme environment of the far south, where they soon came into conflict with the region’s indigenous people.
While the Mapuche people may have been defeated militarily, but their resistance persists to this day, with occasional attacks on landowners in Araucanía, met sometimes with harsh reprisals by the Chilean carabineros.
El Libro del Mar
Another lasting impact of Chilean expansionism is felt to this day in Bolivia. Chile’s annexation of the Bolivian province of Litoral and the Peruvian province of Tarapacá left Bolivia a landlocked country, unable to export its products without passing through Peru or Chile.
The lack of “sovereign access to the sea” is still enough of a major political aspiration in Bolivia that when Evo Morales met Bernie Sanders in Rome in 2016 when Sanders was running for president, Morales gave Sanders a copy of El Libro del Mar — The Book of the Sea, a government-published summary of Bolivia’s claim to access to the sea.
Lithium — the new white gold of the dry, Andean plains — of which Bolivia is now a major producer, raises the geopolitical significance of Bolivia’s landlocked state.
Rotos and cuicos
In many ways, the War of the Pacific is a pivotal moment in Chilean culture and history.
Chile’s army may have been better equipped and better placed strategically with the weight of a global capitalist economy behind it, but the foot soldiers of the Chilean invasion forces were the same foot soldiers who dug the coal and silver mines, cleared the forests of Araucanía, built the railroads, and farmed the wheat fields of Central Chile — the Chilean working class.
It was in the War of the Pacific that a rising class identity intermingled with a heroic nationalism to create the caricature of the roto. Roto in Spanish means “broken” or “torn,” and it was the name derisively used by upper class Santiaguinos to contemptuously refer to the lower class workers and unemployed laborers crowding the city in the latter half of the 19th century.
That these rotos from all parts of Chile encountered each other in the Chilean Army in the War of the Pacific transformed the term into a national heroic archetype, not dissimilar to the French sans culottes. It also became Bolivians’ and Peruvians’ favorite term of derision for Chilean soldiers during the war.
While the class identity of roto mixed with nationalist mythology, the Chileans in turn used the term cuicos — the Quechua word for “worms” — to refer to the Peruvians and Bolivians. Despite the nationalist and quasi-racist origin of the term, the meaning of cuico in Chilean Spanish has migrated over time, first to mean any foreigner, and then to refer specifically to the class of fair-skinned Chileans with Spanish, French, German, even Eastern European names who inhabit the heights of Santiago.
The linguistic migration of roto from something like “working-class scum” to heroic national archetype and cuico from foreign enemy to class enemy and the common origin of both terms in the War of the Pacific illustrates the complex interplay between nationalism, class consciousness, and British imperialism in the period following the war.
