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]
14 A different view is taken by Chilean authorities. An article
in the _Boletin de la Sociedad de Fomento Fabril_ (Bulletin of the
Manufacturers’ Association) stated:
“The soil and climate of Chile indicate that the sugar industry
would prosper in the Republic, if properly exploited, not only to
the extent of supplying the domestic needs of the nation with that
important product of prime necessity, but also in such quantities as
would leave a considerable surplus for export to foreign markets.
The sugar beet is one of the tubers that flourish most luxuriantly
in the lands of the central zones of the Republic. In addition to
the natural adaptability of the soil and climate of Chile for the
growth of this tuberous root, the country also possesses deposits
of nitrate and guano which are recognized to be the best and
most appropriate fertilizers in the cultivation of this highly
saccharine-producing tubercule.”
The duty on the raw sugar is 6.50 _pesos_, or Chilean dollars, per
100 kilograms, equal to nearly one cent per pound in gold. The duty
on refined sugar is about two cents per pound. The output of the
refinery at Viña del Mar is 53,000,000 to 54,000,000 pounds, much
of which is exported. This refinery, with a capital of $1,500,000
gold, through a period of ten years, paid annual dividends of 10½
per cent.
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.
[Illustration: “Christ of the Andes”]
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.
15 The figures are on the basis of Chilean export and import
valuations. The United States Treasury statistics place a higher
value on the imports from Chile, chiefly nitrates.
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.