The Guano War

On the west coast of South Ameria, conflict would soon envelope Bolivia, Chile and Peru into the War of the Pacific, or the Guano War. Along the coastline of Peru and Chile are offshore islands where seabirds congregate: the Chincha Islands in the south, and the smaller islands, Guanajos and Lobos. The enormous fish reserves draw a large population of birds and sea lions to these islands. Millions of white-breasted cormorants, gray pelicans and white-headed gannet roost on just one of these islands. Guano is a combination of droppings, unhatched eggs, and decomposed bodies. The birds produce at least 11,000 tons of guano a year.

Due to the lack of rain, the droppings accumulate and are baked in the dry atmosphere, preserving the nitrates in the deposits. Over the centuries, guano grew into large deposits, often 100 to 140 feet deep. It became an important export commodity from 1840 to 1880, and was highly valued as fertilizer for improving crop yields.

Foreign traders, especially the British, set up trading houses to ship the guano back to England and Europe. At one point, the House of Gibbs had a monopoly on the guano trade, with much of the guano shipped to Great Britain. Guano comprised more than two/thirds of the total shipments to Britain in the late 1860s. The Americans also found guano valuable and passed the U.S. Guano Island Act of 1856 to assist American traders to acquire similar islands in the Pacific and the Caribbean. Since the British had monopoly over the Peruvian guano, American business interests in Peru stemmed not from the direct mining of the guano but from the transport of supplies.

Bolivia granted concessions to Chilean companies to explore and exploit other resources of Bolivia's coastal regions. Chilean companies found vast deposits of nitrate of soda and borax in 1866 and 1868, and a rich vein of silver ore in 1879. As a result, the Chileans developed a lucrative mining enterprise with the assistance of Great Britain. (Dobyns, 1976, p. 195) Not having direct access to guano, the Grace Company supplied American companies with nitrate of soda and continued to develop its interest in this area.

Manual Fuentes, Peruvian journalist and historian, compiled a statistical viewpoint of Lima produced in 1858. At that time Lima's population reached 55,000, with 5,000 inhabitants, one-fifth of the adult males, unemployed. Workers and artesans comprised about one/fifth of the population. Yet, foreign companies received contracts for city services, such as the paving of streets, importing both workers and the stones from Europe. More than half of the top merchants were European. Domestic production through factories was almost nonexistent, making it necessary to import almost everything. (Gootenberg, 1993, pp. 66-69)

A contemporary assessment contends that the Peruvian upper class of those days was more often a lawyer or a politician than a merchant. The merchants of Lima were often foreigners and the banks were also under foreign ownership. Foreigners controlled the development of agriculture and natural resources, the cultivation of sugarcane, the export of wool and hides, the mines, guano and the nitrate resources. They even participated in the funding of the troops, to some extent as a matter of self-protection.

Peru borrowed heavily from foreign investors on the strength of the guano exports. By the 1850s, Peru's emphasis on foreign loans moved it from last to first place as a borrower in the London markets. By the 1860s proceeds from guano exports provided more than 75 % of government revenue (Gootenberg, 1989, pg. 133). The government used some of these large sums of money to undertake large public projects. Guano exports also built personal fortunes, drawing all partners in this short-lived prosperity into the growing conflict over the control of the guano trade.

By 1875, sodium nitrate began to surpass the guano beds as an important resource. The guano beds were exhausted. (Clayton, 1999) The drop in the guano trade was largely due to the recession in Europe, over-supply and the growing demand for nitrate of soda. The 1870s showed a mass move of capital from guano to nitrate production.

W. M. Mathew (1981) offers another parallel explanation. As of 1858, British farmers began to switch the fertilizer for their turnip crops to superphosphates, as the price for guano escalated and the price for superphosphates remained stable. More easily obtained, superphosphates offered a better combination of nutrients for turnips and other root crops.

Faced with falling markets and in a difficult financial position, Peru attempted to establish more control over the exports. Bolivia also assessed additional fees on the Chilean concessionaires to compensate for the falling revenues. The Chileans protested that the new export duties were in violation of a previous treaty.

On the 15th of January of 1876, the Peruvian government declared the nitrate beds a government monopoly with a duty on private exportation so high it would force all lands into government ownership. Thus, three South American countries were drawn into a serious conflict over the right to mine in the Atacama desert region, an area never carefully delineated by national boundaries. English, American and other foreign interests were also at stake, with English interests aligned with those of Chile, and the United States with interests in both countries, and an antipathy towards England for their involvement in affairs in the western Hemisphere.

January of 1878 ushered in a period of peace and tranquility, which might have provided a hopeful future for Peru if it had not been hopelessly bankrupt. Bolivia in 1878 placed a tax of ten centavos on each hundredweight of nitrates. (Williams, 1938, p. 574-575.) Chile was outraged, calling this a violation of the treaty of 1874. Bolivia responded that failure to pay this tax by Chile would end in the confiscation of the Chilean factories and her exclusion from the industry.

Resources:
Clayton, Lawrence A. 1999. Peru and the United States: the Condor and the Eagle. Athens: University of Georgia Press.

Dobyns, Henry F. And Paul L. Doughty. 1976. Peru: a cultural history. New York, Oxford University Press. 336 pp.

Gootenberg, Paul. 1989. Between silver and guano: commercial policy and the state in postindependence Peru. Princeton, N.J.: Princeton University. 234 pp.

Mathew, W.M. 1981. The House of Gibbs and the Peruvian guano monopoly. London: Royal Historical Society. 281 pp.

Williams, Mary Wilhelmine. 1938. The people and politics of Latin America. Boston: Ginn. 889 pp.