Office of the Historian

No. 114.
Mr. Osborn to Mr. Evarts.

Legation of the United States,
Santiago, Chili, March 5, 1880. (Received April 10.)
No. 133.]

Sir: In several of my dispatches upon the subject of the existing war in this section I have expressed the conviction that if Chili should succeed in placing her army in possession of the rich nitre and guano deposits of the Tarapaca district she would insist upon holding them, regardless of any intimation which she may have made touching the purposes of the war. Prior to her occupation of this district her authorized officials here strenuously insisted that great injustice was done her if it was believed that her purpose was one of conquest.

* * * * * * *

The drift of public opinion has constantly been in the direction indicated, and now I doubt if any responsible citizen would have the temerity to suggest a contrary course. There has been, and is now, doubtless, a difference of opinion as to the manner in which the annexation should take place, but that Tarapacá is to be annexed, now that it is in the possession of the Chilian army, is an acknowledged fact which no one presumes to question. A proposition for peace which should exclude the possibility of such a consummation would not, in my opinion, be seriously considered by this government. Just prior to the adjournment of the late session of Congress a resolution proposing an immediate annexation was offered by a very prominent and influential member, but the minister of the Interior urged that its adoption then would be inopportune, and at his request it was laid aside. I judge that the government would prefer to accept Tarapacá as a reimbursement for expenses in the war to any other form of annexation.

The management of the nitre and guano interests in the conquered territory is presenting some difficult questions to the Chilian Government. By military order an export duty upon nitre of one dollar and fifty cents per hundred pounds was established some three months since, but from various causes comparatively little has been shipped, and the revenue derived therefrom is very small. Of the principal causes for the meagre shipment may be mentioned, the excessive duty and the fear upon the part of the individual owners of a confiscation of their interests if Peru should recover her lost possessions. The government is sadly in need of money, and is making every effort to bring about a shipment of the nitre, but I incline to the belief that before much is accomplished in that direction a reduction of the duty will be found’ necessary.

The average value of nitre in the European markets during the year 1878 was thirteen shillings per hundred pounds. At this figure it would hardly pay to engage in its production, with the export duty as fixed. In 1878 the amount exported from the Pacific coast was 313,000 tons. Assuming this to be an average year, it will be seen that upwards of [Page 129] seven millions of dollars per annum could be realized from this source with the duty at one dollar per hundred pounds.

I inclose a military order recently issued regarding the exportation of guano from the district mentioned. These guano deposits are, it is understood, all mortgaged to secure the payment of the Peruvian foreign debt. An agent of a part of the Peruvian bondholders has been here for about five months endeavoring to secure an arrangement with the government by which the guano in question should be appropriated to the payment of the debt for which it was mortgaged, and the inclosed order is the result. In diplomatic circles here this action of the Chilian Government in permitting the foreign bondholders of Peru to pay themselves from the conquered territory is very highly spoken of.

It occurs to me that there may be some question touching the ownership of guano shipped under this order in the absence of further action by the Chilian Government.

I have, &c.,

THOMAS A. OSBORN
[Inclosure with No. 133.]

Military order touching exports of guano from the occupied district of Peru.

José A. Villagran, General-in-Chief of the Army of Reserve, &c.

The province of Tarapacá being occupied by the Chilian army, and in virtue of the powers conferred upon me by the Supreme Government, I proclaim:

That as the foreign holders of Peruvian Bonds have solicited due permission from the Supreme Government to ship guano from the Peruvian deposits, occupied by the arms of the republic, and there being no impediment to granting this permission, I decree:

  • Article 1. The foreign holders of Peruvian Bonds are hereby allowed to extract guano from the Peruvian deposits occupied by the arms of the republic, under the following conditions:
    1st.
    The bondholders shall name a committee or a responsible business house to direct the operations.
    2d.
    The Chilian Government reserves the power of intervention and of naming one or more functionaries to inspect, and if it be thought opportune, to direct the operations of extraction and shipment.
    3d.
    The functionaries referred to in the foregoing paragraph shall dispatch the loaded ships to Valparaiso, whence they cannot sail to a foreign port until the sum of 30s. per ton of guano on board has been paid into the custom-house.
    4th.
    This payment shall be made in bills of exchange upon London, in favor of the Chilian Government and to its satisfaction; this payment shall be lowered to 20s. per ton, in case that the price of guano falls below £6 per ton.
  • Art. 2. The papers of the ships sent off shall be made out to the order of the firm of Messrs. Baring Bros. & Co., or to some other equally respectable firm, in case consignation is not arranged with them.
  • Until a contract of consignation be signed, the ships’ papers shall be made out in favor of the Chilian Minister and Plenipotentiary in Europe, and of James Croyle, esq., and Sir Charles Russell.
  • Art. 3. The consignee or consignees of the guano shall proceed to sell the cargoes, and, after deducting the sums expended, be it in the obtaining of this permission, be it in payment of the debts referred to in Article 1, or be it to repay the shipping expenses, or in other similar objects, the remainder shall be divided between the foreign holders of Peruvian Bonds, in whose favor the guano deposits have been mortgaged.

Provisional article. Until the committee, mentioned in Article 1, be named, Mr. John Proctor is authorized to arrange provisionally the mode of shipment, he being empowered to use for that purpose the material in possession of the Government.

Let this be published, noted, and communicated.

J. A. VILLAGRAN.