ments had proved that from where it commences climbing the mountains, trains could be run on it with safety and regularity during but half of the year. This was not alone owing to snowstorms in the high regions of the Andes, but as much to the slipperiness of the track in the lower regions during the rainy season, uncommonly steep grades having been adopted in the construction. The Pacasmayo-Cajamarca railroad in the north, in construction since the beginning of 1871, had likewise been projected with the view of connecting the Pacific with the antiAndes region, and had likewise failed to show signs of ever returning interest on the capital sunk in it. The same was the case with the railroad in the south, connecting Mollendo with Arequipa, and this again with Puno at Lake Titicaca on the border of Bolivia, with the Chimbote-Huaraz in Central Perú, and others pushed by the government, all contracted for by the enterprising North American, Mr. Henry Meiggs, the medium to wealth and the intimate friend of President Balta. So Perú was now, by the large amount of money professedly expended on these enterprises-all started nearly at the same epoch, none of them finished, hardly any paying in terest-brought to the very verge of bankruptcy. A mere signature of hers was no longer, as it used to be when guano was still abundant on the coast, sufficient to open the treasuryvaults of the Jewish firm, Dreyfus & Co., in Paris, her "stand-by" on many former occasions. The "Chinchas" and the "Lobos" islands were now practically exhausted of guano, and on the reserve quantity of that valuable substance deposited at Patache, "Pabellon de Pica," Punta Lobos, and Guanilla, points on her southern coast where lay Tarapacá, her saltpetre-producing province, she had already obtained heavy sums of money in advance. established a handsome revenue for Perú. Would Chile quietly allow Valparaiso, the center of the industrial life in Tarapacá, to be on a sudden deprived of the source of her income; deprived not only of freight and sale of saltpetre, but also of the furnishing provision for the commercial and industrial establishments she herself had founded? She might possibly not. This explains most rationally why Perú, at this very epoch, commenced agitating against Chile, both in Bolivia and Argentine. This was rather an easy task, for with both republics Chile had difficulties derived from boundary questions. When her citizens discovered in the desert of Atacama rich tracts of saltpetre, borax, silver and copper mines, and began to develop them, and bring the guano deposits at Point Angamos into market, Bolivia disputed with Chile the supremacy of the territory included between the 23rd and 24th degrees S. lat., containing the nucleus of the flourishing industries with which Chilean energy had peopled that desert waste, never formerly thought of by the Bolivians. Bolivia claimed supremacy as far south as to the 24th degree; Chile as far north as to the 23rd degree. However, this dispute had been settled by the treaty of June 5th, 1863, in which Chile conditionally had withdrawn from political right to the disputed territory. The stipulations in the treaty Bolivia had not regarded; but after many futile efforts to persuade her to do so, Chile, by making some concessions, came to an amicable understanding with her northern neighbor. A new treaty had been drawn up in Bolivia, and signed by the Chilean embassador on the 6th of December, 1872, and ratified in Chile on the 8th of January, 1873. All differences between the two countries being now adjusted in a manner favorable to Bolivia, Chile had every reason to anticipate an era of untroubled prosperity for her industrious citizens, located in the desert of Atacama. The influence of Peruvian activity in reference to Chile soon disturbed the existing tranquility. On the 6th of February, 1873, Bolivia signed in Lima a secret treaty, offensive and defensive, with Perú, who shortly afterward sent an embassy to Buenos Ayres, charged with the mission secretly to persuade Argentine to join the Union. Almost immediately after having gained its point with Bolivia, Perú, without waiting for an answer from the cabinet in Buenos Ayres, on the 18th of January issued a decree by which the saltpetre produced in the country was monopolized. The State constituted itself a middleman between the producers of saltpetre and the European buyers of this product, and fixed the price which it would pay the producers per quintal of this article at $2.40, payable on the wharves for exportation. The exportation by any body but the State would be punished with the confiscation of the article. The decree would be enforced as law two months after its issue. This was a great blow for the manufacturers of saltpetre in the province of Tarapacá. By this decree they were deprived of selling directly their products; and, moreover, had to depend for payment for them upon a government that had newly failed to fulfil its compromise with its creditors. In the two months allowed the manufacturers of saltpetre to ship and bargain for the sale of that substance on their own terms, they strove to provide for future losses by producing all the nitre they possibly could, and shipping it to Europe before the expiration of the term indicated. She had, in her attempt to better the status of her financial affairs, by her own hand lowered the price of a merchandise which hitherto had brought her a handsome income; she had levelled a blow against her most industrious inhabitants which ruined several of them, and the reaction of the blow crippled herself. After the lapse of time stipulated in the decree she installed herself as the sole merchant of saltpetre; and then, with the view of bringing the price of that article up again, she issued on the 23rd of April a decree which put a limit on its production; adding that the State, between the 1st of September, 1873, and the 1st of August, 1874, would buy but 4,500,000 cwts. of saltpetre. Furthermore, a commission consisting of saltpetre manufacturers, and selected by the Prefect of the Province, should fix the amount each producer had to deliver. This, again, was a heavy blow to the saltpetre manufacturers. Only those establishments which were sustained by heavy capital could brave the consequences of this decree. One by one those less well provid ed were obliged to extinguish the fires of their costly engines; and now, when the whole stock of machinery, utensils, buildings, etc., that formed the inventory of these establishments came to represent dead capital, then the Peruvian Government stepped in with another decree, issued May 28th, 1875, by means of which she appropriated the saltpetre fields, and offered to buy the machinery and mining utensils which she had forced into idleness at the price fixed by commissioners, whom she appointed and sent to Tarapacá for this purpose. By the same decree the Government offered to make contracts for the manufacture and sale of saltpetre. The manufacturers who continu ed producing were required to pay the Gov ernment an increased duty for exercising thi privilege. It must be understood that sing the Government had the power to fix th amount of duty, it could at any time ind rectly force the manufacturer to abando The consequence was that the warehouses in Europe, especially in Liverpool, became overstocked with saltpetre, and when the time arrived for the Peruvian Government to establish herself sole exporter of the article, the price had become greatly lowered. The first result of Peru's economical ma- the production of saltpetre. The Gover neuvers was a most peculiar one. ment aimed at becoming sole produc field. and driving all competition out of the ing the secret treaty between Bolivia and Perú this latter republic assuming the most friendly guise in her dealing with Chile. In order to persuade Bolivia to resume her friendly relations, she again sent an embassy to Bolivia in the middle of 1873; and to secure her citizens from all annoyances in the future, she made a third treaty with Bolivia on the 6th of August, 1874. As the treasury of Peru was empty, this decree further authorized the Government to contract for a loan of £7,000,000. Four millions of this sum were to be employed in purchasing the manufacturing establishment. Part of the remainder was to be invested in completing the State railroads; and the balance was to be set aside for the maintenance of the Government. But no one aspired to become banker to the Peruvian Government. Nor was it reasonable to suppose that a government so impoverished, that for several years the interest on her national debt had remained unpaid, would be able to find any one willing to provide millions to carry out railroad schemes, which the President's inaugural address declared "had but served as pretexts for shameless frauds on the part of those to whom their construction was entrusted." The government functionaries who were accused of these base actions had been arraigned for trial; but the examination of the charges against them proved that every government official of note was implicated, so the investigation ceased and the charges were dropped. In the meanwhile the Government succeeded in possessing itself of the saltpetre industry, and forced a great number of producers to sell at ruinous prices. The consequence of this financial policy struck principally the Chilean capitalists, who had invested money in Perú; and their failure was the introduction to the commercial crisis that so soon affected all Chile. The Chilean Government, nevertheless, did not lose its patience under these provocations. In spite of this manoeuvering of the Peruvian Government against Chilean citizens, no one denied the right of Perú to decide for herself what was most expedient for her in regard to her financial affairs. In the meanwhile, Bolivia, influenced by Perú, had again violated her treaty with Chile, and had issued decrees contrary to he agreement with that republic. Chile as at a loss to understand the conduct of olivia, as she was yet in ignorance regardVOL. III.-6 In this treaty, Chile resigned all claims upon which she had formerly insisted, on the sole condition, that Bolivia should not raise the tariff in her exportations for a period of 25 years. To avoid future complications a clause was inserted to the effect that all future questions should be settled by arbitration. This contract Chile signed with Don Tomás Frias, the successor of Don Adolfo Baldivian, the Bolivian President who entered into the secret treaty with Perú. The friendly disposition of Frias towards Chile, and his reputation for possessing a dignified and honorable character, led her to anticipate strict fulfillment of the contract. Unfortunately for the good harmony between the two countries, his administration did not last long. One of his generals, Don Hilario Daza, after returning from the Bolivian coast, where he had been sent to subdue a revolutionary movement, had on his countermarch through Perú been the object of many ovations, and had been hailed "the deliverer of his Country." Inspired with revolutionary notions in Perú, with the troops confided to his command he overthrew the existing government, and placed himself at the head of the State. From this time on, the Chileans in Bolivia felt more keenly than ever the hostile spirit in the country towards them and their industries. Life and property were at the disposal of unprincipled authorities. Tribunal of Caracoles, a mining town built up by the Chileans in the interior of the desert of Atacama, received for Judge one. who in 1874 had been punished for attempt to murder, and in 1875 for fraud and other misdeeds. When, in 1877, the rumor became current that a rupture between Chile and the Argentine was inevitable, on ac count of the pending questions as to limits in Patagonia, the Bolivian Congress passed a law on the 15th of February, 1878, which modified a contract already closed in November, 1872, by the Bolivian Government, with an association formed in Valparaiso controlling a capital of $6,000,000, for development of saltpetre in the desert, and stipulating on what conditions that society were licensed to carry on their industry. Although this association, titled "The Anonymous Saltpetre Exploring and Railroad Company of Antofagasta," had promptly complied with the conditions upon which it held its license for exploration, still this decree announced that the license would not be acknowledged as valid unless the association paid a tax amounting to "at least" ten cents per cwt. The Bolivian Government signed this decree nine days after it had passed Congress. By stipulating in this decree that the tariff to be paid on the exportation of saltpetre should be "at least" ten cents per cwt. of that article, the Bolivian Government had indicated clearly enough that the tariff might be raised. Whatever decision might be taken later on, the treaty of 1874 was already violated by this decree, and the Chilean embassador in Bolivia remonstrated naturally against its enforcement. The rumor of the expected rupture between Chile and the Argentine was not confirmed, and this might account for Bolivia withdrawing the decree. But in the latter part of 1878, the rumor was circulated again, and now Bolivia announced that the decree must be enforced, and that the Saltpetre Producing Company of Antofagasta should pay $90,ooo, equivalent to the sum which it claimed for taxes on the saltpetre exported since the first issue of the decree. Although this was an open affront towards her, still Chile trusted that, as the treaty provided that future difficulties should be decided by arbitation, this decree might be withdrawn ultimately. Chile, therefore, desired Bolivia to have this question decided by arbitration, and Bolivia appeared willing to do so. But whilst Chile waited for an an swer from Bolivia, this republic prepared secretly to confiscate the property of the Saltpetre and Railroad Company of Antofagasta, and everything being arranged, she answered Chile on the 1st of February, 1879, by issu ing the following decree: "The contract which, on the 27th of Nov ember, 1872, was closed between this Government and the Anonymous Saltpetre and Railroad Company of Antofagasta is hereby declared null and void, and, consequently, the decree of 14th of February, 1878, is withdrawn. The minister will issue the neces sary decrees for the appropriation of the saltpetre fields belonging to the Company." Bolivia had by this decree thrown her glove to Chile. When this news reached the Chilean Government, it gave its representative in Bolivia orders to leave the country instantly. As Bolivia had not fulfilled the conditions on which Chile had abstained from her right to the territory which her citizens had peopled and developed, the Chilian Government placed the question of limits where it stood before the treaties were entered into. She was now compelled to open a road to prosperity for her industrious citizens in the North by steel and powder. CHILE OCCUPIES THE DISPUTED TERRITORY. The 14th of February, 1879, the very day upon which the Bolivian Government had ordered the Prefect of the coast territory to sell, by public auction, the property of the Saltpetre and Railroad Company, fiv hundred Chilean soldiers under the con mand of Colonel Don Emilio Sotomay landed in Antofagasta, and prevented th execution of the order. The expediti was hailed with enthusiasm by the larg part of the inhabitants, Chileans and f eigners. The commander permitted t Bolivian authorities to withdraw in pea from the territory south of 23d degree latitude. When this decisive step of Ch was rumored in Caracoles the enthusia knew no limit. It became necessary to escort the Boliv |