Peruvian nitrate monopoly information

The Peruvian nitrate monopoly^[A] was a state-owned enterprise over the mining and sale of saltpeter (sodium nitrate)^{[nota 1]} created by the government of Peru in 1875 and operated by the Peruvian Nitrate Company.^[2] Peru intended for the monopoly to capitalize on the world market's high demand for nitrates, thereby increasing the country's fiscal revenues and supplementing the financial role that guano sales had provided for the nation during the Guano Era (1840s-1860s).

During the 19th century Peru established a virtual international monopoly in the trade of guano, another fertilizer, and since the 1840s income from this source had financed the Peruvian Guano Era. By the 1860s these revenues were in decline, as deteriorating quality led to a reduction of exports. Alongside this trend, nitrate exports from the Peruvian province of Tarapacá grew, and became an important competitor to guano in the international market.^[3]: 108 In January 1873 the government of Manuel Pardo imposed an estanco, a state control on production and sales of nitrate, but this proved impractical, and the law was shelved in March 1873 before it was ever applied.

In 1875, as the economic situation deteriorated and Peru's overseas debts increased, the government expropriated the saltpeter industry and imposed a full state monopoly on production and exports.^[3] However, there were nitrate deposits in Bolivia and Chile, and although the latter were not economically viable, exports from Bolivia by the Chilean Compañía de Salitres y Ferrocarriles de Antofagasta (CSFA) made Peruvian price controls impossible. Following the Peruvian state's failure to raise new loan capital from Europe to finance its nationalization program, the government proceeded to acquire Bolivian licenses to exploit newly discovered nitrate fields, and encouraged the Bolivian government to withdraw from the Boundary Treaty of 1874 between Chile and Bolivia. This treaty had fixed for 25 years the tax rate on the Chilean saltpeter company, in return for Chile's relinquishing of its sovereignty claims over the disputed region of Antofagasta.

In 1878 the Bolivian Government imposed a 0.35 Pounds Sterling per tonne (10 cents Bolivian Bolivianos per 100 kg)^{[nota 2]} tax over the CSFA's export of saltpeter, contrary to Article IV of the Boundary Treaty. Although it is uncertain whether Peru exerted direct pressure on Bolivia to impose this tax, its consequence was the confiscation and auctioning off of the CSFA, the major competitor to Peruvian saltpeter.

Historians agree that control over the nitrate fields in the Atacama were a central cause for the start of the War of the Pacific.^[4][5] Some Chilean historians consider that the Peruvian plan to control the price and production of the Bolivian nitrate fields was what ultimately caused the War of the Pacific (1879-1883).^[6] According to the Chilean government, Peru's actions were the primary cause of the 1879 war.^[7] However, most historians consider that the war was actually precipitated by the Chilean government's expansionist foreign policy and its ambitions over the Atacama's mineral wealth in Bolivian and Peruvian territory.^[8][9][10]

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