Historically a crucial industry for Chile, nitrates were an important product for European and American farmers. Nitrates, the principal component of fertilizer and explosives, became an important commodity in the late nineteenth century. Discovered in large quantities in the Bolivian portion of the Atacama Desert and the Peruvian province of Tarapacá in the mid-nineteenth century, these deposits became important sources of income. It is not surprising, then, that Chile would annex these territories after defeating Peru and Bolivia during the War of the Pacific (1879–1883).
Through its military triumph, Chile acquired a monopoly on the world's supply of natural nitrates. Rather than retain ownership, however, which would have required assumption of a large debt, the Chilean government sold off the nitrate mines to private interests. Thus freed of the problems of running the industry, the government levied an export duty on its sales. For the next forty years this tax provided the Chilean government with approximately half its ordinary revenues.
The processing of nitrates was a labor-intensive procedure employing at its height approximately sixty thousand men. With a combination of dynamite and brute force, these laborers dug the nitrate from the hard desert floor, then transported it to refineries. Using the British-derived Shanks process of producing carbonate of soda, the ore was crushed and mixed with water, permitting the extraction of the pure nitrates. The mining and refining of nitrates was a dangerous enterprise which cost the lives of many miners. The high wages and relatively low cost of living at the mines, however, attracted large numbers of laborers, many of whom regarded working in the nitrate pampa as an opportunity to amass enough capital to start their own businesses in the south.
Although the producers of nitrates, the salitreros, had no competition, they did have to deal with the laws of supply and demand. The price of nitrates fluctuated, depending on the needs of agriculture and the presence of war. When demand declined, the producers reduced output to stabilize prices. This somewhat cumbersome tactic generally worked. After World War I, however, the Haber-Bosch process, an inexpensive method of producing synthetic nitrates, severely damaged the nitrate producers. First Germany, then Great Britain and Norway increased the output of nitrate substitutes, driving down the world price.
The Guggenheims, an American mining family, breathed new life into the salitreros after World War I by employing new techniques to refine low-grade ore. These processes, whose improvements relied heavily upon technology, merely slowed but did not arrest the collapse of the Chilean nitrate industry. What the Haber process began the Great Depression completed: after 1930, world demand for nitrates collapsed, devastating the Chilean economy. Still, nitrate production continues and Chile produces 69 percent of world production, as of the mid-1990s. The industry, at the end of the twentieth century, employed directly and indirectly about 100,000 people. Nitrate is used in production of gunpowder, construction materials, and in small quantities as a nutritional supplement.
Markos Mamalakis, "The Role of Government in the Resource Transfer and Resource Allocation Processes: The Chilean Nitrate Sector, 1880–1930," in Government and Economic Development, edited by Gustav Ranis (1971), pp. 181-215.
A. Lawrence Stickel, "Migration and Mining: Labor in Northern Chile in the Nitrate Era, 1880–1930" (Ph.D. diss., Indiana University, 1979).
Michael Monteón, Chile in the Nitrate Era (1982).
Thomas F. O'Brien, The Nitrate Industry and Chile's Crucial Transition: 1870–1891 (1982) and "'Rich Beyond the Dreams of Avarice': The Guggenheims in Chile," in Business History Review, 63 (1989): 122-159.
Pinto Vallejos, Julio. Trabajos y rebeldías en la pampa salitrera: El ciclo del salitre y la reconfiguración de las identidades populares (1850–1900). Santiago de Chile: Editorial Universidad de Santiago, 1998.
Robles-Ortiz, Claudio. "Agrarian Capitalism in an Export Economy: Chilean Agriculture in the Nitrate Era, 1880–1930." PhD diss., University of California, Davis, 2002.
William F. Sater