No. 85.
Mr. Osborn to Mr. Evarts.

No. 83.]

Sir: Chili is involved in another dispute concerning her boundaries. It is with Bolivia now, and concerns the territory on the Pacific coast lying between the 23d and 25th degrees of latitude. Prior to 1866, jurisdiction over this territory was claimed by both of these governments, but on December 9 of that year they promulgated a treaty which had for its purpose a settlement of the dispute. In substance, the treaty provided that the 24th degree should constitute the line of division, but that all guano deposits within the territory prior thereto in dispute, as also all duties which might be derived from the exportation of minerals therefrom, should be equally divided between the two countries. It soon became evident, however, that the treaty had failed to accomplish the purpose for which it was intended, and on the 6th of August, 1874, they celebrated another.

In this the 24th degree was reasserted as the line of division, and each government relinquished its right, within the jurisdiction of the other, to duties arising from exportation of minerals. They agreed, also, that within the hitherto disputed territory neither government should, for the term of twenty-five years, impose upon the exportation of minerals a higher duty than was then provided for, and that neither government should, within said territory tax the citizens, industries, or [Page 149] capital of the other, of whatever character, in excess of that then fixed by law.

The country referred to as the disputed territory is in the heart of what is known as the desert of Atacama, and was regarded, until about the time of the execution of the first treaty, except for the deposit of guano at Majillones, its northern boundary, as of little or no value. The discovery of vast nitrate deposits about that time, however, in that part of the territory, set apart to Bolivia by the treaty, soon brought it into prominent notice, and companies were organized for the purpose of developing that industry. The business seems to have been monopolized by a corporation known as “Elcompañia de Salitres y Ferrocanil de Antofagasta,” a company composed mainly of gentlemen of means, citizens of Chili. It is claimed in behalf of the company that it had full authority from the Bolivian Government for the prosecution of its business, and that it relied upon the good faith of Bolivia in making its investments. It is claimed that its investments now exceed $4,000,000. It has constructed a railroad 40 miles into the interior, running through the nitrate deposits, and Antofagasta, the shipping-point for the nitrate, and the location of the principal works, has developed into a city of nearly 10,000 people.

In February of last year the Bolivian congress enacted a law exacting a tax of ten cents a quintal on all exportations of nitrate, and from this has arisen the present difficulty with Chili. The Chili Government promptly protested against the execution of this law, claiming that it was in direct conflict with the guaranties of the treaty of 1874. The law was allowed to remain dormant for several months, but no action was taken looking to its revocation.

A short time since, however, the Bolivian authorities notified the company at Antofagasta that the law was to be executed, and that the amount which was due from it on account of shipments made since the passage of the law was something in excess of $90,000. The Chili Government protested anew, and caused Bolivia to be informed that if she insisted upon executing the law Chili would regard the treaty as abrogated, and would proceed to assert her right of dominion to the territory claimed by her prior to 1866. Notwithstanding this threat the works at Antofagasta were levied upon and notice was given that they would be sold; whereupon, on the 12th instant the Chilian minister at La Paz was instructed by telegraph to demand his passport, and forces were immediately forwarded by water with instructions to take possession of the territory on the coast as far north as the 23d degree of latitude. On the 14th the Chilian forces occupied Antofagasta without firing a gun, and the disputed territory is now held by Chilian troops.

The course of the government here meets with a hearty approval from all classes. The movement was an exceedingly popular one. It is doubtful, indeed, if the administration could have taken another course and sustained itself. There is much anxiety concerning the course which Peru is likely to take. That her people strongly sympathize with Bolivia in this affair is undoubtedly true, and it is feared by some that the government may be driven into an alliance with Bolivia. I think the fear is well grounded.

The Chili Government is endeavoring to prepare itself for any emergency. The naval force has all been sent to the north and troops are being forwarded as rapidly as possible.

It is understood that congress will be convened in extraordinary session about the 10th of March.

I forward you by this mail a copy of a pamphlet entitled “The new [Page 150] question of Chili with Bolivia,” which was sent to me from the foreign office. Also, a copy of the “Diario Official,” which contains a sort of manifesto from the government under the head of “El conflicto con Bolivia.”

I have, &c.,