The fiscal impact of the War of the Pacific

Abstract

In the War of the Pacific (1879-1883), Chile defeated Peru and Bolivia, and acquired territories that contained vast deposits of sodium nitrate, a leading fertilizer. Chile's export tax on nitrates later accounted for at least one half of all government revenue. We employ a multi-country model of export taxation in order to simulate the potential government revenues that Bolivia, Chile and Peru could have earned under the counterfactual scenario that Chile did not conquer the nitraterich provinces of its adversaries. Our results are that Peruvian and Bolivian government revenues could have been at least double their historical levels. We estimate that, over the remainder of the nineteenth century, Chile's earnings from nitrates would have fallen by 80%.Keywords Export tax Á Nitrates Á War of the Pacific Á South America JEL Classification C72 Á F13 Á F14 Á F17 Á H21 Á N46 Á N76

Military conquest and sovereign debt: Chile, Peru and the London bond market, 1876–1890

“…47 In contrast, Peruvian government revenues in 1913 had only just recovered to 1878 levels-approximately 3.5 million pounds sterling. Sicotte, Vizcarra and Wandschneider (2009) estimate the fiscal impact of the war through the simulation of a multi-country model of export taxation. They find that had the countries maintained control over nitrate properties consistent with the pre-war boundaries, Chile's earnings from nitrate taxation would have fallen by 80% over the remainder of the nineteenth century, to about 300,000 pounds annually, while Peru lost revenue in excess of 1.5 million pounds annually over the same period.…”

Natural Resources Curse in the Long Run? Bolivia, Chile and Peru in the Nordic Countries’ Mirror

“…This crisis was "resolved" with the victory in the "Saltpeter War" (1879-1884), which meant the incorporation of huge new territories rich in minerals, particularly nitrates. Thereafter, Chile became a monopolistic producer of this product (one of the main non-metal minerals of the Second Industrial Revolution), which facilitated the acceleration of the economy and the increase of fiscal revenues [57][58][59][60][61][62]. Both processes have generated an abundant debate concerning the Chilean historiography and the effects that nitrate exploitation had on the economy, especially regarding the resource curse and the fiscal dependency originated by nitrates [57,58,61,[63][64][65].…”

Natural Resources Curse in the long run? Bolivia, Chile and Peru in the Nordic countries’ mirror

“…Thereafter, Chile became a monopolistic producer of this product (one of the main non-metal minerals of the Second Industrial Revolution) which facilitated the acceleration of the economy and the increase of fiscal revenues. [57][58][59][60][61][62] Both processes have generated an abundant debate concerning the Chilean historiography and the effects that nitrates exploitation had on the economy, especially regarding the resource curse and the fiscal dependency originated by nitrates. [57,58,61,[63][64][65] Besides this debate, the nitrate cycle is characterized by high growth rates and two deep crises, one after the First World War, and a bigger and definitive one during the Great Depression, when exports of nitrates fell over 90% and total exports circa 80%.…”