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The Making of the Grace Contract: British Bondholders and the Peruvian Government, 1885–1890

Published online by Cambridge University Press:  05 February 2009

Rory Miller
Rory Miller
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Cambrdige University Press
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Extract

For most of the Latin American countries the five years between 1885 and 1890 were a period of rapid economic expansion. European investors sank their money there as the trade of the area increased. To take one example, imports to Britain from Argentina expanded from under a million pounds in 1880 to over four million in 1890, while British exports to Argentina grew from two and a half million to eight and a half million pounds.1 Exports of Chilean nitrate rose from 275,000 tons in 1880 to 1,000,000 tons in 1890, as foreign capitalists invested heavily in the newly-conquered northern territories of Chile.2 Most Latin American countries borrowed increasing amounts of capital on the London market as their trade grew rapidly, and the boom only came to an end with the Baring crisis of 1890.

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Articles
Information
Journal of Latin American Studies , Volume 8 , Issue 1 , May 1976 , pp. 73 - 100
Copyright
Copyright © Cambridge University Press 1976

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References

1 Platt, D. C. M., Latin America and British Trade, 1806–1914 (London, Adam and Charles Black, 1972), pp. 316–21.Google Scholar

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36 ‘Report of the presidential commission of Francisco García Calderón, Francisco Rosas, and Aurelio Denegri, dated 24 November 1886,’ in Rodriguez, loc. cit., 17, 407a–23a.Google Scholar

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39 Fraser to Salisbury (very confidential), 2 Feb. 1888, FO 61/378.

40 Fraser to Salisbury (very confidential); 13. April 1888, FO 61/379; Sir Chales Mansfield (minister in Lima) to Salisbury, 6 May 1889, FO 61 /383.

41 According to the Earl of Donoughmore, the Pernvians were ‘in an awful fright of the Chileans ’, Donoughmore to Lady Mary Loyd, 16 July 1889, Donoughmore letters. I am grateful to the present Earl for allowing me to see his grandfather's papers.

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72 Tne text of these agreements is in ‘Circular of the Committee of Peruvian Bondholders, 2 April 1890’, PC/UCL. In 1893, after further delays due to French protests and Chilean prevarication, the bondholders received from Chile £300,000 cash and £630,000 in 4½4% bonds. However the issue led to continued lawsuits which were not finally settled until 1921. See Joel (consul-general in Santiago) to Rosebery, , 27 01. 1893, FO 61/404;Google ScholarWynne, , op. cii., pp. 161–9.Google Scholar

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76 Idem. to idem. Jnr, 22 July 1887, and 28 Aug. 1887, in ibid.

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81 At the Annual General Meeting of the Peruvian Corporation in Dec. 1892, the chairman told shareholders that the company could not afford to complete 160 km. of railway that it was obliged to under the Grace contract. For its part the Peruvian Government paid the Corporation £25,000 of the annuity when it first became due in 1893. This was, however, only with the greatest difficulty at a time when trade was depressed throughout South America, and as it became clear that the Corporation would not complete its obligations, the Government ceased to try to pay the annuity. This resulted in a protracted dispute between the Peruvian Corporation and the Peruvian Government which was finally settled only in 1907. ‘Report of Proceedings at Annual General Meeting of the Peruvian Corporation, 15 December 1892’ p. 2, PC/UCL; El Comerio, 22 01 1896;Google Scholar Report on the Finances Trade, and Commerce of Peru (Charles, Mansfield Sir), Parliamentary Papers, 1893–1894, xcv, 802–3; ‘Directors'Annual Report, December 190’, Appendix, PC/UCL.Google Scholar

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89 Rory, Miller, ‘Railways and Economic Growth in central Peru’, Social and Economic Change in Modern Peru, Rory, Miller, Clifford, Smith, and John, Fisher, ed. (Liverpool, Centre for Latin American Studies, forthcoming).Google Scholar

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92 ‘The Corporation appears to be spending too largely on colonisation, exploration, surveys, &c. probably under the Grace-Ollard influence’, wrote Herbert Gibbs at the beginning of a campaign by Gibbs to oust the company's management; Herbert, Gibbs to Harry, Gibbs,8 12. and 15 12. 1893. London, Guildhall Library, Archives of Antony Gibbs and Son, File 11,040/2.Google Scholar

93 Grace bought the Cartavio hacienda from Guilermo Alzamora in 1882, but did not really begin to develop it until he formed the Cartavio Sugar Company in 1891. See Peter, F. Kiaren, Modernization, Dislocation, and Aprismo: Origins of the Peruvian Aprista Party, 1870–1932 (Austin, University of Texas Press, 1973), p.9.Google Scholar Although the Grace interests did not buy the Vitarte Cotton Mill outright till 1917, both Michael Grace and the Peruvian Corporation had taken an interest in the Peruvian Cotton Manufacturing Company, a firm established in 1890 to get control of the Vitarte mill. See ‘Memoria del Ministro de Hacienda, 9 08 1890’Google Scholar in Rodriguez, , loc. cit., xxi, 82, and ‘Annual Reports of Board of Directors of Peruvian Corporation’, Revenue Accounts, 1898–1900, PC/UCL.Google Scholar