Hostname: page-component-586b7cd67f-rdxmf Total loading time: 0 Render date: 2024-11-30T15:40:56.289Z Has data issue: false hasContentIssue false
  • English
  • Français

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
Affiliation:
Cambrdige University Press
Get access Rights & Permissions [Opens in a new window]

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.

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

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

2 Roberto Córtcs, Conde, The First Stages of Modernization in Latin America (New York, Harper & Row, 1974), p. 66.Google Scholar

3 For this, see Heraclio, Bonilla, Guano y Burguesla (Lima, IEP/Campodónico, 1973);Google ScholarShane, J. Hunt, ‘Growth and Guano in Nineteenth Century Peru’; (Discussion paper No. 34, Woodrow Wilson School, Princeton, 1973);Google ScholarCarlos Camprubi, Alcázar, Historia de los Bancos en cl Perú, 1860–1879 (Lima, Editorial Lumen, 1957);Google ScholarRobert, G. Greenhill and Rory, M. Miller, ‘The Peruvian Government and the Nitrate Trade, 1873–1879’;, Journal of Latin American Studies, 5, 1 (1973), 107–31;Google ScholarLevin, J. V., The Export Economies: their Pattern of Development in Historical Perspective (Cambridge, Mass., Harvard University Press, 1960);Google ScholarErnesto Yepes del, Castillo, Perú, 1820–1920: un Siglo de Dearrollo Capitalista (Lima, IEP/Campodónico, 1972);Google ScholarOscar Bermúdez, Miral, Historia del Salitre desde sus on genes hasta la Guenra dcl Pacifico (Santiago, Universidad de Chile, 1963).Google Scholar

4 See, for example, Jesús, Chavarría, ‘La desaparición del Perú colonial, 1870–1919’;, Aportes, No. 23 (01, 1972), pp. 120–53.Google Scholar

5 Yepes, , op. cit., pp. 136–40.Google Scholar

6 Platt, D. C. M., Finance, Trade, and Politics in British Foreign Policy, 1815–1914 (Oxford, Clarendon, 1968), pp. 336–9;Google ScholarHarold, Blakemore, The Chilean Revolution of 1891 (unpublished Ph.D. thesis, London, 1955), pp. 74–96, 193–207, 412–18;Google Scholar and his ‘Limitations of dependency: an historian's view and case study ’;, Boletin de Estudios Latinoamericanos y del Caribe, No. 18 (06, 1975), 74–87,Google Scholar which looks at the question from the Chilean side; Wynne, W. H., State Insolvency and Foreign Bondholders II (New Haven, Conn, Yale University Press, 1955), pp. 109–95.Google Scholar See also Kiernan, V. G., ‘Foreign Interests and the War of the Pacific’;, HAHR, 35, (1955), 14–36.Google Scholar

7 Greenhill, and Miller, , op. cit., p. 108.Google Scholar

8 William, Clarke, Peru and its Creditors (London, 1877), pp. 13–20.Google Scholar

9 President Pardo's speech to Congress, 21 09 1872, Diario de Debates, Cámara de Diputados, 1872, II, pp. 67–72.Google Scholar

10 Mathew, W. M., ‘Peru and the British Guano Market, 1840–1870’, Economic History Review, 2nd series, 23, 1 (1970), 112–28;Google Scholar on the competition from nitrate, see Greenhill, and Miller, , op. cit. pp. 107–18.Google Scholar

11 Duffield, A. J., Peru in the Guano Age (London, 1877), pp. 120–1;Google Scholar Report on the Finance, Trade, and Industry of Peru (Spencer St, John), Parliamentary Papers, 1878, 72, 560.Google Scholar

12 The Times, 12 04 1876; Lord Tenterden to Sir Charles Russell (chairman of the Bondholders'Committee), 13 April 1876. London, Public Record Office, Peruvian Archive (F.O. 61), Vol. 323.Google Scholar

13 Echo. 8 06 1876;Google ScholarStandard, 8 06 1876;Google ScholarBullionist, 10 06 1876;Google ScholarThe Times, 9 06 1876.Google Scholar

14 Minute of Sir Julian Pauncefote, 2 Oct. 1878, FO 61/323; Salisbury's minute on James Croyle (president of International Committee of Bondholders) to Salisbury, 18 Sept. 1878, FO 61/323. For Palmerston's circular of 1848, see Platt, Finance, Trade, and Politics, pp. 398–9;Google Scholar for the Foreign Office role in an earlier dispute, see Mathew, W. M., ‘The First Anglo-Peruvian Debt and its Settlement’, Journal of Latin American Studies, 2, 1 (1970), 112–28.CrossRefGoogle Scholar

15 St, John to Salisbury, , 10 06 1879, FO 61/323.Google Scholar

16 Russell, to Salisbury, , 1 11 1879;Google ScholarPauncefote, to Russell, , 21 04 1879, FO 61/323.Google Scholar

17 St, John to Salisbury, , 2 10 1879, FO 61/323.Google Scholar

18 Decree of 22 02 1880, ‘Correspondence between Minister Plenipotentiary of Chile and the Bondholders'Committee’, p. 48, Peruvian Corporation Archive, University College, LondonGoogle Scholar (hereafter PC/UCL); Pakenham, (minister in Santiago) to Salisbury, , 14 02 1882, FO 65/344.Google Scholar

19 Granville, to Waddington, (French minister in London), 17 04 1884, FO 61/357.Google Scholar

20 Fraser, Google Scholar (minister in Santiago) to Salisbury, , 1 09 1885, FO 62/367.Google Scholar

21 Memo. by Pauncefote, 6 05 1886, FO 61/368; The Times, 11 11 1886.Google Scholar

22 El Comercio (Lima), 14 09 1889;Google ScholarSouth Pacific Times, 9 01 1880.Google Scholar

23 John, Meiggs to Charles, Watson, 8 01 1884, Caja 6/4, Peruvian Corporation Archive (hereafter PC) Lima.Google Scholar

24 El Comercio, 14 09 1889.Google Scholar

25 Ibid.; Ministerio de Fomento, Anales de Obras Públicas, 1886 (Lima, 1890), pp. 86–90 and 100–9.Google Scholar

26 Joseph, Spinney to Charles, Watson, 25 06 1885, Watson letters, Meiggs archive, PC/Lima (hereafter Watson letters); El Comercio, 16 09 1889.Google Scholar

27 El Comercio, 21 09 1887, quoting an interview with Grace in New York Times, 31 08 1887.Google Scholar

28 Anon, , La Deuda Externa y la Cámara de Diputados (Lima, 1888), p. 5.Google Scholar For the first project, see José Maria, Rodriguez, Anales de la Hacienda Pública del Perú, 1821–1895 (19 vols., Lima, 1912–28), 17, 401a–6a.Google Scholar

29 ‘Memoria del Ministro de Hacienda al Congreso, agosto de 1887’, in Rodríguez, 18, 268a.Google Scholar

30 Rodríguez, , XVIII, 19; xvi, 133;Google ScholarCharles, Watson to Charles, Watson, jnr, 18 04 1887, Watson letters.Google Scholar

31 El Comercio, 8 01 1889.Google Scholar

32 Ibid., 30 08 1886.

33 Anales de Obras Púlicas, 1886, pp. 600–1;Google ScholarAnalex de Obras Públicas, 1887 (Lima, 1890), pp. 248–9.Google Scholar

34 Charles, Watson to Charles, Watson Jr, 13 06 1888, Watson letters.Google Scholar

35 In 1881 it was estimated that British speculators held between £24 and £25 million, French £ 1½ million, with the balance in the hands of Italians, Germans, Belgians, Dutch. Pakenham to Granville, 4 Dec. 1881, FO 65/344.

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

37 Ibid.

38 The Grace-Araníbar contract is in ‘ Circular of the Committee of Peruvian Bondiiolders, 3 June 1887’, appendix, PC/UCL.

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.

42 El Cornercio, 16 03 1887.Google Scholar

43 Charles, Watson to Charles, Watson Jr, 22 07 1887, Watson letters.Google Scholar

44 El Comercio, 5 10 1887.Google Scholar

45 Charles, Watson to Charles, Watson Jnr, 2 11. 1887, and 16 11. 1887, Watson letters.Google Scholar

46 El Comercio, 3 10 1887.Google Scholar

47 Ibid., 29 09 1887.

48 Charles, Watson to Charles, Watson Jnr, 16 11. 1887, Watson letters.Google Scholar

49 Idem, to idem., 15 12 1887, in ibid.

50 Rodríguez, , loc. cit. xviii, 67–71.Google Scholar

51 Charles, Watson to Charles, Watson Jnr, 22 07 1887, Watson letters.Google Scholar

52 El Comercio, 4 02. 1888, and 8 02. 1888.Google Scholar

53 Lord, Donoughmore to Pauncefote, , 10 02. 1888,Google Scholar enclosing Ollard, to Donoughmore, , 10 02. 1888, FO 61/378.Google Scholar

54 Charles, Watson to Charles, Watson Jnr, 25 07 1888.Google Scholar

55 Watson later commented that the Earl of Donoughmore, a member of the Committee, was ‘very intimate’ with Sir Julian Pauncefote, the under-secretary at the Foreign Office, and had ‘been useful in bringing pressure on Chile and Peru’. Charles, Watson to Charles, Watson Jnr, 8 08. 1888, Watson letters.Google Scholar

56 Memo of Pauncefote, , 11 02. 1888, FO 61/378.Google Scholar

57 See Platt, , Finance, Trade, and Politics, pp. 34–53.Google Scholar

58 Salisbury, to Newman, (consul-general in Santiago), 18 07 1888, FO 61 /39.Google Scholar

59 Charles, Watson to Charles, Watson Jnr, 27 06 1888, Watson letters.Google Scholar

60 For the Donoughmore-Aspíllaga contract, and the protocol, see Rodriguez, , op. cit., xix, 341a–52a. The contract eventually accepted by Peru and the bondholders is in ‘Circular of the Committee of Peruvian Bondholders, 29 November 1889’, PC/UCL. It was the Donoughmore-Aspíllaga contract that came into force in 1890 with a few modifications. It has always been known, however, as the Grace contract after the éminence grise of the whole affair.Google Scholar

61 El Comercio, 10 11 1888.Google Scholar

62 Verbatim report of preliminary session of the Cámara de Diputados on 27 July 1888, in El Comercio, 13 08 1888.Google Scholar

63 El Cormercio, 15 02 1889.Google Scholar

64 Nominal lists for the five divisions are to be found in Rodríguez, , loc. cit., XIX, 47, 50, 70–1, 78–9.Google Scholar

65 El Comercio, 2 04 1888.Google Scholar

66 South American Journal, 4 05 1889.Google Scholar

67 El Comercio, 8 04 1889.Google Scholar

68 Charles, Watson to Charles, Watson Jnr, 25 07 1888.Google Scholar

69 ‘Circular of Bondholders'Committee, 29 April 1889 ’, Appendix, PC/UCL.

70 Kennedy, J. G. to Salisbury, (confidential), 18 11. 1889, FO 61/384.Google Scholar

71 Robert, N. Burr, By Reason or Force: Chile and the Balancing of Power in South America,1830–1905 (Los Angeles, University of California Press, 1974 ed.), pp. 184–8.Google Scholar

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

73 ‘Circular of Committee of Peruvian Bondholders, 26 05 1884’, PC/UCL; The Times, 27 May 1884; The Times, 31 Dec. 1884.Google Scholar

74 Yepes, , op. cit., p. 173;Google Scholar for the parallel story in nitrates, see Harold, Blakemore, British Nitrates and Chilean Politics, 1886–1896: Balmaceda and North (London, Athlone Press, 1974), pp. 21–2 and 27–9;Google Scholar see also Emilio, Romero, Historia Económica del Perú (Buenos Aires, 1949), p. 379.Google Scholar

75 Charles, Watson to Charles, Watson Jnr, 19 09. 1887, Watson letters.Google Scholar

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

77 John, Meiggs to Charles, Watson, 8 01. 1884, Caja 6/4, PC/Lima. My italics.Google Scholar

78 Platt, , Finance, Trade, and Politics, p. 46.Google Scholar

79 Daily Telegraph, 21 02 1884,Google Scholar and Statist, 29 10 1887.Google Scholar

80 Salisbury, to Kennedy, (telegraphic), 18 12. 1889, F.O. 61/384.Google Scholar

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

82 For, a more detailed analysis of the relations between the Peruvian executive and Congress on the question of foreign concessions between 1885 and 1930, see Miller, Rory, ‘The Peruvian Government and Foreign Firms, 1885–1930’, Business Imperialism: an enquiry based on British experience in Latin Ametica before 1930, ed. Platt, D. C. M. (London, Clarendon Press, forthcoming).Google Scholar

83 South American Journal, 15 02 1890.Google Scholar

84 Report on the Trade and Commerce of Callao (Vice-consul Wilson, ), Parliamentary Papers, 1890, Lxxvi, 425.Google Scholar

85 José Carlos, Mariátegui, Seven Interpretive Essays on Peruvian Reality (Austin, University of Texas Press, 1974), p. 13.Google Scholar

86 Virgilio, Rod, Esquema de la Evolución Económica (Lima, Editorial Amauta, 1971), p. 76.Google Scholar

87 Jorge, Basadre, Historia de la República del Perú (5th ed., Lima, Ediciones “Historia”, 1964), VI, 2770–2.Google Scholar

88 ‘Report of the Peruvian Bondholders'Committee, 30 January 1890’, p. 8, PC/UCL. The construction cost of the Southern and Central railways had been £10.6 million by 5890, but by then their capital value was far less as no repairs had taken place since 1875 and there had been no re-equipment although there had been considerable physical destruction of plant in the war with Chile and during the civil strife that followed. For the original cost of the railways see ‘Reseńa: Transferencia de los Ferrocarriles,. Descripción de los mismos’, pp. 24–37, typescript in Caja 36/4, PC/Lima.

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

90 Agreement of 12 Dec. 1889 between Grace and the Bondholders'Committee in ‘Contracts and Documents, 1890’, PC/UCL.

91 ‘Reseńa: Transferencia de los Ferrocarriles, Descripción de los mismos’, p. 24,Google Scholar Caja 36/4, PC/Lima; Charles, Watson to Charles, Watson Jnr, 22 07 1887 and 28 08. 1887, Watson letters.Google Scholar

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