The War of the Pacific resulted from a dispute between Bolivia and Chile over sovereignty of the mineral-rich coastal area of the Atacama Desert. Under an 1866 treaty, Chile and Bolivia divided the disputed area encompassing the Atacama Desert at 24° south latitude (located just south of the port of Antofagasta) in the understanding that the nationals of both nations could freely exploit mineral deposits in the region. Both nations, however, would share equally all the revenue generated by mining activities in the region.
In 1874 Chile agreed to fix the border at 24° south latitude in return for Bolivia's promise not to increase taxes on Chilean nitrate enterprises for twenty-five years. But Bolivia soon repudiated the treaty, and its subsequent levying of taxes on a Chilean company operating in the area led to an arms race between Chile and its northern neighbors of Bolivia and Peru.
In 1876 Hilarión Daza Groselle (1876- 79) seized power in Bolivia, and became a military caudillo, as brutal and incompetent as his predecessors. He faced many insurrections, a massive demonstration by artisans in Sucre, and widespread opposition. Hoping to gather the support of nationalist Bolivians to strengthen his internal position, Daza involved his country in the disastrous War of the Pacific.
Fighting broke out when Chilean entrepreneurs and mine-owners in present-day Tarapacá Region and Antofagasta Region, then belonging to Peru and Bolivia, respectively, resisted new taxes, the formation of monopoly companies, and other impositions. In those provinces, most of the deposits of nitrate--a valuable ingredient in fertilizers and explosives--were owned and mined by Chileans and Europeans, in particular the British. Chile wanted not only to acquire the nitrate fields but also to weaken Peru and Bolivia in order to strengthen its own strategic preeminence on the Pacific Coast. Hostilities were exacerbated because of disagreements over boundary lines, which in the desert had always been vague. Chile and Bolivia accused each other of violating the 1866 treaty.
Chile landed troops on February 14, 1879. Bolivia, in alliance with Peru, declared war on Chile on March 1, but Bolivia's troops in the coastal territory were easily defeated, in part because of Daza's military incompetence. Although a mutual defense pact had allied Peru and Bolivia since 1873, Chile's more professional, less politicized military overwhelmed the two weaker countries on land and sea. The turning point of the war was the occupation of Lima on January 17, 1881, a humiliation the Peruvians never forgave. Driven from office by a popular revolt, Daza fled to Europe with a sizable portion of Bolivia's treasury.
The United States tried to bring an early end to the war, in part because of American financial interests in Peru. However, the American Pacific Squadron, containing only a few obsolete wooden vessels, was not taken seriously by the Chileans, who owned two new, state-of-the-art, British-built armored warships. Chile rather pointedly suggested that the United States mind its own business. The United States, unable to match Chilean naval power, backed down.
The attempt of General Narciso Campero Leyes (1880-84) to come to the aid of Peru, Bolivia's ally in the war, was unsuccessful, and the combined armies were defeated by Chile in 1880. Having lost its entire coastal territory, Bolivia withdrew from the war. It ceded the territory officially to Chile twenty-four years later, in 1904, under the Treaty of Peace and Friendship.
The War of the Pacific was a turning point in Bolivian history. Bolivian politicians were able to rally Bolivians by blaming the war on Chilean aggression. Bolivian writers were convinced that Chile's victory would help Bolivia to overcome its backwardness because the defeat strengthened the "national soul." Even today, Bolivia has not relinquished the hope of regaining an outlet to the Pacific Ocean.
Soon controlled by British and then by United States investors, the nitrate fields became a classic monocultural boom and bust. The boom lasted four decades. Export taxes on nitrates often furnished over 50 percent of all state revenues, relieving the upper class of tax burdens. The income of the Chilean treasury nearly quadrupled in the decade after the war. The government used the funds to expand education and transportation. The mining bonanza generated demand for agricultural goods from the center and south and even for locally manufactured items, spawning a new plutocracy. Even more notable was the emergence of a class-conscious, nationalistic, ideological labor movement in the northern mining camps and elsewhere.