The creation of the Peru-Bolivian Confederation was an especial menace to Chile and the Argentine. The latter country, still a prey to the most lamentable civil disorders, was in no position to undertake any effective intervention, but Chile's already strong and well-established government determined to restore the balance of power. Pretexts for war were soon found, and the more solid texture of Chile's social and political organisation, the energy of her people bred in cold regions, and her command of the sea, quickly made themselves felt. The first expedition sent to Arequipa in 1837 was compelled to retire by an army which Santa Cruz despatched down the Cordillera from La Paz. The factions in Peru, however, rose and in the following year Chile renewed the war. On the 20th of January, 1839, with the aid of the Peruvian auxiliaries, the Chileans overwhelmingly defeated an army of Bolivians and Peruvians under Santa Cruz at the battle of Yungay.
The fragility of the foundations upon which Santa Cruz had rested his system was now apparent. The "Peru-Bolivian Confederation" disappeared from the map. Peru re-established her independent existence with her old boundaries. Santa Cruz's enemies in Bolivia rose in rebellion and he fell without a struggle. As a matter of fact the ten years of his more or less orderly government had not changed the character of the Bolivian Creoles and mixed-bloods. His government had been military, reactionary, and a mere makeshift; the Indians still occupied their inferior position, the lower classes regarded the ruling coteries as self-seeking aristocrats, a dull discontent fermented among the whole population, and the ambitious chieftains found little difficulty in seducing the soldiery. Bolivia, definitely cut off from the Pacific, helpless to defend her interests in the plains surrounding the plateau, unable to attract the fertilising and civilising currents of commerce and immigration, entered upon an epoch of civil war, pronunciamentos, and dictatorships which lasted nearly half a century. A recital of the literally countless armed risings, and of the various individuals who exercised, or claimed to exercise, supreme power, would throw little light on the progress of the country. Foreign commerce and domestic industry were so small that the government was always poor and unable to meet its expenses. Peru's possession of the seaports held Bolivian commerce at her mercy, and the military and naval power of Chile was a continual menace. Either of Bolivia's larger neighbours could easily bring on a revolution by opportune aid to ambitious factions, and the turbulence of the Creole military classes was not restrained by any powerful and intelligent commercial and industrial population.