Chile, like her neighbours, felt the first shock. Germany, the principal purchaser of nitrates, was cut off; and the republic found by sudden experience, how dangerous and unsound was the system whereby the national finances depended largely on export duties levied upon one commodity. The administration rose to the necessities of the case: taxation was distributed upon a more scientific and normal basis, and very soon the war situation began to pour wealth into the lap of the republic. Nitrate, needed by the Allies for munitions, reached its highest price and its maximum production. Copper--now perhaps the most precious of metals--followed the same course. After-war conditions, particularly in regard to nitrate, are impossible to foresee. But Chile has had her lesson, not to depend on the continuance of what may be accidental conditions and not to build on the foundation of the market in one commodity. "The war," says a representative Chilian, "has brought us a certain prosperity and also something that is worth more than prosperity--common sense."
The industrial movement, which has been noted elsewhere, is being actively pushed forward in Chile, where indeed it dates from a time long before the war; for in Chile local manufactures are favoured by local conditions, namely, remoteness from Europe, a sturdy population, the possession of coal and metals, and, also, a very distinct and compact national character and national ambition, which owe little to recent European immigration. In 1914--just before the war--Chile possessed nearly 8000 factories employing about 90,000 persons. It has often been questioned whether Chile, with a population of less than four millions and a fertile territory largely undeveloped, did wisely to encourage this industrial movement. The war has answered that question. Chilian coal now mainly supplies Chilian needs; and, owing to careful treatment and selection, the results have surpassed expectation. The number of factories is growing; and in view of freight difficulties, there is a movement towards exporting mineral products in a semi-manufactured state.
As to the other republics, the immediate economic effects of the war vary with the character of exports, whether needed by the Allies for war purposes or not. The high prices of copper, sugar, and cotton have brought to Peru a stream of wealth, and have enabled the government to make a very interesting experiment in the scientific taxation of excess war-profits made by exportation. Exports are untaxed until they reach a certain height above normal price. Any addition to that limit is taxed in a progressive ratio.