CHAPTER XCOMMERCE

Home Factories.â€”Chilean Market Needs.â€”Sales to Foreign Countries.â€”Foreign Firms in Chile.â€”Trade-marks.

The position of commerce in Chile is better understood when it is realised that the country has no tropical products for sale. Apart from the extreme north, where rills of precious water redeem the preponderant desert, and where varying quantities of cotton, sugar and peppers are grown, farming is on a par with the farming of western or southwestern Europe, or the temperate regions of Mexico. Chile has a surplus of wheat, cattle and sheep; a large production of grapes and wine; and, in the mineral field, offers her unique supplies of nitrate as well as about 6 per cent of the worldâ€™s supply of copper. Timber from her southerly forests is chiefly used at home for house and ship building; Chilean coal finds its market in the Chilean factory regions or bunkering ports. Whatever the country has to spare of her cereals, fruit (fresh or canned) and other farm produce finds a ready sale in Peru and Bolivia; the copper is practically all ear-marked for the United States. Thus Chileâ€™s offering to the world outside the Americas is not large aside from her immense and greatly needed output of nitrate of soda.

The establishment of four packing-houses (frigorificos) in Magellanic territory, with another recently constructed at Puerto Montt, follows and encouragesthe big development of the sheep-raising industry, with a view not only to supplying the non-pastoral north, but selling a surplus abroad. The wool produced, and formerly exported, is likely to be entirely absorbed by home weaving factories, to which an important addition has been recently made at Valparaiso.

Of great help in Chilean industrial development is the Sociedad de Fomento Fabril, and the work of three Government industrial schools, at Santiago, Chillan and Temuco, turning out electricians, chemists, blacksmiths, carpenters and other technically trained students.

A country with a temperate climate, hardy population, possessing plenty of fuel and offering securities to foreign capitalists and business firms, is likely to prove an inviting ground for the creation of factories; certain parts of Chile, in consequence, are developing home industries in a manner comparable to that of South Brazil.

A good start had been made before the European War, but as in many other South American regions the pressure of necessity brought about a remarkable and speedy industrial growth. Deprived of big quantities of manufactured goods, Chile increased or built national mills, and can today produce a remarkably long list of the goods she needs. Home utilization of raw materials of course tends to limit Chileâ€™s export lists and, diminishing her income from overseas, narrows her capacity for purchases in foreign countries, rendering her still more dependent upon nitrate exports for national revenues.

Chileâ€™s beds of good coal, with the addition of immense forestal areas offering lumber, and, also in the south, considerable water-power resources, form a sound basis for manufacturing. Below the river Aconcagua factories are thickly dotted, and south of theMaule is a 600-mile stretch of country where new industrial towns lie like beads on a string, following the railroad track. Altogether, the large and small factories of Chile number twenty-seven hundred, counting every industry from Tacna to the Straits of Magellan; the group of important establishments employs 70,000 people, of whom 40,000 are men, over 17,000 are women, and over 5000 are children less than fourteen years old. Another 8000 people are employed by little industries. The value of the merchandise produced by these factories increased by nearly 50 per cent between 1915 and 1919, the latter year registering the manufacture of goods worth more than 765,000,000 pesos, Chilean paper. At an exchange value of twelve pence, this is equal to over Â£38,000,000. Santiago province topped the list with manufactured produce worth 280,000,000 pesos, Valparaiso following with 163,000,000 and ConcepciÃ³n coming third with 68,000,000 pesos.

Included in this output are metal goods, furniture, dried and tinned fruit, wines, beer, mineral waters, butter and cheese, lard, candles, soap, boots and shoes, wheat flour, Quaker oats, woven woollen and cotton cloths, pottery, chemicals, brown paper, bottles and other glass utensils, sugar and tobacco. Factories manipulating the two last-named commodities do not draw supplies of raw materials from Chilean soil but depend upon importations, chiefly from Peru. There are two sugar works, both Chilean-owned and operated; one is situated at Valparaiso and another at Penco (near ConcepciÃ³n City), where soft brown crystallised sugar is brought in sacks, and, after undergoing a series of new processes, including bleaching, is distributed to local firms in the form of soft white or cube sugar. The Chilean market rejects all sugars presenting any hue but that of pure white, I was informed when enquiring at Penco why at least a proportion of the excellent brown sugar imported could not be distributed in that condition, and at considerably lower cost to the consumer. When the refinery was erected it was hoped that it could be exclusively supplied with raw material from local sugar-beet farms, and the failure as yet to produce these crops in quantity is emphasised by the retail price of sugar in Chileâ€”fifteen pence per pound in 1920.

At ConstituciÃ³n, South of Santiago.

San Cristobal Hill and Parque Forestal, Santiago.

Malleco Bridge, near Collipulli.

Also near ConcepciÃ³n, a few miles eastward following the curving banks of the silver Bio-Bio River, is a British-owned and operated cotton-cloth factory turning out an average of 1,000,000 yards yearly, and working 276 looms. The machinery is British and yarns are imported from Manchester. All through the agricultural south are flour mills, of which half a score are owned by British firms; some of these installations are small and antiquated, but sixteen or more are equipped with the best modern machinery. As a result of this milling activity, Chile imports but little wheat flour, and this chiefly from Argentina to serve as a blend, her home mills practically supplying the whole of the country and leaving a surplus for export amounting to nearly 24,000 metric tons annually. The best customers for Chilean wheat flour are Bolivia (17,000 tons), Peru and Ecuador.

ConcepciÃ³n with its coal mines is fortunately placed for industrial development, and this with other similarly endowed regions and well-wooded and watered parts of the populated south are fast building up a list of manufacturing enterprises, most of them based upon local products. They are rapidly meeting home demands. The foreign visitor in Santiago has frequently received a surprise when permitted to see the extremely efficient Government munitions and instrument works,realising that here is a South American state which is able to manufacture almost all the equipment needed for its army, from cartridges and rifles to saddles and field-glasses, the lenses of the latter being the only part imported.

When such a visitor has also seen tobacco and shoe factories, and the soap, candle and soda works of the Lever firm at Valparaiso (supplying, with the sister factory at ConcepciÃ³n, one-third of Chileâ€™s needs for these goods), he will receive another lesson at the model match factory at Talca, where the well-being of workers is exceptionally well studied and a crÃªche for the children of women workers is maintained. He should make a point of visiting, at the rich agricultural centre of Traiguen, a factory where beautiful furniture is made, and, following a sight of the sugar, flour, candle works of ConcepciÃ³n, and fruit-canning establishments at Chillan, he will see at Valdivia the most ambitious shipbuilding yards in Chile, turning out vessels of over 3000 tons. Here is also an interesting factory making tannin from the bark of lingue, a large boot and shoe factory, a cider works and several breweries and fruit-preserving factories. Sawmills line the railway between Temuco and Valdivia, and thence to Puerto Montt, where the new frigorifico has been established, and an old lumbering commerce connects with the town of Castro, on ChiloÃ©, where boats are built. Below ChiloÃ© there is no industry until the extreme south is reached, and here in the vicinity of the Strait of Magellan are four packing-houses serving the West Patagonian sheep farms; at Punta Arenas are sawmills, and the headquarters of a number of gold-mining companies operating the alluvial deposits of the southerly islands, a brewery, candle factory, foundry and shipyard. Dawson Island possesses another shipbuildingindustry, constructing wooden vessels up to 500 tonsâ€™ burden. A series of scientific chicken farms also flourishes at Punta Arenas; 30,000 hens at LeÃ±a Dura yield an average of 200 eggs each, annually: the farm collects 5000 eggs per day, exporting them as far as Montevideo.

An immense impulse will be given to Chileâ€™s manufacturing industry when the hydro-electric developments planned during the last few years, and organised in 1921 by the CompaÃ±ia Chilena de Electricidad, are completed. The creation of this new company is the work of S. Pearson & Son, Ltd., famous for brilliant water-harnessing and engineering in many other regions of Latin America. The Pearson firm initiated its interest in Chile by the purchase of the Santiago tramways which had been in German hands prior to the war, and were later operated by J. G. White & Co., on behalf of the British Government.

Pearsonâ€™s decided to increase the power at the disposition of the local service, obtained solely from falls at La Florida, a few miles from Santiago, and effected a combination with Chileans of enterprise and engineering ability already holding concessions for big new hydro-electric development, including the Cia. General de Electricidad and the Cia. Nacional de Fuerza Electrica. Work upon the latterâ€™s plans was under way at Maitenes, inaugurated by the enthusiasm and skill of Don Juan Tonkin. The Pearson company decided to form a new organisation with capital sufficient to enlarge the scope of the work and to take over, in addition, other hydro-electric plans upon the Maipo and Colorado rivers. Proof of faith in Chileâ€™s future was given when Pearsonâ€™s decided to domicile the new company in Santiago and to add to its assets the properties of the Chilean Electric Tramway and Light Company,as well as prestige and financial backing. The new company is the Cia. Chilena de Electricidad, capitalised at Â£8,250,000, with a debenture issue authorised up to Â£5,000,000; Chilean capital is interested to the extent of nearly three-quarters of a million pounds sterling.

Under the enlarged project, the Maitenes plant will be increased to develop 34,000 h.p.; the increase of an existing steam-plant in Santiago will bring another 27,000 h.p. into the market; and the development of plans for the harnessing of the Maipo and its tributary the VolcÃ¡n at Puente del Cristo means the creation of a large hydro-electric station, capable of producing 65,000 h.p. When these installations are in working order, Central Chile will possess a force of 140,000 h.p. at the disposition of public services, domestic utilities and industry; the horizon thus opened is equal to that of the biggest manufacturing region of South America, S. Paulo in Brazil, where in the city alone about 30,000 h.p. is used to turn the wheels of industry.

The electrification of many Chilean railroads follows as a matter of course: no sooner was the new company formed than the Chilean Government signed a contract for the supply of electric power for the State line connecting Santiago and Valparaiso, and obtained a loan in New York for electric locomotive and other equipment; similar improvement is planned to Los Andes and for the reorganised Transandine line. Transmission lines, bringing power to Santiago from the generating plants, will carry force to Valparaiso by way of Llai-llai and Quillota, with substations at important points such as Tiltil, whence the big cement works of El Melon at Calera will obtain electric power, while Valparaisoâ€™s industries will share in the new impetus.

Chilean Market Needs

Chileâ€™s market needs are on a par with those of other South American countries so far as manufactured metals, especially machinery, mining and railroad equipment are concerned: in common with her sister states, she is also a buyer of such luxuries as fine textiles of wool, silk, and linen, perfumery and other toilet specialties, fine wines and spirits; also many utilities which she cannot produce, as print and writing papers, high-grade glass and ceramic ware, inks, paints and varnishes, cement, and sheet glass.

The best grades of cotton cloth are also imported, for the existing Chilean factories are limited in class of output; there is a considerable import of ready-made clothes, and of fine footwear, although it is but fair to add that Chile produces the best shoes made in South America and that her daintiest satin and kid footwear for women compare well with the output of the great makers overseas; Chilean red and white wines also outclass the vintages of sister states, but while the wealthy resident has plenty of money in his pocket there will always be a certain import of European champagnes and liqueurs, spirits and high-class wines.

Chileâ€™s purchasing power varies a good deal, fluctuating with the fortunes of nitrate. The value of imports during the last few years has swung from 153,000,000 pesos in 1915 to the high-water mark of 436,000,000 in 1918, after which a decline was experienced to 401,000,000 in 1919 and 350,000,000 in 1920. Certain commodities, with coal as the striking example, were almost blotted from the import lists during the European war, and with the encouraging development of the national mines in response to necessity, plus a greatly extended use of petroleum as fuel for industrialpurposes, its pre-war place is unlikely to be recovered.

Looking down the lists of Chilean imports, the tendency towards importing materials in the crude state or simply prepared, for working-up in national factories, shows an immense increase since 1914; dependence upon national supplies also increases markedly. Metals in bars or pig, worth less than 400,000 pesos in 1914, were imported to the value of nearly 5,000,000 pesos in 1919; at the same time the value of imported lumber dropped from nearly 3,000,000 pesos to 1,250,000. The value of live animals importedâ€”chiefly pedigree horses and cattle from the United Kingdom and North America, to improve the already excellent livestock of the Chilean farmsâ€”went up with a bound at the end of the war, totalling 12,000,000 pesos in 1918; the importation both of leaf and prepared tobacco shows systematic growth; but purchases of foreign meats, butter and cheese, show consistent falls.

The value of sugar imported rose between 1914 and 1920 from 9,000,000 to 25,000,000 pesos, but this movement indicates soaring prices rather than increased Chilean consumption. Purchases of yarns for weaving, of textiles, bags and sacks, and ready-made clothes, all displayed rises in the same period from 48,000,000 to 123,000,000 pesos; so also did crude chemicals, particularly essences for nationally elaborated and bottled perfumes. Imports of machinery, checked during the war period, followed the same curve as electrical goods, doubling their values in 1919 as compared with 1914.

Chilean purchases of tools and implements have shown steady increases, but the whole group of machinery for mining, agriculture and industry, including motors, boilers and electrical goods, does not far exceed 38,000,000 pesos (less than Â£2,000,000 at 20 pesos to thepound sterling), while material for railways and other transport services costs some 20,000,000 pesos, or about Â£1,000,000 sterling annually. A fair average for Chilean purchases abroad may be calculated at Â£20,000,000 or inside $100,000,000 U. S. currency, at normal exchange.

When one turns to the other side of the ledger, to see what Chilean merchandise is exchanged for these imports, the dangerously dominant position of nitrate becomes evident. The total exports rose from 300,000,000 pesos in 1914 progressively to nearly 764,000,000 in 1918 (subsequently suffering violent fluctuations) and of the latter amount nitrate and iodine accounted for over 532,000,000, with another 109,000,000 placed to the credit of â€œminerales metÃ¡licos en bruto,â€ of which the chief if not the sole representative was copper.

Products of livestock farming, chiefly hides and wool, have risen in export value during the last few years, and may be reckoned as worth an average of 35,000,000 pesos; vegetable products shipped out, with cereals predominating, have varied lately between 14,000,000 and 42,000,000 pesos; manufactured foodstuffs (dried or frozen meat, sugar, cheese, flour) have grown in value since 1914 from 7,000,000 to nearly 24,000,000 pesos; 1,000,000 pesosâ€™ worth of wine is exported; some pottery, glass and leather; and an increasing quantity of unworked lumber. But none of the farming, metallic, forestal or manufactured merchandise groups show signs of growing ability to equal nitrate in export values. Fortunately, the world needs Chilean nitrate, and there is no prospect of the rise of a rival which could meet the naturally produced chemical in price if drastic and feasible cuts were made in export taxes.

Disorganization of world markets since 1914 has affected the imports of Chile not only as regards bulk but also origin of supplies. It will probably not be possible for a judgment to be formed concerning the trend of trade until after 1922, when the flow of commerce may have resettled into regular channels. The general effect of the war years was to send merchandise north and south instead of east and west: a big increase occurred in the trade relations between North and South America, while the stride in commerce between the different South American nations was perhaps even more remarkable.

Intercourse amongst the sister nations has been delayed in the past by lack of coastal shipping and international railways as much as by laws of supply and demand. It has been frequently said that the different Latin-American states have nothing to sell to each other because they all produce the same class of goods, needing similar commodities only to be obtained from the advanced manufacturing countries. The latter part of the contention has a great deal more force than the first; South America must buy certain classes of goods afield, but a careful scrutiny of production lists brought to light, after 1914, many prime materials that could be exchanged, the impetus given to a coastwise traffic (cabotaje) along both Atlantic and Pacific Coasts proving the success of the new efforts. Several Latin-American states own maritime lines, but Chile and Brazil in particular aid the new inter-American trade development with excellent steamship and sail services under national flags.

Brazil doubled her sales to Chile between 1914 and 1919; Argentina increased the value of her shipments from under 6,000,000 pesos (Chilean gold, of eighteen pence each) in 1914 to 31,000,000 four years later;Colombia and Costa Rica increased their sales of fine coffee (via Panama); Ecuador sent more cocoa and Peru more fruit and sugarâ€”Peruâ€™s sales, worth 14,000,000 pesos in pre-war years rising to over 32,000,000 in 1919. Mexicoâ€™s sales to Chile rose from a few thousand pesos in value to over 7,000,000, during the last six years.

Chile at the same time made big increases in her own shipments to Latin-American countries. Her sales to Argentina rose from 4,500,000 to 26,000,000 pesos at eighteen pence; to Bolivia, from 4,000,000 to 8,000,000; to Peru, from 3,000,000 to 18,000,000; to Mexico sales were doubled during war years. In some cases, as those of Uruguay and Brazil, there have been fluctuations so marked that no conclusions can be drawn: but on the whole the stimulus to inter-American trade has been well sustained.

With the United States a tremendous development of traffic took place. Exports from Chile rose from 86,000,000 pesos in 1914 to 489,000,000 in 1918; at the same time Chileâ€™s purchases from the United States, totalling about 55,000,000 pesos in 1914, soared to more than 203,000,000 four years later. In the case of both exports and imports, values were inflated and have not been sustained, although the development of the North American mercantile marine since 1914 is likely to promote a greater share of commerce with South America than was normal before the conflict. It is interesting to note that despite the huge expansion of North American trade with Latin America during war years, inflation in all directions was so great that the proportion of business done by the United States with South America remained the same as it has been for a hundred yearsâ€”5 per cent of the total exterior commerce.

A remarkable series of changes has been experiencedin the export lists of Chile during her economic life. In early days one of the most important exports appeared on shipping invoices as â€œBezoar stones,â€ those curious concretions, forming in the bodies of certain vegetable-feeding animals, which were considered medicinally potent in the Middle Ages. Faith in the Bezoar stone and supplies came from the East to Europe, but after the discovery of the Americas it was found that the llama and guanaco also formed the precious object, and trade grew brisk.

Once upon a time Chile shipped the bulk of her copper to India, taking Oriental cottons and other merchandise in exchange; this trade has long been discontinued, although Hindu as well as Japanese retailers are reviving business with Chile. Up to 1887 Chile was still exporting the skins of vicuÃ±a, now vanished from her confines, and the beautiful chinchilla, also practically extinct in Chilean uplands.

The trade with the eastern side of the Andes in Yerba MatÃ© received a blow when with Independence it was possible for freer commerce to offer Indian and China teas to the former colonies of Spain; but the peasant classes of Chile are still faithful to the matÃ© and the bombilla, and a decreased but steady import continues.

Commercial conditions upon the West Coast of South America are sharply distinguished from those of the Atlantic and the Caribbean by the establishment of a number of powerful firms doing both import and export businesses, owning and operating factories, and possessing widely extended branches.

Several of these houses are British, their foundation dating back to the early days of Chilean independencemore than a hundred years ago; much of the mercantile enterprise, as well as the milling and nitrate refining industry, is indebted to these companies for capital and inspiration. With European alliances also is a strong North American firm, interested in general business, factory development and nitrate, and running a line of steamers between North and South America, while still more recent newcomers are the important Jugo-Slav firms operating all the way from Punta Arenas to Antofagasta, and rapidly increasing their interests in nitrate and other extractive industries.

The largest of the British firms operates sixty branches or agencies throughout Chile, and while importing machinery, tools and agricultural implements, hardware, sacks, rice, coffee, etc., also buys and ships country produce. Another house deals largely in textiles, and a third is chiefly although not exclusively interested in the nitrate country, where in addition to refining and exporting thesalitre, the firm is a big supplier of machinery, foodstuffs, and all supplies for the town-camps in the nitrate fields.

These large houses do not secure a monopoly of business; side by side are numbers of smaller local firms of various nationalities: but their existence and system of operation is a salient fact in the foreign trade of Chile. The repute of the majority of these strongly entrenched houses stands high; their representatives are men of character and ability, and the organizations have not only created and built up Chilean commerce in the past, but are of great value today. Their services are never more strikingly proved than in such times of stress as those of 1921, when small and inexperienced firms broke under the storm that the big organizations were able to meet with all the strength of long usage and wide credit.

It is sometimes complained against this array of impregnable commercial castles that their influence tends to render the West Coast a territory offering but a cold welcome to the newcomer in trade. I have heard the establishment of the heavy tax upon commercial travellers in Chile charged against the suggestion of the big houses. But even if there is foundation for these complaints, there is something to be said on the other sideâ€”for instance, that the old-established firms, having sown for several generations, are not likely to be enthusiastic when a brand-new reaping hook makes an appearance. Thinking of their long cultivation of the soil, big investment, and big overhead charges, they are apt to regard the dÃ©butant travelling salesman as a raider, and are not extraordinary in looking askance at comprehensive plans launched during the last few years for direct selling to consumers by groups of home manufacturers.

As a matter of fact Chile is not singular in levying a heavy tax upon the commercial traveller, and its assessment may be regarded as partly due to the pressing need of Latin America during recent years to discover new sources of revenue. Few American countries have even attempted to face the difficulties of the direct tax, and with their chief source of revenue derived from import and export dues, are affected immediately by every change in the commercial barometer. In times of stress all possible founts are examined and in the course of this search the foreign commercial traveller himself has come to be regarded as amongst the imports. It is true that he is still rather a necessity than an article of luxury, and it is recognition of this fact that may help to account for the frequent evasion of payments of the tax.

Chilean law requires travellers representing foreign firms to buy in each province visited apatente(licence)costing 1000 pesos; with the paper peso at an exchange value of one shilling, this is equal to Â£50, so that in order to traverse Chilean commercial towns from Valdivia to Coquimbo the traveller would have to spend Â£400 or Â£500 on licences. The consequence is that visits are either confined to a strictly limited number of citiesâ€”perhaps, to Santiago and Valparaiso onlyâ€”or an arrangement is made by which the trade representative carries the business card of a local house, and is thus not subject to taxation, or rents an office in Valparaiso, pays the normal trading tax imposed on all businesses, and operates freely from that central point. Chile does not trouble the temporary visitor with the host of small charges and restrictions that exhibit local ingenuity in many parts of South America during the last few years, and which include prohibitions against the entry of a typewriter except under a heavy tax; permits to depart from the police or port captains; demands for new vaccination and other medical certificates; inspection and re-stamping of passports; charges upon samples and catalogues, and, worst trial of all, removal of baggage to customs houses for leisurely future inspection. In Chile one is as free of this bureaucracy as in England before the war.

From commercial rivalry, whether between different groups of foreigners or between foreigners and the Chileans who have for the last twenty-five years taken so vivacious an interest in trade, Chile in general is bound to benefit. The effect of time tends to take retail business more conspicuously than wholesale or big import and export trade from foreign hands and into Chilean, not only on account of ability but because a house beginning life as an exotic has often become Chilean through the domestic ties of its founders. The children of an enterprising foreigner who marries, as so manyforeigners have done, a Chilean wife, are generally Chilean-born and educated, and cling in later life to the pleasant land of their birth; a rapid naturalization of blood and of capital is one of the outstanding features of Chileâ€™s economic history.

The question of trade-marks in Chile is attended by the same difficulties which merchants offering goods from manufacturing countries encounter in many young lands where national rights in discoveries and inventions present few home problems. Broadly, Chilean law gives rights in a trade-mark to the first person registering the mark; and it is not unusual for a foreign maker or agent, entering the country with some special product for sale, to find that his emblem has been already registered by some enterprising and unscrupulous person, who must be bought out if any business is to be done by the original owner. Litigation has raged about this matter, but the only safeguard consists in speedy registration in Chileâ€”and all other parts of the Americas where no international convention is in forceâ€”of the trade-marks of any article which is likely to be sent here for sale.

Chile has had a patent law since 1840, but that in force today was decreed by Barros Luco in 1911; it is modelled upon similar laws in other lands, but there is a time limit of two years within which the patent must be â€œworked.â€ In practice, however, the patentee as a rule obtains a ten-year extension of the term within which his rights are not liable to forfeit in case no active use is made of them.

The Post Office, Santiago.

Santiago, with the Snow-capped Andes in the Eastern Distance.

Subercaseaux Palace, Santiago.

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