Talk:Story of a boom

Peru

In the 1830s, Britain and most of Europe was experiencing population growth and the rise of intensive agriculture. Demand for food was rising and there was increasing understanding of the value of nitrogen/phosophorous etc to crop growth. At some point in the early 1840s, there was a realization that the guano (bird shit) on the Chincha islands in Peru was an incredibly concentrated and effective fertilizer. Demand for the stuff exploded. British imports apparently went from 2900 tonnes in 1841 to 280,000 tonnes in 1845. The Peruvian government laid claim to the islands as a national resource - thus preventing private interests from laying a claim. The exports produced massive profits for the government. Not only did it create the surplus that could be reinvested into the economy, it gave them access to global capital markets. Lenders abroad were willing to lend, knowing their guano deposits could generate the profits required to repay the loans.

In the 1850s and 60s, the government invests into infrastructure like railways, etc. Abolishes slavery in 1854 (ahead of the US btw). Peru gets rich.

By the 1870s, however, a new fertilizer is discovered. Sodium Nitrate. And this was in the Atacama desert, in southern Peru and Bolivia. This leads to a decline in the importance of Guano. By then, Peru has built up massive debt on the back of projected Guano revenues. It defaults in 1876. And a few years later, Chile, Peru, and Bolivia go to war over the Nitrate deposits (the nitrates have their own story of boom and bust). Chile wins. Peru does not quite recover until the early 1900s and gets a real boom during World War I - exporting copper, petroleum, and cotton.

Argentina

"He's as rich as an Argentine", said a Frenchman in 1910. And it was not said sarcastically. Argentina had one of the highest per capita incomes in the world in 1910. Then it lost it all.

Argentina started out life as a peripheral economy emerging from the clutches of Spain - in 1816. All it had was agricultural and animals. Mexico and Peru were far more important places - because of their silver. By the second half of the 19th century, Europe is getting quite rich. And the wealth produces a surge in demand for food. Simultaneously technological developments make several things possible. Railways help move goods from inland to the ports. Steamships make long-distance ocean trade much more viable. And refrigeration makes it possible to ship fresh meat to Europe (instead of having to dry and pickle it first). All these factors combine to turn Argentina into a massive exporter, and Buenos Aires as the gateway. A large number of migrants arrive in Argentina. To trade. To farm. To work. This is followed by capital. Capital chasing returns helps build the railways, the factories, the ports. And banking. Utilities. The works. Argentina booms. And becomes the world's richest country per capita.

The country becomes rich, but depends on agricultural exports and foreign capital. This works well until 1914 and the first world war. Trade is disrupted. Capital markets are disrupted. And the European demand for imports declines. The Great Depression lands the final blow. Global commodity markets collapse. Argentina slips into a relative decline.

Once the governments of the day realised that railway development was critical, companies starting being formed to set up the lines themselves. Initially capital markets provided enthusiastic support and capital. However, the long gestation time of the projects and the heavy capital requirement meant that enthusiasm cooled. Governments had to step in to make sure the projects could continue. The federalist governments did not have as much capital as the Buenos Aires government. So they granted land on either side of the tracks as inducement. The Buenos Aires government guaranteed a 7% return on capital (but with a cap of 6400 pounds per mile of track - this sounds a lot like the transmission utility guarantees etc).