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Impact Of The Great Depression On Chile And Peru

1690 words - 7 pages

In the opening pages of her novel To Kill a Mockingbird, Harper Lee wrote these words: “There was no hurry, for there was nowhere to go, nothing to buy and no money to buy it with…but it was a time of vague optimism for some of the people: Maycomb County had recently been told that it had nothing to fear but fear itself.” Lee alludes to the seemingly inadequate reassurance that United States President Franklin D. Roosevelt provided during his inauguration speech at the onset of the Great Depression, while also describing the melancholy and hopelessness that many citizens felt. This sentiment, however, was not just confined to the United States—the impact of the Wall Street Crash of 1929 had also reverberated throughout Latin America, and very few countries escaped the ensuing economic depression unscathed, including the Latin American nations of Chile and Peru. However, while the Great Depression adversely affected the economy and politics of both Chile and Peru in the 1930s, its effects were longer-lasting and more severe in Chile than in Peru.
By the mid-nineteenth century, Chile had become a major leading producer of copper, and the Chilean defeat of Peru and Bolivia in the War of the Pacific in the late nineteenth century resulted in the conquest of additional nitrate mines. Through the exports of its copper and nitrates, Chile became one of the wealthiest countries in Latin America by 1910. After World War I, however, decline in demand for nitrates, which were used in the making of explosives as well as fertilizer, commenced, as explosives were generally no longer needed. In addition, the fabrication of a synthetic fertilizer by the Germans greatly increased competition with Chile and presaged the prospect of mass production of nitrates in Europe and the United States. Thus, the nitrate market declined immensely—“in 1925, Chile sold 1031.6 million pesos worth of nitrates… in 1932, this number dropped all the way to 193.8 million pesos worth of nitrates” (Howe), which could be attributed to the fact that “American imports of sodium nitrate, chiefly supplied by Chile, declined between 1931 and 1932 from $21 million to $1.4 million” (Glaser-Schmidt).
Chile’s problems were exacerbated by Chilean president Carlos Ibanez del Campo, inaugurated in 1927, who had attempted to combat Chile’s labor problems with violence and its social problems with a costly public works program that “generated a net increase in Chile's public debt of 1069 million new pesos or $128 million” (Glaser-Schmidt). When the Great Depression hit worldwide in 1929, Chile’s copper and nitrate exports collapsed. By 1931, the Chilean government was faced with the task of decreasing a budget deficit that had increased excessively. The loans issued to Chile by the United States and Great Britain were insufficient to pay off the deficit. In addition, by 1932, Chile’s GDP had decreased profoundly, resulting in increased unemployment and business failures. Consequently, the League of...

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