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7 April 2012

The Nitrate King

Tag(s): History, Chile, People

“There is probably no other country in the world, that never was a part of the British Empire or Commonwealth, where British associations and sympathies are so strong.”

L.C. Derrick- Jehu, The Anglo-Chilean Community” (1965)

William “Eddie” Edmundsen quotes this at the beginning of his excellent book “A History of the British Presence in Chile”[i].As an employee of the British Council he has lived in Colombia, Mexico, Cuba and Brazil as well as six years in Chile, which explains his fascination with the continent. I was recently invited to the launch of a follow up book “The Nitrate King: a biography of ‘Colonel’ John Thomas North”[ii]which was held in the Institute for the Study of the Americas in the University of London.

In a stimulating talk Eddie took us on a visual romp through the life of John Thomas North from his birth in 1842 in Holbeck, near Leeds, and his years as a mechanical engineer, charting his rise to become one of the richest men of his generation, making his fortune initially in the Nitrate Industry and finally ending up with other enterprises on four continents.

He was very famous in his day, some would say infamous, and was known throughout Britain as ‘Colonel’ John North and world-wide, from Canada to New Zealand, as ‘The Nitrate King’. He obtained the military rank when he became the Honorary Colonel of the 2nd Tower Hamlets Engineer Volunteer Corps. In Britain he was the target of cartoons, satire and Music Hall songs; although today he is largely forgotten. There is just one memorial to his name in Kirkstall Abbey which North had purchased and then gifted to the borough of Leeds.  In Chile, however, the cartoons were of a different nature, depicting North as a thief, and his name has been largely taboo since the 1880’s to this day. The great Chilean poet Pablo Neruda wrote “You are very clever, Mr North” and repeated it three times in his “Canto General” which was published in 1950 and sought to evoke the entire history of  Hispanic America.

In his book Eddie tries to be even handed respecting the views of Chilean historians but in the end he finds himself liking this chap even if he had been a bit of a rogue.  North left school at 15 and was apprenticed to the firm of Shaw, North, and Watson, millwrights and shipwrights. The family connection- this North was a cousin of his father’s- may have helped in his placement as a trainee mechanical engineer. On completing his apprenticeship North joined the neighbouring firm of Messrs. Fowler and Company at their Steam Plough Works in Hunslet, Leeds. Towards the end of the 1860’s- there are different sources for the exact date- North was sent by Fowler’s to Chile and Peru though again sources vary on his initial assignment. Eddie reviews the competing claims but feels that at first he was probably no more than a boiler riveter in a railway workshop.

The only substantial deposits of salitre (sodium nitrate) in the world are found in the desert region of what is now northern Chile, in a band that is roughly thirty kilometres wide and seven hundred kilometres long. Geologists believe that saline water formed in shallow lakes in this area and that bacteria fixed the nitrogen into sodium nitrate. Chilean nitrate was used as fertilizer, underpinning the huge expansion of agriculture in the world toward the end of the nineteenth century. Nitrates were also employed as an ingredient in the manufacture of explosives, until the synthetic manufacture of nitrate started during the First World War.

In 1873 the Peruvian Government, which had been mismanaging its economic resources, raised the export duty on nitrates. It also entered into a secret treaty of mutual defence with its neighbour Bolivia. Bolivia had been in frontier disputes with Chile and in 1866 agreed the frontier as 24° South. Bolivia and Chile would share revenues from minerals between 23° S and 25°. In 1874 Bolivia agreed that no tax would be levied on Chilean nitrates in this region.

 In 1871 North left Fowler’s and moved to Iquique, then in Peru, and was employed in the Santa Rita oficina (nitrate processing plant) of Peruvian González Vélez. In 1875 the Peruvian government was authorised to raise a loan of £7,000,000 of which £4,000,000 was to be used to buy out owners of oficinas, effectively nationalising the nitrate industry. State certificates were issued payable to bearer.  North bought the Marañon, a water-tanker at the port of Huanillos. In 1878 the Compañia de Aguas de Tarapacá was founded. North took out a lease for two years. He then acquired from Guillermo Speedie the contract to exploit the Porvenir oficina. The same year the Bolivian Congress raised a tax on Antofagasta, a company with both Chilean and British ownership. Chile took the view that this was in breach of her treaty with Bolivia and on April 5th 1879 declared war on Bolivia. Peru entered the war on the side of Bolivia respecting their secret treaty.

In 1880 North joined forces with Cornishman Robert Harvey to exploit the Peruvian salitrera (nitrate field). Robert Harvey was appointed Inspector General of Nitrates by the Chilean Government and North was recognised as the sole owner of the Compañia de Aguas de Tarapacá as the Peruvian owners had fled. In 1881 North and Harvey began buying up the oficina certificates at 11% of their face value or below. Chile then provisionally recognised the certificates at 75% value and a deposit to cover the rest. Mr Edmundsen asks rhetorically “What else could Chile have done?” North and Harvey acquired the title deeds to several oficinas/saliteras. In 1882 the Chilean government reinforced its 1881 decree and granted certificate holders definitive titles to their oficinas. In 1883 Chile signed the Treaty of Ancón with Peru, effectively ending the War of the Pacific with Peru ceding Arica and Iquique. In 1884 Chile and Bolivia signed the Treaty of Valparaiso by which Bolivia ceded control of Antofagasta to Chile. In 1882 North returned to England and raised capital on a Liverpool merchant bank against the security of the certificates. In 1883 he formed the Liverpool Nitrate Company and raised money from the public. Nitrate oficina certificates were sold to the company for many times their face value. North and Harvey with other associates built up a network of companies which by 1890 meant that British interests controlled 70% of all nitrate production with the largest share held by North. Overtime he extended his interests into railways, banking, provisions, water, and coal. He founded the Bank of Tarapacá and London which was later taken over by Lloyds Bank to form the basis of its considerable Latin American interests.

In 1891 civil war broke out in Chile. President Balmaceda cancelled the concession to North’s Nitrate Railway Company by administrative decree. Congress opposed this and violence broke out. North was accused of helping to start the war. Balmaceda was portrayed as a progressive nationalist and North as a meddling predatory capitalist. There is no irrefutable evidence of North’s direct involvement. Balmaceda had a lot of support in the country except for a few liberals, the nitrates lobby, bankers, unions and the Church. Balmaceda had met with North several times in 1889 and recognised the legitimacy of his interests by accepting his agents in Chile. His forces lost the battles of Concón and Placilla and he committed suicide, ushering in a parliamentary system that lasted until 1924.

The real battle had been between the effective cartel of the nitrate producers who wanted to limit production to maintain high prices and the Chilean government which wanted to expand production to maximise tax revenues.

North had returned to England in 1889 from where he controlled his growing empire while enjoying the life of a sportsman winning top coursing competitions with his famous greyhounds. He mixed with royalty, was honoured by the Egyptian Khedive, asked to front businesses in Belgium sponsored by King Leopold and even campaigned against Herbert Gladstone, son of William, for the Conservatives in a by-election at West Leeds, losing narrowly by only 96 votes. In 1896 he died suddenly of heart failure aged just 54.

North can be described as a quintessential imperialist capitalist plunderer and there is some truth in this. His financial machinations were less than transparent in that profits (in dividends) were initially paid from capital derived from acquisitions sold on to companies expressly formed to exploit the assets, and enthusiastically promoted by North’s ebullient personality, rather than solely from any real profit owned. On the other hand if it was not for British skill and capital it is unlikely that the young Chilean nation would have profited much from its own natural resources for some considerable time and Chilean Presidents other than Balmaceda recognised this.

At this time, following the very successful policies of Castlereagh and Canning, the British were able to enjoy fruitful relations with much of Latin America. Finding themselves aligned with the revolutionaries because they were rebelling against Napoleonic Spain, they helped them with soft loans and then with indirect military support. Once independence was secured by the nations, even though they were republics, Britain saw its interest in friendly relations encouraging trade and other activities. British banks were opened all over the continent. British engineers built the railways. British miners established the mines. New companies were formed, such as those of North and his colleagues to link all these activities up. This was not colonialism. There was no direct military involvement although the British navy, enjoying its century after Trafalgar of total control, safeguarded the seas and the movement of minerals and other goods.

The First World War brought most of this to an end. British capital could no longer be diverted abroad. It had to finance the war at home. The Navy turned its attention to defence of the islands and other key strategic posts. Argentina particularly suffered from this. A major economy before the First World War riding on British capital and technology it collapsed afterwards and has never really recovered. Unfortunately South American capital, with few exceptions, has behaved as if it was foreign capital preferring to invest in local resource mining rather than in local manufacture and often going offshore. Only slowly is some of this being addressed. It should also be said that the infrastructure financed and built by the British remained when the owners like North returned home.

While North is not remembered as a great philanthropist he was undoubtedly generous to a fault, gregarious, a risk taker, charismatic and somewhat ostentatious. He made a substantial grant to help found the Engineering Department of Yorkshire College, the forerunner of Leeds University. Just three months before his premature death Colonel North attended the jubilee dinner of “The Eltham Oddfellows”, as chairman for the evening, and declared “I have enjoyed myself thoroughly”. These were the words enscribed on his tomb.

Copyright David C Pearson 2012 All rights reserved

[i]A History of the British Presence in Chile: From Bloody Mary to Charles Darwin and the Decline of British Influence” William Edmundsen  Palgrave Macmillan (2009)

[ii]The Nitrate King A Biography of ‘Colonel’ John Thomas North” William Edmundsen Palgrave Macmillan (2011)

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