Boundary Treaty of 1874 between Chile and Bolivia

Given the economic importance of the area, which was rich in mineral resources, the treaty did not only establish national boundaries, but also regulated the taxation of mining operations.

And crucially for the future of both nations, to ensure long lasting stability, Article 4 explicitly forbade Bolivia from increasing the existing taxes on Chilean people, capital or industries for a period of twenty-five years.

Chile protested the violation of Article 4 and the CSFA refused to pay the new taxes, while tensions rapidly increased in the region.

This taxation dispute was the casus belli for the War of the Pacific, as in February 14, 1879, the day of the auction, Chile's armed forces occupied the Bolivian port city of Antofagasta.

On 5 December 1872, after difficult talks, Bolivian and Chilean negotiators Corral and Lindsay agreed to a clarification of the treaty of 1866.

The Lindsay-Corral Protocol gave Chile the right to appoint customs officers to work alongside their Bolivian counterparts in the condominium zone, stipulated that tax rates could not be modified unilaterally, confirmed Bolivian acceptance of nitrates and borax as products included in the terms of the 1866 treaty, agreed that Bolivia would make a separate account of the amount to be received for taxes not derived from the common zone, and stated that the eastern limits of the common zone would be fixed by experts of both countries, and in case of disagreement, by a third nominated by the Emperor of Brazil.

The Peruvian government saw the Lindsay-Corral Protocol as an increase in the regional influence of Chile and urged Bolivia to reject it, and in fact on May 19, 1873 the Bolivian Assembly postponed approval to 1874.

[1] In Peru, which had large overseas debts, the economic situation deteriorated and the government imposed in 1873 a state control over production and sales of saltpeter.

Peruvian historian Jorge Basadre asserts that the secret treaty and the Estanco were unrelated to each other, but Hugo Pereira Plascencia has contributed several items of evidences to the contrary: in 1873 the Italian author Pietro Perolari–Malmignati cited the Peruvian interest in defending its saltpeter monopoly against the Chilean production in Bolivia as the main cause of the secret treaty, and also said that the Peruvian Foreign Minister, José de la Riva-Agüero informed the Chilean Minister in Lima, Joaquín Godoy, about negotiations with Bolivia to expand the estanco in Bolivia.

[3] (Later, in 1875 the government expropriated the saltpeter industry and a full state monopoly on production and exports of saltpeter was imposed and in 1876 Peru bought Bolivian licences for nitrate fields in El Toco, Bolivia) As the Peruvian Government knew from the rapprochement of Bolivia and Chile, its Chancellery took action to find some means of provoking the rupture and preventing the Chilean ships from leaving European waters, qualifying the conciliatory attitude of Walker Martinez as a blind and advising to Bolivia break the existing Treaties.

The Atacama border dispute between Bolivia and Chile (1825-1879)
Saltpeter fields (in amber color) of Iquique (Peru), Toco and Carmen (Bolivia) and Aguas Blancas (Chile). "Aguas Blancas" were at that time economically irrelevant. The border Peru-Bolivia was not officially determined, and different maps show different boundary lines.