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 18d. per peso. The conversion law of 1895 made the currency convertible at this rate, although the gold peso was rated at 48d. previous to that date; but the financial crisis of 1898 caused the suspension of specie payments, and a forced issue of additional paper led to a further postponement of conversion and the prompt withdrawal of specie from circulation. The paper circulation consists of national and bank issues. The former owes its existence very largely to the war with Peru, the civil war of 1891, and the financial troubles of 1898. On the 1st of January 1890 the national issues stood at 22,487,916 pesos, and the bank issues at 16,679,790 pesos, making a total of 39,167,706 pesos currency in circulation. This total was largely increased by President Balmaceda in 1891. On the 31st of July 1898 the conversion of paper notes, under the law of 1st June 1895, was suspended, and the government issued 27,989,929 pesos to the banks of issue, which was described as a loan at 2%, and raised their outstanding circulation to 40,723,089 pesos, and at the same time issued on its own account 17,693,890 pesos and assumed responsibility for 1,193,641 pesos which had been illegally put into circulation before 1896. This gave an aggregate registered circulation of 86,045,166 pesos in 1898. In 1904 another issue of 30,000,000 pesos was authorized and the date of conversion was still further postponed, and in 1907 a more general act provided that the maximum paper circulation should not exceed 150,000,000 pesos of the value of 18d. per peso, and that new issues should be made only through the issue department and against deposits of gold, which deposits would be returned to depositors on the presentation of the currency issued. The redemption of this issue was guaranteed by a conversion fund of 100,000,000 pesos, and by an authorization to issue a loan of 50,000,000 pesos to redeem the balance, if necessary. The conversion fund under the act of 1895 stood at 77,282,257 pesos (£5,796,170) on the 31st of May 1907. There are 23 joint-stock banks of issue, with an aggregate registered capital of 40,689,665 pesos (£3,051,724). Their circulating notes are secured by deposits in the national treasury of gold, government notes and other approved securities. There is no state bank, though the Bank of Chile, with its numerous agencies and its paid-up capital of 20,000,000 pesos, may be said to fill the place of such an institution. Besides these, there are four non-issue banks, two foreign banks and their agencies, and three mortgage banks, with agencies at the important provincial centres, which loan money on real-estate security and issue interest bearing hypothecary notes to bearer. There are 8 savings banks in the republic, whose aggregate deposits on the 31st of December 1906 were 14,799,728 pesos.

The monetary unit, the gold peso, does not form a part of the actual coinage. The gold coins authorized by this law are the condor of 20 pesos, the medio condor, or doblon, of 10 pesos, and the escudo of 5 pesos. The silver coins are the peso of 100 centavos and its fractional parts of 20, 10 and 5 centavos. The bronze coins are of 2, 2, 1, and centavos.

The metric system of weights and measures is the legal standard in Chile, but the old Spanish standards are still widely used, especially in handling mining and farm produce. Nitrate of soda is estimated in Chilean quintals (101.41 ℔) in the field, and metric quintals (220.46 ℔) at the port of shipment. In silver and copper mining the marc (8 oz.) is commonly used in describing the richness of the ores. Farm produce is generally sold by the arroba or fanega; the vara is used in lineal measurement, and the cuadra is used by country people in land measurement.

Chile was the recognized name of the country from the beginning of its known history. The land was originally inhabited by tribes of Indians, who, though not mere savages, were far below the level of civilization distinguishing the races of Mexico and Peru. When the country first became known to the Spaniards in the 16th century the northern tribes were found to be more civilized and much more submissive than those of the south. The difference was no doubt due to the invasion and conquest of northern Chile in the 15th century by Yupanqui, Inca of Peru, grandfather of Atahualpa, ruler of Peru at the time of its conquest by Pizarro. The dominion of the Incas in Chile was probably bounded by the Rapel river (lat. 34° 10′ S.), and, though their control of the country was slight, the Peruvian influence led to the introduction of a higher civilization, and, by weakening the power of the tribes, paved the way for the invasion of the Spaniards. Beyond the limits of the Inca conquest the Indians of Chile were distinguished by fierce independence of character and by their warlike qualities. Rude and ignorant as they were, they possessed a rough military organization; each community was led by its ulmen (chief), and in war the tribes fought together under an elected leader (toqui). The name of the Araucanians, the most powerful of the tribes, came to be applied to the whole confederation of Indians living south of the Bio-bio river.

The first Spanish invasion of Chile took place in 1535, when Diego de Almagro, the companion and rival of Pizarro in the conquest of Peru, marched into Chile in search of gold. Disappointed in his quest, and meeting with obstinate resistance from the southern tribes, he returned to Peru with his whole force in 1538. In 1540 Pizarro sent Pedro de Valdivia to make a regular conquest and settlement of Chile. Valdivia founded Santiago, the present capital of Chile, in February 1541, and proceeded to build the towns of La Serena, Conceptión, Villarica, Imperial, Valdivia and Angol, in order to secure his hold on the country. But the Indians fought desperately for their independence, and in 1553 a general rising of the tribes ended in the defeat and death of Valdivia and in the destruction of most of his settlements. This was the beginning of nearly a century of continuous warfare. As there was no gold in the country the number of settlers was small, the loose tribal organization of the natives made it impossible to inflict a vital defeat on them, and the mountainous and thickly wooded country lent itself admirably to a warfare of surprises and ambuscades. General after general and army after army were despatched from Spain and Peru; Chile was given a government independent of the viceroy of Lima; attack after attack was made on the Indians, their lands were laid waste, and the struggle was conducted with merciless ferocity: all in vain. Settlements and forts were never free from assault and were taken and retaken; if one Indian army was destroyed another took its place, if one toqui was killed another was chosen; when defeated, the Indians retired to their forests, marshes and hills, recruited their forces, and fell on the pursuing Spaniards. In 1612 an attempt was made by a Jesuit missionary to negotiate a peace, but not till 1640 was the desperate struggle ended by the treaty of Quillin, which left the Indians all the land south of the Bio-bio river. Up to 1800 the peace was broken by three wars, in 1655, in 1723 and in 1766, the last ended by a treaty which actually gave the Araucanians the right to have a minister at Santiago.

It was this constant warfare with the Indians and the necessity for hard continuous work, owing to the lack of precious metals in Chile, that no doubt helped to produce in the settlers the strength and hardihood of character that distinguishes the Chileans among South American races. But not unnaturally the material condition of the country was the reverse of prosperous. The expenditure far exceeded the revenue. The Indian warfare occupied nearly the whole attention of the governors and much of the time of the settlers. By the Spanish colonial system the development of manufactures was prohibited and the trade of the colony was limited not only to Spain but to the one port of Cadiz. Till the 18th century ships were not allowed to sail round Cape Horn, so that the Chileans had to trade indirectly through Peru and the Argentine. Agriculture was the one resource of the colony, and wheat was grown for export to Peru, but the land was concentrated in the hands of a few big landowners, and the cultivation of the vine and olive was forbidden. At the end of the 17th century Santiago was a town of poor one-storeyed houses and had only 8000 inhabitants; the other towns, Valparaiso, Concepción, La Serena, were only large villages. Books were not allowed to be imported, and education was limited to such as was given here and there by priests and monks. The Indians within the limits of the Spanish colony were treated like slaves, and horribly mutilated to prevent their escape; but at the same time a gradual fusion of races was taking place, and the Chilean peasant (peon) of to-day is as much of Indian as of Spanish descent. The Araucanians, however, continued to preserve their independence; they jealously resented the introduction of Spanish influence, and the missionary efforts of the Jesuits met with little success.

During the 18th century the condition of the colony was improved in many ways. The Bourbon kings of Spain were more liberal in their colonial policy. Merchant-ships were allowed to sail direct to Chile, trade with France was sometimes permitted, and a large batch of hardy emigrants was sent out