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 his term of office. Great opposition was raised by the representatives of the debtor class in congress to the suppression of the inconvertible paper money, but in the end President Montt carried the day, and on the 11th of February 1895 a measure finally became law establishing a gold currency as the only legal tender in Chile. In July 1896 the Conversion Act was put in force, a dollar of 18d. being the monetary unit adopted. In 1895 relations with the neighbouring republic of Argentina began to become somewhat strained in regard to the interpretation of the treaty concerning the boundary between the two countries. The treaties of 1881, 1893 and 1895 left doubts in the minds of both Chileans and Argentines as to the position of the frontier line. On the 17th of April 1896 another protocol was drawn up, by which the contending parties agreed to submit any differences to the arbitration of Great Britain, at the instance of one or both governments. President Montt had now fulfilled his term of office, and on the 18th of September 1896 he handed over the presidential power to his successor, Señor Federico Errázuriz, who had been duly elected in the month of June previously.

The election for the position of president of the republic was closely contested in 1896 between Señor Errázuriz and Señor Reyes, and ended in the triumph of the former candidate by the narrow majority of one vote. The father of the new president had been chief magistrate of Chile from 1871 to 1876, and his administration had been one of the best the country had ever enjoyed; his son had therefore traditions to uphold in the post he was now called upon to fill. At the beginning of 1897 the public attention was absorbed by foreign political questions. The problems to be solved were the frontier difficulty with Argentina, the question of the possession of Tacna and Arica with Peru, and the necessity of fulfilling the obligation contracted with Bolivia to give that country a seaport on the Pacific coast. The treaty made in 1896 with the Argentine government, referring to the arbitration of disputed points concerning the boundary, became practically for the moment a dead letter, and both Argentines and Chileans began to talk openly of an appeal to arms to settle the matter once for all. The governments of both countries began to purchase large supplies of war material, and generally to make preparations for a possible conflict. In these circumstances no final settlement with Peru and Bolivia was possible, the authorities of those republics holding back to see the issue of the Chile-Argentine dispute, and Chile being in no position at the time to insist on any terms being arranged. So matters drifted until the beginning of 1898. In July of that year the crisis reached an acute stage. Both Chile and Argentina put forward certain pretensions to territory in the Atacama district to the north, and also to a section of Patagonia in the south. Neither side would give way, nor was any disposition exhibited to refer the matter to arbitration under the protocol of 1896. The cry of an acute financial crisis emanating from the fear of war with Argentina was now raised in Chile. The president was advised that the only way of averting the financial ruin of the banking institutions of the republic was to suspend the conversion law and lend from the national treasury inconvertible notes to the banks. Señor Errázuriz weakly gave way, and a decree was promulgated placing the currency once more on an inconvertible paper money basis until 1902. In August of 1898 the Chilean government determined to insist upon the terms of the protocol of 1896 being acted upon, and intimated to Argentina that they demanded the fulfilment of the clause relating to arbitration on disputed points. This was practically an ultimatum, and a refusal on the part of the Argentine government to comply with the terms of the 1896 agreement meant a declaration of war by Chile. For a few days the issue hung in the balance, and then the Argentine government accepted the provisions made in 1896 for arbitration. The dispute concerning the Atacama district was submitted to an arbitration tribunal, consisting of the representative of the United States in Argentina, assisted by one Argentine and one Chilean commissioner. This tribunal, after due investigation, gave their decision in April 1899, and the verdict was accepted unreservedly by both governments. The dispute regarding the Patagonian territory was submitted to the arbitration of Great Britain, and a commission—consisting of Lord Macnaghten, Sir John Ardagh and Sir T. H. Holdich—was appointed in 1899 to hear the case.

The Argentine difficulty was ended, but Chile still had to find a settlement with Peru and Bolivia. The treaty made with the former country in 1893 was not ratified, as it was thought to concede too much to Peru, and the subsequent ad referendum treaty was rejected on account of Peru claiming that only Peruvians, and not all residents, should have the right to vote in the plebiscite to be taken by the terms of the treaty of 1883 for the possession of Tacna and Arica. By the terms of the armistice of 1883 between Chile and Bolivia, a three years’ notice had to be given by either government wishing to denounce that agreement. By the protocol of 1895 Chile agreed to give to Bolivia the port of Arica, or some other suitable position on the seaboard. On these lines a settlement was proposed. Vitor, a landing-place a little to the south of Arica, was offered by the Chilean government to Bolivia, but refused as not complying with the conditions stated in the protocol of 1895; the Bolivians furthermore preferred to wait and see if Arica was finally ceded by Peru to Chile, and if so to claim the fulfilment of the terms of the protocol.

After the accession to office of President Errázuriz there was no stability of any ministry. Political parties in congress were so evenly balanced and so subdivided into groups that a vote against the ministry was easy to obtain, and the resignation of the cabinet immediately followed in accordance with the so-called parliamentary system in vogue in Chile. The president of the republic has no power to dissolve the chambers, to endeavour to remedy the evil by one or another political party obtaining a substantial working majority, but must wait to see the results of the triennial elections. As a consequence of these conditions Conservative, Liberal and coalition ministries held office at short intervals. These unsettled political circumstances checked any continuity of policy, and tended to block the passage of all useful legislation to help forward the economic development of the country and inhabitants; on the other hand, the financial situation was better by the end of 1899 than in the previous year, since all proposals for a fresh paper issue had been vetoed; and the elections for congress and municipal office at the opening of 1900 returned a majority favourable to a stable currency policy.

In September 1900 a fresh outburst of hostile feeling against Chile was created in Argentina by a note addressed by the Chilean government to Bolivia, intimating that Chile was no longer inclined to hand over the port of Arica or any other port on the Pacific, but considered the time ripe for a final settlement of the questions connected with the Chilean occupation of Bolivian territory, which had now been outstanding for sixteen years. The foreign policy of Chile, as indicated by this note, was considered by Argentina to be grasping and unconciliatory, and there were rumours of an anti-Chilean South American federation. Chile disclaimed any aggressive intentions; but in December the Bolivian congress declined to relinquish their claim to a port, and refused to conclude a definite treaty of peace. The year closed with a frontier incident between Chile and Argentina in the disputed territory of Ultima Esperanza, where some Argentine colonists were ejected by Chilean police; but both governments signed protocols agreeing not to take aggressive action in consequence.

At the opening of 1901 the country was chiefly interested in the forthcoming presidential election, for which the candidates were Don Pedro Montt (Conservative and Clerical) and Señor German Riesco (Liberal). The relations between President Errázuriz and congress became rather strained, owing to the former’s inclination to retain in office a ministry on which congress had passed a vote of censure; but Errázuriz had been in ill-health for more than a year, and on the 1st of May he resigned, and died in July. At the ensuing election Riesco was elected president. The attitude of Chile