John Thomas North, the Nitrate King
Britain's connections with Chile date from her War of Independence, and were powerfully re-inforced by a Victorian company-promoter in the City of London.
In the export of British capital and enterprise in the nineteenth and early twentieth centuries, the key role was often played by individual entrepreneurs who created the necessary interest among the investing public in the potentiality of overseas resources and who made possible significant developments in the areas of their operations, largely by the force of personal example. Such a man was John Thomas North, 1842-1896, known in his day as “The Nitrate King,” the principal promoter of an industry and trade that was the economic prop of the Latin American state of Chile from the 1880’s until the First World War. North was a remarkable Englishman who rose, in his own words, “from mechanic to millionaire” in the space of some twenty years, whose activities in the 188o’s and 1890’s were a constant subject of interest to the commercial press, and whose efforts to become a figure in society were almost as dramatic as his manipulation of the nitrate market on the London Stock Exchange. A self-made entrepreneur, endowed with considerable business acumen and an ebullient character, North belongs to the age of Cecil Rhodes and Barney Barnato, though, unlike them, he is almost completely unremembered in his own country. But he has a permanent place in the history of Chile and in the history of British commercial relations with Latin America.
The decades that witnessed North’s rise to prominence and the growth of the British nitrate industry in Chile were years of economic development for many countries in Latin America, development that was to a large extent fertilized by British capital. By 1880, some £123,000,000 was invested in government loans and over £50,000,000 in productive enterprises such as railways, docks, telegraphs and mines: by 1890, however, these figures had risen to £193,000,000 and £230,000,000 respectively, and represented the keen interest shown by British investors in the continent with which, throughout the nineteenth century, the United Kingdom had very close ties of commerce and sentiment alike.
The bulk of British capital invested in Latin America was directed to Argentina, Brazil, Chile, Uruguay and Mexico, and, among these, Chile had long enjoyed a reputation for political calm and orderly government. Of the foreign commercial opportunities in Chile, the British predominated: by 1820, at least twelve firms had been established in Valparaiso, the dominant trading centre and port of the republic, and forty years later almost two thousand British subjects – half the total for the whole country – were domiciled there. Later in the century, indeed, one envious American writer went so far as to say that Valparaiso, with almost its entire trade controlled by Englishmen, its transactions completed in pounds sterling, its English newspaper The Chilean Times, and the virtually exclusive use of the English language, was “nothing more than an English colony.” Between England and Chile there were particular affinities that had their origin in the period when Chile was fighting for her independence form Spain: Chileans long remembered Canning’s role in the diplomacy of that period and Lord Cochrane’s command of their navy; they sent their midshipmen to train on British vessels throughout the nineteenth century, and the history of the republic was studded with British names such as Edwards, Ross and Blest, representatives of the great Anglo-Chilean families deriving from the early years of the century. British esteem for Chile grew as, with Brazil, she remained an oasis of calm in a turbulent continent.
Chile’s reputation was enhanced by her defeat of Bolivia and Peru in the War of the Pacific, 1879-1882, fought largely to determine the ownership of the rich nitrate provinces of Tarapacá and Antofagasta, the former Peruvian, the latter Bolivian. Nitrate was not important until the 1870’s: before then, it was guano, the manure of untold millions of seabirds, that brought Peru the bulk of her revenue between 1840 and 1870. Guano was in great demand in Europe and America as an efficient natural fertilizer, rich in nitrogen, but when the major Peruvian deposits on the Chincha Isles began to peter out in the 1860’s, the British and other concerns active in the guano trade turned their attention to the natural nitrate of Tarapacá and Antofagasta, the major sources of this valuable fertilizer. At first, the Peruvian and Bolivian Governments simply levied an export tax on nitrate shipments, leaving the ownership of the nitrate works or oficinas in private hands, mainly British and Chilean. In 1873, however, the Peruvian Government, then on the verge of bankruptcy, raised the duty on nitrate, and, two years later, passed laws that threw the whole industry into confusion. In May 1875, the Peruvian Executive was authorized to raise a loan of £7,000,000, of which £4,000,000 was to be used to buy out the foreign owners of oficinas who were to receive bonds made payable to bearer, carrying an annual interest of eight per cent and redeemable within two years by the Government. This attempt to nationalize the nitrate industry produced nothing but uncertainty and depression in the nitrate market: the bonds were issued, but Peru failed to raise the loan to redeem them, and the position deteriorated further when war broke out in 1879 between Chile on the one hand and Bolivia and Peru on the other. The origins of the war were many and involved, but the results were clear and definite: Chile, victorious on land and sea, compelled her adversaries to sue for peace, taking as spoils of war the nitrate provinces of Tarapaca and Antofagasta.
During the war, great uncertainty prevailed among the holders of Peruvian nitrate bonds, in effect the title-deeds to the oficinas, as they did not know what would happen to their certificates in the event of a Chilean victory. Already before the war, owing to the policies of the Peruvian Government, nitrate bonds were selling in Lima at sixty per cent of their nominal value, but by 1881 certificates originally worth £180 were selling at £20 to £30 only. In these circumstances, speculators, counting on a Chilean victory, and, possibly with inside information, on the Chilean Government’s subsequent return of the oficinas to private hands, bought up large quantities of the depreciated bonds. Chief among these speculators was the man whose name later became synonymous with nitrate on the London Stock Exchange, John Thomas North.
At that time, North was already well known on the Pacific coast of South America. Born near Leeds, Yorkshire, in 1842, the son of a coal merchant, he first went to Peru in 1869 when the engineering firm of Fowler & Company, his employers since 1863, sent him out to set up machinery for the extraction of nitrate. He left their service in 1871 to manage an oficina near the principal port of Tarapacá, Iquique, and, within four years, he had acquired sufficient capital to purchase his own nitrate works. Other opportunities for advancement soon presented themselves. Water was scarce in the desert regions where nitrate was extracted; accordingly, in 1878, the Tarapacá Water Company was founded at Iquique to bring water by tanker from Arica. North promptly rented the Company’s tankers for two years, adding to them an old vessel of his own, but, when Chilean forces overran Tarapacá early in the war with Peru, he secured recognition from the Chilean Government as sole owner of the business, the Company’s owners having fled the province. Although the property suffered damage during the war, North obtained partial compensation for this from the Chilean Government afterwards and soon established a monopoly for the supply of water to the nitrate areas.
But the War of the Pacific did much more than this for the rising young entrepreneur; it presented him with a splendid opportunity of securing a dominant position in the nitrate industry itself. North went to Peru when that country was in chaos and the owners of nitrate bonds were hastily disposing of their holdings for whatever price they could get for them. In Lima, he bought up as many bonds as he could lay his hands on, and it is not unlikely that he knew the Chilean Government intended to recognize the certificates as the title-deeds to the nitrate fields, for he was assisted in his activities by a certain Robert Harvey, like North, an engineer by training. Harvey had been Inspector-General of Nitrate to the Peruvian Government and became a leading counsellor to the Chilean Government in nitrate matters when their troops occupied Tarapacá: he may well have been an important factor in the Chilean Government’s decision to return the industry to private ownership, a decision announced by a series of decrees in 1881-2. Another English expatriate, John Dawson, played an essential role in these operations: as head of the Iquique branch of the Bank of Valparaiso, it was he who advanced North and Harvey the funds for buying the nitrate bonds. At the end of the war, therefore, this enterprising trio found themselves the virtual owners of the cream of the nitrate fields, worth much more than they had paid for them. The bonds for the oficina of Santa Ramirez, for example, cost Harvey £5,000, one-third of their real value: the property was sold to the Liverpool Nitrate Company on its formation in 1883 for £50,000, the Company itself being capitalized at more than double this figure.
North returned to England in 1882 to effect the second stage of the enterprise, the floating of companies to engage in nitrate extraction and trade. Between that date and his death, in 1896, he was connected, at one time or another, with more than two-thirds of the British joint-stock companies involved. He and his associates founded the Liverpool Nitrate Company in 1883, the Colorado Nitrate Company in 1885 and the Primitiva Nitrate Company in 1886, North himself being Chairman of the Board of all three by 1888. He was a born promoter with a remarkable gift for gaining people’s confidence with his bluff and optimistic manner. In the mid 1880’s, with nitrate in great demand in Europe, all went well and dividends were high: the Liverpool Company paid twenty-six per cent in 1885, twenty per cent in 1886, and forty per cent in both 1887 and 1888 on its £25 shares, while both the Colorado and Primitiva Companies paid dividends of from ten to fifteen per cent in these years. Other nitrate properties in Chile had still to be turned into companies and, with the earlier ones paying such high dividends, nitrate shares were in great demand when a number of new companies were floated during 1888 and 1889. By now, North had his enemies who were beginning to wonder when the process would end and how soon the nitrate market would collapse under the weight of so many concerns. The Economist was dubious from the start about North: on July 7th, 1888, it wondered sceptically “how far the securities of these undertakings (the new companies) are held by the public, for, although industriously puffed, there is reason to believe they are still largely in the hands of the promoters, who are seeking to work them off upon investors.” The promoters were not disturbed and neither were the subscribers, only too anxious to seek a share in the great fortunes made by the nitrate capitalists and captivated by North’s shining example.
North’s projection of a public image to inspire confidence in his promotions was the key factor in his success. Part of this was North the successful business-man who had created a new network of economic interests. He was the centre of the “nitrate circle”; indeed he soon acquired the sobriquet “The Nitrate King,” and appropriate homage was paid to him. “Put North’s name on a costermonger’s cart,” said The Financial News in May 1888, “turn it into a limited liability company, and the shares will be selling at 300 per cent premium before they are an hour old . . . North is a Pactolus among promoters. Whatever he touches turns, if not to gold, at least to premiums.” And his empire continued to grow: his water monopoly in Tarapacá became the basis of the Tarapacá Waterworks Company, founded in 1888, with a capital of £400,000; the same year saw the foundation of the Bank of Tarapacá and London, with none other than John Dawson as manager at Iquique; a year later, North and Harvey founded the Nitrates Provisions Supply Company, and, perhaps most important, in 1888 North also secured a powerful holding in the Nitrate Railways Company, which operated the only railway in Tarapacá.
Building up his business reputation and fortune was one way for North to impress the world; another was to cut a figure in society. Like many men of humble origin who attain to positions of wealth and influence, North sought to dazzle with ostentation. At vast expense, he built at Avery Hill, Elthan, Kent, an ornate mansion in spacious parkland. The building, Italianate in style, was surmounted by a large cupola, visible for miles around, and the timber used in the construction was specially shipped from South America. At the entrance to the main hall stood two large gates of decorative ironwork, reputedly seized from the Cathedral of Lima by Chilean troops in the War of the Pacific, and, outside, in addition to gardens, orchards, stables and kennels, there was a further reminder of the scenes of North’s early labours, a large conservatory of glass and iron in which his guests might see a picture of South American flora in the heart of Kent. Avery Hill became the social centre of the new nitrate society and its owner an important figure in the life of his adopted county. Master of the West Kent Hunt, Honorary Colonel of the Regiment of Volunteers of Tower Hamlets, which he equipped out of his own pocket, friend of Lords Dorchester and Randolph Churchill, North spared no effort and no expense to realize a social ambition commensurate with his commercial success. Part of his popularity with the general public sprang from his sporting interests: he established a reputation as a bloodstock owner and breeder of greyhounds; one of his dogs won the Waterloo Cup three times. W. G. Grace, of Kent and England, dedicated his book The History of a Hundred Centuries to North, who was also known for his patronage of the boxing ring.
Accounts of North’s benevolence were legion, and, in particular, he was a benefactor of his birthplace. In 1888, when destruction threatened the old abbey of Kirkstall, near Leeds, he paid £10,000 for the building and gave it to the city, as well as £5,000 to the Leeds Infirmary and other sums for charitable and civic purposes. For these services to his native city, and in recognition of his other achievements, he was installed on January 25th, 1889, as the first Honorary Freeman of Leeds.
Thus, in business and in society, “the Nitrate King “ prospered, despite the warnings of such critics as The Economist, which consistently accused North of covering up unpleasant truths about the future prospects of nitrate with displays of ostentatious bonhomie. The paper was concerned about the state of the nitrate market which, by the end of 1888, was entering a period of instability, owing to growing disequilibrium between supply and demand. This had happened before: a saturated market in the early 1880’s led the leading companies to form a combination to restrict output until stocks were reduced and prices in Europe rose, and by 1886 there was a marked recovery for sales and, therefore, dividends for the companies. The chief market for nitrates was continental Europe, and, in particular, the sugarbeet agriculture of Germany and France: in 1887, growers there took over 245,000 tons, compared with 56,000 tons imported into Great Britain and 30,000 tons into the United States. But the recovery in nitrates was now being jeopardized by the formation of new companies in which North had a leading hand, and the new investors, not unnaturally in view of his scintillating rise to fame and fortune, expected high dividends: the temptation to produce at full capacity was, therefore, great, despite the deteriorating condition of the world market. Thus, the circumstances surrounding the formation of the first restrictive combination, which had collapsed in 1886, were about to be repeated.
But the times had changed. The Chilean Government now derived almost half its revenue from the export duty on nitrate, and, under its able President, José Manuel Balmaceda, was spending large sums on impressive public works. It could not view with equanimity the possible curtailment of its revenue as the result of unilateral action by the foreign nitrate capitalists. Balmaceda began to give vague hints in public speeches that the Government might be obliged to look again at the laissez-faire policy it had hitherto followed with regard to nitrates, and conflict between the foreign owners of the works and the Chilean Government was confidently predicted by the commercial press. One of North’s concerns in Chile had already come under attack, the Nitrate Railways Company, linking the ports of Iquique and Pisagua with the nitrate grounds. This railway was built in the 1870’s by virtue of an exclusive concession from the Peruvian Government whereby no other line might be built in Tarapacá for twenty-five years, but its history from the time that Chile took over the province was one long legal wrangle between the Government and the Company. The latter holding a quasi-monopoly on transport in Tarapacá, levied a high freight charge on nitrate shipments, and was under constant pressure from both the Government and nitrate producers outside the North circle to reduce it. The Government sought to show in the Chilean courts that the original concession was invalid and their battle with the Company came to a head in 1889 when the Council of State, the highest judicial authority, ruled that the Executive Power was competent to adjudicate the issue. As the latter was President Balmaceda there was no doubt of the result.
With nitrates in the doldrums, uncertainty in the air about the Chilean Government’s intentions and investors worried, it was time for North to take a hand by visiting Chile to see for himself what was happening. The visit began impressively with a “farewell” ball at the Hotel Metropole on January 4th, 1889, when a thousand guests representing what The South American Journal called the “aristocracy, the plutocracy and the histrionocracy of the kingdom” enjoyed North’s lavish hospitality; it cost him £10,000. He left Liverpool on February 6th, with his wife, his secretary, Melton R. Prior, staff artist of The Illustrated London News, himself a director of the Nitrate Railways Company, Montagu Vizetelly of The Financial Times, and, surprising to some, William Howard Russell, doyen of correspondents, who was accompanied by his wife. It was alleged at the time that Russell was induced by an honorarium of £15,000 to go and write a favourable report on North’s interests, though, in fact, Russell only agreed to go if he could state his own opinions, which he did subsequently in his book, A Visit to Chile and the Nitrate Fields of Tarapacá.
Arriving at Coronel in southern Chile on March 16th, 1889, the party proceeded northwards on what was more of a royal progress than a simple visit. North gave a series of banquets that focused the country’s attention on “Coronel Juan del Norte, el rey de salitre,” and which gave “the Nitrate King “ excellent opportunities to display his natural gift of showmanship. He dined the Chilean press, met civic dignitaries, indulged his philanthropic reputation and gratified the public by presenting two thoroughbred sires to the State Agricultural Experimental Station.
Meanwhile, President Balmaceda had recently returned from a tour of the nitrate regions where, in March, he had again referred to the dangers of foreign monopoly control and had strongly hinted that the Nitrate Railways’ concession would soon come to an end. That the shrewd statesman and the forceful entrepreneur should meet was, perhaps, inevitable, and they did so on three occasions in March and April 1889. Russell, who was present, wrote later that the English party was cordially received by Balmaceda who intimated that “he had not the smallest intention of making war on vested interests,” though he told North bluntly that he was offering too low a price for a new nitrate field he wished to buy. How far North was satisfied, it is impossible to say: the President was a clever man whose affability often concealed his true thoughts, and it probably suited his purpose to give vague verbal assurances, still leaving room for doubt in North’s mind, so that the latter might think twice before embarking on actions likely to antagonize the Government such as a new combination to restrict output of nitrate.
If North had met his match, at last, he was clever enough to conceal his doubts, and went on his socially triumphal way, calling at Iquique, New York, Paris and Brussels on his way home in July. What he meant to nitrate shares was indicated by The Economist on August 3rd, 1889: “When the ‘Nitrate King’ went to Chile,” the paper said, “the market lost its buoyancy . . . prices fell away rapidly and. . . continued to decline, until it was announced that the leader of the market was on the point of returning. . . but it was not until Colonel North had actually reached our shores that anything like strength was restored to the market.” But as 1890 came, and the long- predicted and more permanent recovery did not materialize, North had to work hard to retain the investors’ confidence. He dominated his companies, issued reassuring statements, offered to buy out the worried—which usually persuaded them not to sell—and by bluff and guile preserved his reputation. At the same time, he carefully unloaded his holdings in those companies for which the writing was on the wall: in 1888 he had held 16,000 shares in the Nitrate Railways Company, but by 1896 he had less than 400.
Events in Chile then came to his rescue. Any threats there that might have been posed by President Balmaceda—though that is a moot point—were removed during 1891. In that year, a long-maturing conflict between the President and his Congress over theft powers under the constitution exploded into civil war which lasted for eight months and was one of the strangest wars in modern history. Congress, supported by the navy, seized the nitrate areas to obtain the duty on shipments, but could not attack Balmaceda, who held the rest of the country, since they lacked arms. Balmaceda, supported by the army, could not attack the Congress as he had no fleet and the barren Atacama desert lay between them. An eight-months stalemate between “the whale and the elephant,” as the British Minister to Chile described the antagonists, was only ended in August 1891, when the Congressionalist forces, having secured arms from abroad before Balmaceda obtained his ships, landed in central Chile and defeated his troops in battle. Balmaceda committed suicide.
During the war, nitrate producers took advantage of the Chilean Government’s preoccupations to form the second restrictive combine and use up stocks of the fertilizer. Production was also curtailed by wartime dislocation as workers in the nitrate fields made up the Congressional army. Prices and share quotations both rose in 1891 and North was back in favour, particularly after August, since he was believed to have friendly relations with the victorious new Government in Chile. This partly arose from the fact that during the war the Balmacedist press had frequently alleged that the real cause of the war was an unholy alliance of Chilean landed and banking interests with foreign nitrate capitalists, all of whom feared Balmaceda, and Congress was, in fact, the preserve of these Chilean interests. This theme found support at the time with the American Minister in Chile, Patrick Egan, onetime Treasurer of the Irish Land League, who was virulently anti-British, and also with one Maurice Hervey, sent out specially by The Times to report on the war. Hervey sent home sensational despatches, sometimes pointedly, though not explicitly, referring to North. Thus, on May 19th, 1891, The Times printed his statement that “without quoting names, some of which are as well known upon the London Stock Exchange as the cardinal points of the compass . . . the instigators, the wirepullers, the financial supporters of the so-called revolution were, and are, the English or Anglo-Chilean owners of the vast nitrate deposits in Tarapacá,” an allegation repeated later, again without proof, in his book Dark Days in Chile. Hervey was recalled in May to substantiate such charges and because his reports on Chile were so much at variance with all other sources of information, and there was some suggestion that he had been bribed by Balmacedists. Hervey could not provide The Times with the required proof and he disappeared from the scene shortly after his return to London, but his book and the Balmacedist propaganda against foreign nitrate interests have been the source of much speculation by historians, particularly as the revolution of 1891 was a turning- point in the history of Chile.
Clearly, if North and others had helped to suborn revolution in Chile, evidence would be very hard to find, and, indeed, there is none that is not vitiated by its source. It is perhaps significant that in the Political Testament that President Balmaceda wrote before committing suicide, in which he dilated on the causes and possible consequences of the revolution, there is not one word about economic interests. And, though it is also a negative point, the new Government in Chile, far from being friendly towards foreign nitrate interests, not only carried through Balmaceda’s policy on the Nitrate Railways Company, but also encouraged Chileans to buy nitrate grounds in 1892 and 1893 to weaken the foreign monopoly.
By 1894, interest in nitrates had declined among English investors. The second combination collapsed in that year, there was a fall in confidence in the Chilean Government, and production was again outstripping demand. Moreover, it was beginning to be appreciated that North and his friends had not been exactly honest with shareholders. But lie bluffed to the end: as late as November 1895, at a meeting called to discuss the winding-up and reorganization of the Primitiva Company, North could still paint a rosy picture, pointing out that he still held 5,000 shares. He did not mention that he had unloaded twice that number in the previous five years. In fact, he had long since cushioned himself against the end of the nitrate boom by investing in collieries in England, factories in Paris and St. Etienne, cement works in Brussels, tramways in Egypt and gold-mines in Australia. Not until after his death was it realized how overcapitalized were his companies and how much trading in securities had gone on; large numbers of investors gave him their confidence throughout, so powerful was the force of his personality. And he continued to play his public role: in 1895 he stood as Parliamentary candidate at West Leeds for the Conservatives against Herbert Gladstone, and though he lost by ninety-six votes after a recount, he provided the constituents with a spectacular campaign. Eschewing political speeches, he promised government contracts for local industries if he were elected, offered advice to racing enthusiasts, and distributed handkerchiefs engraved with his portrait, all the while riding on a fire-engine with well-known pugilists.
North died of apoplexy on May 5th, 1896, while taking the chair at a board meeting of the Buena Ventura Nitrate Company in Gracechurch Street. His funeral at Eltham, which went into mourning, was attended by huge crowds from all walks of life, and the telegraph office in the town was so flooded by messages of condolence to the family that it had to increase its staff and remain open at night from May 6th to 9th. Letters of sympathy came from the Prince of Wales, the Khedive of Egypt and the King of the Belgians, who also sent a representative to the funeral.
North’s obituary notices reflected the attitudes that the journals had taken to him during his lifetime. To his strongest critic, The Economist, he was “from first to last just a workman who had made a great fortune and loved to proclaim it by extravagant expenditure and ostentatious display. . . . His great notion of hospitality was to drown his friends in champagne.” But the paper also recognized his inherent ability, boldness and personality. The South American Journal was more charitable to North, as, indeed, it had been throughout: “though not a man of much culture or high educational attainments,” it said, “he was eminently gifted with the qualities of judgement, prevision and promptitude which lead the way to conspicuous success in business enterprise or speculation.” But whatever his methods, and they were sometimes less than honest, John Thomas North was a remarkable self-made man who began life as a penniless engineer and died almost a millionaire, and he deserves to be remembered in the country of his origin as he is in that South American republic on the other side of the world with which Britain has had such close links for so long.
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