"...increasingly dire situation. The advent of the Chatelier process in 1901 had already caused a dramatic drop-off in the revenues of Chile's nitrate mines, a decline that had already been noticeably exacerbated by improvements in the process formulated by German chemist Fritz Haber a decade later. [1] The remarkable internal improvements of Chile at the end of the 19th century and its corresponding nascent industrial base had been dependent on said revenues and fears of a second crisis, this one caused by the end of Valparaiso as a major transpacific port with the opening of the Nicaragua Canal had driven much of Chile's bellicose foreign policy since the turn of the century.
The reality was that Chile was, perhaps more so than any other member of the Bloc Sud, the most fragile partner in the alliance, and there was a reason why the United States resolved near the end of 1913 to develop a strategy to knock them and their nitrate supplies out of the war before focusing their energies on the more formidable trio of the Confederacy, Mexico and Brazil. Despite being at the time wealthier than Japan or even Spain, incomes were greatly stratified and the divides between the working class and middle class were profoundly sharp, and the leap from middle class to aristocracy was equally dramatic, with little in between and social mobility minimal. Though Chile had linked almost all of its cities north-to-south via the National Railroad (financed, of course, by British loans backed by nitrate mining) the vast distances and virtually empty mountains and deserts in between the major cities, particularly the mining towns of the North and the Santiago environs in the Central Region, made every province practically its own island. Chile's agriculture was dominated by latifundias dotted across her more fertile south, not unlike the powerful landowners elsewhere in the Americas in their politics and influence but atypically inefficient in their farming practices, thus often heavily indebted and making the situation for them and their tenants worse with outdated techniques and attitudes, sharply contrasting with the country's more sophisticated financial and industrial sectors. This made the country heavily reliant on internal trade across great distances and external imports at the key ports dotting the coastlines, and this thus made the annihilation of the Chilean Navy at the Desventuradas and the subsequent pseudo-blockade by the United States so devastating to the Chilean economy - an economy already in decline from its late Belle Epoque heights was given a grievous body blow from which it never recovered.
The Crewe Note that had mandated that trade lanes across the Atlantic remain open was generally inferred to apply to the Pacific as well, but it had largely been American, Mexican, Peruvian and Chilean shipping that had dominated the eastern Pacific once past Tehuantepec or the Panama isthmus, and it was just European-flagged vessels that were held to be immune from seizure and impoundment. The security of the Nicaragua Canal was mostly intact but many European insurers were nonetheless reluctant to touch plans to sail into the active warzone in the Caribbean which had nearly halved trade with Mexico in comparison with the United States or Confederate States; the situation on the other side of the Central American Isthmus was worse, as the United States reserved the right to refuse passage through the Nicaragua Canal in the time of war to any vessel that may be carrying contraband to Chile or Mexico's Pacific ports, and thus began a process where European vessels rather than take the risk would stopover in the far Caribbean, switch their cargo to an American, Colombian or Venezuelan ship, and then evacuate. Even Britain was cutting short the extent of its routes, which meant that crucial foreign trade to Chile had almost entirely collapsed from external sources and her own robust merchant marine and budding fishing fleets were fair game now that her coasts were almost entirely unprotected. [2]
The (at last successful and long-delayed) start of the American invasion of Chile in November of 1914 thus presaged one of the most dramatic economic collapses in the history of mankind. The economic headwinds for Chile had been long-brewing and public contempt for Las Oligarcas who ran the country's Congress and Presidency as a personal fiefdom was at an all-time high. Food prices spiked, government and business revenues plunged, and the rising numbers of unemployed or underpaid were haughtily asked why, with all their idle time, they were not volunteering to go fight the Yanqui invader? The conditions for the social eruption that brought down the Republica Oligarca, as the epoch is still known today, were ripe, and they were founded in very straightforward commercial and economic impulses..."
- Total Mobilization: The Economics of the Great American War
[1] To the looming dismay of Peru and Bolivia when they take back their lost lands from 1881 and realize they missed the boat on Chile's Saltpeter Boom
[2] Hey remember that time I started casually throwing around references to Hungary in October/November 1918