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In 1873 Juan de la Cruz Benavente, the representant of Bolivia and José de la Riva Agüero, the minister of exterior relationships of Peru, signed a treated that said they will unit and combate together to any exterior attack but they will determinate when they will comply it. All of this was to prevent the posibly invasion of Chile and also because Bolivia wanted to feel more safe and secure to fight against Chile because with the treaty they know Peru will help them. So the war began because Bolivia and Chile had a taxes dispute and Chile declarate the war to Bolivia and also to Peru because they get involved because of their secret treaty with Bolivia that obligates them to support Bolivia.

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Secret Treaty between Peru and Bolivia-Fiorella V

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Secret Treaty between Peru and Bolivia-Fiorella V

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On February 6, 1873, Peru and Bolivia signed in Lima a secret treaty of alliance against Chile. The document they signed had eleven central articles in which it stated that they would work together and unite to protect themselves from invasion of Chile. The Secret Treaty between Peru and Bolivia caused the War of the Pacific because it start because of a dispute between Bolivia and Chile about taxes of nitarte and Peru got involved because of its alliance with Bolivia and also because Peru has a great rivalry with Chile. So Chile first declared war on Bolivia for the tax increase and then Peru got involved because of the secret treaty they had, resulting in Chile declaring war on both. In addition Bolivia wanted to feel more secure against Chile, so it signed a treat with Peru. And Peru thought it was going to win the war, that they were going to win territories, lands, and that it would benefit their economy by joining with Bolivia to fight Chile (War of the Pacific).

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During February 6, 1873, Peru and Bolivia, through their representatives Juan de la Cruz Benavente and José de la Riva Agüero, signed the Secret Treaty of Defensive Alliance in Lima. With this pact Peru treid to become the great power of the Pacific. The treaty consisted in that if one of the two countries was attacked, the other country would analyze the problem and try to defend from any external agression and manage any cost to be paid if Chile makes any agression against Peru and Bolivia. That is why Bolivia had more power economically since it had the support of Peru, that is why it felt "powerful".

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On Thursday, February 6, 1873, the secret agreement of union between Bolivia and Peru was executed in Lima, in anticipation of the increasingly imminent invasion of the coastal countries of these territories by Chile. The Republics of Bolivia and Peru, formally desiring to strengthen the ties between them, in order to increase their strength and mutually assure certain rights, establish the present Treaty of Union of Defense; for this purpose, the President of Bolivia has delegated sufficient powers for such negotiations to Juan de la Cruz Benavente, Envoy Extraordinary and Plenipotentiary of Ministers in Peru, and to the President of Peru, José de la Riva Agüero, Minister of Foreign Affairs; who have accepted all the positions. The war started because Bolivia and Chile had a tax dispute, for which Chile declared war on Bolivia and also Peru, since it agreed to its secret treaty with Bolivia.

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It could be said that Antofagasta, the Chile-Bolivia Border, was the starting point of the War of the Pacific. It was part of the Bolivian territory, with great resources for the highly sucessful fertilizer business. Chile had a company called The Antofagasta Nitrate & Railway Co. who had a contract with Bolivia to be able to extract nitrate while paying a reasonable tax which could not be increased in 25 years. In February 1878, The Bolivian Congress and the Assembly declared that the contract was incomplete and not valid. Bolivia decided to increase a 10 cent tax to the Chilean company, who thought it was an illegal action. Bolivia said that if the company wouldn't pay, then they will be forced to shut it down and stop extracting nitrate from Antofagasta. Chile responded by declaring war on Bolivia, which ultimately made Peru join in war with Bolivia due to their secret treaty.

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The 10 Cent Tax was proposed by the National Assembly of Bolivia in 1873 that made the the Chilean company Salitres y Ferrocarriles de Antofagasta, also known as CSFA, pay tax of 10 cents for every 100 kg of saltpetre exported and Chile decided to refuse of paying this tax. Bolivia's Government said that if the mineral companies didn't pay the tax, they will shut down their fabrics on Antofagasta. Then on february 14 of 1878, this agremment continue so Chile decided to pay the tax but during this period, both countries try to get a solution for the problem. This disagrement was one of the reasons who bringed the War of the Pacific who also joined Peru because of a treat they got with Bolivia.

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The secret treaty between Peru and bolivia, also called the defensive treaty, was an international agreement signed by Peru and Bolivia by José de la Riva Agüero y Looz Corswarem and Juan de la Cruz Benavente, at the site of Lima in 1873. According to the signatories, the objective was the process to follow before the war and during the war, and also to define the costs to be paid to Chile for the aggression. But according to experts the objective of the alliance was to impose Chile's convenient frontiers on Peru, Bolivia, and Argentina while Chile was militarily weak. This could have caused the war because when Chile saw a treaty and saw that it was not fair, it decided that it should act and start attacking military bases and break the alliance. Likewise, Bolivia, having the support of Peru, felt more powerful, becoming more aggressive with Chile and provoking it.

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On Thursday, February 6, 1873, the secret pact of alliance between Bolivia and Peru was signed in Lima, in anticipation of the increasingly immediate invasion of the coastal territories of those countries by Chile.
The document that the Bolivian representative Juan de la Cruz Benavente signed with the Minister of Foreign Affairs, Mr. José de la Riva Agüero, ordered Bolivia and Peru to unite and bond, mutually guaranteeing their territorial integrity. As a product of the mistrust that has always existed in relations between the two republics, it was established that each of them reserved the right to qualify. The Peruvian Congress approved the alliance on April 22 and the Bolivian Assembly on June 2 of that same year, 1873.
The Republics of Bolivia and Peru, eager to solemnly tighten the ties that unite them, thus increasing their strength and reciprocally guaranteeing certain rights, stipulate the present Treaty of Defensive Alliance; for which purpose. the President of Bolivia has conferred sufficient powers for such negotiation to Juan de la Cruz Benavente, Envoy Extraordinary and Minister Ambassador to Peru, and the President of Peru to José de la Riva Agüero, Minister of Foreign Affairs; who have agreed to the treat

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It was intended to impose on the Chilean company Compañía de Salitres y Ferrocarriles de Antofagasta, for an amount of 10 cents for every 100 kg of saltpeter exported.

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Peru's economy depended on global exports, which meant that it was hit extremely hard by the 1873 worldwide depression and the resulting decline in exports and the Peruvian economy declined. In addition, they lent money without restraint, using guano production to reinforce and spent the money on unnecessary things, they also had a bad choice of projects for the development of Peru, which was not able to diversify its long-term economic dependence, accompanied by bad fiscal management. Peru's guano-based financial mirage eventually disappeared in the 1870s. On this basis, historian Paul Gootenberg explained "Under the combined weight of manic activity, rampant indebtedness, poor choice of development projects, guano evaporation and gross fiscal mismanagement, the Peruvian state finally collapsed". And as a result the guano they used to sell evaporated. So Peru, thinking that they were going to win the war against Chile, went to fight, thinking that if they won they would gain territory in which they would have more guano, and then sell it as fertilizer and obtain more saltpeter to make gunpowder and nitrogen fertilizer. In this way, the economic crisis suffered at that time would disappear.

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Bolivia and Chile shared a border, however they didn't care because all of it belonged to the Spanish, but when the independence happened, Bolivia and Chile didn't have their borders well marked, so they used to think that this part was also theirs because they didn't know where exactly it started, so the disputes started because nobody knew well which part was theirs and where was the border.
Bolivia and Chile have a border in Antofagasta, Chile have a company which extract nitrate, a mineral in Antofagasta. They have a treat where Chile extract nitrate from there, Bolivia could not increase the price of the products during 25 years, however Bolivia increase the price of the taxes in 10 cent tax y they said if they didn't pay they would quit them the permission of extract nitrate of Antofagasta, Chile didn't agree and declared  the war to Bolivia, doing that the Pacific War start.

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Nicolas DezaIn 1873 Juan de la Cruz Benavente, representative of Bolivia, and José de la Riva Agüero, Minister of Foreign Affairs of Peru. The document they signed had eleven central articles that said they would work together and unite to protect themselves from the invasion of Chile. .All this was to prevent the possible invasion of Chile. Peru advanced to become the great power of the Pacific. The treaty was that if one of the two countries was attacked, the other country would analyze the problem and try to defend itself from any external aggression and manage the costs to be paid if Chile carried out any aggression against Peru and Bolivia. The power of Bolivia was much greater, since it had the support of Peru

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Nicolas DezaIn 1873 Juan de la Cruz Benavente, representative of Bolivia, and José de la Riva Agüero, Minister of Foreign Affairs of Peru. The document they signed had eleven central articles that said they would work together and unite to protect themselves from the invasion of Chile. .All this was to prevent the possible invasion of Chile. Peru advanced to become the great power of the Pacific. The treaty was that if one of the two countries was attacked, the other country would analyze the problem and try to defend itself from any external aggression and manage the costs to be paid if Chile carried out any aggression against Peru and Bolivia. The power of Bolivia was much greater, since it had the support of Peru

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After the discovery of the Caracoles Ore, the Chilean economy adopted a free market posture that revitalized the export of raw materials and boosted financial and banking activity. The latter was aided by the Banking Law of 1860, which allowed banks to issue paper money without state supervision up to 150% of their capital reserves. This resulted in a printed circulating surplus that was not backed by the state.

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All started in the Pacific War, where areas independent of a country like Paracatá and Antofagasta, which were abundant in guano and saltpeter, the countries: Chile, Peru, Argentina and Bolivia, still did not know who these territories were going to belong to. For this Chile and Bolivia make an agreement, Chile could exploit these areas and Bolivia would not raise taxes in 25 years. The problem started in 1878 when Bolivia was not doing well economically and Chile did not want to pay more taxes, and decided to invade and keep Antofagasta. But Bolivia had an opportunity, 5 years before it had signed A MUTUAL DEFENSE TREATY WITH PERU, this had as its main objective mutual aid against threats or aggression from foreign countries, as representatives of the agreement we had José de la Riva Agüero and Juan de la Cruz Benavente representing Bolivia.

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To get in context, in 1860 a law was passed in the banks to print paper money but without an state control. Due to this, a surplus was generated, since it had no metallic support.

Years later, in 1876, the world economic depression caused a shortage of silver and, therefore, of metallic support. Irregularities were created that didn’t allow the collection of credits, due to the debtors. Banks were forced to make credits without any interest, because they had no way to back them up. They decided to keep their metallic reserves and replace them only with their bank bills. Then the Minister issued internal debt bonds of up to 3,000,000 pesos. But he forced the Chilean government to contract a credit for 5,000,000 pesos in order to pay the bonds. Chile dictated the inconvertibility of the paper money in gold, and this generated a crisis. Despite the international economic crisis of 1878, Chile was the least affected between Peru and Bolivia. The salitre properties were the best way to restart work and an opportunity to improve their economy. It would also help them in the exportation since the paralysis caused by the departure of Chilean workers, also the naval blockade and the destruction of the shipping facilities, was affected. On the other hand, Bolivia confiscated goods of Chilean companies that were operating in Bolivarian zones. These companies didn’t pay the export duties, they were required to pay. Chile was supported by a treaty of limits of 1874, which exempted Chile from paying them for 25 years, but due to the world economic crisis, Bolivia raised it to 10 cents.

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The Peruvian state, which in the 1870s was civil Mauel Pardo as president, made quite bad decisions that made everything gained from the guano trade fall into an abyss, leaving them in an economic crisis. The Peruvian state lent money without limits creating indebtedness with other countries, the poor fiscal management was another of the things that contributed to the economic crisis, the evaporation of guano, which was one of the things that generated the most money for the state, they also spent the money in unnecessary things and the bad choices in projects that did not increase or increase the economy of the country. These were the causes of the decline of the Peruvian economy, unfortunately as Gootenberg says "Under the combined weight of manic activity, rampant indebtedness, poor choice of development projects, guano evaporation and serious fiscal mismanagement, the state of Peru finally collapsed..." . Finally, Peru having already signed a defense alliance treaty with Bolivia and seeing that Bolivia was at war with Chile, Peru thought that they could defeat Chile and gain weapons, earn money and expand their territory and thus increase the production of guano and recover and even improve the economy they lost.

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The ten cent tax was a cause for the War of the Pacific. Chile had to pay this quantity to bolivia for every 100kg they transported to Antofagasta, Chile didnt agree with this proposal and demanded them andBolbia said that if they didnt pay this tax they will close their fabrics of minerals of their Chile companies.

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The Compañía de Salitres y Ferrocarriles de Antofagasta was a Chilean company. On November 27, 1873, the company signed a contract with the Bolivian government, which authorized the exploitation of minerals for 15 years. This contract was not ratified by Bolivia, since at that time it was analyzing its business with Chile. Finally, everything resulted in the 1874 limit treaty. In this contract, Bolivia was obliged not to impose new taxes on Chilean people, industries and capitals for 25 years. It could neither raise nor lower taxes. However, Bolivia decided to ratify the contract if a tax of 10 cents per quintal of nitrate exported from Bolivian territory was paid. This decision affected the interests of the Compañía de Salitres y Ferrocarriles de Antofagasta, which was finally considered by the Chilean government as a violation of the agreement with the Bolivian government. When the company refused to pay this tax, Bolivia decreed the withdrawal and seizure of the saltpeter company, which finally ended up being a cause for the War of the Pacific. This event is extremely significant because it marks a reason for the war between Bolivia and Chile. On the part of Bolivia, desperate because they had an economic crisis and their income was not enough, they were forced to raise their taxes to benefit themselves, regardless of the contract they had with Chile, which forbade the decision. Chile, in the same way was in an economic crisis that was not worsening because of the income it was getting from Bolivia, it was not convenient to raise or lower its taxes, this is how they felt offended with Bolivia's decision. They felt betrayed by Bolivia, because when they were expelled by Bolivia, they lost money, in addition they were going through an economic crisis that, since Bolivia was a source of income and this source no longer existed, created a worse economic situation for Chile. Finally, Bolivia did not improve its situation because it forced Chile to leave its territory, but it was already invaded by Chileans, this made the situation more difficult, which ended up being much worse. Chile declared war on Bolivia, which if they had a very difficult situation in their country, with the war declared, everything mattered.

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The 10 cent tax was proposed by National Assembly in the year 1873, 10 cent tax was a cause of the war of the Pacific, Chilean company "Compañia de Salitres y Ferrocarriles de Antoghasta" had to pay this amount for every 100 kg of saltpeter exported.

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The 1870s was a decade of crisis and change for the economy of Peru. Guano was a product that was very exported from Peru, but this product began to drop terribly because for some bad decisions made the president and since guano was the most requested product, Peru entered an economic crisis. New products entered the market that made it a huge competition.
The state did not receive their profits so they could not make a program of their expenses.
The national consignees did not comply with their contracts and were late with the payments due to the low demand for the guano. So the state have no money and they spent the money they didn't have on unnecessary things. After signing an alliance with Bolivia and this country went to war with Chile, they thought it would be a good idea to join the war in order to restore their economy by winning land, money or weapons, in the end they ended up losing.

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In the middle of the 19th century Peru had the monopoly of guano (it was a big part of the economy of the country) but when saltpeter was discovered in Tarapaca and Andofagasta (Bolivian city at that time), saltpeter was in great demand at that time because it was a fertilizer and also served for the manufacture of gunpowder, Peru, Bolivia and Chile were the countries that exported more to the United Kingdom (which was the country that most requested it) however, the saltpeter that was in Chile was very small amount so they decided to make a business in which the Chileans (or Chilean companies) could exploit the saltpeter that was in Antofagasta in exchange for paying a tax which according to the agreement made by both countries should not be increased by Bolivia, however, in 1878 Bolivia increased these taxes, which caused Chile to oppose to pay this tax.

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Compañía de Salitres y Ferrocarriles de Antofagasta was a Chilean company. In 1873, the company signed a contract with the Bolivian government. Bolivia decided to ratify the contract if a tax of 10 cents per quintal of nitrate was paid.

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Mariano Ignacio Prado Ochoa was a military man and former President of the Republic on two occasions. In the first he was successively Dictator, Constitutional President and in the second term Constitutional President. he formed the Quadruple Alliance, bringing together Bolivia, Ecuador, Chile and Peru, successfully confronting the Spanish squadron in the battles of Abtao (1865) and Callao (1866), during the War of the Pacific, forcing it to abandon the coasts.