Guano Industry

Guano, a superb natural fertilizer, was the dominant export of nineteenth-century Peru; the guano industry constitutes a classic example of a Latin American boom-and-bust export experience. Guano is the dried excrement of seabirds (from Quechua, huanu, "dung"). On small islands astride the southern Peruvian coast, favorable meteorological conditions of the Humboldt Current led, over the centuries, to unparalleled accumulations of unleached guano—sometimes hundreds of feet thick in the Chincha Islands. Rich in nitrogen and phosphates, guano was used extensively by pre-Columbian agriculturalists but sparingly by Spanish colonists. In the early 1840s, guano suddenly became an international export commodity, as Europe, undergoing an agricultural revolution, discovered its powerful chemical, productive, and economic properties.

Thus guano emerged, between 1841 and 1879, as Peru's critical export, in one of the busiest commodity trades of the nineteenth-century world. Peru entered its legendary Age of Guano. Over four decades, roughly 11.5 million tons of bird manure made its way to Britain, France, the southern United States, and a host of minor markets; at prices fluctuating between $25 and $50 a ton, the aggregate market value of the trade reached about $750 million. Peru's long-suffering state swiftly grasped the opportunity, declaring a national monopoly over the fertilizer in 1841, and deflecting over the years the inevitable foreign pressures to liberalize the guano trade. Innovatively led by General Ramón Castilla, Peru commercialized its deposits mainly through profit-sharing consignment sales, dominated during the initial two decades by the British firm of Antony Gibbs and Sons. By the 1860s, the state had turned to marketing contracts with emerging national merchants, Hijos del País (native sons) such as Manuel Pardo. In the 1870s this approach was replaced with a direct-sales policy linked to foreign-debt servicing and exemplified by the controversial Dreyfus Contract of 1869, signed by the government of Peru and the French company of Dreyfus Brothers. If its international marketing, finance, and politics proved complex, extraction of guano remained a primitive if oppressive affair. Modest numbers of convicts, coolies, and other hapless laborers funneled the unprocessed and toxic dung into the bowels of awaiting ships.

Abroad, guano use helped boost productivity of crops such as turnips, grains, and tobacco; within Peru, the staggering revenue injections revitalized national finance and a sagging postcolonial economy and polity in Lima. Overall, the Peruvian state deftly managed to capture an impressive 60 percent of final sales, or nearly $500 million. The boom, climaxing in the 1860s with annual sales of over $20 million, brought coastal Peru squarely into the world economy.

Guano, and the country's relatively easy access to London bond markets, activated a new commercial-entrepreneurial class, centered around the dramatic expansion of public finance and state activities (real estate spending grew fivefold between 1850 and 1870). In politics, such wealth allowed Peru finally to consolidate its shaky caudillo-style central state and smooth over political conflicts among the elite, eventually spawning the reformist politics of the Partido Civil, which superseded military rule in 1872. The social impact of guano was mixed; benefits were largely confined to connected Limeño families while popular groups (such as artisans) suffered the effects of intensified manufactured imports, inflation, and political neglect.

The singular economic fact is that Peru's guano industry led to little sustained, diversified, or nationwide development. In many respects, mounting dependence on bird dung heightened the vulnerability of the Peruvian economy. Apart from the urban commercial bonanza, a burgeoning banking system in the 1860s, and rising modern coastal sugar and cotton plantations in the 1870s, guano worked slowly on the private sector and on the economy and peoples of Peru's vast Andean interior. By the 1860s, official Peru, with its reduced tax base, resorted to ever larger issues on European capital markets. In part, this borrowing was to realize the schemes of visionary politicians who grasped the impending problems of guano exhaustion and the country's low level of national integration. For example, a mammoth railroad construction project, directed by the North American Henry Meiggs, absorbed fully one-fifth of all guano profits. After its frenetic start in the mid-1860s, Peru's national rail network lay largely uncompleted. Meanwhile, by 1875 Peru's foreign debt had soared to £35 million—by far Latin America's largest on record.

As quickly as it appeared, the Age of Guano evaporated in the mid-1870s. The collapse struck all facets of a Peruvian economy and polity built upon the so-called fictitious prosperity. In a few short years, quality reserves dwindled, substitution and nitrates competition intensified, and European lenders retrenched. The result was Peru's world-shattering default on its foreign debt in 1876 and a broad political and social crisis. In the coup de grace of 1879, Peru and Chile went to war for control of the world's next natural fertilizer, the Atacama Desert nitrates. Peru's smashing defeat in the War of the Pacific, which exposed the frailty of her national development, ended in the loss of assets and accomplishments remaining from the export era. Through planning and conservation, the Peruvian government restarted the guano industry for domestic needs in the twentieth century. However, in the 1960s, the Peruvian government allowed fishing companies to remove the birds, which caused their population to fall again. Peru today retains a modest guano industry for local needs. Also, a small government agency cares for the remaining guano birds, which the state promotes as an ecotourism site.

Economic historians have long pondered the meaning of Peru's experience with guano. While all agree it was a lost opportunity for development, explanations widely differ. Traditionally, guano is seen as an adverse enclave economy. In this view, export-sector revenues and demand filtered abroad to foreign capitalists, merchants, and luxury imports, leaving little impulse for the backward domestic economy. The quantitative studies of Shane Hunt overturned this view by showing how guano produced significant demand effects for the Peruvian economy and a potential for competent public investment. However, cost-price pressures still led to a dangerously overspecialized and productively stagnant rentier economy. Some historians stress, in the absence of wide-ranging social reforms, the limited ability of guano to strengthen national markets and promote cogent national consciousness among national elites; guano exemplifies a tragic "dependency" experience. Other historians explore Peru's historical dynamics of integration with the world economy, which display a paradoxical blend of import liberalism and autocratic statism that stifled prospects for growth. Whatever the cause, the guano age left a legacy of superficial urban modernization and fragmented Andean society—persisting dilemmas for modern Peru.

See alsoAgriculture; Foreign Trade.

BIBLIOGRAPHY

Jonathan V. Levin, The Export Economies: Their Patterns of Development in Historical Perspective (1960), esp. ch. 2.

Heraclio Bonilla, Guano y burguesía en el Perú (1974).

W. M. Mathew, The House of Gibbs and the Peruvian Guano Monopoly (1981).

Shane J. Hunt, "Growth and Guano in Nineteenth-Century Peru," in The Latin American Economies: Growth and the Export Sector, 1830–1930, edited by Roberto Cortés and Shane J. Hunt (1985), pp. 255-319.

Alfonso W. Quiróz, La deuda defraudada: Consolidación de 1850 y dominio económico en el Perú (1987).

Paul Gootenberg, Between Silver and Guano: Commercial Policy and the State in Postindependence Peru (1989) and Imagining Development: Economic Ideas in Peru's Fictitious Prosperity of Guano, 1840–1880 (1993).

Additional Bibliography

Cushman, Gregory Todd. "The Lords of Guano: Science and the Management of Peru's Marine Environment, 1800–1973." Ph.D. diss., University of Texas, 2003.

Raimondi, Antonio. Informes y polémicas sobre el guano y el salitre (Perú, 1854–1877). Edited by Luis Felipe Villacorta O. Lima: Fondo Editorial, Universidad Nacional Mayor de San Marcos, 2003.

                                      Paul Gootenberg