"Disruptive Technologies, Financial Crisis and Political Shocks: The Guggenheims and the Chilean Nitrate Industry, 1926-33"

‘Guggenheims’ and ‘failure’ are not normally words that one associates together. Yet the Guggenheims’ attempt to reconstruct the Chilean nitrate industry after the mid-1920s ended with its almost total collapse during the Depression, as markets shrank and competition from European chemical firms producing synthetic nitrogen proved insurmountable. Until the early 1920s British, German and local producers had dominated the industry, using technologies largely unchanged since the 1880s. Shortly after the war, however, the Guggenheims developed a new process to exploit Chile’s nitrate deposits, commencing production in 1926. For a time they operated their plant alongside the older producers, but in 1929 they acquired their most important local competitor, the Lautaro company. After a year’s negotiations, they then formed a joint venture with the Chilean state, COSACH (Compañía de Salitre de Chile), which absorbed most of the older producers. The new firm, the government and the Guggenheims hoped, would monopolise exports and be in a stronger position to negotiate cartel arrangements with the European synthetics producers. However, unable to raise fresh capital during the Depression, the company lasted no more than two years, and in January 1933 a new Chilean administration announced its liquidation. This paper reappraises the reasons for the failure of the Guggenheims, who controlled the management of COSACH. Using a wide range of sources, including papers in the large Fondo Salitre in the Chilean national archive, we focus on three issues: first, the nature and impact of disruptive technologies and financial and political crises on the Chilean nitrate industry; second, the reasons for the failure of COSACH to meet the predicament; and third, the managerial competence of the Guggenheims in terms of personnel, knowledge, analysis, strategy and tactics.