Business history research on the Chilean nitrate industry overwhelmingly focuses on the period from its take-off growth in the late 19th century to its collapse in the early 1930s. Yet the industry emerged from bankruptcy, and by the outset of World War II regained its footing. Then the war cut off Chile from many of its markets, the major exception being the United States, where nitrate fertilizer played an important role in agricultural production. When the U.S. entered the war, it assumed control of nitrate distribution and supply. Subsequently, the U.S. government and the Chilean Nitrate Sales Corporation (CNSC) negotiated annual contracts setting the price and quantity of Chilean nitrate exports to the U.S.
I examine the strategically important U.S.-Chilean nitrate trade through the lens of these negotiations. My sources for the Chilean perspective are the records of the CNSC and its parent company, the Chilean Nitrate and Iodine Sales Corporation (COVENSA). Although nitrate production was private, Chilean law specified that only COVENSA, a quasi-public corporation, had the legal right to export nitrate. For the U.S. side, I rely on the records of key U.S. government players, including the War Production Board, the State Department, and the Department of Agriculture. The search for consensus among disparate agencies made the U.S. a difficult negotiating partner, and CNSC executives spent much of the war shuttling to meetings across Washington.
The strains of these negotiations wore heavily on Chilean participants, who were sensitive to the asymmetry between the two parties, but also among American bureaucrats who were frustrated by Chilean demands, and what they felt was a lack of transparency about costs. Ultimately these negotiations were successful. Chilean nitrate played a vital role in American production, especially during 1942, the Chilean industry prospered, and the Chilean government earned critical revenues.