{23} The sales of guano and the production of gold and silver made Peru a proud and wealthy nation. Everything prospered until the war with Chili, from 1879 to 1883, ending in the defeat of Peru and the loss of a portion of her territory, including a large part of her guano deposit. She was unable to keep her railroads in operation, much less to extend them, or to pay the interest on her bonds; and thus bankruptcy followed defeat. At last, after fourteen years of default and six years of negotiation, a contract was concluded with Peru by Mr. M. P. Grace, of New York, in January, 1890, on behalf of the bondholders. The bondholders became concessionaires, and in consideration of the release of the bonded debt due to them by Peru, receive valuable concessions, of money, of mines, of railroads, of lands and of guano. These concessions include among other things a government subsidy of $400,000 a year, secured from the customs of Callao; the mines of Cerro de Pasco, which have yielded a yearly average of $2,000,000 for over one hundred years; the entire railway system (769 miles in length) of the state; a grant of 5,000,000 acres for the extension of the Lake Titicaca railroad; a grant of 4,500,000 acres for the extension of the Central or Oroya railroad to the navigable waters of the Ucayala, one of the main tributaries of the Amazon; the exclusive control of the guano deposit until 2,000,000 tons have been sold, from which they expect to sell at least 80,000 tons a year, which will net $1,000,000. The concessionaires on their part agree to liquidate the Peruvian debt, to repair the railroads, and construct 974 miles in extension of the existing system at an estimated cost of $16,000,000, and to assume certain other obligations to a limited amount. This, perhaps the most remarkable settlement ever made between a bankrupt nation and its creditor, is due largely to Mr. Grace, and cannot fail to develop the resources of Peru and restore her days of prosperity. TRADE RELATIONS WITH THE UNITED STATES. It appears from the foregoing statement that all the carrying trade to and from South America, by water, is by foreign steamers; that only four of these are American lines; that the railroads are generally owned and operated by Englishmen; that the bankers and merchants are Englishmen or Germans; that {24} many of the mines, cattle ranches, coffee plantations and other estates are owned by non-resident foreigners; and that the largest consumer of South American products is the United States, although this country sells few of its manufactures and products to South America.