Meanwhile material prosperity was steadily increasing and population growing at the rate of one and a half per cent. a year. Coal mines had been discovered in southern Chile, railroad building continued, and the finding of the rich Caracoles silver mines in 1870, lying near the northern limit of the jointly occupied territory, not only opened up vistas of wealth, but brought to the front the troublesome question of the Bolivian boundary. Peru became alarmed at Chile's rapid progress in the nitrate and guano business, Bolivia feared aggressions on the part of her powerful neighbour, and in 1872 these two powers entered into a defensive alliance intended to protect their joint interests on the Pacific coast. The reaction inevitably consequent on rapid commercial expansion came in the middle of Errazuriz' term, and was aggravated by a fall in the prices of Chilean exports caused by the world panic of 1873. The already burdened government finances quickly felt the strain; outgo exceeded income, and it was necessary to reduce expenses. Happily the debt, though large, was not excessive. Chile had gone in for no such reckless carnival of borrowing as Peru and the Argentine, and her bonds had been opportunely refunded at a low rate of interest. As the time for the election approached the radical liberals put forward Mackenna on a programme which included not only religious freedom in its widest sense, the extension of the common schools, and the abolition of the tobacco monopoly, but also railways and internal improvements enough to bankrupt the treasury. The moderate liberals were opposed to Mackenna and his programme, so the party split. The convention of moderates was at first unable to agree on a candidate, but on a second attempt Anibal Pinto was nominated. Favoured by the outgoing administration, his election was a foregone conclusion.