Chile recovered with some difficulty from the industrial disorganisation and tremendous expenditures caused by the civil war. Balmaceda's vast issues of paper money disturbed government finances and made the returns of private enterprise uncertain. The world-wide fall of prices in the years following 1893 hurt Chilean exports, and an era of economy made necessary by closely balanced budgets succeeded the flush times. Meanwhile, the marvellous material growth of the Argentine Republic began to make Chileans doubt if their country could retain that military and naval hegemony which she had possessed since her great victories over Peru and Bolivia. Shut in between the Andes and the sea, on the north an uninhabitable desert and on the south the bleak Antarctic waste, Chile naturally envied the limitless and fertile plains over which her neighbour might spread her population, and the Argentine navy was fast approaching her own in size and efficiency. By the year 1895 Argentina's revenue exceeded Chile's nearly twenty per cent., while the former's foreign commerce was seventy per cent. and her population fifty per cent. greater. Their rivalry, none the less real because tacit, explains the seemingly unreasonable bitterness of the dispute over the differing interpretations of the treaty of limits. That treaty fixed the boundary at the crest of the Andes, but when the joint commissioners appointed to make the surveys reached southern latitudes where the range becomes ill-defined and runs off into the sea they found it difficult to determine just where the crest was. The Argentines insisted on a line drawn between the highest peaks because that would give them more territory, while the Chileans contended for the watershed between the two oceans. Another dispute also arose about the line which ought to divide the Argentine from the province which Chile had taken from Bolivia. Though in both cases the disputed territory was comparatively valueless, national feeling rose to an extraordinary pitch and more than once war has been imminent. The northern dispute was at length settled in 1898 by the arbitration of the American minister to Buenos Aires, but, though a similar method of settlement had been agreed upon as to the other and more important question, its final submission was delayed from year to year, and meanwhile each nation suspected the other of aggressions. Argentina ordered new iron-clads, which she could ill afford; Chile ordered still better ones, and Argentina kept pace. In 1898 and again in 1901 the two countries were on the brink of a war which certainly would have ruined either one or the other. Happily, better counsels prevailed and arbitration by the English government was hurried forward, resulting in 1902 in a settlement with which both parties are in reality satisfied, and the fine iron-clads building in Europe are now for sale. BOLIVIA CHAPTER I THE CONQUEST AND THE MINES