The Guano Trade
Updated: May 15, 2022
"From this report it will be seen that the deposits submitted to examination do not possess the peculiar characteristics of Peruvian guano, although of the same origin, and are not equal to it in value."
Joseph Henry, Secretary of the Smithsonian Institute, 1858
For nearly a century before Latin America achieved independence from Spanish rule, they suffered through economic and political stagnation as well as indigenous uprisings. When they became independent states, they were saddled with massive debt, political instability, and civil wars. Peru was somewhat an exception. The country had remained steadfastly loyal to the Spanish crown and resisted independence. Caught between the revolutionary armies of Simon Bolivar to the north and Jose de San Martin to the south, Peru finally declared independence in 1821. For a short time, Peru also went through a period of debt and conflict with her neighbors. The newly independent countries sought to find an export that would help build their economy and looked at their most profitable and easily extracted resources. Peru hoped to revive the mines that had been a staple of the colonial economy. But this required capital investments that the country didn't have or couldn't get. Yet by the 1840s, the nascent nation had discovered a resource they believed would solve their debt problem and bring economic prosperity. That resource was guano - bird droppings.
Since the advent of agriculture, mankind has sought ways to return nutrients back to the soil. Many methods had been used including manure, bone dust, ground cow horns, and night soil. The Incas knew the benefits of bird guano, but the Spanish had no interest in exploiting this resource. In 1840, a German chemist, Justus Van Leibig, demonstrated the usefulness of guano as a fertilizer, and in particular, he noted that Peruvian guano was superior to any other kind. Suddenly everyone was interested in getting their hands on guano. Peru became the center of attention.
The Humboldt Current flows north along the western coast of South America. It brings with it nutrients and an abundance of fish, especially anchovies. This provides a food source for a myriad of sea birds including pelicans, boobies, and cormorants. The islands off the coast of Peru were havens for thousands of birds. Over the millennia, the islands accumulated a thick deposit of guano. On the Chincha Islands, for instance, the deposits were over 200 feet thick. The dry climate and cool ocean helped maintain the quality of the guano: high in nitrates, phosphorus, and other essential minerals. Farmers, supported by chemists, would deem guano from the Chincha Islands as the finest fertilizer in the world. Demand skyrocketed, and soon foreign ships, mainly British and American, were arriving on the shores of Peru.
In 1841, the Peruvian government made an agreement with the British merchant clearinghouse of Anthony Gibbs and Son. Gibbs, through the government, gained an exclusive monopoly over extracting the now valuable resource of bird guano. The house of Gibbs earned a commission and loaned the Peruvian government money against future sales of the fertilizer. Peru was able to garner other creditors. As the guano industry proved profitable, Peru was able to pay down its outstanding debt from the revolutionary period and began making capital investments in large scale civil projects. One of these was the ambitious plan to build a railroad through the Andes. Peruvian leaders sold the idea to settlers, investors, and entrepreneurs. Like in the United States, towns began to spring up along the proposed route in anticipation of the coming railroad. Gibbs transferred full control of the guano trade to the government in 1861. The industry was nationalized and the government was able to set high prices for the in-demand commodity. From 1840 to 1870, Peru exported 12 million tons of guano at a worth of $500 million US dollars. For a time, it seemed as if Peru was headed for economic solvency and prosperity.
Like any mining activity, mining the deposits was labor-intensive. Companies relied on indentured servants, prisoners, and migrants. The demand for cheap labor resulted in the blackbirding of Chinese workers. Blackbirding was a means of coercion through deception or kidnapping people into slavery or forced labor. Many of the Chinese thought they were headed to the California gold mines. By the mid-1850s, the Chinese made up two-thirds of the mining labor in Peru. After the Civil War, black labor would also increase.
Mining was a highly manual process. Workers used picks, brooms, or shovels to loosen the guano. Then they filled sacks with the loose guano and emptied them into sieves to remove impurities. The purified guano was then loaded onto ships waiting offshore. It took an average of eight months to fill a ship with a cargo of guano.
Because of the high price of the Peruvian guano, countries began seeking lower-cost sources. In the United States, American farmers petitioned Congress to increase the supply of the valuable fertilizer. President Millard Fillmore, in his inaugural address of 1850, said that the United States should "employ all the means properly in its power" to obtain it. This lead Congress to pass the Guano Islands Act of 1856. Through this act, the United States laid claim to any uninhabited or unoccupied guano island. The act represents one of the earliest authorizations for the United States to annex land beyond the continental boundaries. There are still islands in the Pacific and the Caribbean that the United States retains ownership of due to this act.
The great Peruvian guano boom came crashing down in the 1870s. There were a number of factors that led to the demise of the industry. First and foremost was the fact that guano mining wasn't sustainable. The deposits were depleted within a few decades. The mining activity was also detrimental to the seabirds who used the islands and were the source of the guano. The supply could no longer meet the demand. The high prices asked by the Peruvian government forced countries to seek alternatives. Chile became a major competitor as it began exporting saltpeter, or potassium nitrate. Revenues from the guano trade were siphoned off by government officials to well-connected individuals and bureaucrats. Then came a severe global recession in 1873 which was called in Europe the Long Depression. As markets crashed, demand for guano all but evaporated.
Peru found itself once more in debt as revenue dried up. European and American creditors abandoned them. Many governmental projects were left unfinished. Most prominent of these was the railroad that was never completed. Towns and industries that were built on the prospect of the railroad were now deserted or struggling economically. By 1876, Peru had defaulted on its loans, and the government unable to avert economic disaster. This prompted a change in the government, and the new regime would enter into a war with Chile and Bolivia over rights to nitrate deposits in the Atacama Desert. The war was a catastrophe for Peru, one which the nation would find hard to recover from.
The new nation of Peru certainly squandered a golden opportunity. Even though guano, in the long run, was an unsustainable resource, it had the potential of priming the emerging Peruvian economy and get the country headed in a stable and prosperous direction. Different schools of thought offer different reasons why it failed. The government monopoly stifled the free market. The government and creditors used future guano earnings as collateral for loans and financing of large-scale projects. The country failed to diversify into other industries. Many of the colonial era mines were left with little investment. Then there was the government corruption, the ill-timed depression of 1873, and the emergence of newer sources of fertilizer.
Yet for a brief time, the world ran on bird droppings.
The Great Peruvian Guano Bonanza: Rise, Fall, and Legacy: Council on Hemispheric Affairs
The English House of Gibbs In Peru's Guano Trade in The Nineteenth Century: Megan L. Johnson (Thesis)
The Smithsonian and the 19th Century Guano Trade: Paul F. Johnston (National Museum of American History)
When the Western World Ran on Guano: Cara Giaimo (Atlas Obscura)