uth should be
allowed to mine and to export the produce without tax or other
hindrance. To facilitate this arrangement, Chili was permitted to
maintain a representative in the Custom House at Antofagasta. The
nitrate business of those days was chiefly in the hands of a Company,
the heads of which were the British house of Gibbs, a Chilian named
Edwards, and the Chilian Government. On February 23, 1878, Bolivia saw
fit to impose a tax of 10 _centavos_ (41/2 pence) per _quintal_ (152
pounds) on all nitrates. Chili remonstrated; but Bolivia insisted, and
declared, in addition, that the tax was meant to be retrospective, and
that unless all dues were paid before February 14, 1879, the nitrates in
the hands of the exporters would be seized and sold by auction. As the
day which had been fixed for the seizure drew near, a Chilian squadron,
under Rear-Admiral Rebolledo Williams, was got ready for the purpose of
seizing Antofagasta itself. It was this fleet which, on the morning of
February 7, 1879, steamed out from Valparaiso, with Jim and Terry, as
Chilian officers, on board the _Blanco Encalada_, the flagship of the
squadron.

As the fleet weighed anchor and stood out to sea the bells pealed from
every steeple in the town, while the guns in the hastily improvised
fortifications above the town thundered out a farewell salute to the
ships which were going to vindicate the honour of Chili, and the action
of which was tantamount to a declaration of war. As each warship
rounded the point she returned the salute with all her starboard
broadside guns, while the ensigns at the mizzen-gaff were dipped thrice
in jubilant farewell.

Although war had not as yet actually been declared against Peru, the
Chilian Government had very strong reason to suspect the existence of a
secret treaty between that country and Bolivia; and as Peru was the
possessor of a navy of considerable strength it behoved Admiral Williams
to be exceedingly careful that he did not run into any ambush of
Peruvian ships; a very sharp look-out was therefore kept incessantly
during the six days which the fleet took to steam from Valparaiso to
Antofagasta. There was no Bolivian navy, if we except a few steam-
launches and old spar-torpedo-boats; there was nothing, therefore, to
fear in that direction; but, as the Chilians had not as yet had time to
advance their forces overland up the coast, a contingent of five hundred
regulars was put on board the ships to eff