financial crises caused by industrial
stagnation, an excessive and depreciated paper currency and political
disorder. To ensure an income that would meet its foreign engagements,
the government collected the nitrate and iodine taxes and import
duties in gold. As a considerable part of the expenditures were in
gold, the practice was adopted of keeping the gold and currency
accounts separate. In 1895 a conversion law was passed in which the
sterling value of the peso was reduced to 18d., at which rate the
outstanding paper should be redeemed. A conversion fund was also
created, and, although the government afterwards authorized two more
large issues, the beneficial effects of this law were so pronounced
that the customs regulations were modified in 1907 to permit the
payment of import duties in paper. The national revenue is derived
chiefly from the nitrate taxes, customs duties, alcohol tax, and from
railway, postal and telegraph receipts. There is no land tax, and
licence or business taxes are levied by the municipalities for local
purposes. The national expenditures are chiefly for the interest and
amortization charges on the public debt, official salaries, military
expenses in connexion with the army and navy, public works (including
railway construction, port improvements, water and sewage works), the
administration of the state railways, telegraph lines and post office,
church subsidies, public instruction and foreign representation.

The ordinary and extraordinary receipts and expenditures for the five
years 1899-1903, in gold and currency, in pesos of 18d., were as
follows:--

+------+--------------------------+-----------------------------+
| | Receipts, pesos. | Expenditures, pesos. |
| +-------------+------------+--------------+--------------+
| | Gold. | Paper. | Gold. | Paper. |
+------+-------------+------------+--------------+--------------+
| 1899 | 83,051,604 | 45,239.970 | 31,732,797 | 76,749,793 |
| 1900 | 89,869,178 | 46,515,102 | 30,564,821 | 82,143,742 |
| 1901 | 74,665,061 | 35,394,434 | 39,808,517 | 91,087,171 |
| 1902 | 105,072,832 | 33,434,346 | 45,093,278[5]| 89,170,087[5]|
| 1903 | 108,503,565 | 32,490,145 | 12,508,075 | 84,721,437 |
+------+-------------+------------+--------------+--------------+

For 1906 the expenditures were fixed at 149,000,000