The discovery of the rich guano deposit's in the Bolivian Littoral gave rise to the greed of Chile towards that territory; this greed was exacerbated later due to the discovery of saltpeter deposits in the same region.

The Chilean government tried to acquire dominion over the guano deposits located in Bolivian territory through a law of October 31, 1842, which resulted in a conflict regarding the ownership and possession of the Littoral in Atacama. This law gave rise to an immediate protest on the part of the Bolivian minister in Santiago, Casimiro Olaņeta.

American diplomats devoted their attention to the Bolivian-Chilean conflict on account of the Chilean Navy and the rights of the American ship Sportsman. Furthermore, the American envoys testified in their correspondence to the development of the events caused by Chile's desire to annex the Bolivian territories long before the War of the Pacific.

The capture of the cargo ship the Sportsman, occurred on August 19, 1857, in the Bay of Mejillones. This resulted in a long conflict between the United States and Chile, which demonstrated not only the Bolivian rights over the Littoral, but also showed the Department of State as supporting the owners of the Sportsman, in defending these rights.

This controversy, from the American point of view, was initiated by a note of protest issued by the interim Charge d Affairs Frederick A. Beelen, to the Minister of Foreign Relations of Chile, Francisco Javier Ovalle, reiterating the content of a conversation held regarding this affair.

The American envoy makes an initial defense of the good faith of the American entrepreneurs and reiterates the jurisdiction of Bolivia over this part of the coast of the Pacific. In this regard, he said:

Mr. Beelen, days later, provides an account of all that happened to the Department of State, and in his note, makes reference to the dispute that arose between Bolivia and Chile over the guano deposits, interpreting the boundary problem in the following manner:

In that period, the American government appointed Mr. John Bigler as new minister to Santiago, with instructions to solve the controversy that arose between Chile and the United States due to the capture of the Sportsman. In one of his initial actions, Mr. Bigler forwarded a letter to the Minister of Foreign Relations of Chile, presenting an extensive analysis of the sovereignty ruling over the territory in which the American ship had been captured, which also constitutes another favorable testimony to the defense of the Bolivian rights over the region. In this occasion he said:

The Chilean Government responded to the American minister by stating that the claim for damages to the Sportsman should be forwarded to the Bolivian government, for supplanting the possession of the territory over which they had no jurisdiction at all. Indignant, Minister Bigler reported on this action to the Secretary of State and reiterated that in his opinion, Bolivia did have indisputable jurisdiction over the territory in which a Chilean boat hand behaved arbitrarily. (3) Two weeks later, the American Minister, in support of his thesis, forwarded to Washington a copy of the newspaper El Mercurio that referred to the firm and strong action with which Bolivia protested to Chile with regard to the incident of the Sportsman, even though it pointed out that Bolivia was in no military condition to defend her own rights. He also emphasized his confidence in the fact that Bolivia would not be humiliated for trying to defend her just rights that protected those of a ship that traveled under the American flag; for this, the American envoy would establish the presence of the United States in order to obtain the respect and fear of Chile. (4)"

The Foreign Minister of Chile, Mr. Francisco Ovalle, sent a note to the American representative, in which he presented the claims and rights of Chile over the territory in dispute. In his memorial, Ovalle pretended to refute the note received from Minister Bigler, in the same way, he made reference to the annexation of Texas and Lower California. Due to this reason, Minister Bigler was obliged to present a new note in which he provided even more detail regarding the historic link of the Littoral of Atacama with Bolivia and, using concepts pertaining to international law in force at the time, explained the annexation of Texas and Lower California and tried to establish the difference between those cases and the pretension of Chile over Bolivian littoral territories.

Given the importance of the concepts expressed by Mr. Bigler, a part of the note is transcribed below:

In March of 1858, Bigler reported to the Secretary of State that he had received two notes dated In February from the American minister in La Paz, John W. Dana. In these notes, he informed that the President of Bolivia was appointing a plenipotentiary minister in order to negotiate a treaty to delineate the boundaries and to demand compensations for the violation made by Chile in the Santa Maria Bay, by not acknowledging the legitimate permits of the customs tax collector in Cobija, which is a legal Bolivian port.(6)

The American envoy in Santiago informed later, in August 1858, that formal negotiations had been initiated between the representatives Jose Macedonio Salinas from Bolivia and Antonio Varas from Chile, to solve both the boundary problem and the case of the Sportsman.(7)

At the end of the year 1859, the American envoy forwarded to the Secretary of State a collection of pending claims that the government of the United States had against Chile. The case of the Sportsman was included with the recommendation that is should be sent to an arbitrary tribunal and reiterated that, In view of the seriousness accorded by Chile to the fulfillment of their obligations, consequence of violations to compromises of international law, the President of the United States should request authorization from the American Congress to be able to resort, if necessary, to the use of force for the purpose of obtaining justice. The American minister stated that he found it very surprising that the policy of reconciliation with Chile, applied until then by the United States, was not correctly understood nor adequately appreciated. He reiterated that he was undertaking many firm efforts to obtain solutions that were just and honorable and that he would use all his power to correct, in a peaceful way, all the errors made by the Government of Chile, avoiding thus to have to resort to force.(8)

The American consul In Cobija forwarded an extensive report to the Secretary of State in February 1863, in which he mentioned that the warship Esmeralda had weighed anchor on Mejillones Bay during the last week of January, in order to protect a shipment of guano for Europe. He also mentioned that this fact would create new difficulties between Bolivia and Chile, which would undoubtedly affect American interests in the region.

The American consul said that a Chilean citizen, named Nicomedes Ossa, had received four years earlier concessions from the government of Bolivia for the exclusive exploitation of guano deposits. He added that Mr. Ossa had sold these concessions to a Mr. Gama, whom in turn passed them further to the firm Alsop & Co. from Valparaiso, a branch of a firm operating in New York and San Francisco, California.

The American consul also added that in August 1862 a Mr. Lopez discovered guano deposits in Mejillones, and in order to be able to exploit them, created a society with a Chilean, Matias Torres, a neighbor residing for many years in Cobija. The consul stated that Mr. Torres traveled to Valparaiso and elicited the interest of a French businessman, by the name of Garday, and they obtained from the government of Chile a concession for exploitation. With knowledge of these actions, Mr. Gama, who then had agreements with the firm Alsop & Co., with regard to guano in deposits in Paquica, requested protection from the government of Bolivia on the understanding that this settlement was in the territory of that country. He mentioned that the government of Bolivia initiated a judicial action against Torres and Lopez to guarantee the possessions of Gama. For this action, Mr. Torres requested assistance from the government of Chile, which sent the steamboat Maipu to protect him. The warship Esmeralda arrived with the Maipu carrying on board engineers of the Chilean army who started a mining exploration of the guano deposits on the coast of Mejillones and adjacent areas.

Consul Lewis Joel concluded his note reminiscing over the fact that five years earlier, the warship Esmeralda had also captured the Sportsman for boarding copper mineral in Mejillones.(9)

The American consul in Cobija, Lewis Joel, reported to the Secretary of State in April 1863 that Bolivian President Acha had convoked Congress to deal with the illegal occupation by Chile of part of the Bolivian coast. Congress, by law of June 5, 1863 authorized the president to declare war against Chile if that country did not accept a peaceful solution through appropriate diplomatic channels.(10)

In turn, the American representative in Santiago reported to the Secretary of State in July of the same year with regard to this conditional declaration of war made by Bolivia to Chile. Further, in March 1864 he informed that the Plenipotentiary Minister of Bolivia, Tomas Frias had arrived in Santiago to seek a diplomatic solution, and that the government of Chile had demanded that, in order to initiate talks, Bolivia had to cancel the conditional declaration of war and had also to indemnify Chilean citizen Matias Torres for damages and abuses caused when he was detained by Bolivian authorities within territory in dispute. They also added that Peru had offered to mediate and was turned down by Chile.

The American minister Nelson added that he had suggested the necessity of arbitration but that he believed that Chileans would refuse such a suggestion partly because they were very secure in their power, and that Bolivia could only support herself in diplomatic negotiations. The American envoy offered also the mediation of the United States, which was refused by Chile for the same reasons that they had refused earlier the Peruvian offer.(11)

The Secretary of State congratulated Mr. Nelson for the manner in which he had presented the good offices of the United States and reiterated the interest of his government in the achievement of a peaceful and honorable solution between Chile and Bolivia.(12)

Bolivia and Chile reached a direct agreement and signed a Peace and Boundaries Treaty in 1866, in which Bolivia accepted as a new border a line parallel to the 24th degree south latitude, and thus transferring to Chile's sovereignty its territory south of that border. Moreover, Bolivia and Chile decided to share the tax revenues on mining activities located between the 23° and 25° south latitude.

The American diplomatic correspondence did not devote much attention to the Treaty of Boundaries, signed by Bolivia and Chile in 1866. It was only in 1872 that the American envoy in La Paz reported on details of this treaty and mentioned that in Bolivia there existed a fear over the discovery of immensely rich silver mines in the region of Caracoles, located some 120 miles from Mejillones, which was a zone very well known for its richness in guano deposits. These riches had attracted to the region more than five thousand inhabitants in less than two years, and this created in the Bolivian government the fear that Chile would again dispute with Bolivia over the legitimate possession of the region.

Minister Markbreit said that the Bolivian government had sent an infantry battalion to Caracoles to install order amongst the miners, even though the real objective was to prevent a hostile movement from Chile. The American minister ended his note with the following words:

Months later, Minister Markbreit presented to the Secretary of State an evaluation of the international situation of Bolivia with regard to her neighbors, and wrote that in the Treaty of Boundaries of 1866 subscribed with Chile, Bolivia had been unfortunate to lose part of her territory without obtaining anything in exchange.(14)

From Santiago, Minister Logan informed that the Treaty of 1866 had not solved any dispute between Chile and Bolivia; he said that the government of Chile had inquired as to whether he could act as arbitrator, if it were necessary, to reach a solution to the problem. Minister Logan was well disposed to this, in the event that both parties were in agreement and that the American government authorized him to this effect. (15)

In August 1874, Bolivia and Chile substituted the Treaty of 1866 with a new Treaty that ended the revenues sharing and recognized also the 24th degree parallel as the boundary between both countries. In various evaluation letters regarding the international situation of Chile with respect to her neighbors, Minister Logan referred on many occasions to the bad relations and lack of sympathy on the part of Chile's two neighbors, Argentina and Bolivia.(16)

From the 1840's until the decade of the 1870's, American correspondence, as can be appreciated, testified to Chile's greediness on the Bolivian "Littoral" and mentioned many incidents that would finally bring on the War of the Pacific, directed to consummate the so much desired territorial annexation. In other words, Chile's need for controlling the Bolivian littoral induced that government to play a zero-sum game, where Chile's possession of the territory excluded any Bolivian presence, even though Bolivia had already agreed to share the revenues generated in such territory.

From this data, one could conclude that Chile's manipulation of its boundaries with Bolivia was a result of the need to incorporate those rich and productive areas located in the Atacama seacoast under its exclusive jurisdiction, in order to consolidate and profit from its position as an intermediary between Bolivia, a peripheral nation, and the world system.