Chile, a country in South America, went through a depression from 1874 to 1879 as a result of declining copper and wheat prices, a decline in exports, and increased unemployment. The nitrate industry, which was growing, was the sole promising sector of the economy, but mining it ultimately led to conflict between Chile and its neighbors Bolivia and Peru. In the Atacama Desert along the Chilean-Bolivian border, nitrates were mined. Anglo-Chilean businesses that operated in the Peruvian province of Tarapaca and the Bolivian province of Antofagasta handled the majority of the work. Bolivia and Chile signed a pact in 1866 that established their border at the 24th parallel and allowed both nations to mine nitrates between the 23rd and 25th parallels.
Despite the fact that Chile and Peru did not share a border, opportunistic Chilean miners pushed into the Peruvian desert to mine nitrates. In the Peruvian Tarapaca desert region, mining and subsidiary businesses employed about 10,000 people by 1875. The Anglo-Chilean activities in Peru had received little attention until 1875, when the country's ailing economy compelled it to nationalize the nitrate firms. With government bonds yielding 8% and due in two years, the Peruvian government acquired the companies. Peruvians were unable to fulfill their financial obligations when the bonds were due, which caused their value to collapse.
Given that Bolivia and Peru together had a population that was double Chile's and Peru had a respectable fleet, the combined effort of the two countries seemed frightening. Chile, on the other hand, possessed a more powerful and reliable central government, a more motivated populace, a trained army, and a navy outfitted with two cutting-edge ironclads. The major theater of action was also closer to Chile; the Bolivians and Peruvians had to cross the Andes and the desert, respectively. All three nations experienced economic hardship, but Chile was in the strongest financial standing and benefited from British help because the mining enterprises were primarily British. Bolivia and Peru both made loan defaults to the British and offended them by nationalizing the businesses.
References:
Keen, Benjamin, and Mark Waserman, A Short History of Latin America (Boston: Houghton Mifflin, 1984)