ajority in the congress)
prevented during 1903 any settled policy, or that confidence in the
government which is the basis of commercial prosperity. In 1904,
however, both trade and revenue showed signs of improvement, and the
sale of the warships "Esmeralda" and "Chambuco" for L1,000,000 furnished
a surplus, which was devoted to the improvement of the port of
Valparaiso. This was the beginning of a period of steady industrial
growth and development. The settlement of the long outstanding dispute
with Bolivia in a treaty of peace signed on the 17th of October 1905 was
very advantageous to both countries. By this treaty Bolivia ceded all
claims to a seaport and strip of the coast, on condition that Chile
constructed at her own charges a railway to Lapaz from the port of
Arica, giving at the same time to Bolivia free transit across Chilean
territory to the sea. A cash indemnity of L300,000 was also paid, and
certain stipulations were made with regard to the construction of other
railways giving access from Chile to the Bolivian interior.

Valparaiso earthquake

The prosperity of Chile was to suffer a rude shock. On the 17th of
August 1906 a terrible earthquake visited Valparaiso and the surrounding
district. The town of Valparaiso was almost entirely destroyed, while
Santiago and other towns were severely shaken and suffered much damage.
It was estimated that about 3000 persons were killed, a still larger
number injured, and at least 100,000 rendered homeless. The loss of
property was enormous. The fire which broke out after the earthquake
shock had subsided added to the horror of the catastrophe. Measures
were, however, promptly taken for succouring the people, who had been
driven from their homes, and the task of restoration was vigorously
taken in hand. Before the end of the year the rebuilding of the city was
rapidly progressing.

President Pedro Montt.

In 1906 Senor Pedro Montt was elected president and entered upon his
office on the 17th of September. The personality of the president,
however, had become of much less importance in modern Chile than in
earlier days. Up to 1870 the government was in the hands of a small
oligarchy of Santiago families, but the president enjoyed large powers
of initiative. Nowadays the congress has virtually absorbed the
executive power, with the result that the cabinet is often changed many
times in one year. This prevents indeed any continuity of policy, for
the majority