La Sociedad ExplotLa Sociedad Explotadora de Tierra del Fuegoadora de Tierra Del Fuego

La Sociedad Explotadora de Tierra del Fuego (SETF) The First Fifty Years (1893--1943)

This summary is based on an authorized history of the company, published in 1943. Origins The inspiration for creating the largest sheep-ranching enterprise in Southern Patagonia is due to José Nogueira, one of the early settlers in Punta Arenas. In the year 1880, only 3 years after Henry Reynard introduced the first flock of sheep from the Falkland Islands (Islas Malvinas) into Magallanes, Nogueira brought another consignment of sheep to Pecket Harbour. Sheep were sheared annually, and their wool was graded, baled and shipped overseas, where the fleeces commanded high prices. Around this date, Chile and Argentina began to explore the interior of the island of Tierra del Fuego, and found large expanses of grass-covered steppe, similar to the "pampa" north of the Magellan Strait. The success of his ranching enterprise convinced Nogueira and others of the economic potential of these "empty lands". In 1889, both he and his brother-in-law, Mauricio Braun, obtained concessions of land in Tierra del Fuego from the Chilean government, measuring 180,000 and 170,000 hectares (ha) respectively. Then, in 1890, Nogueira successfully petitioned, for a 20-year concession of 1,000,000ha (over 3,400 square miles), also in Tierra del Fuego. The authorizing legislation required that the operating company be established within 3 years. Birth of the Company Raising the share capital proved difficult. The scale of the operation was unprecedented, and the long-term profitability of sheep ranching was uncertain. Locally, there were simply not sufficient investment funds (as late as 1895, the region had only 5,170 inhabitants). In Santiago, the Territory (until recently a penal colony) was essentially unknown. Overseas investors were reluctant to invest in the region until the Chilean and Argentinean governments solved their border disputes. Then, in 1891, Chile was unsettled by a civil war, which led to the resignation of President Balmaceda. Finally, early in 1893, Nogueira died. It was Nogueira's widow, Sara Braun, in conjunction with her brother Mauricio Braun, who led the project to fruition. The latter lobbied successfully with the Peter H. McClelland (British), general manager in Chile for the powerful trading house of Duncan, Fox & Co., and the necessary backing was found in Santiago. And so, the "Sociedad Explotadora de Tierra del Fuego" was legally constituted in Valparaíso on August 31st, 1893, with Peter McClelland as President, and Mauricio Braun as Director General, operating from Punta Arenas. The authorized share capital was CH$1,250,000, of which the largest initial shareholders were all

from Magallanes - Sara Braun (14%), Mauricio Braun (11%) and José Menéndez (8%). First Operations Straight away, in the summer of 1893-94, Mauricio Braun set about establishing the Company's first"estancia" at "Caleta Josefina", on the north shore of Useless Bay (Bahía Inútil). Like much of the island, there was no local infrastructure: there were roads to be made; fences to be laid out, and houses, sheds, barns etc. to be built. All construction materials (much, of course, previously imported from overseas), had to be transported by sea from Punta Arenas: this was dangerous, and some precious supplies were lost. Despite the hazards and setbacks, a good start was made; and in 1894 the Company appointed Alexander A. Cameron (New Zealander) as Manager ("Administrador") of Estancia Caleta Josefina. The same year, work began on Estancia San Sebastián, on the east coast of the island, with Norman G. Wood (British?) as its appointed Manager. Paidup share capital arrived slowly, constraining the Company's ability to acquire additional livestock. By 1897, however, both Estancias were fully operational, with a total of 72,000 sheep; and a modest dividend was declared. The Human Cost Sadly, this development had a darker side. In keeping with the expansionist, colonial attitudes of the era, the licitation process had taken no account of the indigenous peoples, whose traditional lands were to be developed. Friction with the local tribes was inevitable, and predictably unequal: they were viewed as intruders and obstacles to business success. To protect the newly arrived sheep, natives were displaced: some were gathered by missionaries into reservations, while others were killed outright by bounty hunters. Like native groups elsewhere, they succumbed rapidly to the overwhelming pressures: and public opinion held the Company largely responsible for the outcome. Profitability and Expansion Economically, the Company was demonstrably successful, and its operations continued to expand. By 1901, it owned 216,000 sheep, 4,500 cattle and 1,300 horses. All the original shares had been taken up, and the Board prepared for further growth, by authorizing an increase of share capital to CH$5,000,000. It also diversified operations by building a fat-rendering plant ("grasería") at Rio McClelland (near to Ea. San Sebastián), with capacity for 40,000 sheep annually. By this time, the economic returns of sheep ranching had been amply demonstrated throughout Southern Patagonia, and investor interest was high. In 1905-06, the Chilean Government held a successful series of public auctions of lands in continental Patagonia and in Ultima Esperanza. More than half-way through its 20-year concession, land ownership was increasingly important to the long-term existence of Company. In these

auctions, and via subsequent private purchases, the Company acquired ownership of 380,000ha outside its leased tract in Tierra del Fuego. Recognizing that the primary market for its products was Great Britain, and wishing to avoid the uncertainties of exchange rate fluctuations, the Company redenominated its share capital in pounds sterling. Also in 1905, and doubtless aware of the importance of good contacts within the financial and political establishment, it established its Commercial Management office at Valparaíso, with Francisco Valdés Vergara as Director General; and an Agency in Santiago. The new position of General Manager ("Administrador General"), stationed in Punta Arenas, was awarded to Alexander Cameron, who held it until 1915. Growth by Acquisition In 1906, the Company purchased the "Sociedad La Riqueza de Magallanes". By this operation, it acquired the concessions on 440,000ha of productive lands in Tierra del Fuego and Chilean Patagonia, plus another 600,000ha of marginal economic value in Isla Riesco. In 1906-07, 106,000ha in Ultima Esperanza were bought from private owners. These lands, together with 66,000ha acquired later in Argentina, were the foundation of what would later become the Estancia "Fuentes de Coyle", in Santa Cruz province. [Two further land purchases were made in Argentina, in 1933 and 1940 respectively, totally 141,000 ha.] For long-term business stability, it was important to reduce the proportion of leased land. The 1910 acquisition of "Sociedad Ganadera de Magallanes" furthered this objective by adding 349,000ha of owned land, plus a second fat-rendering and meat-packing plant, at Punta Delgada. The costs of this purchase were met through an increase of share capital to £1,500,000. The Company now operated 2,900,000 ha, of which one third was owned outright: 750,000ha in Chile, 181,000ha in Argentina. By 1910, "The Explotadora" had become the largest, and the most powerful, ranching company in the region. The Years of Maturity: Holding Ground The original concession of lands in Tierra del Fuego was set to expire in 1913. Despite rising pressures to speed up the process of colonization by making more land available to private individuals, the government renewed the Company's lease on 1,370,000ha for a further 15 years. There were conditions, however. The Company was now required to pay a rent; they had to agree to make available, on demand, 200,000ha for sale to small landowners; and at least 80% of the share capital had to be Chileanowned. Then, as later, popular pressures in Chile were strong to reduce the power of the traditional "hacienda" landowners. In the centre of the country, land reform was justifiable both on social and economic grounds. But the "Explotadora" (a name which, unfortunately, suggests "exploitation"),

consistently maintained that this politico-economic model was inappropriate for southern Patagonia: the weather was too harsh, and the soils were poor. A family in the Central Valley, with rich soil and a benign climate, might subsist comfortably on a few hectares. But, in a region where the stockraiser needs to allocate 1-2 hectares per sheep, only ranches in the tens of thousands of hectares are viable. Evidence was presented to show that the typical small operator, working lands previously leased to the Company, had poorer yields of meat and wool, was unprofitable and (worst of all) degraded the land's carrying capacity by over-grazing. Undoubtedly, lack of capital played a part: more so, perhaps, there was a lack of business and technical experience. In any case, as evidence of sound livestock management (Corriedale sheep), the upward trend in the following table is obvious: per capita wool yield (lbs.)

season

head of sheep

yield

1893-94

6,930

5.79

1903-04

420,204

6.99

1913-14

1,163,968

7.55

1924-25

1,213,178

8.26

1934-35

1,293,873

8.69

1942-43

1,154,728

9.95

In 1924, four years prior to the expiration of the Tierra del Fuego lease, the Chilean government found itself in urgent fiscal difficulties (perhaps linked to the collapse of the salitre market). At this date, the Company owned no fewer than 1,860,000 sheep, and had large cash reserves: there was an opportunity for mutual benefit. A commission was despatched to Magallanes to review the ranching operations: it concluded that large companies were the best model, and recommended renewal of the existing leases with the "Explotadora" and the "Sociedad Ganadera Gente Grande". Making a full rental pre-payment of £1,204,000 (about half of its reserves), the Company was granted a 16-year extension. In return, it agreed to cede a further 226,000ha in 1928. The Ponsonby concession (600,000ha in Isla Riesco) was also returned to the state in 1930. In 1938, six years prior to the expiration of this latest lease, the Chilean budget was strained, this time by the need to buy weapons for the armed forces. Once again, the Company successfully obtained a second early renewal, this time for 13 years (to 1957). In return, the Company pre-paid £699,000 in rental, returned another 242,000ha to the state, and agreed to subsidize the (national railway's) shipping service to Magallanes. They had held their ground.