Although Chile is situated in a tense security environment, in which neighbors resort to bullish rhetoric at times, it is highly unlikely to get involved in violent conflict; national security is tight. The tensions arise from border disputes, originating in the Pacific War, taking place from 1879 – 1882. Currently, the most pressing case is brought forward by Bolivia. Peru and Bolivia joined forces in the Pacific War and invaded Chile to occupy the saltpeter rich swathes of land in the Atacama desert. Chile, however, has been able to repel both attacks and subsequently occupied Lima for a period of time. Another factor to consider is the breaking of the Salitre Tax Treaty of 1874. According to this treaty, Bolivia agreed to not exact taxes on Chilean companies for 25 years. Because Bolivia did not abide to the agreements, however, Chile occupied the then-Bolivian city of Antofagasta, and has incorporated it into its sovereign territory. Chilean defense during the Pacific War concentrated almost the entire forces in the North and so left weak the flank in the southern region. This, in turn, emboldened Argentina to threaten to take Santiago, if Chile did not hand over half of its territory in Patagonia. Unable to mobilize yet more forces Chile complied. Any territorial gains in the North were therefore off-set by massive losses in the South. Still, Chile accepted, and proposed treaties of friendship and reconciliation both Peru and Bolivia, the latter party signed in 1904. It is important to be familiar with this episode in order to comprehend the national traumas and resulting security environment that drives all four parties’ – Peru, Bolivia, Chile, adn Argentina – regional politics, wider alliances, and military spending and tactics. In the case of Chile, though small it’s military might be it surely us one of the most powerful and effective in the region. This is due to a military ethic imbued by Prussian generals as well as British navy officers, who played critical roles in the creation of the forces upon official invitation. Another reason is Chile’s close relationship with the United States, but also Great Britain. Both alliances are based on cultural heritage. They are also the legacy of the Pinochet dictatorship’s orientation towards the US and its significant support for Great Britain during the Falklands War. In the Latin world only Colombia and Mexico show similar levels of cooperation with the US. It must be noted, however, that Chile’s military never fought a war, conventionally understood, in contemporary times. The armed forces serve more as a deterrent. The current dispute, to which the International Court of Justice in The Hague will deliver a verdict in “due course,” probably not before 2016, lays out Bolivia’s demand to negotiations over a strip of land in the Atacama desert that would allow it sovereign access to the Pacific. The country argues that, first, in the treatise of 1904 Chile promised such a strip, and, second, Bolivia signed the treatise in an atmosphere of intimidation and is therefore not obliged to comply. The Chilean government has recently denied that the ICJ has jurisdiction over the matter. Our Analysis Bolivia employs increasingly aggressive rhetoric, marked permeated by righteousness and triumph. The country also grows increasingly sophisticated in the use of propaganda, as it buys publishing space in Chile’s print media and transmits its view using Chilean national symbols like Salvador Allende. Additionally, Bolivia’s President Evo Morales exploits the issue in order to boost his approval ratings. In this light, Chile’s responses look rather timid. Worryingly from a Chilean perspective are statements by the heads of state of Uruguay or Argentina, which unequivocally support Bolivia. support maintains not to concede anything until the verdict is out, but looks rather timid in its responses. Chilean decision-makers fail to realize that a narrow geopolitical focus stalls, and therefore worsens, the problem. They should recognize that border dispute is part of a view in which many neighboring countries view Chile as a capitalist bully. Therefore, the issue must be managed by working the La Habana – Caracas – La Paz axis, and that of Lima – La Paz – Buenos Aires. Without such recognition the dispute is not solvable. This is even more the case when considered that Bolivia’s case is not without warrant. The 1904 treaty unequivocally promises the instigation of negotiations over sovereign access to the Pacific. Considered this, and that Peru won in a similar (though maritime) case in 2013 it is not unlikely that the ICJ rules in favor of Bolivia – with or without Chilean approval. In such a case, relations will sour, not only between Bolivia and Chile but among Southern Cone countries in general. Investors should keep a time-frame of 10 years in mind when deciding over investment in the region. It is, in any case, a region with huge potential for investments, either in mining, or large-scale infrastructure projects. If you require deeper analysis of the case or the region itself, and how specific investments, business opportunities, and/or inter-American relations are affected don’t hesitate to contact us and let’s discuss.