Constitutional Here be gan a period of national reconstruction and the normalization of the provincial autonomies. The country entered into commercial treaties with various European countries and with Bra zil, and began to pay the Baring Bank of Lon don the accumulated interest and collateral on the loan obtained by Rivadavia 25 years be fore. The national bank, founded by Riva davia and converted into a mint by Rozas, became the Provincial Bank of Buenos Aires.
The ensuing years witnessed some practical advances, such as the inter-provincial telegraph, the construction of the first railroad, and com munications by steamboat between the Rio de la Plata and Europe, reducing to 40 or 50 days the passage which up to this time had taken three or four months by sailing vessels.
But the incipient economic interests had not yet much political representation. Personal rivalries among the commanders of the army, and the troublesome pride of Buenos Aires, jealous at seeing the national capital in the city of Parana, separated that province from the rest of the confederacy, and civil war be gan once more, hindering the steps of real progress which had been taken. After various bloody battles, in 1861, the hegemony of Buenos Aires threatened the integrity of the rest of the country and the provisional capital was moved to that city. But the aggressions of the tyrant Solano Lopez, dictator of Paraguay, a country which had been formed under the fiercest of the dictatorships which the people of the south had been subjected to, had forced Brazil to war. The invasions into the Argen tine territory by Paraguayan armies, which moved toward the republic of Uruguay with a view to assuring an outlet to the ocean, pro voked the offensive and defensive alliance of Brazil with the republics of Uruguay and Ar gentina, which brought on a devastating war that lasted five years, and in which 70,000 com batants took part. Its outcome was the com plete overthrow of Paraguay, whose male pop ulation was reduced to one-tenth.
Already the Argentine government had be come suspicious of the policy of Chile, a coun try less democratic than its neighbors, who found themselves exhausted by civil and other wars. Chile manifested a strong inclination to obtain ports on the Atlantic side of Patagonia.
Notwithstanding the complete victory over Paraguay, the Argentine government asserted the doctrine that °victory does not give rights,* and offered to submit to the arbitration of President Hayes of the United States the ques tion of the boundaries of Paraguay, thus mak ing an honorable precedent in international policy.
The costs of the war with Paraguay were defrayed by a loan contracted with the Bank of London. The honorable arrangement which in 1854 the government had proposed to the Baring Bank to pay the debt made in 1825 had aroused English capitalists, who not only cov ered the loan for the war but also organized railroad and marine transportation companies.
The continuous issue of fiat money had de preciated the currency to an extreme limit so that the rate of exchange was 27 pesos to one gold dollar. In 1867 the Provincial Bank es tablished the rate of exchange at the fixed point of one dollar gold for 25 paper, and vice versa.
The war, notwithstanding its epidemics and miseries, did not wholly check the progress of civilization. The struggle with the foreigner united the confederate provinces against Buenos Aires, which, though politically allied to the rest of the country, socially still felt it self aloof. At the same time the influx of British capital and the entrance of some thou sands of immigrants changed this feeling a little. Meanwhile citizens who were enthusi astic admirers of the republic of the United States endeavored to make this the general opinion, and in 1868 a pacific presidential elec tion took place in Argentina, resulting in the choice of Domingo Sarmiento, who was at that time the Argentine Minister in Washington. He was devoted to the progress of civilization in South America, through schools and indus tries. He established throughout the country compulsory and free public schools, and invit ing normal teachers and scientists from the United States and Germany, he founded insti tutions of scientific and general culture and strengthened the sway of the national Lyceums, instituted by his predecessor, General Mitre, and established in all the provinces. Sarmien to obtained from the Bank of London $5,200,000 gold, which he employed in public works.