Meanwhile Argentina, the great neighbor of Brazil to the southwest, had been gaining territory and new resources. Since the definite adoption of a federal constitution in 1853, this state had attained to a considerable degree of national consciousness under the leadership of able presidents such as Bartolome Mitre, the soldier and historian, and Domingo Faustino Sarmiento, the publicist and promoter of popular education. One evidence of this new nationalism was a widespread belief in the necessity of territorial expansion. Knowing that Chile entertained designs upon Patagonia, the Argentine Government forestalled any action by conducting a war of practical extermination against the Indian tribes of that region and by adding it to the national domain. The so-called "conquest of the desert" in the far south of the continent opened to civilization a vast habitable area of untold economic possibilities.

In the electoral campaign of 1880 the presidential candidates were Julio Argentino Roca and the Governor of the province of Buenos Aires. The former, an able officer skilled in both arms and politics, had on his side the advantage of a reputation won in the struggle with the Patagonian Indians, the approval of the national Government, and the support of most of the provinces.

Feeling certain of defeat at the polls, the partisans of the latter candidate resorted to the timeworn expedient of a revolt.

Though the uprising lasted but twenty days, the diplomatic corps at the capital proffered its mediation between the contestants, in order to avoid any further bloodshed. The result was that the fractious Governor withdrew his candidacy and a radical change was effected in the relations of Buenos Aires, city and province, to the country at large. The city, together with its environs, was converted into a federal district and became solely and distinctively the national capital. Its public buildings, railways, and telegraph service, as well as the provincial debt, were taken over by the general Government. The seat of provincial authority was transferred to the village of Ensenada, which thereupon was rechristened La Plata.

A veritable tide of wealth and general prosperity was now rolling over Argentina. By 1885 its population had risen to upwards of 3,000,000. Immigration increased to a point far beyond the wildest expectations. In 1889 alone about 300,000 newcomers arrived and lent their aid in the promotion of industry and commerce. Fields hitherto uncultivated or given over to grazing now bore vast crops of wheat, maize, linseed, and sugar. Large quantities of capital, chiefly from Great Britain, also poured into the country. As a result, the price of land rose high, and feverish speculation became the order of the day. Banks and other institutions of credit were set up, colonizing schemes were devised, and railways were laid out. To meet the demands of all these enterprises, the Government borrowed immense sums from foreign capitalists and issued vast quantities of paper money, with little regard for its ultimate redemption. Argentina spent huge sums in prodigal fashion on all sorts of public improvements in an effort to attract still more capital and immigration, and thus entered upon a dangerous era of inflation.

Of the near neighbors of Argentina, Uruguay continued along the tortuous path of alternate disturbance and progress, losing many of its inhabitants to the greater states beyond, where they sought relative peace and security; while Paraguay, on the other hand, enjoyed freedom from civil strife, though weighed down with a war debt and untold millions in indemnities exacted by Argentina and Brazil, which it could never hope to pay. In consequence, this indebtedness was a useful club to brandish over powerless Paraguay whenever that little country might venture to question the right of either of its big neighbors to break the promise they had made of keeping its territory intact. Argentina, however, consented in 1878 to refer certain claims to the decision of the President of the United States. When Paraguay won the arbitration, it showed its gratitude by naming one of its localities Villa Hayes. As time went on, however, its population increased and hid many of the scars of war.