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As has been indicated elsewhere in these pages, the shock of the commencement of the Great War found the River Plate Republics already in a condition of considerable local depression. This was owing to relatively poor harvests, due to a long continuance of exceptional and ill-timed rains; a consequent collapse of land speculation and the usually sinister effects of slump after a long period of boom; and the condition of money markets, for some time past disturbed by the fear of the results of political complications in the Balkans.

The Governments of Argentina and Uruguay must be most warmly congratulated on the vigour and promptitude with which they faced the fact that, with the declaration of war in Europe, they were suddenly left to their own resources to an extent they had never experienced during the few decades which really form the whole period of their true economic history.

Lucky it was for Argentina that such a veteran statesman as Dr. Victorino de la Plaza occupied the Presidential chair, and that he had the aid of a man of such high intelligence and reputation as Dr. Carbó as Minister of Finance; fortunate also for Uruguay in having Dr. Viera (since elected President) at the head of her Ministry of Finance.

Honour is also due to the Officials of the State Banks of both nations and to the private Banks and financiers who[19] lent such an untiring and efficacious aid to both Governments in the hour of pardonable alarm; alarm which was prevented from developing into panic by the prompt and statesmanlike measures adopted.

Really, as Mr. C. A. Tornquist justly observes in an article cited in these pages, it cannot be said that a “crisis” exists in a country while its vital forces are in full development.

Still, in Argentina and Uruguay these forces had not for some time been in full operation, from causes stated above; and, therefore, panic would not have been a surprising result from alarm falling on depression, before cool reason had time to assert its reassuring influence.

It soon did so, however, thanks to the virile and sound handling of the situation by the heads of Government and Finance.

Congresses assembled and their usually heterogeneous political elements unanimously and swiftly agreed to pass the several measures of economic defence placed before them.

During seven days’ Bank Holiday the finance of both Republics was set in good order; not only to avoid ill consequences from the initial and any likely future shocks, but to enable the countries to profit—as there can now be little doubt they are doing and will do—from the political and economic disturbance of Europe.

As Se?or Carlos F. Soares, writing in La Nacion (Buenos Aires) under date January 1st, 1915, said:—

The laws and financial and economic measures necessitated by the European conflagration have proved opportune and efficacious.

Thanks to them, danger to the Credit Houses and Institutions was avoided; Internal and Foreign commercial pressure was lessened, the gold stock in the “Caja de Conversión,” which guarantees the value of the paper currency, was preserved; the escape of gold from the country was avoided; the lack of foreign bills of exchange was compensated for by deposits of[20] gold at the various Argentine Legations; shortage of coal and dearness of wheat and flour were foreseen; and, finally, means of obtaining its value were assured to the natural wealth of the country.

Only one Buenos Aires Bank (of comparatively small importance) failed to reopen its doors after the seven days’ holiday; a failure which there is some reason to believe was by no means entirely due to the War.

Not one Bank and very few Commercial Houses availed themselves of the Moratorium; a fact which is highly creditable to the Local Banking and Commercial community.

The arrangements for the deposits of gold at the Legations constitute a feature novel to the system of International Exchange.

After all this accomplished in so short a space of time, who will continue to throw the reproach of “Ma?ana” at either Argentines or Uruguayans? A reproach long since unjustified by the attitude of the inhabitants of either of the River Plate Republics towards any matter the advantages of which they grasp.

No European Statesmen and Bankers could have more promptly realized and carried out the necessary measures for the economic protection of their country.

The present of Argentina and Uruguay was thus assured. What of their future?

Prophecy, which is generally counted as hazardous, is especially so when it is about to be printed, and may still be read by the light of the experience of several years hence. Still, some Commercial and Financial angels have not feared to tread the ground of prophecy as to the immediate and post-bellum future of Argentina and Uruguay; and not only has competent authority not feared to forecast results in this regard, but there is a remarkable unanimity of influential opinion as to the probably favourable effects of European affairs on the economy of the River Plate Republic. Always supposing, as there seems every reason[21] to suppose, that these Republics continue to have the commercial and common sense to manage their internal affairs in such manner as to be able to derive the greatest possible pecuniary benefits from the troubles of European nations.

One, perhaps the chief, in his courage of declaration of these prophetic authorities is Mr. C. A. Tornquist; a man having very large financial and commercial interests on the River Plate and enjoying a very high local reputation for business acumen and honour. His whole life has been spent in the higher financial circles of Argentina.

Therefore the author has thought well to cite here some portions of an article published by him in the Argentine Press, a translation of which appeared in The Review of the River Plate, under date December 25th, 1914.

In this article Mr. Tornquist says:—

From this chaos (that of the European War) there will arise perhaps an Asiatic country, and, quite certainly, some American countries, and in the first place the Argentine Republic, which, on account of the class and special conditions of its products, is called upon to benefit from the situation more than any other country in the world, as even the United States cannot export in any quantity the noble products produced by Argentina as they require them for home consumption. This war not only does not create difficulties for our economic development, as will happen to nearly all the other countries in the world, but, on the contrary, it will stimulate it, and for this reason, the longer the war lasts the more our national economy will gain at the expense, sad as it is to say it, of the countries now at war. Whilst the war lasts the prices of the majority of our products will not decline, for many of the countries which produce the same goods as we do are at war, and on this account the demand is bound to increase. The first effects of this advantageous situation will bring about the disappearance of what we call here “crisis,” but which is nothing more than a “commercial indigestion,” brought about by excessive speculation, and which has principally affected speculators, and has done absolutely no harm to pastoral or agricultural industries, which are our principal[22] sources of wealth. … It cannot be said that a country is in “crisis” when its vital forces are in full development. This does not mean, nevertheless, what many erroneously think, that if the next crop is good they will be able in 1915 to sell their lands in the vicinity of cities and summer resorts and speculative regions at the prices ruling when they purchased them. Nothing of this will occur, and only the value of revenue-producing property will normalize itself, and will be placed at a value corresponding to a return of 8 to 9 per cent per annum. On the other hand, I believe that several, perhaps many, years will pass before it will be possible to liquidate properties which do not give revenue at the prices which their owners desire. … A favourable factor which might become important, perhaps in the not distant future, is the immigration of the “capitalist” farmer from Belgium and other European countries, who prefer to liquidate their affairs there and come to Argentina with what remains to them, and so get away from the taxes which of necessity the Government of the conquering or conquered countries must impose so as to re-establish their finances. It is a very interesting fact for ourselves that after all large wars or revolutions in Europe in modern times there has been an enormous increase of good immigration in new countries, and especially to America, from which the United States has been the first to benefit, because in that epoch the future of South America was based solely on the gold mines of Peru and the coffee and diamonds of Brazil, whilst the Argentine Republic was only known by its “sterile Pampa and Patagonia,” and its internal revolutions. To-day these things have changed, and if any country is to interest the capitalist immigrant it will without doubt in the first place be the Argentine Republic, because it is in the best condition to receive them, especially if they are convinced that the value of property is not inflated. It is the duty of our Government to make all this known to future immigrants by means of serious propaganda. … Then we shall have to struggle against the lack of tonnage for exporting our crop, but we should not forget that whereas to export with regularity is for us an economic question, for the belligerent countries, purchasers of our produce, the matter is of vital importance, as it is a material question not to die of hunger, and of indispensable necessity to be able to carry on the war, so that those countries are even more interested than ourselves that we should be able to dispose of the necessary means of transport. We take as[23] our basis of the probable assets of our balance of payments an exportation to the value of $580,000,000 gold. At first sight this figure appears high, but let us analyse it. Our record of exports was in 1912-13 $513,500,000 gold, of which $306,000,000 corresponded to cereals and the remainder to produce not affected by locusts, droughts, rain or frost, that is to say, the crop of that year represented $306,000,000 gold for produce exported, and we will suppose $104,000,000 remained in the country, making a total of $410,000,000. If the crop of this year should be 25 per cent less than our “record” crop we should have “at the prices of that time” $307,000,000 as the value of the harvest, and there would remain, deducting what the country requires for consumption and seed, over $200,000,000 for export. But the actual prices and those in perspective are 25 per cent higher than the others, so that would give $250,000,000 for exports of cereals, besides which there are the other products (meat, wool, hides, tallow, etc.), which then represented a value of $207,000,000 gold, and which to-day are worth 20 per cent more, that is to say, $250,000,000 gold, making a total of $500,000,000 gold. To this we must add the value of 2,500,000 tons of maize, the balance of last year’s crop which remained to be exported on October 1st, 1914; the possible value of the export of horses; the value of the sugar exported, which is more than 60,000 tons, and which will probably be duplicated; the export of woven goods (ponchos, cloths, etc.) and articles of saddlery and tanned goods for the European governments; alcohol and other products of lesser importance, which come under the heading of extraordinary exports. It would not therefore be at all extraordinary if we reached $600,000,000 or even passed that figure, which will be the case if our harvest exceeds our estimate. … If the crop turned out to be a “bad” one[6] (that is to say, that it failed in certain parts, as due to the great extension of area, it is not possible to-day for a whole crop to be lost) and it only results in 50 per cent of that of 1912-13, we should still obtain a total value of $205,000,000, and there would remain after deducting the necessities for home requirements $100,000,000 gold for export, calculated on prices of two years ago, but in this case the prices would rise much more than 25 per cent, and for this reason the consumption of cereals in the country, as well as imports in general, would show such a marked decrease, that[24] the favourable superavit in the balance of payments would never completely disappear.

I take as my starting-point the sum of $460,000,000 gold, made up as follows:—[7]

(a) Imports $270,000,000 gold. (b) Service of the Public Debt payable abroad $50,000,000 gold. (c) Interest on Cedulas and on capital placed by foreign companies on mortgage $31,000,000 gold. (d) Interest and dividends on foreign capital in railways $42,000,000 gold. (e) Interest and dividends on other foreign capital $27,000,000 gold. (f) Savings of immigrants and emigrants $24,000,000 gold. (g) Expenses of Argentines abroad $6,000,000 gold.

The sum total of all these items is $460,000,000 gold, so that we have
    $ Gold.
Assets     580,000,000
Liabilities     460,000,000
Total balance     120,000,000

in favour of the Argentine Republic, a sum which can be increased if the harvest is very good and imports are less than I estimated, and decreased if the harvest is bad and imports greater than $246,000,000 gold. From this it will be seen that if my calculations are confirmed Argentina will receive from abroad the sum of $120,000,000 gold for balance of accounts for the commercial year of 1914-15. To demonstrate the importance of this fact I will mention that for the year 1913-14 the balance was $185,000,000 against Argentina; in 1912-13 it was $200,000,000 in contra, and in 1911-12 $202,000,000 in contra, so that compared with the three previous years Argentina will have a difference in its favour in the balance of payments of $300,000,000 gold!

What do these figures signify?

$120,000,000 gold is equivalent to the service of the National Debt for two and a half years, and is more than half the amount actually deposited in bullion in the Caja de Conversión. It also represents the half of all that the country owes abroad for mortgages.[25] On the other hand, $300,000,000 are three-fourths of all our national external debt, are two annual national budgets, as well as the total value of a good harvest. Practically speaking, it results that the Argentine Republic will receive with these $120,000,000 gold a sum which exceeds the average of the new foreign capital which has come to the country in the last few years, which will compensate for the absence of capital which formerly came to the country seeking investment, and will contribute to develop the economic forces of the country. Outside of this $120,000,000 gold it is logical to imagine that some capital will come, as some railways and other foreign companies have recently made issues abroad and others will place their profits here. There are also the various financial operations of the National and Provincial Governments and the Municipality of the capital for the payment of debt services or to consolidate the floating debt, for although money does not come to the country this will diminish by these operations the emigration of capital in respect of items b, d and e of the balance of payments, that is to say, the dividends and interest on foreign capital placed in commercial enterprises and railways, and thus also the service of the external debt, which otherwise would have to be remitted and all of which I have not taken into account. Besides, where will Europeans place their savings? In European bonds which continue to depreciate on account of the issue which will have to be made for the war debt and to consolidate the monetary situation? Assuredly more money will come here than many believe in search of investment. The United States with its new monetary law does not require as much as before. To Brazil and Chile it will not go for some time, neither to Mexico or the Balkans.

An interesting point is the manner in which these $120,000,000 will come into the country.

It should come in the form of Argentine bonds (“Cedulas” principally), and in coined gold all that is not employed to cover debts payable to our commerce and industry to European banks and manufacturers, which sums cannot be very considerable, although it is difficult to fix them. … The reaction will bring about the investment of savings in Argentine revenue-producing bonds instead of in purchases of land on monthly payments; it will bring about a reduction in interest and as a consequence of this an abundance of money which will stubbornly withstand speculation in land. The movement of the Stock Exchange will[26] reawaken—it has been dead since 1906—and there will be money for mortgages and business, replacing that which came from abroad and which has to be repaid. All of this will bring in time an immigration of Cedulas of our external debt bonds and of railway and industrial shares. What will probably not take place for several years, perhaps for many, is what I mentioned at the commencement, namely, that land and other objects of speculation which do not produce anything will rise to prices which their owners dream about and pretend to obtain, as neither banks nor capitalists will invest their money in such objects, neither will they stimulate speculation, all of which are circumstances which will contribute to develop the economic forces of the country and to foment its industries and its commerce until there arrives for the Argentine Republic the psychological moment of being able to produce all that it consumes, that is to say, become self-supporting, without having to fall back on European industry, a situation at which the United States of North America have arrived after great efforts.

Remains only to be added that Mr. Tornquist appears to have omitted consideration of the possibility of money being withdrawn from South America by European investors, not on account of any lack of confidence, but simply because such investors may under existing conditions have actual need of all the pecuniary resources they are able to realize.

For the getting in of the 1914-15 harvests there has been sufficient labour available; because of the stoppage of much municipal and building work, on account of retrenchment rendered necessary by the situation. But for the future, if, indeed, they are to occupy the prominent place in the world’s economy for which Nature appears to have destined them, the River Plate Republics will have to increase their agricultural populations greatly and speedily.

The need of this is now fully realized in both countries, but, strange to say, it is in Uruguay where there are no fiscal lands that proposals for probably useful legislation to this end have attained the greater maturity. It is there proposed, in effect, that the Government should purchase, at least portions of, the present holdings of the large landowners[27] and colonize the land so purchased on systems similar to that obtaining in, for instance, Canada.

Argentina still has large tracts of fiscal land, but no doubt her large landowners will also aid towards the colonization by granting to colonists greater fixity of tenure and greater facilities for mixed farming than the latter have been hitherto able to obtain.

With regard to Belgian emigration to the River Plate, the fact which cannot be lost sight of is that the Belgian, especially the Fleming, is a person deeply attached to his own land and his own ways of living. It seems certain that if Belgians of the agricultural class are to be colonized in South America, such colonization will have to be effected by means of settlements like those of the Welsh colony in Chubut and the Swiss colony in Colonia.

A Flemish family would view with vehement disgust the ramshackle home of an Argentine or Uruguayan CHACRERO (small farmer); a disgust which, communicated to their friends in Europe, would effectually stop further Belgian immigration.

The Belgian is a good worker, but he is much more “insular” than the British in his scorn of ways of living which differ from his own. He is not adaptable enough, in any way, to be put to live or work among the composite Spanish-Italian-American rural classes of the River Plate.

Probably both Argentine and Uruguayan will continue to work out his own salvation in this vital matter of attracting agricultural colonists to his land. Already the spirit of democratic unrest menaces privilege in Argentina, privilege which has already been destroyed in Uruguay. And the greatest political danger which now seems to threaten Argentina and has for some time past been the bane of Uruguay is doctrinairism; a tendency to pursue to most unpractically illogical consequences theories which seem to their initiators and supporters to be destined to cure all the social and economic ills to which man is prone.

State socialism from high places in Uruguay and socialism[28] of all kinds and varieties from lower social spheres in Argentina are each set on the adoption of its own empiric policy.

Like all young things, these Republics must pick themselves up again when they fall (and, in truth, they display great capability for doing so), but it would be well if, just at the present moment, they were to adopt and fully carry out some provedly sound colonizing policy. Afterwards they might experiment with single-tax, rural Banks, state ownership of land and all upon and within it, as much as they might find themselves able to afford to do.

Meanwhile they must work patiently, in unadventurous fashion, towards the most soundly rapid possible development of their rich natural resources.

During 1915, all extension of activity was at a standstill in both Republics. Little or no land changed hands, unless under practically forced sale; city improvements and private building projects were stayed, and no new railway extensions were put under construction.[8]

A few good harvests[9] will put these things as they were; but the lesson of the War will have been lost for Argentina and Uruguay if they do not see to the matter of the extension of their agricultural industries.

It seems, however, that they now are solidly determined to do so; and that, far from the lesson of recent events being lost for them, the finding of themselves cast on their own resources has led to a most beneficial and self-sacrificing examination of what those resources are in contrast with what they so easily might be.

The real vitality of these countries can be measured by the fact that the prices of their National Securities, which fell with the world-wide shock of July-August, 1914, were by the following September already on the high road to the practically complete recovery they have now attained.


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