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CHAPTER VII FINANCE AND COMMERCE
Owing to their dependence on the Northern Hemisphere for the Capital necessary for the continuance of their development, the River Plate countries, and South American countries generally, are as a barometer, and an extremely sensitive one, in regard to the conditions of the Money markets of the Older World.

Thus already in 1913, the fear of Balkan complications in both Argentina and Uruguay was represented by a general fall in what previously may have been somewhat inflated, or at least too anticipatory, land values.

This fall, coupled with and increased by relatively bad harvests, marked the commencement of rather bad times in both Republics. In this regard it may be well to say that comparatively bad times come easily and swiftly on a country like Argentina, the prosperity of which depends very largely indeed on its cereal production and in which landowners and agriculturists from the largest Estanciero to the smallest Chacrero have long been encouraged by Nature to regard each coming year as inevitably more prosperous than its predecessor. The result of this optimism, usually justified by the event, is that when any set-back, caused, say, by late frosts or early rains, such as farmers in less favoured lands would take as an ordinary risk of their occupation, does occur, the streets of Buenos Aires are immediately filled with men with long faces running to the Banks and anxiously discussing the ruin which, apparently, seems to them to be staring them in the face, notwithstanding[94] that most of them must often have been through similar “crises” before.

One need only go “on ’Change” to be almost convinced that the whole vaunted prosperity of the Republic is tumbling about its ears. Even newspapers, which, by this time at least, ought to know better, join in the panic cry.

At such times people possessed of Capital and common sense make good investments; the Banks tide everyone else over quite comfortably enough not to interfere with the socially obligatory summer gathering at Mar-del-Plata; the following harvest is a bumper; and all is well again in the best and sunniest of all possible Republics.

That is the usual course of happenings after inferior harvests but, as is easy to imagine, the present situation is as unique in South America as it is in all other parts of the world. On the River Plate, indeed, it was, if one may be permitted the expression, aggravated by anticipation consequent on the (almost miraculous for these countries) following of yet another rainy harvest-time.

On the top of all came August with its declarations of European War, the first result of which in the River Plate Republics was intimate realization of the extent to which they had been dependent on Europe since the commencement of their real commercial development.

They were thrown entirely on their own resources and ability with no chance of any immediate help from outside.

It is to the credit of both Republics that they rose to the situation. Seven days of Bank Holiday were at once proclaimed in Argentina; during which time the Ministry of Finance and other Government departments were loyally assisted by both native and foreign bankers and financiers to devise necessary measures.

In the result Laws were summarily passed by Congress to prevent all exportation of gold; outgoing ships might only take with them sufficient coal to last them till they reached the next port in South America (Argentina and Uruguay as[95] yet produce no practically valuable coal, so that they are dependent on import for their stocks of this fuel), and provision was made that cereal exports should be limited to the surplus of such produce after the retention of a liberal allowance for home consumption until the next harvests.

Uruguay adopted similar protective measures.

So far so good, but the Argentine Banks, generally, were faced with the necessity for immediate decision under conditions which, unfortunately, are all too frequently recurrent in rapidly progressing countries. Many of the securities held by them were obviously not worth the value that they had been taken for, in consequence of the previous shrinkage of values above alluded to.

This was a momentous matter for consideration during the seven days’ Bank holiday.

In the result, all Banks adopted the policy of cutting losses even at the risk, amounting to extreme likelihood, of letting their weaker customers drown,[17] while mercy was only extended to those evidently strong enough to keep afloat throughout the crisis and its after effects.

This decision taken, and enforced on the reopening of the Banks, scarcely any credit establishment took any advantage of the Moratorium declared by the Government.

In Uruguay the situation proved easier on account of a comparative absence of the complication of securities based on inflated values. Here again the Uruguayan showed his superiority in the matter of cautiously prudent finance over his more enthusiastically volatile over-river cousin.

This observation notwithstanding, it is now clear that although a severe financial pinch is still felt in both countries, the Argentine and Uruguayan ships of State are both fully trimmed to enable them to ride over bad financial weather,[96] the first shock of which was the most perilous to meet and needed the most prompt and intelligent handling.

In the result neither country will eventually be any worse for the moral effects of having suddenly been left to its own resources.

Meanwhile land, especially, perhaps, in Argentina, offers an opportunity to Capital such as, as has been said elsewhere in these pages, everyone for humanitarian reasons must hope will never occur again.

Given knowledge of just where and what to buy, large fortunes await those with courage and capital to purchase either town lots or agricultural and pastoral land in either Republic; in Argentina preferably for earlier realization.

Once peace is declared, and even before, it needs little imagination to perceive the wealth to be secured by the agricultural and live-stock produce on markets suddenly deprived of much of the usual output of sources of cereal supply as Russia and Canada, through withdrawal of labour for military purposes, and faced with an enormously increased demand for meat and grain caused by the necessary shortage of production over all War-infected areas.

In fact Argentina and Uruguay are likely soon to experience the truth of the proverb, “It’s an ill wind that blows nobody any good,” and they are among the very few countries of the world about the commercial conditions of which, after the war, it is pretty safe to prophesy in the direction of a prompt return, in an enhanced degree, to their normal course of ever-growing prosperity.

Always with the factor of population and consequent sufficiency of agricultural labour being reserved for consideration after the event. A large and very serious reservation which cannot safely be lost sight of by anyone desirous of land speculation in either of the two countries under discussion.

Let the reader pardon this recurrent insistence on this question of population, made in the hope that it may help to open the eyes of the Authorities concerned, especially[97] Argentine, to the crying necessity in their country’s interests for practically workable inducements to true colonization, as distinguished from mere partial exploitation of necessitous wage-earners. And the eyes not only of the Authorities, but of everyone having a pecuniary interest of any sort in either Republic, so that their Congresses and landowners may be forced to consider the question in the liberal and enlightened spirit which alone can remove the greatest menace to their country’s economic progress.

If the two Governments and great landowners would only devote one-tenth part of the admirable ingenuity and energy with which they, and the Argentine especially, have very successfully combated locust invasions to the attraction of small-holding proprietary agriculturalists, the River Plate Territories would soon break into an irruption of statues of the originators of such measures which would outrival the vast quantity of those erected to the memories of Generals San Martin, Artígas and Urquíza. (One could travel far in Argentina without discovering a town which does not possess a statue of the first-named deliverer of his country. Uruguay has also many San Martin statues, but runs preferably, as is natural, to Urquíza and, lately, in consequence of the whitewashing efforts of modern historians, Artígas.)

In view of the actual situation, financial and commercial statistics relating to the ante-war era necessarily seem to savour mustily of the back-number. This savour is, however, more due to imagination than to actual fact, since such statistics are just as interesting as ever they were and really show the normal trend of things economic to be resumed and likely to be followed in even a more favourable course, as far at least as Export is concerned. As for the Import of manufactured goods an attempt to deal with some of the probabilities or possibilities of this question in its future aspects is made later in this chapter.

[98]
CURRENCY

The “Caja de Conversión” (A term for which “Conversion Chest” is the usual clumsy translation, though “Conversion Box” stands as a triumph of the translator’s art. Perhaps “Conversion Office” sounds best, though it does not convey a true idea of vaults filled with sacks of golden coin and therefore “Conversion Bank” is here preferred) is an Argentine Government Institution under the control of the National Ministry of Finance created for the purpose of dealing with the issue, exchange, and conversion of the currency of the country. It issues the paper currency and must hold in reserve sufficient gold to meet the circulating paper money; it also mints the nickel and copper coinage of the country.

Under the Conversion Law a fixed ratio was assigned as between gold and paper. A paper dollar, instead of being theoretically equivalent in value to a gold dollar, was declared to be worth only 44 cents gold; thus with 44 cents gold as the fixed equivalent of one dollar paper and, conversely, 2·27 paper dollars that of one dollar gold, and the smallest gold coin minted the equivalent of 2? dollars gold, the use of paper in all the odd amounts of everyday transactions is inevitable and consequently the major portion of the gold which reaches the country is forced by the public need of the more convenient currency into the “Caja de Conversión.”

The accumulation of gold in the “Caja” on December 31st, 1915, was well over 61 millions sterling, and it must be noted that these accumulations cannot leave the “Caja” under any consideration (unless by special sanction of Congress), except in exchange for paper currency, until the time when the currency shall be placed on a logically complete metallic basis. The provisions of the Conversion Law in this regard are exceptionally stringent; under them every official of the “Caja,” from the highest to the lowest,[99] is personally responsible for their observance, and they cannot be overruled by any power in the land. So, until Congress approves what is commonly referred to as the conversion, the store of gold in the “Caja” will continue practically intact and will increase.

The misuse of this term “Conversion” has given rise to much confusion of ideas, even in Argentina. The actual conversion took place with the above-mentioned assignment of the fixed ratio of value between gold and paper.

It is obvious that the present is not the moment for the change in the form of the currency, but it should be added that apart from the immediate effects of the war the time for that change has not yet arrived. Irresponsible projects for the change have been put forward from time to time during recent years, but official declarations in that regard have never yet gone further than complacent platitudes to the effect that the time for it was fast approaching; without, however, the faintest indications of any schemes for carrying the change out in practice. Besides, under the Law it cannot be accomplished until a fund or deposit in the Bank of the Nation, and to which the National Government makes contributions out of revenue, has reached the amount necessary to form a reserve against the paper currency in circulation prior to the passing of the Conversion Law. For a long while past, the amount of that fund stood at six millions sterling, but this amount (then still insufficient for such reserve) became reduced in August last to two millions sterling in consequence of special financial measures adopted by the Argentine Government at the outbreak of the war and referred to more fully in the chapter on “The War.”

On the 31st of December, 1914, the Argentine Government held gold accumulations to the value in round figures of 63 millions sterling, of which, as has been seen, 2 millions pertain to the Conversion Fund at the Bank of the Nation. This fund must not be confused with the amounts in the “Caja,” the uses of the former (apart from its constituting, as[100] has been said, a reserve against the paper currency in circulation previously to the passing of the Conversion Law) being limited to the purposes of foreign exchange, the benefit of the Fund itself and to aid the control of the market; while the accumulations in the “Caja” can only, in normal circumstances, leave it in exchange for paper currency.

Besides the actual gold in the “Caja” this Institution held at the end of 1915 gold and bonds to the value of over 14 millions sterling which had been deposited at the various Argentine Legations. These deposits have naturally increased largely since. Besides all this the Bank of the Nation, the Bank of the Province of Buenos Aires and the private banks held large amounts of gold.

Uruguay has not introduced, and has always resisted the temptation to introduce, any such complications of her currency; which is on a thorough gold basis.

The Argentine Conversion Law was passed in 1899 and abrogated in 1901-2 by Congress (in consequence of the anticipation of possible war with Chile, over the frontier question, the payment by the Nation of Provincial debts and the closing of Argentine ports because of an outbreak of bubonic plague).

Therefore the present solid financial status of the Argentine Republic dates from only twelve, or, on the most liberal reckoning, fifteen years ago.

Uruguay’s first surplus (of $453,110) accrued in 1905-6; though an increased surplus has figured in each Uruguayan National Budget since that date.
    Equivalent Values.
Argentine     $1, gold     =     3s. 11?d.
”     $1, paper     =     1s. 8?d.
Uruguayan     $1     =     4s. 3???d. ($1·3? cents U.S.A.).
    £1     =     $5·05 gold, Argentine.
    £1     =     $11·45 paper, Argentine.
    £1     =     $4·70, Uruguayan.

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THE ARGENTINE MONETARY SYSTEM

Is controlled by the Conversion law, above referred to, which fixed a ratio between the value of the paper and gold currencies and made these interchangeable at that ratio until the time should be judged to have arrived for the substitution of metallic coinage for paper.

The law was passed as the only available though drastic remedy for the state of financial chaos, nothing less, in which Argentina found herself for some years after the crisis of 1891. For the coming of this chaos Argentines blame the European Bankers who, at least, looked on whilst the country floundered into it. For this view they have considerable reason. The Bankers were men of great experience in Finance; of which the Argentines of that day had little or none. Argentina relied on the men who had taken her Finances in hand for the development of her vast natural resources. She awoke to find herself in a financial condition which would have spelt a century of ruin to any less nature-favoured land. And it was an Argentine, Se?or Ricardo Pillado, now Director-General of the Division of Commerce and Industry in the Ministry of Agriculture, who devised the Law which, though it in effect involved a partial repudiation of the country’s liabilities, at any rate made possible the financial renaissance on which her present great prosperity was founded.

As has been seen, the Conversion Law said that a paper dollar should be equivalent to 44 cents gold and that conversely a gold dollar should be worth 2·27 paper dollars. This ratio was supposed to have been fixed by taking the average ratio of value between paper and gold over a certain period immediately prior to the passing of the Law.

This basis is now believed to have been fictitious, it being found that, had such an average of values been struck, a paper dollar would have become the equivalent to something much more like 60 cents gold. So that in fact a repudiation[102] of 40 cents liability on every paper dollar in circulation was made to become one of 56 cents.

That, however, is past history; and the existing Law appears likely to remain in operation for an indefinite time to come.

It has its inconveniences. Institutions and traders are obliged by Law to keep their books in both currencies. There is no gold coin available as an equivalent to 1 paper dollar. One needs to have a clear 50 dollars’ worth of notes before one can get gold out of the Conversion Bank; so that all transactions involving odd amounts must be carried through with the aid of paper. In point of fact gold is only seen in the course of important transactions. Still, the gold is there, in the country, in the Conversion Bank; and cannot be withdrawn from the coffers of that Institution except as against paper dollars, nor can paper dollars be issued except as against gold actually in the Conversion Bank. For the absolutely strict observance of these rules everyone concerned, from the President of the Republic down to the humblest employee of the Caja is personally responsible under the law. By the operation of the law the Republic holds a usually ever-increasing stock of gold; the accumulation of which is aided by the inconvenience for practical exchange of the figures ·44 and 2·27.

There is no doubt but that the object which the framers of the Conversion Law originally had in view, the rehabilitation of the country’s Finance and credit, has been fulfilled long ago; and it is for other reasons that Foreign Capitalists and Banks, to whom Argentina must still look for the means of her fuller development, prefer to let the dual monetary system, with its several practical inconveniences, continue instead of encouraging Congress to declare the purpose of the Law fulfilled, by which declaration it would, by its terms, lapse ipso facto. On that happening there would be a period, momentary only, in all probability, but still a period, during which the coffers of the Conversion Bank would be open[103] through the automatic lapse of the Law of its creation. And Capitalists and Bankers, grown very prudent indeed in their generation, prefer that those coffers should remain closed and safeguarded as they are; even at the cost of some few extra clerks to cope with a system which otherwise works very satisfactorily.

Shin-plasters, as the paper dollars are called by Anglo-Argentines, fulfil all the purposes of daily life as well as would silver or other metallic tokens. Paper dollars, guaranteed by gold, have also other advantages over a metal coinage which might not be so fully guaranteed.

Therefore the Conversion Law remains a live letter on the Argentine Statute Book.

It is, however, a vulgar error to refer to the time when other tokens might be substituted for paper as the time for “Conversion.” Conversion really took place with the coming into operation of the law which converted a fluctuating ratio into a fixed one.

The speculation in gold, referred to elsewhere, which had attained disastrous dimensions just prior to the passing of the Law, was another evil to which that Law put an end. Then as now all everyday transactions were carried out in paper; but, then, no man could tell from hour to hour what the paper he held was worth. Everyone was by force of circumstances practically a gambler whether he wished to be one or not. The paper tokens for which he had sold his wares one day might be worth much more or less the next. Everyone had to make his own forecast of probabilities before he could make or give a price for anything; and therefore became a constant speculator, a gambler in futures, in fact. The bad moral effects of such a state of things is obvious. Many other financial evils were rife at this time, which now have only historic interest, among them may be mentioned the Banks of Issue for which authority appears practically to have been given by the State to anyone able to procure and furnish offices. Stacks of the notes of these precious[104] Institutions still occupy space as curious lumber somewhere in the cellars and garrets of Government House. Valueless and best forgotten by a prosperous and enlightened nation which no longer needs any such awful examples to deter it from lapse into irregular finance.

Uruguay has a gold, silver and nickel coinage, but, as in Argentina, notes are the most common tokens, especially for amounts of $1 and upwards. As will have been understood, Uruguay has no Caja de Conversión, her currency being and always having been on a direct gold basis.
COMMERCIAL CONDITIONS

One of the immediately world-wide effects of the great War has been the practically total elimination of German trade competition, an elimination which may not unreasonably be calculated to last for some time to come.

This therefore is the golden opportunity for other competitors to capture the large bulk of export trade which had gradually been absorbed and was in course of constantly increasing absorption in the countries under discussion by German firms.

Many Consular Reports and publications of the “Bureau of American Republics” have respectively dealt with the consequent loss of trade to Great Britain and the comparatively slow advance in that respect made by the United States and these documents have insistently pointed out the whys and wherefores of German commercial success over their chief rivals.

The writer cannot therefore lay claim to originality in the present observations, but does claim that his persistence in the reiteration of what he, and many greater than he, have continually urged on every possible occasion during the past decade has been and is in what appears to him to be the best interests of those most concerned.

Of the two nations the British still has the better opportunity to extend its commerce in both Argentina and[105] Uruguay. The reasons (apart from the actual kaleidoscopic financial and industrial situation) for this opinion are that the English (as all people hailing from the British Isles are commonly called in South America) have already acquired in both countries a firm reputation for straightforward dealing, founded on many years’ experience and untainted by any suspicion of underlying political motives, whereas the South American Republics generally harbour a latent but constant resentment of what they rightly or wrongly consider to be the tendency of the United States to assume a dominating influence over both Americas. In fact to construe the Monroe doctrine as meaning, to cite the catch-phrase which to the innermost South American mind embodies something very closely resembling an unpleasant truth, “America for the North Americans.”

Therefore, pushing United States’ commerce is immediately met by a seemingly dull indifference to the merits of the wares it offers, praise it those wares never so loudly. And this observation suggests another of almost equal truth and importance, viz. that the loud and strenuous vaunting of an article and the hustling methods so much admired in the great Republic of the North are worse than useless in Spanish South America. “Why so much talk and so much hurry to strike a bargain if the thing is really good?” is the mental attitude of the average Spanish American towards the vociferous North American traveller who usually makes the further mistake of appearing to wish to teach his listener the latter’s own business. This, as has been said elsewhere in these pages, is a thing no Argentine or Uruguayan will stand. No one is a more severe critic of himself, his methods and Institutions, no one is most enamoured of progress and improvement than he. But he must be the discoverer and chooser of the remedies for his own defects, he and he alone must be the arbiter of his own destinies and set his own house in order. In such matters he will brook no interference. And least of all from the United States.

[106]

It is surprising that the commercial ability of the latter country should not long ago have discovered and acted in harmony with this feature of South American psychology. It seems, however, to have escaped appreciation by “Yankee” cuteness.

Accordingly, we find, in the present writer’s opinion, two existing obstacles (apart, as has been indicated above, from the present financial situation) to the extension of the trade of the United States in Argentina and Uruguay. One of these, the inappropriate method of approach usually pursued by travellers and the other a strong and jealous suspicion of the ulterior motives of the United States in endeavouring to strengthen her commercial foothold in the Southern Hemisphere. The first of these obstacles should be easily removable, unless, indeed, it be too firmly rooted in the North American mentality. The second is a matter for extremely delicate state diplomacy, and equally delicate behaviour of the United States’ delegates at each future “Congress of American Republics.”

Having thus glanced at seemingly obvious defects in United States methods we may turn to those of British manufacturers.

In their regard one can scarcely restrain the question, “Do they really want the South American trade at all?” Because, if they do, they set about getting it in the strangest possible ways. Their apparent attitude can be summed up by saying that they point-blank refuse to give a customer what he thinks he wants unless his ideas on that subject entirely coincide with what they think is best for themselves and, incidentally, it would seem, for him.

South American governments insist on the metrical system of weights and measures for Customs purposes: the British manufacturer persists in a firm refusal to contemplate anything but British Tons and Feet. This may seem a trifling matter to anyone not engaged in the Import trade of a metrical-system country, but in practice the rendering[107] of British weights and measures into their metrical equivalents involves not only a large amount of clerical labour, but is also a frequent source of error in the results.

A most actively patriotic Briton who is the head of a large Importing firm in Montevideo told the present writer not long ago that in spite of his patriotism he had been driven to deal with German firms because, for one reason, of the constant inflictions on him of $80 fines by the Customs Authorities, that sum being the statutory fine in Uruguay for any misstatement of weight or bulk on a declaration.

He, in common with the generality of Importers in Argentina or Uruguay, had found himself confronted by several very weighty reasons for necessarily transferring the bulk of his orders from British to German firms, the chief of which was that above summed up; namely, that British manufacturers would not adapt themselves to his customers’ requirements.

“We are making this, that, or the other pattern” of whatever the article in question may be, and “if you don’t like that you must go elsewhere” is the gist of the average British manufacturer’s last word in the discussion. And, as the Importer is not running a Commercial Museum of articles of the highest quality or best British taste, but has to sell what he imports to customers who have lamentably independent ideas of what they want, he does go elsewhere, that is to say he did, and, most frequently, to Germany. To Germany, where most things were at all events cheaper, and where, if qualities were not so good as in the United Kingdom, manufacturers were adaptable, and their travelling representatives spoke Spanish and understood the ways and wishes and even the foibles of South American customers.

As a rule, commercial travellers from either Great Britain or the United States do not speak anything like fluent Spanish. Therefore, they are obliged to engage interpreters to accompany them on their business calls, while they were quite unable to take advantage of the opportunities sought[108] for by their Spanish-speaking German competitors of mingling in the semi-social life of their customers. In the bar or restaurant the German traveller was a jolly good fellow always ready to pay his share of the wine bill and with his pockets filled with more than passable cigars and he could enjoy and respond to the local humour and generally take part in all the fun of a jovial evening-out; for which the Argentine, especially, is always ready and willing to find an excuse.

Now, doing persuasive business through an interpreter is by no means an invariably satisfactory proceeding, because the interpreter’s own mentality inevitably intervenes and unconsciously colours both sides of the argument with tinges of his own individuality. He says what he thinks you wish to say, and often enough replies with the best rendering he can make, not always an entirely accurate one, of what he conceives to be the meaning of the other party to the discussion. As for the evening-out! One has only to imagine the effects of a laborious translation of always very allusive wit; the point of which in Argentina most frequently hinges on double-meaning.

The German studied the language, and, as far as he could, the tastes and ways of the people of the country he intended visiting before he set out on his commercial travels.

Travellers of other nationalities should do likewise if they wish to secure a substantial share of the trade now left open to their bidding.[18]

And British manufacturers, if so be that (I repeat the question) they do want the South American markets for their goods, must make up their minds to suit the requirements of those markets whatever may be their own private opinion of South American tastes and ways. They must still remember that although German competition has ceased and may continue non-existent for even a very long time to come, and while Belgium is, for the time being, hopelessly crippled, there are other nations who desire to rise, and may succeed[109] in rising, to an occasion which, for the awful cause of it, one can only hope will never occur again.

It is a truly great opportunity for both British and United States Commerce, in which, as has been pointed out, the former has a very considerable start in the political and commercial sympathies and prejudices of South Americans. Nothing which British manufacturers cannot remedy appears to exist to prevent them from taking extremely profitable advantage of that start, not only for the recovery of lost ground, but for grasping a very large share of new openings. Will they? Do they really care enough about extending their businesses to do so?

That is the only question, and it is one which they alone can, and soon, we hope, must answer; one way or the other. If they do not want new business or wish that old business should come back to them, there is no more to be said. And no more grumbling to be indulged in about the proportionate falling back of British trade in South America.

It may be objected that the United States, the full manufacturing activities of which remain unimpaired by the withdrawal of labour for military purposes and the output of which is not absorbed to so great an extent as it is with us for war material, have for that reason already a great start of Great Britain in all foreign markets. To this objection I would reply that the time for the struggle for the Argentine and Uruguayan markets is hardly yet; because climatic accident still recently produced results which, coupled with the falling on them of the shadow of the Great Terror, suspended their purchasing power. Two very lean years of cereal production due to weather, the occurrence of two consecutive seasons of which is without parallel in these countries’ history, were followed by another perilously rainy harvest time complicated by shortage of harvest labour due to war risks, and imagined risks, of the transport of the usual army of Italian harvesters who (like the Golondrinas—swallows—after which they are nicknamed in South[110] America) annually go to Argentina and Uruguay[19] and return to Italy after the harvest has been got in. These causes temporarily paralysed Argentine and Uruguayan commercial activity by, as has been said, suspending the purchasing powers of both.

But with the productive recovery[20] of these countries with their enormous natural endowments and producing as they do all the foodstuffs that the populations of poor war-trampled Europe need most, what a call for all kinds of agricultural machinery will come from them in return for their meat and cereals and in order that more and more land may be laid under contribution for the production of these primarily necessary supplies! Failing other labour sources, an augmented stream of Italian “swallow” and permanent emigration will set out for the River Plate, wealth will develop on both shores of that river, and with wealth the demand for all the manufactured things to the desire for which wealth gives rise. Hardware, cutlery, cotton and woollen cloths, electrical appliances and material; the host of things which Britain makes and Germany once sold will come into increasing demand in South America with the spring of the new era on which the whole civilized world will enter when the blackness of devastation shall have passed and the evil which created it be rendered powerless for further ruinous crime.

Would that the millions of able-bodied men murdered by this war could have been utilized instead as an agricultural expeditionary force on the shores of the River Plate! They and their children and the world would have been the richer for their labour carried out under conditions as happy as their present, and for many (alas!) past, task is terrible. They would have supplied that in which Argentina and Uruguay are lacking, namely, the human element, for the[111] development of their natural resources. Countries in which vast areas of land yet await the plough for cereal cultivation and the improvement of their natural rough pasturage and other vast areas of rich alluvial soil need only irrigation to turn them into a terrestrial paradise.

Capital never is and never will be wanting for good investment, but the fund of human labour cannot be drawn upon by a mere signature. And the daily waste of thousands of lives for the full activity of which there is ample room and urgent need on behalf of the millions remaining is, sentiment apart and from a commercial point of view alone, the saddest thing in War.

Europe needs bread and meat not only to fulfil her normal needs but also to replace her own interrupted production of these prime necessities of life. The River Plate countries can produce both in practically unlimited quantities; provided only that they can obtain the necessary labour a ghastly wastage of which is going on daily in Europe, some parts of which are consequently threatened with famine.

Surely if civilization be anything but a mere theoretic expression there will never be another great war!

With this pious hope we may pass to a more concrete subject, namely, commercial credit on both sides of the River Plate.

As has been indicated in another chapter, Uruguay enjoys a more literally creditable reputation than her bigger sister. The causes of this have also been already dealt with.

In practice one can but advise anyone approached by firms in either country to do what it may be taken that any ordinarily prudent man of business would do, viz. to make due enquiry as to his proposed new customer. His means of doing this are really even better than if the latter were established in London or New York, since the commercial community in either Argentina or Uruguay is comparatively small and consequently, to use a current phrase, almost everyone there knows everyone else and a good deal about him and his business.

[112]

Several of the chief banks in Buenos Aires and Montevideo have their head offices in London and all have branches or accredited correspondents in the principal European and North American capitals and commercial centres.[21]

The wholesale importing houses in Argentina and Uruguay usually give ninety days’ acceptances for imported goods and in their turn give six months’ credit to their retail customers. This arrangement has now the sanction of long usage based on its practically being a division of the burden of credit given to the storekeeper by the Importer between the latter and the Exporter.

The system of banking in both Argentina and Uruguay differs little from that obtaining in England except for a certain amount of good single-name paper being taken on account of the usually intimate acquaintance with the business and standing of all leading firms possessed by the commercial community generally.

Rents and working expenses, including special traders’ taxes, in the Capitals of both Republics are high, but the scale of profits when calculated on anything like a reasonable turnover will in most cases be found to leave a balance in favour of both wholesale and retail traders which would be regarded as highly satisfactory by their European and North American brethren. In fact, it may fairly be said that if a man in either country does any appreciable bulk of business in any branch of commerce or trade he is doing what elsewhere would be considered as very good business indeed. When rumour assigns shakiness to any established firm it may be taken as certain that such rumour is founded on tales of speculation outside the lines on which that firm’s true business has been built up. There seems a temptation inherent in new countries for men who have earned money in businesses they understand to risk it in other speculations of which they have next door to no experience. This is, of[113] course, a phase of the “get rich quick” fever which frequently attacks the young inheritors of stable businesses which seem to them too slow and sure to be interesting or indeed to require much looking after.

At one time the Buenos Aires Stock Exchange was responsible for a large number of victims among all classes of the public, but of late years the public has fought very shy of it indeed; so shy in fact as now to be practically unrepresented in the share ring of that Institution. As a consequence of this abstention the few brokers and professional speculators who daily do what courtesy perhaps demands that one should call business there suggests the tale of the island the inhabitants of which lived simply by taking in each other’s washing.

Joking apart, however, the share ring in the Buenos Aires Temple of Mammon were best avoided by the uninitiate. In this ring there is always one, sometimes two (its strength does not run to more), media of pure speculation in course of manipulation by one speculative group or another. The names or nature of these media do not really seem to matter. They vary. Sometimes they may be the shares of the Dock Company of an inchoate Port, sometimes those of an Industrial Company with vague expectations. Indeed, vagueness which may be tinged by rumour and imagination with a hue dimly resembling that of impending rich surprise is almost essential to the initiation of this kind of gamble.

The shares are bulled out of all proportion to their even possible value for a little while and then no more is heard of them; and other very similar ones reign in their stead in the sensational place on the blackboard, on which all bargains during each day are chalked up as they are called out by the parties making them.

The end of these really stillborn booms is mystery. Who are the unfortunate last in? Strangers, doubtless, when there are any. But if there be none, as is the case more frequently than not? One hears vague talk of Paris and other European capitals and then silence for ever more.

[114]

Anyhow, the stranger, for whom this book is chiefly written, would, if he took a hand in any one of these games, soon find out that though he might see the price of the shares he had purchased mounting gaily up on the blackboard like mercury in the tropics he could never realize to any appreciable extent. Did he start to sell, then all the weak little bulls of whom his co-speculators would be composed, people to whom ten dollars a day one way or the other makes all the difference in their domestic budget, would rush to sell also out of sheer fright, and down would go the market on him like a guillotine. At the finish he would be left with a very large proportion of his probably not over-valuable holding; of which he would have little further news than notices regarding proposed reconstruction schemes, etc.

It must not, however, be imagined that the Buenos Aires Stock Exchange is by any means exclusively devoted to such work as that just indicated. On the contrary, many Bank and Industrial shares are also quoted and the other, the Securities, ring is just as genuinely serious as the gambling part of the share ring is meretricious. The chief securities dealt in in the former are the Bonds of the National Cedulas, as “gilt edged” a security as could well be wished for.

These Cedulas are Bonds issued by the National Hypothecary Bank, an Institution of the National Government, as against mortgages of freehold property in the Republic; the method of their issue being, shortly, as follows.

An intending Mortgagor lodges a proposal with the Bank; on which his title is examined and the property offered valued by Government experts appointed for each purpose.

The result of the examination of title being satisfactory, the Bank states the amount for which on its valuation, fixed after leaving ample margin for possible depreciation, it will accept the mortgage.

But the Bank has no cash funds, and therefore issues[115] Bonds, carrying interest at 6%, and subject to annual amortization, for the amount agreed to be granted to the Mortgagor. The latter, if he require cash, as is usually the case (most of such borrowings being actually effected with the objects for which the Bank was founded, viz. improvements of the property mortgaged, extension of holding, or purchase of stock and implements), must take his bonds to the Stock Exchange for sale. For them there is always a free and open market, the price obtainable usually varying only according to ordinary accidents of supply and demand.

Many brokers hold standing orders for these Bonds, at a price, for Europe (before the War Antwerp was always a buyer at a certain level). The only really appreciable downward fluctuations of this security are of very short duration, an hour or two at most, and are due to what can only be condemned as the inconsiderate action of the Directors of the Hypothecary Bank. That is to say, the Bank’s acceptances of Mortgages are sometimes allowed to accumulate and then, all of a sudden, the Directors seem to get to work and sign and issue huge batches of Bonds. Not only do most of these find their way to the Stock Exchange, in consequence of anticipatory orders lodged with brokers by absent or upcountry mortgagors, but many such people leave selling orders with the Bank itself.

The result of all this frequently is that one fine morning or afternoon cartloads of these Bonds arrive on the Stock Exchange and flood the market, in spite of all the market can do with the best intention of sustaining prices.

Soon, however, the mass is absorbed by the home and foreign demand, and the little crisis which could never have occurred except through the bad management above described, is over and normal prices rule again.

All this relates to the current issues of these Bonds, the “Cedula Argentina” as they are now called.

Formerly they were issued in series, each of which was distinguished by an alphabetical letter. The last of these[116] lettered series was “L.” This system of series had inconveniences, inasmuch as the regulations under which they were issued prescribed redemption in Bonds of the same series, which interfered with entirely free dealing; some of the earlier series being now only obtainable at a high premium on account of the buyer’s need of them to make up a parcel.

The Securities ring also deals in debenture and other Bonds—National, Provincial and Municipal. The only speculation in which it usually indulges being of the very safest kind; in regard to which, indeed, the term investment would better apply.

The side of the large Hall of the Exchange opposite to that occupied by the Stock and Share rings is now tenanted by the “Bolsa de Cereales,” an institution the recent creation of which was due to the necessity, arising chiefly from the rapid developments of the milling industry, for dealing in “futures” in cereal production.

On the old Once Corn Exchange such dealings were and still are tabu, as savouring dangerously of the Chicago “Pit,” and much heated discussion took place before the new Exchange was at length authorized to register transactions in futures. The discussion was useful inasmuch as it brought about the framing of stringent regulations against the more ruinous forms of gambling in grain. In the result, the new Institution works very well and fulfils its ostensible purpose of assuring the miller against produce being held against him at times when he is under obligation to deliver flour. Thus, it has prevented instead of encouraging at least one vicious class of operations. Formerly, when all dealing in grain futures was illegal, the miller was continually at the mercy of operators in the cereal markets.

The Institution of the new Market was imperatively needed on account of the huge development and value of the milling industry.

For ordinary dealings the Once cereal market still holds its own.

[117]
THE BUENOS AIRES STOCK EXCHANGE

One needs some courage to write candidly about this institution, the more especially if one hopes to enter it again.

The building itself is the property of a company from which the members rent it. Part of it is now, as has been indicated, sublet to the members of the new Cereal Exchange.

One side of the rotunda—the great inner Hall of the “Bolza”—is therefore now tenanted by the dealers in stocks and shares, and the other, facing it, by those occupied with grain. Each exchange has two large blackboards on which prices are chalked up by attendants as deals are called by the parties making them. These prices then become official; and their genuineness is vouched by the fact of their having been called by members of the Exchange, who are held responsible by the Committee for the bona fides of these announcements.

The rules are now very strict on the question of calling of bona fide dealings only. At one time the announcement and consequent chalking up of fictitious deals (called “gatos,” or, as we might say, “wild cats”) became so scandalously frequent and unblushing that a stop had to be put to a malpractice which deceived the public, since all prices chalked up are published in the daily papers.

The first, usually, in regard to both the magnitude and importance of the dealings recorded on it, of these blackboards or “slates,” as they are called, is that reserved for transactions in Government and other important stocks; the second being that devoted to shares.

Thus the first board is mostly filled with records of the numbers and prices of National Cedulas dealt in, and the second with those of whatever one or two kinds of shares may for the time being be in fashion for what one may bluntly call gambling. For gambling, simply, is the end of[118] almost everything in the shape of speculation in the ephemerally chosen media. It is in regard to this gambling that the note of warning to the stranger already sounded may be repeated here. The really Argentine public has long ago had its fingers sufficiently often and severely burnt to have decided to give all Bolza speculation a wide berth. And here one is brought face to face with a mystery which the present writer has as yet been wholly unable to explain in any fully satisfactory way.

This mystery is that, given the fact that the contributions of the public to Bolza gambling have since long ago become a negligible quantity, it seems clear that such speculation must be confined to a limited group of Bolza operators.

How, therefore, is it worth the while of any of these operators to survive for long as such? They are mostly, if not all, men of small capital, very small in many cases, yet there they are, day after day, busily occupied in attributing usually fictitious values to the shares of one, or at most two (for the time being) companies. Up go the prices of such shares, rising each day to giddier heights, till at last like balloons they disappear from sight and another set of shares takes their place as material for a boom. Who is the last man or men left with shares at top price? And what on earth does he do with them? These be questions the answers to which are hidden by a secrecy the completeness and continuity of which do credit to the initiate few whose common interest it is to maintain it.

The only protection of these people is a mutual defence against the common enemy, similar to that adopted by professional buyers at an ordinary auction against any innocent amateur who may stray into their midst. On the other hand, the mere presence of a known “bear” among these folk, completely paralyses all action on their part until his back is turned again. The writer now has in his mind’s eye a well-known figure, that of a powerful bear who was the terror of the speculative markets in the golden days when the public[119] still played the game and all went merrily except for his malevolent influence. He alone could frown all prices down; and he once held them down against the whole of the furious remainder of the Exchange. It was a never-to-be-forgotten conflict, from which he emerged victorious and with a name at which even the puny bulls of to-day still tremble. Though be it said, he now does little but lend money to those whom circumstances, or still, occasionally, he himself, have forced to carry over. Few Bolza members will fail to identify him from even this slight reference to his fame. The heyday of the Buenos Stock Exchange was that immediately preceding the passing of the “Conversion” law which fixed a ratio between gold and paper and thus ended the speculation in gold which had grown all too vigorous on wide fluctuations. After that, wild cats, resorted to as the next best stimulant, quickly undermined the constitution of the Bolza and frightened the public; permanently, it would still seem, from its precincts as far as gambling speculation is concerned. Such speculation, in any magnitude, has been dead since 1906; in consequence of the collapse at that time of a gold fever boom of which a shoal of doomed alluvial dredging Companies were part cause and part effect.

Nowadays, the real business, of which there is a large and constant volume, done on the Buenos Aires Stock Exchange is in National “Cedulas.” This business has gradually gravitated into the hands of a few large brokers. The only drawback to these Bonds is their name, which might lead the ignorant in matters South American to confuse them with the Provincial (Province of Buenos Aires) Cedulas, the corrupt mismanagement of which caused a great scandal some years ago. Still “Cedula” means a “Bond,” and it would, after all, be idle to wish to abolish the latter word only because some English Bonds may have proved unworthy of the prestige usually attaching to that designation.

The question has often been raised as to whether, on the wording of the guarantee endorsed on National Cedulas, the[120] National Government is responsible for repayment of the principal as well as the interest on them. This, however, amounts almost to a quibble; of little, if any, more than abstract interest. The amortization of these Bonds is certainly guaranteed in like manner as is the interest on them, and only some tremendous crisis, now unimaginable, could so wreck the whole territory of the Republic that land values throughout that territory would simultaneously fall to an extent which could render impossible the redemption of mortgages granted in the first place with a very liberal margin between the actual market value of the land and the amounts of the Bonds issued on its security. For, it should be noted in this connection, a Cedula is not issued by the Bank on the Security of such or such designated property, it is issued on the security, guaranteed by the Bank after due investigation, of all the mortgages held by it. So that, in effect, even if the whole of a Province were to be engulfed by an earthquake, the security of none of the Bank’s Cedulas would be affected by the loss since, at the margin reserved by the Bank, all the remainder of the lands on which it holds mortgages would still be ample security for all its bonds.

The reader who is already well acquainted with these matters must forgive me for thus setting them out in so obvious a way. I ask him to believe that there are still very many holders of Argentine National Cedulas possessed of only the vaguest ideas of how their Bonds came into existence, and practically none as to the real nature of the security for them, except a general sort of notion that they are Argentine Government Bonds.

As will be seen, the facts justify my dictum of a few pages back that these Bonds really offer as gilt-edged a security as anyone could wish for.

Other securities most commonly dealt in in the Securities side of the Market are “Credito Argentino,” National Internal debt, the “Premier Security” of the Country, as it has been called; and some Provincial and Municipal[121] Bonds. On the share side, the shares of the various Banks are usually the subject of the most really important quotations on the slate.

Many first-class Argentine securities and shares seldom come on the market.



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