The Argentine in the Twentieth Century

In 1861 the depreciation of paper touched its lowest point: 2483 piastre notes were given for $100 in gold. The premium was thus 2383 per cent.

But the reader must not take this to be the only surprise that the history of the double standard has in store; others, still greater, remain to be told. In 1862 the depreciation was even lower, the premium reaching 2456 per cent., and 2556 piastre notes being given for $100 in gold.

The premium continued to rule high until 1867, being 2569 per cent. in 1863; 2784 per cent. in 1864, 2597 per cent. in 1865, and 2406 per cent. in 1866.

We stated just now that the Republic, during a long period of history, never escaped from the inconveniences of depreciated paper save practically on two occasions, which were unhappily of only too short a duration. The first occasion was when Adolfo Alsina was Governor of the Province of Buenos Ayres. The “Bureau of Bank Exchanges” was established, its mission being to exchange one piastre in gold against 25 in paper, and vice versa. This Bureau was in operation from February 1867 to May 1876, the date of the suspension of metallic conversion.

After this period the value of paper money declined anew. In May 1876 the golden coin was worth 28 piastre notes; in June, 30; in July, 33; in December, 29.

In 1877 the average value of a golden piastre was 29 piastre notes; that is, 100 piastres in gold represented 2900 notes; in 1878 the ratio was 3187; in 1879, 3220; in 1880, 3055; in 1881, 2706.

It was at this time that the second exception occurred, marking another check to the constant depreciation of paper.

In November 1881, under the Presidency of General Roca, Señor Romero being Minister of Finance, a law was promulgated establishing a bimetallic standard in the Argentine. The monetary unit was to be the piastre of gold or of silver; the first weighing 24.9 grains Troy, and the second 383.8 grains, both being alloys containing nine-tenths of the pure metal. This law also established the metallic conversion of depreciated notes.

This operation was a beneficent advance in the economic and financial system of the country; for by establishing metallic conversion it gave stability to the legal instrument of monetary transactions, and also contributed to establish an enviable state of affairs during the years 1883 and 1884, which gave rise to the rosiest hopes for the future. But by an irony of fate the very Government which had suppressed the double standard found itself forced to re-establish it in January 1885. It should be remarked that at this time Señor Romero was no longer Minister of Finance.

The country being once more abandoned to the miserable system of inconvertibility, the depreciation of paper began its downward progress, recalling the too celebrated case of the assignats, a case one would have thought impossible of recurrence in time of peace and among a people that had suffered no catastrophe for many years.

In June 1885 the premium rose to 50 per cent.; in 1886, it was 39 per cent.; in 1887, 35 per cent.; in July 1888 53 per cent., finally, in 1889, it proceeded by leaps and bounds; 50 per cent. in January, it was 53 per cent. a month later; in March it was 55 per cent., rising to 120 per cent. in September and October, and 130 per cent. in November and December, despite the empirical measures of alleviation adopted, amid violent disputes, by the Minister of Finance.

Thus the Republic entered on the year 1890; a year of grave political and financial disaster. On the one hand was the revolutionary movement, prepared by the connivance of part of the army and the navy; on the other hand, the crushing depreciation of paper, ending in an absolute catastrophe which affected both public and private fortunes.

In the month of April of that year the premium increased to 215 per cent.; that is, 100 piastres in gold were equivalent to 315 in paper. In July, when the revolution broke out, it stood at 217 per cent. In November the Government which replaced that which had been attacked by the insurgents prohibited the quotation of gold. Nevertheless, the premium rose to 225 per cent, and remained at that figure until December.

We must remember that, in spite of the downfall of paper, the economic vitality of the Republic had suffered no serious blow; no war had broken out, no international complication had occurred; there was, in short, no organic cause to which the premium could be attributed. Certainly, the commercial balance was unfavourable; but that phenomenon has not the significance generally attributed to it. The true causes of this crushing state of affairs were exclusively of a financial and administrative nature. It was the inevitable result of the manner in which paper money had been issued to serve the needs of the Government, and to feed the furnace of speculation. One cannot forget that at the end of 1886 the total issue of paper amounted to $80,251,380; that in less than two years it was nearly doubled, amounting to $147,503,911; while in 1890 the paper currency reached the figure of $196,882,500. But this situation, painful as it was, could not be suddenly changed for the better; other causes of a like nature were about to intensify it. The new President, who came into power after the revolutionary outbreak found himself forced, by various circumstances, to increase the existing circulation of paper. The new issues amounted to $150,000,000.

As was only to be expected, such an issue on the back of the existing paper currency, which exceeded $196,000,000, could only produce a disastrous fall in paper. Its depreciation touched the lowest point in the history of the Argentine, or of any other country during the second half of the nineteenth century; the blackboard of the Stock Exchange showed an exchange value of 464 per cent. or a premium of 364 per cent., in the third week of October 1891. This was the record of monetary depreciation.

After 1892 the monthly quotation of gold, in relation to paper, oscillated between 359 and 290 in 1893; 433 and 307 in 1894; 377 and 311 in 1895; 352 and 266 in 1896; 317 and 274 in 1897.

We see from these figures that these conditions are abnormal, extraordinary; and yet, owing to their long duration, they are almost part of the normal life of the Republic. It is therefore a matter of interest to study the causes of such phenomena, in order to decide whether they are inherent in the period of transformation through which the country is passing, in which case it would be idle to attempt any reform at present, or whether they can be controlled or checked by the employment of means counselled by science and confirmed by experience.

According to the judgment of certain persons who have devoted themselves to the study of economic questions, the causes which, in the Republic, produce the double standard, are of a permanent character, proper to the period of formation through which the country is passing. It is even said that so long as Argentina has not a capital of her own with which to float herself in the full tide of affairs—such a capital as is the result of years or centuries of prosperity—so long will she be a debtor among the nations, and the system of the double currency must continue.

We ourselves are of opinion that the causes which have produced, and now maintain the inconversion of the fiduciary currency, are of a very different character to those implied by the above judgment; and that if we consider the economic state of the country at the moment when the double standard was established, we shall find that it was in no way responsible for the phenomenon of depreciated currency. The true cause is the necessities of the Government; determined either by factors beyond the range of debate, such, for example, as the eventuality of a foreign war, or by less justifiable reasons, such as deficits in the budget and reckless issues of paper. In both cases the printing-presses of the official banks have been set to work, in order to tide the Government over a difficult passage, at the risk of vitiating the instrument of national credit by the efflux of inconvertible paper.

Those interested should read the history of the first issues, exposed in a masterly manner by Señor Augustin de Vedia, in his work on the National Bank; they will see that the excessive issue of notes cannot be explained or justified by the period of economic formation which the country has passed through. We must search for other causes in order to explain this long and unfortunate period of inconversion, which lasted, with a few years’ respite; from 1820 down to 1905.

What, for example, were the reasons which determined the premium on gold in 1885, under the first Presidency of General Roca? Was it, by any chance, that any economic calamity fell upon the country? Were the harvests lost? or was there a foreign war, or even one of those revolutionary risings so common among the South American nations? Did the germs of some epidemic invade the country, decimating the population by disease and poverty? Was there any violent and ruinous fall in the market prices of Argentine products?

Nothing of the kind befell. The Government itself, in the message in which it solicited the ratification of the double standard, that “the national production, the valuation and the degree of culture of the soil, had consolidated the national credit.” The crops were abundant; and their prices, in foreign markets, were more than fair. The Republic was at peace, at home and abroad; thus realising one of the dreams of the paternal administration which directed its destinies. As for the public health, it suffered no perceptible eclipse in all the Argentine Territory.

It has also been said that the commercial balances were unfavourable to the Argentine: a country at once a debtor and a centre of immigration. And it has been asserted, too, that the Republic suffered from a sudden increase of growth, without having behind it any reserves of accumulated capital.

The affirmation that the depreciation of the currency, and in consequence the establishment of a double standard, arose from unfavourable commercial balances, has no scientific basis and is not supported by precise demonstration.

“None of the countries which have suffered the misfortune of a depreciated currency have reached that condition purely on account of adverse balances,” as a Spanish economist, Señor Edouardo Sans y Escartin, has said with justice. All countries have suffered from this evil, on account of monetary changes, and the Argentine is only the latest example. France towards the end of the eighteenth century, England from 1797 to 1821, Austria and Russia since the beginning of the last century, the United States from 1862 to 1878, Italy since 1875, Paraguay since 1870, and the Hispano-American Republics for the last twenty-five years: all these countries have suffered from monetary perturbations, some through the abuse of paper money or the excess of the fiduciary circulation, others through the variations of the relation of gold to silver. In none of these countries did the crisis take the form of the consequence of unfavourable commercial balances.

We find, in fact, that it is not the case that economic causes, resulting either from the formative period the country has traversed, or from its lack of accumulated capital, have contributed and are still contributing in the Argentine Republic to prolong the system of inconversion; the causes are exclusively financial and administrative, as we have already maintained.[109]

Having glanced at the circumstances which have determined the state of monetary inconversion which has afflicted the country ever since it became a nation, we must now examine the remedies which the public powers have suggested in the hope of emerging from this detestable state of affairs.

Every presidency has declared its firm intention of redeeming or reducing the paper currency in circulation; but none of them has obtained results that we can really regard as final.

Of all the attempts to terminate the condition of inconvertibility, to give stability to the currency, and to prepare, in a more or less proximate future, for the establishment of a sane monetary system, the most earnest and scientific, and that which had the happiest results, was that which emanated from the proposal presented to Congress in August 1899 by the ex-Minister of Finance, Señor José-Maria Rosa, which has since then become law: the present law of the conversion of the fiduciary currency.

The scheme of reform of this eminent statesman was worked out on the following basis:—

It was on these lines that the Minister drew up, and Congress adopted, a law which enacted that the nation should convert, during a fixed period, at a convenient time, the whole fiduciary circulation into Argentine gold coinage, at the rate of one paper piastre for 44 centavos of a gold piastre. This same law ordered the formation of a Conversion Fund, with resources which it enumerated; and finally it established in the Caisse de Conversion a bureau for the exchange of paper into gold and vice versa to all who might apply, at the rate of one paper piastre for .44 of a gold piastre.

Few laws have been so beneficial as this law of monetary conversion was to the Argentine Republic. The present prosperous economic conditions of the country are the work of this law; it constitutes the glory of Roca’s Government, which gave it birth and enjoyed its first fruits.

Yet we must emphasise the fact that this law, so beneficial to the public, was at the outset repudiated not only by the President, who, to avoid subscribing to it, forced his Minister to send in his resignation, but also by the principal organs of the press, at the head of which was that important journal La Nacion, and again by the Professor of Finance at the University—M. Terry—who was all for conversion on a sliding scale; that is, for the worst method conceivable, as by maintaining the condition of instability he would have adjourned the question instead of solving it. But thanks to the rare energy and the intelligent propaganda of Señor Rosa, the sole author of the law, effectually supported by Senator Pellegrini and Señor Tornquist, this important step was accomplished, despite all the obstacles which barred the way.

In a very short time this law, so strongly opposed before its birth, produced marvellously beneficial effects upon the economic life of the Republic. It gave stability to the currency; that is, it endowed the Argentine with one of the greatest blessings a commercial and productive nation can enjoy.

To be convinced of this fact it is enough to run the eye over the column of metallic quotations on the Exchange, published in the “Statistical Annual of the City of Buenos Ayres.”[110]

This law has killed speculation on exchange values, which before it was passed had assumed scandalous proportions, and went far to developing throughout the country that passion for gambling which is even now a corroding cancer at the heart of the young Republic.[111]

This law also provided for the formation of a Conversion Fund, which was a powerful factor—si vis pacem para bellum—in the pacific solution of the old frontier dispute with Chili. This fund amounts to-day to £5,100,000 deposited in the Bank of the Nation, and would, without this far-sighted law, have been swallowed up in the whirlpool of administrative expenses.

Lastly, the law of monetary conversion has been the salvation of agriculture and stock-raising, the two chief sources of national wealth, by preventing the too rapid change in the value of paper, which is a result that deserves to be considered with attention. The law was promulgated at a time when a large harvest was expected, and when, from that very cause, the depreciation of paper violently increased, the value falling from 278 in August 1898 to 206 in December of the same year. It is certain that at this rate the depreciation would finally have touched 150, to the greater profit of the speculators.

What would have happened had the monetary situation altered so rapidly? The Argentine agriculturalist or stock-raiser, having paid all the expenses of production with gold at about 300 per cent., would have been forced, by reason of the rapid depreciation of paper, to sell his products at a price which would no longer compensate him for his increased expenditure. This would inevitably have ruined the producer—that is, the principal artisan of the national fortune. Far from opening up new lands with his ploughshare, as hitherto had always been the case, he would have abandoned the land already under cultivation.

We need not describe the disaster which would have overcome the country under such conditions as these: the loss of credit both at home and abroad. The stream of immigration would have been suspended; emigration, on the contrary, would have increased, taking the form of a veritable exodus, even of a flight; and each impoverished and disillusioned emigrant, as he left the Argentine, would have proclaimed that the country was ruined. As a result the Argentine would have been for years partially depopulated, or at least deprived of the new recruits which immigration brings in, and of whom it has such need in order to realise the value of more virgin territory.

Worse still: once the harvest was sold, at prices which could no longer be calculated on the basis of the cost, gold, now freed from all restraint, like a balloon whose mooring is broken, would have resumed its upward journey. The melancholy spectacle of 1890 and 1891 would have been repeated; gold would have risen by leaps and bounds, in contradictory and incalculable rushes, finally to reach the limits that mean bankruptcy.[112]

Such are the disastrous results which would have ensued had not the law of monetary conversion come just in time to restrain the rapid depreciation of paper, and to give money the stability it must possess if it is to be the faithful and precise instrument of commercial transactions, the common measure of all exchanges. Such were the beneficent results which followed shortly upon the operation of the law; and we can only regret that it has not always been understood and applied with sufficient force by those who were responsible for putting it into practice. The Governments which have followed since then have not always followed the ideal of economy and scrupulous administration which should ensure the success of this important reform. None the less, the Conversion Fund amounts to-day to £5,100,000.

According to the figures for October 1909 the monetary situation of the country may be summed up as follows:—

The total of notes in circulation amounts to $686,291,704 paper, equivalent to £60,393,670. The Conversion Fund of £5,100,000 in gold, added to £34,752,058 on deposit in the Caisse de Conversion and to the £14,073,515 deposited in the various banks of the capital, forms a total of £53,925,573. It follows from these eloquent figures that the fiduciary circulation, notes, nickel, and copper, is guaranteed in Argentina by an actual value of 65.9 per cent. of its total; the notes alone are guaranteed by 89 per cent. of gold.

Unquiet spirits from time to time, including the enemies of monetary reform, announce their opinion in the press that this law should be modified. Quite lately the well-known journal La Nacion, which is distinguished by the constancy and fervour with which it attacks this beneficent measure, has opened its columns to an enquiry, in order to obtain the opinion of the public, or at least of persons competent in such matters. Happily common-sense triumphed; the law remains intact, continuing to benefit the whole national economy.

CHAPTER IV

Among the official institutions which are closely connected with the issue and redemption of paper money, the Caisse de Conversion demands a special place, on account of the important part which it plays in the financial life of the Republic. This establishment was created in 1890, at a moment particularly critical for the credit of the country, when the terrible crisis occurred which ruined several banks and resulted in a depreciation of the fiduciary currency which exceeded all expectation. The Government which presided over the destinies of the country understood that it was necessary, in order to ameliorate such a situation, to put some means into practice which should ensure a more gradual movement of paper, its reduction in no matter what form, and its future convertibility within a short and definite period, as the message declared which accompanied the draft of the law submitted to Congress.

In obedience to these excellent principles of financial and banking policy, it proposed the creation of a Junta or a special Directorate, “independent in its action, and uniting the necessary faculties for the recovery, administration, and application of the elements that must be confided to it for the effectual accomplishment of its important mission.”

An “important mission” it was indeed that was confided to the Junta by law; for this body was to see the gradual conversion and redemption of paper money, supervise the strict execution of all the laws relating to paper money, and oversee all issues of the same.

With the object of effecting, sooner or later, the actual and effective conversion of paper money, the law created a “Conversion Fund,” composed of the metallic reserves of the guaranteed banks, the sums for which these same banks would be debitors on account of the value of stock bought as guarantees, the public funds issued to guarantee the bank issues, and all the sums which, in virtue of other legislative enactments, might be destined to the conversion of bank paper, and especially those proceeding from economies made out of the general budgets.

The Executive attached a special significance to this fund, proposing to use it to great advantage in the future; if the succeeding Governments had the wisdom to maintain the elements indispensable to the regular circulation of the national currency.

These details prove that the fundamental idea at the bottom of the creation of the Caisse de Conversion was that of effecting, by its help, and by utilising the resources with which it was endowed, a rapid redemption of paper money. This intention, moreover, was solemnly affirmed at home and abroad when the contract was signed with the English bankers for the issue in 1891 of the loan known as the “Funding Loan,” amounting to £15,000,000; in virtue of which loan the Government undertook to withdraw from circulation, during each of the years 1891, 1892, and 1893, $15,000,000 in notes, or $45,000,000 in the three years.

Unhappily the Government’s good intentions had no practical issue; the Caisse de Conversion, from the first moments of its existence, found it impossible to fulfil its object.

So the proposal to withdraw $15,000,000 a year went no further than a beautiful ideal; it never took definite shape as a reality. In 1891 $1,696,676 in paper were burned; they came from an additional customs duty on certain imports. In 1892 $1,463,424, having the same origin, were disposed of in the same way. Besides this a sum of $3,511,600, provided by the payments made by the National Bank and the Bank of the Province of Buenos Ayres on account of $35,116,000 lent them by the Government in order to help them out of a greatly embarrassed condition, was also burned. The balance-sheet of receipts and expenditures drawn up every year by the Comptabilité Générale records only $1,248,032 as burned in 1891, and $3,586,255 in 1892, or $4,834,287 in two years; a very different sum to the 30 millions which the Government had promised to withdraw.

Thus the Caisse de Conversion, from which the Minister of Finance had hoped so much, failed at its birth, and as an institution gave no positive results. So it was not necessary, as the Minister of Finance, Señor V. F. Lopez, pleasantly remarked, to await the appreciation of future Governments.

But this is not all; instead of redeeming the promised quantities of fiduciary money, the Government which was then directing the destinies of the country—we must believe that it was compelled by circumstances, which are so often more potent than the human will—the Government actually found itself forced to increase the total of paper in circulation by emitting, for various reasons, further issues of notes.

Dominated by circumstances, it issued in 1890 $35,116,000, in order to legalise the excess of an issue delivered to the National Bank and the Bank of the Province of Buenos Ayres. In the course of the same year it created an issue of 60 millions more, in order to furnish the National Bank with 25 millions, the National Mortgage Bank with 25 millions, and the City of Buenos Ayres with 10 millions. In 1891 it issued 50 millions in order to found the Bank of the Argentine Nation, and finally 5 millions more for the Mortgage Bank. In short, urged by necessity, the Government created $150,000,000 of paper in two years, which on the top of a previous issue of $161,766,590 in paper was naturally followed by disastrous results.

The Government which took charge of the administration in 1892 also manifested, in its programme, its firm intention of increasing the value of paper money by its gradual redemption; an operation which would, of course, be the duty of the Caisse de Conversion. To this end it included the necessary sums in the budget, and $865,426 were burned in 1893 and $8,000,394 in 1894. But the results obtained by this measure were far from responding to the hopes which were founded upon it; although the Government religiously and with much solemnity, burned on the 15th of each month a determined sum of paper money—usually half a million—the value of paper, far from rising, fell further and further below that of gold.

The Government finally saw that its plan was useless; and hastened to explain itself by the mouth of its Minister of Finance, who declared that “the executive power recognises that the withdrawal of eight millions of piastres per annum cannot fundamentally alter the price of our paper; but what it does affirm is that this quantity will be sufficient, provided the production of the country increases, provided that the exports exceed the imports; that is to say, provided that the international balances are in favour of the Republic.”

We may say in passing that these two desired factors were realised; but not the expected advantage, for the Government again made the mistake of issuing 15 millions of internal stock, bearing interest (£1,320,000), while at the same time it extinguished another debt, also domestic, which did not bear interest.

All these details prove in a conclusive fashion that the original and organic functions of the Caisse de Conversion were inverted from the time of its creation; converting that institution into a factor of depression in all that concerned the paper currency, instead of being the instrument of increasing its value.

After this date the Caisse operated as a secondary and harmless department of the public Administration; leading an almost forgotten existence, until the year 1899, when the law of monetary conversion was passed, which entrusted it with two missions of great importance, which were destined to exercise a beneficent influence upon the fiduciary circulation, and therefore upon the economic life of the Republic.

One of these two missions had as its object the establishment of an office for the exchange of paper into gold and vice versa, at the rate of 2.2727 piastres in paper for 1 piastre in gold. The other consisted in forming a Conversion Fund, to which more or less important resources were assigned. This fund amounted in 1902 to £2,400,000 in gold, but at a moment when an international complication was believed to be imminent this sum was placed at the disposal of the Government by authorisation of Congress.

The Government eventually returned £2,000,000 of this sum, and since then the fund has constantly increased, amounting in 1907 to £5,100,000, as we stated when speaking, in the passages relating to the issues of paper money affected by the Caisse de Conversion, of the results of the application of this new law.

The law to which we are referring was put into execution on the 9th of December 1899. On that day the first transaction under the new law was effected; the Caisse received 100 piastres in gold, in exchange for which it returned the equivalent in notes, in the proportion of 44 centavos of gold to a piastre note. The balance drawn on the 31st of December showed the existence of £292.6 in gold. At this same date the fiduciary currency in circulation amounted in all to $295,149,735.

Let us now look into the operations of the Caisse de Conversion after this date.

During the year 1900 $18,398,449 (£3,679,690) in gold was received; but as this sum was eventually withdrawn the fiduciary circulation soon reached its former figure.

In 1901 there was nothing done; that is, the Caisse received no gold.

In 1902 scarcely anything was done; £4209 was received, and £3636 was paid out, leaving a balance of £573. The operations for 1902 began in October, during which month the Caisse received £68, 12s.; it paid out £67, 12s., so that £1 remained. In November the takings increased to £1497, and the outgoings were £1466, leaving a balance of £31. In December £2639 were taken and £2102 issued, leaving a balance of £537.

Only in 1903 did the operations of the Caisse de Conversion amount to anything. The two principal causes of this state of affairs were, firstly the settlement of the frontier dispute with Chili, a question which had caused serious alarm, and had resulted in enormous official expenses during the few previous years; and secondly the size of the commercial balances. Bearing this in mind, it is not surprising that the amount of gold in the Caisse de Conversion, and, consequently the issues of paper money, should have commenced to increase and have continued to do so until they reached the proportions which they have since attained.

In 1903 £9,208,284 in gold was taken, and £1,576,625 paid out; leaving £7,648,229. The busiest months were April, when £2,519,048 was taken, and March, when the takings were £1,738,395. The largest outgoings were in March and July, amounting respectively to £239,133 and £222,104.

In succeeding years the metallic reserve of the Caisse de Conversion has continually increased, thanks to the favourable sense of the economic balances of the nation’s trade, and the capital which has entered the Republic, to be employed in the establishment of new industries, or the creation of railways, tramways, etc.

At the time of writing the metallic reserve of the Caisse de Conversion has lately increased to £34,752,058, which, added to the £5,100,000 of the Conversion Fund, gives a total of £39,852,058. The proportion of these reserves to the paper currency in circulation is to-day 65.9 per cent.

According to the law the increase of the metallic balance in the Caisse de Conversion has inevitably caused, as a natural consequence, the parallel increase of the issues of notes, nickel, and silver, of which the amount in circulation increased to $688,177,998 on 31st October 1909, or $393,028,267 more than on 31st December 1899, the year in which the law of monetary conversion was voted, and in which the same circulation amounted to $295,149,731.

The rapidity with which the emission of paper has increased has caused certain journals, and especially those which have been prominent in attacking the law of monetary conversion (whose beneficial effects they were yet powerless to deny) to raise cries of alarm, thinking to see in this increase a future economic peril, or the seeds of a dangerous crisis, due to the inflation which, in their judgment, is produced by such issues. But it is easy to prove that these alarms are not justified from the moment when such issues are guaranteed by a corresponding deposit of metallic currency in the Caisse de Conversion. Moreover, a very little reflection will show that one cannot help admitting that this gold, being the product of the ever-increasing economic balances of the country, will affect the monetary situation equally if instead of being in reserve in the Caisse de Conversion it is to be found in the strong-rooms of private banks.

As we may see from these data, the Caisse de Conversion has completely changed its rôle. It has abandoned its original function, which was confided to it by the law; namely, the redemption of the fiduciary currency and the re-establishment of the monetary equilibrium when destroyed by excessive issues of paper. To-day this institution is merely a purely mechanical department of the Administration, and its functions might be fulfilled, at any rate theoretically, by other administrative departments which are closely connected with it.

CHAPTER V

The Inventory of Movable Values

The time has come to sum up our conclusions, and we cannot do better than attempt to present the figures of the movements of the capital invested in the Argentine, and by stating, as far as possible, its yield. We have already had occasion to declare that Europe has not turned her attention to the young South American Republic for sentimental reasons, nor on account of the beauty of her political institutions nor the splendour of her landscapes. What interests the general public is the extraction of the riches of the Argentine soil; the economic and industrial expansion of the country, and its fitness as a field for investment and original enterprise.

To respond to this mental attitude we have thought it proper to undertake a dry and impartial inquiry into the value of the capital invested in the Argentine, and the total of its yield. Capital represented by movable values is the only factor which has in some sense an official existence which is amenable to control; it lends itself to statistics sufficiently precise to allow of our estimating, from this point of view, the wealth of a country; and it is consequently in this direction that we may search for a standard with which to compare the favourable estimates expressed in our preceding chapters on the subject of the development and prosperity of the Argentine Republic.

This inventory will lead us to other data, which are equally instructive. In reviewing the movable values and in estimating their yield we shall at the same time examine into the general movement of foreign capital and its earnings, so that we shall be able approximately to state the amount and the profits of the capital invested by the various European nations which have dealt with this country.

By the aid of these statistics we shall finally see the situation of the Argentine, which the results of its foreign trade have shown us only imperfectly, in its true light. Although the country has an extremely favourable commercial balance, which in 1908 was not less than £24,000,000, this sum has to support enormous charges for the payment of interest on loans placed abroad: the dividends of railway companies, of banking houses, of all manner of land companies, of commercial and industrial companies, whose shareholders are abroad, etc. etc. These are the sums we are trying to determine, in order to draw up as exactly as possible the balance-sheet of the Argentine.

This chapter will therefore be devoted to estimating on the one hand what the country owes to foreign capital, and on the other hand what profit foreign capital draws from its investment in the Argentine. It is to some extent the current account of Europe and the Argentine that we wish to present, taking as our basis the movable values, which are the only serious data upon which we can base our inquiry.[113]

The nominal total of Argentine movable values subscribed up to the 21st December 1908 was £474,396,935 (in gold), of which sum £219,513,399 represents shares, £104,502,163 bonds, and £150,381,572 the public debt of the Nation, the Provinces, the municipalities, the capital of State railways, and the capital of the Bank of the Nation.

If we compare these figures with the inventory of the movable values existing at the end of December 1904, we shall find an increase of £157,173,555. But if we take account of the fact that in the first amount the cedulas of the Province of Buenos Ayres figure to the value of £15,400,000, while in the second they amount to £10,400,000 only (the amount of shares admitted to conversion by the Government), we see that the difference is considerably greater.

This increase does not arise exclusively from the new shares issued by companies created during the last two years; a large proportion is due to existing companies, which have at last decided to furnish the information demanded in view of this new inventory. But a certain number of companies still remain outside the inventory, whose stock would increase the total by 5 or 6 million pounds.

Here is the list of the stock in circulation on the 31st December 1908: