The Electrical Industry.—It is greatly to the credit of the Argentine that everything that makes for progress, for an increased welfare or greater convenience, is immediately applied by the Republic. The latter quickly absorbs all improvements and, profiting by the experience of older nations, immediately puts new procedures into practice, instead of lingering in the rut of outworn systems. Thus it was, for example, in the case of the electrical industry. The Argentine has no need, in this respect, to envy the most advanced nations. In Buenos Ayres—for only the large centres can be progressive to this extent—all the tramway and electric lighting concerns are most excellently equipped, and are in this matter equal to the best installations of England or the States.

The electric tramway companies, whose tracks cross Buenos Ayres in every direction, are seven in number, forming a network of lines which are distributed as follows:—

The “Anglo-Argentine” Company, 18·8 miles; the “Capital” Company, 34·7 miles; the “Metropolitan” Company, 19·8 miles; the “Grand National,” 76·9 miles; the “Compagnie Lacroze de Buenos Ayres,” 44 miles; the “Southern Electric Tramways,” 49 miles; and the “Harbour and City of Buenos Ayres,” 6·8 miles.

The great event of 1908 was the amalgamation of these companies by the “Anglo-Argentine,” which proposes to unite these lines under a single management, in order to form a vast network, comprising all the principal lines, with the exception of the “Compagnie Lacroze” and the “Harbour and City of Buenos Ayres.” The total capital invested in this important undertaking amounts to not less than £14,000,000.

It is to be hoped that this great financial operation, which will place the Anglo-Argentine Company at the head of the most important tramway companies of the world, will not fail to benefit the public, and that the Company will also turn its attention to improving its equipment and to lowering its fares to a uniform rate.

On the other hand the number of passengers carried by the Buenos Ayres tramways is constantly increasing, as may be seen in the following table:—

These figures go to confirm all we have said as to the enormous development of capital in the Argentine, and of its commercial activity.

Electric Lighting.—In the matter of illumination, Buenos Ayres was early discontented with the old methods; electricity is now preferred both for public and private purposes. Today there are 721 miles of gas pipes and 233 miles of electric cables.

The capital of the electric lighting companies is estimated at nearly £2,000,000, and their output at 30,905 horse-power. The electrical supply is chiefly in the hands of the German Electricity Company, with a capital of £1,850,000, which has already absorbed the two companies previously in existence. Its equipment was furnished by the famous firm of Siemens Halske, which stands in the front rank of German electrical manufacturing firms.

Telegraphs.—Another mark of progress is the continual extension of the telegraphic system. The national, provincial, and private lines together represent to-day a length of 31,215 miles, of which 15,125 belong to the State; twenty years ago the mileage was barely half this figure.

As for telegraphic communication with the exterior, there are two foreign cable companies, one possessing the cable running to the United States via Galveston, and the other that communicating with Europe via Madeira. Communication between London and Buenos Ayres is now established in about forty-five minutes, while a few years ago the average was five hours.

Telephones.—The telephone is used in the capital and the principal towns—Rosario, Córdoba, Santa Fé, Tucuman, Mendoza, etc. Buenos Ayres is connected by telephone with Montevideo (124 miles), Rosario (190 miles), and will shortly be connected with Bahia Blanca (437 miles). The two companies established in Buenos Ayres, the “Telephonic Union of the Rio de la Plata” and the “Co-operative Telephonic Company,” represent a capital, respectively, of £243,963 and £582,032.

All these data, which we merely mention in passing, go to prove that the Argentine has assimilated all the details of industrial progress, even in their most improved forms. Experiments in wireless telegraphy are now being made with a view to communicating at long distance with the steamers leaving or approaching Buenos Ayres.

Various Industries.—At the end of 1908, according to the statistics of the official industrial census of that year, which was undertaken by the Department of Commerce in the Ministry of Agriculture, there were, in the city of Buenos Ayres, 10,349 factories or workshops, representing a capital of £23,443,144. The sales of these factories, etc., for 1908, amounted to £47,048,773. The raw material consumed was worth £25,223,681. The motive power employed in these factories was equivalent to 105,575 horse-power, and the number of workers employed was 118,315. Of the owners, 14·8 per cent. were of Argentine nationality.

If we compare these figures with those of the municipal census of 1904, we obtain the following results:—

We see that even in four years there has been a remarkable development of the industries of Buenos Ayres. This development is especially demonstrated by the increase of the capital represented by the sales of merchandise or manufactured articles and by the horse-power employed. At the end of four years the capital has increased by nearly 300 per cent., the sales by the same amount, and over five times the motive power is employed.

This progress is certainly remarkable, but it does not perhaps truly represent the actual progress achieved. The Director of the Census, Señor Ricardo Pillado, declares that “the general opinion prevalent in the offices of the census department is that certain important items of information, relating to matters of great interest, have been concealed by interested persons. Among such we may cite the value of output, the amounts of sales, the capital employed, the number of employés, etc.; as the manufacturers are anxious, above all, to shelter themselves from a possible increase of taxation or licences.” So that in spite of the satisfactory results of the last census, in spite of the notable increase of wealth and industry recorded, the figures given are far from representing the true significance of the industries of the capital city.

The results already given may be classified as follows, under the headings of the kind of industry, capital employed, value of produce, motive power, and employés engaged:—

The establishment of large electric works which furnish current at very moderate rates, as well as the advantages of electro-motors as compared with steam-engines, have led a number of industries to adopt new systems of motive-power. Of a total of 105,575 horse-power, 12,505 are furnished by electricity, 90,655 by steam, 1939 by gas, and 476 by naphtha.

Among those industries which are still in a state of infancy we must mention the chemical industry; this is limited to a few candle and soap factories, sulphuric and nitric-acid works, scent distilleries, dye factories, etc., whose produce is insufficient to the needs of the country.

The match factories, on the other hand, furnish a good article and are sufficient to the country. The consumption at present exceeds 200 million boxes per annum.

We must also mention the existence of a few paper-mills, glass furnaces, and various works where certain agricultural necessities are produced: such as iron wire, fencing, etc., and also certain wheel factories; but here again importation furnishes a great proportion of the articles consumed.

CHAPTER IV

In any sketch of the commercial life of the Argentine, we must include the Bourse and the banks, which play an important part in the business life of the community, owing to the facilities which they afford to all kinds of commercial transactions.

To-day such transactions represent a considerable figure, and involve a movement of capital amounting to scores of millions. There is obviously need of an organised body designed to simplify this movement, and to place at the disposal of trade the means of effecting its exchanges with the least possible displacement of capital.

Banks.—It was inevitable that in the Argentine the evolution of banking should be towards an international character, since the trade of the Republic is almost entirely with foreign countries. Moreover, this trade is very largely in the hands of foreigners: French, English, Germans, Italians, Spaniards, Belgians, or Americans from the States; which fact has resulted in the formation, in the city of Buenos Ayres, of various groups of banks, corresponding, in respect of their founders or their capital, to these various nationalities. Each of these establishments is in constant communication with the country of its origin, and seeks to gather round it clients of its own nationality.

Both in the matter of importance and that of organisation the banks doing business in the Argentine leave nothing to be desired. As we shall presently see, the sum of the capitals of all these banks amounts to a total of nearly £26,000,000; a sum which appears to be amply sufficient for all the present requirements of trade.

Working under a system of free competition, and handling a considerable capital, they have been induced to offer greater and greater facilities to trade, in order to increase the number of their clients and the volume of their operations. Moreover, the suppression of the gold premium has removed one of their chief sources of profit; so that they have been forced to obtain, through the extension and perfection of their ordinary banking operations, the compensatory increase of business which allows them to maintain the volume of their profits and their dividends.

One cannot subject these banks to a rigid comparison; each of them conducts its business for the benefit of clients of its own nationality, and in consequence must accede to their usages. The English banks, for example, have as their clients railway companies, a large number of export houses, and steamship lines, on account of the ties which connect them with the London market and its principal financial groups. The German Bank principally serves German industrial houses, and also German exporters. The French Bank of the Rio de la Plata, owing to its relations with the Paris market, and its strong position in Buenos Ayres, is of inestimable service to French commerce in the Argentine. The Italian banks share the custom of the Italian colony, which, on account of its numerical importance, gives rise to a great deal of small business.

The Banco Español del Rio de la Plata, which has branch establishments in Paris, London, Genoa, and Madrid, is in direct relation with the financial circles of those cities, and facilitates all banking operations between the various Spanish-speaking countries. Founded by the financiers of Buenos Ayres, and afterwards enlarged by French capital, the Spanish bank, which has admirable premises, has succeeded in surrounding itself with a clientèle of great landed proprietors, by offering them all kinds of facilities for the conduct of business operations connected with the sale of national produce. Their branch establishment in Paris is the favourite bank of the numerous Argentines who go yearly to Europe on business or for pleasure.

In this congeries of banks the Argentine is represented by two great establishments: one of these, the Banco de la Nacion Argentina, is a State institution which, in addition to the business transacted with the Government, runs cash and deposit departments like other banks; the other is the Banco de la Provincia de Buenos Ayres, whose origin was in the reconstruction of the historic bank of the same name, the collapse of which was provoked by the terrible financial crisis of 1890. The excellent results of the last three years which we shall presently consider in detail, allow us to predict a brilliant future for this institution.

We shall give, in the following table, a list of these banks, in the order of their establishment, with details as to their capital, reserves, transactions, and dividends.

As lately as the year 1907, it was extremely difficult to obtain exact information as to the operations of financial establishments, as there was no law obliging them to publish periodical statements of their position. From this state of affairs resulted this curious fact: that if one wished to ascertain the situation or study the operations of the English banks, for example—establishments which effected their business transactions by the aid of funds deposited by inhabitants of the Argentine—one was forced to resort to the records of the London Stock Exchange, in order to examine the reports and balance-sheets presented each year by the administrative Boards to the shareholders residing in England. But, very fortunately, thanks to a decision of the ex-Minister of Finance, Dr Eleodoro Lobos, this omission has been remedied, and it has been decreed that all financial establishments must in future supply the Ministry of Finance, during the first days of each month, with an explanatory balance-sheet giving details of their transactions. This information is made public, so that not only the Government, but anyone devoting himself to the study of commercial or financial affairs, may obtain an exact knowledge of the situation of the leading banks, and thence of the market, or indeed of the country in general.

All these banks work with a relatively large capital, which is mostly deposited. To understand the situation we must remember that banks are obliged, in the Argentine, to keep going by their own means, and are not allowed the resource of mobilising their turnover by rediscounting at the Bank of the Nation. The latter, indeed, is rather a competitor than a prop; since it also seeks the custom of private clients. Thus the funds at the disposal of the banks consists of their own capital and their deposit accounts—these latter varying greatly from one period to another—and they cannot benefit by the supplementary force arising from a credit at the National Bank.

This lack of fluidity as affecting their capital is doubly inconvenient; it forces the banks always to keep their cash reserves at a high level, and also prevents their finding employment for their deposited funds—at any rate in the case of accounts at sight. Without this faculty of rapid mobilisation they cannot enlarge, by operations of short duration, the sums which they receive in deposit, and consequently cannot allow any appreciable interest on that portion of their capital. Some banks are at present paying 1 per cent. on current accounts; others, and notably the National Bank, allow their depositors no interest. For deposit accounts at three months the interest is usually 3¹⁄₂ per cent.

As for the rates of discount, these have fallen considerably in the last few years; partly on account of the increasing competition between the various financial groups, and partly on account of the abundance of capital after several years of good harvests. After standing for a long time at 7 and 8 per cent., the average rate for first signatures tends nowadays to settle at 6 per cent.

This is a fact which may surprise those who believe that the monetary situation of a country is always affected by the premium on gold, but we shall see, in the chapter on finance, that there is, as a matter of fact, an influx of gold into the country, and that its movable resources have never been more abundant. The circulation of notes is now guaranteed by a cash reserve of more than 65 per cent.

The banks receive deposits at sight, at thirty, sixty, ninety, and one hundred and eighty days. They also receive deposits on the “savings-bank” system: that is they pay 3¹⁄₂ or 4 per cent. upon deposits not exceeding 5000 to 10,000 piastres in paper money, or 3000 to 5000 in gold (according to the particular bank)—that is, £440 to £880 in notes, £600 to £1000 in gold—on condition that if the money is withdrawn under sixty days no interest will be allowed. After the lapse of sixty days the money may be withdrawn at the will of the depositor, and the interest is added since the day of deposit. Small savings deposited on this system attain to considerable proportions, and the public is becoming more and more familiarised with business of this kind.

One item that differs very sensibly from European usage is the rate of interest charged on current debit accounts. As the Argentine has no law regulating this rate, there have been times, happily now past by, when this rate has been as high as 10 and 12 per cent. Of late years the Government has paid, as a maximum, 6 to 7 per cent. and that in moments of disequilibrium, when international complications were feared, and the bank rates had risen in England and elsewhere.

For private individuals conditions are also easier, on account of competition, and 7 per cent. has become practically the average rate. In certain banks the rate on debit accounts has even fallen as low as 6 per cent.

The following table indicates the movements of the principal accounts, during the years 1906-1908, in the case of the various banks which publish their balance-sheets, in the Argentine.

On an international market like that of Buenos Ayres exchange operations are naturally most attractive. Since the suppression of the gold premium, which has reduced the risks to a barely sensible amount, these operations no longer retain their old speculative character; but, on the other hand, the profits to be drawn from operations of this kind have greatly diminished, so that business has gained only in safety and extent. We may here recall the fact that speculations in gold, which amounted to 1,234,000,000 piastres paper (£108,592,000) in the year 1899, had fallen to 211,000 piastres in 1904, and have now entirely ceased.

Moreover, in order still further to avoid all risks, such business is now done by means of cable transfers, instead of by cheques at one month from date as formerly; thus avoiding as far as possible any variation in the rate of exchange. It is chiefly during the period of exportation that these drawing transactions become of great importance.

Exchange business is transacted on a gold basis; that is, on the basis of the gold piastre, which is equivalent to a dollar, or to 5 francs of French money, or 4s. of English; as for settlements, they are made indifferently in gold or paper, on the basis of 44 centavos, or ·44 of a piastre in gold, for one piastre in paper.

Formerly the rate of exchange used to vary very perceptibly with the seasons. The banks used to buy during the export season, which for grain and wool lasts from December to March, and consequently profited by the abundance of the market to discuss the price. They then sold to import houses during the slack season, sometimes making a profit of 6 to 10 centimes. Now competition has greatly reduced these margins, which scarcely vary at all, in a normal season, except to the extent of an insignificant fraction.

Again, the sales of money are now extended over a far longer period than before, as the export season itself has been extended by new products, such as maize, chilled and frozen meats, etc., which do not necessarily find their outlet at the same time as the rest of the harvest. Thus the banks have no longer any incentive to hoard reserves of money, as they are no longer certain of selling them a few months later.

All these conditions here enumerated are of course subject to certain small variations, according to the kind of trade or industry. The large landowner, the grazier, the farmer, the cattle-breeder, who has no money at his disposal but that coming from the sale of his products, can only procure credit, no matter what his wealth may be in land, at a rate far higher than that which is demanded of the large commercial houses of Buenos Ayres. But as we have especially attempted to demonstrate, the Argentine banks are to-day splendidly equipped with capital, so organised as to assist commerce by services of many kinds, and, finally, their charges have been abated, by the action of competition, to rates which one would hardly expect to find in practice in a new country.[90]

As the latest sign of progress we may mention the establishment of the Clearing-House, which commenced operations in 1893, upon the model of the London Clearing-House, under the able management of the under-manager of the Bank of London and the Rio de la Plata, Mr Hogg. This institution, as its name indicates, serves to strike the balances of the sums which the various banks may owe one another, the balances only being actually paid over. The total sum represented by the operations of the Clearing-House in 1908 was over £352,000,000. This figure includes the transactions of the principal banks of Buenos Ayres, with the exception of the National Bank, which does not make use of the Clearing-House.

Between 1893 and 1899 the business done at the Clearing-House underwent a notable and continual increase, and in 1899 amounted to more than £350,000,000. Since that time its operations temporarily decreased in value, owing to the suppression of the gold premium, which put an end to exchange speculations, which formerly kept the Clearing-House busy; so that in 1903 and 1904 the total amount of the operations was barely £264,000. Since 1904, however, these figures have gradually increased, and in 1907 and 1908 they once more exceeded £350,000,000. To-day the business is purely commercial, rendering any exact comparison with the times when speculation played the principal part extremely difficult. But if we could subtract this latter element we should certainly find that the compensations based on commercial operations have greatly increased, since the figures of 1899, although less by those representing speculative transactions, have not appreciably diminished.

The Bank of the Nation.—To complete this account of the banks of Buenos Ayres and their operations, we must give an account of the working of the most important of them all: the Banco del Nacion. This bank is of especial interest, on account of its relations with the Argentine Government, which guarantees all its liabilities.

The Bank of the Nation came to birth at an extremely critical moment in the history of Argentine credit and finance. In 1890, after the double political and financial crisis which was then affecting the country, as a consequence of the errors and abuses committed by the Governments, at a time when all the official credit establishments in the country lay moribund, disorganised, and discredited, the Government of Signor Pellegrini, called in to inherit the confusion of that which had just fallen, found itself faced with terrific problems. It attempted to solve the banking problem by founding a new institution, to which it assigned a capital of 50,000,000 of piastres—£4,400,000—the shares to be offered for public subscription. To the subscribers it promised a certain intervention in the administration of the bank, at the same time reserving to the State the right of appointing the president, just as the French Government appoints the president of the Bank of France. In order as far as possible to guarantee the shareholders and the public against the errors and abuses which had formerly been so disastrous, it established certain restrictive rules in the charter of the new establishment.

At another time there was much discussion as to whether the Government of Signor Pellegrini, whose patriotic intentions no one doubted, would not have done better to rescue the old National Bank, which was tottering amid the ruins of the crisis, and whose assets, administered by the new institution, might have given better results than did liquidation, thus saving the State much expense; but this question is no longer of immediate interest.

As was only to be feared, the public, after the spectacle of such striking examples of the lamentable end to which official banks are liable in countries formed by the chances of immigration, and devoid of established traditions: wherein there exists no sanction for the suppression of undoubted abuses: the public, we shall see, regarded the new institution with mistrust, and abstained from buying shares. The Government, disappointed in its attempt, was compelled to replace the system of public subscription by an issue of notes, which explains why a purely official bank was created, instead of the mixed bank which had been proposed.

Realising that the success of a bank depends far more upon the confidence with which it inspires the public than upon its organic charter, Signor Pellegrini’s Government, together with those that followed it, took care to place at the head of the Banco del Nacion only men who were capable, by their good judgment, their technical competence in banking business, their social position, and their knowledge of the business world, of giving prestige to the establishment, and surrounding it with the atmosphere of respect and confidence which was necessary to its success. Thus in spite of its official origin the bank was able to find support in public opinion, and to render important services to industry and commerce.

A study of the accounts of this establishment, during the years 1904-1908, reveals a steady and prosperous progress, which has incontestably placed the Bank of the Nation at the head of all similar institutions.

A glance at the following table will prove this. It contains the balances of the three principal accounts, upon the 31st of December of the five years from 1904 to 1908 inclusive.