The United States And Argentina
( Originally Published Early 1900's )
WHAT SHOULD BE DONE TO BETTER OUR TRADE?—WE NEED AMERICAN STEAMERS AND AN INTERNATIONAL AMERICAN BANK-HOW THE ENGLISH ARE MAKING MONEY IN SOUTH AMERICAN BANKING-STOCK SPECULATION IN BUENOS AIRES-A DAY ON THE EXCHANGE-OPPORTUNITIES FOR INVESTMENT.
THE United States will not be able to compete with the European nations for the trade of the Atlantic coast of South America until it has closer commercial' connections. Steamship lines and banking companies are among the tools of commerce, and until we own such tools we cannot hope to compete with other nations which are so equipped. To get our share of the trade of Argentina we need a fast line of American steamers running from New York to Buenos Aires, making regular trips from one port to the other. We need also an American bank at the Argentine capital, with its connections in New York and its branches in the larger cities of Eastern South America.
As to steamships, those that come from Europe to Buenos Aires are so much finer than those from New York that many passengers prefer to travel via Europe, although the distance is about three thousand miles greater. The freight rates of the various lines are such that goods can be sent from New York, via Europe, to Buenos Aires, almost as cheaply as on steamers that go direct. Shipments, moreover, can be made much more quickly, the result being that much of our goods sold to South America crosses the Atlantic twice on the way to their destination.
Today there is not a single port of importance on the European coast that has not weekly steamers to Buenos Aires, while New York has steamers only fortnightly and often only once a month. At Buenos Aires or Montevideo you can get a ship for Europe almost any day of the week while you often have to wait weeks for a direct passage to the United States. The steamship lines which ply between Buenos Aires and Europe are managed by companies with large capital. The Royal Mail sailing from Southampton has a capital of $4,000,000. The North German Lloyd from Bremen has a capital of $9,000,000, and the capital of the Campagnie des Messageries Maritime, sailing between Buenos Aires and Bordeaux, France, amounts to $11,000,000. All of these companies pay dividends, as do also the other English, German, and Italian lines that regularly call at Buenos Aires. A fast line of American steamers could take one from New York to Buenos Aires in seventeen days, and the journey would be almost a pleasure trip. The line would secure a large part of the carrying trade of the east coast of South America, a trade annually amounting to $100,000,000, and it would probably pay from the start.
An American bank might be organized in New York to do business in South America with headquarters at Buenos Aires, and if properly managed it would be very profitable. It should have a capital of several million dollars, subscribed by stock-holders interested in exporting and importing. Such a bank would have the handling of most of the hundred million dollars of the commerce above mentioned. Its profits upon this exchange alone, if we could control it, would be worth $1,000,000 a year. At present all banking is done through London, and the bankers there take a toll of one per cent for allowing our drafts to pass through their hands. This is a tax of one per cent on trade, to say nothing of the tax paid in the way of freight charges to European vessels.
Nearly all the foreign banks of South America are making money. They charge for every accommodation; some pay dividends of i6 per cent, and some give 5 per cent on deposits. They operate with large capital. The London and River Plate Bank of Buenos Aires has a capital of $7,500,000, and its reserve fund amounts to $5,000,000. It keeps something like 1,000,000 pounds in English sovereigns in its vaults, and its deposits amount to $80,000,000. The Anglo-Argentine Bank, another English institution, has $2,250,000 capital, and the London and Brazilian Bank has a capital stock of $7,500,000. There are also several strong Italian banks, a number of German banks, French banks, and Spanish banks, and, in fact, almost the only country that does business with Argentina without direct banking connection in Buenos Aires is the United States. These banks do not speculate, and so far as I know no foreign bank doing business in Argentina has failed. The great speculation of a few years ago was chiefly confined to the native banks. Argentina had a great boom which collapsed and thereby almost ruined the people. To-day the speculative craze has passed away; it has taught the Argentines their lesson, and property is more stable.
The larger enterprises of all kinds are now managed by foreigners, and from year to year the government holdings grow less. A foreigner's property is perfectly safe ; he has, in fact, equal rights with the naturalized Argentine, and he is subject to no heavier taxes. All businesses, however, have to pay licenses ranging from $5 to $20,000 per annum, according to the amount of business done. Banking firms pay even more, the highest tax on such firms amounting to $60,000. Foreigners who do business, with or without a house in Buenos Aires, have to pay from $100 to $500 for the privilege, and those who are only commercial travellers pay a fixed license of $5o. This sum permits them to sell only in Buenos Aires and the national territories; if they go outside Buenos Aires there is usually a state tax which is paid in addition, and this ranges from $100 to $300 a year, according to the laws of the state. There are, of course, other taxes on business, such as stamps, etc., but these are some-what the same all the world over.
As to stock-gamblers, Buenos Aires has as great a number of " bulls " and " bears " as any other country in the world. Its stock-exchange or "boisa" is the financial centre of Argentina. In it you can feel the pulse of the money market and can see as much crazy speculation as in Paris, London, or New York. The great boom, which burst in 1890, came from the rapid growth of the country during the previous ten years. Its growth was discounted over and over again, and in ten years more than $662,000,000 worth of stock was floated, and of that quite half a billion dollars were totally lost. There were land companies, railway companies, insurance companies, banks, and in fact almost every kind of institution, capitalized at millions. Most of these have entirely disappeared from the market, while the shares of other companies have declined ninety per cent. I doubt whether there has ever been such loose business methods as prevailed here at that time.
The officers of the government were in many of the deals. Even the highest officials speculated with government money, and through the government banks allowed millions to be loaned on mortgages on worthless property. Europe sent millions to fill the gaps, expecting to get tens of millions back, and when the bubble burst the Baring Brothers and other long-established London firms came near bursting with it. Today the chief speculation on the stock-exchange is in the money of the country. The brokers buy and sell gold, which is up today and down to-morrow, or rather they sell the credits of their country. In other words, most of their business is in buying and selling their own notes.
There is no more interesting place in South America, than this stock-exchange of Buenos Aires. Its doors are guarded by footmen in livery, and from 12 to I o'clock and from 3 to 4 P. M., you may meet on its floors the brightest men of the Argentines. The membership costs almost nothing, and the dues are less than $3 per quarter. The result is that there are 700 brokers, and nearly every prominent business man in the city is a member of the exchange. The stock-exchange is not unlike a business man's club, and if you could enter it without knowing where you were going, you might well imagine yourself in the stock markets of New York or Chicago. The one difference is the language, for the men are of all nationalities, and they dress and look much like their brother brokers in London, New York, and Chicago. The same mutations of fortune exist, and each man can tell you the story of his own ups and downs—of fortunes lost and won. Speculation makes and loses money just as quickly in Buenos Aires as in New York; and as the commercial relations of the United States and Argentina grow closer, I predict that Americans will here hold their own with the Italians, Germans, and English, as they make their bids for the financial plums of the Argentine Republic.
As to general investments Argentina offers excellent chances for capitalists who care to buy lands. Real estate has been rising for years and is still going higher. Land is bought by the square league, of 6,666 acres. It ranges in price from a few hundred up to fifty thousand dollars a league, according to its character and location. There is also money to be made in manufacturing, in the organization of electric railways, and along other such lines. There is, however, no opportunity for the man with-out capital, especially when the lack * of capital is accompanied by the lack of a working knowledge of the Spanish language. Spanish is used everywhere, and without it no man can do business. People with capital can buy their interpreters, but they will labour under obvious disadvantages. Men without capital will have to compete with the cheapest labour of Spain and Italy, and must work for wages much less than those paid for the same class of brain and muscle in the United States.