Brazil And The United States
( Originally Published Early 1900's )
CHANCES FOR AMERICAN CAPITAL-THE BANKS, AND THEIR ENORMOUS PROFITS -RAILROADS THAT PAY-COLD-STORAGE PLANTS-STEAMSHIP COMPANIES THAT DISCRIMINATE AGAINST OUR TRADE.
DURING my travels in Brazil, covering 8,000 miles, and including all the chief industrial centres, I have investigated the trade conditions and the chances for the investment of American capital. The country seems to me to be in the infancy of its development. It will some day support a hundred people where it now supports one ; it will be one of the richest countries in the world and it will pay Uncle Sam to cultivate it and to insist that he get his rights in it as one of the great world-traders. Brazil has a territory almost as large as the United States, and one which includes more cultivable land. It contains more than half the people who live in South America; its population, moreover, is increasing, and it is steadily growing as a goods-consumer. At present, its exports are $25,000,000 more than its imports, while its imports figure up the respectable sum of $100,000, 000 per annum.
The United States takes about half of all that Brazil has to sell. We buy most of her coffee, and tens of millions of dollars' worth of her rubber. We get but little in exchange. Our ex-ports to Brazil are only about one-fifth our imports, and we pay her a balance of about $48,000,000 a year. If we should stop buying, the officials of some of the best States would go hungry. Para would have a famine, and Sao Paulo would have to "patch its pantaloons." The officials of those provinces rely on the revenues from the export business. These are enormous, amounting to 25 cents a pound on rubber, at the present rate of impost, and 11 per cent on the export value of coffee. The duties are of course paid by the consumer, so that every American who rides a rubber-tired bicycle has had to pay 25 per cent into the treasuries of Para and Manaos, and everyone who drinks a cup of coffee adds thereby to the support of the government of the coffee-growing States of Brazil.
One would think that Brazil ought to be grateful for this enormous trade ; she may be so, but she has a curious way of showing it. She imposes a tariff on everything we sell to her, taxing us on some articles as much as 100 per cent. At times she makes with us what are called reciprocity treaties. Some of our goods go in nominally free, but indirectly every ship carrying American goods that comes to Brazil has to pay toll. In most of the harbours there is what is called expediente taxes, which are levies made on some excuse or other. At Bahia the officials will ask the ships to pay so much for a new hospital; at Pernambuco they want something for a sailors' home; and at Rio they may blackmail the ships for harbour improvements. These taxes are levied, not by law, but according to the ideas and tastes of the local officials. They are really a sort of blackmail, the probability being that most of the money goes into the pockets of the collectors. " In fact," said a leading railroad official to me the other day, " every one down here seems to be lying awake at night to plan how he can squeeze a few milreis out of the foreigner without working for them." Every man who goes into business here must expect to pay a tax for the privilege. Every merchant and mechanic in Rio is taxed. The bootblack pays for the right to blacken one's shoes. Every store pays for the privilege of opening its doors, and every contract, note, and check must bear its stamp.
The Brazilians, I find, are rapidly adopting electricity. There are towns of from 10,000 to 15,000 in southern Brazil equipped with electric lights. The city of Sao Paulo, which has about 200,000 population, is well-equipped in this respect. There is a good electric light system in Para, although the poles are placed in the centre of the sidewalks ; I also found Brush arc lights used in Manaos, 1,000 miles up the Amazon.
At present nearly all the railroads of Rio de Janeiro are moved by horse- or mule-power. The electrical franchises would be worth a great deal. The city is surrounded by suburbs, and the Brazilians, who are a lazy people, would patronize the electric railroads. Sao Paulo has horse-cars. Para is arranging for an electric railroad, although the street-cars are still hauled by mules. Man‚os has about completed an electric railroad, which is owned by an American firm. Bahia (200,000) still relies upon horse-cars, although the Germans are manoeuvring to get hold of the electric railway franchises.
I am told that a large German syndicate has agents going about through Brazil, picking up everything good in the way of electricity. Already they have their hands to a certain extent on Rio, having built there the Villa Isabella tramway, with the idea of equipping it electrically. They have secured roads in Sao Paulo and are negotiating for roads in Pernambuco. Pernambuco is flat and car-lines could be operated without much power. The street-car rates are lower, however, than they are with us. The fares are from one and one-half cents to three cents a trip. At the same time labour is very cheap, and most of the lines are operated at a profit. Brazil is growing fast as to its railroads. It now has about 9,000 miles of track, and there is a like extent of mileage under survey or construction. The English own the best of the properties, and they are endeavouring to get hold of others.
At present the government has about 3,000 miles of lines, but they are poorly administered and do not pay. I doubt, indeed, if any business managed by a South American government can ever pay, as every official expects to make a squeeze or a percentage out of all the money that comes into his hands. The losses have been so great that a law has been recently passed authorizing the leasing of the government railroads, and it is probable that they will eventually go into the hands of English capitalists. Most of the Brazilian railways have been constructed under a guarantee from the government of from 6 to 7 per cent on the capital invested, and many of them are now working on that basis.
One of the most profitable roads in the world is that which runs up the mountains from Santos to Jundiahy. This road has paid as much as 50 per cent dividends, and for years it paid 10 per cent semi-annually. The road was first built with a government guarantee of 5 per cent. It had a capital of $10,000,000, which it soon increased to $15,000,000, and it has since made its capital $28,000,000. It is now paralleling its lines in order to accommodate the enormous business that goes over it. It is the only connection which Santos has with the interior, and the enormous coffee shipments which go out from that port are brought from the plantations over this railroad. The trade of Santos amounts to $75,000,000 a year. The road shoots out of Santos to the foot of the mountains; here the locomotives are taken off and the cars are dragged up the hills by stationary steam-engines, which wind and unwind immense steel wire cables to which. the cars are attached.
On nearly all the roads of Brazil there are first, second, and third-class cars. Few of them have sleepers, and the cars, as a rule, are by no means as good as ours. The Brazilian Central has a Pullman system, so that you can go from Rio de Janeiro to Sao Paulo by sleeper. Most of the trains, however, have only day coaches. The charges for baggage are very heavy. My trunks have usually cost me more than my railroad ticket. Nothing but a single handbag is allowed to be taken into the carriages. The man who brings more is not permitted to pass through the gates until he has handed it over to the express and baggage men; this is very inconvenient, especially as no baggage that looks at all fragile, or that is not carefully wrapped, can be checked.
We should have a line of steamships from New York to Rio de Janeiro and other ports on the east coast of South America. It is along this coast that most of our trade exists with South America, and the trade amounts to much more than $100,000,000 a year. On nearly every dollar of it we must pay a percentage to the European steamships for freighting the goods. These European companies discriminate against American shippers. Indeed, a number of them have combined against the United States to drive some of the steamers on our side of the Atlantic out of the Brazilian market. They formed a trust not long ago and reduced the freight rates on coffee to about 10 cents a bag. When they had succeeded and had the field to themselves, they again raised the rate to 30 cents a bag. This same combination charges a higher rate on all shipments of goods from New York to Brazil than it does from the European ports to Brazil. Some of the commission merchants of Rio de Janeiro find it more profitable to ship flour from New York to Rio by way of Hamburg, taking it over 3,000 miles of additional ocean travel, and thereby getting a lower rate.
Consul-General Seegar states that one of the leading agricultural houses of Sao Paulo is forced to buy its iron in Europe, al-though the prices offered by American houses are lower. This is on account of the heavy freight rates from New York. Flour carried from New York to Rio pays a freight rate of 85 cents per barrel, while flour from Hamburg to Rio pays less than 70 cents per barrel. This system is applied to all sorts of importation, and the same spirit enters into all phases of European competition with the United States. The English and the Germans are intensely jealous of the United States; they fear us commercially, and oppose us at every step. The competition of the Germans is often by unfair methods; they will imitate our trade-marks and goods, and often make misrepresentations to increase their business.
Today the Germans, on the other hand, are the best traders in South America. They are pushing their way into every port, and their merchants are to be found in every town. From Kaiser Wilhelm down they are doing all they can to further the trade interests of their country, and are succeeding. I have written how they have absorbed the trade of the lower provinces of Brazil. I find them in business here at Para. They own rub-ber plantations up the Amazon, and have their mercantile houses on the frontiers of Ecuador and Bolivia. They are also doing quite a good deal in banking; they have one bank in Brazil, which has a capital of more than $2,000,000, and another in Argentina with a capital of $4,000,000, while there is a third in Chile whose capital is equal to that of the Brazilian bank. I am told that they have been buying nitrate property in Chile recently, and that they have put a great deal of money into rail-roads in. Venezuela. There is no end, moreover, to the small German enterprises. You find coffee-houses here run by them ; they have breweries scattered from one end of South America to the other, and the big tanning interests of southern Chile be-long to them. They are by far the most active exploiters with regard to opening commercial houses in new centres. I found them selling goods in interior Bolivia and in the mountains of Peru, and have yet to find a city which the German drummers do not visit. These drummers usually speak Portuguese or Spanish. They have spent years in South America, and know the people and trade thoroughly. They take things easily and are content with small profits. They give from six to nine. months credit, and ask for no payment until after receipt of the goods.
There are a number of financial investments down here worthy of investigation. The matter of an American bank is one. Our trade with Brazil annually amounts to more than $100,000,000, and almost the whole of it is done in European exchange. An American bank at Rio de Janeiro with branches at Sao Paulo, Santos, Bahia, Pernambuco, ParŠ, and Manaos could make much money. Interest rates range from ten per cent upward ; you can get good loans at one per cent a month and one and one-half, and two per cent are not uncommon. The banks charge for everything; discount rates are high, and all of the European banks, so far as I can learn, are making profitable returns.
It would seem to me that a fortune might be made by a cold-storage company which should put up plants in the larger cities. None of the Brazilian towns have cold-storage houses, and meat and other things cannot be kept from one day to another. I have already referred to Pernambuco which has 200,000 people. The meat sold in the market must be eaten the day it is killed ; it must be sold before it begins to spoil, else the market inspectors will condemn it; the result is that the price changes from hour to hour during the day. When the market opens you will see over each butcher's stall a little slate on which is marked the price of meat. As the day "wears on the butcher rubs out the figures and changes the prices, so that meat which is worth 8 cents a pound at seven o'clock in the morning is offered for 4 cents a pound at noon. Indeed, dried beef in the market brings more per pound than fresh meat. If there were a cold-storage plant the meat could be kept as long as desired, and vegetables, eggs, and fruit could be stored away to await higher prices.
There are a number of other opportunities here for the investment of capital and good business brains. Brazil as a country has hardly been prospected, and there are vast regions which are yet to be explored. There is only one thing that the investor must consider, and that is that it is not safe to risk any money in South. American soil unless he or his agent has been long enough on the ground to understand the local conditions.
With my travels in the Amazon valley I closed my tour of South America, taking passage at Para on a cargo steamer loaded with rubber for New York. The journey was a pleasant sea trip of twelve days and was made at a cost of $90. My South American tour from New York and return, including the many interior trips which I made, has covered more than 25,000 miles of travel. It has been made without great hardships, although not free from annoyances and delays. The expenses at times have been heavy, and at other times comparatively light, averaging for the whole tour a little less than $10 gold a day.
The time spent in making the journey has been about one year, during which I have visited every South American country, save Venezuela and the Guianas. Venezuela is a republic, and it is interesting to our people as a centre of trade and a land of resources and great possibilities. The information concerning it found in the following chapters is from data furnished the State Department at Washington by prominent Venezuelians whom I met on my travels, and from the latest reports and researches of authentic source. The Guianas have been treated in the same way, my idea being to give a practical view of these countries, thus covering the short gap in my tour and making the book as nearly as I can a complete view of the South American Continent.