CHAPTER IV
THE VALUE OF THE SOIL
Difficulties in estimating this value—Principal factors of valuation—Examples taken from lucerne fields and the forests of quebracho—Despite adverse circumstances, and with a few exceptions, there has always been a tendency for the price of land to rise—Alienation of lands acquired by conquest from the Indians; their enormous present value—The rise of value dates from 1902, and has hitherto continued without relapse—The causes of this rise, and its rational principles, according to an authoritative opinion.
Examples of valuation drawn from the sales of public lands—The rise of prices in the Provinces of Buenos Ayres, Córdoba, Santa Fé, and the Pampa, with figures indicating the prices realised in some large recent transactions.
Nothing is more difficult than to determine the value of land in a country in the course of formation, like the Argentine Republic, in which it undergoes considerable increase from one moment to another; not only on account of general progress, but also from special reasons, such as good harvests, the construction of a railroad, etc. In the same region, in the same district, two neighbouring tracts will often have a different value, accordingly as they have or have not a permanent water-supply, or as they are more or less adapted to agriculture, nearer to or further from a railway, a station, or a centre of population.
For some years now, two new factors of valuation have come into being: the culture of lucerne and the planting of quebracho wood.
Since farmers have known of the enormous—the fabulous—profits to be derived from fields of lucerne, every buyer of land inquires first of all if there is water available; that is, if the subterranean water-level is near the surface; as on that factor depends the existence of the lucerne pasture for many years.
If upon investigation it is found that there is water the land, by this sole fact, acquires an enormous value in comparison to what it would be worth if it were unfit for lucerne.
An important newspaper, published in Buenos Ayres in the English tongue, the Standard, has shewn that the price of land in Victoria (Australia), where the acre is worth from £4, 6s. to £9, compared to the prices paid for land in the Argentine suitable for sowing lucerne (that is, in the south of Córdoba and San Luis, where there are no invasions of rabbits, where there is no drought, and which are half-way, so to speak, to the European markets) proves, by comparison, the low value of Argentine land. Even when near a railway, such lands may be bought for 17s. 6d. or £1 per acre.
In proof of the above affirmation, the Standard has made the following calculation: Let us suppose an expense of 6s. 5d, per acre for the expenses of sowing and cultivating an acre of soil (including sowing it with lucerne at £2 per cwt.), it follows that the acre costs from £1, 3s. to £1, 8s., and the square league of 6175 acres (representing the work of eighteen months) about £7920. Adding £880 for fencing and watering, we find the price of the square league (9.648 square miles) amounts to some £8800.
What, according to the Standard, is the profit to be drawn from this square league? It will fatten some 4500 head of three-year-old cattle, which may be bought at £4, 8s. per head, and seven months later sold at £7, 18s. 6d.; this will give a profit of £3, 10s. 6d. per head, or a gross profit of £15,862. Deducting £7040[59] for expenses (allowing freight to the extent of 10s. 6d. per head), there remains a net profit of £8800 per league per annum, or 100 per cent. on the outlay. If such are the results to be obtained from the transformation of an uncultivated tract of land into a lucerne pasture, it is not surprising that rural property is so quickly attaining so high a value.
[59] Apparently made up of half the cost of the lucerne pasture, plus freight and labour; as two sets of beasts can be fattened in a year or a little over.—[Trans.]
In the case of quebracho—a very hard wood which is useful for building and constructive purposes, and from which an excellent tannin can be obtained—matters are much the same. Having had experience of the large profits to be derived from the manufacture of quebracho extract, and the splendid dividends paid by the companies engaged in the
work, men or business, anxious to invest their capital to advantage, hastened to acquire forests of quebracho, with the result that the price of such land suddenly rose to a level hitherto undreamed of. Tracts situated in the Chaco—a region where quebracho abounds—which were selling a year previously for £88 the square league of 9648 square miles, rose in price to £880, and this latter price can by no means be considered as a definite maximum.
What is true of lucerne and quebracho is also, though on a much smaller scale, true of linseed or wheat, when after an abundant harvest the land-owner or farmer procures the requisite capital for the purchase of the land he has been cultivating and pays a good price for it. There are here elements which confound all calculations made in advance, and make it difficult to fix even an approximate value on the soil.
At the present moment there is no basis for such a valuation. A farm selling to-day at 20s. per acre, may to-morrow sell for 26s., the day after to-morrow for 32s., and so on, until prices are reached which astonish the first vendor, and give him the melancholy conviction that he did ill to part with his land. For this reason, the best thing one can do to-day is to hold on to the land.
The value of rural and urban property has gone on increasing more and more rapidly for more than forty years; and although there have been great fluctuations in prices, the rise has always been constant in the long run; owing to the increase in the population, the consolidation of political institutions, the construction of far-reaching railway systems, the prodigious development of international traffic, and, as a natural consequence, the great increase of public wealth.
To gain an idea of the entire significance of this increase in values, we must go back to the more than modest prices of rural property which ruled before the later development of the upward movement. It is enough to recall the fact that in 1879, with the object of procuring funds in support of the expedition which General Roca was leading against the Indians of the wilderness, an expedition which resulted in the conquest of 226,800 square miles of territory, the Government offered for sale an enormous tract of land at
the price of £80 the league (about £9 the square mile), the purchase-money to be payable over five years. But the devaluation of these lands was so great, and faith in their remunerative possibilities so inferior, that very few accepted the offer. Many did so rather as a patriotic loan than as a serious investment. Others did so as a mark of personal deference towards the men who were at the head of the Government. But all have been abundantly rewarded, since much of the soil which they were able to obtain at £35 the league is selling to-day at £26,000 and £35,000. More than one of the great private fortunes in the country had no other foundation than this.
This depreciation of rural property continued still unchanged for a dozen years; so much so, that in order to tide over the crisis before the crash of 1890, the Government, which so disastrously handled the affairs of the nation, had the evil inspiration to offer for sale in Europe, by virtue of the law of October the 15th, 1889, those very 24,000 leagues of land obtained by conquest by General Roca’s expedition. The sale was to be effected at the figure of 10 francs per hectare—about 3s. 3d. per acre!—payable half upon purchase and half at the end of two years. No limit was set to the powers of purchase of any one buyer; each could buy just as much as his purse would allow. The law, in palliation of this incredible operation,[60] promised to apply the whole product of the sales to the fund for converting the issue of the guaranteed bank-notes of famous memory. Providence, happily, which more than once has taken the Argentine under its especial protection, prevented this disastrous alienation of territory from taking place. Had it been otherwise, the Republic would have sold for a mess of pottage a magnificent portion of her territory, a country large enough to house more than one European nation, and which to-day perhaps would be in the hands of a company or a foreign government—a new state within the State.
[60] It must be remembered that this tract was four and a half times the size of England!—and this enormous country, in the heart of the Argentine, was offered for sale to foreigners! The process of buying it back when the terrible folly of the act was once obvious, would have been equivalent to making the country tributary for years, and for enormous sums, to Europe.—[Trans.]
The depreciation of rural property continued for some
years. Thus, in 1897, the Government sold by tender to the highest bidder a large portion of its best lands, at the price of 3750 piastres, or £330 the square league (about £36 the square mile), payable in five years, with permission to pay in bonds of the patriotic loan, which then stood at about 75 per cent.[61]
[61] The piastre note, was then worth 1 franc 71—1s. 4·4d., or 34·2 per cent. of the par value. It was later fixed by law at 44 per cent.—[Trans.]
This situation continued until 1902—a year which saw the settlement of the old question of the Chili-Argentine frontier; a year of abundant harvests and enormous development in the stock-raising world; a development which took shape first in the export of cattle on the hoof and then in the despatch of great quantities of chilled or frozen meat to the English markets; a year which also saw the advent of a financial stability resulting from the “law of monetary conversion,” which gave a fixed value to paper money, the medium of all commercial transactions in the interior. Then came a steady and decisive rise in the value of landed property in general and of rural property in particular.
Since the beginning of this movement the value of the soil has steadily increased; the last price is always greater than the previous one, although the latter may have appeared stationary, if not final. This being the case, we ought to ask whether this general rise responds to permanent and sufficient causes, or if it is only the result of capricious speculation, affecting landed property now as at another time it affected paper money.
In reply to this question, Señor Roman Bravo, one of those Argentines who are most familiar with all the complex aspects of land valuation,—for he is the Director of the house of business[62] which transacts the greater proportion of such operations—has at our request summed up, in the following terms, the causes which at present determine the increase in the value of property:—
[62] The sales by auction conducted by this house during the first six months of 1905 amounted to £2,376,000.
“The economic life of the country offers at each step signs of further progress. The enlargement of ports, the extension of railways, the dredging of channels, the
development of the building trade in the chief city of the Republic, all show the spirit of enterprise at present animating the individual and the people. Commerce and vigorous industries reinforce these elements of prosperity and welfare.
“But it is in matters of land purchase that we best perceive the material expansion and the intensity of the forces in action. Without going back to the year 1904, we have only to consider the transactions of the last few years to realise that, both in the capital of the Republic and in the national Territories and the Provinces, the period has been a fertile one in the matter of transactions in landed property. There has been no more active period since 1889; and this time the facts have an explanation, a natural and logical sanction. Agriculture and stock-raising have so augmented the sources of national wealth that in a few years the balances in favour of the country have reached the figure of nearly £20,000,000. This is the effective cause of the increased value of the land: to which we must add the confidence which we all feel in the gradual development of the forces which labour has released, to the benefit of public tranquillity.”
One of the most surprising examples of the increased value of the soil, and of the interest awakened by sales of land, is to be found in the public and official auction of national lands which took place in the month of April 1905.
These sales were to be effected on account of those who had bought these lands in analogous circumstances in 1897, and who had not paid for them during the delay stipulated by the law. The whole surplus over the price established by the previous sale, less deductions for interest and other expenses, went by law to the original purchaser. The auctions were conducted in the presence of a crowd of speculators, capitalists, and labourers, eager to invest their money in so remunerative a speculation, since in the Argentine all are convinced that the purchase of the soil is the best form of saving. The result of the sale was that in many cases double the original price was obtained; three times the price in some cases, and in some five times the original price was realised.
In the Territory of Pampa Central an area of 933,680
acres was offered for sale, the previous price being £49,693; the sale price was £135,297, representing an average price of £842·6 per league, or 2s. 8·7d. per acre.
In the Territory of Chubut, 265,278 acres were put up to auction, the original price being £5243·5, and the sale price £25,361·6, or an average of £590·28 per league, or 1s. 9·7d. per acre.
In the Territory of Santa Cruz an area of 98,800 acres was put up for sale, the first price being £3391·34, and was sold for £9477·6, or 1s. 10d. per acre.
In the Territory of Chaco, in which especial interest was felt, as the lands in question bore forests of quebracho trees of great value (the quebracho industry being then in vogue), higher values were obtained, representing five times the original sale price. The lands to be sold in this Territory represented a surface of 123,500 acres, and were first disposed of for £4948. However, a price of £24,170 was obtained, representing an average of £1208·24 per league, or 4s. 6·9d. per acre.
In the Territory of Rio Negro 74,100 acres were put up for sale, which were previously sold for £3058. They realised £8712, or £726 per square league, or 2s. 4·2d. per acre. The general result of the sale was that the Government did a splendid stroke of business; but the transaction was still more to the profit of the fortunate first applicants, who, for failing to comply before a given date with the conditions established by law, were rewarded by receiving the price of sale less the price at which they bought; sums which to many of them represented a considerable fortune.
Since that period the value of land has continually increased, as we see from the following information, which was given us by the “General Bureau of Lands and Colonies” of the Ministry of Agriculture. In 1906 and 1907, this Bureau sold by public auction a large section of public lands, and the prices obtained were far higher than those we have recorded above.
In the Territory of Rio Negro, in August 1906, 497,600 acres were sold at an average price of 9s. 8d. per acre.
In March 1907, 314,974 acres of land, situated in the
Peninsula Valdez (Chubut) found a buyer at 6s. 73⁄4d. per acre.
Numerous sales were effected in 1907 in the Pampa Central. Among others, we may cite the following: 18,520 acres sold at 10s. 6·7d. and 4640 at 10s. per acre; a lot of 18,750 acres at an average price of 6s. 9·7d.; 7500 at 6s. 5d.; 151,410 acres at 4s. 4.8d.; 1235 acres at 3s. 7·6d.; and 12,350 acres at 3s. 11·3d. per acre.
In October of the same year, auction sales were held in various portions of Pampa Central, the results being as follows: 16,425 acres at 8s. 10·24d.; 5390 at 8s. 2·3d.; 40,137 at 10s. 3d.; 24,700 at 7s. 4·3d.; 306,050 at an average price of 3s. 8·5d.; 24,700 at 3s. 7·8d., and 9182 at 6s. 7·8d. These examples are given to show the variety of actual prices, according to the situation and the yield of the land.
In the matter of private sales, it is difficult to keep track of rising values on account of the number of sales which take place every day. We will try, however, to give a few examples, to arrive at some approximate value of the Argentine soil in the year 1905.
The Province of Buenos Ayres, which is the most thickly populated and the wealthiest in the Republic, is also that in which rural property has reached its highest value. In the district of Lobos, a few hours from Buenos Ayres, a field of 170 acres, known as the Atucha Meadow, was sold for £26, 7s. 2d. per acre; another of the same area for £59, 8s. 9d. per acre; another of 635 acres for £12, 1s. 0d. per acre, and another of 587 acres for £14, 4s. per acre.
In the region of Rojas, also some hours from the Federal capital, the land on which stood the “San José,” “Santa Barbara,” and “La Matilde,” establishments belonging to Señor Roberto Cano, and whose area was 15,800 acres, was sold for an average price of £8, 8s. per acre.
In the neighbourhood of Dolores, not far from Buenos Ayres, a meadow belonging to the “Montes del Tordillo” estate, composed of 18,850 acres, was sold for 19s. 1·4d. per acre. In the section of Lincoln 10,000 acres were sold at prices varying from 48s. to £5, 2s. per acre. At Trenque Lauquen, one of the belts of land in Buenos Ayres which has seen the most rapid rise in values, sales have been effected of 22,000
acres at prices rising from £1, 18s. to £3, 6s. per acre, the average being £2, 8s.
In this same section, some 8 miles from the railway station of Primera Junta, 1976 acres were in 1907 sold at prices varying from £2, 8s. 3d. to £5, 12s. 9d. At General Pinto the land belonging to the “Filadelfia” estate, 23,198 acres in extent, was sold at an average price per acre of £2, 2s. 9d.
In the department of Olavarria 19,856 acres were sold in 1908 for prices varying from £3, 7s. 8d. to £7 per acre, the average being £5.
In the department of General Conesa, 11,085 acres, facing the Bay of São Borombon, and 23 miles east from San Dolores, found a buyer at an average price of £1, 3s. 4d. per acre. In the department of Coronel Pringles, the establishment known as El Bombero, situated some 19 miles to the west of Tres Arroyes, divided into thirty-one lots of from 370 to 4940 acres, was sold at prices running from £2, 1s. 11⁄2d. to £4, 2s.
Among these sales of 1908 which attracted most attention were those transacted in the Province of Buenos Ayres. These included a tract at Exaltacion de la Cruz of an area of 914 acres, near the railway station of Cardales, which, sold in small lots of from 58 to 180 acres, obtained an average price per acre of £29.6 per acre. At Lomas de Zamora the land of the establishment “Santa Ines” were sold to the Sansinena Company for £13, 3s. 6d. per acre. In the department of Azul, a meadow known as “La Vanguardia,” of an area of 2080 acres, 11 miles from the town of Azul, found a buyer at £7, 16s, per acre. The San Miguel estate, near the Manzanares railway station, subdivided into thirty-six lots, was sold at an average price of £10, 5s. per acre. On the 19th of August 1908, in the same department, 741 acres fetched a price of £12, 9s. 2d. per acre. At General Belgrano, less than 2 miles from the railway station, 3294 acres, divided into five lots, were sold at prices varying from £8, 11s. to £10, 13s. 10d. A tract of 499 acres about 1000 yards from Jeppener Station, in the department of Brandzen, was sold at the rate of £12, 5s. 9d. Finally, at Burzaco, at a distance of 2500 yards from the station, 494
acres of land attained the fabulous figure of £42, 15s. per acre.
These are high prices in comparison with those ruling formerly, and at present they are firmly maintained.
The prices of lands suitable for agriculture vary greatly, according to their distance from the great city of Buenos Ayres or the port of Bahia Blanca, and their proximity to a railway station; accordingly as they have water near the surface, and are thus adapted to the growth of lucerne; and according to the terms of payment granted by the vendors. There are, of course, other factors as well.
Among many other examples, we will cite the 588,050 acres of land at Curumalan, ten hours from Buenos Ayres, the property of a syndicate which bought them in 1903 from Messrs Baring Bros, of London, at a price of £807,575. Up to July the 1st, 1905, this company had sold more than 247,000 acres of land directly to agriculturalists—Russian for the most part—at prices varying from £2, 10s. 8d. to £3, 4s. 1d., allowing them a term of three or four years for payment, plus an interest of 8 per cent, per annum.
The Province of Córdoba is, after the Province of Buenos Ayres, that in which the land has most rapidly risen in value. Transactions in rural property are very numerous and represent an important figure. In the five years from 1899 to 1903, about 9,386,000 acres have changed hands, and in 1904 alone 3,820,830 acres were sold.
It is difficult to give an account of these transactions by reason of their number; but to cite only the most important, we may mention a block of 61,750 acres in the department of Juarez Celman, belonging to Alejandro Roca, which was sold at public auction in the early part of 1905, at prices varying from 17s. 101⁄2d. to £2, 6s. per acre. In view of the prices which the buyers realised later, they made a splendid bargain; none of them sold for less than double what he gave. In the Union department of the same Province, 59,904 acres were sold at prices varying from 13s. 3d. to £1, 16s. 11d. per acre.
Another important sale, effected also in the early part of the same year, was that which took place in the department of Tulumba, fifty miles from the colony and railway station of Morteros on the Central Argentine railway. The block
sold comprised an area of 20,826 acres, and the prices obtained varied from 1s. 5.8d. to 2s. 2d. per acre.
In the Province of Santa Fé, the appreciation of land values has of late years been neither so great nor so rapid as in Buenos Ayres and Córdoba; the reason being that it was this Province which initiated the colonising movement in 1856, by the foundation of the Esperanza Colony, so that its land values had already undergone sudden augmentations in previous years. In the five years from 1899 to 1903, the sales have amounted to £5,831,160 acres, and in 1904 to 2,026,420 acres. In the department of General Lopez 23,487 acres were sold for prices varying between 2s. 4d. and £2, 18s. 3d.
We may also note a tract of 8204 acres, 8 miles from La Serna railway station, which in 1908 was sold for £1, 12s. per acre.
The Provinces of San Luis and Santiago de l’Estero were the last to take part in this movement of appreciation of land values. The former, in especial, has from this point of view been a revelation to every one. As soon as it was discovered that the soil of this Province was admirably adapted to the formation of splendid meadows of lucerne, its value rapidly rose from 1s. 51⁄2d. to 6s. 5.7d., 12s. 11d., and 19s. 5d.
We must, in particular, mention a meadow known as the “Agualapada,” 98,000 acres in area, which on the 27th of July 1908 was sold at the rate per acre of 5s. 4d. 53,219 acres of land, some 13 miles from the railway stations of Nueva Galia and La Fortuna were bought at an average price of 10s. 3d. per acre. In the department of Pedernera 16,043 acres, divided into five lots, found purchasers at prices varying from 16s. 2d. and £1, 1s. 2d. to £1, 15s. 9d.
But, as we have already said, it is in the Pampa—in that vast country of 56,170 square miles in area—larger than England—which was incorporated in 1880, after the expedition led by General Roca—that the most surprising examples of appreciation are to be found. There all is undergoing a continual transformation; each year the plough opens wider furrows for the seed; the sowing of lucerne is rapidly increasing; stock-raising establishments are to be found in
the very confines of the country; and a large network of railways, in operation, in construction, or under consideration, promise to surround it on every hand, to circulate its products and to facilitate exchange. All these wonderful transformations are being effected under our eyes, day by day; so that it is not surprising that the value of the soil follows this tide of energy.
In the Pampa Central, of late years, we have seen land suitable for lucerne, with water 10 to 30 feet below the soil, not far from populated centres, and with means of rapid communication, fetch prices which quadrupled those it had touched eighteen months earlier, selling for as much as £3, 11s. 3d. per acre. In more than one case land which was bought for £880 the square league was afterwards sold for £8800.
Among the sales of 1908 was one of a meadow of 18,525 acres, six miles from Utracan Station, which, sold by order of the law, fetched a price of 17s. 10d. per acre. In another part of the same Territory 7698 acres were sold in a single lot, on the 1st of October 1908, at the rate of £1, 4s. 7d. per acre. In the Alfalfa Colony, during an auction sale, several chacras, or small farms, attained prices varying from £1, 19s. 3d. to £2, 2s. 9d. per acre.
By the Catrilo railway station on the Western Railway, situated in the same Territory of El Pampa, is a field whose owner, M. Mathias R. Sturiza, was offered £61,600 for it; two years earlier he had bought it for £5280.
Competent authorities assure us that in the neighbourhood of Santa Rosa de Toay, the capital of the Territory of the Pampa, the value of the fields has been shown by recent sales to have increased by 300 per cent. In the department of Victoria, in the same Territory, fields which a while ago were offered at 2s. 1.5d. per acre, are to-day selling for £1, 1s. 4d.—ten times that sum.
Such are the chief manifestations of the economic phenomena of the appreciation of land values; one of the most interesting of the problems which present themselves to the observer of the modern Argentine Republic. Is it a true symptom of national vitality, or must we see in these data the warnings of a period of commercial crisis, characterised,
according to the learned economist Juglar, by the rise of all values and by frantic speculation?
Events, which unroll themselves amidst our feverish Argentine activities far more rapidly than in other countries, will not be long in giving us the answer to these questions.[63]
[63] The importance of the sales of rural property is to-day so great, and speculation so eager, that the prices given here, according to information gathered barely a few months ago, appear to us already as ancient history.