CHAPTER V
THE BALANCE-SHEET OF THE ARGENTINE ACCORDING TO THE INVENTORY OF SECURITIES
The Inventory of Movable Property or Securities—The capital represented by movable properties, stocks, bonds, shares, etc., is the only kind of capital which lends itself to statistics—The great groups of movable properties: National Funds, Railway Shares, Insurance Companies, Foreign Banks, Mortgage Companies, and agricultural and industrial undertakings.
The nominal amount of capital represented by movable values—Table of the annual revenues of the same, and the sinking fund—Division of this revenue among the different countries having capital invested in the Argentine.
English capital—The importance of English investments in all branches of Argentine activity—The benefits of a reaction in favour of Argentine capital—French capital; its small value compared to English capital—German capital and its rapid increase—Approximate valuation of that portion of revenue remaining in the Argentine, and of that which goes to the various nations having capital invested in the country.
The Balance-Sheet—The assets are principally composed of exportation values; the liabilities, the value of imports—The revenue of investments exported to foreign countries, and the total of the sums expended by the Argentine abroad—Table giving a summarised Balance-sheet and the balance in favour of the Argentine—International exchanges and the importation of gold confirm this favourable situation—Argentine capital will presently play a more important part in the country as compared with foreign capital.
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]
[113] In this book we make use of the figures which Señor Alberto Martinez communicated to the International Statistical Congress, held in Paris in July 1909.
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:
Summary of Securities in Circulation on 31st December 1908, and their Subscribed Capital.
| Shares, Securities etc. | Shares. | Debentures. | Bonds. | Totals. |
| External National Debt (approximate values) | — | — | £62,892,428 | £62,892,428 |
| Internal National Debt | — | — | 16,839,341 | 16,839,341 |
| External Debt of the Province of Buenos Ayres | — | — | 11,289,600 | 11,289,600 |
| Internal Debt of the Province of Buenos Ayres | — | — | 5,369,760 | 5,369,760 |
| Internal Debt of the Province of Santa Fé | — | — | 1,109,074 | 1,109,074 |
| Internal Debt of the Province of Entre Rios | — | — | 345,351 | 345,351 |
| Internal Debt of the Province of Tucuman | — | — | 195,765 | 195,765 |
| Municipal Debt of the City of Buenos Ayres | — | — | 5,078,900 | 5,078,900 |
| Municipal Debt of the City of Rosario | — | — | 1,850,000 | 1,850,000 |
| Municipal Debt of the City of Córdoba | — | — | 780,000 | 780,000 |
| Municipal Debt of the City of Santa Fé | — | — | 236,000 | 236,000 |
| Municipal Debt of the City of Bahia Blanca | — | — | 110,000 | 110,000 |
| National Mortgage Cedulas | — | — | 14,779,805 | 14,779,805 |
| Bank of the Argentine Nation | — | — | 9,697,947 | 9,697,947 |
| State Railways | — | — | 20,000,000 | 20,000,000 |
| Private Railway Companies | £101,587,932 | £76,735,107 | — | 178,323,039 |
| Tramway Companies | 14,158,644 | 7,230,981 | — | 21,388,625 |
| National Bank of the Capital | 16,145,653 | 289,044 | — | 16,434,697 |
| Mortgage and Agricultural Loan Companies | 8,865,866 | 7,788,378 | — | 16,654,244 |
| Gas and Electric Lighting Companies | 8,122,166 | 3,455,199 | — | 11,577,365 |
| Harbours, Docks and Quays | 5,276,358 | 5,096,521 | — | 10,372,879 |
| Anglo-Saxon Banks of the Capital | 6,332,400 | — | — | 6,332,400 |
| Agricultural and Stock-raising Companies | 8,282,978 | 443,058 | — | 8,726,036 |
| Savings Banks, Building Societies, Annuity Companies | 7,016,067 | 88,000 | — | 7,104,067 |
| Forestal Exploitation | 5,550,880 | 597,900 | — | 6,148,780 |
| Mining Exploitation | 3,958,663 | 138,354 | — | 4,097,017 |
| Refrigerator Companies | 3,290,135 | 703,780 | — | 3,993,915 |
| Telegraph Companies (wireless included), Telephones, etc. | 2,431,004 | 302,400 | — | 2,773,404 |
| National Insurance Companies | 2,723,191 | — | — | 2,723,191 |
| Breweries | 1,780,972 | 352,800 | — | 2,133,772 |
| Transport Companies (Land and Sea) | 2,061,187 | — | — | 2,061,187 |
| Local Provincial Banks | 1,832,133 | — | — | 1,832,133 |
| Sugar Refineries | 1,198,456 | 588,368 | — | 1,786,824 |
| Markets | 1,197,820 | 423,360 | — | 1,621,180 |
| Dairy Companies | 696,784 | 16,360 | — | 713,144 |
| Hotels, Theatres, Clubs, etc. | 610,381 | — | — | 610,381 |
| Metallurgical Companies | 577,100 | — | — | 577,100 |
| Flour Mills | 425,340 | 45,158 | — | 470,498 |
| Various Industrial Companies | 7,555,232 | 60,000 | — | 7,610,232 |
| Various Commercial Companies | 3,793,891 | — | — | — |
| Official Totals | £219,513,639 | £104,502,123 | £150,381,572 | £474,396,935 |
The largest group of investments is constituted by the capital represented by the private railway companies, which amounts to £178,000,000, against £111,600,000 in 1904. This capital increases daily, and considering the development of the network of railways all over the country, it is not fantastic to prophesy that in a short time this sum will reach the figure of perhaps £200,000,000.
The second large group consists of the securities representing the External National Debt, which on the 31st December 1908 stood at £62,900,000, or £7,400,000 lower than that of the debt in circulation on 1st July 1905. This diminution arises from the redemption of bonds by means of the 6 per cent. Funding Loan, of which the total was £5,600,000.
If to the amount of this debt we add the sums represented by the external debt of certain cities, the internal debt of the nation, and the internal debt of some of the Provinces, we find that the entire Argentine National Debt forms a total of £130,000,000. We need not examine at greater lengths the composition and value of these two groups of securities, as we have already dealt with them in special chapters.
As for the insurance companies and foreign banks, any estimate of their capital is difficult; but it is otherwise in the case of the mortgage companies. The capital which these companies have invested in the Argentine is now of a nominal value of more than £16,500,000. But this is only a small portion of the foreign capital invested in mortgages in the Argentine; for the high interest earned by this class of investment, which a short time back rose to 10 per cent., has attracted large sums of foreign money which have been invested privately. Señor Tornquist estimates the foreign capital thus put out in mortgages at £9,000,000.
We must call attention to the interesting fact that the amount of foreign capital invested in the agricultural and other rural undertakings of the Argentine increases day by day. At the end of 1908 this capital amounted to £8,726,037, of which the greater part was the property of British subjects, who first devoted their energies to agriculture and stock-raising in the Argentine a comparatively long time ago. It is the English who have been the most active
agents of the rapid and extraordinary progress of Argentine stock-raising, especially in all that relates to the selection of breeds and the best manner of feeding.
Among the industrial undertakings, that which has of late years assumed the greatest importance is the frozen or chilled-meat industry—the refrigerating industry. There are now nine refrigerating establishments, with a subscribed capital of £3,993,915. Other industrial undertakings, such as sugar factories, breweries, quebracho mills, and mines, are beginning to take a significant place in the list of Argentine securities.
The nominal total of all movable values being estimated, at the end of 1908, at £474,396,933, the question which now occurs is, What is the annual yield of these securities? This is the most difficult point of our inquiry, and one we can answer only by approximate estimates.
While it is simplicity itself to calculate the interest on the bonds of the public debt, whether external or domestic, it is anything but easy to calculate in all cases the dividends paid by each company to its shareholders. Some companies do not publish balance-sheets, and others confound the profits realised in the Argentine with the profits earned by their foreign houses or headquarters.
As far as our present knowledge goes, the revenue of the securities we have mentioned may be estimated to be as follows:—
Annual Revenue, of the Securities of the Argentine Republic, 31st December 1908.
| Name or Nature of Securities. | Revenue in Pounds Sterling. |
| External National Debt | £3,209,727·2 |
| Internal National Debt | 843,879·4 |
| Municipal Debt of Buenos Ayres | 196,135·4 |
| Municipal Debt of Santa Fé | 1,636·0 |
| Municipal Debt of Rosario | 120,000·0 |
| Municipal Debt of Córdoba | 19,500·0 |
| Municipal Debt of Bahia Blanca | 6,600·0 |
| External Debt of the Province of Buenos Ayres | 368,928·0 |
| Internal Debt of the Province of Buenos Ayres | 255,904·0 |
| Cedulas of the National Mortgage Bank | 872,051·6 |
| Debts of the Provinces of Tucuman and Entre Rios | 29,013·4 |
| Debt of the Province of Santa Fé | 67,745·0 |
| Railway Companies | 8,423,510·8 |
| National Banks of the Capital | 1,131,499·6 |
| Anglo-Saxon Banks of the Capital | 788,680·8 |
| Local Provincial Banks | 53,725·6 |
| Mortgage and Agricultural Loan Companies | 1,044,847·2 |
| Tramway Companies | 907,603·8 |
| Gas and Electric Companies | 804,578·2 |
| Telegraph and Telephone Companies | 97,478·6 |
| Harbours, Docks and Quays | 293,447·8 |
| Savings Banks, Building Societies, Annuity and Insurance Companies | 254,852·2 |
| Agricultural and Stock-raising Companies | 496,309·2 |
| Forestal Exploitation Companies | 188,505·0 |
| Refrigerating Companies | 229,654·2 |
| Markets | 165,243·8 |
| Mining Companies | 23,816·8 |
| National Insurance Companies | 192,040·4 |
| Sugar Refineries | 165,154·6 |
| Breweries | 174,249·0 |
| Dairy Companies | 31,882·6 |
| Metallurgical Companies | 40,605·0 |
| Transport Companies | 251,783·2 |
| Hotel and Theatre Companies | 59,332·6 |
| Mills and Granaries | 33,765·2 |
| Various Industries | 169,253·8 |
| General Commercial Companies | 141,957·2 |
| —————— | |
| £22,144,939·2 | |
| =========== |
Now what, approximately, are the amounts of securities or movable values belonging to foreigners and to natives of the Argentine? Such is the question we must now set ourselves, as one of the most important relating to the country’s future. Blessed with an immense area of territory, mistress of enormous and unexhausted natural wealth, and peopled by only 6 millions of inhabitants, the Argentine is a nation still in process of formation. She attracts men and money from all quarters of the globe; for she promises generous payment for initiative and for labour.
From the economic standpoint, then, it is of enormous importance for the Argentine whether the revenue of her securities goes to persons residing in the country, or whether,
on the other hand, it goes abroad, thus unfavourably affecting the result of her commercial transactions, and threatening to upset the balance of international payments.
In the case of a country which exists under the special conditions which affect the Argentine, where there are no accumulations of capital, where the spirit of enterprise is not very highly developed, and where every commercial or industrial undertaking of any importance has to look to the outer world for support, the total of the sums which leave the country each year to pay for imported articles, to meet the interest on the National Debt, to pay the dividends on the shares of limited companies, and the profits of private undertakings, the interest on capital out on loan, whether on mortgage or otherwise secured, and finally to remunerate capital invested and employed in the thousand different ways peculiar to this period of rapid intercommunication—the total of all these sums must be very great; something, indeed, like a metallic river rolling across the ocean.
So much being granted, the moment has come to present the problem: of the 22 million pounds required to pay the interest on loans, the sinking-fund charges for their redemption, and the dividends of hundreds of companies, what is the proportion which each year leaves the Argentine to become spent or invested abroad, assuring the owners of bonds and shares the best part of the revenue of a distant country, a country endowed with a fertile soil, in which industry has a great future awaiting it? And what proportion of this total remains in the country?
To solve this problem, it would be necessary to follow the track of each of the shares or bonds issued, in order to discover the destination of each; and this is what we shall attempt to do, with the help of the principal banking houses and the great commercial houses in financial relations with the outer world.
Although all estimates on such a subject must rest upon the slightest foundations, and cannot be accepted as precise statistics, we do not hesitate to give a few figures as an indication worthy of credence, being drawn from the best possible sources.
To proceed with due method, let us begin with the most
important division of the foreign capital invested in the Argentine, namely, English capital, which was the first to come from abroad to stimulate the progress of the country. According to an inventory made by the banking house of Tornquist & Co., which has willingly given us the information we required, the capital imported from England and invested in Argentine securities amounts to more than £290,000,000, distributed as follows:—
English Capital Invested in the Argentine.
| Capital. | Interest. | |
| Loans—Governmental, Provincial, Municipal | £63,854,643·8 | £3,046,598·2 |
| Railways | 166,360,683·2 | 8,049,431·8 |
| Banks | 7,862,400·0 | 705,096·0 |
| Agricultural Loans and Mortgages | 6,847,216·6 | 259,732·2 |
| Tramways | 20,284,705·6 | 875,603·8 |
| Electricity | 5,152,590·4 | 287,685·2 |
| Agriculture and stock-raising | 4,018,997·8 | 248,204·8 |
| Various investments | 14,729,708·8 | 785,986·4 |
| ——————— | —————— | |
| £291,110,946·0 | £14,258,338·4 | |
| ========== | ========= |
Thus this sum of £291,110,946 sterling represents an annual revenue of £14,258,338.
To continue: in seeking to find the true amount of the economic international balance, we should have to include in the inventory of English capital bound to the Argentine by commercial transactions the large number of steamers which run between British and Argentine ports, whose value might be represented by a sum not less than £10,000,000.
If this be added to the sum already obtained, we find that the English capital invested in the Argentine or bound to the country by commercial ties is not less than £300,000,000: the revenue of which, estimated at an average of 6 per cent., represents a sum of £18,000,000 per annum, entirely paid out of the production and the economic forces of the Argentine.
To test the accuracy of this estimate we may mention that according to a conscientious study of English capital as placed in the principal countries of the globe, a study published in 1909 in the Economist, the sums invested in the Argentine
amount to £254,000,000: a figure not very different from that we have already given.
But let us be content for the moment to realise that the known inventoried revenue on bonds and shares belonging to British companies or British subjects residing or situated in England amounts to £14,000,000 after the deduction of the portion remaining in the hands of Englishmen residing in the Argentine; and in the presence of such figures let us meditate for a moment on the social and economic consequences of such a fact.
English capital, since the dawn of the organisation of Argentina, has been the great propulsive agent of all national progress. In 1822, when she was still insignificant both in riches and in population, Argentina knocked for the first time on the doors of British capitalists, asking them to lend a million pounds to be used for the construction of a harbour, for the instalment of waterworks in her capital, and for the foundation of cities; projects which were never executed; for it was with this loan as it was to be afterwards with many other Argentine loans. The funds demanded on credit were not employed to further the object for which they were solicited. After this first loan all other Argentine loans were subscribed by British capital.
Moreover, no industrial or commercial undertaking has been established in this country but it has gone to seek the breath of life in the financial houses of the City. Professor Eteocle Lorini said with reason, in commenting on this fact in his book, Il Debito Publico Argentino: “All the industrial, commercial, agricultural and mining companies which furnish our Argentine statistics bear the foreign mark, limited; so that one ends by getting the impression that one is studying a purely English colony, for one finds this limited upon all species of manufactures; limited after the statement of capitals; all undertakings are limited; insurance is limited; the circulation and distribution of Argentine wealth is limited.”
Whatever may be the importance of the limited company, it is by no means to the interest of the Argentine to declare war upon foreign capital; she should, on the contrary,
respect the far-seeing provisions of her Constitution, which imposes upon Congress the duty of encouraging the introduction of foreign capital conjointly with a foreign population, because both are vital elements of the national development and progress. But while we respect this tradition we feel that the Government should, in counteraction, endeavour to stimulate the application of Argentine capital to commercial or industrial enterprises, in order that the entire resources of the country shall not be developed for the sole profit of the foreigner.
Professor Lorini, whom we have just quoted, is of the same opinion. “We are certainly not of those,” he says, “who complain of the introduction of foreign capital. The more the latter is imported, the more it gives employment, and increases yet more the wealth and welfare of the country. But we must also add that as more capital arrives from without, so the payments which the country has to make for the use of it grow larger, and for this reason the whole financial policy of the Government and the Argentine should have as its object the introduction of the severest economy and the greatest possible thrift; not only that engagements contracted may be honourably met, but that in course of time we may form a national capital, capable of competing with foreign capital, of reducing its pretensions, and even of replacing it little by little, should the latter, for any reason whatsoever, be compelled to emigrate in virtue of causes foreign to the economic laws of the country.”
After England France stands in the first rank of those European nations which have had faith in the future of the Argentine, and have risked the investment of their capital in this young and wealthy state. Unhappily the total amount of French capital invested has not been augmented, as one might have hoped, by the political and commercial ties which for many years have united the two countries, or by the fertile opportunities which the Republic has to offer to the activity and enterprising spirit of the Latin races.
The nominal total of Argentine securities quoted on the Paris Bourse amounted, on the 31st of December 1907,
to the value of £78,999,308, which sum may be analysed as follows:—
| State funds | £52,332,306 |
| Banks | 10,335,680 |
| Transport | 12,802,290 |
| Mines | 548,978 |
| Various | 2,980,000 |
| ————— | |
| £78,999,254 | |
| ========= |
To prevent an erroneous interpretation of the above figures, it should be stated that this total does not represent the value of the securities actually held by Frenchmen, but only the securities quoted on the Bourse, which is a very different matter. For example, the French Bank of the Rio de la Plata figures in this total to the extent of £2,400,000, the amount of its capital actually subscribed, although scarcely a quarter of it circulates in France.
On the other hand there is a very considerable quantity of Argentine securities belonging to capitalists or investors living in France; securities which are not quoted on the Bourse and are not deposited in any bank. We may cite as an example the last loan of £10,000,000, issued under the title of “Internal Argentine Credit 1909.” Of this amount £3,400,000 was subscribed in France, yet the bonds of this loan, on account of a difference with the French Government, have not yet been quoted on the Paris Bourse.
We are thus justified in concluding that the amount we have given as representing the value of the stock held by Frenchmen—£78,998,854—is approximately correct; and that the two factors which affect the matter in opposite senses may be taken to cancel one another.
We must also note the fact that the majority of Government funds find as large a market in London as in Paris. For example, the 4 per cent. loan of 1897-1900, which was entirely issued in London, was only admitted to quotation on the Bankers’ Exchange of Paris in 1903.
In the banking department, the shares of the Spanish Bank of the Rio de la Plata and the French Bank of La Plata were only introduced to the Paris Bourse at the beginning of 1908; the principal market for these shares is still at Buenos Ayres.
In the transport department, the General Company of
the Tramways of Buenos Ayres, which has a capital of £1,800,000, can only be represented in France by a very small proportion of this capital; the shares have been issued principally in Brussels, London and Berlin.
We must remember that French influence in the Argentine has been active for a long time and in various ways. It was especially the immigration of the worthy inhabitants of the French Pyrenees which first set in towards the Rio de la Plata, where the Frenchmen invested their energies in many remunerative departments of labour; some becoming farmers, some cattle-breeders, some giving themselves to industrial work, some to trade in the cities; thus contributing to the development of the wealth of the country. The French mercantile marine was also the first to establish and maintain a rapid and easy transport between French and Argentine ports, thus permanently uniting the two countries.
As for French commerce, it retained, as lately as 1884, a place in the first rank with regard to the exchange of manufactured articles or the products of the soil, the trade being carried on especially through the medium of the Rio da la Plata; indeed there was a time when French commerce represented 51 per cent. of the total trade of the Argentine, while now it is responsible for only 20·7 per cent. of the total value of Argentine imports and exports united.
We may therefore consider that the part played by French capital in Argentine affairs is much too small as compared to the function of English capital, and we must regret that France is not more deeply interested in the great movement towards national prosperity.
After France the European nation which has invested the largest amount of capital in the Argentine, and which has fully understood the true importance of the latter country, is Germany.
In the remarkable increase and expansion of her industries Germany has not forgotten the shores of the Rio de la Plata. She has entered upon a struggle with England; all her electrical and chemical undertakings have taken root; factories have sprung up due entirely to German capital; a German Transatlantic Bank has been established in Buenos
Ayres; the Hamburg South American Company flies its ensign on the ocean, swiftly carrying passengers and merchandise between the two continents; a German electrical company has established its power-houses in the Argentine capital; an extract of meat company is drawing its profits from the live-stock industry; several quebracho mills have been founded; many other factories have been established, and the Germans have thus absorbed a large proportion of the Argentine export trade.[114] The commercial relations between Germany and the Argentine increase each day. Twenty years ago the exchanges between the two countries represented hardly 19·4 per cent. of the general foreign trade of the Argentine—at a time when France possessed 51 per cent. instead of her present 20·7 per cent. of the trade—while in 1908 the exchanges with Germany amounted to 23·4 per cent. of the entire trade.
[114] In the course of the year 1908 there left Buenos Ayres, in the vessels of various lines, 10,805 first-class passengers for Europe, of whom 2750 left by the German Company of Hamburg; 2041 by the Royal Mail Steam Packet Co.; 1193 by the Messageries Maritimes; 791 by the Transports Maritimes à vapeur; 711 by the General Italian Navigation Co.; 688 by La Véloce; 588 by the Italia; 556 by the Lloyd Sabando; 377 by the Lloyd Italiano; 340 by the Spanish Transatlantic; and the rest by vessels of various less important lines.
What is the total value of the German capital invested in the Argentine Republic? It is not easy to say with strict accuracy; but according to the very authentic information of certain Buenos Ayres bankers we may reckon that the German capital employed in the banks, commercial houses, estancias, and industrial concerns, and in the German Electrical Company, the electric tramways, etc., etc., amounts to £40,000,000. If to this capital we add that represented by the vessels under the German flag, which maintain an active communication with the Rio de la Plata, obtaining a large proportion of the best clients, the total of the German capital employed in the Argentine amounts to some £60,000,000.
With these data in hand, and an approximate knowledge of the amount of foreign capital invested in this country in shares, bonds, and other securities, namely some £384,000,000, as well as its approximate revenue, which in round figures is about £18,000,000, plus £1,600,000 as the general sinking
fund charge, or in all about £19,600,000, we may draw the following conclusions:—
We know that the revenue of the bonds held by the English capitalists, including the sinking fund, amounts to £14,158,337. Again, the amount necessary to pay the interest on the bonds of the National Debt, cedulas, debentures, and shares held by French, German, and Belgian investors, may be estimated at £3,698,779; so that of the total revenue of £18,493,896 produced by the Republic, there remains in the country a balance of £4,287,820.
The Balance-sheet
Nothing is more difficult than to bring together the constituent elements of a national balance-sheet, on account of the complexity of the necessary facts which often escape the net of the statistician. Beginning with the most important elements of this balance, and, so it seems, the most plainly visible—those formed by the movement of exports and imports through the customs—and ending with the most insignificant facts, there are still a large number of factors for which it is impossible to allow.
Taking a broad view of the matter, we must first of all observe that the estimates by which we finally decide that that which leaves a country, whether in merchandise or in specie, is of greater value than that which enters it, are extremely arbitrary. The principal means of appreciation is the table drawn up by the Customs Administration upon cargoes leaving and entering the country, but the results drawn from this table are inevitably approximate. On the one hand the declarations upon which the valuations are based are always untrustworthy, as they are made by individuals who are interested in diminishing the actual values of their consignments. On the other hand, they are influenced by a thousand other circumstances which the customs cannot take into account, such as shipwrecks and unfortunate commercial transactions.
Moreover, merchandise exported is usually valued by the customs at the moment of leaving the port of embarkation; that is, when it has so far paid only very small sums for
carriage and transportation. Imported merchandise, on the other hand, is valued at the time of its disembarkation, in the ports of arrival or destination, when it is already burdened by all the expenses incident to a long voyage; such as freight, insurance, brokerage, etc.
It very often follows that in calculating the results of a given transaction, and in supposing, moreover, that the estimates are perfectly correct, we often find a perceptible difference between the comparative figures of exportation and importation, which must be settled (so it is often supposed) by a payment of cash, whereas in reality the whole transaction consists of a simple exchange of commercial products.[115]
[115] See Nouveau Dictionnaire d’Economie Politique, Article Balance du Commerce, by Georges Michel.
Besides these general causes of error in the calculation of the principal elements of the Argentine balance-sheet, there are others affecting the Argentine which we might call local, which arise from the manner in which the customs estimate the merchandise imported. We have seen that the Customs Administration bases the collection of duties upon a valuation tariff, the exaggerations of which have given rise to the liveliest complaints. As for the statistics of the exports of national produce, they are based upon the market prices.
As for the foreign capital invested in securities, etc., we know its value within a fair degree of approximation. But it is quite otherwise with the large masses of foreign capital employed or invested privately, whether in mortgages, commercial enterprises, urban or rural properties, or in a thousand other directions; we know neither the total amount nor the interest, nor profits which it produces. These profits are a permanent cause of uncertainty with respect to the establishment of the national balance-sheet.
Apart from these causes already enumerated there is yet one other which deserves to be taken into account; it consists of the sums which Europeans who are established or have become enriched in the Argentine send each year to their families abroad. We have, unhappily, no means of estimating the importance of this sum.
Finally, a cause of inaccuracy which is felt at present as it never has been before, has its rise in the ever-increasing number of natives of the Argentine who leave their country for Europe, their purses well lined, and themselves ready to spend their money in superfluities or luxuries, or in travelling from place to place.
According to the information furnished us by the agents of various steamship companies, 10,805 first-class passengers left the Argentine for Europe in 1908, in search of more or less costly amusement.
What will one of these rich South Americans spend abroad? How far do the mass of them contribute to increase the sum which the country pays out across the ocean every year? It is difficult to guess; but if we estimate, as we moderately may, that each of them spends about £1000, we may add on this count only a sum of £1,080,500 to the debit side of the Argentine balance. On the other hand, we have not included among the yearly liabilities the enormous sums which the country pays each year in ocean freight charges, because in fixing the sale price of exported products the freight has already been deducted, as well as insurance, brokerage, commissions, the cost of wharfage, etc., etc. But to give some idea of the importance of these sums it is enough to say that, according to estimates worthy of evidence, the Argentine Republic paid in freight, in the year 1908, for the transport of some 6 million tons of linseed, wheat, and maize, at the rate of £1 per ton of grain, a sum of about £6,500,000.
These figures having been considered, we may now establish as follows the basis of the economic balance of the Argentine:—
The Credit side is formed in the first place by the value of the exports, which in 1908 increased to £73,200,000; then by the great and incessant consignments of capital on the part of already existing companies, or new ones which are formed to exploit railways, tramways, or other industrial undertakings, or to undertake the mortgaging of landed property. An economic journal, much valued in Buenos Ayres, the Buenos-Aires Handels Zeitung, estimates at £8,000,000 the amount of fresh capital which enters the
country each year. The third class of assets is constituted by the sums brought into the country by immigrants, which are estimated at £1,800,000. The total of all these sums amounts to the considerable figure of £83,000,000.
On the Debit side we must first of all place the value of imports, which in 1908 amounted to £54,600,000, including the large arrivals of railway and tramway material which the country has not to pay for immediately, as it obtains them upon long credit; this item is consequently much smaller in reality than it appears at first sight. Then comes the interest on the foreign capital invested in the Argentine Republic in bonds of the National Debt, in railway shares, tramway shares, and various other undertakings.
We have seen that the revenue of all these securities issued by or in direct relation with the Argentine Republic amounts to £22,000,000, and that of this sum £4,300,000 remains in the Argentine; we therefore conclude that £18,000,000 leaves the country each year as remuneration for investments.
Then we have also to enter upon the debit side a total of £84,400,000 which “seems to leave the country” each year in payment of the debts contracted with foreign countries. But in reality this sum is perceptibly less, for the reasons we have mentioned above, so that we may reduce it to £80,000,000.
Now, if we place side by side the Debit and Credit of the nation’s economic balance account, we shall find that in the year 1908 there was a favourable balance of not less than £3,000,000.
It is undeniable that this favourable balance has in fact been obtained, not only in 1908 but also in previous years, for there exist two irrefragable proofs of the fact: the rates of international exchange, always favourable to the Argentine, and the uninterrupted stream of metallic currency which flows towards the Rio de la Plata. “The state of exchange,” as Goschen has said in his work on the subject, “offers us the means of ascertaining not only the state of the commercial atmosphere, by indicating the proximity of disturbing currents, but it also indicates them in such a manner that by interpreting them carefully, we may choose
the line of conduct to be followed in order to steer clear of danger, and to avoid the precipitate results of panic.”[116]
[116] C. I. Goschen, Theory of Foreign Exchanges.
“The attentive observation of exchanges,” says the economist Foville, confirming by these words the assertion of the expert just cited, “suffices to indicate to the minds of those competent whether the monetary stock of a country is in process of increasing, or whether, on the contrary, there is an escape of currency towards the outer world. Exchange tells us in which direction bullion is being attracted, at a given moment, just as the weathercock tells us the direction of the wind.”[117]
[117] See in the Bulletin de l’Institut International de Statistique, Vol. XV., 1906, p. 200: Les Eléments de la balance économique des peuples, by A. de Foville.
Now if we examine the table showing the international variations of exchange during the last five years we shall find that the latter are on the whole high above par; in December 1906 and January 1907 especially they attained considerable figures which have never since been surpassed.
As for the importation of bullion and the visible existence of gold in the country, it will serve our purpose to know that according to the official figures there was on the 31st of December 1907 a total of £29,060,000 in the country, which was distributed as follows: £21,020,000 in the Caisse de Conversion, and £8,040,000 in the various banks, including the Conversion Funds. A year later, on the 31st of December 1908, these figures attained a total of £34,860,000, of which £25,340,000 was in the Caisse, and £9,520,000 in the various banks. But in the course of the year 1909 this upward movement has been even more evident, since the total amount of gold in the Republic on the 1st of November 1909 was no less than £53,800,000, of which £34,800,000 was in the Caisse and £19,200,000 in the banks or the Conversion Fund. It is already therefore certain, if we are to judge by the important consignments of gold actually on the way to the Argentine, that by the end of 1909 the Republic will possess metallic funds to the amount of at least £56,000,000.
We have seen what a part foreign capital has taken in realising the economic value of the Argentine and the influence it has exerted in developing the country. It
is employed in the greatest variety of ways: in State loans, railways, and every branch of industry. To it we owe harbours and railways; that is, the principal factors of economic wealth; it is foreign capital, invested in navigation companies, which puts the Argentine in touch with all the nations which consume her products.
However, placing ourselves at the standpoint of the laws of evolution which preside over the destinies of the nations, we must admit that, in view of the present prosperity of the country, the intervention of foreign capital in the affairs of the Republic must daily lessen, in proportion as a national reserve of capital collects; as has happened in the United States, and in all states which are in the first rank of civilisation. But the term of this economic movement is still far removed, and until the day arrives, foreign capital will in all security continue to find employment in navigation and in public works, and also in those nascent industries which are beginning to exploit the mineral wealth of the Republic.