COMMERCIAL CONDITIONS
One of the immediately world-wide effects of the great War has been the practically total elimination of German trade competition, an elimination which may not unreasonably be calculated to last for some time to come.
This therefore is the golden opportunity for other competitors to capture the large bulk of export trade which had gradually been absorbed and was in course of constantly increasing absorption in the countries under discussion by German firms.
Many Consular Reports and publications of the “Bureau of American Republics” have respectively dealt with the consequent loss of trade to Great Britain and the comparatively slow advance in that respect made by the United States and these documents have insistently pointed out the whys and wherefores of German commercial success over their chief rivals.
The writer cannot therefore lay claim to originality in the present observations, but does claim that his persistence in the reiteration of what he, and many greater than he, have continually urged on every possible occasion during the past decade has been and is in what appears to him to be the best interests of those most concerned.
Of the two nations the British still has the better opportunity to extend its commerce in both Argentina and Uruguay. The reasons (apart from the actual kaleidoscopic financial and industrial situation) for this opinion are that the English (as all people hailing from the British Isles are commonly called in South America) have already acquired in both countries a firm reputation for straightforward dealing, founded on many years’ experience and untainted by any suspicion of underlying political motives, whereas the South American Republics generally harbour a latent but constant resentment of what they rightly or wrongly consider to be the tendency of the United States to assume a dominating influence over both Americas. In fact to construe the Monroe doctrine as meaning, to cite the catch-phrase which to the innermost South American mind embodies something very closely resembling an unpleasant truth, “America for the North Americans.”
Therefore, pushing United States’ commerce is immediately met by a seemingly dull indifference to the merits of the wares it offers, praise it those wares never so loudly. And this observation suggests another of almost equal truth and importance, viz. that the loud and strenuous vaunting of an article and the hustling methods so much admired in the great Republic of the North are worse than useless in Spanish South America. “Why so much talk and so much hurry to strike a bargain if the thing is really good?” is the mental attitude of the average Spanish American towards the vociferous North American traveller who usually makes the further mistake of appearing to wish to teach his listener the latter’s own business. This, as has been said elsewhere in these pages, is a thing no Argentine or Uruguayan will stand. No one is a more severe critic of himself, his methods and Institutions, no one is most enamoured of progress and improvement than he. But he must be the discoverer and chooser of the remedies for his own defects, he and he alone must be the arbiter of his own destinies and set his own house in order. In such matters he will brook no interference. And least of all from the United States.
It is surprising that the commercial ability of the latter country should not long ago have discovered and acted in harmony with this feature of South American psychology. It seems, however, to have escaped appreciation by “Yankee” cuteness.
Accordingly, we find, in the present writer’s opinion, two existing obstacles (apart, as has been indicated above, from the present financial situation) to the extension of the trade of the United States in Argentina and Uruguay. One of these, the inappropriate method of approach usually pursued by travellers and the other a strong and jealous suspicion of the ulterior motives of the United States in endeavouring to strengthen her commercial foothold in the Southern Hemisphere. The first of these obstacles should be easily removable, unless, indeed, it be too firmly rooted in the North American mentality. The second is a matter for extremely delicate state diplomacy, and equally delicate behaviour of the United States’ delegates at each future “Congress of American Republics.”
Having thus glanced at seemingly obvious defects in United States methods we may turn to those of British manufacturers.
In their regard one can scarcely restrain the question, “Do they really want the South American trade at all?” Because, if they do, they set about getting it in the strangest possible ways. Their apparent attitude can be summed up by saying that they point-blank refuse to give a customer what he thinks he wants unless his ideas on that subject entirely coincide with what they think is best for themselves and, incidentally, it would seem, for him.
South American governments insist on the metrical system of weights and measures for Customs purposes: the British manufacturer persists in a firm refusal to contemplate anything but British Tons and Feet. This may seem a trifling matter to anyone not engaged in the Import trade of a metrical-system country, but in practice the rendering of British weights and measures into their metrical equivalents involves not only a large amount of clerical labour, but is also a frequent source of error in the results.
A most actively patriotic Briton who is the head of a large Importing firm in Montevideo told the present writer not long ago that in spite of his patriotism he had been driven to deal with German firms because, for one reason, of the constant inflictions on him of $80 fines by the Customs Authorities, that sum being the statutory fine in Uruguay for any misstatement of weight or bulk on a declaration.
He, in common with the generality of Importers in Argentina or Uruguay, had found himself confronted by several very weighty reasons for necessarily transferring the bulk of his orders from British to German firms, the chief of which was that above summed up; namely, that British manufacturers would not adapt themselves to his customers’ requirements.
“We are making this, that, or the other pattern” of whatever the article in question may be, and “if you don’t like that you must go elsewhere” is the gist of the average British manufacturer’s last word in the discussion. And, as the Importer is not running a Commercial Museum of articles of the highest quality or best British taste, but has to sell what he imports to customers who have lamentably independent ideas of what they want, he does go elsewhere, that is to say he did, and, most frequently, to Germany. To Germany, where most things were at all events cheaper, and where, if qualities were not so good as in the United Kingdom, manufacturers were adaptable, and their travelling representatives spoke Spanish and understood the ways and wishes and even the foibles of South American customers.
As a rule, commercial travellers from either Great Britain or the United States do not speak anything like fluent Spanish. Therefore, they are obliged to engage interpreters to accompany them on their business calls, while they were quite unable to take advantage of the opportunities sought for by their Spanish-speaking German competitors of mingling in the semi-social life of their customers. In the bar or restaurant the German traveller was a jolly good fellow always ready to pay his share of the wine bill and with his pockets filled with more than passable cigars and he could enjoy and respond to the local humour and generally take part in all the fun of a jovial evening-out; for which the Argentine, especially, is always ready and willing to find an excuse.
Now, doing persuasive business through an interpreter is by no means an invariably satisfactory proceeding, because the interpreter’s own mentality inevitably intervenes and unconsciously colours both sides of the argument with tinges of his own individuality. He says what he thinks you wish to say, and often enough replies with the best rendering he can make, not always an entirely accurate one, of what he conceives to be the meaning of the other party to the discussion. As for the evening-out! One has only to imagine the effects of a laborious translation of always very allusive wit; the point of which in Argentina most frequently hinges on double-meaning.
The German studied the language, and, as far as he could, the tastes and ways of the people of the country he intended visiting before he set out on his commercial travels.
Travellers of other nationalities should do likewise if they wish to secure a substantial share of the trade now left open to their bidding.[18]
And British manufacturers, if so be that (I repeat the question) they do want the South American markets for their goods, must make up their minds to suit the requirements of those markets whatever may be their own private opinion of South American tastes and ways. They must still remember that although German competition has ceased and may continue non-existent for even a very long time to come, and while Belgium is, for the time being, hopelessly crippled, there are other nations who desire to rise, and may succeed in rising, to an occasion which, for the awful cause of it, one can only hope will never occur again.
It is a truly great opportunity for both British and United States Commerce, in which, as has been pointed out, the former has a very considerable start in the political and commercial sympathies and prejudices of South Americans. Nothing which British manufacturers cannot remedy appears to exist to prevent them from taking extremely profitable advantage of that start, not only for the recovery of lost ground, but for grasping a very large share of new openings. Will they? Do they really care enough about extending their businesses to do so?
That is the only question, and it is one which they alone can, and soon, we hope, must answer; one way or the other. If they do not want new business or wish that old business should come back to them, there is no more to be said. And no more grumbling to be indulged in about the proportionate falling back of British trade in South America.
It may be objected that the United States, the full manufacturing activities of which remain unimpaired by the withdrawal of labour for military purposes and the output of which is not absorbed to so great an extent as it is with us for war material, have for that reason already a great start of Great Britain in all foreign markets. To this objection I would reply that the time for the struggle for the Argentine and Uruguayan markets is hardly yet; because climatic accident still recently produced results which, coupled with the falling on them of the shadow of the Great Terror, suspended their purchasing power. Two very lean years of cereal production due to weather, the occurrence of two consecutive seasons of which is without parallel in these countries’ history, were followed by another perilously rainy harvest time complicated by shortage of harvest labour due to war risks, and imagined risks, of the transport of the usual army of Italian harvesters who (like the Golondrinas—swallows—after which they are nicknamed in South America) annually go to Argentina and Uruguay[19] and return to Italy after the harvest has been got in. These causes temporarily paralysed Argentine and Uruguayan commercial activity by, as has been said, suspending the purchasing powers of both.
But with the productive recovery[20] of these countries with their enormous natural endowments and producing as they do all the foodstuffs that the populations of poor war-trampled Europe need most, what a call for all kinds of agricultural machinery will come from them in return for their meat and cereals and in order that more and more land may be laid under contribution for the production of these primarily necessary supplies! Failing other labour sources, an augmented stream of Italian “swallow” and permanent emigration will set out for the River Plate, wealth will develop on both shores of that river, and with wealth the demand for all the manufactured things to the desire for which wealth gives rise. Hardware, cutlery, cotton and woollen cloths, electrical appliances and material; the host of things which Britain makes and Germany once sold will come into increasing demand in South America with the spring of the new era on which the whole civilized world will enter when the blackness of devastation shall have passed and the evil which created it be rendered powerless for further ruinous crime.
Would that the millions of able-bodied men murdered by this war could have been utilized instead as an agricultural expeditionary force on the shores of the River Plate! They and their children and the world would have been the richer for their labour carried out under conditions as happy as their present, and for many (alas!) past, task is terrible. They would have supplied that in which Argentina and Uruguay are lacking, namely, the human element, for the development of their natural resources. Countries in which vast areas of land yet await the plough for cereal cultivation and the improvement of their natural rough pasturage and other vast areas of rich alluvial soil need only irrigation to turn them into a terrestrial paradise.
Capital never is and never will be wanting for good investment, but the fund of human labour cannot be drawn upon by a mere signature. And the daily waste of thousands of lives for the full activity of which there is ample room and urgent need on behalf of the millions remaining is, sentiment apart and from a commercial point of view alone, the saddest thing in War.
Europe needs bread and meat not only to fulfil her normal needs but also to replace her own interrupted production of these prime necessities of life. The River Plate countries can produce both in practically unlimited quantities; provided only that they can obtain the necessary labour a ghastly wastage of which is going on daily in Europe, some parts of which are consequently threatened with famine.
Surely if civilization be anything but a mere theoretic expression there will never be another great war!
With this pious hope we may pass to a more concrete subject, namely, commercial credit on both sides of the River Plate.
As has been indicated in another chapter, Uruguay enjoys a more literally creditable reputation than her bigger sister. The causes of this have also been already dealt with.
In practice one can but advise anyone approached by firms in either country to do what it may be taken that any ordinarily prudent man of business would do, viz. to make due enquiry as to his proposed new customer. His means of doing this are really even better than if the latter were established in London or New York, since the commercial community in either Argentina or Uruguay is comparatively small and consequently, to use a current phrase, almost everyone there knows everyone else and a good deal about him and his business.
Several of the chief banks in Buenos Aires and Montevideo have their head offices in London and all have branches or accredited correspondents in the principal European and North American capitals and commercial centres.[21]
The wholesale importing houses in Argentina and Uruguay usually give ninety days’ acceptances for imported goods and in their turn give six months’ credit to their retail customers. This arrangement has now the sanction of long usage based on its practically being a division of the burden of credit given to the storekeeper by the Importer between the latter and the Exporter.
The system of banking in both Argentina and Uruguay differs little from that obtaining in England except for a certain amount of good single-name paper being taken on account of the usually intimate acquaintance with the business and standing of all leading firms possessed by the commercial community generally.
Rents and working expenses, including special traders’ taxes, in the Capitals of both Republics are high, but the scale of profits when calculated on anything like a reasonable turnover will in most cases be found to leave a balance in favour of both wholesale and retail traders which would be regarded as highly satisfactory by their European and North American brethren. In fact, it may fairly be said that if a man in either country does any appreciable bulk of business in any branch of commerce or trade he is doing what elsewhere would be considered as very good business indeed. When rumour assigns shakiness to any established firm it may be taken as certain that such rumour is founded on tales of speculation outside the lines on which that firm’s true business has been built up. There seems a temptation inherent in new countries for men who have earned money in businesses they understand to risk it in other speculations of which they have next door to no experience. This is, of course, a phase of the “get rich quick” fever which frequently attacks the young inheritors of stable businesses which seem to them too slow and sure to be interesting or indeed to require much looking after.
At one time the Buenos Aires Stock Exchange was responsible for a large number of victims among all classes of the public, but of late years the public has fought very shy of it indeed; so shy in fact as now to be practically unrepresented in the share ring of that Institution. As a consequence of this abstention the few brokers and professional speculators who daily do what courtesy perhaps demands that one should call business there suggests the tale of the island the inhabitants of which lived simply by taking in each other’s washing.
Joking apart, however, the share ring in the Buenos Aires Temple of Mammon were best avoided by the uninitiate. In this ring there is always one, sometimes two (its strength does not run to more), media of pure speculation in course of manipulation by one speculative group or another. The names or nature of these media do not really seem to matter. They vary. Sometimes they may be the shares of the Dock Company of an inchoate Port, sometimes those of an Industrial Company with vague expectations. Indeed, vagueness which may be tinged by rumour and imagination with a hue dimly resembling that of impending rich surprise is almost essential to the initiation of this kind of gamble.
The shares are bulled out of all proportion to their even possible value for a little while and then no more is heard of them; and other very similar ones reign in their stead in the sensational place on the blackboard, on which all bargains during each day are chalked up as they are called out by the parties making them.
The end of these really stillborn booms is mystery. Who are the unfortunate last in? Strangers, doubtless, when there are any. But if there be none, as is the case more frequently than not? One hears vague talk of Paris and other European capitals and then silence for ever more.
Anyhow, the stranger, for whom this book is chiefly written, would, if he took a hand in any one of these games, soon find out that though he might see the price of the shares he had purchased mounting gaily up on the blackboard like mercury in the tropics he could never realize to any appreciable extent. Did he start to sell, then all the weak little bulls of whom his co-speculators would be composed, people to whom ten dollars a day one way or the other makes all the difference in their domestic budget, would rush to sell also out of sheer fright, and down would go the market on him like a guillotine. At the finish he would be left with a very large proportion of his probably not over-valuable holding; of which he would have little further news than notices regarding proposed reconstruction schemes, etc.
It must not, however, be imagined that the Buenos Aires Stock Exchange is by any means exclusively devoted to such work as that just indicated. On the contrary, many Bank and Industrial shares are also quoted and the other, the Securities, ring is just as genuinely serious as the gambling part of the share ring is meretricious. The chief securities dealt in in the former are the Bonds of the National Cedulas, as “gilt edged” a security as could well be wished for.
These Cedulas are Bonds issued by the National Hypothecary Bank, an Institution of the National Government, as against mortgages of freehold property in the Republic; the method of their issue being, shortly, as follows.
An intending Mortgagor lodges a proposal with the Bank; on which his title is examined and the property offered valued by Government experts appointed for each purpose.
The result of the examination of title being satisfactory, the Bank states the amount for which on its valuation, fixed after leaving ample margin for possible depreciation, it will accept the mortgage.
But the Bank has no cash funds, and therefore issues Bonds, carrying interest at 6%, and subject to annual amortization, for the amount agreed to be granted to the Mortgagor. The latter, if he require cash, as is usually the case (most of such borrowings being actually effected with the objects for which the Bank was founded, viz. improvements of the property mortgaged, extension of holding, or purchase of stock and implements), must take his bonds to the Stock Exchange for sale. For them there is always a free and open market, the price obtainable usually varying only according to ordinary accidents of supply and demand.
Many brokers hold standing orders for these Bonds, at a price, for Europe (before the War Antwerp was always a buyer at a certain level). The only really appreciable downward fluctuations of this security are of very short duration, an hour or two at most, and are due to what can only be condemned as the inconsiderate action of the Directors of the Hypothecary Bank. That is to say, the Bank’s acceptances of Mortgages are sometimes allowed to accumulate and then, all of a sudden, the Directors seem to get to work and sign and issue huge batches of Bonds. Not only do most of these find their way to the Stock Exchange, in consequence of anticipatory orders lodged with brokers by absent or upcountry mortgagors, but many such people leave selling orders with the Bank itself.
The result of all this frequently is that one fine morning or afternoon cartloads of these Bonds arrive on the Stock Exchange and flood the market, in spite of all the market can do with the best intention of sustaining prices.
Soon, however, the mass is absorbed by the home and foreign demand, and the little crisis which could never have occurred except through the bad management above described, is over and normal prices rule again.
All this relates to the current issues of these Bonds, the “Cedula Argentina” as they are now called.
Formerly they were issued in series, each of which was distinguished by an alphabetical letter. The last of these lettered series was “L.” This system of series had inconveniences, inasmuch as the regulations under which they were issued prescribed redemption in Bonds of the same series, which interfered with entirely free dealing; some of the earlier series being now only obtainable at a high premium on account of the buyer’s need of them to make up a parcel.
The Securities ring also deals in debenture and other Bonds—National, Provincial and Municipal. The only speculation in which it usually indulges being of the very safest kind; in regard to which, indeed, the term investment would better apply.
The side of the large Hall of the Exchange opposite to that occupied by the Stock and Share rings is now tenanted by the “Bolsa de Cereales,” an institution the recent creation of which was due to the necessity, arising chiefly from the rapid developments of the milling industry, for dealing in “futures” in cereal production.
On the old Once Corn Exchange such dealings were and still are tabu, as savouring dangerously of the Chicago “Pit,” and much heated discussion took place before the new Exchange was at length authorized to register transactions in futures. The discussion was useful inasmuch as it brought about the framing of stringent regulations against the more ruinous forms of gambling in grain. In the result, the new Institution works very well and fulfils its ostensible purpose of assuring the miller against produce being held against him at times when he is under obligation to deliver flour. Thus, it has prevented instead of encouraging at least one vicious class of operations. Formerly, when all dealing in grain futures was illegal, the miller was continually at the mercy of operators in the cereal markets.
The Institution of the new Market was imperatively needed on account of the huge development and value of the milling industry.
For ordinary dealings the Once cereal market still holds its own.