FOOTNOTES:
[78] The official valuation of the average imports from 1792 to 1796, inclusive, was only 2,606,754 dollars; though at that period every article sent from Spain was charged at the most exorbitant price to the colonists.
[79] In 1835 nearly a million and a half lbs. were also sent to the United States, and the demand for it was likely to increase with its production.
[80] The drought in question was one of the most destructive on record; large lakes in the south, never before known to have been without water, were entirely dried up, in which immense numbers of fish perished, the stench from which was described as enough to have produced a pestilence. Another serious consequence from it, of a different description, was the prodigious increase of all kinds of vermin, especially field-mice, myriads of which overran the country, and entirely destroyed the maize-harvest for 1833.
CHAPTER XVI.
PUBLIC DEBT.
Origin of the Funded Debt of Buenos Ayres. Receipts and Expenditure from 1822 to 1825, during peace. Loan raised in England. War with Brazil, and stoppage of all revenue from the Customhouse for three years. Pecuniary difficulties in consequence. The Provincial Bank of Buenos Ayres converted into a National one. The Government interferes with it, and, by forcing it to increase its issues, destroys its credit. Debt at the close of the war at the end of 1828. Hopes founded on the peace destroyed by the mutiny of the Army;—deplorable consequences of that event. Depreciation of the Currency. Deficit in the revenue, and increase of the Funded Debt:—its amount in 1834, and further increase in 1837. General account of the liabilities of the Government up to that year; increased by subsequent war with Bolivia, and French Blockade.
In any attempt to convey an idea of the finance accounts of Buenos Ayres it should, in the first instance, be observed that, although those accounts are, primá facie, national, they exhibit in reality the receipts and expenditure of the government of the province of Buenos Ayres alone:—the other provinces, containing three-fourths of the population of the whole republic, contribute nothing towards the general expenses, though most of them manage to support their petty provincial administrations. Buenos Ayres alone found all the pecuniary means both for the war with Spain for the establishment of the independence of the republic, and, subsequently, for liberating the Banda Oriental from the domination of the Emperor of Brazil, which latter state, though gaining everything by the result, has never repaid her a single dollar. Chile owes her as much for the armies sent across the Andes, which freed that country also from the yoke of the King of Spain, and has been equally ungrateful.
It is only astonishing how this little State contrived, as she did, to raise the ways and means for these efforts, and that she did not altogether succumb to the difficulties and embarrassments they gave rise to:—that they have left her finances in a wretched state can hardly be wondered at. Nevertheless, if it had not been for the struggle with Brazil, which succeeded the establishment of her own independence of the mother-country, Buenos Ayres would long ago have been quit with all her creditors, presenting a very different appearance, quoad her finances, to the world.
When the struggle with Spain was over, and her military establishments reduced, the arrangement of her pecuniary affairs became one of the first objects of her provincial administration.
In 1821 commissioners were appointed to call in and liquidate all outstanding claims against the government, of whatever description, not excepting even those left unsettled by the authorities of the mother-country previous to the declaration of independence. The greater part of these debts were due for actual services, or for loans to the government in times of necessity; others were of a more doubtful character, and had been sold or made over to other parties by the original creditors, and into these classes they were separated by the legislature:—the one receiving obligations bearing an interest of six per cent; the other, receiving the same, bearing an interest of four per cent per annum; and these obligations were simultaneously provided for by the creation of public stocks, bearing quarterly interest:—the first instance of the establishment of anything like a public funded debt in any of the new states of South America. Commissioners were appointed to manage it, and to pay the dividends quarterly to the stock-holders; transfer-books were opened, and a sinking-fund was established for its gradual redemption. The first quarter's interest became due on the 1st of January, 1822, and, for the credit of Buenos Ayres, it should be stated that, notwithstanding the great subsequent increase of the debt, under the circumstances to which I shall presently refer, the quarterly dividends have, from that time to this, been as regularly paid as those at the Bank of England.
The amount of stock created up to the close of 1825 was—
| Dollars. | ||||
|---|---|---|---|---|
| of | 6 | per | cents. | 5,360,000 |
| " | 4 | " | " | 2,000,000 |
which was sufficient to provide for every outstanding claim against the government up to that period, whilst the charge for the annual interest was hardly felt in the general expenditure, which, after the reductions consequent upon a state of peace, the revenue was more than sufficient to meet,—as will be seen by the following returns of the yearly receipts and payments from 1822 to 1825, inclusive.
The receipts were—
| Dollars. | ||
|---|---|---|
| in | 1822 | 2,519,094 |
| " | 1823 | 2,869,266 |
| " | 1824 | 2,648,845 |
| " | 1825 | 3,196,430 6½ |
The total of the four years was, Spanish dollars, 11,233,635, which, at the exchange of 45d. per dollar, was equal, in sterling money, to about £2,106,306, or, on an average, £526,576 per annum.
Three-fourths of this revenue was derived from the custom-house duties, the yearly account of which was, in the year—
| Dollars. | ||
|---|---|---|
| 1822 | 1,987,199 | |
| 1823 | 1,629,149 | |
| 1824 | 2,032,945 | |
| 1825 | 2,267,709 | |
| In the 4 years | 7,917,002, | or about £1,488,604. |
The remainder was made up by duties on stamps, the contribucion directa, a sort of property-tax; the post-office revenue, the port-dues, rents of government buildings and lands, and other items of little consequence.
The account of the expenditure for the same period stood thus:—
| Expenditure | 1822 | 1823 | 1824 | 1825 | ||||
|---|---|---|---|---|---|---|---|---|
| Dollars. | Dollars. | Dollars. | Dollars. | |||||
| On account of the Public Debt and Dividends | 643,791 | 3 | 452,038 | 3¼ | 547,107 | |||
| Of the Home, or Government Department | 446,140 | 2½ | 513,993 | 7¼ | 679,585 | 2½ | ||
| Of the Finance Department | 264,187 | 2½ | 323,663 | 3½ | 290,696 | 4½ | ||
| Of the War Department | 843,935 | 6 | 1,249,258 | 2½ | 1,111,976 | 3½ | ||
| Total | 2,198,054 | 6 | 2,538,954 | ½ | 2,629,365 | 2½ | 2,698,231 | 5½ |
Never had the financial concerns of the republic borne so creditable and promising an appearance. In this prosperity nothing was thought of but schemes for improvement of every kind; and projects were submitted to the government for a variety of public works, piers, docks, custom-houses, &c., some of which were of manifest utility.
It was under these circumstances, and with a view to carry into effect some of the projected improvements, that the government of Buenos Ayres determined to endeavour to raise a loan in England, which there was no difficulty in obtaining upon the terms they stipulated for, viz., seventy per cent. At that price parties in London contracted with them for a loan, nominally, of a million sterling, to be raised upon bonds bearing interest at six per cent per annum, payable half-yearly. A sinking-fund of £5000 per annum was to be applied to their redemption, and the contractors were further allowed to keep back the amount of the dividends for the first two years. This, with charges, &c., reduced the sum to be paid over to the government of Buenos Ayres to about £600,000. The first half-yearly dividend became due on the third or fourth quarter of 1824.
Whilst the government were deliberating, amongst the many projects before them, how to lay out this money to the best advantage, the quarrel broke out with the Emperor of Brazil for the possession of the Banda Oriental, which soon settled all difficulty on that point, and absorbed every dollar of the loan in preparations for the ruinous war which followed. From the commencement of that struggle not only were the expenses of the state enormously increased, but, when resources were most wanted, nearly the whole of its ordinary revenues (depending upon the duties on foreign trade) were suddenly cut off by the blockade of the river Plate instituted by the Brazilians, which lasted during the whole continuance of the war, viz., from December, 1825, to September, 1828,—nearly three years.
In their emergencies the government determined to avail themselves of the bank, an establishment which had been set up by the leading capitalists of Buenos Ayres in 1822, upon the grant of an exclusive privilege of issuing notes in that province for twenty years. It was entirely independent of the government, and was managed by directors annually chosen by the shareholders. To the mercantile body it was of great utility, and its notes, payable in specie on demand, in default of any national coinage, had become the ordinary currency of Buenos Ayres, and were as readily taken as gold or silver:—its capital was a million of dollars. But, as this could not be done compatibly with its independence and existing constitution, it was further, in an evil hour, resolved to alter entirely its original character.
Under pretence of extending the circulation of its notes throughout the republic, application was made to the General Congress[81] to sanction its conversion into a national bank, with a nominal capital of ten millions of dollars, towards which the government subscribed for shares to the amount of three millions, and very soon assumed the right to exact from it almost any accommodation they required. The consequences were soon apparent. The wants of the government increasing, the bank was obliged, in order to provide for them, to increase its issues, which, ere long, reached an amount obviously out of all proportion to its real capital[82]. The aid of the legislature was again called in:—the notes were declared a legal tender for their nominal value, and the bank was relieved by law from the obligation of paying them in specie on demand:—its credit fell to the lowest ebb, and its notes became proportionably depreciated.
The government, however, had then no alternative but to go on with the system it had commenced:—the precious metals having wholly disappeared as a medium of circulation, it was in this depreciated currency that it found itself obliged to continue borrowing such sums as it required, until, as may easily be imagined, the nominal amount of the public debt became fearfully increased. Before the close of the war with Brazil, the value of the paper dollar of the bank had fallen from 45d. to below 12d. sterling; and at the end of 1828, besides 6,000,000 dollars which had been added to the amount of the funded debt, the deficit on the general account of receipts and expenditure was 13,412,075 dollars, the whole of which was due to the bank; and this was independently of the English loan.
Nevertheless, when peace was signed, upon terms highly honourable to the republic, the public confidence immediately rallied. The value of the current dollar rose at once to 24d., and amidst the general rejoicings even the pecuniary prospects of the country put on a flattering appearance. Nor were the hopes entertained by the Buenos Ayreans of a speedy improvement in their finances without foundation. It was evident, as has been observed in the preceding chapter, that, although the foreign war had led to enormous expenses, the sudden suspension of the trade had locked up a large amount of foreign, as well as native, capital within the country, the investment of which, in a variety of ways, had greatly tended to increase its means of production, and consequently its national resources.
The mutiny of the army, however, under General Lavalle, and his barbarous murder of General Dorrego, the Governor, blasted all these flattering prospects, and involved the whole republic in confusion and ruin. The consequences of the civil warfare which followed to the finances of the country were deplorable, and infinitely worse than those occasioned by the war with Brazil. The currency suffered apparently beyond all hope of recovery, and the paper dollar, after great fluctuations, fell to about 7d., at which rate it has, with little variation, been stationary for the last seven years.
In the five years from 1828 to 1832, inclusive, the receipts and expenses were as follow:—
| Dollars. | ||
|---|---|---|
| 1 | The expenditure of the Government, or Home Department, was | 8,254,515 |
| 2 | Of the Department of Foreign Affairs | 778,935 |
| 3 | Of the Finance Department and Public Debt | 29,884,831 |
| 4 | Of the War Department | 31,947,435 |
| Dollars, currency | 70,865,716 | |
| The revenue in the same period only produced | 40,889,263 | |
| Leaving a deficiency of to be provided for by loans and other extraordinary ways and means. | 29,976,453 | |
The War Department, it will be seen, absorbed more than three-fourths of the whole revenue:—nor was this the final account of the extraordinary expenses which may be traced to the revolt of the troops above alluded to. Whilst they were cutting the throats of their countrymen in the interior, the Indians broke in upon the frontiers, left without defence, and made it necessary to organise a new army to put them down, which occasioned a great expenditure, though it was, perhaps, compensated for by the extension of the frontiers, and the new security it gave to the lands in the south of the province.
To provide for these expenses the Funded Debt was again very largely increased, and at the close of 1835 stood as follows:—
| 4 per cents. | 6 per cents. | |||
|---|---|---|---|---|
| Dollars. | Dollars. | |||
| Created before the war with Brazil | 2,000,000 | 5,360,000 | ||
| In | September, 1827 | 6,000,000 | ||
| " | February, 1831 | 6,000,000 | ||
| " | March, 1834 | 3,000,000 | ||
| " | November, 1834 | 5,000,000 | ||
| 2,000,000 | and | 25,360,000 | ||
| Of which the Sinking Fund had redeemed up to that time | 574,246 | and | 6,389,713 | |
| Leaving unredeemed at the close of 1835 | 1,425,754 | and | 18,970,286 | |
Besides this there was a floating debt in treasury-bills and other outstanding claims of nearly 8,000,000 more to be provided for out of the ways and means for 1836, which, after every possible reduction of the establishments, were hardly equal to meet the ordinary expenditure. In the hope of being enabled to pay off this part of the debt, the Legislature authorised the Government, in the first instance, to offer for sale, at a fixed price, a portion of the lands in the south, acquired in the recent campaigns against the Indians:—but their expectations were not realised,—there were no bidders for the lands; and when the junta met the next year to receive the accounts for 1837, instead of any decrease in the floating debt, it had risen to above 9,000,000 of dollars. They then adopted the alternative of creating Public Funds, and passed a law for adding no less than 17,000,000 to the Public Debt. The funds in question were placed at the disposal of the government for sale, at a price not lower than sixty per cent, at which it was calculated that they would produce 10,200,000, and be, therefore, sufficient to cover the floating debt, and leave the ordinary revenue free to meet the ordinary expenditure of the states. To provide for the increased interest of the Public Debt, new stamp duties and a more strict enforcement of the direct taxation (Contribucion Directa) were enacted.
This was at the commencement of 1837, when, including this new creation of stock, the responsibilities of the government appeared to be as follow:—
First.—The Funded Debt.
| Dollars. | Dollars. | ||
|---|---|---|---|
| Created up to Nov., 1834 | 2,000,000 | and | 25,360,000 |
| Created in 1837 to provide for the Floating Debt | 17,000,000 | ||
| Total created | 2,000,000 | and | 42,360,000 |
| Of which there were redeemed at the beginning of 1837 | 585,967 | and | 7,385,422 |
| 1,414,033 | 34,974,578 | ||
| The 4 per cents, reduced to the same denomination, equal to | 942,688 | ||
| Amount of Funded Debt unredeemed (6 per cents) | 35,917,166 | ||
The annual charge for the interest and sinking fund of this part of the debt amounted to 3,055,199 current dollars.
Secondly.—The English loan for 1,000,000 sterling, the interest of which (at the rate of £60,000 per annum) has been unpaid since January, 1828.
And Thirdly,—The amount of the bank issues in circulation, understood to be about 20,000,000 of dollars currency, for the whole amount of which the government had declared itself responsible to the public as the easiest mode of settling its own account with that establishment upon the expiration of its charter in 1836.
On the other hand, the whole of the ordinary revenues were only estimated at 12,000,000 of currency, of which about a fourth part, as above stated, was required to be set apart in the first instance to meet the charges for the funded debt.
The remaining 9,000,000 was insufficient by half to meet the ordinary expenditure of the state, much less to enable the government to make any provision for a settlement with the English bondholders, or for the redemption of the currency.
This was the state of things at the commencement of 1837, as far as I can collect from the accounts which have been published; deplorable as it appeared, it perhaps would not have been altogether irremediable, had the peace of the country been preserved, and the war establishments been reduced.
The estimated revenue of 12,000,000 was based upon the average of the years immediately preceding, which had been far from favourable to the development of the resources of the republic. It was notorious that many branches of it were very loosely collected; the contribucion directa, or property-tax, especially, which produced little or nothing, instead of being made, as it ought to have been, one of the most important items in the revenue of the state. In this, as in other branches of it, there was no doubt that, with care and good management, the public income might have been greatly increased. Besides, there were still the greater part of the public lands undisposed of, which the legislature, in 1836, had given authority to the government to sell, for the purpose of liquidating the debt previously contracted; and with regard to the funded debt, the operation of the sinking fund with its accumulating interest was becoming so efficient that, notwithstanding its large amount, a very few years indeed would suffice to redeem the whole of it, if not further increased. In 1837 the sinking fund already amounted to more than a million of dollars, which, in twelve months, redeemed little short of two millions and a half of stock.
But, as I have before had occasion to observe, touching their social condition, so it is most especially with regard to their financial prospects, there can be no well-founded expectation of any improvement which is not based upon a continuation of the peace and quiet of the country. That, unfortunately, has been again interrupted in the past year, and the Republic has not only become involved in the war declared by Chile against Bolivia, but in a much more serious and disastrous dispute with the French, the calamitous consequences of which it is difficult to estimate.
Pending the settlement of their alleged grievances, the French have instituted a strict blockade of Buenos Ayres, which falls heavily upon those neutral parties who have established an extensive commercial intercourse with the country.