I.
A study of the effects of the war upon our relations with the other republics of this hemisphere involves political, commercial, financial and strategic elements of far-reaching scope and much complexity. The situation presents an opportunity. It offers a lesson even more vital than the opportunity. The political considerations are most relevant to the lesson; and the final text of the lesson will be the result of the war. The economic opportunity is already upon us, definite and clear. It will not wait. It must be grasped without delay and may therefore be first discussed.
There is something repellent in counting our advantages under the shadow of so great a tragedy but we must try to be as practical as those who are fond of accusing us of materialism. Does any one think that the steam-roller of admirably organized and Government-fostered German competition would pause if we lay in the road; that if we received a check, Anglo-Saxon cousinship and fair play would always mitigate British competition; or that then not a single European merchant in South America would ever again use scorn and detraction against our goods, or encourage, through influence with the press, prejudice due to "Yankee peril" nonsense? In short, is it likely that all our competitors would suddenly love us just because we were in trouble? No, things are not as they should be and meanwhile must be dealt with as they are.
There used to be apparently very little hope of our shaking the tree and gathering the golden fruit of foreign enterprise unless forced to it by the collapse, through dire hard times, of the wonderful home market which has made spoiled children of our manufacturers. Now comes this war. It forces upon us a wonderful, a unique opportunity to gain and hold our proper place in the finance, trade, and enterprise of Latin America. The richness of the field is often exaggerated, but its cultivation is certainly worth the effort of men of foresight.
What are we going to do about it? This is the question; for if American business men do not do their part the ultimate effect of the war upon our economic interests in this part of the world will be unimportant. We must not be like the young gold miners who were looking exclusively for large nuggets with handles. We must go at it seriously and scientifically and solidly, not superficially, casually, and opportunistically. We must begin with the earnest intention of continuing our efforts for all time.
An enthusiastic commercial spasm will be worth nothing. There have got to be real efforts, real hard work, the expenditure of money for future and not merely immediate profits, a cheerful readiness to discard old and cherished methods, a new adaptability, a new painstaking attention to details. There has got to be serious study of foreign countries and keen interest in our relations to them. Without all this, mailing catalogues, (usually in English,) banquets and speeches and organizations will take us nowhere.
American business men are bestirring themselves. They know that we need ships to carry our goods advantageously, and banks for the favorable financing of our trade. They should be able to compel our Government's support where needful, as in a ship subsidy or a limited guarantee of reasonable profit to American investment in ships. In connection with our efforts at Caribbean commerce, as another instance, they should be able to get a flexible sliding scale tariff provision passed by Congress, so that, in dealing with the countries whose coffee or other special products we buy, we could induce them to give us for our exports reciprocal advantages over our competitors. Indeed, a kind of Caribbean tariff union might well be feasible and desirable.
So long ago as last August the British Government sent all over the world for samples and specifications of German goods which their manufacturers might contrive to displace. We should take corresponding action in regard to the goods of our competitors. Our manufacturers should be reconciled to sending to find out what each market wants instead of asking a population to take or leave what we make. Our commercial campaign should include the effort to replace goods from one belligerent country formerly handled by local merchants from another belligerent country, such as British goods previously sold through the German houses which so abound in these countries.
Good men from small countries without political significance in world-politics already make their influence felt as employes of foreign Governments and as merchants in foreign countries. The war may set free many more men and send them about the world to work for their own interests, for the country they most believe in, and perhaps ultimately for an adopted country. International commerce must have its courtiers, and the good will of all such men should also be reckoned with. They spread friendship or prejudice against us. Many of them are importers and will push our goods or some one else's according to the manner in which we deal with them.
American manufacturers are doubtless weary of being told that they pack badly, that they are niggardly about credits, that they do not send enough or sufficiently qualified representatives, that they are careless of details, and so on. Still, before mentioning some further particular steps that should be taken, it is necessary to emphasize the fact that these same old faults are, and until corrected must remain, the chief detriments to our foreign trade.
In some of the republics there is a real disposition to deal with us; in others there is a preference for Europe. Now, as to many goods, they must deal with us or go without, although I am informed that a German firm, for example, has got word to its clients in these countries that it is prepared to fill orders via Copenhagen. If we think that our competitors have gone entirely or permanently out of business we shall be ridiculously and sadly disappointed. We shall be on trial, and if our exporters make good they will find a conservative disposition to continue to buy from us.
In the effort it is important to remember that there is much to live down in criticism of methods of the past. One Latin-American gentleman, an enthusiast for American commerce, exclaimed to me in despair: "Son hombres capazes de poner una hacha Collins con vidrios para ventanas," which means: "they (the American exporters) are capable of packing a Collins hatchet with window glass." Others told me how leading firms always stamped their letters for domestic and not foreign postage. The office boy simply would not learn geography. Nobody minded paying the deficit, but through local red tape this seeming trifle sometimes caused two or even three weeks' delay in the delivery of important letters.
Certain of our strongest firms have been calmly ignoring shipping directions. What did they care if the packages had to cross the Andes on mule back, and if mules could only carry packages of a certain size and weight? What did they care if the duty remission for materials on some Government contract, or the customs classification of a shipment, depended on adherence to specific directions? I could multiply examples of the most amazing casualness and careless disregard, of bad packing, of ungenerous credit, which have enraged the importer.
A European merchant, many years established in a South American city, and knowing the community, has been selling pianos in this way: The manufacturer would quote him a price and deliver the piano, giving him long credit at an ordinary rate of interest. The merchant would finally sell the piano on the installment plan, receiving interest at a higher rate on the deferred payments, the merchant trusting the buyer, the manufacturer trusting the merchant, both thus making good profits, and the purchaser being accommodated. This man found the American manufacturer entirely unwilling to deal in this way.
European houses on the spot, whether independent or financed by large home houses, give credits for as long, sometimes, as a year. They would not continue to do so if they lost by doing it. Often this fits the customs of the local domestic trade. In one country the local retailer is expected to be paid within eighteen months. Naturally, our exporters' demand for "cash down on receipt of documents," even when the customer is well vouched for, does not appeal to him.
He prefers to get long credit from a European house, and pay interest for it, rather than to borrow from his bank at high interest or sink his own capital to pay for American goods, long before he gets them, their price plus the profit of a commission house. Indeed, he is generally dissatisfied with the methods of American export trade as now conducted, which is almost exclusively through commission houses. These, it seems, might become more efficient through organization and more aggressive and scientific methods.
On the other hand, the export trade of certain of the big combinations is beginning to be pushed with commendable zeal and efficiency. Trade at large, to reach its greatest volume, must include the pushing of smaller lines of goods. These smaller lines, in the aggregate, would reach considerable sums, and it does not appear that there have hitherto existed efficient agencies for their marketing. To hold Latin-American trade we must equal our competitors in liberality of credits, in representation on the spot, and in other facilities.
There is no doubt that more American merchants resident in the trade centres would give valuable impetus to our commerce. Even our commission houses operating on the spot are so few that in handling many lines there is the greatest danger of their sacrificing the building up of a steady trade to the opportunities of unduly heavy profits now and then, and so damaging our general commercial interests. Then we must send many commercial travelers.
Just here, however, it cannot be too strongly emphasized that Americans sent to these countries to do business must above all be men of agreeable manners. In these countries many quite unworthy people have these: so a good man who lacks them is likely to be badly misjudged. They should have sympathetic personality and sufficient education, besides being men of sobriety and good character, and should be able to speak the language of the country.
All this will be expensive, but non-competing firms might join in sending men, or competing firms might, it is hoped, be guaranteed against the terrors of the Sherman law in order to join in sending a corps of representatives upon some basis of division of the field or the profits. Combination is even more necessary abroad to put forth the nation's strength in world competition than it is for efficiency at home. These men would be students and salesmen, and perhaps future merchants who would settle in these countries and emulate the patriotic groups of resident foreigners who in so many places help to form an atmosphere favorable to their countries' interests.
They would work to replace with our goods those now shut off by the war, but also to introduce dozens of lines of American products which are now comparatively hard to find in these markets. A number of strong firms might join to establish commercial houses or selling agencies in trade centres of certain groups of countries. Commission houses might do the same if they carried samples and instructed their clients in packing, credits, &c., but in each case there should be American houses on the spot which would carry general lines and supply to the eye that visible evidence of the goods themselves which is such a valuable form of advertisement.
In the establishment of American houses in these countries, as in many other respects, much may be learned from the Germans. They bring out carefully selected young men. These, if efficient, have sure promotion. The partners retire before old age to make room for those who work up. The inefficient are dropped. It is a little like the principle of a good foreign service.
I think the most minute study should be given, first, to the nearer countries, say those north of the Equator, including the republics of the Caribbean. Each country must be separately studied. Primarily, there will be found a cry, sometimes desperate, for capital. Public works, concessionary and otherwise, have stopped for lack of funds from Europe. New developments in railroad building, mining, harbor works, plantations, are arrested. Where European credits have been customarily used to handle crops, there is distress, and no less so in cases in which such credit has previously been given by ostensibly American houses operating really with European capital.
American capital may come to the rescue by advances upon good security through local banks. It can establish banks or buy controlling interests in existing banks, many of which pay their stockholders 15 per cent. or more. It can relieve the stagnation and make profitable investment by an active campaign for public and private contracts and for sound and fair concessions, not visionary or get-rich-too-quick schemes.
Supposably, the repairing of the destruction brought by the war will make European capital scarce for some years, but an effort will doubtless be made to retain for it its former preponderance in these countries; and so it is important that, whatever the war's effects upon our own money markets, use should be made of such an opportunity as does not come more than once.
To be sure, the scarcity of money in the United States makes this difficult, but the same worldwide money scarcity will secure an especially high rate of interest in Latin America, where even in normal times money can often be placed on excellent security in some of the countries, and at a rate very high indeed compared to that prevailing now in the United States. For safe investments with such a margin of profit, it is to be hoped that money, even if dear at home, will be forthcoming.
Undoubtedly the purchasing power of these republics has been hard hit by the cutting off of credits and markets by the war, as their Governments have been hard hit through the falling off of revenues from import duties. Some of the Governments will require foreign loans. Capital, I repeat—and I mean really American capital—is the urgent need. We are not asked to make them a present of capital to buy our goods with, but if we do not help finance them and buy their products they will have nothing with which to buy our goods.
The situation invites us to give capital and credit to take the place of the European supply which has failed. One need not fear that the returns will be uninviting, for Europe would hardly have been supplying credit and capital to Latin America as a mere matter of amiability. Thus our capital must regenerate Latin-American prosperity, while our bankers, merchants, and manufacturers are engaged in making solid, permanent arrangements, not opportunistic ones, to take possession of a great share in the present and still more in the growing future development and commerce of these countries. Capital, then, and credit are the first requisites.
The war has had the effect of making the Latin-American countries realize for once the economic importance to them of the United States. The products of some, like the tin of Bolivia and the nitrates of Chile, have been going almost entirely to Europe. Several republics suffer the more acutely in proportion to their previous failure to cultivate financial and commercial relations with the United States.
They now feel this and are compelled to a mood receptive to our advances. More, they are forced to seek new markets for their goods just as they are forced to buy some of ours. In this way there should come about new exports to the United States, and there should spring up there the corresponding new industries and habits of consumption, to the ultimate benefit of all the countries concerned.
Meanwhile, the United States is the only present economic hope of a number of the republics. It is to be hoped that our capitalists and business men will realize the responsibilities as well as the opportunities of profit in the rôle they are asked to play, and that their response to their new opportunities will be one of courage, thoroughness and intelligence, and one also of quiet patriotism.