The Treasury had exhausted its resources, in order to increase and support the funds of the National Bank, whose debt to the Government amounted to $47,491,483[104] in paper, and £2,528,224 in gold, while its debt to foreign creditors amounted to £3,708,037, and to home creditors £2,328,800.
[104] This amount is not reduced to gold, the rate of exchange not being fixed at the time.—[Trans.]
If the situation of the National Bank, which served as the Government’s treasury, was serious, that of the National Mortgage Bank and that of the City of Buenos Ayres were no less grave. The first owed $1,690,833 in paper and £111,475 in gold in dividends, and the second was drained dry by its debts, amounting to $34,646,533 paper and £92,339 gold at home, as well as £1,960,000 abroad.
From the outset the Government concentrated all its efforts upon the solution of these three grave problems. It proposed the reconstitution of the National Bank; it would enable the Mortgage Bank to continue operations, chiefly by repaying the advances which it had made to the State; and assist the City of Buenos Ayres to meet its engagements in respect of the interest of the foreign debt, constraining it to collect and employ the municipal revenues in a more methodical manner.
The prime object of this important transaction was “to give the country a period of economic repose, by provisionally suspending the removals of metallic currency for the liquidation of the nation’s foreign engagements,” as the Government declared in the message which accompanied its proposal. To achieve this end, the creation of a consolidation loan was proposed, amounting to £12,000,000, and increased later on to £15,000,000 upon the advice of the lenders, the result being destined, for a period of three years, for employment in paying the interest on the nation’s loans and in relieving the Treasury of the burden of guaranteeing the dividends of the railways.
In accordance with agreements concluded between the Government of the Republic and the banking houses which undertook to negotiate the loan, the banks undertook to accept, during a period of three years, as consideration for the debt, and for the effectual guaranteeing of the railways, bonds of the loan itself; and undertook, moreover, to accept them at par. The issue each year was to be proportional to the sum necessary to pay the interest on the debt.
The nation, on the other hand, undertook to set aside for the payment of the interest on the said loan 6 per cent. of the customs receipts, which were subjected to a monthly levy of the amount required, the amount affected by the prior rights of the loan of 1885 being deducted first.
The nation also engaged not to increase its foreign debts, whether by borrowing or giving guarantees, during the three years fixed for the issue of the loan.
The total amount authorised was £15,000,000, the interest 6 per cent., and redemption was to commence at the end of three years, to be completed in thirty years. Coupons could be paid to the State in settlement of customs duties. Of the above nominal sum, only £7,691,725 was actually raised, £7,308,275 remaining unissued for the following reasons:—