Under the administration of Señor Saenz Peña, when Señor Romero was installed in the Ministry of Finance on the 12th October 1892 he found the Consolidation Loan in process of issue, the stock being sold at need, the 6 per cent. bonds being guaranteed by the customs receipts; they were then selling in London at about 63 per cent. Señor Romero estimated that if the system of paying debts by means of debts is generally a ruinous one, it was especially so in this case, where the transaction was being effected by means of bonds so badly depreciated as those of this loan.
The first important act of this Presidency was to make an arrangement with the representatives of the bearers of the foreign debt, by which they consented to a reduced interest for five years—that is, until 1898—the redemption charge being suspended simultaneously. In the following years, from 12th July 1898 to 12th January 1901, the full interest alone was to be resumed, and from 1901 the payment of the redemption charge would also be resumed.
As a consequence of this arrangement, it was decided to issue no further stock of the loan, even in cases where the issue was authorised: as, for example, in the effective guarantee of railway stock. Holders of the latter would receive payment on the basis of the price at which the shares were quoted. This is why the Consolidation loan issue of 1891 was confined to the sum already cited.
The “Travaux de salubrité,” or Water Supply and Drainage loan, authorised by the law of 30th January 1891, to the extent of £6,750,000, in bonds bearing 5 per cent. interest and 1 per cent. redemption, was created under the following conditions:—
The Government of Señor Juarez Celman, which preceded that of Signor Pellegrini, was inspired by the Spencerian doctrine, which asserts as a principle that the State is always a bad administrator, and fell into financial and administrative errors which were to cost the country dear indeed. Thus it resolved to place in the hands of individuals all the industrial enterprises undertaken by the nation, among which was the scheme for supplying the city of Buenos Ayres with water and facilitating the elimination of its filth and sewage.
Every one very soon saw, however, that a serious mistake had been made. The individual firm entrusted with these important services was exclusively preoccupied in exploiting the public, and its methods resulted in protests and resistance on the part of the inhabitants of Buenos Ayres. On 6th August 1890, the Government, Pellegrini being president, came to the conclusion that it was its duty as an administration, and was also a matter of political efficiency, to place the sanitation works in the hands of the State once more; and with this object it obtained an authorisation to contract a loan of £6,750,000, at 5 per cent. and 1 per cent. redemption. Such was the origin of this loan, of which stock to the value of £6,374,995 was issued.
The “Rescission of Railway Guarantees” loan, authorised by the laws of 10th January 1896 and 30th December 1898, was contracted to disburthen the State of the heavy obligations which weighed upon it as a result of having guaranteed an interest of 6 per cent. on enormous capitals employed in the construction of railways. With this object £11,699,957
worth of stock was created, and issued at 4 per cent. and 1⁄2 per cent.
The loan for the “Conversion of Provincial Debts,” created by the law of 8th August 1896, was justified by the highest considerations of national solidarity, and of the defence of Argentine credit abroad.
The enormous debts contracted by the Provinces, unauthorised and uncontrolled by the central power, quickly resulted in a veritable bankruptcy, at the end of a period of waste and folly, of unchecked and uncalculating expense.