The Argentine in the Twentieth Century

by Alberto B. Martínez; Maurice Lewandowski

Lastly, the law of monetary conversion has been the salvation of agriculture and stock-raising, the two chief sources of national wealth, by preventing the too rapid change in the value of paper, which is a result that deserves to be considered with attention. The law was promulgated at a time when a large harvest was expected, and when, from that very cause, the depreciation of paper violently increased, the value falling from 278 in August 1898 to 206 in December of the same year. It is certain that at this rate the depreciation would finally have touched 150, to the greater profit of the speculators.

What would have happened had the monetary situation

altered so rapidly? The Argentine agriculturalist or stock-raiser, having paid all the expenses of production with gold at about 300 per cent., would have been forced, by reason of the rapid depreciation of paper, to sell his products at a price which would no longer compensate him for his increased expenditure. This would inevitably have ruined the producer—that is, the principal artisan of the national fortune. Far from opening up new lands with his ploughshare, as hitherto had always been the case, he would have abandoned the land already under cultivation.

We need not describe the disaster which would have overcome the country under such conditions as these: the loss of credit both at home and abroad. The stream of immigration would have been suspended; emigration, on the contrary, would have increased, taking the form of a veritable exodus, even of a flight; and each impoverished and disillusioned emigrant, as he left the Argentine, would have proclaimed that the country was ruined. As a result the Argentine would have been for years partially depopulated, or at least deprived of the new recruits which immigration brings in, and of whom it has such need in order to realise the value of more virgin territory.

Worse still: once the harvest was sold, at prices which could no longer be calculated on the basis of the cost, gold, now freed from all restraint, like a balloon whose mooring is broken, would have resumed its upward journey. The melancholy spectacle of 1890 and 1891 would have been repeated; gold would have risen by leaps and bounds, in contradictory and incalculable rushes, finally to reach the limits that mean bankruptcy.[112]

[112] We remember that gold, which on the 9th of August 1890 stood at 35 per cent. when a new Government came into power, had risen to 425 per cent. by May 1891, and in October of the same year touched 464 per cent.; the highest premium ever known in the long history of the double standard during the last half of the nineteenth century. In the United States during the war of secession, the premium on gold rose to 286 per cent. only (on July the 4th 1864).

Such are the disastrous results which would have ensued had not the law of monetary conversion come just in time to restrain the rapid depreciation of paper, and to give money the stability it must possess if it is to be the faithful

and precise instrument of commercial transactions, the common measure of all exchanges. Such were the beneficent results which followed shortly upon the operation of the law; and we can only regret that it has not always been understood and applied with sufficient force by those who were responsible for putting it into practice. The Governments which have followed since then have not always followed the ideal of economy and scrupulous administration which should ensure the success of this important reform. None the less, the Conversion Fund amounts to-day to £5,100,000.

According to the figures for October 1909 the monetary situation of the country may be summed up as follows:—

The total of notes in circulation amounts to $686,291,704 paper, equivalent to £60,393,670. The Conversion Fund of £5,100,000 in gold, added to £34,752,058 on deposit in the Caisse de Conversion and to the £14,073,515 deposited in the various banks of the capital, forms a total of £53,925,573. It follows from these eloquent figures that the fiduciary circulation, notes, nickel, and copper, is guaranteed in Argentina by an actual value of 65.9 per cent. of its total; the notes alone are guaranteed by 89 per cent. of gold.