Of the four large German banks in South America only one is remarkable for energetic and successful expansion. The others have been moderately successful. The difference is to all appearances chiefly due to management.
Although these four banks were presumably designed primarily to advance the business interests of the banks which organised them, they have incidentally had a powerful influence on investment of capital and on trade. The German manufacturers of machinery, steel products, and the like, have been especially helped by the ability of the German banks, both in South America and at home, to help in finding capital and in financing.
The German banks have not found political or economic conditions in South America which were insuperable obstacles to sound or profitable banking.
Other Banking Institutions
Other nationalities besides the English and the Germans have invaded the banking field in South America. The French, the Italians, and the Spanish have all been active, particularly on the east coast, and are represented by large institutions.
AMERICAN BANKS
Only after the federal reserve act went into force in November, 1914, was it possible for any bank organised under the national-bank act of the United States to establish branches abroad. The act restricts this privilege to institutions having capital and surplus of $1,000,000 or more, and gives the Federal Reserve Board discretion to withhold its consent. Up to this writing the only institution which has taken advantage of the powers granted by the federal reserve act to enter South America is the National City Bank of New York, which has established branches in Buenos Aires, Montevideo, Rio de Janeiro, Santos, and São Paulo. Other branches will probably be established in the near future. Especial attention is being given to the collection of credit information. The bank also maintains a foreign trade department, which gives information and advice to its depositors as to building up business abroad. This department is now equipped to make specific reports on trade openings in Argentina, Uruguay, Brazil, Colombia, and Venezuela.
The Buenos Aires branch, which was the one first established, is understood to have done a satisfactory amount of exchange business. It stood ninth in volume of clearings in January, 1915, among the twenty-odd commercial banks of that city. The other branches have not been in operation long enough to show clear results. The branches in Argentina (including the subbranch at Montevideo) and Brazil have each $1,000,000 allocated to them—though this is purely formal, as the bank's whole capital and surplus are behind the obligations of every branch.
The expansion of the National City Bank in South America has been much more rapid than that of any preceding institutions, including even the aggressive German banks. As a natural result, there is apparently less effort at this stage to build up local connections and influence in each city. So far the policy of the National City Bank appears to be to furnish foreign trade facilities to American exporters over as wide a territory as possible, rather than to concentrate its activities in any restricted region.
Other national banks in this country are known to be desirous of aiding in the financing of foreign trade, but have not up to this time found it practicable to take action under the provisions of the banking law as it now stands.