DOMESTIC BANKS
There are many important and successful banks in South American countries which are strictly domestic institutions, not only incorporated under the laws of the country in which they do business, but owned and managed by local interests. The notion sometimes seriously put forward that South American banking is almost wholly in the hands of foreigners is quite unfounded. It is true that trading operations are generally handled either by foreign houses or by houses in which there is a strong foreign influence and that the financing of nearly all foreign trade and of much local trade is likely to go to foreign banks. But the accounts of the rest of the domestic trading firms, of land owners, and of governmental corporations, as a rule, gravitate toward the domestic banks.
Following is an approximate statement of the total of deposits and credits in account current in each South American country on or about December 31, 1913, and an estimate of the distribution between foreign and domestic institutions:
| Countries. | Total bank deposits. | In European banks. | In domestic banks. | ||
| Amount. | Per cent. | Amount. | Per cent. | ||
| Brazil | $190,000,000 | $78,000,000 | 40 | $112,000,000 | 60 |
| Uruguay | 42,500,000 | 14,000,000 | 33 | 28,500,000 | 67 |
| Argentina | 626,000,000 | 173,000,000 | 28 | 453,000,000 | 72 |
| Paraguay | 3,500,000 | 3,500,000 | 100 | ||
| Total, east coast | 862,000,000 | 265,000,000 | 30 | 597,000,000 | 70 |
| Chile | 104,500,000 | 29,500,000 | 28 | 75,000,000 | 72 |
| Bolivia | 8,800,000 | 1,500,000 | 17 | 7,300,000 | 83 |
| Peru | 28,500,000 | 7,500,000 | 26 | 21,000,000 | 74 |
| Ecuador | 4,000,000 | 4,000,000 | 100 | ||
| Total, west coast | 145,800,000 | 38,500,000 | 26 | 107,300,000 | 74 |
| Colombia | 5,800,000 | 5,800,000 | 100 | ||
| Venezuela | 6,200,000 | 6,200,000 | 100 | ||
| Total, north coast | 12,000,000 | 12,000,000 | 100 | ||
| Total, South America | 1,019,800,000 | 303,500,000 | 30 | 716,300,000 | 70 |
The great Banco de la Nación Argentina (Bank of the Argentine Nation) is an official institution, all the shares of which are owned by the National Government. It is a successor of the former national bank, which was driven into insolvency in the great financial crisis of 1890 and was afterwards liquidated. Although it was organised during a period of disaster and there were many prophecies of its certain failure, the Bank of the Argentine Nation has had a wonderful development and to-day ranks as the seventeenth in size among the great banks of the world.
The bank pays no dividends, but carries 50 per cent. of its profits to the credit of capital account and 50 per cent. to reserves. Entirely through this process the capital and reserve funds have increased from approximately $22,000,000 in 1892 to over $100,000,000 at the present time. During the same period deposits have grown from $21,000,000 to $205,000,000, and discounts and advances from $47,000,000 to $208,000,000. There are now more than 150 branches.
The bank differs from most other governmental institutions in that it carries on distinctly a commercial banking business more or less in competition with private commercial banks. Until the crisis of 1914 it did no rediscounting for other banks, and even during the crisis its activities in assisting other banks were much restricted.
LAND MORTGAGE BANKS
In several of the South American countries there is a well-organised system of land-mortgage banks following European models. In some cases the banks are owned and operated by the National Government and in other cases receive some special support or guarantee. The plan under which they all operate is the following: The owner of land who desires to raise money on mortgage approaches the bank and requests an investigation and appraisal, the expenses of which he usually pays. If the property is shown to be unencumbered with prior claims and meets other conditions, the bank delivers to the owner the mortgage bonds in convenient denominations up to a given proportion, usually 50 per cent., of the appraised value. These mortgage bonds are part of a series and are themselves secured, not by any specific piece of property, but by all the property covered by the series; they are also backed by the credit of the issuing bank. The owner of the property then offers the bonds for sale through a broker, and in this way obtains the desired funds. He pays the bank a small commission, from one-fourth of 1 per cent. to 1 per cent., for its services.
In Argentina, where this system is developed to its highest extent, these land-mortgage bonds are known as "cedulas," and are issued by the Banco Hipotecario Nacional (National Land Mortgage Bank). At the present time the Argentine "cedulas" tend to sell on a 7 per cent. basis, more or less.