Uruguay, Brazil, and Chile all have similar issues, which sell on bases ranging from 7 to 9 per cent. or even higher. Broadly speaking, and without attempting to assign a definite value to any one of these issues, they are sound, conservatively issued, well protected, and under normal conditions readily marketable. The more important issues have been widely sold in England, France, and Belgium. If they were properly introduced and made well-known in the United States, there is no reason to question their finding a good market here also.
Side by side with the land-mortgage banks there are operating in the Argentine a number of English mortgage companies, which directly invest their own funds in land mortgages and have earned highly satisfactory profits.
In several countries there are state-owned savings banks, a large portion of the funds of which also go into land mortgages.
Conditions of Commercial Banking
A banking business, like any other, must adapt itself to surrounding conditions, including laws, business customs, precedents created by older banks, and the like. In South America these conditions differ in a number of respects from those which prevail in the United States. Probably the first impression of most observers gives an exaggerated idea of the differences. However, they should be fully and carefully considered.
The chief differences that directly affect banking operations are the following: (1) Comparative absence of banking regulation on the part of governments or associations; (2) national colonies; (3) social character of business relations; (4) lack of highly developed economic organisation; (5) relatively high and stable rates of interest; and (6) in some countries fluctuating currencies. The first five of these circumstances call for brief comment.
LITTLE CONTROL OR CO-OPERATION
Not only is there a marked absence of laws directly applicable to banking concerns, but there is also an equally noteworthy absence of control exercised either by the Government or by associations among the banks. Even the large governmental or semi-governmental banks in Brazil, Uruguay, Argentina, Chile, and Bolivia are competitive with the other banks. Whatever influence they exercise is secured through their active and direct competition, not through any special authority over the other banks conferred upon them. In the fall of 1914, for the first time, there was some rediscounting of the paper held by other banks on the part of the Bank of the Argentine Nation and of the Bank of the Republic of Uruguay; but this tendency did not go far. The other banks objected to placing information as to their relations with customers in the hands of the governmental institutions. In other countries there has not been even this much of an attempt toward fulfilling the functions of a central bank of rediscount.
It is difficult to secure in most of the South American cities even the most elementary kind of co-operation among the banking institutions. How is it possible that they should continue to stand apart when they would obviously gain so much by coming together? A partial answer is to be found in the peculiarity that has already been pointed out, namely, the fact that many of the more powerful institutions are the offspring of European countries. Each one is fighting to support the trade of a certain well-defined group of clients. The national antagonisms among them are deep-seated and sometimes virulent. All this was true even before the European war. It will be tenfold true for a number of years to follow.