On the top of all came August with its declarations of European War, the first result of which in the River Plate Republics was intimate realization of the extent to which they had been dependent on Europe since the commencement of their real commercial development.
They were thrown entirely on their own resources and ability with no chance of any immediate help from outside.
It is to the credit of both Republics that they rose to the situation. Seven days of Bank Holiday were at once proclaimed in Argentina; during which time the Ministry of Finance and other Government departments were loyally assisted by both native and foreign bankers and financiers to devise necessary measures.
In the result Laws were summarily passed by Congress to prevent all exportation of gold; outgoing ships might only take with them sufficient coal to last them till they reached the next port in South America (Argentina and Uruguay as yet produce no practically valuable coal, so that they are dependent on import for their stocks of this fuel), and provision was made that cereal exports should be limited to the surplus of such produce after the retention of a liberal allowance for home consumption until the next harvests.
Uruguay adopted similar protective measures.
So far so good, but the Argentine Banks, generally, were faced with the necessity for immediate decision under conditions which, unfortunately, are all too frequently recurrent in rapidly progressing countries. Many of the securities held by them were obviously not worth the value that they had been taken for, in consequence of the previous shrinkage of values above alluded to.
This was a momentous matter for consideration during the seven days’ Bank holiday.
In the result, all Banks adopted the policy of cutting losses even at the risk, amounting to extreme likelihood, of letting their weaker customers drown,[17] while mercy was only extended to those evidently strong enough to keep afloat throughout the crisis and its after effects.
This decision taken, and enforced on the reopening of the Banks, scarcely any credit establishment took any advantage of the Moratorium declared by the Government.
In Uruguay the situation proved easier on account of a comparative absence of the complication of securities based on inflated values. Here again the Uruguayan showed his superiority in the matter of cautiously prudent finance over his more enthusiastically volatile over-river cousin.