Bathing-Place at Ramírez, Montevideo, showing the Parque Hotel in Background.
The tales of fortunes made by the purchase of land in Buenos Ayres during comparatively recent years, which one heard on all hands, were bewildering in the dazzling possibilities they held out for “getting rich quick.” I was shown properties that in ten or fifteen years had not merely doubled in value, but had increased from five to tenfold. One particular site I remember near Recoleta, which had been valued at about $30,000, on the occasion of the owner’s death in 1907, was sold in 1912 for upwards of $200,000. The secretary of an important mortgage company, that rigidly refrained from all speculation, mentioned to me several instances in which his company had foreclosed and sold off properties to recover its mortgages, where, had it bought the property at its auction price, it would, in the course of a very few years, as events proved, have earned upwards of 500 per cent. on the capital invested.
With all these alluring facts before me, and with every opportunity to acquire Argentine land and wait for it to treble or quintuple its value, I own not one square inch—not even an 8 per cent. or 10 per cent. mortgage, which I was told was as easy to acquire as a 4½ per cent. mortgage in England! But, acting on the most reliable “inside information,” I did become the owner of a considerable number of Argentine railway shares, and at the time of writing I have the pain of seeing these being sold on the London Stock Exchange at 30 per cent. less than I paid for them. This reminds me, by the way, that an old English lady whom I met in Buenos Ayres, on a business visit to the city, had brought with her some hundreds of pounds to invest in Argentine railways. She was much surprised, and not a little disappointed, when I advised her to take her money back to London, where the shares could be purchased to better advantage. From bitter personal experience, I can state that on all financial matters affecting English investments in South America, a London stockbroker can give one better information than can be obtained “on the spot.” The Stock Exchange of Buenos Ayres I found ridiculously ignorant of possibilities in respect to shares of Argentine enterprises whose registered offices are in London. Thus the investor in Argentine public companies controlled from London can do a great deal better if he lives in Hampstead than if he lived in Belgrano.
On the other hand, investment in mortgages and the purchase of land can only be satisfactorily transacted by those who are resident in the country or have secured a thoroughly reliable person to hold their power of attorney. That fortunes are still to be made in land purchase, and that splendid incomes are being derived from mortgages, are facts that cannot be disputed, but the nonsense that gets into print in American and English journals about lucrative investments to be secured by the simple act of sending out your check and receiving in return fat half-yearly dividends, is of the most reprehensible character. Some one sent to me an English daily paper with an article entitled “A Safe Eight Per Cent. Argentine Investment.” On the face of it, all looked in perfect order, but on careful analysis, the 8 per cent. dwindled to 6 per cent., after allowing for bank collection charges and the fluctuations of exchange, and the investment was in nowise “gilt-edged.”
It may be possible to get from 8 per cent. to 10 per cent. on a mortgage on agricultural land in the Argentine, but if the mortgagor is resident in the United States or in England, by the time he has met a variety of charges for the collection of said interest, the return beyond what would have been obtainable from the same money invested in a home industrial concern, is not likely to reach an extra 2 per cent. More, there are all sorts of little difficulties and peculiar customs to be noted in connection with Argentine mortgages. For instance, a mortgage that is continued beyond eight years may become illegal, and repayment be a matter for the discretion of the mortgagee! It is thus a common custom to effect a mortgage for five years, with a clause providing that it may be re-inscribed by the judge for a further period at the end of three years. An important consideration is the provision that the mortgaged land shall not be rented for a period longer than the duration of the mortgage. And in every instance, no matter where the mortgagee may reside, or even if his land be a thousand miles distant from the federal capital, he should give an address in Buenos Ayres, as otherwise any question of legal difficulty is intensified to the point of impossibility. I have already hinted sufficiently at the difficulties of securing justice in Argentine Courts, but the absentee mortgagor who becomes involved in any legal question with a native, resident remote from the capital, and has not provided for the right to sue that native in the federal capital, may as well give up hope of securing satisfaction, no matter how patent his rights may be. There are many other difficulties in the handling of mortgages which arise to cloud over the bright prospect of investing one’s capital in that way and so deriving a snug income to keep one in comfort at home.
Nor is it all that fancy paints it to be owner of land in the Argentine. Several persons of my acquaintance are in that supposedly enviable position. In one case a lady is receiving upwards of $10,000 a year from a piece of property, exactly the same as her sister ten or twelve years ago sold for a sum that does not yield her $1000 per annum in a 5 per cent. investment. This lady is one of the fortunate. A gentleman owning a far larger property has had to spend as much as eighteen months of his time at a stretch in the Argentine trying to let it to advantage, and has suffered all sorts of losses from bad tenants. Yet the gentleman in question is a well-known authority on Argentine land, and in his time must have bought and sold property aggregating many millions of pesos. He is now resident in England, and if anybody goes to him for advice about investing money in Argentine land (except as a shareholder in a land-investment company), he will pronounce an emphatic “Don’t.”
During my stay, there was every evidence of a coming “slump” and since I left it has come with a vengeance. Old-established firms which hitherto had enjoyed the highest reputation for stability have gone bankrupt in dozens. This was entirely to be expected; was inevitable. I have already given sufficient reasons to show why the country must from time to time pass through financial crises; that of 1913-14 is no more than a momentary pause in its onward progress. It has been largely influenced by conditions of universal depression, for in the world of finance, even more obviously than in that of humanity, “We are every one members one of another,” in the Pauline phrase. The Argentine, whose development has depended entirely upon European faith in its possibilities, whereby colossal sums of European capital have been placed at its disposal, has suffered from a sudden tightening of the European purse strings. It is like a young, go-ahead business, which has gone ahead a trifle too fast for its financial resources, and, unless it can raise some fresh capital, is in imminent danger of bankruptcy. Thoroughly sound at bottom, nothing can well stay the progress of the Argentine, and the millions of European gold that have been poured into it have served to create new sources of wealth, whose ultimate increase an hundredfold is as certain as most things mundane.
Apart from natural risks, such as failure of crops from drought, excessive rains, or locusts, destruction of cattle and sheep in millions from protracted periods of heat, there is another danger to which the Argentine is peculiarly exposed. That is the lack of a settled policy in agriculture and cattle-raising. So many of the estancieros are still experimentalists, that they are apt to show a certain affinity with their sheep in following the mode of the moment rather than in maintaining an individual and well-conceived working policy for their lands. From all that I could gather, the country is essentially one for stock-raising. In the early colonial days, so stupendous were the herds of wild cattle roaming the plains, that settlers were permitted to possess themselves of three thousand head—but not more! This will indicate how cattle may multiply on these sunny plains.
It is doubtful if there is in all the world a similar territory so admirably adapted for stock-raising, and on its live-stock its modern prosperity has been based. But, not content with the profits derived from this great business, estancieros during more recent years have turned their attention to agriculture rather than to cattle-raising. The reason for this entails but little searching. Provided huge crops of grain may be secured from land which else were pasturage, the relative profits are vastly greater. Hence it became the fashion to devote more attention to agriculture and less to cattle. With what result? The most deplorable. During 1912 and 1913, the public press was voicing the national alarm at the tremendous decline in ganadería. In such wise was the supply of cattle shrinking that large numbers of cows were being sent to the meat chilling establishments (frigoríficos) to fulfil contracts. The destined mothers of future herds were being slaughtered. The Argentine, whose supplies of cattle ought to be without limit, was actually in 1913 importing live-stock from the neighbouring Republic of Chili, where the cattle industry is comparatively in its infancy!