Antofagasta, with its hard-surfaced nitrate fields, owns about six hundred miles of first-class roads; a record equalled only by the big Territory of Magellanes in the far south, where the sheep-farmers of the newly developed estates have made roads across Western Patagonia. In each of these two regions the climate, although in the North almost unbrokenly dry and in the South almost unbrokenly humid, is equable, lacking the sharp and destructive changes of the Central region. It must be owned, however, that the proportion of roads to area in great southern territory is one mile in length to each fifty square miles of land.
Altogether, Chile is officially stated to have between six and seven thousand miles of highway in first-class condition, with Coquimbo, Atacama, Aconcagua, Santiago and Tarapacá following the two provinces named above in length of highways in good condition. The new law aims at putting another six thousand miles of road into the same category within the next few years, out of the total of all classes reaching a mileage of nearly twenty thousand.
CHAPTER XII
FINANCE
Conversion Fund.—Currency.—Debts.—Public Revenues.
When the war in Europe broke out Chile was on the point of establishing a Conversion Office upon lines similar to those followed by Argentina and Brazil. The object was fixation of the exchange value of paper currency by the creation of strong gold reserves, and under normal circumstances Chile’s office would have begun its work in 1915. It has not been possible, up to the end of 1922, to open the “Caja de Conversión,” although funds are maintained on deposit with this purpose in view in Chile, England and, upon a much smaller scale, in the United States. Funds amounting to over 30,000,000 pesos of eighteen pence were also lying in Germany when war broke out, but these were, by special arrangements with the Allies, withdrawn during war years.
The total amount in the Conversion Fund in 1914 was over 108,000,000 pesos of eighteen pence. Of this less than 4,000,000 was held in Chile, and more than 74,000,000 in the Bank of England, besides the deposit in Germany. The reserve was increased during the following year, standing at 111,000,000 pesos at the end of 1915, or about £8,300,000, but was reduced to 88,000,000 in the following year when the National Congress authorised the utilisation of £2,000,000. This money was drawn upon to pay off Treasury Bills issued in conformity with the decree of January, 1914, for the purchase of vessels for the Chilean Navy and the construction of port works, but has been gradually replaced until in 1919 the total Fund amounted to over 114,000,000 pesos, of which 67,000,000 were banked in Chile and the remainder in England. At the beginning of 1921 Chile possessed £2,300,000 on deposit in the Bank of England, or nearly 31,000,000 pesos of eighteen pence; and to the credit of the Conversion Fund in the Casa de Moneda in Santiago had bar gold, $400,000 United States gold money, £78,845 of English money, and other specie, amounting in all to nearly 84,000,000 of pesos.
The withdrawal of funds from the Conversion reserves for special purposes was not unprecedented. Three years after the inauguration of the Fund in 1899 (when it was hoped to begin conversion operations in ten years’ time) 20,000,000 pesos were used for military expenditure, this sum being practically replaced in 1904 by proceeds of the sale of certain old cruisers.
Gallant efforts made to bring up the Fund to a point justifying the opening of the Conversion Office have been rendered abortive by the hard times of late 1920 continued throughout 1921, but the intention of Chile’s financial advisers is maintained and appears only to await the accumulation of sufficient gold.
At the same time the fact that credit and not gold is the true basis of economic prosperity has been forcibly impressed upon South America since 1914. Countries possessing big reserves of gold have been observed to suffer from depreciation of their paper currency, and, what is worse than depreciation, from constant fluctuation in every economic breeze, despite all the efforts of experienced financial experts; and on the other hand countries which were able to trade advantageously during the war and thus to pile up immense stocks of the precious metal have been seen to experience a demoralising paralysis of their markets—to be choked with their own gold.
The fact that those countries whose fiduciary issues have sunk to an apparently ruinous level are on that very account able to export their merchandise with profit, taking payments in comparatively valuable currencies and paying their way at home in depreciated paper, is illuminated by the lesson of the territories with currency maintained at a high exchange rate by gold backing, which are unable to find buyers of their products because no outsider can afford to pay the exaggerated rates of exchange. However, exporters are not the only persons to be considered, and the general uncertainty of commerce, together with the natural timidity of foreign capital when invited to lands with persistently variable currencies, will undoubtedly act as an incentive towards establishment of the Conversion Office in Chile.