The Argentine as a Market

by Nowell Lake Watson

The year 1885 marked the next stage in the development. Owing to facilities of transport being absent, Tucuman was in no better position than before, while the issue in the same year of the decree authorising a paper currency with the consequent premium upon gold, resulted in a natural increase in the restrictions on importation. The increase in the duty was nominally from 5 to 7 c. per kilo irrespective of quality. But the actual increase resulted in a total of 90% on refined sugar and 108% on the lower grades.

The third increase took place three years later, in 1888, when the import charge was raised to 9 c. gold per kilo on refined sugar, other qualities being taxed at the old figure. On M. Pillado’s estimate this meant a difference of 268% between the cost of that sugar in bond and its price to the importer.[7]

[7.] The percentage seems to work out at 219, while the premium on gold in that year (1888), as given in another official publication of 1906, was in reality 150 roughly, which would mean 184%. But the absence of reliable data makes an amateur result untrustworthy.

The foregoing is a brief account of the course of taxation introduced for purposes of protection as described by M. Pillado. At this point he takes occasion to moralise on the iniquity of the system, and exclaims that it is a matter of congratulation that the promoters of the industry did not think fit to produce even further from the great centres, somewhere on the borders of Bolivia. In emphasising these existing burdens, however, the writer is merely making a dramatic pause preparatory to enlarging on the further excess in the institution of bounties on export.

The immediate result of this tariff was naturally an immense rise in the price of all sugar, and subsequently the practical exclusion of the imported article. The figures cited in the work speak for themselves. In 1884 the total imports of sugar of all classes were 35,000 tons. In 1902 they had fallen to 155 tons. While the next year saw an importation of some hundred tons of refined sugar, the other grades were represented by a total of about 300 lbs.

We now come to the real interest of the question—the effect namely which this policy had upon the industry itself and the devices which the latter adopted to regulate prices.

In the first instance an unparalleled boom took place. In 1884 the production was 75,000 tons. In 1895 it was 109,000. In the following year the sum of 134,417 tons was reached—a production quite in excess of the country’s requirements. The result was that in the words of M. Pillado, “the refiners began to cry to heaven and to earth for any solution whatever to rescue them from the asphyxiation which threatened to overwhelm at one and the same time themselves and their system.”

For the planters, however, Tucuman had become a veritable Eldorado. Two years sufficed to give a net return four times as great as the capital invested. As a natural consequence it followed that labour and capital flowed into the Sugar districts, creating an unprecedented boom and denuding the other agricultural industries not only of the province but of the rest of the republic as well of their very necessities of existence. The effect was felt, apparently even in the capital, so that “lawyers deserted their profession, workmen their tools, to throw themselves with a regular fever into an occupation so full of promise.” Works sprang up as if by magic. Palaces were constructed to house the staffs. Capital was lavished on the industry by individuals and banking houses alike. No one, in short, took the slightest pains to investigate the stability of the trade, and investments were made with complete recklessness.

While fortunes were being created in the cultivation of sugar cane, orchards, orange-groves, pasturage, arable land—everything else, in short—were being either transformed or neglected, and the public generally was compelled to pay an exorbitant price for its sugar. The moment had, therefore, arrived for a reduction in the import duties, and in the price of the article. That, however, was not the view of the interested parties. “If,” they said, “by any misfortune this year’s harvest should prove so good as the last” a worse evil would befall. Considering that private mortgages amounted to some five million dollars and that the total indebtedness of the industry, in spite of its abnormal prosperity, was no less than twenty million, the gravity of the situation was not exaggerated. A bad harvest would be insufficient to satisfy the claims of creditors. A good harvest would cause a tremendous fall in prices and consequent disaster.

It is not surprising that there was formed in 1895 the “Union Azucavera,” or Sugar Trust, with the avowed object of taking over the entire production of all the refineries and determining prices for home consumption and export.