The remainder was made up by duties on stamps, the contribucion directa, a sort of property-tax; the post-office revenue, the port-dues, rents of government buildings and lands, and other items of little consequence.
The account of the expenditure for the same period stood thus:—
| Expenditure | 1822 | 1823 | 1824 | 1825 | ||||
|---|---|---|---|---|---|---|---|---|
| Dollars. | Dollars. | Dollars. | Dollars. | |||||
| On account of the Public Debt and Dividends | 643,791 | 3 | 452,038 | 3¼ | 547,107 | |||
| Of the Home, or Government Department | 446,140 | 2½ | 513,993 | 7¼ | 679,585 | 2½ | ||
| Of the Finance Department | 264,187 | 2½ | 323,663 | 3½ | 290,696 | 4½ | ||
| Of the War Department | 843,935 | 6 | 1,249,258 | 2½ | 1,111,976 | 3½ | ||
| Total | 2,198,054 | 6 | 2,538,954 | ½ | 2,629,365 | 2½ | 2,698,231 | 5½ |
Never had the financial concerns of the republic borne so creditable and promising an appearance. In this prosperity nothing was thought of but schemes for improvement of every kind; and projects were submitted to the government for a variety of public works, piers, docks, custom-houses, &c., some of which were of manifest utility.
It was under these circumstances, and with a view to carry into effect some of the projected improvements, that the government of Buenos Ayres determined to endeavour to raise a loan in England, which there was no difficulty in obtaining upon the terms they stipulated for, viz., seventy per cent. At that price parties in London contracted with them for a loan, nominally, of a million sterling, to be raised upon bonds bearing interest at six per cent per annum, payable half-yearly. A sinking-fund of £5000 per annum was to be applied to their redemption, and the contractors were further allowed to keep back the amount of the dividends for the first two years. This, with charges, &c., reduced the sum to be paid over to the government of Buenos Ayres to about £600,000. The first half-yearly dividend became due on the third or fourth quarter of 1824.
Whilst the government were deliberating, amongst the many projects before them, how to lay out this money to the best advantage, the quarrel broke out with the Emperor of Brazil for the possession of the Banda Oriental, which soon settled all difficulty on that point, and absorbed every dollar of the loan in preparations for the ruinous war which followed. From the commencement of that struggle not only were the expenses of the state enormously increased, but, when resources were most wanted, nearly the whole of its ordinary revenues (depending upon the duties on foreign trade) were suddenly cut off by the blockade of the river Plate instituted by the Brazilians, which lasted during the whole continuance of the war, viz., from December, 1825, to September, 1828,—nearly three years.
In their emergencies the government determined to avail themselves of the bank, an establishment which had been set up by the leading capitalists of Buenos Ayres in 1822, upon the grant of an exclusive privilege of issuing notes in that province for twenty years. It was entirely independent of the government, and was managed by directors annually chosen by the shareholders. To the mercantile body it was of great utility, and its notes, payable in specie on demand, in default of any national coinage, had become the ordinary currency of Buenos Ayres, and were as readily taken as gold or silver:—its capital was a million of dollars. But, as this could not be done compatibly with its independence and existing constitution, it was further, in an evil hour, resolved to alter entirely its original character.
Under pretence of extending the circulation of its notes throughout the republic, application was made to the General Congress[81] to sanction its conversion into a national bank, with a nominal capital of ten millions of dollars, towards which the government subscribed for shares to the amount of three millions, and very soon assumed the right to exact from it almost any accommodation they required. The consequences were soon apparent. The wants of the government increasing, the bank was obliged, in order to provide for them, to increase its issues, which, ere long, reached an amount obviously out of all proportion to its real capital[82]. The aid of the legislature was again called in:—the notes were declared a legal tender for their nominal value, and the bank was relieved by law from the obligation of paying them in specie on demand:—its credit fell to the lowest ebb, and its notes became proportionably depreciated.
The government, however, had then no alternative but to go on with the system it had commenced:—the precious metals having wholly disappeared as a medium of circulation, it was in this depreciated currency that it found itself obliged to continue borrowing such sums as it required, until, as may easily be imagined, the nominal amount of the public debt became fearfully increased. Before the close of the war with Brazil, the value of the paper dollar of the bank had fallen from 45d. to below 12d. sterling; and at the end of 1828, besides 6,000,000 dollars which had been added to the amount of the funded debt, the deficit on the general account of receipts and expenditure was 13,412,075 dollars, the whole of which was due to the bank; and this was independently of the English loan.
Nevertheless, when peace was signed, upon terms highly honourable to the republic, the public confidence immediately rallied. The value of the current dollar rose at once to 24d., and amidst the general rejoicings even the pecuniary prospects of the country put on a flattering appearance. Nor were the hopes entertained by the Buenos Ayreans of a speedy improvement in their finances without foundation. It was evident, as has been observed in the preceding chapter, that, although the foreign war had led to enormous expenses, the sudden suspension of the trade had locked up a large amount of foreign, as well as native, capital within the country, the investment of which, in a variety of ways, had greatly tended to increase its means of production, and consequently its national resources.