The science of foreign banking is the most difficult to understand of all the departments of modern finance. It requires the experience of experts whose knowledge must be the most profound and complete and includes such details as the conditions of the world’s markets, the existing crops, factory productions, local and extraneous political affairs, as well as external and internal commerce.
European financiers and merchants soon recognized the importance of reciprocal banking arrangements between the home countries and foreign fields and as early as 1862, anticipating the growth of Latin America and sensing the financial necessities of its future merchants, opened the London and River Plate Bank, which with its ramifications of branches and agencies in Argentine, Brazil, Chile, New York, and various European countries has been a potent factor in developing and controlling business along British channels. Following the pioneer move of this corporation, other institutions were organized in England, until to-day the amount of British capital invested in banks in all of Latin America is close to $500,000,000.
Calle Rivàdavia, Buenos Aires
Realizing the benefits to be derived from such monetary connections in these countries and knowing that a bank’s co-operation meant much to both the buyer and seller and formed perhaps the strongest link in the chain of foreign commerce with which they hoped to girdle the world, Germany followed in the footsteps of England and opened a similar series of institutions in the same territories, even going so far as to have branches in England, knowing the decided preference for “bills on London.” Through their offices in the English capital, they succeeded in keeping as much as possible of the business they acquired abroad in their own hands, reaping all possible profit from every transaction. In their turn, and as their foreign trade demanded it, France, Italy, Spain and Switzerland entered the field but on a much smaller financial basis, at the same time restricting their activities so as to confine them more to the home countries and to persons of their own nationalities engaged in this field of commerce.
Only recently have statutory and business conditions warranted the advance of the American banker into this sphere of finance. To-day in Latin America our banking institutions may be found in the Argentine, Brazil, Panama, Cuba, Santo Domingo, Porto Rico, Mexico and to a small extent in Haiti. As it becomes apparent that our merchants and those of other countries require financial organizations to further and facilitate trade with the United States, additional establishments will be opened in these lands until ultimately the dollar will be so enthroned in the estimation of the business world that it need pay no homage to the Pound Sterling, which up to the present has been Emperor Supreme in the Realm of Finance.
That this movement is judicious no one familiar with this trade will for a moment dispute. The ability of the British banks, through their strong financial arteries, gave them exceptional opportunities to force business into the hands of English merchants, by obliging the seller of exchange, for example, in Buenos Aires on New York to pay from 1 per cent. to 1.5 per cent. more than if he sold on London, or if he desired to buy, to pay a correspondingly higher price for a draft on New York than on London. In addition to exerting thus their powers through a high rate of exchange to drive merchants into British markets, the profits in the transfer of money incident to the transaction were enormous. The truth of this statement is vividly apparent when we are told that in 1912, “bills on London” valued at $9,025,000,000 were sold, on every penny of which a fraction of a per cent. of profit was made by English bankers.
It is not deemed necessary for the purpose of this work to go into the intricacies of the banking problem in Latin America. Such incidents as local loans, credits and financing, need not concern us, and are best left for solution to those in this line of business. It is to be hoped however that the presence of American banking institutions throughout Latin America will result in the financing with American money of municipal and national improvements such as water-works, sanitation, electric and gas companies, subways, harbor improvements, fortifications, building of warships, telephones, electric and steam railways. It was the custom of the European financier in making such loans to stipulate that the work should be done under the supervision of citizens of, and with articles and machinery purchased in, the country placing the loan. This was as it should be. It gave their engineers and contractors an opportunity to force upon these countries their products and methods, provided permanent employment for many of their countrymen, who in return created a demand for articles of home production.
We may therefore consider the banking situation only in so far as it applies to the traveller, the house he represents and the customer he sells in the accommodation it can afford them and the service it may render all parties. One of its chief uses will be to give reliable information as to the credit rating of customers.
From a financial point of view all of Latin America may be divided into seven groups: (1) the east coast countries of Brazil, Argentine, Uruguay and Paraguay; (2) the west coast countries of Chile, Peru, Bolivia and Ecuador; (3) the northern countries of Venezuela and Colombia; (4) the Central American Republics of Guatemala, San Salvador, Nicaragua, Costa Rica, Honduras, with which Haiti may be considered; (5) Mexico; (6) the countries wherein American banking systems exist, such as Panama, Cuba, Santo Domingo and Puerto Rico, and (7) the extensive group of foreign possessions and islands such as British, French and Dutch Guiana, British Honduras, Trinidad, Barbados, Jamaica, Martinique, Guadeloupe, Curaçao and St. Thomas.