HOW TO DEVELOP SOUTH AMERICAN COMMERCE

ADDRESS BEFORE THE TRANS-MISSISSIPPI COMMERCIAL CONGRESS, KANSAS CITY,

MISSOURI, NOVEMBER 20, 1906

Sir Henry Wotton is credited with the statement that "an

ambassador is an honest man sent abroad to lie for the

commonwealth", a definition half in jest but not without a

touch of seriousness. The feeling is making itself manifest

which will soon become universal, that an ambassador is an

honest man sent abroad to represent the people of his own

country to the people of the country to which he is

accredited. Mr. Root, not sent to South America, but going

on his own initiative, was an ambassador in this modern

sense of the word to the Latin American states in 1906; and

upon his return he enlarged the meaning of the function of

an ambassador by representing to his countrymen the peoples

whom he had visited in South America. The three addresses

delivered before the Trans-Mississippi Commercial Congress,

the National Convention for the Extension of Foreign

Commerce of the United States, and the Pan American

Commercial Conference are conceived in this spirit and were

delivered in the performance of a continuous mission.

A little less than three centuries of colonial and national life have

brought the people inhabiting the United States, by a process of

evolution, natural and, with the existing forces inevitable, to a point

of distinct and radical change in their economic relations to the rest

of mankind.

During the period now past, the energy of our people, directed by the

formative power created in our early population by heredity, by

environment, by the struggle for existence, by individual independence,

and by free institutions, has been devoted to the internal development

of our own country. The surplus wealth produced by our labors has been

applied immediately to reproduction in our own land. We have been

cutting down forests and breaking virgin soil and fencing prairies and

opening mines of coal and iron and copper and silver and gold, and

building roads and canals and railroads and telegraph lines and cars

and locomotives and mills and furnaces and schoolhouses and colleges and

libraries and hospitals and asylums and public buildings and storehouses

and shops and homes. We have been drawing on the resources of the world

in capital and in labor to aid us in our work. We have gathered strength

from every rich and powerful nation and expended it upon these home

undertakings; into them we have poured hundreds of millions of money

attracted from the investors of Europe. We have been always a debtor

nation, borrowing from the rest of the world, drawing all possible

energy towards us and concentrating it with our own energy upon our own

enterprises. The engrossing pursuit of our own opportunities has

excluded from our consideration and interest the enterprises and the

possibilities of the outside world. Invention, discovery, the progress

of science, capacity for organization, the enormous increase in the

productive power of mankind, have accelerated our progress and have

brought us to a result of development in every branch of internal

industrial activity marvelous and unprecedented in the history of the

world.

Since the first election of President McKinley, the people of the United

States have for the first time accumulated a surplus of capital beyond

the requirements of internal development. That surplus is increasing

with extraordinary rapidity. We have paid our debts to Europe and have

become a creditor instead of a debtor nation; we have faced about; we

have left the ranks of the borrowing nations and have entered the ranks

of the investing nations. Our surplus energy is beginning to look beyond

our own borders, throughout the world, to find opportunity for the

profitable use of our surplus capital, foreign markets for our

manufactures, foreign mines to be developed, foreign bridges and

railroads and public works to be built, foreign rivers to be turned into

electric power and light. As in their several ways England and France

and Germany have stood, so we in our own way are beginning to stand and

must continue to stand towards the industrial enterprise of the world.

That we are not beginning our new role feebly is indicated by

$1,518,561,666 of exports in the year 1905 as against $1,117,513,071 of

imports, and by $1,743,864,500 exports in the year 1906 as against

$1,226,563,843 of imports. Our first steps in the new field indeed are

somewhat clumsy and unskilled. In our own vast country, with oceans on

either side, we have had too little contact with foreign peoples readily

to understand their customs or learn their languages; yet no one can

doubt that we shall learn and shall understand and shall do our business

abroad, as we have done it at home, with force and efficiency.

Coincident with this change in the United States, the progress of

political development has been carrying the neighboring continent of

South America out of the stage of militarism into the stage of

industrialism. Throughout the greater part of that vast continent,

revolutions have ceased to be looked upon with favor or submitted to

with indifference; the revolutionary general and the dictator are no

longer the objects of admiration and imitation; civic virtues command

the highest respect; the people point with satisfaction and pride to the

stability of their governments, to the safety of property and the

certainty of justice; nearly everywhere the people are eager for foreign

capital to develop their natural resources and for foreign immigration

to occupy their vacant lands.

Immediately before us, at exactly the right time, just as we are ready

for it, great opportunities for peaceful commercial and industrial

expansion to the south are presented. Other investing nations are

already in the field--England, France, Germany, Italy, Spain; but the

field is so vast, the new demands are so great, the progress so rapid,

that what other nations have done up to this time is but a slight

advance in the race for the grand total.

The opportunities are so large that figures fail to convey them. The

area of this newly awakened continent is 7,502,848 square miles--more

than two and one half times as large as the United States without

Alaska, and more than double the United States including Alaska. A large

part of this area lies within the temperate zone, with an equable and

invigorating climate, free from extremes of either heat or cold. Farther

north in the tropics are enormous expanses of high table-lands,

stretching from the Atlantic to the foothills of the Andes, and lifted

far above the tropical heats; the fertile valleys of the western

cordilleras are cooled by perpetual snows even under the equator; vast

forests grow untouched from a soil of incredible richness. The plains of

Argentina, the great uplands of Brazil, the mountain valleys of Chile,

Peru, Ecuador, Bolivia, and Colombia are suited to the habitation of any

race, however far to the north its origin may have been; hundreds of

millions of men can find healthful homes and abundant sustenance in this

great territory.

The population in 1900 was only 42,461,381, less than six to the square

mile. The density of population was less than one-eighth of that in the

state of Missouri, less than one-sixtieth of that in the state of

Massachusetts, less than one-seventieth of that in England, less than

one per cent of that in Belgium.

With this sparse population the production of wealth is already

enormous. The latest trade statistics show exports from South America to

foreign countries of $745,530,000, and imports of $499,858,600. Of the

five hundred millions of goods that South America buys, we sell them but

$63,246,525, or 12.6 per cent. Of the seven hundred and forty-five

millions that South America sells, we buy $152,092,000, or 20.4 per

cent--nearly two and a half times as much as we sell.

Their production is increasing by leaps and bounds. In eleven years the

exports of Chile have increased forty-five per cent, from $54,030,000 in

1894 to $78,840,000 in 1905. In eight years the exports of Peru have

increased one hundred per cent, from $13,899,000 in 1897 to $28,758,000

in 1905. In ten years the exports of Brazil have increased sixty-six per

cent, from $134,062,000 in 1894 to $223,101,000 in 1905. In ten years

the exports of Argentina have increased one hundred and sixty-eight per

cent, from $115,868,000 in 1895 to $311,544,000 in 1905.

This is only the beginning; the coffee and rubber of Brazil, the wheat

and beef and hides of Argentina and Uruguay, the copper and nitrates of

Chile, the copper and tin of Bolivia, the silver and gold and cotton and

sugar of Peru, are but samples of what the soil and mines of that

wonderful continent are capable of yielding.

Ninety-seven per cent of the territory of South America is occupied by

ten independent republics living under constitutions substantially

copied or adapted from our own. Under the new conditions of tranquillity

and security which prevail in most of them, their eager invitation to

immigrants from the Old World will not long pass unheeded. The pressure

of population abroad will inevitably turn its streams of life and labor

towards those fertile fields and valleys. The streams have already begun

to flow; more than two hundred thousand immigrants entered the Argentine

Republic last year; they are coming this year at the rate of over three

hundred thousand. Many thousands of Germans have already settled in

southern Brazil. They are most welcome in Brazil; they are good and

useful citizens there, as they are here; I hope that many more will come

to Brazil and every other South American country, and add their

vigorous industry and good citizenship to the upbuilding of their

adopted home.

With the increase of population in such a field, under free

institutions, with the fruits of labor and the rewards of enterprise

secure, the production of wealth and the increase of purchasing power

will afford a market for the commerce of the world worthy to rank even

with the markets of the Orient, as the goal of business enterprise. The

material resources of South America are in some important respects

complementary to our own; that continent is weakest where North America

is strongest as a field for manufactures; it has comparatively little

coal and iron. In many respects the people of the two continents are

complementary to each other; the South American is polite, refined,

cultivated, fond of literature and of expression and of the graces and

charms of life, while the North American is strenuous, intense,

utilitarian. Where we accumulate, they spend. While we have less of the

cheerful philosophy which finds sources of happiness in the existing

conditions of life, they have less of the inventive faculty which

strives continually to increase the productive power of man and lower

the cost of manufacture. The chief merits of the peoples of the two

continents are different; their chief defects are different. Mutual

intercourse and knowledge cannot fail greatly to benefit both. Each can

learn from the other; each can teach much to the other, and each can

contribute greatly to the development and prosperity of the other. A

large part of their products find no domestic competition here; a large

part of our products will find no domestic competition there. The

typical conditions exist for that kind of trade which is profitable,

honorable, and beneficial to both parties.

The relations between the United States and South America have been

chiefly political rather than commercial or personal. In the early days

of the South American struggle for independence, the eloquence of Henry

Clay awakened in the American people a generous sympathy for the

patriots of the south as for brethren struggling in the common cause of

liberty. The clear-eyed, judicious diplomacy of Richard Rush, the

American minister at the Court of St. James, effected a complete

understanding with Great Britain for concurrent action in opposition to

the designs of the Holy Alliance, already contemplating the partition of

the southern continent among the great powers of continental Europe. The

famous declaration of Monroe arrayed the organized and rapidly

increasing power of the United States as an obstacle to European

interference and made it forever plain that the cost of European

aggression would be greater than any advantage which could be won even

by successful aggression.

That great declaration was not the chance expression of the opinion or

the feeling of the moment; it crystallized the sentiment for human

liberty and human rights which has saved American idealism from the

demoralization of narrow selfishness, and has given to American

democracy its true world power in the virile potency of a great example.

It responded to the instinct of self-preservation in an intensely

practical people. It was the result of conference with Jefferson and

Madison and John Quincy Adams and John C. Calhoun and William Wirt--a

combination of political wisdom, experience, and skill not easily

surpassed. The particular circumstances which led to the declaration no

longer exist; no Holy Alliance now threatens to partition South America;

no European colonization of the west coast threatens to exclude us from

the Pacific. But those conditions were merely the occasion for the

declaration of a principle of action. Other occasions for the

application of the principle have arisen since; it needs no prophetic

vision to see that other occasions for its application may arise

hereafter. The principle declared by Monroe is as wise an expression of

sound political judgment today, as truthful a representation of the

sentiments and instincts of the American people today, as living in its

force as an effective rule of conduct whenever occasion shall arise, as

it was on December 2, 1823.

These great political services to South American independence, however,

did not and could not in the nature of things create any relation

between the people of South America and the people of the United States

except a relation of political sympathy.

Twenty-five years ago, Mr. Blaine, sanguine, resourceful, and gifted

with that imagination which enlarges the historian's understanding of

the past into the statesman's comprehension of the future, undertook to

inaugurate a new era of American relations which should supplement

political sympathy by personal acquaintance, by the intercourse of

expanding trade, and by mutual helpfulness. As secretary of state under

President Arthur, he invited the American nations to a conference to be

held on November 24, 1882, for the purpose of considering and discussing

the subject of preventing war between the nations of America. That

invitation, abandoned by Mr. Frelinghuysen, was renewed under Mr.

Cleveland, and on October 2, 1889, Mr. Blaine, again secretary of state

under President Harrison, had the singular good fortune to execute his

former design and to open the sessions of the first American conference

at Washington. In an address of wisdom and lofty spirit, which should

ever give honor to his memory, he described the assembly as--

... an honorable, peaceful conference of seventeen

independent American powers, in which all shall meet

together on terms of absolute equality; a conference in

which there can be no attempt to coerce a single delegate

against his own conception of the interests of his nation; a

conference which will permit no secret understanding on any

subject, but will frankly publish to the world all its

conclusions; a conference which will tolerate no spirit of

conquest, but will aim to cultivate an American sympathy as

broad as both continents; a conference which will form no

selfish alliance against the older nations from which we are

proud to claim inheritance--a conference, in fine, which

will seek nothing, propose nothing, endure nothing that is

not, in the general sense of all the delegates, timely,

wise, and peaceful.

The policy which Mr. Blaine inaugurated has been continued; the Congress

of the United States has approved it; subsequent presidents have

followed it. The first conference at Washington has been succeeded by a

second conference in Mexico, and now by a third conference in Rio de

Janeiro; and it is to be followed in years to come by further successive

assemblies in which the representatives of all American states shall

acquire better knowledge and more perfect understanding, and be drawn

together by the recognition of common interests and the kindly

consideration and discussion of measures for mutual benefit.

Nevertheless, Mr. Blaine was in advance of his time. In 1881 and 1889

the United States had not reached a point where it could turn its

energies away from its own internal development and direct them outward

towards the development of foreign enterprises and foreign trade, nor

had the South American countries reached the stage of stability in

government and security for property necessary to their industrial

development.

Now, however, the time has come; both North and South America have grown

up to Blaine's policy. The production, the trade, the capital, the

enterprise of the United States have before them the opportunity to

follow, and they are free to follow, the pathway marked out by the

far-sighted statesmanship of Blaine for the growth of America, North and

South, in the peaceful prosperity of a mighty commerce.

To utilize this opportunity certain practical things must be done. For

the most part these things must be done by a multitude of individual

efforts; they cannot be done by government. Government may help to

furnish facilities for the doing of them, but the facilities will be

useless unless used by individuals. This cannot be done by resolutions

of this or any other commercial body; resolutions are useless unless

they stir individual business men to action in their own business

affairs. The things needed have been fully and specifically set forth in

many reports of efficient consuls and of highly competent agents of the

Department of Commerce and Labor, and they have been described in

countless newspapers and magazine articles; but all these things are

worthless unless they are followed by individual action.

I will indicate some of the matters to which every producer and merchant

who desires South American trade should pay attention.

1. He should learn what the South Americans want and conform his product

to their wants. If they think they need heavy castings, he should give

them heavy castings and not expect them to buy light ones because he

thinks they are better. If they want coarse cottons, he should give them

coarse cottons and not expect them to buy fine cottons. It may not pay

today, but it will pay tomorrow. The tendency to standardize articles of

manufacture may reduce the cost and promote convenience, but if the

consumers on the River Plata demand a different standard from the

consumers on the Mississippi, you must have two standards or lose one

market.

2. Both for the purpose of learning what the South American people want

and of securing their attention to your goods, you must have agents who

speak the Spanish or Portuguese language. For this there are two

reasons: one is that people can seldom really get at each other's minds

through an interpreter, and the other is that nine times out of ten it

is only through knowing the Spanish or Portuguese language that a North

American comes to appreciate the admirable and attractive personal

qualities of the South American, and is thus able to establish that

kindly and agreeable personal relation which is so potent in leading to

business relations.

3. The American producer should arrange to conform his credit system to

that prevailing in the country where he wishes to sell goods. There is

no more money lost upon commercial credits in South America than there

is in North America; but business men there have their own ways of doing

business; they have to adapt the credits they receive to the credits

they give. It is often inconvenient and disagreeable, and it is

sometimes impossible, for them to conform to our ways, and the

requirement that they should do so is a serious obstacle to trade.

To understand credits it is, of course, necessary to know something

about the character, trustworthiness, and commercial standing of the

purchaser, and the American producer or merchant who would sell goods in

South America must have some means of knowledge upon this subject. This

leads naturally to the next observation I have to make.

4. The establishment of banks should be brought about. The Americans

already engaged in South American trade could well afford to subscribe

the capital and establish an American bank in each of the principal

cities of South America. This is a fact, first, because nothing but very

bad management could prevent such a bank from making money; capital is

much needed in those cities, and six, eight, and ten per cent can be

obtained for money upon just as safe security as can be had in Kansas

City, St. Louis, or New York. It is a fact also because the American

bank would furnish a source of information as to the standing of the

South American purchasers to whom credit may be extended, and because

American banks would relieve American business in South America from the

disadvantage which now exists of making all its financial transactions

through Europe instead of directly with the United States. It is

unfortunately true that among hundreds of thousands of possible

customers the United States now stands in a position of assumed

financial and business inferiority to the countries through whose

banking houses all its business must be done.

5. The American merchant should himself acquire, if he has not already

done so, and should impress upon all his agents that respect for the

South American to which he is justly entitled and which is the essential

requisite to respect from the South American. We are different in many

ways as to character and methods. In dealing with all foreign people, it

is important to avoid the narrow and uninstructed prejudice which

assumes that difference from ourselves denotes inferiority. There is

nothing that we resent so quickly as an assumption of superiority or

evidence of condescension in foreigners; there is nothing that the South

Americans resent so quickly. The South Americans are our superiors in

some respects; we are their superiors in other respects. We should show

to them what is best in us and see what is best in them. Every agent of

an American producer or merchant should be instructed that courtesy,

politeness, kindly consideration, are essential requisites for success

in the South American trade.

6. The investment of American capital in South America under the

direction of American experts should be promoted, not merely upon simple

investment grounds, but as a means of creating and enlarging trade. For

simple investment purposes the opportunities are innumerable. Good

business judgment and good business management will be necessary there,

of course, as they are necessary here; but, given these, I believe that

there is a vast number of enterprises awaiting capital in the more

advanced countries of South America, capable of yielding great profits,

and in which the property and the profits will be as safe as in the

United States or Canada. A good many such enterprises are already begun.

I have found a graduate of the Massachusetts Institute of Technology, a

graduate of the Columbia School of Mines, and a graduate of Colonel

Roosevelt's Rough Riders smelting copper close under the snow line of

the Andes; I have ridden in an American car upon an American electric

road, built by a New York engineer, in the heart of the coffee region of

Brazil; and I have seen the waters of that river along which Pizarro

established his line of communication in the conquest of Peru, harnessed

to American machinery to make light and power for the city of Lima.

Every such point is the nucleus of American trade--the source of orders

for American goods.

7. It is absolutely essential that the means of communication between

the two countries should be improved and increased.

This underlies all other considerations and it applies to the mail, the

passenger, and the freight services. Between all the principal South

American ports and England, Germany, France, Spain, Italy, lines of

swift and commodious steamers ply regularly. There are five subsidized

first-class mail and passenger lines between Buenos Ayres and Europe;

there is no such line between Buenos Ayres and the United States. Within

the past two years the German, the English, and the Italian lines have

been replacing their old steamers with new and swifter vessels of modern

construction, accommodation, and capacity.

In the year ending June 30, 1905, there entered the port of Rio de

Janeiro steamers and sailing vessels flying the flag of Austria-Hungary,

120; of Norway, 142; of Italy, 165; of Argentina, 264; of France, 349;

of Germany, 657; of Great Britain, 1785; of the United States,--no

steamers and seven sailing vessels, two of which were in distress!

An English firm runs a small steamer monthly between New York and Rio de

Janeiro; the Panama Railroad Company runs steamers between New York and

the Isthmus of Panama; the Brazilians are starting for themselves a line

between Rio and New York; there are two or three foreign concerns

running slow cargo boats, and there are some foreign tramp steamers.

That is the sum total of American communication with South America

beyond the Caribbean Sea. Not one American steamship runs to any South

American port beyond the Caribbean. During the past summer, I entered

the ports of Para, Pernambuco, Bahia, Rio de Janeiro, Santos,

Montevideo, Buenos Ayres, Bahia Blanca, Punta Arenas, Lota, Valparaiso,

Coquimbo, Tocopilla, Callao, and Cartagena--all of the great ports and a

large proportion of the secondary ports of the southern continent. I saw

only one ship, besides the cruiser that carried me, flying the American

flag.

The mails between South America and Europe are swift, regular, and

certain; between South America and the United States they are slow,

irregular, and uncertain. Six weeks is not an uncommon time for a letter

to take between Buenos Ayres or Valparaiso and New York. The merchant

who wishes to order American goods cannot know when his order will be

received nor when it will be filled. The freight charges between the

South American cities and American cities are generally and

substantially higher than between the same cities and Europe; at many

points the deliveries of freight are uncertain and its condition upon

arrival doubtful. The passenger accommodations are such as to make a

journey to the United States a trial to be endured and a journey to

Europe a pleasure to be enjoyed. The best way to travel between the

United States and both the southwest coast and the east coast of South

America is to go by way of Europe, crossing the Atlantic twice. It is

impossible that trade should prosper or intercourse increase or mutual

knowledge grow to any great degree under such circumstances. The

communication is worse now than it was twenty-five years ago. So long as

it is left in the hands of our foreign competitors in business, we

cannot reasonably look for any improvement. It is only reasonable to

expect that European steamship lines shall be so managed as to promote

European trade in South America, rather than to promote the trade of the

United States in South America.

This woeful deficiency in the means to carry on and enlarge our South

American trade is but a part of the general decline and feebleness of

the American merchant marine, which has reduced us from carrying over

ninety per cent of our export trade in our own ships to the carriage of

nine per cent of that trade in our own ships and dependence upon foreign

shipowners for the carriage of ninety-one per cent. The true remedy and

the only remedy is the establishment of American lines of steamships

between the United States and the great ports of South America, adequate

to render fully as good service as is now afforded by the European lines

between those ports and Europe. The substantial underlying fact was well

stated in the resolution of this Trans-Mississippi Congress three years

ago:

That every ship is a missionary of trade; that steamship

lines work for their own countries just as railroad lines

work for their terminal points, and that it is as absurd for

the United States to depend upon foreign ships to distribute

its products as it would be for a department store to depend

upon the wagons of a competing house to deliver its goods.

How can this defect be remedied? The answer to this question must be

found by ascertaining the cause of the decline of our merchant marine.

Why is it that Americans have substantially retired from the foreign

transport service? We are a nation of maritime traditions and facility;

we are a nation of constructive capacity, competent to build ships; we

are eminent, if not preeminent, in the construction of machinery; we

have abundant capital seeking investment; we have courage and enterprise

shrinking from no competition in any field which we choose to enter.

Why, then, have we retired from this field in which we were once

conspicuously successful?

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