I.

A study of the effects of the war upon our relations with the other

republics of this hemisphere involves political, commercial, financial

and strategic elements of far-reaching scope and much complexity. The

situation presents an opportunity. It offers a lesson even more vital

than the opportunity. The political considerations are most relevant to

the lesson; and the final text of the lesson will be the result of the

war. The economic opportunity is already upon us, definite and clear. It

will not wait. It must be grasped without delay and may therefore be

first discussed.

There is something repellent in counting our advantages under the shadow

of so great a tragedy but we must try to be as practical as those who

are fond of accusing us of materialism. Does any one think that the

steam-roller of admirably organized and Government-fostered German

competition would pause if we lay in the road; that if we received a

check, Anglo-Saxon cousinship and fair play would always mitigate

British competition; or that then not a single European merchant in

South America would ever again use scorn and detraction against our

goods, or encourage, through influence with the press, prejudice due to

"Yankee peril" nonsense? In short, is it likely that all our

competitors would suddenly love us just because we were in trouble? No,

things are not as they should be and meanwhile must be dealt with as

they are.

There used to be apparently very little hope of our shaking the tree and

gathering the golden fruit of foreign enterprise unless forced to it by

the collapse, through dire hard times, of the wonderful home market

which has made spoiled children of our manufacturers. Now comes this

war. It forces upon us a wonderful, a unique opportunity to gain and

hold our proper place in the finance, trade, and enterprise of Latin

America. The richness of the field is often exaggerated, but its

cultivation is certainly worth the effort of men of foresight.

What are we going to do about it? This is the question; for if American

business men do not do their part the ultimate effect of the war upon

our economic interests in this part of the world will be unimportant. We

must not be like the young gold miners who were looking exclusively for

large nuggets with handles. We must go at it seriously and

scientifically and solidly, not superficially, casually, and

opportunistically. We must begin with the earnest intention of

continuing our efforts for all time.

An enthusiastic commercial spasm will be worth nothing. There have got

to be real efforts, real hard work, the expenditure of money for future

and not merely immediate profits, a cheerful readiness to discard old

and cherished methods, a new adaptability, a new painstaking attention

to details. There has got to be serious study of foreign countries and

keen interest in our relations to them. Without all this, mailing

catalogues, (usually in English,) banquets and speeches and

organizations will take us nowhere.

American business men are bestirring themselves. They know that we need

ships to carry our goods advantageously, and banks for the favorable

financing of our trade. They should be able to compel our Government's

support where needful, as in a ship subsidy or a limited guarantee of

reasonable profit to American investment in ships. In connection with

our efforts at Caribbean commerce, as another instance, they should be

able to get a flexible sliding scale tariff provision passed by

Congress, so that, in dealing with the countries whose coffee or other

special products we buy, we could induce them to give us for our exports

reciprocal advantages over our competitors. Indeed, a kind of Caribbean

tariff union might well be feasible and desirable.

So long ago as last August the British Government sent all over the

world for samples and specifications of German goods which their

manufacturers might contrive to displace. We should take corresponding

action in regard to the goods of our competitors. Our manufacturers

should be reconciled to sending to find out what each market wants

instead of asking a population to take or leave what we make. Our

commercial campaign should include the effort to replace goods from one

belligerent country formerly handled by local merchants from another

belligerent country, such as British goods previously sold through the

German houses which so abound in these countries.

Good men from small countries without political significance in

world-politics already make their influence felt as employes of foreign

Governments and as merchants in foreign countries. The war may set free

many more men and send them about the world to work for their own

interests, for the country they most believe in, and perhaps ultimately

for an adopted country. International commerce must have its courtiers,

and the good will of all such men should also be reckoned with. They

spread friendship or prejudice against us. Many of them are importers

and will push our goods or some one else's according to the manner in

which we deal with them.

American manufacturers are doubtless weary of being told that they pack

badly, that they are niggardly about credits, that they do not send

enough or sufficiently qualified representatives, that they are careless

of details, and so on. Still, before mentioning some further particular

steps that should be taken, it is necessary to emphasize the fact that

these same old faults are, and until corrected must remain, the chief

detriments to our foreign trade.

In some of the republics there is a real disposition to deal with us; in

others there is a preference for Europe. Now, as to many goods, they

must deal with us or go without, although I am informed that a German

firm, for example, has got word to its clients in these countries that

it is prepared to fill orders via Copenhagen. If we think that our

competitors have gone entirely or permanently out of business we shall

be ridiculously and sadly disappointed. We shall be on trial, and if our

exporters make good they will find a conservative disposition to

continue to buy from us.

In the effort it is important to remember that there is much to live

down in criticism of methods of the past. One Latin-American gentleman,

an enthusiast for American commerce, exclaimed to me in despair: "Son

hombres capazes de poner una hacha Collins con vidrios para ventanas,"

which means: "they (the American exporters) are capable of packing a

Collins hatchet with window glass." Others told me how leading firms

always stamped their letters for domestic and not foreign postage. The

office boy simply would not learn geography. Nobody minded paying the

deficit, but through local red tape this seeming trifle sometimes caused

two or even three weeks' delay in the delivery of important letters.

Certain of our strongest firms have been calmly ignoring shipping

directions. What did they care if the packages had to cross the Andes on

mule back, and if mules could only carry packages of a certain size and

weight? What did they care if the duty remission for materials on some

Government contract, or the customs classification of a shipment,

depended on adherence to specific directions? I could multiply examples

of the most amazing casualness and careless disregard, of bad packing,

of ungenerous credit, which have enraged the importer.

A European merchant, many years established in a South American city,

and knowing the community, has been selling pianos in this way: The

manufacturer would quote him a price and deliver the piano, giving him

long credit at an ordinary rate of interest. The merchant would finally

sell the piano on the installment plan, receiving interest at a higher

rate on the deferred payments, the merchant trusting the buyer, the

manufacturer trusting the merchant, both thus making good profits, and

the purchaser being accommodated. This man found the American

manufacturer entirely unwilling to deal in this way.

European houses on the spot, whether independent or financed by large

home houses, give credits for as long, sometimes, as a year. They would

not continue to do so if they lost by doing it. Often this fits the

customs of the local domestic trade. In one country the local retailer

is expected to be paid within eighteen months. Naturally, our exporters'

demand for "cash down on receipt of documents," even when the customer

is well vouched for, does not appeal to him.

He prefers to get long credit from a European house, and pay interest

for it, rather than to borrow from his bank at high interest or sink his

own capital to pay for American goods, long before he gets them, their

price plus the profit of a commission house. Indeed, he is generally

dissatisfied with the methods of American export trade as now conducted,

which is almost exclusively through commission houses. These, it seems,

might become more efficient through organization and more aggressive and

scientific methods.

On the other hand, the export trade of certain of the big combinations

is beginning to be pushed with commendable zeal and efficiency. Trade at

large, to reach its greatest volume, must include the pushing of smaller

lines of goods. These smaller lines, in the aggregate, would reach

considerable sums, and it does not appear that there have hitherto

existed efficient agencies for their marketing. To hold Latin-American

trade we must equal our competitors in liberality of credits, in

representation on the spot, and in other facilities.

There is no doubt that more American merchants resident in the trade

centres would give valuable impetus to our commerce. Even our commission

houses operating on the spot are so few that in handling many lines

there is the greatest danger of their sacrificing the building up of a

steady trade to the opportunities of unduly heavy profits now and then,

and so damaging our general commercial interests. Then we must send many

commercial travelers.

Just here, however, it cannot be too strongly emphasized that Americans

sent to these countries to do business must above all be men of

agreeable manners. In these countries many quite unworthy people have

these: so a good man who lacks them is likely to be badly misjudged.

They should have sympathetic personality and sufficient education,

besides being men of sobriety and good character, and should be able to

speak the language of the country.

All this will be expensive, but non-competing firms might join in

sending men, or competing firms might, it is hoped, be guaranteed

against the terrors of the Sherman law in order to join in sending a

corps of representatives upon some basis of division of the field or

the profits. Combination is even more necessary abroad to put forth the

nation's strength in world competition than it is for efficiency at

home. These men would be students and salesmen, and perhaps future

merchants who would settle in these countries and emulate the patriotic

groups of resident foreigners who in so many places help to form an

atmosphere favorable to their countries' interests.

They would work to replace with our goods those now shut off by the war,

but also to introduce dozens of lines of American products which are now

comparatively hard to find in these markets. A number of strong firms

might join to establish commercial houses or selling agencies in trade

centres of certain groups of countries. Commission houses might do the

same if they carried samples and instructed their clients in packing,

credits, &c., but in each case there should be American houses on the

spot which would carry general lines and supply to the eye that visible

evidence of the goods themselves which is such a valuable form of

advertisement.

In the establishment of American houses in these countries, as in many

other respects, much may be learned from the Germans. They bring out

carefully selected young men. These, if efficient, have sure promotion.

The partners retire before old age to make room for those who work up.

The inefficient are dropped. It is a little like the principle of a good

foreign service.

I think the most minute study should be given, first, to the nearer

countries, say those north of the Equator, including the republics of

the Caribbean. Each country must be separately studied. Primarily, there

will be found a cry, sometimes desperate, for capital. Public works,

concessionary and otherwise, have stopped for lack of funds from Europe.

New developments in railroad building, mining, harbor works,

plantations, are arrested. Where European credits have been customarily

used to handle crops, there is distress, and no less so in cases in

which such credit has previously been given by ostensibly American

houses operating really with European capital.

American capital may come to the rescue by advances upon good security

through local banks. It can establish banks or buy controlling interests

in existing banks, many of which pay their stockholders 15 per cent. or

more. It can relieve the stagnation and make profitable investment by an

active campaign for public and private contracts and for sound and fair

concessions, not visionary or get-rich-too-quick schemes.

Supposably, the repairing of the destruction brought by the war will

make European capital scarce for some years, but an effort will

doubtless be made to retain for it its former preponderance in these

countries; and so it is important that, whatever the war's effects upon

our own money markets, use should be made of such an opportunity as does

not come more than once.

To be sure, the scarcity of money in the United States makes this

difficult, but the same worldwide money scarcity will secure an

especially high rate of interest in Latin America, where even in normal

times money can often be placed on excellent security in some of the

countries, and at a rate very high indeed compared to that prevailing

now in the United States. For safe investments with such a margin of

profit, it is to be hoped that money, even if dear at home, will be

forthcoming.

Undoubtedly the purchasing power of these republics has been hard hit by

the cutting off of credits and markets by the war, as their Governments

have been hard hit through the falling off of revenues from import

duties. Some of the Governments will require foreign loans. Capital, I

repeat--and I mean really American capital--is the urgent need. We are

not asked to make them a present of capital to buy our goods with, but

if we do not help finance them and buy their products they will have

nothing with which to buy our goods.

The situation invites us to give capital and credit to take the place of

the European supply which has failed. One need not fear that the returns

will be uninviting, for Europe would hardly have been supplying credit

and capital to Latin America as a mere matter of amiability. Thus our

capital must regenerate Latin-American prosperity, while our bankers,

merchants, and manufacturers are engaged in making solid, permanent

arrangements, not opportunistic ones, to take possession of a great

share in the present and still more in the growing future development

and commerce of these countries. Capital, then, and credit are the first

requisites.

The war has had the effect of making the Latin-American countries

realize for once the economic importance to them of the United States.

The products of some, like the tin of Bolivia and the nitrates of Chile,

have been going almost entirely to Europe. Several republics suffer the

more acutely in proportion to their previous failure to cultivate

financial and commercial relations with the United States.

They now feel this and are compelled to a mood receptive to our

advances. More, they are forced to seek new markets for their goods just

as they are forced to buy some of ours. In this way there should come

about new exports to the United States, and there should spring up there

the corresponding new industries and habits of consumption, to the

ultimate benefit of all the countries concerned.

Meanwhile, the United States is the only present economic hope of a

number of the republics. It is to be hoped that our capitalists and

business men will realize the responsibilities as well as the

opportunities of profit in the rôle they are asked to play, and that

their response to their new opportunities will be one of courage,

thoroughness and intelligence, and one also of quiet patriotism.