COMMERCE
Principal Exports of the Isthmus: Coffee, Bananas, and Precious
Metals--Other Products--Imports--Condition of American Trade--Effects
of the European War.
The foreign commerce of Central America is based upon the exchange of
coffee, bananas, precious metals, and a few other products of minor
importance for manufactured articles from the United States and Europe.
The most important export, from the Central American point of view,
is coffee; for the banana farms, which belong to foreign corporations
and are cultivated by foreign laborers, are situated in districts so
far away from the centers of population that they play a small part in
the economic life of the country, and the gold and silver mines are
also with few exceptions the property of European and North American
capitalists. The mining companies give employment to many natives at
wages somewhat greater than those paid in agricultural enterprises,
but otherwise they do little to add to the general prosperity of the
community. The owners of the coffee plantations, the majority of whom
are natives, reside in Central America and spend their income there,
and all employ exclusively native labor. Except in Honduras, where it
is cultivated only for local consumption, coffee is the chief export of
the mountain region on the West Coast where the great majority of the
inhabitants of the Isthmus live.
Central American coffee is of an excellent quality, and brings a high
price in the European markets, to which the greater part of it has
always been sent. The product of Costa Rica is a favorite in England,
while “Coban” and other Guatemalan varieties are well known in Germany
and on the continent. The product of the Isthmus has not been so
popular in the United States, where it has been unable to compete with
the lower-priced, but inferior, coffee of Brazil or with certain other
superior grades which have secured a better foothold in our markets.
Table V indicates the disposition of the crop of each country of the
Isthmus in normal times, and to some extent the change which has been
brought about in export conditions by the European war.
TABLE I
EXPORTS OF CENTRAL AMERICA, 1913.
(Value in U. S. Gold.)
Guatemala Salvador Honduras Nicaragua Costa Rica
Coffee 12,254,724 7,495,214 116,302 5,004,449 3,605,029
Bananas 825,670 ...... 1,714,398 429,802 5,194,428
Precious Metals ...... 1,495,805 886,591 1,063,077 1,021,473
Hides 455,476 95,870 159,820 326,599 132,883
Timber 247,759 ...... 12,617 321,869 141,361
Rubber 100,323 18,092 14,289 278,763 44,482
Sugar 349,052 72,852 ...... 31,805 ......
Chicle 142,108 ...... ...... ...... ......
Balsam of Peru ...... 89,476 ...... ...... ......
Cocoanuts ...... ...... 219,968 ...... ......
Indigo ...... 52,984 ...... ...... ......
Cacao ...... ...... ...... 39,828 105,034
Live Cattle ...... ...... 251,361 288,009[73] ......
The ripe berry is prepared for the market at a cleaning and drying
plant called a _beneficio_. The larger growers, who produce the greater
part of the total crop, ordinarily have their own _beneficios_ on
their plantations. Those who have not been able to install the rather
expensive machinery which these plants require either ship their coffee
partly cleaned, in the shell, or else have it prepared for the market
on the plantation of a neighbor or at establishments which exist
for the purpose in such cities as Guatemala and Managua. The small
landholders, many of whom have a few trees from which they secure a
money income to supplement their food crops, ordinarily sell their
coffee in the berry to the owners of the _beneficios_. The exportation
is frequently, perhaps usually, undertaken by the planter himself, who
ships his crop directly to an importer in some European city or on
consignment to an agent in Hamburg or London, to be sold in the open
market. This seems to be the general though not the universal practice
in Costa Rica, Salvador, and Nicaragua. In Guatemala, on the other
hand, there are several German and North American houses which buy the
coffee from the grower and export it on their own account. Certain
companies in the United States, with agencies in Central America, have
done a large business of this kind, especially since the beginning of
the European war.
The majority of the coffee plantations of the Isthmus belong to native
Central Americans. This is true even in Guatemala and Nicaragua,
where, as has been said in preceding chapters, nearly all of the
largest and best equipped _fincas_ are the property of Germans or of
other aliens.[74] In Salvador and Costa Rica there are few foreign
owners. Even in these countries, however, the tendency which has been
so strong in Guatemala, for the more valuable plantations to pass
gradually into the hands of investors from abroad, has been at work in
recent years. Foreign influence, moreover, is by no means confined to
the ownership of the plantations themselves, for the native planters
frequently have financial connections with European banking houses
in the Central American capitals or in Hamburg or London which give
the latter a large measure of control over the sale of their coffee
and even over their methods of production. A very large proportion of
the plantations is heavily mortgaged to these concerns, and even the
annual crop is often hypothecated or sold to the banker several months
before it is harvested, and is handled by him when ready for market.
The terms of these arrangements are usually anything but favorable to
the planter. In Guatemala, for example, the banker ordinarily not only
receives interest on the sums advanced at the prevailing rate of ten or
twelve per cent, but at the same time takes an option upon the entire
crop, under which he can purchase it at twenty-five cents per bag less
than the market price at the time of the harvest. This option alone is
equivalent to the payment by the planter of about three per cent of
his entire gross receipts, in addition to the interest. Under these
conditions, especially in view of the improvidence and inefficiency
of many of the native landowners, it is not strange that the most
desirable plantations are passing one by one into the hands of Germans
and Englishmen, who are able either to finance themselves or to secure
money for moving their crops upon better terms.
TABLE II
THE WORLD’S EXPORTS OF BANANAS, 1911.
(From U. S. Daily Consular and Trade Reports, Dec. 26, 1912.)
Central America--
Costa Rica 9,309,586 bunches.
Honduras 6,500,000 ”
Nicaragua 2,250,000 ”
Guatemala 1,755,704 ”
----------
Total 19,815,290 bunches.
Other Countries--
Jamaica 16,497,385 bunches.
Colombia 4,901,894 ”
Panama 4,261,500 ”
Canary Islands 2,648,378 ”
Cuba 2,500,000 ”
Mexico 750,000 ”
British Honduras 525,000 ”
Other Countries 1,037,516 ”
----------
Total 33,121,673 bunches.
----------
Grand Total 52,936,963 bunches.
Total imports into United States, 1911, 44,699,222 bunches. (Commerce
and Navigation of the U. S., 1911.)
Second only to coffee in the value of the total amount exported, and
far more important so far as the United States is concerned, are
bananas. In 1913, nearly twenty-two million bunches, or between two and
three billions of bananas, were exported from Costa Rica, Honduras,
Guatemala, and Nicaragua. Nearly all of this immense amount, which was
about forty per cent of the total commercial production of the world,
went to the United States. Less than fifty years ago, Mr. Minor C.
Keith, who was building a railway from Puerto Limon to the interior of
Costa Rica, began the cultivation of bananas along the line in order to
provide freight for the road during the years which must elapse before
it could reach the inhabited part of the Republic. Until this time, the
hot and unhealthful forests along the East Coast of Central America had
been an uninhabited and undeveloped jungle, but they proved so well
adapted to the growing of bananas that the fruit farms soon became
more valuable than the railway. Meanwhile other planters had engaged
in the same business in Jamaica and elsewhere in the West Indies,
and the banana, which had hitherto been a curiosity, was coming into
general use in the United States. The more important producers around
the Caribbean Sea joined in forming the United Fruit Company, which is
now by far the most important business concern in tropical America.
Its immense plantations in Central America, Jamaica, Cuba, Colombia,
and Panama are traversed by hundreds of miles of railway, and their
products are carried to the United States and Europe by a great fleet
of its own steamers, which are the principal, and since the beginning
of the European war almost the only, carriers of freight and passengers
between Central American ports and the eastern part of the United
States. Besides the numerous lines built expressly for carrying bananas
from the farms to the wharves, the Fruit Company, or concerns allied to
it, control the entire railway system of Guatemala, a large part of
that of Salvador, and the most important road, from San José to Puerto
Limon, in Costa Rica. The few independent growers along its lines are
completely at its mercy, for they have no alternative but to sell their
fruit to it under the conditions which it dictates. In Honduras and
Nicaragua, there are a number of ostensibly competing companies, with
their own railway lines and ships, but many of these are said to be
actually under the control of the greater corporation. The latter has
on more than one occasion shown itself ruthless and unscrupulous in
dealing with real competitors, over whom it has every advantage through
its control of the facilities for shipping fruit.
In the last few years, the bananas have been attacked by a disease
which apparently shows itself in nearly all plantations after a certain
period of cultivation. Its appearance has made it necessary to abandon
large tracts of developed land and many miles of railway, especially
in some portions of Costa Rica. No means of checking it has yet been
discovered, and it has been found easier to plant new farms than to
fight it where it has obtained a foothold. At present the disease does
not seem likely to decrease materially the total production, for there
are still immense tracts of virgin land suitable for banana growing
around the shores of the Caribbean Sea, but it is a very grave menace
to the prosperous communities which have grown up on the coast as a
result of the fruit trade. Unless it is overcome, or unless some other
product, such as cacao, can be grown on the abandoned farms, there
seems to be serious danger that many sections of the East Coast will
sink back into jungle.
Among Americans who have been on the Coast and have but a slight
acquaintance with the interior, there is a tendency greatly to
exaggerate the influence of the United Fruit Company in Central
America. As a matter of fact, that corporation plays a smaller part
than might be expected in the economic and political life of the five
republics. On the Coast, especially in Costa Rica, it is all-powerful,
for it absolutely controls the industry and the export and import trade
of the banana country, and is the employer of the greater part of
the population; but in the interior, where the great majority of the
people live, its influence is confined to its control of the railway
lines. These are not owned and operated directly by the Fruit Company,
but by corporations closely connected with it. There are also many
other enterprises, including street railways, mines, and electrical
plants, which have been financed by some of the capitalists who are
prominent in the Fruit Company, so that the total Central American
investments of what are known as the “Keith interests” are very great.
These investors, however, apparently interfere little in politics.
Their relations with the governments, sometimes cordial, sometimes
the opposite, are not so close that they can be said to exercise
any important influence on the internal affairs of any of the five
republics, and the native officials are apt to be jealous of their
power and to regard with suspicion any concession which seems likely to
increase their influence.
Notwithstanding the immense development of the banana trade, the full
possibilities of this fruit in providing cheap fruit for the people of
the temperate zones are still far from being realized. Exportation from
Central America and other producing countries is at present limited
to the amount necessary to meet the demand for the fresh fruit in the
United States, because the European market has as yet been little
exploited, and few facilities have been provided for exporting bananas
from the Caribbean to transatlantic ports. A considerable proportion of
the product of Costa Rica was sent to England in the years immediately
preceding the war, but the total was insignificant in comparison
with the consumption in the United States.[75] Millions of bunches of
fruit now go to waste every year, for the amount cut each week on the
plantations is arbitrarily limited with a view to the state of the
market and the facilities for shipping, and thousands of bunches are
rejected at the train or at the steamer as being overripe or otherwise
defective. It ought to be practicable to convert this waste product
into dried bananas or banana flour, both of which are now commercially
possible, but few attempts have so far been made to do so. The two
or three factories which have been established in Central American
ports for this purpose have had little success, apparently from poor
management or lack of proper equipment.
The precious metals, which rank third in the list of exports, are
found in all parts of Central America, but as yet they have been
exploited on a comparatively small scale. There are a few gold and
silver mines, operated by foreign capital, in each of the republics
except Guatemala, but the total exportations of the Isthmus, according
to customs reports, amounted to less than four and one half millions
of dollars in 1913.[76] The investment of foreign capital in mines has
been discouraged by the disorder which has prevailed in some of the
five republics, and the lack of adequate transportation facilities
has been an obstacle to the introduction of heavy machinery and to
the exportation of the product. These difficulties, which have held
back the production of gold and silver, have of course made impossible
the exploitation of the other mineral resources of the Isthmus,
although these are known to be great. With the establishment of
internal stability and the building of good roads to the metalliferous
districts, however, mining should easily become a much more important
industry than it is at present.
In comparison with coffee, bananas, and the precious metals, the other
exports of Central America are of little importance. The herds of
cattle, which are one of the principal forms of wealth in Honduras
and Nicaragua, provide some horns and hides for shipment to foreign
countries, but the quantity has hitherto been very small. The live
animals are the chief articles of commerce between Honduras and
Nicaragua on the one hand and their more densely populated neighbors
on the other, but they have never been exported to any extent to other
countries. Mahogany, Spanish cedar, and other forest products, such as
rubber and chicle, which is used in making chewing gum, are exported,
chiefly by foreigners, from the low country along the coasts. Sugar
in various forms and cacao are grown in large quantities, but almost
entirely for local consumption. Besides these products, typical of any
tropical country, there are others which have importance in certain
localities as articles of foreign commerce. Thus, some millions of
cocoanuts are shipped from the North Coast of Honduras, and indigo and
balsam of Peru from Salvador. None of these minor exports have received
very much attention, because the interest of the native community
has been centered in the production of coffee and of the staple food
crops, and foreign capital has been invested chiefly in mines, banana
plantations, and railways. With the comparatively good transportation
facilities that now exist, it would seem that there should be a great
opportunity for the cultivation of such products as cacao, vanilla, and
rubber, or for the shipment to the United States, on the fast banana
steamers, of some of the countless delicious tropical fruits which have
hitherto been almost unknown in our markets. Countries of such rich
and varied agricultural possibilities, with such easy access to the
Gulf ports of the United States, must eventually acquire an importance
far greater than that which they now have in supplying our markets with
many kinds of food which we cannot ourselves produce.
TABLE III
SHARE OF THE UNITED STATES, GREAT BRITAIN, AND GERMANY IN THE COMMERCE
OF CENTRAL AMERICA.
EXPORTS.
United States Great Britain Germany Total
Guatemala, 1913 3,923,354 1,857,105 7,653,557 14,449,926
1915 6,881,410 1,322,271 50,237 11,566,586
Salvador, 1913 2,676,637 668,823 1,611,085 9,411,112
1915 3,096,277 341,920 9,945 8,812,387
Honduras, 1913 2,974,000 18,000 164,000 3,421,000
1915 2,987,000 1,000 690 3,858,000
Nicaragua, 1913 2,722,385 998,564 1,887,698 7,712,047
1915 3,079,810 438,500 ...... 4,567,201
Costa Rica, 1913 5,204,429 4,319,085 504,506 10,324,149
1915 4,864,803 4,438,233 13,225 9,971,582
Total for Central ---------- --------- ---------- ----------
America, 1913 17,500,805 7,861,577 11,820,866 45,318,234
1915 20,909,300 6,541,924 74,097 38,775,756
(Compiled from official reports of the Central American governments.
The values are given as in American gold, calculated at the prevailing
rate of exchange for the year in question.)
Even before the beginning of the European war, the United States
bought the greater part of Central America’s exports. Nearly all of
the bananas went to American ports, as did by far the greater part of
the gold and silver from the mines. With the coffee, the situation
was different, but the partial closing of the European markets forced
the planters to seek a market for this in the United States. This was
especially true in Guatemala, where American buyers were almost the
only ones in the field during 1915 and 1916. In the countries which
had been less dependent on the German market, the change was not so
marked, but all of them nevertheless shipped more coffee to the United
States in those years than ever before. Costa Rica, however, retained
her privileged position in the London market, at least during 1915,
and Salvador found valuable new customers in the Scandinavian countries
and Holland. The necessity for finding new purchasers has naturally
involved a considerable loss for the Central American planters. Their
coffee has on the whole met with a favorable reception in the United
States, but the prices which they have received have not been so high
as those to which they were accustomed in the markets in which they
had long established connections, and they have encountered no little
difficulty in making shipments because of the withdrawal of many of the
steamers which formerly called at the ports of the Isthmus.
TABLE IV
IMPORTS OF COFFEE INTO THE UNITED STATES, 1913 and 1915.
(From Commerce and Navigation of the United States, 1915, p. 75.)
1913 1915
Guatemala 18,544,228 lbs. 44,605,039 lbs.
Salvador 8,756,267 ” 15,823,350 ”
Nicaragua 2,915,239 ” 6,430,600 ”
Honduras 239,114 ” 665,912 ”
Costa Rica 1,474,397 ” 6,770,964 ”
TABLE V
COFFEE EXPORTS OF CENTRAL AMERICA, 1913 and 1915.
(Figures in quintals of 100 lbs. Spanish or 46 kg. From Central
American government publications.)
Guatemala Salvador Nicaragua Costa Rica
1913 1915 1913 1915 1913 1915 1913 1915
U. S. 211,886 386,080 107,796 142,337 36,753 62,439 16,032 38,969
England 106,666 .....[77] 34,151 29,127 32,854 40,816 231,382 204,711
Germany 432,329 .....[77] 121,201 994 75,634 ...... 25,451 1,304
Austria-H. 42,054 .....[77] 35,574 381 ...... ...... ...... ......
France ...... .....[77] 159,559 90,502 103,012 57,379 ...... ......
Italy ...... ...... 95,389 76,147 ...... 30,095 ...... ......
Holland ...... ...... ...... 92,763 ...... ...... ...... ......
Scandinavian
countries ...... ...... ...... 218,619 ...... ...... ...... ......
Total ------- ------- ------- ------- ------- ------- ------- -------
exports 875,337 775,622 625,942 663,216 243,324 198,533 283,023 265,355
The imports of Central America are those of all tropical countries
which have no manufacturing industries of their own. Machinery and
tools for agricultural purposes; textiles; flour, lard, and other food
products which are produced in insufficient quantities in the Isthmus;
and in general, manufactured articles of all kinds, must be purchased
abroad. The greater part of these are for the use of the upper classes,
but even the ordinary laborers, whose standard of living in many places
is otherwise little better than it was in the days when the country had
no foreign commerce, use some foreign goods, such as cheap textiles and
machetes.
In the import as well as the export trade, the United States easily
occupies the leading place, supplying the greater part of the
foodstuffs, hardware, and machinery, and a very considerable part of
the textiles. Our share in the total, even before the war, was well
over fifty per cent, with Great Britain and Germany respectively second
and third. Tables VI, VII, and VIII will give an approximate idea of
the nature and origin of the imports of the Isthmus in normal times.
The predominance of the United States was due primarily to proximity
and superior steamer connections. The Caribbean ports of the Isthmus,
which are less than fifteen hundred miles from our Gulf ports, were
connected with those ports by regular lines of swift steamers, whereas
they had no adequate means of communication with Europe. The Pacific
ports, on the other hand, although they were visited regularly by the
small steamers of the German Cosmos Line, relied chiefly upon the
service of the Pacific Mail between San Francisco and Panama.
This gave American trade an advantage which would have been even
greater than it was if transatlantic manufacturers had not been favored
by several factors which to some extent offset their geographical
handicap. Freight rates to Europe, however, were not proportionately
greater than rates to the United States, even in cases where the goods
must be transshipped at a North American port. Furthermore, European
merchants controlled the greater part of the import and wholesale
trade in each of the five republics, and naturally bought articles
from export houses in their own country, whenever they could, not only
for sentimental reasons, but because they received better terms and
longer credits. Even at the present time, when the war has caused a
great reduction in the exports of all of the belligerent countries,
the people of the Isthmus still continue to buy certain classes of
goods from French or English manufacturers which might just as well
be imported from the United States if American manufacturers made an
effort to secure the trade.
TABLE VI
SHARE OF THE UNITED STATES, GREAT BRITAIN, AND GERMANY IN THE COMMERCE
OF CENTRAL AMERICA.
IMPORTS.
(Compiled from Central American government publications; values in
American gold.)
United States Great Britain Germany Total
Guatemala, 1913 5,053,060 1,650,387 2,043,329 10,062,327
1915 3,751,761 577,206 146,053 5,072,476
Salvador, 1913 2,491,145 1,603,846 713,855 6,173,545
1915 2,478,322 1,054,838 41,136 4,182,922
Nicaragua, 1913 3,244,008 1,150,611 619,212 5,770,006
1915 2,592,799 302,294 36,960 3,159,219
Honduras, 1913-14 5,262,000 460,000 522,000 6,625,000
1914-15 5,177,000 303,000 96,000 5,875,000
Costa Rica, 1913 4,468,946 1,289,181 1,341,333 8,867,280
1915 3,031,997 548,810 42,979 4,478,782
Total for Central ---------- --------- --------- ----------
America, 1913 20,519,159 6,154,025 5,239,729 37,498,158
1915 17,031,879 2,786,148 363,128 22,768,399
TABLE VII
PRINCIPAL IMPORTS OF GUATEMALA, 1913 and 1915.
(From U. S. Commerce Reports and Guatemalan official statistics; values
in American gold.)
1913. 1915.
Cotton goods, total 1,734,832 758,570
United States 503,920
Great Britain 778,278
Germany 337,181
Linen, hemp, and jute manufactures (in large part
coffee sacks). Total 222,320 252,481
United States 20,788
Great Britain 80,954
Germany 111,141
Woolen manufactures, total 253,107 52,308
United States 30,938
Great Britain 64,635
Germany 111,866
Silk manufactures, total 263,448 68,525
(Mostly from Japan, China, and France.)
Manufactures of iron and steel, total 685,548 121,198
United States 384,094
Great Britain 97,434
Germany 181,538
Glass, crockery, earthenware, etc., total 106,825 27,859
United States 24,783
Germany 58,944
Leather goods, total 156,688 94,661
United States 110,318
Germany 30,244
Foodstuffs, total 566,856 538,236
United States 260,854
Great Britain 54,859
Germany 86,923
Stationery, paper, etc., total 179,798 147,243
United States 87,420
Germany 60,491
Drugs and medicines, total 268,523 108,666
United States 99,359
Germany 62,375
Wheat flour, from United States 394,931 506,510
Agricultural and industrial machinery, total 350,366 127,433
United States 175,683
Great Britain 86,456
Germany 78,711
Lumber, from United States 179,880 78,667
Railway material, total 426,826 121,843
United States 424,235
Petroleum, from United States 184,936 110,925
Wines, liquors, etc., total 347,752 125,583
United States 73,752
Germany 73,415
Other articles, total 1,636,678 732,449
United States 1,079,007
Germany 406,214
Great Britain 50,298
TABLE VIII
PRINCIPAL IMPORTS OF COSTA RICA.
(From Costa Rican official statistics, quoted in U. S. Commerce
Reports, Dec. 9, 1916. Values in American gold.)
1913. 1915.
Live cattle, from Nicaragua 323,067 95,964
Cotton goods, total 828,948 466,699
United States 243,802 266,333
Great Britain 355,042 129,848
Germany 124,699 4,491
Coal, total 261,975 106,953
United States 258,329 92,039
Drugs, total 150,142 115,903
United States 76,173 85,194
Germany 29,690 4,065
Electrical material, total 150,339 95,176
United States 121,416 86,773
Flour, total 258,407 224,480
United States 257,457 209,662
Lard, total 200,362 144,181
United States 194,968 142,270
Railway material, total 296,772 62,387
United States 272,242 59,725
Rice, total 143,391 108,649
United States 31,621 93,283
Germany 82,088
Wheat, from United States 219,487 323,567
Coffee sacks, total 88,958 98,531
United States 11,161 13,220
Great Britain 69,424 83,919
That they have not done so seems to be due chiefly to indifference. The
reasons why American exporters fail to make a better showing in Latin
American markets have been discussed so often and so fully in the last
three years that there is little object in repeating them here. It is
sufficient to say that the same story of carelessness in filling orders
and in packing goods, of failure to send well-equipped salesmen, and
of refusal to comply with the custom of the country in such matters as
credits and accommodations, are heard in Central America as elsewhere.
Since the European war has forced the importers of the Isthmus to
depend more than ever before upon American manufacturers for their
supplies, one hears many complaints of inconsiderate or discourteous
treatment, and of general inefficiency in handling trade.
One of the chief obstacles to the increase of American trade in
Central America has been the lack of banking facilities. Most of the
banks which exist in the larger cities of the Isthmus at the present
time are purely local institutions, and their operations are rarely
such as to make them a strong force for good in the economic life of
the community. They speculate in the rate of exchange, issue more or
less depreciated paper money, engage in financial transactions with
the government which consume a large part of their available funds,
and make loans to planters and merchants at rates of interest which
vary from ten per cent, with first-class security, to thirty or forty
per cent in cases where the element of speculation is greater. These
conditions, which are perhaps inevitable in a country where capital
is so scarce and where the instability of political affairs makes
the element of risk in all credit transactions so great, seriously
detract from their usefulness. Unfortunately, moreover, there are
some institutions which are not managed in accordance with the
principles either of sound banking or of ordinary honesty, and these
are necessarily a source of weakness to the whole financial community.
Within the last five years, two of the largest banks in Central America
have failed, under circumstances which aroused very grave suspicions
of mismanagement and defalcation. The banks cannot afford adequate
facilities for financing the export and the import trade, for they
have neither the available funds nor the connections abroad which are
necessary for this purpose. Moreover, they can obtain such high profits
in other forms of operations that there is little inducement for them
to engage in ordinary commercial transactions. Many of them are engaged
in the coffee export business or in other forms of trade themselves
and are consequently little inclined to aid other merchants who may
wish to compete with them. The establishment of branches of American
banks, dedicated to a legitimate banking business, and especially to
the financing of American trade, would perhaps do more to stimulate
commerce with the United States than any other one influence.
The question of credits has been another serious obstacle to the
development of our trade. The average Central American merchant must
have from three to six months to make payment for goods which he
imports, because he in turn must grant a considerable time to the
small retail dealers whom he supplies. American manufacturers are as a
rule unwilling to grant credits for so long a period, and they have
sometimes exposed themselves to heavy loss when they have done so
because of the difficulty of ascertaining which of the local importers
were deserving of confidence. This difficulty also could to a great
extent be obviated if reliable American banks could be established in
the five republics.
That our commerce holds first place in Central America despite these
drawbacks is due partly to the fact that there are certain articles,
such as flour, railway material, and petroleum, which the people of the
Isthmus must almost inevitably purchase in our markets, and partly to
the activity of a few great corporations which have stores or permanent
agencies in Central America, and handle a very large amount of imports
from the United States. The United Fruit Company and other fruit
companies in Honduras and Nicaragua, as well as most of the mining
companies, maintain commissaries where American goods are sold in
great quantities. Grace and Company, in co-operation with the American
International Corporation, does a considerable business in merchandise
on the West Coast, and has offices in most of the important cities of
the Isthmus. Several well-known American manufacturers also are more
or less adequately represented by permanent agents in the important
commercial centers.
Although our share in the total imports and exports of the Isthmus has
been greater than ever before, since the beginning of the European
war, the total of our trade has not been so large as might have been
expected, because of the partial paralyzation of the commerce of the
five republics. At the outbreak of hostilities the foreign credits
upon which the normal business of the Central American community had
depended were entirely cut off, and exchange on European centers rose
to a prohibitive figure, especially in the countries which were not on
a gold basis. Merchants were thus unable to obtain goods or even to pay
their debts. At the same time, the purchasing power of their customers
was seriously decreased, because the rise in the rate of exchange
made prices inordinately high in the local currency, and because the
planters, unable to secure advances from abroad to move their crops,
were forced to cut down their expenditures and in some cases to lay off
their workmen. Most of the governments, also, were in severe financial
difficulties, for their revenues, which consisted chiefly of the import
duties, had declined, and their expenditures, of which the money for
the service of the foreign debt constituted an important part, had
increased with the advance in the cost of foreign drafts. Some of them
were thus unable to pay their employees, and the poverty of the latter
intensified the general financial depression. For a time, the sale
of foreign goods almost ceased. When it was found, however, that the
products of the Isthmus could still be sold abroad, even if at somewhat
lower prices, confidence began to return and commerce recovered to some
degree, but imports are still far below normal, and seem likely to
remain so for some time.
After the close of the war, it seems probable that the position lost
by English and German exporters since 1914 will be regained by them,
unless their American competitors make a more successful effort than
they have yet made to secure a permanent foothold in the market. The
European houses which control the import business of the Isthmus
will probably turn back to their former correspondents at the first
opportunity, for their experience with American firms in the last three
years has not been such as to encourage them to continue it after they
are able to resume their old connections. Many of the difficulties
which merchants in Central America say they have encountered in dealing
with American exporters have undoubtedly been due to war conditions
in the United States and to an ignorance on both sides of the other’s
methods of doing business, but many others can only have resulted from
carelessness and indifference to new trade opportunities.
Nevertheless, there is every prospect that the share of the United
States in the commerce of Central America will continue to increase in
the future as it has in the past. Proximity and the excellent steamer
connections created by the banana trade give our manufacturers an
advantage against which European importers will find it increasingly
hard to compete. The North American element in the Isthmus as a whole
is increasing more rapidly than any other foreign element, especially
in the banana towns on the East Coast, and North American investments
are probably already greater than those of any other country. The
richer classes among the Central Americans themselves, moreover, travel
more and more in the United States rather than in Europe, and thus
acquire a taste for articles of North American manufacture, where they
formerly demanded French or English products. A great increase in our
trade with the five republics waits only upon the establishment of
proper banking facilities and upon the awakening of American exporters
to a realization of their opportunities.
FOOTNOTES:
[73] Figures of Costa Rican government for imports from Nicaragua.
Note. These figures are compiled from official statistics, or from
the United States Daily Consular and Trade Reports, which in turn are
based upon the official statistics of the Central American governments.
They are inexact, because the statistics upon which they are based are
rarely entirely trustworthy.
[74] Special Agent Harris, in his Report on “Central America as an
Export Field” (U. S. Dept. of Commerce, Special Agents’ Series, No.
113), gives the following figures in regard to the ownership and
production of the coffee plantations of Guatemala:
Nationality No. of Plantations Product in quintals
Guatemalan 1,657 525,356
German 170 358,353
North American 16 19,285
Other 236 143,242
[75] 2,763,111 bunches were exported from Costa Rica to England in
1913. (Costa Rica, _Anuario Estadístico_, 1913, p. 279.)
[76] It is probable that more than this was actually produced. Large
amounts are said to be smuggled out of certain countries every year to
avoid paying the export tax, and this assertion is to some extent borne
out by a comparison of the export statistics with the import statistics
of the United States.
[77] Figures not available.