THE WAR
ITS PRESENT AND PROBABLE FUTURE EFFECTS ON ARGENTINA AND URUGUAY
As has been indicated elsewhere in these pages, the shock of the
commencement of the Great War found the River Plate Republics already
in a condition of considerable local depression. This was owing to
relatively poor harvests, due to a long continuance of exceptional and
ill-timed rains; a consequent collapse of land speculation and the
usually sinister effects of slump after a long period of boom; and the
condition of money markets, for some time past disturbed by the fear of
the results of political complications in the Balkans.
The Governments of Argentina and Uruguay must be most warmly
congratulated on the vigour and promptitude with which they faced the
fact that, with the declaration of war in Europe, they were suddenly left
to their own resources to an extent they had never experienced during the
few decades which really form the whole period of their true economic
history.
Lucky it was for Argentina that such a veteran statesman as Dr. Victorino
de la Plaza occupied the Presidential chair, and that he had the aid of
a man of such high intelligence and reputation as Dr. Carbó as Minister
of Finance; fortunate also for Uruguay in having Dr. Viera (since elected
President) at the head of her Ministry of Finance.
Honour is also due to the Officials of the State Banks of both nations
and to the private Banks and financiers who lent such an untiring and
efficacious aid to both Governments in the hour of pardonable alarm;
alarm which was prevented from developing into panic by the prompt and
statesmanlike measures adopted.
Really, as Mr. C. A. Tornquist justly observes in an article cited in
these pages, it cannot be said that a “crisis” exists in a country while
its vital forces are in full development.
Still, in Argentina and Uruguay these forces had not for some time been
in full operation, from causes stated above; and, therefore, panic would
not have been a surprising result from alarm falling on depression,
before cool reason had time to assert its reassuring influence.
It soon did so, however, thanks to the virile and sound handling of the
situation by the heads of Government and Finance.
Congresses assembled and their usually heterogeneous political elements
unanimously and swiftly agreed to pass the several measures of economic
defence placed before them.
During seven days’ Bank Holiday the finance of both Republics was set in
good order; not only to avoid ill consequences from the initial and any
likely future shocks, but to enable the countries to profit—as there can
now be little doubt they are doing and will do—from the political and
economic disturbance of Europe.
As Señor Carlos F. Soares, writing in _La Nacion_ (Buenos Aires) under
date January 1st, 1915, said:—
The laws and financial and economic measures necessitated
by the European conflagration have proved opportune and
efficacious.
Thanks to them, danger to the Credit Houses and Institutions
was avoided; Internal and Foreign commercial pressure was
lessened, the gold stock in the “Caja de Conversión,” which
guarantees the value of the paper currency, was preserved;
the escape of gold from the country was avoided; the lack of
foreign bills of exchange was compensated for by deposits of
gold at the various Argentine Legations; shortage of coal and
dearness of wheat and flour were foreseen; and, finally, means
of obtaining its value were assured to the natural wealth of
the country.
Only one Buenos Aires Bank (of comparatively small importance) failed to
reopen its doors after the seven days’ holiday; a failure which there is
some reason to believe was by no means entirely due to the War.
Not one Bank and very few Commercial Houses availed themselves of the
Moratorium; a fact which is highly creditable to the Local Banking and
Commercial community.
The arrangements for the deposits of gold at the Legations constitute a
feature novel to the system of International Exchange.
After all this accomplished in so short a space of time, who will
continue to throw the reproach of “Mañana” at either Argentines or
Uruguayans? A reproach long since unjustified by the attitude of the
inhabitants of either of the River Plate Republics towards any matter the
advantages of which they grasp.
No European Statesmen and Bankers could have more promptly realized and
carried out the necessary measures for the economic protection of their
country.
The present of Argentina and Uruguay was thus assured. What of their
future?
Prophecy, which is generally counted as hazardous, is especially so
when it is about to be printed, and may still be read by the light
of the experience of several years hence. Still, some Commercial and
Financial angels have not feared to tread the ground of prophecy as to
the immediate and _post-bellum_ future of Argentina and Uruguay; and
not only has competent authority not feared to forecast results in this
regard, but there is a remarkable unanimity of influential opinion as to
the probably favourable effects of European affairs on the economy of the
River Plate Republic. Always supposing, as there seems every reason to
suppose, that these Republics continue to have the commercial and common
sense to manage their internal affairs in such manner as to be able to
derive the greatest possible pecuniary benefits from the troubles of
European nations.
One, perhaps the chief, in his courage of declaration of these prophetic
authorities is Mr. C. A. Tornquist; a man having very large financial and
commercial interests on the River Plate and enjoying a very high local
reputation for business acumen and honour. His whole life has been spent
in the higher financial circles of Argentina.
Therefore the author has thought well to cite here some portions of an
article published by him in the Argentine Press, a translation of which
appeared in _The Review of the River Plate_, under date December 25th,
1914.
In this article Mr. Tornquist says:—
From this chaos (that of the European War) there will arise
perhaps an Asiatic country, and, quite certainly, some American
countries, and in the first place the Argentine Republic,
which, on account of the class and special conditions of its
products, is called upon to benefit from the situation more
than any other country in the world, as even the United States
cannot export in any quantity the noble products produced by
Argentina as they require them for home consumption. This
war not only does not create difficulties for our economic
development, as will happen to nearly all the other countries
in the world, but, on the contrary, it will stimulate it, and
for this reason, the longer the war lasts the more our national
economy will gain at the expense, sad as it is to say it, of
the countries now at war. Whilst the war lasts the prices of
the majority of our products will not decline, for many of
the countries which produce the same goods as we do are at
war, and on this account the demand is bound to increase. The
first effects of this advantageous situation will bring about
the disappearance of what we call here “crisis,” but which is
nothing more than a “commercial indigestion,” brought about
by excessive speculation, and which has principally affected
speculators, and has done absolutely no harm to pastoral or
agricultural industries, which are our principal sources of
wealth. … It cannot be said that a country is in “crisis” when
its vital forces are in full development. This does not mean,
nevertheless, what many erroneously think, that if the next
crop is good they will be able in 1915 to sell their lands
in the vicinity of cities and summer resorts and speculative
regions at the prices ruling when they purchased them. Nothing
of this will occur, and only the value of revenue-producing
property will normalize itself, and will be placed at a value
corresponding to a return of 8 to 9 per cent per annum. On the
other hand, I believe that several, perhaps many, years will
pass before it will be possible to liquidate properties which
do not give revenue at the prices which their owners desire. …
A favourable factor which might become important, perhaps in
the not distant future, is the immigration of the “capitalist”
farmer from Belgium and other European countries, who prefer
to liquidate their affairs there and come to Argentina with
what remains to them, and so get away from the taxes which
of necessity the Government of the conquering or conquered
countries must impose so as to re-establish their finances. It
is a very interesting fact for ourselves that after all large
wars or revolutions in Europe in modern times there has been
an enormous increase of good immigration in new countries,
and especially to America, from which the United States has
been the first to benefit, because in that epoch the future
of South America was based solely on the gold mines of Peru
and the coffee and diamonds of Brazil, whilst the Argentine
Republic was only known by its “sterile Pampa and Patagonia,”
and its internal revolutions. To-day these things have changed,
and if any country is to interest the capitalist immigrant
it will without doubt in the first place be the Argentine
Republic, because it is in the best condition to receive them,
especially if they are convinced that the value of property is
not inflated. It is the duty of our Government to make all this
known to future immigrants by means of serious propaganda. …
Then we shall have to struggle against the lack of tonnage for
exporting our crop, but we should not forget that whereas to
export with regularity is for us an economic question, for the
belligerent countries, purchasers of our produce, the matter is
of vital importance, as it is a material question not to die of
hunger, and of indispensable necessity to be able to carry on
the war, so that those countries are even more interested than
ourselves that we should be able to dispose of the necessary
means of transport. We take as our basis of the probable
assets of our balance of payments an exportation to the value
of $580,000,000 gold. At first sight this figure appears high,
but let us analyse it. Our record of exports was in 1912-13
$513,500,000 gold, of which $306,000,000 corresponded to
cereals and the remainder to produce not affected by locusts,
droughts, rain or frost, that is to say, the crop of that year
represented $306,000,000 gold for produce exported, and we will
suppose $104,000,000 remained in the country, making a total
of $410,000,000. If the crop of this year should be 25 per
cent less than our “record” crop we should have “at the prices
of that time” $307,000,000 as the value of the harvest, and
there would remain, deducting what the country requires for
consumption and seed, over $200,000,000 for export. But the
actual prices and those in perspective are 25 per cent higher
than the others, so that would give $250,000,000 for exports
of cereals, besides which there are the other products (meat,
wool, hides, tallow, etc.), which then represented a value
of $207,000,000 gold, and which to-day are worth 20 per cent
more, that is to say, $250,000,000 gold, making a total of
$500,000,000 gold. To this we must add the value of 2,500,000
tons of maize, the balance of last year’s crop which remained
to be exported on October 1st, 1914; the possible value of the
export of horses; the value of the sugar exported, which is
more than 60,000 tons, and which will probably be duplicated;
the export of woven goods (ponchos, cloths, etc.) and articles
of saddlery and tanned goods for the European governments;
alcohol and other products of lesser importance, which come
under the heading of extraordinary exports. It would not
therefore be at all extraordinary if we reached $600,000,000 or
even passed that figure, which will be the case if our harvest
exceeds our estimate. … If the crop turned out to be a “bad”
one[6] (that is to say, that it failed in certain parts, as
due to the great extension of area, it is not possible to-day
for a whole crop to be lost) and it only results in 50 per
cent of that of 1912-13, we should still obtain a total value
of $205,000,000, and there would remain after deducting the
necessities for home requirements $100,000,000 gold for export,
calculated on prices of two years ago, but in this case the
prices would rise much more than 25 per cent, and for this
reason the consumption of cereals in the country, as well as
imports in general, would show such a marked decrease, that
the favourable superavit in the balance of payments would never
completely disappear.
I take as my starting-point the sum of $460,000,000 gold, made
up as follows:—[7]
(_a_) Imports $270,000,000 gold. (_b_) Service of the Public
Debt payable abroad $50,000,000 gold. (_c_) Interest on
Cedulas and on capital placed by foreign companies on mortgage
$31,000,000 gold. (_d_) Interest and dividends on foreign
capital in railways $42,000,000 gold. (_e_) Interest and
dividends on other foreign capital $27,000,000 gold. (_f_)
Savings of immigrants and emigrants $24,000,000 gold. (_g_)
Expenses of Argentines abroad $6,000,000 gold.
The sum total of all these items is $460,000,000 gold, so that
we have
$ Gold.
Assets 580,000,000
Liabilities 460,000,000
-----------
Total balance 120,000,000
in favour of the Argentine Republic, a sum which can be
increased if the harvest is very good and imports are less than
I estimated, and decreased if the harvest is bad and imports
greater than $246,000,000 gold. From this it will be seen that
if my calculations are confirmed Argentina will receive from
abroad the sum of $120,000,000 gold for balance of accounts for
the commercial year of 1914-15. To demonstrate the importance
of this fact I will mention that for the year 1913-14 the
balance was $185,000,000 against Argentina; in 1912-13 it was
$200,000,000 in contra, and in 1911-12 $202,000,000 in contra,
so that compared with the three previous years Argentina will
have a difference in its favour in the balance of payments of
$300,000,000 gold!
What do these figures signify?
$120,000,000 gold is equivalent to the service of the National
Debt for two and a half years, and is more than half the amount
actually deposited in bullion in the Caja de Conversión.
It also represents the half of all that the country owes
abroad for mortgages. On the other hand, $300,000,000 are
three-fourths of all our national external debt, are two annual
national budgets, as well as the total value of a good harvest.
Practically speaking, it results that the Argentine Republic
will receive with these $120,000,000 gold a sum which exceeds
the average of the new foreign capital which has come to the
country in the last few years, which will compensate for the
absence of capital which formerly came to the country seeking
investment, and will contribute to develop the economic forces
of the country. Outside of this $120,000,000 gold it is logical
to imagine that some capital will come, as some railways and
other foreign companies have recently made issues abroad and
others will place their profits here. There are also the
various financial operations of the National and Provincial
Governments and the Municipality of the capital for the payment
of debt services or to consolidate the floating debt, for
although money does not come to the country this will diminish
by these operations the emigration of capital in respect of
items _b_, _d_ and _e_ of the balance of payments, that is to
say, the dividends and interest on foreign capital placed in
commercial enterprises and railways, and thus also the service
of the external debt, which otherwise would have to be remitted
and all of which I have not taken into account. Besides, where
will Europeans place their savings? In European bonds which
continue to depreciate on account of the issue which will have
to be made for the war debt and to consolidate the monetary
situation? Assuredly more money will come here than many
believe in search of investment. The United States with its new
monetary law does not require as much as before. To Brazil and
Chile it will not go for some time, neither to Mexico or the
Balkans.
An interesting point is the manner in which these $120,000,000
will come into the country.
It should come in the form of Argentine bonds (“Cedulas”
principally), and in coined gold all that is not employed
to cover debts payable to our commerce and industry to
European banks and manufacturers, which sums cannot be
very considerable, although it is difficult to fix them. …
The reaction will bring about the investment of savings in
Argentine revenue-producing bonds instead of in purchases of
land on monthly payments; it will bring about a reduction
in interest and as a consequence of this an abundance of
money which will stubbornly withstand speculation in land.
The movement of the Stock Exchange will reawaken—it has
been dead since 1906—and there will be money for mortgages
and business, replacing that which came from abroad and
which has to be repaid. All of this will bring in time an
immigration of Cedulas of our external debt bonds and of
railway and industrial shares. What will probably not take
place for several years, perhaps for many, is what I mentioned
at the commencement, namely, that land and other objects
of speculation which do not produce anything will rise to
prices which their owners dream about and pretend to obtain,
as neither banks nor capitalists will invest their money in
such objects, neither will they stimulate speculation, all of
which are circumstances which will contribute to develop the
economic forces of the country and to foment its industries and
its commerce until there arrives for the Argentine Republic
the psychological moment of being able to produce all that
it consumes, that is to say, become self-supporting, without
having to fall back on European industry, a situation at which
the United States of North America have arrived after great
efforts.
Remains only to be added that Mr. Tornquist appears to have omitted
consideration of the possibility of money being _withdrawn_ from South
America by European investors, not on account of any lack of confidence,
but simply because such investors may under existing conditions have
actual need of all the pecuniary resources they are able to realize.
For the getting in of the 1914-15 harvests there has been sufficient
labour available; because of the stoppage of much municipal and building
work, on account of retrenchment rendered necessary by the situation. But
for the future, if, indeed, they are to occupy the prominent place in the
world’s economy for which Nature appears to have destined them, the River
Plate Republics will have to increase their agricultural populations
greatly and speedily.
The need of this is now fully realized in both countries, but, strange
to say, it is in Uruguay where there are no fiscal lands that proposals
for probably useful legislation to this end have attained the greater
maturity. It is there proposed, in effect, that the Government should
purchase, at least portions of, the present holdings of the large
landowners and colonize the land so purchased on systems similar to that
obtaining in, for instance, Canada.
Argentina still has large tracts of fiscal land, but no doubt her
large landowners will also aid towards the colonization by granting to
colonists greater fixity of tenure and greater facilities for mixed
farming than the latter have been hitherto able to obtain.
With regard to Belgian emigration to the River Plate, the fact which
cannot be lost sight of is that the Belgian, especially the Fleming, is
a person deeply attached to his own land and his own ways of living.
It seems certain that if Belgians of the agricultural class are to be
colonized in South America, such colonization will have to be effected
by means of settlements like those of the Welsh colony in Chubut and the
Swiss colony in Colonia.
A Flemish family would view with vehement disgust the ramshackle home
of an Argentine or Uruguayan CHACRERO (small farmer); a disgust which,
communicated to their friends in Europe, would effectually stop further
Belgian immigration.
The Belgian is a good worker, but he is much more “insular” than the
British in his scorn of ways of living which differ from his own. He is
not adaptable enough, in any way, to be put to live or work among the
composite Spanish-Italian-American rural classes of the River Plate.
Probably both Argentine and Uruguayan will continue to work out his own
salvation in this vital matter of attracting agricultural colonists to
his land. Already the spirit of democratic unrest menaces privilege in
Argentina, privilege which has already been destroyed in Uruguay. And the
greatest political danger which now seems to threaten Argentina and has
for some time past been the bane of Uruguay is doctrinairism; a tendency
to pursue to most unpractically illogical consequences theories which
seem to their initiators and supporters to be destined to cure all the
social and economic ills to which man is prone.
State socialism from high places in Uruguay and socialism of all kinds
and varieties from lower social spheres in Argentina are each set on the
adoption of its own empiric policy.
Like all young things, these Republics must pick themselves up again when
they fall (and, in truth, they display great capability for doing so),
but it would be well if, just at the present moment, they were to adopt
and fully carry out some provedly sound colonizing policy. Afterwards
they might experiment with single-tax, rural Banks, state ownership of
land and all upon and within it, as much as they might find themselves
able to afford to do.
Meanwhile they must work patiently, in unadventurous fashion, towards the
most soundly rapid possible development of their rich natural resources.
During 1915, all extension of activity was at a standstill in both
Republics. Little or no land changed hands, unless under practically
forced sale; city improvements and private building projects were stayed,
and no new railway extensions were put under construction.[8]
A few good harvests[9] will put these things as they were; but the lesson
of the War will have been lost for Argentina and Uruguay if they do not
see to the matter of the extension of their agricultural industries.
It seems, however, that they now are solidly determined to do so; and
that, far from the lesson of recent events being lost for them, the
finding of themselves cast on their own resources has led to a most
beneficial and self-sacrificing examination of what those resources are
in contrast with what they so easily might be.
The real vitality of these countries can be measured by the fact that the
prices of their National Securities, which fell with the world-wide shock
of July-August, 1914, were by the following September already on the high
road to the practically complete recovery they have now attained.