pressure of the war expenditure going on since April, 1865, had led,
under the previous Cabinet of Senhor Zacharias, to the creation of a
large floating debt, represented by Treasury Bonds, issued for various
short periods. There is always in Rio de Janeiro a large amount of
loanable capital seeking interest on temporary investment, which it had
found previously to the crisis of 1864 in the deposits of private
bankers' establishments. This loanable capital deprived of such resource
after the crisis of that year found better and safe temporary shelter in
Treasury Bonds. And obtaining money in this way to carry on the war, the
preceding Cabinet was able to avoid new permanent operations for
supplying the means for its necessities. The wants of the Government so
supplied, however, deprived commerce of part of its legitimate supplies
of money and made the situation of the Treasury precarious and
hazardous. The extent, too, of temporary resources of this kind had
obviously reached their limit. It was, therefore, partly to extinguish a
large amount of this floating debt, and so to relieve the Treasury from
any embarrassment that might arise from failure in the renewal of
Treasury Bonds when at maturity, and partly to provide for the
exigencies of the war, that the Government in September, 1868, resorted
to the internal loan of 30,000 contos, £3,335,000, issued at ninety
percent., in bonds bearing six per cent. interest payable in gold,
redeemable in thirty-three years by purchase when under par, and drawing
when at or above par, in which last case payment to be made in gold.
This loan was so favourably received that applications for it were
received in Rio only to the extent of 105,000 contos, and it quickly
rose to a premium of seven per cent.
Again, then, complete success has attended the financial policy of
Viscount Itaborahy, and the Treasury has been provided with the means of
discharging a large amount of floating debt and of prosecuting the war.
In spite of the provisions adopted by the legislation, and of the
concurrent necessary activity of Brazilian commerce, the exchanges in
London after the crisis of 1864, though high in reference to the over
issue of inconvertible paper, had fallen, and in February, 1868,
declined, as if in panic, to 14d. This fall was partly due to the
remittances to England of bills for purchasing gold and honouring the
Government commitments on this side, and still more to the large orders
from the Plate for operations in exchange, and purchases of bullion here
caused by the financial crisis of Monte Video.
This decline in the rate of exchange on London was, however, brief.
Thanks principally to the financial measures just described, and to the
improving prospects of the war, the rate has again risen, and is still
rising.
Such, in necessarily brief and rough outlines, is the history of the
circulating medium of the Brazilian Empire.
Everything, it will be seen, conduces to the conviction that with the
close of the war and expenditure there will be a certainty of
maintaining the standard of 1846, so solemnly reproduced in the laws of
1853, 1860, and 1867, and in the internal loan of 1868, and that the
foreign exchange will once more rise, in the interests of commerce and
of all domestic industries to above the legal level so fixed in 1846.
When this has been accomplished it will be recognised, and be due to an
intelligent and prudent administration of the finances, to the
prodigious development of the external commerce and to the inexhaustible
resources of the great American monarchy.[8]
-----
Footnote 8:
In the preparation of this chapter we are indebted to several
important and valuable Brazilian works—“Systema Financial do Brazil,”
by Conselheiro C. B. de Oliveira; the Report on the Circulating Medium
of the Empire, made in 1859-60, by a Commission presided over by
Conselheiro Almeida Areas, now Brazilian Minister in London; the
Report on the Crisis of 1864, by a Commission presided over by the
late Conselheiro Silva Ferraz (Baron de Uruguayana); the _Relatorios_,
from 1865 downwards, of the Ministers of Finance, and the Annals of
the Senate and Chamber of Deputies for the same period.
ARGENTINE FINANCES.
A notice of this extensive and rising country would be incomplete
without some allusion to its financial condition, and in order to
illustrate this more clearly I must revert to the year 1824, when the
first loan of a million sterling was raised in London, to assist the
young republic in meeting the expenses incurred during the War of
Independence. That the money thus obtained was more or less squandered,
and did not find its way into legitimate channels, is probable enough;
nevertheless the liability was always admitted by the existing
Governments, although interest had ceased to be paid on the loan for
upwards of twenty years and the original stock was almost worthless.
At the period I allude to the revenue and resources of the country were
small, and during the reign of Rozas they were entirely under his
private direction, and the national means spent according to his will.
In fact, what is now known as the Argentine Republic had no existence
until after the downfall of Rozas in 1852, Buenos Ayres up to that
period exercising sovereign control. A heavy internal debt, represented
by paper money, had also generally reduced the value of the dollar
(originally worth about four shillings) to two pence, and there appeared
little chance of the English bondholders ever obtaining again the money
lent in 1824, through the agency of Messrs. Baring Brothers and Co.
But on the downfall of Rozas, a new era dawned upon the republic. Many
illustrious citizens, who had been obliged to expatriate themselves in
order to save their lives, returned to Buenos Ayres, and the principles
of constitutional government were again infused into the body politic,
subject, however, to many vicissitudes, which, for a time, retarded
internal progress, and prevented the real resources of the country from
being profitably utilised. So soon as these difficulties were overcome
the question of its indebtedness forced itself upon the Executive and
Legislative powers, who wisely decided that their first great financial
effort should be to come to some understanding with their English
creditors.
At the same time a movement was set on foot by the bondholders
themselves, and a Committee was formed in London, under the auspices of
Messrs. Baring Brothers and Co., comprising some of the largest
bondholders. Negotiations were entered into with the Buenos Ayres
Government, who evinced every disposition to meet the matter fairly; and
eventually, in the year 1857, an arrangement was come to by which the
original debt in full, with its accumulated interest, was consolidated,
and interest agreed to be paid thereon; and this arrangement has been
most faithfully adhered to up to the present hour. The decree in which
this honourable recognition of a great principle is contained is dated
the 12th December, 1857, and is signed by the Governor Filipe Llavallol
and Norberto de la Riestra the then Minister of Finance. I insert a copy
of the document itself:—
MINISTRY OF FINANCE.
Buenos Ayres, Nov. 20th, 1857.
The Government of the State of Buenos Ayres, in virtue of the
authorisation conferred upon it by the law of the 28th of October
last, has made the following arrangement with Mr. George E. White,
representative of Messrs. Baring Brothers and Co., agents of the
loan contracted in London in 1824 for settlement of the said debt,
viz.:—
Art. 1st.—To meet the payment of the interest upon the original
bonds the Government of Buenos Ayres engages to remit to the Loan in
London in
1857 the sum of £36,000
1858 48,000
1859 60,000
And from and after 1860, inclusive, besides the above-mentioned sum
of £60,000, it will also remit annually the sum of £5,000 as a
redemption fund. This sum, together with the interest of the shares
redeemed, or that may be redeemed, shall be employed, one half each
six months, in the purchase or redemption of the new bonds of this
class till the whole of them have been redeemed. The funds
corresponding to the stipulated remittances shall be placed in
London, one half before the 30th of June, and the other half before
the 31st of December in each year.
Art. 2nd.—The sums appropriated to the redemption shall be employed
by the agents of the London Loan in the purchase of bonds in the
market at the current price so long as that is less than par; but
should the price of the bonds exceed par, the funds to be redeemed
by the redemption fund shall be determined by lot, in presence of
the principal agent or representative of the State of Buenos Ayres
existing in London.
The bonds drawn by lot shall be published in the _Gazette_, or two
of the London journals, stating the day on which payment will be
made at par, and from which date they will cease to bear interest.
The bonds purchased or redeemed by the redemption fund, with their
corresponding future dividends of interest, shall be cancelled in
presence of the principal agent or representative of the State of
Buenos Ayres in London, and immediately deposited in the Bank of
England, publishing their numbers in the _Gazette_, or in two of the
principal London journals.
Art. 3rd.—The holders of the original bonds shall receive a new list
of debentures for their future dividends, with a copy annexed to it
of the two preceding articles, beginning with the debenture for the
dividend that falls due on the 12th of January, 1861.
Art. 4th.—For the interest due upon the original bonds up to this
date, and for those that fall due to the end of 1858, amounting to
the sum of £1,641,000, the Government of Buenos Ayres shall emit new
bonds to bear interest at the following rates, viz:—
Art. 5th.—From 1861 to 1865 inclusive, one per cent. per annum. From
1866 to 1870 inclusive, two per cent., and from and after 1871,
three per cent. The first half-yearly dividend upon these new bonds
shall fall due on the 12th July, 1871, and subsequently on the 12th
January and 12th July of each year, on which days the half-yearly
instalments or dividends due shall be paid in London. All the
guarantees accorded to the original bonds shall be extensive to
these new bonds.
Art. 6th.—The Government of Buenos Ayres engages to remit to the
agents of the loan in London the funds necessary for meeting the
payment of the interest assigned to these new bonds, and moreover,
from and after 1871, the sum of £8,205, or, say the 200th part of
the total amount of the said bonds, as a redemption fund for them.
This sum together with the interest of the bonds that have been
redeemed shall be employed in equal proportion every six months in
the purchase or redemption of these new bonds, till the whole of
them have been redeemed. Accordingly the sums that must be remitted
to meet the interest and redemption fund shall be as follows, viz.,
from 1861 to 1865 inclusive, £24,615, annually; from 1866 to 1870
inclusive, £41,025; and from and after 1871, the sum of £47,435; the
Government engaging to place these funds in London, one-half before
the 30th June, and the other half before the 31st December of each
year. The Government reserves to itself the right of employing in
the redemption of these new bonds, over and above the sum
stipulated, any further sums the Legislature may appropriate to this
purpose.
Art. 7th.—The sums applicable to the redemption fund, as also the
others that may be destined to this purpose, shall be employed by
the agents of the loan in London, to the purchase of these new bonds
in the market, at the current price, always that this is less than
par; but in case the price of these bonds should come to exceed par,
the bonds that are to be redeemed shall be determined by lot, and
those that are drawn by lot, as also those purchased in the market
shall be published in the journals, paid and cancelled on the
respective debentures in the manner and form established in the
second Article in respect to the six per cent. bonds.
Art. 8th.—The new bonds shall be denominated Three Per Cent. Buenos
Ayrean Bonds, shall be signed in the name of the State, by the
Minister of Finance in Buenos Ayres, and shall be emitted through
the medium of Messrs. Baring Brothers and Co., of London, by whom
they shall be countersigned.
Art. 9th.—The payments stipulated in the present convention are
specially assigned upon the products of the rents of the public
lands of the State, excepting those belonging to the Municipalities,
and in case of deficiency this shall be made up from the general
rents of the State, or from the special resources created by the
Legislature for the purpose.
The conduct of Buenos Ayres statesmen in respect to the obligations
referred to was fully appreciated in this country, and the bonds
gradually rose up to par value, holding even during the great monetary
crisis a good position; nor must it be lost sight of that, although the
original debt was incurred for the benefit of the entire Confederation,
yet the Province of Buenos Ayres alone took upon itself the sole
responsibility; and, up to the present confederation with the other
Argentine provinces, always paid the interest out of its provincial
resources.
Subsequent to the settlement of the English debt, what is known as the
National Government was formed, and the internal debt of the entire
provinces has been consolidated into a national stock, bearing interest
at 6 per cent., which is punctually paid, and the stock, from being
worth 30 to 40 a few years back, has latterly risen to 55, subject, of
course, to fluctuations generally caused by speculation on the Bolsa of
Buenos Ayres, where, for a long period, gambling in paper money was the
chief business, until a wise measure of Governor Alsina, in establishing
an Exchange Office, and fixing a paper value for gold, put a stop to
this element of financial and social disturbance.
As already mentioned, there is a provincial revenue and a national
revenue, as well as expenditure; that of Buenos Ayres being the most
important, from its great commercial wealth. Until recently, the only
bonds known here were those of Buenos Ayres. Now we have what are called
Argentine bonds, lately issued on the security of the National
Government; and in order to show the nature of this latter security, as
well as the progressive state of the national revenue, I cannot do
better than quote the following figures, issued by their able
representative Minister, his Excellency Don Norberto de la Riestra, in a
circular dated 1st June last, at the time he was negotiating this
important transaction:—
In 1864 the General National Revenue $7,005,328 or £1,401,065
amounted to
In 1865 it reached 8,295,071 or 1,659,014
In 1866 9,568,554 or 1,913,711
In 1867 the yield is estimated at 2,600,000
it having produced in the first eight months of the year $8,981,430.
The Revenue estimates for 1868 amount to 2,647,200
as follows:—
Ordinary Import Duties $7,650,000
Ordinary Export Duties 2,070,000
Storage Dues 350,000
Stamps 160,000
Post Office and Miscellaneous 206,000
———————————
$10,436,000
Additional Customs' Duties 2,800,000
———————————
$13,236,000 or £2,647,200
The Budget of ordinary expenditure for 1868 £1,581,649
amounts to
as follows:—
Ministry of the Interior $ 901,079
Ministry of Foreign Affairs 99,538
Ministry of Finance 729,491
Ministry of Justice, &c. 487,940
Ministry of War and Marine 3,116,593
Service of Public Debt 2,573,626
——————————
$7,908,267 or £1,581,649.
The surplus revenue over ordinary expenditure is applied to defray
the extraordinary war expenses.
The above revenue is distinct and independent of the private
revenues, both State and Municipal, of the different Provinces of
the Republic, which are raised for local purposes.
The Public Debt of the Republic at this time is as follows:—
EXTERNAL.—Old Buenos Ayres Debt (London Loan of 1824) now in charge
of the nation, say:—
Original Six per Cent. Stock £ 905,800
Deferred Three per Cent. do. 1,110,900
Argentine Six per Cent. Loan of 1866 540,000
——————————
Total £2,556,700
INTERNAL.—
Consolidated Six per Cent. Argentine Stock $12,839,535 or £2,567,907
Buenos Ayres Public Stock (in paper 596,988
currency)
Paraná Debt 1858, including Interest 433,309
Obligations to Foreign Creditors 18,852
Loan from Brazilian Government 1851 228,541
Loan from Brazilian Government 1865-66 400,000
——————————
Total £4,245,597
There is besides a floating debt in Treasury Bills to a moderate
amount, which is being rapidly cancelled.
I think this statement, combined with the facts I have elsewhere given
from personal experience and observation, as to the rapidly extending
commerce of the Argentine Confederation, will fully bear out the
favourable impression that is now gaining ground in England, and in
Europe generally, as to the _bona fide_ security presented by Argentine
bonds; and I must say that, looking back to the conscientious course
pursued by the Government, no country in the world deserves more to
enjoy the confidence of British capitalists.
It will be seen from Senor Riestra's statement that the only foreign
debt of the Argentine Republic is that due to English bondholders. Her
internal debt is due chiefly to her own citizens, who are safe to be
paid both principal and interest; nor has any act of repudiation, or
compromise ever stained the character of the Argentine people. The
pursuance of this praiseworthy conduct has been followed by the
investment of British capital in promoting railways and other industrial
enterprises. Indeed, look around in whatever direction we may, it is
difficult to find a more pleasing illustration of the maxim, that
“honesty is the best policy,” than that exhibited by the Argentine
Republic.
TOWN AND HARBOUR OF SANTOS.
Before recording the details of my passage home I wish to say a few
words more with regard to the rising port of Santos, a notice of which
has been accidentally omitted in a former part of my work. Its
connection with the San Paulo Railway and the fact of its being the
shipping port of the province renders Santos of much future importance.
The distance from Rio de Janeiro is about 200 miles, and the navigation
is simple enough—in fact, in sight of land the whole way, the sea coast
ridge of mountains being conspicuous. The only danger is from the
Alcatrazes rocks, which lie some distance to the eastward of Santos, and
very ugly customers they are, towering a considerable height above the
sea. Steamers can, however, have no difficulty in avoiding them after
getting hold of the island of San Sebastian, from the point of which the
Santos light becomes visible, and can be seen at a distance of 20 miles,
but coasting craft require to keep a good lookout at night. The light is
placed on an island of some elevation, covered with trees to the summit,
and it has a very picturesque appearance. Rounding a bluff point, you
enter at once what appears to be a river channel, though it is an
estuary, for Santos is really an island. The passage is winding and the
land on each side is covered with shrubby vegetation, the distance up
four miles, with deep water for vessels of 1,000 tons. There are some
scattered houses on the beach, chiefly used by sea-bathing residents,
and on one side is an antiquated looking fort, supposed at one time to
have guarded the entrance of the estuary—a specimen of early Portuguese
defences; and on the island of Santos are the remains of the old town of
San Vincente, the first founded on this part of the coast. The anchorage
opposite the town is convenient and well protected; several wharves
extend out where vessels lie alongside to discharge and load cargo, and
at the Custom House there is an iron pontoon used for the same purpose.
At this wharf the steamer I came down in (1,000 tons burden) received a
full cargo and sailed within three days, a feat without parallel in any
other port in Brazil.
There is some pretty scenery around Santos—on the coast side a range of
hills, and opposite to the town, across the estuary, rise the bold
mountain ranges covered with verdure. It is a pleasant ride round the
base of the hills on the seaside until you come to the town of San
Vincente. The railway is laid along a swampy marsh, running parallel and
close to the old San Paulo road until it crosses the bridge of Cubitao,
which connects the island and the main land. The town itself is long and
straggling, containing from 8,000 to 10,000 inhabitants, with some fine
warehouses or stores for storing coffee, cotton, or other country
produce previous to shipment. At the extremity of the town is the
railway station, a commodious building, having wharves, alongside of
which vessels can come, and opposite to the station is what looks like a
palace, with two wings and a centre, the outside almost entirely lined
with ornamental blue Lisbon tiles, and the whole bearing an appearance
quite out of keeping with the general features of the place. It is the
costly hobby of an old Portuguese merchant, and intended for his own
residence, but it progresses very slowly towards completion. The streets
are paved with roughish stones, not easy for a novice to walk on, but a
great improvement on the sandy element which formerly characterised
primitive Brazilian streets. The class of buildings is generally solid,
and there are some good, well stocked shops. There is also a theatre on
a very diminutive scale, where I went to see an amusing amateur
performance, but the heat was stifling; nevertheless, it was quite full,
and some well dressed and sprightly young ladies formed part of the
audience, and did not appear to be very much troubled by the not very
aromatic flavour of the atmosphere. It was a relief to get into the
fresh air for a few minutes between the acts.
Santos is not to be judged by its present status, but by what the
railway must make it; and a few years will produce a very great change,
further accelerated by the introduction of gas, water, and drainage,
which are here much needed, as well as in the City of San Paulo. There
is a specialty about the old Brazilian towns that one cannot help being
struck with, and they present a striking contrast when railway
innovation comes to disturb the slumbrous habits of the people. As a
seaport and a rising town Santos is deserving of this additional notice,
and, I may observe, its close proximity to the sea renders it
exceedingly healthy.
MR. PERKINS ON EMIGRATION.
In the elaborate and interesting report of Mr. William Perkins, who was
at the head of a recent Government expedition to El Rey, an old Spanish
settlement in the Gran Chaco, occurs the following remarks:—“The
northern part of the Province of Santa Fé is justly considered the most
important, being so highly favoured by nature; and in truth the Creator
has here scattered with a prodigal hand all the elements capable of
attracting population and industry. For these reasons it saddens the
heart to see these magnificent lands deserted, teeming as they do with
natural riches. Mighty rivers and streams cross each other in all
directions; first-class timber in the woods to an extent the eye cannot
reach; picturesque meadows of rich pasture,—in a word, whatever can be
desired for agricultural and industrial pursuits.”
Mr. Perkins has been one of the most active and intelligent agents in
the cause of emigration to the Argentine Republic and so soon as the
land transfers of the Central Argentine Railway are completed the
company intend to send him to the United States and to England for the
purpose of making arrangements, and to bring out people to occupy their
land, a desirable step, which will at once enhance its value and that of
the immense tracts by which it is surrounded. The peculiar feature of
this railway is the territory attached to the concession, namely, a
league on each side of the line, comprising a total of about a million
of acres, one half of which is the property of the contractors, the
other half belonging to the shareholders, who have, besides, the
national guarantee of 7 per cent. on the capital of £1,600,000, which
the railway is to cost, or about £6,500 per mile. It is, perhaps, one of
the easiest railways in the world to make, the chief expense being the
rails and rolling stock, few earthworks or ordinary sleepers being
required. As I have before noticed, there is plenty of wood higher up
the country, about Villa Nueva, where a large quantity of sleepers of
excellent quality were being prepared to complete the line to Cordova.
In Mr. Perkins' report just alluded to are some very graphic
descriptions of the riverine facilities, at present so little known or
availed of, but it is to be hoped when he revisits those scenes, after
utilising his services at home, he will return to see progress already
made, and some at least of the lands of the Central Argentine Railway
occupied by thriving settlers. It only requires encouragement, and a
beginning to be made, which I believe will not long be delayed.