Evening Republican, Volume 18, Number 260, Rensselaer, Jasper County, 3 November 1914 — SOUTH AMERICA NEEDS MONEY [ARTICLE+ILLUSTRATION]

SOUTH AMERICA NEEDS MONEY

f A_N the United States spare South America $500,000,000 during the next five years? Can it supply $100,000,000 during the next 12 months? South America wants these amounts within the period stated. The needs of several of the countries are pressing. They must get money somewhere. When the war cloud broke at least half a dozen countries were negotiat--4 ing in Europe for loans. Most of them were in the midst of commercial and financial crises due to economic causes which were at work the world over. Part of the loans wanted were merely to take up old obligations by new issues, but in every case there was also a demand for additional capital, which would have increased the total The war has dealt a death blow to these expectawhere International finance is discussed, it is now perfectly understood that with the European countries staggering for the next 50 years under the debts which the war will create there will be no more loans for South America. The same understanding exists on the coffee exchange in Rio de Janeiro and on the bourse in Santiago. Temporarily some of the South American .countries

will suffer as much from the war as the nations which actually are engaged in it They will not only be unable to obtain money abroad but also their whole foreign commerce will be dislocated through the loss of markets. Some of the countries have met the emergency by following the example of the European nations and decreeing moratoriums. Harassed South American financial institutions and big commercial firms which were in difficulties may therefore bless the war as avoiding the necessity of forced payments, but they will welcome it only as a means of Immediate relief to debtors who otherwise would be forced into bankruptcy.

Brazil has met the situation, brought about through the inability to float new loans, by pi-ovid-*ng * Or a . De : iSSUe ° f Paper currency in addition to the abundant volume which already is in circulation. Time may demonstrate the wisdom or the unwisdom of this action as an emergency measure, but It shows the demoralization that the European war has caused. South American public men and the diplomatic representatives of*the different governments in Washington who know how great the dependence has been xm Europe and who understand fully the fiscal status of their respective countries, inevitably turn their eyes to the United States, and It Is through them that the query comes as to whether the United States can supply a few hundred millions capital. The answer which may be given to the question will determine whether the United States is to obtain commercial supremacy and to dominate South America financially. European financiers who until the New York Stock exchange was closed were getting gold by unloading American securities in their look ahead are now doubtless revolving the same question as to what the United States may do in the way of financing South America. To them the question takes the form of a query: Whether any of the >2,000,000,000 Indebtedness of the South American governments can be shifted to the United States, and If so how soon and under what terms ? Two billion dollars represents Ground numbers what the South American countries owe in the form of public debts. What may be called the national debts do not foot up this sum, but the municipal and state or provincial debts, some of which are not guaranteed by ths national government, bring up the total. All the South American countries have had the borrowing habit. Some of the weaker and more reckless ones have given the whole continent a bad name. Yet the truth'ls that in view qt resources and natural wealth and the rapid develop--inent that has been going on >2,000,000,000 is not an extravagant public debt total. It will be found, moreover, that the very large proportion of the debts has been created by the countries which are solvent and which scrupulously meet their obligations. Since the International imbroglio, In which the United States took a hand, Venezuela has been paying off Its debt until now the total amount outstanding |s less than >35,000,000. Colombia has what is known as a consolidated debt, #hlch does not exceed >24,000,000. The country has managed to meet the interest in a manner to satisfy even the critical British foreign bondholders committee. Colombia, whether It gets the >25,000,000 Panama gratuity from the United States or not, wants a general loan of something like >50,000,000 to build railways and rehabilitate the countrv generally. Ecuador has a public debt not exceeding >2O,-

000,000, most of which grows out of the bonds issued for the Guayaquil and Quito railway. These are held In England, France and the United States. The provision made for the sanitation of Guayaquil carried with it a prospective loan of $10,000,000. A proposition which was brought to New York bankers a year ago was for a blanket loan of $45,000,000 to $50,000,000 to take up outstanding obligations, provide for the sanitation of Guayaquil and to leave a balance for national purposes. A New York banking house a few years ago tided Ecuador over a stringency by means of a temporary loan and realized a very handsome profit. Peru, after the war with Chile in 1881, was left with a debt so monumental that it never could have recovered if the burden had remained. The country worked out of the situation by turning over the state railways under a long lease to the Peruvian corporation, which was also given the remaining guano deposits and various land concessions. The Peruvian corporation and the government have had more or less friction under the arrangement; but so far as its status as a borrowing nation was concerned Peru was able to face the world without a big debt. During the last quarter of a century the total Indebtedness Incurred has not been large. It now amounts approximately to $35,000,000. Peru was in the market for a loan when the European war broke out. Bolivia, the midcontinent country of South America, left by the war with Chile without a seaport, also was able to start the peace era without a big national debt. The amount of the different forms of what may be called the Bolivian debt is now»between $19,000,000 and $20,000,000. Paraguay, on account of Its numerous revolutioqs and possibly for other reasons, never has had much success in securing money from Europe. Its present public debt is between $12,000,000 and $13,000,000. The opening of railway communications with Buenos Aires and other chapters of peaceful development have Inclined European financiers to look more favorably on Paraguay, and a loan for the country was in prospect until a month ago. Now, If Paraguay borrows, it -will have to be In New York Instead of in London. Taking the group of countries which are not large borrowers out of ken, It will be found that the bulk of the public debts of South American countries are those of the Argentine republic, Brazil, Chile and Uruguay. This group of countries owes Europe—that IS, the governments owe Europe—more than $1,700,000,000. They are able to meet their obligations, though some of the loans may require refunding on new basis. The borrowing, nations are really the A.-8.-C., or mediating Squth American countries which helped President Wilson settle the Mexican imbroglio, and Uruguay. The total of the Argentine obligations is variable, according to the amount of cedulas, or national mortgage bonds, which are in circulation.

Two years ago the Argentine debt was approximately $657,000,000. A year later it had risen nominally to $732,000,000. . Something more than a year ago Argentina sought to float a new loan in France, but the conditions were unfavorable. A new loan on the same basis would doubtless still be desirable, but the Argentine government would look to New" York rather than to Paris or London for funds. Brazil’s various debt Issues now approximate $660,000,000. There have been loans for public improvements and other objects. Brazil, as a vast country, greater in size than the United States, with undeveloped resources the extent of which is not yet known, has been a free borrower. Within the last year there have been various propositions for new loans to take up the old ones. It is not likely that any Brazilian loan can now be floated' in Europe and none is therefore likely to be sought by the government. Later,

when the inevitable readjustment takes place, Brazil most likely will seek to place her loans in the United States. Chile now has outstanding obligations In the nature of public debts to the amount of $210,000,000. The country has borrowed largely on the underlying security of the nitfate beds and the revenue to be obtained from them. The European w-ar interferes with the demand for these fertilizers and a- temporary .result may be that the workmen 16 many of .the nitrate fields will be out of employment. However, the permanent source of wealth which Chile possesses In the nitrate beds remains. Uruguay, for an agricultural country, may be assumed to have a pretty large debt, since the total now amounts to $138,000,000. Yet the republic, which Is on the gold standard and which has a dollar worth more than the dollar of the United States holds high rank In European financial circles because of the certainty with which its financial obligations have been met. A few months*ago when an emergency loan of $10,000,000 was wanted Uruguay made vain efforts to place it in the United States. Ultimately It had to be placed in London, Paris and Antwerp, at 86%. By far the larger part of the public debts of the South American countries Is held In England. * While some of the loans which have been placed through London have been apportioned to other monetary centers in Europe and have been absorbed on the continent probably between seventy and seventy-five per cent of the obligations remain In England. 1 These general facts about the debts of the South American countries and their distribution in Europe are essential to knovK in judging of the probability of American capital at some period in the near future relieving Europe of a part of its South American financial burden. Heretofore there has been no market In the United States. The main question recurs, and on it depend in large degree the future trade relations of the United States with South America: Can the United States spare South America $500,000,000 during the next five years? n Can it supply SIOO,000,000 during the next 12 months,