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The Argentine in the twentieth century [microform] online

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monetary ratio— The Clearing House ; the importance of its operations.

The Bank of the Nation — Its history — The formation of its capital — Political
interference in the nomination of its Directors — Statistics of its accounts
— Rapid increase of deposits— Difficulty of realising capital — The resump-
tion of payments.

The Bank of the Province of Buenos Ayres— Its reorganisation — Its present
prosperity.

Mortgage and Loan Banks — History of the Banque ffypotMcaire of the Province
of Buenos Ajres — Bankruptcy — Arrangement between the bank and its
creditors — Proposal of reorganisation — Laws relating to mortgage in the
Argentine— The National Mortgage Bank; statistics of business done —
Joint-stock loan companies ; their capital and amount of business done.

The Stock Exchange (Bourse) — History of this institution — Its importance ;
its functions ; amount of business done — The decrease in its transactions
since the cessation of speculation in currency or the monetary ratio.

The Bourse is a private estabhshment — Its membership and its regulations —
Statistics of business done during the last ten years — Securities quoted
on the Buenos Ayres Bourse — Decrease in the total amount of business
done during the last five years — The monetary reform of 1901 as a factor
of this decrease — The place occupied by the Stock Exchange in the life
of the nation.

Joint-stock Companies — The development of joint-stock companies — Legis-
lation affecting such companies — Abuses committed in the formation of
euch companies, due to speculation — Statistics of capital invested in joint-
stock companies before and after the speculative crises of 1890 — Revival
of such companies, in a sense more consistent with the development of the
country.

IN any sketch of the commercial life of the Argentine, we
must include the Bourse and the banks, which play an
important part in the business life of the community, owing to
the facilities which they afford to all kinds of commercial
transactions.

261



262 THE ARGENTINE IN THE 20th CENTURY

To-day such transactions represent a considerable figure,
and involve a movement of capital amounting to scores of
millions. There is obviously need of an organised body
designed to simplify this movement, and to place at the
disposal of trade the means of effecting its exchanges with
the least possible displacement of capital.

Banks. — It was inevitable that in the Argentine the
evolution of banking should be towards an international
character, since the trade of the Republic is almost
entirely with foreign countries. Moreover, this trade ' is
very largely in the hands of foreigners: French, English,
Germans, Italians, Spaniards, Belgians, or Americans from
the States; which fact hns resulted in the formation, in
the city of Buenos Ayres, of various groups of banks,
corresponding, in respect of their founders or their capital,
to these various nationalities. Each of these establishments
is in constant communication with the country of its
origin, and seeks to gather round it clients of its own
nationality.

Both in the matter of importance and that of organisa-
tion the banks doing business in the Argentine leave
nothing to be desired. As we shall presently see, the
sum of the capitals of all these banks amounts to a
total of nearly £26,000,000 ; a sum which appears to
be amply sufficient for all the present requirements of
trade.

Working under a system of free competition, and hand-
ling a considerable capital, they have been induced to offer
greater and greater facilities to trade, in order to increase
the number of their clients and the volume of their opera-
tions. Moreover, the suppression of the gold premium has
removed one of their chief sources of profit; so that
they have been forced to obtain, through the extension
and perfection of their ordinary banking operations, the
compensatory increase of business which allows them
to maintain the volume of their profits and their
dividends.

One cannot subject these banks to a rigid comparison ;
each of them conducts its business for the benefit of clients
of its own nationality, and in consequence must accede to



BANKS AND LIMITED COMPANIES 2«3

their usages. The English banks, for example, have as
their clients railway companies, a large number of export
houses, and steamship lines, on account of the ties which
connect them with the London market and its principal
financial groups. The German Bank principally serves
German industrial houses, and also German exportei-s. The
French Bank of the Rio de la Plata, owing to its relations
with the Paris market, and its strong position in Buenos
Ayres, is of inestimable service to French commerce in the
Argentine. The Italian banks share the custom of the
Italian colony, which, on account of its numerical importance,
crives rise to a great deal of small business.

The Banco Espanol del Rio de La Plata, which has
branch establishments in Paris, London, Genoa, and Madrid,
is in direct relation with the financial circles of those cities,
and facilitates all banking operations between the various
Spanish-speaking countries. Founded by the financiers of
Buenos Ayres. and afterwards enlarged by French capital,
the Spanish bank, which has admirable premises, has
succeeded in surrounding itself with a clientele of great
landed proprietors, by off'ering them all kinds of facilities
for the conduct of business operations connected with the
sale of national produce. Their branch establishment in
Paris is the favourite bank of the numerous Argentines who
go yearly to Europe on business or for pleasure.

In this congeries of banks the Argentine is represented
by two great establishments : one of these, the Banco de la
Nacion Argentina, is a State institution which, in addition
to the business transacted with the Government, runs cash
and deposit departments like other banks ; the other is the
Banco de la Provincia de Buenos Ayres. whose origin was
in the reconstruction of the historic bank of the same name,
the collapse of which was provoked by the terrible financial
crisis of 1890. The excellent results of the last three years,
which we shall presently consider in detail, allow us to
predict a brilliant future for this institution.

We shall give, in the following table, a list of these
banks, in the order of their establishment, with details as
to their capital, reserves, transactions, and dividends.

As lately as the year 1907, it was extremely diflficult to



264 THE ARGENTINE IN THE 20th CENTURY

obtain exact information as to the operations of financial
establishments, as there was no law obliging them to publish
periodical statements of their position. From this state of
afiairs resulted this curious fact : that if one wished to
ascertain the situation or study the operations of the English
banks, for example — establishments which effected their
business transactions by the aid of funds deposited by
inhabitants of the Argentine — one was forced to resort to
the records of the London Stock Exchange, in order to
examine the reports and balance-sheets presented each year
by the administrative Boards to the shareholders residing
in England. But, very fortunatelj?-, thanks to a decision
of the ex-Minister of Finance, Dr Eleodoro Lobos, this
omission has been remedied, and it has been decreed that
all financial establishments must in future supply the
Ministry of Finance, during the first days of each month,
with an explanatory balance-sheet giving details of their
transactions. This information is made public, so that not
only the Government, but anyone devoting himself to the
study of commercial or financial aflfairs, may obtain an exact i
knowledge of the situation of the leading banks, and thence
of the market, or indeed of the country in general.

All these banks work with a relatively large capital,
which is mostly deposited. To understand the situation we
must remember that banks are obliged, in the Argentine,
to keep going by their own means, and are not allowed the
resource of mobilising their turnover by rediscounting at
the Bank of the Nation. The latter, indeed, is rather a
competitor than a prop ; since it also seeks the custom of
private clients. Thus the funds at the disposal of the banks
consists of their own capital and their deposit accounts —
these latter varying greatly from one period to another —
and they cannot benefit by the supplementary force arising
from a credit at the National Bank,

This lack of fluidity as affecting their capital is doubly
inconvenient ; it forces the banks always to keep their cash
reserves at a high level, and also prevents their finding
employment for their deposited funds — at any rate in the
case of accounts at sight. Without this faculty of rapid
mobilisation they cannot enlarge, by operations of short



BANKS AND LIMITED COMPANIES



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266 THE ARGENTINE IN THE 20th CENTURY

duration, the sums which they receive in deposit, and
consequently cannot allow any appreciable interest on that
portion of their capital. Some banks are at present paying
1 per cent, on current accounts ; others, and notably the
National Bank, allow their depositors no interest. For
deposit accounts at three months the interest is usually
3| per cent.

As for the rates of discount, these have fallen considerably
in the last few years ; partly on account of the increasing
competition between the various financial groups, and partlyi
on account of the abundance of capital after several yearsl
of good harvests. After standing for a long time at 7i
and 8 per cent., the average rate for first signatures tends
nowadays to settle at 6 per cent.

This is a fact which may surprise those who believe that
the monetary situation of a country is always afFected|
by the premium on gold, but we shall see, in the chapter
on finance, that there is, as a matter of fact, an influx
of gold into the country, and that its movable resources!
have never been more abundant. The circulation of notes'
is now guaranteed by a cash reserve of more than 65 per
cent.

The banks receive deposits at sight, at thirty, sixty,:
ninety, and one hundred and eighty days. They also'
receive deposits on the "savings-bank" system: that is,
they pay 3^ or 4 per cent, upon deposits not exceed-!
ing 5000 to 10,000 piastres in paper money, or 3000'
to 5000 in gold (according to the particular bank) — that is,:
£440 to £880 in notes, £600 to £1000 in gold— on condition
that if the money is withdrawn under sixty days no interest;
will be allowed. After the lapse of sixty days the money;
may be withdrawn at the will of the depositor, and thai
interest is added since the day of deposit. Small savings^
deposited on this system attain to considerable proportions,!
and the public is becoming more and more familiarised with!
business of this kind. i

One item that differs very sensibly from European usageij
is the rate of interest charged on current debit accounts.!'
As the Argentine has no law regulating this rate, there have,
been times, happily now past by, when this rate has been asi|



BANKS AND LIMITED COMPANIES 267

high as 10 and 12 per cent Of late years the Govern-
ment has paid, as a maximum, 6 to 7 per cent, and
that iu moments of disequilibrium, when international
complications were feared, and the bank rates had risen in
England and elsewhere.

For private individuals conditions are also easier, on
account of competition, and 7 per ceut. has become practically
the average rate. In certain banks the rate on debit
accounts has even fallen as low as 6 per cent.

The following table indicates the movements of the
principal accounts, during the years 1906-1908, in the case
of the various banks which publish their balance-sheets, in
the Argentine.

Ou an international market like that of Buenos Ayres

exchange operations are naturally most attractive. Since

. the suppression of the gold premium, which has reduced the

risks to a barely sensible amount, these operations no longer

: retain their old speculative character; but, on the other hand,

; the profits to be drawn from operations of this kind have

. greatly diminished, so that business has gained only in

safety and extent. We may here recall the fact that

speculations in gold, which amounted to 1,234,000,000

piastres paper (£108,592,000) iu the year 1899, had fallen to

211,000 piastres in 1904, and have now entirely ceased.

Moreover, in order still further to avoid all risks, such
; business is now done by means of cable transfers, instead of
I by cheques at one month from date as formerly ; thus avoid -
, iug as far as possible any variation in the rate of exchange.
I It is chiefly during the period of exportation that these
) drawing transactions become of great importance.
; Exchange business is transacted on a gold basis ; that is,
; on the basis of the gold piastre, which is equivalent to a
I dollar, or to 5 francs of French money, or 4s. of English ;
I as for settlements, they are made indifferently in gold or
i paper, on the basis of 44 centavos, or -44 of a piastre in gold,
for one piastre in paper.

Formerly the rate of exchange used to vary very per-

i ceptibly with the seasons. The banks used to buy during

' the export season, which for grain and wool lasts from

December to March, and consequently profited by the



268 THE ARGEKTINE IN THE 20th CENTURY



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BANKS AND LIMITED COMPANIES 269

abundance of the market to discuss the price. They then
sold to import houses during the slack season, sometimes
making a profit of 6 to 10 centimes. Now competition has
greatly reduced these margins, which scarcely vary at all,
in a normal season, except to the extent of an insignificant
fraction.

Again, the sales of money are now extended over a far
longer period than before, as the export season itself has
been extended by new products, such as maize, chilled and
frozen meats, etc., which do not necessarily find their outlet
at the same time as the rest of the harvest. Thus the bunks
have no longer any incentive to hoard reserves of money,
as they are no longer certain of selling them a few months
later.

All these conditions here enumerated are of course subject
to certain small variations, according to the kind of trade or
industry. The large landowner, the grazier, the farmer, the
cattle-breeder, who has no money at his disposal but that
coming from the sale of his products, can only procure credit,
no matter what his wealth may be in land, at a rate far
higher than that which is demanded of the large commercial
houses of Buenos Ayres. But as we have especially
attempted to demonstrate, the Argentine banks are to-day
splendidly equipped with capital, so organised as to assist
commerce by services of many kinds, and, finally, their
- charges have been abated, by the action of competition, to
rates which one would hardly expect to find in practice in a
new country.*

As the latest sign of progress we may mention the
establishment of the Clearing-House, which commenced
operations in 1893, upon the model of the London Clearing-
House, under the able management of the under-manager
of the Bank of London and the Rio de la Plata, Mr Hogg.
This institution, as its name indicates, serves to strike the
balances of the sums which the various banks may owe one
another, the balances only being actually paid over. The
total sum represented by the operations of the Clearing-
House in 190S was over £352,000,000. This figure includes

*The depoBitB in the Argentine banks at present amount to nearly
jC80,000,000.
S



270 THE ARGENTINE IN THE 20th CENTURY

the transactions of the principal banks of Buenos Ayres, with
the exception of the National Bank, which does not make
use of the Clearing-House.

Between 1893 and 1899 the business done at the Clearing-
House underwent a notable and continual increase, and in
1899 amounted to more than £350,000,000. Since that time
its operations temporarily decreased in value, owing to the
suppression of the gold premium, which put an end to
exchange speculations, which formerly kept the Clearing- ,
House busy; so that in 1903 and 1904 the total amount of i
the operations was barely £264,000. Since 1904, however, I
these figures have gradually increased, and in 1907 and 1908 i
they once more exceeded £350,000,000. To-day the business I
is purely commercial, rendering any exact comparison with ,'
the times when speculation played the principal part extremely :
difficult. But if we could subtract this latter element we j
should certainly find that the compensations based on i
commercial operations have greatly increased, since the ]
figures of 1899, although less by those representing specula- !
tive transactions, have not appreciably diminished. i

The Bank of the Nation. — To complete this account of j
the banks of Buenos Ayres and their operations, we must i
give an account of the working of the most important of !
them all : the Banco del Nacion. This bank is of especial ]
interest, on account of its relations with the Argentine
Government, which guarantees all its liabilities.

The Bank of the Nation came to birth at an extremely
critical moment in the history of Argentine credit and
finance. In 1890, after the double political and financial
crisis which was then afi'ecting the country, as a consequence
of the errors and abuses committed by the Governments,
at a time when all the official credit establishments in the
country lay moribund, disorganised, and discredited, the \\
Government of Signor Pellegrini, called in to inherit the i!
confusion of that which had just fallen, found itself
faced with terrific problems. It attempted to solve the
banking problem by founding a new institution, to which
it assigned a capital of 50,000,000 of piastres— £4,400,000—
the shares to be offered for public subscription. To the
subscribers it promised a certain intervention in the



BANKS AND LIMITED COMPANIES 271

administration of the bank, at the same time reserving to
the State the right of appointing the president, just as the
French Government appoints the president of the Bank of
France. In order as far as possible to guarantee the share-
holders and the public against the errors and abuses which
had formerly been so disastrous, it established certain restric-
tive rules in the charter of the new establishment.

At another time there was much discussion as to whether
the Government of Signor Pellegrini, whose patriotic inten-
tions no one doubted, would not have done better to rescue
the old National Bank, which was tottering amid the ruins
of the crisis, and whose assets, administered by the new institu-
tion, might have given better results than did liquidation,
thus saving the State much expense ; but this question is no
longer of immediate interest.

As was only to be feared, the public, after the spectacle
of such striking examples of the lamentable end to which
official banks are liable in countries formed by the chances
of immigration, and devoid of established traditions : wherein
there exists no sanction for the suppression of undoubted
abuses : the public, we shall see, regarded the new institution
with mistrust, and abstained from buying shares. The
Government, disappointed in its attempt, was compelled
to replace the system of public subscription by an issue of
notes, which explains why a purely official bank was created,
instead of the mixed bank which had been proposed.

Realising that the success of a bank depends far more
upon the confidence with which it inspires the public than
upon its organic charter, Signor Pellegrini's Government,
together with those that followed it, took care to place at
the head of the Banco del Nacion only men who were
capable, by their good judgment, their technical competence
in banking business, their social position, and their knowledge



Online LibraryAlberto B MartínezThe Argentine in the twentieth century [microform] → online text (page 23 of 33)