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proved whether they have attained their legal majority, have
experience of business, and have enjoyed a good reputation, all
of which must be guaranteed by three men of business of
known responsibility. The number of such brokers is not
limited, and may be increased or decreased according to
circumstances. In 1905, for instance, their number was 385.
They are not obliged to give security nor to make any
deposit as guarantee before practising ; they have merely to
pay a small monthly subscription.



BANKS AND LIMITED COMPANIES 283

The regulations of the Bourse contain severe provisions
against brokers who infringe any of the numerous prohibi-
tions affecting them ; such as accepting orders from clients
whose identity has not been proved ; from persons known to
be insolvent, or from incapable persons ; or acting as inter-
mediary in negotiations where there is reason to suspect that
the parties involved are not proceeding seriously. Brokers
who infringe these rules or others — who do not, for example,
meet their engagements — are suspended by the Council
Chamber of the Exchange.

All operations must be declared in an audible voice by
the stockbroker to the recorder (annotator), in order that the
latter may inscribe them upon the blackboard. The vendor
and the buyer must then exchange memoranda, in order that
the transaction shall be definitely confirmed and made valid.
All transactions efiected on exchange * during ofiicial hours
are copied, with the prices, from the blackboard into the
Journal of Sales ; these latter being also published in the
Boletin de la Bolsa de Gomercio ; or, as we should say, the
Stock Exchange Bulletin. The settlement of all transactions
concluded is effected through the Council Chamber, with the
aid of the Bureau de Liquidation, or Settlement Oflfice, under
the supervision of an official liquidator, appointed at a general
meeting of the brokers, who charges a percentage on the
settlements which he effects.!

Such are the principal rules of the organic charter which
regulates the operations of the Stock Exchange of Buenos
Ayres, and such is its method of operation. Let us now
examine the total amount of its operations during the period
1895-1908, and how they may be analysed: —

Pounds (Sterling).



Year.






Piastres (Paper).


1805
1896






1,244,602,058
1,383,472,329


1897
1898






1,306,531,655
1,219,304,846




Carry


forward,


5,153,910,888



* Literally, •' at the basket." — [Tkans.]

t The brokerage is ^ per cent, on the sale or purchase of bonds, shares, de-
bentures, etc., and is charged on the face (or nominal) value of the amount
changing hands. A charge of J per cent, is also made on all operations on
Exchange.



284 THE ARGENTINE IN THE 20th CENTURY



Year.




Piastres (Paper).


Pounds (Sterling).


Brought forward,


5,153,910,888




1899 ...




1,295,304,846





1900 ...




834,982,214


£73,478,434«


1901 ...




1,003,709,984


88,326,476


1902 ...




841,627,532


74,063,222


1903 ...




383,905,622


33,783,694


1904 ...




423,957,361


37,308,227


1905 ...




515,607,316


45,373,454


1906 „.


...


655,624,566


57,694,961


1907 ...




192,130,565


16,907,489


1908 ...




143,466,502


12,625,052


Total for 14


years ...


$11,444,377,390


(9 Years), £439,561,009



Of this total an amount of 8724 millions of piastres, or
76"2 per cent., applies to metallic operations, which kept
speculation alive until the monetary law of 1899 once and
for all arrested the varying values of paper money. If this
law had had no other effect, this result alone would have
justified it as wholly beneficial to the interests of the nation.

In the quotations of the above period mortgage bonds
hold the second place ; they represent about 5 per cent.

Being dominated by the spirit of speculation, which
expended itself principally, indeed almost exclusively, upon
monetary transactions, the Bourse had no time to devote
itself to more legitimate business. Thus the public funds
represented only some 3 per cent, of this total ; then came
shares and debentures of various companies ; and last of all
banking shares, the amount of these being insignificant.

The nominal value of all the securities which were
quoted on the Buenos Ayres Bourse in 1907 amounted to
|554,791,932 paper and $127,763,525 gold, or an actual total
of £74,374,395, and an analysis gives the following results: —





Dollars (Paper).


Dollars (Gold).


Public funds and stocks


157,025,295


35,000,000


National Mortgage Cedulas


129,383,100


11,443,600


Provincial „


129,745,642





Limited Companies : Bhares


136,657,520


78,416,320


Debentures and certificates


1,980,375


2,903,605


Totals


.. $554,791,932


$127,763,525



These two totals together are equal to a sum of £74,374,395.

* These values are given only from 1900, when the value of the piastre was
fixed.



BANKS AND LIMITED COMPANIES 285

In the first edition of this book we gave a summary of
the nominal value of all the stocks quoted on the Buenos
Ayres Stock Exchange in 1904 ; the sura amounted to 462
millions paper and 38 millions gold, or a total of £52,256,000 ;
so that in three years these tigures had increased by 93
millions paper and 70 millions gold, or over £22,000,000.

It is permissible to hope that in the course of time the
Buenos Ayres Exchange will attain a far greater develop-
ment, and that it will even exercise some steadying influence
on the prices of the public funds. To-day their real market
is iu London, Paris, or Berlin, so that the credit of the country
is atiected by the disturbing events of European markets,
while, the Buenos Ayres market is devoid of any compen-
sating effect.

However, it may be observed that when a country begins
to grow rich and to have more assets at its disposal, the
public funds placed abroad show a tendency towards
repatriation. We have seen this in the case of Italy and
Austria, which had an important foreign debt in France,
and have considerably reduced it during these last ten years
of economic progress.

It will certainly be the same in the case of the Argentine
when, thanks to a series of good harvests, its available or
fluid assets have increased beyond what is absolutely
necessary for the development of agriculture. Investments
will be made not only in land or in live stock, but money
will be invested in stocks and shares as well, and notably in
the Government stock of the country.

As a symptom of this tendency, we may mention that
interest on the foreign debt, the coupons for which have
hitherto been payable abroad only, is now payable in the
Argentine as well, in order to facilitate the purchase of this
stock in the Republic as a staple investment. The internal
debt is also the object of more extensive operations, now
that the seventeen loans which constituted the old debt
have been unified, and now that a special call is to be made
upon the internal credit of the countrj'' with a view to under-
taking vast public works. To enlarge the market for this
Government stock the authorities have just decided that its
coupons shall be payable on the principal foreign markets.



286 THE ARGENTINE IN THE 20th CENTURY

Finally, in the course of time the market for industrial
stock, bank stock, and railway shares will gradually become
less restricted, in proportion as the public fortune becomes
more extensively subdivided, instead of being concentrated,
as it is at present, in a comparatively small number of hands.
The only thing that may compromise this future is the
excessive speculation which we find, unhappily only too often,
in a country where gambling is a dominant instinct. This
excess, with its natural sequelae in the form of financial
crises, might end by driving all serious clients from the
Bourse, and in destroying the excellent elements which
Buenos Ayres possesses for the creation of an important
financial market.

Limited Companies. — In the vast progressive movement
which increase in force yearly throughout the Argentine
Republic, the Bourse of Buenos Ayres has yet another part
to play : that is, to facilitate the formation of collectivities of
capital under the form of joint-stock companies, since the
spirit of enterprise exhibits itself by preference under this
form. Collective efibrt is to-day more and more replacing
individual effort ; the Argentine must therefore learn how
to employ this weapon of associated capital in order to
promote new undertakings, and, by popularising movable
values or securities by the help of the Bourse, to raise up
new resources to the country's profit.

Our study of the chief manifestations of Argentine life
and its commercial machinery would thus be incomplete if
we did not give some account of the public companies of the
Argentine, the legal formalities demanded of them upon
their formation, their mechanism, and the vicissitudes through
which they have passed at various interesting periods of
Argentine history.

The constitution of public companies is subjected by the
Commercial Code to rigid formalities, in accordance with the
most advanced principles of universal legislation upon such
matters, in order to assure their proper operation as well as
the interests of the shareholders.

The indispensable conditions of the formation of such
companies are the following : the number of associates must
not be more than ten; the capital of the venture, or its first



BANKS AND LIMITED COMPANIES 287

issue, must not be less than 20 per cent, of the total, and must
be entirely paid up ; the shareholders must contribute 10
per cent, of the capital actually subscribed, a sum which must
be deposited in an official or private bank ; the company
must be constituted for a fixed term, and must be authorised
by the Government, which cannot refuse its authorisation
if the functions, organisation, and articles of the company
are in conformity with the code, and if its object is not
contrary to the public interests.

To gain the right to publish the prospectus appealing to
possible shareholders, the company must also conform to
the following rules : it must indicate the date of the
provisional formation of the company, must mention the
place where the charter of the company was drawn up and
registered, and what journals have published the articles
and the Governmental authorisation ; it must give details of
the object of the company, its capital, the number of shares,
and the conditions of subscription and payment ; it must
explain the exceptional advantages claimed by the founders
of the company, and convoke the subscribers to a general
meeting, which must take place within three months, at
which the company shall be definitively constituted.

The law formally forbids the founders of limited
companies to reserve any sum or advantage whatever, in
the form of shares, debentures, or founders' shares, in ex-
change for concessions gratuitously granted by the Govern-
ment. It concedes them a maximum of 10 per cent, of the
capital, or 10 per cent, of the realised and liquid profits
during a term which must not exceed ten years.

The founders or administrators of any company are
responsible, jointly and severally and without any limit,
for all that has been done in the name of the company up
to the time of its definitive constitution, without appeal
against the latter, if it take place.

If the company be finally constituted, the expenses and
the consequences of all proceedings undertaken to that end
by the founders will be charged against the exclusive account
of these latter, nor will they have any resort or recourse to
appeal against the subscribers.

In the case of limited companies which are not legally



288 THE ARGENTINE IN THE 20th CENTURY

constituted, the founders, administrators and representatives
are, conjointly and severally and without limit, required to
restore any sums they may have received for shares issued,
and also to pay the debts of administration and the losses
that may be incurred by third parties by the failure to fulfil
obligations contracted in the name of the company.

Once a limited company is constituted, its administrators
contract no common or personal responsibility for the
engagements of the company, but they are responsible,
personally and conjointly, to the company and to third
parties, for the failure of execution or the improper employ-
ment of their mandate, and also for the violation of laws,
regulations, and statutes.

All companies are obliged to appoint at least once a year a
censor chosen by the general meeting, who directly represents
the shareholders, and who supervises the proper conduct of
the company, and the accomplishment of the legal formalities
which concern it.

The Commercial Code contains many other enactments
which tend to ensure the correct and legal constitution, as
well as the proper conduct, of limited companies : but those
we have cited will suffice to show that the law-maker has
striven to use the utmost foresight, with the object of
guaranteeing the interests and the capital confided to such
companies.

Despite this prudence and foresight, we are forced to
recognise that the institution of such companies, which
constitutes a powerful economic lever when they are correctly
administered and established with a view to commercial and
industrial utility, is at present discredited on account of the
abuses committed in its name at the time of the great crisis
of 1890.

The institution of limited companies is so intimately
connected with the financial disasters of that period that
its history is to a certain extent the history of speculation,
and it has suffered all the vicissitudes of speculation.

In 1882, when Buenos Ayres was federalised and became
the permanent capital of the Republic; when public tran-
quillity was confirmed, with the conviction that it would
be long before it was disturbed ; when the public expenditure



BANKS AND LIMITED COMPANIES 289

was increased, thanks to the employment of credit and the
issue of paper currency ; when, in short, the prospect of
universal prosperity had awakened energy and initiative ;
there began to pass through the country a light breeze of
speculation, which was soon to become a tempest; and the
limited company, which until that time had existed in a
modest, inconspicuous degree, quickly assumed a greater
importance, with a more definite, more concrete form.

The companies floated in 1882 and in the three following
years were not very numerous, and their capital was in-
significant as compared with the capital of those that
followed : yet a very marked impulse towards progress was
already perceptible, as much in numbers as in capital. Thus
the sum of 10 million piastres, the amount of the nominal
capital declared by the limited companies in 1882, rose to
nearly 13 millions in 1885.

But as the fever of speculation and affairs grew higher
and ever higher, thanks to the aid of the credit too liberally
granted by the banks, whether mortgage or money-lending
banks or otherwise, and as at the same time all the paper
thrown upon the market was immediately absorbed, to the
great profit of those who issued it, the limited company
followed the upward march, although this movement did not
always correspond with the idea of progress. Thus we see
with surprise that from 13 millions of piastres (paper) in

1885, the capital of the companies rises to 34 millions in

1886, to 95 millions in 1887, to 196 millions in 1888, and in
1889 to 378 millions ; and in these two latter years the fever
has reached the period of greatest danger.

In 1890 the economic-financial crisis, long delayed by
artificial means, burst over the country with terrible force,
and a revolution broke out simultaneously. Under the
weight of this double disaster the banking houses tottered
on their foundations, soon to fall in ruin ; credit, personal or
secured, vanished absolutely ; the paper currency, already
depreciated, fell to a still lower value; industry and commerce
were arrested in their progress, and the whirligig of specula-
tion, which had so far gone merrily but giddily round, came
to an abrupt standstill. As a natural reaction, the formation
of companies, which speculation had stimulated to excess,



290 THE ARGENTINE IN THE 20th CENTURY

was stricken with an almost complete paralysis ; so that we
see the capital of these companies, which in 1889 had risen to
878 millions of piastres, fall in 1890 to 190 millions, and
finally, in 1891, to the modest sum of 13 millions.

These, rapidly denoted, are the salient lines of a sketch
of the vicissitudes of speculation and the affairs of the capital
during the last ten years ; a picture which begins with the
rosy tints of hope and illusion, and ends in the sombre colours
of bankruptcy and ruin.

The branches of trade and industry which are most
largely represented by the limited company form another
question of interest. It is certainly very difficult to discover
the true social idea which these companies pursue at flotation,
for behind pompous titles which seem to express a true
national progress, such as the construction of harbours, the
foundation of colonies, the building or management of rail-
ways or tramways, the opening up of new districts by means
of canals, etc., there lurks, only too often, a mere scheme
of speculation in shares or land. Judging, however, by the
actual operations effected by these companies during the
course of their existence, we can class them according to
the object declared at the time of flotation, and at the same
time give the statistics of their capital.

The capital of all the companies floated since 1882
amounts to 950 millions of piastres (paper), or £83,600,000.
Of this sum £14,320,000 was frankly intended to promote
speculation in land; £13,200,000 was applied to railways
(including the purchase of the railways of the Province of
Buenos Ayres) ; £12,144,000 to insurance (a form of employ-
ing capital much in vogue at the time), and £12,056,000 to
banking affairs, which in some cases were only the mask of
speculations in stock and in land.

To make our sketch complete we ought to give, instead
of the nominal capital declared by these companies, the
capital actually paid up ; as we know that it is not every
company that has at its disposal the sum mentioned in its
articles, but that many have to be content with the payment
of one or two instalments, while others cannot even find
subscribers. Knowing these data, and being cognisant of
the present condition of the companies, we should then be



BANKS AND LIMITED COMPANIES 291

able to estimate the amount of lose which they have in-
flicted upon the country.

Unfoi'tunately this investigation is impossible, for lack
of information, and vp^e can only state that millions of
pounds of private fortunes were lost or stolen in the limited
companies of the period.

After the crisis of 1890 there was, as there was bound to
be, a great mental reaction ; especially in matters relating
to the institution of the limited company ; and the latter was
so discredited that for several years not a penny could be
obtained for investment in undertakings of the kind.

But it was not possible that such an important element
of economic progress should be entirely suppressed on
account of the abuses committed in its name. Very slowly
it came into favour once more ; but thanks to the lessons
of experience the new companies were concerned in the
foundation of undertakings of genuine industrial and
commercial value. Thus the companies floated in 1902,
1903, and 1904 represented a nominal capital of $803,979,000
paper (£70,950,352 actual value), and those founded from
1905 to 1908 (inclusive) had a nominal capital of £72,573,445,
i which may be analysed as follows : —



Land


£1,676,959


Railways ...


6,059,791-7


Insurance ...


13,593,981-5


Banks


9,251,968-1


Industry ...


7,295,793-2


Commerce ...


6.856,762-3


Agriculture and stock-raising


7,218,579-7


Navigation


440,000-0


Colonisation and Immigration


293,996-3


Tramways


5,113,303-1


Hygiene


564,759-5


Telephones and telegraphs


1,349,983-8


Mines


7,332,286


Mortgage Companies and Real Estate




Companies ...


4,098,448-1


Gas and electric lighting


759,249


Savings Banks


667,598-8


Total


.£72,573,450



The mere list of the above investments is enough to
convince us that the day of merely speculative companies



292 THE ARGENTINE IN THE 20th CENTURY

is over, when shares were mere travesties, more or less
justified, as in the years which preceded the crisis of 1890,
Now speculation in land is represented by a sum of less
than £1,700,000 ; while insurance is represented by over 13
millions, banks by more than 9 millions, industry by
7 millions, agriculture by 7 millions, and mines by
about the same amount. These latter investments belong
to the category of " eruptive " stock, for, like a volcanic
eruption, they rise suddenly to great heights, to fall, a little
later, leaving nothing but smoke and ashes.

In the matter of company formation, as in the matter of
operations of the Bourse, we see that the Argentine has
re-entered the normal path of progress. Under these two
manifestations, which reflect the economic activity of the
country, the tide of affairs continues to increase, but the
spirit of speculation no longer turns it aside, no longer
undermines the organisation of the nation's commerce.



\



PART IV

ARGENTINE FINANCE



CHAPTER I

THE ARGENTINE BUDGET

The financial situation — Continual increase of national expenditure — Great and
rapid progress since 1891 — Insufficiency of the means adopted to moderate
this increase — The Budget Extraordinary and the Special Legislation
Budget.

Causes of this increase of national expenditure — The increase of administrative
requirements caused by an increasing population ; this is the most natural
cause, and that most easily justified — Increase of the public, debt — The
intervention of the State as the promoter or guarantor of important public
undertakings — Exaggerated military expenses.

The total sum of national, provincial, and municipal expenses. The proportion
per inhabitant — Comparison with other foreign countries in the matter of
administrative expenses.

The national revenue — The revenue as organised by the Constitution, and its
analysis — Indirect taxation — The customs the chief source of revenue —
Direct taxation ; its origin in the Argentine ; its justification ; its yield —
Revenue of the industrial undertakings belonging to the State : railways,
sewers, posts and telegraphs — The exploitation of the State lands.

Elasticity of the receipts, which follow the development and progress of the
country — The accelerated increase of expenditure, and the resulting chronic
deficit — Necessity of serious reformfi.

THE phenomenon of an increase in the national expendi-
ture : a phenomenon which makes itself felt under
monarchies as well as under republics, in those countries
which have long centuries of life behind them, as in those
whose independent existence has barely begun : this phenom-
enon is felt in the Argentine Republic more keenly than
in the older nations of Europe. Our book would present
a serious lacuna if we did not, before speaking of the increase
of the Argentine budgets, inquire first of all, as closely as we
can in a work of information, what are the causea which
have led to this continual increase in the national expenses.
We must know, in short, whether this increase is due to
general causes, produced by administrative necessities, and
connected with the mere progress of the country, or whether
on the contrary it arises from special factors, peculiar to the
social and political conditions of the country, and to the
295



296 THE ARGENTINE IN THE 20th CENTURY

practical defects of its Government. If we examine th(
amounts of the Argentine budgets for a number of years
we shall see that, with a few rare exceptions, they have
always increased, and at a more or less extraordinary rate
Even in the years when the country was groaning undei
some profound economic or financial crisis the same thing
was to be observed.

Not to go back too far in our retrospective study, let ue
take as a point of departure the year 1891, which year is a
veritable landmark in the history of the Argentine people,,
since it was in that year that the political and financial crisis



Online LibraryAlberto B MartínezThe Argentine in the twentieth century [microform] → online text (page 25 of 33)