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railways, we perceive at once that these lands, which are a j
powerful source of attraction to immigrants, may also in time {
become a very important source of revenue.

The revenue derived from the exploitation of industrial


undertakings and from the national domains being thus
eliminated from the list of effective revenues, as being
nominal or insignificant, we see that the nation has no other
positive resources than the customs duties and imposts upon
consumption. This explains the development of the budgets
of the last few years, in which the domestic and indirect
duties have increased the fiscal receipts.*

One of the characteristics of the present situation of the
Argentine is the remarkable elasticity- displayed by the
increase of the fiscal resources. At the present time few
countries in the world present a similar spectacle. Here,
more than in any other country, the official revenues are in
direct relation to the result of the harvests and the exporta-
tion of the products of the ranch ; so that the table of fiscal
receipts is a kind of infallible barometer, which measures
the degree of wealth and prosperity of the general popu-

If — not to go back too far in our investigations — we take
the thirteen years from 1895 to 1908 as an example, and if
we convert into gold the sums received in paper, according
to the average rate of exchange for each of these years, we
find, in the first place, that in 1895 the Treasury received
£7.600,000. Since then these figures have increased in
rapid progression ; passing from £7,600,000 to £8,600,000 ;
thence to £10,000,000; thence to £10,600,000; thence to
£14,600,000; but in 1900, through economic causes such as
the loss of harvests, anthrax, the closing of English ports
to Argentine live-stock, joined to such political causes as
the fear of complications with Chili, the revenues fell to
£13,000,000. But progress was not long in establishing itself
anew; in 1904, the revenue was £15,200,000; in 1907,
£21,200,000 ; and in 1908, £22,400,000, which is the highest
figure the administration has ever known.

To appreciate this enormous progress at its true worth, we
must take the fact into account that it was precisely during
these years that the nation released several sources of
revenue which had previously been taxed ; such as duties
levied on the export of natural products, and on natural or
artificial wines, and additional duties levied on importations,

* See Memoria del Ministerio de Hacienda, 1895, Vols. IX. and XI.


all of which represented a respectable number of millions per

Thus in thirteen years, from 1895 to 1908, the fiscal
receipts have increased by £14,800,000, or by 194 per cent.

Such a result cannot but be satisfying, and it would be
the most eloquent proof of the intense vitality of the
Argentine finances were it not for the still more rapid
increase of oflficial expenditure. This also has increased,
rapidly and enormously, more often than not exceeding the
revenue, and leaving each year a more or less important
deficit, which, accumulating from one year to another, has
finally to be converted into a consolidated debt, whether
foreign or domestic. " The practical result of the budgets
from 1863 to the present time," says an official document,
" has been an uninterrupted series of deficits.*

In the face of this situation the patriotic advice which the
Minister of Finance, J. M. Rosa, gave the Government and
the Congress in a memorable document some years ago, is
more than ever applicable.

" We must do our utmost to economise," he said, " by
restraining ourselves and reducing our expenses to the
absolutely indispensable. It is only by applying ourselves
to the work of simplifying our administrative services, by
suppressing useless formalities and superfluous employments,
by scrutinising the least details of the public expenditure, that
we shall succeed in making large economies. It is certain
that to purge the administration of its ancient vices, to
sweep away all useless appointments, to refuse to find
vacant places at the bidding of power and influence, and to
establish the strictest rules of economy, is a task of no mean
difficulty ; but we cannot stop to think of the animosity and
the vindictive temper which it may arouse when duty renders
such conduct necessary." *

If Argentina truly wishes, not to compromise her lofty
destinies, but to remain a centre of attraction to the
labourers or the disinherited children of fate to whom she
offers the resources of her fruitful soil ; if she aspires to be,
in the twentieth century, the great centre of the world's
emigration, as were the United States in the nineteenth

* See Memoria del Departamento de Hacienda de 1899, by Joseph M. Rosa,


century, she must obtain an administration both methodical
and economical ; careful of the public moneys, and at the
same time open to all material progress. It is thus that she
will win the confidence of men and of capital ; that is, of the
two elements which she must still multiply in order to
become a great nation.



Statistics of the public debt on the Ist January 1909 — History of the public
debt — The first loans.

The financial crisis — Consolidated loans — The Eomero arrangement — Loan
for the rescission of guarantees— The internal public debt — The total of
the Argentine public debt, and its annual cost in dividends and redemption
— The proportion of financial charges as compared to other budgetary

The burden of the public debt is heavy, but not unduly heavy in relation to the
productive power of the country — The necessity of restraining further
issues and of converting old debts — The efforts of the Argentine to improve
her credit.

ALL the vicissitudes through which the Argentine has passed
in the course of the nineteenth century have left their
traces upon the history of the National Debt. To the legitimate
uses of credit have been joined abuses ; but all this now
belongs to the past, and we do not intend, in a book dealing
with matters as they are, to recount this history at length,
nor to comment upon it nor criticise it.

The consolidated National Debt, on the 1st July
1909, amounted to £62.892,428. It may be analysed as
follows : —

Foreign Debt.*

Annual Cost,


and Amortisatioa.

on ist January 1909.

£ £

Loans at 5 per cent. ... 23.3r)0,139-76 1,702,585-29

Loans at 4^ per cent. ... 7,697, 2t;2-8R 516.147-42

Loans at 4 per cent. ... 29,820,31279 1,454,465-64

Loans at 3^ per cent. ... 2,004,710-40 121,238-09

Total £62,882,425-83 £3,794,436-44

In the total given above is an important sum of which the
cost, though entered in the National Budget, is really borne by
the various provinces. Items in this amount are a sum of

♦ By 15th September 1909, the amount of the debt had been reduced to the
following figures: 5 por cent., £22,702,330; 4| per cent., £7,579,580: 4 per
cent., £29,728,562; 3 per cent., £1,920,000 ; total, £61,930,472.


£6,800,000, for which the Province of Buenos Ayres is respon-
sible ; the £3,000,000 of the conversion loan of Santa Fe ;
£2,800,000 taken up by Eiitre Rios ; and the Cdrdoba eon-
version loan of £1,000,000 ; while Mendoza accounts for
£600,000 and the National Bank in liquidation, for £1 ,800,000.
This establishment, although belonging to the Government,
bears the cost of its debt out of its own resources. Elimi-
nating these £16,000,000, we find that the external debt,
whose cost is borne by the Treasury, amounts not to nearly
£63,000,000, but to £47,000,000.

We shall ultimately have occasion to inquire how far this debt
weighs upon the resources of the Treasury, what the burden per
inhabitant amounts to,and how it stands in relation to the debts
of other countries. For the moment we must glance backward
in order to realise the historical conditions under which this
debt was contracted, and what its destination has been.* The
first credit transaction effected by the Republic al.u'oad was con-
cluded a few years after the Declaration of Independence. In
1822 the Province of Buenos Ayres, which had always been the
heart and head of the Republic, taking its place, indeed, under
certain conditions, and under others representing it in foreign
countries, was fortunate in having at its head a progressive
Government, which, by its profitable initiative, has left ineradi-
cable traces behind it. The President was General Martino
Rodriguez ; the Ministers included Bernadino Kivadavia and
Manuelo-Josepho Garcia.

This Government cast its eyes over the empty surface of the
vast Argentine territory ; it saw immense wealth unexploited,
for lack of the necessary elements ; it realised its great need of
material progress, and understood, with a just and clairvoyant
judgment, that of all these needs the most urgent were the con-
struction of a port for the exchange of products with the outside
world, the instalment of a water supply which would ensure
health to the inhabitants, and the establishment of villages
along the line of the new frontier, serving as desert outposts,
and constituting a military pale to withstand and confine
the irruptions of the savage Indians.

* See, in T/f North AmeTicnn Review for May 1902. an article by SeCor
-\lberto Martinez, entitled: "National Debts of the World. IX. Public Debt
of Argeutiua.'



For the realisation of these then important undertakings ;U^ ,
of public utility the Government of 1822 resolved to obtain irifiP'"^!''
the necessary resources, by raising a loan of a million 0^fli
sterling, giving as consideration a dividend of 6 per cent. i£'2r'
and an annual redemption of 1 per cent. ; the House of "^^ '
Baring to act as agents for the loan. Unhappily the i ^^ ^
executive power employed the resources furnished by this j ^^^
transaction in founding a bank which had a very short i i
existence, and the intended public works were not effected. ] i
More than half a century elapsed before their realisation. '

Tlie loan was issued in 1824, and was taken up in entirety
at a discount of 30 per cent., so that the Government
received £700,000. For many years, at the time of the
Rozas tyranny, and during the ensuing period of national ■■
dissolution, the payments on this loan were suspended ; not
until 1856, when the tyranny was overthrown and the
Argentine nation reconstituted, did the Government of
Buenos Ayres instruct Norberto de la Riestra to come to an
understanding with the creditors, and to offer them the
punctual payment not only of the future dividends, as they
fell due, but also of all those overdue, on deferred stock at
lis. 2d., at 2 per cent, interest, with an annual redemption
of I per cent. This debt is to-day extinguished, and has left j
no traces on the budget. j

The second loan contracted by the nation after its I
reorganisation was intended to cover the expenses of the i
war to which it had been unreasonably provoked by the
tyrant of Paraguay in 1865 ; and this loan has also dis-
appeared from the ledger of the public debt. ,

The third national loan was contracted in 1870, the sum I
being £1,042,978, under the Presidency of Senor Sarmiento; \
and the capital was required for the accomplishment of !
public works. This loan and that preceding it were finally I
converted into others which carried a lower interest. j

Then these transactions were followed by others, of which j
we will briefly enumerate the details. i

The railway loan, authorised by the law of the 2nd of ;
October 1880, was to raise the sum of $12,000,000 ; a sum i;
required for the extension of the Central North Railway as '
far as the town of Jujuy, the Andean line as far as San Juan,


and for the branch line to Santiago de I'Estero. It bore
G per cent, interest, with an annual redemption of 1 per cent.
It was issued in London, in June 1881, for the amount of

(£2,450,000, at a price of 91 per cent.
The loan entitled " The Public National Funds," which
was decreed by the laws of 12th October and 28th June 1883,
I enabled the Government to pay for the shares in the National
I Bank (to-day in liquidation), which it had acquired. This
loan, bearing- 5 per cent, interest and 1 per cent, redeniption,
was issued in May 1884, by Baring Brothers, at a discount
(if 84'5 per cent., and amounted to £1,683,100.

The loan entitled " Harbour Works of the Capital,"
authorised by the law of 27th October 1882, was contracted
tor the construction of the new harbour which the city of
Buenos Ayres required for the development of her foreign
trade. An issue of $20,000,000 in gold was decreed, bearing
C per cent, interest, with 1 per cent, redemption.

The "Public Works" loan was created by the law of
21st October 1885 ; its amount was £8,400,000, and its object
the unification of certain loans required for various under-
takings. The shares bore 5 per cent, interest with an
annual redemption of 1 per cent. The sum issued was
£8,333,000, of which £4,000,000 was placed in London, in
January 1886, at 80 per cent., and the remainder in January
1887 at 85| per cent. This loan was guaranteed, as far
as the interest was concerned, by the customs revenue, and
the representatives of the investors had on this pretext
reserved certain rights of control over the administration of
this revenue.

The " Central Northern Eailway Loan " was divided into
I two series. The first, authorised by the law of 9th October
1886, was of £4,000,000 ; but of this sum only £3,968,200
was issued, as follows : to London, in June 1887, £1,300,000
at 91-5 per cent.; in April 1888, £1,500,000 at 94 per cent. ;
in May 1889, £1,168,200 at 97 per cent. The second series,
authorised by the law of 30th October 1889, amounted in all
to £3,000,000, of which only £2,976,000 was issued. The
two loans bore an interest of 5 per cent, and a redemption of
1 per cent.; they were contracted to allow of the prolongation
of the Central Northern Railway.


yr The " National Bank " loan, created in virtue of the law
of 2nd December 1886, authorised an issue of £2,058,200,
to enable the Government to pay the debt which it had
contracted towards the said Bank. The bonds were issued
at 90 per cent. ; they bore an annual interest of 5 per cent.,
with a redemption of 1 per cent.

The " Treasury Bonds Conversion " loan, authorised by
the law of 21st June 1887, was employed, as its descrip-
tion indicates, in the consolidation of a debt contracted for
a short term. The issue required was $5,078,330 paper, but
only £624,000 was actually realised.* The stock carried
an aunual revenue of 5 per cent., with 1 per cent, redemption,
while the old Treasury Bonds have an interest of 9 per cent.

The loan contracted by virtue of the law of 15th August
1887 was intended to balance certain debts on the part
of the National Government towards the Government of the
Province of Buenos Ayres. The issue was one of £3,973,700,
the interest being 4|^ per cent, and the redemption 1 per
cent. ; it was taken up at 90 per cent.

The " Conversion of Debts " loan, at 6 per cent., contracted
in virtue of the law of 2nd August 1888, was an opera-
tion of consolidation and reorganisation of debts. The issue
amounted to £5,290,000. The bonds, which yielded 4| per
cent., with 1 per cent, redemption, were negotiated in London,
in February 1889, at 90 per cent.

The " Conversion of Hard Dollars " loan was issued in
virtue of the law of 2nd July 1889, which authorised an
issue of £2,600,000 to be applied to the conversion of debts
contracted in hard piastres. The new stock was to yield
an interest of 3| per cent., with 1 per cent, redemption.
The issue actually amounted to £2,659,500.

The " Consolidation Loan " (authorised 24th January
1891) was one of the most important credit transactions ever
effected in the Argentine Republic : a transaction which
evokes memories of a critical period which we ought briefly
to recall.

When Signor Pellegrini's Government came to power, on
the 6th August 1890, the country was suffering from a

* The sum of $5,076,330 is equivalent at the present discount of paper to
£446,873 ; in 1887 the value of the paper piastre was higher.— [Tkans.]



political upheaval, and at the same time was entering upon
a time of severe financial crisis, " the most violent, the most
desperate crisis which has ever aflflicted the Republic, and put
its honour to the test," according to the words of Vincenzio
Lopez, the eminent (inance Minister of that administration.

The Treasury had exhausted its resources, in order to
increase and support the funds of the National Bank, whose
debt to the Government amounted to $47,491,483 * in paper,
and £2,528,224 in gold, while its debt to foreign creditors
amounted to £3,708,037, and to home creditors £2,328,800.

If the situation of the National Bank, which served as
the Government's treasury, was serious, that of the National
Mortgage Bank and that of the City of Buenos Ayres were no
less grave. The first owed $1,690,833 in paper and £111,475
in gold in dividends, and the second was drained dry by its
debts, amounting to $34,646,533 paper and £92,339 gold at
home, as well as £1,960,000 abroad.

From the outset the Government concentrated all its
efforts upon the solution of these three grave problems. It
proposed the reconstitution of the National Bank ; it would
enable the Mortgage Bank to continue operations, chiefly by
repaying the advances which it had made to the State ; and
assist the City of Buenos Ayres to meet its engagements
in respect of the interest of the foreign debt, constraining it
to collect and employ the municipal revenues in a more
methodical manner.

The prime object of this important transaction was "to
give the country a period of economic repose, by provisionally
suspending the removals of metallic currency for the
liquidation of the nation's foreign engagements," as the
Government declared in the message which accompanied its
proposal. To achieve this end, the creation of a consolidation
loan was proposed, amounting to £12,000,000, and increased
later on to £15,000,000 upon the advice of the lenders, the
result being destined, for a period of three years, for employ-
ment in paying the interest on the nation's loans and in
relieving the Treasury of the burden of guaranteeing the
dividends of the railways.

• This amount is not reduced to gold, the rate of exchange not being fixed
at the time.— [Teans.]


In accordance with agreements concluded between the
Government of the Republic and the banking houses which
undertook to negotiate the loan, the banks undertook to
accept, during a period of three years, as consideration for
the debt, and for the effectual guaranteeing of the railways,
bonds of the loan itself ; and undertook, moreover, to accept
them at par. The issue each year was to be proportional
to the sum necessary to pay the interest on the debt.

The nation, on the other hand, undertook to set aside for
the payment of the interest on the said loan 6 per cent,
of the customs receipts, which were subjected to a monthly
levy of the amount required, the amount affected by the
prior rights of the loan of 1885 being deducted first.

• The nation also engaged not to increase its foreign debts,
whether by borrowing or giving guarantees, during the three
years fixed for the issue of the loan.

The total amount authorised was £15,000,000, the interest
6 per cent., and redemption was to commence at the end of
three years, to be completed in thirty years. Coupons could
be paid to the State in settlement of customs duties. Of the
above nominal sum, only £7,691,725 was actually raised,
£7,308,275 remaining unissued for the following reasons : —

Under the administration of Senor Saenz Peiia, when
Senor Romero was installed in the Ministry of Finance on
the 12th October 1892 he found the Consolidation Loan in
process of issue, the stock being sold at need, the 6 per cent,
bonds being guaranteed by the customs receipts ; they were
then selling in London at about 63 per cent. Seiaor Romero
estimated that if the system of paying debts by means of
debts is generally a ruinous one, it was especially so in this
case, where the transaction was being effected by means of
bonds so badly depreciated as those of this loan.

The first important act of this Presidency was to make
an arrangement with the representatives of the bearers of
the foreign debt, by which they consented to a reduced
interest for five years — that is, until 1898 — the redemption
charge being suspended simultaneously. In the following
years, from 12th July 1898 to 12th January 1901, the full
interest alone was to be resumed, and from 1901 the payment
of the redemption charge would also be resumed.


As a consequence of this carrangement, it was decided to
issue no further stock of the loan, even in cases wliere the
issue was authorised : as, for example, in the effective
guarantee of railway stock. Holders of the latter would
receive payment ou the basis of the price at which the shares
were quoted. This is why the Consolidation loan issue of
1891 was confined to the sura already cited.

The " Travaux de salubrite," or Water Supply and
Drainage loan, authorised by the law of 30th January 1891,
to the extent of £6,750,000, in bonds bearing 5 per cent,
interest and 1 per cent, redemption, was created under the
following- conditions : —

The Govei-nment of Senor Juarez Celman, which preceded
that of Signor Pellegrini, was inspired by the Spencerian
doctrine, which asserts as a principle that the State is always
a bad administrator, and fell into financial and administrative
errors which were to cost the country dear indeed. Thus it
resolved to place in the hands of individuals all the industrial
enterprises undertaken by the nation, among which was the
scheme for supplying the city of Buenos Ayres with water
and facilitating the elimination of its filth and sewage.

Every one very soon saw, however, that a serious mistake
had been made. The individual firm entrusted with these
important services was exclusively preoccupied in exploit-
ing the public, and its methods resulted in protests and
resistance on the part of the inhabitants of Buenos Ayres.
On 6th August 1890, the Government, Pellegrini being
president, came to the conclusion that it was its duty as an
administration, and was also a matter of political efficiency,
to place the sanitation works in the hands of the State once
more ; and with this object it obtained an authorisation to
contract a loan of £6,750,000, at 5 per cent, and 1 per cent,
redemption. Such was the origin of this loan, of which
stock to the value of £6,374,995 was issued.

The " Rescission of Railway Guarantees " loan, authorised
by the laws of 10th January 1896 and 30th December 1898,
was contracted to disburthen the State of the heavy obliga-
tions which weighed upon it as a result of having guaranteed
an interest of 6 per cent, on enormous capitals employed in
the construction of railways. With this object £11,699,957


worth of stock was created, and issued at 4 per cent, and
I per cent.

The loan for the " Conversion of Provincial Debts,"
created by the law of 8th August 1896, was justified by the
highest considerations of national solidarity, and of the
defence of Argentine credit abroad.

The enormous debts contracted by the Provinces, un-
authorised and uncontrolled by the central power, quickly
resulted in a veritable bankruptcy, at the end of a period
of waste and folly, of unchecked and uncalculating expense.

The nation, which had in no way intervened in the matter
of these loans, and had contracted no obligations whatever
on their behalf, might strictly have refused to accept any
responsibility for such heavy liabilities ; but it is indubitable
that the insolvent condition of the Provinces in the European
markets might have aflfected the credit of the nation, the
latter being, in foreign eyes, involved in all these individual

What President Quintana said in his inaugural address on
the subject of the peace of the Provinces, which is also the
peace of the State, may also, with no less reason, apply to

Online LibraryAlberto B MartínezThe Argentine in the twentieth century [microform] → online text (page 27 of 33)