word by any means. One of the best salesmen that 1 ever knew almost never
wrote an order, but he was almighty good at finding out what his friend, the buyer,
actually needed in the way of machine belting and then inducing the buyer to write
out his own order and send it in by mail. Many times he procured for the buyei
belting of a make quite different from the one turned out by the factory which he
represented. He called himself "trade developer" and his concern "the service
station." When the conversation opened up with the distracting inquiry "how
cheap?" he usually replied: "Do you want it by the kilogram or the meter or the
texture or by my talk? Any way suits me, but not my texture against the other
fellow's kilogram." There is a world of good advice in that to any Latin American
who prefers a low price to anything else, and gets it but gets little else.
In brief, the responsible concerns of North and South America on whom we
depend for Pan American solidarity practise a far-sighted system of foreign trading
designed for a term of years and predicated on the smiling satisfaction of their cus-
tomers ; speculative order-taking has no place in their program.
It must also be said that our South American brothers should prefer their
trade relations with North American houses of established high repute, if they want
the certainty of fair treatment. For those concerns only are the ones which know
they must protect their investment and their good- will by judicious settlement of
such errors of practice and misunderstanding as may inadvertently occur. It is the
experience of the Bureau of Foreign and Domestic Commerce in its role as volunteer
mediator of Pan American trade disputes that representative North American
houses are zealously eager to make the amend honorable every time. On the other
hand, irresponsible commercial pirates regard any deal as closed after they have
secured their money, and they avoid adjudication as a burglar does a police court.
There is no such thing as a superabundance of information about any man
or his concern when we are dealing with him for the first time. Nor will he him-
self refuse to report his whole background and history, unless he has something to
conceal. I wish that the habit of commercial confession on which North American
domestic credits are based might be emulated in Latin American countries instead
of it being so often thought a species of impertinent familiarity.
Of course, there is no morality involved in a transaction when two trader's
meet each other fortuitously for the secret purpose of tricking each other. When
the victim of "horse-trading" cries out that the animal he received for his spavined
horse vvas even more spavined and also foundered, the Bureau of Foreign and
Domestic Commerce as mediator retires from the paddock with a smile of serene
detachment. The Pan American deserves just what he gets and nothing else.
Please do not for even a moment infer from this discussion that we find
Pan American trade relations greatly beset with complaints or difficulties of under-
standing. As a matter of fact, the course of this trade for several years back, even
during troublous war conditions, has been singularly free of conflict. Instead of
disputes there has been a constantly augmented flow of warm commercial sym-
pathy and admiration. The official correspondence of the United States Depart-
ment of Commerce with South America frequently reads like the billet doux of la
But, now, that we have learned one another's ways and viewpoints, what
common tenet of commercial faith may be found, what creed of ethical value to
which all our business interests may adhere? It seems to me that we ought to
242 SECOND PAN AMERICAN COMMERCIAL CONFERENCE
have a standard, a touch-stone by which our mutual trade conduct is measured
and guided. The Home, the Church and the State acknowledge, each for itself, a
platform of moral declaration by which it appeals for support to the peoples of the
world. In different lands the articles of faith vary, but they never deviate from
the supreme purpose of inculcating a common morality in accordance with the
best thought of the land. The great institution which we call "business" deserves
such a creed, so that men North and South may acknowledge it, just as most of
us acknowledge allegiance to the ten commandments of Moses ; it needs a creed to
which the guardians of economic integrity and every honest business man is such a
guardian to which he may point and say "You may count upon me to follow that
ideal so far as it is humanly feasible." It would then be possible for us to hold
up any phase of business conduct to the creed and to determine how far it followed
that ideal or departed from it. It would mean that in the very beginning of a
transaction the several parties thereto could accept the guiding principles in
which they concur without debate and thereby clear the ground of any basic
misunderstanding before actual trade ensued. It would mean the same unity of
spirit and purpose that actuates all the members of a church or of a political party.
It would satisfy the intense longing of the honest and capable business men within
the realm of the Pan American Union to know each other better so that coordinated
business conduct is made easy and habitual.
Needless to say, the adoption of such a creed would automatically exclude
from our confidence those individuals who could not or would not subscribe to its
Without doubt, there exists in the minds of most good business men a list
of non-ethical practices which are known to commerce and abominated. These
frequently take the form of prohibitions, expressed in negative terms, such as a
resolution that we will not attempt to ruin .another man's market by the process
of selling goods below cost next door to his best customer for the sole purpose of
injuring him and his customer at any cost. Likewise, no good manage-
ment will throw a hard-pressed dealer into bankruptcy for the purpose of
stealing his business. Neither will a good management secretly bribe a customer's
purchasing agent to take goods of inferior quality at high prices. No good man-
agement should deliberately hire away the valuable employees of another con-
cern for the purpose of crippling it ; this is an evil which is too prevalent now and
would be abolished if there could be an agreement on its unmoral character. No
good management thinks it permissible to adulterate the goods of a competitor and
then sell as of representative value in order to damn the competitor in the eyes of
his trade. Even the practice of selling second grades or so-called job-lots at prop-
erly reduced prices may be considered justifiable only when the goods are indelibly
marked for recognition as to second quality by the consumer.
There is no need to recite the entire list of tricky practices which the high
minded commercial men of North and South America condemn as individuals.
These, however, might be carefully rehearsed and written down and by a process
of studious analysis reduced to several fundamental prohibitions in principles on
which Pan American agreement could be expected. I would, however, be in favor
of an explicit and detailed exhibit of those practices as the first step in formu-
lation of the creed so that the underlying principles would be thoroughly appre-
hended by those people who need daily explicit direction in the same way that the
great moralist Moses gave it to them.
Practically all instances of suspicion directed against a customer or com-
petitor as to his motives would disappear if we knew that he had pledged himself
to a code that we ourselves support.
Further, let me say that business should explain to the world the irresistible
economic laws on which it is founded; it should encourage and advertise the fine
morality of its directing heads; it should formulate and profess a code of honor
appropriate to the commercial idealism of the day; and it might, with great profit,
define a code of business honor which good business everywhere would gladly em-
brace for its own protection.
At this particular juncture of world affairs, when we may count the loss by
war of two hundred and fifty billions of dollars' worth of accumulated credit, rep-
resenting the earnings of millions of people during the last century, we must look
forward to commercial operations based on future earning capacity. The credits
and the negotiable values which were available to us in July of 1914 for the last
time have been diverted to other uses or have completely disappeared. This is
TRADING METHODS 243
primarily true of Europe, but its effects are even now being directly felt in the New
World. From now on commercial credits and confidence will be based, to a large
degree, on the future earning power of the people in all parts of the world. Those
countries which have been wholly occupied in warfare will be called upon to re-
deem the inflated currency issued by their governments; they will be called upon
to produce raw materials and finished commodities in such volume that a surplus
over their own normal needs will accumulate and be translated into financial credits.
In other words, only a part of a nation's fiscal strength will be found in values now
existing. Since our dependence for the resumption and expansion of commerce will
rest very largely on the future ability of peoples to earn an excess livelihood, and
since we must accept promises to pay at a future date instead of demanding imme-
diate delivery of gold, we are in the position of relying on the moral courage and
integrity of business interests everywhere to make good their promises. Could any
time, therefore, be more propitious for the formulation of moral values in business
and for a complete comprehension and acceptance of a code of honor binding us
closer together and making of the peoples within the realm of the Pan American
Union an economic unit working for their common salvation?
DISTRIBUTION OF BRANDED ARTICLES IN LATIN AMERICAN MARKETS
BY E. T. SlMONDETTI, OF JOHN W. THORNE & Co., NEW YORK
(Read at the Afternoon Session of Wednesday, June 4)
To gain the good will of everybody present I am going to be brief, taking up
only one specific phase of merchandising in Latin America : the distribution of
articles of general use sold in packages and under a special brand.
The small package, making possible the general home and personal use of
articles that before were sold in bulk, represents a distinctively American develop-
ment of modern merchandising. Being founded on convenience and sanitation the
small package will be received and accepted all over the world with the same in-
creasing favor which is finding in the United States. That is, if American manu-
facturers, who are pioneers in this method of selling, will apply to their export
business the same good common sense that has made them successful at home, and
will realize that people are governed by the same fundamental impulses everywhere.
To develop successfully a Latin American market for branded articles, the
manufacturer, in my opinion, must be willing to follow his goods not only from the
factory to the shipping port but also through the foreign channels of distribution
until they reach the ultimate consumer and are 'really and finally sold. At present,
too often the filling and shipping of an order from a foreign buyer or agent marks
the end of the manufacturer's activity. Too often the manufacturer is even ignorant
of the manner in which his goods are being distributed and the price at which they
are Being sold, thus being unable to correct those errors which render impossible
the full development of the market.
Rather than to point out specifically all the errors that have come under my
observation, I prefer to outline the various successive steps which, in my opinion
based on actual experience, the manufacturer of branded articles should take, in
order to secure a real worth-while export business.
First : The manufacturer should employ the services of an export depart-
ment either organized for his own exclusive use, or organized for the use of various
manufacturers of allied and similar lines. This department must be directed by men
possessing knowledge of modern merchandising as practiced in the United States
and knowledge of foreign markets. Through this organization selling agents must
be appointed for the various markets as determined by facilities of communications,
which may mean one or more agents for each country.
Second : The selling agent must be a selling representative in the real sense
of the word,, one that may and generally should carry stock, but not a dealer with
a store, whether a jobber or a retailer. The manufacturer who appoints a jobber
as selling representative limits his sales from the outset to the restricted number
of retailers which that jobber controls through established trade and mainly through
the carrying of accounts for long terms. Other jobbers will not buy from that
competitor, neither are retailers controlled by them allowed to buy from that com-
petitor. Thus the giving of an agency to a jobber serves only as a stimulus to
244 SECOND PAN AMERICAN COMMERCIAL CONFERENCE
other jobbers to seek agencies of competitive lines, to the detriment of all of them.
A selling representative openly recognized as such, even though carrying
stock in his warehouse, is free from jealousies and can sell freely to all jobbers and
retailers. This is particularly important during the initial period of missionary
work when the agent must first distribute directly to the retailers in small quantities
to establish easily available sources of supply and develop a demand which later
will induce the jobbers to place orders for large amounts.
Third : The manufacturer must not assume that the representative abroad is
able to plan and execute a regular selling campaign, but through his export de-
partment, although taking in consideration the recommendations of the agent, must
plan and direct the campaign, employing with proper adaptation to each market
those methods through which he has been successful at home.
The first thing that his plan must contemplate is the price at which the
package is to be sold to the ultimate consumer, this price to allow a profit for the
jobber as well as for the retailer besides the agents' commission. To establish this
price there must be taken in consideration the cost of freight insurance and duty
to each market, thus arriving first at the cost of goods delivered to the agent's
warehouse. With rare exceptions the respective profits for jobbers and retailers
can be figured at 30 per cent for the former and 33% per cent for the latter. An
important point is to see that the agent will not allow any retailer the jobber's dis-
count and thus shut himself out of their trade later on. This of course does not
apply to^ those exceptional cases in which it is found advisable for the selling agent
to distribute at all times directly to the retailers eliminating entirely the jobbers.
While there will always be a certain amount of price changing on the part
of retailers everywhere, the price to the ultimate consumer can be maintained
''fairly regularly by consistent and judicious consumer's advertising.
This advertising as well as the dealer's promotion work must be directed by
the manufacturer's export department availing itself of the cooperation of the
selling agent to the extent only to which the agent can usefully cooperate and in
proportion of his knowledge of modern merchandising methods. This knowledge
of course can be constantly increased by the intelligent and sympathetic assistance
that an efficient export department must give the foreign selling agents who should
be considered as an integral part of the manufacturers organization.
The whole question, after all, resolves itself into this: A manufacturer of
branded articles of general use must not abandon his goods the moment they are
Delivered on board a steamer at a United States port, but must follow them through
the various channels into the hands of the foreign consumer with the same solicitude
and intelligence with which he follows them into the hands of the domestic consumer.
BY C. A. MCQUEEN, CHIEF, LATIN AMERICAN DIVISION, BUREAU OF FOREIGN AND
DOMESTIC COMMERCE, DEPARTMENT OF COMMERCE, WASHINGTON.
(Read at the Afternoon Session of Wednesday, June 4)
Mr. Chairman, Ladies and Gentlemen:
Mr. Barrett this morning in the session on transportation, made the remark
that communication is the first essential of trade. That is obviously true, and it
occurred to me when he made that remark that in the session this afternoon
someone should point out the fact that knowledge is the great essential to proper
methods of trade if not knowledge, at least the possession of a source whence
knowledge may be obtained. I have chosen this topic because it is brought home
to me every day in conducting the work of the Latin American Division of the
Bureau of Foreign and Domestic Commerce.
Our duty is the promotion of the commerce of the United States with
Latin America. Incidentally, we promote the commerce of Latin American coun-
tries with our own country. The Pan American Union of course is a cooperative
organization of the American republics. I shall have to speak, however, as^ an
officer of the United States Government, entrusted with the promotion of American
To go back to the topic of knowledge, I wish that all of you who are in-
terested actually in trade could come and see the beginnings made in the Bureau
TRADING METHODS 245
of Foreign and Domestic Commerce for the collection of all sorts of economic
information on Latin America.
In talking this noon with a well known gentleman here present who has
recently returned from Argentina, he made the remark that conditions as they
exist at present in South America have not been covered in any publication that
has come to his attention nor in any of the speeches, as excellent as they have been,
which he has so far heard at the Conference. He made the remark that no one
in this country realizes the tremendous changes that have taken place.
The people who are going to do business with Latin America must post
themselves on those things. They will find our Bureau at their disposal. By
means of the trade information supplied us through the consular service and
through our own offices in Latin America, we get reports on economic conditions.
Through all the important newspapers published in Latin America, we are posted
on what is happening, not in the way of news but in matters of trade, statistics,
production of native materials and special opportunities that arise for the invest-
ment of capital or the more active promotion of export sales. In various other
ways we are supplied with a fund of knowledge which we really wish we could
disseminate with greater facility.
Since the signing of the armistice, we have supplied some five thousand five
hundred business firms with more or less important trade information regarding
Latin America either by letter or by personal interviews. I suppose that allowing
for repetition we may safely say that we have supplied information to three thou-
sand five hundred separate concerns in this country manufacturers, banks and
exporting and importing houses.
A great many of those firms were entirely new to Latin American trade,
for, just as soon as most of the manufacturers could get their bearings after the
signing of the armistice, they began to look around for foreign markets and
Latin America was one of the fields in which they were chiefly interested. I would
like to review the ways we have, the different channels we have of directing the
efforts of those people toward Latin American business, but the purpose of this
session is, I understand, to discuss trade methods.
Including selling through commission houses and direct sales and all other
forms of promotive effort, I find that there are six different ways of getting
Latin American business six different systems of handling the business, and the
knowledge that you must obtain of Latin America before you attempt to do busi-
ness there will guide you to one of those six systems which you must adopt.
Through Commission Houses. Secretary Redfield in his opening speech
of Tuesday morning said, that before the war our products were largely
sold in Latin America by foreign merchants and were shipped there in foreign
vessels. Now, that is true, as every one who has traveled in; Latin America
knows. I myself have seen in Buenos Aires the warehouses of German firms
filled with American specialties such as gasoline engines, barbed wire, wind mill
supplies, machinery and a number of other things which are known as American
specialties kitchen ware, office supplies, filing cabinets, petroleum products, lubri-
cating oil, leather shoe findings and other things those were' sold practically
entirely through the commission houses of this country and they carried the
burden of the country's Latin American commerce. I presume it may be safely
estimated that they did 70 per cent to 75 per cent of this country's Latin Ameri-
American firms can do their business through commission houses in two
ways. One is without effort on their part, simply selling the commission house
as they would a domestic customer. That has been done to a great extent. I
know a great many important manufacturing concerns who make things like build-
ing hardware, anvils, and similar metal specialties who every month receive very
nice orders from the New York commission houses, and they have no further in-
terest in Latin American trade because they are satisfied with what they are
getting. That was especially the case before the war. That is the first way of
doing export business with Latin America, but I don't think you should consider
those people in the export business strictly speaking, because they make no effort
to get it and the mere fact that their products go to Latin America is not im-
portant to them; they simply accept the business.
The second way of exporting to Latin America involves more exertion on
the part of the manufacturer. That is through inducing sales by means of adver-
246 SECOND PAN AMERICAN COMMERCIAL CONFERENCE
tising or by sending salesmen to a foreign country and soliciting orders to be
placed through a New York commission house. It is a good plan to adopt in the
case of special industrial equipment. Industrial equipment, of course, is not sold
in any great volume in Latin America. As a rule there are a few very large
factories in certain lines and a manufacturer has to study how those factories buy
their equipment. They are usually tied up with some local importing and export-
ing concern which supplied the capital for the beginnings of the business. You
could not give those factories any machinery, it has to be bought through that
commission house, which insists on remaining the channel for the supplies of the
industrial organization so that where the number of possible customers is limited,
it is best to ascertain just how each factory buys its equipment and then work
through those channels. You may have to go to a firm in Paris. I have known
of cases where a large factory in, Buenos Aires would place its orders through a
local house who would forward the order to Paris; that house would then send
it to New York for execution, but the business was originally sold by the salesman
of the American manufacturer.
Those are the two forms of doing business through commission houses.
With the changes brought about by the war, the relative volume of Latin Ameri-
can exporting done in that way is less than it has been in the past.
There are four ways of doing business in a direct manner and they are
receiving the close attention of American manufacturers. (1) I would take as an
example a manufacturing concern which has an export department in this coun-
try, employing a man who knows how to get Latin American business and sending
salesmen to call on customers through Latin America, just as they would on busi-
ness houses in this country. That is done very successfully by a number of highly
reputable firms in this country who have thereby created a very steady demand
and a good sale in Latin America for their goods.
The second way of selling direct is that of an export organization on a
broader plan with perhaps branch houses in some important parts of Latin
America and resident agents in other sections. That is going into business on the