appealed to. His or her needs are studied, and in this way is created the demand
which produces the sales, to the dealers.

Are we doing this in Latin America? To a very, very large extent we are
not. The people themselves are not being studied. Our manufacturers approach
the importers, and when assured of their financial ability to meet obligations, the
appeal is made to them, and all the arguments are addressed to them, instead of,
as we do at home, to those for whose use or consumption the article is intended.

Why is this? It is, I think, largely because we have not taken the trouble
to study the peoples of Latin America and have not bothered our heads very
much to ascertain what their individual needs may be. We think, apparently,
that we can leave that question to the merchants down there who have been ca-
tering to their wants for generations, forgetting, meanwhile, that, as a whole, the
people are in ignorance of what we can supply them that may better suit their
needs and add more to their comfort and happiness than they have deemed possi-
ble. I think I may have said sufficient to indicate to United States manufacturers
that it is "up to them" to think of the trade of Latin America as they think of the
trade at home, and to create demand where it does not now exist, by practically
the same methods as they employ at home.

May I say a few words on a subject which has not been fully understood,
and, which, from my own experience, has been too frequently slighted even when
attempts have been made to explain it. I refer to commercial integrity, or honor,
as the Latins more frequently term it. You will readily understand that in my
business, the moral risk of the subject we investigate, is of more consequence
than the financial. That is true here at home, where we have had expressions
from the greatest financial authority of our generation, I refer to the late Mr.
J. Pierpont Morgan, that, in his estimation, the moral side of a risk was of
the first importance. He is even credited with having said that he would risk
more on moral character than he would on financial strength. This is infinitely
more true in Latin America than it is with us, for there is a code of honor down
there, and when I say a code of honor, you must understand me as saying that
it is a code and not an incidental thing.

A few of us who have taken the trouble to study the Latin Americans un-
derstand this, but, as a rule, according to my observation, it is not understood,
and as I consider it of the first importance, I would beg of you to try to under-
stand it. It will more often that not, give you ease of mind and it will greatly
facilitate your commercial intercourse, even if you do not follow up the inter-
course on the social side, where it is absolutely necessary that you comprehend
the code.

Without entering into the subject at length, I will say that the majority of
the Latin American peoples are descended from races which inhabited their con-
tinent before the European knew that it existed. I mean civilized races, and you
know that the distinctions in civilization are questions largely of environment.
Even the terms barbarious and civilized are not absolute terms, they are relative,
and again are questions of environment. Those of us who have studied the early
American civilization know that they had reached a marvelous development, par-
ticularly when you consider their isolation from the rest of the World, and one
of the most striking features of the civilized state was the regard in which the
spoken word or 'promise was held. A pledge made was sacredly carried out, and
we have every evidence that this faith in verbal contracts has been transmitted
down through the generations to the living descendants of the old civilized peoples.

Spanish honor is proverbial ; under most conditions of life, it is taken for
granted. No matter how we commercially minded moderns may differ in our



258 SECOND PAN AMERICAN COMMERCIAL CONFERENCE

opinions of the Spaniard, we are at one, either consciously or sub-consciously, in
granting that the World has been justified in holding to the belief that Spanish
Honor does exist as a living thing and has its highest exemplification in the
Spaniard's regard for his spoken pledge. Well then, if with the blood of the
ancient people has been infused the blood of the Spaniard, have we not the right
to expect a greater degree of safety in our dealings with this combination than
we have any historic justification for expecting among any other people. I think
we have. And these are the two points I wish to make clear in order to help
you to a surer way of cementing relations of business and frendship. Study the
wants of the people themselves, study their history and know with whom you are
dealing.



DIRECT SALES

BY CHARLES B. WILLIAMS, UNDERWOOD TYPEWRITER COMPANY, NEW YORK, N. Y.

My remarks on this subject can only be general inasmuch as the manufac-
turer will have to determine his own method of propaganda and sales. As a general
proposition we should select high-grade representatives with a knowledge of both
Spanish and Portuguese ; this representative must have a thorough technical knowl-
edge of the article he is presenting ^and should, if possible, be a man who has
actually lived in and gained his experience from those countries, and on the theory
that both the manufacturer and his product are unknown in that market, the per-
sonality of this representative must be such as to inspire confidence. I believe that
the initial work of getting a product started in the Latin Americas should be done
by a man on whose judgment we can rely in every way, necessarily one of tact and
real willingness and desire to give to the trade there just what they require; he
should be a high-salaried man, because when sending out representatives working
on a purely commission basis there is always the tendency for them to overstock
the purchaser or, possibly, not making a connection with a firm which would ulti-
mately prove highly satisfactory, because of the fact that some other firm for the
moment might be induced to place a larger order. We must not overlook the fact
that the Latin American merchant has been purchasing goods for a great many
years, largely European, and when we go after those markets we have to show him
that our proposition is clean-cut and of positive value. The representatives of
competitive European firms will naturally take part in thoroughly digesting our
propositions.

Now, suppose that we do not have available a man who has the qualifica-
tions I have just enumerated, or that he does not have a knowledge of Spanish or
Portuguese! Send him down there anyway so that he can get first-hand informa-
tion on the requirements of the market; let him make sure of the ultimate de-
sirability of the firms with whom he does his first business and then when he re-
turns here foster that account and give it the assistance of a representative who
knows local conditions of the country down there and speaks the language, but not
necessarily English. I cannot impress upon you too strongly the importance of
sending to do the initial work men on whose judgment you can absolutely rely and
do not expect to get into that market without risking the expense of sending a good
high-grade man. Only recently I was approached by a group of bankers on the
Pacific Coast who told me they were contemplating sending a man to Central and
South America for the purpose of extending the business of their clients ; I asked
them what salaried man they contemplated sending; the reply was "a $3.000 man."
The position I took with them was that a $3,000 man would in turn get in touch
with $3,000 men down tfiere, but if they wanted to make a success they would
find a $10,000 man would be much the cheaper. The Latin American merchant is
shrewd and he is reliable, as is evidenced by the failures in comparison with those
of our own country ; you cannot expect to break him away from products which
have made his business a success unless you give him a tangible benefit ; I neither
believe in his prejudice against American goods nor his unselfish d.esire to purchase
American goods; price, quality and reliability are what will appeal to him but
these must be presented in the same businesslike way that we would go about it
to sell a first-class concern here in the United States; it is not an office boy's job,
and if you send office boys down there in an attempt to get business you will find
that his Latin brother has just as m'any aunts, cousins and grandmothers dying



TRADING METHODS 259

with the attendant necessity of going to the funeral as ours here; he will also find
his brother Latin American equally skilled in all his games and with pockets as
capable and bulging as ours here, and just as frequently going home with the bacon
as our boys here ; in time they graduate from office boys and go on up the ladder
until we find them successful and shrewd businessmen just like we have here but
it would be naturally very unsatisfactory for the manufacturer to await this period
of evolution in order to get his goods before the market.



SHOULD WE MAKE GOODS "TO SUIT" THE LATIN AMERICAN MARKET?

BY WALTER C. KRETZ, OF JOHN A. ROEBLING'S SONS COMPANY, NEW YORK.
(Read at the Morning Session, Friday, June 6)

Several of our Latin American friends have raised the point in their speeches
that American manufacturers, to gain a hold on South and Central American trade,
must supply merchandise exactly as the buyer demands it, and they have let it be
inferred that substitutes are offered for no very good reason, and merely due to lack
of a desire to be accommodating.

Now I should like to state the manufacturers side of the case, and these
words are addressed specifically to the representatives of the Southern Republics
who may be here.

Let me ask in the first place just exactly what is meant by the request that
we must make goods to suit "the market." Perhaps the best way to drive home
the point of this question is by means of a specific example. I shall select a
simple article, namely, insulated wire, which, as you all know, is used to carry
electric current, and the market which I shall chose is Chile. What are the con-
ditions there? These:

In Iquique, American sizes and types are standard ; in Santiago and Val-
paraiso, German sizes and types are standard ; and in Talcahnano, British sizes
and types are standard. These are all different. Will somebody kindly tell me
what the "Chilean" market demands?

The answer to this might be, that we should make all three kinds, and ship
to each locality what they are accustomed to.

The question then arises, can we do this? Yes, we can, but the party who
would lose by it is the buyer.

If you will glance at the map in this room, you will see that the total imports
into all Latin America are only slightly more than one-third of the total imports
into the United States, which means that they are quite small in comparison with
the total value of merchandise actually manufactured and consumed in the United
States. Even if then our manufacturers should succeed in garnering the entire
South American import trade, this would take a small portion of their production.
The greater part of their product is made to suit the American market, and all
tools, patterns, dies, jigs, etc. are designed to turn out this product cheaply and
efficiently. In a great many cases these tools cannot be used to make anything
but our standard material.

To return to our example: It would require new wire-drawing dies and
various other changes in machinery, to make sizes and types different from our
own, and if we did it, and sent imitation British wire to Talcahnano, and imitation
German wire to Santiago, what would the buyer gain? Absolutely nothing, for
these other types are not one bit safer or better than American wire, and the
German is, in fact, not as good. Besides which, these imitations are bound to
cost more than our standard material, for the new tools, and the extra trouble
must be paid for.

And what is true of insulated wire is equally true of wearing apparel and
machinery, and drugs and any number of other articles.

The fact of the matter is that the Latin American markets have as standards
those articles which happen to have been first imported ; if they came from Eng-
land, then British standards are accepted, and if they came from Germany, then
that type is right, and if they came from the United States, then our goods suit.

Now I ask, is this blind adherence to "what father used" progressive?
Must shoes always have a long narrow toe because that is the Spanish or the
French last? Can we not walk just as well in a different shape, and do we not



260 SECOND PAN AMERICAN COMMERCIAL CONFERENCE

gain something if we can buy that other shape made out of equally good leather,
at a cheaper price?

And that is why we North American manufacturers try to induce the Latin
Americans to accept goods as we make them for our own people in large quanti-
ties because we know that our goods, when once tried, give satisfaction, and
because we can sell them cheaper than imitations of what are often inferior
articles. We realize full well that in the beginning the merchant finds little
difficulty in introducing new types to his customers, but we believe that this
difficulty is more apparent than real and that the effort devoted to such educa-
tional work will find its reward in the ultimately greater satisfaction of the con-
sumer.



PRICE FIXING AS A FACTOR IN EXPORT TRADE TO LATIN

AMERICA

BY LANGWORTHY MARCHANT, EXPERT ON BRAZIL AND PORTUGUESE TRANSLATOR OF
THE PAN AMERICAN UNION.

The question of price is too important a one to be overlooked by manu-
facturers engaged in trading with Latin America. By the term price in this con-
nection I mean, not the net price at which goods leave the plant, but the net price
with all additions accumulated during the journey to the foreign buyer.

It seems to be established at the present time that European manufacturers
will not be able for a long time to come to supply the Latin American countries
with goods at the comparatively low prices at which they did so before the war.
They will be prevented by the increased cost of living and wages, as well as by a
deficiency of raw material and the generally disorganized conditions of their indus-
tries. There is therefore an outlook for a period of parity between the cost of
manufacturing in the United States and Europe, and consequently a greater
facility on the part of American manufacturers to compete on equal terms in the
markets of Latin America. It is observed, however, that this equilibration applies
to the trades of the two sources considered in the whole. It is clear that on either
side individual manufacturers may be able, through special efficiency, to land their
output in Latin America at a lower figure than others who may be less efficient
may not command the same sources of raw material or whose management may be
less economical. Consequently there is always room for competition in the mar-
ket, both among manufacturers on one side or between those on different sides of
the Atlantic.

I do not wish to minimize the importance of other factors in the trade with
Latin America, such as advertising methods, credit system, and the manner of
dealing which the manufacturer pursues with regard to his Latin American cus-
tomer. All these things are immensely important, much more so than they are
in relations of a manufacturer with his domestic buyers. But the fundamental
questions which have so long obstructed the free expansion of American export
trade are now in a fair way to a satisfactory adjustment. For instance, in the
manner of financing shipments, manufacturers are now able, through the aid of
the _ National Banks, the War Finance Corporation, and other general agencies, to
avail themselves of great facilities in the working out of a credit system which
frees them from the embarrassment which hindered their movements in the past.
A great deal of progress is also being made by manufacturers in the acquisition of
experience regarding appropriate methods of advertising and approaching Latin
American customers. With the clearing away of these and other difficulties, the
question of prices stands out more prominently in the problem. It has not become
more important in the absolute, but it has increased in relative importance, and is
destined to exert a great deal of influence in determining the success of manufac-
turers in the Latin American field.

Up to the outbreak of the war in Europe such American goods as found a
market in Latin America did so on the strength of their intrinsic merits. They
were articles of a superior order, which had not been produced elsewhere in
exactly the same kind or quality. Consequently they stood in the market as
privileged goods, and their manufacturers enjoyed a 'Corresponding degree of
freedom in fixing their price, being governed, only by considerations of margin



TRADING METHODS 261

between cost and net price, and of the paying capacity of the Latin American
market. In other lines of goods, however, such as could be produced in Europe
of as good a quality as in the United States, American industries were represented
but sparingly and in many cases not at all. The prime reason of this is clearly
that American manufacturers could not compete with the lower cost of produc-
tion in Europe except by. appealing to the argument of superior quality for their
own products. It is true that American manufacturers had not made any particu-
lar efforts to engage the Latin American, or any other foreign market, being con-
tent with the trade afforded by the home consumption ; but this circumstance is
in reality included in the statement, since, if the foreign markets had afforded
scope for profit, American manufacturers would, in obedience to a natural law,
have adapted themselves of such conditions, developing the necessary efficiency in
order to secure the corresponding advantages.

In these general lines the only competition upon which Europeans had to
count, except as among themselves, was that of the rising industries of the Latin
American countries. These native industries have now attained some degree of
development, chiefly in Mexico, Brazil and Chile. But whatever progress they
have shown is due in a great measure to the tariff regime instituted to protect
them. Prior to the outbreak of the war these high duties acted chiefly as a curb
on imports from Europe. They affected American imports in a lesser degree, for
the same reason which enabled them to resist the conditions of the lower cost price
of the European article that is, owing to their superior quality and the corres-
ponding prestige which they held in the mind of the Latin American public.

At the present time, with the exception of a few American articles which
are favored in the tariff law of Brazil, European and American producers stand
on about the same footing with regard to the native competition of Latin Ameri-
can countries.

It is well to notice in this matter of native industries that not all of them
utilize native raw materials. Under the protection of the law some industries
flourish which do not utilize raw material at all, but partly finished products
imported from other parts of the world including the United States. This con-
dition of course affords an opportunity to American manufacturers of partly
finished materials and machines utilized by these native industries. On the other
hand it may be remarked that these native plants are not as a rule prepared to
turn out the highest grade of products. They are calculated to satisfy the wants
of the poorer classes and some of those of the better classes, who cannot always,
but sometimes can and do, afford the luxury of the imported article.

In some lines it may be convenient for American manufacturers to produce
high class articles and price them accordingly, just as was the case before the war.
This, however, can no longer constitute a general policy, for it would curtail
Amerian trade without affording any compensating advantages. The higher price
obtained in the limited trade would not balance the returns obtained from a
large volume of trade in cheaper lines. What I mean is that manufacturers should
get rid of the idea they must send to Latin America only the highest grade of
their output. On the contrary it is best for all parties concerned for them to
supply the Latin American importers with several grades, just as they do with
regard to the home market. It is well to remember that in the Latin American
markets, as in any other market, for that matter, the consumer often finds it con-
venient to buy an article which he knows to be of middling grade, because he
cannot afford to pay the higher price demanded for the better one. In doing this
it is his object to save money at the expense of durability while looking after the
appearance, and he pays the lower price well aware that his purchase will not last so
long as the article left on the shelf, but that while it does last it will serve his pur-
pose equally well. Please note that I am not advocating anything like the wholesale
dumping into the Latin American markets of a mass of half worthless stuff such
as made up a considerable portion of the trade of the Germans before the war.
I do not recommend anything tending to bring discredit on the American industry
by the flooding of the Latin American markets with, inferior American goods.
In fact everything you ship should be of a quality which you need not be ashamed
to recommend. What I suggest is only that you send out a series of grades just
as you do for the home market in order to consult the limitations of the con-
sumer's purse, and thus avoid forcing him to supply himself elsewhere with goods
which may possibly please him less than yours. With such an arrangement of
grades the manufacturers can construct a corresponding scale of prices which will



262 SECOND PAN AMERICAN COMMERCIAL CONFERENCE

enable him to secure a large amount of trade lying between the limits of qualities
and grades supplied by competitors of all sorts.

From what has been said it can be seen that American industries as a whole
have now before them in Latin America an infinite variety of opportunities, of
which they will avail themselves or not according to their willingness to adapt
themselves to conditions as indexed by the prices of competing concerns. Here is
room for each manufacturer to study the prices as he finds them in the market
which he proposes to enter, and scale his own prices so as to consult, better than
his competitors, the multiple requirements of his customers, bearing in mind that
American goods will bring higher prices than the native articles of the same class,
but that the difference must lie within the bounds of the customer's budget.

As was said a moment ago, in all the present considerations, reference is
had to the price of the goods as they reach the importer, that is including c. i. f.
rates and duties. The adjustment of quotations to the consumers is a matter per-
taining to the local market. It stands, however, on the basis of the average prices
which the general body of wholesalers pay for their stock.

The question -now presents itself: Is it possible for a manufacturer, say at
Dayton, Ohio, to control the price at which a shipment of his goods will reach an
importer in Rio de Janeiro? Not in the absolute, since the problem rests in part
on conditions over which he has no dominion; on general economic conditions in
this .country and in the world at large governing the cost of labor, raw material,
transportation, insurance, customs, duties, etc. In a relative sense he can, owing
to the choice it is in his power to make of the agencies employed in carrying on
his trade. It is clear that if a manufacturer does his advertising and carries on
his dealings with his Latin American customers through representatives who are
bound by stipulations as to price ; employs express and forwarding agencies whose
functions are confined to this capacity, or does his own forwarding, he will be in
a position to control his outlay for c. i. f. rates and at the same time protect the
importer as regard proper classification of the goods in the Rio custom house by
attending directly to the packing and invoicing. If, however, he should deal
through export commission houses excellent institutions in their way, and often
convenient and necessary he cannot exert any control on any one of the con-