United States. Bureau of Foreign and Domestic Comm.

Markets for American hardware in Chile and Bolivia online

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Chilean Government. Taking 1912 as the most recent year in which
conditions approached the normal, it may be noted that the national
receipts were approximately $78,000,000 and the national expenses
$85,000,000. Such deficits will probably be covered by extraordinary
taxation.

CHILEAN BANKS — NEW YORK CORRESPONDENTS.

There are in Chile 25 banks with a combined capital of approxi-
mately $36,000,000 and deposits of $90,000,000. These various banks
have 112 branch offices, in addition to these, there is one faiown as



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20 HABDWABE MARKETS IN CHILE AND BOLIVIA.

the Caja Hipotecaria, which loans money on real estate by means
of trust mortgages. These loans are generally made in paper pesos
(the peso being worth at the present time about one-sixth of a dol-
lar), and these bonds are sola or traded in on the stock exchange.
This bank does not receive deposits, its real function being that of an
xmderwriting agent for the purpose of handling mortgages on real
estate. There are outstanding at present about $40,000,000 in these
loans, issued in paper currency. There are also about 58,000,000
francs of these bonds in Germany, about 50,000,000 francs in France,
and £662,000 in England.

No American bank is established in Chile at the present time, much
to the popular regret. There are, however, a number of European
and local Danks having New York: correspondents in the sense that
thev have established mutual credits against which they may respect-
ivefy draw. In the following Hst is given the name of the bank in
Chile, and opposite it the name of the New York correspondent:

Banco Aleman Transatldntico National City Bank, New York.

Banco Anglo Sud Americano Anglo South Americaa Bank, New York.

Banco de Chile Guarantee Trust Co., New York.

Banco de Chile y Alemania G. Amsinck & Co.. New York.

Banco EspafLol de Chile National City Bank, New York.

Banco Germdnico America Sur National Bank of Commerce, New York,

In addition to these banks, certain commercial houses buy and sell
drafts, and although the amoimt of their transactions comes to a large
smn in a year, this is an incidental, rather than a fundamental,
business with them.

THE QUESTION OF EXCHANGE.

The exchange business has been almost entirely through London
imtil a short time ago, and the American dollar nas been so little
known to the pubhc that a $20 gold piece was taken as £4 sterling,
when accepted at aU. But the financial difficulties of 1914 have
tended to introduce the doUar and make its value known. In
August, 1915, a remarkable departure was made, in decreeing that
expenditures could be made on certain Government work up to
$480,000 United States gold. All such decrees for foreign purchase
had previously been made in pounds sterling. Inasmuch as the
question of exchange is a very important one in Chile, there is shown
on the opposite page a small diagram giving the variation in money
of the country, as compared with the value of American cents. The
peso to which this graphic representation refers is not the gold peso
worth 18d. in British currency ($0,365 United States gold), in which
customs duties are paid; it is the paper peso — the only one that is
encoimtered in conmiercial use. It is obvious that when the value
of the paper goes down, foreign merchandise apparently becomes
more expensive, and bills falling due on a f aUing value of the peso are
sometimes not met as promptly as though the reverse were true.
This is a particularly important point to the exporter's credit de-
partment^ since it is often necessary to grant an extension at such
times.



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22 HABBWABE MABKETS IN OHILE AND BOLIVIA.

DL EXTENT TO WHICH HARDWARE IS USED.

Having considered in a general way the principal features of Chile,
which are as appUcable in studying the development of one line as
another, we may now take up trie presentation of other facts more
specifically related to the hardware trade. Certain general problems,
however, particularly as related to credits aud financing of sules, will
be considered later.

The extent to which hardware of various kinds is used in Chile,
although it can not be precisely calculated from the records because of
the ffreat variety of materials included in the official classification, may
be described as amounting to something less than $1 per capita, or a
total of about $3 ,500,000 per ypar. The items that each exceed $1 00,000
in annual consmnption are enameled ware, machine bolts, bolts and
screwsj railway bolts, shovels, lamps, nails, and locks, their importance
being m the order named. By far the, greatest of these is enam-
eled ware, which alone exceeds $500,000 ia annual importation, in
addition to the small amount produced by the five local estab-
lishments. • The local product is almost entirely blue, is of the cheap-
est variety, arid is made and presented in such a way as to be very
unattractive. The work is generally done in a factory making tin ,
articles as well,4ind among all the producers less than 100 persons are
employed, including many girls.

The records of machine bolts and screws are so closely interwoven
that it is very difficult, not to say impossible, to separate them in
such form as might be desired. In tne statistical data submitted
(see p. 36), which differs to a small degree from the form in which
the records are kept at the present time, carriage bolts, machine bolts
used in construction of buildings or by carpenters, stove bolts, screws
with washers for use in roof construction, and screws that are driven
into wood with a screw driver (which is what practically all North
Americans would mean by the word screw) are all reported imder
one classification.

BOLTS FOR USE OF RAILWAYS.

The reason that railway bolts have been included is that certain
tariff rates have been applied to aU bolts that are specifically destined
for the use of railways. This item includes track bolts. It is worthy
of note that a few of the hardware firms having continual dealings
with the railways — perhaps the largest single purchaser of the hard-
ware line — ^frequently find it convenient to make bids on a great
variety of bolts at the same time. It is not surprising that these
firms should desire to take advantage of any close relations they
may have estabhshed, for the purpose of semng some articles that
are not commonly considered a part of their special line. It would
be very difficult to separate the actual imports of track bolts from
locomotive bolts, or those used in construction of railway cars, trucks,
water tanks^ anchors for bridge work, etc., as they are for railway
use and subject to a rate of duty differing from that apphed to other
bolts. It is even conceivable that an importer might declare certaia
articles as railway bolts, because of their peculiar form, even though
the articles were destined for other uses, since he would thereby, in



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CHILE. 23

some cases, take advantage of the lower rate. Considering track
bolts alone, it may be interesting to note that there are in operation
in Chile 8,153 kilometers (5,066 miles) of track and that the renewal
of 10 per cent of the bolts per annum would require about 700,000
pounds of material. Ordinary new construction might make the
total an even million, or, we may say, 25 per cent of the total rail-
-way-bolt importation. This is not a definite figure, but the rough
estunate is offered for what it may be worth.

SHOVELS AND HANDLES — HARDWARE IN NITRATE "OFICINAS."

Shovels are not only used by the railways, nitrate producers, miners,
and other large companies, but are also in the hands of nearly
all the people. The peculiar Ukes and dishkes among the latter pur-
chasers are catered to by some merchants. The organizations that
are headed by competent managers would not permit the use of any
convenient stick as a shovel handle; but the small builder of laborers'
houses or the poor man who has a garden, is a farm renter on a small
scale, or works for the larger companies by piecework, has his own
ideas with regard to the handle he will use. Generally he prefers to
cut his own shovel handle from available wood. Th^ is partly the
result of custom, partly of the fact that it appears cheaper, and partly
of the import duty that he is thus able to avoid.

In connection with the nitrate producers, one may mention here
the more common classes of hardware used in the nitrate '^oficinas''
in the north of Chile. The following Ust was prepared by an engineer
intimately acquainted with the requirements in that industry:

Bolts and nuts; rivets, J to 1 inch; screws, i to 3 inches; wire nails, J to 6 inches;
door locks; door bolts; window bolts; Yale padlocks; plain hinges, 1 to 4 inches^ por-
celain door knobs; corragated iron, 6 to 9 feet; copper rivets; carpenters' tools; mmers'
hammers, 3 and 5 poimds; cold chisels; white metal; window fasteners; window weights:
pointed shovels; rounded shovels; pickaxes; pickax handles; handles for miners
hammers; clothes hooks; pincers; monkey wrenches; brandishers for steel cleaning;
spanners; copper wire; zmc wire; wire nettine; wheelbarrows; zinc buckets; pine
grease; paraffin; waste; wire rope for winches; sneet iron; tools for mechanics' work-
shops; iron brackets; axes; adzes; hatchets; iim crows; files; sandpaper; emery; black
lead; glue; shellac; resin* wiring for electric bells; carpet nails; iron chain, 1 to 2-inch
link; buckles for straps, harness, etc.; saddlers' needles.

LAMPS AND GLOBES — IMPORTATION ANP PRODUCTION OF NAILS.

The real number of any given kind of lamps that is imported or
made in the country is not snown in any available record. The cus-
ton\house reports the following articles imder this classification:
''Kerosene, gas, or electric lamps, with or without burners, globes,
reflectors, cmmneys, coimterweights, elbows, hooks, arms, or other
parts, made of steel, iron, tin, copper, brass, or glass, to be fastened to
the wall, suspended, or set upon a table.'' Incandescent globes are not
included unless they should be attached to a chandeUer, and this, of
course, would be a very imusual method of packing or shipment.

Nails are imported into Chile in large quantities, m spite of the fact
that there are several wire-nail factories in Santiago, two in Valpa-
raiso, one in connection with a sugar refinery in Vina del Mar, two in
Concepcion, one in Valdivia, and one in Talca. The wire is principally
imported from the United States. The business is practically in the



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24 HAEDWABE MARKETS IN CHILE AND BOLIVIA.

hands of one firm, because the installation is inexpensive and the va-
rious local producers cut down the prices to a point so low that they were
all about to f aU. The principal creditor of several of them, therefore,
organized the industry and supplies them with wire. He does not
permit them to sell without profit. In ^pite of these manufacturers
of wire nails, about 1,000 tons of this product were imported in 1914.
Thev were sold through retailers or to large companies on direct order,
the latter being permitted in some cases to import free of duty because
of concessions made for the development of certain industries. Actu-
ally, there was a very small amoimt, if any, coming in xmder such con-
ditions during the year immediately preceding the writing of. this
report. It is a custom, however, to make concessions of this character
from time to time, ana because of that fact American manufacturers
should always watch the records of concessions granted throughout
Latin America. These data are generally available in the pubUcations
of the Bureau of Foreign and Domestic Commerce, the Bulletin of the
Pan American Union, and other pubUcations issued in the various
coimtries, which are available to the foreign representatives of the
manufacturers.

The importatipn of cut nails during the year 1914 was about 2,000
tons. No factory is known to exist locally that makes this kind of
nails. The United States practically controls this business at the
present time, with the exception of the variety called *' cornered''
naUs, this term indicating that they have six sides, or are rounded
on top, or have some other pecuUar form that makes them desirable
for use in nailing leather to seats or saddles or in finishing interior
woodwork. Great Britain, Germany, and Belgium sell the greater
part of this kind.

QHABACTEB OF LOOKS USED — ^THEIR MANUFACTURE AND SALE.

The manufacture of locks is one that has not yet gained any foothold
in Chile. The importation seems very great for a coimtry that has but
three and a half million people, the customhouse valuation being about
$ 160,000 per year. The large majority of these, such as furniture locks
and padlocks for gates and stables, are of a cheap class and retail at
from 20 to 50 cents. In figure 6 are shown certain locks that indicate
the general type finding a market along the west coast of South Amer-
ica. In a general way it may be said that the locks used in Chile are
of a highly imsatisf actory kind.

It is common knowledge that many of the cheapest kinds of Euro-
pean locks are not made dv skilled workmen, but are assembled and
cut to fit by farmers and other laborers whose employment is seasonal
and who have considerable spare time, especially m the wiuter. It is
understood that they carry a number of the unassembled parts to their
homes and put them together there. Anything that will pass muster
at some price is, of course, so much to their advantage. In times past
the number of French locks of this type that have been oflFered by Ger-
man salesmen has been indeed surprising. They were collected by
German and French houses, it is beheved, and sold abroad as German
or French, as the nationality of the collecting house might be. This is
not to be taken as evidence of a tendency toward deception on the part



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CHILE. 25

of the salesmen, but rather as showing that the origm of the bill of
lading does not invariably afford a reliable indication with respect to
the actual nationaUty of the workmen. It was, of course, easier for
German firms to collect such goods and reexport them in a made-up
bill of goods than it was for houses of any other nationaUty, because of
the free port faciUties which that coimtry offers to its commercial
houses.

As is true of so many articles, the North American manufacturer
enjoys a fair, but relatively small, share of foreigti business in the bet-
ter grade of locks. This condition arises from the fact that he pro-
duces an article which virtually sells itself because of its quahty and
(at least to a reasonable degree) without reference to the price or
credit terms offered.

GENERAL CONSIDEBATIONS AFFECTING AMERICAN TRADE.

It may be remarked in passing that the writer of this report finds no
occasion for surprise in the comparatively small amoimt of business
that manufacturers of the United States obtain in certain lines. He
is rather surprised by the amoimt that is actually secured, in view of
the methods by which, only too frequently, their business in foreign
countries is conducted. It must be reaUzed that competition in most
foreign countries is very keen, and one notes with regret that many
American firms apparently cease their efforts abroad when the domestic
trade is thriving. Certain American companies, however, after many
years of effort, nave been able to build up a foreign busuiess based on
concretely practical experience, and they form an example worthy of
emulation by less far-sighted and judicious manufacturers. To them
great praise is due, and any other exporter desirous of achieving a
similar success should study very carefully certain vital questions.

Are his goods of such a quaUty or are they covered by such patents
that they can not be replaced from some other source ? If that is true,
then can he not find a place where they may be used even in competi-
tion with goods from other countries or factories ? Could he not offer
such credit faciUties that purchases might be made on installments ?
In foreign markets where he has failed because his goods were too
expensive or seemingly did not fill a need, could he not work up a
demand by emphasizmg their advantages or by introducing such asso-
ciated economies as to make his products a part of an economical
scheme, if not cheap in themselves ? Or can he not estabUsh connec-
tions with a foreign manufacturer who can make use of parts of his
product and introduce these parts cheaper than they can fee made by
other nations ? In many countries the import dutv on spare or repair
parts is much lower than on the finished article, and. the customs duties
are therefore of interest in the case of most articles that are made of
various parts.

REASONS OPERATING TO PREVENT CHILEAN MANUFACTURE.

Returning to a consideration of the specific subject in hand, it is
of interest to note that complete hardware — that is, from the raw
material to the finished article — can not at present be produced in
Chile to any great extent. The primary reason for this fact is that,



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26 HABDWABE MAEKETS IN CHILE AND BOLIVIA.

among the thousands of different articles that are included under
this general trade name, there are a great many specialties that can
only be produced under pecuUar conditions that are characteristic
of certain special localities. It is obvious that in a coimtrj in which
the very insuflSicient supply of male labor is reasonably mtelligent,
physically strong, poorly paid, and of consequent nomadic tenden-
cies, there is naturally Uttle inducement for the estabUshment of
factories involving the permanent investment of large capital in the
production of an arficle that rec[uires ffreat skill, a large market, and
a supply of semiprepared material ready for manufacture.

Chile is rich in high-grade iron ore, a wonderful variety of wood,
and a supply of coal far bejond the requirements of the people for
many generations. There is an abundance of water power and an
.average of one seaport (su6h as it is) for every 45 miles of coast Une.
But the Chilean iron will not be locaUy transformed intp steel,
because of the opposition to the importation of foreign coal to com-
pete with the product of the local rioines. There is a very evident
imwillingness to reduce the price of local fuel to such a degree as
will be necessary if the estabushment of industries in the coimtry is
to be reasonably faciUtated. The manufacture of steel imder the
ordinary methods requires coke. The Chilean coal, in the first
place, is of a poor coking quality, and, in the second place, the gas,
tar, ammonia, andother by-products would not find a ready market.
It may be added, also, that tne demand for steel along the west coast
of South America is insufficient to keep a steel mill occupied in any
group of specialties. It is true that there is a great deal of steel and
iron used in Peru, BoUvia, and Chile, the total annual demand in
these three countries amounting^ perhaps, to 250,000 tons. But this
ranges from rivets, nails, or wire, to rails, beams, shapes, wheels,
axles, and various machine parts. In round numbers, about half
of this tonnage consists of railway material for tracks, telegraphs,
fences, and other equipment, and although the amount mentioned
would easily maintam a steel plant if the product were all wire, for
example, it would not be sufficient when divided among so many
diverse articles.

FOREIGN COAL IN CHILE.

There is, at the present time, a very earnest tendency toward the
prohibition of entry of foreign coal into Chile, in so far as it may be
possible to accomplish this end by the favoring of local coal for rail-
way use and possibly by the placing of an import duty on all entering
coal. Whatever action is taken may not affect the introduction of
coal into the nitrate regions, because no perceptible advantage would
accrue as regards increased consumption of Chilean coal. Snips that
might ply between the local ports of Chile could have nothing to
carry south if they took coal north, and the ships coming aroimathe
Horn from Europe, boimd for the nitrate fields, come universally
under charter and can not stop to take coal north. The possible re-
sult, then, would simply be to mcrease the price of imported coal into
the nitrate fields, with no apparent benefit to the Chilean coal miners.
Inasmuch as the price of Cnilean coal is fixed in relation to the freight
rates from Austraha and the United States rather than on a produc-



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CHILE.



27



tion cost of about 12 pesos (or $2 American gold) per ton aboard ship,
it is believed that any increase in tariffs or any prohibitory act with
reference to importation would most seriously damage all the indus-
tries of the country in which coal is used.

in, FACTORS AFFECTING FUTURE DEVELOPMENT.

In a consideration of the future of the hardware market it is
desirable to review, in a cursory way, at least, the leading industries
in the territory imder investigation, since these are likely to indicate
the luies in which development may be rapid, the general character
of t]te articles used, and, in some cases, the lines m which compe-
tition might-be expected.

Statistics for some of the principal industries of Chile are shown in
the following tables:

MINING AND METALLURGY: PRODUCTION DURING 1911.



Minerals and metals.



Quantity.



Value.



Minerals and metals.



Quantity.



Value.



Argil (white clay), metric

tons*

Borax metric tons .

Coal do...

Copper pounds.

Gola Troy ounces.

Guano metric tons .

Gypsum do . . .

Iodine pounds.

Iron ore do. . .

Lead do...

Lime - .metric tons.

Marble do. . .



10,947

31,907

086,946

470,107

34,622

20,594

5,000

077,955

005,857

151,638

54,067

200



Online LibraryUnited States. Bureau of Foreign and Domestic CommMarkets for American hardware in Chile and Bolivia → online text (page 3 of 26)