THE LATIN AMERICAN RETURN 
 VISIT COMMITTEE 
 
 ^POINTED BY THE SECRETARY OF THE TREASURY OF THE 
 UNITED STATES IN COMPLIANCE WITH THE RESOLUTION 
 OF THE FIRST PAN AMERICAN FINANCIAL CONFERENCE 
 
 ISSUED BY THE SECRETARY OF THE TREASURY 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 1918 
 
REPORT 
 
 OF 
 
 THE LATIN AMERICAN RETURN 
 VISIT COMMITTEE 
 
 APPOINTED BY THE SECRETARY OF THE TREASURY OF THE 
 UNITED STATES IN COMPLIANCE WITH THE RESOLUTION 
 OF THE FIRST PAN AMERICAN FINANCIAL CONFERENCE 
 
 ISSUED BY THE SECRETARY OF THE TREASURY 
 
 ; 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 1918 
 
TABLE OP CONTENTS. 
 
 Report of Latin American Return Visit Committee 3 
 
 Report of Financial and Commercial Commission to Argentina 11 
 
 Appendix: Notes on leather, hides, and related industries in Argen- 
 tina, by Owen Gathright 24 
 
 Report of Financial and Commercial Commission to Uruguay and Para- 
 guay 31 
 
 Report of Financial and Commercial Commission to Brazil 38 
 
 Report of Financial and Commercial Commission to Peru, Bolivia, and 
 
 Chile 40 
 
 Report of Financial and Commercial Commission to Central America 74 
 
 2 
 
REPORT OF THE LATIN AMERICAN RETURN VISIT COMMinEE. 
 
 SIR : I have the honor to transmit on behalf of the Latin- American 
 Return Visit Committee the reports of the parties sent out under the 
 direction of the committee appointed by you pursuant to a resolution 
 of the First Pan American Financial Conference, adopted May 28, 
 1915. The resolution in question reads as follows : 
 
 That the Latin-American States unite in inviting the bunks and industrial 
 and commercial groups here present to join together and visit within a period 
 of six months the countries of Central and South America, where they will 
 be received by Governments, chambers of commerce, and industrial interests. 
 
 To which end, the Governments of the countries to be visited will hold it an 
 honor to have the visitors as their guests. 
 
 Details regarding the itinerary, etc., will be fixed at the proper time. 
 
 That a special committee representing the States assembled here be formed, 
 together with their diplomatic representatives accredited to the United States, 
 for the purpose of taking up and carrying out this suggestion. 
 
 And as a complementary measure * * * that the Secretary of the Treas- 
 ury * * * appoint a United States committee charged with giving practical 
 form to this idea and to organize the trip which is to result from it. (Proceed- 
 ings First Pan American Financial Conference, Washington, 1915, p. 236.) 
 
 This resolution having been unanimously approved by the delegates 
 to the conference, you appointed the following members upon the gen- 
 eral Latin- American Return Visit Committee: James A. Farrell, 
 chairman, New York City; Mr. H. E. Bard, New York City; Hon. 
 John Barrett, Washington, D. C. ; Mr. D. P. Black, Pittsburgh, Pa. ; 
 Mr. John Clausen, San Francisco, Cal. ; Mr. D. Y. Cooper, Henderson, 
 N. C. ; Mr. G. A. Davidson, San Diego, Cal. ; Hon. Duncan U. Fletcher, 
 Jacksonville, Fla. ; Mr. Elliot H. Goodwin, Washington, D. C. ; Mr. 
 S. M. Hastings, Chicago, 111. ; Mr. S. T. Henry, New York, N. Y. ; Mr. 
 Daniel Kelleher, Seattle, Wash. ; Mr. W. S. Kies, New York, N. Y. ; Mr. 
 A. L. Mills, Portland, Oreg. ; Mr. Charles C. Moore, San Francisco, 
 Cal.; Mr. Walter Parker, New Orleans, La.; Mr. James J. Shirley, 
 New York, N. Y.; Mr. Willard Straight, New York, N. Y.; Mr. 
 Edwin Warfield, Baltimore, Md. ; Mr. Robert H. Patchin, secretary, 
 New York, N. Y. 
 
 The labors of this committee, extending over one year and con- 
 sisting of organization of the several parties which visited Latin 
 American countries, were financially sustained by voluntary contribu- 
 tions from the members. No appropriation of public funds wn? 
 
4 RKPOKT CK RETURN VISIT COMMITTEE. 
 
 made a>ul rlx- 'niire expense of all the parties was borne by their 
 members. The International High Commission, Hon. W. G. McAdoo, 
 chairman; Dr. L. S. Howe, secretary general; Dr. C. E. McGuire, 
 assistant secretary general, cooperated with and supported the com- 
 mittee's work, and appreciative acknowledgment of this assistance- 
 is hereby made. 
 
 It is proper also to make due and sincere acknowledgment on be- 
 half of this committee, as well as on behalf of the gentlemen compris- 
 ing the several commissions, of the deep interest shown in this work 
 and ample facilities extended for its performance by the Departments 
 of State and of Commerce, which furnished letters and official creden- 
 tials to all the parties and assured the effective assistance of the 
 commercial attaches and consular representatives of the United 
 States throughout Latin America. The thanks of the committee are 
 due the Navy Department for the transportation afforded by the 
 U. S. S. Cleveland to the party visiting the countries of Central 
 America, without which their itinerary could not have been expedi- 
 tiously completed. Also to the Pan American Union is the com- 
 mittee deeply indebted. 
 
 At the outset, it was contemplated that a special commission should 
 be sent to each country with the exception of the Republics of Central 
 America and of the West Indies. One party, it was felt, could satis- 
 factorily cover the West Indian Republics and another could be so 
 arranged as to visit the six Republics of Central America. 
 
 The rapid changes in business conditions in the United States dur- 
 ing the winter of 1915-16 made it inexpedient to organize parties 
 large enough for practical purposes for each of the countries of 
 South America, and, consequently, it became necessary to plan for a 
 commission to visit the west coast of South America and another to 
 visit Paraguay and Uruguay. It was also contemplated that one 
 group should visit both Colombia and Venezuela. 
 
 Your committee carefully canvassed the financial arid industrial 
 centers of the United States for appropriate representatives of the 
 great commercial and financial activities of the United States, and 
 organized separate commissions as herewith listed: 
 
 Argentina. Mr. Owen Gathright, vice president, Harbison & 
 Gathright, Louisville, Ky., chairman; Mr. J. Ralph Pickell, Secretary 
 of the Chicago Council of Grain Exchanges, Chicago, 111. ; Mr. David 
 Beecroft, directing editor, The Automobile. Motor Age, etc., New 
 York City ; Mr. Charles W. Cheney, Harvard University, Cambridge, 
 Mass., secretary. 
 
 Uruguay. Mr. Arthur H. Titus, National City Bank, New York 
 City, chairman; Mr. William E. Hinchliff, president. Burson Knit- 
 ting Co., Rockford, 111.; Mr. Thomas A. Crimmins, Crimmins & 
 
REPORT OF RETURN VISIT COMMITTEE. 5 
 
 Peirce Co., Boston, Mass.; Mr. Henry L. Janes, engineer, Monte- 
 video, Uruguay; Mr. Emerson Hinchliff. Buenos Aires, Argentina. 
 
 Brazil. Dr. Richard P. Strong, American International Corpora- 
 tion, New York City, chairman; Mr. Charles Lyon Chandler, South- 
 ern Railway Co., Chattanooga, Tenn., secretary; Mr. W. L. Findley, 
 lawyer, New York City; Mr. Louis R. Gray, Arbuckle Bros. Co., Rio 
 de Janeiro, Brazil; Mr. Frederico Lage, Win. Morris Imbrie & Co., 
 New York, N. Y. ; Dr. Edward F. Stace, president, Stace, Burroughs 
 & Co., Chicago, 111.; Mr. Thomas W. Streeter, Streeter & Holmes, 
 Boston, Mass.; Mr. Arthur C. Weigel, Walsh Weidener Boiler Co., 
 Chattanooga, Tenn.; Mr. Henry C. Ulen, president, Ulen Contract- 
 ing Co., Chicago, 111. 
 
 Peru, Bolivia, and Chile. Mr. Ernest H. Wands, American Inter- 
 national Corporation, New T York City, chairman; Mr. O. M. Clark, 
 president, Clark & Wilson Lumber Co., Portland, Oreg. ; Mr. A. W. 
 McLelhm, president, Alden Mills Corporation, New Orleans, La. 
 
 Central America. Mr. Lamar C. Quintero, general attorney, 
 tropical divisions, United Fruit Company, New Orleans, La., chair- 
 man; Mr. Ernest E. Ling, manager, foreign trade department. 
 National City Bank, New York City; Mr. John Clausen, manager, 
 foreign department, Crocker National Bank, San Francisco, CaL; 
 Mr. J. P. Ripley, J. G. White & Co., New York City ; Mr. Thomas 
 J. Walker, vice president. First National Bank, Sari Fernando, CaL; 
 Mr. Roger W. Babson, president, Babson Statistical Corporation, 
 Wellesley Hills, Mass.; Mr. A. A. Biddle, Philadelphia, Pa., sec- 
 retary. 
 
 The parties contemplated for Venezuela and Colombia and for 
 Cuba and the other Republics of the West Indies have not yet been 
 organized on account of war conditions and it is doubtful just when 
 they may be set on foot. We believe it unwise further to delay 
 publication of the reports which have come to hand, especially since 
 the supplementary reports of the commissions just alluded to can be 
 submitted directly to your office whenever the visits actually shall 
 have been made. 
 
 The accounts given of the various trips by the gentlemen compris- 
 ing the respective commissions are clear, straightforward statesments 
 of fact, requiring little commentary or elucidation in a letter. of trans- 
 mittal such as this. Your committee, however, will be permitted, 
 perhaps, to call attention to certain interesting points contained in 
 the several reports. 
 
 The report of the Argentine commission contains, as do indeed 
 nearly all the reports, evidence of the need at this time of legislation 
 permitting the producers, manufacturers, and merchants in the 
 United States to combine for purposes of export trade. It has 
 been all too true, as the text of the Argentine report puts it, that 
 
6 BEPORT OF KETUKN VISIT COMMITTEE. 
 
 "there are very many persons who take it for granted that unless 
 a particular manufacturing company is large enough and powerful 
 enough to engage in direct exporting, it has no alternative but to 
 confine its efforts to the domestic market." Once more, the members 
 of your committee feel that the business community of this country 
 must be awakened to the necessity of, and full advantages to be 
 derived from, such legislation as the Webb-Pomerene bill permitting 
 cooperation in export trade. 
 
 The report of the Brazilian commission particularly, and other re- 
 ports incidentally, have dwelt upon the need for more extensive use 
 of the metric system of weights and measures in our foreign trade. 
 The extent to which human ingenuity has equalized Ilia conditions 
 under which production and distribution of merchandise lire car- 
 ried on everywhere in the world makes it necessary for us to take 
 into account what are apparently the smallest factors, if we are not 
 merely to hold our own with our competitors but to get an increased 
 share of the world's commerce, a share commensurate with our great 
 resources and our ability fairly and generously to serve the a?eds of 
 the rest of the world. Every factor, such as the use of the metric 
 system of weights and measures in catalogues, correspondence, specifi- 
 cations, etc., as well as ready and cheerful acceptance of other re- 
 quirements of our customers abroad and of their Governments, in- 
 cluding those which have reference to customs regulations, packing, 
 the handling of shipping documents, etc., must be given due attention 
 by our manufacturers if they are to hold the place that they have 
 gained in the markets of the world. 
 
 The commission which visited the west coast refers to the neces- 
 sity for a larger number of consular agents; and it may not be 
 improper to emphasize the desirability of increasing our staff of con- 
 suls and consular agents throughout Latin America. Immediate 
 increase of the clerical force is required. The presence of loyal and 
 vigorous representatives in all foreign ports and trade centers where 
 there is a potential market for our goods or which seem a likely 
 source of products which our own industries will need, is most 
 earnestly to be hoped for. This is rendered urgent by the consular 
 and diplomatic services' heavily increased duties in administration 
 of Avar trade regulations. 
 
 In the report of the commission which visited the six Republics of 
 Central America there will be found special reference to the great 
 need for uniformity of commercial law and fiscal administrative 
 methods throughout Latin America. Your committee feels that it 
 would not be doing justice to the great cause of international com- 
 merce if it failed to express its hearty indorsement of the work done, 
 under your guidance, by the International High Commission, looking 
 toward uniform^ in the commercial law and simplification of the 
 
REPORT OF RETURN VISIT COMMITTEE. 7 
 
 methods of fiscal administration of the American Republics which 
 was already well under way when the visits of these parties to the 
 countries of Central and South America were made; and which, 
 of course, has since been carried to a more advanced stage. Only 
 through the wider acquaintance of the leaders in finance and industry 
 in all portions of the hemisphere can the groundwork be laid for a 
 lasting structure of friendly social and economic relations, and such 
 a foundation has been laid and will from time to time be strength- 
 ened by Pan American financial conferences and parties organized 
 to visit our sister Republics. Upon this foundation must be built the 
 solid superstructure of study and scientific analysis of the laws and 
 administrative systems of all the Republics, study and analysis which 
 will result in substantial uniformity and harmony of administrative 
 methods and legal processes. This is the work which the Interna- 
 tional High Commission has carried on and must continue to carry 
 on with success. We especially commend its effort to secure uni- 
 form methods of classification of merchandise for statistical purposes 
 as the basis of a later effort to make uniform the customs tariffs of 
 this hemisphere. 
 
 The mutual interests of the United States and the sister Republics 
 were apparent to all visiting parties, but with the entrance of the 
 United States in the war Pan Americanism has become an essential 
 element of the great task of winning the war. Nine Governments 
 of Latin America have either declared war upon Germany, or have 
 broken off diplomatic relations. There is no country in Latin America 
 which does not supply some material required in the production of 
 supplies and munitions of war, and some foodstuff necessary to sus- 
 tain the army or the belligerent population behind the army. The 
 friendly commercial relations developed between the United States 
 and sister Republics before the war, and the market offered here for 
 Latin-American produce, created channels in commerce through 
 which is now flowing a steadily increasing stream of materials in- 
 dispensable to our life and industry and to our part in the present 
 conflict. The proportion of Latin- American produce directly im- 
 ported by Europe has decreased. The exports from the United States 
 to Latin- American countries have greatly expanded both in volume 
 and value. The natural economic reciprocity of the United States 
 and the other Republics is emphasized by the fact that the United 
 States offers the largest and most profitable market for their produce, 
 while they can now obtain nowhere else much of the manufactured 
 merchandise necessary to their development. In fact, they must have 
 many American manufactures in order to carry on their production 
 of nitrates, manganese, iron and copper ore, rubber, tin. wool, hides, 
 and foodstuffs, which the United States and the nations with which 
 we are associated in the war now so urgently require. 
 
8 REPORT OF RETURN VISIT COMMITTEE. 
 
 One of the most pressing problems for the United States is to ex- 
 pand, as a war measure, the production necessary to permit increased 
 exportation to Latin America. This will powerfully support our 
 financial and productive resources for the successful prosecution of 
 the war. 
 
 The recommendations of the return visit parties, coinciding as 
 they do with those of other organizations would, if carried into ef- 
 fect before 1917, have strengthened the United States for its part in 
 the war. They should, through national policy, be accomplished 
 without delay. Practical Pan Americanism calls for a larger degree 
 of cooperation than hitherto has been possible. 
 
 All the parties have emphasized the necessity of improved facili- 
 ties for transportation. Generally speaking, the tonnage available 
 for exports has been sufficient for the traffic because the total tonnage 
 of imports greatly exceeds that of exports; and vessels returning to 
 South America for wool, coffee, nitrate, copper ore. sugar, etc., huve 
 afforded ample space. 
 
 During the period of our neutrality it was strikingly apparent 
 that the commerce of the United States with Latin American 
 Republics was at a disadvantage because it was so largely de- 
 pendent upon steamers under European flags, the service of which 
 was rapidly depleted by governmental requisition. The officials of 
 all countries visited emphasized their desire for direct and more fre- 
 quent steamship communication with the United States. The various 
 Governments, both in the Pan American Financial Conference 
 and otherwise, have indicated their desire to assist in a practical 
 manner the establishment of direct services. The problem is not 
 alone one of steamship services under the United States flag. Several 
 of our neighbors have considerable merchant fleets and some of them 
 have pursued constructive policies for strengthening their commercial 
 carrying power. 
 
 The importance of investment of capital in the development of 
 Latin American resources by the business interests in the United 
 States is apparent. The progress of Mexico, Cuba, the Republics of 
 Central America, and the northern part of South America is in no 
 small degree due to American investments, and the predominance 
 of American merchandise in the import trade of those nations bears 
 a close relation to these investments. Farther south the proportion 
 of investments by business interests in the United States is less, 
 but it has been steadily increasing during the last three years and, 
 for the first time, certain of the larger South American Govern- 
 ments have borrowed extensively in the United States. 
 
 During the war the United States will probably not be in a posi- 
 tion to make large investments for industrial purposes in Latin 
 American countries, but it should be remembered that they are de- 
 
REPORT OF RETURN VISIT COMMITTEE. 9 
 
 pendent upon foreign capital for development and that their ability 
 to serve the commercial needs of more fully developed countries is 
 in direct proportion to the extent that the financial resources of 
 such countries are available to them. 
 
 The responsiveness of the commerce, and indeed of the whole 
 economic situation, of the countries of Latin America to the 
 shock of world war, is dwelt upon by all the visitors whose impres- 
 sions are here gathered, and once more it is made clear that the 
 world's commerce is a delicate fabric wholly unified and readily 
 affected throughout its extent by a disturbance of any portion of it. 
 When we have learned how closely related to the prosperity and well 
 being of our domestic commerce and, indeed, of our domestic -affairs 
 and government, is the trade and body of commercial relations 
 which we maintain with the other nations' of the world, we will 
 realize how necessary it is for every producer and manufacturer on 
 no matter how small a scale to keep himself fully informed of the 
 principles and tendencies of international commerce. When we have 
 come to know how much the relations existing between our country 
 and our neighbors in this hemisphere or the other will affect 
 vitally and immediately the entire structure of our industry and 
 trade, we shall take more intelligent and vigilant care to see that 
 those relations are upon the best possible basis than we have ever 
 done before. 
 
 The committee feels, Mr. Secretary, that the resolution of the Pan 
 American Financial Conference has substantially been carried out, 
 and that the process has been an instructive and valuable one, 
 whereof the record is now submitted for such disposition as you may 
 care to make; and, on behalf of my colleagues, I extend the sincere 
 thanks of our committee for the stimulus and assistance that you 
 have given, and I ask that the committee be discharged. 
 Respectfully, 
 
 JAMES A. FARRELL, Chairman. 
 ROBERT H. PATCHIN, Secretary. 
 
 The Honorable 
 
 The SECRETARY OF THE TREASURY, 
 
 Washington, D. C. 
 
REPORT OF FINANCIAL AND COMMERCIAL COMMISSION 
 
 TO ARGENTINA. 
 
 Hon. W. G. McADoo, 
 
 Secretary of the Treasury, 
 
 Washington, D. C. 
 
 SIR: The commission appointed by you to visit Argentina, in 
 response to the invitation extended to the business men of the United 
 States by the Latin American delegates to the First Pan American 
 Financial Conference in Washington, May 25-20, 1915, consisted 
 of the following : Mr. Owen Gathright, vice president of Harbison & 
 Gathright, wholesale leather and saddlery merchants, Louisville, 
 Ky., chairman; Mr. J. Ralph Pickell, secretary of the Chicago 
 Council of Grain Exchanges, Chicago, 111.; Mr. David Beecroft, 
 directing editor of The Automobile, Motor Age, Motor World, Motor 
 Print, The Commercial Vehicle, and other periodicals devoted to the 
 automobile industry; and Mr. Charles W. Cheney, of Harvard Uni- 
 versity, secretary of the commission. 
 
 In order to facilitate its study of commercial and industrial con- 
 ditions in Argentina, Dr. Albert Hale, commercial attache of the 
 United States Embassy at Buenos Aires, was associated with the 
 commission. 
 
 The party sailed from New York on April 29, 1916, arriving in 
 Buenos Aires on May 22. On May 29 the commission adopted the 
 somewhat unusual course of visiting the interior for information. 
 The itinerary included the important commercial cities of Rosario 
 and Santa Fe on the River Parana, the educational and industrial 
 center at Cordoba, and the sugar-growing region about Tucuman. 
 This route also passed through some of the very fine agricultural 
 and cattle-raising country on which the prosperity of the nation is 
 founded. 
 
 The official visit of the commission concluded on June 10 with a 
 dinner given in its honor by the United States Ambassador and Mrs. 
 Stimson, at which prominent Argentine officials were present. The 
 members returned to the United States at intervals thereafter, as soon 
 as each had completed his special investigation. 
 
 The general report of the committee follows. For much of the 
 information contained in it, the members of the committee would 
 
 n 
 
12 REPORT ON ARGENTINA. 
 
 express grateful acknowledgement to Prof. P. T. Cherington and 
 Dr. Julius Klein, of the Harvard University School of Business Ad- 
 ministration. Following the general report of the committee will be 
 found some notes and special observations prepared by Mr. Gath- 
 right. Similar special reports were prepared by Messrs. Beecroft 
 and Pickell. Mr. Beecroft's report upon the automobile market has 
 been published by the Department of Commerce in Miscellaneous 
 Series, No. 62, which may be obtained from the superintendent of 
 documents, Government Printing Office, Washington. Mr. Pickell's 
 report upon the market for agricultural machinery, and the extent 
 and character of the Argentine grain trade has been published pri- 
 vately in an attractive booklet by the J. Rosenbaum Grain Co., of 
 Chicago. 
 
 I. DESCRIPTION AND RESOURCES Of ARGENTINA. 
 
 The Argentine Republic embraces an area of over 1,000.000 square 
 miles, roughly equivalent to that part of the United States east of the 
 Mississippi River. It covers 35 of longitude, or a range equal to 
 that between Cuba and Labrador. But the pampa, which is the most 
 fertile and commercially important part of the country, is included 
 between the latitudes of 30 and 40 S., while Buenos Aires, the 
 capital, corresponds roughly to the latitude of Charleston. S. C. or 
 Los Angeles. Cal. At this point the Republic has a width of about 
 700 miles to the crest of the Andes, with the Pacific Ocean only 100 
 miles beyond. For some 200 miles east of the mountains the rainfall 
 is insufficient to support crops and irrigation has been employed to 
 some extent. The remaining two-thirds of the pampa contains some 
 of the finest land in the world, and it is here that the greatest devel- 
 opment has taken place. 
 
 The population of Argentina is now nearly 8,000,000, approxi- 
 mately that of Canada. It is doubling about every 20 years as new 
 regions are opened up to settlement and communication. Indians 
 are found only in the remote provinces, while negroes are scarcely 
 ever to be seen. It is probable, in fact, that the proportion of white 
 people is larger than in our own country. 
 
 Buenos Aires, a clean, cosmopolitan, and enterprising city of about 
 1,500,000 inhabitants, is 7,000 miles distant from New York and is 
 reached by direct passenger steamers of 10,000 tons in 23 d&ys. Owing 
 to the marvelous development of the interior, additional deep-water 
 ports have been constructed at Bahia Blanca (on the coast 500 miles 
 south of Buenos Aires), Rosario (200 miles up the River Parana from 
 the capital), and Santa Fe (100 miles above Rosario). All these 
 ports enjoy the most modern facilities, including docks, warehouses, 
 loading machinery, and direct railroad connection. The chief im- 
 
REPORT ON ARGENTINA. 13 
 
 portance of the first two is for the exportation of grain, and of the 
 last for the exportation of forest products, while Buenos Aires re- 
 mains the leading center for importation. In addition to these large 
 ports, there are numerous small towns, both on the coast and on 
 the Rivers Parana and Uruguay, which are accessible by steamers 
 discharging into lighters as inducement offers, and regularly by 
 transhipment at the more important ports to coastwise or river 
 steamers. A point to be remembered is that, since almost all of 
 South America lies to the east of the United States, the ports on the 
 English Channel are to all intents and purposes as near to Buenos 
 Aires as New York or Boston. 
 
 Until recently the railway system of Argentina has been growing 
 very rapidly. There are now over 22,000 miles of line of meter 
 gauge (3 feet 3 inches), standard gauge (4 feet 8J inches), and broad 
 gauge (5 feet 6 inches), the last of which comprises more than half 
 the total. Argentina thus has a greater railway mileage than any 
 other country south of the equator. The service is very good, and 
 no discomforts are to be expected in traveling. Hotels in the cities 
 of commercial importance will be found entirely satisfactory. 
 
 The leading industry in Argentina is the growing of cereals, chiefly 
 wheat, corn, and linseed, for which her broad fertile plains are ad- 
 mirably adapted. The country now ranks with Canada and Russia 
 as one of the granaries of the world. Next in importance is the live- 
 stock industry, in which Argentina has taken the place of the United 
 States as one of the leading sources of the world's supply. Some 
 of this development is due to the erection of facilities for slaughter- 
 ing and refrigerating for the European market by American packers, 
 who were suffering from the decreasing supply of cattle in this 
 country. A remarkable development which has occurred recently 
 has been the fact that live-stock products have displaced agricultural 
 products as the chief exports of the country. This is due to the 
 bumper crops in the United States and Canada in 1915 and to the 
 shortage of shipping, with the result that comparatively little grain 
 was bought from Argentina, while the demands of the outside world 
 for her hides, wool, and frozen meats were unchecked. In 1916, on 
 the other hand, both the United States and Argentina were suffering 
 from extremely short crops. The third important group of exports 
 is forest products, which consist chiefly of the extract of quebracho, 
 obtained from the great forests north of Santa Fe and sent abroad 
 for use in tanning. 
 
 In addition to these staple industries, figuring so prominently in 
 the export trade, are other activities which limit themselves to sup- 
 plying the home market. Chief among them are the sugar industry 
 
14 REPORT ON ARGENTINA. 
 
 of Tucuman and Salta, and the wine industry of Mendoza. There 
 is some development of water power, especially at Cordoba, where 
 flour mills and shoe factories are operated by electricity. The fact 
 that practically all the coal used in the country had been, before the 
 war, largely imported from Great Britain, and is now imported 
 from the United States, prevented the growth of manufacturing to 
 any great extent, and probably will continue to do so. This lack of 
 coal also explains the high rates on the railways, as well as the fact 
 that the houses are not heated in winter. Recently, petroleum has 
 been discovered in the remote southern part of the country, but it is 
 too early to predict how great its effect will be. 
 
 The following figures, taken from Argentina official reports and 
 converted into United States dollars at the rate of 96.5 cents for a 
 gold peso, will give some idea of the effect of the war on the foreign 
 commerce of Argentina : 
 
 Year. 
 
 Exports. 
 
 Imports. 
 
 Dec. 31,1913 
 
 $466,581,888 
 
 $406 605 203 
 
 Dec. 31, 1914 
 
 337 030 246 
 
 262 304 274 
 
 Dec. 31 1915 
 
 538 740 820 
 
 218 %1 487 
 
 Dec. 31, 1916 
 
 453 911 952 
 
 211 343 535 
 
 
 
 
 These figures indicate that Argentina did not escape the world- wide 
 paralysis of trade immediately following the decLanition of war in 
 Europe. In common with the rest of the world, exports were 
 checked by the uncertainty as to delivery and payment, and con- 
 sumption of both domestic and imported goods was reduced to bare 
 necessities. The high figure for exports in 1915 is stated to be due 
 to exceptionally high prices, especially for meat products, and not to 
 an increase in the volume of exports. The intensification of the 
 shipping famine, with a consequent reduction in volurne_j explains 
 the falling off in 1916, though the figures for that year remain ap- 
 proximately equal to those for 1913. This condition is reflected, as 
 already explained, in the decrease of 49 per cent, or nearly half, in 
 the exportation of agricultural products during the first half year 
 (the latest period for which detailed figures are available). Mean- 
 while, the decline in imports, very sharp at first, is being gradually 
 checked. But a change in the other direction is not to be expected 
 until new construction is resumed throughout the country, and that 
 depends to a great extent on the investment of foreign capital a 
 subject which will be discussed farther on. It is important to note 
 the trend of these import figures, however, in order to understand 
 the remarkable fluctuations in Argentina's imports from the United 
 States. 
 
REPORT ON ARGENTINA. 15 
 
 The changes in Argentina's trade with this country during the 
 first two and a half years of the war are shown by the following 
 table, based on figures in the Statistical Abstract of the United 
 States. Since these figures are differently compiled, and cover a 
 different period from those of the Argentine Government already 
 given, any comparisons indicating percentages will be only approxi- 
 mately correct. The reason for using these different sets of figures 
 is simply to show the latest statistics available in each group^ The 
 figures for Argentina's trade with the United States follow : 
 
 Years. 
 
 Exports to 
 United States. 
 
 Imports from 
 United States. 
 
 June 30, 1913 
 
 $26, 863, 732 
 
 $52,894 834 
 
 June 30 1914 
 
 45 123 988 
 
 45 179 089 
 
 June 30 1915 
 
 73 766 258 
 
 32 549 606 
 
 June 30 1916 
 
 112 512 420 
 
 65 993 611 
 
 Dec.31,1916' 
 
 116,292,647 
 
 76, 874, 254 
 
 
 
 
 In her trade with this country Argentina's exports have shown a 
 steady and very remarkable growth, having increased more than 
 fourfold. Her imports, on the other hand, at first showed a very 
 striking falling off, being in the fiscal year 1915 a full $20,000,000 less 
 than two years previously. The figures for her total imports go far 
 toward explaining this change; for, when consumption was re- 
 stricted, there was naturally a decrease in purchases from the United 
 States, as well as from other countries. Indeed, were it not for the 
 fact that many new lines of American goods have been introduced 
 during this period, a still greater decrease would have been shown. 
 Lately this latter influence has been overcoming the former, so that 
 imports from the United States are now increasing rapidly, while 
 total imports continue to decline. Arranged in descending order, 
 the new lines, and those in which an increase is shown, include coal, 
 iron and steel products, cotton and cotton goods, oils, paper, glass, 
 cleaned rice, malt, sacks for packing meat, spare parts for vehicles, 
 and woolen cloths. The lines in which Argentina has enlarged her 
 exports to us are wool, hides, frozen meat, and linseed. Much of this 
 increase represents goods which formerly reached this country from 
 Argentina via England or some other point of transhipment. The 
 latest figures available (calendar year 1916) show that Argentina's 
 exports to us have increased 334 per cent over the fiscal year 1913, 
 while her imports from us have increased only 45 per cent. We are 
 thus in a more favorable position to increase our sales to Argentina 
 than before the war, as any increase now would tend to restore the 
 equilibrium rather than to upset it. 
 
 1 [The figures for 1917 may be interesting: Exports to United States, $178.245,833; im- 
 ports from the United States. $107,041,905. Editor.] 
 
16 REPORT ON ARGENTINA. 
 
 II. INDIRECT METHODS OF EXPORTING TO ARGENTINA. 
 
 It is not the purpose of this report to enter into a detailed discus- 
 sion of indirect methods of exporting. Yet there are very many 
 persons who take it for granted that unless a particular manufac- 
 turing company is large enough and powerful enough to engage in 
 direct exporting, it has no alternative but to confine its efforts to the 
 domestic market. It becomes necessary, therefore, to point out that 
 there are many strong houses in New York and other seaports of the 
 United States organized expressly to take care of such foreign 
 business. 
 
 Take, for instance, the export commission house. In its pure form 
 such a house merely places orders sent to it by its clients abroad 
 and receives from them a commission for so doing. But most of the 
 export commission houses now engage in a merchant business, buying 
 and selling on their own account. So far as the manufacturer is 
 concerned, there is very little difference between selling goods to an 
 export house in New r York for consumption in Argentina and selling 
 them to a wholesaler in New York for consumption in Connecticut. 
 In either case the manufacturer supplies the goods ordered in the 
 best condition he knows how and receives his money immediately. 
 The export house or the wholesaler finds the customers, attends to 
 shipment, and assumes the credit risk. This system of selling abroad 
 has the same advantages, disadvantages, and obligations as dis- 
 tributing through wholesalers at home, and, as any manufacturer 
 knows what they are, further consideration of them here is un- 
 necessary. 
 
 , If the manufacturer is located at an inland point and feels the 
 need of some one on the spot to represent him in his dealings with 
 such houses as those just mentioned, he has at his disposal in New 
 York a large number of so-called manufacturers' export agents. 
 These men, or firms, do business on terms ranging all the way from a 
 consignment to a merchant basis, and some one can usually be found 
 whose terms will be satisfactory to the manufacturer. When that is 
 done, an exclusive agency agreement for the exportation of the goods 
 is concluded between the parties. It need hardly be mentioned that 
 such a step presupposes as careful consideration and choosing as the 
 manufacturer habitually gives to similar arrangements for his purely 
 domestic business. One of the chief advantages of the manufac- 
 turers' export agent is the fact that he is in a position to reach the 
 large number of foreign buyers who come to New York to select the 
 goods they desire. 
 
 Many manufacturers doing an indirect export business have found 
 it profitable to assist these distributing agencies by themselves stimu- 
 
REPORT ON ARGENTINA. 17 
 
 lating the demand for their goods in the territory to be exploited. 
 This can be done in three ways, the best results being obtained when 
 all three are used together : 
 
 (1) Advertising. Success here requires some idea of what argu- 
 ments will make the strongest appeal to buyers in Argentina. If no 
 one is available with that knowledge, the New York distributing 
 agency which the manufacturer is seeking to help may be consulted 
 for advice. 
 
 (2) Correspondence. Unless the person or firm addressed has 
 indicated a willingness to use English, all correspondence should be 
 in Spanish. If there is not enough of it to justify the employment 
 of a Spanish-speaking person in the office, the correspondence can be 
 translated by some reliable person recommended by the distributing 
 agency. It is important that the sense, rather than the words, of the 
 letter be rendered. These considerations apply with equal force to 
 circular letters and catalogues. 
 
 (3) Travelers. The use of travelers in Argentina to stimulate 
 demand may be the most effective, as well as the most expensive, 
 method of accomplishing that end. On account of the high cost, 
 several manufacturers often combine to have one traveler promote 
 their goods. The advantages and disadvantages of such a plan will 
 be discussecj in connection with salesmen in direct exporting. Where 
 the object is not to make sales but to stimulate demand, as in this 
 case, care must be taken to refer all inquiries to the regular channels 
 for distribution. 
 
 When it comes to actually shipping the goods the American manu- 
 facturer who is not in the habit of doing it immediately runs into 
 difficulties. This is where the services of the foreign freight for- 
 warder may be found useful. Most of the domestic express com- 
 panies have well-equipped departments for this purpose. For a small 
 commission they will supply information as to packing, marking, 
 and billing ; will take charge of the shipment at seaboard ; and will see 
 that it is delivered in good condition to the Argentine buyer. It goes 
 without saying that where a foreign freight forwarder is employed 
 for this purpose all instructions as to packing, marking, and billing 
 must be faithfully carried out ; the only reason for taking advantage 
 of this service is the fact that the forwarder is familiar with the 
 details of shipment to Argentina, while the manufacturer is not. 
 The same applies to instructions given by a New York export house. 
 
 III. DIRECT METHODS OF EXPORTING TO ARGENTINA. 
 
 The chief advantage of direct exporting over indirect is that it 
 brings the center of interest nearer the buyer and consequently tends 
 100318- 2 
 
18 REPORT ON ARGENTINA. 
 
 to give greater satisfaction and to increase sales. Its disadvantages 
 are its greater cost and the fact that a few serious blunders may 
 permanently ruin the market for the goods sought to be sold. This 
 applies to the exportation of manufactured products the world over, 
 not alone to Argentina. 
 
 The first possibility for the manufacturer is to have his agents in 
 Buenos Aires, rather than in New York. This may be done on either 
 a commission or a merchant basis. If an Argentine house is chosen, 
 care should be taken that it is not also the agent for a competing line 
 of goods manufactured in its home country. In that case, of course, 
 the American manufacturer would be foolish to expect his goods to 
 be pushed as vigorously as those of his competitor, a situation best 
 guarded against by means of an exclusive agency contract. When the 
 manufacturer, after very careful consideration, has finally arranged 
 with the importing house either European or Argentine which is 
 to represent him, he should leave to it the filling of orders from inte- 
 rior points. This does not prevent his helping to stimulate the 
 demand in any of the ways already mentioned. 
 
 If the prospective business seems to warrant the expense, the 
 manufacturer may establish a branch office in Buenos Aires. Such a 
 branch would sell to the same people, and probably on the same 
 terms, as would the agent just discussed; but it would have a closer 
 relation to the home office, and could more effectively carry out the 
 policies of the company. As it would not have other lines with an 
 established sale to swell receipts, it would usually be a losing venture 
 for a period of years, and should not be undertaken unless the pros- 
 pects have been found on thorough investigation to be very good. 
 
 Finally, traveling salesmen, reporting direct to the home office and 
 taking orders from wholesalers or retailers throughout Argentina, 
 may be employed. The following considerations with respect to 
 salesmen apply equally to anyone representing the manufacturer in 
 Argentina, viz, the staff of a branch office, the importing house 
 chosen as agent, or the travelers whose mission is merely to stimulate 
 orders to be filled through indirect channels. 
 
 (1) The manufacturer comes into personal contact with his cus- 
 tomers only through his representatives. If they are the right kind, 
 the results will probably appear in a satisfactory, if not a surprising, 
 volume of sales; if they are the wrong kind, the manufacturer's 
 reputation may be ruined for a generation. These things are im- 
 portant in the United States; they are even more important in 
 Argentina. The manufacturer will suffer in dollars and cents if he 
 sends a representative who can not be introduced into polite society, 
 who adopts a patronizing attitude toward his customers, or who in- 
 dulges in sharp practice under the impression that he is benefiting 
 his principal. 
 
REPOItT ON ARGENTINA. 19 
 
 (2) In order to accomplish anything worth while, there must be 
 the fullest confidence on both sides, which implies that when the rep- 
 resentative makes recommendations looking toward any changes in 
 policy, or even in the goods themselves, the manufacturer should be 
 very sure of his ground before turning them down. For it may be 
 assumed that any manufacturer who has gone so far as to choose 
 or send a representative for the Argentine market is seriously anxious 
 to succeed there and is willing to make any reasonable changes to 
 accomplish that end. From this ma}?- be seen the extreme importance 
 of chocking a representative who can be trusted to the fullest extent, 
 and then giving him a chance to do his best work without being 
 molested by home advice from anyone whose experience of the 
 Argentine is less extensive than his own. 
 
 (3) Another quality that is absolutely essential in any repre- 
 sentative, whether agent, salesman, or traveler, is thorough ac- 
 quaintance with both the goods and the market. It is a generally 
 accepted principle at home that a satisfied customer is the best ad- 
 vertisement, and the principle is every bit as true in Argentina. It 
 does not tend to satisfy a customer to sell him an article which is 
 physically incapable of fulfilling the ends to which he proposes to 
 put it: nor does trying to sell him an article totally unfit for use in 
 his country. Several cases have been brought to our attention of 
 importers who have come all the way from Argentina to procure 
 goods which they knew were manufactured by American firms, but 
 which could not be obtained through the accredited representatives 
 of those firms in their country. Obviously, they would not take this 
 trouble if corresponding goods could, for the time being, be obtained 
 from any other source. While a knowledge of the Spanish language 
 is of very great importance, it can not take the place of familiarity 
 with the goods and the market. 
 
 (4) Once a manufacturer has his representatives in Argentina, it 
 becomes necessary for them to report to someone in the home office 
 who is in a position to coordinate the demands of selling with those 
 of production. It has already been pointed out that it will require 
 one of the very best men obtainable to do full justice to the Argentine 
 market as a representative on the spot. Such being the case, it is 
 extremely important that his judgment be not overruled by anyone 
 in the home office who knows less about selling in Argentina than he 
 does. The responsible person at home should certainly be an officer 
 of the company, and should, if possible, actually have visited South 
 America. Of course, not all firms will be able to start with any such 
 system as this, but they should nevertheless attempt to reach such a 
 situation at the earliest possible date in order to obtain the best 
 possible results. 
 
20 REPORT ON ARGENTINA. 
 
 The decision to embark in direct exporting involves certain factors 
 with which the manufacturer is but little concerned in indirect ex- 
 porting. In the first place, it is fatal to expect success if orders from 
 the representative are ever turned down on the ground that the mill 
 is already sold up on home orders. No agent or salesman can build 
 up a permanently remunerative trade for an article if he runs the 
 risk of having his repeat orders refused whenever there is a boom in 
 the home market. In other words, a concern engaging in direct 
 exporting must give up the idea once and for all that Argentina is 
 a convenient place to dispose of surplus production. Certainly, an 
 American business man who had gone to the trouble and expense 
 of creating a market for a particular brand of foreign goods and 
 then found his repeat orders arbitrarily refused, would never again 
 push those goods. This is one of the things to which the manu- 
 facturer who wants the trade must make up his mind. 
 
 In direct exporting also the question of payment assumes a more 
 complicated form. Owing to the great distance from New York and 
 the practice of paying the manufacturer's 90 days' sight draft on the 
 buyer with another 90 days' sight draft on London, the whole trans- 
 action is not ordinarily completed in less than 240 days. During 
 the war a good deal of business has been done on terms involving 
 payment of the seller's draft by a sight draft on New York, but 
 even that requires 150 days for completion. Yet this does not mean 
 that the manufacturer has to wait all that time for his money. Far 
 from it. He can take his draft with documents attached to a bank 
 in New York having correspondents in Buenos Aires and London and 
 get his cash immediately. The bank will make certain charges to 
 cover collection and interest, which normally amount to about 2 per 
 cent of the sum involved. In practice, the manufacturer usually pro- 
 tects himself by adding 2| per cent to the amount of his invoice and 
 drawing his draft for the total. The net result is that the manufac- 
 turer gets his money immediately, while the importer gets the credit 
 he desires and pays the charges made by the bank for its service in 
 holding the bills until due. Of course, if the customer fails to pay 
 the draft at maturity, the manufacturer will be called upon to reim- 
 burse the bank. To guard against such occurrences, however, the 
 manufacturer has available the full credit information on Argentine 
 houses obtainable from the various credit agencies, as well as the 
 private advices of his own representative. 
 
 One other factor in this connection should be noticed. In response 
 to the desire of many manufacturers to engage in foreign trade 
 without the heavy expense and risk of individual direct effort, the 
 Webb bill, modifying the anti-trust laws so as to permit formation 
 of cooperative export associations, has been passed by the House of 
 Representatives, and is now (September, 1917) awaiting action by 
 
REPORT ON ARGENTINA. 21 
 
 the Senate. It has the indorsement of the administration. Its prin- 
 ciple has likewise been indorsed by four National Foreign Trade Con- 
 ventions and by a referendum of the Chamber of Commerce of the 
 United States. 
 
 IV. ADDITIONAL FACTORS OF MUTUAL ADVANTAGE. 
 
 There are two factors which are usually beyond the control of 
 the exporter, but which, by intelligent effort on the part of other 
 American business men or of the Government, can be made extremely 
 helpful to him, while at the same time helping the Argentinians by 
 supplying additional facilities which are greatly needed. These fac- 
 tors have to do with shipping and with investment. 
 
 So long as the goods shipped from this country to Argentina 
 did not compete with those shipped from the European countries 
 in which the steamship lines were owned, there were few complaints 
 of discrimination in rates, though the service from Europe has always 
 been both faster and more frequent. This has left us at a disad- 
 vantage, because of the slow and unreliable postal communication, 
 but mainly through the fact that merchants handling American goods 
 had to have a larger capital tied up in stocks to last them until the 
 arrival of the next steamer. And with the rigid economic measures 
 now being adopted by the great European nations, it is hardly likely 
 that their shipping companies will be allowed to transport our goods 
 on even terms, if we show any signs of capturing their markets. 
 Even now there are instances where the Buenos Aires office of an 
 American firm has been buying its goods from the London office of 
 the same firm rather than from the home office, because it could 
 obtain vastly superior freight service from London. With the end 
 of the war and the revival of competition from Europe, some other 
 way will have to be found. 
 
 Until recently the establishment of American steamship lines to 
 Argentina has been discouraged by the scarcity of return cargoes; 
 but in the last three years, as already shown, the balance has run 
 heavily the other way, and there has been a considerable increase 
 in the number of American ships on this route. A peculiar difficulty 
 arises from the lack of coal in South America. Hence, all steamers 
 have to carry enough fuel to take them down and as far back as some 
 coaling station in the West Indies, usually Trinidad or Barbados. 
 This situation normally affects steamers of all nationalities equally, 
 but during the present war it has become a serious problem for 
 American exporters. The difficulty might be overcome by the estab- 
 lishment of a coaling station in Porto Rico or the newly acquired 
 Virgin Islands. Argentina, being farther from the consuming cen- 
 ters of Western Europe, has suffered more from the shipping famine 
 
22 REPORT ON ARGENTINA. 
 
 than has the United States, and is eagerly hoping for relief through 
 the provision of American ships. 
 
 The second way in which we can benefit both the Argentinians 
 and ourselves is by investing capital in their country. In this regard 
 England holds the commanding position, having financed most of the 
 railways and many of the public utilities and private enterprises 
 of the land. But the demands of the war have largely interrupted 
 the supply of capital and checked the development of the country, 
 and doubtless will continue to do so for some time to come. 
 
 Now, there are two main classes of consumers in Argentina: the 
 Argentinians themselves, and the foreign-owned corporations domi- 
 ciled in Argentina. The former class is reached for the most part 
 through European import houses, which normally buy in their home 
 markets, but American houses are steadily increasing their share of 
 the trade. With the cessation of imports from Germany through the 
 port of Genoa early in 1915, and the reduction in imports from 
 France and England due to the war, many European houses in 
 Argentina have been forced for the first time to seek supplies in 
 this country. If these newly introduced American articles eventually 
 reach and satisfy the native Argentinian, he is likely to create a 
 " consumer demand ' for them after the war, which will make it to 
 the advantage of the European importers to continue to handle them, 
 as they already do American harvesting machinery otherwise, they 
 will probably revert to their former sources of supply. 
 
 On the other hand, those newly-introduced American articles which 
 eventually reach a European-owned corporation, even though satis- 
 factory, are likely to be discarded as soon as the mother country is 
 once more able t0 supply them this because the boards of directors 
 of such companies are largely composed of Europeans, who naturally 
 give the preference to their nationals when ordering supplies. The 
 following is a case in point: A United States company had built a 
 power plant near Cordoba which contained exclusively United States 
 machinery; a few years later the same company built another plant; 
 but in the meantime the control had passed to Englishmen, and the 
 machinery in it was exclusively British. One of the unexpected 
 effects of the war has been to make us more and more able to spare 
 capital for investment in foreign lands, and the wise use of as much 
 as finds its way to Argentina should allow that country to resume 
 its interrupted development without waiting for the reconstruction 
 of Europe. 
 
 V. SUMMARY. 
 
 The conclusions of this report may be summarized as follows : 
 I. In the last few years Argentina has been assuming a place of 
 greater importance as a source of supply for many staple products 
 
REPORT ON ARGENTINA. 23 
 
 which are needed in this country. In return it offers an attractive 
 market for a large variety of our manufactured goods, if the problem 
 is approached in the right way. 
 
 II. It frequently happens that it is inadvisable for a manufacturer 
 to undertake direct exporting. In such cases, after it has been ascer- 
 tained that the particular product is adapted to the Argentine market, 
 the existing means of handling such business may be used to ad- 
 vantage. 
 
 III. No manufacturer should undertake to do his exporting to 
 Argentina direct without being ready to apply to the problem the 
 same careful attention and good business judgment that have made 
 him successful at home. Without such a personal interest in his 
 Argentine trade, the possibilities of the market can not be fully 
 realized. 
 
 IV. The commercial and financial relations between the United 
 States and Argentina can be further strengthened to their mutual 
 advantage by the use of United States ships, and especially of United 
 States capital, to help develop the resources of the " Great Republic 
 of the South." 
 
 SOURCES OF INFORMATION. 
 
 In addition to the first-hand information acquired while in Ar- 
 gentina, the following sources have been used for much of the infor- 
 mation obtained in the report: 
 
 Dollar, Capt. Robert: How to Obtain Foreign Trade. New York, Official 
 Report National Foreign Trade Convention, 1914. 
 
 Duval, G. L. : Th Relation of the Merchant to Import and Export Trade. 
 New York, Official Report National Foreign Trade Convention, 1914. 
 
 Farrell, J. A.: The War and South American Trade. New York, National 
 Foreign Trade Council, Bulletin No. 1, 1914. (Out of print.) 
 
 Hough, B. O. : Practical Exporting. New York, American Exporter, 1915. 
 
 Filsinger, E. B. : Exporting to Latin America. New York, D. Appleton & Co., 
 1916. 
 
 Business Training Corporation : Course in Foreign Trade. New York, Busi- 
 ness Training Corporation, 1916. 
 
 The commission respectfully submits to you and to the Latin 
 American Beturn Visit Committee the material which it has gathered, 
 and indulges in the hope that study of the facts set forth here and 
 elsewhere will stimulate the business community of the United States 
 to address itself with increased vigor to the promotion of trade rela- 
 tions between Argentina and the United States. 
 Respectfully, 
 
 OWEN GATHRIGHT, Chairman. 
 
 JULY 1, 1917. 
 
24 REPORT ON ARGENTINA. 
 
 APPENDIX. 
 
 NOTES ON LEATHER, HIDES, AND RELATED INDUSTRIES IN 
 
 ARGENTINA. 
 
 [Prepared by Owen Gathright, chairman of the return visit party for Argentina.] 
 
 So many, varied, and increasing have been the demands and the drains upon 
 the basic supplies of materials entering into the production of leather that 
 prices have soared high, and much ingenuity and capital have been expended 
 in efforts to reduce cost and time of production. It can not be said that these 
 efforts have uniformly resulted in the production of a better or even as good an 
 article of leather as of old. 
 
 It is a fact, notably in the United States, that the supply of cattle, and, 
 therefore, the supply of hides, has not kept pace with the steady increase in 
 population with its consequent larger demand for leather for all the varied 
 domestic and industrial uses and purposes to which it has long been applied. 
 
 It may safely be said, I believe, that no raw basic material used in such 
 quantities as hides of cattle, and so necessary to supply the needs of the 
 human family, has, under normal conditions of trade, advanced so steadily and 
 greatly in a given time. The green hide of a Chicago or Argentine packer steer 
 with its offal of flesh, hair, salt, and tail, now brings five or six times as much per 
 pound in the States as in the eighties, and sells for twice the price per pound 
 that finished first-class thoroughly bark-tanned harness leather sold for in the 
 eighties. The end is not yet reached in prices, unless intelligent and scien- 
 tific means be taken to conserve and use economically not only hides and skins, 
 but the valuable tanning and currying materials that enter into the manufac- 
 ture of good leather. I would place emphasis upon " good " leather, for it is 
 little short of criminal to kill the life and service of a good hide in the tanning, 
 either by quick processes in order to shorten the time, or by the introduction 
 of salts or other mineral substances to add weight to the leather. 
 
 Long and exhaustive tests by the War Department of the United States Gov- 
 ernment, through the Quartermaster's and Ordnance Departments, have demon- 
 strated the superiority of bark-tanned leather for service as required in the 
 military equipment of our Army, in shoes (particularly for the soles), harness, 
 saddles, etc., preference being given to oak-bark tannage, particularly because 
 it resists water or dampness better than other tannages, and, therefore, is 
 naturally longer lived, and not as liable to disintegration from the effects of the 
 ment of American banks or branches, and there is room for more of these. 
 
 TANNING MATEEIALS. 
 
 Argentina now occupies the position of being the world's largest exporter of 
 hides and tanning materials, from which the United States draws her greatest 
 outside supply. 
 
 Next to the hide (or skin), the most important raw material in the making 
 of leather good leather is one that produces the tannin. The two chief 
 materials of the United States for this purpose are, or have been, oak bark and 
 hemlock bark, the oak having been longer used, and generally conceded the 
 best for producing leather of superior quality and durability. That the supply 
 of these barks, particularly the oak, has been rapidly approaching a condition 
 when it would not, at any price, be adequate to meet the requirements of the 
 tanning industry, has recently and repeatedly been claimed. Like conditions 
 obtain in the great tanning countries of Europe, probably more acutely than 
 in our country, and they have cast about for the best sources of supply from 
 other countries. What do we find as the result of this search for new and 
 
REPOET ON ARGENTINA. 
 
 25 
 
 reliable tanning materials? The British capitalist who had found his many 
 hundred millions invested in Argentina railroads, docks, lighting plants, and 
 other utilities, to pay him well, and the less wealthy, more scientific German, 
 backed by financial interests allied to the tanning industry, began some years 
 ago an aggressive development of the quebracho wood and tanning extract 
 industry in Argentina, which in a comparatively short time has grown to- 
 remarkable proportions and, as figures show, with profitable results to the 
 investors. There are some eight or ten large companies engaged in the business 
 of selling quebracho logs to be sawed and ground up and rendered into liquid, 
 or solid tanning extract, very much as syrup or sugar is made from cane, or 
 as maple syrup, or sugar, in the States is made by boiling the sap, or wood 
 extract down into a liquid form, or into solid hard cakes, having very much 
 the appearance of rosin, or asphalt. Not all these companies make the 
 quebracho tanning extracts; the logs are sold largely to Germany, England, 
 and other foreign countries, and to an extent to the United States, to be made 
 into the extract. There is a large sale of the smaller quebracho timber for 
 beams, posts, and firewood, but the few companies that have manufactured the 
 extract have built up a remarkable business. Through the courtesy of the 
 management (Mr. Gustavo Brandeis, administrator general) and from the 
 report of the directors of the Forestal Land, Timber & Railway Co. (Ltd.), 
 the largest of these companies, some interesting figures are given on the 
 showing of its business for the years ending December 31, 1914 and 1915. 
 We submit also, from other sources, some salient figures as to this industry. 
 The Forestal Co., said to own some 5,000,000 acres of timbered pasture and 
 agricultural land in the Province of Santa F, is also a large breeder of cattle. 
 Its home office and sales headquarters are in London, but before the war the 
 selling agency of the company was at Hamburg. On the outbreak of the war 
 the two German directors were removed from the board, as was the German 
 manager in Buenos Aires. 
 
 The Forestal has a capital of 3,091,699, or about $15,000,000, half in prefer- 
 ence and half in ordinary shares of 1 each, to use the British term. Preference 
 shares are entitled to G per cent cumulative dividend and 25 per cent of the 
 surplus profits available for dividends, wh'le ordinary shares are entitled to 
 75 per cent of the surplus profits available for dividends. Of the above stock 
 193,300 shares each preference and ordinary were sold in 1914 at 2 and 3 
 per share, respectively, or a premium of 100 per cent for preference and 200 
 per cent for ordinary shares, the total premium received amounting to 579,900, 
 or $2,750,000. These additional shares, or their proceeds, were used for the 
 acquisition of the assets of the New York Tanning Extract Co. and the 
 Argentine Quebracho Co. The properties of the Argentine company are now 
 included in the item of " Freehold timber and pastoral lands, factories, steam- 
 ers," etc.. of the Forestal Co., which item on December 31, 1914, amounted to 
 4,251,890, or over $20,000,000. The assets of the Forestal Co., in round figures, 
 are: 
 
 Assets. 
 
 Pounds 
 sterling. 
 
 United 
 
 States 
 equivalent. 
 
 Freehold timber lands, factories, steamers, etc 
 
 4 251 SCO 
 
 S21 000 f 00 
 
 Stock of extract and felled timber 
 
 930 931 
 
 4 oOo'oOO 
 
 Ft )c' s o r stores and materials 
 
 248, 663 
 
 1 180 010 
 
 
 540 7 C 6 
 
 2 5"0 COO 
 
 1 ive stock 
 
 52>,8 3 
 
 2 500 000 
 
 Sundry do! ts due the company, bills receivable advances etc 
 
 818 282 
 
 3 900 000 
 
 Cash at banks and on hand. , 
 
 317,945 
 
 1,500 000 
 
 
 
 
 Total assets, approximate 
 
 11 890 270 
 
 57 2oO 000 
 
 
 
 
26 REPORT ON ARGENTINA. 
 
 In addition to the preferred and ordinary shares outstanding, there are two 
 issues of 5 per cent mortgage bonds of 1,200,000 each. 
 
 The factory and real estate in New York acquired from the New York Tan- 
 ning Extract Co. were incorporated into a new American company entitled 
 " New York Quebracho Extract Co.," the shares and bonds of which, owned 
 by the Forestal Co., are included in the item of "Holdings in associated under- 
 takings and other investments " on the books of the company. 
 
 Many most interesting details are set forth in the report of the directors 
 presented to the ninth annual general meeting of the Forestal Co., at London 
 June 18, 1915 (Baron Emile D'Erlanger, chairman), and in the 31-page pro- 
 ceedings of that meeting, from which I quote briefly with the object of setting 
 before our people facts as to the importance of the quebracho wood and extract 
 business, not alone to the great tanning industry of the United States but as 
 a field for the profitable investment of American capital. 
 
 The report states: 
 
 " The outbreak of the war caused serious dislocation of the company's affairs 
 for a few months when all but two of the extract factories had to be closed 
 down, and the sales of timber to Europe were almost completely stopped. 
 These conditions, of course, adversely affected the results for 1914. However, 
 since the beginning of the current year (1915) the factories have been working 
 to their fullest capacity. The results so far obtained (June, 1915) justify 
 the anticipation that the profits for 1915 will exceed those of any previous 
 year. It is most gratifying to be able to place before you so strong a balance 
 sheet, however, and I am glad to be able to say that a balance sheet to June 
 30, 1915, instead of to December 31, 1914, would reveal a stronger position 
 still. [Applause.] " 
 
 The results for 1914, that had been " seriously affected by the war," show : 
 Fixed assets, 4,251,000 December, 1914, against 3,436,000 December, 1913, an 
 increase of 815,000, or nearly $4,000,000 this in the face of the fact that, in 
 the language of the report : 
 
 " We have deleted from our accounts the sum of 405,000 of good will, in- 
 cluded in fixed assets last year. When we purchased the Argentine Forestal 
 Co. and turned it into an English company we had to pay 405,000 for good 
 will. It is indisputable that the good will is worth a great deal more than 
 405,000, nevertheless, we thought it was a good thing to avail ourselves of the 
 premium realized on the shares under the American contract (579,921) and 
 delete (charge to profit and loss) this sum from our balance sheet." 
 
 This is unquestionably a strong position. 
 
 " Holdings in associated companies December, 1913, 163,000 ; December, 1914, 
 540,000. The addition of 377,000 is due to new holdings in the New York 
 Quebracho Extract Co., and to the bonds we hold of the Province of Santa Fe. 
 Live stock, December, 1913, 420,000 ; December, 1914, 529,000 ; valuation made 
 on the same principle. Total of liquid assets, live stock, extract, felled timber, 
 etc., of 2,845,000 could readily be sold. Reserve, in round figures, is 740,000, 
 all invested in the business of the company. Depreciation account, composed 
 of sums set aside out of profits year by year, amounts to 491,000." 
 
 Nearly $2,400,000 of profits " gleaned out of the woods " and set aside for 
 depreciation speak eloquently of profits that must have gone into dividends to 
 satisfy that hungry mortal, the stockholder. 
 
 " Profit on trading, dividends from associated undertakings, and interest 
 614,880" (nearly $3,000,000). On this point the report says: 
 
 " Not as good as we should have liked to put before you, but it would be most; 
 ungrateful to grumble at a profit and loss account which shows such a profit 
 
REPORT ON ARGENTINA. 27 
 
 In a year of stress and duress like that through which we have passed. For 
 oight months of the year prices ruled lower than ever before." 
 
 Quebracho extract in June, 1914, was $62 to $63 a ton gold in Buenos Aires, 
 nrnl in June, 1916, about $235 to $245 per ton gold, though the logs were quoted 
 at $12.75 ton gold in June, 1914, and only $15 a ton in June, 1916, in Argen- 
 tina. It was stated in Argentina that at June, 1916, price of quebracho logs, 
 about $15 a ton gold, the extract could be made for $80 or $90 a ton. It is 
 claimed that 4 tons of logs will produce a ton of the extract. 
 
 From the " not good profit " in $60 to $80 a ton quebracho extract in 1914 
 the Forestal paid 8 per cent on preferred shares, 6 per cent on ordinary shares, 
 added 117,500 ($550,000) to its generous depreciation account and 26,500 to 
 its reserve account. 
 
 A synopsis of the results of the Forestal Co.'s operations for the year 1915, 
 obtained recently, shows a trading profit of 1,281,299 as compared with 614,880 
 for 1914, or over 100 per cent increase in profit, and the chairman of the share- 
 holders' meeting, London, June 16, 1916, gave them good reason to hope that 
 the extremely satisfactory results for 1915 " would be greatly surpassed dur- 
 ing 1916." 
 
 After deducting London charges, and debenture interest from the large trad- 
 ing profit, and setting aside 143,600 for depreciation account, now totaling 
 634,170, adding 33,600 to reserve, making it total 25 per cent of the paid-up 
 capital, a net profit of 900,947 ($4,300,000) was left, nearly four times the 
 net profit of 1914 after similar deductions. Of this, 200,000 was set aside for 
 excess profit duty, income tax, war, and other contingencies, 463,000 paid in 
 dividends, 12 per cent on preferred, and 18 per cent on ordinary shares ; 200,000 
 placed to special reserve ; 37,000 added to the " carry forward " to the credit of 
 both classes of shares. 
 
 EXPORTATION OF QUEBRACHO EXTRACT AND LOGS FROM ARGENTINA. 
 
 The exportation of quebracho tanning extract from Argentina since 1900, 
 six years before the Forestal Co. was formed, increased from a little less than 
 6,000 tons that year to 113,600 tons in 1915, worth approximately $20.000,000, 
 of which 35,400 tons came to the United States. The falling off of extract 
 exportation into the United States in 1915 from 1914 may have been due to 
 the large importation of logs and the manufacture of the extract in this 
 country, as the United States imported from Argentina 66,000 tons of quebracho 
 logs in 1914 and 96,000 tons in 1915, of total exportations of 291,000 and 
 195,000 tons of logs for the respective years. The exportation of quebracho 
 logs for the manufacture of the extract was 240,000 tons in 1900, fell back 
 to 200,000 in 1903, rose to 438,000 tons in 1911 (the record year, nearly 100.000 
 tons in excess of any previous year), fell back to 279,000 tons in 1912, and rose 
 to 342,000 tons in 1913, the second largest year on record. Of this large 1913 
 exportation of logs the year before the war Germany took 129,364 tons, or 
 pearly 38 per rent of the whole more than the next two countries combined, 
 namely, Russia (52,665 tons, and the United States, which took 54,682 tons. 
 The exportation of logs for 1914 was 291,000 tons; for 1915 it was 195,000 
 tons, of which the United Stiuos took 80,000 tons, or nearly 50 per cent of all 
 exported in tbnt year. 
 
 QUEBKACHO EXTRACT, QUEBRACHO LOGS, AND SMAU.KU \\OO1). 
 
 It 1s rstiiTaterl that four tons of quebracho logs will make one ton of the 
 tanning extract. 
 
 Quebracho wood (Colorado or rtv.l. from wMr'i tani Ing extract !- imtU.^ Is 
 kory hard and heavy, its specific fjrnvity IK-SHU' 1,27 as *i gainst 1.1S for ebony. 
 
28 KEPOKT ON AKGENTINA. 
 
 0.77 to 0.90 for English oak, 0.70 for ash, 0.55 for elm, and 0.45 for white pine, 
 and naturally yields a large percentage of extract. It is said to yield in 
 weight fully 25 per cent of solid tanning extract, and the by-products are very 
 valuable, particularly in eastern Argentina, the center of greatest population, 
 where timber of all kinds is very scarce. In fact, quebracho beams for rail- 
 road ties and other purposes bring higher prices per ton than the logs used 
 for manufacture of extract, while the still smaller timber is carefully graded 
 into three or four sizes and lengths for posts, for which there is and will con- 
 tinue to be great demand for wire fences, etc. All defective quebracho, offal, 
 branches of trees, etc., find ready sale as fuel, as our West Virginia and similar 
 $3 to $4 a ton coal has brought $30 to $40 a ton in Argentina. It is claimed by 
 experts that 2$ tons of quebracho as fuel equals 1 ton of coal. Our committee, 
 on its trip of observation and investigation through interior provinces, saw 
 practical demonstrations of the use of quebracho wood (offal) as an effective 
 and economical fuel in the English-owned power plant of the Santa Fe street- 
 car system, as up to date, clean, and complete a plant, for its purpose, as is to 
 be found anywhere. A large stock of coal was on hand for any emergencies, 
 but great stacks of quebracho carefully piled were being fed the furnaces. 
 Mr. Eugene Betts and his assistant, Mr. Lovelli, who, under the effective 
 arrangements made by Dr. Albert Hale for our trip to the interior, extended 
 us all the courtesies and practical assistance possible, took us over their rail- 
 way system and power plant, and through the legislative building to call on 
 the governor of the Province of Santa Fe ; and, through the courtesy of the chief 
 of the department of docks, who gave us the use of his launch, accompanied 
 us on a sail of inspection of the docks, where we saw a ship loading a cargo 
 of quebracho extract exclusively, worth $1,600,000, destined for far-away Russia. 
 We landed and looked partly through an uncompleted plant being erected for 
 the manufacture of dyes from wood, in nearly all colors, it was claimed. The 
 interesting machinery for " clawing " the logs into fine shavings being similar 
 to that used in the manufacture of tanning extract. 
 
 Santa F<5 is the chief port for export of quebracho logs and vies with Buenos 
 Aires in export of the extract. The latter is also exported from Rosario and 
 Collastiua. 
 
 QUEBUACHO TANNED LEATHEB. 
 
 Our observations and limited investigation of the tannage of leather in 
 Argentina by the use of quebracho lead to the conclusion that tanners there 
 who use only the extract from that wood do not get as good results in the 
 finish, and probably not in quality of leather, as those tanners in the United 
 States who combine, or blend, quebracho extract with oak, hemlock, or other 
 tanning ingredients. 
 
 We inspected at a large plant at Buenos Aires the process of tanning leather 
 by the use of the quebracho wood ground into a substance very much like coarse 
 sawdust or hominy, this ground wood being spread upon the hide after it had 
 been soaked, dehaired, fleshed, and laid in the tanning vat. Layers of hide with 
 ground quebracho alternating between until the vat was properly filled, when 
 water of proper temperature or liquor would be let in, and, as by the " old 
 fashioned bark-tanned " process used largely in the United States, the hides 
 were allowed to remain for four or five to six months, and sometimes longer, 
 until the tanning had been extracted from the wood and thoroughly penetrated 
 and tanned the hides. This tannery utilized thoroughly every particle of 
 the quebracho log, which was sawed into proper lengths, split to thicknesses 
 of 3 or 4 inches, and fed into a powerful grinder, similar to our hominy 
 mill. After the tannin had been thoroughly extracted from the dust it was 
 
KEPOKT ON ARGENTINA. 29 
 
 fed, wet, into the furnace, which with the powerful draft of a tall concrete 
 stack seemed to make of it as good fuel as dry wood or coal. This tannery 
 spent not a dollar annually for any other fuel. 
 
 It is of interest to note that only the body or wood of quebracho timber is 
 used and ground up in tanning, the bark being discarded; while the reverse 
 is the case in oak and hemlock tannages, for which only the bark is carefully 
 stripped from the tree and ground to the proper substance for " bark tanning," 
 or is rendered into extract. Owing to the growing scarcity of tan bark in the 
 United States, particularly of chestnut-oak, the wood has been, to a limited 
 extent, used in making a tanning extract, said to be of inferior quality to the 
 extract from the bark. 
 
 TRIP OF OBSERVATION AND INVESTIGATION INTO INTERIOR PROVINCES OF ARGENTINA. 
 
 Rosario. In the well-planned but necessarily limited trip of observation and 
 investigation to some of the interior Provinces of Argentina laid out for 
 us by Dr. Hale, we visited Rosario, on the River Parana, a city of 230,000 
 population, second hi size after Buenos A,ires. We were met by Mr. William 
 Dawson, jr., United States consul, who, after luncheon at the Strangers' 
 Club, conducted us through an inspection of the extensive port works, the 
 Bolsa de Comercio, and other places of commercial interest and importance. 
 Rosario is an important railroad center. The workshops of the Central Argen- 
 tine Railroad, British owned, are located here, in which are manufactured 
 not only equipment for its own use, but for tramways. Rosario is a thriving, 
 growing business center, a field for United States manufacturers in many lines, 
 but not extensively cultivated as yet. The huge hardware and kindred goods 
 establishment of Chiesa Brothers, with a battery of stores and warehouses 
 that rival some of the famous plants in our country, is located here. The 
 owners are Italian. The most courteous general manager of the business, 
 Mr. E. J. Rosenberg, gave liberally of time in showing us through the sample 
 and sales departments. Practically all classes of heavy and shelf and builder's 
 hardware, tools, cutlery, iron, wire, iron pipe, chains, cultivation implements, 
 machinery, house furnishing goods, furniture, pumps, sewing machines, etc., 
 are handled. Here and there were to be seen articles of United States manu- 
 facture, but not conspicuous in number or variety. This house is the agent at 
 Rosario for the Buenos Aires branch of the National City Bank of New York. 
 
 Cdrdoba. Cordoba, capital of the Province of C6rdoba, population about 
 110,000, some 12 hours from Buenos Aires by the Central Argentina Railroad, 
 commands a somewhat unique position of distinction in the cities of Argentina. 
 It is called the Greenwich of Argentina for here is located their famous national 
 observatory which sets the time for the Republic. We were greatly pleased to 
 find that it was in the efficient hands of a citizen of the United States, Dr. 
 Carlos Dillon Perrine, formerly of Lick Observatory. 
 
 A distinction associated with Cordoba is that its national university is one 
 of the two or three oldest in the Western Hemisphere. Founded in 1615, it is 
 some years older than Harvard, and is the most noted educational institution in 
 Argentina. 
 
 Opportunity for the introduction of general lines of United States manu- 
 factures exists at Cordoba, as at all other cities visited, to a greater or less 
 degree, if manufacturers will give proper study to particular requirements, will 
 furnish what is desired, not always necessarily the cheapest, will give reason- 
 able credit, and treat the trade with patient courtesy and fairness. 
 
 Quebracho grows near Cordoba and logs and extract are marketed to some 
 extent from this point. There was brought to our attention the fact that great 
 
30 EEPORT ON ARGENTINA. 
 
 deposits of white, mottled, and colored marble of superior quality lie iii the 
 hills near Cordoba. 
 
 8UMMAKY AS TO LEATHER, HARNESS. SAMDLEUY, SHOES, ETC. 
 
 Argentina produces, under favorable conditions, great quantities of raw 
 materials for the manufacture of leather, namely, hides, skins, and quebracho, 
 of which materials the United States imports enormously. Therefore her manu- 
 facturers in these lines, protected by a high tariff, make it an uphill business for 
 United States manufacturers to export these goods into that country or into 
 Brazil, particularly the cheaper and plainer manufactures. They do not yet 
 possess the skill to produce as finely finished leathers as in the United States, 
 particularly for better classes of shoes, riding saddles, etc., and there is room for 
 export trade in these lines. In fact, this country is supplying botii Argentina 
 and Brazil with great quantities of upper leather, and a number of standard 
 makes of North American shoes now have a foothold. 
 
 CONCLUDING NOTES. 
 
 1. It is but repetition to say that the transportation facilities between the 
 United States, Argentina, and other South American countries are wholly 
 inadequate and far from favorable to the interests of the United States 
 importer arid exporter, largely because the ships are foreign owned. 
 
 2. Our financial relations have been given a healthy impetus by the establish- 
 ment of American banks or branches, and there is room for more of these. 
 
 3. The essentials necessary for our citizens in obtaining South American 
 trade, to quote an experienced banker, are: "() Show them the goods. (&) 
 Give them reasonable credit, (c) Treat them fairly. They will be permanent 
 customers." 
 
REPORT OF FINANCIAL AND COMMERCIAL COMMISSION 
 TO URUGUAY AND PARAGUAY. 
 
 Hon. W. G. McAnoo, 
 
 Secretary of the Treasury, 
 
 Washington, I). C. 
 
 SIR: The commission appointed to return the visit of the delegates 
 from Uruguay to the Pan American Financial Congress held in 
 Washington from May 24 to 29, 1915, as finally organized, was com- 
 posed of Mr. William E. Hinchliff, Rockford, 111.; Mr. Thomas A. 
 Crimmins, of Boston, Mass.; Mr. Henry L. Janes, of Montevideo, 
 Uruguay; Mr. Emerson Hinchliff, of Buenos Aires, Argentina; and 
 the undersigned, Mr. Arthur H. Titus, of New York, who was elected 
 chairman of the committee. 
 
 The gentlemen comprising the committee had duly received their 
 commissions to act as members, and those who were not already here 
 arrived in time to permit of the party leaving Buenos Aires, March 
 19, 1916, for Montevideo. We advised the Uruguayan committee of 
 the date of our intended arrival, and when we reached Montevideo 
 early in the morning of March 20 we were met by Dr. Gabriel Terra, 
 chairman of the Uruguayan section of the International High Com- 
 mission; Mr. H. F. Arthur Schoenfeld, charge d'affaires of the 
 United States legation ; Col. Gamarra, military aide-de-camp to the 
 minister of finance ; and other prominent persons. 
 
 The committee that had been appointed by the Uruguayan Gov- 
 ernment to receive and entertain our committee was made up as 
 follows: Dr. Gabriel Terra, chairman; the president of the national 
 chamber of commerce; the president of the national chamber of 
 industries; the president of the mercantile chamber of native prod- 
 ucts; the president of the association for the protection of com- 
 merce; the president of the Bank of the Republic; the president of 
 the State insurance bank; the president of the Mortgage Bank; the 
 manager of the state light and power plant; the president of the 
 board of administration of the port; the president of the Northern 
 Railway & Tramway Co. ; the manager of the local branch of the Na- 
 tional City Bank of New York; the manager of the Midland Rail- 
 way; the manager of the Eastern Uruguay Railway; the manager of 
 the Montevideo packing plant; Mr. Manuel Sterling, Mr. Charles 
 Shaw, Mr. P. C. Towers, Mr. Aurelio N. Surra Santfn, Mr. Jorge 
 
 31 
 
32 REPORT ON URUGUAY AND PARAGUAY. 
 
 West, Mr. Ernesto O. Crocker, Mr. Ricardo Shaw, Mr. Guillermo 
 Young, jr., Mr. Juan Domingo Lanza, Mr. Eduarclo Richard, Mr. 
 Alejandro Shaw, Mr. Carlos Bayne; secretaries, Mr. Leopoldo 
 Hughes and Mr. Jose Alberto Nicolich; military attaches, Col. A. 
 Gamarra and Lieut. Col. J. Massioti. 
 
 Upon landing, and after a cordial exchange of greetings, our com- 
 mission was escorted through the city and along the new boulevard to 
 the Parque Hotel, in Pocitos, where special provision had been made 
 for our comfort. Later, during the forenoon, we were taken for a 
 ride through the various parks. 
 
 At 4 p. m. the members of our commission presented their creden- 
 tials to, and were formally received by, Dr. Pedro Cosio, the min- 
 ister of finance, whose remarks of welcome were made in English, as 
 follows : 
 
 Ladies and gentlemen, at one of the last sessions celebrated by the Pan 
 American Financial Conference at Washington last May the delegates of 
 Uruguay proposed that the Government of the United States should appoint a 
 delegation of American citizens to return to the Latin Republics the visit that 
 was at that moment being paid by the representatives of the latter to the great 
 Republic of the north. 
 
 This idea was accepted by acclamation, and the invitation was thereby 
 formally accepted, and to this is due the visit with which we are now honored. 
 
 The European war, which has affected all parts of the world, causing serious 
 economic disturbances, suggested the necessity of America in peace drawing 
 her nations together under the impulse of the community of interests and the 
 harmony of friendly sentiments. 
 
 The first step was the conference of 1915 at Washington, and this is being 
 followed by these visits in which the most representative people in commerce 
 r.nd industry become personally acquainted with the countries, the men, and 
 the economic life of Latin America. 
 
 After this visit, will come another great exponent of this movement of Pan 
 American concentration. I refer to the conference in Buenos Aires next April 
 of the International High Commission. 
 
 Ladies and gentlemen, delegates of the United States, the Government of 
 Uruguay receives you as great friends and has made you acquainted with some 
 of the most conspicuous representatives of our commerce, industry, and banking 
 institutions, who will undertake to show you everything that may be interesting 
 to you. 
 
 In the name of the Government I have the pleasure of offering you this proof 
 of sincere friendship. And now allow me to propose the happiness of the 
 American Nation and the health and happiness of the ladies and gentlemen by 
 whom the United States is here represented. 
 
 The welcome of the minister of finance was responded to by Mr. 
 W. E. Hinchliff, with a few well-chosen and appreciative remarks. 
 The party then visited the United States Legation, and in the absence 
 of the United States minister was received by Mr. Schoenfeld, charge 
 d'affaires. 
 
 Tuesday, March 21, in the forenoon the party was taken to visit 
 the buildings and grounds of the institute de agronomia (institute 
 
REPORT ON URUGUAY AND PARAGUAY. 33 
 
 of agriculture), a short distance outside the city. Dr. Enrique 
 Etcheverry, agricultural engineer in charge, showed the party 
 through the institution, explaining its work in a very interesting 
 manner. The college has a four-year course. The students devote 
 the first half of each day to theoretical work and the afternoons to 
 practical work, the last year of the course being spent at the agri- 
 cultural experiment station. 
 
 The party next visited the orphan asylum and hospital. The 
 director, Dr. Vidal y Cuervo, and the directress, Seiiorita Angelica 
 G. de Alsina, conducted the party through the institution. They 
 had under their charge 420 children of from 4 to 14 years of age, as 
 well as a few older ones. There were 80 infants in care of this hos- 
 pital, arid the institution has supervision over the welfare of some 
 1.500 small children that it has placed in private families. 
 
 In the afternoon a visit was paid to the lazareto vetemnario (veter- 
 inary quarantine and detention station). This institution is in 
 charge of Dr. Banza, veterinary surgeon. An interesting and in- 
 structive sight there was some 150 head of fine cattle that were being 
 examined preparatory to their shipment to Brazil, to be used by the 
 Brazilian Government in its breeding farm. 
 
 Mr. Alberto Puig, one of the members of the reception committee, 
 took the party to his warehouses, where large quantities of Uru- 
 guayan wool were being sorted, baled, weighed, and marked for 
 shipment to the United States. 
 
 This was followed by a visit to the Montevideo factory of Messrs. 
 Salvo, Campomar & Co., where local wool was being made up into 
 cloth, blankets. " ponchos," and knitting yarn. We were told that 
 this textile industry has received a great impulse from orders for 
 woolen blankets and "ponchos" from the European Governments 
 during the past two years. 
 
 In the evening of March 21, at 8.30 p. m., Mr. Cosio, the minister 
 of finance, gave a formal banquet to the visiting party, to meet 50 or 
 more of the prominent officials and citizens of Uruguay and their 
 wives. Senor Cosio, as host, in his remarks, again addressed the 
 party in English. The response, in behalf of the visiting committee 
 was made by Mr. Arthur H. Titus. 
 
 Wednesday, March 22, in the forenoon, the party was taken to the 
 Cabana Anaya (horse breeding ranch) of Senor Francisco E. Anaya. 
 where some fine race horses, many of them of North American stock, 
 and some excellently appointed stables were seen. Although this 
 establishment was some distance out in the country, good macadam 
 roads were encountered all the way. 
 
 During the afternoon the University of Montevideo was visited. 
 This is a very creditable institution, of which the citizens of Uruguay- 
 are rightly proud. 
 
34 REPORT ON URUGUAY AND PARAGUAY. 
 
 Of special interest was the school of commerce and industry, where 
 the director, Dr. Pablo Fontaina, exhibited moving pictures of many 
 phases of the cattle industry from the ranch to the finished product 
 loaded in a vessel ready to be shipped. A cordial and enthusiastic 
 reception was given the party by the faculty and students. 
 
 In the evening of March 22, Mr. and Mrs. Crimmins, who were 
 obliged to return to Buenos Aires, left the party, taking the night 
 boat for that city. Before Mr. Crimmins left, Mr. Titus was elected 
 permanent chairman of the committee, and empowered to act for it 
 in any matters that might come up. 
 
 Thursday, March 23, the party was taken in a special train on the 
 Ferrocarril Central del Uruguay (Central Railway of Uruguay) 
 to Puerto Sauce, on the River Plate. The train left Montevideo at 
 9.30 a. m., arriving in Puerto Sauce at 2 p. m., or, according to Uru- 
 guayan railway time tables, in which the 24-hour scheme is used, at 
 14 o'clock. 
 
 The accompanying party, numbering about 25, included Dr. Terra, 
 the chairman of the entertainment committee ; Mr. Bayne, president 
 of the railway; Dr. Santiago Rivas, minister of public works; and 
 other prominent persons. The route was through the towns of 
 Piedras, Canelones, Santa Lucia, 25 de Agosto, Rodriguez, San Jose, 
 Mai Abrigo, Colonia Suiza, and Rosario, all located in a rich and 
 very productive section devoted to agriculture. 
 
 In Puerto Sauce the party visited the main woolen textile factory 
 of Salvo, Campomar & Co., in which 450 men were employed. At 
 the time they were working on some uniform-cloth contracts for the 
 French Government. 
 
 Another object of interest at Puerto Sauce was a paper mill, 
 through which the party was conducted by the proprietors. 
 
 The party left Puerto Sauce at 4 p. m., stopping at Colonia Suiza, 
 where carriages were in waiting to take the guests for a drive through 
 the town. 
 
 This trip consumed the entire day. Luncheon and dinner were 
 served on the train by the regular dining-car staff. Montevideo 
 was reached at 10.25 p. m., and the train was run out on the dock 
 alongside the river boat Ciudad de Montevideo, on which the com- 
 mittee was to embark for Buenos Aires. 
 
 At the dock to bid the party farewell were Senor Cosio, the 
 minister of finance, and other members of the entertainment com- 
 mittee, and prominent persons who had not accompanied the party 
 on the railway trip. 
 
 A touching parting attention was the presentation to each of the 
 ladies of the party of a large bouquet of flowers, tied with ribbons in 
 the colors of the two nations, Uruguay and the United States of 
 America. 
 
REPORT ON URUGUAY AND PARAGUAY. 35 
 
 Each member of the visiting committee was deeply impressed by 
 the cordiality, and the minute desire displayed by each and every 
 member of the entertainment committee and by all other persons 
 whom they met, to make them feel that they were welcome to all 
 the country had to offer. 
 
 It is safe to say that each member of the visiting committee was 
 convinced of the value of the exchange of courtesies of this kind 
 in the formation of closer international relations. 
 
 Seilores Jose Alberto Nicolich and Leopoldo Hughes, secretaries 
 of the reception committee, and Col. Gamarra, the military aide-de- 
 camp of the minister of finance, were constantly in attendance upon 
 the party. 
 
 The accommodation and service provided at the Parque Hotel 
 were excellent, and the entertainment committee had placed a number 
 of automobiles at the disposition of the committee. 
 
 While the visit of the committee was of comparatively short dura- 
 tion, and it was therefore impossible to go very fully into the economic, 
 industrial, and commercial features of Uruguay, still it is appro- 
 priate to append some statistics indicative of the commercial pos- 
 sibilities of the country. 
 
 Uruguay consists of about 72,000 square miles of territory and 
 has a total population of about 1,250,000,; the capital city, Monte- 
 video, has a population of about 400,000, or in other words one-third 
 of the total population of the whole country. The estimated wealth 
 of Uruguay is about $2,000,000,000, approximately distributed as 
 follows: 
 
 Agricultural and grazing lands $1,200,000,000 
 
 Montevideo real estate 250,000,000 
 
 Capital invested in agriculture 60,000,000 
 
 Capital invested in live stock 150,000,000 
 
 Capital invested in railways 70,000,000 
 
 Capital occupied in other lines of commerce and industry 580, 000, 000 
 
 Currency in circulation, about 40,000,000 
 
 The public debt of Uruguay is about $150,000,000, of which there 
 are approximately $25,000,000 in internal loans and $125,000,000 
 borrowed from other countries. Until recently there was very little 
 United States capital in Uruguay; at present, however, there seems 
 to be some interest displayed in this country, noticeably in the de- 
 velopment of the meat industry, and in the installation of various pub- 
 lic-service and sanitation projects, and there is in Montevideo a 
 branch of the National City Bank of New York. All of these things 
 indicate a greater interest on the part of the citizens of our country. 
 Of course, the principal industry of the Republic is the raising of 
 cattle and sheep. The live-stock census records a total of about 
 
36 REPORT OK URUGUAY AND PARAGUAY. 
 
 8,000,000 cattle, 25,000,000 sheep, 500,000 horses, and 180,000 hogs. 
 A normal wool crop is worth in Uruguay about $25,000,000. The 
 volume of cattle slaughtered annually for meat products is approxi- 
 mately $22,000,000. The agricultural interests are small in compari- 
 son to industries mentioned above. An average wheat crop is about 
 200,000 tons; the average corn crop is about the same, and oats ap- 
 proximately 30,000 tons. 
 
 The official figures indicate the exports for 1915 were $34,979,000, 
 and the imports $73.290,000, making a total commerce, both in and out, 
 for the year $108,269,000. 
 
 The climate of Uruguay is equable, and the country has wonder- 
 fully quick recuperative powers. In some years the lack of rain will 
 cause an almost utter failure of the cereal crops, and cattle will 
 languish and die, this condition continuing perhaps for several 
 months, when suddenly the rain will fall and in a very few days the 
 results will appear in the form of pasturage sufficient to save and 
 fatten the remaining cattle and prevent the complete disaster ex- 
 pected. 
 
 Before the outbreak of the present war with Europe, Uruguay's 
 purchases from the United States amounted to about $500,000 per 
 month, while the last year showed this amount to have doubled. 
 These figures seem impressive, but it must be understood that the 
 increase is largely due to the fact that Uruguay was entirely cut off 
 from German markets which heretofore have supplied goods to the 
 amount of several million dollars per year. Uruguay, for instance, 
 purchased $2,000,000 worth of sugar yearly from Germany, also 
 large quantities of steel and iron. These are now being bought in 
 the United States, and in considering these figures it must be re- 
 membered that imports at the present time, which in normal years 
 meant a vessel tonnage in a port of Montevideo of 12,000,000 tons 
 annually, have been cut in half since the beginning of the war. It 
 does not hold, however, that because of ^ ths increase in purchases 
 from the United States the advantage therein obtained by us will be 
 held after the war, for those who have examined the situation will 
 realize that United States citizens have not been as alert as they might 
 have been, and have not succeeded in gaining a market which might 
 have been theirs if properly sought. 
 
 The Uruguayan people are very favorably disposed to the United 
 States of America, and often show their preference for our 
 ideas in the management of their schools, public-service systems, 
 etc., and if we had displayed a reasonable amount of energy and tact 
 in seeking and handling the commerce of their country we would 
 have had an opportunity during the past two years that might have 
 netted us great results. 
 
REPORT ON URUGUAY AND PARAGUAY. 37 
 
 A great portion of the revenue of the nation is obtained through 
 its custom duties, which before the war averaged about $17,000,000 
 yearly, whereas this year they will scarcely amount to $12,000,000. 
 With all this, however, the economic and financial situation is steady 
 and the country is being held well in hand for the expected progress 
 which is inevitable upon the resumption of normal conditions in the 
 world at large. 
 
 The soil of Uruguay is capable of being developed into a very 
 important factor in the commerce of the country. Land suitable for 
 agricultural purposes is abundant, and all sorts of grains grow 
 quickly and luxuriantly. However, there is a very nominal land 
 tax in the country which encourages the holding of undeveloped 
 land in very large blocks, and inasmuch as nature provides so quickly 
 the means for feeding cattle and the raising of cattle requires so 
 much less help and labor than the production of grain, the cuttle in- 
 dustry predominates and probably will for some years to come. 
 This, of course, somewhat retards the growth of the country and 
 explains why the capital city of Montevideo contains one-third of 
 the total population of the nation. 
 
 Business in Montevideo is clone very largely on a cash basis; in 
 other words, the purchaser pays cash for almost everything. Bank 
 checks are almost unknown, and the currency of the country, which 
 ordinarily, if checks were used as a paying medium, would be depos- 
 ited in the banks, now rests in safes and strong boxes of the various 
 merchants and individuals. 
 
 The people of Uruguay are exceptionally conservative, proud of 
 their Government and of their position, courteous to the last degree, 
 and most progressive in their desire to have the best of everything 
 in the way of public institutions, utilities, etc. They are well dis- 
 posed to the United States, and the proper cultivation on our part 
 of that disposition would undoubtedly mean the establishment of a 
 friendly commercial relationship, which would be of great value to 
 our country in our commercial progress which must from now on, as 
 never before, be world-wide in its scope rather than confined to the 
 borders of our own country and domain. 
 
 Respectfully submitted for the commission. 
 
 A. H. TITUS, Chairman. 
 
REPORT OF FINANCIAL AND COMMERCIAL COMMISSION 
 
 TO BRAZIL. 
 
 Hon. W. G. McAooo, 
 
 Secretary of the Treasury, 
 
 Washington, D. C. 
 
 SIR: On July 29, 1916, the members from the United States of 
 the financial and commercial commission appointed by you to visit 
 Brazil in response to an invitation extended by the Latin American 
 delegates to the Pan American Conference, sailed for Brazil. The 
 personnel of the committee sailing from the United States was as 
 follows: Dr. Richard P. Strong of the American International Cor- 
 poration, chairman; Mr. Charles Lyon Chandler, South American 
 agent of the Southern Railway Co., secretary; Mr. W. L. Findley, 
 lawyer, of New York City ; Dr. Edward F. Stace, president of Stacc, 
 Burroughs & Co., of Chicago, 111. ; Mr. Thomas W. Streeter, of the 
 American International Corporation ; Mr. Henry C. Ulen, president of 
 Ulen Contracting Co., engaged in important enterprises in Uruguay; 
 Mr. Albert C. Weigel, manager foreign department of Walsh & 
 Weidner Boiler Co. of Chattanooga, Tenn. The members of the 
 commission resident in Rio de Janeiro were Mr. W. C. Downs, com- 
 mercial attache of the United States at Rio de Janeiro; Mr. Louis 
 R. Gray, head of Arbuckle Bros. & Co. in Brazil, and Mr. Frederic 
 Lage, formerly of Brazil and now of William Morris Imbrie & Co., 
 of New York. 
 
 The members sailing from New York made a stop at Bahia, Brazil, 
 on August 13, 1916. On August 15 they arrived at Rio de Janeiro 
 and were welcomed there by the first secretary of the American 
 Embassy , the president of the American Commercial Club of Rio, 
 a delegation of prominent Brazilians, and the remaining members of 
 the committee. 
 
 The commission made its headquarters at Rio de Janeiro until Sep- 
 tember 8, 1916. During their stay in Rio de Janeiro they had the 
 privilege of meeting men prominent in the political, financial, and 
 business life of Brazil, and they were the recipients of many courte- 
 sies extended by the American ambassador, Mr. Morgan, by the Bra- 
 zilian minister of finance, Senhor Calogeras, by Senhor Manuel 
 Lisboa, director of the Government railways, by local members of the 
 committee, arid others. Through the courtesy of the Brazilian Gov- 
 ernment and Dr. Calogeras, the commission made a trip on a special 
 38 
 
REPORT ON BRAZIL. 39 
 
 train to Bello Horizonte, the capital of the State of Minas Geraes, 
 stopping on the way at important manganese mines at Burnier and 
 visiting the School of Mines at Ouro Preto, the former capital of 
 the State of Minas Geraes. The Brazilian Government also furnished 
 a special train to take the committee from Rio de Janeiro to Sao 
 Paulo at the conclusion of the visit to Rio. 
 
 In their efforts to carry out their mission the committee was espe- 
 cially indebted to his excellency Edwin V. Morgan, the United States 
 ambassador, who freely gave his time to the members of the commit- 
 tee and brought them in touch with representative Brazilian gentle- 
 men. 
 
 On September 8, the members of the committee went to the city of 
 Sao Paulo, from which important center they made trips to different 
 parts of the State of Sao Paulo, visiting, among other places, the 
 famous Dumont coffee plantation. 
 
 In complying with your request that the members of the commit- 
 tee, after the accomplishment of their mission, should join in a 
 report to the honorable the Secretary of the Treasury, recommend- 
 ing such policies on the part of the Government and urging such 
 activities by business men of the United States as will promote this 
 purpose, your committee would state that in rendering this report 
 it had had in mind the fact that the commercial relations between 
 Brazil and the United States have not been recently inaugurated, 
 and indeed that almost every phase of these relations has been going 
 on for over a century. 
 
 It may be recalled that the United States has been buying from 
 and selling to Brazil since as early as 1802. Therefore, in the nec- 
 essarily brief investigation of this subject by the members of this 
 financial and commercial commission it would, a priori, hardly be 
 expected of them, or within their province, to indicate any startling 
 departure in relation to current trade. In view of these facts the 
 committee has considered it inadvisable to make extensive recom- 
 mendations regarding new departures, and will confine itself to a 
 few suggestions as to how, in the opinion of its members, several 
 obstacles to our trade with Brazil may perhaps be overcome. How- 
 ever, the mere mention of some of the most important of these ob- 
 stacles will perhaps suffice for the purpose of this report, since there 
 are already many agencies at work which are conscientiously 
 endeavoring to remedy these defects when brought to their attention. 
 
 The trade relations of the United States with Brazil present some 
 distinct features as compared with those between the United States 
 and other South American countries, to which it seems advisable 
 briefly to refer. For one thing, to no other country in South America 
 do we sell so little in proportion to what we buy. 
 
40 REPORT ON BRAZIL. 
 
 This has been the case for many years, although it is true that the 
 proportion has recently somewhat changed, for, while the nature 
 and amount of our imports from Brazil has become more extensive 
 than formerly, our sales to Brazil have nevertheless increased at a 
 greater rate. Obviously there has been, since the outbreak of the 
 war, an increased demand from Brazil for our goods, but the move- 
 ment of our manufacturers to take advantage of the check of Euro- 
 pean exports to South America, in order to introduce our produc- 
 tions more widely and more consistently, apparently has not been as 
 yet as active or as extensive as is necessary for obtaining permanent 
 favorable results of importance. Our manufacturers, on the whole, 
 are apparently learning very slowly the important lesson that if we 
 wish to increase our trade with Brazil we must endeavor to conform 
 more to the customs and wishes of the people and to the standards 
 and usages current in that country, though we are glad to be able 
 to report that in several instances brought to our attention some 
 improvement in this respect has been made. In this connection we 
 believe that every effort should be made to bring the commercial 
 organizations of this country to a realization of the fact that our 
 present system of weights and measures is as injurious to our trade 
 with Brazil as it is with other foreign countries. 
 
 WEIGHTS AND MEASURES. 
 
 One hears in Brazil, since the outbreak of the war, even more 
 criticism and dissatisfaction at our adherence to the English system 
 of weights and measures, since man} 7 merchants in Brazil who for- 
 merly have bought in European markets have, for the time being at 
 least, been compelled to import only American goods. Therefore it 
 is recommended that all possible steps be taken to enact the necessary 
 legislation speedily to bring about the adoption of the metric system 
 by the United States. 
 
 The commercial banking and shipping phases of our trade rela- 
 tions with Brazil are, when the matter is analyzed, so intricately 
 interwoven that it would render this report less pertinently appli- 
 cable if they were to be too sharply separated. Therefore they will 
 be treated as much in conjunction as possible with the aim of pro- 
 posing remedies that will benefit the whole situation rather than 
 only one part thereof. 
 
 TEA NSPORTATION . 
 
 The transportation facilities between the United States and Brazil 
 have been thought in the past to be sufficient for the present volume 
 of business between the two countries, and in fact they are better in 
 proportion than those between the United States and any other South 
 American country. Brazil's import and export trade is not con- 
 
REPORT ON BRAZIL. 41 
 
 fined, as in. Argentina and Uruguay, almost entirely to one central 
 port, which also serves as a distributing center for much of the coun- 
 try. On the contrary, her various ports of Para, Pernambttco, Bahia. 
 Rfo de Janeiro, Santos, and Rio Grande do Sul, each serve a distinct 
 area, each with almost distinct exports and imports, and with each, 
 as well as with many smaller ports, there is direct and regular com- 
 munication with the United States. With almost all of these such 
 communications exist under the (lags of the two countries. This 
 can not be said of the shipping between any other South American 
 country and the United States. The Lloyd Brazlleiro Line on the one 
 hand and the United States and Brazil Steamship Co., in addition 
 to other lines under the flags of other nations, furnish regular pas- 
 senger and freight transportation facilities. 
 
 It is nevertheless exceedingly desirable that a more direct and more 
 speedy passenger service should be secured between Brazil and the 
 United States. 
 
 BANKING. 
 
 As regards the means of improving banking f aci iities and financial 
 relations, arid also the financing of public and private enterprises, 
 and the stabilization of international exchange between the United 
 States and Brazil, these matters have already been so extensively re- 
 ported on by the representatives of the Federal Trade Commission 
 and the Department of Commerce that your committee feels it hardly 
 necessary to enter into a detailed discussion of them. The National 
 City Bank, of New York, opened branches in Rio de Janeiro, Sao 
 Paulo, and Santos, possibly the three most important cities of Brazil, 
 for the initiation of United States branch banks. Both the capital 
 city, as well as Sao Paulo, the leading industrial and business cen- 
 ter, had long since needed these essential factors in inter- American 
 commerce. A few days before your committee arrived at Bahia a 
 branch of the National City Bank had been opened there,, subordinate 
 to the branch in Rfo de Janeiro. 
 
 It would seem advisable that branches of American banks be also 
 opened in Para, Pernambuco, and Porto Alegre, and it would appear 
 that such action would not merely be of direct financial benefit to 
 the institution inaugurating it, but would also serve as a direct meas- 
 ure of promoting the commerce and influence of the United States to 
 these cities, and to the States of Brazil dependent on them for their 
 growth and development. In the course of time, following the 
 example of the banks of European countries, many American bank- 
 ing institutions will doubtless enter the Brazilian field, and the 
 competition resulting thereby will serve to increase the financial re- 
 lations between the two largest American Republics. 
 
42 REPORT ON BRAZIL. 
 
 COMMERCIAL DISPUTES. 
 
 As regards the extent to which commercial disputes now arising 
 may be settled by a system of arbitration between commercial bodies, 
 your committee would recommend the more general adoption of some 
 such agreement as now exists between the Chamber of Commerce of 
 the United States of America and the Bolsa de Comercio of Buenos 
 Aires. Such an agreement might be worked out between the Asso- 
 ciacao Commercial do Rio de Janeiro, as well as the chambers of 
 commerce of all the more important trading centers of Brazil on the 
 one hand and the Chamber of Commerce of the United States of 
 America on the other. 
 
 In the Republic of Brazil the statutory regulation of negotiable 
 instruments is vested in the National Government, and has been exer- 
 cised in the Codigo Commercial do Brazil, enacted by the Federal 
 Congress. A part of this code went into effect in the year 1909 and 
 in its entirety it became operative January 1, 1917. 
 
 In the United States of America, in so far as bills of exchange and 
 promissory notes are concerned, this power is exercised by the sepa- 
 rate States. Efforts have been made to secure uniform legislation on 
 this subject, and a bill has been prepared for that purpose and sub- 
 mitted to the various State legislatures. This "uniform act" has 
 been adopted by a few of the States. Other States have enacted it 
 after making such changes as were deemed necessary to meet peculiar 
 local conditions, while in many States it has been ignored. After 
 20 years of effort 44 States of 48 have adopted this model law in some 
 form or other. 
 
 There is thus no uniformity of legislation on the subject of bills of 
 exchange and promissory notes in this country, and no standard of 
 comparison by which the differences between the legal regulation of 
 this subject by Brazil and the United States can be gauged. 
 
 It may be said, however, that in general principles the laws of the 
 two countries governing this subject are the same. 
 
 The provisions of the Commercial Code of Brazil relating to bills 
 of exchange and promissory notes are embraced in 57 brief sections. 
 They lay down in clear, concise, and comprehensive terms the gen- 
 eral rules that are to govern the making, issuing, negotiating, pay- 
 ment, and enforcement of these negotiable instruments. No attempt 
 is made to cover the limitless field of varying circumstances which 
 daily arise in the ordinary transactions of business. In contrast with 
 this the negotiable instruments law, submitted to and already adopted 
 by forty-four of our States, is a voluminous document. 
 
 Its aim seems to be to lay down rules to cover every conceivable 
 circumstance, or combination of circumstances, that may arise, and to 
 
REPORT ON BRAZIL. 43 
 
 point out just what may or may not be done in every unusual or ex- 
 traordinary case. A great variety of things are permitted or forbid- 
 den which are not mentioned in the Brazilian negotiable instruments 
 law. But these differences are in matters of detail, the underlying 
 principles governing the subject being substantially the same in both 
 enactments. In the matter of bills of lading the Commercial Code of 
 Brazil follows a course similar to that adopted in dealing with bills 
 of exchange and promissory notes. In a few brief sections general 
 rules are prescribed, with little attempt to anticipate or provide for 
 unusual or exceptional cases. 
 
 BILLS OF LADING. 
 
 The Congress of the United States, during the session of 1916, 
 passed a bills of lading act, applicable to interstate and foreign busi- 
 ness, which was to take effect on January 1, 1917. This law, while 
 much more voluminous than the Brazilian statute on the same sub- 
 ject, does not greatly differ from the latter, except in being more 
 exact and specific in matters of detail. In this connection the com- 
 mittee acknowledges the valuable assistance rendered to it by Dr. 
 Francisco de Castro, jr., of Rio de Janeiro, a member of the 
 Brazilian bar. 
 
 Since the question of improving the parcel-post and money-order 
 systems and the reduction of postal rates is now being studied by the 
 Hon. Robert F. Maddox. chief of the Division of Foreign Mails of 
 the Post Office Department of the United States, who is now travel- 
 ing in South America for this purpose, your committee would merely 
 recommend that the same reasons which have led our Post Office 
 Department to conclude a 2-cent postal arrangement with British 
 Guiana might be applied with even greater force to the negotiations 
 of a postal treaty or agreement with Brazil by which a similar agree- 
 ment could be put in force with that country. 
 
 NEWS SERVICE. 
 
 As regards the improvement of cable service and the reduction of 
 cable rates, the secretary of your committee was informed by Mr. 
 Roy W. Howard, the representative of the United Press, a United 
 States corporation, that the cable rates from Great Britain to Brazil 
 were half those from the United States to Brazil, which, apart from 
 other considerations, rendered it almost impossible to publish any 
 large amount of news matter from the United States in the Brazilian 
 press, such as is received daity in Buenos Aires by La Prensa and 
 La Nation of that city. A direct cable between the United States 
 and Brazil is to be greatly desired. 
 
44 REPORT ON BRAZIL. 
 
 COFFEE. 
 
 With reference to creating in the United States dependable and 
 reliable markets for the commodities of Brazil, coffee being the 
 principal commodity of Brazil naturally occupies the most prominent 
 position in the thoughts not only of the producer of the article but 
 also of the Government of the country. Much has been written 
 about it, and it is unnecessary to make any mention in this report of 
 how coffee is grown and marketed, that being generally very well 
 understood. 
 
 It appears that much more care is now being given than heretofore 
 to the planting and care of the tree, to the preparation of coffee after 
 gathering, and to the separation of the different qualities, which, to- 
 gether with the fact of the United States Government prohibiting 
 imports of the article below a certain grade, has made the average 
 cup of coffee now drunk here to be better and more palatable. It has 
 been suggested that there is still ground for improvement in the 
 United States in the way in which coffee is roasted and prepared 
 for the table. It is held by some in Brazil that the higher or deeper 
 brown coffee is roasted the less caffeine there is in it; this statement 
 has not been confirmed, but the indications are that there is but a 
 slight diminution. It is also stated that in preparing it for the table 
 the best way is to pulverize the bean and percolate boiling water 
 through it, not pouring the water more than twice if the best flavor 
 from the coffee is to be obtained. 
 
 Brazil produces more coffee than all the other countries of the 
 world together, and in view of its lower cost of production in com- 
 parison with the rest of the world there could be a larger produc- 
 tion in Brazil if consumption increased more rapidly than it does. 
 The consumption in the United States per capita has decreased on 
 account of the advertising attacks made against coffee as a bev- 
 erage by producers of substitutes for the article. The Brazilian 
 Government has viewed with much concern and displeasure this 
 propaganda directly attacking the interests of their chief product, 
 and the officials of the State of Sao Paulo naturally desire that some 
 steps should be taken to prevent any unwarranted and untruthful 
 attacks made in the periodicals and other sources of advertisement in 
 the United States against coffee, the chief commodity of Brazil. 
 
 SCHOLARSHIPS FOR BRAZILIAN YOUTHS. 
 
 Your committee would also recommend that either some existing 
 organization undertake, or that some society be established in Brazil 
 with correspondents in the United States for the sending of young 
 men from Brazil to the United States to work in factories and in- 
 
REPORT ON BRAZIL. 45 
 
 dustrial establishments on the plan adopted in Chile, by which the 
 correspondents in the United States acquaint the Sociedad Pro 
 Estudiantes Chile-no* en el Estrangero with the opportunities for 
 young men for such work. This Chilean society, assisted by the 
 Chilean Government and private funds, pays for the transportation 
 of these candidates to the United States and also provides financial 
 support for them during the period of their training in the fac- 
 tories. 
 
 In conclusion, we wish to reiterate the idea that the members of 
 this committee are fully conscious of the fact that their studies of 
 many of these problems were necessarily of a brief and cursory 
 nature, but we nevertheless venture the hope that our labors may 
 prove not to have been in vain, particularly with respect to the 
 further extension of friendly relations and the promotion of mutual 
 helpfulness. Furthermore it is hoped that the activities of this com- 
 mittee may be found to have contributed at least another link in the 
 chain of intellectual sympathy and understanding between the 
 people of Brazil and of the United States. 
 Very respectfully, 
 
 RICHARD P. STRONG, Chairman. 
 
REPORT OF FINANCIAL AND COMMERCIAL COMMISSION 
 TO PERU, BOLIVIA, AND CHILE. 
 
 Hon. W. G. McAooo, 
 
 Secretary of the Treasury, 
 
 Washington, D. C. 
 
 SIR : The commission selected to serve, in accordance with the reso- 
 lution adopted at the Pan American Financial Conference, held at 
 Washington in the month of May, 1915, as a return visit committee 
 to Peru, Bolivia, and Chile, consisted of the following members: 
 Mr. O. M. Clark, president of the Clark & Wilson Lumber Co., of 
 Portland, Oregon, representing the lumber interests of the United 
 States; Mr. A. W. McLellan, president of the Alden Mills Cor- 
 poration, of New Orleans; Mr. Ernest H. Wands, of New York. 
 Mr. Harry Guggenheim and Mr. W. C. Potter, who had been in- 
 cluded among the commissioners, found it impossible to await the 
 sailing of the committee from New York and departed for Chile some 
 days before the date set for th'e sailing of the party for Peru. Messrs. 
 Clark, McLellan, and Wands met in New York in time to sail on the 
 United Fruit Co.'s steamer Metapan, on April 15, 1916. Mr. Wands 
 was selected to act as the chairman of the committee. 
 
 With the exception of a stop of one day at Habana the voyage from 
 New York to Colon was uneventful. A day was spent in an inspec- 
 tion of the Panama Canal. The committee then sailed by the steam- 
 ship Guatemala of the Pacific Steam Navigation Co. for Peru. 
 
 ARRIVAL IN PERl ! . 
 
 The first Peruvian port at which the commission touched was Paita. 
 The harbor is merely an open roadstead, protected to some extent, 
 it is true, from the prevailing winds and currents, and, inasmuch as 
 the west coast of South America is never visited by the destructive 
 storms which at certain seasons sweep the western Pacific, even this 
 unimproved harbor offers a relatively secure anchorage to the numer- 
 ous coastwise and overseas vessels calling at Paita. 
 
 Paita. The commission was met by United States Commercial At- 
 tache William F. Montavon and made welcome to Peru in the name 
 of the United States Legation at Lima. 
 
 Paita is the seaboard terminus of the Paita-Piura Railway, one 
 of the many short lines operated by the Peruvian Corporation. 
 Piura, the inland terminus of this railway, lies in the midst of some 
 46 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 47 
 
 of the best cotton lands in Peru. Here the rough staple cotton, 
 known in the trade as " Peruvian rough," is grown almost exclu- 
 sively. This cotton, having a coarse texture and grayish color, mixes 
 well with wool and is used in the manufacture of cheap woolen and 
 shoddy goods largely in England. Trails lead from Piura far into 
 the interior, through the grazing lands of Cajamarca into the beau- 
 tiful upland plains where lies the town of Cajamarca, the seat of the 
 Inca power in the days of the conquest; and passing the divide, 
 extend far into the wooded lowlands of the montana and the great 
 department of Loreto, even to the upper tributaries of the vast river 
 system of the Amazon. 
 
 Only a few miles to the north of Paita and bordering on the coast 
 lie the rich petroleum fields of Negritos, Zorritos, and Lobitos. 
 Here the Imperial Oil Co. has recently acquired large holdings and 
 has undertaken the development of the small port of Talara within 
 its own properties. Until recent years the borings in these fields had 
 been of a relatively shallow character, and the development of the 
 properties was far from attaining its fullest proportions. Experi- 
 mental borings have now shown that there are several petroleum- 
 bearing strata lying at depths varying from 500 to 3,000 feet, and 
 the production is being greatly increased. 
 
 Eten. After an all-night sail from Paita the Guatemala arrived 
 off Eten in the early morning of May 2. Like Paita, Eten derives 
 its importance from the fact that it is the seaboard terminus and 
 coastwise shipping point for the Eten-Chiclayo Railway, which taps 
 the rich sugar lands which lie behind the first foothills and are irri- 
 gated from streams flowing from the snow-covered peaks of the 
 Andes. In this valley are located three sugar plantations, which 
 are reached by the train from Chiclayo in the following order: 
 Pomalca, an estate having approximately 4,000 acres in cane and 
 producing 8,000 tons of sugar per annum ; Tuman, having 5,600 acres 
 in cane and producing annually 15,000 tons of sugar; and Patapo, 
 an estate having an area in excess of 50,000 acres, of which, how- 
 ever, only 2,100 are in cane, with an annual production of about 
 4,000 tons. 
 
 The Eten manager of the railway, Mr. A. J. Leon, graciously 
 placed a special train at the disposition of the committee and made 
 it possible within the few hours at our disposal for us to visit the 
 Tuman estate. This great estate belongs to the Pardo family, of 
 which the present President of Peru is a member, and reached its 
 high degree of productivity under the personal direction of this 
 distinguished statesman. The crushing and granulating plants on 
 Tumai) are modern in every detail. 
 
 It is confidently expected that the production of Tuman will be 
 20,000 tons of granulated sugar per annum. 
 
48 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 Tunian is a fair illustration of what scientific administration can 
 make of the sugar lands of Peru. Cutting is continuous throughout 
 the year, with only brief interruptions for repairs to the machinery, 
 and the production has been brought up to nearly 5 tons per acre, 
 or about three times the average production in Louisiana. It has 
 been estimated that sugar can be produced on the Peruvian estates 
 at an average cost of less than $2 per hundredweight, and with the 
 high prices prevailing for sugar at the time of our visit to Tuman 
 the earnings of these estates are almost fabulous. 
 
 The port of Eten is equipped with a steel pier extending 800 
 meters out to sea and operated by the Eten-Chiclayo Railway Co. 
 This pier has five traveling cranes for handling cargo, one of which 
 has a capacity of 14 tons. In addition, the railway company has 
 3 gasoline tugs, 11 lighters of 20 tons capacity each, and has on sev- 
 eral occasions succeeded in handling 2,000 tons of cargo in a single 
 day. 
 
 Mr. Leon stated that from 20 to 25 passenger and 5 or C cargo 
 steamers of an average tonnage of more than 2,000 called at Eten, 
 in addition to a large number of smaller coasting steamers and sail- 
 ing craft. 
 
 The total exports from Eten during 1915 <%> isisted of 715,000 
 packages of cargo, weighing 68,840 tons. Of this amount, 40,000 
 tons were sugar and the remainder was made up in varying propor- 
 tions of alcohol, rice, cattle, hides, and other agricultural products. 
 The imports amounted during the same year to 27,000 tons and con- 
 sisted of flour, coal, kerosene, gasoline, lumber, and miscellaneous 
 manufactured goods. 
 
 During 1914 and through 1915 to the present time there is notice- 
 able a steady increase in the volume of trade between the port of 
 Eten and the United States, and Mr. Leon suggested that the im- 
 portance of this trade had become such as to justify the appoint- 
 ment of a United States consular agent at Eten. That the appoint- 
 ment of such an agent would tend greatly to facilitate trade is well 
 illustrated by the case of the hides exported from the port. During 
 1915, 25,000 hides were exported from Eten. Our quarantine regu- 
 lations require that these hides be disinfected before they may enter 
 the United States. In order to secure a consular certificate of disin- 
 fection the hides must be shipped at considerable expense to Callao 
 and back again to Eton., or Teexported from Oallao. 
 
 Pacasmayo. The next port visited by the committee was Paeas- 
 mayo. This port is the seaboard outlet for a fertile valley which 
 extends well into the foothills and in which rice and cattle are the 
 chief productions. Even before the conquest of Peru this valley 
 was the scene of a highly developed agriculture, and there are evi- 
 
IlEPOBT ON PERU, BOLIVIA, AND CHILE. 49 
 
 dences extant to-day that a great river watered the valley and made 
 it possible for a populous city to grow up. 
 
 The Jequetepeque River, which to-day is but a dry gravel bed 
 winding through the barren desert sands, a few centuries ago sup- 
 plied water for a great system of irrigation of which some of the 
 canals may still be traced; the valley to which Pacasmayo is the 
 gateway must have been a veritable garden spot stretching from the 
 seaboard far into the mountain fastnesses of the Andes and provid- 
 ing the chief outlet to the Inchaic headquarters of Cajamarca. The 
 waters of the river have disappeared, absorbed apparently by the 
 sands of the desert. As is true elsewhere on the Pacific coast of 
 Peru, there are at Pacasmayo great subterranean streams at a depth 
 of 20 to 60 feet. These streams are again being brought to the 
 surface by means of wells and pumping systems. 
 
 Salaverry. Salaverry, at which port the Guatemala arrived at 
 daylight May 3, lies at the entrance to Chicama Valley, the sugar 
 lands par excellence of Peru. In this valley at distances varying 
 from 20 to 50 miles lie the richest and most highly developed plan- 
 tations of the country. Among these Casa Grande, of the firm of 
 Guildermeister & Co., Cartavio, belonging to the firm of W. R. Grace 
 & Co., La Roma and Laredo, belonging to Peruvian families, are 
 the best known and the most productive. 
 
 The committee found the warehouses at Salaverry overflowing 
 with sugar, and the production was such that the steamers calling 
 at the port seemed able to make but little headway in relieving the 
 congestion. The pier at Salaverry, like that at Eten, is fairly well 
 equipped. In addition to sugar, Salaverry exports cattle and min- 
 erals in considerable quantities. 
 
 Because of the fogs and cold southwest winds which sweep along 
 this coast during June, July, and August, the population living at 
 Salaverry is made up wholly of men engaged directly in shipping. 
 Ten miles inland lies the interesting city of Trujillo. Here the 
 temperature is milder and here are located the governmental head- 
 quarters, the commercial and industrial houses, and the banking in- 
 stitutions, clubs, etc., of the Chicama Valley. 
 
 ARRIVAL AT LIMA. 
 
 Callao. At noon on May 4 the Guatemala arrived at Callao. A 
 representative from the foreign office together with the prefect of 
 the Department of Lima came aboard to welcome the committee on 
 behalf of the Government of Peru. The United States minister, 
 Hon. Benton L. McMillin, and the consul general of the United States. 
 Mr. William H. Handley, together with committees from the Lima 
 Chamber of Commerce and other organizations of the city greeted 
 tho committee aboard the steamer. The courtesies of the port of 
 106818 4 
 
50 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 Callao were granted the commission, who, accompanied by the wel- 
 coming delegates, proceeded ashore in a launch placed at our service 
 by the Peruvian Government. 
 
 Lima. The daily press of Lima had, several days prior to our 
 arrival, devoted some space to the announcement and discussion of 
 the purposes which our commission had in making this visit to Peru. 
 As a result we had scarcely had time to establish ourselves in the 
 Hotel Maury when callers interested in one phase or another of our 
 mission began to be announced. Among the first of these was Mr. 
 Pedro D. Gallagher, president of the Lima Chamber of Commerce. 
 Mr. Gallagher most generously assured the committee of the desire 
 of the chamber of commerce to render every assistance and requested 
 that on the following day we meet him in the directors' room at the 
 offices of the chamber of commerce for the purpose of more fully 
 outlining the character of the information we desired. 
 
 May 5, the first day of our stay in Lima, was largely taken up 
 with official calls on the United States minister, Hon. Benton 
 L. McMillin, and on the ministers of foreign relations, finance, and 
 public works of the Peruvian Government, and in a conference with 
 the officers of the chamber of commerce. 
 
 The minister of the treasury, Dr. Garcia y Lastres, in the course 
 of our visit discussed problems of public finance which at present 
 confront his Government, and outlined the export taxes recently 
 placed on certain raw materials shipped from Peru, including 
 copper and sugar. He made clear the fact that the tax was assessed 
 against profits or net income rather than against products, and 
 pointed out the fact that direct taxes, including a tax on income, were 
 not popular in Peru, but that the export taxes amounted to what 
 might be styled an indirect tax on incomes and had met with less op- 
 position than might have been expected. The income derived from 
 this new tax had been greater than had been anticipated because 
 of the unusually high prices being received for the agricultural and 
 mineral products of Peru against which the tax is levied. 
 
 Among the most interesting events of our visit to Lima was our 
 audience with His Excellency, President Pardo. His Excellency re- 
 ceived us in one of the beautiful audience chambers of the historic 
 executive palace at Lima, which has witnessed the splendor of tho 
 viceregal courts under former administrations, and which to-day is 
 the executive headquarters of the Republic of Peru. 
 
 The commission remained in Lima from May 4 until May 13. 
 During this time places of historical interest, public buildings and 
 institutions, manufactories, mills, and mercantile establishments were 
 inspected and an opportunity offered for interesting interviews and 
 conferences with the men who are at the head of affairs in Lima. 
 The committee was greatly assisted in its work by Mr. Cisneros y 
 Raygado, of the foreign office ; by Mr. Fernandez, of the Asociacion 
 
REPORT ON PKRU, BOLIVIA, AND CHILE. 51 
 
 de Industrias de Lima; by Mr. Pedro I). Gallagher, president of the 
 Lima Chamber of Commerce, and by a great many others connected 
 with the Government or with the commercial and industrial estab- 
 lishments of Lima who gave their services unstintedly to the com- 
 mittee, and without whose assistance it would have been difficult, if 
 not impossible, to collect the large volume of the reliable data which 
 was gotten together by the committee in so brief a space. 
 
 The office of the minister of the United States to Peru and of the 
 consul general of the United States at Lima rendered valuable service 
 in collecting reports and preparing statistical and other information 
 for use by the committee. Commercial Attache Montavon and Mr. 
 L. B. Clark, of the office of the United States commercial attache, 
 placed their services unreservedly at the disposition of the committee 
 in Lima, arid their assistance was of much value both in the collec- 
 tion of data and in the compilation of reports, but especially in 
 making it possible for the members of the committee to make the 
 very best of the few days spent in Lima. 
 
 The committee had announced prior to its arrival at Lima that 
 it desired a program free enough from social functions to make pos- 
 sible the devotion of most of its time to the study of conditions and 
 the collection of information. There was therefore no elaborate 
 program of social entertainment. The commission was entertained at 
 luncheon by Mr. W. G. Hollow ay, manager of the firm of W. R. Grace 
 & Co., in Peru, and at dinner by the minister of the United States to 
 Peru, Hon. Benton L. McMillin, at whose table they met members 
 of the cabinet of President Pardo, the presidents of the Lima Cham- 
 ber of Commerce, of the Bolsa de Coinercio de Lima, and other gentle- 
 men prominent in affairs; by Dr. Felipe Pardo, brother of the Presi- 
 dent of the Republic of Peru ; and by Mr. Pedro D. Gallagher and 
 Mr. Jose Payan, presidents, respectively, of the Lima Chamber of 
 Commerce and of the Bolsa de Comercio de Lima. 
 
 The banquet offered the committee by the presidents and directors 
 of the Chamber of Commerce and the Bolsa de Comercio was at- 
 tended by men most prominent in the financial and commercial 
 circles of the country. While at the other functions speaking had 
 been limited to brief toasts, at this banquet an occasion presented 
 itself for the public expression of the aims of the commission. 
 
 Mr. Pedro D. Gallagher, president of the Lima Chamber of Com- 
 merce, speaking in English, welcomed us to Peru in the following 
 gracious language: 
 
 In the mime of the commercial and financial Interests of Peru, 1 welcome you 
 with much pleasure to our shores. The visit which you are making to us can 
 but make stronger the ties of those commercial relations between our countries 
 which give unmistakable promise of advantages and material gain for both 
 and the stimulation of which has ever been our chief ambition. It is par- 
 
52 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 
 
 ticularly during a period of trouble like the present that the bonds between 
 those nations who have the good fortune of enjoying peace should strengthen 
 themselves more than ever before in order thus to compensate themselves 
 mutually for the part that may be theirs in the loss and the suffering of the 
 entire world. I hope, therefore, gentlemen, that the visit which you are making 
 to Peru may enjoy a success even greater than that which you had hopes for and 
 of which it is most worthy because of the splendid purpose for which it- was 
 undertaken. We shall spare no effort to cooperate with you in securing this 
 success. 
 
 Mr. Wands responded for himself and his associates in Spanish. 
 
 To me there Is a special gratification at being in Peru and seeing again my 
 friends of Lima, many of whom, I am glad to say, are friends of many years' 
 standing. In the years that have elapsed since my first visit here about 15 
 years ago, the people of our two countries have grown to know one another 
 better. There has been a most satisfactory development, not only of the 
 commercial, but also, I am glad to say, of the social relations between Peru 
 and the United States. This has been brought about by the efforts of both 
 countries. More Peruvians are visiting the United States every year and more 
 people from my country are coming to Peru every year. Then you have been 
 extremely fortunate in the class of men selected by your Government to repre- 
 sent you in diplomatic and consular posts, and still further in the men who 
 Lave represented Peru at gatherings like the Pan American Financial Con- 
 ference held in Washington a year ago and the Pan American Scientific Con- 
 gress held in Washington only a few months ago. 
 
 It is possible that the idea of holding such a conference would not have been 
 conceived had it not been for the war in Europe. With the outbreak of that 
 conflict many countries that formerly sold their bonds to European bankers 
 were forced to look elsewhere for financial markets. Because of the needs of 
 our own country, investors of the United States had not been generous buyers 
 of foreign securities. But conditions are changing with amazing rapidity. 
 To-day in the United States there is an eager interest in South and Central 
 American opportunities. Business propositions from South America are care- 
 fully studied and many of them are even now being financed. There is, in 
 fact, no doubt that many of our financiers whose vision is not limited have 
 concluded that in the long run more benefit will accrue to the United States in 
 financing and developing South America than in holding funds to lend to our 
 European trade competitors for reconstruction purposes after the war. 
 
 Our business men realize there are many reasons why this is a particularly 
 good time to get acquainted with the possibilities of Latin America. We must 
 bear in mind that there are only three large international trading nations in 
 the world the United States, Great Britain, and Germany. 
 
 Great Britain gained her commerce by establishing the first line of steamers 
 between Europe and South America; by introducing the first cable; by financ- 
 ing the pioneer railroads which opened up the countries to settlement fnd 
 development ; and by establishing adequate banking facilities. 
 
 Germany's huge trade is the result of similar enterprise, but she was also 
 materially helped by the hundreds of thousands of German emigrants who 
 settled largely not only in the southern part of Brazil, but also in the other 
 South American countries. 
 
 Great: Britain and Germany, the countries which in the past have had the 
 greatest merchant marine and the best system of branch banks, have been the 
 two most important factors in the world's trade. For the United States to 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 53 
 
 develop a merchant marine there must be a return cargo commercially acces- 
 sible. Also, in order to establish branch banks in Soul!) American cities with 
 any prospect of profitable business it is necessary that there should be a large 
 export trade from the United States and a large import trade on the part of 
 the United States from Latin America. In other words, we must buy your 
 products and not strive solely to sell you our manufactured articles. 
 
 The problem of return cargo from the west coast of South America is being 
 solved by the rapid development of your copper mines and other industries, the 
 output of which is in such keen demand by our manufacturers. 
 
 The problem of return cargo from the eastern coast of South America has 
 been solved by our new tariff law, which permits the importation of South 
 American beef. 
 
 The opportunity to establish branch banks under our new Federal law comes 
 at a happy time. The business to be secured to-day is much greater than it was 
 10 years ago, and there is the additional advantage of millions of dollars of 
 money from my country which has been invested in the countries of the 
 southern continent. 
 
 It is the belief of the commission that the visit to Peru has done 
 much to confirm and strengthen the ties of friendship which have so 
 long bound our country to Peru, and that as a result of the personal 
 conferences held with men who are leaders in the industrial and 
 commercial fields in Peru much has been accomplished in dispelling 
 what little prejudice there may have been against our goods or our 
 trade. 
 
 It shall not be our purpose to set forth fully the vast volume of 
 information which we weie able to collect while in Peru. Some of 
 this, as must be expected, would necessarily have to be submitted to 
 rigid tests before it could be accepted at its face value. It shall be the 
 purpose of the following paragraphs rather to suggest lines along 
 which further investigation may be made, to mention such sources of 
 information as were made available and to summarize very briefly 
 what we consider to be the information of greatest value at the pres- 
 ent time which has come before us. 
 
 CONDITION OF PUBLIC FINANCES. 
 
 Moratorium. Our committee was especially pleased to find a high 
 degree of optimism both in governmental and commercial circles 
 with regard to the country's finances. So intimate were the economic 
 relations existing between Peru and Great Britain and the countries 
 on the Continent of Europe, so completely were the finances of 
 Peru dominated by those of the Old World that when the European 
 war broke out in August, 1914, there seemed no means of escaping a 
 most serious panic in Peru, involving in its disastrous effects both 
 Government and private enterprises and institutions. So serious was / 
 the situation that on September 22, 1914, a general moratorium was*r 
 declared to remain effective for a period of one year. Business re- 
 mained at a standstill and the financial institutions were thus given 
 
54 KKPORT OK PEBU, BOLIVIA, AND CHILE. 
 
 time to adjust their operations to the new conditions brought about 
 by the war. 
 
 Scarcity of circulating medium. As was to be foreseen there 
 was a universal tendency during this period of disturbance, little 
 short of panic, to hoard metallic money and there soon arose the 
 new factor of a shortage in the circulating medium of exchange. 
 To remedy this difficulty the Government, in cooperation with the 
 banks of Lima, issued paper in the form of circulating checks pay- 
 able to bearer. Prior to the war the circulating money of Peru had 
 been silver and gold coin with the pound Peruvian as the unit. The 
 silver coin known as a sol was the legal equivalent of one-tenth of a 
 pound and the subsidiary coins were decimal parts of the sol. The 
 pound Peruvian was in weight and fineness the exact equivalent of 
 the pound sterling. 
 
 Circulating checks issued. The act of the Peruvian Congress 
 authorizing the issue of the circulating checks limited the total 
 amount to be issued to 2,200,000 pounds and the amounts of the issues 
 were to be distributed among the banks in proportion to their capital 
 stock. The issues were in each case to be protected by a reserve fund 
 in gold equal to 20 per cent of the issue and in securities, to be passed 
 on by a board of overseers, equal to the remaining 80 per cent of the 
 value of the issue. 
 
 Confidence restored. The exports of Peru soon found in New 
 York a market as good as or better than they had theretofore found 
 in Liverpool and the other markets of Europe. The prices for these 
 exports rose rapidly and the favorable trade returns made it possible 
 for the banks of their own initiative to increase the gold reserves 
 back of their issues of circulating checks. As the public became ac- 
 customed to a paper currency thus supported, confidence was restored 
 and the metallic currency, which had been so carefully hoarded, has 
 already begun to reappear. 
 
 Foreign trade. Two factors operated to curtail the foreign trade 
 of the country and consequently to reduce the custom receipts which 
 had been the chief source of the public revenues the withdrawal 
 from their usual routes of many of the merchant ships of the bel- 
 ligerent nations, the consequent rise in ocean freight rates, and the 
 closing to a great extent of the markets of Europe which practically 
 cut Peru off from the markets in which she had been accustomed both 
 to sell her exports and to purchase the bulk of her imports. 
 
 Foreign exchange. So great was the demand for foreign exchange 
 after the outbreak of the European war that sight drafts on London 
 commanded a premium of 15 per cent in August, 1914. The reaction 
 has been so complete, however, due both to the prudent administra- 
 tive measures adopted by the National Government of Peru and to 
 the fact that the foreign market for the exports of Peru has been in 
 
REPORT ON PEBU, BOLIVIA, AND CH*LE. 55 
 
 great part restored, that the present rate of premium on exchange 
 (fall, 1916) is as low as one-half per cent for sight drafts on London. 
 
 Export tax. For the purpose of creating new revenues to take the 
 place of those which had become unproductive as an effect of the 
 war, the National Government of Peru levied an export tax on cer- 
 tain raw materials produced in the country, including cotton, wool, 
 sugar, and certain minerals. This tax becomes effective only when 
 the market price of the export has reached a minimum fixed by the 
 law. Due to the fact that most of the exports of Peru have com- 
 manded prices in the markets of the world during the past year 
 considerably in excess of those usually paid, the export tax has been 
 productive of revenue beyond the hopes of its most ardent advo- 
 cates. 
 
 Rise of price of exports. The following statements will bear out 
 at least in part the above. Sugar is the chief agricultural crop grown 
 in Peru. In January, 1914, Peruvian granulated sugar commanded 
 $2.50 per English hundredweight of 112 pounds. As a result of the 
 outbreak of the war the price of sugar rose in August, 1914, to $4.86, 
 and to-day the price is $4.10 per Spanish quintal of 101.46 pounds. 
 The rise in the value of copper as a result of the war has been even 
 more remarkable than that of sugar. The exports of copper from 
 Peru exceed in total value any other mineral exported. In January, 
 1914, copper brought 66 pounds per tori and closed in December of 
 the same year at 56.15 pounds. In December, 1915, copper was bring- 
 ing 84.5 pounds, and at present it has risen to the unusual figure 
 of 137 pounds per ton. 
 
 Freight rates affect imports. As has above been pointed out, the 
 commerce of Peru has been and still is handicapped by the very high 
 ocean freight rates collected on all her exports and imports. The 
 fact that manufacturing industries developed in Peru do not supply 
 even the domestic market to any appreciable degree accentuates the 
 evil effects of this rise in freight rates, and the result has been the 
 total or partial depletion of the stocks held in certain lines of goods 
 in Peru. It has been stated that during the closing of the Panama 
 Canal in the early part of the present year ocean freights to Peru 
 were as much as 400 per cent above normal. 
 
 INDUSTRIES OF PERU. 
 
 Mining. Peru occupies a favored position in the central part of 
 the Andes and has within her borders what must probably be con- 
 ceded to be one of the most highly mineralized portions of the earth's 
 surface as yet explored by men. The gold mines of Peru were known 
 for the richness of their ores even in the day of the Inca and before 
 the conquest. To-day the copper mines of Cerro de Pasco and Moroc- 
 
56 REPOKT ON PERU, BOLIVIA, AND CHILE. 
 
 ocho are amongst the most valuable producing mines of the world. 
 In addition to copper and gold, silver, tungsten, and lead are pro- 
 duced in considerable quantities. Extensive deposits of zinc and of 
 coal, both hard and soft, are said to exist and await but the onward 
 march of progress and of population when they may be developed 
 to advantage. 
 
 At the present time, due largely to the European war, the prices 
 commanded in the markets available by the minerals exported from 
 Peru are greatly in excess of the cost of production and the earnings 
 of the mining companies are certainly very satisfactory. 
 
 Agriculture. The voyager who knows Peru merely from the view 
 he may get of it from the deck of the steamer sailing along its 
 coast can form no idea of the agricultural wealth which lies but 
 a few miles inland behind the barren desert sands and naked hills 
 which present so forbidding an aspect along the coast. Fortunately, 
 the committee had an opportunity to get beyond the desert belt and 
 to inspect personally some of the valleys made fertile by irrigation 
 systems at times as old and older than the period of European activi- 
 ties in America. 
 
 Sugar, cotton, wool, and cattle are the chief production of the 
 agriculture of Peru. Cattle raising tsnd wool production on the 
 Andean plateau is being extended, and the quality of wool is being 
 improved by experiments in the cross breeding of sheep and the 
 creation of herds adapted to the unique conditions of climate and 
 altitude found in Peru. The cattle industry of Peru, though old in 
 point of time, is still in the infancy of its development and seems to 
 hold much in store for future development. 
 
 Of the agricultural products of Peru, however, sugar and cotton 
 are close rivals for premier position. In normal times the cotton 
 crop is of greater value than the sugar crop, and the possibility of 
 development in cotton seems to be greater than it is in the sugar 
 plantations, because of the fact that cotton resists the arid condi- 
 tions better than does sugar cane. 
 
 The raw cotton industry of Peru suffered because of the European 
 war in much the same manner as did our own cotton industry, 
 and has not yet fully recovered. In Peru both smooth and rough 
 staple cotton are grown. The rough staple, commonly known as 
 Peruvian rough, is a variety of cotton not grown successfully on a 
 large scale elsewhere than in Peru. It is well adapted both because 
 of its roughness and of its peculiar grayish color for mixing with 
 wool, and it is this characteristic which gives it its great value. The 
 best grades of rough cotton are grown within a very limited area in 
 the northern part of the country, but a semi rough cotton is grown in 
 other sections. 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 57 
 
 The smooth staple cotton is of both the long staple and the up- 
 land varieties, and finds a good market in normal times in Europe, 
 while considerable quantities are being consumed in the mills estab- 
 lished at Lima and elsewhere in Peru. In these mills there are in 
 eration 68,000 spindles and some 2,500 looms. The business seems to 
 be prosperous, is controlled in part by foreign capital, and the tend- 
 ency is to increase the volume of the output which finds a good mar- 
 ket in Peru and adjoining countries. 
 
 There are upward of 90 sugar estates in Peru. These are located 
 in the short valleys along the Pacific coast, have a total area of not 
 less than 500,000 acres, of which, however, not more than 100,000 are 
 actually in cane. The problem on the sugar estates, as it is in every 
 other agricultural venture in Peru, is the problem of water. The 
 farmer has no rainfall upon which to depend, and although his lands 
 when duly watered are of phenomenal fertility, there are no great 
 systems as yet created for the preservation of the limited supply 
 which comes to his lands from melting snow of the Andean summits. 
 The crop is grown entirely under irrigation, and the supply of water 
 for irrigation for a crop like sugar, which must grow throughout the 
 year, is necessarily the supply available during the months of mini- 
 mum flow. Keports covering three distinct irrigation projects, which 
 have for their purpose the conservation and economical distribution 
 of the available water supply, were shown to the committee by the 
 Lima Chamber of Commerce. The seven largest of these projects 
 involve a total area of 670,000 acres, and competent engineers have 
 estimated that the cost of irrigating these would be in the neighbor- 
 hood of $50,000,000, or an average cost of slightly less than $75 per 
 acre. The largest of these, involving more than one-half of the total 
 area, that of Chancay, could be constructed, it has been estimated, at 
 a cost of approximately $70 per acre. 
 
 Manufacturing. Manufacturing in Peru exists only on a small 
 scale and has for its purpose the supplying only of the domestic 
 market. The cotton and woolen mills are turning out good work. 
 The tanneries, shoe factories, furniture factories, hat factory, and 
 other establishments visited by the committee are handicapped by the 
 limitations of the domestic market to which they cater, are obliged 
 to devote their energies to the production of a wide variety of goods, 
 and have riot tlte advantages which come from specialization. 
 
 TRADE RELATIONS BETWEEN PERU AND THE UNITED STATES. 
 
 The commerce of Peru has suffered much because of the European 
 war, as has already been pointed out in a general way. The United 
 States is practically the only market in which Peru may profitably 
 purchase to-day the commodities which she must import, and the 
 high prices prevailing in that market, as well as the abnormal 
 
58 REPOBT ON PERU, BOLIVIA, AND CHILE. 
 
 charges for freight and insurance, limit even that market to a great 
 extent. 
 
 In a general way our goods are being introduced into Peru in ever- 
 increasing quantities. Our ability to hold this market when the war 
 is over and normal Conditions are restored will largely depend upon 
 our ability to adjust our production to the new conditions of compe- 
 tition and to avail ourselves of the advantage of closeness which the 
 Panama Canal makes ours. 
 
 There is no doubt that the investment of ever-increasing amounts 
 of our capital in the productive enterprises of Peru, and the im- 
 provement of our exchange by the establishment of an American 
 bank at Lima, would tend to strengthen our trade relations with 
 Peru and increase the bulk of the commerce between the two coun- 
 tries. 
 
 DEPARTURE FROM LIMA. 
 
 At 2.80 p. m. on May 13, a group of distinguished citizens, Gov- 
 ernment officials, and business men of Lima escorted the committee 
 to the Callao station and after most cordial farewells the committee 
 sailed for the Peruvian port of Mollendo. 
 
 Tanibo de Mora and Pisco. On May 14 the ports of Tambo de 
 Mora and Pisco were visited. These ports are mere shipping points, 
 as indeed are most of the west coast ports of Peru. Back of them, 
 and only a few miles inland, lie the fertile irrigated vineyards and 
 olive gardens of Peru. Wine of good quality, olives, and dates are 
 grown in considerable quantities and form an important item in the 
 trade of these ports. 
 
 Chala. On May 15 the committee visited the port of Chala. As 
 Paita, the first Peruvian port visited by the committee, is the port 
 from which the rough cotton of Peru is exported, so Chala is the 
 port from which the bulk of the smooth-staple cotton finds its way 
 into the markets of the world. The firm of W. R. Grace & Co. has 
 an agency at Chala which is of considerable importance because of 
 the fact that it buys the bulk of the raw material used by the cotton 
 mill of the same firm which we had visited while in Lima. The com- 
 mittee found that although the market for Peruvian smooth-staple 
 cotton hnd been almost paralyzed for months, because of the closing 
 of the European market, there were evidences of improvement and 
 the growers were more hopeful. 
 
 Mollendo. On May 16, we arrived at the port of Mollendo. This 
 port lies exposed to the southwest winds which prevail at this season 
 and the landing of passengers and cargo was at once a picturesque 
 and perilous undertaking. So violent was the surf even alongside 
 the small pier that passengers and cargo had to be hoisted from 
 launches and lighters by the moving cranes with which the pier is 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 59 
 
 equipped. It is said that a few miles to the south of Mollendo there 
 exists a harbor which might be made safe at all seasons of the year. 
 The committee did not have an opportunity to investigate this mat- 
 ter. What we have seen of the west coast of Peru makes us feel 
 that a coastwise longitudinal railway in Peru, which would connect 
 the fertile valleys with one or two good shipping points, is a facility 
 which must be provided before the foreign trade of this coast may 
 expect to reach its fullest development. 
 
 Mollendo, which for years enjoyed a practical monopoly as the out- 
 let to Bolivia, has in recent years come into competition with the ports 
 of Arica and Antofagasta, both in Chilean territory. As a conse- 
 quence the bulk of trade passing through Mollendo has diminished, 
 and unless some practical step is taken to improve the harbor at 
 Mollendo, or to develop a harbor in this vicinity, the probability is 
 that Mollendo will lose entirely the importance it has enjoyed as the 
 outlet for the mineral wealth of the Republic of Bolivia. 
 
 At noon, May 17, the committee left Mollendo by the regular 
 train of the Southern Railway of Peru. This road is operated by the 
 Peruvian Corporation. 
 
 ARRIVAL IN BOLIVIA. 
 
 Guaqui. Arriving at Guaqui on the morning of June 19, we were 
 met by the minister of the United States to Bolivia, Mr. John D. 
 O'Rear and Mr. V. L. Havens, commercial attache of the United 
 States in Chile. Bolivia being included in the district of the com- 
 mercial attache of Peru, Mr. William F. Montavon had accompanied 
 the committee and remained with it during its visit to Bolivia at the 
 request of the committee. Representatives of the Government of 
 Bolivia and of the commercial and industrial establishments of La 
 Paz had likewise come on to Guaqui to meet the committee. A 
 special train was ready, and we at once set out for Tiaguariaco. the 
 seat of what are probably the most ancient ruins of Bolivia. Mr. 
 Arturo Posnansky, an authority on Bolivian antiquities and the 
 author of several printed volumes on the ruins of Bolivia, met the 
 committee and spent several hours in explaining the ruins in the 
 vicinity of Tiapuanaco. 
 
 La Paz. Arriving at La Paz the committee was met by the cabi- 
 net of President Montes of Bolivia and made welcome in the name of 
 the country. Very comfortable quarters had been provided for the 
 committee, and nothing had been left undone which might add to 
 the success and pleasure of our visit to La Paz. 
 
 Because of delays occasioned by the irregularity of sailings from 
 Callao, the committee arrived at La Paz several days behind the 
 schedule which it had adopted. As a consequence the visit to Bolivia 
 had to be made as brief as possible and limited entirely to the city 
 
60 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 of La Paz. During the two days and a half spent in this interesting 
 country, every minute of the time of the committee was taken np by 
 a program prepared by the Government of Bolivia, and it is not prob- 
 able that the time could have been spent in a more interesting or 
 valuable manner. 
 
 The daily press of La Paz devoted a great deal of its space to the 
 work of the committee and discussed with great sympathy the pur- 
 pose of the visit. The cordiality of the reception accorded to the 
 committee by the Government of Bolivia, by the business interests 
 of La Paz, and by the people in general is eloquent testimony of 
 warm friendship for the United States. 
 
 Among the most interesting events of May 20 was the audience 
 granted to the committee by His Excellency President Montes. The 
 audience was in the presence of the cabinet and took place in the main 
 audience hall of the Presidential Palace. 
 
 The minister of foreign affairs, Dr. Sanjines, entertained the com- 
 mittee at dinner in the evening of May 20. Fifty of the men most 
 prominent in political, military, and commercial life of Bolivia made 
 up the guests. 
 
 In welcoming the members of the commission, the host spoke as 
 follows : 
 
 Gentlemen, one year ago, at the suggestion of Mr. William Gibbs McAdoo, 
 Secretary of Treasury of the United States, there assembled in Washington, 
 under most favorable auspices, the First Pan American Financial Conference, 
 made up of delegations from 18 Republics of this continent. 
 
 It was the privilege of the distinguished representatives of the respective Gov- 
 ernments, who formed part of that assembly, to place wreaths of flowers, MS a 
 homage of admiration and respect for the departed great, at the one-time home 
 and now resting place of the remains of the greatest of Americans Washington. 
 
 That ceremony, in which the feelings of the people of the three Americas 
 acted in unison, in rendering cult to the memory of a great man, reveals to us 
 symbolically the growing solidarity of the Nations of the new continent and 
 their ever-increasing tendency to create new bonds of union between themselves. 
 
 At the financial congress of May, 1915, at which the financial, mercantile, 
 and transportation features of the American Republics were studied, proposi- 
 tions were acclaimed which are destined to bring about uniform systems of 
 legislation, especially in regard to economic and commercial relations. 
 
 The momentous propositions of that conference have been further promoted 
 by the commission that met at Buenos Aires on April 3 last. The highest in- 
 tellectual powers joined in that assembly in order to study the practicability of 
 solving certain far-reaching problems which had previously been looked upon 
 merely as ideals which it was more than difficult, if not impossible, to carry 
 out. Nevertheless it was then shown that it is possible to generalize legislation 
 in regard to bills of exchange and a gold standard of equal purchasing power 
 In all of the countries of the American Continent. 
 
 In addition to the progressive steps that we are taking in the direction of 
 adopting uniform laws on commercial transactions, it is a pleasure for me to 
 dwell on the helpful work of intellectual intercourse brought about by the latest 
 scientific congresses. 1 refer to that of Santiago de Chile, of January, 1909, and 
 to the Washington congress, which adjourned oil the 8th of January last. 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 61 
 
 Simultaneously with the accomplishment of that work, for which our thanks 
 are due to the brilliant initiative of eminent personages of the United States 
 of America, the world at large has been enabled to form an idea of the bound- 
 less mineral and agricultural wealth of the soil of America, at the great 
 Panama-Pacific Exposition of 1915, the finest and, maybe, the most complete of 
 all of the exhibits of nations held to this day. 
 
 If the Panama Canal has shortened distances and made communications 
 easier between the two oceans and between North and South America, if the in- 
 ternational congresses have provided an opportunity to bring about a contact be- 
 tween statesmen and thinkers of all three, Anglo-Saxon, Spanish, and Lusi- 
 tanian Americas; if a system of uniform laws and rules of conduct is soon to 
 be a reality, then we have good cause to rejoice at success attained and to 
 speak with entire faith of Pan Americanism and acclaim it as a brilliant fore- 
 runner of the future. 
 
 On many occasions, when the official representatives of Bolivia visited the 
 United States, their reception was of a nature so brotherly and hospitable that 
 our gratitude is pledged to the charming courtesy of the American people. 
 
 It is to-day our good fortune, in turn, to be the hosts of some of the most dis- 
 tinguished members of the highest financial circles of the United States. Their 
 coming among us fills us with joy and with hope. Oh tendering our most sincere 
 and cordial welcome, we express the hope that their stay amidst the Bolivian 
 family may be pleasant to them, and that, when they leave this country, they 
 shall carry with them the best impressions, not only of the rural beauties of 
 our landscape, of the imposing heights of our snow-clad mountains, of the 
 fabulous wealth of our mines, but also of the hospitality of the people of 
 Bolivia and of their fitness to assume their proper share in the work of common 
 progress. 
 
 I ask the gentlemen who are present to raise their glasses and to drink to 
 His Excellency the President of the United States, to Mr. McAdoo, to whose 
 Initiative we owe the meeting of the Washington conference on finance, to the 
 minister of the United States, and to each one of the distinguished gentlemen 
 who honor us with their visit. 
 
 Mr. O. M. Clark arose to reply to the cordial words of welcome of 
 his excellency the minister for foreign affairs. 
 
 Mr. Minister and gentlemen, it is indeed a pleasure which I appreciate most 
 deeply to have the privilege of breaking bread with you to-night. This is my 
 first visit to South America and to your most interesting country of Bolivia. I 
 m neither an orator nor a linguist; my colleague, Mr. Wands, is both, and 
 I hope that you may hear from him later. But I assure you, my friends, that 
 sincerity shall be the compensation which I shall offer you for eloquence, and 
 the language of sincerity is humanity's language, the language of trim men the 
 world over, understood, I am sure, in Bolivia even as it is understood in my 
 native city on the shores of the Columbia. 
 
 My fellow citizens of the northwest of the United States did n<ft choose me 
 as a member of this distinguished committee because of my qualifications as 
 an orator. They chose me because they have confidence In my judgment and 
 faith in my ability to bring back to them a fair and impartial account of my 
 Impressions. 
 
 Portland, Oregon, the city which is home for me, is one of the fairest cities 
 of our great country; a city of roses and fine homes; a community of enter- 
 prising citizens, where every man is encouraged to own his own honu* unl to 
 enjoy a high degree of economic independence. 
 
62 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 My business is in timber and the manufacture of lumber. We have loaded 
 at our own docks many a steamer destined for the west coast and thus have 
 contributed in a practical manner toward the construction of your railways 
 and other public improvements. Some of our timber has found its way into 
 these picturesque regions of the Andes and has even become a factor in the 
 upbuilding of this interesting city of La Paz. 
 
 Trade to be permanent and profitable must be accompanied by advantages to 
 both parties; there must be reciprocity of profits, our ships must not return 
 empty. If we are to sell you our goods, we must buy your minerals. Our 
 country produces a surplus of many commodities which your country needs 
 canned goods, dried fruits, cereals, machinery, timber, and many others that I 
 might mention. Your country likewise produces more tin and copper and 
 valuable ores than is needed here. It is to our mutual advantage that we 
 exchange the surplus, and in this mutual advantage I see the foundation of a 
 profitable commerce between my country and yours. 
 
 This wonderful Continent of the Americas, blessed with a population of 
 progressive and enterprising citizens, with political institutions on a par with 
 the best that men have established at any time, with a soil, fertile and produc- 
 tive, and a climate as varied as it is pleasant, can by our cooperation be made 
 economically independent. We can produce everything that man may require, 
 and in this time, when the Old World is in the throes of a dreadful disaster, it 
 behooves us, my friends, to draw every day tighter the bonds of commercial and 
 social relations and thus, in some degree at least, compensate ourselves for that 
 part which is inevitably ours in the general loss and destruction. 
 
 In this connection permit me to assure you that the delegates whom you have 
 sent to the various Pan American congresses, and especially to the financial 
 conference held at Washington in 1915 and to the Panama-Pacific Exposition 
 last year have been men who, because of their high attainments and culture, 
 have done much to confirm the international friendships already existing, and 
 thus to further the commercial and economic solidarity of our countries. 
 
 Perhaps the most pressing problem before our country, and one which is most 
 intimately bound up with the general problem of commerce, is the problem of 
 transportation. Adequate facilities for the movement of goods over water and 
 lands must be provided if trade is to reach its full development. Upon my 
 return to the United States I shall devote much time to this problem. Of 
 scarcely less importance is the problem of banking and credits, and it is my 
 firm belief that the establishment of a strong United States banking institution 
 here is one of the steps which. our business men must take at once. Such an 
 Institution would doubtless become a powerful factor in stimulating both the 
 productive industries and the commercial enterprises of our countries. 
 
 We shall feel that our visit has not been in vain if it has served to .strengthen 
 ever so little the bonds of friendship which unite our country to yours. In the 
 name of the business men of the United States whom we represent we invite 
 you most cordially to visit our country and to know us better, for it is from 
 euch mutuaf knowledge and friendships that must result that solidarity of the 
 American nations to which we all aspire. I thank you, gentlemen, for your 
 hospitality and for the many kindnesses we have received at your hands. 
 
 Mr. Wands spoke in Spanish, proposing the health of President 
 Montes in the following words: 
 
 In conclusion, I wish to propose this toast to a statesman who has been the 
 standard bearer of every effort for the peace and progress of his country, a 
 man who enjoys the reputation of being one of the most prominent statesmen in 
 
RKPORT ON PKRU, BOUVJA. AND CHILK. 63 
 
 all of South Anii'rica. I refer t< His J<]xce!l*MH!y the President of fix- Republic 
 of Bolivia. 
 
 On May 21. Mr. and Mrs. Jorge Saenz entertained the committee 
 at luncheon, and in the evening the minister of the United States to 
 Bolivia entertained at dinner. The minister of finance spoke as 
 follows : 
 
 Gentlemen, the invitation of his excellency, the minister of the United States 
 to Bolivia, Mr. O'Rear, that this group of distinguished gentlemen gather at 
 his table affords me an opportunity, beneath the folds of that beautiful flag 
 that floats over this board, to address a brief word to the gentlemen in whose 
 honor this banquet has been offered. 
 
 The idea of your visit to South America sprang in May, 1915, from one of 
 (he delegations to the Pan American congress then assembled in the Capital 
 of the illustrious name of the immortal Washington, just one year ugo. And 
 the motion was unanimously accepted with applause. 
 
 Since then we expected to see you in this country, and hope that you may 
 receive here, in your short visit, only the impression of good wishes with 
 which we welcome you. 
 
 The importance of this visit, I hope, will have a meaning more significant 
 than a mere usual courtesy and reciprocity in the relations of your country 
 with her sisters of this Continent ; something- far more transcendent, that may 
 leave a luminous mark in your path of peaceable and laborious prosperity. 
 
 There is in this country a vast field for commerce and industries. You have 
 already seen the wonderful display of all the samples of rich products that 
 within the privileged Bolivian soil are kept. Between them you may find the 
 very one that Mr. Clark referred to, as being used to cover the articles he 
 offered to send us in his expressive speech last night. You gentlemen have to 
 study and give your thoughtful consideration to everything nature offers here, 
 but from the viewpoint of mutual benefits, as that is the fundamental condi- 
 tion for the firmest resolutions ; in this way you may open the doors of South 
 American industries and commerce on bases of mutual confidence for the un- 
 restricted interchange in the usual transactions of offer and demand. 
 
 In concluding, gentlemen, I want to toast for your happy return home, at 
 the same time remembering His Excellency, Secretary McAcloo, whom we would 
 have been exceedingly pleased to receive here the same as you, in this our 
 country, which, if it has no big material things to offer, certainly can extend 
 to you the most frank and friendly hospitality. 
 
 All three members of the American commission responded to the 
 kind words of the minister of finance, expressing their appreciation 
 of the many courtesies extended to them in the Bolivian capital. 
 
 During the afternoon of the 21st the committee visited a museum of 
 metallurgy, which had been placed on exhibition for the special 
 benefit of the committee. 
 
 ECONOMIC CONDITIONS. 
 
 The United States minister furnished the committee with a very 
 comprehensive report on economic and industrial conditions, and a 
 full statement of the effects of the war upon the country and the 
 present economic conditions was received by Mr. Jose Luis Tejada, a 
 prominent banker and business man and chairman of the finance 
 
64 BEPORT ON PERU, BOLIVIA, AND CHILE. 
 
 committee of the National House of Deputies. This statement, trans- 
 lated, is given herewith: 
 
 Bolivia, like all of the young nations of America, has not yet had the time nor 
 the administrative means necessary to organize a complete system of finances, 
 whereby all the economic energy of the country would be made to contribute 
 its proper share to the budget necessary for the general expenses of the Gov- 
 ernment. 
 
 Up to the present its principal source of revenue has been customhouse rev- 
 enues, where duties are collected upon the importation of foreign goods and 
 where also are levied export duties upon certain raw materials which leave 
 the country, to wit, minerals and rubber. The revenues of the customhouses 
 in normal times represent somewhat more than 60 per cent of the total amount 
 of the income of the National Government. 
 
 With these facts in mind it may readily be appreciated that the unexpected 
 outbreak of the great European war in the middle of 1914 constituted a very 
 serious menace for this country, and gave rise to a general uncertainty, not 
 only in Government spheres, but as well in those of commerce and industry. 
 
 The first and general effect experienced in the days following the outbreak 
 of hostilities in Europe, which may be attributed directly to this conflict, \vas, 
 in so far as Bolivia is concerned, a total paralyzation of international trade 
 through the enforced cessation of importations and the impossibility of con- 
 tinuing to export metals and rubber. The far-reaching effect of this can not 
 be overestimated, for all the present economic organization of Bolivia is de- 
 pendent upon these two industries. The exportation of minerals represents the 
 larger part of the volume of the annual exportation of the country, and the 
 value of these products serves as a basis for the importations and for the 
 settling of international obligations. When the war brought. the immediate 
 cessation of all exportation it was synonymous with a suspension of labor 
 throughout the mineral districts, and it may be said brought hunger to the doors 
 of all (he laboring classes as well as reacting upon all the population in general. 
 
 Few nations, therefore, derived greater advantage than Bolivia from the fact 
 that the allies succeeded in securing the complete dominion of the seas within 
 the first few months. This dominion of the seas changed the situation radically, 
 for by making navigation to Europe and the United States possible it reopened 
 to the Bolivian people the international ports of commerce, doing away with the 
 fundamental cause of the general discontent, which commenced to make itself 
 felt through the laying off of mining labor and threatened a total suspension of 
 the work of this industry. 
 
 After a short period of vacillation the export movement recovered normality, 
 and to this extent the economic situation in Bolivia was solved with respect to 
 the corporations and industrial enterprises and that class of laborers who ore 
 dependent upon them. 
 
 The increasing needs of the belligerents at this time begun to open up to 
 Bolivia a new horizon of business. The war brought with it as a natural 
 result a constant increase in the price of minerals such as copper and tin, of 
 which Bolivia has rich deposits in exploitation, as well as in the price of other 
 metals which form part of Bolivia's mineral wealth, although hitherto not rep- 
 resented in any great degree among her exports owing to the low prices 
 previously prevailing for these metals in the markets of the world. In this 
 last category are included principally the metals wolfram (tungstate of iron 
 and manganese), antimony, and lead. The first of the metals named rose 
 giddily in price from ?/120 per ton to the stupendous figure of T.1,100 per ton. 
 
BEPOiiT ON PERU, BOLIVIA, AND CHILE. 65 
 
 Antimony, which in times of peace sold n round L6 per ton of ore, rose to f-35, 
 and lead underwent a like rise in price. 
 
 In Bolivia, the deposits of these metals have been known for a long time to 
 have existed, but it was impossible to mine them because of the difficu'ty of 
 transportation. Once the prices reached figures when it paid to mine them, 
 work was at once started on the known deposits, but the great value of these 
 metals and their increased demand stimulated new discoveries and soon brought 
 to light the fact that along the whole length of the range of the Andes and its 
 spurs that is to say, throughout the extent of territory at present inhabited 
 and accessible to the railroads, there existed extraordinarily abundant and rich 
 deposits of antimony, of wolfram, and of lead. The mining of these metals soon 
 came to be au element of general prosperity for the country, and the volume of 
 the exports steadily increased. A few figures will give some idea of this devel- 
 opment. In 1914 antimony was exported only to the value of Bs. 30,616; In 
 1915 the exportation increased to Bs. 13,442,286, and in the first three months 
 of this year, January to March, the value of the antimony exported was 
 Bs. 5,669,035, and every day greater activity is noted in its mining. 
 
 Wolfram, which with good reason has come to be known as black gold, 
 because of its extraordinary price, figured among the exportations of 1914 as 
 Bs. 428.300; in 1915, it reached Bs. 1.497.845, and in the three first months of the 
 present year, it has reached almost the figure of the entire preceding year, to 
 wit, Bs. 1,380,929, which gives some idea of its increase. 
 
 With respect to the metals which have always been mined by the Bolivian 
 miners, the increase was likewise appreciable. In 1914 the country exported 
 tin to the value of Bs. 42,479,887. In 1915 this exportation reached Bs. 
 44,885,450. The value of copper exported in 1914 was Bs. 4,442,735, and in 1915 
 it figured in the exportations as Bs. 14,035,311. 
 
 This factor of the increase of the country's exports in so appreciable an 
 amount, in comparison with the normal volume of the Bolivian exports, brought 
 about a very satisfactory situation in the country's general condition, but the 
 result was even better than might be thought, when taken in consideration with 
 the extraordinary diminution of the importation of goods from abroad. For- 
 tunately, the country had accumulated in the years preceding the declaration of 
 war a very large stock of merchandise, due doubtless to the liberality of local 
 credits which had characterized the policy of the national banks before the 
 passage of the law in Bolivia limiting to a single bank, the Banco de la Naci6n 
 Boliviano, the right of note issue. This heavy and perhaps excessive importa- 
 tion in advance has prevented the Bolivian people from suffering during these 
 war times any scarcity in imported goods, or any rise in their price, and at the 
 same time the merchants have been able to dispose slowly and profitably of 
 their merchandise, which perhaps could not have met the competition of 
 imported goods of more recent manufacture if the normal movement of imports 
 had continued. 
 
 Synthesizing, then, the economic situation of Bolivia, it may be said that the 
 country, in 1915, as a result of the war, has produced and exported more than 
 in any previous year since the foundation of the Republic, and at the same time 
 there never has been a less amount of foreign goods imported in proportion to 
 the exports. The relative figures are as follows: 
 
 1914 Importation Bs. 39, 761, 222 
 
 Exportation (^ sol, 5G2 
 
 1915 Importation 22, 574, 566 
 
 Exportation 95. 210, ?"r 
 
 106318 5 
 
66 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 A comparison of these figures will indicate with sufficient precision just what 
 prosperity the European war has brought to Bolivia's business. Since exports 
 rose above any previous year, while imports fell off about Bs. 18,000,000, the 
 country has never had greater resources with which to pay off old debts and 
 accumulate greater wealth. An unequivocal symptom of the comfortable cir- 
 cumstances in which the country finds itself, may be had from the foreign 
 exchange quotations. At the outbreak of the war and during the first months 
 of uncertainty which followed, the value of the Boliviano dropped to 14 pence, 
 but under the influence of increasing exports and small imports, it has risen 
 steadily until it has reached, not only the legal par of 19& pence, but even a 
 premium of 4 per cent in favor of the Boliviano, or a quotation of up to 20 
 pence per Boliviano. 
 
 These seem to be the culminating factors of the situation in so far as the 
 business of imports and exports is concerned, that is to say, the two poles of 
 the economic life of the nation, and from them have issued a prosperity shared 
 in by everybody in general, due largely to the increased wealth produced by 
 the mining operations, likewise a constant demand for labor and high wages, 
 and the disposal, sknvly but profitably, of merchandise imported in previous 
 years in imprudent quantities, all of which have contributed to the maintenance 
 of the general prosperity. It is not an exaggeration to say that business in 
 general and everybody connected with it has seldom enjoyed a period of greater 
 activity in production or better remuneration for his labor. 
 
 When we recall, however, the defective organization of our public finance, it 
 ts not to be wondered at that the reverse of this very satisfactory state of 
 affairs for individuals obtains in so far as the Government is concerned. The 
 small volume of the imports restricted in even larger proportion the custom- 
 house duties, which is the principal source of the national revenues. Imports 
 consisted chiefly of food products, which is the class of imports paying the 
 smallest rates in the tariff. This source of revenue failing, the resources of the 
 nation diminished rapidly from Bs. 22,000,000, the amount collected in the last 
 year of peace, to the very low figure of Bs. 15,840,216, collected in 1914, and to 
 a still lower figure in 1915 of under Bs. 15,000,000. 
 
 From the very first, therefore, the Government has been in straitened cir- 
 cumstances, arid although the situation improved somewhat with the possibility 
 of importing on a small scale and of exporting in the satisfactory way already 
 outlined, still, a serious upsetting in the conduct of the Government's affairs 
 could not be avoided. Fortunately, the Government, the Congress, and the 
 people appreciated from the first that a time had come when it was necessary 
 to make some sacrifice in order not to compromise the future of the country. 
 By common consent, therefore, there was agreed upon a simple plan of expendi- 
 ture of the Government's revenues more or less along the following lines : 
 
 (1) To pay religiously, and at whatever sacrifice, the service of the foreign 
 debt, of the internal debt, and of the guaranties in force for the railroads. 
 
 (2) To suspend all public work which did not have furfcls of its own. 
 
 (3) Finally, to effect economies in all governmental services and reduce, 
 temporarily, 30 per cent, later 20 per cent, the salaries of public employees. 1 
 
 This program has been rigidly adhered to, and Bolivia to-day boasts of hav- 
 ing met its debts as promptly as in normal times. The other economies have 
 also been effected, and at present it is hoped that the Government's difficulties 
 will be solved without any other measure than the issue of notes to be paid off 
 in succeeding years by acceptance in the customhouses in definite proportions, 
 
 1 At present, from 5 per cent to 20 pr cent. 
 
EEPOBT ON PP:HU, BOLIVIA, AND CHILE. 67 
 
 the issue, it Is hoped, not to exceed Bs. 10,000,000, and to be fully paid within 
 five years as a maximum. 
 
 Bolivia has learned many lessons from the war. It has called attention, 
 none too gently, to the defective organization of its finances, based as they 
 are upon the income of customhouses and exposed to brusque variations. It 
 has, furthermore, called attention to the urgent necessity of stimulating other 
 industries which can contribute something to the life of its inhabitants, avoid- 
 ing the importation of food products and other goods which the country can 
 produce itself on a great scale. Finally, it has demonstrated the great im- 
 portance of the railroads, without which it would have been impossible to in- 
 crease within a few months its exports of metals, and without which it would 
 be equally impossible to stimulate the development of other industries in regions 
 remote from the great centers of consumption. These lessons can not but have 
 a beneficial effect upon the future of Bolivia. 
 
 The Government and the people are determined upon changing this situation 
 which has brought on them such great disturbances during the present state 
 of war in Europe. For this reason, they are firmly determined to develop the 
 agriculture of the country, to make it independent of foreign markets in its 
 consumption of sugar, alcohol, meat, and grains. At present, with its own 
 funds, the government of the department of La Paz is extending a railroad 
 toward the fertile Yungas region, which, once it has a railroad, will open for 
 production a very extensive and rich area. The work on the Tupiza-Quiaca 
 Railroad is going forward with enthusiasm, in order that we may have direct 
 communication with the centers of production of the Argentine, and also to 
 facilitate the exportation of our products to the Atlantic Ocean. 
 
 DEPARTURE FROM LA PAZ. 
 
 On the morning of May 22, the members of the committee said 
 good-bye to the Bolivian officials and other friends by whom they had 
 been so hospitably entertained, and in the afternoon they left La Paz 
 on the long journey to the coast. The trip was made in a special 
 train generously placed at their disposal by the Bolivian Govern- 
 ment. All the ministers, many of the leading men of the country, 
 and a large public were at the station to bid us good-bye. The 
 United States minister, representatives of the ministries of foreign 
 affairs and of the treasury accompanied us to Viacha, a ride of about 
 one hour. We left Viacha, the junction of the three railways enter- 
 ing Bolivia, at 2.30 p. m. Final farewells were said at this point 
 and the long journey to Antofagasta across the desert was begun. 
 There was little of note along the railway beyond the continual 
 barrenness of the ground, only scratched here and there by the most 
 rudimentary implements. The temperature fell continuously. 
 Heavy overcoats were necessary and even then the cold seemed very 
 piercing. The train arrived at Oruro about 9 p. m. While waiting 
 for the necessary train movements, calls were received from Meliton 
 Lemaitre, the prefect of Oruro, and his secretary, Mr. Cabezas Villa, 
 as well as the traffic manager of the railwav. Invitations were ex- 
 
68 REPORT OK PERU, BOLIVIA, AND CHILE. 
 
 tended to visit the local mineral exhibit, but owing to the unforeseen 
 delays which had been encountered it was thought best to continue 
 at once. 
 
 The special train placed at our disposal consisted of a sleeping car, 
 a dining car, and a baggage car. The night was unusually cold and 
 heavy winds were blowing, but we arrived at Uyuni, the junction 
 of the Antofagasta 30-irich gauge and of the Bolivian meter gauge, at 
 au early hour on the morning of Tuesday, May 23. 
 
 AUKIYAL IN CHIUC. 
 
 Antofagasta. We arrived in Antofagasta at 1.30 p. in. and were 
 received by the United States consul, Mr. Thomas W. Voetter, the 
 chief of the Antofagasta custom guard and inspection, Dr. Eliseo 
 Pinto. 
 
 Telegrams were sent from Antofagasta to Bolivia thanking the 
 Bolivian Government for their many kind and considerate attentions, 
 and also to the United States Embassy in Santiago, informing them 
 of the expected sailing hour from Antofagasta. The party called on 
 the Intendente of Antofagasta, the head of the local government, and 
 on Mr. Avalos, the administrator, or head of the Antofagasta custom 
 service. Mr. Avalos took the party through all the storerooms, offices, 
 and different sections of the customhouse. Space is so limited that 
 oftimes goods are piled in the street or left on the clocks where 
 proper watching is almost impossible. Landing is done by launches 
 in a sea which is never really smooth and there is a crying demand 
 for the construction of first-class port works. Much of the cost for 
 new customhouse buildings would be covered by the reclamation of 
 land. 
 
 Coquimbo. The party went aboard the steamship Flora at 1 p. m., . 
 being conveyed to the ship by the customhouse launch, in charge of ! 
 Mr. Pinto. The trip along the coast was uneventful. We arrived at * 
 Coquimbo at 6 a. m. on Saturday, May 27. This was the first port south I 
 of Callao where any green things were seen. It is about the j 
 northern limit of the Chilean agricultural region, and is the center of j 
 a fairly rich copper mining region, equipped with a good smelter, 
 and only about 35 miles south of the Tofo iron mines operated by the 
 Bethlehem Steel Co. The iron is 68 per cent pure and the company 
 expects to get out about 1,500,000 tons per year. They are now elec- j 
 trifying their private railway, which is about 24 miles long, connect- 
 ing their mines and the artificial port they have constructed. Co- 
 quimbo is a port on a tranquil bay and is the outlet for the Province 
 of the same name. The principal city of the Province is Serena, about 
 half an hour's ride on the railway, which runs trains at frequent in- 
 tervals. The party went ashore here, sent various telegrams ahead 
 
REPORT ON PERU, BOLIVIA, AND CHII,K. 69 
 
 advising of our expected arrival in Valparaiso, and called on the 
 newly appointed American consular agent, Mr. F. J. Harper, head of 
 the local branch of W. R. Grace & Co. Mr. Harper later called on us 
 aboard the Flora at 8.30 a. m., and spent an hour discussing local 
 business conditions, which was highly interesting to the committee. 
 We sailed at 10 a. m., the sea being unusually calm for this -section, 
 but the fall in temperature, due to the continual southerly advance, 
 and to our entrance into the cold, northbound Humboldt current, was 
 (juite noticeable. For a number of hours during the afternoon it was 
 necessary to whistle and ring the bell, because of the dense fog, but 
 little danger was expected, because of the small number of ships 
 present along the course at this time. By evening the fog had lifted 
 and a few stars were visible. 
 
 Valparaiso. On Sunday, May 28, we arrived at the port of Val- 
 paraiso shortly after sunrise and within a very short time after drop- 
 ping anchor the representative of the intendente, or chief of the local 
 government, called with a launch and arranged for our immediate 
 transfer to shore and the Royal Hotel. 
 
 Santiago. The committee left Valparaiso at 8.30 in the morning 
 of May 30. in a special car. which the Chilean Government had most 
 graciously placed at their disposal. Lunch was secured at Llay-Llay. 
 the stations where the railways branch, one going to Santiago, and 
 the other to Buenos Aires. The guests arrived in Santiago at 2 p. in., 
 and were received in the station by Mr. Sanchez Mira, of the treas- 
 ury department, Mr. Boomer of the office of the commercial attache, 
 and Mr. Frederic Wightman, head of the house of W. R. Grace & 
 Co. in Chile. The party immediately went to the Grand Hotel. 
 
 Two days were spent in visiting the industrial plants of Santiago 
 and in an interesting conference with the minister of finance. The 
 committee also had the good fortune to be invited to attend the open- 
 ing of Congress, at w r hich function the President of Chile read his 
 annual message. 
 
 On Friday, June 2, the ambassador of the United States, Mr. 
 Joseph IT. Shea, entertained at luncheon in the embassy Mr. Augusto 
 Villanueva, Mr. Luis Izquierdo, and Mr. Gonzalo Vergara Bulnes, 
 Chilean delegates to the Pan American Financial Conference in 
 Washington; Mr. Clark and Mr. Wands, members of the return 
 visit committee; Mr. George T. Summer lin, first secretary of the 
 embassy; Mr. V. L. Havens, commercial attache; and Mr. Johnson, 
 second secretary of the embassy. 
 
 At 3 o'clock the same afternoon the commercial attache accom- 
 panied Mr. Clark and Mr. Wands to visit the minister of the treas- 
 ury, Mr. Armando Quezada A., with whom an hour was spent very 
 pleasantly. The minister then took the party to call on the Presi- 
 dent of the Republic. 
 
70 REPOKT ON PERU, BOLIVIA, AND CHILE. 
 
 On Sunday, an interesting luncheon was given to the committee 
 by Seiiores Villanueva, Izquierdo, and Vergara in the Union Club. 
 
 CHILE AND THE WAR. 
 
 During its short stay in Chile the committee was able to secure 
 considerable information about the country's economic situation. 
 
 Before the outbreak of the European war in August, 1914, Chile 
 was commercially and financially prosperous, a notable development 
 having taken place in the country during the few years prior to the 
 war. 
 
 Serious difficulties arose with the outbreak of hostilities in Europe 
 which paralyzed commerce and industry. These difficulties were 
 as follows: 
 
 (a) Through the stagnation of shipping, owing to the presence 
 of Von Spec's squadron and a British fleet on the Chilean coast. 
 
 (6) The complete suspension of all banking facilities and the 
 prohibition of the export of practically everything from this coun- 
 try, with the exception of nitrate. Furthermore, the general condi- 
 tions were very much aggravated by the fact that German banks and 
 German firms had been considerable drawers of bills of exchange on 
 British institutions. These documents were neither accepted nor met 
 when presented for payment, because of British decrees on this sub- 
 ject. The bills were formally protested and returned to Chile. 
 
 (c) The momentary paralyzation of financial matters created con- 
 siderable disorder and led to the closing of most of the nitrate and 
 other industries in the country. 
 
 The currency question in Chile has not been affected or modified 
 in any way since the outbreak of the war. The circulating medium 
 in Chile to-day is nominally 150,000,000 Chilean pesos, with a few 
 millions in addition which have been taken out on deposits made by 
 banks to increase their holdings under the law of May 11, 1912. 
 
 Financial problems practically solved themselves in regard to the 
 bills drawn by German on British institutions by the bills being 
 returned to Chile protested and met in various ways. The drawing 
 power is practically now in the hands of Chilean and British banks 
 and British and American firms. 
 
 The effect of the war on exchange was naturally extremely serious. 
 Prior to the 4th of August, 1914, the rate of exchange ruling was 
 8td. and immediately after that date, owing to the scarcity of notes, 
 which had been hoarded and withdrawn from circulation, exchange 
 rose steadily until it touched 9f d., afterwards falling away to 6Jd., 
 the lowest rate, which was reached September 15, 1914. Since then 
 it has gradually improved as the nitrate enterprises renewed work 
 with the demand for nitrate. 
 
REPORT ON PERU, BOLIVIA, AND CHILE. 71 
 
 A law was passed just after the outbreak of hostilities with the 
 object of assisting nitrate producers and to encourage them to con- 
 tinue producing and to build up and hold large stocks. This law, 
 which is dated August 12, 1914, allowed for a Government advance 
 of $3 Chilean currency per quintal on nitrate manufactured and 
 placed on the nitrate fields and $4 Chilean currency per quintal of 
 nitrate placed in port ready for shipment. The object of this was to 
 prevent people being thrown out of employment. While these facili- 
 ties were taken advantage of by several of the larger Chilean pro- 
 ducing companies, the general effect of the war on the industry 
 during the first six months of the war was the almost total suspension 
 of the export of nitrate and the consequent closing down of about 
 80 per cent of the nitrate plants. This necessitated the transporta- 
 tion of a large part of the population from the nitrate fields in 
 the north to the agricultural fields in the south at the expense of 
 the Government and a total suspension of all traffic in shipments of 
 supplies of produce from the southern to the northern ports. The 
 nitrate industry began to revive early in the month of March, 1915, 
 and since then it has steadily improved until we have to-day larger 
 shipments than before the war. 
 
 As the country had to live on its own resources agriculture took a 
 spurt, and the keenest endeavors were made to increase the production 
 of all consumable articles. Unfortunately for Chile, however, it 
 proved to be a bad wheat year and a heavy importation took place 
 for the supplies of 1915, wheat touching famine prices. Potatoes 
 were also scarce. The export of all agricultural products was totally 
 suspended by the Government in order to provide for the necessities 
 of the country. Subsequently, however, permits were granted for the 
 shipment of a few cargoes of oats only to Australia, owing to the 
 excessive quantity of this cereal being left in the country. 
 
 OBSERVATIONS. 
 
 We realize that our trip was too rapid to permit of a thorough 
 study of fundamental conditions. However, every advantage was 
 taken of opportunities offered to obtain a correct view of how the 
 west coast countries met the problems arising as a result of the 
 European war; and in concluding this renort, we venture to make 
 the following observations: 
 
 (1) Latin America to-day offers opportunities on a basis never 
 presented before, not only for the extension of our trade in foreign 
 markets, but also for the investment of United States capital in 
 profitable enterprises. There is no reason why these investments 
 should not be properly safeguarded. The committee believes that 
 special attention should be given to the financing of contracts insur- 
 ing a market for American materials and the employment of 
 American skill and labor. 
 
72 REPORT ON PERU, BOLIVIA, AND CHILE. 
 
 In financing enterprises of a pioneering nature, involving the de- 
 velopment of raw products, care should be exercised to secure guar- 
 antees against duties or other taxes being raised for a term of years. 
 With these guarantees and an assured labor supply there would seem 
 to be no reason why United States capital should not be profitably 
 employed. 
 
 We must not lose sight of the fact that South America is destined 
 to be one of the great sources for the food supply of the more densely 
 settled countries. 
 
 (2) The committee recommends the publication by the Depart- 
 ment of Commerce or the Pan American Union of a group of small 
 handbooks, one for each Latin-American country, presenting briefly 
 and readably the up-to-date fundamental facts of each country. It 
 would not be necessary to give more than 2,000 to 3,000 words to the 
 smaller countries and 6,000 to 7,000 words to the larger countries. 
 With these handbooks as a foundation, details of industries and com- 
 merce could be issued from time to time in pamphlet form. 
 
 In making this recommendation the committee does not wish to 
 give the impression that it undervalues ths many excellent reports 
 already published by Government departments. It is of the opinion, 
 however, that a great deal is being poured into an already overfull 
 reservoir. If he has the voluminous reports already available, the 
 average American business man has not the time to go through them 
 all on the chance of finding a point of value or interest. It is the 
 belief of the committee that there are enough American manufac- 
 turers and merchants who want to do a foreign trade who would 
 welcome an elementary statement of fundamental conditions, such 
 as is contemplated in this recommendation. A great deal of the in- 
 formation already on hand would be found of value in the prepara- 
 tion of the handbooks suggested, but it should be most carefully con- 
 densed and systematized. 
 
 (3) The committee strongly commends the efforts that are being 
 made for the appointment of citizens of the United States as con- 
 sular agents in every case possible. Undoubtedly the complete 
 Americanization of the consular service at the present moment is not 
 practicable, but all steps leading in that direction are deserving of 
 congressional support. 
 
 ERNEST H. WAKDS, Chairman. 
 NOVEMBER 1, 1916. 
 
REPORT OF FINANCIAL AND COMMERCIAL COMMISSION 
 TO CENTRAL AMERICA. 
 
 Hon. W. G. McADOo, 
 
 Secretary of the Treasury, 
 
 Washington, D. C. 
 
 SIR: Pursuant to a resolution proposed and adopted by the dele- 
 gates of the Latin American Republics participating in the Pan 
 American Financial Conference held at Washington, May, 1915, a 
 committee styled the Latin American Return Visit Committee was 
 appointed to make the necessary arrangements for a visit to all the 
 Latin American countries, which visit it was believed would " prove 
 of the greatest value in strengthening and improving our financial, 
 commercial, and political relationships with those countries." 
 
 The first of the commissions appointed was to visit Panama and 
 the five Central American Republics and consisted of the following 
 persons : Mr. Lamar C. Quintero, of New Orleans, La., general attor- 
 ney for tropical divisions of the United Fruit Co.; Mr. Ernest E. 
 Ling, manager of the foreign-trade department, the National City 
 Bank, New York City, N. Y. ; Mr. John Clausen, manager of the for- 
 eign department, -the Crocker National Bank, San Francisco, Cal.; 
 Mr. J. P. Ripley, engineer, of the engineering firm of J. G. White & 
 Co., New York City, N. Y. ; Mr. Thomas J. Walker, vice president 
 of the First National Bank, San Fernando, Cal.; Mr. Roger W. 
 Babson, president, Babson Statistical Corporation, Wellesley Hills, 
 Mass. 
 
 The above committee, with the exception of Mr. Babson, met at 
 New Orleans during the session of the Foreign Trade Council, in Jan- 
 uary, 1916, and elected Mr. Quintero as chairman of the committee. 
 Mr. Alfred A. Biddle, of Philadelphia, Pa., was appointed secretary. 
 
 Mr. Babson did not join the party until its arrival in Guatemala. 
 
 The party, known as the Financial and Commercial Commission to 
 Central America, sailed from New Orleans on February 2, 1916, and 
 the departure was made the occasion of an active demonstration by 
 the people of New Orleans, indicating their live interest in move- 
 ments affecting the interests of the country in general. 
 
 The itinerary of the party was as follows : 
 
 February 2. Sailed from New Orleans on United Fruit steamship Abangarez. 
 February 9. Arrived Cristobal and proceeded by rail to Panama City, arriving 1 
 the same day. 
 
 73 
 
74 REPOKT ON CENTKAL AMERICA. 
 
 February 10. Left Panama City and went by rail to Cristobal and sailed on 
 United Fruit steamship Cartago for Port Limon, Costa Rica. (The stay in 
 Panama was very brief on account of a five-day delay occasioned by an accident 
 to the steamship Abangarez in New Orleans.) 
 
 February 11. Arrived Port Lim(5n, Costa Rica. 
 
 February 12. Proceeded to San Jose", capital of Costa Rica, arriving same 
 day. 
 
 February 19. Left San Jose" by rail and went to Puntareims on the Pacific 
 coast and embarked on the U. S. S. Cleveland. 
 
 February 20. Arrived Corinto, Nicaragua. 
 
 February 21. Proceeded by rail from Corinto to Managua, the capital of 
 Nicaragua. 
 
 February 25. Left Managua, went to Corinto by rail, and sailed on the 
 Cleveland. 
 
 February 26. Arrived Amapala, Honduras. 
 
 February 27. Left Amapala and went by motor boat and automobile to 
 Tegucigalpa, the capital city of Honduras. 
 
 March 6. Returned to Amapala and sailed on the Cleveland. 
 
 March 7. Arrived Acajutla, Salvador, and proceeded by rail to Son Salvador, 
 the capital city, arriving the same day. 
 
 March 14. Returned to Acajutla and sailed on the Cleveland. 
 
 March 15. Arrived San Jose", Guatemala, and proceeded by rail to Guatemala 
 City, the capital of Guatemala, arriving the same day. 
 
 March 24. Left Guatemala City by rail and went to Puerto Barrios, on the 
 Atlantic coast of Guatemala, arriving the same day. 
 
 March 25. Sailed on the United Fruit Co. steamship Sixaola, returning to 
 New York, via Port Antonio, Jamaica, and Santiago de Cuba. 
 
 April 3. Arrived New York City. 
 
 It will be noted that the stay in each Republic was short, particu- 
 larly in Panama, and our investigations of financial and commercial 
 conditions were seriously restricted in their scope on this account. 
 
 PANAMA. 
 
 The commission reached Colon, Panama, on February 8, 1916, and 
 was received by the governor, representing the Government. A 
 special car carried the party across the Isthmus, stopping at various 
 points along the route to view the canal locks. A committee con- 
 sisting of the minister of finance, the minister of foreign affairs, the 
 secretary to the President, and a number of prominent citizens wel- 
 comed us at the station and took us to the hotel. 
 
 The United States charge d'affaires, Mr. Willing Spencer, ar- 
 ranged for an official visit to the President and the minister of 
 finance, and also for a meeting with the association of commerce. 
 
 We learned that the Government had established a national sec- 
 tion of the International High Commission, composed of prominent 
 merchants and financiers, to work in harmony with the United 
 States section at Washington on questions of uniform legislation, 
 and that a code commission had just completed a set of new codes, 
 suitable to the conditions of the country. 
 
BEPOBT ON CENTRAL AMERICA. 75 
 
 There was considerable complaint about the canal commissaries 
 and storehouses, which enter into serious competition with the mer- 
 chants of the Republic of Panama, being able to undersell because 
 of nonpayment of duties. 
 
 An afternoon was pleasantly spent viewing the Panama Exposi- 
 tion, with its beautiful buildings and its interesting exhibits. At 
 night a banquet was tendered to the commission by the association 
 of commerce, and there was an exchange of views that the friendly 
 relations at present existing between the two countries would be 
 further developed as a result of the visit of the commission. 
 
 The Eepublic covers an area of about 32,000 square miles, and has 
 a population of about 450,000. The climate is very hot, more so than 
 in any of the other Central American Eepublics, due to its being 
 the most southerly of the group and to its generally lower altitudes. 
 It is unique in that it is cut in two by the Canal Zone, over which 
 the United States has jurisdiction. Ths capital city is Panama, 
 located on the Pacific side and having a population of about 38,000. 
 
 Of a total railway mileage of about 150 miles, the only line of 
 importance is the Panama Railroad, which is owned by the United 
 States and runs across the Isthmus from Colon to Panama, a dis- 
 tance of 48 miles. This line is very well built, having a gauge of 
 5 feet, about 80-pound steel, and gravel ballast; a considerabb 
 part of the track is built with native lignum-vitse ties and screw 
 spikes. It is spanned over most of its length by steel bridges carry- 
 ing two 3-phase electric circuits which transmit power used by 
 the canal commission for various purposes. It is probable that this 
 was done with the idea of ultimately changing over to electric oper- 
 ation, a change which, from an economic point of view, must be very 
 remote. Oil is now used for fuel. The service on this line is good 
 and rates are high. 
 
 The balance of the railway mileage in Panama consists chiefly 
 of banana railroads in the Bocas del Toro region on the Atlantic 
 side. A line of 3 feet 6 inches gauge, generally known as the Chiri- 
 qui line, is being constructed by Hobard & Co. for the Panama 
 Government and will run from David Bay, on the Pacific side, in a 
 northwesterly direction, to Boquette. It will open up a consid?rable 
 amount of coffee country. About 25 miles of this line are now prac- 
 tically completed. 
 
 In foreign commerce the balance of trade is against Panama, the 
 value of imports being in general about five times the value of ex- 
 ports. The principal export is bananas. In undeveloped resources, 
 timber is probably of the greatest value. There is a great amount 
 of very valuable timber in the country, but most of it can not be 
 taken out without involving excessive cost of transportation. It is 
 
76 REPORT ON CENTRAL AMERICA. 
 
 said that the soil is very fertile for sugar growth and that an ex- 
 tensive development will be possible when transportation facilities 
 are improved. 
 
 In the way of manufacturing industries. Panama has practically 
 nothing. The best-known is, of course, the Panama hat industry. 
 These hats were originally made only in Ecuador and Peru, and were 
 called Panama hats because marketed in Panama. Now a consider- 
 able proportion are made in Panama. 
 
 Panama is said to possess mineral wealth in gold, silver, copper, 
 and zinc, but very few claims have been worked on any commercial 
 scale. It is probable, however, that mining will increase consider 
 ably with the future development of transportation facilities. 
 
 In banking facilities, as in steamship service, Panama is much 
 better equipped than any of the other Central American Republics. 
 The principal banks are as follows: Banco Nacional. Panama Hank- 
 ing Co., International Banking Corporation, and a branch of the 
 Commercial National Bank, of Washington, D. C. 
 
 COSTA RICA. 
 
 A distinguished reception committee was on thv Limon dock to 
 receive us. We were escorted to the quarters of the Fruit Company 
 and started out for a trip over the wonderful banana plantations. 
 We spent several hours viewing the great development of the country, 
 including the establishment of hospitals, residences, etc. We were 
 entertained at dinner by the reception committee. 
 
 Early the next morning a special train took us to San Jose. This 
 is one of the most beautiful journeys in Latin America. The scenic 
 beauties of the country are wonderful. One passes from a dense 
 tropical jungle to refreshing mountain heights. One week was 
 passed in San Jose. 
 
 The total railway mileage in the Republic is about 430 miles, 
 including the 70-mile Government-owned line from San Jose to 
 Puntarenas, the Pacific port. The principal system is the Ferro- 
 carril Costa Rica, which is owned by British interests, but is leased 
 for operation to the Northern Railway of Costa Rica, which is owned 
 by the United Fruit Co. The Ferrocarril Costa Rica connects Port 
 Limon, the Atlantic port, and San Jose. 
 
 The line from Port Limon to San Jose is one of the finest scenic 
 railways in the world. After passing through lowlands near the 
 coast it enters rough mountain country, the scenery becoming con- 
 tinually more beautiful as the higher altitudes of the interior are 
 reached. Swift-running mountain rivers are followed most of the 
 way, and at places there must be as much as 1,000 feet difference in 
 elevation between the railway and the river below. In general the 
 
REPORT ON CENTRAL AMERICA. 77 
 
 line is not well located. There are many tortuous curves and grades 
 as high as 4 per cent. The gauge is 3 feet 6 inches, the rails generally 
 of 60-pound weight, arid a considerable portion of the ties are of 
 steel, in order to keep the gauge on sharp curves. Most all of the 
 bridges are of steel. The operation of this line must be very costly, 
 due to the profile and alignment and to high maintenance costs 
 brought about by trouble with slides on mountain sides and washouts 
 of bridges. Furthermore, coal from England, costing about $12 per 
 ton. is used as fuel, but it is said that all the equipment will soon be 
 changed for oil burning, a change which, it seems, should have 
 Uen made some time ago. Some of the equipment is of American 
 manufacture and the balance English. 
 
 The road is capitalized at a high figure and freight and passenger 
 lates are complained of by the Costa Ricans. Passenger rates are 
 ii bout 4 cents per mile and freight rates average about 15 cents per 
 ton-mile. The line could probably not be replaced for less than 
 $75,000 per mile. 
 
 The railway from San Jose to the Pacific is owned by the Govern- 
 ment and is about 70 miles in length. This line likewise runs through 
 rough mountain country, but the territory served is in general more 
 arid and not so productive of local traffic as that to the Atlantic side. 
 The Government line is also of 3-foot 6-inch gauge and is built of 
 about 60-pound steel with wood ties, there being less curvature than 
 on the line to the Atlantic. Most of the equipment is of American 
 manufacture. Wood and coal are used as fuel. There is no deep- 
 water wharf at Puntarenas, and the lighterage charges to and from 
 ships are high. This, together with poor steamship service on the 
 Pacific, as compared with the Atlantic side, places the Government 
 line at a disadvantage in competing with the United Fruit line to 
 the Atlantic. 
 
 The lines now in operation, similarly to most railways in tropical 
 countries, suffer from the lack of large volumes of low-grade traffic 
 such as those which form the backbone of revenue of American rail- 
 ways. Costs of construction and operation are high, due to the 
 mountainous nature of the country and to heavy rainfalls. For 
 further development of the interior to the north and south of the 
 two systems, which together form a transcontinental railway, the 
 improvement and extension of highways appears to be the logical 
 method. 
 
 The two chief products of Costa Rica are bananas and coffee. The 
 cultivation of bananas, which reached a tremendous output some years 
 ago, has somewhat diminished of late on account of the banana 
 disease, but still large quantities are being shipped. Costa Rica 
 coffee has been famous for years in Europe, where it obtains a high 
 
78 REPORT OK CENTRAL AMERICA. 
 
 price because of its exceptional quality and flavor. Some of this 
 coffee is now being shipped to the United States. 
 
 The articles imported are principally cotton fabrics, machinery, 
 flour, lumber, lard, coal, rice, and canned and preserved foods, and 
 live animals on foot from Nicaragua, 
 
 There are known to be considerable mineral deposits in Costa Rica, 
 but. :here is b*ut little mining, except for gold. The export of 
 
 gold has been quite large, 
 
 At Port Limon the terminal facilities are excellent. There are two 
 wharves with accommodations for six large and two small steamers, 
 and so equipped with track facilities that loading and unloading can 
 be carried on directly from the car to the vessel. 
 
 Of course, Costa Rica has suffered like the whole world on ac- 
 count of the European war. The people are fairly prosperous, 
 though the Government is hard pressed on account of the falling off 
 of customs duties. Costa Rica has ample banking houses, but these 
 need additional capital. The International Bank of Costa Rica, 
 established at the suggestion of the President, Don Alfredo Gon- 
 zales Flores, some months ago, has helped considerably in weathering 
 conditions. 
 
 The establishment of a bank destined to facilitate loans on mort- 
 gages at a fair rate of interest would be a blessing to the agricultural 
 interests of the country. The " Cedula " law of Costa Rica should 
 work toward making such a bank merit investigation of American 
 bankers, particularly as the registry of property and the adminis- 
 tration of justice in Costa Rica are most reliable. 
 
 The commission ascertained that the present parcel-post rr 
 between the United States and Costa Rica is inadequate, and preju- 
 dicial to commerce, A new treaty, along the lines of the German- 
 Costa Rica convention, is now needed. The treaty should increase 
 the weight and size of the package. The collection of extra charges 
 at destination should be prohibited and the country of destination 
 should have its parcel charge prepaid. Ample provision should be 
 made for transportation of parcels in baskets instead of sacks. The 
 American consul, Samuel T. Lee, of San Jose, Costa Rica, has been 
 very active in this matter, and believes that the adoption of these 
 suggestions would be most advantageous for the trade between the 
 :ed States and Costa Rica, 
 
 The currency is on a gold basis, the monetary unit being the colon, 
 worth about 46 cents United States gold. The principal banks are 
 the Banco Internacional. Banco de Costa Rica, Banco Anglo-Costa- 
 rricense, the Royal Bank of Canada, and Banco Comercial. The 
 Banco Internacional is an emergency bank, which was founded by 
 the Government to meet the extraordin.-i ' conditions 
 
REPORT ON CENTRAL AMERICA, 79 
 
 brought about by the European war. It will be liquidated soon 
 after the war is over and conditions are again normal. It is a bank 
 of issue and has a capital consisting of Costa Rican treasury bonds. 
 The reserve required by law for banks of issue is 40 per cent in gold. 
 Interest rates on commercial loans are high, ranging from 10 to 12 
 per cent. The President proposes to convert the Banco Internacional 
 into a general mortgage bank and induce the three or four com- 
 mercial banks to combine and form one commercial bank, with the 
 end in view of increasing the total banking power in the country, 
 decreasing interest rates, and providing for the extension of rural 
 credits. The Royal Bank of Canada, realizing the possibilities of 
 profit from the financing of coffee crops, and other commercial bank- 
 ing operations, has recently established a branch in San Jose. 
 
 NICARAGUA. 
 
 Nicaragua is the largest of the Central American Republics and 
 the most thinly populated, its area being 49.200 square miles and 
 population about 550,000. The greater part of the population is on 
 the Pacific side, where the land is in general higher and the climate 
 more agreeable than on the Atlantic slope. The capital city is 
 Managua, located near Lake Managua, on the Pacific slope, and hav- 
 ing a population of about 30.000. 
 
 On the Atlantic coast, the country is in general low and there 
 are many swamps; a considerable area is covered with dense tropical 
 growth! including hardwood trees, Oa the Pacific side are two 
 large fresh water lakes Lake Managua, about 16 by 32 miles, and 
 Lake Nicaragua, about 34 by 92 miles. These lakes temper the cli- 
 mate noticeably and both are used for transportation. The San 
 Juan River connects Lake Nicaragua with the Atlantic Ocean and 
 forms a part of the proposed route of the Nicaraguan Canal. 
 
 The only railway of importance in the Republic is the Ferro- 
 carril del Pacifico de Nicaragua, a system of 3 feet 6 inch gauge and 
 about 171 miles of track with Pacific terminus at Corinto and inland 
 terminus at Granada, on Lake Nicaragua. There are branch lines 
 to El Viego and Diriamba. This property was originallv built by 
 the Nicaraguan Government but is now owned by a corporation of 
 the above name. The Government owns 49 per cent of the stock and 
 the balance is owned by foreign interests. 
 
 In contrast with the Costa Rican railways, this line runs through 
 relatively level country and does not include much heavy construc- 
 tion. No great amount of elevation is overcome, grades are in places 
 somewhat heavy over short distances, but this is due to poor location 
 rather than to the topography of the country traversed. Managua 
 and Granada are only about 100 feet above the s^a level. A 
 
80 REPORT ON CENTRAL AMERICA. 
 
 s icier able portion of the track is tangent and the speeds of opera 
 tion are high as colnpared with other lines in Central America. 
 
 It is entirely fair to say that the American management of this 
 railway has done work of great sociological value. The native em- 
 ployees have been taught railroading along the lines of best Ameri- 
 can practice. This education, together with the work of the hos- 
 pital department toward improved health of the employees, has 
 surely accomplished something in the way of developing good citi- 
 zens. 
 
 One of the greatest needs of the country is further railway de- 
 velopment, particularly a connection of the present system with the 
 Atlantic coast. The Atlantic seaboard is the most advantageous 
 route for importing and exporting ; and, as stated before, the greater 
 part of the Nicaraguan population is on the Pacific side. A rail- 
 road to the Atlantic would undoubtedly be a great help toward 
 cementing more closely together the peoples of the various sections 
 of the country and thereby lessening the likelihood of revolutionary 
 disturbances. 
 
 An Atlantic extension of the Nicaraguan system would involve 
 less initial cost and could be operated more cheaply than the trans- 
 continentals in Costa Rica and Guatemala. Whether or not it would 
 be profitable can not very well be said without making a study of the 
 interior country through which it would run. It appears doubtful, 
 however, that earnings would cover interest on first cost for at 
 least two or three years after commencement of operation, because 
 the interior sections of Nicaragua are sparsely populated and largely 
 undeveloped. The earnings of the new line would also be in a meas- 
 ure at the expense of the present system. The Nicaraguan trans- 
 continental, if built, would probably have more possibilities for the 
 ultimate development of local traffic en route than those across Costa 
 Rica and Guatemala. 
 
 The political geography of Nicaragua is interesting. Granada 
 and Leon are rival cities, the former being the seat of the Conserva- 
 tive Party and the later of the Liberals. Managua, the capital, is 
 about halfway between the two, the location having been chosen 
 as a compromise. Leon is the largest city in the republic in both 
 population and business. 
 
 The only bank of issue in Nicaragua is the National Bank of 
 Nicaragua. 
 
 A criticism frequently advanced is the high value of the mone- 
 tary unit (the cordoba), which is equivalent to our dollar. The 
 laboring classes are accustomed to being paid with depreciated 
 paper currency and there has been some difficulty in convincing them 
 that the cordoba is worth so many times more than the old peso. 
 Some employers contend this has forced them to raise wages. 
 
REPORT ON CENTRAL AMERICA. 81 
 
 In addition to the Banco Nacional, there are the Anglo-American 
 Bank and the Commercial Bank of Spanish America, Ltd., which 
 do a general commercial banking business. 
 
 The greatest resources of Nicaragua are agricultural, principally 
 coffee and sugar. There is said to be a considerable amount of min- 
 eral wealth in Nicaragua, mostly on the Atlantic side, but there has 
 been no geological survey of the country to determine just what the 
 mineral wealth deposits amount to. Like the other Central American 
 republics, Nicaragua possesses timber wealth, but as yet development 
 has not been on any large scale, due presumably to lack of trans- 
 portation facilities. 
 
 In the departments of Chinandega and Leon the soil is very fertile 
 for the cultivation of -sugar. Not far from the town of Chinandega 
 is the property of the Nicaragua Sugar Estates, Ltd., a British 
 concern, which has undertaken sugar cultivation in Nicaragua on an 
 extensive scale. The property covers 9,000 acres and 800 men are 
 employed. The output last year was 6,000,000 pounds of sugar and 
 it is expected that this year's will total 10,000,000 pounds. It is said 
 that the company earns 30 per cent net on its investment. 
 
 The country is now recovering from a long period of economic 
 disturbance brought about principally by political unrest. Com- 
 paring present conditions in Nicaragua with those which obtained 
 several years ago, the progress of the Republic has certainly been 
 rapid. 
 
 HONDURAS. 
 
 Honduras is the country of Central America which has perhaps 
 attracted more attention than any of the others on account of the 
 great development that has been going on for some time on the 
 north coast. For the most part Honduras is mountainous and 
 heavily forested, but there are plantations on the uplands splendid 
 for cattle grazing. On the north coast in general the lands are low 
 and it is here where the great banana industry flourishes at its best. 
 Outside of the railways operated by the various banana companies 
 on the coast and the National Railroad running from Puerto Cortez 
 to Pimienta, there is little or no railroad communication between 
 important points. The United Fruit Co., the Vaccaro Bros;, and 
 the Cuyamel Fruit Co. maintain steamship lines between the various 
 Atlantic ports and American ports. Amapala, the island port of the 
 Pacific, suffers for want of communication, as do all the other ports 
 on the west coast. 
 
 The railroad development on the Atlantic coast has been very 
 great. The Tela Railroad Co. has built over one hundred miles 
 of railroad and erected a thriving port at Tela, with a wharf where 
 large ships can dock and a magnificent hospital for the care of its 
 
 106318 6 
 
82 REPORT ON CENTRAL AMERICA. 
 
 employees. The Truxillo Railroad Co. has already built about 
 25 miles of line, opening up one of the richest agricultural 
 sections of the country, and contemplates extending its line to Juti- 
 galpa. The port of Truxillo, one of the oldest and best in the 
 Republic, is destined to be in the near future one of great im- 
 portance. 
 
 The Republic is even more lacking than Nicaragua in railway 
 mileage and will undoubtedly continue to be so for some time to 
 come, because of the tremendous costs of railway construction and 
 the lack of traffic. There are about 150 miles of railway in the 
 country, all of which is in the northern part and tributary to the 
 Atlantic. The National Railway, owned by the Government, is 65 
 miles in length and runs inland from Puerto Cortex, on the Atlantic 
 coast. 
 
 In discussing the subject of transportation routes in Honduras, 
 mention must be made of the Carretera del Sur, the great national 
 highway from San Lorenzo to Tegucigalpa. It was commenced 
 about 15 years ago and its construction was a stupendous task to 
 say the least. The country traversed is extremely mountainous. 
 The road is splendidly built its maximum grade is said to be 9 
 per cent. It seems unfortunate in a way that the road was built 
 to the Pacific side instead of to the Atlantic 1 , because the Atlantic 
 slope is decidedly the most fertile and the Atlantic seaboard is the 
 most advantageous commercially. Of course, the distance to the 
 Atlantic coast from the capital city is greater than to the Pacific. 
 Shipments over the Carretera del Sur to or from the Pacific are 
 burdened heavily by the cost of lighterage from San Lorenzo to 
 Amapala, a distance of 30 miles through " esteros " from the end 
 of the road to the Pacific port. It is planned to extend the " carra- 
 tera " to a point on the mainland opposite Amapala and it is pos- 
 sible that the extension will be carried further so as to reach Zacate 
 Island. This work, if carried out, will decrease the cost of lighter- 
 age very greatly. 
 
 Transportation in the interior is chiefly by mule back or oxcart. 
 It is safe to say that over half the population of the country is de- 
 pendent on mule-back transportation. 
 
 A privately owned automobile service is furnished for passengers 
 between Lorenzo and Tegucigalpa, the fare being $12. For this 
 service the Government pays a subvention of $600 per month. The 
 greatest development of the national resources of Honduras has 
 been mining and in the production of certain agricultural products, 
 principally bananas, coconuts, and coffee. The New York & Hon- 
 duras Rosario Mining Co., the Socorro Gold & Silver Mine, the 
 El Transito, and the Sabana Grande Honduras Mining Co. are the 
 principal companies doing business there. 
 
KEPOKT ON CENTRAL AMERICA. 83 
 
 The three principal banks in Honduras are the Banco de Honduras, 
 Banco Atlantida, and the Banco de Comercio. The two first named 
 are banks of issue. The law requires a 40 per cent silver reserve. 
 Rates of exchange are largely influenced by the operations of the 
 New York & Honduras Eosario Mining Co. and the United Fruit Co. 
 
 The Honduran Government's debt was mostly incurred about 40 
 years ago in connection with a Government bond issue sold to Europe 
 for the construction of the Puerto Cortez-Pimienta Railroad. There 
 is considerable difference of opinion in regard to the validity and 
 amount of the debt; various figures from forty to one hundred 
 million dollars are mentioned. 
 
 Honduras is reported to be rich in mining resources, largely un- 
 developed. Gold and silver are the principal ores mined. However, 
 not very many properties are being worked. The largest property 
 under operation is owned by the New York & Honduras Ersario Min- 
 ing Co., and is located near San Jacinto, about 30 miles from Teguci- 
 galpa. This company is capitalized at about $2,000,000 arid pays 12 
 per cent dividends. The ore yields about $10 silver per ton. The 
 company's plant is modern in every respect. These mines have been 
 worked by American capital for about 30 years, and it is said that 
 they are not far from exhaustion. The company has plans under 
 way to open up new fields in another section. 
 
 The future development of mining in Honduras will probably be 
 with large scale operations on relatively low-grade ores, and will 
 be somewhat dependent upon the development of transportation 
 facilities. 
 
 In agriculture the greatest development has been in the production 
 of bananas on the lowlands near the Atlantic. Hardwood timber 
 resources on the Atlantic slope, although valuable, have not been 
 worked to any extent on account of lack of transportation. 
 
 KL SALVADOR. 
 
 Salvador is the smallest of the Central American Republics and 
 the most densely populated. With an area of 7,325 square miles and 
 a population of about 1,600,000, it ranks third among the countries 
 of the world in density of population. 
 
 This Republic is the only one of the group which does not front 
 on the two oceans, its only coast being the Pacific. This feature is, 
 of course, to its commercial disadvantage. Its trade relations with 
 the United States are mainly through San Francisco. The three 
 principal routes to Salvador from the Atlantic are as follows : First, 
 via Puerto Barrios and the International Railway to Zacapa, Guate- 
 mala, and by mule back or carts for more than a hundred miles to 
 San Salvador; second, via Puerto Barrios across Guatemala by rail 
 
84 REPORT ON CENTRAL AMERICA. 
 
 to San Jose, Guatemala, and by ship to any one of the three Pacific 
 ports of Salvador; and third, via the Isthmus of Panama and north 
 by ship on the Pacific to Salvador. 
 
 The general topography of the country is volcanic in nature and 
 not unlike that of the Pacific side of Nicaragua. Central American 
 earthquakes are said to often center in Salvador. 
 
 The resources of the country are principally agricultural, coffee 
 being of the greatest importance by far. The country seems to be 
 remarkably well adapted to the growth of good coffee, and the 
 density of the population has brought about a very intensive culti- 
 vation, with the utilization, in many instances, of very rough moun- 
 tain sides for planting. 
 
 Unlike the other Central American Republics, Salvador produces 
 no bananas on a commercial scale; the growth of bananas in the 
 other Republics is limited almost entirely to the Atlantic lowlands. 
 There are quite a few sugar plantations in Salvador, but the industry 
 is of no great importance and not a great amount is exported. 
 Tobacco is raised, but is of an inferior grade and is only exported 
 to the other Central American countries. 
 
 The " balsam of Peru " industry is worthy of mention, particularly 
 because it is the one by which Salvador is best known. The sap, 
 which is used for medicinal purposes, comes from the inner bark of 
 the balsam tree. Scientists say that the balsam tree is native in no 
 country but the west coast of Central America, inferring that "bal- 
 sam of Peru " is somewhat a misnomer. 
 
 Salvador does not possess timber resources comparable with those 
 of the other Central American countries. This is to some extent 
 due to its being entirely on the Pacific slope and also to the necessity 
 of clearing the land for agricultural purposes. 
 
 The principal railway is owned by the Salvador Railroad Co., 
 Ltd., an English concern, and runs from Acajutla, on the Pacific 
 coast, to San Salvador, the capital city. The gauge is 3 feet 6 inches 
 and wood is used for fuel. The Salvador Government pays this 
 company a subvention of 25,000 pounds sterling per annum, but this 
 arrangement expired in December, 1916. This line, like the Nica- 
 raguan Railroad, is very dusty. The stations and equipment are in 
 good condition. This railroad has a practical monopoly of rail 
 traffic in and out of the country. 
 
 A rail line from San Salvador to the port of La Libertad has been 
 projected, but as yet it has not been finished. A part is already built 
 and owned by local capital, and the failure of the plan of extension 
 is attributed by some to the attitude of those in control of the part 
 already built. This line, if built to La Libertad, would be over the 
 most direct route from the capital city to the coast and would 
 traverse a densely populated section. 
 
EEPOKT ON CENTRAL AMERICA, 85 
 
 The San Salvador-La Uni6n line is being built by the Inter- 
 national Railways of Central America, and there remains a gap of 
 only about 60 miles not yet constructed. It is planned that this line 
 be ultimately extended northward to connect with the Guatemala 
 lines and thus form a part of the Pan American Railway. La Union 
 is on the Gulf of Fonseca and has a deep water wharf and a good 
 natural harbor. 
 
 For internal transportation, Salvador, like the other countries 
 visited, is in great need of more and better wagon roads. 
 
 The principal banks are the Banco Nacional de El Salvador, the 
 Banco Agricola Comercial, and the Banco Occidental. Each of these 
 issues bank notes; the silver reserves required are 50 per cent by the 
 Banco Nacional and 40 per cent by each of the other two. 
 
 The Government proposes to put in effect an income tax system 
 which will make up some of the loss in revenue which it has suffered 
 as a result of the war in Europe. It is to be expected that there will 
 be considerable difficulty in establishing such a system on a very 
 remunerative scale because the burden will fall upon a relatively few 
 who are politically influential. 
 
 Nearly all the cultivable lands of the Republic have been developed 
 and land values are high. The greater part of the rich lands are 
 owned by a relatively small number of men, mostly Salvadorians. 
 
 In its educational system Salvador is second only to Costa Rica. 
 Education is free and compulsory. There is a national university, 
 with colleges of medicine, law, and engineering. 
 
 Salvador is a small country, crowded with population, and with- 
 out any great possibilities of development. In order to realize its 
 national ambitions it, like the other Republics, must, in some way, 
 change its methods of raising funds for the Government. 
 
 GUATEMALA. 
 
 Except for small areas along the Atlantic and Pacific coasts, and 
 other small areas in the extreme north, Guatemala lies high, with 
 altitudes of from 4,000 to about 11,000 feet. The country is very 
 much broken by mountain ranges, with numerous plateaus and high 
 valleys. The climate is not oppressive and is quite healthy. The 
 soil is fertile and the rainfall is good. The bulk of the popula- 
 tion is located in the half of the Republic toward the Pacific. There 
 is but little settlement on the north and a scanty settlement on the 
 Atlantic side. 
 
 Although the mountains of Guatemala are known to be rich in 
 minerals, there has, as yet, been very little development in the mining 
 industry of the country. 
 
 Guatemala is preeminently an agricultural country, particularly a 
 coffee-growing country, the exports of this product accounting for 
 
86 REPORT ON CENTRAL AMERICA. 
 
 about 80 per cent of the total exports. Guatemala coffee, like that of 
 other Central American countries, has a high reputation, particularly 
 in Europe, where it brings, as a rule, the highest prices. Besides 
 coffee there has been a considerable development in bananas and 
 sugar. 
 
 The agricultural resources of Guatemala are very great and have 
 been little more than scratched by development, and the methods used 
 have for the most part been primitive. 
 
 The coffee-growing business is nearly entirely in the hands of Ger- 
 mans and is the most striking instance in Central America of the 
 practical domination of one field of business activity by foreigners of 
 a single nationality. Germans own plantations producing about a 
 third of the tut a I crop as compared with the domestic-owned total, 
 producing about one-half. A very large proportion of the properties 
 owned by other than German nationalities are mortgaged to German 
 firms. 
 
 The banana industry on the Atlantic seaboard is of great im- 
 portance and is almost entirely in the hands of the United Fruit Co. 
 As yet there has been no trouble from the banana disease in Gua- 
 temala. 
 
 The sugar-growing industry is of some importance locally, but no 
 great amount is exported. The machinery used is chiefly of English 
 and German manufacture. 
 
 There is said to be a great amount of mineral wealth in Guatemala, 
 but as yet there has riot been much development. There is a great 
 amount of first-class grazing land for cattle, but only the hides are 
 exported. The country is rich in timber resources, but development 
 has been very slow on account of transportation difficulties. 
 
 There is probably more manufacturing in Guatemala than in any 
 of the other countries of Central America. Shoes, hats, furniture, 
 and iron work are those worthy of mention. In Guatemala City 
 a fruit-canning plant has recently commenced operation, and it is 
 planned that several choice Guatemalan fruits be in this way ex- 
 ported to foreign countries. 
 
 The total railway mileage is about 500 miles, mostly owned by the 
 International Railways of Central America. This system includes 
 a transcontinental line from San Jose, on the Pacific, to Puerto 
 Barrios, on the Atlantic, which is the best built of any of the Central 
 American lines, except the Panama Railroad. It is mostly of very 
 costly mountain construction. The gauge is 3 feet 6 inches, and oil is 
 used for fuel. Grades are in general very steep. The line was origi- 
 nally built by a Southern Pacific group headed by Mr. Huntington. 
 
 Transportation in the interior is mostly by mule back, ox cart, and 
 on the backs of Indian " cargadores." The costs are, of course, high. 
 
' 
 
 REPORT ON CENTRAL AMERICA. 87 
 
 The principal hunks are the Banco de Guatemala, Banco Inter- 
 nacional, and Banco Occidental. The monetary unit is the peso, and 
 the circulation consists practically entirely of bank notes. There is 
 no metal reserve worth mentioning, the security behind the bank 
 notes being the indebtedness of the Government to the banks. Con- 
 sequently, there is no stabilized rate of exchange. 
 
 Guatemala has great resources and is destined for vast develop- 
 ment. 
 
 CENTRAL AMERICA AS A WHOLE. 
 
 Each of the Central American Republics possesses a distinctive 
 character of its own. although they are, in many respects, similar 
 and are struggling with certain problems common to all. Each Re- 
 public has a national spirit and there is considerable rivalry be- 
 tween them. 
 
 The Spanish language is, of course, universally used throughout 
 Central America, and Spanish business methods are still in vogue. 
 As regards climate, the several countries are similar in that there 
 are wide variations depending mainly on altitude. Each country, 
 except Salvador, is rich in undeveloped resources and will remain so, 
 in great measure, until means of transportation are improved and 
 extended. 
 
 Before the outbreak of the Piuropean war the total value of annual 
 exports from the Central American Republics was about $44,000,000, 
 of which about $21,000,000 was sold to the United Kingdom, Ger- 
 many, and France, and about $18,000,000 to the United States. The 
 corresponding figures of annual imports are, approximately, 
 $46,000,000 total; $17,900,000 from the United Kingdom, Germany, 
 and France, and $25,000,000 from the United States. From these 
 figures, it will be noted that Central America has been doing quite 
 a business with Europe. The United States, however, has sold more 
 to Central America than Europe has, although buying less than 
 Europe. 
 
 After the outbreak of the war, there was a shortage of bottoms, 
 ocean freight rates went up, and the Central Americans found their 
 European trade almost entirely shut off with a consequent reduction 
 in Government revenues derived from imports. In an attempt to 
 make up these decreases, the Governments are struggling with the 
 tremendous problem of instituting some system of direct taxation. 
 
 In each Republic, the railroad is the subject of bitter attack. 
 Most of the lines are owned by foreign capital and in general there 
 is but one important railroad in each country. Some of the com- 
 plainers are prone to compare rates with those on American railways 
 and at the same time refuse to consider the great differences in oper- 
 ating conditions, length of haul, and volume of traffic, which entirely 
 invalidate the comparisons. 
 
88 REPORT ON CENTRAL AMERICA. 
 
 It is true that rail rates are in general pretty high in Central 
 America, but they are necessarily so because traffic volumes are small. 
 None of the lines carries any large amount of low-grade commodities 
 such as those which bring American railways a considerable portion 
 of their revenues and which can be moved in heavy trainloads at 
 low unit operating costs. Moreover on some of the lines, particularly 
 those in Costa Rica and Guatemala, the costs of initial construction 
 and of operation are high. These conditions are bound seriously to 
 restrict railway development in Central America. Furthermore, 
 transportation by oxcart and mule back is cheap and often wins out 
 in competition with parallel rail lines when speed is not essential. 
 In the development of the interior, these more primitive methods will 
 be discouraging competitors to the ambitious railroad builder. 
 
 Even more important to Central America than the extension of 
 railways is the provision of steamship facilities, particularly on the 
 Pacific side. The Pacific Mail and W. E. Grace & Co. operate the 
 only lines worth mentioning on the Pacific side ; the service is in- 
 frequent and irregular. At Acajutla, Salvador, we saw 60,000 bags 
 of coffee which we were told had been there some time awaiting ship 
 space. The costs of shipment via the Pacific are very considerably 
 increased by the general lack of deep-water wharves. On the At- 
 lantic side, the service provided by the United Fruit Co. is splendid. 
 Bates are, of course, high at present due to unusual trade and ship- 
 ping conditions, but this is general all over the world. 
 
 The telegraph systems in Central America are owned and operated 
 by the Governments. Rates are surprisingly low and the service is 
 very greatly used, proportionately more so, it appears, than in the 
 United States. 
 
 Interest rates are high in Central America, in general about 10 or 
 12 per cent for commercial loans and for discount of notes. The 
 banking power is not great, in some cases perhaps not enough for 
 legitimate commercial requirements in moving crops, etc. Many of 
 the people who have money keep it in foreign banks, and there is 
 not enough local capital in any one of the countries to carry out 
 permanent improvements of any extent. 
 
 The long-time credit, which is more or less universal in Spanish 
 America, is at present a serious barrier to the furtherance of Ameri- 
 can trade with Central America. 
 
 The Central Americans actually attach more importance to credit 
 terms than to price quotations in making purchases from abroad. 
 The long-time credit is deep rooted in Spanish- American custom 
 and has sprung from, and is justified to a certain extent by. funda- 
 mental economic conditions. Production is in the main agricultural 
 and is limited to a very few crops. The load factor, so to speak, of 
 money requirements is therefore very low, and there ro no manu- 
 
REPORT ON CENTRAL AMERICA. 89 
 
 facturing industries to even it up by more or less continual output 
 and employment capacity. The slowness of transportation also con- 
 tributes, to a certain extent, toward justification of the long credit. 
 It is in general a long time before goods purchased from foreign 
 countries arrive at their destination and their value can be realized. 
 
 A report on Central America, touching upon possibilities of ex- 
 tension of American trade and investment of American capital, 
 would be incomplete without mention of the great work of the 
 United Fruit Co. They were the forerunners of the movement 
 toward Pan American trade as far as Central America and the West 
 Indie% are concerned. By the investment of many millions of dollars 
 in Latin America they have brought wealth and employment to the 
 natives; have earned a good return on the capital invested; have pro- 
 vided a magnificent fleet of steamships plying to and from the prin- 
 cipal ports of the United States and Europe ; and last, but not least, 
 have changed the status of the banana in the United States from 
 ihfit of an expensive luxury to that of a cheap, wholesome, and gen- 
 erally used food. 
 
 There appears to be a desire in Central America for the establish- 
 ment of branch banks, with capital to loan to coffee growers, and for 
 other commercial purposes. Coffee growing is generally financed 
 by the advance-payment plan, net unlike the method used in the 
 Southern States for cotton growing, and the rates of interest are 
 very high. European capital has engaged in this field on a large 
 scale and with profit. Branch banks could be exceedingly helpful 
 in obtaining credit information for the use of American manufac- 
 turers and which is essential for the furtherance of our export busi- 
 ness with Central America. 
 
 For machinery, it is surprising to learn of the wide price differ- 
 ences in favor of European concerns as compared with those of the 
 United States; so much so as to make one doubt that American 
 manufacturers can keep the greater part of the machinery business 
 after the war even if they get it. 
 
 The English and Germans have been very successful in Central 
 America in the development of an export trade in machinery and 
 general merchandise. They have studied the needs of their customers 
 more carefully and have gone after the business more actively than 
 we have, presumably because foreign trade was to them more essential 
 than to us. 
 
 There is a great need for uniformity in forms of consular invoices, 
 trade paper of various kinds, commercial laws, etc., among the 
 several Republics, and, in fact, throughout Latin America. At pres- 
 ent each country differs from the others in these respects, with the 
 result that there is unnecessary routine labor in dealing with them. 
 These unnecessary obstacles to trade are bound to be disposed of 
 
90 J8EPOKT ON CENTKAL AMEKICA. 
 
 before long. The committee were impressed with the constructive 
 work which the chambers of commerce in the various Republics are 
 carrying on toward developing closer commercial relations with the 
 United States. The thought was expressed on many occasions that 
 this could best be accomplished by more intimate affiliation and 
 coalition of the United States Chamber of Commerce and its sister 
 organizations throughout the country with those of Central America. 
 
 Experience prompts the suggestion that a workable plan toward 
 that end be initiated, with the recommendation that exhibits of 
 Latin- American products and industries be established in the cham- 
 bers of commerce of the United States, and like displays made of 
 American products in these Republics. 
 
 The appointment of well-qualified representatives of the respective 
 chambers of commerce for the purpose of supplying information 
 relative to commercial and financial conditions would be a logical 
 and constructive corollary to the plan of cooperation suggested. 
 
 Of the six countries of Central America, Nicaragua and Guatemala 
 offer the greatest possibilities for development. The Pan American 
 movement and conditions brought about by the European war have 
 awakened in the Central American Republics a new interest in their 
 economic life and their world-trade position. From this new interest 
 and the activity which will spring from it progress is almost certain 
 to result. 
 
 MONETARY CON DITION 8. 
 
 It is appropriate here to refer to a paper recently prepared by 
 Mr. John Clausen, a member of "this commission, in which he said: 
 
 " In Central America we find a variety of money standards with 
 gold, silver, bimetallic, and inconvertible paper circulation nnd 
 while this in itself is a study, it would seem a matter of great con- 
 cern for these Republics to arrange a more uniform medium of 
 exchange, recognizing the essential advantages of a metallic system 
 as against fiat and inconvertible paper issues." 
 
 In line with the matters under consideration it may here prove of 
 interest to present a resume of conditions and requirements of the 
 six Republics comprising Central America : 
 
 Panama. The monetary system of Panama is based on a theoretical 
 gold standard, with the balboa as the unit and a circulation of silver 
 half balboas and fractional coins. 
 
 Unlike other Central American Republics, it has $6.000,000- -part 
 of the $10,000,000 paid them by the United States Government for 
 the Panama Canal rights invested in New York City real estate 
 first mortgages, from which a yearly revenue of some $250,000 is 
 derived. The United States holds the larger part of their foreign 
 
REPORT ON CENTRAL AMERICA. 91 
 
 trade, which could be materially increased by the improvement of 
 shipping facilities. 
 
 Costa Rica. The standard monetary unit of Costa Rica is the 
 gold colon, with a circulation of bank notes based upon gold 4-0 
 per cent and other assets of the issuing banks. Foreign gold coins 
 circulate freely and, at fixed rates, are accepted as legal tender in 
 the Eepublic. 
 
 The foreign debt amounts to approximately $17,000,000, as 
 against a yearly public revenue of $4,000,000, of which some 60 per 
 cent is derived from import duties. 
 
 The more pressing needs of this Republic, as elsewhere in Latin 
 America, are adequate commercial credits and facilities to dispose of 
 the coffee crop. 
 
 Nicaragua. The present monetary system of Nicaragua is based 
 upon a theoretical gold standard, of which the cordoba forms the 
 unit- with a circulation of silver coins and bank notes guaranteed 
 to be payable in gold the old paper peso circulation being retired 
 at a fixed rate of $12.50 pesos for each cordo'ba. 
 
 The foreign debt of Nicaragua is comparatively small and con- 
 sists of $1,500,000 treasury notes held mostly in the United States 
 and $6,000,000 of outstanding bonds held in Europe, as against a 
 public revenue of about $2,000,000. 
 
 Honduras. The monetary system of this Republic is on a silver 
 basis, with the silver peso as the unit subject, therefore, to fluctu- 
 ation of that metal in the open markets of the world. 
 
 The foreign debt of Honduras is estimated barring the validity 
 of the obligations at $120,000,000, of which a very large portion 
 covers 40 years or more of unpaid interest. The internal debt 
 amounts to $2,500,000, as against Government revenues of approxi- 
 mately $2,000,000. 
 
 Salvador. The standard monetary unit of Salvador is the silver 
 peso, likewise subject to the rise and fall of the white metal. The 
 circulation consists of silver and bank notes convertible into silver 
 and secured by metallic reserve and other assets of the issuing 
 banks. 
 
 The outstanding debt is approximately $4,000,000, with internal 
 obligations of about $6,000,000, as against $7,000,000 of public rev- 
 enues, of which customs duties represent more than $4,000,000. 
 
 The Government of Salvador is lending every encouragement for 
 the establishment of banks, both commercial and savings, and in this 
 field capital could be most advantageously employed. 
 
 Guatemala. Only nominally on a silver basis Guatemala de- 
 pends upon an inconvertible paper currency for its circulation, with- 
 out any fixed value with relation to gold or foreign exchanges. The 
 bank notes are issued without ny Government guaranty, with the 
 
92 REPORT ON CENTRAL AMERICA. 
 
 latter indebted to the banks for about the amount of the outstand- 
 ing circulation payable in the form of paper currency which is 
 reported to be approximately 100,000,000 pesos. 
 
 The foreign debt of Guatemala is about $11,500,000, as against 
 public revenues of $2,500,000. 
 
 Our committee member, Mr. John Clausen, likewise serving as 
 chairman of the permanent group committee for Guatemala, has pre- 
 pared a special report on that country, which it is of interest here 
 to quote: 
 
 Latin America offers promising markets for commercial expansion on account 
 of its rich natural resources. Never since our sister Republics severed the 
 political ties with Europe has there been such an opportunity for us to widen 
 the scope of our commercial activities among them. 
 
 Central America forms a separate unit and comprises the live Republics 
 lying between Mexico and Panama, viz, Guatemala, Salvador. Honduras, Nica- 
 ragua, and Costa Rica, with a combined area of 174,000 square miles and a popu- 
 lation of about 5,500,000 inhabitants. 
 
 The Republic of Guatemala covers an area of about 50,000 square miles, with 
 an estimated population of 2,120,000 inhabitants (the largest of any Central 
 American country), of which 125,000 reside in the capital, Guatemala City. 
 The name " Guatemala " is probably of Aztec origin, and is said to mean " Land 
 of the Eagle." The bulk of its people are located in that half of the Republic 
 bordering on the Pacific, with a few settlements on the north or on the Atlantic 
 side. Its mountain ranges, with very little exception, give the country an 
 elevation of from 4,000 to 11,500 feet. The Pacific slope is very fertile, and 
 produces large crops of coffee, corn, and sugar ; while on the Atlantic side there 
 is found very little agricultural wealth, except from the cultivation of bananas 
 in the lowlands and near the coast. The production of coffee, however, is the 
 principal money crop of the country moved largely upon funds that have been 
 advanced for that purpose and on its marketing, therefore, depends much of 
 the prosperity of the Republic. 
 
 It is one of the most beautiful countries in Central America, with riches in- 
 calculable. Close observers, travelers, and investors have been so impressed 
 with its great potential richness as to prompt the unique saying, " If you tickle 
 the ground with a hoe, it smiles back with a yam." 
 
 The guiding force of Guatemala is its president, Manuel Estrada Cabrera, 
 who was born in Quezaltenango, Guatemala, on the 21st clay of November, 1857, 
 succeeding Gen. Reina Barrios during the tragic events of February, 1898. He 
 was later elected constitutional chief executive of Guatemala on October 20, 
 
 GuatemeLa has a good system of primary education. It is of interest to men- 
 tion that English is compulsory, and that proficiency in that language is a pre- 
 requisite to the degree of bachelor of arts. 
 
 According to the report of the minister of finance, made under date of April 
 14, 1915, the debt of Guatemala amounted to $13,304,759.79, United States gold, 
 made up as follows : 
 
 English debt $11, 785, 314. 39 
 
 Internal debt__ 1,519,445.40 
 
 Total debt (including railroad obligations) 13,304,759.79 
 
 Guatemala's external obligations consist of what is called the English debt of 
 4 per cent which was not contracted by the present administration, but dates 
 
REPORT ON CENTRAL AMERICA. 93 
 
 back to the time when all Central America was one federation of Republics, or, 
 in other words, since the independence of Guatemala was established in the 
 year 1821. 
 
 Upon the breaking up of the federation, three-fourths of this obligation fell 
 on Guatemala, while the remainder (one-fourth) was allotted to the other four 
 Republics. Subsequent administrations increased the debt by additional loans 
 raid delinquency in paying interest, until it reached the aforementioned fig- 
 ure. No new foreign loans have been contracted by the present Government. 
 
 Only during the lust few years has Guatemala effected a material settlement 
 with its English creditors in resuming payment of interest. 
 
 The service of the English debt requires only $300..000 United States gold 
 annually for interest, which is conveniently cared for, as the Republic has a 
 favorable trade balance of approximately $3,500,000 United States gold and a 
 net internal revenue of $1,000,000 to $2,000,000 United States gold. In naming 
 these figures, however, it must necessarily be taken into consideration that the 
 European war, together with prevailing inadequate transportation facilities, 
 may tend to decrease the Government revenues. The internal indebtedness 
 which amounts to approximately $8,000,000 United States gold has been found 
 difficult to liquidate, with the result that the obligation is constantly increasing 
 through delinquency in payment of interest. 
 
 The English loan, however, in spite of the expenditure of large sums on public 
 work and charitable institutions of the country, has received its interest in 
 advance, and this feature is being favorably commented upon by British capi- 
 talists. These bonds have been quoted during the greater part of the year at 
 40 to 41, netting the holders nearly 10 per cent per annum. 
 
 Unlike some other Latin-American Republics, the municipalities of Guate- 
 mala have no bonded indebtedness, and their temporary advances from local 
 banks are automatically repaid from taxation. The paper currency of the 
 banks has for many years been on a depreciated basis inconvertible on account 
 of no specie upholding its value and it is estimated that the total amount out- 
 standing at the present time is approximately 100,000,000 pesos, the further 
 Issue of which, however, is being discouraged. 
 
 While the external transactions of Guatemala are liquidated in gold and the 
 duties in part imposed on that basis, the actual currency of the country consists 
 of notes theoretically payable in silver, but not so redeemed issued by the 
 following six banks: Banco Internacional de Guatemala, Banco Colombiano, 
 Banco de Guatemala, Banco Agrfcola Hipotecario, Banco Americano de Guate- 
 mala, Banco de Occidente. Authorities affirm that it would take approximately 
 $12,000,000 in gold to place and maintain the country on a gold basis. 
 
 Supply and demand alone regulate not only the value of the currency but also 
 the rate of exchange. What chances there may be for converting the paper 
 money now in circulation into specie bills depends wholly upon the desire of the 
 Government to effect a suitable currency reform. 
 
 Among the measures taken to meet these economic difficulties stands the 
 decree of recent date which authorizes the coinage and circulation of $2,000.000 
 Guatemala money in copper coins of 25 and 124 centavos to stabilize the medium 
 of circulation and facilitate business transactions. To prevent these coins 
 from being shipped out of the country, as has been the case with former metal 
 coinage, a restrictive measure has been placed in effect prohibiting the export 
 of copper, aluminum, zinc, and other alloys. 
 
 Perhaps if, instead of gold, the silver standard were adopted, Guatemala's 
 interest would be better served, although the rise and fall in the price of the 
 white metal might occasionally unsettle conditions. For one reason or another 
 the necessity of changing the monetary system has not heretofore made itself 
 
94 REPORT ON CENTRAL AMERICA. 
 
 vitally felt. Inconvertible paper money may even enlist energetic supporters, 
 especially among coffee growers and producers in general, who find it profitable 
 to pay their laborers in paper money and receive gold for their exports. 
 
 In the face of these arguments, however, we must not lose sight of the fact 
 that many disadvantages which result from the depreciated paper peso neces- 
 sarily affect Guatemala in its foreign commerce as in domestic transactions, by 
 making dearer all articles of consumption and so encouraging the importation 
 of poorer grades of food and necessities of life. This likewise applies to the 
 importation of machinery necessary in agricultural and other industries and 
 in no small measure to the increased burden of the taxpayer to pay for the 
 Government purchases and services in foreign countries, which are made in 
 the equivalent of gold. 
 
 It must be remembered that in reforms of a monetary character the exchange 
 depends on the balance of trade rather than the economic balance. The rela- 
 tion of gold and silver with inconvertible paper money can not always be 
 in-ranged by legislative act. 
 
 Guatemala has only one means of going over to a gold or silver standard, and 
 that is to cultivate its own industries, extending principally its agricultural 
 development. This can not be the work of a day. Other nations were years 
 and years accomplishing this end, 
 
 A change to a metal standard would undoubtedly prove of great benefit to 
 commerce. On the other hand, agriculture might suffer thereby, and it may 
 perhaps be wiser to establish a system where the paper peso would be given 
 the value of 50 cents gold, guaranteed by the commensurate deposit of like 
 metal, which would no doubt lend stability to foreign exchanges as well. 
 
 There is said to be about $750,000 in United States gold in the Republic si ml 
 approximately 100,000,000 to 110,000,000 pesos of Guatemalan paper money in 
 circulation. 
 
 A few observations may not be amiss in relation to <_ii>vtr'mu".ii finances. :\tnl 
 the figures to follow may prove convincing in that respect. 
 
 The yield of the public revenue in 1915 was $85,007,704.74 pesos, us uj?airst 
 $82,399,924.55 pesos in 1914. 
 
 The public expenditures for 1915 were $67,841,283.64 pesos, which exceeded 
 the amount estimated by $7,778,643.65 pesos. 
 
 The total value of trade in 1915 was $16,639,061.99 gold, as against 
 $22,085,141.48 gold in 1914. On the other hand, between the imports, amount- 
 ing to $5,072,473.03 gold, and exports, aggregating $11,566,585.96 gold, there was 
 left a favorable trade balance for Guatemala of $6,494,109.93 gold. 
 
 Two causes especially affect Central American trade and finance the loss of 
 the usual market in Europe and the inadequacy of transportation facilities. 
 The Republic of Guatemala in particular lost its normnl outlet for coffee the 
 largest of its export commodities. 
 
 A very cordial feeling has been developed in Guatemala toward the United 
 States, and while a good portion of their imports originate in this country, a 
 much larger percentage of business transactions should be exploited as a 
 result of the favorable opportunities at present. To make our appeals forcible 
 it becomes necessary to invest more capital in the Republic, to extend more 
 liberal credits, to improve banking facilities for export trade, and to make 
 more direct and personal efforts in their markets. At present they need 
 financial assistance and shipping facilities perhaps more than other Latin- 
 American countries. It is essential for the maintenance of the foreign pur- 
 chasing power of Guatemala to lend help in developing and marketing its 
 products abroad. 
 
REPORT ON CENTRAL AMERICA. 95 
 
 THE EXCHANGE PROBLEM. 
 
 The exchange problem is at times a serious impediment to a free 
 expansion of trade between Central American countries and the 
 United States. The severity of this problem exists in different de- 
 grees in the several countries forming Central America and arises 
 from the monetary systems in practice and the extent to which 
 America is able to buy from Central America. As an example, coffee, 
 which constitutes so great a proportion of the merchantable products, 
 finds its market in Europe, and the American market absorbs very 
 little of it. The speculation in exchange is a vicious condition in 
 trade and leads to a disinclination on the part of some old established 
 mercantile houses to see the monetary systems placed upon a sound 
 basis, because such a condition would narrow exchange fluctuation 
 and remove chances of profitable speculation in exchange. 
 
 The principal hindrance to investment of capital arises in a measure 
 from fear of security of peaceful possession of the property and the 
 uncertainty of governmental legislation affecting the interests of the 
 investor. Capital shrinks from the obligation of constant vigilance 
 over political legislation and the probability of being forced to 
 engage in lobbyism and political intrigue to protect its interests, and 
 these conditions deter investments. 
 
 If these impediments were removed and assurance were possible 
 from damage by force or legislation, capital would be tempted to 
 investigate the opportunities in the lumber, cattle, mining, agricul- 
 tural, and transportation resources of the several countries, and con- 
 siderable progress would no doubt result therefrom calculated to 
 speedily increase the very small foreign trade of the countries. 
 
 But these problems are difficult of solution owing to the disinclina- 
 tion of the several countries to cooperate. Intercountry rail trans- 
 portation is practically nil, and until conditions are arrived at which 
 warrant capital investment for this purpose, the same ignorance and 
 consequent suspicion will last which to-day prevents any intelligent 
 intercountry cooperation. To-day only adventurous capital is war- 
 ranted to develop the natural resources, and undoubtedly there is 
 room for a certain amount of capital to facilitate actual commercial 
 transactions in the several capitals, but the returns on such capital 
 are incommensurate with the cost of operation when it is considered 
 that this capital would be divided up among the several countries in 
 ratio to the demands and opportunities. Serious capital will un- 
 doubtedly wait until financial and political conditions of the several 
 countries are brought more nearly on a sound basis. 
 
 Until dangers from force, from revolution, arising either through 
 internal or external causes, are removed, and assurance is given from 
 insecurity arising through political legislation, conservative capital 
 
96 REPORT ON CENTRAL AMERICA. 
 
 will hold aloof and no great improvement of conditions can be 
 reasonably expected. Except from the courageous investment of 
 adventurous capital, it does not seem probable that great develop- 
 ment will take place. 
 
 TRADE AND FISCAL RELATIONS. 
 
 It is deemed appropriate, in connection with the foregoing report, 
 to add an article recently written by Mr. Ling, a member of the 
 commission, telling how trade and fiscal relations with Central 
 American countries may be developed and of the obstacles which 
 must be overcome. The article is as f ollows : 
 
 A visit to the countries forming Central America, viz, Panama, Costa Rica, 
 Nicaragua, Honduras, Salvador, and Guatemala, discloses primarily the funda- 
 mental fact that, as in the case of the countries forming South America, each 
 country must be regarded as a unit and that it is not proper to group them in 
 considering their economic and political development. These countries, while 
 possessing similar conditions as to topography arid products, are each separate 
 and tenacious of their individual integrity, customs, and nationality. 
 
 The recent visit to each of these countries was at an unfortunate time in the 
 sense that economic conditions there are rendered abnormal due to the European 
 war, when a very serious falling off in imports has decreased Government 
 revenues and the inability to ship their products of coffee has decreased pur- 
 chasing power. The bulk of the coffee has been heretofore purchased by 
 Europe, where on account of its fine flavor it has found a ready market; but 
 to-day a greater effort is being made to introduce coffee into the American 
 market. A greater consumption of Central American coffee by the United 
 States will very materially tend to increase the exchange facilities between the 
 two countries which is at the present time a real hindrance to increased trade 
 between the countries. It is generally conceded by the merchants in Central 
 America that the United States is the natural supply market for them, although, 
 owing to the greater knowledge of European merchants and the natural pro- 
 pensity of the Central American to visit Europe rather than the United States, 
 European goods are prevalent in Central America. 
 
 MUST ESTABLISH CREDIT AND OTHER DIRECT FACILITIES. 
 
 The chief criticism one encounters in Central America is that the United 
 States manufacturers do not send their representatives into the country and 
 do not cater to their business, and are not willing to give the necessary credits. 
 These countries are agricultural countries and the credit season is from crop to 
 crop. The most favored form of credit desired by the Central American mer- 
 chants seemed to be the " revolving credit " which Europe has given them, but 
 there appeared to be a general desire for a modified credit of say 90 days sighu 
 
 In the cities of the countries, especially in Costa Rica, Salvador, mid 
 Gauteinala, the supplies of merchandise in the stores of the larger merchants 
 present a very good appearance, and more and more American goods are making 
 an appearance. There appeared to be surprisingly few failures, and there is 
 no doubt that in each of these countries there are well-established merchant? 
 and enough of them to warrant more energetic sales campaigns by American 
 manufacturers. 
 
REPORT ON CENTBAL:AMfe,ft)3CJi 5 ; 97 
 
 FIRST RESULTS OF PAN AMERICA^ 
 
 The recent establishment of the credit information bureau in connection with 
 the new chamber of commerce at Panama, and similar steps in some of the 
 other countries which seem to have been prompted by the recommendations 
 made at the late financial congress, indicate that there is a growing desire on 
 the part of the merchants themselves for their own protection and for the 
 extension of their trade to furnish credit information similar to that which 
 is readily obtainable in the United States and which heretofore they have not 
 been accustomed to give freely. 
 
 These countries are fully alive to the necessity of peaceful progress, and 
 we can not visit the countries and take note of their increasing educational 
 establishments and social and economic endeavors without feeling sympathy 
 for the difficulties with which they have to cope and the apparent earnest- 
 ness with which they are undertaking the work. There is scope for greatly 
 increased production and purchasing power, but it seems likely to be of slow 
 growth. There is no manufacturing to speak of, and consequently almost 
 everything has to be imported. Clothing, hardware, foodstuffs, chemicals, and 
 drugs find a market. It is fairly easy to ascertain the names of the principal 
 merchants in these countries from the consular records and the banks. The 
 countries are easy of access, and the best way to sell is to send travelers there. 
 All prices should, of course, be quoted in United States dollars, and rigid 
 attention paid to filling and packing the orders. 
 
 Agriculture in some of these countries is carried on in a somewhat elementary 
 way, and the natural assumption is that a demonstration of the advantages 
 of employing more modern methods and machinery would result in increased 
 sales of agricultural machinery and tools. As time goes on it is probable 
 that increased interest in manufacturing will rise and lead to a market for 
 industrial machinery. 
 
 OPPORTUNITIES FOB CULTIVATING BETTER TRADE RELATIONS. 
 
 The natives appear to possess an adaptability to industry, as is shown 
 wherever they are employed in native industries, and they are good agricul- 
 tural workers. 
 
 Considerable interest is now manifested in the cattle industry, and appear- 
 ances lead to the conclusion that this industry is at least worthy of careful 
 examination and attention with reference to the establishment of frigorificos, 
 so that a ready market may be established for cattle. As education and social 
 upraise take place the balance wheel of a middle class will be created which 
 should tend to assure peaceful progress and greater desires and consequent 
 greater markets. 
 
 There appears to be room, too, for investigation of the possibility of increasing 
 the purchase of the hardwoods and mahogany of Central America. To the extent 
 that we are able to increase our consumption of the natural products of the coun- 
 tries we shall be able to that much further increase our ability to sell our 
 products there. There can be no doubt of the suitability of the countries for 
 great development, as is demonstrated by the area adjacent to the Panama 
 Canal, which presents such a striking contrast to some of the portions of the 
 country no worse situated naturally. 
 
 Evidences were not wanting which indicated a certain distrust of United 
 States citizens engendered by the unsatisfactory results from concessions granted 
 to incompetent and in some cases irresponsible concessionaires, and it would not 
 106318 7 
 
98 KXrOKT.ON CENTRAL AMERICA. 
 
 be surprtei'i;-; & ,ih Yur>o'is 4'Joverniaents protected themselves by cancellation 
 of noneznpteyed ^o^cvssiorife and adopted a much more stringent policy in future 
 as to concessions. 
 
 SOME OBSTACLES TO OVEECOME. 
 
 Except in the coast regions the climate is conducive to active work and is not 
 debilitating. At the present time a degree of dissatisfaction exists in the minds 
 of many Central American merchants because they feel that we are not keen 
 to supply them and to give them the satisfactory terms and treatment that they 
 have received from Europe, and due allowance is not given the United States 
 merchant for the additional burdens imposed upon him by the abnormal war 
 conditions, where he is called upon to supply a large part of Europe's demands 
 in addition to the usual domestic trade and Latin American trade also. There 
 is, however, a moderate market in Central America, which will grow and which 
 is well worth cultivating at this time if we desire to increase our permanent 
 trade in that section of the world. My impression of the Government officials 
 and men in business and social life is that they are earnest, sincere, and 
 remarkably well educated and pleasant to deal with. 
 
 A WORD OF THANKS. 
 
 The commission spent two months on its journey. It would have 
 been impossible to visit all these countries in such a brief time had it 
 not happened that the United States Government placed the U. S. 
 cruiser Cleveland at the command of the commission for the trip up 
 the west coast. A word of thanks is due to Lieut. E. S. Boot, who 
 commanded the vessel, and also to the other officers, for the splendid 
 manner in which they looked after the comfort of the commission. 
 
 Kespectfully submitted on behalf of the commission. 
 
 LAMAR C. QUINTERO, Chairman. 
 
 NEW ORLEANS, June 12, 1916. 
 
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