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The Argentine as a Market S HERRATT & H UGHES Publishers to the Victoria University of Manchester Manchester: 34 Cross Street... Scholarship must be devoted to theexamination of subjects

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PUBLICATIONS OF THE UNIVERSITY

OF MANCHESTER

ECONOMIC SERIES—No IX

GARTSIDE REPORTS ON INDUSTRY AND

COMMERCE No 6

The Argentine as a Market

S HERRATT & H UGHES

Publishers to the Victoria University of Manchester

Manchester: 34 Cross Street

London: 60 Chandos Street, W.C.

THE GARTSIDE REPORTS.

The Gartside Reports are the reports made

by the Gartside Scholars at the University

of Manchester The Gartside Scholarshipswere established in 1902 for a limitedperiod, by John Henry Gartside, Esq., ofManchester They are tenable for twoyears and about three are awarded eachyear They are open to males of Britishnationality who at the date of the electionshall be over the age of eighteen years andunder the age of twenty-three years

Every scholar must enter the University ofManchester for one Session for a course

of study approved by the electors Theremainder of the time covered by the

Scholarship must be devoted to theexamination of subjects bearing uponCommerce or Industry in Germany orSwitzerland, or in the United States ofAmerica, or partly in one of the above-mentioned countries and partly in others,but the electors may on special groundsallow part of this period of the tenure ofthe Scholarship to be spent in study andtravel in some other country or countries.

It is intended that each scholar shall selectsome industry, or part of an industry, orsome business, for examination, andinvestigate this comparatively in theUnited Kingdom and abroad The firstyear’s work at the University ofManchester is designed to prepare thestudent for this investigation, and it partlytakes the form of directed study, from

publications and by direct investigation,

of English conditions with regard to theindustrial or commercial subjects uponwhich research will be made abroad inthe second year of the scholarship.Finally, each scholar must present areport, which will as a rule be published.The value of a Scholarship is about £80 ayear for the time spent in England, £150 ayear for time spent on the Continent ofEurope, and about £250 a year for timespent in America

EDITOR’S NOTE

Mr N L Watson’s sudden departure to

fill a commercial position in the East hasprevented him from seeing this Reportthrough the press himself.

TABLE OF CONTENTS.

PAGE.

EconomicBasis of theArgentine 1

" II The Railways 6

" III Industries and

the Labour

Question 12

" IV Foreign

Capital andPublic Debt 16

" V Argentina

from theImmigrant’sStandpoint 20

" VI English

Trade ItsPositionandProspects 25

" VII The Tariff 41

Statistical Appendix 53

CHAPTER I.

The first thing that strikes the new arrival

in the Argentine, and the last thing that he

is likely to forget when he leaves the

country, is the extraordinary inflation of

prices With the exception of meat, and

perhaps bread, there is no article of

common consumption which does not cost

considerably more than in England, every

allowance being made for freight andtariff charges The reason for this excess

is doubtless to be found in theconcentration of trade in the capital Allimports, for reasons that will be dealtwith later, pass through the hands of thelarge houses in Buenos Aires, who act assole agents for the whole of the Republicnorth of the Rio Negro [While, owing tothe precarious nature of all business,dependent entirely on the grain and cattleyield, much higher prices are charged infat years than would be justified if thesetimes of prosperity were regarded aspermanent.] Because of this concentration

of business in the capital, and in the centre

of the town in particular, rents have risen

to an immense extent, greatly increasingall establishment charges, and in turn the

price of commodities sold—a causewhich acts again of course in retail tradeand neutralises the freight charges tooutlying districts But the essential fact inArgentine Economics, and one whichseems more than obvious, but apparentlyescapes the comprehension of Argentinelegislators, is that the country is naturally,and must remain for some considerabletime, a producer of raw materialexclusively The country is stillconsiderably under-populated for thedevelopment of its natural resources,while only a small portion of the settledarea is yet producing even half the yield ofwhich it is immediately capable.Immigration of a certain class—capableagriculturalists with some capital—is stillrequired But with a strange perversity

politicians have persistently advocated ahigh protective tariff for the purpose offostering industrial development Theresult has been that certain industries havecropped up under this system, which arequite incapable of independent existence,and, while satisfying neither theemployers nor their men, constitute a veryheavy drain on the national purse Thechief objection, however, to the policy isthat it invites a class of immigrant who isreally not required in the country and whohas taken to settling in the capital instead

of scattering into the camp

The immigrant required is the “colonist,”

to whom the country is already beginning

to owe much of its prosperity There aretwo distinct types of colonist—the one

who buys his land on a permanent colony,and builds a decent house, and thetemporary tenant whose economicprinciple is to break the soil of new land,and moves to a new district at the end ofhis term The latter owes his origin to thecultivation of “alfalfa,” the wonderfulclove-like plant that will grow on sand,and requires no rain, but thrives on thesurface water which abounds in thecountry’s flat, low-lying plains Alfalfawill not grow in hard unbroken ground,and where the land is such, cerealcultivation is necessary for three years toreduce it to a fit condition This workrequires labour which is not availableamong the gauchos, the horsemen who act

as hands on the estancias, and theestanciero himself probably does not

possess the knowledge requisite for thecultivation of grain A contract istherefore made with colonists, usuallyPiedmontese or Basques, to break the soiland grow cereals for three, or moreusually five, years, either at a fixed rent orfor a percentage of the crop, thestipulation being that with the last year’sseed alfalfa is sown as well When thelast crop has been cut, the latter growsthrough the stubble The growth of thisplant is such that as alfalfa is morecultivated, the stock-bearing capacities ofthe country will easily be trebled.

The main supports of the country are,therefore, cereals and cattle, the latterbeing undoubtedly the more profitableinvestment, but requiring a much larger

capital By Argentine, as by French, lawproperty at death is compulsorily divided,and this tends to split up the now immensetracts of land occupied by individuals.Whatever the social advantages of such asystem may be, it is not conducive to themost economic working, nor yet to thebreeding of the finest strains of stock, forwhich a large capital is required A form

of evasion, however, has been found in theformation of limited liability companies,often private, to run big estancias Thesehave everything to recommend them fromthe economic point of view A capablemanager is put in charge of the work onthe spot, and, as capital is usuallyforthcoming, the estancias are run in such

a way as to yield the greatest possiblereturn They are usually well-maintained,

up-to-date in management and fittings, andsupplied with good home-bred strains.There are, however, other natural sources

of wealth in the Argentine; notably, theforests of hard-woods (of the acaciaorder) which abound in the Chaco, inCorrientes and Entre Rios, and are alsofound in the province of Córdoba andelsewhere; the sugar industry in the north-west (of which more will be said under

“The Tariffs”); the hitherto undevelopedfruit cultivation in all parts of the country(this in the sub-tropical and centralprovinces would be especially liable tosuffer from the depredations of locusts);perhaps, too, cotton growing in the Chaco,where, however, the supply of labour ismuch questioned, and some pests peculiar

to the cotton-bole are reported as existing;and, lastly, the minerals, as yet whollyundeveloped Although these areundoubtedly much more scarce than inBolivia and Chile, the absence of animpartial geological survey has renderedthe flotation of bogus companies easy, andpractically prevented any genuinedevelopment, in spite of their greateraccessibility than in the former country.The recent boom and collapse in goldventures was the result of stock exchangetransactions, probably fraudulent, as, withthe exception of the sea-bed to the verysouth of the country (where it cannot berecovered), gold is probably one of thefew minerals which does not exist to aworkable extent.

A curious feature in the Argentine is theabsence of navigable rivers With theexception of the treacherous Paraná andthe Uruguay, enclosing the provinces ofEntre Rios and Corrientes, there is not asingle waterway, natural or artificial Theresult of this has been an enormousnetwork of railways spreading over thecentral provinces with isolated offshootsnorth and west The consequent greatinflux of capital would naturally haveencouraged a large import trade; but theprohibitive tariff has succeeded inretaining the money in the country, whilethe revenue derived has, almost withoutexception, been uneconomicallyemployed The result is that, apart from anoccasional monopoly that has succeeded,the only large gainers from this policy

have been the town property holders.

A large part, however, of the province ofBuenos Aires is liable to periodicinundation, and, to obviate this, anextensive system of drainage has beenplanned, a work of great difficulty owing

to the small difference of altitude betweenthe land and the sea Some canals,however, are in course of construction ofwhich advantage might possibly be taken,

if they were made of sufficient depth, forlocal transport If this were done, a largeand important part of the country would beprovided with a cheaper alternative to therailway In a volume descriptive of theRepublic (published, in English, by theDepartment of Agriculture) this possibility

is foreshadowed, stress being laid on the

slight fall from the Andes to the coast, and

a scheme, chimerical on the face of it, of asystem of trans-continental canals isvaguely outlined But, being so wildlyimprobable, it seems to have no existence,even problematical, outside the pages ofthat advertisement

CHAPTER II.

The prosperity of the Argentine Republic

would undoubtedly have been impossible

without the enormous investments made by

British financial houses in its railway

development For many years—in fact,

until quite recently—the influx of capital

was welcomed and encouraged

Concessions were lavished on anyone

ready to take them up, and, far from

irksome conditions being imposed,

valuable privileges were granted to the

concessionnaires Moreover, the national

and provincial governments were only tooeager to get rid of such lines as theythemselves owned, and invariably worked

at a loss, and to transfer them to Europeanconcerns That the railways were financedfrom motives of promiscuous philanthropy

is improbable, but that the Englishfinanciers were almost alone in theirconfidence in the future of the country isnot only true, but it is a truth which themost respected and able Argentines fullyrealise There exists, however, at thepresent moment a very powerful feeling ofopposition to the “Empresas,” as they arecalled—the “concerns” that practicallycontrol the country—and (so say theiropponents) exploit it entirely for their ownends Apart from the fact that a railway, in

order to pay, must humour its traffic, andwould be attempting suicide were it reallyguilty of the exorbitant overcharging andmismanagement of which some lines areaccused, there is little or no cause forthese complaints In a country where amortgage on land pays 8 per cent interest,and where other investments are expected

to give a proportionate return, the 7 percent of a railway dividend is far frombeing excessive, especially when it isremembered that locusts and drought may

at any time absorb practically the wholeyear’s profits of a whole system

The motive of this hostile spirit, or whatmay be behind it, is difficult to discover.That jealousy of foreign—especiallyEnglish—influence exists in a certain

section of the people is undoubted But,considering that the true Argentinepopulation—supposing that such a thingexists or could be defined—is very smallcompared with the foreign element, andthat of itself it is absolutely incapable ofdeveloping the country, some other reasonmust exist to justify the position But,discreditable as such jealousy is to thepeople concerned, it is without doubt avery powerful factor.

Fortunately, these opinions are not shared

by the Government, nor, probably by thepeople generally, who, although alwayscomplaining of high freights, delay intransport, and all the other grievances forwhich every railway under the sun isblamed, seem to dread the alternative of

Government control The official members

of the Government are on the wholeconsidered to be sincere, industrious men,with a genuine desire to do their best ButGovernment management invariablymeans peculation, among subordinatesespecially, and the introduction of pettypolitics into business It is from thiselement that the opposition springs.Concessions requested by capitalists,permission for extensions required byexisting concerns, although of undoubtedadvantage to the country and approved byGovernment, are blocked in Congress.The tone and quality of Congress may bejudged from the fact that the only measure

of any importance passed during a wholesession was that authorising an increase inthe salaries of the deputies For weeks on

end no meeting can be held, be themeasures to be discussed ever soimportant, because, from carelessness ordeliberate intention, sufficient members

do not appear to form a quorum Severaldeputies, indeed, never sit from thebeginning of the session to the end Thus,even if there is no opposition to a railwaybill, it often happens that it is aseffectually blocked by the sheer slackness

of individual congressmen

That the railways themselves are notblameless in every respect stands toreason And, although this is almostcertainly not the origin of the presentobstruction to their demands, they wouldcommand a much greater share ofsympathy—after all, a considerable asset

—if they would realise their own faults.Having had, and still having, a practicalmonopoly in their own districts, thevarious companies have adopted asomewhat despotic attitude towards newand outside enterprise, and, sometimes adisregard for the requirements of theircustomers, as well as for the true needs ofthe country Railway affairs centre inRiver Plate House, and any attempt on thepart of outsiders to establish themselves inthe Argentine is viewed with greatsuspicion by the financial ring that rulesthere Concessions put forward have beenblocked times out of number by theinfluence which the ring could exert inCongress If by any chance—and this hasbeen more frequent of late—the

concessions have been secured in spite ofits opposition, every obstacle is placed inthe way of raising the requisite capital inLondon—opposition which the ring is in apeculiar position to make effective Onlyrecently a very sound project was floatedwith the greatest difficulty, even thedebentures failing to realise more than 90per cent., because one of the existing linesconsidered the proposal a trespass on itsespecial preserves Moreover, thereseems to be every reason to anticipate therapid failure of the new line owing to therate war which the existing one willundoubtedly declare.

This apparent disregard of the needs ordesires of their customers is, perhaps,attributable partly to the unreasonable

nature of the demand, partly to anoccasional pursuit of some pet theory ofmanagement, but, in all probability, morelargely to the division and conflict ofauthority The management is separatedfrom its central board, not only by theAtlantic, but by the local board sitting inBuenos Aires And, although on the homeboard there are men whose knowledge ofthe country was intimate some yearspreviously, their aspect of the working of

a railway naturally undergoesconsiderable modification upon theirtransference from the executive to thedirectorate; while the local board, whoare often appointed merely to secure localsupport and influence, are rather apt toexercise their power in a vexatious andcapricious manner—more to show their

authority than to further the interests of therailway As regards the actual working ofthe lines, in some cases complaints aremade that too much confidence is placed

in the long-haul, long-train theory Thereare only a few lines on which there is anyopportunity for or advantage in the verylong train, the agricultural districtscentring round the various ports Owing tothe lack of warehouse accommodationalong the line, grain has often to be loadedinto the trains straight from the growers’carts, thus causing endless delay whentrains of immense length stand to be filled

It often happens, too, if the harvest proves

at all good, that, in spite of Governmentorders, the rolling stock is quiteinadequate for the traffic, the result beingthat with the accumulation of work in the

docks, a crop is sometimes kept locallyfor a whole year before it can be removed

to a port

Considerable inconvenience is caused,and will continue to be caused for sometime, by the congestion at the port ofBuenos Aires Control there has beenexercised by half a dozen different boardswith no central authority The wharfageand warehouse accommodation are quiteinadequate, even if the great savingspossible in time and space were realised.And, lastly, although there is alreadysufficient confusion with a one gaugesystem, there is an immediate prospect ofthe introduction of two other gauges Theexisting lines there are 5 ft 6 in Butpreparations are already being made for

the continuation of the Central Córdoba(metre gauge) into the port, and possibly

of the Entre Rios (4 ft 8½ in.) extension

to construct new ports or develop existingones elsewhere, a course that is alreadybeing adopted by the Southern at BahiaBlanca, and the Entre Rios line at Ibicuy.There is also a new project floated for theconstruction of a large port in the Bay of

Samborombon (also on the Southernsystem), but this scheme does not meetwith much approval in the country, while,for some reason, the port of La Plata hasnever succeeded, in spite of everyencouragement At some time a port willhave to be constructed at Mar del Plata,where the only rock foundation on thewhole coast is to be found Mar del Plata

is the Argentine Brighton, and anycommercial development there is certain

of an unfavourable reception But as sandand mud are the only base from Santa Fé

to Bahia Blanca—in some cases therebeing not even firm sand—and asdredging is exceptionally expensive, noother solution seems reasonable On theUruguay River, and on the Eastern Bank of

t h e Paraná, in the South of Entre Rios

there is deep water But as this onlyaffects the lines of that province and ofCorrientes it has no bearing on the generalquestion of Argentine transport.

As a last word, it must be rememberedthat the present boom in the country isextremely recent Argentine has developed

in an extraordinarily rapid manner, andsome confusion is excusable That therailway and the country will realise andovercome their difficulties there can belittle doubt And in any case the naturalwealth of the country is so great that in theend it will force a way out, in spite ofobstacles

Statistics relating to railways will befound in Chapter VI

CHAPTER III.

The labour question in the Argentine

Republic is one of great difficulty There

is really no native labour, certainly none

for industrial purposes The Gaucho,1

now degenerated into the peon,2 is only

available for stock-raising Agriculture is

carried on almost entirely by colonists of

various nationalities, and industries by