Evening star. [volume] (Washington, D.C.) 1854-1972, 1895-05-14
How She is Making Her Paper
Equal to Gold.
MINISTER MENDONCA'S EXPLANATION
Her Credit Good in Any Of the
Banks of Europe.
A POPULAR LOAN SUCCESS

promise TO advance her to an enV1able po-
sition. Senior Mendonca, the Brazilian min
lister here, has been a close student of the
recent financial developments in his coun-
try, and this, with his long service in the
United States, permits him to make inter-
esting observations. He has received copies
of the recent decree for an internal loan
Of 100 200 900 contos or $50000,OO0.
Part of this was taken by the people, in
the form of a popular loan, much as Sem
ator Sherman urged as the most desirable
manner of floating bonds. OF this S1O-
0OO,0O0 was at once used in redeemng
paper money, and $15,OU0U00 more will be
used for the same purpose. The important
feature Of this step is that Brazil has be-
gun to strengthen her gold reserve and re-
duce her paper money. with view to
bringing her two forms of currency-gold
and paper-to an equality.
1T will not be bimetallSm as Brazil has
little silver except for subsidiary coin, but
1t will inaugurate the unique but effective
system Of gold and paper circulating side
by side on an equality.
Deprecintcd Paper Currency.
cat the present time" said Senior Men
donca. ''our paper currency is worth 40
cents on the dollar in gold This deprecia-
ton was due to the large issue of paper
some years ago under the provisional gov
eminent, before the republic was consti-
tutionally organized.
Inc pruning presses were started and a
flood of paper bills, aggregating 375,OUo,OOO.
CT little short of the United States issue Of
"greenbacks." was put into circulation.
The gold reserve of Brazil remained at
1OOGO0,OOO. The natural result, therefore,
OF putting out this large amount of paper,
while the gold reserve remained unchang-
ed. was to send gold to a premium and
the paper money to discount.
AT one time our paper Giro ulation was so
small compared with the gold balance that
gold, each paper milreis bringing a gold
penny above par But with the increase of
the paper currency it's value gradually fell
until. as have stated the current rate is
about 40 cents on the dollar of gold, or 60
per cent discount.
These conditions continued the minis
ter, ARE what give Importance to the
present step by the Brazilian minister of
finance to redeem the paper. After taking
up $25,OUO,OSO the outstanding paper money
will be reduced by about IL per cent. At
the same time our gold balance is being
maintained at its full figure. The natural
| result. therefore, will be to give a greater
gold value to the remaining paper outstand-
ing.
Instead of paper being at a discount of
W per cent. 1t will be Immediately reduced
to about 43 per cent. But the first great
step will have been taken toward bringing
our paper money up to the full value, dol
lar for dollar. to gold. When another re-
demption of paper occurs, ii will still fur
Their reduce the discount on paper. and
thus, slowly but surely. Brazil will have a
currency either of gold or of paper. bear
ing the government stamp. which is worth
as much as gold. OF course, such paper
money cannot be called fiat"
ITO be sure, 1t is not coin note, and 1t
bears merely the stamp Of the government
assuring it's credit. but when it passes cur
rent with gold that is a sufficient proof of
its value"
Does this mean" Senior Mendonca was
asked. that Brazil will ultin1 be on a
strictly gold basis. meeting paper, bonds
and all obligations in gold?'
'It is not so much that as 1t is deter
mined purpose to restore complete credit
to its paper currency" said ne. Prob
ably all nations are striving to secure the
most perfect standard Of value. 1t hap
pens with US. having gold and paper as the
two main forms of money, that gold is
naturally the standard. There is some sill
yer used as subsidiary coin, but not suffi-
cient to give us bimetallism in the sense
used in the United States, with gold and
silver coined and circulating side by side.
With US it Is gold and paper, instead OF
O,ld and silver, and we expect to make our
paper as good as gold.
A Popular Loan.
Senior Mendonca was asked concerning
the popular features of the recent loan.
1.-The government was careful to give
every advantage to the people at large, in
preference to the bankers" said he. with
in three days of the time notice of the loan
was given it had been more than taken.
The loan was for 900, but the sub
scriptions inside Of three days reached
s64 600. OF this amount private indi-
viduals put in subscriptions amounting to
s2i.O0O,O00. Instead of making a pro rata
allowance between the individuals and
bankers, the government gave the full
S2iO0Q,000 of bonds subscribed by indi-
viduais, leaving the banks to take a pro
rata amount of the balance.
1T has been most satisfactory showing
as to the high credit of Brazil that its own
people could take up a loan of such a large
amount inside of three days, and it has
been particularly satisfactory that the peo-
pie at large have taken an interest in the
government finances, and have shown their
support of the administration by subscrib-
ing such a large sum.
LAS a rule. the Rothschilds are the.bank-
ers of Brazil" continued the minister. but
in this last instance the confidence in the
government was so strong at home that
there was no need of going abroad for
money.
houses are ready at any time to take the
bonds of Brazil, under a somewhat peculiar
system which we have. According to this
plan budget is made up as to the proba-
BILE income from customs and other sources
Treasury script is issued on this prospec-
tive income. The Rothschilds or other
London concerns take any amount of this
scrip, as the government desires, and plao es
to the credit of Brazil cash to be imme-
diately available. Thus the government is
always supplied with ready cash, and the
scrip is taken up as fast as the customs
and other revenues are realized
The bankers never have any cause for
uneasiness. because Brazil has never been
even one day late in the payment of an
obligation, either principal or interest, not
withstanding the revolution it passed
through some time ago.
The London and Brazil Bank.
Senior Mcndonca has recently received adj
vices concerning the annual meeting in
London of the directors of the London and
Brazil Bank. He regards the meeting as
important in bringing out the fact that
financiers who are intimately acquainted
with the internal affairs of Brazil attach
no Importance at all to the alleged rebel
lion said to exist in southern Brazil, and
to the continued reports of an ATTEMPT to
overthrow the present admins ira tom
This bank Is one Of the=zsaes++i4s4, ortant
organizations in the world" said he, HAY
ing branches in London, Brazil and the
River Platte. Two of its officers have been
sent to Brazil to make careful observation
and report at the annual meeting in Lon
don. As "a result of their report, the chair
man Of the BOARD of directors OF tod