The San Francisco call., 1909-03-15
HIGH FINANCE
PROVES BANE OF
TINY REPUBLICS
Tricks of Central American Die
tators Make c. w. Morse
Seem Like an Amateur
Foreign Debts Repudiated and
Resources of Countries
Are MOrtgaged
By Frederick Palmer


Central America can have no real
prosperity OF standing until she re-
forms her financial system, if system
it may be called, and it is one OF a
certain kind The problem that faces
each new dictator is how TO borrow
more money. when his country has de-
faulted on both principal and interest
of her debt and everything is mort
gagged up TO the hnt
From the dawn OF Central American
history any sum whatsoever that can
be secured in foreign lands has been
regarded as so much velvet incurring
no further responsibility. The foreign
bond holders society meets in London
for grave discussion and offers almost
any compromise that win bring a little
cash. while the Central American min
listers OF finance smile over the trust
fulness Of some European investors.
Honduras has the most brillian
record. she first foated a s. 100000
loan to build a transcontinentaI rail
road at 10 per cent. issued at 50 in g.;
another at $4,000. 600 for 2-3 per
cent. at Is in 50; another of $4,000, 600
Tor 10 per cent. at 50 IN 20 With
these sums she actually built 81 miles
Of the proposed transcontinental rail-
road for which the bonds were issued.
All the rest Of the money went into
the pockets Of her politicians and the
loan agents. OF course. she was
cheated. cheated by her politicians as
well as the loan agents; while the
advocates or the Drago doctrine ask
why the people should pay for what
they do not get to lot Of Lombard
srroet sharpers.
b 20 Honduras had defaulted and
never cent has she paid since At
present the total Indebtedness. with
accrued interest. amounts TO 100000
GOO. while the interest itself on that
sum is more than three times Hon
duras total revenue A compromise
settlement Of s5.O0O.000 has been Of
fered by the bond holders but $4,000
oO0 seems almost as far out or reach
as 100000 GEO TO Honduran statesmen.
FRANCE ALONE
MORE IN DEBT
Combining the foreign debt and the
internal debts and voluntary loans.
] am sure that for population. Central
America, miserabiy poor in all except
natural resources, has larger per
capita debt than Great Britain. 1t
is sufficient comment on conditions
that accurate figures may be had only
concerning the foreign 6eot, which
must be known abroad.
That Of Costa Rica is $14.o00.0O0
with sf.20O,000 Of unpaid interesD; OF
Guatemala, $4,000 600 with $500. 900
Of unpaid INTEREST,"; Of Nicarag qua,
sf.5O0,000, Of Salvador, 3.500. 600. Thus.
three Central American countries, Qua
temala, Honduras and Costa Rica, have
continuously defaulted; the other two.
Salvador and Nicara qua. have paid UP
by compromises temporarily in order
10 borrow more money.
The first debt contracted was by the
old Central American federation, in
1925, when SIS to the amount OF 81 7OO0-
600 were offered in Europe and $780,
600 was subscribed at an issue price
OF 73 in 40 Costa Rica paid off her
portion on a basis Of S5 per cent of the
principal In so Salvador compromised
on 80 per cent in cash. Qua temala de-
faulted until '5e. and Nicaragua until
~. BY borrowing from Peter. event
ually settlements were made by one
compromise or another for all OF this
debt
Costa Rica has been the most sue
cessful in floating loans, because her
credit, due TO her prosperity, is best
Her per capita debt, less only than that
OF France, is $50. which. at the same
rate. would mean q national debt OF
S2s40.O00.O0O for the United states. But
her revenues are large, her prospects
bright, and she is abundsntly able to
pay.
Moreover not only the advisa bility
but the honesty OF liquidation has be
come 2 matter OF public discussion. Al
the last session of congress a law, in
Nolving an agreement which the
United Fruit company repudiated, was
passed, taxing bananas at the rate OF
I cent bunch, the total proceeds to
so toward the national debt
In SO Salvador borrowed 81 SOC, 600 to
build railroad distance Of 35 miles
from Acajutla to Atenas. Seven miles
were built and the balance Of the
money went 10 the politicians. In go
finding that the government railway
did not pay. she converted her national
debt into securities of the Salvador
railway company by a process profit
able 10 all concerned except the bond
holders. agreeing to a payment TO the
company OF a subsidy Of $4,000 a year
Still another financial scheme was
worked recently. OF which more later
PREPARING
TO JOIN CASTRO
Nicaragua in "a compromised on heI
railroad debt by reduction of the in
terest from to 4 per cent and only
half the coupons in arrears to be paid
one does not wish to suspect Zelaya un-
duly. but he is looking forward to re-
1frement in Belgium and anything that
he can borrow, no matter what the
rates. by bolstering up his country's
credit temporarily is so much TO the
good"
Tn 1904 he made a 5 per cent loan OF
81 000. coo issued at T5. through New
Orleans bankers, with the customs as
security. At the time of writing he is
irving 10 float a 6 per cent loan OF
S. 600 600. issued at so in Paris, on the
guarantee OF his horrible whisky and
tobacco monopolfes. Should he succeed
he viii have made his final coup and
viii be ready 10 join Castro.
1t is hopeless for any Of these coun-
tries to secure any further foreign
loans on their credit as nations. They
must mortgage their revenues. Here
appear the financial geniuses, almost
invaria bly, German-Americans. whs
have made the greatest fortunes out.
side Of the fruit company pioneers. o.
those uerfuees Ado1phus Sto1l Of Qua 2.