Evening star., 1921-08-28

in settlement of Europe's debt but it is be-
lieved practical that there could be an annual
"transference of amount sufficient to meet
the interest charges on the debt. with gradual
increases to iqudate part of the principal.
But to accomplish even this there are many
complications and difficulties which would have
to be overcome. In the first place. there is
not in this country any extensive market for
South American securities. The market would
have to be created, and this would not be easy.
1t would take lot of educating to persuade
the American investor to buy a or per cent
Argentine bond when he has choice of SO many
attractive offerings at home which will net him
and per cent. There is the further compli-
cation that great bulk of the South American
securities held in Europe are payable in pounds
sterlinD in francs. marks and lire. instead Of
in the currencies of the countries Of their
origin. To sell these securities for dollars. in
the present condition of exchange, somebody
would have to take heavy losses. Whether it
is regarded that the dollar is at premium
the currencies of other nations at discount.
the effect is the same. Take the case OF an
Argentine security owned in England and Of
fered for sale in this country. In dollars the
British pound sterling is at discount of about
25 per cent and the Argentine peso is off nearly
40 per cent. An Argentine bond Of the normal
equivalent Of $1,000 would have an American
value of only $3.50 If payable in pounds sterling.
If payable in Argentine pesos its present ex-
change value would be only $500. Brazilian
bond Of pre-war value equal to 81 600 owned
in France would have value here of $500 II
payable in francs and of only $3.50 If payable in
Brazilian milreis. for the franc IS at a discount
of approximately 60 per cent and the milreis
is at a discount Of 62 per cent.
But the losses which the sellers of these
bonds would have to take is more apparent
than real. A South American bond which called
for the payment Of 100 pounds sterling would
have normal gold value of $48665. II the
owner sold 1t today in this country for its full
exchange value he would get only $365.75 for
it. but with that $365.75 in dollars he could turn
around and buy 100 pounds worth Of sterling ex-
change SO in reality he would be out nothing but
the cost Of the transaction. If he suffered loss
at all it would consist in his having. to meet
present needs, sacrificed alta discount a sound
investment which. in all human probability. in
time would have returned to its original value
Whether the European holder of South
American security would be willing to part
with 1T at the necessary present sacrifice would
depend upon hos, badly he needed the money
to pay his debts what greater profits he
thought he could make by having the reduced
sum available in the form Of American dollars
These South American securities ought to
be regarded good buy by American in
vestors Of somewhat speculative turn Of mind.
Certainly they are safer risk than the Ger
man mark, which American spectators have
been buying until they now are believed to own
this all but worthless paper currency to the
face value of fifteen to twenty billion marks.
This is a gamble. pure and simple with good
chapce that the American gambler stands to
lose. for the German paper mark cannot much
longer have any value at all If the food Of
issue continues.
X
The matter Of safety does not enter seri-
ously into the question Of high-grade South
American securffi6S he of
tion has to do with the disparity of exchange
whether 1t will get worse better and when,
If ever. 1t will get back to the pre-war normal
If 1t can be assumed that there will be a speedy
return to normal exchange. South American
curfties undoubtedly offer attractive field
for American investment. Take the case Of
Argentine bond of normal value Of $1,000,
bearing per cent interest and payable in ten
years in British sterling. The par purchase
price Of that bond today in dollars would be