The Washington herald., 1921-06-12
NJ JULIUS KLEIN,

Isos.siy uritsd seatss csnnsroii Ateehs
at Busass Aires.
OF the many reconstruction PROB
lens that have arisen in Latin Amer
lea since 1913 the reorganization OF
the Brazilian financial system Is In
many ways the most important and
far-reaching. because Of the number
of inhabitants, the extent of terri
tory. and the extraordinary richness
Of the resources that are, directly and
indirectly involved. Nowhere on the
southern continent did the war bring
such large scale economic catas-
trophies as in Brasil. Before 1914
about IS per cent of her export ac-
tivitiy was concentrated in icoffe and
rubber, and the war time disasters to
her markets for these two products
bought correspondingly severe
strains upon her whole economic
system. The loss of the Continental
European coffee trade and the rapidly
growing pre-eminence of Far East
ern plantation rubber. which pro-
duced ~ per cent of the worlds out
put In, 1913 and So per cent in 1890.
seemed to promise nothing but ma
tionai bankruptcy for Brazil.
The decline in exports was espe-
cialIy damaging to the finances OF
the nearly autonomous states of the
republic. which are largely depend
ent upon export duties for their rev.
enues. The federal government, on
the other hand. derives 60 per cent
of its income from tariffs on imports,
an6 the havoc. wrought upon the i'm
port trade by shipping restrictions
and by the curtaiimentN Of overseas
credits through d. falling exports
therefore explains the unprecedented
deficit, accumulated by the national
treasury during. 1sl5-1s-. some
80, 900, 600 gold milreis and 1,o22.
SOC, 900 in paper, or about $780,
ooo,oeo at the exchange rate of De-
Gambler, 1919. S.:
wsr-Ti.se Expedients-
Various wartime expedients were
used to tide over. the situation.
Rigorous. economies were effected
In all sovernme MT departments, pub
lie works, industrial subsidies. etc.
A. funding. loan ofSf1s.ooo.ooo was
negotiated In 1sff TO relieve the
government temporarily of its inter
est payments on the foreign debt of
more, than ~fiis.ooe. 600: The most
important >measure, however. was a
series of large issues of inconver-
tibte paper currency, the total
amount in circulation on June l,
1890, having reached the record rg-
ure of 1,7s.e35.oeo milreis, as
against So1.s0o.ooo In 1918. In No
vember. 1920. steps were taken to
make q further issue, not exceed
ing so.ooo.0eo milrefs. II was no
wonder. therefore, that while the
proportion of gold to paper notes in
July, 1917 was IA per cent. the
figure had fallen by December. 1919,
to 7.6 per cent
This has accounted very largely
for the marked fluctuations and
present depreciation of the milreis
exchange rate, which has had
neither increased exports of raw
materials nor available gold reserves
to support II. In fact. the exchange
decline would have been even more
marked and prolonged had 1t moi
been for the development since 1914
of .ne~ industries and exports in the
country which partly took the place
OF the declining coffee and rubber
trades. 4.
Diversiaeatisn sf Industries.
This invaluable >diversification., In
which exports of beans. rice. meat
and rnanganese were conspicuous
considerabIv rnoAidsd IN. nrsdonI.
nance OF coffee and actually crowded
rubber into fourth and even NTH
place In the countfy's exports
Furthermore. these = new trades
created dc~'nnds Tor at least q part
of the ,Great1y expanded eurrenc,
and thus retardef the decline In
exchange during the latter part OF
the war. But the. recent stagnation
of all exports, including the new
staples. mas radiscaiiys altered the