South Bend news-times. (South Bend, Ind.) 1913-1938, 1921-05-22
BY WALTER j. VINCENT.

|
| lean export field have been amazed
during the past several months by
the alarming situation Of South
American exchange.
Since last July there has been a
steady drop in South American cur
rency as expressed in terms Of Amer
lean money. and this situation has
now reached a very critical stage.
During the past month Argentine
exchange has dropped more than 20
cents on the dollar. At par the
American dollar costs S1.O2 Argen-
tine gold.
Owing to this rapid depreciation
of the Argentine peso during the
last year, It has been costing the
Argentine importer from SIPS 10
$3.50 to pay for a dollars worth of
American goods.
Naturally this condition has had
very depressing effect upon ex-
portation from the United States
into South America.
In discussing the cause and cure
OF this adverse financial situation,
Rev. John f. O'Hara, dean of the
Department of Commerce, Notre
Dame university. touches on some
fundamental points that appear to
have been overlooked by other stu
dents Of the South American trade
problem.
Stirs Anti-U. s. Feeling.
1.-THE effect Of the phenomenal loss
IN the value of South American
money" says Father O'Hara, lis
that South American merchants are
unable TO buy goods in the United
States or TO pay for goods previous
ly purchased in good faith.
such goods have mounted in
some custom houses in South Amer
lea 10 an enormous extent, and for
eign commercial rivals Of the United
States are taking advantage of this
situation TO spread among the South
Americans the specious fabrication
that the United States, having as
sumed the financial supremacy of
the world, is taking advantage Of its
situation 10 beat down the ex-
changes of other countries. Such
an explanation, absurd as it is dis
4
appeal to people who do not under
stand the mechanism Of exchange.
And, it is this explanation that is
doing great harm 10 the financial
reputation Of the United States IN
those countries.
/ The explanation usually given IN
the United States regarding ex-
change fluctuations is that as the
/ balance Of trade Is the primary
factor in determining the rate of
exchange between two countries. or
that the South American exchanges
are selling off because the United
/ States is selling 10 them more than
I it is buying from them.
Explanation Inadequate.
This explanation is absurdly in
adequate. According to figures re-
Gently published by the department
/ Of commerce, the trade Of the
United states with the whole of
/ Latin-America during the past year
was distributed between imports and
exports at the ratio OF 81 10 46.
With certain countries. notably Ar
gentine and Uruguay, the trade bal
ance was against the foreign coun-
. try since last Septem Der. but not in
sufficient measure 10 account for the
phenomenal drop in the exchange
rate. During the war there was a
much heavier adverse balance Of
trade against the United States in
/ Argentine trade than exists in our
favor today. and vet the depreciation
I Of the American dollar was not one
I fourth the present depreciation Of
/ the Argentine peso.
The only sound explanation Of
/ the present situation is this: Euro
\ pean accounts. especially English
I banking houses, have paid off their
/ indebtedness to American firms by
/ buying dollar acceptance in the
South American market. Every such
/ transfer OF funds or credit from
South America 20 the United States
I results IN 4 depreciation OF the South
I American exchange rate, and since
I IL Is for English account. IL strength
| ems the position OF sterling in the
American financial market A sim
/ pie glance al the curve OF deprecia-
N-o-- - 80 50 -A---~- -'-rA4- -AieA- n /
and the curve representing the rise
7 in sterling exchange since last fall
will show this relation very clearly.
I The 20-cent drop IN Argentine ex-
I change registered during the past
month had its counterpart in the
rise OF sterling from s3.92 10 over
S4.0C.
| "There~is nothing dishonest about
this process by which depreciation
in exchange Is brought about: Il is
| sim pIv good banking business and