Evening star., 1931-12-07
REVOLT H|ISU. S.
LOAN IN SALVADOR
Investors Involved in Results
of Disturbance-Credits
Are AnaIyzed.
Special Dispatch TO The star.

Special Dispatch to The Star
NEW YORK, December 7.--Salvador
could not afford to be outdone by her
more powerful neighbors She, too, has
succumbed and staged a full-fledged
revolution, the first in almost SO years.
The United States could not be said
to have benefited from the disturb
| ances in the countries south of the Rio
Grande. American investors, who have
poured hundreds of millions of dollars
INTO Latin America, are now being
called upon to pay rather dearly for the
| recklessness with which loans we're
| contracted.
While not all of these loans were OF
} type ordinarily referred to as non-pro-
ductive, in the midst of difficulties,
| Latin American debtors do not differ
entlate, and calmly suspend payment
on all contractural obligations De-
| 1aults exert most adverse influence
upon national credit, and the collapse
OF national credit means paralysis of
J trade and commerce with neighboring
/ countries
| Prior to the war, American invest
ments in Salvador aggregated S3,000.-
| 300. Trade with the republic in the last
| pre-war year totaled slightly more than
| $4,000, 600, of Which S., SIT 900 repre-
| sented American imports from Saliva
dor, and S2,407, 900 Salvadorean pur-
chases in the United States. Last year,
American Salvadorean commerce
amounted to s7,320000 of which ex-
| ports to Salvador accounted for S4.445.-
QUO, the remainder representing Ameri-
can imports from the southern republic.
Compared with 1913, last years figures
represent an increase of about 45 per
cent II one takes into account the de-
cline in the purchasing power of the
dollar, which has taken place in the
| meantime, the gain is appreciably
smaller than would appear at first
| glance.
u. s. Investments Increase.
| Americas investments in Salvador,
however, have increased at a much
faster rate At the beginning of 1881.
Americas stake in the republic AMOUNT
! ed to about S44000,000, almost is
times the pre-war figure. 1t is obvious
! that trade did not follow the dollar
| in the case of Salvador, and that the
| extent to which United States capital
was placed in the country was not war;
ranted by the increase in the COM
merce between the two republics
| OF the total funds invested in SAL
vador, $l4,530,300 represents American
holdings of Salvadorean securities,
| publicly and privately sold in the
| American market. The remainder rep
resents so-called direct investments
that is, ownership Of plants and prop
| critics. These include the international
railways of Central America and the
Central American mines, organized in
| 1928 under the laws of Delaware to
| take oyer the Ell Salvador Silver Mines
| Co. They include also the Buffers
/ Potosi Consolidated mines, the Buffers
! Divisadero Co. and the Monte Mayor
! Mines of Delaware. A considerable
| amount of American capital is also in
terested in Salvadorean financial in
stitutions and public utility enterprises.
notably telephone and lighting prop
critics.
Publicly placed issues held by Ameri-
can investors include the Salvador per
cent loan, contracted in 1924 for the
purpose Of adjusting an existing de-
fault. Bonds were sold in the American
market after the Department of State
had consented to arrange for arbitra-
ton of disputes and to nominate q
receiver in case of default
More than sl0,000,0o0 par value of
Salvador 7 per cent series &C" bonds
are also believed to be owned by
American investors and institutions.
These bonds are technically an internal
issue and are secured by lien. on the
country's customs receipts. subject to
| the 8s and 61a per cent loan held
in Great Britain to the amount of
about S5,000,000.
Although the smallest of the Central
American republics, Salvador ranks first
| on the American continent in point of
density of population, with about 1870
| inhabitants to the square mile. OF the
| total population, 90 per cent is pure
| Indian, mostly small farm owners who
Ecultivate their own lands intensiyely
with sufficient supply of manual labor.
The main crop is coffee, of which rs
per cent is raised on small properties
owned by the population,
Fiscal Record.
| Salvador's fiscal record is not par
| ticularly impressive. The first default
occurred almost Immediately after the
! first obligation was contracted. This
! happened in 1928 and, for more than
| generation, bondholders, mostly British,
received nothing. In 1860 a settlement
was effected on the basis of a cash pay
ment of 80 cents on the dollar. The
| credit of the republic. however, had be-
come badly impaired, so that it could
| receive no accommodations for almost
OO yCdlos All SDLOC VI pIlG SCbllCllktlG-
| In 1889, loan of ST 500 900 was con-
tracted in London; this was followed
| three years later by s2,500, 900 loan.
| In March, 1908, another issue of s5,000.-
! 900 was underwritten by a British
| banking group, headed by the Anglo
| South American Bank Seven years
| later, refunding loan of about S1,150,-
900 was obtained which, together with
the 1908 issue, went into partial default
| in 1915. The debt defaulted completely
in 1921, and, three years later, it was
cleared up by means of loan ar
ranged in the United -Salvador's
| first direct financial contact with Amer
| lean investors.
Although trade already has fallen off
sharply and bonds generally have regis
| tered drastic shrinkage, the present
| political upheaval is not likely to affect
very materially Americas commerce
| with Salvador. If any further change
| in the status of bonds should occur,
it is less likely to apply to the per
cent bonds held in the United States
and the 612s held in Great Britain,
than to the z per cent loan which, while
held mostly by American investors, is
officially classified as an internal issue.
tCopyright; 1881 by the North American
Newspaper Alliance, Inc)
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