Evening star., 1932-02-07
Points to Advances,

1t has been pointed out by authori-
ties who defend the loan policy of the
United States investment bankers in
the 2OS Of this century that our trade
with Latin America has increased in
almost exact proportion to the increase
in our lendingS Proceeds of the loans
have meant an increasing economic ad-
vance in the countries which have re-
celVed deserved credits. The most
cauStic critic of the financial policy of
the boom years will admit that the
social advance and the Improvement of
living conditions and industrial activity
IN Latin America are little short of
Startling-nO other region of the world
has marked such an advance in the
last Is years Increased work and the
higher wages that resulted from gov
ernment spending virtually broke for
ever the system of peonage which had
grlpped the labOring classes of many of
the countries for four centuries
This change necessarily caused diff
cultleS and some losses to local and for
eign companies operating in those coun-
tries; food and local commodity prices
rose, etc. Colombia's losses of labor
from the coffee fields to the public
works began with the loans of 1925 to
1923. caused a slowing up in the chief
productive industry of the country,
which was supposed to produce revenue
to pay the very service on the bonds.
But nevertheless there came also riS-
ing standard of living, a broadening
civilization. Education has been ex-
tended, in part, at least, as result Of
foreign loans. And no step in eduCa-
tional advance can be backward in
Latin America.
This is poor comfort, however, to in
veStOrs in Latin American bonds. The
defaults and postponements have not,
however been repudiations-indeed re-
quotations are not the rule in Latin
American finance. The bond issues of
the last decade have been generous ones.
many of them too generous, but the
agreed principal was all transferred to
the borrowing governments and used or
wasted by them. The commissions were
sometimes large, and there was often a
fairly wide spread" between the price
paid by the ultimate buyer and the price
paid to the governments, but 1t was al
ways matter of strict arrangement and
agreement. There were few instances at
all comparable to the unfairness and
criminal cheating of Latin American
governments, by their own people and by
the bond houses, which marked some
of the earlier loans.
There is no question, however, that
the sudden stoppage of all loans was
more unfair and more destructive to
all values than the forcing of money
which was not yet needed on countries
which felt that they should take these
loans while the taking was good
Less Bitter Than Expected.
The Latin American attitude at the
close Of the investment orgy was less
bitter than might have seemed Justified.
A not unexpected result was a demand
for the reduction of interest rates and
the extension of the period of amorti-
zation. or the suspension, temporarily,
of payments on the principal. Some
of the countries which continue in
terest and sinking fund payments even
with great hardship have felt that be-
cause of that firm attitude they were
entitled to interest rates equal to those
of the strongest countries in the world.
But they asked it on the ground that
unless these concessions were made.
they would have to suspend payments
temporarily-and that is not the
ground on which such credit terms
are extended. Many difficulties have
come to the surface in these hectic
ing the problem of relatively shoyt
terms for which the loans of Latin
American governments run.
1t is certainly far from an idle
dream that foreign investments from
the United StateS in the future will
have direction a;s1 a continuity which
they have lacked in the past. Not
the least of the causes of the COL
lapse of Latin American securities in
193O-31 was the fact that many of
the projects for which money had been
lent in the preceding few years were
unfinished, and as yet unproductive
When the sudden closing off of the
flow Of money came these projects