Evening star., 1932-02-07

aIbeI lIlG lear anu pdtIlC Va lllS dNPAN.
sion have allowed securities TO reacn
a true value, will be nearer 20 per cent
than 80 Cthe present average paper
loss on the government issues ana
that the chief losses in most cases Will
be the interest from the time OF default
to the time of resumption Of payment
and in a number Of cases a shaving III
the interest rate.
Most of the government loans-there
are only few CeptiOnS-and all OF
the corporate Investments almost With
out reservation, were flOated on the
basis of sound values or sound pros
poets, judged in the psychology OF the
boom. Some we're overloaned a con-
siderably larger sum than was juStlned,
but the soundest banking would, and
did. issue loans on revenue expectation
that was wiped out, temporarily, with
thousands of other values in the de-
preston However. the underlying
worth. the sound promise Of the future
Of the countries and of their commodl-
sIes remained, and still remain.
Perhaps the chief lesson learned,
however. and the one of greatest value
for the years ahead, is that laid down
by Herbert Hoover in 1927, when the
Coolidge boom was on the upSWlng. He
said the following words in his address,
third Pan American Commercial Con-
ference in Washington: he repeated
them, with grim forcefulneSS, when, as
President he addressed the fourth PAN
American Commercial Conference in
the same city and from the same ros-
trum four years later in october, 1881:
mo nation, as government, should
borrow. and no government lend, and
nations should discourage their citizens
from borrowing and lending, unless this
money is to be devoted to productive
enterprise. Out Of the wealth and
higher standards of living created from
enterprise itself must come the ability
to reDaV the capital together with the
net gain to the borrowing country,
Any other course of action creates OBJ
legations impossible of repayment eX-
Cept by a direct SubStraCtion from the
standards of living of the borrowing
country and the impOveriShment OF her
people In fact, if this principle could
be accepted between nations OF the
world. that is if nations would do away
with the lending of money for the bal
anCing of budgets, for purposes Of mill
tary equipment or war purposes, or
even that type of public works which
do not bring some direct or indirect
productive return a great number of
world There could be no question as
to ability to repay. With this increas-
ing security. capital would become
steadily cheaper the dangers to ma
tional and individual independence in
of the lender to collect his
defaulted debts would be avoided, there
would be definite increase in the
standard of living and comfort and
prosperity of the borrower. There
could be no greater step taken in the
prevention of war itself"
Capital Greatest Need.
Strong medicine to bring up four
years later. and yet proven true not
alone for Latin America but for all the
world It marks. in a way perhaps
the epitaph of the old era of borrowing
and lending on government bond issues.
Perhaps if the holder of Latin Ameri-
can COR other government) securities
could know the kind of loan his bonds
he could tell without con-
Sulting any expert how good the bond
would be in days ahead. But such
vision, such understanding, is not easily
come by. The second best means is to
survey the long trend of events, the
slow development Of the security Of the
countries which represent most of our
security issues and which in the next
few years must have our money as well
as our aid and comfort in a myriad of
other ways.
Latin America is creator of wealth
from within itself. The total area is
immensely more vast than the United
States. It's wealth within itself now is
second only to that of the United
States and probably is destined to out
u t~+o T,1 = he
Capital is it's great need, and for an
even hundred years capital has flowed
to it. 1t is now passing out of the third
of the eras of capital inflow, and the
fourth era lies just ahead. In that
fourth era there will be a closer ap-'
prOXimatiOn to the sound principles
laid down by President Hoover.
That fourth era will, indeed, probably
be time of sound, self-sustaining cap
ital investments in industry, in produc-
tive public works and in the upbuild-
ing of national and private organiza-
ton and equipment for the production
of prosperous civilization and the goods
thereof. The new era is inevitable and
it will carry to Latin America the in
vestment of capital that it needs, and
to the investor that combination of
sound security and enhanced return
that alone has ever tempted him into
overseas investments.
The contrast of the various eras that
have gone before is deeply significant
of what is to come in the future. Let
US contrast for the sake of emphasis
two outstanding national types of in
veStment in Latin America-thoSe of
the United States and of Great Brit
ain.
The United States has invested about
Sc 900 100000 in Latin America, about
four-fifths Of it since the close of the
World War. Great Britain has invested
an almost equal sum, rather more than
four ffths of it prior to 1914 The
United States investment was primarily
in the period of development, the Brit
ish belonged to the era of concessions
and exploitation. The British loans
to governments were mostly at high
rates, in a period of ignorance and un-
certainty Of security, and most Of the
British private investments were staked
down with concessions and monopolieS,
as on railways and port works.
Regarded Sound Risks.
Investments from the United States
have been roughly divided, half and
half, between government securities and
private enterprises. All OF Lneln, now
ever, were considered as sound business
risks, and neither as politics nor
charity. The earlier investments from
the United States went into mining
ventures and fruit companies, in which
the returns were high, but which, on
the basis of stock market valuations,
quickly found level but little above
the rate that would have been expected
from similar ventures in the United
States itself at the time. AS a gen.
eral rule, the United States investor,
particularly between 1923 and 1929
when virtually all his recent invest
ments entered Latin America, gave
these securities the benefit of the high
est rating in their class-a generosity
which the disastrous drops in many
of them in 193031 did not seem to
justify.
The British, on the other hand, al
though their losses from Latin Ameri-
can investments probably have been
greater, have estimated more nearly the
q nro5it ricl in h 10