Evening star., 1932-05-01
LATIN AMERICAN DEBT
ATTITUDE MUST CHANGE
Neighboring Republics Held Not Wholly
Responsible for Present
Inability to Pay.

So Rigorous taxation and drastic
domestic economies, however, thor
oughly applied. will not produce foreign
exchange-internatio money-unless
it becomes available through the
avenues of foreign trade, foreign in
veStments or foreign loans"
1t is self-evident that even II Latin
American countries could improve
their position in relation to foreign
exchange, through further curtailment
Of imports, the payment of their
foreign debts will continue to be
difficult until other countries are able
to receive Lstin-American products in
a volume approaching that of three
years ago Or until foreign capital
resumes its flow into those countries
for investment.
A foreign correspondent makes an
appropriate description when he COM
pares this situation to that Of "a man
! with a large quantity Of valuable
, merchandise on his hands who finds
| himself unable temporarily to dispose
of the goods because of lack of de-
mand,' and, therefore, unable TO pay
his personal debts.
The Latin-American countries are
perfectly willing to liquidate their
merchandise at almost any price and,
as reported by the press, many Of
them are now disposing Of large ton
nageS, but even So the total of sales
is not sufficient to create flourishing
international trade and service on the
debts
This willingness of the Latin -Ameri-
can governments to comply with the
| terms of their foreign obligations as
I soon as conditions will permit consti-
/ tuteS another reason why ungracious
/ comment on their temporary defaults
/ should be avoided
Up to the present time there has
been no suggestion Of repudiation on
| the part of any debtor country. The
repudiation Of European debts is much
more likely to happen than that of
Latin American debts. The southern
| governments have only announced q
/ temporary suspension OF payment on
/ either interest or capital or on both,
until the worst Of their financial
| troubles Is over.
Bonds Not a Total Loss.
There has been no deliberate intent
Of defaulting. nor is there any intent
/ of extending this temporary suspension
Of payments indefinitely.
Consequently, the Latin American
bonds now in default are not going to
/ be q total loss, and they are obviously
not a total loss today. Economic
( conditions in Latin America will
improve, prices will gradually strength
en-, and when this takes place one Of
the first things to be cared for will be
/ the national credit.
Irrelevant Of recent political changes,
the one consistent thought Of those
| governments has been, and is today
| that no repudiation will occur and that
| every effort Will be made to resume
service as soon as world conditions
make this possible.
In this connection, Latin Americans
point out the fact that there Is fair
number Of investors among them who
purchased United States railroad,
corporation and other securities in times
of prosperity When they consider the
tremendous depreciation in their
holdings today, and the drastic income
decline, they wonder why such sweeping
criticism is being voiced concerning the
depreciation in Latin American bonds.
Furthermore, Latin Americans remind
their creditors that several sovereign
states OF the Union have not only de-
faulted in, but repudiated, their
debts. The Confederacy went out Of
existence after having accumulated a
huge debt which never was and never
can be paid. British investors were in
this case the chief sufferers.
ana right at the present time, the
three most important cities in the
country, New York, Chicago and
Philadelphia, are in serious financial
difnculties. States and counties and
lesser municipalities are on the verge
OF bankruptcy. Millions of debts have
simply been written of.
Finally, third reason why critics
Of Latin America would do well to
proceed little slowly in condemning
the southern governments for their
present inability to pay is that the
disclosure OF the methods involved in
the negotiation of the defaulted loans
has placed much of the responsibility
on the bankers shoulders. have
dealt with such disclosures in pre-
ceding articles. Suffice it here to
repeat that the blame for the reckless
borrowing which characterized inter-
American financial relations for the
last IL years has been conclusively
shown to be divided "fifty-fifty''
between the lenders and the borrowers.
That all these reaSOns-the world
Wilderness of the economic crisis,
the intention Of the Latin-American
governments to resume payments as
soon as possible, and the part of the
fault which vas the bankerS-are now
acknowledged by those conducting
international finances in this country
Is proved by the lenient attitude
adopted by them toward the defaulting
governments.
Nobody is thinking today Of sending
Marines as debt-collectors for Uncle
Sam. OF course, not even they could
collect today, but, anyhow, it is
significant to see the Wall Street
magnates adopt a fairer attitude
toward their debtors than was Gus
tomary Is years ago.
To get public opinion in that same
mood, to clear the misunderstanding
prevailing in the minds of the average
newspaper readers in this country as
to the inevitability Of, and the good
intentions behind, these temporary
defaults Is what remains now to be
accomplished
Copyright, 1927