Evening star., 1933-12-27
BONDHOLDERS SEEK
FOREIGN TRADE CAIN
Revival of Commerce Is Seen
as Hope for Collecting on
DefauIted Bonds.
BY the Associated Press.

the Associated Press.
The question of reviving international
trade in a world now committed to
nationalism stalks the newly-formed
Foreign Bondholders' Protective Coun-
Gil
The council hopes to help American
investors start collecting on about 81
100000, 900 of defaulted securities issued
abroad and fioated in this country.
Although excessive debt alone would
have caused some defaults, shrinking
world commerce is blamed for the bulk
of them. The attendant decline in
prices deprived Latin American coun-
tries of revenue from raw material
exports, and mounting tariff barriers
left these as we'll as some of the more
Self-contained European nations unable
to obtain foreign exchange for debt
remittance
The committees ammunition largely
will be economic diplomacy coupled
with whatever assistance the Federal
Government may see fit to give in its
attempts to dispose of domestic sur
pluses and stimulate American industry.
European Defaults Smaller.
OF the two chief groups in default
European and Latin American-the
former Is smaller.
The superiority of these issues
chiefly German, Austrian and Hun
garian-in the minds of investors is
indicated by their relatively high quo
tations on the exchanges. BY far the
largest debtor is Germany.
In these countries debt service in
terms of domestic currencies is being
deposited in banks to a large extent.
prohibited or restricted by exchange
regulations.
Thus under the terms of the German
transfer moratorium arrangements
have been made for one-half the 1888
interest on bonds held abroad to be
paid in cash and one-half in scrip
representing domestic credits in Ger
many the value of which depends on
the use to which the payee can put
such credits.
Although much of the money lent to
German states and municipalities went
for projects which have not been indus
triallv productive there has been no
representation that the debts are too
heavy to be borne. But, in the minds
of financial observers. there is little
hope for full resumption of debt serv-
ice until Germany is able to sell more
of her goods abroad through lowering
Of tariffs or by reciprocal agreements.
Little Industrial Development.
The exchange problem also is present
in the case of the Latin American de-
faults. which constitute two-thirdS Of
the total, but the situation there is
complicated by the fact that the wealth
of these countries lies almost entirely in
raw materials and agricultural prod
= ,.foJ oil
ment outside that devoted to the ex-
traction and refining of minerals for
export and the processing of agricul-
tural products.
Probably the most disappointing
South American default was that Of
Chile, whose former debt record was
excellent. When it's neighborS were de-
faulting in other periods of depres-
sion. Chile paid up and kept clean
book.
But the export of nitrates, which
has been the countrys chief source OF
income for half century, has prac-
Chile said, frankly, that creditor ma
tionS need not hope to get payment on
their loans until they again began buy
ing Chilean nitrate and other products.
Similarly there is little hope Of Bo-
livia reSlming her debt service until
the world price of tin rises, and re-
sumption of Peru's American-held OBJ
legations must await revival of mar
kets for her copper, lead, petroleum,
cotton and other products. The same
situation exists in varying degree in
every defaulting South American coun-
try,
1t has been said that in many cases
the American loans, especially to some
of the smaller Latin countries, were
not carefully spent and were closely
involved with politics. This feeling
within the debtor countries has served
to dampen ardor for resuming pay
ments.
Argentina Pays Interest.
Argentina has maintained interest
payments in spite of great difficulties.
Payment on some Brazilian debts has
been deposited in domestic currency
within the country and interest on
others is being paid in funding bonds,
with a large part of the Obligations
in complete default.
Default is far from new in South
America, and in past periods the hnaI
outcome generally has been a scaling
down of debt, sometimes to small
bart of the original figure. If def1n1-
Sive settlements we're urged by bond
holders now, it is obvious they would
have TO write of large part OF their
Investment.
The new council prefers to go slowly
IN such moves, in the hope that world
trade recovery eventually will make bet
ter terms possible to bondholders. Bar
ring tremendous American initiation, it
Is generally agreed that heavy write
offs eventually will be necessary at best