Evening star., 1939-11-05
Latin American Loans Wisdom
Challenged by Record as Debtor
Uncle Sam, Anxious to Be Good Neighbor,
May Discard Business Caution for
Another ExDOrt Bubble
By Herbert NJ. Bratfer.

I Uruguayan meat-and that certainly
would help our automotive exporters
regain trade. President Roosevelt has
quite accurately stated that Argentine
corned beef is both cheaper and Of a
better grade than the home product.
But, somehow, Western Senators do not
agree with him. and Argentine beef re-
mains effectively embargoed.
Government Urged to Lend.
Latin America would be glad enough
take them on credit. If Wall Street, for
example, would again resume lending
money to Latin American governments
there would be dollar exchange to pay
for more American exports of goods.
But Wall Street, although it is rolling In
excess reserves, can no longer find
enough private American bond investors
to make such loans possible on q large
scale. Because the private investor is
twice shy, the Government is being urged
to step in. Since Latin America likes
and desires our goods, why can't we use
some of our surplus billions of gold to
finance expansion of trade with that
! area?" people are asking.
The obvious point is that what Latin
America wants is our goods, not our gold.
If we made loans in gold, the gold would
| find its way back to us, for the purchase
| Of American goods. What the question
really boils down to is, why don't we
again lend money to Latin America?
If new loans to Latin America are to
be considered as business propositions
| and not as instruments of international
politics, we cannot afford to ignore the
existing debts The President is reported
to have described as disappointing" the
results of private efforts to secure pay
ment on defaulted Latin American bonds
| held here. Doubtless the bondholders
also are disappointed. The record Is in
| deed sad one, and it raises very serious
| doubt whether loans to many Latin
American countries could be classified as
business" propositions at all.
s2,50O, 100000 Invested.
Latin America is deep in our debt.
Between 1914 and 1929 about $2,5O0, ,OOO,-
coo net of American capital was invested
in Latin America. During the course of
the depression most of the bonds went
| into default. One after another, Latin
| American countries failed to meet the
interest or sinking fund payments. Al
though sometimes, by negotiation, the
interest rate was lowered, back coupons
were Cancelled, or other compositions
were made. at the end of 1898 here is
what the records showed:
The default record of most Latin
American bonds is worse than those of
any other geographical area in the
world.
Almost exactly half of our private
investments in European bonds were in
default as to interest payments. In the
West Indies IA per cent were in default.
In Japan none were in this category.
But in the case of South American
bonds as group (and there are excep-
tions) $40 out of every 500 was in ar
rears in 1898, and in the case of Central
American dollar bonds, $91.50 out of
every 500.
American insurance companies, uni
versities, businessmen and widows who
bought MISUNDERSTANDING Latin
American bonds in the 1920s are sadder
but wiser today.
The average market value Of all for
eign dollar bonds last December was
$685. per $1,000 bond. Canadian issues
were selling above par. Asiatic issues
were quoted at 10 on the average. Eu-
ropean dollar bonds could be had at 50
cents on the dollar.
But investments in Central American
dollar bonds had shrunk by over so
per cent to $397 per $1,000 bond, while
South America issues averaged only $2s2
on the Stock Exchange.
Reason for Hesitancy.
Even this does not tell the whole
story Of some sorry investments. While
South American issues not In default
were selling at $685. per $1,000 bond, on
the average, those issues in default aver
aged only $l3l per $1,000 of face value.
No wonder the private businessman and
banker hesitates to incur Latin American
risks.
Apart from Canada, no geographic
area has received as much private Amer
ican investment capital as South Amer.
lea. The principal amount Of South
American dollar bonds held here $685..
100000 IS larger than those Of all our
European bonds combined. Including
branch factories and the like, our in
vestments In South America total 81
549, 900 900; in Mexico and Central Amer
lea, $665 y000, 900, and in the West Indies,
$685., 900 900, according to the Commerce
Department. These $4,051 ,0000, 900 Of in
vestments in Latin America-37 per cent
Of our total investment abroad-are
equivalent to $31 for every man, woman
and child in this country. Brazil alone
has borrowed more money In Wall Street
than any country but Canada and Ger
many. And Brazil's debt is all in default,
despite the loan our Government made
earlier this year.
II the proceeds Of al the goods Latin
America sold here In 1888 had been ap-
\
!"