THE supreme importance of European trade with the South American continent in the era prior to 1914 is nowhere better exemplified than in the economic and financial history of the Argentine Republic. Based on the stony pillars of racial kinship and cumulative financial investment, the relations between Argentina and the Old World seemed immovable. Thus when the Centennial Exhibition, held in Buenos Aires in 1910 as an epitome of the progress of the Republic, demonstrated the advance that had been made, it also served to bring into high relief the strength, variety, and intrinsic importance of Argentina's European connections.

To quote statistics of that epoch would but stress the financial and commercial side of the relationship; it would not, obviously, illustrate the relative importance of the intellectual and ethnic connections, or the means whereby they were maintained and fostered. These important factors of contact were not overlooked. The French and German medical schools, and to a lesser extent those of Italy and Spain, sent professors to lecture in Buenos Aires on their several specialties, while their commercial chemists saw to it that the latest serums and therapeutic material in general kept abreast of the professional propaganda when shipments to Argentina were concerned. French art and literature served, and still serve, to aid French exports in numerous ways. Italian and Spanish contributions to the intellectual life of Argentina were chiefly associated with the theatre, drama, comedy, and opera; leading companies made regular visits to Argentina and year by year earned important sums which were equivalent to a considerable addition to Italian and Spanish national exports. Indeed Germany, feeling that opportunities were being lost, also started a concerted effort to lead Argentine taste to a due appreciation of her drama and her music. Thus, between 1910 and the outbreak of war, full companies sang Wagner in Buenos Aires, German light comedy and operetta were presented with considerable success, and the first regular symphonic concerts were staged under German direction. Part and parcel though this may have been of the purely artistic evolution of Argentina, it nevertheless had a close affinity with the course of trade.

No reference is made to either Britain or the United States in this connection, for the good and sufficient reason that the former was wholly wrapped up in her commercial and financial undertakings, while the latter had but an insignificant share of Argentine business and was even less in touch with Argentina's spiritual and intellectual values than was Britain.

Argentina grew fast during the decade prior to the outbreak of war, nor was that growth confined to material progress. Intellectual activity among the younger men and women was marked, and with this stirring of the mind there set in an almost universal thirst for novelty, coupled with a spirit of inquiry wholly foreign to the customs, and even to the ideals, of the older generation. This is a point to be kept carefully in mind if one would fathom the basic causes which have brought about the present altered conditions in Argentine life, as reflected in its commercial affairs. For the awakening is not of today; it had its genesis in the period between 1905 and 1914. And although actual development was perforce checked until 1920 -- for the postwar demands of Europe had first to be met, both from its own and from American sources of supply -- consciously or unconsciously Argentina was already preparing for a change. The old criollo philosophy of a race whose wealth derived principally from flocks and herds has been rapidly displaced by a more modern appreciation of life and opportunity as understood in the western sense. Romantically regrettable maybe; but one cannot shut one's eyes to the fact that the pause occasioned by the European war has enabled Argentina at one and the same time to increase her wealth and to prepare a settled policy of internal expansion which is now being carried into effect.

How far Argentina's suppliers in Europe have realized the magnitude of the change in the Argentine outlook is not easy to guess. That the majority of the countries having connections with the Republic do now grasp the essentials of the new position is doubtless true. But they have been over-long in admitting that the somewhat shiftless, easy-going, well-to-do customer of pre-war days, conservative in his tastes and preferring to give a "repeat" order rather than go to the trouble of examining a fresh proposition, has disappeared from the map. So ingrained was this belief in the Argentine buyer's inevitable acceptance of whatever goods were offered to him, that the comparatively small amount of export trade which the United States transacted with Argentina prior to 1924 bore the stamp of European methods; this, incidentally, explains many of the difficulties and losses experienced by American traders, even under apparently favorable war-time conditions. It is not generally realized, even in American circles, that the United States paid her footing pretty smartly when first she sought to enter the Argentine market on a large scale. Many lines of goods that found general favor at home either fell flat in Buenos Aires or proved so much in need of special adaptation to local requirements as to make their sale too slow a proposition to be sought after by American export houses. Nevertheless, with European exports to South America reduced to a trickle of goods from a few neutral countries, Argentina took whatever the United States chose to send, and, if not exactly thankful, made the best of a bad job, consoling herself with the thought that when once the war was over trade would return to its old channels.

Meanwhile, however, a succession of Budget deficits, arising out of a sharp reduction in the import dues which provide 75 percent of Argentina's national revenue, led to the gradual piling up of an unusually heavy floating debt. Borrowing abroad was not possible, at least as far as could then be seen; and yet there were sundry public works in hand that had to be carried on, chief among them being important extensions in the State Railways. These lines, though unlikely to earn interest on their capital for a considerable period, will eventually be of primary importance to the Republic. They have already done much to open up northern Argentina; and the southern and western sections, tapping the valuable territories that lie about the foothills of the Andine chain, will render profitable the establishment of sheep and cattle ranches in those areas, at the same time opening up the country for colonization. Materials, locomotives and rolling stock were wanted, and urgently. But the State Railway Department was heavily in debt; worse still, some doubt was entertained as to the position of its creditors vis-à-vis the national government, much of the outlay incurred to date not having had due Congressional sanction. To go into detail would call for an exposition of the Argentine political situation when President Irigoyen first assumed office in 1916, a subject scarcely germane to the purpose of this article. Suffice it to say that it was at this critical juncture that American financial and commercial interests joined forces to try and find the means of supplying the needed locomotives and cars. It was a sound commercial proposition, colored neither by political nor philanthropic considerations. The State Railways obtained their rolling stock on fair terms, the American manufacturers were able to discount their bills, and the national government of Argentina officially stood behind the whole transaction, principal and interest, on the understanding that extension of the date of payment would be granted if necessary. It was an eminently common-sense piece of business, and it was transacted on terms literally impossible for any European manufacturers (who, moreover, were grumbling bitterly at the State Railway Department for its delay in settling old debts, and declaring that it was but one step removed from bankruptcy). The debts already mentioned, and the Budget deficits, had combined to give reasonable excuse to European exporters and financiers for their inability to supply Argentina with those capital funds of which she must stand in need for many a year to come. No funds for foreign investment were to be had in the European markets during the early years of the reconstruction period; but that also was a fallacious conception in Europe of what was necessary to stimulate the post-war export trade. Methods varied, but one and all erred, as far as Argentina was concerned, in failing to realize the change in the Argentine outlook. Then, too, there was a general belief that inasmuch as the Republic had made great profits during the war years her people could and would give spot cash for their purchases. Coincidently, Italy, France, Germany and Britain became obsessed with the notion that Argentina offered an ideal market for profitably disposing of old war material, whence sprang the invasion of a new style of drummer, usually with a military title before his name and a string of letters after it.

Interesting stories could be told of these "business" efforts, conducted for the most part on very unbusinesslike lines, but the main thing to be understood is that, by and large, they "cut no ice" in present-day Argentina. Britain and Germany soon realized this fact; the Latin countries, however, kept on feeling that old wares could readily be exchanged for fresh Argentine produce if only the sympathetic strings of racial affinity were sufficiently loudly thrummed. True, certain orders for armaments went to France and to Italy, but meanwhile Argentina was taking the bulk of her general import trade elsewhere. Collectively considered, her chief desire was for plant and material fitted to her immediate needs. Price was important, though not perhaps as important as some trade rivals sought to make it appear. The chief consideration was the immediate adaptability of materials to Argentine needs and conditions. Agriculture and transport in the first place, administrative machinery and facilities for communication in the second, provided an almost unlimited field for those in a position to supply exactly what was sought; and here the United States (and in a much lesser degree Canada) stood alone.

The universal call throughout the Republic for improved transport is responsible for the fact that Argentina is today America's best customer for both automobiles and motor trucks. One need not go into detail, since the story has been told so often, but it is literally true that mark after mark of European passenger car has been launched in Argentina only to prove a miserable failure. Yet in 1913, when the automobile was but a rich man's toy, to be used only in Buenos Aires and a few other centres having paved thoroughfares, France supplied 36.8 percent of the $5,000,000 worth of cars then imported, the United States coming second with 19.3 percent and Germany third with 16.3 percent. The United Kingdom was classed with "Other Countries," no detailed percentage being available. For 1927, United States exports of all classes of automotive vehicles to Argentina totalled 58,745 units; Italy took second place with 927; France was third with 796; and Britain fourth with 758, chiefly trucks. And with the extension of Argentina's roads -- there is today, exclusive of city streets, a mile of road per 61 square miles of area -- no reason exists why imports of automobiles should not double within fifteen years. Less spectacular, but equally valuable, has been the growth in Argentina's purchases of American agricultural plant -- purchases arising from the fact that nothing quite as adaptable and as efficient can be had elsewhere, save for the products of one Canadian firm. Europe simply does not supply the goods needed; and efforts now being made there to turn out a power-driven reaper-binder-thresher adapted to the Argentine market have not been successful. The following portrays the magnitude of this business:

Argentine Imports in 1926 Bought from U. S. A.
Ploughs 53,076 units 49,159
Headers 4,266 " 3,538
Harvester threshers 5,033 " 4,021
Agricultural tractors 2,676 " 2,657
Spare parts, agricultural machinery 7,365,853 kilos 5,704,114

In all these items the United States already held the lead in 1913, but the percentage was much smaller. Due to altered statistical systems, direct comparison is difficult; but, roughly speaking, 60 percent was supplied by the United States, 30 percent came from Britain, and the balance from Germany. Somewhat similar is the situation as regards trade in office furniture, typewriters, sewing machines, and electrically driven household appliances, including refrigerators and radio sets. In the older lines America has increased her percentage of sales chiefly owing to the up-to-date improvements to be found in her goods, e. g. office furniture, typewriters, and sewing machines. As concerns later inventions, films included, she has practically had the field to herself and has made the most of her opportunities. Thus for 1927 the estimated actual value of Argentine imports from the United States stands first, with $217,816,076 Argentine gold dollars; Britain comes second with $166,459,525; and Germany is third with $96,988,994. In the year 1913 Britain held first place with $130,886,587; Germany was second with $71,311,628; and the United States was third with $62,032,853. Roughly speaking, France, Italy, Belgium, and Spain are today more or less where they were in trade with Argentina when the war began, and all European countries, save Britain, suffer to some extent from the fact that their consumption of Argentine products is relatively small, besides being hampered in certain instances by tariff restrictions. There have been efforts to make capital out of this tariff question, and the slogan "buy from those who buy from us," was for a short time regarded as likely to be of benefit to British trade with Argentina. But the best Argentine financial and commercial opinion has recognized the fallacy which this slogan has in common with slogans in general. Argentina has no marked preferences for individual nationalities; she certainly has decidedly marked preferences when it comes to buying the goods she needs.

Past custom and a long record of fair dealing stand English houses in good stead, and when a deal with a British firm can be arranged on terms that appear advantageous to Argentina it would perhaps be correct to talk of preference. It is, however, doubtful whether this is of more than sentimental importance; it most certainly has not stood in the way of wholesale acceptance of American financial proposals, or, on the other hand, of the absorption by far-sighted American capitalists of sundry interests once regarded by Argentines as exclusively British, alike in their financial constitution and their general administration. Thanks chiefly to the large Germano-Argentine section of the commercial community, coupled with the active efforts made by German manufacturers and merchant houses to re-knit trade connections broken during the war, the commercial reputation of Germany today stands high in Argentina, though it is generally felt, and said, that Germany, wishful though she may be to deliver the goods, cannot trade as she did in 1914.

America both can and does deliver the goods in all those lines which she has by now made so peculiarly her own; furthermore, she helps Argentina to employ such goods to her own profit. The valuable if indirect propaganda that moving picture films exercise is too well known to call for detailed reference here. Even more important is the direct selling force that develops from the various systems of "service," introduced and gradually adapted to local needs by American importers in Argentina. Automobile and agricultural spare parts and skilled mechanical aid are at the end of a wire throughout the Republic. Whether one may couple with such "service" the widespread introduction of instalment selling, and of subsidiary finance houses devoted to mobilizing the paper thus created, is as yet rather a moot point. It must be tested by adversity before a verdict can be hazarded; as it stands, it has widened the market for American goods to a considerable degree.

A conditional answer must also be given to the question that so obviously arises: Will American trade be able to retain its pride of place in the Argentine market? Much hangs upon the extent to which Europe achieves mental as well as physical rehabilitation. And here one inclines to the view expressed by Professor Clive Day in FOREIGN AFFAIRS [i] two years ago, namely that Europe in general appears to be too old to win back the ground lost. His conclusion has a direct bearing on the subject we are discussing, since Argentina's youthful vigor finds a national complement in the energy and invention of a great nation of somewhat the same age -- a nation, moreover, which broadly speaking is politically similar, and which is strengthened for commercial competition by the fact that it has met and solved successfully many of the selfsame difficulties with which Argentina herself is striving today.

[i] "War Shocks to European Commerce," FOREIGN AFFAIRS, July 1927.

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  • H. HALLAM HIPWELL, correspondent in Argentina for the London Economist and other journals, head of the Commercial and Intelligence Department of the Bank of London and South America.
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