THE financial difficulties of the republics of Latin America during 1930 and 1931 were of especial interest to the people of the United States because of the large and growing American investment in that part of the world. According to a careful estimate by the United States Department of Commerce, the long-term investment of American capital in Latin America at the end of 1930 was slightly larger than the American investment in all of Europe. The estimated total for Latin America was about 5,350 million dollars; that for Europe was about 4,900 millions.[i]
While the amount of capital from the United States placed in Latin America exceeds by only a small margin the amount placed in Europe, there is a wide difference in the character of the respective investments. About two-thirds of the investment in Europe is in the form of securities. Barely one-third of the investment in Latin America is of that type; the rest is a direct investment in properties. Not only do securities form a small part of the total Latin American investment, but most of them have either been issued directly by the governments or are supported by a government guarantee. According to the Department of Commerce, 98 percent of the Latin American bonds held by investors in the United States are of this description, and only 2 percent have been issued solely on the credit of private corporations. On the other hand, 20 percent of the European securities offered for public subscription in the United States have been issued by private corporations without any government guarantee.
The flotation of Latin American securities on a large scale in the United States began in 1921 and reached its climax in 1926. There was a slight decrease in 1927 and 1928 and a sharp decline in 1929, when the boom in the American stock market destroyed the appetite of American investors for foreign bonds. In 1930 there was a temporary revival of interest in the bond market in New York, and a number of new foreign issues were floated. The total amount of [ii]