The future of South America

Preface

Owing to the many exceedingly useful books on Latin America already published, I hesitate somewhat in preparing another. Most if not all of the books now issued, however, are written either for the traveler or the historian, without special appeal to commercial and industrial interests. In view of this I have, during the past few years, been systematically collecting information regarding Latin America which should be of service to those looking at this continent from a money-making, rather than from an historical, point of view.

Although I have personally visited most of the countries of South America, I do not pose as a traveler. My visits have been short, on strictly business missions, and some of the cities about which I have written pages I have been in but a short time. Therefore I do not attempt to compete with the seasoned traveler nor the man who has spent many years in these southern republics.

On the other hand, experience with statistics has taught me that often the man who sees countries at a distance, one in comparison with another, gets a truer perspective than one who has spent his life in a given spot. Hence, I believe that this book will be of great service to men who are looking for real opportunities and who are comparing in their own minds Latin-

vii viii PREFACE

American opportunities with those in other parts of the world. I have tried to be neither pessimistic nor optimistic regarding these countries to the south of us, but to tell in a simple and frank manner what statistics show the future of these countries is to be, for, after all, it is the future in which we are interested, and not the present or the past.

In conclusion, I wish to express my deep appreciation to the presidents and other officials of these various countries who were so kind to me, to the ambassadors and ministers, representing both our own country and South America, and especially to Mr. John Barrett and our commercial attaches and consuls. Certainly we all owe a great debt of gratitude to these men who represent us in strange and distant lands. May we do more for them and may we show our appreciation in more substantial ways than this.

R. W. B.

Contents

Chapter Page

Preface vii

I. The Problem of South America . 1

Chapter I

However much one may read about a continent or even a single country, it is impossible to get the whole story. The all-important atmosphere of a place can be obtained and understood only by a personal visit, and even then only after careful study. For some years I have been methodically studying South America, and have now reached definite conclusions about its possibilities and some of the difficulties which present themselves in establishing trade relations with the people of Latin America.

We show great ignorance in speaking of South America as a unit. It is too large and varied to refer to in any such term. Even one country — Brazil — is larger than the United States, and its coast line would stretch from Boston to Liverpool. Yet there are ten different nations in South America — not counting the Guianas.

The various parts of the country present distinct problems and possibilities. The table-lands of the north, which include Venezuela and Colombia, are beautiful, but their utilization is a matter of the future. Their good lands are inaccessible, and until means of travel are developed, it will not be practicable for us or our children to use these lands and raise cattle, coffee, and the like. Excepting for a few cities, the prospects of trade in the north are slight and may be forgotten for the moment.

The west coast, including Ecuador, Peru, and northern Chile, is rich in minerals and nitrates, but the agricultural possibilities depend upon irrigation. Considering the vast unused areas in other districts which do not need irrigation, it is obvious that this stretch of country must wait. Hence, with the exception of Lima, Antofagasta, and two or three other cities, the west coast, north of Valparaiso, may now be ignored for sales opportunities. This is especially true so long as the present sanitary and political conditions exist.

Valparaiso and Santiago are good cities. Valparaiso, next to San Francisco, is the largest western port on the Pacific Ocean. Although a breakwater is under construction, the harbor is now only an open roadstead, and ships must go out to sea when certain storms arise. Moreover, the city is built on the side of a mountain, which together with the prospects of earthquakes makes building rather unattractive. Santiago, situated less than one hundred miles inland, is an especially pleasing city. These two places combined offer a good market for our goods.

The south of Chile is a fine country — fertile, rich in timber, and with some coal. There are also good rivers suitable for both irrigation and water power. But with all these advantages combined, there is not a great total. The valley is less than one hundred miles wide, and the southernmost part is fit only for sheep raising.

The east coast of South America is another story. Every inch of it is fertile, and its vastness surpasses comprehension. A large part of the east coast is low and humid; the south is too wet and the north is too hot. There are insects of all sizes and varieties, and snakes of known and unknown kinds. The natives vary from the high-grade Argentine scholar to the naked, savage Brazilian Indian. However, with all these difficulties, I am a great believer in the east coast of South America, not only for our children and grandchildren, but for the present generation. The section from Bahia Blanca, Argentina, to Rio de Janeiro, Brazil (fifteen hundred miles), extending about four hundred miles westward, is a gold mine. It is a tract as large as all of our country east of the Mississippi, and is worthy of careful study.

This area includes the best part of Argentina, the whole of Uruguay, most of Paraguay, and the southern part of Brazil. Argentina is the wonder of America. Its farms are beyond description, its cities are the most active imaginable. It should become a great customer for our goods. Uruguay is a small country, but very much alive. Paraguay is rich in timber and cattle lands, and as it is inhabited only by Indians, the lands are very, very cheap. These countries to-day have little manufacturing to speak of, and as for years to come they will be great exporters of grain, cattle, and their by-products, they will also be great importers of manufactured goods. Every live United States manufacturer should have branches in this section, for it is on the verge of a great awakening.

In this section I also include southern Brazil, which is my favorite land of all, so far as climate goes. Here is a section eight hundred miles long and four hundred miles wide, situated on a high plateau. It is healthy, cool, and compares favorably with any section of any land. It is the southern California of South America. Sao Paulo is its capital and is also the center of the manufacturing industry of South America, with textile mills, shoe factories, and other plants. It is now a city of about four hundred thousand people and will soon have one million inhabitants.

The only safe way to invest money or to sell goods in South America is to arrange to have some person in whom you have confidence go there and live. There is nothing in flying trips and long-distance control. If the people of the United States hope to do anything permanent in South America, they must adopt the German apprentice system, under which the best young men go to foreign fields for periods of ten or more years, often marrying native women and sometimes settling down there for life. Our hasty methods have already made us looked down upon as "fourflushers and bluffers." We ought either to stop talking about South America, or send our young men down there to stay and solve the problems seriously, as do the young men of Germany and England.

Concerning the great resources of South America, I am fully convinced. Concerning the great opportunities there, I have no doubts. The only question which troubles me is whether or not we — a democratic people with a democratic form of government — can develop a successful foreign trade under present conditions, when force rules the world. The English have developed great foreign trade at the point of their guns. The Germans have developed great foreign trade through subsidies and trusts. The whole foreign trade game — as played to-day — is contrary to the fundamental principles of democracy. Considering that our government will probably become more rather than less democratic, and that the power of the masses will gradually become greater, while the influence of capital may consequently become less, what is the outlook for our foreign trade and investments? England and Germany have adopted " dollar diplomacy" accompanied by the "big stick." Will we? I think not.

There are two things which we must absolutely have to develop foreign trade with Latin America: protection for our investments abroad so that we can safely extend credits and start banks, and freedom from dependence on foreign ships, cables, and means of exchange.

There are, however, other problems connected with South America which one cannot understand fully until one has been there.

Until really studying the situation and the country for a long time, I had not realized the importance of the Spanish language to citizens of the United States. Practically all of our island possessions have come from Spain; our neighbors talk Spanish or English; and yet our schools are content to teach French and German. Spanish is to be a great world language, and it should be placed on a par, at least, in our schools with other languages, to prepare our children for the great Latin- American development which is sure to come.

What a great impetus it would give to industry in the United States if all labor organizations would realize that increased trade must come before increased wages can be maintained! Permanently to raise wages there must be an increased demand for labor, more mills must be built, and more men employed. Thus the most fundamental work which labor organizations can do to bring about their ends is to further every plan for extending United States trade and selling United States goods throughout the world. For this reason the working people should favor the teaching of Spanish in our schools, the study of markets and products, and should indorse all appropriations for extending foreign trade. Our education is very provincial. The average boy leaving our public schools knows no language except English; he has not had a lesson in economics, while his knowledge of industrial history is nil.

I had always understood that care must be exercised when dealing in the money of South American countries, but until having actual experience, I had never realized how the currency of the different nations varies, and how much the currency of certain countries has depreciated. These facts were first really brought home to me in Peru. I had been taught that a sol, the name of the Peruvian dollar, is exactly one tenth of an English pound. Ten soles should, therefore, make a pound sterling, approximately $4.86 in gold. When, after considerable difficulty, I cashed an express check, I was considerably surprised at receiving twelve soles, while some of my companions did even better and received more.

In Bolivia, where the boliviano, as the Bolivian dollar is known, is supposed to be one twelfth of an English pound, one receives over sixteen bolivianos for a United States five-dollar gold piece. In Chile conditions are even worse. I received sixty-four dollars of Chilean paper for a ten-dollar gold piece.

The following table shows the relations of the money of ten South American nations :

Approximate

Approximate

Country

Name of dollar theoretical value value in United in United States

States gold in money

Bolivia ....

Boliviano

$0.41

.19

.18

Colombia .

Peso

.01

.009

Ecuador .

Sucre

.48

.45

Peru . . .

Sol

.48

.44

Chile . . .

Peso (paper)

.15-.20

Peso (paper)

.43

.42-.44

Brazil . .

Milreis

.54

.28-32

Paraguay .

Peso

.09

.06

Uruguay .

Peso

1.03

1.00

Theoretical; .22 is the better figure.

Panama and Cuba use United States money; Jamaica and the other English islands use English currency.

It will be seen that all these leading South American nations have entirely different monetary systems. Some, like Argentina, secure their systems by gold; others, like Peru, base theirs on silver; while still others, like Chile, simply issue paper currency when the government needs money and redeem this currency when the government has a surplus. In other words, the Chilean notes are simply non-interest-bearing bonds having uncertain security.

The money of these different countries should be standardized. The monetary systems of all the Latin- American countries should be on a gold basis, and the dollars of all countries should be on the same scale,

This does not mean that these different countries should have the same currency or be obliged to accept the currency of another country. I only say that their moneys should be based upon gold, and their dollars should be interchangeable or multiples.

Not only are the monetary systems of these countries at sixes and sevens, but most of them are directly or indirectly based upon the English pound sterling. Argentine five-dollar gold pieces are interchangeable with English sovereigns. In short, it is difficult to-day to find anything which the systems have in common, but the English pound is the nearest common denominator. So long as this state of affairs continues, it is discouraging to talk about " dollar exchange.' ' The dollar of every country has a different value and none of them bears any fixed relation to our own dollar. Not only this, but the banks, controlled by the English and Germans, make their chief profit from buying and selling exchange. To substitute " dollar exchange" for sterling exchange might close up one half the banks in South America. I do not mean to suggest that "dollar exchange" is not possible and ideal. It is both, and such exchange is already in existence. I do say, however, that other things are now needed more and that "dollar exchange" will not become practicable until there are more United States banks in South America.

Like every unsophisticated North American, I had supposed that revolutions were at an end in South America. The bankers in New York and the diplomats at Washington have been assuring us for years that political conditions in South America are all settled, and that no more revolutions will occur. That is also what they told us about Mexico. My trips to South America have taught me that the days of revolutions are not over. I had also been fooled by the South American use of the term "Republic." Many of these South American countries are controlled in a way which I do not care to describe. The elections are a farce in many instances, and the best men are usually outright dictators. In fact, with their present methods of elections, I fail to see how a change in administration can be brought about there except through a revolution. Up to the present time, these revolutions have not been harmful to foreign interests, but the foreigners think they are compelled to pay graft to live.

In conclusion, I want to add that the people of the United States are not getting the truth about Latin America. Only the good news is sent out. Still I am not bearish on Latin America; I believe that it offers great opportunities to manufacturers, merchants, and investors of the United States, but I do want my readers to proceed with their eyes open.

CHAPTER II Cuba

The first surprise one always gets when entering the harbor of Havana (or Habana, as the Cubans spell it) is the architecture of the island. We are apt to think of Cuba as new territory and of Havana, Santiago, and Matanzas as ''coming cities." When we go to Spain, we expect to see low stone houses, with red-tiled roofs and pink or blue walls. We do not, however, think of seeing a quaint Spanish city within three days' sail from New York.

"How strange and picturesque everything looks!" remarked one of a group of American business men, as we steamed into the beautiful harbor of Havana and passed the famous Morro Castle. "We did not expect to see such old Spanish architecture down here. Why, one would think we were entering the old port of Cadiz, Spain, or passing along the coast of Italy!"

Yes, this group of American millionaires, owners of great mills in the United States — men who are the heads of great corporations — had never before realized that Cuba is almost as old as Spain itself! In fact, Cuba is simply "Little Spain," while Havana and the other Cuban cities are as truly Spanish as are the ancient towns of the old world, about which Columbus wandered when a boy.

I repeat these remarks because they illustrate better

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CUBA 11

than anything why the United States does not do more business in Cuba. The truth is that the American people do not know Cuba. The American business man and the manufacturers don't know Cuba. Turn to the average book about the island, and you will find little to show that Cuba is a quaint old land with queer, set customs. No, our manufacturers and business men think of Cuba as a "new possession/' a new island which has just come up from the bottom of the sea, or as a territory like Oklahoma which has recently been opened for settlement. When we learn to treat the Spanish business men of Cuba with the respect and consideration to which they are entitled by history and position, then our trade relations will change for the better.

And the trade of Cuba is worth getting, for it is the most important country of Central America or the West Indies, the largest inhabited island in the Western Hemisphere, and has a history dating back to the time of Columbus. It is nearer to the United States than any southern country except Mexico, and probably has a more stable government. The average person does not realize that the island is over seven hundred and fifty miles long, with a population of fifty-four to the square mile, as compared with five to the square mile in the average South American country. Certainly most business men do not realize that the trade of Cuba per capita is greater than that of any other country in North and South America except the Argentine Republic. In a recent year, the commerce per inhabitant for Argentina was $108; for Cuba, $100; Canada, $^7; Chile, $65; United States, $33; Brazil, $23; and Mexico, $17,

Cuba was discovered by Columbus in 1492, and its occupation by the Spaniards was practically continuous until 1898. The one exception was in 1762, when Havana was taken by the English and held for a few months. It cost the American colonies of Great Britain sixteen million dollars, and thirty thousand lives, to acquire Cuba at that time, but in the next year it was exchanged for Florida. The Spaniards found an Indian population of about a million, but the natives soon perished, and negro slaves were imported to take their places in the working of mines and plantations.

In 1848 President Polk authorized the American minister to Spain to offer one hundred million dollars for the island, but this offer was refused. The revolution of 1868 in Spain afforded an opportunity for an outbreak in Cuba, and a civil war developed which lasted until 1878. This was the "Ten Years' War" which ravaged the whole island and was terminated by a treaty — "The Peace of Sanjon."

Important reforms promised by Spain were never carried out, so another revolution was organized in 1895, and conditions became so bad that the United States intervened. The campaign which ensued was short; the Spaniards were vanquished, and the island turned over to the Cubans under the protection of the United States Government. In 1902 the new Cuban Republic was placed in absolute control, and since then, with the exception of 1907, when the United States felt called upon to intervene, the Cubans have enjoyed their own government.

The failure of our business men to grasp the geographical and historical significance of Cuba is one

CUBA 13

reason why the Cubans do not trade with us, but there is another : the tradesmen of Cuba dislike us. ' One of the leading merchants of Havana told me frankly that he would buy from English and German manufacturers rather than from those in the United States, prices being equal.

This aroused my curiosity, and the next day I went back to see him, and after talking of general matters (one should not be so rude with a Latin-American as to start right in by talking business) I asked, "Why is it that the people of Cuba do not love us?"

"That question is asked me by almost every man whom I meet from your country," he said. "Because you sent a few soldiers over here and helped us whip the Spaniards when we already had them about whipped, is not all of the story. You must remember that we had been fighting them for nearly fifty years, and that we feel that it was rather revenge for the blowing up of the Maine that brought you into the war than any love for us. However, we'll be generous and give you the benefit of the doubt. But how about your tariff legislation?

"You have harmed us more with your iniquitous tariff legislation than you helped us with your glorious Spanish War. For two centuries the people of this island devoted their strength and capital to developing the sugar industry. The nations of the world owe all they know about sugar to this little island. The life of our trade, the value of our land, the employment of our people, and the prosperity of all of us were founded upon the sugar industry. Moreover, in spite of all our troubles and abuses under Spanish rule, we had built up a great industry, and our people were fairly well off and contented. The very fact that we were able to fight the Spanish as we did was evidence of our prosperity.

"Our success became the envy of some people in your country. Some of these men were honest plantation owners in Mississippi, Louisiana, and other southern States; others were land speculators and promoters in Utah and your western States. They were determined to control the sugar industry.

"We hold nothing against your people for such ambitions. You had every right to develop sugar plantations and compete with us in your markets, but you should not have used an unjust tariff to accomplish such a result. You should have fought a fair fight, relying upon your brains, capital, soil, and industry as your weapons. You were already on the ground, and this gave you an advantage at the start. Why should not your people have been satisfied with these advantages without attempting to resort to unjust tariffs? But no, you were in too great a hurry. You were not content to grow slowly and fairly. You wished to become great producers of sugar at once, even although it ruined us. Do you call that brotherly love?

"And ruin us you did. For a long time after the enactment of this law, we suffered tremendously. In fact, we have never recovered. When the European War broke out in 1914, sugar was very low, and the industry greatly depressed. Great plantations which represent years of labor are still lying idle — all because of your selfishness and hurry in endeavoring to create a sugar industry too quickly.

"If you had been content with limiting your imports of sugar to their former figures and had even created

CUBA 15

legislation so that the increased consumption would have gone to your own planters, we would not have complained. But you not only demanded the benefit of your increased growth, but also stole from us by unjust means the industry which we had so laboriously developed."

I have quoted my Cuban friend at length because his remarks bring out a fundamental fact which is at the bottom of all our foreign trade relations. Before the United States can get the good will of Cuba and the rest of the islands in the West Indies, we must revise, not so much the tariff, as our tariff principles. We must recognize that although we have the right to encourage home industries, we have no right to ruin the industries of other nations. I am not pleading for free trade. So long as other nations erect tariff walls, perhaps we must do the same. But should we erect tariffs against nations which have not tariffs against us? I am not pleading even for general tariff reductions. Where foreign nations have built up industries with our present tariffs in existence, there may be no reason why we should lower them. But after a foreign nation has created an industry with the understanding that our tariff is to be a certain amount, should we increase it without the consent of some international representative commission?

It was with the same thought in mind that a member of the Cuban Congress once said to me :

"What kind of hypocrites have you in the United States that pray on Sunday for world peace and then on Monday talk about capturing the trade of other nations and the need of higher tariffs?"

But to return to the geography of Cuba, which one should know before an accurate idea of the trade conditions can be gained. Cuba is really a great garden lying ninety miles east of Key West, Florida. The island is seven hundred and eighty miles long and varies in width from twenty to a hundred miles. It has two thousand miles of coast line and a total area of about forty-five thousand square miles. With the exception of the northern part of Maine, which to-day is practically uninhabited, Cuba is as large as the whole of New England put together. The State of Massachusetts has about one fifth the area of Cuba; Vermont and New Hampshire about one fourth, while Rhode Island has only about one twentieth of Cuba's area. Before one visits Cuba, he has little impression of the size of the island. I had not realized that it takes twenty-four hours by train or forty-eight hours by steamer to go from Havana to Santiago on the other side of Cuba. The island is somewhat mountainous, for all the West Indies are simply the tops of a high range of subterranean mountains projecting above the surface of the sea. About one fifth of Cuba is mountainous and some of the ranges are much higher than one would expect, for in the Sierra Maestra range there is one peak eighty-three hundred feet above sea level. Of the rest of the country, three fifths is made up of fertile plains, with scattering hills and valleys, and about one fifth is swampy.

Cuba is sometimes called the " Island of a Hundred Harbors/' and certainly she is greatly blessed with harbors, which, by the way, are very scarce on the coast of South America. More than fifty harbors are ports of entry, many of them deep and pouch shaped, with narrow entrances completely landlocked. The

CUBA 17

entrance to the harbor of Santiago is the most remarkable I have ever seen. The city is absolutely invisible from the sea, being approached only through a long, tortuous channel, six miles in length, the sea opening being only six hundred feet wide. Certainly the chief cities of Cuba have been determined by the harbors, of which that of Havana is the best. The entrance is only one thousand feet wide. Good harbors make good cities, hence as one travels along the coast of Cuba and sees a fine harbor, he may be sure that some day a large city will develop there, even though only a few negro huts are to be found now.

There are already several important cities. Havana, of course, is the best known, and is located on the northwest coast; Santiago de Cuba is located at the southeast; Cienfuegos, an important market place, is on the southern coast, and Antilla, a new made-to-order town like Gary, Indiana, is on the northeastern coast. The chief interior cities are Camaguey, Santa Clara, and Matanzas.

Another geographical feature of Cuba which impressed me is the large number of rivers and streams. It is true that most of the rivers are small, but they are, nevertheless, of tremendous value. A prominent banker of Havana assured me that these rivers number two hundred and fifty, the largest ones being El Canto and the Sagua la Grande. Otherwise water is scarce, for although the total rainfall is heavy, yet it comes all at once, and thus far no storage facilities exist.

In going to a new country, particularly in the tropics, the climate must be given careful consideration. Winter in Cuba is like our April and May; and summer like our July and August — only hotter. However, it is always possible to get into a breeze. The heat is greatly tempered by the wonderful trade winds which blow from the northeast with but little variation throughout the year. The nights, during both winter and summer, are cool. Unfortunately, however, the sections of the island which present the greatest opportunities for making money are also the most unhealthful. This applies especially to the coast line during the summer season. Yellow fever has been stamped out to a great extent, but malaria still rages. There have been some cases of plague in Havana, but a systematic campaign has been carried on against the rats which spread the infection, and the city is destined in time to be very healthful, if indeed it may not be called so already.