Part 18

In explanation of these measures it is necessary to state that the pressure of the war expenditure going on since April, 1865, had led, under the previous Cabinet of Senhor Zacharias, to the creation of a large floating debt, represented by Treasury Bonds, issued for various short periods. There is always in Rio de Janeiro a large amount of loanable capital seeking interest on temporary investment, which it had found previously to the crisis of 1864 in the deposits of private bankers' establishments. This loanable capital deprived of such resource after the crisis of that year found better and safe temporary shelter in Treasury Bonds. And obtaining money in this way to carry on the war, the preceding Cabinet was able to avoid new permanent operations for supplying the means for its necessities. The wants of the Government so supplied, however, deprived commerce of part of its legitimate supplies of money and made the situation of the Treasury precarious and hazardous. The extent, too, of temporary resources of this kind had obviously reached their limit. It was, therefore, partly to extinguish a large amount of this floating debt, and so to relieve the Treasury from any embarrassment that might arise from failure in the renewal of Treasury Bonds when at maturity, and partly to provide for the exigencies of the war, that the Government in September, 1868, resorted to the internal loan of 30,000 contos, £3,335,000, issued at ninety percent., in bonds bearing six per cent. interest payable in gold, redeemable in thirty-three years by purchase when under par, and drawing when at or above par, in which last case payment to be made in gold. This loan was so favourably received that applications for it were received in Rio only to the extent of 105,000 contos, and it quickly rose to a premium of seven per cent.

Again, then, complete success has attended the financial policy of Viscount Itaborahy, and the Treasury has been provided with the means of discharging a large amount of floating debt and of prosecuting the war.

In spite of the provisions adopted by the legislation, and of the concurrent necessary activity of Brazilian commerce, the exchanges in London after the crisis of 1864, though high in reference to the over issue of inconvertible paper, had fallen, and in February, 1868, declined, as if in panic, to 14d. This fall was partly due to the remittances to England of bills for purchasing gold and honouring the Government commitments on this side, and still more to the large orders from the Plate for operations in exchange, and purchases of bullion here caused by the financial crisis of Monte Video.

This decline in the rate of exchange on London was, however, brief. Thanks principally to the financial measures just described, and to the improving prospects of the war, the rate has again risen, and is still rising.

Such, in necessarily brief and rough outlines, is the history of the circulating medium of the Brazilian Empire.

Everything, it will be seen, conduces to the conviction that with the close of the war and expenditure there will be a certainty of maintaining the standard of 1846, so solemnly reproduced in the laws of 1853, 1860, and 1867, and in the internal loan of 1868, and that the foreign exchange will once more rise, in the interests of commerce and of all domestic industries to above the legal level so fixed in 1846. When this has been accomplished it will be recognised, and be due to an intelligent and prudent administration of the finances, to the prodigious development of the external commerce and to the inexhaustible resources of the great American monarchy.[8]

Footnote 8:

In the preparation of this chapter we are indebted to several important and valuable Brazilian works—“Systema Financial do Brazil,” by Conselheiro C. B. de Oliveira; the Report on the Circulating Medium of the Empire, made in 1859-60, by a Commission presided over by Conselheiro Almeida Areas, now Brazilian Minister in London; the Report on the Crisis of 1864, by a Commission presided over by the late Conselheiro Silva Ferraz (Baron de Uruguayana); the _Relatorios_, from 1865 downwards, of the Ministers of Finance, and the Annals of the Senate and Chamber of Deputies for the same period.

ARGENTINE FINANCES.

A notice of this extensive and rising country would be incomplete without some allusion to its financial condition, and in order to illustrate this more clearly I must revert to the year 1824, when the first loan of a million sterling was raised in London, to assist the young republic in meeting the expenses incurred during the War of Independence. That the money thus obtained was more or less squandered, and did not find its way into legitimate channels, is probable enough; nevertheless the liability was always admitted by the existing Governments, although interest had ceased to be paid on the loan for upwards of twenty years and the original stock was almost worthless.

At the period I allude to the revenue and resources of the country were small, and during the reign of Rozas they were entirely under his private direction, and the national means spent according to his will. In fact, what is now known as the Argentine Republic had no existence until after the downfall of Rozas in 1852, Buenos Ayres up to that period exercising sovereign control. A heavy internal debt, represented by paper money, had also generally reduced the value of the dollar (originally worth about four shillings) to two pence, and there appeared little chance of the English bondholders ever obtaining again the money lent in 1824, through the agency of Messrs. Baring Brothers and Co.

But on the downfall of Rozas, a new era dawned upon the republic. Many illustrious citizens, who had been obliged to expatriate themselves in order to save their lives, returned to Buenos Ayres, and the principles of constitutional government were again infused into the body politic, subject, however, to many vicissitudes, which, for a time, retarded internal progress, and prevented the real resources of the country from being profitably utilised. So soon as these difficulties were overcome the question of its indebtedness forced itself upon the Executive and Legislative powers, who wisely decided that their first great financial effort should be to come to some understanding with their English creditors.

At the same time a movement was set on foot by the bondholders themselves, and a Committee was formed in London, under the auspices of Messrs. Baring Brothers and Co., comprising some of the largest bondholders. Negotiations were entered into with the Buenos Ayres Government, who evinced every disposition to meet the matter fairly; and eventually, in the year 1857, an arrangement was come to by which the original debt in full, with its accumulated interest, was consolidated, and interest agreed to be paid thereon; and this arrangement has been most faithfully adhered to up to the present hour. The decree in which this honourable recognition of a great principle is contained is dated the 12th December, 1857, and is signed by the Governor Filipe Llavallol and Norberto de la Riestra the then Minister of Finance. I insert a copy of the document itself:—

MINISTRY OF FINANCE.

Buenos Ayres, Nov. 20th, 1857.

The Government of the State of Buenos Ayres, in virtue of the authorisation conferred upon it by the law of the 28th of October last, has made the following arrangement with Mr. George E. White, representative of Messrs. Baring Brothers and Co., agents of the loan contracted in London in 1824 for settlement of the said debt, viz.:—

Art. 1st.—To meet the payment of the interest upon the original bonds the Government of Buenos Ayres engages to remit to the Loan in London in

1857 the sum of £36,000 1858 48,000 1859 60,000

And from and after 1860, inclusive, besides the above-mentioned sum of £60,000, it will also remit annually the sum of £5,000 as a redemption fund. This sum, together with the interest of the shares redeemed, or that may be redeemed, shall be employed, one half each six months, in the purchase or redemption of the new bonds of this class till the whole of them have been redeemed. The funds corresponding to the stipulated remittances shall be placed in London, one half before the 30th of June, and the other half before the 31st of December in each year.

Art. 2nd.—The sums appropriated to the redemption shall be employed by the agents of the London Loan in the purchase of bonds in the market at the current price so long as that is less than par; but should the price of the bonds exceed par, the funds to be redeemed by the redemption fund shall be determined by lot, in presence of the principal agent or representative of the State of Buenos Ayres existing in London.

The bonds drawn by lot shall be published in the _Gazette_, or two of the London journals, stating the day on which payment will be made at par, and from which date they will cease to bear interest.

The bonds purchased or redeemed by the redemption fund, with their corresponding future dividends of interest, shall be cancelled in presence of the principal agent or representative of the State of Buenos Ayres in London, and immediately deposited in the Bank of England, publishing their numbers in the _Gazette_, or in two of the principal London journals.

Art. 3rd.—The holders of the original bonds shall receive a new list of debentures for their future dividends, with a copy annexed to it of the two preceding articles, beginning with the debenture for the dividend that falls due on the 12th of January, 1861.

Art. 4th.—For the interest due upon the original bonds up to this date, and for those that fall due to the end of 1858, amounting to the sum of £1,641,000, the Government of Buenos Ayres shall emit new bonds to bear interest at the following rates, viz:—

Art. 5th.—From 1861 to 1865 inclusive, one per cent. per annum. From 1866 to 1870 inclusive, two per cent., and from and after 1871, three per cent. The first half-yearly dividend upon these new bonds shall fall due on the 12th July, 1871, and subsequently on the 12th January and 12th July of each year, on which days the half-yearly instalments or dividends due shall be paid in London. All the guarantees accorded to the original bonds shall be extensive to these new bonds.

Art. 6th.—The Government of Buenos Ayres engages to remit to the agents of the loan in London the funds necessary for meeting the payment of the interest assigned to these new bonds, and moreover, from and after 1871, the sum of £8,205, or, say the 200th part of the total amount of the said bonds, as a redemption fund for them. This sum together with the interest of the bonds that have been redeemed shall be employed in equal proportion every six months in the purchase or redemption of these new bonds, till the whole of them have been redeemed. Accordingly the sums that must be remitted to meet the interest and redemption fund shall be as follows, viz., from 1861 to 1865 inclusive, £24,615, annually; from 1866 to 1870 inclusive, £41,025; and from and after 1871, the sum of £47,435; the Government engaging to place these funds in London, one-half before the 30th June, and the other half before the 31st December of each year. The Government reserves to itself the right of employing in the redemption of these new bonds, over and above the sum stipulated, any further sums the Legislature may appropriate to this purpose.

Art. 7th.—The sums applicable to the redemption fund, as also the others that may be destined to this purpose, shall be employed by the agents of the loan in London, to the purchase of these new bonds in the market, at the current price, always that this is less than par; but in case the price of these bonds should come to exceed par, the bonds that are to be redeemed shall be determined by lot, and those that are drawn by lot, as also those purchased in the market shall be published in the journals, paid and cancelled on the respective debentures in the manner and form established in the second Article in respect to the six per cent. bonds.

Art. 8th.—The new bonds shall be denominated Three Per Cent. Buenos Ayrean Bonds, shall be signed in the name of the State, by the Minister of Finance in Buenos Ayres, and shall be emitted through the medium of Messrs. Baring Brothers and Co., of London, by whom they shall be countersigned.

Art. 9th.—The payments stipulated in the present convention are specially assigned upon the products of the rents of the public lands of the State, excepting those belonging to the Municipalities, and in case of deficiency this shall be made up from the general rents of the State, or from the special resources created by the Legislature for the purpose.

The conduct of Buenos Ayres statesmen in respect to the obligations referred to was fully appreciated in this country, and the bonds gradually rose up to par value, holding even during the great monetary crisis a good position; nor must it be lost sight of that, although the original debt was incurred for the benefit of the entire Confederation, yet the Province of Buenos Ayres alone took upon itself the sole responsibility; and, up to the present confederation with the other Argentine provinces, always paid the interest out of its provincial resources.

Subsequent to the settlement of the English debt, what is known as the National Government was formed, and the internal debt of the entire provinces has been consolidated into a national stock, bearing interest at 6 per cent., which is punctually paid, and the stock, from being worth 30 to 40 a few years back, has latterly risen to 55, subject, of course, to fluctuations generally caused by speculation on the Bolsa of Buenos Ayres, where, for a long period, gambling in paper money was the chief business, until a wise measure of Governor Alsina, in establishing an Exchange Office, and fixing a paper value for gold, put a stop to this element of financial and social disturbance.

As already mentioned, there is a provincial revenue and a national revenue, as well as expenditure; that of Buenos Ayres being the most important, from its great commercial wealth. Until recently, the only bonds known here were those of Buenos Ayres. Now we have what are called Argentine bonds, lately issued on the security of the National Government; and in order to show the nature of this latter security, as well as the progressive state of the national revenue, I cannot do better than quote the following figures, issued by their able representative Minister, his Excellency Don Norberto de la Riestra, in a circular dated 1st June last, at the time he was negotiating this important transaction:—

In 1864 the General National Revenue $7,005,328 or £1,401,065 amounted to

In 1865 it reached 8,295,071 or 1,659,014

In 1866 9,568,554 or 1,913,711

In 1867 the yield is estimated at 2,600,000

it having produced in the first eight months of the year $8,981,430.

The Revenue estimates for 1868 amount to 2,647,200

as follows:—

Ordinary Import Duties $7,650,000

Ordinary Export Duties 2,070,000

Storage Dues 350,000

Stamps 160,000

Post Office and Miscellaneous 206,000

———————————

$10,436,000

Additional Customs' Duties 2,800,000

———————————

$13,236,000 or £2,647,200

The Budget of ordinary expenditure for 1868 £1,581,649 amounts to

as follows:—

Ministry of the Interior $ 901,079 Ministry of Foreign Affairs 99,538 Ministry of Finance 729,491 Ministry of Justice, &c. 487,940 Ministry of War and Marine 3,116,593 Service of Public Debt 2,573,626 —————————— $7,908,267 or £1,581,649.

The surplus revenue over ordinary expenditure is applied to defray the extraordinary war expenses.

The above revenue is distinct and independent of the private revenues, both State and Municipal, of the different Provinces of the Republic, which are raised for local purposes.

The Public Debt of the Republic at this time is as follows:—

EXTERNAL.—Old Buenos Ayres Debt (London Loan of 1824) now in charge of the nation, say:—

Original Six per Cent. Stock £ 905,800 Deferred Three per Cent. do. 1,110,900 Argentine Six per Cent. Loan of 1866 540,000 —————————— Total £2,556,700

INTERNAL.—

Consolidated Six per Cent. Argentine Stock $12,839,535 or £2,567,907

Buenos Ayres Public Stock (in paper 596,988 currency)

Paraná Debt 1858, including Interest 433,309

Obligations to Foreign Creditors 18,852

Loan from Brazilian Government 1851 228,541

Loan from Brazilian Government 1865-66 400,000

——————————

Total £4,245,597

There is besides a floating debt in Treasury Bills to a moderate amount, which is being rapidly cancelled.

I think this statement, combined with the facts I have elsewhere given from personal experience and observation, as to the rapidly extending commerce of the Argentine Confederation, will fully bear out the favourable impression that is now gaining ground in England, and in Europe generally, as to the _bona fide_ security presented by Argentine bonds; and I must say that, looking back to the conscientious course pursued by the Government, no country in the world deserves more to enjoy the confidence of British capitalists.

It will be seen from Senor Riestra's statement that the only foreign debt of the Argentine Republic is that due to English bondholders. Her internal debt is due chiefly to her own citizens, who are safe to be paid both principal and interest; nor has any act of repudiation, or compromise ever stained the character of the Argentine people. The pursuance of this praiseworthy conduct has been followed by the investment of British capital in promoting railways and other industrial enterprises. Indeed, look around in whatever direction we may, it is difficult to find a more pleasing illustration of the maxim, that “honesty is the best policy,” than that exhibited by the Argentine Republic.

TOWN AND HARBOUR OF SANTOS.

Before recording the details of my passage home I wish to say a few words more with regard to the rising port of Santos, a notice of which has been accidentally omitted in a former part of my work. Its connection with the San Paulo Railway and the fact of its being the shipping port of the province renders Santos of much future importance. The distance from Rio de Janeiro is about 200 miles, and the navigation is simple enough—in fact, in sight of land the whole way, the sea coast ridge of mountains being conspicuous. The only danger is from the Alcatrazes rocks, which lie some distance to the eastward of Santos, and very ugly customers they are, towering a considerable height above the sea. Steamers can, however, have no difficulty in avoiding them after getting hold of the island of San Sebastian, from the point of which the Santos light becomes visible, and can be seen at a distance of 20 miles, but coasting craft require to keep a good lookout at night. The light is placed on an island of some elevation, covered with trees to the summit, and it has a very picturesque appearance. Rounding a bluff point, you enter at once what appears to be a river channel, though it is an estuary, for Santos is really an island. The passage is winding and the land on each side is covered with shrubby vegetation, the distance up four miles, with deep water for vessels of 1,000 tons. There are some scattered houses on the beach, chiefly used by sea-bathing residents, and on one side is an antiquated looking fort, supposed at one time to have guarded the entrance of the estuary—a specimen of early Portuguese defences; and on the island of Santos are the remains of the old town of San Vincente, the first founded on this part of the coast. The anchorage opposite the town is convenient and well protected; several wharves extend out where vessels lie alongside to discharge and load cargo, and at the Custom House there is an iron pontoon used for the same purpose. At this wharf the steamer I came down in (1,000 tons burden) received a full cargo and sailed within three days, a feat without parallel in any other port in Brazil.

There is some pretty scenery around Santos—on the coast side a range of hills, and opposite to the town, across the estuary, rise the bold mountain ranges covered with verdure. It is a pleasant ride round the base of the hills on the seaside until you come to the town of San Vincente. The railway is laid along a swampy marsh, running parallel and close to the old San Paulo road until it crosses the bridge of Cubitao, which connects the island and the main land. The town itself is long and straggling, containing from 8,000 to 10,000 inhabitants, with some fine warehouses or stores for storing coffee, cotton, or other country produce previous to shipment. At the extremity of the town is the railway station, a commodious building, having wharves, alongside of which vessels can come, and opposite to the station is what looks like a palace, with two wings and a centre, the outside almost entirely lined with ornamental blue Lisbon tiles, and the whole bearing an appearance quite out of keeping with the general features of the place. It is the costly hobby of an old Portuguese merchant, and intended for his own residence, but it progresses very slowly towards completion. The streets are paved with roughish stones, not easy for a novice to walk on, but a great improvement on the sandy element which formerly characterised primitive Brazilian streets. The class of buildings is generally solid, and there are some good, well stocked shops. There is also a theatre on a very diminutive scale, where I went to see an amusing amateur performance, but the heat was stifling; nevertheless, it was quite full, and some well dressed and sprightly young ladies formed part of the audience, and did not appear to be very much troubled by the not very aromatic flavour of the atmosphere. It was a relief to get into the fresh air for a few minutes between the acts.

Santos is not to be judged by its present status, but by what the railway must make it; and a few years will produce a very great change, further accelerated by the introduction of gas, water, and drainage, which are here much needed, as well as in the City of San Paulo. There is a specialty about the old Brazilian towns that one cannot help being struck with, and they present a striking contrast when railway innovation comes to disturb the slumbrous habits of the people. As a seaport and a rising town Santos is deserving of this additional notice, and, I may observe, its close proximity to the sea renders it exceedingly healthy.

MR. PERKINS ON EMIGRATION.