Part 14

As is to be supposed, the European countries having possessions in the West Indies and South or Central America, very naturally have banking facilities between these colonies and each mother country. In addition, prominent Canadian banks have successfully established branches in the largest of the British colonies for the purpose of building up direct trade with the Dominion of Canada, thereby eliminating the tribute London usually demands on exchange. Although we take much of the exports and sell these possessions most of their necessities, still the individual business done in each island or colony is relatively small and the field of operation too restricted to warrant other banking connections. Besides exchange on New York is cheaper here than elsewhere, owing to the fact that both Canadian and English banks maintain branches in that city. In the other colonies merchants, as a rule, have personal accounts in American banks in the States and are thereby enabled to handle their own transactions advantageously.

There are four monetary systems in use in Latin America: (1) the gold standard, wherein gold is the only legal tender, other forms of money being maintained at a parity with or without a government guarantee; (2) the gold exchange standard, wherein gold and other forms of money are legal tender, the conversion of the legal tender into gold being guaranteed by the government; (3) the silver standard, wherein silver is the legal tender, and (4) inconvertible paper, the value of which continually fluctuates and is dependent entirely upon the stability of the government’s credit.

The gold standard is used by Bolivia, Cuba, Costa Rica, Ecuador, Peru, Porto Rico, Santo Domingo, Uruguay, the British, French, Danish and Dutch West Indies and possessions.

The gold exchange standard is in use in Argentine, Brazil, Mexico, Nicaragua and Panama.

The silver standard is current in Salvador and Honduras.

Inconvertible paper is found in Chile, Colombia, Guatemala, Haiti and Paraguay.

The basis of exchange between countries depends primarily on the relation existing between the gold value of their respective moneys, the price paid being materially influenced by the condition of the balance of trade and the social or political state of the country. For example, with the balance of trade in favor of England, the price of exchange on that country would go up a fraction of a point or so, while if a country is in a state of political or economic unrest, or at war, the price of exchange on it goes much higher than if conditions were normal. For these reasons exchange in all countries varies daily, the price for the day being decided upon the receipt of European cables from the home institution. It will therefore be apparent that it is impossible to determine a fixed rate of exchange for any definite period. By buying when exchange is low and selling when it is high, much money can be made, especially if the sum involved is large. The United States did a gross business with Latin America in 1912 of $526,468,815, practically all of which was paid for by European exchange. Assuming that the commission charged was one-half of one per cent., the cost to the American merchant would be $2,632,344, which in itself is a strong argument for American banks in these lands.

Furthermore the home offices of all of these European banks having branches throughout Latin America, have had in mind the rendering of financial assistance to the home merchant or manufacturer. This was especially true of the German organizations, which were designed to foster and facilitate commercial relations of all kinds abroad. In the headquarters of these institutions, complete records and data are kept regarding all overseas merchants, their credits and the financial turnover of their business each year being known. As a consequence when the exporter presented his shipping documents at say Hamburg, the bank, should he so desire, knowing the rating of the importer, discounted the bill, and for the service rendered charged a commission, while the Latin American customer had the benefit of the time agreed upon for payment, according to the terms of the sale. Compare this perfect system of the banks extending courtesy to the exporters and the importers with the American policy of “cash against documents” and we see another vital reason why the Europeans succeeded in their conquest of these markets. The American manufacturer with small capital was handicapped. His business demanded a quick turnover; he had no way of ascertaining Latin American credits and no American banking connections to accept his export shipping documents at a discount. As a consequence, the door of this trade was closed to him and his productions.

Owing to the fact that gold coin is bulky and heavy to transport and paper money of a foreign nation always worth as a rule much less than its face value, a traveler is accustomed to carry what is known as a Letter of Credit. This is a document issued by a bank to a person or concern authorizing him or it to draw on the bank or its correspondents drafts for the whole or any desired part of the sum named in the Letter of Credit, by means of sight or time drafts. Customary means to prevent forgery of the holder’s signature are provided. On presenting this document to the bank’s foreign correspondent, the sum desired is advanced in the money of the country or in the monetary terms expressed in the Letter of Credit. These Letters of Credit are always time limited and are made against cash or some suitable guarantee to the bank issuing them.

In traveling in South America it is advisable to have two different Letters of Credit, one in Pounds Sterling and the other in Dollars. In Central America, Venezuela, Colombia, the British, Dutch and Danish West Indies it is often more advantageous to use dollars when buying exchange or getting cash on the Letter of Credit, while in Chile, Argentine, Brazil and Uruguay, pounds sterling are better. Before selling exchange on your Letter of Credit or realizing money on it, always visit the banks and see which one offers the best rate and whether English or American gold is in demand. By taking advantage of these conditions much money can be saved in the course of a long trip. The opening of American banks in Latin America will do much toward making the dollar popular and travelers are advised to take out letters of credit through United States banks with local branches in these lands.

It has been the understood custom for the correspondent banking house on whom a letter of credit was drawn to give the holder all information desired as to the rating and financial standing of local merchants and to aid him in every way possible. This was done in theory more than in practice. Assuming that your letter of credit was on an English bank in Buenos Aires, and that you were selling cotton goods, it would be most natural for the bank manager in Argentine to evade all direct information as to a possible customer’s standing, especially if his home institution had been discounting bills for a good client in England drawn against the local merchant. This is generally the attitude of bank managers in competitive lines and particularly when there is a tendency to cut into the trade of their customers. In this regard they can hardly be blamed for they are really protecting their patrons. If however, one is selling flour, or something which England cannot produce, the desired information is given fully and freely and every assistance rendered. Native or private bankers are not so reliable or as trustworthy sources of information.

In only two or three South American countries are there responsible commercial agencies; therefore, after getting what data you can from the bank it is always well to verify it by any other means at hand. Customers will often give references either in Europe or America as to their standing, which should be corroborated. Inasmuch as you desire information as to your clients’ credit and standing, you should be equally willing to establish the reputation of your house and to that end should assist as much as possible in supplying whatever facts in this connection may be wanted.

To illustrate the insufficiency of our knowledge regarding Latin American credits, let me cite a personal experience. At the beginning of the war in Europe, one of the largest daily papers in Buenos Aires was refused credit for less than $100.00 a week of cable news, because there was no really reliable means in New York of satisfying the manager of the foreign press agency that the paper was of the highest financial standing. A moratorium had been declared in the Argentine and Europe and at that time no direct banking connections existed with the United States. This condition of affairs only served to make the New York manager insist that the service be paid for weekly. He was absolutely unwilling to extend credit for even ninety days, provided the paper paid the cable tolls in Buenos Aires, which it had offered to do. The publication, its plant, equipment and the building it owns and occupies are easily worth $5,000,000. Furthermore it is eminently responsible and reputable. With all the manifold resources of a great, wealthy newspaper, it was absolutely impossible for it to remit money to the United States to get the war news so essential for its readers. Cables to Europe were cut, as the world knows, thereby preventing it from getting reports from this source. Its position was desperate. After finding that efforts to obtain the desired service from the press agency were useless and that no credit would be extended, the South American editor, in despair, cabled me, and I financed the paper for five months, paying weekly the bills incurred. With the opening of the National City Bank in Buenos Aires, remittance in full with interest was made for the money I had advanced, the draft sent me being one of the very first issued by that institution. This American news association had a great opportunity to establish a profitable connection in a country where a service of this kind is badly needed, for the favorable attitude of the press is of the greatest benefit in developing both business and friendly relations between nations. Instead of taking advantage of the situation, the position it assumed has positively hurt us as a nation.

One of the things to be met and overcome is the question of long credits. European merchants originally extended much time to reliable customers. Instances are on record of from twenty-four to thirty-six months being given. Goods were often shipped on consignment. The tendency of late, however, as business became established in these lands has been to curtail credits. This condition is one which demands delicate and diplomatic handling and very naturally will be materially controlled by circumstances. European banks were organized, as hereinbefore explained, to discount long time paper, provided the drawer and the drawee were considered good risks. The Federal Reserve Act, however, falls short of helping us in this regard for the life of a foreign negotiable draft is limited by it to ninety days.

Long credits are not to be encouraged. They were excusable in the age of the sailing ships and poor banking facilities, but with the quick transportation service of to-day are unwise and unnecessary. Under no conditions should more than six months time be allowed and that only for some special line dependent upon some future contingency, such for instance as crops—agricultural machinery being a good illustration. Staples and necessities require less time to dispose of and ninety days should be ample. If possible it might be wise to get the customer to agree to pay one-third of the invoice on receipt of shipping documents and the balance in sixty or ninety days. On overdue accounts, the Latin American merchant has always been accustomed to pay a good rate of interest.

XXVI PACKING AND SHIPPING

The method of packing goods intended for the export markets of Latin America is worthy of the greatest study and the most serious consideration. Poor and improper packing, so characteristic of American made goods, has caused us the loss of much business, and wherever I have been in these countries it has formed the subject of much unfavorable comment and highly warranted criticism. Of late there has been a slight tendency toward improvement in this really important branch of the foreign trade, but there is still much opportunity for bettering conditions in this regard.

In the United States with every forwarding facility, the largest, best and most complete transportation systems on earth, we are prone to think of the rest of the world as being similarly provided with modern methods for handling goods. The fact is that the burro, the llama, the camel, the elephant, the coolie and the Indian are yet the greatest common carriers, and it will be many, many years before the shrill whistle of the locomotive will supplant the jingling bells of the pack train, or the slow moving caravan, in the outer edges of terra firma. In Latin America to-day, in proportion to its size, there are comparatively few railways, and fully another century will elapse before it possesses half the amount of mileage that we have at present in the United States. This is primarily due to the scarcity of population and secondarily to the inaccessibility of many of its interior towns, built in early days in remote and secluded spots so as to be free from the frequent invasions of buccaneers, as were the coast cities, or for the purpose of being near some rich mine or fertile agricultural district. The narrow mountain trails that wend their circuitous and tiresome way along the gigantic buttresses which Nature has so profusely placed throughout this part of the world are the only routes to these inland cities. As a rule they are hardly wide enough for two mules or pack animals to pass, except at certain localities. On one side they are bounded by the walls of snow-tipped mountains, which raise their majestic heads into the clouds, while on the other yawning abysses, hundreds, sometimes thousands of feet deep, open their gaping mouths, along the bottom of which winding watercourses wend their way to the sea.

Many of the ports of Latin America are open roadsteads, such for instance as Mollendo, Peru, one of the gateways to the interior of that country and Bolivia as well. At certain seasons of the year it is almost impossible for one to land and I have known of vessels to wait as long as six weeks before getting their cargoes discharged into the rolling, tossing lighters which continually thump and smash against the side of the ship. After the lighters are loaded, they in turn have to wait days, weeks and often months before a favorable opportunity arrives for getting their contents ashore. Without being conversant with these conditions one can hardly realize the strain and pressure exerted upon packing cases at such times.

After the goods have been brought to land by the none too gentle longshoremen, they are opened by the customs authorities and examined, and are then placed upon trains for forwarding into the interior points, for practically all these ports are the terminus of some railway leading into the remote inland districts. When they have gone as far as the train can take them, they are then consigned to the tender mercies of the muleteer, aided and abetted by the llama, burro or mule, and may be weeks on the road to their final destination.

The varying climatic changes to which they are subjected should also be given due consideration. Leaving the ice-bound northern ports of the States in winter, they come through the storm tossed waters of either or both oceans to the port of disembarkation, where for days they may rest under the broiling tropical sun. As they follow their path to the interior, on train and by beast of burden, they pass through torrid heat and tropical rains, across wind swept plateaus, through sand and snow storms, sleet and hail, above the clouds in high altitudes, and down into green valleys, across swollen streams, and on again up the sides of steep canyons, and through gloomy woods. Each night they are unstrapped from the animals’ backs, and roughly thrown on the ground along the trail or in the filthy barnyard of some mountain hospice. Before the stars have stopped their twinkling in the early dawn they are again piled upon the backs of the unwilling, resisting beasts and the dreary, wearying, monotonous march resumed.

Custom has decreed the exact weight each burro, llama or mule will carry and let me add that these animals know to a nicety their load, and are life members of a union that prohibits its initiates from carrying more than is expected of them. Attempts to overload bring forth growls, groans and moans, and if these signals of protestation are overlooked by the attendants, the animal flatly refuses to budge, until the burden is made the standard union size, a condition of affairs that must be extremely satisfactory to the cause of labor.

The merchant living in the interior is always specific to state the exact dimensions of each box and how he wishes it strapped and packed, in accordance with the transportation which he will have available at the time the goods arrive. Obviously a llama or burro cannot carry as heavy a load as a mule, and the buyer, who generally owns his own pack animals, gives his instructions in accordance with the nature and size of the animals which will form his caravan. Extraordinarily heavy cases may be carried suspended from poles between two mules.

Follow these shipping instructions to the letter. The man who makes them out knows all about the difficulties that are to be overcome and is familiar with every inch of the road that must be traveled. Do not let the superior judgment of your shipping clerk alter one word of these requirements. Near Durango, in Mexico, there lie practically all the parts of a large plant, not made according to the instructions given the man who took the order. In the draughting room of the shops which constructed the machinery, they could not understand why the fly wheel of the engine should be made in so many sections adapted to be bolted together, and so they constructed it as if intended for shipment to Buffalo, and not so that a mule might carry each component part on his back. The entire order was executed in the same manner. As a result the equipment they turned out is gradually resolving itself into iron oxide, at the railway station nearest to the mine it was designed for, while the people who purchased it are filled with contempt for American methods and the American machinery company that received the business has long since vowed never to accept another Latin American commission.

If the packing instructions read:—“Each case to be made of half-inch pine boards, strapped with iron bands, half an inch wide around each end, and wrapped first in waterproof paper, then sewn in burlap, and NOT TO WEIGH more than 40 kilos (about 100 pounds)”—do exactly this and NOTHING more.

The iron bands and the heavy wood of the packing case insure protection against breakage during its ocean and railway voyage. The waterproof paper will serve to keep the contents of the case from rain and snow storms, to say nothing of preventing the spray of the ocean while it is in the lighter, from damaging its contents. The burlap sewed over all is a visible defense against theft en route, either by the customs authorities or by the pack train men. The weight of 40 kilos means that it may be strapped to the side of a burro, and form one of two such packages to be carried by him. Furthermore the wood of the case being half an inch wide, means that when the box reaches its destination, it can be sold to the coffin maker for conversion into a baby’s casket, because wood of this nature is scarce in many of these lands. The metal strips will find another use and the waterproof paper and burlap covering will serve some particular purpose, perhaps be sold to the upholsterer.

Your shipping instructions will also tell you exactly what signs or marks to put upon the outside of the case or its covering. Observe this with precision. The net and gross weights must also be marked thereon in a legible manner. Be sure that in weighing and marking the case you use the metric system for this is the only one used through all of Latin America. They know nothing of pounds and ounces. It is a wise plan to have your shipping clerk familiarize himself with this method, so as to avoid mistakes in marking, which may cause the importer much trouble at the custom house when the goods arrive.

Never place anything of a foreign nature in a packing case unless expressly instructed to do so by the shipper. Many exporters often take advantage of a small space available in a box to enclose a package of cards or some other advertising material. In most Latin American countries it is against the law for a case to contain anything more than what the bill of lading or the consular invoice expressly states, and the trouble that ensues from this desire to really help the purchaser can never be understood by those so far away from the native customs official who seizes every opportunity to extort money from the local dealer in the shape of fines and fees.

The merchant in ordering will generally definitely state just how he wants the goods which you are shipping him declared, so as to properly conform to the classification in vogue in the local custom house and its tariff regulations. Here it again behooves you to follow his instructions word for word, otherwise the officious custom house employe sees another chance to levy a fine and the unfortunate importer becomes correspondingly disgusted with your methods of doing business with him.

Finally, the packages should agree in number, weights, markings, declarations and contents with the consular invoice and the bill of lading. This will help materially all along the line from the receiving clerk of the steamship company to the merchant who accepts the consignment at its destination.