The collapse of the Argentine economy and the bankruptcy of the national government in 1890 climaxed a long period of borrowing. For several years Argentina had been forced to meet the service charge on its foreign debt (payable only in gold) by raising new gold loans abroad. When these loans suddenly ceased in 1889, it was only a matter of time before the central and provincial governments became insolvent.
In the period between 1881 and 1885 private and public interests in Argentina borrowed approximately 150,000,000 pesos from abroad. More than two-thirds of this amount was owed by the central government. The total annual interest on the foreign debt surpassed 8,800,000 pesos gold.1 In the next five years the national government borrowed more than 200,000,000 pesos without any appreciable rise in its own revenues or reduction of the existing debt. The problems involved in such operations were complicated by the constantly fluctuating gold premium on the Buenos Aires Exchange.2
Argentina was basically a rich country with a potential which warranted a program of heavy foreign investment for development.3 Almost all the loans which the government had contracted were necessary for the economic expansion of the country, but unfortunately they carried a fixed charge, payable immediately in gold. Most of the foreign capital went into railroad construction and various land improvements. The ultimate effect of these investments was a considerable increase in the exportable produce of the country; but it took a long time for these benefits to manifest themselves, and meanwhile the increase in the volume and value of exports failed to keep pace with the increase in the interest charges on the foreign debt.
As long as gold loans continued to flow into Argentina, the federal and provincial governments could supply the gold or foreign currency for the service of these debts and maintain import consumption at the same time. But if these loans ceased to be made, the gold received in Argentina as a result of the sale of these exportables would not be enough to cover the interest rates. Any adjustment was bound to take the form of a drop in imports, a suspension of the debt service or both. It seems clear that in the long run the expansion of exports made possible by railroad construction and newly opened lands in the southern pampas would have enabled the Argentine government to meet these interest charges—provided that the world prices of Argentina’s principal exports remained constant.4 It was essential, of course, that the flow of gold towards Argentina should not cease abruptly before the country could reap the benefits of these investments.
While the gold premium rose, so did paper prices. The resulting temptation to authorize new issues of paper money was too much for President Miguel Juárez Celman to resist. Even before the influx of gold began to dwindle, he had shown no inclination to maintain a hard currency in Argentina. In 1887, when the gold premium was at a low of thirty-five, he had extended for two years the suspension of specie payments, originally enacted to meet the temporary crisis of 1885. The amount of unsupported and inconvertible paper money in circulation rose from 94,000,000 pesos in 1887 to 245,000,000 by 1890, and the gold premium stood at 186 when Juárez resigned.5
Another factor increasing the instability of the financial structure was the speculative trade in a peculiar type of Argentine land mortgage known as a cédula. Landowners desiring loans on their property applied to one of the mortgage banks and assumed the obligation to repay the loans by means of annual payments including interest and amortization. The banks did not make the loans in cash; instead, they gave the borrower a negotiable bond or cédula, which the borrower then sold for cash on the market. These cédulas bore coupons which the buyer turned over at intervals to the issuing bank, which was required to pay him interest (usually seven to eight percent in paper currency), even if the original landowner had not kept up his annual payments to the bank. Interest was always payable to the bearer of the coupons, no matter how often the cédula changed hands. The price at which a cédula circulated had nothing to do with the actual value of the mortgaged land as compared with the original loan or even with the repayment of the loan, but depended solely on public confidence in the ability of the issuing bank to maintain payments on the coupons.
The Argentine economic collapse carried down with it the European banking firm most closely associated with the nation’s development. This was the English house of Baring Brothers, which had handled over 100,000,000 gold pesos worth of Argentine securities between 1882 and 1890 alone. It was the ill-fated “Buenos Aires Water Supply and Drainage Loan” of 25,000,000 pesos which ruined this old, respected firm and plunged the Argentine government into insolvency. The Drainage Loan had been underwritten for 21,000,000 pesos to be paid to the Argentine government in three installments of 7,000,000 pesos each (about 1,500,000 pounds). The loan proved a complete failure, for British investors were beginning to look with suspicion on Argentine financial ventures. Eventually, on the verge of bankrupty, Baring Brothers asked the Argentine government to be released from its obligation to remit the third installment. By then a revolution had occurred in Buenos Aires; President Juárez Celman had been forced to resign; and his vice president, Carlos Pellegrini, a financier and strong nationalist, had undertaken to fill out the remaining two years of his term. Leaving the domestic problems of unrest and potential revolution to his capable Ministers of War and Interior, the new president turned his full attention to the financial position of the national government and the economic plight of the country.
Even after Pellegrini assumed the presidency in August 1890, the fortunes of the Republic continued to decline until the end of the year. Notwithstanding the price of gold, the enormous foreign debt, and the unfavorably balanced trade, Pellegrini and his Congress still underestimated the effects of financial and economic policies during the previous decade. “The Executive Power thinks,” said the president in his first message to Congress,6
The remaining regular session of the 1890 Congress, which adjourned in October, unfolded much as in any other year. The debates, particularly those dealing with financial affairs, suggested an atmosphere of severe depression like that of 1875, but hardly the impending catastrophe. On August 19 Pellegrini sent a message to Congress, accompanied by six administration bills. He proposed to emit 60,000,000 pesos in new treasury notes and transfer the bonds guaranteeing the paper currency of the national guaranteed banks under the provisions of the Banking Law of 1887.7 Two other bills created a committee to study carefully the debts of the municipality of Buenos Aires, in which there had been a great deal of fraud and corruption, and outlined steps for the establishment of an Office of Conversion. The remaining two bills proposed a time limit (ten years) within which the guaranteed banks would be required to convert their notes to specie and a new bond issue designed to raise 20,000,000 pesos for the national government.8
Pellegrini did not intend the new issue of 60,000,000 paper pesos for the government’s operating costs (a common practice in the past), but for loans to two major banks as a means of shoring up the Argentine banking system. 50,000,000 pesos were to be divided between the National Bank and the National Mortgage Bank, while the remaining 10,000,000 were to be turned over to the municipality of Buenos Aires.9 What he proposed was merely an emergency measure to save two of the country’s most important banks, hard hit by runs on their deposits. When the officers of these banks demanded further issues in 1891, Pellegrini turned a deaf ear to their pleas.
The two most important native banks in the Río de la Plata were the National Bank10 and the Bank of the Province of Buenos Aires. Both had exhausted their reserves early in 1889 and applied for help to the Juárez Celman government. The president had authorized the National Bank to issue 12,000,000 pesos in the bank’s currency, and the Bank of the Province had been allowed to do the same to the amount of 8,700,000 pesos. Both banks had been able to continue their operations. When the government of the province of Buenos Aires had sold the Western Railroad to private interests, 13,000,000 pesos in gold had been deposited in the Bank of the Province; and for a time it had assumed an air of prosperity. In fact, the Bank of the Province had been able to lend money to the National Bank after the latter had run through the 12,000,000 paper pesos authorized by the Juárez Celman government. At the end of 1890, then, the National Bank was once again drained of all reserves, as was the National Mortgage Bank, around which the fantastic trade in cédulas revolved, while the Bank of the Province was fairly solvent. The passage of Pellegrini’s measure calling for 60,000,000 pesos in new currency enabled both the national and mortgage banks to continue into 1891.11
The second measure that Pellegrini sent to Congress provided for the exchange, within Argentina or abroad, of the four and one-half percent gold bonds on which the emissions of the guaranteed banks had been based according to the Banking Law of 1887. These were to be converted into foreign bonds, sterling, marks, or francs. Any revenue raised in this way was to be turned over to the newly created Office of Conversion.12 The bill to establish the committee to investigate and liquidate the debt of the municipality of Buenos Aires passed easily,13 as did another terminating all concessions for railroad construction and other public works not yet formally sanctioned by law.14
In its long-range effects on Argentine monetary history the bill establishing the Office of Conversion was quite likely the most important of those which the administration proposed during the regular session of 1890. Its provisions illustrate Pellegrini’s unwarranted faith in the possibility of returning to a policy of convertible currency in the near future. The Caja de Conversión was to incorporate the National Office of the guaranteed banks and take over its functions. It was to be administered by a directory of five men appointed by the president and approved by the Senate. This directory was to supervise carefully the implementation of all laws regarding the emission, conversion, and amortization of paper money. The funds with which the Caja would be able to convert notes presented to it were to be drawn from the following: the metallic reserves which, according to the Banking Law of 1887, had been set aside as conversion funds; the gold owed to the government by the guaranteed banks for the gold bonds on which their currency was supposed to be based;15 and other amounts of specie to be raised later in one way or another.16 It is obvious now that these funds were either imaginary or projected; just how imaginary they were was not fully understood until the investigations of the National Bank and the Bank of the Province disclosed their insolvency and the hopeless confusion of their records.
The last banking bill which Pellegrini sent to Congress at this time represented an attempt to carry on the old practice of raising a new gold loan to meet the service charges on the existing foreign debt, thereby simultaneously increasing that debt. Pellegrini called for a bond issue of 20,000,000 pesos to be floated on the London market at five percent. According to this plan, none of the gold raised in this manner would be sent to Argentina, but would be deposited in London for the sole purpose of fulfilling Argentina’s obligations to foreign creditors for 1890 and 1891. Although the bill passed,17 the bond issue was doomed to failure. British investors wanted nothing to do with Argentine securities by this time, and those who possessed gold in Argentina preferred to exact an inflated price for it on the Exchange than to lend it to the government at five percent (even on the optimistic assumption that the government would be able to continue paying the interest on the bonds until they matured).18 Argentine economists and members of Congress criticized Pellegrini for his attempt to continue an old policy which had helped to bring about the situation in which Argentines found themselves. Many of these critics based their views on emotional and nationalistic issues and hoped that the president would repudiate the foreign debt or suspend payment on the interest at once, rather than wait till the treasury had been drained of the last centavo.19
The foundation of Pellegrini’s financial policy was his fanatical devotion to the credit rating of his country in the money markets of the world. Neither the willingness nor the ability of the nation to meet its foreign obligations was to be put in question. After the new 20,000,000-peso bond issue proved a failure, Baring Brothers went into bankruptcy, and this catastrophe brought about the complete collapse of the Argentine financial structure. Under these circumstances Pellegrini did not hesitate to put the reputation of Argentina in European financial circles above the solvency of his government. Years later, while debating in the Senate over the proposed consolidation of the foreign debt, he recalled those moments: “... in the midst of the first anguish of the treasury when we lacked even the resources with which to pay the administration, I sent the last peso to Europe to meet the coupon of October 1890 and January 1891.”20
Pellegrini’s desire to raise the national credit above suspicion found its most striking expression in his plan for the federal government to assume the foreign debts of the several provincial governments. According to the most careful study made, these amounted to over 140,000,000 pesos gold.21 Obviously such a measure was inspired by Pellegrini’s view of a unified nation, presided over by an efficient and powerful central government. Many provinces were fearful for their autonomy and postponed action on the administration’s bill, but eventually the nation did assume these foreign obligations. Pellegrini’s views on this point were clearly spelled out in a public message:22
Amongst these [obstacles to recovery] the most serious and pressing is the foreign indebtedness of the provinces, whose obligations on interest and sinking funds are beginning to give rise to well-founded anxiety. Although, strictly speaking, the national executive cannot be taxed with any kind of responsibility for loans of a purely local character, it is politic, for the sake of Argentine credit, which has been steadily upheld, that the National government take over the responsibility of these local obligations rather than allow a pretext for unjustifiable outcry and complaints though they have no legal rights to rest on.
Once again, we shall give to the world this solemn proof of our good faith, even in favor of creditors whose conduct in this regard is not above reproach and who have no plausible right to appeal to the nation to cover acts and protect claims, the responsibility for which lies in . . . individual profitable operations. . ..
At no time did Pellegrini ever consider the possibility of repudiation or even a default on the interest of the debt, as long as the government had gold at its disposal. When the August government had come to power, all classes had joined in hoping that with the removal of Juárez Celman, Argentina’s troubles would somehow vanish and the good days of the Eighties would return. Pellegrini reflected this view himself and did everything in his power to stimulate confidence and halt the spiral of depression. He hoped that by severely cutting official spending and raising revenues the financial position of his government could be greatly strengthened. As for the national economy, he believed that in view of the obvious agricultural and pastoral potential of the country a great reduction in imports, a general increase in productive activity and exports, and popular self-sacrifice would produce beneficial results in a year or two. This was the essence of his program.
For the first few months, as the new government came to grips with its problems, it impatiently awaited the third installment of the Buenos Aires Drainage Loan (about 7,000,000 pesos gold). This supply of the precious metal and whatever could be raised by the new 20,000,000 pesos gold bond issue were expected to enable the embattled administration to meet its current international obligations, giving it at least a year in which to bring about economic revival.
The longer the president and his Minister of Finance, Vicente Fidel López, studied the legacy of Juárez Celman, the more pessimistic they became. López confided to close friends that day by day he was losing confidence in the programs which he and the president were devising and trying to carry out.23 Bach week held new surprises—unsuspected debts, new imbroglios, and greater compromises. Pellegrini expressed the same sentiments years later:24
It was a government which passed through great difficulties, which sought for each one its own remedy. I would not say . . . we did not err, . . . still less when it was necessary to improvise on the field of battle, moment by moment, to soften the blows which fell and worsened the economic situation of the country, hour by hour, day by day.
The heaviest blow fell in November when Baring Brothers telegraphed the Argentine government that they would not be able to pay the third installment on the Drainage Loan. This news precipitated a general collapse in Argentina, as the national government prepared to default on the service of its foreign debts, followed by the provincial and municipal governments. On November 24, 1890, a committee of international bankers under the auspices of the Bank of England established a corporation “to acquire and take over the business of Baring Brothers and Company, undertaking any and all contracts and liabilities and liquidating them.”25 This committee, headed by Baron Rothschild, held a preliminary meeting on November 28 with Dr. Victorino de la Plaza, the Argentine financial agent in London. Rothschild and his colleagues hoped to make a detailed study of the financial and economic conditions in Argentina in the hope of salvaging something from the Baring collapse.26 When de la Plaza announced that his government would send the entire service of the foreign debt for October and January, English banking circles applauded the fine gesture demonstrating the good will and integrity of the new government,27 but it could not conceal that government’s inability to meet its obligations beyond January 1891.
After several meetings with de la Plaza, Baron Rothschild reported the committee’s findings to the governor of the Bank of England.28 The essence of this report was that the Argentine government would have been solvent if gold had been circulating at par in the Río de la Plata. It went on to state that since exports had increased and imports were expected to decrease, the chief prerequisite for breathing new life into the Argentine economy was the establishment of a sound currency system. German and French bankers on the committee were so optimistic that they urged the extension of a temporary loan to the Argentine government. This, they argued, would permit the government to pay the coupons of the foreign debt for the next six months, after which Argentina would resume full debt service on its own. When the English, notably Rothschild himself, refused, the European bankers withdrew from the conference. The result of the delibrations between the committee and de la Plaza was a new funding agreement the terms of which were as follows:29
The Argentine government was relieved from its obligation to remit the service on its debt to Europe (except that on a 42,000,000-peso loan of 1885, whose interest was already secured by a lien on customs duties).
The committee granted Argentina a six percent funding loan of 15,000,000 pounds to be secured by customs. The coupons were to be received by the Argentine government for customs dues.
All payments of the interest on railroad guarantees and on the national foreign debt were to be made in the bonds of the funding loan from January 1891 to January 1894.
The Argentine government was to pledge itself not to undertake any new liabilities during these three years.
The Argentine government was to undertake officially the withdrawal of bank notes from circulation by as much as 15,000,000 pesos per year for three years or as long as the gold premium was over 50.
With this agreement Pellegrini met the special session of Congress, convened on December 15, 1890, and executive and legislature set about to devise an entirely new program with which to face the ever deepening depression. The brief session saw the passage of the de la Plaza agreement30 and the rest of Pellegrini’s program, which was aimed primarily at increasing government revenue.
Prior to the opening of the special session the president had issued a series of decrees, constituting an emergency program. In November he prohibited trading in gold on the Exchange and required all operations involving foreign exchange to be restricted to legal currency. Another decree stipulated that all gold contracts could be met with national currency. (This is what the notes of the guaranteed banks amounted to, although Argentina did not have an official currency until 1893.) In December the administration forbade the circulation of foreign coins throughout the Republic.31
As soon as Congress convened, it passed legislation to carry out the rest of the president’s crisis program. Administration bills included measures doubling the rates on most of the papel sellado (legally required for every sort of legal or official transaction or memorandum)32 and the imposition of a two percent tax on deposits in all banks which had not purchased bonds and issued currency under the Banking Law of 1887.33 The latter bill, of course, was designed to make depositors shift their savings to the guaranteed banks. Another bill increased tariffs and published a long list of articles dutiable in gold, which would be turned over to the Caja for the annual retirement of 15,000,000 paper pesos, as specified in the de la Plaza agreement.34
One of the strongest bills passed to increase government revenues amounted to a complete rewriting of legislation on domestic taxation. The bill placed a high tax on every form of alcohol, and article ten declared a ten percent levy on the dividends of private banks and one of seven percent on those of joint stock companies whose directors and subscribed capital “were not rooted in this country.” Article seven called for a similar tax of seven percent on the premiums on all policies sold by foreign insurance companies. All sums raised by such taxation were to be paid to the Caja in order to begin the retirement of the existing paper currency and to lay the foundation for Argentina’s ultimate return to a metallic-based currency.35
The last major revenue bill passed during the special session of 1890 raised the license fees on foreign insurance companies, manufacturers of cigarettes and cigars, and various business establishments such as restaurants and cafes.36 Before Congress adjourned, it passed a resolution, approving Pellegrini’s nomination of Juan José Romero, perhaps the ablest financier in Argentina, as director of the Caja de Conversión.
In January Pellegrini and his cabinet were left alone to face the awful problems of 1891. Certainly the economic condition of the country was worse than it had been on the day Juárez Celman resigned, although there were a few hopeful signs. The unhappy position of the government in the money markets of the world has been described and a brief survey of its foreign obligations given; but in order to understand the fiscal and economic policies of the Pellegrini administration, it is necessary to examine the economy of the country in greater detail.
Although Argentina suffered a great drain of agricultural workers in this period through mass emigration to Brazil and Chile, the vast fertile pampas did not disappear like the paper profits of the Eighties. Agricultural production continued to increase. In 1889 about 23,000 tons of wheat had been produced; in the following year of revolution and crash that amount had increased to nearly 328,000 tons. Similarly, corn production rose from 432,000 tons to 707,000 tons.37 The frozen meat industry was still in its first stages of development, but it was beginning to show the promise which it fulfilled in the next few decades. While frozen mutton was the only meat exported in great quantities under this process, the exports of this commodity rose steadily in value during the period, 1855-1890, from 75,323 pesos annually to over 1,600,000 pesos, although packers were still absorbing heavy investment costs.38
These gains were offset by a fall in the export of wool and sheep-skins, heretofore an important item in the export trade. The value of these dropped from 57,000,000 pesos in 1889 to around 35,600,000 pesos the following year.39 Still the expanding railroad system and the work which continued on the Madero port were opening up new directions for the flow of commerce. Despite the new port facilities, the total number of ships arriving at Buenos Aires fell by 572 in the year of the revolution and the total tonnage of imports by 370,000. The number of ships departing Buenos Aires with cargo also declined by 2,300 and the cargoes by 1,700,000 tons.40
The value of both imports and exports decreased along with world prices of those commodities in which Argentine production was rising most sharply. Although the balance of trade improved, imports still exceeded exports by 42,000,000 pesos for the entire year of 1890, compared with a similar imbalance of 74,000,000 for the previous year. The extent to which Argentina had lived beyond its means during the years of heavy borrowing can be clearly seen by an examination of the imports for the decade of the Eighties. In 1880 the value of imports amounted to about 45,500,000 pesos, while a scant ten years later—without any sizeable increase in population, exports, or monetary wealth—the same country was importing over 142,000,000 pesos worth of goods, with an extraordinarily high proportion in the luxury class.41
The advantages of a fine railway system had been achieved at a heavy cost to the national government, which for years had been granting concessions for construction and operation to private enterprise with built-in guarantees of five to seven percent. No matter what the condition of the national treasury, the government was obliged to furnish the interest on the guaranteed railway bonds. It became apparent much later that these payments had continued long after the railroads were yielding their directors high profits. This annual guarantee amounted to over 4,500,000 pesos gold.42
Total revenues for 1890 amounted to 73,150,856 pesos (of which fewer than 2,000,000 were in gold), or the highest amount ever collected in the history of the Republic. The bulk of these revenues came from duties on imports at the customs-house of Buenos Aires (47,546,785 pesos), a clear indication as to the dependence of the treasury on Argentina’s foreign trade. Official appropriations for the same year totaled 92,853,846 pesos legal tender, with the resulting deficit of almost 20,000,000 pesos carried over into 1891.43
The exact plight of the government cannot be realized without a study of its bonded indebtedness. The total bonded indebtedness of the national government as of December 31, 1890, was approximately 356,000,000 pesos, of which 128,209,130 pesos were owed abroad at rates varying from three to six percent.44 The largest amount (about 60,000,000) required a service of five percent. The interest on the foreign portion of the debt was payable only in gold, while the government collected most of its revenues in the depreciating paper currency of Argentina.
On top of this burden lay several others. One was the provincial foreign debts, which Pellegrini wished the central government to assume.45 Another was the interest payments on over 200,000,000 pesos worth of cédulas issued by the National Mortgage Bank at from seven to eight percent, for which the national government was responsible.46 As if all this were not enough, a special class of gold bonds (not included in the regular totals of the government debt) was also guaranteed by the federal government. According to the provisions of the 1887 Banking Law, the Argentine national government had sold almost 197,000,000 pesos worth of gold bonds at 4½ percent to banks across the country.47 Since the bonds were gold certificates, the individual banks used them as the basis for their currency. These banks had borrowed gold from Europe with which to purchase these bonds, and it had been this bond issue which accounted for most of the provincial foreign debts. For some reason government accountants did not figure this enormous obligation as part of the bonded indebtedness of the nation and excluded it from all tables itemizing the domestic national debt.
Perhaps President Juárez Celman had been responsible for these strange methods of accounting, as it was he who explained to Congress in his State of the Union message for 1889 that the 4½ percent gold bonds (he did not specify their amount) were not part of the bonded indebtedness of the Nation, because they did not circulate.48 By so doing he was able to paint the financial picture in brighter colors, showing that all the domestic obligations of the government (a few gold cédulas apart) were serviceable in paper currency which he could authorize to be printed at any time, while the only important gold charges were all due to foreign investors. In this manner he may have intended to prepare the way towards the repudiation of foreign commitments or the substitution of paper for gold.
President Juárez Celman notwithstanding, these bonds required over four million pesos in gold during 1890 for interest and amortization.49 This was a most important part of the national debt, for the fate of all the provincial banks which had purchased the bonds depended on the government’s continued capacity to service them in gold. These banks desperately needed the gold from the central government, so that they could meet their own European obligations on the gold—which they had borrowed in order to purchase the bonds from the national government in the first place. Should the interest on these bonds not be paid, these banks would be forced to close their doors.
The new funding agreement, arranged by de la Plaza and the Rothschild consortium, added 75,000,000 pesos gold to the national foreign debt, bringing that total to well over 200,000,000. The new loan accomplished its purpose, although it added to the burdens which the treasury would have to bear in the future. For the time being it removed the need to service the foreign debt and uphold the railway guarantees, and the actual gold payment on these charges was reduced from 14,000,000 pesos in 1889 to about 3,500,000 pesos in 1891. The remaining amount was paid in the funding bonds.50
This arrangement was, at best, only an emergency measure, and it was abandoned before the end of the three-year period. It was conceived in the hope that by the time three years had elapsed, Argentina would be able to assume the full responsibility for servicing all its foreign debts. But the continuation and ever increasing severity of the depression throughout 1891 made it unworkable, and it gave way to a new contract, worked out by Juan José Romero, Finance Minister under Pellegrini’s successor, Luis Sáenz Peña.
After the first two months of 1891, the crisis was clearly not abating, for the gold premium continued to rise, and depositors had begun to descend on the private and the guaranteed banks, producing symptoms of panic and unstoppable runs which forced many to the edge of bankruptcy. Directors of the guaranteed banks asked for new emissions of paper money, but Pellegrini refused. In early March there was a panic on the Exchange, and by a decree of March 551 the president declared March 6 and 7 bank holidays.
As Congress was not in session, Pellegrini decided to convene an unofficial body, composed of leading men in the city, to discuss the situation and hear the administration’s emergency proposals. For three hours in the afternoon of March 6, Pellegrini, flanked by his cabinet, held the conference in the executive mansion.52 The president opened the meeting with an outline of three measures which the government was prepared to put into action after approval by the majority of those assembled. The first called for a new loan to be raised within Argentina and a bond issue of 100,000,000 pesos to be purchased in the depreciated paper currency of the guaranteed banks. The other alternatives were a new mission of inconvertible notes to the amount of 100,000,000 pesos and an issue of notes declared to be convertible currency (notas metálicas) and authorized for the discharge of gold debts.
The purpose of these measures was to save the guaranteed banks, particularly the National Bank and the Bank of the Province of Buenos Aires. Pellegrini traced the recent troubles of the banks, pointing out that the Bank of the Province had been the hardest hit, having paid out to depositors between 22,000,000 and 24,000,000 pesos in the previous two months. He finished his preliminary remarks with a warning that the collapse of these institutions would have disastrous economic and social effects and assurances that his government would use all its powers and resources to avoid such a catastrophe. At the same time he voiced his own feelings regarding the proposed emission of 100,000,000 pesos in new treasury notes:53
The opinion of the government with respect to the emission is radically hostile, because it understands that a new emission of bank notes will embark us definitively on a policy of paper money without hope of escaping from it for a long time. It is a resort which, however well it may produce immediate aid to these institutions, will entrain tragic consequences which will offset with usury this ephemeral advantage.
Pellegrini then turned to the proposal which represented his own hopes for a solution to the country’s financial ills—namely, to return to a currency of notas metálicas. Almost a decade later, with Pellegrini’s support, this idea was to form the basis for the Conversion Law of 1899, which returned Argentina to a convertible currency. In 1891, however, any thought of conversion was really out of the question. Throughout the next year or so Pellegrini obviously toyed with the idea of basing these notes on silver if not the traditional gold. As stated to the Assembly of Notables, his plan called for the government to issue new metallic notes through the Caja in exchange for those already in circulation at the rate of one for two. The new notes, in turn, were to be acceptable as gold in payment of customs dues and all gold debts and also (for the National Mortgage Bank) in payment on its gold cédulas.
The net effect of such a policy would have been to fix the gold premium by law at 100, whereas its actual premium established by the market averaged 287 for 1891. In contrast, the Conversion Law of 1899, which eventually did provide a convertible currency, fixed the gold premium permanently at its actual market quotation of 127. If the government had had any specie at its disposal, and if Pellegrini’s measure of 1891 had been enacted, it seems clear that the gold in the Río de la Plata would have vanished and found markets elsewhere. The hollowness of the entire scheme lay in the fact that the Argentine government simply did not have the metallic reserves at its disposal to meet demands for conversion on the new notes which Pellegrini proposed.
Some evidence suggests that Pellegrini hoped for enough specie from the United States so that Argentina might go on a convertible basis in the near future. Nevertheless, the only real significance of this plan was that it demonstrated the administration’s almost fanatical desire to get away from inconvertible paper. Perhaps the president hoped that patriotic Argentines, realizing the gravity of the situation, might accept a new currency on the same basis as true notas metálicas simply because their government promised conversion at some indefinite date. This seems highly improbable. Whatever the possibilities of such a policy in an earlier era, the experiences of the previous decade had demolished the faith of every Argentine in any kind of paper currency not immediately convertible through the Caja.
Although this unlikely plan was the one which Pellegrini favored, an entirely different solution was finally adopted. On the day before the meeting in the executive mansion a group of wealthy citizens— bankers, merchants, and heads of corporations—had gotten together and discussed possibilities for the solution of the nation’s most pressing financial problems. This gathering proposed a new “patriotic loan” of 100,000,000 at six percent, to be taken up entirely or in large part by the bankers and traders of the Exchange. It was argued that such a sum of money in the paper currency of the guaranteed banks would solve the immediate problems of the government and shore up the most important banks. “The only difficulty,” continued Pellegrini knowingly, “is whether or not these public bonds, once they are offered, will find enough subscribers in the market of Buenos Aires to attend to the necessities of the moment.”54
This and other objections to the plan formed the subject of the afternoon debate. Beyond question, the most dramatic occurrence of the session was the eloquent address by Aristóbulo del Valle. His very presence must have astounded most of those attending the meeting, for he was the intellectual and parliamentary leader of the late rebellion—the personification of the forces opposed to the Pellegrini government and the founder of the Argentine liberal tradition. Although moved by Pellegrini’s generous action in inviting him, del Valle did not allow his gratitude to restrain his remarks, and he launched into an attack on the existing social order as the cause of all the economic woes besetting the Republic.
In del Valle’s view none of the solutions presented by the president would work—nothing short of a complete reformation of the rent, banking, and economic systems and their relationship to the government. He went on to indicate that a complete overhaul of the banking system might involve the liquidation of many insolvent and mismanaged institutions. As for the proposed “patriotic loan,” he doubted that it would raise more than 30,000,000 pesos; but he thought that if it were offered to the public with the assurance that a mature plan of reform was in preparation, it would suffice to meet demands on deposits in certain key banks for a while longer. Pellegrini saw eye to eye with del Valle in regard to the possible liquidation of even the National Bank and its replacement with a more effective central bank. This much is clear from the joint proposal which they had made in the Senate in 188155 and from the action which he was about to take as president a few months later.
Dr. José Terry, Professor of Finance at the National University of Buenos Aires and the author of numerous works on financial and economic matters, advised announcing the bond issue, accompanied by the proviso that if the loan failed to raise sufficient funds, it would be followed by an emission of paper money. Ernesto Tornquist, head of a distinguished banking firm bearing his name, quickly opposed such a measure on the grounds that if the government was trying to find a way to restore confidence, such a promise as Terry proposed was the worst way to go about it.
The result of the Assembly of Notables was the launching of the “patriotic loan” of 1891 on March 9. Simultaneously the bank holiday was extended for three days.56 In spite of the best efforts to publicize the new loan with speeches, posters, and broadsides extolling the virtues of patriotism and their application to the loan, it did not prove successful. A week after its announcement only about 30,000,000 pesos had been raised, and the final total which the government actually collected barely exceeded that amount.57 The Buenos Aires Standard editorialized on March 13 that it could “make a list of two hundred nabobs who possess half the wealth of the Republic and whose names are not to be found in the Patriotic Loan.”
By the middle of March when the Office of Conversion informed Pellegrini that only about 43,000,000 pesos had been subscribed, the president calculated that this would be enough to keep the National Bank and the Bank of the Province open. He turned over 10,938,000 pesos to the former and 15,350,000 to the latter.58 He firmly announced that his government would sanction no further issues of paper money to the banks, but the Buenos Aires Herald reflected the general opinion when its editor wrote on March 14: “We have learned that presidential promises are fallible.” By the end of the month Romero felt it his duty to inform the president that, with the prospect of continuing runs on deposits, he judged the loan insufficient to save the banks, and on April 6 he announced to him that the funds of the Office of Conversion were depleted and would not last till the first of May. On the following day Pellegrini issued a decree suspending payments on deposits at both banks.59
In thus closing the banks the administration stirred up a storm of protest, especially from those who had clamored for the indefinite issue of paper money to meet demands on deposits, as well as the operating expenses of the government. The shutdown of the Bank of the Province was the subject of an especially bitter attack by the Governor of Buenos Aires, Julio Costa, whose opposition culminated in a six-hour speech to the provincial legislature and was supported by a large group within the national Congress.60 In April it was bruited about that Pellegrini had some plan to erect a new bank on the remains of the two closed banks; but until Congress convened, nothing specific was known. The American envoy reported favorably on the president’s action in regard to the old banks, and the Buenos Aires Standard expressed similar sentiments.61
Soon after the closing of the banks the community received another paralyzing shock when an investigating board headed by Vicente Casares revealed the extent of corruption within the National Bank in a report to the shareholders.62 A simple listing of all the malpractices of the bank would fill a chapter. In his opening statement the Chairman of the Board set the stage:
We see an imprudent distribution of money, not only owing to the class of people favored, but also owing to the enormous sums lent; we see eases where huge amounts are considered lost, and the respective debtors actually look upon the fact as mere accident that in no manner affects their credit standing; truly, one is amazed at the responsibilities which accrued through loose supervision in loans, and one wonders at the granting of certain loans to certain individuals who have neither the standing nor the credit to entitle them to such liberality.
Pointing out that the government had been hand in glove with the bank and that the results of such a partnership had led to the most serious malpractices, the report went on to enumerate and describe in detail examples of the bank’s mismanagement. It had made loans to members of the government and to all kinds of politicians whose previous liabilities had not been met and whose assets were illusory. It had used its funds for speculation. Furthermore, it had purchased fraudulent provincial bond issues for reasons unknown and had also bought national railway loans at seven points higher than that stipulated by law. Prominent members of the government had been in the habit of entering the bank and giving orders for the delivery of large sums of money to certain individuals without consulting the directors or the officers.
Without any authority employees of the bank had managed large sums of money; clerks had accepted drafts for amounts twenty to thirty times larger than those permitted by the Board of Management. The bank had made loans through third parties to the accounts of those approving the loan, while local managers of the bank’s branches had discounted bills of persons who did not exist.
Incredible as it seems, there were no records of the bank’s operations beyond 1885, and such records as did exist were not indexed— a “vast accumulation of documents that baffled classification and investigation.” The bank had published false balance sheets, authorizing the distribution of dividends which were never paid. How many other kinds of malpractices remained undetected no one could tell, as the chairman of the investigating committee reported that “nearly all the important operations of the bank were shrouded in mystery for want of the necessary documents to explain same.”
The Bank of the Province was in a similar condition. Commenting on the record of both banks in the year before he closed them, Pellegrini itemized the sums which, between the two of them, they had exhausted. These consisted of 20,700,000 pesos in clandestinely issued notes; 50,000,000 pesos in authorized notes; 27,000,000 pesos from the “patriotic loan”; and 13,000,000 pesos gold from the sale of the Western Railroad by the province of Buenos Aires. Of all these monies virtually nothing remained.63
By April Pellegrini’s blueprint for a new bank had certainly taken shape; indeed, the outline of it had been in his mind for over ten years. On April 19 the Buenos Aires Standard referred to the plan for a new bank as an open secret, and a few days before had informed its readers that the next act of the government would be to propose the establishment of an institution modeled on the Bank of England. The editor commented favorably on the project.
In his opening message to Congress on May 9, Pellegrini announced his project for the new bank, and on May 19 he sent the administration’s bill creating the institution to the legislature.64 It was to be called the Banco de la Nación Argentina and established with a capital of 50,000,000 pesos, of which twenty millions were to be “de pesos moneda metálica,” raised through the sale of stocks or bonds. The directory of the bank was to be made up of fifteen men nominated by the shareholders, and a majority of these were required to be Argentine citizens. The presiding officer of the directory was to be nominated directly by the president of the Republic. As soon as one-half of the fifty millions had been subscribed, the bank was to open, taking over the assets and liabilities of the old National Bank as nearly as these could be determined.
The two key problems involved in implementing such a plan lay in raising such a large sum immediately after the failure of the “patriotic loan” and in the lack of available “metallic money.” It is clear from his messages to Congress and from his negotiations with the American minister, John R. G. Pitkin, that throughout his brief tenure Pellegrini hoped to be the statesman who would bring off the great stroke of returning Argentina to some form of convertible currency. There is no doubt that he long harbored the conviction that Argentina might find a solution to this problem through the use of silver.
In May Pellegrini remarked privately to the American minister that he would very much like to see American capitalists set up a bank in the Río de la Plata. On May 28 Emilio Hansen, UnderSecretary of Finance, called at the American legation with an outline of the president’s ideas on this matter. Hansen assured Pitkin that the Argentine government was prepared to submit a detailed plan for an American bank and went on to enumerate the commercial advantages which would be accorded such a bank. He urged Pitkin to inform the State Department of the importance of sending an American financial agent right away, in order that he might survey the opportunities at first hand. On May 30 Hansen returned to the legation and repeated that American bankers would be given special privileges. The opportunities for foreign capital were obvious. With the severe depression, property—land in particular—was on the block for extremely low prices.
According to Pitkin, Pellegrini remarked explicitly that he preferred to deal with Americans at this time rather than with European or English bankers. Of course the Argentine Congress would have to approve any arrangement that might be arrived at between an American financial agent and the Argentine government. According to a brief sent by Vicente López, the president hoped that American money would be involved in the capitalization of the new bank which was to consist of 50,000,000 pesos in currency and silver coin.65
No sooner had Pitkin notified the State Department of these negotiations than the runs of the private banks were renewed with increased frenzy. The Italian Bank of the River Plate collapsed after paying out over 12,000,000 pesos in a few days, and four other private banks quickly followed it into bankruptcy. What appears to have been a determined and organized assault was made on the deposits of the London and River Plate Bank. This formidable house, the strongest bank in Argentina, had only recently purchased the Carabassa Bank (an old Italian firm) and had lent 20,000 pounds to the Italian Bank of the River Plate during the crisis which destroyed it. In spite of these severe drains on its reserves, the London and River Plate Bank was able to call on Baron Rothschild who telegraphed its directors that they could draw on him for as much as 2,000,000 pounds.
Resentment against English moneyed interests reached a high point during the latter part of 1891. The chairman of the London and River Plate Bank, G. W. Drabble, commented in an interview on the hostility of the Argentine public and expressed the opinion that Pellegrini was an honest and careful executive whose best efforts would fail as long as the existing Congress continued to sit.66
Pellegrini and his Minister of Finance finally clashed with Congress in June. The closing of the banks had been extremely unpopular, and the aged López had even been threatened with bodily harm. Pellegrini vetoed an act of Congress suspending all commercial obligations for a period of ninety days, on the grounds that the people whom the act was designed to protect had incurred their obligations before the crash. Also at the end of that time they would be no more prepared to meet their obligations than they were at the moment. Congress overrode the veto, and for three months the commercial life of Buenos Aires was at a standstill.67 A good deal of the hostility, in and out of Congress, came from persons whose primary allegiance was to their “pequeña patria” or province. These elements had been enraged and terrified when the national government closed the Bank of the Province of Buenos Aires, for the action implied a threat that it might proceed to liquidate other bankrupt provincial banks.
Nonetheless, in October Pellegrini’s bill for the new National Bank did emerge from the Congress, even though it had undergone some major changes, dictated by the will of the Congress and the realities of the Argentine financial scene. The Finance Committee of the Senate lost no time in pointing out that there would be no available convertible currency in the foreseeable future with which to capitalize the proposed bank, for it was ignorant of the negotiations going on between the administration and the representatives of the United States.68
Nothing ever came of these, and in the end the solution proposed by Congress was the only feasible one—that the total capital of the bank should be made up of paper currency. Although the launching of a new bank on nothing but unsupported paper was a daring scheme in the wake of Argentina’s terrible experiences with paper currency, this in itself was not the most striking feature of the act as passed in October. All the money was to be raised by an issue of stock (500,000 shares at 100 pesos each) and sent to the Office of Conversion. The Caja would then send the equivalent to the bank in the form of specially printed notes. In a truly fantastic provision (article 19) the law allowed the Caja to anticipate the receipt of the money and turn over to the bank the special notes even before the money had been actually raised by the sale of stock.
The seriousness of such a provision was quickly borne out when the stock issue failed to net more than 6,000,000 pesos.69 Nevertheless, the Caja dutifully continued to deliver the specially printed notes periodically to the directors of the National Bank, until the full 50,000,000 pesos had been reached. Thus under the auspices of a government opposed in principle to further issues of paper money, a new bank was set up in direct defiance of the de la Plaza-Rothschild agreement, which had stipulated that the government should refrain from such practices and even reduce the amount of paper in circulation by as much as 15,000,000 pesos annually. Not only did the capitalization of the bank conflict with the moratorium, but it also aroused the protests of the press, bankers, and many businessmen.
Dire results were predicted. José Terry pronounced the bank “anemic,” but as early as 1892 Pellegrini felt that it would be a great success, and so it proved. Perhaps public confidence in the banking system and the honesty of the government had reached a turning point. As Argentine exports continued to expand and the country began to grow slowly into its capital structure, the chances for recovery were beginning to open. By 1916, when the National Bank published an accounting of its first twenty-five years of operations, it had accumulated reserves amounting to 161,000,000 pesos and had one hundred and seventy-six branches throughout the country.70
Although the emission of so much paper money was against all Pellegrini’s fiscal theories, he told Congress on several occasions that he was ready to resort to it in time of war or other national emergency. Like Franklin D. Roosevelt in the United States he would try anything once. After several vain attempts to float loans abroad and at home, the Congress and the administration achieved success through the new emission of specially printed notes. Although the president must have had the gravest misgivings when he saw the Caja forwarding the notes to the bank despite the failure of the bond issue, neither he nor anyone else could have complained at the result.
When Pellegrini left office in October 1892, the economic situation of the Nation had begun to improve. In 1891, for the first time in ten years, Argentina had had a favorable balance of trade. During that year imports had amounted to a little over 67,000,000 pesos (or a reduction of more than 75,000,000 pesos from 1890) against exports exceeding 103,000,000 pesos. The value and bulk of Argentine exports were gathering momentum, for the investments of the previous decade, all well as new techniques in agriculture and the preservation of meats, were beginning to take effect. The decrease in imports had been brought about primarily by a tremendous decline in nonproductive luxury items. For the first nine months of 1892 the trend continued, and imports for that period were valued at 68,700,000 pesos as against 89,000,000 pesos in exports.71 Unavoidably, however, these drastic cuts in imports reduced government revenues, of which nearly half had always come from customs duties.
Despite the reduction of income from this quarter, the government was able to collect the largest amount in its history. Revenues for 1891 totalled 77,400,000, while various cost-saving measures had reduced appropriations to 58,250,000 pesos.72 The increased revenues at a time of declining imports resulted from a stringent program of taxation launched by Pellegrini and López in the special session of Congress during December 1890.
Although the national revenues were able to meet the operating cost of the national government and even showed a surplus when Pellegrini left office, the financial position of the government was still precarious. Its bonded indebtedness had not been decreased at all; in fact, as a result of the 75,000,000-peso moratorium loan arranged by de la Plaza, it had risen.73 The principal to be retired remained intact, and the payment of interest on it was to recommence in January 1893. Thus, in spite of Pellegrini’s best efforts to maintain the national credit, many of which had earned him the undying hostility of his countrymen, the new administration of Luis Sáenz Peña found itself faced with the same problems which Pellegrini had inherited in August of 1890. The question was posed anew—would Argentina default on the interest of the foreign debt or even repudiate its foreign obligations altogether?74
Pellegrini made his real contribution as president, not by performing an economic and financial miracle, but by providing a sound and honest administration which had reestablished the banking system on firmer footing, cut governments costs to a minimum, and maintained public order. The reputation of the Argentine government, both at home and abroad, had been partially rehabilitated if not totally restored. Indeed, many members of the opposition who had formed the Civic Union Party in 1890 and participated in the revolution agreed to cooperate with succeeding administrations controlled by the dominant oligarchy.
John H. Williams, Argentine International Trade under Inconvertible Paper Money, 1880-1900 (Cambridge, 1920), 43.
By far the most illuminating investigation of this topic is to be found in A. G. Ford, The Gold Standard 1880-1914, Britain and Argentina (Oxford, 1962), 133-152. The Argentine gold peso was equal to .965 United States gold dollars.
See the description by A. G. Ford in “Argentina and the Baring Crisis of 1890,” Oxford Economic Papers, New Series, VIII (June 1956), 127-150.
Tables on Argentina’s exports for the period 1888-1900 can be found in Ford, “Argentina and the Baring Crisis,” 139-142.
Williams, Argentine International Trade, 9 and table on 60. that the problem to be taken up first and with urgency is that of finding what means are most adequate and most practicable for putting into effect the restorative forces upon which the Nation counts in this moment, in order to escape from the economic disorders into which it has fallen and to open the way for it to take, slowly improving its bad condition until it reaches the solution of its difficulties.. . . The Executive Power does not pretend to present the most perfect methods and intentions, but rather those which are most likely to be achieved in order to reconstruct our affairs.
Message dated August 18, printed in Congreso Nacional, Diario de Sesiones de la Cámara de Senadores, September 2, 1890.
These bonds and the Banking Law of 1887 are described below in the course of the article and in note 16.
Diario de Senadores, September 2, 1890.
The bill passed and became Law N. 2715; Augusto da Rocha (ed.), Colección completa de leyes nacionales sancionadas por el honorable Congreso durante los años 1852 a 1917 (21 vols., Buenos Aires, 1918), IX, 240-242.
Not really a central bank in a European sense. See Ford, The Gold Standard, 98-99.
Pellegrini traced the recent history of these banks in his opening annual message to Congress. Heraclio Mabragaña (ed.), Los mensajes. Historia del desenvolvimiento de la nación Argentina, redactada cronológicamente por sus gubernantes (1810-1910) (6 vols., Buenos Aires, 1910), V, 24-27.
Law N. 2718, Colección, IX, 243.
Law N. 2717, ibid., 242-243.
Law N. 2716, ibid., 242.
Under the terms of the 1887 Banking Law (Law N. 2216, Colección, VII, 255-265), any bank in Argentina with a capital of 250,000 pesos could issue its own currency to the extent of 90 percent of its capital, provided that it held the same amount in the 4½ percent gold bonds especially issued by the Federal Government for this purpose.
Law N. 2714, Colección, IX, 262-265.
Law N. 2744, ibid., 268.
Wealthy Argentines who had made their fortunes from their monopoly of the land were notorious for their lack of interest in the bond issues of the government or private enterprise, as they preferred to channel all their available investment capital into more land.
Perhaps the most prominent among these critics was José A. Terry, Professor of Finance at the National University of Buenos Aires. See his work, La crisis (Buenos Aires, 1893), 171-176.
Diario de Senadores, December 17, 1896.
The report by Emilio Hansen, López’ successor as Minister of Finance, dated December 31, 1891, cited in Williams, Argentine International Trade, 100.
Extracted from the complete message printed in United States Consular Reports, No. 124 (January 1891), 78-79. E. L. Baker was the U.S. Consul in Buenos Aires.
Terry, La crisis, 167.
Diario de Senadores, December 17, 1896.
The Times, November 26, 1890.
The Money Market Review, November 29, 1890.
The Times, November 22 and 24, 1890.
Printed in The Money Market Review, December 6, 1890.
Williams, Argentine International Trade, 126-127.
Law N. 2770, Colección, IX, 297-298.
The decree demonetizing gold is printed in Revista General de Administración, XIV (Buenos Aires, 1890), 247-248. For the circulation of foreign coins see Williams, Argentine International Trade, 31-33.
The sale of this paper was a fairly important source of revenue. See Thomas A. Turner, Argentina and the Argentines (New York, 1892), 61.
Law N. 2768, Colección, IX, 295-296.
Law N. 2772, ibid., 299-301.
H. S. Ferns in his Britain and Argentina in the Nineteenth Century (Oxford, 1960), 461-462, has given a somewhat distorted account of Pellegrini’s financial program by characterizing it as almost exclusively antiforeign and in particular anti-British. He has accomplished this unintentionally by listing all measures calling for the taxation of foreign interests as if each were provided for by a separate bill or decree. On the contrary, these measures were merely articles in a tax bill which contained many other articles taxing Argentines. Pellegrini’s whole program was designed to scrape up every loose peso in the Republic in order to meet government costs and to hasten the day when Argentina’s obligations to its foreign creditors could once again be met. By relying exclusively on British sources Ferns has missed the chief Argentine criticism of Pellegrini; namely that he was too concerned with the welfare of foreign capitalists. The new tax law was enacted as Law N. 2774, Colección, IX, 302-304.
Law N. 2775, Colección, IX, 304-306.
U.S. Consular Reports, No. 138 (March 1892), 392.
Ibid., 393.
Ibid., 394.
Ibid., 399.
Ibid., 417.
Ibid., 450. Pellegrini complained in his second annual opening speech to Congress that 16,000,000 pesos in gold had been paid to the railroads without a centavo being returned. Mabragaña (ed.), Los mensajes, IV, 52. The railroads were supposed to return all the excess or a portion of it, as defined in the terms of the particular concession to a given railroad, if the roads earned the guaranteed interest or more on their own.
Pellegrini’s first annual message to Congress (1891). Mabragaña (ed.), Los mensajes, V, 13-14.
Report of the Chief of the National Statistical Office, cited by Consul Baker in U.S. Consular Reports, No. 138, 444.
Over 140,000,000 pesos. See note 22.
U.S. Consular Reports, No. 138, 447.
Williams, Argentine International Trade, 95.
Mabragaña (ed.), Los mensajes, IV, 319.
Williams, Argentine International Trade, 95.
Ibid., 127.
Printed in Diario de Senadores, May 26, 1891.
The minutes of the meeting were published in 1891 under the title Presidencia Pellegrini. Documentos relativos a la primera asamblea de notables celebrada en la República Argentina el año 1891. Todos los decretos, discursos y resoluciones. It is reprinted in Carlos Pellegrini, Obras (5 vols., Buenos Aires, 1941), IV, 265-331.
Pellegrini, Obras, IV, 270.
Ibid., 277.
Their joint proposal for a new national bank was printed in Diario de Senadores, May 12, 1881.
The decree establishing the loan and the extension of the banking holiday are printed in Diario de Senadores, May 26, 1891.
This was the face value. A total of 43,000,000 face value was eventually subscribed. As the bonds were sold at 75 the first week and 80 thereafter, the actual amount subscribed was approximately 33,000,000, and the cash realized by the government did not exceed 29,000,000 paper pesos. Pellegrini’s message of May 19, printed in Diario de Senadores, May 26, 1891.
Mabragaña (ed.), Los mensajes, V, 24-27.
Ibid.; the decree is printed in Diario de Senadores, May 26, 1891.
The tenor of his tirade was that any plan for the reconstruction of the banking system was a wild idea fit only for “schoolboys and poets.” The Buenos Aires Standard published extracts from it on May 3, 1891.
John R. G. Pitkin to James G. Blaine, April 25, 1890, National Archives, Department of State, American States, U.S. Legation, Argentina, Diplomatic Despatches, vol. 28, No. 50 (hereafter the regular diplomatic correspondence will be cited by volume and number only).
The report was printed in full in the Buenos Aires Standard, April 29, 1891.
Mabragaña (ed.), Los mensajes, V, 24-27.
The bill is printed in Diario de Senadores, May 19, 1891.
Pitkin to Blaine, telegram June 2, 1891, vol. 29, no number; Pitkin to Blaine detailed report June 3, 1891, vol. 29, No. 132 with enclosure: Vicente López to Pitkin, June 1, 1891.
Buenos Aires Standard, June 2 and 3, 1891 and September 22, 1891 (complete interview with Drabble); Pitkin to Blaine, June 6, 1891, vol. 29, No. 135.
Pellegrini’s veto message is printed in Diario de Senadores, June 19, 1891.
The bill was reported out by the Senate Finance Committee with recommendation, August 11, 1891.
Williams, Argentine International Trade, 131.
Ibid., 132.
U.S. Consular Reports, No. 151 (April 1893), 515-516; 548.
From the government Statistical Office, cited by Consul Baker in ibid., 551.
Only 38,458,561 pesos were ever issued of this loan over the period 1891-1895. Williams, Argentine International Trade, 127.
Under Pellegrini’s successor, Luis Sáenz Peña, a new agreement with Argentina’s foreign creditors was reached by the able Minister of Finance, Juan José Romero. By its terms Argentina agreed to pay part of the service on the debt since it was incapable of paying all. According to the agreement—the Arreglo Romero—Argentina was to pay 7,887,600 pesos per year from July 1893 to July 1898, the rest suspended. From 1898 on it was to resume full interest payments of 11,169,902 pesos annually. It is interesting to note that Pellegrini never favored this agreement, remaining convinced that Argentina could by great sacrifice begin payment in full in 1893. (He was fond of citing the example of the French after the Franco-Prussian War.) It was Pellegrini who, as Senator from Buenos Aires, led the drive for resumption of full interest payments a year ahead of schedule in July 1897. For the fascinating debates on this matter between Romero and Pellegrini see Diario de Senadores, December 3 and 5, 1895; June 23, November 12, 14, and 17, 1896. Far from being ungrateful or hostile to foreign interests, Pellegrini’s views laid him open to vitriolic attacks as the lackey of foreign capitalists.
Author notes
The author is Associate Professor of History at Greensboro College.
