Chapter VIII: Part 8

One thing Don Carlos Lopez did not leave out of sight. He felt his Government was an anomaly and a menace to civilisation and political freedom in the surrounding States, and any day even his so patient subjects might find their bonds too galling for longer endurance. He, therefore, developed the military strength of the Dictatorship, and raised the fortress of Humaita on the banks of the Paraguay in such a position as to render the country all but impregnable to external assault.

At the end of a long reign Lopez I. died, and his dominion went by testament to his son,—Don Francisco Solano—as Vice-President. M. Quentin gives the following account of the proceedings adopted by the present ruler of Paraguay to secure the position he has used to bring ruin upon his unfortunate country:—

Don Carlos Antonio Lopez died on the 10th of September, 1862. On the
very same day Don Francisco Solano Lopez assembled the bishop, the
supreme judge, and the principal functionaries, and in their
presence opened the sealed envelope which contained the testament of
his father. In virtue of the law of 1856 Don Francisco Solano Lopez
was designated Vice-President, and in that capacity he convoked the
Extraordinary Congress.

As under such circumstances it is well to neglect nothing, young
Lopez prudently confided the command of the army to his brother, and
one of his uncles was already at the head of the clergy. Thus all
the avenues to power were guarded.

The Congress assembled under the presidency of Don Solano Lopez.
The result of the vote was certain. Every precaution had been
well taken. They were about to proceed to the ballot, when a
deputy, named Varela, commenced speaking. He began by eulogising
General Lopez, and assuring him of his personal esteem and
sympathy, reminded Congress of the express terms of the Act of
Independence—Paraguay shall never become the patrimony of a
family, and concluded with these words:—“I have the most
profound respect for General Lopez, but I have sworn to obey the
laws of my country. I hesitate between my affection and my
conscience.” The moment was a critical one. An unexpected
opposition manifested itself, and drew its force from the law,
for the first time invoked in the heart of a Congress. Lopez
tremblingly witnessed this episode, but retained his coolness
and self-possession. He made a sign to Father Roman, the Bishop
of Asuncion, who of right formed part of the Congress. The
prelate approached Varela, who humbly fell on his knees in the
midst of the assembly, and the bishop, placing his hands upon
his head, said with a loud voice—“_Ego te absolvo_; thou art
released from thy oath; this is not the case for its observance
(_no es este el caso de observarlo_).” Varela rose with delight,
and cried, “Then I will be the first to give my vote to his
Excellency General Lopez!” It need not be stated that the
President obtained unanimity, and that the people welcomed his
new master with transport. The Lopez dynasty was founded.

Lopez II., thus firmly seated in his place of supremacy, adhered to the traditions of his father. His government has been equally despotic, and the same policy of isolation and monopoly has been persistently observed. Public opinion has no existence, and the only paper published in Paraguay is the official organ, edited by the Dictator himself. The commerce and industry of the people—their toil, their means, their blood—are at the uncontrolled disposal of their tyrant. And how this authority has been exercised we all know. Inflamed by ambition, and desirous to extend his power beyond the limits of Paraguay, the greater part of his reign—I use the word advisedly—has been devoted to the steady accumulation of military and naval stores, the organisation of an army out of all proportion to the number of inhabitants, and the erection of strong fortresses on the riverine passages to the interior. For what purpose? Let his acts of gratuitous invasion tell; let the story of the present war with Brazil and her allies testify. I have already placed the facts with respect to this struggle before my readers, and I feel sure they will concur with me that the real object of Lopez was to bring the whole of the River Plate under the terror of a Guarani-Indian subjection. Happily this calamity has not occurred, but it has only been avoided by a prodigious outflow of blood and treasure.

BRAZILIAN CURRENCY.

Like most new countries achieving their independence and establishing constitutional government under circumstances of difficulty, internal and external, Brazil has been subject to vicissitudes in her monetary circulation, and has been affected by occasional aberrations from the great truths of economical science in the emission of paper money. The law of 1866 has, however, corrected the errors previously committed, and when the restoration of peace shall afford the present President of the Council and Minister of Finance, who, when holding the same offices in 1853, evinced both the capacity and determination to place the financial condition of the Empire on a sound foundation, the Viscount Itaborahy will, no doubt, achieve for his country even a greater financial reform than that which secured for him in Brazil a reputation not dissimilar from that of Sir Robert Peel in England.

The Brazilian standard of value is the gold oitava of 22 carats, of the value of four milreis, the par value of each milreis being by law 27d. sterling. The ancient mercantile par of the exchange of the milreis was in sterling 60d. After the arrival of King Dom Joao VI. in Brazil the exchange on England gradually rose, until in 1814 it reached 96d. This rise was owing to the increase of its commerce, consequent to the freer commercial legislation which was then first introduced and to the depreciation of English irredeemable paper money consequent on Mr. Pitt's Bank Restriction Act. The war which the Argentines plunged the Empire into immediately after their independence to deprive it of its Cis-Platine province produced, however, great financial embarrassments, and they were increased by the mismanagement of the paper circulation by the then Bank of Brazil, which King Dom Joao VI. had founded, by attempts at revolution in the northern provinces, by the intervention of the Emperor Dom Pedro I. in the affairs of Portugal, by his abdication of the Brazilian crown in 1831, and by serious and prolonged domestic troubles. The consequence was in 1833 the reduction of the ancient par to 43⅕d. the milreis. From 1831 to 1840 distracted regencies governed Brazil. During one of the regencies a civil war broke out in the great province of the Rio Grande do Sul, which only terminated in 1845, thanks then to the efforts and capacity of Count (now Marquis) de Caxias, who is at this hour as heroically fighting, in his old age, the battles of Brazil in Paraguay with equal success. Then followed other provincial and political difficulties of less importance, but all reacting on the financial position of the Empire. So that again in 1846 the par of the milreis had to be lowered to 27d., at which it has since been preserved. And it is to the credit of the Empire, its Government, Legislature, and people, that subsequently, neither the great financial and banking crisis of 1864, nor the pressure of the war with Paraguay, which has continued from 1865 to the present time, has produced any propositions for its further reduction. The maintenance of the par of the milreis at 27d. is now the established fundamental policy of Brazil. This policy is made especially and emphatically manifest in the financial measures of Viscount Itaborahy, who is once more Prime Minister and Finance Minister of the Empire, with the prospect, it may be hoped, of as long an administration as that which distinguished his Government from 1848 to 1853, during which period he governed so greatly to the advantage of the nation, terminating the slave trade, and introducing a financial system, the departure from and disregard of which in 1857 undid the good which he then accomplished.

The free trade legislation of England in 1845 opened the consumption of this country to Brazilian sugar, one of the great productions of Brazil, and the Revolution of 1848 in France was followed by the partial admission to France of Brazilian coffee, then the largest item of the agriculture of the Empire. Under these influences an immense impetus was given to the productive capacity of Brazil. The firm and enlightened Government of Viscount Itaborahy gave the Empire concurrently a period of domestic repose, of which the planters made the most. Political passions subsiding agriculture made huge strides. The termination of the African slave trade gradually relieving agriculture from debts and embarrassments, introduced better systems of cultivation, largely increased production, augmented commerce, released for better purposes a great amount of capital engaged in that abominable traffic, stimulated honest improvements of every sort and kind, and the exchange on England rose to 28¼d. the milreis. At this time Treasury notes were the only paper money in circulation, and their amount was so insufficient for business purposes that coin became more abundant than paper money, to the inconvenience of trade and society in so vast an empire.

The necessity of a convertible paper money became apparent and it was generally demanded. The result was the enactment, on the proposition of Viscount Itaborahy, of the law of the 5th of July, 1853. Under it the Bank of Brazil was established as a bank of issue to a limited extent; other banks were merged in that great institution; branches of it were established in the larger provinces, with similarly restricted powers of issue in circumjacent districts; the privilege of issue was confined to this one establishment, and Brazil was provided, as England now is, with one great bank issuing convertible paper in connection with, yet to a large extent independent of, the State, and the Executive Government had virtually no authority or power to found other banks of issue. Thus unity of banking was established so far as paper money was concerned, and to the immense advantage of the country. An easy, cheap, and convenient paper currency was provided, always convertible into coin, yet preferable for the ordinary purposes of life to coin; and the provinces and the metropolis were equally well supplied with this currency. The consequences were still further progress in the Empire, the Treasury was relieved from the trouble of regulating the currency, the revenue and trade increased, and an impetus was given to activity throughout the Empire. For all this Brazil had to thank the good sense and statesmanship of Viscount Itaborahy.

The Viscount's Cabinet terminated in 1853 in the midst of the improvement it had created. The progress thus produced by wise and scientific legislation unfortunately rendered a powerful section of the country impatient for further progress and misled succeeding Governments into a policy of a very different kind, whence mainly have flowed the subsequent financial misfortunes of the country. From the substantial but slow benefits of sound legislation, Senhor Souza Franco, a successor of Viscount Itaborahy in the Ministry of the Treasury, was led into the evils of unsound banking. He became enamoured of the then American system of free banking, as it was termed, and in 1857, misinterpreting the real meaning of the law of 1853, established plurality of banks of emission. Banking societies were then empowered to issue their own notes convertible by law, it is true, on presentation into coin, but without any corresponding security wherewith to furnish gold for their payment on presentation. The Government sanctioned no fewer than six banks of emission, two in Rio de Janeiro and four in the provinces, and assigned to each districts within which the right of paper issue might by means of branches be further extended. In the same spirit the Government sanctioned the establishment of joint stock companies and anonymous societies for all kinds of purposes throughout the Empire. The right thus assumed by Government was superabundantly exercised. Speculation spread apace in all directions, and fictitious prosperity for a moment took the place of real progress; shares and pecuniary responsibility, far beyond the means of those who assumed them, became the order of the day; long credit and increased discount aggravated the evil; gold began to leave the Empire rapidly, the rate of exchange to fall heavily, and in 1859 pecuniary anarchy was the consequence of this policy.

Senhor Souza Franco had to retreat before this result, and he was succeeded by Senhor Torres Homem, who soon found in the Chambers a spirit opposed to those wiser measures he recommended which he was unable to overcome during his short tenure of office. Then came Senhor Ferraz at the Treasury; he was more fortunate in remedying the mischief thus caused. The Empire and the General Assembly had recovered from their delusions. So, on 22nd August, 1860, a new law of banking, &c., was enacted. Its principles were the resumption of cash payments by the banks of emission and the withdrawal of all power from the Executive Government to sanction powers of emission or of anonymous societies, reserving such power for the Imperial Legislature. By this law the Bank of Brazil was prohibited from further emission until it had resumed payment of its notes in gold, the power of emission was reduced and fixed, and no banks can now be established except by legislative authority.

Immense as was the mischief caused by the measures of 1857, the law of 1860 to a considerable extent corrected it. The two banks of emission at Rio de Janeiro resigned the privileges they had acquired; within two years the Bank of Brazil resumed payment of its notes in cash; the Bank of Pernambuco withdrew its notes from circulation; and the currency of the Empire had undergone substantial improvement when—in September, 1864, suddenly a great “crisis” burst on Rio de Janeiro, immediately the consequence of adverse European influences, but substantially the result of unscrupulous and indefensible mismanagement of discount and private bankers in that capital.

Their establishments were in the enjoyment of great credit. Their chiefs were men of mercantile activity and public spirit, living _en evidence_, pushing business, giving facilities to everybody, and dealing with money as if possessed of boundless capital of their own. Their means for this pecuniary profusion was, however, chiefly derived from money deposited with them, for longer or shorter periods, or “at call,” sometimes in large, but more frequently in small sums, on which they allowed interest of, say, 8 per cent. Thus they became possessed of a greater part of the floating and uninvested capital of Rio de Janeiro. Receiving money in this way freely and largely, from the poorer public chiefly, it was the duty of these bankers to place it out at higher rates of interest, but on ample security always, and easily convertible into cash. By such business they would have reaped substantial profits for themselves, have assisted honest commerce, and have provided effectually for their depositors. A run upon one of these houses in September, 1864, after the arrival of bad financial news from Europe, resulted in its closing its doors on its depositors. This stoppage alarmed the creditors of the other houses, and they followed suit by demanding back their deposits. With the same effect—the closing of doors and stoppage—until five of these bankers suspended payment with deposits of £5,655,000.

Investigation into their affairs showed how reckless had been their management, how disregardful of every rule of deposit banking. The funds entrusted to them had been invested in houses, advanced on mortgages, lent to planters on bills renewable; and thus Rio de Janeiro was by their misconduct involved in unexpected ruin. The Government had to interfere with the payment of bills of exchange, to direct the administration of their insolvent estates. The Bank of Brazil was involved in large advances to these houses and unable to assist the community at the moment when assistance was most needed. The consequence was a suspension of its cash payments.

This crisis once more raised the question of the currency and of banking, and led, after a prolonged discussion, to further legislation in 1866.

By the beginning of 1865 the paper circulation of the Empire reached the enormous sum in sterling of £11,025,000, of which, however, only £3,150,000 were notes of the Government having general circulation throughout the country. For the balance of £7,785,000, the circulation of which was limited to defined districts in which the issuing banks were situated, the public, had no adequate security. The natural consequence was disarrangement in the internal exchanges and general disturbance of the money market. To remedy it Government proposed a radical reform of the Bank of Brazil, and its separation in two departments,—one of issue, the other of banking. The discussions on this question continued through the legislative sessions of 1865 and 1866. And during these discussions the adverse situation was illustrated by further decline in the foreign exchanges and the augmentation of the non-Government paper in circulation to £9,225,000, to which it had swollen in May, 1866.

In the session of that year the difficulties of this state of affairs were brought under the consideration of a Committee of the Senate, of which Viscount Itaborahy was the most eminent member, and to which a remedial measure of a radical character was referred for examination. The result of its deliberations was the expression of an opinion that the Bank of Brazil, having in two years doubled its circulation, could no longer accomplish the essential objects of its existence. Thus sentence of death was passed on that institution by the statesman who had formed it, and legislation became inevitable after such a condemnation.

Accordingly, on the 12th of September, 1866, a measure became law which enabled the Government to abolish the contract under which the Bank of Brazil existed. The principal provisions of this law were: 1. The cessation of the bank's privilege of emission. 2. The division of the bank into two departments—one for banking purposes only, the other for mortgage loans, in order to effect a gradual liquidation of the securities given by the agricultural classes, and so to form the commencement of the operations of the law of September, 1864. 3. The sale of the bank's stock of bullion, which amounted to £2,925,000 and the application of the proceeds to a proportionate withdrawal of its notes from circulation. 4. The annual contraction of its remaining paper circulation. 5. The payment to the bank for the State notes it used in accordance with its primitive contract, in withdrawing from circulation about £1,237,500, by the substitution of bank notes by State notes, and the discharge of an insignificant amount of treasury bonds cashed by the bank. 6. The issue in payment of floating debt, and those treasury bonds of State notes, to the amount of notes withdrawn by the bank.

Thus the Government were supplied with coin for remittances to the army and navy engaged with war in Paraguay, and the Bank of Brazil was reduced to a mercantile association. So it now remains, only a small and scarce portion of its notes having a forced circulation, and that small portion is being greatly reduced.

Thus, too, the exclusive functions of providing for the circulating medium were restored to the State, instead of being confided to a bank on which were at times painfully and mischievously exercised the exigencies of internal credit, and the reaction in Brazil of those crises in Europe and the United States, that affected the Brazilian Empire while its currency was in so unsound a condition with great violence.

In 1867, the increasing pecuniary requirements of the war compelled the General Assembly to vote the Government a credit of fifty thousand contos (£5,625,000) which have in great part been used by the Government. But, inserted in the law which authorised the issue, is a provision that on the termination of the war, the legislature will fix in the budget of each year the necessary amount to be applied to the withdrawal of this addition to the State notes.

It was not, however, only by further emissions of State notes that the General Assembly in 1867 made provision for the extraordinary expenditure of the Government. In that session old taxes were increased, new sources of taxation opened up, and the whole system of taxation was re-organised in a more rational and scientific way, greatly to the increase of the general revenue of the Empire. So much so that in the session of 1868 the budget for 1869-70 showed under the influence of greatly enlarged receipts, and of economies effected in the various departments of the State, an important surplus.

And while thus placing the paper circulation on the more solid basis of national security, important reforms were effected in the same session of 1867 in the coinage of the Empire.

Owing to the fineness of the silver coinage a fall in the foreign exchanges was immediately followed by the exportation of silver from Brazil to the great inconvenience of petty commerce. So in September, 1867, for the silver coinage of Brazil was adopted, in respect of the coins of two milreis (4s. 6d.) and milreis (2s. 3d.) the fineness and weight introduced by the International Convention between France and other countries. And the Government substituted for the old copper coinage bronze pieces of twenty reis (½d.) and ten reis (¼d.) of a similar alloy to that of our present bronze coinage—viz., ninety-five parts of copper, four of tin, and one of zinc. So that the Brazilian coinage consists of gold pieces (of twenty and ten milreis of 917 milliomes,) legal tender for any amount—that is, of 27d. per milreis, and of these silver and copper pieces for tokens. In addition, English sovereigns and half-sovereigns are also legal tenders for any amount in Brazil.

On the change of Ministry in July, 1868, which led to the formation of the Cabinet over which Viscount Itaborahy now presides, the Chamber of Deputies, by an unexpected and sudden combination of forces previously adverse to each other, came to a resolution which left the newly formed Cabinet no alternative but an appeal at once to the nation, and that without the Chamber making full financial provision for the conduct of the war. Left in this position by no fault of its own, the Cabinet in September, 1868, had no alternative but the adoption of financial operations on its own responsibility. But they have fortunately met with the full approval of the country, and will, no doubt, be sanctioned by the result of the now impending general election of deputies.

These measures were of an alternative character. First of all they consisted of a decree authorising a further issue of State notes to the amount of 40,000 contos, viz., £4,500,000. But this decree was followed by another empowering the Treasury to raise a domestic gold loan of 30,000 contos, £3,335,000. The former decree was, however, only intended to support the credit of the Government, in the event of the failure of the loan authorised by the latter decree, and as it has been successful, a further issue of State notes will, it may be anticipated, be averted to any considerable amount.

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]

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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.

In the elaborate and interesting report of Mr. William Perkins, who was at the head of a recent Government expedition to El Rey, an old Spanish settlement in the Gran Chaco, occurs the following remarks:—“The northern part of the Province of Santa Fé is justly considered the most important, being so highly favoured by nature; and in truth the Creator has here scattered with a prodigal hand all the elements capable of attracting population and industry. For these reasons it saddens the heart to see these magnificent lands deserted, teeming as they do with natural riches. Mighty rivers and streams cross each other in all directions; first-class timber in the woods to an extent the eye cannot reach; picturesque meadows of rich pasture,—in a word, whatever can be desired for agricultural and industrial pursuits.”

Mr. Perkins has been one of the most active and intelligent agents in the cause of emigration to the Argentine Republic and so soon as the land transfers of the Central Argentine Railway are completed the company intend to send him to the United States and to England for the purpose of making arrangements, and to bring out people to occupy their land, a desirable step, which will at once enhance its value and that of the immense tracts by which it is surrounded. The peculiar feature of this railway is the territory attached to the concession, namely, a league on each side of the line, comprising a total of about a million of acres, one half of which is the property of the contractors, the other half belonging to the shareholders, who have, besides, the national guarantee of 7 per cent. on the capital of £1,600,000, which the railway is to cost, or about £6,500 per mile. It is, perhaps, one of the easiest railways in the world to make, the chief expense being the rails and rolling stock, few earthworks or ordinary sleepers being required. As I have before noticed, there is plenty of wood higher up the country, about Villa Nueva, where a large quantity of sleepers of excellent quality were being prepared to complete the line to Cordova.

In Mr. Perkins' report just alluded to are some very graphic descriptions of the riverine facilities, at present so little known or availed of, but it is to be hoped when he revisits those scenes, after utilising his services at home, he will return to see progress already made, and some at least of the lands of the Central Argentine Railway occupied by thriving settlers. It only requires encouragement, and a beginning to be made, which I believe will not long be delayed.

The Argentine Government has come forward to assist the Argentine Railway by an issue of bonds for £300,000, the contractors supplying the remaining £300,000, which, with £1,000,000 in shares when the company was formed, completed the capital. The timely assistance thus rendered by the Government is an earnest of their desire to see this great work accomplished, in which the welfare of the upper provinces is so deeply concerned, as there are no navigable rivers running westward to Cordova, the Parana and the Paraguay tending northward into Paraguay and Matto Grosso. It follows, as a matter of course, that a large portion of the produce of these western provinces will find its way to Cordova and to the railway, amongst them many articles which have never yet been brought down to Rosario or Buenos Ayres, on account of the great cost of transit.

Reverting to Mr. Perkins, his services in the cause of exploration of the country have been very valuable, and few there are better acquainted with the facilities it presents for emigration, when once centres of population are established by this main trunk railway from Rosario to Cordova.

MY VOYAGE HOME.

My visit has been prolonged by unforeseen events, but I am on my way home again, on board the steamer City of Buenos Ayres, commanded by my old friend Captain Peters, also belonging to Tait's Line, which has experienced some of the incidents and drawbacks peculiar to the formation of new companies; but from the spirit manifested by that firm, there is every prospect of the enterprise proving a successful one. The rapid increase of passenger trade to the River Plate is a notable fact that has to be provided for, independent of that to Brazil, which continues to assume larger proportions, and steamers now will get a preference of freight both ways. Two days after the storm at Buenos Ayres, to which I have referred in another place, the vessel was enabled to complete her cargo, and to get under weigh at 9 p.m., on the 19th June, reaching Monte Video at 11 a.m. on the following day. There was a fresh breeze blowing, which rendered boating somewhat hazardous, and prevented our leaving the harbour until 8 a.m. on Sunday, the 21st, when we steamed down the river, passed Maldonada, and after five days we once more entered the bay of Rio de Janeiro, where several men-of-war were at anchor. As we passed the American frigate Guerriere, the band struck up “God save the Queen,” in compliment to our captain, who was a friend of the American admiral. Her Majesty's ship Narcissus, with Admiral Ramsay on board, was also lying in the harbour, with the American steamer Kersseage, which terminated the career of the world-famed cruiser, Alabama, in the combat off Cherbourg.

The weather was beautifully fine, clear, and pleasant at Rio, very different from that I had experienced a few months previously, and rendered the two days on shore very agreeable. I had a busy time of it, seeing and taking leave of old friends, but managed to get through, and embarked on Sunday afternoon. We sailed down the harbour, again passing the men-of-war, officers and crews of which were collected on deck, and returned our salutation. Captain Wilson, flag-captain of the Narcissus, lunched on board us, with some of the officers, and a number of other friends of the passengers were on board before we started. We passed the fort at 5 p.m., when they very politely hoisted the number, “Wish you a good voyage.” The scenery of the bay looked, if possible, more magnificent than ever, under the influence of the setting sun, the outline of mountains being so clearly and vividly portrayed, and few could leave so grand a scene without a feeling of admiration and regret. Our passengers were a mixed group (including about a dozen children of various ages) of different nationalities, English, Scotch, Irish, Belgian, Dutch, and Germans, so almost all languages were spoken on board. Some English families were returning from a residence of some years in the campos of Buenos Ayres, not very well pleased with the result of their speculation in sheep farming, which has no doubt been a bad one of late, but I could not find from their report that they had undergone any particular hardships, besides which they had other reasons for returning home. As I have before observed, it is a mistake for people to go out to the River Plate to commence sheep farming under the idea they can realise a fortune and retire in a few years. They must make up their minds to rough it, and to persevere as they would have to do at home in a similar occupation.[9]