Saturday, February 27, 2021

OPINION AND ANALYSIS | 21-01-2018 15:58

Seen any good debts lately? Well, just try history

What is all the fuss and concern about Argentina’s international debt? It’s as big and much the same as always.

What is all the fuss and concern about Argentina’s international debt? It’s as big and much the same as always. The pattern does not change. The Mauricio Macri government invites holders with squillions of dollars, and the bundles of cash in Kirchnerite proportions are turned into pesos to become acceptable residents of this estuary for a few weeks – a sort of Punta del Este holiday all year round – then the cash is changed back into dollars and it goes elsewhere… or comes back. Over the years it has been the same. The cash sort of follows the 1765 song in the Mother Goose Melody, “Fly away Peter, Fly away Paul” and then “Come back Peter, Come back Paul.” Over two centuries of so-called independent life in Argentina, the practice has not been much different to that four-line nursery rhyme. The rhyme has been used by such important people as Petula Clark, Jethro Tull, Peter Gabriel, and many novel writers, among others.

“All Argentina really needs is a good harvest to carry on as usual.” Believe it or not, I heard this comment made in a London club by an English lord (in a class of people who know everything) to a Wall Street operator (who know everything else). It was overheard many years ago. Not much has changed since. It might mean a little more than one harvest, not a lot, for a Peronist to tell a Radical, “if the next harvest is a good one, the election is ours.”

Argentina, or the United Provinces of the River Plate as they then were known, has been involved in sovereign borrowing for a long time. Government minister Bernardino Rivadavia, before he became Argentina’s first president, was ordered to seek an international loan by public subscription and a bond issue of one million pounds through the Baring Brothers financial agency. The aim was to spend the money on a new port for Buenos Aires, and Rivadavia extended the spending plan to start three new towns on the north Patagonian coast. Of the one million pounds sterling that the government in Buenos Aires aimed for, only about 520,000 pounds became available. The rest vanished in a variety of commissions. The prime promoters and negotiators were the Scottish brothers, John and William Parish Robertson, who encouraged the start of the contemporary Scottish farming colony in Monte Grande. The agreement for the bond issue was signed on July 1, 1824.

Just as happens today, attitudes toward the bond issue in the River Plate provinces were divided. The Rivadavia crowd saw the loan as the first step of a former colony that wanted to be open to the world. On the other side, critics saw Argentina submitting to neo-colonial domination (by Britain) through endless debt.

The port was not built. Credit went to finance the war with Brazil over possession of what would become a buffer state, independent Uruguay, in a deal between Rio de Janeiro and Buenos Aires bartered by… a Foreign Office envoy. Rivadavia tried to guarantee payment of the debt through an archaic and historically mysterious Emphyteusis Law in which the use and usufruct of a property are transferred for up to 99 years, but not the whole entire rights to the property. Private and state land were both part of the guarantee. Rivadavia was rapidly overruled when he stepped down as head of state. Who won? Who knows? Baring Brothers faced bankruptcy in November 1890, due mainly to excessive risk-taking on investments in Argentina. The London vaults were stuffed with useless notes issued by Argentine provincial banks.

Work on the port of Buenos Aires started more than 60 years later. Eduardo Madero, a youthful member of a Buenos Aires merchant family, submitted three port projects to President Julio A. Roca, who snapped up one of the drafts. In 1887, work began on the New Port, as it was called for decades, with British steel and stone from Conchillas, in Uruguay. However new, the port’s start went way back to the application for a loan dated in the beginnings of a nation that had started to tear itself apart in civil war.

It would be interesting if we could see the above events in the context of their time. The bad-luck timing of the Argentine-Baring bond issue coincided with the end of Spanish imperial rule in the Americas. A different kind of capitalism was seeing the light, and it sometimes had a very grey glow. The industrial revolution (1760-1840), a transition of manufacturing in the Western world, was settling into a development (which became faster in coincidence with the crowning of Victoria as queen in 1837) dependent on overseas colonial raw materials. But in Argentina a whole new generation understood that only at the end of the 19th century.

English merchants had started the East India Company in 1600, and the Dutch followed in 1602 by forming the Vereenigde Oost-Indische Compagnie (VOC), or United East India Company. The charter of the new company empowered it to build forts, maintain armies, and conclude treaties with Asian rulers. The VOC was to become the original military-industrial complex. 

The company existed for almost 200 years from its founding in 1602, until its end in 1796. During those two centuries, the VOC sent almost a million people to Asia, arguably more than the rest of Europe combined. The VOC was not just a first multinational corporation, but probably the largest corporation in size in history.

Over 200 years later, as Spain ended its rule in the Americas and Argentina saw its beginnings, capitalism was to change forever. The three British companies, Bank of England, East India Company and South Sea Company, had learned that trading in goods had relative values, yet cash dividends were the more attractive means of trade.

After 1815 and the Napoleonic Wars, the centre of global finance shifted from Amsterdam to London. The move took several decades. By then – and with the Empire looking economically safe – London had set its sights on the Spanish Americas. That too happened during the Napoleonic wars. Hence, England was first in line to offer cash facilities to the newly independent countries. 

In history, you can pick up the story of debt wherever you wish.


The last five paragraphs feature extracts taken from, “The Rise and Fall of the Largest Corporation in History.” By Bryan Taylor, Global Financial Data. November 6, 2013. See also, “Los mitos de la historia argentina.” By Felipe Pigna, Buenos Aires 2005/6. Additional research and information by Matthew Bradbury.

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Andrew Graham-Yooll

Andrew Graham-Yooll

Former editor of the Buenos Aires Herald (1994-2007).


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