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British Long-Term Investment in Latin America, 1865-1913

Published online by Cambridge University Press:  11 June 2012

Irving Stone
Irving Stone
Affiliation:
Assistant Professor of Economics, Bernard M. Baruch College, City University of New York
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Abstract

Following a review of the early period of British investment in Latin America (1822–1865) and a discussion of previous estimates of British capital exports to South and Central America before World War I, Professor Stone presents new and revised data concerning the composition and distribution of British holdings by amount, industry, and region.

Type
Research Article
Information
Business History Review , Volume 42 , Issue 3 , Autumn 1968 , pp. 311 - 339
Copyright
Copyright © The President and Fellows of Harvard College 1968

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References

1 A substantial portion of this article is based upon a doctoral dissertation completed at Columbia University in 1962.

2 Although the peak of British long-term capital in South and Central America may have been reached about 1930 (1931 according to the South American Journal and 1928 in the opinion of J. Fred Rippy), it barely exceeded the 1913 total. See the South American Journal, January 26, 1938, p. 97, and Rippy, J. Fred, British Investments in Latin America, 1822–1949 (Minneapolis, 1959)Google Scholar, Chapter V.

3 Further information about the origin and status of South American government loans may be found in The Forty-Eighth Annual Report of the Council of the Corporation of Foreign Bondholders, The Stock Exchange Year Book, edited by Skinner, Thomas (London, Paris and New York, 1875)Google Scholar and Fenn, Charles, Compendium of the English and Foreign Funds, Twelfth Edition, Rewritten with an Appendix bringing the work down to February, 1876 (London, 1876)Google Scholar.

In addition to the loans listed above, Great Britain, Parliament, Sessional Papers, 1831–2, Volume 6, Appendix 95 and Spackman's, WilliamStatistical Tables of the Agriculture, Shipping, Colonies, Manufactures, Commerce and Population of the United Kingdom and. Its Dependencies (London, 1842), 69Google Scholar, add the following loans: Poyais (non-existent kingdom), £160,000, 1822; Guadalaxara, £360,000, 1825. In regard to the latter loan, Rippy, op. cit., 19, 20, states that Guadalaxara was a Mexican municipality, that the face value of the loan was £600,000, and that it was issued at 60. However, the Council of Foreign Bondholders, loc. cit., makes no reference to this loan.

4 English, Henry, A Complete View of the Joint Stock Companies Formed During the Years 1824 and 1825 (London, 1827)Google Scholar.

5 Spackman, op. cit., 68.

6 Colombia, which then included Ecuador and Venezuela, actually defaulted on a British loan in 1821 and attempted to repudiate its loan of 1822.

7 According to English, loc. cit., an additional £159,000 was paid in on the shares of abandoned companies.

8 Corporation of Foreign Bondholders, Fifth Annual General Report.

9 In regard to the £8,000,000 Mexican Loan of 1864, there is doubt as to the amount of the loan actually issued in London. This loan was converted into the Mexican Imperial Lottery Loan of 1865, later repudiated by the Mexican government.

10 The other governments raising “new” loans were Chile, Colombia, Cuba, Peru, Uruguay, and Venezuela.

11 These dividend aggregates are derived from annual summaries of dividends paid by British and foreign mines prepared by J. Y. Waston for the Mining Journal, Railway and Commercial Gazette together with other dividend information published in this journal.

12 The major sources consisted of: Investor's Monthly Manual; Annual Reports of the Council of the Corporation of Foreign Bondholders (London); Stock-Exchange Year-Book; Charles Fenn, Compendium of the English and Foreign Funds; Stock Exchange Official Intelligence.

13 In the case of companies operating in South and Central America which were not registered in Great Britain, if their securities were issued in sterling, they were included in the tabulations of this paper. When companies were reported as operating in Latin America, but were neither registered in Great Britain, nor issued their securities in sterling, only those securities quoted in the “Official List” of the London Stock Exchange or were dealt in on other British exchanges were included. Securities such as those subscribed to by Latin American governments, securities of subsidiary companies held by parent companies, or securities for any other reason not available to the British investing public were excluded from the tabulations of this study.

14 Unpublished data furnished by Prof. Matthew Simon, Queens College, C.U.N.Y.

15 Differences between decade increases in holdings and totals of new issues for the same periods are due to factors such as movements in previously issued securities, redemptions, discontinuation of enterprises, and to the fact that in making estimates of holdings, debentures were taken at face value while in the new issues series, they were computed at market value.

16 According to data presented in the South American Journal, the predominance of investment in the private sector continued beyond World War II.

17 The broad industrial groupings such as Public Utilities, Financial, etc., were devised for this paper and do not appear in the Stock Exchange Official Intelligence.

18 These may not have been the first municipal loans since in 1864 a £1,000,000 loan issued at 60 was known as the “Montevidean” loan but was secured generally upon the revenues of the Republic and certain customs and anchorage duties. In addition, J. Fred Rippy noted, “Information on a Sao Paulo loan of £400,000 sold in London in 1865 is scanty. It is not known whether the bonds were issued by the Province of Sao Paulo or the Municipality of Sao Paulo.” Rippy, 30.

19 See McCaleb, Walter Flavius, The Public Finances of Mexico (New York, 1921)Google Scholar, for details.

20 Corporation of Foreign Bondholders, Annual Report of the Council for the Year 1885 (London: 1886), 15–16Google Scholar.

21 It should be noted that from the earliest days a substantial portion of Latin American railroads in which British investors placed their capital were not British-owned. For example, three of the thirteen companies in 1865 were not British-owned and fifteen of the ninety-four firms in 1913 were controlled by either Latin Americans, Americans, or Continental Europeans.

22 South American Journal, January 26, 1938, p. 97; January 14, 1939, p. 33; January 21, 1950, p. 33.

23 Paish, The Statist, Supplement, February 14, 1914, p. iii. P. iv of the same article reports the growth of railway mileage in operation in Argentina:

24 The first Latin American Telegraph and Cable Companies were established in the 1870's. Telephone Companies, judging by company names, did not appear until the 1880.

25 In addition to banking carried on by means of joint-stock banks, there was, of course, banking activity conducted through private banks.

26 Commonly designated “investment trusts,” these organizations were rather similar to American investment companies. The first two investment trust companies were formed in London in 1863. By 1886, there was a sufficient number of these companies to be grouped under the heading of “Financial Trusts” in the “official list” of the London Stock Exchange.

27 In addition to the companies grouped under the various subdivisions of Raw Materials, there were others engaged in the production of raw materials and foodstuffs, but, following the practice of the Stock Exchange Official Intelligence, they have been classified as Commercial and Industrial companies. Such firms were engaged in the cultivation and processing of sugar, tobacco, timber, and livestock. Nevertheless, their inclusion under Raw Materials would not have materially affected the relative share of this broad grouping in total British Latin American investment. Further, the investment data for both Raw Materials and Commercial and Industrial firms include only enterprises organized as joint-stock companies and exclude all other forms of ownership, such as individually owned plantations.

28 J. Fred Rippy cites a Spanish study which declared that British firms domiciled in Chile or Peru had engaged in the nitrate industry for several years before the formation of any joint-stock companies and that they had participated earlier in the closely-allied guano business. Rippy, op. cit., 58.

29 Ibid.

30 Two of the major Mexican companies included in the tabulation were not registered in London, and only those of their securities quoted in the “official list” were tabulated in this analysis.

31 Paish, Journal of the Royal Statistical Society, 1909, p. 471.

32 The British-owned Iron, Coal and Steel companies were not the first of their type in Latin America. We have evidence of the exploitation of Chilean coal by native Chileans as far back as 1840, of a government-owned iron foundry in Brazil in 1810 and, even in backward Paraguay, there is mention of an iron foundry established in 1854.

Note: “Investment” refers to estimated British holdings in terms of paid-in capital at year-end.