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The Bank of Nova Scotia in the Caribbean, 1889–1940

Published online by Cambridge University Press:  13 December 2011

Neil C. Quigley
Neil C. Quigley
Affiliation:
Neil C. Quigley is senior lecturer and chairperson of economic history at Victoria University of Wellington, New Zealand, and in 1991–92 is visiting assistant professor in the Department of Economics, University of Western Ontario.
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Abstract

By examining the activities of the Bank of Nova Scotia, this article demonstrates that Canadian banks established branches in the Caribbean to finance trade with the United States rather than with Canada. The expertise of Canadian banks in the management of branch networks and in the finance of international trade was the basis on which they successfully filled an important gap in the provision of banking services for the Hispanic Caribbean and offered strong competition to the American banks that expanded into the region after 1914.

Type
Articles
Information
Business History Review , Volume 63 , Issue 4 , Winter 1989 , pp. 797 - 838
Copyright
Copyright © The President and Fellows of Harvard College 1989

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References

1 Clement, W., Continental Corporate Power: Economic Linkages between Canada and the United States (Toronto, 1977), 122Google Scholar; Kaufman, M., “The Internationalization of Canadian Bank Capital (with a Look at Bank Activity in the Caribbean and Central America),” Journal of Canadian Studies 19 (1984–1985): 61–81CrossRefGoogle Scholar; and Naylor, R. T., The History of Canadian Business, 2 vols. (Toronto, 1975), 2: 252–55 and 281.Google Scholar

2 Quoted in Clarke, W. M., The City in the World Economy (London, 1965), 31.Google Scholar

3 See the evidence of H. C. McLeod for the Canadian Select Standing Committee on Banking and Commerce, Select Standing Committee on Banking and Commerce: Evidence and Proceedings (Ottawa, 1913), 161Google Scholar; and Naylor, History of Canadian Business, 2: 225.

4 Callendar, C. V., The Development of the Capital Market Institutions of Jamaica (Jamaica, 1965)Google Scholar; Wallich, H. C., Monetary Problems of an Export Economy: The Cuban Experience, 1914–1947 (Cambridge, Mass., 1950).CrossRefGoogle Scholar

5 Wallich, Monetary Problems, 190–92.

6 Kaufman, “The Internationalization of Canadian Bank Capital,” 71; Shearer, R. A., Chant, J. F., and Bond, D. E., The Economics of the Canadian Financial System: Theory, Policy and Institutions, 2d ed. (Scarborough, Ont., 1984), 228Google Scholar; and Levitt, K. and McIntyre, A., Canada West Indies Economic Relations (Montreal, 1967).Google Scholar

7 This calculation excludes branches in Newfoundland.

8 Quigley, Neil C., “Bank Credit and the Structure of the Canadian Space Economy, 1890–1935” (Ph.D. thesis, University of Toronto, 1986)Google Scholar, and Neufeld, E. P., The Financial System of Canada: Its Growth and Development (Toronto, 1972).Google Scholar

9 Computed ftom data in Quigley, “Bank Credit.” On the move into the Caribbean, see Schull, J. and Gibson, J. D., The Scotiabank Story: A History of the Bank of Novn Scotia: 1832–1982 (Toronto, 1982).Google Scholar

10 The data that the Canadian banks supplied to the Department of Finance included only aggregate commercial loans and call loans outside Canada. Although the banks did not make call loans in the Caribbean, the volume of their commercial loan business in the United States, South America, and other parts of the world was such as to prohibit any attempts to interpolate the extent of their Caribbean business from these data.

11 Clarke, The City in the World Economy, 11–47.

12 For an outstanding contemporary description of foreign exchange transactions as they related to the finance of trade with the United States in this period, see Sprague, O. M. W., “Foreign Exchange,” in Dunbar, C. F., The Theory and History of Banking (New York, 1922).Google Scholar

13 Sprague, “Foreign Exchange,” 127.

14 Phelps, C. W., The Foreign Expansion of American Banks (New York, 1927), 211Google Scholar, indicates that the National City Bank and its subsidiary, the International Banking Corporation, had eighty-six branches in 1920, whereas Cleveland, Harold van B. and Huertas, Thomas F., Citibank, 1812–1970 (Cambridge, Mass., 1985), 324Google Scholar, give a figure of eighty-one branches for that year.

15 The Bank of Nova Scotia, Letterbooks of the General Manager to the Board of Directors (hereafter LGM), the Bank of Nova Scotia Archives, Toronto, 30 Aug. 1915.

16 LGM, 26 Feb. 1917.

17 Ibid., 12 Feb. 1917.

18 Stern, S., The United States in International Banking (New York, 1951).Google Scholar

19 Quigley, Neil C., “The Chartered Banks and Foreign Direct Investment in Canada,” Studies in Political Economy: A Socialist Review 19 (1986): 31–57.CrossRefGoogle Scholar Quigley, “Bank Credit.”

20 Langley, L. D., The United States and the Caribbean, 1900–1970 (Athens, Ga., 1980), 3–14.Google Scholar

21 The definition of informal imperialism is that used by McLean, D., “Finance and ‘Informal Empire’ before the First World War,” Economic History Review 2d ser., 29 (1976): 83.CrossRefGoogle Scholar On the Caribbean see Langley, United States, and Rippy, J. F., The Caribbean Danger Zone (New York, 1940).Google Scholar

22 Lewis, C., America's Stake in International Investments (Washington, D.C., 1938), 590.Google Scholar See also Williams, E., From Columbus to Castro: A History of the Caribbean, 1492–1969 (London, 1970), 428–42.Google Scholar

23 Langley, United States, 96; Rippy, Danger Zone, 224–40.

24 Rippy, Danger Zone, 262.

25 In practice this protection was provided by the establishment of customs receiverships and by military occupations. See Langley, United States, 28–29, 68–77. See also Perkins, W. T., Constraint if Empire: The United States and Caribbean Interventions (Westport, Conn., 1981).Google Scholar

26 Munro, D., The United States and Caribbean Republics, 1921–1933 (Princeton, N.J., 1974)Google Scholar; Perkins, Constraint of Empire; and Langley, United States, 115–61.

27 The Bank of Nova Scotia, Letterbooks of Thomas Fyshe, the Bank of Nova Scotia Archives, Toronto, T. Fyshe to J. Paton, 12 March 1889; Schull and Gibson, The Scotiabank Story, 71; Callendar, Capital Market.

28 LGM, 5 April, 15 June 1906; 28 April 1911, 6; 6 Oct. 1915.

29 By 1935 the Colonial Bank (reincorporated as Barclays Bank D.C.O.) had added only one new branch, the Canadian Bank of Commerce had opened in Kingston, and the Royal still had just two Jamaican branches. See Handbook of Jamaica (Kingston, Jamaica, annual).

30 LGM, 4 March 1901, 2.

31 Eisener, G., Jamaica 1830–1930: A Study in Economic Growth (Manchester, 1961), 269–70.Google Scholar

32 LGM, 22 Dec. 1911.

33 Ibid., 24 Aug. 1914; 23 Oct. 1915.

34 Ibid., 23 Oct. 1915, 2.

35 This underestimates the extent of Labilities to the Jamaican public by the value of notes issued by the Bank of Nova Scotia that circulated in Jamaica. From 1900 until 1945 the bank had the right to circulate its notes as currency in Jamaica. The value of the notes in circulation varied greatly from year to year, but was never more than £180,000. Crawford, D. A., “Jamaica—Early Paper Currency Circulation,” Institute of the British Numismatic Society Journal (1978): 28–30.Google Scholar

36 LGM, 28 April 1911, 6; 8 July 1913.

37 Deposit and loan figures for 1910 are from LGM, 1910. See A Banking Centenary: Barclays Bank (Dominion, Colonial and Overseas), 1836–1936 (1938) on the subsequent relationship between loans and deposits.

38 Callendar, Capital Market, 96.

39 The Havana Electric Railway Company was established by Canadian entrepreneur Sir William van Horne. It operated a railway which ran southeast from Havana to the port city of Antilla, a distance of approximately 600 miles. LGM, 31 March 1911, 4.

40 Ibid., 25 March 1905; Langley, United States, 38.

41 LGM, 15 Feb. 1906.

42 Ibid., 5 March 1908; 28 Nov. 1913.

43 The Bank of Nova Scotia, Statistics 7, the Bank of Nova Scotia Archives, Toronto.

44 LGM, 1 Feb. 1922.

45 Ibid., 26 Feb. 1925.

46 Ibid., 16 March 1908.

47 Ibid., 12 Jan. 1910.

48 Ibid., 31 March 1911, 5.

49 Ibid., 28 Nov. 1913, 3. On the price of sugar and its impact on Cuban national income, see Brundenius, C., Revolutionary Cuba: The Challenge of Economic Growth with Equity (Boulder, Colo., 1984).Google Scholar

50 LGM, 3 May 1922.

51 Wallich, Monetary Problems, 164–85.

52 LGM, 3 May 1922, for example.

53 Ibid., 19 March 1901, 1–2.

54 Ibid., 10 March 1907, 1–2.

55 These figures, and those following, calculate the share of the total banking business as each bank's share of the aggregate deposits plus loans.

56 LGM, 17, 21 Sept. 1910. That prosperity was, however, largely confined to the export sector or “enclave economy“; see Langley, United States, 158–61.

57 LGM, 17 Sept. 1910.

58 Ibid., 3–4.

59 Ibid., 2 July 1912, 2; 18 July 1913.

60 On the Jones Act and the political climate in Puerto Rico during the interwar period, see Langley, United States, 157–61.

61 LGM, 10 Aug. 1911, 5.

62 In 1910 loans to comparable concerns in Canada, such as the major grain elevator companies, realized approximately 6 percent per annum. Quigley, “Bank Credit,” 408–9.

63 Ramon Aboy was one of the most important merchants in the Puerto Rican sugartrade, and in addition he had interests in companies in New York and the Dominican Republic. The accounts of his principal firms, Aboy Vidal and Co. and Cintron and Aboy, were acquired by the Bank of Nova Scotia when they opened in San Juan in 1910. In 1911 Cintron and Aboy merged with the business of Eduardo Giorgetti, who was reputed to be the wealthiest and most politically influential person in San Juan, but the new firm continued to be managed primarily by Aboy, and to use the Bank of Nova Scotia for a growing portion of its business.

64 In 1935 the Vannina Central had a line of credit with the bank totaling $1,213,000. LGM, 1935.

65 These calculations are based on figures in De Venuti, B., Money and Banking in Puerto Rico (Rio Piedros, Puerto Rico, 1950).Google Scholar The proportions calculated before 1927 are estimates based on yearly average figures for the Bank of Nova Scotia and the balances reported for Puerto Rico on 30 June each year.

66 Langley, United States, 77–85; Bell, I., The Dominican Republic (Boulder, Colo., 1981).Google Scholar

67 LGM, 13 March 1919, 3. Staff from Canada often found the Caribbean climate unbearable, and many succumbed to debilitating or fatal diseases. Problems were accentuated in the Hispanic Caribbean because of the need for staff who spoke Spanish and the bank's policy of not hiring local people for positions of responsibility. After the First World War staff were trained in Spanish through a course offered by the Canadian Bankers' Association.

68 Great Britain, Department of Overseas Trade, Report of Economic and Commercial Conditions in the Dominican Republic (1931); Bell, Dominican Republic.

69 These calculations are based on figures reported by the British Consul as at 31 Dec. 1936. Great Britain, Department of Overseas Trade, Report of Economic and Commercial Conditions in the Dominican Republic (1938).

70 The Bank of Nova Scotia, Statistics 7 (Bank of Nova Scotia Archives, Toronto).

71 Great Britain, Report, 1931, 14.

72 Bell, Dominican Republic.

73 LGM, 25 Nov. 1913, 2–3.

74 The potential for multiple deposit “creation” through the expansion of loans was limited by the enclave structure of the export sector and the high marginal propensity to import among the commercial elite of that sector. This pattern was observed in Cuba by Wallich, Monetary Problems, 210–11.

75 LGM, 10 Aug. 1911, 4.

76 For a detailed discussion, see Galbraith, J. A., The Economics of Banking Operations: A Canadian Study (Montreal, 1963), 165–293.Google Scholar

77 A full description of these aspects of the management of branch loans in Canadian banks is provided in Quigley, “Bank Credit.” For an attempt to apply these ideas explicitly to the issue of discrimination in the lending policies of the Canadian banks, see Evans, L. T. and Quigley, N. C., “Discrimination in Bank Lending Policies: A Test Using Data from the Bank of Nova Scotia,” Canadian Journal of Economics 23, 1 (1990): 210–25.CrossRefGoogle Scholar

78 LGM, 24 Feb. 1920.

79 The Bank of Nova Scotia, General Office Inspection Report, 1910 (Bank of Nova Scotia Archives, Toronto), 669.

80 LGM, 24 Feb. 1920.

81 Moggridge, D. E., British Monetary Policy, 1924–1931: The Norman Conquest of $4.86 (Cambridge, England, 1972).Google Scholar Jamaican funds in London were generally invested in Canadian or British government securities; see LGM, 1 Nov. 1923, 3.

82 Wallich, Monetary Problems, 191–92.

83 Ibid., 191.

84 Ibid., 192.