Credito Agricuola en La Provincia de Buenos Aires

Agricultural Credit in the Province of Buenos Aires, Argentina, 1890-1914 Author(s): Jeremy Adelman Source: Journal of Latin American
Studies, Vol. 22, No. 1 (Feb., 1990), pp. 69-87 Published by: Cambridge University Press Stable URL: http://www.jstor.org/stable/157167 . Accessed: 13/08/2013 17:44
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp
.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.
Cambridge University Press is collaborating with JSTOR to digitize, preserve and extend access to Journal of Latin American Studies.
http://www.jstor.org
This content downloaded from 193.145.39.81 on Tue, 13 Aug 2013 17:44:15 PM All use subject to JSTOR Terms and Conditions
Agricultural Credit in the Province of

Buenos
Aires,
Argentina,
I89oIi9I4*
JEREMY ADELMAN
Introduction In I879, for the first time, Argentina exported more wheat than it imported. A generation later the Republic figured among the top five exporters of wheat in the world and wheat had become its premier earner of foreign exchange. The expansion was by any account remarkable.' in the late With the expulsion of the Indians from the Pampa Huimeda I870s, hundreds of thousands of hectares of arable and highly fertile land were suddenly made available to agriculturalists. Railways, built largely with British capital, provided the means to ship new agricultural produce out of the region to the newly constructed ports. Immigrants flocked from Europe to take advantage of the opportunities offered by the vacant land, either as new property owners, as tenants or as wage-earners. The surge in the supply of land, labour and capital initiated a period of growth in Argentina, a growth which was shared by other regions of recent settlement which responded to similar opportunities.2 In 1978 Joseph Tulchin described the role of agricultural credit in
Argentina from
I910
to
1926,
a period in which 'the great surge of
economic growth had already begun to decline'.' He showed how credit was used by commercial interests to exert financial control over agriculture. My concern is different. How, when the formation and expansion of the modern agricultural sector was at its most intense
* I am grateful to Roberto Cortes Conde, Juan Carlos Korol,
Eduardo Miguez, Christopher Platt and Hilda Sabato for their comments on an earlier draft of this article, and to the Riat family for allowing me access to their papers. For a general overview of the process of expansion see Roberto Cortes Conde, El progresoargentino. I880-19I4 (Buenos Aires, 1979); Carlos F. Dfaz Alejandro, Ensayos sobre la historia econdmica argentina(Buenos Aires, 1975), pp. 17-74. For an interesting comparison of two regions of recent settlement, see Carl E. Solberg, The Prairies and the Pampas: Agrarian Poligy in Canada and Argentina, I88o-r93o
(Stanford, I987).
Joseph Tulchin, 'El credito agrario en la Argentina, vol. i8, no. 71 (Oct.-Dec., 1978).
1910-1926',
Desarrollo Econdmico
Jeremy Adelman is post-doctoral Fellow in History, University of Toronto.
J. Lat. Amer. Stud.
22,
69-87
Printed in Great Britain
69
70
Jeremj Adelman
between I890 and 1914, was creditallocatedto agriculturein the Province

of Buenos Aires, which by the end of this period was producing more than half of the Republic's cereals? And, given the allocation of credit, did it have any bearing on the distribution of land? Finally, in what way did the operation of the credit system reflect a certain rationality on the part of economic agents? The article serves also as an initial study of one aspect of the operation of the Argentine capital market during the economy's expansive phase. Thus far, no serious study has been conducted on the relationship between finance and the productive sector, save a general article by Donna Guy whose main concern is to explore the weakness of the domestic capital market.4 She argues that domestic finance did not contribute to industrialisation, thereby reinforcing dependent links with Great Britain. The alleged malfunctioning of the local capital market is simply assumed, in which the landowners are said to have enjoyed preferential access to what little finance existed. Jorge Sabato, in an interpretative essay on the Argentine economy from I88o to I914, suggests that resources, including financial resources, were allocated with an eye to minimising risk and maximising short-term flexibility.5 Such a broad description of the 'rationality' of the financial system deserves further research. Our conclusions here suggest that financial flows in the agricultural sector were characterised by a preference for less risky investment. The risk aversion was due both to the relatively unstable nature of Argentine agriculture and to the opportunity cost of not investing in other sectors. If Sabato's argument is correct, we find that the alleged risk-aversion was probably a rational way for lenders to treat the agricultural economy. Further research is needed to establish the characteristics of financial flows in other sectors.
The legagy of the i80os and the Baring crisis The decade of the I88os witnessed two key developments in the Province
of Buenos Aires: first, the uprooting of policies designed to foster colonising efforts based on the example of Santa Fe and the United States, and secondly, the silencing of voices arguing for the need to lend to small- and medium-sized agricultural producers. The expansion of agriculture in the late I88os, following the removal of the Indian threat and the expansion of the railways, was not robust and it was concentrated in the northern partidos (counties). In contrast to the
4 Donna
Guy, 'Dependency, the Credit Market, and Argentine Industrialization, BusinessHistory Review, vol. 58, no. 4 (Winter, I984). ' Jorge Sabato, 'Notas sobre la formaci6n de la clase dominante en la Argentina unpublished manuscript, CISEA, May 1979. moderna (I880-I9I5)',
i860-i940',
Agricultural Credit in BuenosAires
7'
rapid expansion of Santa Fe, Buenos Aires was slow to develop its agricultural capacity - by I896 less than 500,000 hectares were devoted to wheat. National and Provincial governments aimed to use the abundance of land to colonise the Province in the hope of fostering otherwise elusive growth. Earlier legislation was ineffectual. The most ambitious attempt was made in I887, with the passage of the Agricultural Centres Law which sought to establish 222 settlements around the Province. The Law was caught up in the fever of speculation, however, and the failure of the measure had catastrophic consequences, not the least being that it led to the liquidation of what remained of public land in Buenos Aires. The speculation that overwhelmed the Province in the late I8 8os undermined careful, deliberate policy. After I887 land prices trebled and speculators interested in increasing land values rather than production bought large tracts; they then mortgaged them and used the borrowed funds to buy yet more land. The idea was to sell off smaller parcels later at a handsome mark-up. In a frank and earnest letter to the Provincial Governor, Paulino Llambi Campbell, the President of the Banco Hipotecario de la Provincia, showed his concern: I am very concerned that when you leave office, there will be a great celebration,not only among your correligionarios politicos to whom nothing need be said for them to do it, but also especiallya fiestaof merchants,of the ranchers and, in a word, the most importantpeople who have interestsin the Province.6 The fiesta which came to pass not only ruined official land distribution policy, but it ruined the most important lending institution in the Province, the Banco de la Provincia de Buenos Aires (BPBA). In absolute terms, the BPBA lent more money than any other institution and was the best represented throughout the Province. Of the 42 branches of the BPBA existing in I887, 23 yielded losses,7 but Bank officials expected the Provincial economy to expand rapidly, therefore justifying the immediate losses. In the Memoria of i886, the President of the BPBA stressed the importance of decentralising the institution and reducing the number of transactions in the Federal Capital and in La Plata; the Bank, it was argued, should also charge the same interest rate in branches as in the central office. The following year only I7 branches incurred losses. The gradual settlement of the Province seemed to justify the risk. The new President, Daniel J. Donovan, waxed optimistic and tried to direct his Bank on more desarrollistalines. The Bank should increase its lending facilities and
6
Letter to Dardo Rocha, I March I884, Archivo Dardo Rocha, Archivo General de la Naci6n (herein AGN), Legajo I96. 7 BPBA, Memoria de 4&86.
72
Jeremj Adelman
give the producerall the facilitiespossible so that he may develop his industryand obtain better results from his own efforts, multiply the number of producersby of our rurallandholdings means of long term loans, facilitatethe fraccionamiento by means of the creation and support of a small producer class... 8 Branches of the Bank, according to Donovan, should be converted into bancoshabilitadores.The slow emergence of agriculture in the Province required financial support and 'greater sacrifices borne by the credit establishments, and especially by the State banks'. New bank policy would favour loans allocated to hacendados, agriculturalists and industrialists, and exclude finance negocios de la bolsa. Even if the new BPBA administration policy was genuine, it stood little chance of surviving the financially reckless years of the late I88os. Whatever its intentions, the Bank was swept up in the fury to issue acciones for sale abroad and, with the help of the Lgy de Bancos Garantidos, contributed to the increase in peso circulation from 94 million to 245 million between I887 and I890. When the flow of fresh loans to the Republic ceased, foreign debt service payments added to the imbalance in foreign trade and Argentina could not meet the obligations to its creditors.9 The Baring crisis of I 890 led to the suspension of the BPBA's activities in I 89I . Whatever hopes existed of a financial institution geared to the direct promotion of agriculture vanished. In sum, the I8 8o decade, and the Baring crisis which brought the cycle to a close, led to the disposal of public land in large units to speculators and estancierosand to neutralisation of financial measures which might have counteracted the tendency to appropriate large tracts through preferential allocation of credit to modest producers. Attempts to generate finance for an agricultural sector akin to that of North America were abandoned.
1890-1914: The allocation of credit
Francisco Segui, an official responsible for agricultural development in the i88os, once called the I89os a decade of 'convalescence', of generally scarce credit. It was, according to the ex-official, a decade of severe contraction. In the wake of the crash, officials abandoned whatever illusions they might have had. How many banks existed in the Province? The I895 National Census listed 5 I banks (including head offices and branches), nine of which were located in La Plata. By reconstructing the census-slips (cedulas)we can
8 BPBA, Memoria de iVV7.
9 For a recent treatment of the crisis see Roberto Cortes Conde, 'Nuevos aspectos en la crisis de I890', Serie Documentos de Trabajo I45, Instituto Torcuato Di Tella (Buenos Aires, I987).
73
acquire a more detailed impression of the location of banks.'0 The largest number (28) were located in the northern, more settled partidos, thirteen in central partidos and only ten in the south (four in Bahia Blanca). There were three types of banks: official banks with central offices in the national and provincial capitals, non-official banks with central branches in the capitals and non-official local banks, often consisting of a single office based in the capital of the partido. The BPBA accounted for 2 1 of the total credit outlets in the Province. Only three BPBA branches survived liquidation after I89I, leaving only 26 banks (including head offices and branches) operating in the Province. Nineteen of the 26 operative banks were created after the crash of I890. The largest bank employed eight. Most were operated by three or four employees, with an average of 200 to 400 clients. The largest banks, with the most employees and clients, were located in the provincial capital. Outside La Plata, the largest bank
was the Banco de BahiaBlanca,with 2,200 clients. In short, after I 890, the
region beyond the cities, the rural sector, was not well represented. Only those agriculturalists with access to good transportation and the time to spare to make the tiresome trips to larger urban centres could avail themselves of bank services. The Banco de la Naci6n Argentina (BNA) became the single largest lending and savings institution in the I 89os, replacing the dormant provincial bank. I 5 branches of the BNA were created between I 890 and I896. Together with the new local banks, the BNA gradually furnished funds to a capital-starved provincial economy. By I896, Francisco Segui was able to detect an improved situation for borrowers." By I905, 73 banks were operating in the Province, including 37 branches of the BNA.'2 In I906 the moratorium on the Banco Hipotecario (the Mortgage Bank) and the BPBA was lifted and in I908 the latter was able to resume activities with 20 branches.'3 In I9II the National Government rewrote the legislation governing the activities of the Banco Hipotecario Nacional, widening its activities, but allowing it to issue mortgages only up to 50 % pesos could not exceed of the value of a property; loans of over 250,000
40%
of the value of the estate.'4 By
I9I4,
any credit shortage could be
0 The slips, 'cedulas', are located in the AGN, Segundo Censo Nacional, II, Econ6micoSocial, Legajos 3 56, 80.
Congreso Nacional, In'estigacidn Parlamentaria sobre Agricultura, Ganaderia, Industrias Derivadasy Colonizacidn,Anexo B, Informedel ComisarioD. FranciscoSegui (Buenos Aires,
I898), p. 295.
12
13
14
Boletin Mensualde la DireccidnGeneralde Estadistica de la Provinciade BuenosAires VII: 66 (Jan. I906). Banco Hipotecario de la Provincia de Buenos Aires, Memoria Correspondiente alperiodo junio i9o6-mayo 1907; BPBA, Memoriajy Balance General (Dec. I908). Roberto Ramm Doman, Manual de la Bolsa de Comerciode BuenosAires (Buenos Aires,
I9I 2), p. 87.
74
JeremyAdelman
blamed not on the lack of institutions, but rather on their lending policy and preferences. It should be noted that most of the Province's lending activities took place in the national capital or in La Plata. Even as late as 1920, of the loans issued to agriculture and ranching by the BPBA, only 8 million gold pesos were loaned directly from branches in the Province, while 40 million gold pesos were loaned from the Caja Central.'5 One might expect local banks to have filled the gap left by the official banks and to be especially conscious of the needs of the rural sector. Small local banks, however, were often short of lending facilities and even more risk-averse than official banks. The Banco Comercial de Dolores, and serving 69I clients in the partido in I895, established in I892, exemplified the lending preference of local banks. In I 898, a year of rapid expansion of agriculture, high prices for wheat and high levels of pesos to agricultural machinery imports, this bank lent only 45,050 to ranchers and 240,8 II to farmers, 78,3 I I to industrialists, I80,200 commerce. Calculations for all banks other than the BNA reveal that, for the same year, 50 % of the value of all loans went to commerce, 40 % to ranchers and I0 % to agriculture.'6 An article in La Agricultura of I900 explained that in various points of the Province of Buenos Aires there exist 'popular' Banks which are prosperingmore each year and offer real services to commerceas well as to ranchersin the respectivecounties in which they are established.In general, the agriculturalist is not favouredby these establishments;they are forced to go about with both feet in the stirrupsif they want to progressand not be left to the mercy of the winds and currents."7 Given the general spread of banking in the Province, how much lending, in aggregate, went to agriculture? We can only be sure for the seven-year period from I907 (the opening of the BPBA) to I9I 3. Before 1908, direct lending by banks was slight. The dominant form of credit was mortgages, which will be discussed later. Total direct loans to all sectors in the Province amounted to 97,3 39,000 pesos in 1904, but rose rapidly to 241,149,000 pesos by 1907 (see Table i). Several points should be made. Table I does not include loans issued from central branches in the city of Buenos Aires, where industrialists, estancieros and comerciantes would be likely to have conducted a lot of their borrowing activity. Agriculturalists, committed to the land, especially in remote areas of the Province, were less likely to make trips to the capital.
15 16 17
(Dec. General BPBA, MemoriayBalance
I920).
Parlamentaria, p. 371. Congreso Nacional, Investigacidn VIII: 397, 23 Aug. I900. There were, however, exceptions, such as La Agricultura, the Banco Popular of Bragado. But the latter's pro-agricultural lending was not contagious.
Aires Agricultural Creditin Buenos
75
Table i. Lending b.y the BPBA and the BNA in the Province of Buenos outsidethe national capital, 1907-13 (in thousands Aires by sector, by branches of paper pesos)
Year
1907 I908 I909 I9I0
I9II I9I2
Agriculture
19,923
30,01I3
Industry
9,o83
I4,22I
Hacendados
47,997
Commerce
31,485 50,842 66,o26
6i,305
I3,941
33,353
40,221 50,775 77,825
i6,I26
I7,569
2 I,690 29,108
86,613
97,825 121,571
65,86o
68,487
92,596
1913
59,o68
42,741
113,378
86,I90
Source: Direcci6n General de Estadfstica de la Provincia de Buenos Aires, Boletin Mensual.
Table
Year
I894
2.
Total lendingby the BNA in Argentina by sector,selected years (in thousands of pesos)
Agriculture
II,74I
Industry
I2,906
Hacendados
2I,I32
Commerce
58,I54
1905
1913
23,966
7I,5 I 5
I9,429
59,659
69,837
2I9,800
87,I63
339,110
Source: Banco de la Naci6n Argentina, Memoriay Balance General.
Nonetheless, banks outside the capital tended to prefer lending to rather than to agriculture. The aggregate bias commerce and estancieros against lending to agriculture is more evident in Table 2. The figures for Table 2 under-represent the flow of credit in total since only the BNA figures are included, but they are indicative. Banks, official and unofficial, were more enthusiastic about lending to estancierosand commerce than to agriculture - the importance of agriculture to the economy notwithstanding. The bias is especially evident for bank lending as a whole, but applies also, and surprisingly, to branches outside the federal capital where one might have expected a bias towardsagricultural lending. Was there a geographical bias? In other words, did most agricultural lending take place in specific regions of the Province? The question is worth posing because, as Cortes Conde has demonstrated, the bulk of the Province's agrarian expansion after I895 occurred in the central and western belts.'8 One might expect, then, that most agricultural lending would take place in the expanding regions. This was anything but the case, as Table 3 shows. To simplify Table 3, I have taken three partidos for each region. The
18
Cortes Conde, El Progreso, pp.
I07-17.
76
Jeremy Adelman
Table 3. Agricultural lendingby the BPBA and the BNA by region of the of paper pesos) Provinceof BuenosAires, I907-13 (in thousands
Year
1907
I908
North
i,i66
3,352
Centre
1,119
1,028
Periphery
3,o98
2,56I
I909
I9I0 I91I 1912
4,206
3,208
787
2,029
2,3 12
2,214
2,659 10,266
3,795
I,644 2,734
1,214
4,I68 3,76I
1913
6,793
Source: Direcci6n General de Estadistica de la Provincia de Buenos Aires, Boletin Mensual. Note: North = Baradero, Chivilcoy, Pergamino; Centre = 9 de Julio, Olavaria, Tandil; Periphery = Trenque Lauquen, General Villegas, Coronel Pringles.
figures cited include only the BPBA and BNA and exclude the non-official banks so active in the north. Not all the partidos had branches of either or both banks and would therefore have to depend on competing sources of credit within and without the partido. Nevertheless, the trend is clear: the expanding regions did not enjoy ample credit facilities. This is especially so when one considers the role of smaller private banks operating in the north and the greater proximity agriculturalists enjoyed to the large urban centres. Agricultural expansion, it would seem, had little to do with the availability of formal bank credit. We can now ask why credit was not allocated to agriculture in proportion to its contribution to either employment or GDP. All three partidos in the north were the subject of colonisation campaigns prior to I89o. In Pergamino, Baradero, and Chivilcoy, the proportion of ownerproducers to all agricultural units was higher than the provincial average and even higher than the central or peripheral partidos; it is likely that the financial privileges accorded to the north reflected the high proportion of owner-operated units. Bankers lent to freeholders rather than leaseholders. It is also worth noting that, after I900, the northern belt ceased to be a major wheat-producing region; it turned increasingly to cattle fattening and maize. Wheat, the principal staple of the Province (at least in terms of its capacity to generate foreign exchange) was sown for the most part in the centre and periphery of the Province. Wheat production was less well served by formal credit than other agricultural land uses. In the peripheral partidos of the Province, bank lending was not active. Population density was much lower, so that in per caput terms, the preference for the north appears less marked. However, the three partidos discussed were considerably larger in size than in the north and it is clear that in terms of lending per hectare the peripheral areas were particularly deprived. Moreover, most wheat was cultivated by sharecroppers
77
It is more than probable, as and cash-tenants (arrendatarios). (medianeros) will be discussed below, that lease-holding was not conducive to credit, so that wheat production was generally short of funds. Bankers preferred to lend to farmers who owned their land. If collateral was required to procure a loan, the tenant had little to offer. In addition, wheat cultivation was considered an itinerant activity, a crop sown largely to convert land from primitive pasture to high-quality grazing. The large
estanciero, Benigno del Carril, in a letter printed in the Anales de la Sociedad
Rural Argentina, explained how he hired tenants on three- or four-year contracts to plough under the tough Pampa sod, breaking the topsoil, sowing wheat for several years and sowing alfalfa in the last year of the contract. This left high-quality pasture for pedigree cattle."9 Del Carril, and many other estancieroslike him, provided an ideal opportunity for European migrants, without capital of their own, to earn a quick fortune and return to Europe or settle in the city. A short-term contract did not bind them to the land for too long, and with luck, good prices and fair conditions, the return could be handsome. Yet it was not always the case. Locusts, drought and flooding were a continuous hazard. Moreover, prices did not always outstrip costs. In a word, the risk was great - and it was precisely that risk which the estanciero wanted to displace onto the tenant that weakened the tenant's credit-worthiness. The combination of a lack of collateral, high risk, and more often than not sheer ignorance, made poor Italian tenants less eligible for loans from banks already stung by the speculative fury of the i88os. Money was lent where returns were highest. For creditors, returns on commercial loans were more remunerative and loans to estancieros more secure. Even in La Agricultura, a weekly journal devoted to farm interests and generally opposed to the estancieroand country merchant, it was conceded that commercial loans were lucrative.20 Merchants and industrialists inspired more confidence, while the oscillations of prices and yields made farmers more risky borrowers. Moreover, merchants, industrialists and estancieros enjoyed more personal contacts with bankers. To the capitalists, even if at some point they could have considered applying their capital to 'rational' agriculture,the risks to which the harvestsare subjected,the attention required to oversee an agricultural domain etc., appear as insurmountable mountainscomparedto the absenceof risk and the smalleffortrequiredto collect the interest earned on investment in bonds (bonos cedulas).2"
'
Anales de la SociedadRural Argentina, vol. XXVI, I 892. William Walker, an estanciero in General Villegas, leased plots on a similar basis. For a sample, see Archivo Walker, Copiador de Correspondencia III, I June 1902.
20
21
La Agricultura, vol. IX, no. 457, 31 Oct. I901. La Agricultura, vol. X, no. 515, ii Dec. I902.
78
JeremyAdelman
Farmers in search of funds found themselves in a cul de sac. Without stability, they could not acquire loans, and without credit, stability was elusive. Yet stability was not always the objective of the tenant farmer he would have preferred a quick speculative return. Nor was the tenant always keen to take on a loan, which surely would have involved high overhead costs - as farmers in the United States and Canada knew only too well.22 The tenant, in short, was not concerned with fixed capital land, fencing and livestock - which was the preserve and burden of the landowner. In this, the tenant and the wage labourer were alike: they had only their labour to lose. But unlike the wage labourer, the tenant was concerned with variable capital -- the essential ingredient for bringing in the harvest. It should be noted that by furnishing land, fencing, some livestock or even implements at times, landowners in fact provided an implicit credit, or more accurately, an advance of capital required by any farmer to cultivate; tenants were not required to look for long-term funds to become rural operators, though they could enjoy at least a share of the ground rents by producing agricultural goods for the world market. However, the extent to which the tenant might earn a return on the capital advanced was offset by the rent charged by the owner. IThus, rising land prices after 190423 and the increase in the value of fixed capital explain partially the inflation of rents which led to the tenants' revolt of I9I2. The problem of agricultural credit reflected the very peculiar nature of cereal, and especially wheat, farming on the Pampa. It was a problem not of credit and the machinations of lenders nor of the stupidity of agriculturalists. Rather, it was the outcome of the agricultural system itself - the way in which each protagonist (tenant, estanciero or lender) positioned himself in the rural economy. The bias had as much to do with the preferences of lenders as it did with the ambiguous position of tenantfarmers who did not need direct credit to gain access to means of production, but required financing for the procurement of variable capital. The problem this may have posed remained latent as long as the system expanded on the basis of vacant territory, good prices and informal credit. By I9IO, it was running out of steam.
The operation of agricultural credit
A distinction must be drawn between mortgage credit and direct loans (either in the form of bonosissued by creditors to borrowers, who in turn sold titles on local bond markets, or in cash). Though mortgages were the largest source of credit, they tended to favour urban-dwellers. Carlos
22 23
Solberg, The Prairies and the Pampas, pp. 60-73. Cortes Conde, El progreso argentino,p. i66.
79
Girola observed that of the loans issued by the Banco Hipotecario Nacional in the Province in I902, only i8 million pesos went to rural borrowers, while 79 million went to urban borrowers.24 In the countryside, mortgages were only issued to those who owned land. 'The industrialists and agriculturalists', noted one author, 'only on the condition of being landowners can be the direct beneficiaries of mortgage loans .25 Between I892 and I897 the value of mortgages issued in the Province grew noticeably,26 but the real expansion occurred after the turn of the century with the general increase in lending activity and the reopening of the Banco Hipotecario de la Provincia. By 1904, 2.6 million pesos of mortgages were issued, increasing to I69.6 million pesos in 19I 3.27 Mortgages were the main credit instrument of large landholdings.28 Tables 4 and S suggest that estancieros were the principal beneficiaries of the dominant credit instrument in the countryside. Loans of over 50,000 pesos accounted for 70 and 8o % of the value of rural mortgage credits in
1905
and
I912
respectively.
Moreover,
rural units over i,25o
hectares
accounted for 82 % and 76 % of the total hectares mortgaged in 1907 and I 9 I 2, but for a much smaller proportion of the area devoted to agriculture. To give an idea of the value of these loans, consider that a thresher, trilladora,by far the most expensive of agricultural machines deployed at the time, cost just over 2,500 paper pesos during the first decade of the century, while a reaper cost between 300 and S?o paper pesos. A mortgage
for 50,000 pesos was indeed considerable.
Emilio Lahitte, usually less critical of the landholding system than some of his contemporaries, noted in 1902, with reference to the Banco Hipotecario Nacional, that 'the allocations ... with relation to the loans of smaller values, exclude small-owning farmers from the benefits which this credit instrument might apport...' 2 Elsewhere, he noted that of the 263 rural loans issued by the Banco Hipotecario Nacional in 1905, only 73 went to units of less than 300 hectares (a mere 3 % of the total value of mortgages issued by the Bank). Not only did mortgages flow disproportionately to large landowners,
24
26 27
Carlos Girola, 'Investigaci6n Agrfcola en la Repuiblica Argentina', Anales del Ministerio de Agricultura (I904), p. 275. The urban bias in mortgage lending could well have been a legacy of the Baring crisis which struck rural financing harder than it did urban finance. 25 La Produccidn Nacional, vol. I, no. 7, I Aug. I895. Congreso Nacional, Investigacidn pp. 394-404. Parlamentaria, Direcci6n General de Estadistica de la Provincia de Buenos Aires, Boletin Mensual, vol.
XVI, no.
28 29
I75
(Feb.
I9I5).
This was clear even before the I 890 crash. See Hector C. Quesada, El creditoterritorial en la Repuiblica Argentina (Buenos Aires, i888), p. iii. Emilio Lahitte, 'Cosecha I90I-I902', Boletln de Agriculturay Ganaderia,vol. II, no. 4I
(I5
Sept. I902).
8o
JeremyAdelman
Table 4. Rural mortgage loans by the Banco Hipotecario Nacional in the of paper Provinceof BuenosAires by size of loan in selectedyears(in thousands pesos)
1905 1912
Size
$1-2,000
Number of loans
2
Value of loans
4
40
130
Number of loans
2
Value of loans
3
32 322
$2-5,ooo
$5-10,000
$IO-20,000 $20-30,000
9 i6
I9
21
8
42
315
48
30 12 15
762 780
579
223
$30-40,000
$40-50,000 $5o-8o,ooo $8o-ioo,ooo
$100-150,000
6
8
I9 13
443
714
387
1,284
1,243
8
6
2 129
1,040 I,110 460
35 i6 i8
5
22 253
2,384 1,538
2,266
927
$ I50-200,000
$200-600,000
Total
6,814
6,8i8 I6,989
Source: Ministerio de Agricultura, Estadistica Agrzcola.
Table 5. Rural mortgageloans by the Banco Hipotecario Nacional in the Provinceof BuenosAires by size of property in selectedyears
1907 1912
Hectares Under
26-50 5 I-I00
IOI-200 25
Number of loans
I6
Hectares mortgaged
171
Number of loans
7
26 I9
Hectares mortgaged
65
3
7 14 3 15
20
95
614 2,o66 7I8
7,29I
885
I,506
57
30 45
21 22 30 253
8,564
7,656 I9,633
201-300 30i-650 65I-I,250

I,25I-2,500
I8,305
25,444
i8,6i8
38,680 I38,680
234,3I4
i6
22
Over Total
2,500
107,768 I62,49I
ii6
Rural; Source: Ministerio de Agricultura, Anuario de la Divisidn de Estadz'sticayEconomzai Estadistica Agrzcola.
but they also encouraged chronic speculation. Interest rates, though high, were lower than the annual increase in the value of land; borrowers could use loans to purchase land and then realise profits because the value of their land rose faster than the amount due to the banks. This was especially true after the turn of the century, once the austerity of the I 8gos began to abate and credit to flow. The discrepancy between interest rates
8i
and land prices was region-specific. Land prices rose especially in regions where sudden investments, such as the laying of railways, increased the productive value of the land. Hence, in more peripheral areas of the Province, which were connected by rail after 1900, speculators could anticipate increased land values and bought lots with mortgage credit.30 Belisario F. Arana, for instance, was able to acquire an estanciaof 4,800
hectares in the western partido of Pehuajo in 1905 by taking out a
mortgage loan from the BPBA. In a letter sent to the Directors of the Bank, Arana explained that he was then able to amortise his obligations over time by selling off portions of the unit at higher and higher prices, in the end paying off his debt and simultaneously being left with a sizeable unit for himself.3' The archives of the BPBA house many documents suggesting that Arana's use of the mortgage credit was not unique in areas of particularly rapid expansion. Large units were the main beneficiaries of the mortgage system. It also goes without saying that tenant farmers, who accounted for the vast majority of agricultural producers, were excluded from mortgage services altogether. For small- and medium-size farmers and tenants, the main recourse to credit was either through scarce direct loans in cash from the banks, or more often than not, short-term loans from country-merchants. Farmers sought loans for two reasons: to invest and increase either the size of their plot or their capital stock or to stabilise their income-stream over the crop-year. The former involved longer-term borrowing for fixed capital purposes, while the latter implied borrowing in the short-run to meet heavy seasonal expenses. The nature of bank and merchant lending to farmers of modest endowment made short-term borrowing the principal form of credit. Lahitte calculated that in the 14 years prior to I899, direct cash loans to the rural sector amounted to only 74 million pesos in total, and of that, only 8 % was distributed in sums of less than
5,000
pesos.32
The experience was not unlike that described by Bogue and Bogue in the United States: Allan and Margaret Bogue, 'Profits and the Frontier Land Speculator', Journal of Economic History, vol. XVII, no. i (March 19 5 7). In this sense, speculation may accelerate the flow of resources. Financial capital, by being more mobile than other resources, responds more easily to changing expectations. The inflow of financial concerns acts as a magnet for less elastic resources, productive capital and labour. If there is a perverse effect, it is that concentrated financial speculation distorts the allocation of land. This was much less the case in the United States, where financing, while speculative, was more accessible to small operators.
31 32
Archivo del BPBA, Creditos Hipotecarios,OI5-3-I, Documento IO. Emilio Lahitte,'Cosecha I90I-I902', p. 977. It is worth noting that Lahitte'sviews of
credit changed considerably. By 1912 he upheld the existing system and had become a fierce critic of tenant farmers for being more like lottery players than genuine rational producers: see 'Cr6dito AgrIcola (I912)', Informesy Estudios de la Direccidnde Economza Ruraly Estadstica, vol. II (Buenos Aires, I9I6).
82
Adelman Jeremy
Table 6. Loans by branchesof the BNA in the Provinceof BuenosAires in of paper pesos) I89J (in thousands
Loan value No. of loans
i6
20 44 I9
Total value
23,424 70,227 3oo,609 417,5 10
Average value
1,464 3,5 1 I 6,832 21,974
Under $2,000
$2-4,ooo $4-I0,000 Over $I0,000
Loans by branchesof the BNA in the Province of Buenos Aires in of paper pesos) (in thousands
Loan value Under
$2-4,ooo $4-I0,000 $z,ooo
I91
No. of loans
43
52 1 75 2I6
Total value
56,794
I72,284 1,330,199 7,899,879
Average value
1,320 3,3 I2 7,60I 36,574
Over $I0,000
Source: Banco de la Naci6n Argentina, Libros de Actas.
Table 6 compares the lending from the BNA branches in the Province of Buenos Aires in i895 and I9I0. Provincial branches were farmers' primary source of official credit. The figures suggest that larger landowners were the beneficiaries. Indeed, though small loans increased somewhat, BNA branches allocated the bulk of their increased credit funds between I895 and 19I0 to large loans (over io,ooo pesos). Yet we should not be surprised. Large owners were investing considerable sums in fixed capital, namely land, livestock and fencing; and mortgages and cash loans were geared to capital formation on the estancia.If the supply of official rural credit was more elastic for larger borrowers, it became increasingly so with time. Cereal producers, especially smaller operators, were often required to sell their produce immediately after the harvest and in many cases sold their crop at a fixed price to owners of threshing machines or local merchants before harvesting even began. By the eve of the harvest, many farmers, irrespective of whether they had land or not, would have exhausted the savings held over from the previous year's crop. In such cases they would turn to local agents who lent money, short-term, in return for rights on some proportion of the only resource the farmer had: the expectedcrop.33 Short-term lending, for 3o, 6o, or 90 days, allowed farmers to even-out their stream of income over the period of a year and cover high variable costs, especially during the harvest. Workers were hired to help the agriculturalist bring in the crop and threshers were leased
3
Boletin de la Liga Agraria de la Provinciade BuenosAires, vol. II, no. 5 (Jan. I 899); Jose agricola (Buenos Aires, I907), p. 104. Vivares, Credito
Agricultural Credit in BuenosAires Table
83
7. Loans by Aifredo Riat y Cia., Vella SuiZa, Coronel Pringles, Province of Buenos Aires, I89J (in paper pesos)
No. of loans
2
13
Loan value
$ I 00-zoo
$20I-500
Total value 3,499

4,398
Average size
I67
338
$501-I,000
Over
$i,ooo
6 8
3,96I
I8,65I
66o
2,33I
Source: Alfredo Riat y Cia., 'Libro Diario I895', Provincia de Buenos Aires.
Vella Suiza, Coronel Pringles,
(accompanied by supervisors and hired workers) to thresh and bag the harvest. Borrowing to pay for seasonal costs may have stabilised the farmer's income over the year, but in the long run cultivators experienced income losses. They paid heavily for short-term funds. In the period before the First World War, farmers depended on intermediaries for their loans. Emilio Coni, a professor of agricultural engineering, wrote in 1923 that the country merchanthas played a very importantrole in our cereal agricultural
sector ... he has constituted the binding link between the Banks and the colonist,
providing essential credit to those with little or no responsibilityand to whom the Banks could not loan directly.34 In the partido of Coronel Pringles in the south of the Province, Alfredo and Luis Riat, Swiss immigrants who had built up a wool-producing estancia, ran a small commercial operation which also served as a local outlet for capital. The Riats, like many other rural intermediaries, were able to borrow money from formal outlets and then re-lend it to local operators at a higher rate. What exists of their papers provides an interesting insight into informal credit systems. The only account book which falls in our period is that for i895. Table 7 summarises the lending activities in that year. The Riats provided the small loans which banks were reluctant to furnish, setting aside almost 40 % of their credits to allocations under 1,OOO pesos, but they were not averse to large loans. Of the records of loans which specify the rate of interest, ten borrowers were charged I % interest a month, while three were charged I 2 % annually. The Riats also accepted deposits - mostly small sums between I,OOO and 3,350 pesos which earned between 6 and 8 % interest. Informal creditors occupied the institutional vacuum left by bankers, providing a service for which there was a demand, but which more formal networks were reluctant to supply. Since they were dealing in a higher risk
3
Emilio Coni, Proyecto de Ley Creandola Caja Nacional de ColoniZaci6n(Buenos Aires, 1923), p. z86; Vivares, Credito Agricola, p. io.
84
JeremyAdelman
market, the Riats and others charged higher premiums on their services. Merchants may have exercised local monopoly power, but there were limits on the interest rates they could set. In any case, much more could be earned by fostering commerce with modest interest rates. The margin between informal rural rates and prevailing rates on national capital markets (around 3 %) was not great compared, say, to the average annual increase in the value of land up to 20 % during this boom period. The operation of country merchants like the Riats suggests that farmers relied more on informal than formal markets and were subject to marginally higher rates of interest that reflected greater risk. The argument made here is admittedly based on a narrow choice of findings, due mainly to the scarcity of source material. Further study, preferably in local history, is required to test the critical role of informal lenders. Country merchants, however, at times suffered from over-commitment. In January 1907, Luis Riat agreed to lend I0,000 pesos for two to three months at 9 % to his friend Domingo Rodriguez from the neighbouring partido of Tres Arroyos.35 In the ensuing months Riat's initial sympathy for Rodrfguez evolved into concern, and later impatience, as the borrower failed to meet payments (his difficulties arising from low wool prices so that he could not liquidate the year's shearing). On 3 I August, still without word from Rodriguez, Luis Riat wrote to his brother-in-law enlisting his efforts that he 'find out by post if there is any news, and if he (Rodriguez) is answering or not my telegrammes which Enrique sent, because this is no longer a joke'. The Riats in the end shared the producer's misfortune. In general, country merchants applied stringent conditions for reasons that were understandable. This made it difficult for the agriculturalist, for whom it is almost impossibleto get short-termfunds... becausemeeting the obligations does not depend on the will of the farmer,but ratherhis harvest,which runs the risk of collapsing and even disappearing completely, depending on natural climatic conditions.36 The agricultural economy was unstable, exposed to natural disasters and to oscillations in world prices. Moreover, it was dominated by tenants who seldom occupied the same plot for more than four consecutive seasons before having to move on. It did not, in short, inspire confidence among creditors. The risk of collapse was very great for the creditor, while non-landowning tenants had little to lose, other than foregone income. The burden of risk was transferred to the creditors. Calling cultivation a 'game of chance', one colonist agreed:
36
" The transaction is recorded in the volume 'Cartas', vol. I1, 1907-9. La ProduccidnNacional, vol. T, no. io (i6 Sept. i895).
85
The colonist looks for large amounts of land to cultivate wheat, linseed and maize, and hopes, with one single big crop, to create the basis of his fortune, with no risk and little work ... No risk, I said, because he who is running the risk is the merchant or almacenerowho offers the colonist, by offering his credit, the means to play the card game of 'the great harvest'." Tenant farmers could not 'lose' land, or any fixed capital investment, to which they had no title. The expected harvest usually served as the guarantee, which meant that a failure inflicted losses on the creditor as well as the debtor. As long as creditors, country merchants or local banks could find safer havens for their capital elsewhere, small farmers and tenants were not good business. The position of the Sociedad Rural Argentina (SRA) the main organisation representing estanciero interests, is instructive. The Sociedad Rural objected to institutional reform which might provide credit to small farmers and tenants. When Senator Francisco Uriburu pushed for the creation of rural credit cooperatives in 1904-5, the SRA supported the move to create credit facilities 'in general ', but was opposed to the specifics: Here the rural population is too undeveloped, too recent, it lacks indispensable community relations so that its neighbours and relatives may take full advantage
of this initiative ...38
Though the Sociedad Rural position was bound by the class interests of estancieros, for whom increased credit would put the agriculturalists outside their control, their position also reflected an 'objective' problem: agricultural credit to rough colonists was a risky business. If facilities for short-term loans were few and costly, longer term loans geared to helping farmers buy agricultural machinery, good seed or livestock, were almost non-existent. One exception was lending by domestic machinery and importing houses to promote sales. According to Francisco Seguf, they played a significant role.39 Yet the evidence is scanty and it is more likely that the role of machinery producers and importers was not great. Farmers interested in investing in fixed capital, or improving the quality of the seed sown, were required to rely on their own savings. In a report published in the Boletzn de Agriculturay Ganaderza in I906, Emilio Lahitte found that the distribution of property, the preference for extensive rather than intensive agriculture, coupled with the scarcity of long-term credit, must have depressed the rate of capital formation in the countryside: the 8,ioo,ooo hectares brought into cultivation since the year
37 38 39
I895
until now,
La Tierra, vol. II: 59 (z Dec. 1913).
Anales de la Sociedad Rural,vol. XLIV, no.
(Sept.-Oct.
38I.
1905).
Congreso Nacional, Investigacion Parlamentaria, p.
86
JeremyAdelman
have required, for the necessary installations, some 250 million pesos; a very exiguous sum if one compares it to that part of fixed capital deployed in agriculturein other countries of the world which are less favoured by nature."0 The effect of the credit system on technical diffusion cannot be addressed within the scope of this paper. Yet it is worth noting that Lahitte was not surprised by his conclusions. Indeed, it was quite rational for Pampean agriculture to have been organised as it was. Put simply, the estanciero-basedrural economy, enriched by agricultural tenants, was a reasonable model of economic organisation where capital and labour were scarce.4' Scarcity required deployment of land in place of labour or capital, land being the more abundant resource. Large units and extensive patterns of production, in Lahitte's view, was the optimal balance. The credit system merely reflected the structure of production. What Lahitte was reluctant to acknowledge was that capital and labour, were no longer scarce, as is manifest from the explosion of by i900, lending after the turn of the century. Bank lending continued to favour commerce and large landowners and in doing so raised the relative cost of machinery and capital investments for modest producers. Insofar as the dual credit market persisted - a more favourable climate for large landowners and commerce paralleled by a more austere market for those of modest means - capital formation, while slow to develop in agriculture, deepened in pastoral production. Dual credit markets prolonged the lifespan of extensive rural production. After I 900, once the problem of scarce capital began to abate, the extensive mode of production and the estancia depended on the credit system to reinforce its superiority. Credit, inasmuch as it facilitated the operation of the rural economy, also supported a specific structure of property relations. In turn-of-the-century rural Buenos Aires, few operators had a great deal of land, while the majority were landless. According to the 1914 census, less than a third of rural units were owned by operators. Of the rest, 14,036 were (7,493) were sharecroppers. Given the tenant-operated, while another 4,299 predominance of leased units, it is no wonder that credit flowed elsewhere. In so doing it reinforced the existing structure.
Conclusion
Direct formal financial services to agriculture were scarce. Bank credit found its way into the hands of cultivators, but mostly through informal channels. Increased risk meant more costly credit. Informal lenders (rural
40 41
Boletin de Agricultura y Ganaderia, vol. VI, no. 99 (March, 1906). Lahitte. 'Credito Agrfcola', pp. 1 30-3 . Close readers of this piece, and of the explanation of the rural unrest of I9g2 on the part of Government officials, will note the similarity. Lahitte, it would seem, wrote speeches for the Minister.
87
merchants and suppliers) were willing to take the risk because they earned profits on the purchase and sale of merchandise, which the loans themselves created. Merchants, unlike formal money lenders, were willing to forgo the risk because financial profits were not the basis of their livelihood. They were less risk-averse and more directly committed to rural production than their cousins, the bankers. The limitations of the credit system did not prevent agriculture from expanding, but it conditioned the path of its development. Once the supply of vacant land was exhausted around I908, the mutual interests of landowners and tenants disappeared. Owners began to charge higher rents as the demand for land outstripped supply. Thus, when prices sagged suddenly in I9I2 on the heels of a disastrous harvest, tenants felt the pressure and responded by refusing to till the land. Officials blamed moneylenders for the unrest. Legislators suddenly came up with a host of proposals to resuscitate the idea of the bancohabilitador,abandoned in the i88os. In the several years after the I912 revolt, rural credit belatedly dominated the congressional agenda for agrarian reform - to little avail as Tulchin has shown.42 Looking back, it was clear even to conservative Congressmen that two decades of phenomenal agricultural expansion owed little directly to banks.
42
Tulchin, 'El credito agrario'.

Credito Agricuola en La Provincia de Buenos Aires

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Credito Agricuola en La Provincia de Buenos Aires

Uploaded by

Copyright:

Available Formats

Agricultural Credit in the Province of Buenos Aires, Argentina, 1890-1914 Author(s): Jeremy Adelman Source: Journal of Latin American

Agricultural Credit in the Province of

a period in which 'the great surge of

Jeremy Adelman is post-doctoral Fellow in History, University of Toronto.

J. Lat. Amer. Stud.

Printed in Great Britain

between I890 and 1914, was creditallocatedto agriculturein the Province

Agricultural Credit in BuenosAires

Agricultural Credit in BuenosAires

of the value of the estate.'4 By

any credit shortage could be

(Dec. General BPBA, MemoriayBalance

Aires Agricultural Creditin Buenos

Source: Direcci6n General de Estadfstica de la Provincia de Buenos Aires, Boletin Mensual.

Source: Banco de la Naci6n Argentina, Memoriay Balance General.

Cortes Conde, El Progreso, pp.

Agricultural Credit in BuenosAires

Agricultural Credit in BuenosAires

rural units over i,25o

1,040 I,110 460

Source: Ministerio de Agricultura, Estadistica Agrzcola.

201-300 30i-650 65I-I,250

Rural; Source: Ministerio de Agricultura, Anuario de la Divisidn de Estadz'sticayEconomzai Estadistica Agrzcola.

Agricultural Credit in BuenosAires

Source: Banco de la Naci6n Argentina, Libros de Actas.

Agricultural Credit in BuenosAires Table

Total value 3,499

Vella Suiza, Coronel Pringles,

Agricultural Credit in BuenosAires

La Tierra, vol. II: 59 (z Dec. 1913).

Anales de la Sociedad Rural,vol. XLIV, no.

Congreso Nacional, Investigacion Parlamentaria, p.

Agricultural Credit in BuenosAires

Tulchin, 'El credito agrario'.

You might also like