ARGENTINE RAILWAY NATIONALISATION:

NOTES FROM THE PRESS AND COMPANY REPORTS, 1906 TO 1955.

SUMMARY: Those who blame Perón for having nationalised Argentina's foreign-owned railways and those who worship him for having done so are both seriously mistaken. Neither Perón nor anyone in his government had made any innovation. They only followed precedents set by a previous administration and bowed to foreign pressure.
        Two developments induced railway shareholders to "canvass" the possibility of nationalisation. First, a 1931 agreement with labour unions allowed wage cuts on condition of (a) the retention of supernumerary workers and (b) the suspension of dividends. The agreement became official policy by the Presidential Award of 1934 that extended the suspension of dividends to preference shares and attenuated the wage cuts by turning them into refundable "retentions." By the early 1940s government allowed tariff increases on condition that they be applied to wage payments. Thus the railwaymen had de facto obtained a first mortgage on railway revenue. Second, bilateral Anglo-Argentine trade agreements provided for artificially low exchange values of the peso and exchange controls. Thus the peso cost of fuel, other supplies, and what remittances of interest and dividends the railways remained able to make was increased by nearly 50 per cent.
        While the shareholders became willing to sell and the government was willing to buy, successive governments did not act until the British government, pressured by the US, first to sell the railways to American interests, and second to return to convertibility, sought to solve its balance of payments, exchange control and food supply problems by putting the railways up for sale. The early post-war trade and exchange policies of the US and the UK were pursued world-wide resulting in a wholesale divestiture of UK assets abroad that Argentina could not avoid. However, Argentina negotiated the hardest terms it could get: unprecedented gold guarantees, increased commodity prices, ex gratia payments, etc.
        The British were in a dire situation. They had obtained a much needed US credit of 3.75 billion dollars ($3,750,000,000) only on condition of a speedy return to free convertibility of the pound sterling. That raised the spectre of an Argentine Government withdrawal of their £150 million of blocked sterling at the Bank of England, exchanged for (at the then current rate of exchange) into US$600,000,000. That would have meant a haemorrhage of a major part of the new US credit which had to be avoided at all costs. The cost was the abandonment of British-owned railways in Argentina as a means to wipe out the Argentine credit at the Bank of England.
        The nationalisation of British-owned railways in Argentina must not be viewed in isolation of the British Government's eagerness to achieve a liquidation of British business interests abroad. That desire was so strong that, in the end, the purchase price of £150 million was not financed by exhaustion of Argentine deposits in London but by a gift of £10 million from the British Government, a British credit of £100 million, and only £40 million of Argentine money. The credit was an advance payment for future deliveries of Argentine products, deliveries made at previously increased prices of beef and maize.
        Expropriation terms mandated by Argentine Law (payment of "recognised capital" plus 20 per cent.) were never considered and much less applied. By waiting till after the law had allegedly expired (which it did not, only the tax concessions granted by it had a sunset clause) Argentina got the railways for much less: for the value of one year's worth of a bilateral trade balance. Whereas Sao Paulo share and bond holders got more than their nominal capital, holders of Argentine railway securities got about 60 per cent, and about 75 per cent of what the law had mandated. Unhappy shareholders were threatened with dire consequences if they rejected the deal.
        The above may be sufficient to dispel the belief that Perón and Miranda had a leading role in railway nationalisation. It is more correct to say that they followed and made the best they could of a British initiative which was as inevitable as it had been pursued by the British in many other countries besides Argentina.
        In later years there was much occasion to regret the nationalisation with a repeat of Perón's flippant talk of a high price for old iron, but that was not the issue. What was regrettable was the persistence with war-time labour, exchange, and railway rate policies rooted in the 1930s that nearly ruined the foreign-owned railways and finally ruined the government railways.
        Finally, it must be noted that the money paid by Argentina in nationalisation was not all immediately received by railway shareholders. The French-owned companies continued operating in Argentina until the 1950s. Shareholders in British-owned companies saw the liquidations of their companies drag on until 1964. Those who resided abroad (outside the UK) had their liquidation payments frozen in blocked sterling accounts for several years.

Early appetite
Largely out of disappointment with the guarantee system and a desire to construct extensions of guaranteed lines there have been some early expropriation projects, none of which prospered:
        In 1882, Deputy Carlos Bouquet introduced a bill to expropriate the Central Argentine Railway, and in 1883 Deputy Torcuato Gilbert did the same in regards to the East Argentine Railway. Gilbert's project advanced to the point were President Julio A. Roca and Minister Bernardo de Irigoyen sent a bill to Congress for the expropriation of the East Argentine Railway.
(The South American Journal, 31 August 1881, page 11; Cámara de Diputados, Diario de Sesiones, 11 June 1883, pages 248-249; 15 June 1883, pp. 310-313; 27 July 1883, pages 749-750.)

Celestino Pera's project
A Deputy [Celestino Pera] presented a project to Congress, by which a tax of one cent on every dollar of railway revenue would be collected, the proceeds to be used to buy railway shares, and the dividends then also applied to buying shares. Thus he figured the railways would be completely nationalised in 60 years.
(South American Journal, 13 October 1906, page 398)

The [1907] Budget Report advised the creation of a reserve fund to be applied to the purchase of railway shares of private companies, so as ultimately to nationalise the Argentine system.
(The Annual Register, a Review of Public Events at Home and Abroad for the Year 1906, London: Longmans, Green and Co., 1907, page 472.)

Repentant Bolsheviks at the Buenos Aires Chamber of Commerce?
In 1917 Argentine merchants had been agitating for railway nationalization, studied the question, and presented their conclusions to the Minister of Public Works, an extract of which was reprinted by Alejandro E. Bunge in his Ferrocarriles Argentinos, Contribución al estudio del patrimonio nacional, Buenos Aires, 1918, pages 432-35:

Respecto de la expropiación resultan interesantes y sugestivas, — aun cuando no coincidimos en todo acerca de este punto, — las observaciones que hace el "Comité Nacional del Comercio", en el estudio presentado al Ministerio de Obras Públicas de la Nación, el 7 de noviembre de 1917.

"Aparte de conocerse por todos las enormes pérdidas soportadas por el ferrocarril del Estado, la operación financiera sobre la base de las tarifas actuales resulta a todas luces inconveniente para los intereses públicos que tendrían que soportar una pérdida anual de $ oro 60.000.000, carga demasiado pesada para el erario público que tendría que salvarse con impuestos que irían a gravitar sobre determinadas industrias llamadas en esencia a sostener el enorme déficit anual.
        "El capital emitido por los ferrocarriles hasta el 31 de diciembre de 1914 era aproximadamente de 1.324.090.073 oro sellado.
        "La expropiación tendría que efectuarse por esa suma más la del 20 % que casi todas las concesiones autorizan como indemnización, lo que representaría la suma de $ oro 1.588.908.087.
        Esta operación demandaría un empréstito de $ o|s. 1.700 millones, si se tratase de un empréstito de 6 % de interés y uno de amortización acumulativa colocado en las mejores condiciones, o sea a 93 % libre de gastos.
        "Si el interés del empréstito de 5 a 1 %, el tipo en que se tomaría neto, neto para el gobierno, no sería superior a 85 %, lo que representaría la suma aproximada de $ o|s. 1.840 millones.
        "La primera operación de $ o|s. 1.700 millones demandaría un servicio anual de $ o|s. 119 millones, y la segunda operación, la de 110.400.000 $ o|s., en tanto que el producto anual de los ferrocarriles ha sido:

1910	$ o|s	110.941.406
1911	" "	116.782.267
1912	" "	132.059.613
1913	" "	140.113.204
1914	" "	114.742.638
Representando sus gastos la suma de:
1910	$o|s	65.926.627
1911	" "	71.447.103
1912	" "	82.641.737
1913	" "	87.274.512
1914	" "	78.831.242
Lo que significa una utilidad de:
1910	$o|s	45.011.779
1911	" "	45.335.164
1912	" "	49.417.876
1913	" "	52.838.692
1914	" "	35.911.396

        "De esto se deduce que con las tarifas actuales todas las entradas, haciendo abstracción de los gastos, serían apenas suficientes para pagar el servicio del empréstito, que tomando el menor servicio, o sea el 5 y 1 % y la mayor entrada, la de 1913, de $ o|s 140.113.204, daría una pérdida mínima anual de $ o|s. 57.561.308.
        "Si la operación se redujere a un determinado ferrocarril pasaría igual cosa, así, por ejemplo, si tomaran aislados o conjuntamente los tres ferrocarriles que han redituado más, como ser: el Sud, Oeste y Central Argentino.
        "Para expropiar el F. C. Sud se necesitarían 290.000.000 de $ o|s., o sea un empréstito de 310.300.000 de $ o|s. al 6 % de interés y uno de amortización, o uno de 333.500.000 $ o|s. de 5 y 1, lo que obligaría a un servicio de 21.721.000 $ o|s. o 20.010.000, cuando el producido del mejor año, o sea de 1913, ha sido de 30.627.492 $ o|s con 17.724.861 $ o|s. de gastos, o sea una utilidad de 12.903.131 $ oro; de modo que en el mejor de los casos habría un déficit anual de más de 7.000.000 de $ oro sellado.
        "Para el Oeste la expropiación sería de 153.000.000 $ o|s., con un empréstito de 5 y 1 %, lo que requeriría un servicio anual de $ o|s. 9.180.000, cuando el producido del mejor año ha dado la suma de 14.088.812 $ o|s. con 8.031.335 $ o|s. de gastos y una utilidad de $ o|s. 6.057.479, lo que equivale a decir un déficit de $ o|s. aproximado a 4.200.000 anuales.
        "Para el Central Argentino, ella llegaría a 324.000.000 $ o|s. con un servicio de $ o|s. 19.440.000; habiendo sido el mayor producido del último quinquenio el de $ o|s. 32.734.821 contra 19.135.594 $ o|s. de gastos que representa sólo una utilidad de $ o|s. 13.599.227, de modo que con esa base se produciría un déficit anual aproximado de 6.000.000 $ oro sellado.
        "Son éstas, señor Ministro, las causas que nos han determinado a realizar este estudio, que va sin duda alguna a disipar creencias equívocas y prejuicios injustificables.
        "Debemos hacer también una sincera aclaración y es la que antes de entrar al análisis de la situación de las empresas, creíamos como la generalidad que: a) la situación de ellas era próspera, b) que los rendimientos efectivos de las mismas eran ocultados, y c) que la legislación existente les permitía una libertad de acción inconciliable con el decoro y los intereses generales del país.
        "Hoy en posesión de todos los detalles, nos satisfacemos en manifestar nuestro error y en evidenciarlo a todas luces, máxime cuando la determinante de una u otra opinión no obedecía sino a una verdadera convicción."

Promotion of socialism by American anti-British propaganda

The men in charge of public affairs in the Argentine are perfectly fair and just and considerate as regards the stranger who has invested money within their gates. We have no complaint to make, as I have said before. People sometimes say to me: "In the Argentine you may get a Socialist Government. You know there are Socialists there who say we are earning gigantic profits in the Argentine Railways". There was a scandalous paper which came out in the Argentine some time ago, issued by Americans, — citizens of the United States— in which they said: "These English railways are coining money: they have one statement of accounts to show to the Argentines, and they have another statement of accounts concealing immense wealth which they show to their shareholders in London." (Laughter). Well, gentlemen, you know, to your sorrow, that is not so. (Hear, hear and laughter).
(VISCOUNT ST. DAVIDS at the Buenos Ayres & Pacific Railway meeting held 18 December 1919)

An Argentine Railway Expropriation.
According to La Nación of Tucumán, a speech made by Engineer Uttinger on the occasion of his being nominated Administrator of the State Railways, has attracted considerable attention. He referred to an entire reorganisation of the administrative staff of the railways, and added that it was an evident necessity, and a measure was to be put into practice without delay either to expropriate the Central Cordoba Railway or to make a fusion of the State lines with it in order that the lines of the nation should extend right into the Federal Capital. One of his first administrative intentions, he stated, was to join up the Antilla branch with the main line at Rosario de la Frontera, and to complete the works of the inter-Provincial line with Catamarca connecting it with that of the Central Cordoba at La Cocha.
(Railway News, 12 May 1917, page 554)

Bid and ask prices for the Central Railway of Chubut
The [Central Railway of Chubut] Company was said to have asked 20,000 gold pesos per kilometre of line but that the Argentine Government had offered to buy the line for only 13,968 gold pesos per km.
(The Review of the River Plate, July 14, 1922, page 83)

Nationalisation of the Central Railway of Chubut
The Argentine Government purchased the Central Railway of Chubut, ad referendum of Congress, for the price of 1,950,000 gold pesos [18,571 per km.], 487,000 gold pesos in cash and the balance at 12, 18 and 24 months with 6% interest.
(The Economist, 16 September 1922)

[Congress delayed authorisation of the purchase. In the interim the railway was leased for £21,280 per annum]

State Railways made no cash payment in respect of rent since April, 1930. The total amount owing June 30, 1931 was m$n 387,634 (£33,841 at par). The Company received in respect of this debt 7% 180-day renewable promissory notes for m$n 243,750.
During the year, the State Railways finished laying 75 cm. gauge track on the original metre gauge line between Port Madryn and Trelew, and rolling stock of the former gauge is now in use over the whole system.
(Central Railway of Chubut, Report of the Directors for 1930-31)

Por Ley 11.860 se aprueba el contrato de compra-venta del Ferrocarril Central del Chubut por 1.950.000 pesos oro sellado más el importe de arrendamientos atrasados.
(Boletín Oficial 12.063, 28 de agosto de 1934)

The railway, pier and maritime plant with a book value of £326,771 were sold for £271,300 in 4% Argentine "Roca Bonds" delivered in 1935 and not negotiable for two years. The bonds were disposed of in October of 1936. Holders of £95,800 in 6% bonds received £99,562 on 31 May 1937. Holders of £200,000 in shares received £153,953 in instalments. The liquidation of the company was completed on 31 July 1947.

The Montevideo Agency of La Prensa reported on August 10 that the Uruguay Government intended to purchase the Central Uruguay Railway and that negotiations with Mr. Grindley, the General Manager, were proceeding satisfactorily.
(The Review of the River Plate, 15 August 1930, page 40.)

A Forecast
It must . . be borne in mind that, sooner or later, and probably sooner, the ever-growing tendency towards nationalisation will lead to a conflict of interests which is bound to affect the situation of the railways in Argentina. Again and again, the Socialist deputies, with Catonian persistency, call for reconsideration of the various enactments dealing with the railway tariffs, while already, with the recent increases scarce a month ago, a private proposal has been laid before Congress by one of the deputies, Mr. Bauschi, calling for a reduction of freight on sundry items of livestock and goods traffic classified as being calculated to benefit agricultural, pastoral, or mining interests. It is probable that Argentina does but follow her destiny in this matter of giving special preference to national as opposed to foreign initiatives, but one sometimes doubts whether London interests fully realise that this trend of events must be followed sympathetically and closely if its subsequent development is not to prove unpleasantly abrupt. Abrupt, that is to say, to those who have not followed step by step the reasoning and the ambitions of the present-day young Argentine, who, be it said en passant, is both technically and intellectually on a far higher plane than his immediate predecessors.
(The Economist, 28 October 1922, page 806, posted at Buenos Aires 26 September 1922).

Search for State Railway access to Buenos Aires by nationalisation of a French-owned railway:
Un actionnaire demande ce qui'il y a de vrai dans les bruits de rachat de la Compagnie que l'on entende continuellement.
Monsieur le Président fait connaître qu'il y a eu, en effet, des pourparlers avec le Gouvernement Argentin qui nous a faite des propositions, mais celles-ci ne nous ayant pas paru acceptables tant au point de vue économique qu'au point de vue juridique, la question est restée en suspense jusqu'à présent.
(Compagnie Générale de Chemins de fer dans la Province de Buenos-Ayres, Procès-verbal de l'Assemblée du 20 Décembre 1922.)

There is talk...of an important line now in private hands to be acquired by the Argentine Government and merged in the State Railway system...Argentine credit is sufficiently good that, if the Government so decides, it can acquire the particular railway to which we refer and, no doubt, could acquire a large proportion and ultimately the whole of the railway system...those interested in Argentina, provided such a proposal were to take practical shape, would be well advised to consider how their interest would be affected...It is important to bear in mind the somewhat alarming experiences to which property owners, and particularly railway shareholders and the owners of scrip in various transport undertakings, were subjected during the recent Administration.
(The Statist, 11 November 1922, page 684)

The Cordoba Central Railway
As reported by the Chairman in his address at the Ordinary General Meeting of the Company held on the 30th October, 1924, the Directors were asked, and stated, the terms upon which they would be prepared to recommend to the Proprietors the transfer of the Company's property to the Argentine Government. As, however, after the expiry of some 12 months, the Government had not come to any decision in the matter, and there appeared to be no immediate prospect of their being able to do so, the Directors considered it inadvisable to allow the offer to remain open any longer, and it accordingly lapsed.
(Cordoba Central Railway, Report of the Directors for the Year 1924-25, pages 5-6)

Prevention of American control of Argentine railways
In May of 1929 Senator Diego Luis Molinari and President Hipólito Irigoyen became alarmed by the prospect of American takeover of Argentine railways. Malcolm Robertson, British Ambassador to Argentina, was asked for assistance to prevent American control of Argentine railways.
(Foreign Office document 371/13460.)

Notice was given that at the Ordinary General Meeting of the Argentine Great Western Railway Company, Limited, held at Winchester House, 100 Old Broad Street, in the City of London, on Monday, the 28th day of October, 1929, that
"the following Extraordinary Resolution will be proposed which, if passed by the requisite majority, will be submitted to a subsequent extraordinary General Meeting for confirmation as a Special Resolution, viz.:

RESOLUTION.

That the Articles of Association be altered in manner following :—

[a] By adding at the end of Article 2 the following words :—

(G) The expression "foreigner" means any person who is not of British or Argentine nationality, and the expression "foreign corporation" means any corporation other than a corporation established under and subject to the laws of some part of His Majesty's Dominions or the Argentine Republic and having its principal place of business in those Dominions or in the Argentine Republic. The expression "Corporation under foreign control" includes :—

(a) A corporation of which the majority of the Directors or persons occupying the position of Directors by whatever name called are foreigners.

(b) A corporation shareholders in which holding shares or stock conferring a majority of the votes are foreigners or foreign corporations or persons who hold directly or indirectly for foreigners or foreign corporations.

(c) A corporation which is by any other means whether of a like or of a different character in fact under the control of foreigner or foreign corporations.

(d) A corporation the executive whereof is a corporation within (a) (b) or (c).

61A. Every person or corporation seeking to be registered as a member of the Company shall before being registered as such member make and deliver to the Company a declaration in writing (if eligible to do so) in a form to be approved by the Board of the Company that the person or corporation so seeking to be registered as aforesaid is not a foreigner or a foreign corporation or a corporation under foreign control and does not hold the shares or stock in respect of which he or it so seeks to be registered as aforesaid for or in trust for or on behalf or under the control of a foreigner or foreigners or foreign corporation or foreign corporations or a corporation under foreign control and if such person or corporation or corporations shall fail to make such declaration or if after being called upon so to do by the Board he or it shall fail to prove to the satisfaction of the Board that he or it is not a foreigner or a foreign corporation or a corporation under foreign control or does not hold such shares or stock for or in trust for or on behalf or under the control of a foreigner or foreigners or foreign corporation or foreign corporations or corporation or corporations under foreign control such person or corporation shall be registered as a member of the Company in a special part of the Register (hereinafter called "the Special Register") and no member of the Company who is registered in the Special Register shall be entitled to vote either on a show of hands or on a poll and whether in person or by proxy at any General Meeting of the Company. A majority of the Board may also at any time certify in writing that there is in their opinion reason to believe that any share or stock in the Company is held by or for or in trust for or on behalf or under the control of a foreigner or foreigners foreign corporation or foreign corporations or corporation or corporations under foreign control and thereupon the Board shall call upon the holder of such shares or stock to prove to its satisfaction that the share or stock in question is not so held and upon such certificate as aforesaid being signed the name of the holder of such share or stock shall be entered in the Special Register and shall remain so entered until the time when such proof as aforesaid is given or until the share or stock referred to in such certificate is duly registered in the name of some other person or corporation.

The succeeding Articles numbered 62 to 69 (both inclusive) shall be read subject to this Article. Subject as aforesaid all shares or stock of any class of the Company shall notwithstanding that such shares or any of them or such stock or any part thereof are or shall be held by or for or in trust for or on behalf or under the control of a foreigner or foreign corporation or corporation under foreign control rank as to capital dividends and in all other respects pari passu with other shares or stock of the same class.

"all of whom shall be of British or Argentine nationality."

"The general effect of these alterations will be that they will preclude the possibility of any foreign shareholders, other than Argentine nationals, obtaining control of the management of the Company. There is to-day virtually no foreign holding in the Company. The Directors believe that it is a matter of national importance that the control of the company, subject to the limitation mentioned above, should remain as at present, and they confidently invite the support of the members for the scheme."

Colonel Josiah Wedgwood, M.P. (Labour), was opposed to these disenfranchisements, considering the action to be unwarranted.
(The Review of the River Plate, 21 June 1929, pages 9, 11.)

Foreign (other than Argentine) shareholders were disenfranchised as a precautionary measure [taken by the Buenos Ayres and Pacific Railway Company in June, 1929] to ward off American take-over....Paradoxically, this American interest followed after, and may even have been stimulated by, the disenfranchisement.
(The Economist, July 13, 1929, page 80)

Mesures de Défense prises par les Compagnies Anglaises contre les capitaux étrangers.— Monsieur Bustos Morón rend compte dans sa lettre du 14 Mai que des Compagnies de Chemin de fer Anglaises, en vue de parer à l'éventualité d'une main mise des capitaux Nord-Américains sur les actions de leurs Sociétés pour en prendre le contrôle, ont fait modifier leurs Statuts en vue de supprimer le droit de vote aux actionnaires de nationalité autre que Anglaise ou Argentine.
D'autre part, Monsieur Bustos Morón signale qu'il a été question du rachat par des capitaux Nord-Américains de la concession Selva, de Rosario à Mendoza, ce qui pourrait être une indication au sujet des projets des capitalistes des Etats-Unis en Argentine.
(Cie. du chemin de fer de Rosario à Puerto-Belgrano, Conseil d'administration, Procès Verbal de la Séance du 5 juillet 1929.)

Intentions des Américains et des Compagnies Anglaises au sujet des réseaux français en Argentine.— Dans la même lettre, le Directeur rend compte qu'au cours d'un autre entretien qu'il a eu avec Monsieur Leslie, il a été question des rumeurs qui circulent au sujet des tentatives de groupes Nord-Américains pour s'emparer du contrôle des Chemins de fer Argentins et notamment des réseaux français depuis que les Compagnies Anglaises ont prise de mesures pour empêcher l'accaparement de leurs actions. Le Directeur a retiré l'impression que pour éviter cette éventualité d'ingérence de capitaux Américains les Compagnies Anglaises ont déjà pensé sérieusement à prendre l'initiative d'une opération de ce genre.
Le Conseil décide de se renseigner sur les conditions du marché des actions de la Compagnie a fin de savoir si celui-ci ne présente rien d'anormal et au besoin d'étudier les moyens de parer a quelques tentatives de main mise sur la Compagnie.
(Cie. du chemin de fer de Rosario à Puerto-Belgrano, Conseil d'administration, Procès Verbal de la Séance du 31 juillet 1929.)

Exit of an Anglo-Argentine
"...ya en el año 1929...noté síntomas alarmantes de que el tiempo próspero para el negocio ferroviario había pasado en el país y que se aproximaban tiempos muy difíciles. Ignoro si otros accionistas habrán pensado o hecho lo mismo, pero por mi parte, después de reunir acciones de un valor nominal de cien libras esterlinas, durante mucho tiempo, creí llegado el momento de deshacerme de ellas, vendiéndolas a 112 libras."
Las causas del deterioro vistas por el autor fueron la Ley de Vialidad N° 11.658, falta de coordinación de transportes, devaluación del peso y control de cambios, crecientes cargas sociales apenas cubiertas por tardíos aumentos de tarifas.
El 26 de abril de 1934 el Ferrocarril Sud "decidió no extender más sus vías, limitándose a mantener las existentes y tomó la decisión definitiva de no levantar más capital en acciones ordinarias de la empresa."
(Arthur H. Coleman, Mi vida de ferroviario en la Argentina, 1887-1948, Bahía Blanca, Talleres Gráficos Panzini, 16 de mayo de 1949, págs. 576 y 586.)

Noblesse oblige ...
Nous avons à vous signaler par ailleurs que, pour l'année 1936, les Pouvoirs Publics ont accordé aux Compagnies de Chemins de fer un change spécial pour les transferts autorisés, qui est supérieur de 5 % au taux officiel d'achat payé par le Gouvernement Argentin: mais en contre-partie les Compagnies ont dû consentir un rabais sur les tarifs de transports de maïs.
(Compagnie Française de Chemins de Fer de la Province de Santa-Fé, Rapport du Conseil d'Administration sur l'exercice 1935-1936)

At 30 June 1938 the Cordoba Central Railway had a book value of £21,506,94 and £332,478 in stores of coal and other materials. This was sold for £700,000 in cash, £8,800,000 in 4% State Railway Bonds, and an undisclosed sum for stores. At 30 June 1939 the State Railways were still owing £133,351 for stores. The State Railway bonds were redeemed prematurely on 1 Nov. 1944. Investors received an estimated amount of £9,926,099, most of which was paid by 1945. Liquidation was completed 31 August 1964.

Canvassing the Government
The Association of Investment Trusts and Insurance Companies requested Baring Brothers & Co. to approach President Justo through their Buenos Aires agent. The association wanted to determine whether the Argentine Government would consider some scheme for nationalising the railways. It wanted to know whether the Argentines would accept gradual acquisition of a substantial interest in the British owned companies. Baring Brothers thought this could be accomplished in a number of ways. The British companies could convert themselves into Argentine companies and express their capital in pesos rather than in £ sterling. Baring also suggested a scheme in which the Argentine Government would buy outright 30 to 40 per cent of the equity...paying for the purchase in 3 or 4% bonds...As an alternative, Baring Bros. proposed that the Argentine Government consider a plan to buy the British railways on the open market...
(Henderson to Eden, 20 January 1937, and Foreign Office Minutes, 20 July 1936, Public Record Office, Foreign Office, 371/20598, 371/19761 cited by W. R. Wright, British-owned Railways in Argentina, Texas, 1974, pp. 211-12.)

British-Argentine Railway Committee
In 1936 the British-owned railways formed a "British-Argentine Railway Committee" in Buenos Aires primarily to better respond to increasingly restrictive railway policies of the Argentine Government. The Committee was composed of the chairmen and other members of the Local Boards of the British-owned railways. Its chairmanship rotated annually among the Argentine chairmen of the local boards. A similar committee was formed among the directors in London. During the 1940s that committee evolved by interlocking directorships among the boards of the four broad-gauge railways. Thus only two or three directors were needed to accompany British Government missions to Buenos Aires and to negotiate the sale of the British-owned railways. This followed the dissolution in 1936 of Jointco, an older committee formed in 1933 that included representatives of the French-owned railways.
(Info. from several Directors' Reports.)

Nationality of Personnel of Privately Owned Railways

According to the Instituto de Estudios Económicos del Transporte (supported by railways and housed in the Railway Clearing House), the employees and workmen composing the personnel of the Southern, Western, Central Argentine, Pacific and Córdoba Central railways number 90,792. Of these 49,519, or 55 per cent. are Argentines, whilst 41,273, or 45 per cent are foreigners. This proportion is very close to that of the adult male inhabitants of the country. The male inhabitants of the country of ages between twenty and sixty years number 2,900,000. Of these approximately 1,700,000 or 59 per cent. are native born citizens, whilst the remaining 1,200,000, or 41 per cent are foreigners.
        Of the 41,273 foreigners employed by the five railway companies referred to, only 1,650 are British — that is to say citizens of the country of origin of capital of the railways. These 1,650 persons represent only 1.8 per cent of all the personnel employed by the five railway companies.
        As regards the proportion of the different nationalities listed in a complete census of railway staff, the most representative, after the Argentine, are the Italians and Spaniards. In point of fact, the number of workpeople of each nationality corresponds more or less, in the proportionate sense, to the percentage of each foreign community to the total foreign population of the country. In other words the possibility of obtaining employment on the railways is, according to nationality, purely and simply a matter of the relative number of persons of each nationality in the entire adult population of the Republic.
(The Review of the River Plate, 4 December 1936, page 33. Of course, this does not address the nationalists' complaint of under-representation at the higher railway management levels. However, given the small size of the native-born population and the correspondingly small number of native high-school and university graduates, a correction of the lamented under-representation would have forced government departments and railways to hire foreign professionals.)

Nationalisation of the Transandine Railway
4. As the shareholders have been informed by circular, during the past year discussions have taken place between the Argentine Government and the Company for the future of the Railway, arising out of the decree by the Government [of 30 December 1935] ordering the repair of the portion of the line destroyed in the flood of 1934.
        The Government subsequently decided to take control of the line and to become responsible for its reconstruction.
        These negotiations resulted in an agreement being signed in June last by the Executive Power and the representative of the Company embodying the terms upon which the Argentine Government will acquire the Railway.
        The terms of this agreement were set out in the circular to the shareholders of the 24th June last and are subject to the approval of the Argentine Congress and the Debenture and Shareholders of the Company.
        Congress has not yet dealt with the matter, but it is hoped that the agreement will receive its consideration and approval in near future.
(Argentine Transandine Railway Company, Report of the Directors and Statement of Accounts for the Year Ended June 30, 1937, pages 6-7)

The final terms agreed on 8 June 1937, were as follows:

£75,000 cash plus £675,000 in 4% Argentine Railway Sterling Bonds guaranteed by Government and blocked against sale for 5 years.
£383,985 of 5% (Govt. Bond) Debenture remained a Government debt and were exchanged for Argentine 5% Bonds on which the Stock was secured.
£225,000 Deferred Shares held by Government were cancelled.
Law No. 12.573 of February 20, 1939 authorized the purchase for a maximum of m$n 5.614.489.

On 30 June 1937 the Transandine Railway had a book value of £2,484,444, plus £55,516 in stores and £21,140 owing to it by Government for freight and fares. The investors received an estimated £860,603, most of which had been paid by 14 August 1946. The liquidation was completed on 3 March 1960.

Nationalisation of the Cordoba Central Railway
[Because of dust-bowl conditions in the US, some Argentine railways had the benefit of carrying the maize exports of two years] The revival of railway receipts indirectly caused the recent partial strike on the Cordoba Central Railway. Under the Award of the President of the Republic of October 23, 1934, which was accepted by the companies and the railwaymen, it was agreed that wages should be cut until such time as the surplus of receipts over expenses should reach a certain level. This level has been attained by the other companies but not by the Cordoba Central...The men of the latter company...saw no reason for their own less happy lot.
        The strike, which was unauthorised by the railwaymen's own leaders, was called after the strikers' representatives had been interviewed by the Minister of Public Works. The Government is about to issue a decree restoring the cuts. In the meantime, efforts are being made in several political quarters, Opposition as well as Government, to persuade Congress to approve the purchase of the Cordoba Central Railway by the State without delay.
(The Economist, 3 July 1937, page 19, posted by the Argentine correspondent June 19)

9. In the month of December, 1936, terms were provisionally agreed with the Government of the Argentine Republic, subject to the approval of the Stockholders of the Company, for the purchase of the Company's undertaking by the State, the consideration to be £8,000,000 (nominal) 4 per cent. State Railway Sterling Bonds guaranteed by the Nation, and £700,000 in cash, plus a sum in respect of Stores on hand.
        Towards the end of that month the Government submitted a Bill to Congress for authorising the purchase of the railway.
10. Partial stoppages of work by the Company's employees occurred in the month of June last, the men demanding the restoration of the salaries and wages cuts made by virtue of the Presidential Award of October, 1934. As a consequence the Argentine Government intervened and ordered that the cuts be suspended, and undertook to bear the cost involved.
        These arrangements covered a period of four months from the 1st June to the 30th 5eptember, 1937, during which time it was considered by the Government that Congress would have come to a decision as to the purchase by the State of the Company's undertaking. The ordinary session of Congress, however, terminated on the 30th September last without dealing with the matter, and as the Government did not extend the period of their undertaking, further stoppages of work on the part of the men ensued on the 15th October. The Argentine Government again intervened, and proposed that the State Railways should assume the direction of the working of the railway for a period of up to 12 months, undertake to satisfy the claims of the men, and guarantee to the Company practically the same net earnings as those realised during the past financial year. Should, in the meantime, sanction of Congress be obtained to the purchase of the railway, the option for which is being continued, the Government will make up the difference between the said net earnings and an amount equivalent to 4 per cent. on the agreed purchase price.⁽¹⁾
        The Board accepted the Government's proposal, and normal service was re-established throughout the railway on the 4th November.
        The sale contract remains subject to the approval of the Stockholders.
(Cordoba Central Railway, Report of the Directors and Statement of Accounts for the Year Ended June 30, 1937, pages 4-5, paragraphs 9 and 10)

On February 11th the Government sent to Congress a long message explaining their motives in taking over the Cordoba Central Railway. The message recapitulates the Government's policy of ultimately taking over all the privately owned railways, announced last year. The nationalisation of the railways, it considers, would strengthen the bases of Argentine social peace. The action of the Government in taking over the Cordoba Central Railway by decree has been criticised in Argentina as an encroachment upon the powers and privileges of Congress, and it is apparent that the purpose of the recent message is to persuade Congress to endorse the action of the Executive with regard to the railways without delay. The delay is due to Alvearista [Radical] opposition to President Ortiz [Concordancia].
(The Economist, February 26, 1938, page 443, "Correspondence from Argentina," posted February 12)

The message could not have been clearer: "la incorporación de las líneas del Central Córdoba a la red del Estado, . . . importa un primer paso . . . de lo que ha de constituir, sin duda, nuestra orientación ferroviaria del porvenir . . . Restituir al dominio pleno de la Nación . . . servicios públicos esenciales . . . es la política que debe seguirse en el futuro . . . el transporte por ferrocarril no debe tener otra tarifa que la indispensable . . . sin agregarse las cargas representativas de intereses comerciales . . ."

Canvassing the Government

Buenos Ayres & Pacific Railway, AGM, October 28, 1937, Lord St. Davids in the Chair:
        As to the more distant future of the railway, it does not seem likely to me that until exchange returns to par anything can put us in the position in which we used to be. There are no signs of any improvement in exchange....
        Now I want to speak to the ordinary stockholder, for whom I am frankly very sorry. He may ask me whether there is any hope for the ordinary stockholder. Well, as I see it, there is. I have told you that the Government are buying the Argentine Transandine Railway and you have heard that they are buying other railways. Some of my colleagues do not agree with me, but my own belief is that it is only a matter of a term of years—possibly it will be a long term of years—before they buy them all. What is the financial position of the country? The financial affairs of Argentina have been carried on with quite exceptional ability; I think that everyone agrees as to that, and there can be no two opinions about it. They have kept on paying off debt, lowering the interest on their debt and getting rid of liabilities. Their credit, as you all know, has enormously improved.
        What is the position of our finances in Great Britain? I do not think anyone would say that our Government's financial position is not well managed, but we have got in Europe dangers which are forcing our people to rearm. We have already had to borrow for that purpose, and we may have to borrow over and over again before the process is completed. This borrowing has put down the prices of our securities and may put them down more. Supposing that this has to go on for another two or three years, we borrowing and the Argentine paying off and not borrowing, it is quite on the cards that within two or three years the credit of Argentina may be at least as good as that of this country. If that time comes, will there not be a clamour in Argentina for buying up foreign railways? If that time comes, I think that there will be.
        Now look at the financial position of our railway. First of all remember that the Government are buying the Argentine Transandine which is at the end of our line and of the Argentine Great Western. We have a minutely small debt at 4 per cent; all our other money has been borrowed at 4½ per cent or 5 per cent; and our Preference stocks at very much higher than that, and we are not in a position to get out of the moratorium.
        If Argentina chose, it could buy us up by paying off our high-paying debt, and that is where the advantage of our small Ordinary stock comes in. In a few years' time they might easily buy us up on terms that would pay our debts and leave something satisfactory for the Ordinary stock. That may sound to you far-fetched at the present moment, but it is right that people in our position should look ahead. Some few years ago a young man told me that he wanted to give his life to Argentine railways. I said to him "You may find it a very interesting thing to do for the first few years of your life, but I do not think it will last through your life if you live to be an elderly man because I think the railways will be bought up," and I think so still. At any rate, these views of mine, right or wrong, are, I am sure, worthy of serious consideration by anybody who wants to look ahead in South American matters.
(BAP Ry. Co. Ltd., Proceedings ... 1937)

* * *

In the House of Commons:
Sir Nicholas Grattan-Doyle
        asked the Secretary of State for Foreign Affairs whether he is aware that the permission of the Argentine Government to the Anglo-Argentine railways on 20th December to increase their rates has been stated to produce £312,000 for the coming year, upon a capital of £270 millions; and, in view of the fact that this increase is insufficient, will he obtain from the Argentine Government an official statement as to the estimated extent the proposed increased tariffs will benefit the railway revenues?

Sir J. Simon
        I assume that my hon. Friend bases his question on a report which appeared in the Press last December that the Argentine Government were about to issue a decree permitting the increase in railway tariffs which he describes. My information does not indicate that any such decree has, in fact, been issued. His Majesty's Ambassador at Buenos Aires has been requested to throw any light he can on the origin of the above mentioned report.

Mr. De la Bère
        asked the Chancellor of the Exchequer whether, in view of the inability of the directors of the Anglo-Argentine railways to obtain redress from the Argentine Government, notwithstanding their prolonged efforts, he will request the Council of Foreign Bondholders to take up with the Argentine Government the ill-treatment of the £270,000,000 of British savings invested in the Argentine railways, and in respect of which His Majesty's Treasury is concerned in relation to Income and Surtax and Death Duties?

The Financial Secretary to the Treasury (Lieut.-Colonel Colville)
        My right hon. Friend thinks that the preferable course is that difficulties between the Argentine authorities and British railway companies operating in the Argentine should continue to be discussed between the British companies and the authorities concerned. His Majesty's Government are always ready to consider any request for support made by such companies. In so far as the question implies that the Argentine Government's attitude to such companies is one of hostility or that the directors of the British companies have failed to represent adequately the interests of the British capital invested therein, my right hon. Friend does not agree that such implications correctly represent the facts.
(Hansard, House of Commons Debates, 21 February 1938, vol 332 cc12-3.)

* * *

En sollicitant l'approbation du Congrès pour le rachat du Central Cordoba, le Gouvernement précédent a rappelé les vues qu'il avait déjà exposées dans son premier message quant à l'orientation à donner à la politique ferroviaire de l'avenir, et tendant d'une manière générale à placer entre les mains de l'État la Direction des services publics essentiels; au cours des débats, qui se sont terminés par le vote de la Chambre des Députés, le nouveau Gouvernement a manifesté ses dispositions également favorables à cette politique.
Celle-ci ne pourra trouver son application que dans un délai et suivant des modalités que nous ne pouvons déterminer; mais la situation difficile des chemins de fer attire, dè maintenant, l'attention de S. E. le Président de la République et nous somme persuadés que son Gouvernement saura trouver en temps opportune les formules indispensables pour venir en aide à des entreprises qui ont été crées pour la mise en valeur du pays et qui doivent demeurer l'instrument essentiel de son développement.
(Compagnie Générale des Chemins de Fer dans la Province de Buenos Aires, Rapport du Conseil d'Administration, Exercice 1937-38, p. 6-7)

* * *

The following statements at shareholder meetings of 1938 all refer to J. M. Eddy's mission to Buenos Aires, from February to December 1938, made to interest the Argentine Government in the formation of a mixed enterprise and gradual nationalisation. Correspondence on the matter can be found in the National Archives, Kew.

J. A. Goudge, Chairman, Buenos Ayres & Pacific Ry., AGM November 1, 1938:
It is 7 years since we were able to pay a dividend on our preference stocks, and 8 years since the ordinary stockholders received a penny on their investments.... It is not surprising, therefore, that we are looking forward with great interest, if not anxiety, to the steps the Argentine authorities may be able to take to safeguard their own interests in the maintenance of efficient railway working. It is obvious that such a condition as I have outlined cannot continue indefinitely. We here can only manifest our confidence that we shall, as ever before, receive full consideration of our case, and a fair adjustment of our difficult situation.

* * *

Sir Follett Holt, Chairman, Buenos Ayres Western Ry., at the AGM November 2, 1938:
You have no doubt heard of rumours that the Argentine Government is planning a policy for the future of the privately owned railways. With the object of ascertaining the wishes of the Government and of discovering, should plans be formulated, how far with good will they could be met with mutual satisfaction, our valued colleague, Mr. Eddy, is in Buenos Aires, where he was joined for a time by Lord Davidson.
        Although no concrete proposals have been made, our advices are that there is no doubt that the Government, whilst being anxious to find a means to improve the position of the railways, which is an urgent necessity for the good of all concerned, is also desirous of evolving a plan to provide for their ultimate acquisition by the State. We can take no exception to a policy of nationalization, as it is our view that the people of the country who benefit so largely from the railways should at least share in the heavy responsibilities of their finance and risks. (Hear, hear.)

* * *

Sir Follett Holt, Chairman, Buenos Ayres Great Southern Ry., at the AGM November 2, 1938:
        You will have heard no doubt of facts and rumours concerning the future policy of the Argentine Government towards the foreign-owned railways. Some general considerations were propounded in the message that was sent to Congress by the late Government when recommending the purchase of the Central Cordoba Railway, and although some of these must have startled political economists, the message established the policy of eventual acquisition of the railways by the State.
        The position of the Central Cordoba and Transandine systems having been determined, we had reason to believe that the new President and Government, whilst wishing to find means to ameliorate the position of the other foreign-owned railways, in which Great Britain has such an enormous stake, also adhered to the policy of their nationalization. For us and I maintain for the best interests of the Republic, the amelioration of the railway industry is an urgent need. It is obvious that those who have invested their money in the industry are not receiving the fair return to which by their courage and enterprise they are entitled and by their charters they were led to expect. (Hear, hear.)
        Although the number of Argentine investors in the private railways is entirely insignificant, the number of Argentines who benefit from their service is enormous, and the railways have reached a stage at which without improved conditions their maintenance and development must be crippled. For this reason alone, if not in common equity, relief is overdue, for the maintenance of the efficiency of the railway system remains of vital importance to the Republic, and this leads me to the question of nationalization.
        That a progressive and increasingly prosperous country such as the Argentine should continue to depend largely upon foreign genius and wholly upon foreign resources for the care and development of its main lines of transport is a situation which cannot last for ever. It is inevitable—in my opinion at any rate—that the people of Argentina, through their Government, should at least be prepared to share some of the responsibilities and the financial risks of the railways upon which their continued progress and prosperity so largely depend. (Hear, hear).
        Our colleague, Mr. Eddy, has been in Buenos Aires for some time, and our colleague Lord Davidson, and Mr. Walter Whigham, of the Central Argentine, have also been there to examine at first hand the trend of events and to aid any plans that may be formulated.

* * *

... the open canvassing of the possibilities of "nationalisation" in the Chairmen's speeches seems to be based in part upon the feeling that company administration of Argentina's railway systems may never again be rewarded on the pre-depression scale, although the industry justly acknowledges that the Argentine Government today is showing a keener appreciation of railway problems.
(The Economist, 5 November 1938, page 275.)

The attitude of the Argentine President, Dr Ortiz, towards the financial situation of the railways was expressed in a recent interview given to Mr J. M. Eddy, who has been conducting negotiations with the Government on behalf of the British-Argentine Railways. According to a message from Buenos Aires received by the Anglo-Argentine Press Bureau, the President stated that the Government were perfectly well aware of the present financial position of the railways, and that he was prepared to deal with it, but believed that the problem should be faced and settled in all its aspects.
        In accordance with the views already expressed by him on previous occasions, he was prepared to study a solution which would include transport in general, and in preparation for which the companies would adapt their financial and technical structure to present requirements. The intentions of the Government would not exclude the possibility of State intervention, if this should prove necessary, since the services in question were public ones which required to be efficiently maintained. In this connexion, said the President, a suitable fiscalization might be contemplated in order to attain the end in view.
(The Times, 17 November 1938, page 22e.)

You have heard also that it is a part of Government policy to acquire the privately-owned railways. However sound this policy of acquisition may be, for the time being at least it is not expected to be one of practical realisation, except maybe in certain zones where the State Railways are already heavily involved as they are in Entre Rios. ...
        Owing to the publicity that has been given to it, I must take this opportunity to refer to the communication from an official source which appeared in "The Times" and no doubt other newspapers on Thursday last. It gave the text of a communication that had been made to Mr Eddy by the President of the Republic a short while ago for the information of the Boards of Directors of the British-owned railways who were at the time meeting their shareholders.
        The message was received, substantially as reported in "The Times," and was considered with grave attention by the Directors concerned but was not announced at the meetings as it was thought that the questions which would have been raised might have caused mis-apprehensions and misunderstandings amongst the Stockholders, which it was our ardent wish to avoid. I need hardly say that the message, with which we were honoured, is receiving and will receive, the full attention it demands and deserves.
(Sir Follett Holt at Entre Rios shareholders' meeting, 21 November 1938.)

In the House of Commons:
Sir Nicholas Grattan-Doyle (Newcastle upon Tyne North)
        asked the Prime Minister whether, in view of the failure of the London boards of the Anglo-Argentine railway companies to earn more than 2¼ per cent. on £277,000,000 of railway capital, of which £144,000,000 has not been allowed to earn a dividend for some years past, he will propose to the Argentine Government that they should buy the Anglo-Argentine railways at a price of their cost to British investors in return for Argentine Government sterling bonds or, alternatively, that the Argentine Government should relax the restrictions imposed upon the companies so as to allow them to earn a dividend of not less than 5 per cent. on the £144,000,000 of capital?

Mr R. A. Butler (Saffron Walden)
        According to a recent statement from an authoritative Argentine source, the British companies concerned have submitted to the Argentine Government various suggestions for reform tending to remedy the situation, and the authorities are examining these with all good will to find an equitable solution within reasonable limits. His Majesty's Government, who are naturally interested in the welfare of the railway companies concerned, welcome this statement. The Argentine Government are already aware of the hope of His Majesty's Government that a settlement satisfactory to both parties will be reached as soon as possible, and my hon. Friend may rest assured that His Majesty's Government will continue to watch the situation in full consciousness of the importance of the British interests involved.

Mr Emanuel Shinwell (Seaham)
        Can we have an assurance that we shall not have a quarrel with the Argentine Government, such as we had in the case of Mexico?

Mr R.A. Butler (Saffron Walden)
        I do not think the cases are similar.
(All Commons debates on 21 Nov 1938.)

A Project for the Nationalization of the Railways
PRESENTED BY NATIONAL DEPUTY JOAQUÍN MÉNDEZ CALZADA

The following is a free translation of a draft law presented to Congress by National Deputy Joaquin Méndez Calzada (Partido Demócrata Nacional, i.e. conservative governing party, Deputy for Mendoza 1938-1942) providing for the purchase by the State of all or part of the privately-owned railways in the Republic:—

Article 1.—During the term of two years from the promulgation of the present law, the Executive Power of the Nation is authorised to concert with such railway companies as resolve to avail themselves of the benefits of the same and ad referendum to the Honourable Congress, the sale and transfer to the Nation of their lines and instruments of transport on the general conditions therein established.

Art. 2.—The agreements shall comprise the transfer of the movable and immovable properties situated in the Republic which form part of their investments and assets, as verified by the Dirección General de Ferrocarriles and which are proper and inherent to the services of transport.

Art. 3.—The transfers may be concerted for global prices on the capital actually invested and already recognised by the Dirección General de Ferrocarriles and the National Executive Power, and up to a price which shall not exceed sixty per cent of the total capital invested; or, likewise, on the basis of percentages on the amount of their distinct obligations in debentures and preference and ordinary shares, in which case the partial percentages must not exceed the margin of ten per cent. on the average of the official quotations attained by the different categories and share capital (debentures, first and second preference shares, ordinary shares) on the London market during the period 1927 to 1937, always provided that the general average of the purchase price and conversion does not exceed the 60 per cent. already referred to, on the recognised capital.

Art. 4.—For the carrying out of the operations contemplated by the present law, the issue is authorised of up to 650 (six hundred and fifty) million pesos gold, or its gold equivalent in foreign currencies, of bonds to be denominated Obligaciones de los Ferrocarriles Argentinos del Estado, divided into three series of 3½, 4 and 4½ per cent., with 1 per cent amortization annual and cumulative, with a quarterly service, and to which would be assigned the general revenues of the State railways, both from their own system and from the systems incorporated in it. The Executive Power is authorised to fix the amount of each issue and series, as also the monetary currencies of each, within the maximum figure authorised.

Art. 5.—To fix the global prices or the percentages on the different classes of obligations and share capital, the Executive Power will formulate a proportional scale, relating price bases which represent between 40 and 60 per cent of the capital invested, to the average of the liquid working yields of each company in the period 1927-1937, which shall be taken as the basis to establish the one or more percentages corresponding to each conversion, as also to establish the type of series and the interest to be agreed upon. The agreements may comprise the payment in bonds of different series and interest rates, whether the negotiation be effected on the basis of the fixing of percentages on the different obligations and shares, or for global prices. Bonds of the Series "A" of 4½ per cent. cannot be assigned to companies which have not attained a liquid yield of 4 per cent. as a general average during the period, but they can be assigned to convert debentures of a higher rate of interest in the case of agreements based on partial percentages on the different obligations and shares. Nor can bonds of Series "B" of 4 per cent. be assigned to companies which during the same period show profits below 3½ per cent. Bonds of Series "C" can be utilised for the payment to those which have not attained those averages or which have shown no profits.

Art. 6.—If on the expiry of the term of two years fixed by Article 1, the issue authorised by Article 4 has not been totally utilised or pledged, owing to any railway company not having accepted the conditions of this law, the authorised amount of the issue will be understood to be reduced to the limit of the sum pledged.

Art. 7.—The companies and the Executive Power shall agree as to the procedure and the occasion for the transfer and handing over of the lines, rolling stock and other properties, which would at once be placed under the control of the Administration General of the Slate Railways which, once in possession of the new lines, would proceed, within a period of six months and after the approval of the Executive Power, to effect the unification of the general tariff of transport for the whole of its system and to formulate and apply a plan of rationalization of the services and costs of working.

Art. 8.—The whole personnel of the entities transferred would come under the dependency of the Administration General of the State Railways, with the exception of the directing or administration staff of the private companies whose services were not found necessary.

Art. 9.—Let this be communicated, etc.

(Signed) JOAQUÍN MÉNDEZ CALZADA.

(The Review of the River Plate, 1 July 1938, pages 10-11.)

The British proposal:
In October 1939, Baring Brothers & Co. put forward a plan for the nationalisation of the British-owned railways.
        In June 1940 the Governor of the Bank of England wrote a letter to the Chancellor of the Exchequer, suggesting that new large-scale purchases of Argentine maize be made on condition that the Argentine purchase the railways on the basis suggested by Barings. That basis was similar to the Pinedo Plan and to the terms of the Miranda-Eady Agreement.
        The Governor's proposal was discussed in various ministries and departments but did not prosper. Political advantage gained by selling railways did not justify purchases in excess of immediate requirements.

Nacionalización de los ferrocarriles particulares

Últimamente se ha divulgado que el Poder Ejecutivo de la Nación presentaría al Parlamento un proyecto tendiente a nacionalizar los ferrocarriles particulares, lo que parecería ser una definida determinación gubernativa de próxima realización, por las disposiciones consignadas en el "Plan de Reactivación Económica" ya aprobado por el Senado Nacional.
   Por lo tanto, y con la finalidad de promover su estudio por los técnicos argentinos, hemos considerado oportuno ocuparnos de este complejo e importante problema actualizado por la difundida mala situación financiera por que atraviesan las empresas ferroviarias particulares que, de prolongarse, afectará a sus servicios, y con ello al desarrollo normal de la vida económica nacional.
   De ahí que se hayan realizado algunos estudios sobre los ferrocarriles de capital privado, entre los que se destacan la monografía recientemente publicada por el Instituto de Economía de los Transportes de la Facultad de Ciencias Económicas de Buenos Aires, y el informe divulgado últimamente, y que fuera preparado, hace algún tiempo, a pedido de varias empresas interesadas.
   La excelente monografía del referido Instituto oficial abarca tanto el examen y análisis de la situación económico-financiera de los ferrocarriles particulares en el período 1928-1939 como el estudio del costo y precio de los transportes ferroviarios en nuestro país, e incluye una investigación sobre la posibilidad de que el Estado adquiera y explote esas líneas férreas.
   Por su parte, el otro estudio persigue la formación de una entidad denominada "Corporación de Ferrocarriles Argentinos", tendiente al traspaso progresivo al Estado de las líneas ferroviarias particulares.
   Ambos trabajos tratan de obtener en forma distinta la estatización de esos ferrocarriles, pero descartando en absoluto la compra basada en la tan debatida cuenta capital, que según las empresas al 30 de junio de 1938 ascendería a casi 3.268 millones de pesos moneda nacional, mientras que de acuerdo al decreto del Poder Ejecutivo del 30 de junio de 1937 sería de 2.866 millones de la misma moneda.
   Por eso y por el estado de las instalaciones y del material rodante, nadie ya pretende que la nacionalización de los ferrocarriles particulares se haga aplicando el artículo 16 de la Ley Nacional 5315, cuyo primer párrafo dice así: "La Nación se reserva el derecho de expropiar en cualquier tiempo las obras concedidas por el monto del capital reconocido aumentado en un veinte por ciento".
   El Instituto de Economía de los Transportes, después de diversas consideraciones, llega a mostrar que seria factible a nuestro gobierno la adquisición de los ferrocarriles particulares, con la emisión de un empréstito por un monto aunque sea igual al 100% del capital reconocido, con interés del 4% y amortización del ½% durante 56 años, en mérito a que el promedio anual de las utilidades durante los once años del período 1928-1939, ha sido de 112,6 millones de pesos moneda nacional.
   Por su parte en el plan elaborado por encargo de las Empresas de los Ferrocarriles Sud, Oeste, Central Argentino y Pacífico, se encara la nacionalización progresiva y de acuerdo a las disposiciones esenciales siguientes: constitución de una sociedad anónima por acciones sin valor nominal determinado, a la que las empresas mencionadas entregarían todos sus bienes, la que cargaría con "el pasivo privilegiado de las compañías reducido en su monto y en su interés a 131.496.498 libras esterlinas de debentures a cargo de la nueva entidad, todos ellos del 4 por ciento de interés y ½ por ciento de amortización acumulativa"; supresión de las rebajas que por ley le corresponde al Gobierno Nacional para sus transportes y que se aprecia en el promedio anual de 13 millones de pesos moneda nacional, lo que significa una contribución fiscal por esa suma como mínimo pues es lógico esperar una creciente actividad del Estado; emisión de acciones A y B, las primeras por el 70% del patrimonio y las segundas por el 30 % restante, que se entregarán al Estado si acepta todas las estipulaciones, en cuyo caso le corresponderá el Presidente y el 30 % de los directores de la Sociedad; separación de las utilidades anuales de 38 millones a prorratearse entre las compañías y de 18 millones para el Gobierno Nacional, y el excedente, si lo hubiera, se repartirá en idéntica proporción; formación de una reserva por un importe igual a la cantidad requerida para abonar los dividendos, durante un año, a las acciones A y B; amortización de las acciones A, con la aplicación parcial de las ganancias obtenidas por las compañías, pero supeditándola a determinados porcentajes y condiciones; y garantía subsidiaria de la Nación para el cobro de los dividendos por accionistas y prestamistas. . . .
(firmado: J. A. V., La Ingeniería, año xliv, No. 794, diciembre 1940, p. 1021-1022. Un plan parecido fue discutido en comisión mixta argentino-británica durante los finales del año 1943.)

The purchase of the Entre Rios and Argentine North-Eastern Railways by the Argentine Government was proposed in a bill submitted to the Chamber on January 13th by the Conservative [not any Socialist] members for the Province of Entre Rios. An essential feature of the scheme is that the price must not exceed 61.3 per cent. of the capital computed [recognised] by the Direction-General of Railways.
        The deputies in question regard the proposed purchase as another step towards the fulfilment of the plan for the nationalisation of all the railways, announced by President Justo when he submitted the Cordoba Central and Transandine bills to Congress.
        The project authorises the Government to enter into an agreement with the companies for the purchase of their track, rolling-stock, fixtures, etc., under conditions similar to those established in the case of the Cordoba Central line.
        The percentage of the computed capital mentioned above is to be the purchase price, provided it is lower than the present value of the assets, after deducting depreciation. For the purchase of the material stores of the railways, the bill fixes the sum of £198,254 for the Entre Rios and £82,402 for the Argentine North-Eastern lines, subject to assessment.
        The bill also authorises a bond issue, bearing interest at 4 per cent. per annum, with an annual accumulative sinking fund of 1 per cent. to cover the cost of the operation, while any amount that may be required to be paid in cash under the terms of the agreements may be taken from general revenue.
        The bill will not come up for consideration before the ordinary Congressional period starts next May.
        Issued capital of the Entre Rios Railways Co. is £4,517,189, and outstanding debentures total £4,405.000. The Argentine North-Eastern Railway Co. has an issued capital of £2,768,500 and debentures outstanding amount to £4,623,190.
(The South American Journal, 28 January 1939, page 106).

[The capital recognised as of 30 June 1938 was $83,144,631 m/n for the Entre Rios and $89,671,973 m/n for the Argentine North-Eastern. At $16 per £, that amounted to £5,196,539 and £5,604,498 for the ER and ANE railways. 61.3 per cent of that would have been £6,621,036. Add £280,656 for stores, and the 4% interest on the £6,901,692 total would have amounted to £276,068 per annum. Compare that with the total interest paid by the two companies during 1937/8, £155,470, after which substantial arrears of interest remained and no dividends had been paid for several years. How the Deputies arrived at their figures for stores is unclear. Balance sheets for 30 June 1938 and 1939 showed stores in hand and in transit of the Entre Rios Railways of £227,811 and £253,558, and of the Argentine North Eastern, £102,005 and £104,995 respectively. S.D.]

More on this:

PROJECT FOR PURCHASE OF ENTRE RIOS AND ARGENTINE NORTH EASTERN RAILWAYS

Last week, National Deputies Morrogh Bernard, Padrós, Labayén and Medina, presented a project to Congress for the purchase by the State of the Entre Rios and the Argentine North Eastern Railways. We imagine that the project need not be taken very seriously at this stage. The following is a free translation of its text:—
        "The Executive Power is hereby authorised to concert with the owning companies, the acquisition of the Entre Rios and Argentine North Eastern Railway lines with all their installations and dependencies, subject to the bases and under the same financial conditions as were agreed upon for the acquisition of the Cordoba Central Railway system.
        As the maximum purchase value, in pounds sterling and at 4 per cent. interest and one per cent. amortization, there is hereby fixed the proportion of 61.3 per cent. of the capital reckoned by the General Railway Board as the physical assets of the aforesaid companies, always provided that that sum proves to be less than the actual value of the said assets, after deducting such depreciation as may affect them.
        The Executive Power is likewise authorised to acquire the existing materials in stock, pertaining to the said railways, within the maximum sum of 198,254 pounds sterling for the Entre Rios Railways and 82,402 pounds sterling for the Argentine North Eastern Railway, subject to result of their valuation.
        The Executive Power is hereby authorised to issue bonds of Crédito Argentino Interno of 4 per cent interest and 1 per cent. amortization, cumulative, or to utilise the sum necessary out of general revenue, as an advance, for the payment of the cash quota that may be agreed upon and for other expenses the operation may involve. The Executive Power is likewise authorised to issue bonds denominated Bonos de los Ferrocarriles del Estado for the payment of the remainder of the price agreed upon, the interest and amortization services of which shall be attended to by the State Railways, with the guarantee of the Nation.
        The Executive Power is hereby authorised to arrange with the Argentine North Eastern Railway for the repayment of the sums received by that company in terms of Laws Nos. 3,350, 5,000, 6,370 and 6,508."
(The Review of the River Plate, 20 January 1939, page 16.)

The last paragraph above is particularly disingenuous. Law 3350 was passed in 14 January 1896 to do away with the guarantee system and settle the amounts owing by the National Government under previous concessions and contracts. By Laws 5000, 6370 and 6708 the ANER received grants to facilitate its extension to Posadas, its connection with Paraguay at Posadas, and its extension to Concepción del Uruguay. The amounts granted under these laws were not repayable unless the railway earned more than a specified percentage of its capital, which it never did. Moreover, the amounts received in grants under laws 5000, 6370 and 6508 were never included in the capital cost of the corresponding works reported to shareholders and were already excluded from the amount of "recognised capital" which the legislators were not prepared to pay. In short, this project of law is a perfect example of the then current predatory attitudes taken in Argentine official circles.
      The promoters of this predatory law were not ignorant of equitable business principles. Juan Francisco Morrogh Bernard was born in Gualeguaychú 29 March 1894, elected deputy in 1932 (Partido Demócrata Nacional), was first Vice-President of the Chamber of Deputies, died in car crash at Curuzú Cuatiá 29 August 1969. Representing Tucumán sugar interests, Julio Simón Padrós was elected on the conservative ticket of the Concordancia. Juan Labayén and Justo G. Medina had been members of the Entre Rios Constitutional Convention of 1932; Labayén was president of Frigorífico Gualeguaychú. Justo G. Medina was a journalist, editor of El Demócrata, elected to Congress in representation of the Partido Demócrata Nacional. That party was created in 1931 and was since 1932 the dominant faction in the Conservative Concordancia that governed until 1943.

Nationalisation is "seriously" considered.

In September of 1940, Arturo Noni, Director General of the Railways Board, had presented to the Minister of Public Works his estimate of the price payable in nationalisation of all private railway companies. In doing this he not only applied depreciation rates in excess of those allowed under the Mitre Law that he administered, but applied them to historical cost in pesos disregarding the increase in replacement cost by inflation and devaluation.
(Ministry file No. 015463/C/1940.)

Buenos Ayres and Pacific Railway Company Limited, Chairman's Statement to be laid before the General Meeting called for 12 noon on 28th November, 1940
J. A. Goudge, CBE, Chairman, Buenos Ayres & Pacific Ry.:
        "On a matter that may turn out to be of importance to us all—all the Argentine Railways—I think you ought to have some information, though at the moment it is more a question of general atmosphere rather than of any definite action. I want to make that point quite clear.
        The possibility of the incursion into South America of the Dictator countries has naturally aroused as much interest there as in the United States, and the Foreign financial interests in Argentina took on at once a new aspect to those who realized the importance of any possible change in the ownership of the capital invested there.
        Some months ago a private member's bill was put forward in the Senate, outlining a scheme for what I will term the "nationalization" of all the Railways, by the issue of Government Bonds. In effect, a purchase operation.
        This admittedly was only an initiative by a Senator, but it was referred to Committee of the Senate, and we are, with others, asked by that Committee for our views. As we are subject to a national expropriation law, our reply would probably be that we respected that law, and that the matter for discussion would mainly be the amount and form of the compensation to be received.
        We have heard nothing further from that Committee nor is there any indication yet of Governmental views, but we have since seen that in the Chamber of Deputies a member has also indicated the advisability that some steps should be taken to secure that the control of such vital public services as those rendered by us should not pass into foreign hands which might exert pressure and influences antagonistic to the national interests. That member was good enough to say—in so many words—that the Argentine could, after the experience of many years, trust the British, but there were other powers with whom the country did not share that well-founded mutual confidence and respect.⁽²⁾
        It seems clear that public opinion in Argentina is awake to the position that might arise if the proprietorship of our securities should pass from their present owners either by reason of war-like action or financial pressure.
        I have thought it best to lay this point frankly before you, though again I repeat that it is a question of tendency and a possible direction of policy at the moment.
        It has, however, naturally occupied a good deal of our attention, and you can rely on our keeping close watch on all possibilities."
(Statement distributed with the Report of the Directors for the Year Ended June 30, 1940 or see the The Railway Gazette, December 6, 1940, page 604)

...meanwhile there is a development of some interest in the renewal of the suggestion, in the Congress of the Republic, for the wholesale nationalisation of the foreign-owned railways. It was generally realised that this issue has remained a live one in the country, even if little has been heard of it for some time, but there is no reason to suppose that the motion has any official inspiration behind it. That such is the long-term policy there is no doubt, and already the Argentine authorities have taken over the little Cordoba Central line, largely by an issue of Government stock. What evidence exists, however, suggests that the Government is in no hurry to complete the transfer and the railway directorates show no sign of expecting any drastic action. The possibility of much more ambitious measures than have so far been attempted has, however, already been mooted in connection with the reported Anglo-Argentine agreement—which still awaits official confirmation—while some such development might fit admirably with this country's requirements for expanding purchases of essential commodities, and manufactures from without the sterling bloc. In these circumstances the possibility of either the existing Anglo-Argentine agreement, or some future accord between the two countries, will include a deal over the railways cannot be excluded...Whenever the purchase were negotiated by the companies, it is most improbable that payment would be made in sterling or in free pesos. The alternatives would be either partially blocked currency or, more probably, Argentine Government stock... In the existing circumstances it is, however, far from impossible that the British Government could, as part of a wider arrangement, find and immediate use for the peso proceeds, thus providing sterling for payment to the stockholders...
(The Economist, November 16, 1940, page 616)

Doctor Pinedo and the Railway Nationalization Scheme
The publication in the columns of La Prensa of a practical, original, and ingenious scheme whereby the privately-owned railway companies in Argentina might be progressively nationalized at virtually no initial cost to the State, attracted considerable public notice, partly on account of the undoubted merits of the scheme as a whole, and partly on account of La Prensa's somewhat intriguing announcement to the effect that it was one prepared, upwards of a year ago, by a competent Argentine authority, at the request of the railway companies concerned. The sequel to the scheme's publication was, of course Doctor Pinedo's frank statement in the middle of Tuesday night's Senate debate on his emergency economic action bill to the effect that he was the author and architect of the scheme, for which he had been paid the sum of ten thousand pounds sterling. That the Minister of Finance decided to make this statement, as and when he did, was obviously due to his having become aware of the existence of, if not a whispering campaign against him, at lest of certain currents of responsible opinion subscribing to the belief that his position as a Minister of State, interested in the furtherance of a project for which privately, he had received payment from the interests involved, albeit prior to assumption of high office, was morally assailable. His action in making an issue of the matter on the floor of the Senate, before charges had materialised or imputations been levelled against him, was typical of the able parliamentarian he is. His arguments in defence of his position, on the incontestable plea that he was employed in a private capacity as a lawyer at a time when he was out of office, were masterly in the shape and point he gave them, and the eulogistic tributes which he drew in reply from all sectors of the House, to his great capacity, high integrity, and unimpeachable honesty, were but his due and the measure of a well-merited triumph.
(The Review of the River Plate, 20 December 1940, page 9.)

Dr. Pinedo's Plan
In the issue of November 16, 1940, The Economist has already drawn attention to the revival of interest in the Congress of Argentina in the suggestion that the Argentine external debt, including the railway capital, should be repatriated. This proposal has now been carried a stage further by its inclusion in the Pinedo Plan, designed to counteract the economic dislocation which is resulting from the war and the consequent closing of export markets. The Pinedo Plan, which is reported to have already obtained the approval of the Cabinet, is stated to be under the consideration of a committee of the Senate. Since the greater part of the Argentine external debt and the control of the main Argentine railways are held in Great Britain, the details of any scheme of repatriation is a matter of supreme interest to the investing public in this country. It is believed that British controlled railway companies have been asked to present their views to the Senate Committee, and it is known from the statements of chairmen in the recently issued annual reports of the main railways that the companies have no objection in principle to nationalisation. While it can hardly be a favourable moment from the stockholders' point of view to discuss questions of compensation, for prices of securities in the past two years have fallen to bargain levels and the closing of export markets has had an increasingly disastrous effect on traffic figures, there is no doubt that repatriation would provide a valuable addition to British purchasing power in Argentina during the present emergency. The latest report of the details of the Pinedo Plan suggests that the proceeds of Argentine exports to the sterling bloc would be used to purchase on behalf of the Argentine Government the outstanding sterling securities. The suitability or otherwise of the scheme from the point of view of the investor in this country clearly turns wholly on the question of the purchase price which could be agreed.
("The Argentine Debt", The Economist, January 18, 1941, page 80)

Venta a los Estados Unidos
Buscando medios de aportar fondos al esfuerzo bélico de Gran Bretaña, el gobierno de los Estados Unidos exigió la liquidación de activos británicos en países americanos, especialmente los ferrocarriles argentinos, cuya venta era obsesión del presidente Roosevelt.
Según documentos del Foreign Office, se avisaban dos objetivos del gobierno británico: (1) mejorar las relaciones con la Argentina dejando de herir su orgullo lastimado por la propiedad extranjera de los ferrocarriles, (2) obtener dólares para comprar armamentos. A tal efecto se pensó en utilizar al Plan Pinedo, el gobierno británico adquiriendo la parte inglesa de una sociedad mixta para venderla en los Estados Unidos, pero hubo que lamentar en Londres el cese del apoyo norteamericano a ese plan.

Some months ago, Dr. [Federico] Pinedo, before retiring from the position of Finance Minister, disclosed the fact that he had, in return for a substantial fee, outlined a scheme by which the railways might be taken over and there seems to be an idea that his successor, Dr. Carlos Alberto Acevedo, may proceed with this matter. Dr. Pinedo's plan was that the principal lines should be acquired by the formation of a holding company, which would have taken over the debentures, guaranteed stocks and preferences for a 4% debenture stock, with a sinking fund of ½ %, guaranteed by the Government. This plan had some attractive features, for it would assure for the owners of the fixed charge stocks a steady income, and by the amortization arrangement Argentina would become the owner in about 60 years. On the assumption that the fusion effected economies, a very big one by the way, after meeting the debenture service, there would be a margin which would be available for the shares into which the Ordinary stockholders had exchanged. A balance of some 5,600,000 pesos was envisaged.
(The South American Journal, 22 March 1941, page 207. The plan details are very similar to those proposed by J M Eddy in 1938.)

[A heavy fall in demand for primary products] presumably explains the failure of Argentina to proceed with the Pinedo plan for the acquisition of foreign-owned railways. But a reminder of the fate eventually awaiting most British investments in the continent is afforded by the news that, subject to ratification, the Chilean authorities have decided to take over the Nitrate Railways. The terms have yet to be fixed, but the decision was sufficiently popular to cause a rise of 13s. to some 59s. in the £10 Ordinary shares.
(The Economist, 6 September 1941, page 301.)

Since the prospects for the outright acquisition of the British-owned railways of Argentina by the Government of that country were discussed in The Economist in November [16], 1940, opinion on this subject has turned almost full circle. The Pinedo plan, which had held the field, was dropped, partly because Argentina's sales to this country fell off, and there was less surplus sterling available. There were hopes for better treatment for the lines, and also of some measure of grouping. Concessions were, in fact, made, but in a form which prevented the British stockholder from reaping the full benefit. Nothing has been heard for some time of any really ambitious scheme for concentration and now, with sterling still accumulating and much of the redeemable Argentine Government Stock already repatriated, there is again talk of formal acquisition. On this matter there is little new to say. The solution in an ideal world would be to avoid this, and to create a company of Argentine registration, with London and Buenos Aires registers, and special facilities for transfer either way, and special protection for holders against taxation by the Government of the other party. Conditions are, however, far from ideal. Argentina grows more rather than less nationalistic... There is no time for the lines to achieve much better than death-bed repentance...Meanwhile, the debt to Argentina will continue to grow, and it is highly probable that the railways will be sold to help meet it. As things are, that may be well worth while, if only to remove a cause of friction which exists, however unreasonable such an attitude may seem.
(The Economist, 27 June 1942, pp. 899-900)

...the attitude of the Argentine authorities has been anything but sympathetic to the railways' claim for the establishment of working conditions in which they can earn even a moderate return on their capital. Increase in rates and charges (the most recent of which was authorised only a week or two ago), have been hedged round with conditions ensuring that their financial fruits shall not reach the proprietors. And the entire legal basis for the companies' operations will come into the melting pot in 1947, on the expiration of the Mitre Law...Suggestions that important interests in Argentina favour a policy of "delayed expropriation," or eventually of acquisition of foreign-owned railway properties at bargain-counter prices, may, perhaps, be exaggerated. But so long as they exist, it will clearly be difficult for those in charge of the railways either to find a solid financial foundation for capital-re-adjustment schemes or to plan a successful approach to British investors for new long-term funds.
(The Economist, 21 August 1943, page 248.)

The Argentine Railway Problem

FROM time to time the question of the repatriation of ownership of the British-owned Argentine railways comes before the public, sometimes through unusual channels and not infrequently in novel form. At present the matter has been raised anew by an article in an Argentine newspaper to the effect that the present conversations between representatives of British railway interests in Argentina and the Argentine Government may be the first step towards repatriation of British-owned railways in that country. It points out that a large portion of Argentina's foreign bonds held in London are being withdrawn, and suggests that the current trend of Argentine trade may make necessary further operations of this kind. The annual report of the Central Bank of Argentina is often the medium of quasi-official views as to the repatriation of Argentina's foreign debt, both public and private, and the report for last year is no exception. Not for the first time, attention is drawn to the amount of blocked sterling currency in London, which, at the end of 1942, revealed a balance of 295,000,000 pesos. The precise amount, in sterling is not disclosed, but, at the present official buying rate of $13.50 to the £, it is probably nearly £22,000,000. The Central Bank would prefer to see this balance reduced, amply guaranteed though it is by gold, and the view is expressed that it would be regrettable were the country, through disinclination to make the necessary efforts, to allow to pass this favourable opportunity of repatriating part of the external debt, whether public or private. The "private" debt is, of course, largely represented by public utility undertakings, the most important of which are the railways, to which specific reference was made in the same connection in the report for the preceding year.
        The Central Bank renders a noteworthy service by explaining the banking transactions which led up to the accumulation of the blocked sterling balance in London, which is, at times, mistakenly believed to belong to the Argentine Government. In effect the sterling was purchased, like any other foreign currency by delivering to the sellers a corresponding amount of pesos, which, in turn, increased the volume of currency in circulation in Argentina. To utilise the sterling balance for the repatriation of foreign indebtedness, whether public or private, it is necessary to reverse the operation, that is, to return to the Central Bank the pesos created when the sterling was taken over. Thus, it would be essential for the Argentine Treasury to be able to count on those peso funds to allow possession to be obtained of such part of the sterling balance in London as would enable Argentine Government sterling bonds to be purchased.
        Perhaps most enlightening of all, is the statement in the same official document that it is not possible, at the present time, to obtain peso funds by the issue of Government loans on the Buenos Aires market, which is hardly able to satisfy a part of the heavy borrowings to meet the requirements of the State. Hence, it is impracticable to contemplate further issues for the purpose of repatriating foreign indebtedness. It may reasonably be deduced, therefore, that there is little immediate prospect of the British-owned Argentine railways being bought out by the State, at all events in their entirety, not because it is not the policy of the Argentine Government to repatriate the ownership of the lines, but through inability to finance a transaction of such magnitude. As the report of the Central Bank further points out, apart from the issue of loans the national Treasury has no orthodox method of obtaining funds, other than by taxation.
        There is another alternative, so the report adds, which is believed to be worth examining. The suggestion is put forward that, instead of issuing pesos against the sterling arising from exports to Great Britain, a moderate part of such exports should be paid direct in sterling, without previous conversion into pesos. Such sterling, credited to the producers in the proportion considered convenient in relationship to the value of the products sold and exported, would be retained by them on deposit or utilised for the purchase of sterling bonds, which the national Treasury could exchange into peso bonds, subject to the limitations imposed by the local market. In this way, so it is stated, part of the sterling would be eliminated from the monetary system and, concurrently, the currency in circulation would be correspondingly reduced—a desideratum which, doubtless, is founded on the knowledge that, in Argentina, the amount of money in the hands of the public is out of proportion to the volume of commodities available for sale, with the consequent inevitable tendency for prices in general to rise.
        The suggestion that sterling securities should be purchased by producers and exporters to this country hitherto has not found favour because sterling investments, other than certain British Government loans, are subject to British income tax, now at the rate of 10s. in the £, which has effectively prevented investors, other than those resident in the United Kingdom, from purchasing such securities. Indeed, it is the principal reason why Argentines do not interest themselves, financially, in their own railways. Were the companies domiciled in Buenos Aires, with "peso" capital, and, consequently, not subject to British income tax, except as to holders resident in Great Britain, the market for the securities would be widened considerably and the discharge of Great Britain's debt to Argentina—by this time appreciably greater than the £22,000,000 previously quoted—would be facilitated. Perhaps most important of all, the Government and people of Argentina would be able to take a financial interest in their own railways, which might well lead to a more sympathetic attitude towards the undertakings than has been noticeable for so long past. Nor need we point out that the greater the amount of the shareholdings in Argentina, the less would be the loss on exchange to be faced in remitting interest and dividends to Great Britain.
        Meanwhile, the gradual repatriation of ownership of the railways continues and the report of the Central Bank records that last year part of the blocked sterling balance in London was utilised to pay off the outstanding Transandine Railway bonds, the value of £365,700, which were issued in payment of the line when it was taken over not long since from the former British-owned Argentine Transandine Railway Company.
(The Railway Gazette, 10 December 1943, pages 575-76)

Nationalisation of minor railways
Ferrocarriles del Estado, Memoria correspondiente al año 1944, p 4:

De acuerdo con lo autorizado por Decreto del Poder Ejecutivo Nacional N° 5496|43, del 18 de agosto de 1943, fué adquirido, mediante contrato celebrado el 17 de mayo de 1944, el ramal de Lapachito a Zapallar con una longitud de 75 kilómetros de línea de trocha 0,75 m. Este ramal ha sido incorporado a la red del Ferrocarril Central Norte Argentino.

Ferrocarriles del Estado, Memoria correspondiente al año 1944, p 131:

[En la] adquisición del activo físico del Ferrocarril de Rosario a [Mendoza y] Puerto Granaderos [se han invertido] m$n 1.540.084,05.
El producido de la venta de materiales obtenidos del levantamiento de los bienes físicos de este Ferrocarril ascendió a $ 1.741.268,77 m/n que se destinó al "Fondo de Renovación" de la entidad, con arreglo a las disposiciones del decreto N° 17.292|43 del 23|12|1943.

The British Government is interested
During the War the British Government has, more than once, let it be known that it favoured the repatriation of public utility holdings, and particularly the railways, as a means of liquidating accumulation of sterling balances. It is also evident from repeated statements, official and unofficial, that Argentina favours a policy of freeing herself from the payment of interest and dividends on foreign capital and the use of the money to import capital goods which will be owned by the national. Hitherto the Argentine authorities have concentrated upon redeeming debt whose service was being met. If there remains, as seems probable, a surplus of sterling after this process is complete, they will be faced with the choice of taking up securities which are not in any sense Government obligations or of using the funds to import capital goods. The latter alternative can scarcely be available until some time after the end of hostilities, and it is very probable that the treatment of the railway, and other public utility stocks, in British hands will depend in no small degree upon the estimated duration of the war and the expectations about the volume and nature of Britain's demand for Argentine goods, for Argentina is at present wedded to bilateral trade agreements, which leave little room for the benefits which flow from the division of labour.
(The Economist, 25 September 1943, page 437)

See the Railway Gazette about discussion of nationalisation held in Buenos Aires by Eddy, Forres and Drayton with Argentine officials.

June 21 Mr. Eden said in the House of Commons that the three railway directors returned from Argentina called upon the Parliamentary Under-Secretary for Foreign Affairs on June 14th and discussed with him certain conclusions which they have reached, and which are embodied in a report prepared for their colleagues on the boards of the railways, who now have it under consideration.
        When in the Argentine the three were appointed to an Argentine Government Commission which reviewed the railway position, but no agreement on a mutually satisfactory plan of reorganisation could be reached.
(The South American Journal, 24 June 1944, page 336)

Whatever the true position may be with regard to the question of economic sanctions against Argentina, there is some evidence of a change of attitude by those responsible for running British enterprises in that country. In the past, it has always been their policy to stress the good relations existing between them and the Argentine Government. But in the past few months there has been a change. It is true that the policy of discrimination against foreign capital has been carried further than hitherto, but, until recently, the change was one of degree rather than of kind. Some of the aspects of the treatment of the Anglo-Argentine Tramways, the projected expropriation of Primitiva Gas, and, one may gather, the impression created on the railway managers in their negotiations in Argentina, seem to mark a new departure; an intention not only to reduce earnings to a level where even depreciation cannot be adequately covered, but also to assume control with a minimum of compensation. in these circumstances, the comments of the boards of several Argentine enterprises have been much more outspoken than was at all usual, and the matter has been brought to something of a climax by the statement last week of Mr. J. A. Goudge, Chairman of the Buenos Ayres & Pacific Railway. All Mr. Goudge said was that there was little prospect that the British stockholders would be allowed to derive any benefit from the recovery in Argentine prosperity and that there had been a change in the Argentine Government's attitude. In the past the statements of railway chairmen have been so consistently mild that even this modest amount of criticism marks a decided change in policy. It is not fanciful to see in it the dawning of a belief that the policy of appeasement in matters of investment is as little likely to succeed as such policies usually are. What is required, in this connection as in other matters, is that this country and the USA, at least, should concert a policy which will hold out hopes of development for backward countries, among which Argentina must now be counted, and make it abundantly clear that only those who are prepared to observe the rules will receive the benefits.
(The Economist, 22 July 1944, pages 122-23)

[Mr. B. H. Binder, Chairman of the Argentine North Eastern and Entre Rios Railways] pointed out that the effect of the settlement reached by Sir Montague Eddy (Chairman of the Buenos Ayres Great Southern Ry.) was that the Argentine Government waived their claim for the payment of wage retentions and allowed the new wage increase to be met by a 10 per cent. rise in freight charges for goods, livestock, and parcel rates; in other words, the railways are back where they were before the Argentine Government made these unjustifiable demands.⁽³⁾ Mr. Binder gave it as his own opinion that, despite the rejection by the Government of the suggestion for joint working, the amalgamation of the four main British-owned railways [Southern, Western, Central and Pacific] arrangements for the smaller lines to join the scheme is a more likely possibility than their purchase by the Argentine Government. It has still to be proved that such amalgamation would increase the railways' efficiency and Mr. Binder may in fact have been expressing only his own hopes.
(The Economist, 30 December 1944, page 876)

Times are changing everywhere...
It seems unlikely to the degree of impossibility that the British investor will be disposed to put more money into railways in this part of the world. In the first place, ordinary and preference shareholders are out of the question, and most of our undertakings are already sufficiently top heavy with debentures. Financial reconstruction to write down capital and then create more, is not a sort of proposition which is likely to be attractive, nor do we know what our [British] government's attitude will be towards the export of capital. Then also there is the very uncertain factor of the local political attitude.⁽⁴⁾
(H. H. Grindley, O.B.E., General Manager, Central Uruguay Railway, in the South American Journal, 19 August 1944, page 89)

POST-WAR RAILWAY DEVELOPMENT

According to Reuter, Major R. K. Hubbard, co-ordinator of post-war planning on the British-Argentine Railways, will arrive in England at the end of this month.
        Major Hubbard has been spending two months in the United States studying the latest developments in diesel traction. With him are Mr. K. N. Eckhard, chief electrical engineer of the Central Argentine Railway, and Mr. P. W. Dobson, mechanical engineer to the Buenos Aires Great Southern and Western Railways.
        Major Hubbard has been responsible for the preparation of the largest "dieselisation" programme in the history of the British-Argentine railways. While in England he is expected to advise the boards in tentative arrangements for placing orders with manufacturers.
(The South American Journal, 15 September 1945, page 123)

BRITISH RAILWAYS' STATEMENT

British-owned railways in Argentina, in a joint statement to Reuter's correspondent in Buenos Aires regarding an article in the Wall Street Journal alleging delinquencies on their part, declare that the article was incomplete and incorrect. The statement, referring to the assertion in the article that the British Railway franchise expires in 1946, says that what actually [the only thing that] expires then is Article 8 of the Mitre Law, which provides exemption from Customs duties for railway materials. As to an allegation that the British railways had failed to make improvements in lines or rolling stock, because they were more concerned with earning dividends than improving their networks, the statement points out that four British-owned railways between the end of the last war and the economic collapse of 1929 had invested more than 600 million pesos in various improvements, not counting normal renovations at the rate of 15 million pesos annually between 1926 and 1930 and 32 millions between 1931 and 1935. Despite importation difficulties occasioned by the war and lack of suitable fuel, the statement says, the railways continue to give the public an adequate service.
(The South American Journal, 17 March 1945, page 155)

BRITISH AMBASSADOR'S SPEECH ON RAILWAYS

Argentine citizens have swallowed insidious German propaganda about exorbitant profits made by the British-owned Argentine Railways, Sir David Victor Kelly, British Ambassador to the Argentine, said in Buenos Aires on September 6th, in a speech at a dinner of the British Engineering Transport Institutions.
        Urging that hundreds of millions of pesos should be spent immediately on modernisation of the railways, he said :—

"For over three years I have urged that the whole railway problem should be treated on a broad statesmanlike level, that a new deal should be made by which the owners of the railways in co-partnership with the Argentine people should be enabled and encouraged to find all the new capital and materials needed for modernisation of the railways. This encouragement means, in plain language, allowing them to get some return for their capital.
      I am sorry to say my constant efforts to get this problem considered on these lines seem so far to have totally failed. This great matter of transportation has been regarded as merely a subject for word-spinning and arguments about details and dull memoranda.
      When certain far-reaching schemes of the greatest importance to every man, woman and child in this country were put forward to representatives of the railways, they were received with a complete lack of imagination and sidetracked in the dossiers of technical departments," he stated.

"The people —he said— should be told the facts and called into consultation at the same time as the railway directors from England, who have been waiting now for many months for the opportunity of a fair hearing and an opportunity to raise this great transport question on a higher statesmanlike plane."

"Unfortunately the true position is totally unrealised by the people of this country, whom it so deeply concerns. During fifteen years, hundreds of thousands of shareholders have been deprived of any return whatever upon capital which has made this country. Yet insidious German propaganda has hypnotised millions of well-meaning citizens into honestly swallowing the stupid legend of the exorbitant profits of railway shareholders."

Clarín revealed secret negotiations of Sir David with Government since 1943 about formation of a mixed company saying that "at all times the Government cast off the idea of a 100 per cent. nationalisation of the British-owned railways."
(The South American Journal, 8 December 1945, page 267)

"During my stay, all the leading politicians—first of the conservative régime and then of the military régime, including Colonel Perón himself— kept telling me privately that they did not want to buy out the railways," . . . "The night before I had made my hurried departure from Buenos Aires in 1944, I had had a cloak and dagger meeting in a flat from which the servants had been sent away for the occasion, with General Farrell, the President, and Colonel Perón—at which Colonel Perón had assured me with a hearty laugh that the last thing the Argentine Government wanted was to buy the [Argentine] British[-owned] railways."
(Sir David Kelly, The Ruling Few, 1952, pages 287-314.)

Aiming for a mixed company at first
Discussions are due to take place, after next February's elections, between the companies and the Argentine Government. The railways' case, as Sir Montage Eddy claimed at last week's meeting of the Buenos Ayres Great Southern Railway, is also the Argentine case. Prejudice against foreign ownership has obscured the simple truth that the railways are part of Argentina's national wealth and contribute materially to the country's well-being.
        Past experience, however, suggests that these elementary principles will not obtain much consideration, unless they can be backed with effective diplomatic support. Fortunately, there are signs that this support is now more generally forthcoming than it was before the war. According to Argentine press reports, two plans submitted by the railways to the Argentine Government for the reorganisation of the railways on a participating basis have been rejected by the Government. They first contemplated a joint company, with a capital of 1,896 million pesos, of which the Government would hold 20 per cent., while the second one was for a company with a capital of 1,600 million pesos, with a 30 per cent. Government interest.
        It seems reasonable to infer from these reports that the Argentine Government does not oppose the general principle of a mixed company. Admittedly, the railways are stated to have turned down a counter-offer for a mixed company with a share capital of 1,400 million pesos (of which 600 million would be held by the Government) and a debenture capital of £100 million 3% debentures with a 1% sinking fund and a Government guarantee of service. In view of their own capital structure, the railways were entitled to reject this as a basis for discussion. But bargaining will obviously be difficult, for the Government apparently lacks the singleness of purpose to demand complete nationalisation, while the companies must endeavour to obtain equitable treatment in sterling, and not merely in peso terms. No equity which merely provides pesos will cure the persistent anaemia of exchange losses which have debilitated the railways during two decades.
(The Economist, 15 December 1945, page 883)

Railway Finances
The Railway Publicity Board has published an analysis of the effect on the financial position of the foreign-owned railways of Government social legislation, and in particular of Decree No. 29,394 of October 30, 1944. This decree stipulated that railway workers should receive certain specified increases in pay, which altogether represented an additional disbursement, taking all the railways together, of some 46 million pesos a year. To meet this obligation, the railways were authorised to use the money accumulated since September 1943 in the Family Wage Fund, and also to incorporate into their receipts the income resulting from the 2% increase in tariffs which was authorised, for the formation of the Family Wage Fund, until December 31, 1946; for the same purpose, the railways were also authorised to increase their goods, cattle and parcels tariffs by 10%.
        The net result of these various adjustments has been adverse for the railways, as may be seen in the following table, which shows the figures for June 30, 1945.

INCREASES IN WAGES AND TARIFFS ON THE FOREIGN-OWNED RAILWAYS
INCREASED INCOME	m$n.	m$n.
Income from the 2% increase in tariffs for the Family Wage Fund, from 1-9-43 to 30-11-44	12,870,631
Income from ditto, from 1-12-44 to 30-6-45	6,868,782
Income from 10% increase in tariffs	23,503,359	43,242,772
INCREASED LIABILITIES	m$n.	m$n.
Amount of increased wages	46,001,613
Contributions to Policlinico Ferroviario	671,114
Extra costs in transport of service fuel	622,777	47,295,504
Deficit under Increased Wages and Tariffs		4,052,732

        Another provision of the same decree was that the companies should return to the staff all the salary retentions which were outstanding at the time. To provide funds for this, the Government authorised reductions of $1 and $2 to the £ sterling on the exchange rates in force for payments of imports and financial services, respectively.
        In order to make the necessary payments to the staff within the stipulated time, the railways arranged a joint loan with the Bank of London and South America, to be cancelled by the proceeds of the exchange reductions mentioned. The results of this operation at the end of the railways last financial year, are the following:—

REPAYMENT OF SALARY RETENTIONS BY FOREIGN-OWNED RAILWAYS
DISBURSEMENTS	m$n.	m$n.
Amount advanced to the railways by the Banks	22,167,016
Interest	483,736	22,650,752
Amortizations of the loan effected from the results of exchange differences:—
a) On Financial Services	14,441,718
b) On Imported materials	1,882,047	16,323,765
Indebtedness to Banks outstanding		6,326,987

It is, or should be, abundantly clear from the foregoing sets of figures that there is no truth in the charge that the railways are making "even greater" profits as a result of the increases in tariffs, a point which ultra-nationalistic economists like to labour, thus showing that they are better nationalists than they are economists.
(The Review of the River Plate, 1 February 1946, pages 10-11.)

THE TWO BRITISH MISSIONS
Their Composition and Aims

The composition of the British commercial and financial missions which will shortly commence discussions in Buenos Aires with representatives of the Argentine Government was announced in London at the end of last week. The Board of Trade Mission will be needed by Sir Percival Liesching. K.C.M.G., Second Secretary to the Board of Trade. Sir Percival, who left London on Tuesday by British South American Airways (B.S.A.A.) 'plane arrived in Buenos Aires yesterday, accompanied by one of the Assistant Secretaries of the Board of Trade and his private secretary. The essential purpose of Sir Percival Liesching's mission will be to discuss general trade questions of common interest to Argentina and the United Kingdom, and will have particular reference to the manner in which the two countries are affected by the United States proposals for a world conference on trade and employment, with a view to achieving a progressive reduction of tariff barriers and restrictions on international trade.
        The present commercial agreement between Argentina and the United Kingdom ends on August 20 next.
        The British Treasury Mission headed by Sir Wilfrid Eady. K.C.B., K.B.E., C.M.G., Joint Second Secretary of the Treasury (born 1890 in Villa Nueva, Córdoba), comprises six members including Sir Wilfrid, the remaining five members being Mr Walter Simon, formerly Financial Adviser to H.M. Embassy in Buenos Aires; Mr. F. F. Powell, Adviser to the Bank of England, particularly on Latin American countries; Mr. W. Strath, a principal Assistant Secretary at the Ministry of Supply; Mr. John Phillimore. late Adviser to His Majesty's Treasury in South America, who is at present in Buenos Aires, and Mr. David Pollock, legal member of the Mission.
        The mission will be accompanied by Sir Montague Eddy, Chairman of the British-Argentine Railway Council, and Mr. B. H. Binder, a Member of that Council and Chairman of the Entre Rios Railways. The latter is also a Director of the Anglo-Argentine Tramways Co. Ltd.
        The Treasury Mission's particular province will be that of discussing with the Argentine Government financial and economic questions, including problems affecting British railway interests in this country. The Mission is expected to leave London by B.S.A.A. 'plane on June 29 next and will arrive in Buenos Aires on July 1.
(The Review of the River Plate, 21 February 1946, page 14.)

Excerpt from a Letter from Sir Wilfrid Eady (Treasury) to Mr. R. H. Brand (Washington), the Chairman of the British Supply Council in North America and of the U.K. Treasury Delegation to Washington, dated 22 December 1945:—"The Argentine are also making some tactical noises. But I do not expect that will come to much. We have a very entertaining project for the Argentine in the late Spring. It should produce a very satisfactory deal about the Argentine railways. Of course it depends upon the result of the Argentine Elections and the appearance of a Government of enough stability to be able to sign its name. Keep this very much under your own hat, for leakage would be damaging."
(Roger Bullen and MM. E. Pelly (eds.), Documents on British Policy Overseas, H.M.S.O., Series I, vol. IV, page 15)

Perón's Trumps. Juan Perón had what the world badly needed last week—food. And on the other side of the trade tables he held Argentina's two billion dollars in war-accumulated credits, for use in buying the world's goods. Argentina's Strong Man and President-elect figured he could win his way out of diplomatic isolation.
        When ex-President Hoover said that Latin America would have to make up Europe's food deficit this year, he was talking about Argentina. Argentina expects to have the wheat (two and a half million tons), corn (three million tons) and, above all, meat (half a million tons) that may make all the difference. UNRRA would have to come to Perón (though Argentina was not even a member), and Argentines knew it. Crowed the Peronist El Laborista: "What would UNRRA do without Argentina?"
        Perón's followers dramatized the situation. Perón-bossed unions struck Buenos Aires packing houses and last week stopped meat shipments to Europe; if Britain and the U.S. wanted food for Europe, they would have to pay for it with more than money. By withholding wheat shipments to Brazil until the Brazilians ponied up with 10,000 tires for Perón's trucks, bread queues were threatened in Rio.
        But food was only one Perón weapon. The Argentines were now ready to spend from $1 to $1½ billion to bring their war-worn economy up to date, and make it more self-sufficient. Perón wants machine tools, trucks, oilfield equipment, and engineering savvy to advance Argentina in the familiar pattern of totalitarian autarkic.

Bulls for Buses. "I can just see that damn pile of pink pesos down there waiting for American business," groaned a Commerce Department official in Washington last week. But whether much of that money went to the U.S. depended on how quickly the U.S. could forget the way Argentina's rulers cottoned up to Nazi Germany in World War II. For Russia had sent a trade delegation to Buenos Aires presumably to offer Soviet tractors, trucks and combines for wool, hides, and blooded pampa bulls to build up Russia's war-depleted herds.
        The British already rode the Perón bandwagon (they were never off it). Sir Montague Eddy, boss of Britain's billion-dollar investment in Argentine railways, was reportedly ready to strike a deal permitting expropriation of his railways by Perón. Trade scouts were promising trucks and buses, more textiles, and an aircraft plant for Argentina in three months. More important than the lavish U.S. wartime buying program, Britain still took Argentina's entire meat supply—some of which goes to UNRRA. Last week the British extended their favorable trade treaty with Argentina for a further six months and settled down to sell the Argentines enough goods to liquidate their £200,000,000 sterling credit in London.
        Would the U.S. yield and bid too? Were U.S. trucks and machine tools to be the price of food for Europe? Either way, Juan Perón stood to win.
(Time Magazine, Monday, 25 March 1946).

Argentina's Labour Party, whose candidate in the Presidential election, Col. Juan Perón, is now assured of being elected, has drawn up a £400,000,000 programme of nationalisation, which includes the meat packing industry, largely owned by British and American interests, says Reuters.
        The programme also makes it clear that the Party, on assuming office, intends to nationalise the electric light and power companies, which are mainly n the hands of American interests but partly controlled by the international combine known as Sofina, the telephone services and privately-owned railways.
        At first observers consider that the programme is beyond Argentina's financial capacity, even taking into account her blocked funds in London and New York.
        How far the programme is inspired by Col. Perón himself is not known. Some observers believe that it may be a manoeuvre be some of his collaborators to embark the Party on a wholesale nationalisation drive regardless of ability to pay adequate compensation.
(The South American Journal, March 30, 1946, page 179)

The new mission which is said to be leaving shortly for talks with the Argentine Government [new Perón government] will wrestle with a nationalistic régime which has the advantage of being in a particularly independent economic and financial position. Whether Argentina's [blocked] sterling balances prove to be an asset or a liability to the British case remains to be seen. The one hard fact is that the Mitre Law expires this year.
      The market, however, is for the time being acting on some esoteric prompting that something will be done and that something will flatter present quotations. In the early stages of the recovery support concentrated on leading debentures carrying arrears.
(The Economist, 15 June 1946, page 979)

There must be few countries with a greater backing of gold and foreign exchange to its currency, and experts consider that, if the peso were allowed to reach its natural level it would stand at about par again. During the war, the [depressed] price of the peso was agreed upon by the Argentine and British Governments. The British Government, to get meat as cheaply as possible, was interested in keeping down the value of the peso as much as possible, and came in for criticism at the annual meetings of the British meat companies for doing so. If an agreement can be reached to free the peso so that it will rise to its proper level, that factor alone would go a long way to revolutionise for the better the position of the British-owned railways.
(The South American Journal, 22 June 1946, page 321. Emphasis was added.)

Last week the British were lobbing trade missions across the South Atlantic like cannon shells. The first, or 6-inch, mission was a Board of Trade venture. Suave Sir Percival Liesching, who headed it, had already conferred with Foreign Minister Juan Atilio Bramuglia. But he was only scouting for Sir Wilfrid Eady's 16-inch, or Treasury mission which arrives this week. Sir Montague Eddy had come along to advise on railroads. And if the knights needed any help, there was the Marquess of Linlithgow, ex-Viceroy of India, now missioning in Argentina for the Midland Bank.
        Sir Wilfrid and his fellow missionaries had two tough nuts to crack: 1). find some way of making good the $750 million credit, now frozen in Britain, that Argentina built up with wartime food shipments; 2) get a return on their own $1½ billion investment in Argentina.
        The two problems could conceivably cancel each other out. If Argentina would not turn the $750 million into an interest-free loan, the British might let them use it to buy back the great, unprofitable network of British-owned railways which fan out across the pampas. Argentina would prefer the $750 million payoff in capital goods. One obvious British fear: that an industrialized Argentina would no longer complement Britain's economy.
        Facts & Figures. While the Government-directed bargainers haggled (politely), U.S. businessmen in Buenos Aires grumbled: "We do business with Argentina in spite of our State Department." But the fact is that the U.S., which outsold Britain in Argentina during the war, is still outselling her almost 2-to-1.
        Last week U.S. foreign traders got a lift when Washington (on U.S. Ambassador George Messersmith's okay) freed $700 million of Argentine gold that had been stored (on suspicion that it was Nazi) in Federal Reserve vaults. They thought that action forecast better relations with Juan Domingo Perón.
(Time Magazine, Monday, 8 July 1946)

As the "horse trading" stage of the talks is reached, the Argentinians have begun to use methods that were obviously not learnt at a public school and for which the recent financial negotiations in Washington and Ottawa had done little to train the British team. President Perón made a well reported speech disclaiming any intention of using Argentina's sterling to buy up the "worn out equipment" of the British-owned railways. To underline his point, the railway unions announced the same day that they would call a strike on all privately owned railways. The next move was an announcement by the Argentine Government that the Roca-Runciman Agreement, which expires on August 20th next, would not be renewed and that from that day the price of Argentine steers exported to Britain would be raised to the parity indicated by the price for North American steers, namely about £34 as against the figure of £11 under the present agreement.
        After these appropriate preliminaries, the Argentines made their first offer: that the outstanding sterling balances now held by Argentina be converted into a long-term loan bearing interest at 2½ per cent. This was refused by the British delegation which pointed out that they "were not disposed to pay the aforementioned rate of interest on pounds sterling accumulated because of conditions arising from the war." There the matter stands for the moment—not a very promising juncture for holders of Argentine railway stocks...
(The Economist, 27 July 1946, pages 143-44)

So the truth about the Argentine talks is out at last...the position has been one of virtual deadlock from the outset...After eight weeks, nothing has been achieved except a definition of the opposing points of view.
        What hopes there might be of agreement upon the problems of the meat contract and the railways defies all estimation, for the Argentinians have made separate agreement upon the sterling balances a condition precedent to any other arrangements...The Argentinians appear to be still standing pat upon their initial demand for an interest rate of 2½ per cent., on the ground that, if they cannot get repayment in cash but must retain their funds as an "investment," they ought to be paid as much they themselves pay on their own overseas debts. The British are reported to have offered ½ per cent.—London call market loan rate—and gradual repayment in terms of goods, with concessions on meat prices as compensation for the low return on the balances. Obviously, if the meat contract and, especially, the question of the sale of the railways could be joined in the discussions, there would be scope for give and take which might produce an acceptable formula.
(The Economist, 31 August 1946, page 344)

Señor Miranda's reported indication that, in view of the absence of a solution to the sterling balances problem, the Argentinians will not feel disposed to accept further payments in sterling which is not fully convertible, is scarcely a promising augury.
(The Economist, 14 September 1946, page 425)

In opposition to a mixed company and urging nationalisation, Arturo Frondizi moved on 4 September 1946 three resolutions of the Chamber of Deputies. Two were requests for information meant to discredit the British-owned companies. The third mandated impossible valuation criteria. In his speech he said : "Finally, we do not want that the country supply capital nor allow rate increases to modernise the railways."
(Diario de Sesiones de la Cámara de Diputados, 4 Sept. 1946, p. 2288.)

The Anglo-Argentine Agreement
The complete text is available elsewhere in this collection

WHEN last week's issue of The Economist was being written, nothing seemed more remote than agreement between the British Mission and the Argentine authorities. By the time it was published, accord had been reached amid scenes of rejoicing and affability which could not have been bettered if the ten weeks' discussions had been wholly unruffled by differences of view. The British Mission left this country in June determined to reach an integral agreement on three related issues: Argentine's sterling balances; the future of the British-owned railways in Argentina; and future supplies and prices of Argentine meat to Britain. It is no secret that the Argentine Government wished first to reach agreement on their sterling balances, leaving the other two questions for separate discussion, and only the threat of final rupture convinced them that the British viewpoint was one of principle and not one of mere bargaining expediency.
        If there is much which awaits detailed clarification in this trilogy of agreements which Sir Wilfrid Eady now brings home, there is also room for real satisfaction about their broad outline. The payments agreement is on lines which involve the minimum of prejudice and give the maximum assistance of precedent in the major negotiations between Britain and her sterling creditors. The meat agreement assures a substantial part of the British ration during the next four years, at prices which have yet to be finally fixed but are not expected to exceed existing levels by more than 10 per cent. And the railway agreement, by which the British-owned undertakings are to be acquired by a company in the Argentine, to which the Argentine Government will subscribe a substantial cash sum, introduces the concept of partnership between the two parties which has so often been lacking in the past, and on terms which, so far as they are defined, appear to confer upon the existing owners a reasonable equity in the new undertaking.
        First impressions, then, are favourable. All instruments of this character, however, should withstand examination in detail, and in the present case the agreement on Argentina's balances is the crucial test. It may be said at once that it emerges very favourably. Payments between Argentina and the sterling area continue to be settled in sterling, though with no commitments about rates. As from September 17th all sterling received by Argentina will be freely available for payment for current transactions anywhere—in line with, though anticipating, the obligations imposed on Britain by the American loan agreement. From the same date, the sterling balances held by Argentina—now put at £130 million—are to be maintained for a period of four years, and will carry interest at ½ per cent. Fears that the balances would be entirely freed or alternatively funded at 2½ per cent can thus be set aside. The rate actually fixed is the same as the return on Treasury bills, in which form non-Empire sterling balances are usually held in London. The release of sterling balances will be limited, over the four years, to £5 million annually, which can be used in payment for current transactions; to the transfer of £10 million from Argentina to Brazil ; and to the repatriation of sterling debt and British investments in Argentina. Some implications of these conditions are discussed in a Business Note on page 465.
        This first publicly negotiated settlement of sterling balances (the Agreement with Portugal has not been published) has a dual significance. It involves the largest sterling balance held outside the sterling area; and secondly it prescribes the broad limits within which future settlements, both outside and within the sterling area, may be expected to be reached. Funding of Argentina's balances at a high rate of interest would not have made more reasonable settlements with the other creditors impossible ; but the agreement which has been reached with Argentina should immensely ease the course of the coming year's negotiations with the rest of Britain's creditors. It is true that the agreement, as it stands, runs only for four years, but a carry-over for a limited period at a reasonably low rate of interest is infinitely preferable to a policy of long-term funding at a high rate. And it may well be that at the end of the period Argentina's balances will have been appreciably reduced by the repatriation of sterling debt, leaving a comparatively wieldy sum to be dealt with by a longer-term funding arrangement, under conditions more favourable to Britain. The important present achievement is to have asserted the principle that the sterling creditors must retain substantial balances in London at a short-term rate of interest. Without that principle established, the strain on the British budget and the British balance of payments in meeting the current interest cost of the sterling balances would be considerably heavier than it now promises to be.

*

A contract which increases the deadweight of food subsidies—now costing £350 million—needs to be examined with care. The meat agreement certainly contemplates such an increase ; from October, prices of Argentine meat will exceed the prices of the first bulk contract made at the outbreak of war, by at least 45 per cent. plus a flat payment of £5 million, which appears to be in the nature of an ex gratia payment in respect of past transactions, but definitive prices have yet to be fixed in discussion between the two sides. Since meat prices generally have increased by about 35 per cent. the real increase at present involved in the new contract should be more of the order of 10 per cent, based on existing prices of supplies from other countries. That is not a welcome increase, but at least it does not seem an intolerable price to pay for assuring the British meat ration—an aspect considered on page 451. The new price arrangements will last for two years, when it will be open to the British Government to seek a revision of prices by mutual negotiation. But the Agreement rather ominously provides that in arriving at revised prices, regard shall be had not only to cost of production but also to "any other relevant factors, including the need to encourage production." The meat agreement, with its provisos about prices, and its reservation of 17 per cent of the export surplus in the first year and 22 per cent in the second year for disposal to other countries, may not be an unduly hard bargain. But, even though it is accompanied by the warm-hearted gesture of presenting the British people with five shiploads of beef for Christmas, there is a brisk businesslike atmosphere about the contract which suggests that Argentina is not throwing away present opportunities, and may have a sneaking doubt whether they will be as good in 1948.
        The third section of the Agreement concerns the railways. The new Argentine company will acquire the operating assets of the British-owned railways, and their liabilities (other than debenture debt); its initial capital, its constitution and its basis of operation will be worked out by a joint Anglo-Argentine committee, which is to meet before the end of October, and it is intended that the transfer of the undertakings should be physically completed by January 2, 1947, if possible, but with legal effect from July 2, 1946. Broadly speaking, the company will enjoy the advantages which the present companies have obtained under the Mitre Law—freedom from all national and local taxation, freedom from Customs duties on materials and supplies imported into Argentina, and freedom from taxation on dividends. The peso capital of the company will be credited to the British companies, who will be free to deal in the shares on the Argentine market, but will also hold them subject to the right of the Argentine Government "on giving reasonable notice" to acquire shares at par from any holder. This provision is surely significant, for presumably those shares in the new company which are held by British holders will be purchasable by the Argentine Government out of their sterling balances, on all fours with other British investments in Argentina.
        The capital structure of the new undertaking depends upon a valuation which has yet to be agreed by the two sides, but a line on the minimum size of the capital can be inferred from the income guarantees which the Argentine Government offers. If in two consecutive years, the company's net income (after allowing for renewals) does not reach 4 per cent of its issued capital. the Government will take steps to enable the company to earn that rate. If in any year net income exceeds 6 per cent. the excess must be devoted to redemption of capital or new construction. These standard revenue percentages are then extended by reference to the initial (not the issued) capital of the company—that is, the total share considerations paid to the British undertakings. If the net income available for distribution in any year does not reach 80 million pesos (say, £5 million) the deficiency will be made good by the Argentine. The two guarantees are not quite symmetrical as to capital or time, but they permit the inference that the initial capital of the new company will be at least equivalent to £125 million.
        An indigenous Argentine company, such as the agreement proposes, should in any event enjoy more favourable treatment than a group of companies domiciled in London. But this more considerate attitude should be reinforced by actual partnership under which the Argentine Government is to provide 600 million pesos (say, £30 million) for modernisation, in return for which it will receive shares forming part of the issued capital. It is difficult to see how, in the absence of this special participation, the re-equipment of the railways could be carried out, for arrears of renewals and maintenance have piled up during the war years, and the funds available to the British companies would have been inadequate to meet present needs. This direct interest which the Argentine Government is to undertake offers some hope that it will have a continuing solicitude for the prosperity of the new undertaking.
        When it comes to translating these heads of agreement into terms of current market prices for Argentine rail stocks, the imponderables come well to the fore. Measured on a capital value basis, the projected minimum initial capital of £125 million is at least a substantial advance on the depressed current market prices—aggregating about £100 millions—which prevailed until the agreement was signed. It may be that more optimistic estimates are now outside the bounds of possibility though after an agreement which has conceded a good deal already, the Argentine members of the joint committee to fix the new company's initial capital may be in a tougher mood when figures come to be discussed and terms agreed. At any given level of total initial capital, however, two important assumptions have to be made before even the broad consequences of the agreement become clear. The first is that the British companies must be lumped together in the calculation, disregarding their differences of structure and relative participations in the total ; and the second assumption presupposes that the net income of the company will be freely transferable in dividends to foreign shareholders—on which there is no assurance whatever in the agreement.
        For purposes of illustration, however let it be assumed that the initial capital is agreed at the equivalent of £150 million, and that this capital is related to net incomes of 4 per cent, and 6 per cent. The debenture issues of the five leading companies total approximately £90 million, and their annual interest service require £4 million, so that even on an initial capital of £125 million which has been inferred above from the guarantees, the prior charges would be covered with a margin for interest and capital. On the assumption of 4 per cent earnings on an initial capital of £150 million, there would be a margin of £2 million after debenture interest to meet full preference requirements on these four companies of approximately £2 ¼ million. On the more favourable assumption of 6 per cent net income the balance after meeting full debenture and preference requirements would amount to £2 ¾; million on an ordinary capital of approximately £90 million.
        These are orders of magnitude based on calculations of convenience. They make no pretence to forecast, for on the facts forecasting is quite impossible. They leave all arrears out of account, they deal in cavalier fashion with the smaller undertakings, and they leave entirely out of reckoning differences in the financial positions of the various companies and in their capital structures. Many months must elapse before the full consequences of the agreement are patent to stockholders, though the fact that their approval is a condition of the agreement suggests that the companies will be wise to take stockholders as fully into their confidence as may be expedient. It would indeed be dangerous to assume that the more optimistic estimates of initial capital will eventually be agreed, even though they are confidently entertained in informed circles. Nor is it certain that the Argentine Government, by becoming a partner in the new undertaking will be in an unassailable position to stabilise its costs and adjust its charges at will, or that it will be content to remain a minority shareholder. The permanent earning possibilities of the new company and the permanent disposition of its capital are the great unknowns which make all calculation quite hazardous. It is right that the debenture issues should have made the running this week. Beyond the prior charges, all is open—on some assumptions the possibilities are intriguing, but on others there is room enough for hesitation.

(from The Economist, September 21, 1946, pages 460-61.)

The honeymoon is over. It now remains to be seen whether the views of the two technical missions will readily coincide on the proper capitalisation of the new company and its future earning power. The railways have indeed gained very much from the agreement, for in its absence they would have been threatened with disaster with the lapsing of the Mitre Law at the end of this year...
(The Economist, 28 September 1946, page 515)

The latest essay in Argentine possibilities prepared by a City house works to such a precise set of assumptions that one is left with the impression that it may be particularly well informed about the real prospects. The alternative explanation, that it is just being more daring in its guesswork, seems hardly feasible in view of the auspices under which the memorandum was prepared. It assumes, in the first place, that the capital of the new company will be fixed at £150,000,000. Second, that the existing British companies will be liquidated and a new holding company formed with assets consisting of £150,000,000 stock in the new company. Third, that this stock will be divided between the existing companies in the proportion in which these companies have contributed to the total earnings of the Argentine railways over the last 12 years. Fourth, that £125,00,000 of 3½ per cent "A" stock will be issued and £25,000,000 of "B" stock showing an income of 6½ per cent. on the basis of the minimum income of 4% on the capital of the new company. Fifth, that Debenture holders will be satisfied in "A" stock, and the "A" stock will be distributed for the net amount of arrears after tax.
(The Review of the River Plate, 10 January 1947, page 10, citing the Investor's Chronicle of November 9, 1946.)

The French-Owned Argentine Railways

What may be a step in the direction of the national co-ordination of all kinds of transport, adumbrated by Señor Miguel Miranda, President of the Banco Central, in his speech at the Bolsa, was taken this week when it was announced that as a result of an agreement between the Argentine and French governments, Argentina had bought outright the three French-owned railways operating in the country. These are the Compañía General de Ferrocarriles in the Province of Buenos Aires, the Compañía Francesa de Ferrocarriles de Santa Fe and the Compañía de Ferrocarriles de Rosario a Puerto Belgrano. The purchase agreement was signed by Señor Miranda, representing the Argentine Government, and the French Ambassador, Comte Wladimir d'Ormesson. The global purchase price of 182,796,173.98 pesos is payable in Buenos Aires and its remittance to France in French francs will be effected through the free exchange market procedure. The present free market rate on Paris is $3.46 per 100 francs. The global peso capital of these companies, according to their 1944-45 accounts, was 349.6 million pesos and their working result for the 1945-46 railway year showed a revenue of 57.1 million pesos against aggregate charges in Argentina, including debenture services and renewals, of 54.9 millions, leaving a surplus of 2.2 million pesos.
(The Review of the River Plate, 20 December 1946, pages 8-9).

* * *

1° A la suite de la signature de l'accord anglo-argentin de Septembre 1946, la Représentation diplomatique française en République Argentine a engagé des pourparlers avec le Gouvernement argentin en vue de l'extension aux réseaux des trois Compagnies françaises du régime défini par ledit accord pour les réseaux britanniques ; et le Gouvernement argentin a répondu à ces ouvertures en proposant l'achat de l'ensemble des trois réseaux français ;

2° Les Compagnies n'ayant pas été amenées à intervenir directement auprès des Autorités argentines pour négocier chacune séparément le rachat de son propre réseau, les parties se trouvent en présence d'un prix global pour l'ensemble des trois réseaux ;

3° Dans le mémorandum du 24 Septembre 1946 qui fut remis aux négociateurs argentins en réponse à la suggestion de ces derniers, la Représentation diplomatique française, après consultation des Compagnies, a fait une proposition de cession s'élevant au total à $ m/n 293.000.000 ;

4° Le Gouvernement argentin n'a pas accepté cette proposition et, à la suite des négociations qui se sont poursuivies, a en définitive offert un prix global de cession de $ m/n 182.796.173,98 sur la répartition duquel les Compagnies n'ont pu se mettre d'accord.
(Compagnie française des chemins de fer de la Province de Santa Fé, Assemblée Générale Extraordinaire des Actionnaires du 18 Mars 1947, Rapport du Conseil d'Administration, page 9.)

La vente qui vous est soumise, nous devions nous y préparer depuis longtemps. . . . C'est en 1938, lorsque les Chemins de fer de l'Etat absorbèrent un réseau britannique, celui du Central Cordoba, que cette imbrication devint très serrée. Mais votre Compagnie — dont le réseau présentait plus que tout autre un intérêt primordial pour la réalisation du plan conçu par les Pouvoirs Publics — put passer dans de bonnes conditions un accord de trafic avec les Chemins de fer de l'Etat, assurant à ceux-ci le transit de leur matériel sur nos lignes. Il n'en reste pas moins que cet accord annonçait, préfigurait en quelque sorte une solution radicale et définitive, que le Gouvernement argentin désirait visiblement faire aboutir et qui était l'absorption totale de votre réseau. En vérité cette incorporation se serait faite de toute manière; on peut même dire qu'elle aurait probablement eu lieu beaucoup plus tôt si la guerre n'était pas survenue.
(Compagnie française des chemins de fer de la Province de Santa Fé, Assemblée Générale Extraordinaire des Actionnaires du 18 Mars 1947, Allocution par M. Jacques Allier, pages 1-2.)

* * *

By agreement signed December, 1946, the Argentine Government purchased the French-owned railways for the following prices:

Railway	Paid (m$n)	Recognised capital as of June 30, 1942	Amount paid in per cent. of recognised capital
Santa Fe	101,026,499	136,234,765	74.2
Compagnie Générale	53,723,074	89,724,584	59.9
Rosario a Puerto Belgrano	28,466,000	59,224,961	48.1

(The South American Journal, 14 June 1947, page 287. Recognised capital values added by S.D.)
The Argentine Government took possession of the above three French-owned railways in November, 1947.

Railways Share-Out Chaos
Conditions akin to chaos reigned last week in the London Stock Exchange following the official announcement — an announcement intended to clarify the Argentine Railway market's position — of the manner in which the £150 millions paid by the Argentine Government for the British-owned railways in Argentina and their ancillaries was to be shared out. The possibility of such confusion arising because of the difficulty of allocating amongst the different companies the balance representing the transfer value of the ancillary interests was adumbrated in last week's issue of THE REVIEW.
        The confusion on the London Stock Exchange was due, it seems, to the fact that there are only three firms of jobbers in the Argentine Railway market Until recent months their market had been in a semi-moribund condition. Their physical and capital resources had been adjusted to this situation and they were in no position to cope with the unprecedented demand which the sale of the railways and the subsequent speculation in railway securities produced. The securities in question were, for the most part, under-valued by several millions relative to the price fixed for the deal with Argentina. Speculation on what had been regarded as a "certainty" was on an exceptional scale. In addition to this, as estimates of the "share-out" amongst the different companies circulated, usually at higher prices than those existing in the market, buying pressure became intensified to the point where dealers felt that they might be undertaking commitments which they could not meet.
        So great was the strain that jobbers decided to deal only by negotiation on paper—that is, by "marrying" orders. In place of the usual system of price-making to brokers by jobbers, the former were requested by the latter to state their dealing limits on slips of paper. The jobbers then left the market and attempted to "marry" the orders, taking about one-quarter per cent for Ordinary and one-half per cent for Preference and debenture stocks as their commission. Under the strain of 2,000 to 3,000 slips this system broke down completely. The bulk of the orders on the slips were not carried out — and the brokers themselves were not advised of this. The brokers thereupon themselves entered the market and proceeded to do business direct with each other, after the manner of the New York Stock Exchange. The result was chaos. No one could state with certainty any price within points and many brokers advised their clients to await more normal conditions.
        In order to achieve such conditions, The Financial Times points out, it is obviously necessary, now that each company's share of the total compensation has been provisionally fixed, to make regular and frequent calculations of each company's capitalisation in order to measure the gap between market value and compensation. At present, the market value of all the companies is £131,714,000, which shows an under-valuation of more than £18 millions on the Argentine purchase price without taking account of cash, securities, and London properties, or interest at one-half per cent per annum on the sale price from July 1, 1946, to the date of payment. "It will surely be surprising," says The Financial Times, "if these 'sweepings' produce less than £10 millions."
(The Review of the River Plate, 7 March 1947, pages 4, 6.)

By agreement dating from the departure of the British mission last Autumn, the sales proceeds would be divided among the companies on the basis of "recognised capital" as defined in the Mitre Law. The railways rejected any alternative method involving past or future earning power as "affording no generally acceptable basis." The division of the sale price, excluding the value of London assets, but including ancillary capital in the Argentine, is set out in the following table:

(From The Economist, March 8, 1947, pages 345-46)

Off Again—On Again
The railway negotiations have been the topic of the week and, at the moment of writing, still are. These negotiations, based on the Eady-Miranda agreement of last September for the establishment of an Anglo-Argentine consortium to incorporate the British lines have been in progress for the past two months and a half and have been, until this week, conducted in circumstances of impenetrable reserve.
        This week, however, has witnessed a sudden burst of public curiosity in their progress—or their seeming non-progress—this interest having been stimulated by a Financial Times report, based apparently on London sources of information, that the negotiations now being conducted aimed, not at the formation of a mixed capital consortium, as provided for in the Eady-Miranda Agreement, but at a direct sale of the railways to the State. This report, to which the local English-language Press gave resounding publicity on Wednesday, derived some colour from the fact that rumours of a breakdown in the "consortium" discussions had become current last week, these being apparently associated with an audience which H.M. Ambassador had had earlier with the President of the Republic. On the other hand, a later Financial Times report, originating locally, cited Señor Miranda as having stated on Monday evening to that paper's Buenos Aires correspondent that discussions were still proceeding and that the problem was still the same: that of ascertaining what the British railways were worth. This report revealed that, according to Señor Miranda, the obstacle to agreement was the gap between 2,000 million pesos on the Argentine side and 2,600 million on the British, the original British figure having been 3,000 million. Our own more recent enquiries of the head of the British delegation regarding this reduction attributed to it by Señor Miranda, failed to elicit the requisite confirmation of the lower figure.
Financial Considerations
The suggested possibility of the outright purchase of the railways at a figure possibly in excess of Argentina's sterling balances has not, up to the moment of writing, been officially denied, though there are good grounds for doubting whether such a course would commend itself to the Argentine authorities There is, moreover, the financial aspect of the matter to be considered. The outright purchase of the railways means payment in gold or free exchange, the total Argentine resources of which are approximately 5,600 million pesos. Although this sum seems abundantly capable of taking care of a disbursement of between 2,000 and 3,000 million pesos, there are other considerations, principally Argentina's urgent import needs for the re-equipment of industry, replenishment of raw material stocks, modernisation of transport services, road, rail and air, etc., etc. Those urgent impart needs will constitute a severe enough drain on the country's reserves of gold during the period immediately ahead without the luxury of the railway purchase, while, with it, they might easily imperil the stability of the country's balance of international payments as soon as overseas deliveries of what Argentina needs become speedier, and this even after allowance is made for the further international purchasing power which the present export boom is, for the time being, creating. A position of acute difficulty might, of course, be avoided by the purchase of the railways on credit, but Britain today is in no position to give such credit facilities. The United States could and doubtless would be of assistance in this respect, but here too there are at present obvious and not easily surmountable difficulties in the way. All these considerations, therefore, lead compellingly to the conclusion that whatever emerges from the present Eddy-Miranda negotiations —and something seems bound to emerge soon—it would be surprising in the extreme if it were the outright purchase of the lines by Argentina.
(The Review of the River Plate, 17 January 1947, pages 11-12.)

Deadlock
It has been hoped, though, latterly scarcely expected, that this week would see the Anglo-Argentine railway negotiations satisfactorily terminated and the terms of the Eady-Miranda Agreement in this respect implemented. All that the week has produced so far and up to the moment of closing this number of THE REVIEW is increasing evidence of what must be regarded as a serious impasse. We have it on the authority of Señor Miranda that the negotiations over which he has been presiding between the two technical sub-committees, and particularly his discussions with Sir Montague Eddy representing the British railway companies, have broken down completely. Señor Miranda, as reported by Reuter following an interview he gave to the local representative of that agency, emphasised the gravity of the breach that has developed in the discussions when he said that even if the British delegation were to accept the Argentine proposal of 2,000 million pesos as the capital worth of the railways, there was a possibility that Congress would refuse to ratify the agreement. The whole gravity of the impasse is expressed —and implied—in that remark of the President of the Central Bank.
        We now see that the three main figures round which the protracted discussions have been revolving, are (a) Señor Miranda's figure of 2,000 million pesos, (b) Sir Montague Eddy's figure of some 3,000 million pesos which is apparently an inventory estimate, and (c) the Argentine technical sub-committee's figure of something below 1,000 million pesos which is stated to be based on the earning capacity of the services. In regard to Señor Miranda's 2,000 million pesos this was admitted by the President of the Central Bank to be a compromise between the other two figures, which it almost is arithmetically in any case. That, we believe, was all that Señor Miranda meant when as reported by Reuter, he said, that although the Argentine technical sub-committee's findings valued the railways at less than 1,000 million pesos, "for sentimental reasons I agreed to go up to 2,000 million pesos." There is nothing lachrymose about the "sentiment implied here nor, we believe, is there anything insincere. Argentines when they reflect on the contribution in terms of the economic development and expansion of their country which British capital and enterprise generally, and the railways in particular, are to be credited with, not surprisingly feel an occasional flicker of friendly sentiment. It will be recalled that on the occasion of the formal signing of the Eady-Miranda Agreement last September. H.E. the President of the Republic said (in terms of admirable sentiment) :

"We should be ungrateful did we not recognise what other nations have done in this sphere, and very particularly Great Britain, whose spirit of enterprise has conferred so many benefits on civilisation. Consequently, on this occasion we extend to her the expression of our gratitude, as in risking her capital in the construction of the great network of railways in Argentina she contributed to an extraordinary degree in making our country what it is today."

Perón had a 4-hour meeting with Miranda on the subject, HM Ambassador had similar meetings with the Minister of Foreign Affairs [Bramuglia], and there was talk of £136½ million for the railways alone (without their other investments).
(The Review of the River Plate, 7 February 1947, page 9)

In the House of Commons:
12.15 a.m.
Colonel Crosthwaite-Eyre (New Forest and Christchurch)
        I wish to take this opportunity to draw attention to matters which arise out of the Argentine Railways Agreement. When this question was raised earlier in this House, the Chancellor of the Exchequer, in reply to a Question which I put to him, said that this was a matter which must be judged in the light of the Agreement as a whole. Whatever one might feel about the particular terms granted to the railway companies, that was something which could only be taken in the full context of the agreement made earlier in the year. As I understand it, three things principally devolved from that agreement. The first was that the sterling balances would be funded at one-half per cent., and that the interest accruing to the Argentine Government should be paid in either gold or dollars. That sum was equivalent to £625,000 a year. It was, secondly, agreed that £5,000,000 a year of the sterling balances should be made available to the Argentine Government in each year subsequent to the Agreement. It was thirdly agreed that a consortium should be set up, in order to manage the Argentine railways, and that this consortium should give a guarantee that instead of the average of £4,000,000 a year paid in the way of dividends to this country on the railways, a sum of £5,000,000 should in future be paid. Those were the main things laid down as a result of this Agreement.
        Subsequently His Majesty's Government entered into further negotiations as a result of which the Argentine railways were sold out to the Argentine Government, for a sum of £150,000,000, of which £125,000,000 represented sterling balances and £25,000,000 represented presumably Argentine pesos, gold, dollars; or at any rate, some sort of hard currency. Therefore, the result of what His Majesty's Government have done is that, instead of having the sterling balance that was accumulated in a common war effort funded at one half per cent., and liquidated at a very gentle rate, one is now faced with the position in which the whole of this sterling balance has been redeemed by the Argentine Government in exchange for our most valuable asset in that country.
        I think that it is also fair to say that at present we are, of necessity, bound to buy a great deal from the Argentine. The Chancellor of the Exchequer told me that the adverse balance of trade is somewhere in the region of about £50 million for 1946. He told me that before the sale of the Argentine railways, and their subsidiaries, we managed to get something like £13 million, in the form of dividends, from the Argentine. Therefore, the crux of the situation is that under an agree-men made by His Majesty's Government we, now faced with an adverse balance of £50 million, have traded a certain income of £13 million per annum for £25 million in the immediate present, and surrendered something like £5 million per annum that we have received in the way of dividends.
        One can only come to the conclusion that His Majesty's Government have failed to make any proper appreciation of the situation, that they have been willing to give up most valuable investments in the Argentine, that they have sold up our assets. All that has been swept away. They have definitely and completely ruined any immediate chance of striking a proper and fair balance of trade with the Argentine. Even if that was not enough, there are wider and further repercussions. One of the things that we on this side have been pressing the Government about is that in any settlement of sterling balances we must try to strike some sort of balance between the actual cost by any nation, and the actual effort made by any nation, in the common effort to win the war. The Argentine Government were neutral until the eleventh hour; in fact, victory was secure, at the time they joined the United Nations. If we are to face the future, crippled and burdened as we are, with all the debts we have accumulated, and all the difficulties of reconstruction of our industry, and trying once again to be a virile member of the world economic unity, one thing we must do is to make our situation, vis-à-vis sterling balances, one of reality. We have sent high-powered missions abroad, by which we hope to obtain a fair and just settlement, but, our negotiations are burdened from the very start with this most unjust settlement. If, in an attempt to pay out to the Argentine the whole 100 per cent. of their sterling balances, we pay them out in concrete British assets, without regard to any contribution that we and they may have made to the common war effort, then we have no cause whatever to complain when we come to discuss our balances with other nations, if similar hard bargains are demanded.
        The charge which we must bring against His Majesty's Government on this occasion is that they have sold the pass for all subsequent negotiations, with other creditor countries in which it will be necessary to try to produce a just settlement, in which cost and effort are co-related. The Chancellor said, in answer to a Question by myself, that counter claims we may make must be considered in any final settlement. If he means any thing by that why has it not been done in the case of the Argentine? Why is nothing done in the case of the Argentine, which has profited so much in the last year, and has thought nothing of increasing the price of linseed oil by 100 per cent?
        They have also increased the price of beef by 100 per cent. And as far as I could gather from last Friday's Debate, an existing contract has been increased by £7 million. What is that except a sort of blackmail of the Government? It proves that the Government are not prepared to fight this issue of the sterling balances which is vital if we are to preserve the hard currency situation and try to prevent this country from starving. If the Chancellor's statement meant any thing, why were the counter claims not submitted to the Argentine Government? Why, in the first practical test of Government policy, have the sterling balances been settled so incredibly in favour of the Argentine Government? I have no doubt that the Financial Secretary appreciates the differences between the market value of the shares and the value obtained by the Government. The Government have no doubt appreciated the point of view of that adverse balance of trade versus dividends. They no doubt appreciate that normally £10 million of exports were attributable to our interests in the Argentine. That £10 million, plus the £4 million dividends, has simply vanished in exchange for £25 million of hard currency.
        In conclusion, I would ask the Financial Secretary to answer three questions. First, is this settlement with the Argentine to be considered as something which has set the standard for other settlements? Second, is he satisfied that this agreement is in any sense equitable as compared with the war effort of the Argentine and our selves? Is it anything of which we can feel proud when we justify the cost between ourselves and the Argentine? Third, can we have an assurance that in no circum stances will this standard which has been set become a criterion for any other negotiations we may make? There may be reasons for making this settlement essential, but I ask the Financial Secretary to assure the House that in no circumstances will he allow us to be brow beaten by any other country over any other settlement. If we are to be saddled with this £3,600,000,000 of debt in the sterling area, and the Government are going to pursue this sort of policy, no matter how many debates we have on the economic policy, this country is bound to fail. I hope the Financial Secretary will be able to reassure us on that point.

12.28 a.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)
        I have rarely listened to a speech which contained so many inaccuracies. It was based on a misreading of the economic agreement made with the Argentine. If I understood the hon. and gallant Member's complaint aright, it was that in its attitude to the Argentine railway agreement the British Government had in some way abrogated the Economic Agreement made with the Argentine Government in September, 1946. To begin with, the British Government have made no railway agreement with the Argentine Government. The shareholders have come to terms with the Argentine Government and have sold, as he correctly stated, their holdings in the Argentine railways for some £150 million sterling. It is true, as he said, that under the agreement to which he referred, a consortium was suggested between the Argentinian Government and this Government, under which the Argentinian Government would put a certain amount of capital into the Argentine railways; but if he had taken the trouble to read Part 3 of the White Paper to which he referred, he would have discovered that, under paragraph (i) on page 6, it is laid down that that agreement that is, an agreement for a consortium — was conditional upon the approval of the shareholders of the British companies being obtained in accordance with English law, and the approval of the Argentine Government being also obtained in accordance with Argentine law. Those approvals to the consortium did not materialise. In their place, as I have already indicated and as the hon. and gallant Gentleman said, the shareholders have themselves come to terms tentatively with the Argentinian Government for the sale of their railway interests in the Argentine for a sum of £150 millions. The British Treasury cannot prevent a transaction of that kind from taking place. All the British Treasury can do is to see that, when a transaction of this kind is undertaken, the assets possessed by British shareholders abroad obtain a satisfactory price when such a sale takes place.

Colonel Crosthwaite-Eyre
        Is it not true that actually it was a representative of the British Treasury who arrived at the global figure of compensation, that figure being subject to ratification by the shareholders, and that the whole negotiation was carried out by the British Treasury, and not by the stockholders?

Mr. Glenvil Hall
        This is not British Government property. This is property of the shareholders and of companies with their headquarters in the City of London who have carried out the negotiations. It so happened that the sterling balances in London belonging to the Argentinian Government was £125 million, and what the British Treasury was asked to do was to liberate that sum in order to assist the Argentinian Government to buy the railways in its own country. As I say, the British Government has agreed to the transaction. I, for one, do not see all the ills which the hon. and gallant Gentle man envisages flowing from that permission. If he will consider the matter a little further, he will see that, under the Economic Agreement, the transaction which has taken place between the shareholders and the Argentinian Government was provided for in the White Paper. On page 2 of that document, under "Payments," among other things, it was agreed that the sterling balances accumulated up to the date of the Agreement could be used to repatriate British investments in the Argentine. If we put our signatures to an Agreement of that kind when shareholders and an other Government get together, and desire to repatriate capital of that kind, we can not, surely, go back on our word, unless the transaction proposed is grossly unfair to the national interest. In this instance, as I think the hon. and gallant Gentleman will agree, nothing of the kind occurred. In fact, so far as I know, the shareholders and the City — and I believe the hon. and gallant Gentleman has interests in the City, and will confirm this — feel that the arrangement arrived at is one that is eminently satisfactory to the shareholders concerned.
        The effect of this transaction will be that, instead of our owing the Argentine Government £125 million by way of sterling balances, we shall owe them nothing under that head. These will be, if the deal goes through, completely wiped out. In addition, we shall have £25 million in hand towards current trading deficit on our meat and other contracts which have been made with the Argentine. That is a nice little amount that we can well do with, and can use with benefit to the people of this country. In addition, the fact that we have agreed to this arrangement means that there will be no release of £5 million per annum of convertible sterling over the next four years. That will no longer have to be found from our resources, in order to comply with the terms of the White Paper to which reference has been made. It also obviates this country having to pay half-per cent. interest on the accumulated balances, which would have amounted to the sum of about £625,000 per year.
        I do not want at this late hour to pursue this matter further, but I would briefly add that, of course, this does not set up a standard for all future transactions.
        Each transaction will naturally be taken on its merits, and this one must not be taken as a yardstick. We have made a commonsense arrangement which we think is one that is satisfactory to all concerned. Nor does it mean that, when settlements are made with States who hold sterling balances, the assistance received by them during the war should not be taken into account in any settlement arrived at. Cases must be taken on their merits, and everything relevant will be taken into account as each agreement is made

Colonel Crosthwaite-Eyre
        Why was no counter claim made to the Argentine? is it not a fact that the Argentine joined the United Nations long after the eleventh hour — at practically two minutes to twelve — and why is it His Majesty's Government's policy to allow the Argentine to charge us these enormous sums, with a 100 per cent. increase on linseed oil, and so on, and no counter claim is made for the services we rendered to them during the war?

Mr. Glenvil Hall
        The hon. and gallant Gentleman is again rather muddled. He is taking two different things and trying to contrast them. We make contracts with various countries to whom we go for various commodities this country needs. Those contracts are made on a commercial basis. Sterling balances are dealt with under agreements, and also under Article 10 of the Anglo-American Agreement. The hon. and gallant Gentleman should not mix up contracts made with various countries for goods which we need and the outstanding balances known as sterling balances.
(House of Commons Debates, 11 March 1947, vol 434, cc1291-8.)

ARGENTINA AND RAIL PACT

Buenos Aires, August 25th.—No-one in Buenos Aires entertains serious doubts that the Argentine Government will in due course ratify the agreement for the purchase of the British-owned Argentine railways.
        Talk among some informed quarters about possible hitches at this stage are not centred on whether the Argentine will ratify the agreement so much as on how she will settle the purchase price—that is to say, what bargaining will develop on this point and where such bargaining will lead. Britain's suspension of convertibility of sterling seems to open up a much wider range of possibilities in this connection than originally contemplated.
        As to ratification itself, the Argentine Government is deeply committed politically and any retreat, particularly just now, could turn into rout of the Peron administration. Only on Wednesday night, General Peron, in the first of a series of broadcasts, replied to his opponents, that before his coming to power, Argentina "was obliged to render colonial vassalage to her foreign exploiters" while today she "had achieved absolute economic independence." Referring more than once to nationalisation of the railways as an accomplished fact, he said "the Government has done so much that any single one of its accomplishments—purchase of the railways for example—would have been sufficient to give an important place in our history to any of the Governments which preceded us."
        There is strong evidence to support the view that Argentina —again if only for political reasons —will try to win some advantage before the Argentine Central Bank hands its railway cheque to the Bank of England. One of the most clamourous complaints of the opposition is that the Government has bankrupted the country in that, after the railways are paid for, the gold and exchange reserves will only be a quarter of what they were a year ago and be below the pre-war level.
        The suspension of sterling's convertibility must seriously aggravate the Government's position in this respect. Embarked on a vigorous programme of industrialisation it now faces the threat of being checked mid-stride with all the internal dislocations which this will lead to.
        It is thus believed that the Argentine representatives will have plenty to say to the British negotiators before the railway deal is consummated.—Reuter.
(The South American Journal, 30 August 1947, page 104.)

BRITISH ENGINEERS PLAN ELECTRIFICATION OF BUENOS AIRES SUBURBAN RAILWAYS

Well-informed quarters in Buenos Aires believe that Britain's trading position in Argentina, greatly strengthened by the non-convertibility of sterling, was fortified last week by the fact that Sir Montague Eddy introduced to Sr. Miranda two British technicians who have begun to study a plan for the electrification of Buenos Aires' suburban railways.
(The South American Journal, 20 September 1947, page 135.)

El convenio anglo-norteamericano de 1946 y su influencia en la adquisición de los ferrocarriles.

Las observaciones formuladas precedentemente aluden a hechos y razones de orden interno en lo referente a la adquisición de los ferrocarriles por el Estado argentino. Aun cuando en ellas haya debido hacerse incidentalmente una lógica mención de la participación que cupo al capital británico en las negociaciones que condujeron a la venta de sus bienes, no aparecen ahí las razones de orden externo que decidieron la referida venta. Ellas existieron, por supuesto, y su gravitación logró tal amplitud, que basta por sí misma para explicar la dinámica de los acontecimientos. En diciembre de 1945 el gobierno norteamericano propuso a consideración del de Gran Bretaña un convenio financiero a regir entre ambos países. Por su intermedio, el primero concedería a este otro un préstamo por valor de 3.750 millones de dólares. El objeto confesado de este préstamo consistía en "facilitar las compras inglesas de bienes y servicios de Estados Unidos, ayudar a Inglaterra a mantener reservas adecuadas de oro y dólares y asistir al gobierno del Reino Unido a asumir las obligaciones del comercio multilateral, según se define en este y otros convenios".
        La consideración de las cláusulas de este convenio, que fué aprobado por el Congreso de ambos países en mayo de 1946, no confirmaría que tradujeran plenamente los objetivos mencionados. La dureza que campea en ellas y el vejamen que imponen al prestatario, hacen expresar al profesor de Oxford G. D. H. Cole⁽⁵⁾ lo siguiente, suponiendo con todo fundamento que la redacción de dichas cláusulas no ha sido ajena a la sugestión de la Secretaría de Estado: "Este Departamento es hoy en día nido de las formas más extremas de imperialismo económico enmascarado en el lenguaje del liberalismo y de la filantropía universal".
        En la imposibilidad, y en la inoportunidad, de aludir a las cláusulas generales de este convenio (que puede consultarse en el diario de sesiones de la Cámara de Representantes de mayo de 1946), conviene no obstante, referirse a las que, notoriamente, tienen vinculación con la venta de los ferrocarriles. Dichas cláusulas permitirían además, hallar la explicación, desde luego, de la existencia de los dos convenios celebrados entre los gobiernos de Argentina e Inglaterra, el de 17 de setiembre de 1946 y el de 13 de febrero de 1947, y de la diversidad de las condiciones que ambos contienen.
        Según el acuerdo anglo-norteamericano, firmado en julio de 1946, las libras que Gran Bretaña adeudaba a diversos países "debían ser liberadas inmediatamente y permitirse convertirlas a voluntad y sin cortapisas, en cualquier otra moneda, para usarlas en operaciones en cuenta corriente". En concordancia con esta cláusula, la Argentina pudo exigir a Gran Bretaña que su fondo en libras acumulado durante la guerra, fuera transformado en cualquier otra moneda que le permitiera adquirir las mercancías que la Argentina necesitaba, en otro mercado que el de Gran Bretaña. El acuerdo anglo-argentino de setiembre de 1946 se oponía concretamente a esa disposición, es decir, estaba redactado en términos que implicaban una violación de la cláusula transcripta antes. Se debe recordar, en efecto, que el acuerdo anglo-argentino comenzaba por establecer una diferencia entre las libras provenientes de operaciones futuras y las retenidas en Londres desde la iniciación de la guerra: para las primeras se acordaba un régimen de completa liberalidad; las segundas, que son las aludidas en el acuerdo anglo-norteamericano, y que sumaban 140 millones, la Argentina podía rescatar de ellas durante los siguientes cuatro años, cinco millones por año. La suma restante podía ser utilizada parcialmente para rescatar inversiones de capital británico o repatriar su deuda pública.
        No deja de advertirse la violación notoria que implica la parcial liberación de la deuda que había impuesto o convenido Gran Bretaña con la Argentina, respecto a lo que le dictaba el convenio formalizado con Íos Estados Unidos. Lo previsible es que este último país no aceptara esos términos y forzara a Gran Bretaña a cumplir cabalmente sus compromisos. De ahí la brusca sustitución del Convenio anglo-argentino de setiembre de 1946 por el de febrero de 1947. En el primero, si bien el capital británico hacía algunas concesiones, permanecía adherido a la economía argentina a través de la sociedad mixta proyectada y desde luego aceptada. El capital británico endosaba al Estado argentino todos los inconvenientes derivados de la explotación de los ferrocarriles y capitalizaba todas las ventajas. Continuaba pues, haciendo pie en un elemento provisto de toda eficacia para prolongar su dominio y oponerse a la penetración norteamericana.
        Puede deducirse de las demás cláusulas del convenio anglo-norteamericano que esta solución no estaba incluida en ellas. Si los Estados Unidos imponían a Gran Bretaña como condición esencial para la concesión del préstamo, la adhesión a los proyectos de Bretton Woods, es decir, si la inducía a colocar la dirección de su moneda bajo la regulación internacional y a aceptar el compromiso de abstenerse del control de cambios, esas medidas no tenían por objeto facilitar a Gran Bretaña la recuperación de su hegemonía financiera, sino todo lo contrario, restarle los mejores recursos que propiciaran su rehabilitación. Durante la discusión del convenio de referencia el profesor Cole pudo comprobar que "los norteamericanos se empeñaban en obstruir todos los caminos por los que Gran Bretaña tuviera alguna posibilidad de equilibrar de nuevo su balanza de pagos o de adquirir con exportaciones aquellas importaciones cuya falta supondría de modo inevitable una caída desastrosa del nivel de vida".
        La oposición al convenio anglo-argentino de 1946 está también en esta línea, como por extensión debiera estarlo el que Gran Bretaña acaso intentó formalizar con la India y con Canadá. Cerrando toda salida a la regulación de la deuda que Gran Bretaña tenía con India y Canadá, que era mucho más caudalosa aún que la que tenía con Argentina y negando, como lo establece otra cláusula, la franquicia de que los dólares prestados por Estados Unidos pudieran "destinarse a cubrir obligaciones existentes respecto a otros países", este último país colocaba a Gran Bretaña ante la urgencia de liquidar las inversiones de capital realizadas en aquéllos y perder por consiguiente toda su influencia. A este objeto se puede expresar que la independencia de la India y la virtual autonomía de Canadá son una consecuencia de la pérdida de los bienes de capital invertidos en dichos países por Gran Bretaña y nacionalizados por imposición del convenio de 1946. Este último constituye, pues, uno de los episodios más significativos de la lucha anti-imperialista librada posteriormente a la guerra.
        Por lo que afecta a la influencia directa que tuvo este convenio en nuestro país, se puede expresar, que sumada la imposición de liquidar "de inmediato" la deuda de la Argentina, a la del impedimento de transformar las libras en dólares y pagar en esta moneda, y a los factores que deprimían entonces el desarrollo del ferrocarril, pudieron decidir a los representantes del gobierno de Gran Bretaña a renunciar a las concesiones logradas en el acuerdo de setiembre de 1946 y negociar la venta en las condiciones a que hemos hecho referencia.
        Este nuevo factor, el convenio anglo-norteamericano, cuya incidencia en las negociaciones ocurridas entre setiembre de 1946 y febrero de 1947, fue indiscutiblemente decisiva, permitió acertar con la salida apropiada a los intereses permanentes de la Argentina. Aun cuando las circunstancias que rodearon a esas tratativas hubieran permitido lograr condiciones concordantes con los bienes de capital que se adquirían, lo concreto es que su posesión permitía aliviar al país del recurso opresivo que implicaba un capital de tal densidad y de tal gravitación sobre la economía argentina.
        La eliminación del capital ferroviario constituyó pues un acontecimiento plausible; sin perjuicio de los conocidos antecedentes acerca de su influencia en nuestro proceso histórico, el análisis de los términos de ambos convenios, el de setiembre 1946 y el de febrero 1947, aportaría aún nuevos hechos; en ninguno de ellos puede advertirse la prevalencia de los intereses argentinos y aún es posible comprobar la imposición de las iniciativas británicas [y norteamericanas] y el logro de sus propósitos.
(Ricardo M. Ortiz, El ferrocarril en la economía argentina, Buenos Aires, Editorial Cátedra Lisandro de la Torre, 1958, p. 165-69.)

By the provisions of Section 8(ii) of the Financial Agreement the United Kingdom renounced rights under Article XIV of the Articles of Agreement of the I.M.F., which provided for a transitional period of adjustment while restrictions relating to current payments, discriminatory currency practices or convertibility of foreign held balances were removed.
(Roger Bullen and M. E. Pelly (eds.), Documents on British Policy Overseas, H.M.S.O., Series I, vol. IV, page 11, fn. 3.)

Only the inside story of the negotiations would reveal, at what precise stage it was that the outright sale of the railways emerged as potentially the more practical solution, and from which side the initiative in this direction came. There is evidence to suggest that on earlier occasions the railways have been offered for sale by the British interests concerned. It is on record, for example, that in 1940 the British Government "expressed a wish" that a comprehensive scheme for the purchase of the railways by Argentina should be considered. Sir Wilfrid Eady too apparently made a tentative suggestion on similar lines last year but the suggestion was not taken up with any practical interest on the Argentine side. General Perón in a speech he made on the occasion of the Eady-Miranda agreement referred to the desirability of the effective nationalisation of the railways, the only obstacle to which, however, he said, was one of financial and not a technical character... This accumulation of evidence would seem to suggest that the initiative in regard to the outright sale of the railways was taken by the British delegation... Señor Miranda himself recently betrayed a certain concern over the financial magnitude of the task that lies ahead although admittedly his reference in question was in the nature of a debating point in the course of the negotiations. [Also]... it is known that the President of the Republic himself is emphatic, as well as sincere, in his desire that even after the railways have passed finally under full Argentine administration, the British personnel shall continue in their posts.
(The Review of the River Plate, 14 February 1947, pages 12-14.)

The repatriation of the British-owned railways, which will take £150,000,000... which the Government repeatedly refused to consider until a few months ago. Many factors, some of which are probably not yet obvious except to those with inside knowledge, have been responsible for the sudden change of plans; but one which must be clear to all observers, must be Great Britain's inability to supply the imports wanted and confidently expected to have been available before now.
(The South American Journal, 12 April 1947, page 177)

Dr. Frondizi and the Sale of the Railways
        It is reported that one of the Radical Deputies, Dr. Arturo Frondizi, has expressed his intention, of presenting two Bills to the Chamber at the opening of the next period of sessions. These Bills are said to concern the purchase by the State of the foreign-owned railway companies and the formation of mixed capital companies, and one Bill demands that the agreements between the Argentine Government and the British and French railway representatives be submitted for debate by Congress.
        It is perhaps open to doubt whether Dr. Frondizi's suggestion will be approved by the Chamber, when it is considered that he belongs to the minority party and that his proposals imply certain criticisms of the Government's actions in the matter of the railways.
        Dr. Frondizi is reported to have said that the agreements of sale cannot be put into effect without the sanction of Congress. He holds that the purchase price of the British railways, 2,482.5 million pesos is excessive, and that it should be less than 1,000 million pesos, as stated by the Argentine technical committee which studied the problem. He is also said to have expressed his disagreement with the principle of mixed capital companies, and that the railways should be operated by an autonomous Government Department similar to the YPF and other organisations of the same pattern.
        It would seem at first sight that Dr. Frondizi is right in saying that the sanction of Congress should be requested for an operation involving 2,482.5 million pesos; but the instrument of sale, that is, the contract signed by the two negotiating parties, contains a clause concerning ratification which states that the agreement shall become definite after it has been ratified, on the one hand by the Boards of Directors and General Meetings of Shareholders of the Companies concerned, and on the other hand by the Argentine Institute for Trade Promotion.
(From The Review of the River Plate, 18 April 1947, as reproduced in "20 Years ago", R.R.P., April 21, 1967, page 110)

If the deal does not go through, many years will elapse before there is the slightest chance of present prices being justified, while it is not unlikely that the British Government is so interested in the matter that steps will be taken to over-ride any action objectors might be disposed to take, in which circumstances approval of the plan would be the wisest course. See above
(The South American Journal, 7 June 1947, page 273)

Argentine Rail Compromise

THE penultimate phase of the Argentine railway pay-off, details of which became available just as the last issue of The Economist went to Press, has some depressing implications. If the scheme of arrangement, shortly to be submitted, receives the approval of the various classes of shareholders in each of the British companies owning railways in Argentina, it will remain only to settle the claims of the more senior stockholders on the stipulated terms; and then to proceed to liquidation. When it was agreed, as part of the Anglo-Argentine pact of September, 1946, that effective control of these lines should pass to Buenos Aires; it was well understood by the British authorities equally with the stockholders, that Argentina was likely eventually to apply part of her frozen sterling balances; carrying interest at only one-half per cent. to buying up the British holding in the proposed consortium—a holding on which the return was, broadly, to be between 4 per cent and 6 per cent. In all the circumstances the possibility of discharging the sterling debt by surrender of interest in the railways seemed, in principle, to be good business. And the later agreement of the Argentine Government, from which the present scheme of arrangement stems, to buy the systems outright instead of entering into a partnership with the companies, disposes of the problem of the accumulated balances once and for all. The purchase price of £150 million odd is, indeed, rather larger than the net amount of the balances now available, and Argentina will need to earmark current sterling income in order to foot the bill. Against that, the rail link between the two countries, which at one time was productive not only of substantial investment income, but also of profit arising from an important export trade in railway materials and supplies, may be snapped decisively.
        Justification for the Treasury's acquiescence in the sale of this overseas investment is not, however, inherent in the sterling balances problem The crucial consideration is the changed character of the investment. Of late years the return has been derisory, partly because the companies have been hit by the functioning of an artificial and deliberately manipulated exchange control system, partly because they have had to bear their share of improvements in workers' conditions without being able to pass on to railway users anything like the full cost. Moreover, at the end of 1946 the Mitre Law, under which the companies were free from duties on imported materials and from national, provincial and municipal taxation, ran to its close. Deprived of this protection, which they had enjoyed for forty years, the lines, since the beginning of the year, must have been failing to cover even operating expenses, and with the Argentine Government moved as much by nationalist feeling as by the economics of the case, obviously bent on nationalisation in the end, there was no prospect of any betterment. British investors' experience, notably disillusioning in the past two decades, clinches the case for relinquishing the investment and discharging the debt. And it imparts a national significance to the decision she stockholders must shortly take.
        It has been widely emphasised that, subject to the final word of the High Court, the whole sale agreement would be jeopardised were even one of the sixty classes of stockholders to stand out against the share-out terms. This makes it desirable that comment on the bare outline of the scheme, which is all that has so far been published, should be restrained: some criticisms on points of detail may be answered in the full General Scheme of Arrangement, which owing to printing difficulties, will not be available for some weeks. It is however, fair to make the point that rejection of the scheme by one or more classes would not inevitably kill the sale plan forthwith. For one thing, it might be possible to submit amended terms, though admittedly the difficulties would be great. More realistic perhaps, is the consideration that, given the British authorities' evident interest in the plan, and with the prestige of the Perón Administration ostentatiously engaged on behalf of it, the Treasury might seek effective means to avoid failure—even going perhaps to the length of requisitioning stocks and remunerating holders on the basis either of the present scheme or of one evolved by a new tribunal. These however, are only possibilities ; they certainly provide no excuse for merely factious opposition.
        Even so, the reaction to the terms of the scheme cannot be a comfortable one. The manner in which the sums accruing to each of the companies is to be allocated has been approved by a panel composed of Sir Andrew Duncan [GBE, MP], [the Rt. Hon.] Sir David Maxwell Fyfe [KC, MP] , and Mr Gilbert D. Shepherd [JP, FCA], the President of the Institute of Chartered Accounts. This is a distinguished muster, but the panel's work was severely limited. It had no say in the division of the global sum of £150 millions (which included a payment for ancillaries) between the various companies. That was decided by agreement between the various boards—agreement reached even before the companies' negotiators went out to Buenos Aires, on the basis of the "recognised capital" of each company for purposes of Argentine law.⁽⁶⁾ This basis, which harks back to 1908 and makes no allowance for the relative efficiency and earning power shown in the intervening years, is open to criticism ; but at this stage the point that matters is that the panel was asked to consider only the directors' proposals for dividing between the different classes of stockholders a sum which for each company was already inexorably fixed— subject only to estimated receipts from the sale of other assets and allowance for certain commitments and contingencies. As thus adjusted the total share-out figure is £155,567,660. From this, holders of loan capital will receive definitive amounts, provided before liquidation. The return to holders of share capital will depend on the amounts yielded on liquidation, though these are not expected to vary importantly from the estimates.
        This procedure—of discharging the claims of the holders of loan capital as modified by the scheme of arrangement, before proceeding to liquidation—is the clearest evidence that the task of the panel was to adjudicate not upon the existing rights but upon a modification of them. Its members had to marry equity to expediency. Clearly, holders of stocks which, on the distribution of sales proceeds in strict accordance with contractual obligations would be left out in the cold, or at least in a chill draught, could not be expected to assent to the sale of the company's assets without being offered some compensation. Judged from the standpoint of expediency the question to be asked is whether the "nuisance values" of such stocks have been pitched at the minimum figures compatible with getting the scheme through. Alternatively, are the senior stockholders being asked to give too much away? The answer is bound to take account of the speculative Stock Exchange activity in Argentine railway share capital of recent months. Table I shows movements since mid-February, when the outright sale of the railways was announced, in prices of the "equity" issues, which include the four Central Argentine stocks ranking pari passu in a liquidation.

Stock	Price* Feb. 13	Price May 29**	Estimated Return ***	Current Price
B.A. Gt. Southern Ord.	13½	19	20	18
B.A. & Pacific Ord.	7¾	11	12½	11
Argentine Gt. Western Ord.	9½	17½	17½	15
Buenos Aires Western Ord.	16¼	27¾	25	24
Central Argentine 4½ Pref.	20	32½	32½	30½
Central Argentine 6% Cum. Pref.	31	37	37½	33½
Central Argentine Cons. Ord.	12½	21	21¼	19
Central Argentine Deferred	10	18	15	14
Entre Rios Ord.	7½	9¼	12½	11
Argentine North Eastern Ord.	25	15	12½	11
* Prices ruling when outright sale was announced ** Prices ruling just prior to announcement of terms of scheme *** Estimated return on liquidation if scheme gets through

        Holders of Argentine North Eastern Ordinary have not fared so well as had been hoped, but in all the other stocks the rise in prices since mid-February is largely justified by the terms of the scheme. It is only natural that these terms, which are meant to appeal to holders, should pay close regard to Stock Exchange valuations. But if these valuations are, as the Stock Exchange Council has rightly insisted, no criteria of the real worth of "nationalisation" stocks; they cannot be taken as the true measure of the worth of Argentine rails. As Table II indicates, the necessity for finding something for everybody leads to the imposition of big sacrifices on some of the senior stockholders it should be emphasised that, if the prior charges received their full contractual rights, too little would be available for holders of the middle stocks to provide scope for any sacrifices by them in favour of junior stockholders. Exactly how these sacrifices fall depends largely on the accident of capital structure, but it is worth noting that to give the B.A.G.S. Ordinary a return of 20 per cent involves paying the huge sum of £6,400,000, which would have provided the full 120 (instead of 75) on the 5 per cent Preference plus 85 (instead of 50) on the 6 per cent Preference. This tendency to squeeze the Preference holder is discernible throughout the list, demonstrating once again that, while their remuneration is circumscribed when things go well, Preference holders are expected to take a large part of the brunt when less favourable circumstances occur. Not that the Preference capital is alone, in this scheme, in being called up for sacrifices. In general, where arrears of interest or dividend have piled up, the most that Debenture holders get is repayment at redemption premium. Arrears are cancelled for all issues except three Central Argentine stocks, which get half their arrears—perhaps because any other treatment would have pampered the junior stockholders. The simplicity of this wholesale cancellation of arrears must have appealed to the directors and the panel as being all the sweeter because a fixed sum applied to capital repayment is worth very much more than the same sum applied to settlement of interest or dividend arrears. Thus, distribution of £402,500 gross to satisfy the 57 per cent arrears on Entre Rios 5 per cent Debentures would have meant a receipt of only £221,375 by holders after deduction of income tax at the standard rate. In other words, by ignoring the claims of the one class to a return of £221,375 net, an amount of £402,500 is left available for distribution to more junior securities. If the temptation to treat arrears so cavalierly is understandable, the fact remains that the scheme takes the easiest way out. The popular rule-of-thumb reckoning, that if a reconstruction scheme is to gain the assent of junior holders they must be left at least 25 per cent of the equity, has no application here, for this scheme is unique in its background, its extent and its complexity. But at least it can be argued that, with the ordinary scheme of arrangement, timing is an essential factor: equity holders, if pushed too hard, can afford to reject a scheme and let events run their course in the hope that sooner or later they will take a turn for the better. If one thing is certain with Argentine rails it is that, failing adoption of the sale agreement the position will go from bad to worse until eventually, instead of something for everybody, there may be nothing for anybody. It is only the abundant need for compromise that can reconcile holders of some of the more senior stocks to such a substantial dilution of their claims.

(from The Economist, 7 June 1947, pages 897-99; and Circular to B.A. Central Noteholders of 12 June 1949. Footnotes, notes in [square brackets] and emphasis added by S.D.)
The Review of the River Plate published a more detailed statement regarding British-owned railways.

Opinion of a predator...
Justiniano Allende Posse, a civil engineer closely associated with the highways department, opined that no more than 1,000 million pesos should have been paid for British-owned railways, that having been their market value on the London Stock Exchange. He was not alone in holding that opinion quoted in La Prensa. Ignorant of the consequences of Argentine Government railway policy, those who thought so spoke like predators who first run their prey into the ground.
(The Review of the River Plate, 29 August 1947, page 8; caricature by José Antonio Ginzo (1900-1969) in Hugo Gambini, Historia del peronismo. El poder total (1943-1951), Buenos Aires, Javier Vergara, 2007, between pages 320-321.)

They were so much nicer in Brazil...
The Brazil Federal Government took over the Sao Paulo Railway for £6,638,803 in 1946. Payment suffices to pay off all stockholders at par, leaving £258,000 surplus. Excluded assets are worth about £3 million. The Ordinary [shares] rose from 48 to 138.
(The South American Journal, 6 September 1947, page 117)

Have we paid too much?
It will never be known whether the price paid for the railways was too high or too low. However, ordinary shareholders may have been disappointed, seeing how much better other British companies fared, besides often having had a better dividend record during the 1930s and 1940s:

Amounts Received by Ordinary Shareholders in Liquidation after Nationalisation:
Taken over as of:	Southern Railway	Prov. of B.A. Waterworks	Rosario Waterworks	Rosario Drainage	Primitiva Gas	United River Plate Telephone
	1 July 1946	26 May 1944	1 July 1948	1 July 1948	5 March 1945	5 March 1946
Nominal value of a share	£100	£1	£10	£1	9s. 6d.	£1
Amount received	£22 13s. 6d.	£1 4s. 5.95d.	£17 12s. 9d.	£1 10s. 3d.	13s. 3.2d.	£2 16s. 5d.
In % of nominal value	22.675	122.480	176.375	151.250	139.649	282.083
Date of last liquidation payment	May 1958	14 March 1955	25 May 1955	25 May 1955	1963	1948

Compensation to staff and directors of former British-owned railways:

Aggregate compensation to individual directors from the companies:

(The Review of the River Plate, 18 July 1947, pages 22-23; Circular to Buenos Aires Central Railway Noteholders, 12 June 1949.)

Argentine Railways Purchasing Agency

A private company with a capital of £500 in £1 shares has been registered with the title of Argentine Railways Purchasing Agency. Its objects are to carry on the business of purchasing, shipping and general agent in the United Kingdom and elsewhere for any Government, company, department, board, or person owning or operating railways or other undertakings in the Argentine Republic, or any other part of the world. The two subscribers, each with 250 shares, are Sir Montague Eddy and Mr. B. H. Binder. Sir Montague Eddy has stated that the agency has been formed to carry on commitments made by the British companies in Argentina on behalf of the Argentine Government. Such an organisation is essential for fulfilment of contracts for steel, iron, rolling stock and all materials needed for the railways, and will facilitate smooth functioning without interruption. Previously, the several companies had their own individual purchasing arrangements. It is understood that the new company will begin operations as the railways sale agreement is ratified.
(The Railway Gazette, 29 August 1947, page 250; The South American Journal, 30 August 1947, page 104.)

Still not Done

Final settlement of the sale of the British railways ln Argentina to the Government is now awaiting only the termination of discussions on financial technicalities, accordlng to information received by the American Embassy in Buenos Aires.
     It is said that Sir John Montague Eddy, representative of British stockholders, stated at a press interview that he had had several interviews with Señor Miguel Miranda, President of the National Economic Council, to discuss matters related to the purchase of the railways. He added that the financial technicalities affecting the transaction were being studied by the Argentine and British Governments, and that as soon as a solution was reached, negotiations would be resumed for the (Argentine) ratification of the purchase-sale contract and transfer of the railways.
     Sir John explained that the phase of the negotiations bearing on the financial side of the deal, which is now receiving attention from both governments, will necessarily delay the final delivery of the railways to Argentina, but that it will in no way affect the conditions stipulated in the purchase-sale contract, already signed and in full force.
(US Dept. of Commerce, Bureau of Foreign and Domestic Commerce, Foreign Commerce Weekly, 25 October 1947, p. 31.)

The Argentine Agreement

THE trade and financial agreement with Argentina was formally concluded by an exchange of notes this week. It is a complex arrangement which involves a complete re-casting of the payments machinery between Britain and Argentina; on the commercial side, it conforms to the new pattern of semi-barter agreements, though it inevitably fails by far to reach that bilateral equilibrium which is so desired by our present-day commercial negotiators. In order to get the new agreement in proper focus it may be well to step back a little and look at it from an historical viewpoint. Before the war, Britain bought a good deal more from Argentina than it exported to that country, but the balance was largely made good by various invisible items, the most important being interest on capital invested by Britain in Argentina. During the war the traditional disequilibrium in the merchandise trade between the two countries was considerably accentuated, and as a result Argentina built up substantial accumulations of sterling.
        The agreement of September, 1946, was negotiated to deal with these accumulations and to arrange the future mechanism of current trade payments between the two countries. The Argentine balance was struck as at September 17, 1946, and the amount of £130 million was blocked, receiving interest at ½ per cent. and to be released at the rate of £5,000,000 per annum. These balances, which had the protection of a gold guarantee, were also available to finance the purchase by Argentina of British-owned assets. The 1946 agreement provided that currently earned sterling held on Argentine account was to be fully convertible. It also provided for an extension of the meat contract and sketched the main outlines of the purchase of the British-owned railways.
        The suspension of convertibility of sterling last August involved a fundamental and unilateral change in this agreement. It affected the convertibility both of Argentina's currently earned sterling and of the prospective releases of £5,000,000 per annum from the accumulated sterling balances. The world-wide events of which the suspension of sterling convertibility was a part also had their inevitable direct effects on Argentina. That country had suffered considerable pressure on its gold and dollar reserve, and for that reason felt increasing reluctance to use its accumulated sterling, which carries a gold guarantee, in order to finance the railway purchase. As matters stood, that sterling had become an essential part of the statutory reserve for the Argentine note circulation. The new agreement which had to be negotiated was, therefore, concerned with the new commercial contracts, with the machinery for financing current payments between the two countries and finally with the completion of the railway deal.
        On the commercial side, the agreement which takes effect from the date of signature this week and covers the period until March 31, 1949, provides for the purchase by the United Kingdom from Argentina of essential foods and animal feeding stuffs valued at £100 million is represented by the price of supplies to be bought in the period, while the remaining £10 millions is an ex gratia retrospective payment by the United Kingdom. In addition to these contracts, which are being handled by the Ministry of Food, a programme of additional imports from Argentina has been arranged to a total of about £20 million for the period.
        There are two interesting points on the food side of the agreement. Under previous contracts Britain purchased supplies for other European countries ; the new contract relates only to the United Kingdom and dependent areas. Second, wheat has not been included. After Britain's recent purchase of 80 million bushels of Australian wheat, there is possibly a very urgent need to buy additional supplies before the summer. By then more definite information may be available about the Marshall Plan. The main items covered by the new contract are 500,000 tons of meat, over 1,200,000 tons of coarse grain consisting almost entirely of maize, 100,000 tons of oilcake and some linseed oil, believed to be about 20,000 tons. In addition quantities of wheat offals, tallow, edible beef and mutton tallow and lard have also been purchased. The new quantities are similar to those purchased in 1947, so that the new agreement is unlikely to affect British rations, although the weekly two-pennyworth of corned beef may be reintroduced. No details have been published of the new contract prices or of the cost of individual items. But the meat purchases will probably account for £45 million, maize for about £42 million, linseed oil for a little over £3,000,000.
        If this division is correct, the new contract price for meat shows no increase over the previous one (ignoring the £10 million retrospective payments), while the price of maize has been raised to about £35 a ton, compared with the current Chicago price of around £22 a ton. This is indeed a sharp increase and the inference to be drawn is that the higher prices asked by Argentina have been wholly shifted on to maize to prevent a general rise in the contract prices of meat from other sources.
        Over the period of thirteen months covered by the agreement, therefore, the United Kingdom will have to make payments of approximately £130 million to Argentina in respect of current transactions. On the other hand, a long and detailed programme has been drawn up of exports from the United Kingdom to Argentina. The British Government has to facilitate the supply of certain essential commodities, including 1,000,000 tons of coal and 2,000,000 tons of petroleum products valued at £25 million. The Argentine Government has in turn agreed to grant licences to the value of £10 million for the import of certain non-essential consumer goods from the United Kingdom including rayon goods and motor cars. In addition, exports of capital goods valued at £10-15 million from the United Kingdom are being arranged bringing the prospective total of British exports to between £45 and £50 million. Including remittances from Argentina to the United Kingdom in "invisible" account, it is estimated that Argentina will have to find about £60 million sterling for current payments during the period of the agreement. On balance, therefore, the current account will involve a net payment of about £70 million from the United Kingdom to Argentina— apart from the capital item of £150 million which Argentina has to remit to Britain this month in payment for the British-owned railways.
        For the finance of these diverse transactions, Argentina has at hand at the moment £117 million in the blocked "A" account at the Bank of England, which is protected by a gold guarantee, and a further £35 million representing current accruals of sterling under the 1946 Agreement and held in the "B" account at the Bank of England. For reasons already explained, Argentina does not wish to exhaust its accumulated sterling as it would have to do if the balance in the "A" and "B" accounts were used to finance the railway deal. A way around this difficulty has been found by an arrangement under which the Ministry of Food is to make an immediate prepayment of the £110 million which is due on the whole of the food contracts up to the end of March, 1949. This sum is to be credited immediately to the "B" account, and will raise the balance on that account to £145 million. The remaining £5 million needed to make up the required £150 million for the railway purchase will be provided by a draft on the balance in the "A" account which will thus be reduced to £112 million.
        The sterling in this "A" account will then be the only resources immediately available to Argentina to meet current payments due to Britain. These payments will amount to £40 million over the period of the agreement—namely £60 million due for visible and invisible imports, less £20 million exports to Britain for which pre-payment is not being made. To enable Argentina to make these current payments, it has been necessary to unblock the balance in the "A" account. This balance is in fact, being made available to meet current payments in any part of the sterling area. The net payment of £40 million due to the United Kingdom will reduce the balance in this account to about £72 million by the end of March, 1949, but in fact the draft on the balances may be greater since Argentina will have the right to finance purchases from other sterling area countries by drawing on these resources.
        The sterling remaining in "A" account will continue to have the benefit of the gold guarantee which, it should be realised, is not a guarantee to pay in gold but to adjust the sterling balances to allow for any revaluation of sterling in terms of gold. The Argentine negotiators succeeded in attaining a similar guarantee for any sterling which they might accumulate at a later date in the "B" account. This is not an eventuality which is likely to affect either country during the next 13 months, since over this period Argentina will have no net current sterling earnings. Looking beyond the period of the present agreement, however, it is evident that the precedent which has now been made in granting Argentina an exchange guarantee on currently earned sterling may acquire considerable significance. This is the first occasion on which such a guarantee has been given, for the only other essays in this direction are the strictly bilateral guarantees given to Belgium and Sweden, which operate only if sterling depreciates in terms of the other currency concerned. The guarantee to Argentina operates without qualification if sterling depreciates in terms of gold, irrespective of anything that may happen to the sterling-peso rate of exchange. The agreement also involves the grant to the United Kingdom of an informal preference by the Argentine Government, which has undertaken that its departments will, other things being equal, give preference to British firms when placing contracts abroad.
        What emerges from this complex of commercial and financial arrangements? The basic fact remains that Britain is throwing in one of its last remaining assets in Argentina in order to maintain a level of current imports far higher than could be financed out of current income. Contrary to first impressions, the £150 million capital transaction will not be engulfed in one fell swoop by a single year's deficit on current account; the full details of the agreement show that it represents about two years deficit at the 1948 rate. But whether it will do duty for another 12 months beyond the period of the present agreement depends on whether the Argentine authorities are prepared once again to build up their sterling balances to somewhere near the £152 million at which they stand today. That, even with the help of the gold guarantee, is a doubtful prospect.
        As regards the financial arrangements, the most important feature of the new agreement is the freeing of the whole of the sterling accumulated by Argentina during the war and now held in "A" account. This gesture is not calculated to help negotiations with other countries whose accumulated balances Britain may wish to immobilise. Nor is the freeing of Argentina's accumulated balances a formal gesture. This sterling, as already noted, will be available to finance Argentine purchases in sterling area countries other than the United Kingdom. If, at the same time, Argentina persists in its present policy of demanding dollar payments for exports of cereals and other essential materials to sterling area countries such as India, the sterling area's use of the remaining dollar reserves will be correspondingly increased. At the same time, if Argentina succeeds in obtaining greater supplies of essential imports from sterling countries—for example, jute from India—these accumulated balances may in fact run away rapidly, in spite of all the arguments which the Argentine authorities have just used about their indispensability as currency reserve.

(from The Economist, 21 February 1948, pages 312-33.)

Meat for Railways

There could be no more opposite illustration of Britain's balance of payments difficulties and of the shifts and expedients to which they are driving this country than the Anglo-Argentine commercial and payments agreement initialled this week...Argentine exports to Britain this year are expected to reach £190 million. This compares with a figure of £118 million for the first eleven months of 1947. The increase is in part due to the higher price which Britain has contracted to pay for meat this year. As against these £190 million of imports from Argentina, Britain is planning to export goods to the value of £40 million to that market. This compares with a figure of £31 million for the first eleven months of 1947. The difference of £150 million is approximately equal to the amount which Argentina has undertaken to pay the British-owned railways. This sum is apparently to be made available immediately to Argentina by an advance from the British Government.... This leaves untouched Argentina's accumulated sterling balances, which must now amount to about £140 million and out of which it was expected that the railway deal would be financed. The greater part of these balances is protected by a gold guarantee. The deal with Argentina, therefore, is tantamount to "swapping" the British-owned railways in that country as consideration to one year's current trade deficit. This is living from hand-to-mouth with a vengeance. The meat ration is thus safeguarded for another year by throwing overboard capital assets in which British investors have sunk £250 million over the past 60 years. What happens in 1949, when there will be no more reserves of this kind to throw into the current Anglo-Argentine balance is a problem which, in accordance with the Government's present technique, can be left to look after itself when it arises...
        ...It is also probable that if accumulated balances had been used to finance the railway deal, Argentina would have insisted on obtaining a gold guarantee for the £150 million to be accumulated as a result of the current trade in 1948.
        Over 5 months have passed since the purchase scheme was due to be implemented and a full year since the purchase price was agreed...It is clear now that Argentina had other ideas, and meant to drain the utmost value from the railway purchase scheme as a bargaining counter for a trade agreement.

(The Economist, 14 February 1948, pp. 276-77)

The Railways and the Elections

So large a transaction as the purchase of the British-owned railway system must inevitably have been a matter of great political delicacy; £150 million is not only a large sum, but greatly in excess of what the public had originally expected to pay and it will be recalled that throughout the negotiations it was the Government's own newspapers which took the leading part in informing the public that track and equipment were no better than old iron and ought to be purchased as such. Three months ago it was being said that although ratification was inevitable, the Government must chose the moment when it could cause the least political inconvenience, there might still be time for the transfer to be completed and done with before the end of the year 1947, otherwise the opinion went, nothing would be done until the elections were over. In point of fact General Perón has once more shown himself a far more discerning judge of the public temper than either his critics or observers. Far from evading the political issues which the purchase of the railways gave rise to, the Government has courted them; the agreement was ratified and the transfer even completed on the very eve of the elections, and anyone who watched the enthusiastic multitudes which thronged to Retiro on March 1st or who saw the trains and stations adorned with the national colours must have admitted that General Perón had once more scored a personal triumph.
        The election results, still incomplete at the time of writing, amply confirm this view. The purchase of the railways has been immensely popular with the electorate and especially with the working classes and for the moment both the price paid and the difficult problems involved in re-organisation and re-equipment are forgotten amidst the rejoicing that the Nation's transport system is no longer in foreign hands. Those of his opponents who sustain that the feeling which the President and his wife command in the wage-earning class are a temporary phase, must admit that at least there is no sign of their abatement. Certainly the aggregate of votes cast for the opposition parties campaigning separately, must fall short even of the relatively small share which they secured two years ago as a united front. Though much of the President's popularity is due to his success in convincing the general public—though perhaps not all the economists—that profiteering and inflation are being successfully held in check, though much also is doubtless due to a vigorous foreign policy, there is no more remarkable feature of the election campaign than the skill with which the railway issue was converted from a potential liability to an asset of the first order.
(The Review of the River Plate, 19 March 1948, pages 4-6).

"I will only say: We have the means of transport in our hands, which is the same as saying that we have achieved our full sovereignty; this is represented by the purchase of the railways and the formation of a merchant fleet."

Argentine Railway Dividends
Captain John Crowder (Finchley—C.) , on February 24 asked the Chancellor of the Exchequer how much interest was received in this country from dividends paid by the railways in the Argentine during 1946 and 1947.
        Sir Stafford Cripps (Chancellor of the Exchequer): Dividends and debenture interest paid in this country by British companies owning railways in the Argentine amounted to rather less than £5 million in 1946, and rather less than £3 million in 1947.
        Captain Crowder: Does the Chancellor think that surrender of all future dividends from these railways by the Chancellor to the Argentine Government justifies this new Argentine Agreement?
        Sir Stafford Cripps: I understand that the railway shareholders settled the agreement with the Argentine Government.
        Colonel O. E. Crosthwaite-Eyre (New Forest & Christchurch—C.): Does His Majesty's Government consider that in this case the shareholders are equivalent to the interests of this country at the present time?
        Sir Stafford Cripps: I am not concerned with that question here. I am concerned with how much was paid by the companies in certain years.
(The Railway Gazette, 12 March 1948, page 332)

Railway Farms Transferred to Ministry
One result of the acquisition by the Argentine State of the British-owned railways has been the transfer to the Ministry of Agriculture of a number of experimental farms and establishments, the principal among which are those previously run by the Buenos Ayres & Pacific Railway at Rama Caída (Province of Mendoza), and by the Buenos Ayres Great Southern Railway at Bordenave (Province of Buenos Aires), and Cinco Saltos (Territory of Río Negro).
        The first-named farm was created for the study of the best methods of growing fruit and tomatoes; the second, of cereals; and the third, of fruit. Research work will continue on the lines followed up to the present.
(The Railway Gazette, 23 April, 1948, page 485)

THE END OF THE LONDON MARKET IN "ARGENTINE RAILS"

A Press cable from London published locally last Wednesday reports that operations in Argentine rail- way securities on the London Stock Exchange ceased on Tuesday evening after a period of 94 years. All but a small number of Ordinary and Preference shares have been redeemed, and there is no further dealing, even in the remaining "handful." The cable goes on to say:

Altogether, British investors, beginning in 1854, have invested £252,680,304 in eight railways in Argentina, which to-day are functioning over 15,651 miles of track, and amount for 80 per cent. of the aggregate revenue of the Argentine railway system.
        British owners to-day are receiving in full payment the sum £135,500,000, plus £14,500,000 for auxiliary undertakings, such as docks, warehouses, hotels, etc. This is equal to 59 per cent of their original capital.
        This old market in Argentine rails has been anything but a stodgy one during its long life. It has had wide sweeps up and down, which was most attractive to speculators, though the growth of Argentine national sentiment, has crippled it in the past 20 years. One by one, even the well-secured debentures have less and less been recommended for modest portfolios, though in the Edwardian and late Victorian days they were regarded as tip-top long-term investments.
        In addition to the eight British railways, Argentina bought out three French-owned systems for £11,000,000. Including the three French, eight British and seven government railroads—mostly small—Argentina now has an amalgamated nationalized railroad system, including 18 different roads, and 26,568 miles of track.

Uruguayan railways subject to the same pressures
Uruguay paid £7,150,000, of which £5,591,000 corresponds to the Central Railway. To this amount for the Central should be added £196,487 for "other assets". From the resulting total of £5,787,487 the following deductions are made: £287,517 for creditors not affected by the scheme; £194,046 in respect of pensions and compensation for members of the staff; £26,486 to the Managing Director; and £15,000 to the other Directors. The amount finally available is therefore £5,264,438, which it is proposed to distribute as follows: 4½ % 1st. Debentures: par plus interest from January 1, 1945 to July 1, 1948. 5% 2nd. Debentures: 85%. Ordinary: 12½.
(The Review of the River Plate, 25 June 1948, page 25. See full details.)

DISSOLUTION OF THE RAILWAY
MANAGERS COMMISSION

It has been announced that the new State Secretary of Transport has dissolved the Railway Managers Commission, and that Messrs. W. A. Pickwoad, J. E. Sandham, F. B. Lowry and F. A. Bottomley will return to their specific functions as Managers of the several systems. Mr. Mervyn F. Ryan, who was Chairman of the Commission, is thanked for his services.
(The Review of the River Plate, 23 July 1948, page 35.)

Nationalisation of an Argentine railway
By an agreement arrived at between the Minister of Transport and Frank O. Cartwright, who represented the River Plate Trust, Loan & Agency Co., the Law Debenture Corporation, and the British Trust Association Ltd, the Argentine Government cancels the debentures and guarantee notes issued by the Ferrocarril Central de Buenos Aires, S. A., for a nominal value of £4,541,500 and all the arrears of interest by means of a single payment of £950,000.
        An agreement was also signed with Ing. Federico Lacroze, representing the shareholders, for the purchase of all the shares, amounting to a nominal value of 6,000,000 pesos, by means of $5,980,000, the selling party being responsible for the liquidation of the items mentioned in the agreement, amounting to 4,373,486.15 pesos.
(The Review of the River Plate, 29 April 1949, page 31)

Transfer of British-Owned Railways Completed
The final instruments of sale to the State of the British-owned railways were signed on May 5 by Lt.-Colonel Castro, Minister of Transport, on behalf of the Argentine Government, and by Mr. Robert Montgomery and Dr. Jerónimo Cortés Funes on behalf of the liquidators.
        More than 17,000 separate items were listed in these documents, which complete the sale-purchase agreement of February 13, 1947, and the actual transfer of the railways on March 1, 1948.
(The Railway Gazette, 27 May 1949, page 577)

Argentine Railways for Nothing
The Chamber of Deputies is considering a bill submitted by the Executive Power (Law 13.539) whereby the latter would be authorised to sell...such lands now belonging to the State as are not required for public works or transport services....According to the Deputy of the majority party who was called on to provide information in this matter, the sale of all the lands considered unnecessary would bring in, according to the condition of the lands in question, between 2,500 and 3,500 million pesos. The lands in question are principally those which have become the property of the State along with the former British-owned railways, and it is true that in nearly every station outside the suburban areas the sidings and yards were laid out on the ample and lavish lines of the days when land counted for little in Argentina....
        We do not know what calculations have been used to arrive at the estimate of 2,500 to 3,000 million pesos as the market value of the State's surplus lands, and in view of the considerations expressed above it seems somewhat unlikely that the State could actually realise even the lower figure except over a relatively long period—a number of years. But, as a matter for speculative thought it is interesting to consider that if the State were to realise some such figure from fractional sales of railway lands, it would be able to reimburse the coffers of the IAPI⁽⁷⁾ for the purchase of the railways themselves—or, in other words—would have got them for nothing.
(The Review of the River Plate, 15 July 1949, pages 14-15.)

Regarding these properties, Perón said, in a message to Congress on 1 May 1948, that the lands purchased from British-owned railways comprised 125,569 hectares actually occupied by railway tracks, stations and other installations, 104,035 hectares of the railways' experimental farms and estancias, and 242,491 hectares of surplus lands, making 472,095 hectares in total.
        The matter of surplus lands was revived in 1951. (The Review of the River Plate, January 16, 1951, page 5.)
        It was estimated that properties worth 300 million pesos could be sold. (The Review of the River Plate, June 8, 1951, pages 7-8.)

An astonishing speech by General Perón, the Argentine President, is reported in The Financial Times. Perón boasts of his country's business acumen in buying the British-owned Argentine railways in 1947.

"We invited the English to come here and they asked 8,000 million pesos," says Perón. " We offered 1,000 million. Naturally they were not pleased. But ... we were able, after six months, to get the railways for 2,029 million pesos. Since we had no money," he says, "we paid with wheat. That we bought at prices which fully compensated the farmers and left them very happy. We then sold the wheat abroad at a higher price. The result of this was that we paid only one-third of the 2,029 million pesos—that is about 700 million."

La Prensa had called for nationalisation of the railway of the Province of Buenos Aires and the Review endorsed the idea. (The Review of the River Plate, December 8, 1950, pages 14-15.)

1955: Vuelta a la administración británica
Jorge Antonio visitó Londres en junio de 1955 para lograr la formación de un consorcio británico que quisiera hacerse cargo de la administración de ferrocarriles reorganizados. La Embajada de los Estados Unidos en Londres quiso pescar informaciones sobre el asunto pero el Foreign Office las ocultó.

1. At 16 pesos per £, £8.7 million amounted to $139.2 million or 76.9 of the "recognised capital" as of June 30, 1936, of the Cordoba Central and its subsidiary Rafaela Steam Tramway included in the sale. See fn. 6 below about recognised capital.

2. The last sentences applied again in 1946-8 when the British were determined to sell to meet American demands for convertibility of sterling. Perón must have considered the fact that if his Government did not buy the railways, then someone else, quite possibly from a country unfriendly to him, would be the buyer.
        A change in control was a real danger to Perón but should have been of no concern to Mr. Goudge after the disenfranchisement of foreigners in 1929.

3. Apparently it took 10 years for the realisation that the Presidential Award of 1934 was an award to the railway workers of a mortgage on railway revenue.

4. Mr. Grindley's statement—as well as other references to Brazil, Chile and Uruguay—may serve as reminders that railway problems and railway nationalisation were a universal result of American and British commercial and foreign-exchange policies and not peculiarly Argentine aberrations.

5. Presente y futuro del dinero. (Fondo de Cultura Económica, Méjico, 1947).

6. Under the Mitre Law (No. 5315 of 1907) the National Railways Board (Dirección Nacional de Ferrocarriles) determined the capital of every railway company under its jurisdiction on the basis of audited capital expenditure accounts following authorization of such expenditures and inspection of the new plant and equipment prior to it being put to use, sold or scrapped. The capital thus determined is at original cost of fixed assets and rolling stock without deduction for depreciation or increase for inflation, and excluding working capital, the value of stores, and financial items such as discounts on debentures and other "water in the capital." The last figures were published in volume L of the Board's Estadística de los Ferrocarriles en Explotación, pages 270 ff., which for the British-owned companies and for June 30, 1942, were:

By Article 16 of the Mitre Law, the Argentine Government could expropriate for the above sum plus 20 per cent. There was no sunset clause attached to this article. Only Art. 8, granting tax and duty exemptions, was to expire on the first day of 1947.
The price paid for the above was $2,242,525,000 including—as per paragraph 2(d) of the final agreement—assets "whose cost has been eliminated from the Capital Account of the British Companies by Decree of the Argentine Government, as also any land belonging to the British Companies whose incorporation in the said Capital Account has not been established by the Argentine Government," i.e. assets over and above "recognised capital." The price paid included £8,567,935, the estimated value of stores. Deducting this from the global price of £135 million, one arrives at a price approximately comparable to recognised capital of $2,100,725,676.

7. The "Instituto Argentino de Promoción del Intercambio," the State Trading Agency, the bane of Argentine farmers that for some years may have been necessary to implement post-war bilateral trade agreements and deal with foreign clients such as the UK Ministry of Food.