"Those chaps are pretty smart," commented Mackenzie. "It's only since 1918 that they took up flying seriously, and for Dagoes they've done wonders. But I wouldn't say too much about it to any Rioguayan, if I were you; it isn't exactly healthy. There's San Antonio just showing up. It's the port nearest to the Atlantic that Rioguay possesses, and like a good many South American towns, it is going ahead like steam. Keep your eyes open and don't say too much, or we may both find ourselves in gaol." Viewed from the broad estuary, San Antonio looked like a huge marble town, standing out against the lofty, tree-clad hills that enclosed it on three sides. But it was not the appearance of the place that attracted Peter's attention so much as the shipping. To his surprise, he saw three large battleships lying at moorings off the town--leviathans that, in spite of the Rioguay ensign, looked unmistakably British. "Ay, two of them hailed from the Clyde and the third from Barrow," declared Mackenzie. "They were originally built for the Brazilian and Chilian Governments, but for some reason those republics agreed to sell them to Rioguay. I expect they had been studying the 'Is the Capital Ship Doomed?' controversy and come to the conclusion that they'd best sell while they had the chance." "But what good are they to Rioguay?" asked Peter. "Ask me another, my boy," rejoined his companion. "They gave out that they were for maintaining friendly relations with the Republics of San Benito and San Valodar; or, in other words, those battleships are guarantees for a free passage between Rioguay and the open sea. They're building others like them over there. A couple of thousand skilled Japanese artisans were brought over eighteen months ago. I did hear that they can turn out a fully equipped battleship for three million dollars.... There's the submarine base." Peter looked in the direction indicated. All he could detect was a solitary submarine, bearing a strong resemblance to the late unlamented _Unterseebooten_ that played such an important part in the downfall of the German Empire. "There are others," continued his mentor. "About twenty, I believe; but where their base is actually, I don't know. It's somewhere about here, but where exactly I've never been able to find out." Slowing down, the little steamer entered one of the creeks comprising San Antonio harbour. It was not the largest, but its shores were occupied by at least half a dozen building slips on which were craft in all stages of construction. "For passenger and cargo traffic between Rioguay and the West Indies and Brazil," explained Mackenzie. "A sort of national enterprise. The capital was issued in five-dollar shares, giving each holder the chance of winning a big prize. That sort of thing, anything of the nature of a lottery, appeals to the Rioguayans. The required capital was over-subscribed in less than a week."