[1] Cited by J. V. Gonzalez in _La Nación_, Buenos-Ayres, May 25, 1910. {378} CHAPTER IV THE ECONOMIC PROBLEM Loans--Budgets--Paper money--The formation of national capital. Unexploited wealth abounds in America. Forests of rubber, as in the African Congo; mines of gold and diamonds, which recall the treasures of the Transvaal and the Klondyke; rivers which flow over beds of auriferous sand, like the Pactolus of ancient legend; coffee, cocoa, and wheat, whose abundance is such that these products are enough to glut the markets of the world. But there is no national capital. This contrast between the wealth of the soil and the poverty of the State gives rise to serious economic problems. By means of long-sustained efforts, an active race would have won financial independence. The Latin-Americans, idle, and accustomed to leave everything to the initiative of the State, have been unable to effect the conquest of the soil, and it is foreign capital that exploits the treasure of America. Since the very beginnings of independence the Latin democracies, lacking financial reserves, have had need of European gold. The government of Spain used to seize upon the wealth of her colonies to satisfy the needs of a prodigal court, and to prevent its own bankruptcy. The independence of America was won with the aid of English money, hence the first of the necessary loans. Canning encouraged the South American revolutionaries, and the English {379} bankers gave their support to their plans, in the shape of loans to the new governments. Colombian, Argentine, and Peruvian agents solicited heavy loans in the City of London, without which assistance the Spanish power could never have been defeated. The republican _régime_ thus commenced its career by assuming imperious financial responsibilities. Before commencing to practise a policy of fiscal economy, it was necessary to accept the conclusion of the most urgent loans, but once the European markets were open the financial orgy commenced. In 1820 Señor Zea concluded the first Colombian loan; in 1821 the government of that country declared that it could not ensure the service of the debt. The necessities of the war with Spain and the always difficult task of building up a new society demanded the assistance of foreign gold; loans accumulated, and very soon various States were obliged to solicit the simultaneous reduction of the capital borrowed and the rate of interest paid. The lamentable history of these bankrupt democracies dates from this period.