THE COMMERCIAL BALANCE In a country like the Argentine, which has no accumulated reserves, and has not become the creditor of foreign countries by investing its capital abroad, a favourable commercial balance (that is to say, the realisation of an excess of exports over imports) is a matter of considerable importance. Now this excess was £18,600,000 in 1908; a record, if we omit 1905, which proves clearly that the Argentine has entered upon a period of exceptional prosperity from the economic point of view. To understand the full significance of this commercial balance, we must bear in mind the financial situation of the Argentine, which has a foreign debt of £74,200,000, demanding a yearly interest of £3,907,200, payable, of course, in gold. In order, then, that the country may be able to keep its engagements, the total value of its exports must cover the amount due on the year’s imports and must also cover the interest to be paid on the foreign debt, the dividends earned by the railway companies, etc., and the expenses of maritime transport. All that we have considered up to the present shows that the productive capacity of the Argentine is limited to the results of agriculture and stock-raising. With the exception of these two elements we may say that the country produces nothing, transforms nothing. Industry is as yet in its infancy; internal trade is undeveloped; the mercantile marine is of no importance. For this reason the Argentine must perforce employ the results of its agricultural exportation in procuring what it lacks——objects of prime necessity, or raw materials of all kinds. We can thus understand what an influence a change for the worse in the commercial balance may exercise on the destinies of the country. If there is a bad harvest the deficit must somehow be made up; and as Argentina has not as yet saved enough capital to allow her to live on her own reserve funds, it is at such times that a loan becomes necessary. Thus each bad harvest helps to increase the foreign debt, to say nothing of the financial disturbances which it may create.