Argentine Mortgage Bond Cédula Hipotecaria Argentina 1886 - 1946

Argentine Mortgage Bond
Cdula Hipotecaria Argentina

1886 1946
Roberto Corts Conde

Buenos Aires, November 2006
Acknowledgements
Special thanks to Violeta Antinarelli, from the Library of the National History
Academy; Marta Gutirrez and Patricia Len, from the Library of the Central Bank of
Argentina; and Elsa Duffy, from the Library of the Ministry of Economy, who provided
invaluable material for this book.
I also wish to thank my assistants Mariano Pablo Scapin and Mara Edisa Soppelsa, who
contributed to the statistical compilation and general organization of this work.
3
Table of contents
Introduction .................................................................................................................. 5
Chapter 1 ...................................................................................................................... 6
The 1880s, until the foundation of Banco Hipotecario Nacional ................................ 6
Growth and convertibility crisis. The banking situation......................................... 6
Banks .................................................................................................................... 7
Population ............................................................................................................ 9
Immigration and the housing issue ...................................................................... 10
Investments ......................................................................................................... 11
Monetary reform ................................................................................................. 12
Economic activity................................................................................................ 12
The 1885 crisis.................................................................................................... 13
Year 1886............................................................................................................ 15
Background and creation of Banco Hipotecario Nacional........................................ 17
Foreign precedents. Land societies and the Crdit Foncier ................................. 17
National precedents. Banco Nacionals Mortgage Loan Department................... 18
The law which created Banco Hipotecario Nacional ........................................... 20
Chapter 2 .................................................................................................................... 24
The Economy during the Banks First Years ........................................................... 24
The Economy between 1886 and 1890................................................................. 24
Not such a promising start. Banco Hipotecario Nacional in times of crisis .......... 33
The Bubble Bursts: The Banco Hipotecario Crisis................................................... 35
Background......................................................................................................... 35
The Year 1890. The Crisis ................................................................................... 36
The Development of the Crisis............................................................................. 37
Banco Hipotecario and the crisis ........................................................................ 39
The depreciation of the peso. Gold bonds ............................................................ 48
The drop in real estate value and its effect on bond prices................................... 54
The 1890s Economic Recovery ............................................................................... 55
Pellegrinis Administration ................................................................................. 55
Public Debt ......................................................................................................... 55
Financial Arrangements...................................................................................... 56
Chapter 3 .................................................................................................................... 63
Expansion in the First Decade of the 20th Century ................................................... 63
The 1900s............................................................................................................ 63
Banks. The Currency Board ................................................................................ 64
The Stock Exchange ............................................................................................ 66
Banco Hipotecario and Urban Housing .............................................................. 68
Banco Hipotecario. Management Consolidation ................................................. 72
Cdula Hipotecaria Argentina............................................................................. 74
Chapter 4 .................................................................................................................... 80
War and Crisis. The Reform of 1919. The 1910s..................................................... 80
War and Crisis. 1913-1917 ................................................................................. 80
Banco Hipotecario and the war........................................................................... 84
The Mortgage Bond Abroad ................................................................................ 89
The Reform of 1919. Colonization ....................................................................... 91
Chapter 5 .................................................................................................................... 93
The 1920s. Recovery and Belle poque .................................................................. 93
The 1920s and the Recovery ................................................................................ 93
Banco Hipotecario in the 1920s .......................................................................... 97
4
Chapter 6 .................................................................................................................. 102
The crisis of 1930 and the Great Depression.......................................................... 102
Argentina and the Crisis.................................................................................... 102
Industry and Import Substitution ....................................................................... 108
Banco Hipotecario and the Crisis of 1930 ......................................................... 110
Conversions of 1933 and 1941 .......................................................................... 113
The Creation of the Central Bank ...................................................................... 121
Appendix ........................................................................................................... 124
Chapter 7 .................................................................................................................. 126
The World War II years ........................................................................................ 126
Argentina and World War II.............................................................................. 126
The Second Post-war Period ................................................................................. 133
The End of World War II and the New Monetary Banking Regime..................... 133
Chapter 8 .................................................................................................................. 136
Cdula Hipotecaria Argentina Profitability Study.................................................. 136
Introduction .......................................................................................................... 136
Profitability....................................................................................................... 140
Cdula Hipotecaria Argentina Profitability and Savings ................................... 141
Stability............................................................................................................. 144
Security ............................................................................................................. 145
Conclusions .............................................................................................................. 147
Appendices ............................................................................................................... 149
References ................................................................................................................ 166
5
Introduction
This paper aims to describe the key moments in the 60 years of history of Banco
Hipotecario Nacional (National Mortgage Bank), from its foundation in 1886 to 1946,
when its activity focused on issuing mortgage loans, financed with the market
placement of the Cdula Hipotecaria Argentina (Argentine Mortgage Bond), a type of
security which became widely spread and highly prestigious.
We did not want to restrict the Bank's history to a mere description of its main
institutional and financial conditions. The goal was to place each stage of the Banks
evolution against the background of major Argentine economic developments.
The Bank was set up in years of swift progress and serious speculative excess that led to
the severe 1890 crisis, by which is was significantly affected. Recovered from the crisis,
the institution carried out a number of reforms which enabled its consolidation and, by
the dawn of the 20th century, made it capable of addressing the needs of a decade of
remarkable progress. It was about then that it standardized its issues and created the
famous Cdula Hipotecaria Argentina.
Unlike the previous period of turmoil, the World War I crisis found the Bank in a
consolidated and well-managed position, which enabled it to confront any negative
effects. Similarly, the 1930 crisis and the Great Depression, which caused asset prices
and institutions to collapse worldwide, found the Bank in a position to confront any
adverse consequences and follow its path of progress. This situation continued through
World War II until 1946, when the new regime established for the Central Bank
changed its way of operating: bonds were redeemed and, from then on, mortgage loans
were financed with Central Bank rediscounts.
The most successful period in Argentine social and economic life in the first half of the
20th century can only be understood by taking into consideration the exceptional role
played by Banco Hipotecario, providing liquidity to huge real estate assets, channeling
savingsnot only of high-income segments, but also of popular sectorsand
promoting housing construction. Thanks to this, a country with huge urban growth
achieved an extraordinary result: a large share of its population was able to own their
homes.
6
Chapter 1
The 1880s, until the foundation of Banco Hipotecario Nacional
Growth and convertibility crisis. The banking situation.

Banco Hipotecario Nacional was founded in 1886, at the beginning of the second half of
a decade of strong economic growth and significant changes.
The 1880s saw the ending of the conflict caused by the choice of the Republics capital.
National forces quenched Carlos Tejedors uprising in the province of Buenos Aires
and, after the approval of the Provincial Legislature, the National Congress convened in
the town of Belgrano and declared the city of Buenos Aires the capital of the Republic.
After two decades of uneasy coexistence, the federal government secured control of the
country's largest city, consolidating its authority particularly over the province of
Buenos Aires, the influence of which, until then, had been most significant.
It is also true that a year before the Banks foundation (1885), the country had faced one
of its many recurrent convertibility crises.
The large outflow of gold in the two official banksBanco Nacional and Banco de la
Provincia de Buenos Aireswhich, according to some, was due to the reversal of
capital flows (John Williams1) and, according to others (Ral Prebisch2, Roberto Corts
Conde3), due to excessive issuance, led Banco Nacional to ask the Executive Branch to
abandon convertibility, which applied to the rest of the banks of issue.
The chart below shows the significant outflow of reserves in 1883-1885 in the two
official banks, which resulted in the abandonment of such regime.
John Williams, El comercio internacional argentino y el papel moneda inconvertible 1880 -1890,
Buenos Aires, National History Academy and Tres de Febrero National University, 2004.
2
Ral Prebisch, Anotaciones sobre nuestro medio circulante, in Revista de Ciencias Econmicas,
October 1921, p. 55 and subsequent pages.
3
Roberto Corts Conde, Dinero, deuda y crisis, Buenos Aires, Editorial Sudamericana, 1989.
7
Chart 1:
Change in bullion reserves 1881 - 1886
Source: Prepared in-house based on Roberto Corts Conde, Dinero, deuda y crisis, Buenos
Aires, Editorial Sudamericana, 1989.
The abandonment of convertibility enabled banks to continue carrying out a policy of

credit expansion, which deepened in the following years.
Banks
Until 1880, the most important bank was Banco de la Provincia de Buenos Aires,
founded in 1854. In 1872, Banco Nacional was founded as an Argentine state-owned
bank, as provided by the Constitution. When in 1876 the federal government had to take
a loan from Banco Provincia, it was required to limit the bills in circulation issued by
Banco Nacional in provincial territory (which included the city of Buenos Aires).
However, after the 1890 events, the balance of power between the Nation and the
province had changed and Banco Nacional became as important as Banco Provincia.
Table 1
Trend in currency liabilities of Banco Provincia de Buenos Aires
In million m$n
Banco Provincia de Buenos Aires
1880
1881
1882
1883
1884
1885
1886
1.0092
1.176
1.368
NDA
NDA
1.7
14.56
0.2356
0.456
0.62
NDA
NDA
1.7
0.7
0.7736
0.72
0.748
NDA
NDA
NDA
NDA
13.86
Currency
32.56
36.6
38.32
88.75
98
112.7
121.4
Deposits
32.56
36.6
38.32
63.9
76.6
84.8
94.1
Notes/bills
24.85
21.4
27.9
27.3
Metallic
portfolio
Deposits
Metallic
notes
Conversion
results
Source: Prepared in-house based on Roberto Corts Conde, Dinero, deuda y crisis, 1989, op.
cit.
Until then there were several banks of issue: Banco de la Provincia de Buenos Aires,
Banco de la Provincia de Santa Fe and Banco de la Provincia de Tucumn, and Banco
Nacional. They carried out usual operations, such as discount and deposit transactions.
However, the most important operation was the issue of bills, which was restricted to
authorized banks. Bank assets backed bank liabilities, both in terms of deposits and
bills.
There were other commercial banks, such as Banco de Londres, founded in 1862; also
Banco de Italia and Banco del Ro de la Plata, as well as Banco Hipotecario de la
Provincia de Buenos Aires.
9
Table 2
Trends in currency liabilities of Banco Nacional
In million m$n
Banco Nacional
1880
1881
1882
1883
1884
1885
1886
0.8
3.8
27.1
45.9
0.0
0.0
0.6
0.8
0.0
11.69
19.1
0.0
0.0
1.4
0.0
3.8
15.41
26.8
0.0
0.0
Currency
58.8
78.3
Deposits
29.7
35
Notes/bills
29.1
43.3
Metallic
portfolio
Deposits
Metallic
notes
cit.
Population
One of the most remarkable features of the time was the enormous population growth
largely due to foreign immigration, mainly between 1880 and 1886.
Chart 2:
Migration in Argentina
10
Source: Prepared in-house based on Roberto Corts Conde, El Progreso Argentino, Buenos
Aires, Ed. Sudamericana, 1979.
Most immigrants worked in urban sectors, especially construction; others made up the
bulk of settlers that engaged in agriculture, as the rail network expanded in the pampas.
Immigration and the housing issue
One of the most evident signs of this expansion was urban growth. The arrival of huge
numbers of immigrants to the cities of Buenos Aires, Rosario, Baha Blanca and other
smaller ones, led to a substantial increase in the number of inhabitants.
This is seen in the emergence of a major problem: that of urban housing. As a result of
these shortages, the concept of collective housing (conventillos), where several families
rented rooms in a house, emerged.
Conventillo-dwellers in districts 10 and 11 totaled 21% of the population in 1904,
slightly below the 27% in the three districts surrounding the area of Plaza de Mayo. In
the 4-district (8, 9, 10 and 11) area, conventillo-dwellers accounted for 15%.4
Approximately one third of the population in downtown Buenos Aires lived in
conventillos in 1887 (...) remaining virtually stable until 1904, amounting to nearly
25% of the total population. 5
The overcrowding problem in the city center was alleviated by extending the outskirts
of the city. To this end, transportation networks had to be built and money had to be
invested in housing construction.
The expansion of urban transport networks and trams allowed the expansion of the
urban areas radius. The city of Buenos Aires expanded to the west and north and even
encroached on other urban areas, such as Avellaneda and Quilmes, which could be
reached by tram. City growth, in James Scobies words, was initially to the west,
following the tracks of the first railway line in the country, which was completed in
1857 in the town of Flores, six miles away from the Plaza de Mayo. By 1900, Rivadavia,
the main artery in the north of the city, together with the tram lines and westbound
4
James Scobie, Buenos Aires: Plaza to Suburb, 1870 1910, New York, Oxford University Press, 1974,
p. 25.
5
Ibid, p. 115.
11
railway line, furthered growth of the settlement area, two and six blocks wide, to
Flores.6
As regards trams, the first lines were opened in 1870 and contributed greatly to the
development of the city. The tram expansion had an immediate effect on land
revaluation. Auction notices made specific reference to the presence of tram lines. In
1870, a sale of fifty lots in Barracas promised a tram every five minutes; an offer of 18
lots in Corrientes, near Plaza Once, assured potential buyers that they could get to
Plaza de Mayo in 25 minutes.7
The tram network was extended from 15 miles in 1873 to 405 miles in 1910, raising the
number of trips from 438,000 in the first year to a total of 5,000,000 at the end of the
20th centurys first decade.
In these forty years, the number of passengers increased from 12 million to 323 million.
A remarkable fact that sets Buenos Aires apart from European cities is that many people
here have achieved home ownership.
After 1900, most porteos (a term first applied to inhabitants of the area surrounding
the port, and then expanded to include any citizen of Buenos Aires) started to benefit
from the availability of small individual lots and homes. Workers could now afford
these new luxuries motivated by the significantly shortened distances and the
improved tram service, as well as cheap land and credit facilities offered by auctioneers
and construction companies. Many inhabited houses of one-to-three bedrooms,
accessed both either through purchase or lease.
()
"For workers, the ultimate symbol of social mobility was living in or owning a lot in the
suburbs."8
Investments
Another remarkable fact of the time was the huge inflow of foreign capital invested
mainly in railways but also in fields, lands, mills and banks, insurance companies and
other activities.
Investment flows had resumed in the 1880s after the serious impact of the 1876 crisis,
thanks to the measures implemented by President Avellaneda, which made it possible to
meet external obligations. In turn, after the abandonment of convertibility in 1876, the
6
Ibid, p. 23.
Ibid, p. 166.
8
Ibid, p. 178.
7
12
monetary tightening and fiscal balance enabled banks to return, four years later, to the
convertibility and parity regime that existed before the crisis, which caused a great
impact on foreign investor confidence.
The economic activity, the population increase and the number of wage earners helped
to generate a strong flow of savings inside the country.
The banks channeled a significant portion of these savings, including those of the lowincome population. Immigrant savings were sent as remittances to relatives abroad,
which led to the set up of major private banks (Banco de Italia, Banco Francs and
Banco Espaol, among others).
High-income sectors were operating in the Buenos Aires and Rosario stock exchanges.
Monetary reform
In 1881 a law was passed establishing a new currency for the country: the peso oro
(gold peso) of 1.6129 grams of gold. It was to be coined in coins of 5 pesos oro, known
as the Argentino, and of 2.5 pesos oro (medio Argentino). The peso was equivalent to a
silver coin of 25 grams.
Several discrepancies were raised in the Congress as regards the metallic content the
peso should have, as until 1875 it had had 27 grams of silver. By adopting the 25 grams
pattern, silver was overvalued by 7.4%.
Although it was not explicit, there was a compelling reason for this. The provinces
which traded with neighboring countries used silver coins, as they had had positive
trade balances with them since colonial times9, and the League of Governors had
triumphed in 1880.
The only legal tender was metallic. Banks would be required, starting from 1883, to
convert their paper bills into the new currency unit.
As we said, even before 1883, Banco de la Provincia de Buenos Aires had its own
exchange office, where it converted currencies freely; this also began to occur in Banco
Nacional.
Economic activity
Estimates of GDP growth confirm that economic activity gathered a very significant
pace.
Roberto Corts Conde, Dinero, deuda y crisis, 1989, op. cit.
13
Chart 3:
Gross Domestic Product
In million m$n, 1914
Source: Roberto Corts Conde, aided by Mara Marcela Harriague, Estimaciones del Producto
Bruto Interno de Argentina 1875 1935, Working documents, School of Economics, University
of San Andrs, Buenos Aires, 1994.
The reasons for this growth include, most notably, the expansion of agriculturethe
most remarkable event in the decade. The wheat-grown area was virtually multiplied by
8 in slightly more than ten years.
Table 3
Trends in wheat-grown areas
in Argentina
Year
Hectares
1875
114,497
1888
815,438
Source: Curto Hotschewer, La evolucin de la agricultura en la Provincia de Santa Fe, Santa

Fe, provincial Ministry of Finance, Economy and Industry, 1953.
The 1885 crisis

During the race to progress, in 1884, Banco Nacional suffered heavy bullion outflows.
Since 1883, banks were forced to convert bills into gold. The increase in the amount of
money in circulation in a fixed exchange rate regimeif the demand for money remains
14
stableleads to a loss of reserves. As issuance remained well above output growth, the
drain on reserves continued, and by 1885 the banks coffers were depleted.
In an atmosphere of business euphoria, the Buenos Aires market began to feel the
pressure of requests for changes in relation to Europe, to the payment of the imports
resulting from the rapid growth of those years, and alsoin the framework of free
convertibilityto the fact that the increase in money supply led the public to get rid of
paper money for security reasons and replaced it with bullion.
Under these circumstances, and in the context of a strong speculative attack from
August 1884 to January 1885, Banco Nacional had to sell gold for 34.1 m$n, exceeding
the total amount of bills in circulation. During the first days of 1885, the federal
government was asked to authorize the abandonment of convertibility, a request which
was finally granted on January 9.
An executive order established that the currency would be inconvertible for two years,
as from that date, that the total amount of bills in circulation could not exceed m$n 28
million, and that the bank's metallic reserves to date could not be reduced, forcing the
bank to use half of its net profits to increase its reserve requirements.
As from 1885, Argentina operated under a regime of inconvertibility. At first, there was
a devaluation of approximately 30% and then, the pesos value stabilized thanks to the
governments intervention in the foreign exchange market by selling gold from the
realization of assets. After the convertibility crisis, the monetary expansion remained
very strong, as shown in the chart below.
15
Chart 4
Trends in nominal and real currency issuance
In million m$n
cit.
Year 1886
Banco Hipotecario was created in 1886. The economic expansion was still undergoing,
as described by an analyst of that time:
To the casual observer, the country was still on its road to prosperity and in a unique
position.
Income increase
Import increase
1885
m$n 38,550,000
1886
m$n 46,000,000
1885
m$n 95,000,000
1886
m$n 97,000,000
While it is true that exports had declined from m$n 83,000,000 in 1885 to m$n
69,000,000 in 1886, this was attributed to cholera and not to economic reasons.
The m$n 42 million loan had been definitively arranged, issuing the first series in
January and the last, after 12 months. Though it was true that only 38 million had been
raised and that it was the first loan where customs entries were especially taxed,
16
according to the Minister of Finance, there was no doubt that the governments and the
countrys credit was increasingly consolidating.
Attention should also be drawn to the issuance of domestic debt gold-backed securities
to consolidate the floating debt. This is very importantthe Minister saidbecause so
far the domestic debt has always shared the fate of the bank bill and therefore, could
not to attract capitals to the country.10
In the context of this expansion process, rural property prices increased significantly.
Chart 5
Trends in rural Ha prices in the province of Buenos Aires
In m$n
Source: Prepared in-house based on Roberto Corts Conde, El progreso argentino, 1979, op.
cit.
Something similar occurred with urban properties.

According to Terry, in 1886, sales of real estate in the city reached m$n 38.5 million,
with an average of m$n 86 to the north of the Cathedral and of m$n 106, south of the
Cathedral.
The capital of stock corporations (sociedades annimas) had also risen significantly,
from m$n 13 million in 1885 to over m$n 34 million in 188611. The stock exchange had
traded 172 million of pesos moneda nacional.
10
11
Jos Terry, La crisis 1885 1892. Sistema bancario, Buenos Aires, Imp. Biedma, 1893, pp. 88-9.
Jos Terry, La crisis 1885 1892. Sistema bancario, 1893, op. cit.
17
The 1886 presidential election had taken place without any complications, apparently
showing, for the first time after the 1874 and 1880 crises, the countrys steady path to
progress and peace.
Banco Hipotecario de la Provincia de Buenos Aires continued carrying out its activities;
deposit and checking account performance in the Banco Nacional was strong. In 1885,
these amounted to m$n 412 and, in 1886, they rose to m$n 607.
Monetary expansion was encouraged by a government provision that mobilized (i.e.,
reduced) reserve requirements.
Background and creation of Banco Hipotecario Nacional

Foreign precedents. Land societies and the Crdit Foncier12
Several mortgage institutions existed in the 19th century. However, it is generally
accepted that the first to develop and become significant were the German land societies
that emerged in the light of the completion of the Seven Years War.
Created by Wolfgang Bhring, the German Landschaften (owner societies) were the
first mortgage institutions that took into account the various difficulties caused by this
type of operations.
The main causes that led to the emergence of these societies include the search for
solutions to the problem of high costs of capitalist-landowner transactions, and the risks
of immobilizing, for long periods of time, capital which was until then liquid.
Bhrings proposal was to create societies that issued debt securities, and for these
securities to be freely negotiated, thus solving the difficulties mentioned.
Initially, there was a direct relationship between capitalist and landowner that was
supported by the society, but due to the ongoing challenges posed by operations, the
society had to take over brokerage.
Another important precedent was the French Crdit Foncier, which was empowered to
make both long- and short-term loans, with or without depreciation, resorting to its
capital stock and profits from its operations.
The bank granted loans in cash, but as it was difficult to find resources to continue
operating, it started to issue bond loans at a fixed interest rate with the typical
characteristics of mortgages.
12
See Sixto Quesada, El Banco Hipotecario de la provincia de Buenos Aires, Buenos Aires, 1895.
18
In 1857, bond loans became a standard product at Crdit Foncier, which was
responsible for negotiating on behalf of borrowers.
The statutes, by which the loan was restricted to no more than 50% of the property
value in bonds, were the basis of responsible fund management.
National precedents. Banco Nacionals Mortgage Loan Department
In 1884 a law was passed to create a Mortgage Department at Banco Nacional aimed at
granting mortgage-backed loans across the country. At the time, the possibility of
setting up a Banco Hipotecario was considered, but it seemed unwise because the
market was not sufficiently large to back the bonds already issued by Banco Hipotecario
de la Provincia de Buenos Aires.
In the discussion, representative Rojas, the commissions reporting member, said that it
seemed unfitting, due to our territories vastness, to set up such an institution, because it
would not be able to cover the whole country.
A department that would make loans in cash instead of bonds was proposed, which,
according to legislators, would better adapt to the conditions prevailing at the time.
One important reason which made the placement of these bonds difficult was the
underdevelopment of capital markets in provincial cities which, unlike Buenos Aires,
had no major financial centers.
Those who opposed bonds noted that these would entail problems for Banco Nacional
management, while a Mortgage Department, endowed with resources to carry out its
functions, would be more efficient.
Another outstanding feature was the possibility of a quick closure when private capital,
instead of state capital, was in charge of the business. Legislators hoped that over time
the role played by government institutions in the mortgage market would be taken over
by the private sector.
In senator Rojas' words before the Senate:
The Commission believes, Mr. President, that this project also offers the possibility of
closing down the Mortgage Department it establishes, when government authorities
consider it is no longer necessary to keep it, once its aims have been achieved, and
allocating these resources to other needs linked to the progress, initiative and
assistance of our government.
This time will come, Mr. President, when as a result of the same boost given to our
industries by this Mortgage Department, we will have the capitals we lack today for this
19
sort of operations. And also when, given the association spirit resulting from the
powerful incentive of profits, institutions similar to those existing in other countries,
such as agricultural banks and so on, are created.
Then it will be time to close down this Mortgage Department and leave the field clear
for private speculation, because it is known, Mr. President, that this sort of operations,
in the form of business or speculation, should not be conducted by governments and can
and should only be carried out by them under the conditions proposed in this project
and due to the reasons I mentioned.13
The session was attended by Senator Miguel Jurez Celman, who later became
President of the Republic, when the Banco Hipotecario bill was passed in 1886.
It was discussed whether the Bank was empowered to put a mortgaged property up for
sale at a public auction in case of breach of obligations. Some senators argued that this
power clashed with that of provincial governments, who were the ones in charge of the
codes of procedure.
Banco Nacionals Mortgage Department would receive an interest rate of 8%, lower
than the 9% charged in bonds by Banco Hipotecario de la Provincia de Buenos Aires.
The rate was deemed appropriate, since it covered the Department administrative
expenses and it would be a good reflection of the opportunity cost of capital.
The National Treasury would make a capital contribution to the Bank, and in exchange,
the government would receive the mortgage loan profits.
The government loan to the Bank consisted of government securities, a 20-millionworth public fund with a 5% rate of interest and a cumulative annual depreciation of
1%.
Several senators expressed reservations about the new issue, as it was known that the
level of public debt was considerable. The then Minister of Finance, Victorino de la
Plaza, informed the Senate that such services were not centered around the Treasury, as
it was the Banks duty to make the payments with its profits.
The discussion in the House of Representatives reiterated the arguments in the Senate,
focusing on whether it was convenient or not to make these mortgage loans in cash or
bonds.
13
Republic of Argentina, Diario de Sesiones del Senado, 1884.
20
The law which created Banco Hipotecario Nacional
On July 20, 1886, a bill was introduced in the Senate which was passed as Act No. 1804
for the creation of Banco Hipotecario Nacional.
According to the Finance Committee, two projects had been received and, in the end,
the chosen one was that put forward by the Executive Branch.
Section 1 of the mentioned Act provided that:
Section 1 Create a National Mortgage Bank to grant mortgage loans throughout the
Republic, issuing credit notes to be extinguished by a cumulative sinking fund.
Section 2 defined bank operations:
Section 2 Bank operations will include:
1 The issue of fixed credit notes, income bonds, and depreciation schedules,
transferable on mortgages executed in their favor.
2 The collection of annuity payments to be made by borrowers for their mortgages.
3 The timely income and depreciation payment to noteholders.
Section 29 exempted these transactions from taxation; Section 31 stated that loans
would be made in bonds at their par value; Section 46 empowered the Bank to sell a
property if the debtor failed to pay; Section 51 established sale procedures; and Section
59 stated that payments could be made in legal tender or bonds.
The project clarified the difference between Banco Nacional loans, which were
personal, and Banco de la Provincia de Buenos Aires loans, which were limited to
operations within the scope of the province. Finally, the same legal provision made the
1884 provision on the Banco Nacional Mortgage Department Section null and void.
In the debate, Senator Derqui emphasized the need for supplying the provinces with the
capital they needed. The provinces were vast in terms of land but they had a profound
lack of capital. This would be a good way of helping them in that regard.
The commission was once again divided between those who argued for loans in bills or
in bonds.
The newspapers of the time opposed the creation of a new national government bank,
as they understood the Constitution restricted the number of those institutions to one. In
this regard, the newspaper La Nacin said:
The nation may create one bank of issue. However, it cannot be argued that banks of
issue and mortgage banks are the same thing without offending common sense.
Moreover, even if they were not identical in nature, they would be not one, but two
21
banks. The nation may not, then, set up a mortgage bank because it in its power to
establish but one bank, and this must be a bank of issue.
To this, and to everything already said on the issue, we will just add a crucial
reflection: The provinces cannot set up banks of issue on their own. Why not? Because
that power is restricted to Congress. If that were the case with mortgage banks, they
would follow the same rules. And however, the same Constitution that bans provinces
from setting up banks of issue, does not forbid them from establishing mortgage banks.
There is no reason for banning it, as it is not a power exclusive of the general
government.
The general criterion has not strayed much from this; and, whereas no province has
ever tried to create banks of issue, Buenos Aires, a long time after its reintegration,
founded its provincial mortgage bank.14
La Prensa newspaper was no less critical:
The parliamentary discussion about the project of founding a national mortgage bank
with branches across the Republic has ended. And we declare it has ended because
what is missing are more or less important details that the Senate will go over in a
single session.
We have closely followed the debate in the House of Representatives: the political and
constitutional arguments in favor of the project have buttressed our conviction against
it.
()1
The constitutionality of the Act is untenable: not even the most skillful rhetoric has been
able to weaken the cry of protest from the federal system we have chosen for ourselves.
It has been asked where in the Constitution Congress is denied the authority to create a
state-owned mortgage bank. The answer to this question is this: in each and every one
of its sections, starting with the preamble; because, within the government system
adopted by the Argentine population, states rule states, with complete independence of
the federal authority, and the Bank voted gives the national government the power to
rule over provincial land: from now on, public authority will be shared between both
levels, and this is not federalism, but centralism.
14
La Nacin newspaper, September 4, 1886.
22
You need to be unaware of the meaning of this political system, or have the firm
resolution to repeal it, to hold that under it the nation can trade real credit in the
provinces, appropriating land from their jurisdiction.15
While abroad the creation of the Cdula Hipotecaria Argentina (Argentine mortgage
bond) was seen as a positive development, on accounts of its safety and its profitability,
mention was made of the dangers it entailed in a context of strong appreciation and
speculation in the land market.
According to The Economist, the prestigious specialized magazine:
There is not much to be said against the bonds. The Republic of Argentina has many
good agricultural and farming resources which, as shown in recent years, are likely to
rapidly expand, especially thanks to the help of institutions like Banco Hipotecario.
It can also be said that the government is right to encourage the countrys commercial
prosperity by providing this type of facilities, e.g. when it requests credits for the
railroad expansion.
Moreover, one can say that these 'bonds' do not increase the debt, since this security is
covered by a most substantial character and has a wide margin for advance payments.
And from the viewpoint of investors, it should be noted that these bonds are not only
risk-free, property-backed instruments, but also pay 2% more than pound-denominated
bonds in this market. Of course, they are affected by any paper money depreciation but,
on the other hand, profits will be made with any fall in the gold premium.
Although these arguments are plausible, much can be argued against them. First, it is
doubtful that these land transactions will be carried out judiciously by the Government.
Perhaps it would be better for the country to leave this activity in private hands, where
there is no reason to believe that they will not meet the legitimate requirements. One
considerably great risk is the fact that there is no restriction on the issuance of these
bonds. The moment the government guarantees in 'bonds' half of their lands value,
well-to-do people will embark on all sorts of speculative business. And, as long as there
is demand for such bonds, the government, which has the same ferocity as the people it
represents, will not impose restrictions on the issuance of 'bonds.
Speculation in all land deals will be dangerously encouraged and security-printing
companies will work hard issuing more and more of these securities.
()
15
La Prensa newspaper, August 29, 1886.
23
The absence of this kind of restriction can be a cause of inflation and collapse in land
speculation. In such case, the owners of 'bonds' will perhaps find themselves in an
unenviable position. The overvalued price of land will drop dramatically and, under
such circumstances, it will be very difficult to realize the ownership of land.16
By the end of that year, The Economist issued a new wake-up call in relation to the
increase in land speculation especially since the creation of Cdulas Hipotecarias
(mortgage bonds):
In recent years, speculators bought vast areas of uncultivated land to make them
productive, but in reality, the aim was to make money from securitized areas.
Speculation in lands has been, and still is, so excessive that prices have risen to
absurdly extravagant levels, and there is much reason to fear that the loans made by
both banks (Banco Nacional and Banco Provincial), in most cases, exceeded the value
of the property backing them.
And when the inevitable reaction is here, there will be no doubt that banks will have to
face up a liquidation situation.17
16
17
The Economist, March 5, 1887.

The Economist, December 15, 1888.
24
Chapter 2
The Economy during the Banks First Years

The Economy between 1886 and 1890
In the second half of the 1880s, the first years of Banco Hipotecario, the economy
experienced a strong upswing. The 1884-1885 crisis and the 1885 inconvertibility had
not prevented it from growing, reaching its strongest momentum in 1890, as can be seen
from the various indicators presented.
Chart 1
Gross Domestic Product (GDP)
In million m$n (1914)
Source: Roberto Corts Conde in collaboration with Mara Marcela Harriague, Estimaciones del
Producto Bruto Interno de Argentina 1875 1935, Working Papers, Economics Department,
San Andrs University, Buenos Aires, 1994.
25
Chart 2
GDP Growth, by sector 1880 - 1890
IN 1880 = 100
Producto Bruto Interno de Argentina 1875 1935, 1994, op. cit.
Foreign capitals inflows continued, and a new immigration waveabout 100,000

people per year poured into the country, and the expansion was based on two
complementary spheres: the extension of cultivated areas and that of the railroad
network. From another point of view, this was precisely the cause of the growth of
population and foreign investment.
Thanks to the expansion of cereal crops, the countrya net wheat importer until
1876was able to become self-sufficient and start exporting cereals. In the following
decade, the country was trading very large volumes of grain.
Table 1
Trend in Wheat Cultivated Areas 1888 1895
Year
Cultivated Ha.
1888
815,438
1895
2.049,683
26
Source: Curto Hotschewer, La evolucin de la agricultura en la Provincia de Santa Fe, Santa
Fe, Ministry of Finance, Economy and Industry of the province, 1953.
There is also a marked increase in goods and passenger transport by rail.
Chart 3
Rail Transport
In million passengers and tons
Source: Prepared in-house based on Roberto Corts Conde, El progreso argentino, Buenos
Until 1889, bank reserve outflows and balance-of-payment issues in 1885 did not affect
confidence among public and private Argentine debt creditors or in the financial sector.
After the abandonment of convertibility in 1885, and until 1889, there were no bank
depositor runs.
27
Chart 4
Trend in Banco Provincia de Buenos Aires monetary liabilities
In million m$n
Source: Prepared in-house based on Roberto Corts Conde, Dinero, deuda y crisis, Buenos
Chart 5
Trend in Banco Nacional monetary liabilities (bills)
In million m$n
28
cit.
To some extent, the ongoing foreign investment flows were explained by the fact that
they were allocated primarily to gold- or pound sterling-denominated securities, or to
risk-free nation-guaranteed sectors, like railroads.
Table 2
Total external loans, 1881 1885
In million gold $
Sector
Loans
Public borrowing
105,046
Private investments
44,313
Total
149,359
Source: John Williams, El comercio internacional argentino y el papel moneda inconvertible

1880 -1890, Buenos Aires, National History Academy and National University of Tres de
Febrero, 2004.
However, while the real economy grew at a rapid pace, factors of fiscal and monetary
imbalance were accumulating, which would lead to the terrible crisis of 1890-1891.
The Government not only launched an ambitious public works programsince,
reasonably, progress in Argentina required a modern infrastructurebut also,
encouraged by the progress fever, took some reckless measures regarding the maturity
of obligations incurred vis--vis returns on investment.
But, as it has happened in other circumstances, there was also an unscrupulous
management of the Treasury.
In addition to the disorderly management of public finance, there were financial
experiments which, had the required assurances and conditions been in place, would
have yielded better results. However, the way in which things were handled ended in
dismal failure.
One of these measures was the creation of guaranteed banks which, according to the
authorities, would be similar to US national banks. In Argentina, banks were in charge
of issuing bills, which were not legal tender during convertibility.
29
By virtue of the provisions included in the National Constitution, the national state had
the power to establish as legal tender the metallic coins minted by Casa de Moneda (the
Mint). In 1875 the following banks of issue were operating:
Table 3
Banks of Issue in Argentina 1875
Salta
Tucumn
Santa Fe
Crdoba
Buenos Aires
Banco Nacional
Source: Roberto Corts Conde, La economa argentina en el largo plazo, Buenos Aires, Ed.
Sudamericana, 1997.
The stated purpose of guaranteed banks was to uniformly supply money throughout the
country. The issue could be done by purchasing gold-backed government securities,
which guaranteed the bills. We must bear in mind, however, that since 1885 bank bills
were inconvertible.
The Office of Guaranteed Banks, the governments regulatory agency, handed uniform
paper money to banks when it received the gold with which they purchased securities.
The government issued domestic debt in gold worth $150 million for guaranteed banks.
The provinces that established these banks took loans from abroad to buy gold, which
they used to get national debt, or otherwise used gold-denominated notes.
Issuance was colossal and entailed an increase in the debt in gold contracted by all the
provinces that established banks.
Although the deposit of metallic money for guaranteed banks was made effective in the
1888 financial statement of the Banco Nacional, it amounted to almost m$n 54.53
well below the issuance, as shown in the chart below.
30
Table 4
Financial Statements of Guaranteed Banks 1888
In million m$n
Bank
Issuance
Salta
0.1
Tucumn
0.4
Santa Fe
Crdoba
Entre Ros
Buenos Aires
50
National
41.3
Total
103.8
cit.
As a result, between 1888 and 1889, there was a huge monetary expansion, which led to
strong speculative pressure.
Chart 6
Trading Volume on the Buenos Aires Stock Exchange, Excluding Gold
In million m$n
31
Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio
de Buenos Aires.
As the National Bank intervened to prevent the peso from depreciating any further (after
the abandonment of convertibility, its value dropped 37% and it afterwards remained
more or less stable until 1889) and Argentine prices reflected international ones, at first,
there was not a considerable increase in consumer goods. However, the price of real and
financial assets did rise, driven by a cheap credit policy that caused a speculative
bubble.
Chart 7
Trend in Built m2 Price in the City of Buenos Aires
In m$n
Source: Prepared in-house based on Boletn Estadstico de la ciudad de Buenos Aires, several
years.
The Government tried to avoid currency depreciation, because taxes were collected in
paper peso and the external debt was to be settled in gold. For that purpose, it
intervened in the market selling gold, but with fiscal deficits caused by growing
expenditures as well as the peso depreciation and a huge monetary expansion. This left
the economy in dire straits.
32
Table 5
Ordinary and Additional Tax Revenues in Paper and Gold 1885 - 1891
Year
Average gold price
Revenues in paper
Equivalent in gold
1885
143%
25.3
20.5
1886
141%
32
22.7
1887
138%
40.7
29.5
1888
150%
41.9
27.9
1889
197%
62.4
31.7
1890
253%
50.4
19.9
1891
391%
47.4
12.1
Source: Roberto Corts Conde, Dinero, deuda y crisis, 1989, op. cit.
The value of the peso was maintained with the sale of real assets, the Andean and
Northern railroads, for m$n $30 million.
In order to obtain metallic reserves, another step was the creation of the guaranteed
banks, by means of which the national government intended to have access to the gold
private commercial banks held in their coffers.
Real estate credit, i.e. mortgage bonds, was affected by the extraordinary increase in the
money supply and was part of the widespread speculative process.
Sixto Quesada described the existence of purely speculative operations at Banco
Hipotecario de Buenos Aires. They consisted in purchasing a property and then
applying for a mortgage to obtain bonds, which would later be sold. This was because
the bonds for the mortgaged property exceeded by far property value, disregarding the
50% limit set by the law.
According to Quesada, the succession of directors did not change the outlook of the
Bank (Hipotecario Provincial de Buenos Aires). These abuses were committed in loans
agreements in previous administrations and bonds continued to be issued in large
quantities.
All this was against a backdrop of general concern about the visible rise in rural estate
and land prices, which was disproportionate to the price of any products derived from
them.
Many people were engaged in land businesses and purchased at high, steadily growing
prices.
33
This rise was generally attributed to speculation, given the large profits made as a
result of this activity. However, doubts gradually faded away and the truth was
revealed: purchases were merely aimed at mortgaging properties and receiving from
the Bank larger amounts than the price paid for them. 18
In a context of widespread price increases and expected upward trends, property
appraisals made by Banks exceeded purchase prices.
Chart 8
Bond Issuance by Banco Hipotecario de la Provincia de Buenos Aires
In million m$n
Source: Sixto Quesada, El Banco Hipotecario de la Provincia de Buenos Aires, Buenos Aires,
1895.
The purchase of real estate with mortgage bond loans, speculating with the profits
resulting from the price increase, resulted in a speculative bubble that finally burst in
1890.
Not such a promising start. Banco Hipotecario Nacional in times of crisis
It must be borne in mind that bond operations were different from mortgage operations
at commercial banks, such as those performed by Banco Nacionals Mortgage Section
in 1884.
18
Sixto Quesada, El Banco Hipotecario de la Provincia de Buenos Aires, Buenos Aires, 1895.
34
Mortgage bonds are long-term credit instruments. Creditors can place these bonds at
any time in the secondary market, but debtor obligations are paid on a fixed term and by
individuals, even though they are guaranteed by the Bank.
Commercial banks created bank money with fractional reserves and their conditions
could become unstable, since, with short-term deposits, by means of automatic renewal,
they granted long-term loans.
But Banco Hipotecario did not use a deposit multiplier to create money, like fractional
reserve banks: the mortgagor acquired bonds and sold them in the market, profiting
from the sellers money.
The amount of bonds traded was determined by the then current money and the
preferences of those who chose to give up liquidity for that asset.
For this reason, the issue of bonds in the local market did not entail a monetary
expansion, unlike those placed abroad. The inflow of gold into the country in return for
bonds in the Currency Boardas it should have done in most casesincreased the
money supply in the gold standard.
Regarding Alberto Martnezs and banker Ernesto Tornquists views, John Williams
says that the A through F19 series were entirely in Europe and that 90% of the total
issued by 1900 would have had the same fate. However, during the first decade of the
20th century, Carlos Tornquist estimated that the bonds traded abroad amounted to
60%20.
The following chart shows the market value estimate for bond inflows and services.
Table 6
Foreign Capital Allocated to Bonds 1887-90
In million gold pesos
19
Year
Amount of bonds sold abroad
1887
54,138
1888
46,621
1889
55,885
A, B, C, D, E and A gold series were issued before the crisis, whereas the F series was the first one
issued after the 1895 re-conversion.
20
See John Williams, El comercio internacional argentino y el papel moneda inconvertible 1880 -1890,
Buenos Aires, National Academy of History and National University of Tres de Febrero, 2004 and Carlos
Tornquist, El balance de pagos de la Repblica Argentina, Buenos Aires, Imp. Tailhade y Rosselli,
several editions.
35
1890
13,975
Source: John Williams, El comercio internacional argentino 1880 1890, 2004, op. cit.
In this sense, it may be argued that the national government used the Bank to attract
gold from abroad. Foreign investors purchased bonds with gold, while debtors received
gold in exchange for the paper. Banco Nacional, a governmental financial agency, was
in charge of exchange operations.
Table 7
Nominal and Actual Amount of National and Provincial Mortgage Bonds Traded
in Cash on the Buenos Aires Stock Exchange
In m$n
Provincial bonds
National bonds
Nominal
Actual
Nominal
Actual
amount
amount
amount
amount
NDA
NDA
1886
18,181,000 14,911,720
1887
13,334,000 11,003,359 16,711,000 13,373,048
1888
9,250,000
7,553,642
1889
3,883,800
//
1890
//
7,494,767
//
515,172
1891
//
51,581,020
//
4,190,086
1892
//
23,049,332
//
3,068,470
9,526,000
7,862,840
3,447,500 6,028,380*

de Buenos Aires.
*Total provincial and national bonds traded in cash.
The Bubble Bursts: The Banco Hipotecario Crisis

Background
In every crisis, there is a point when someone concerned about high prices decides to
stop buying and start selling. When this becomes widespread, everyone wants to do the
same and no one buys. Sellers start to sacrifice part of the price, but when it continues to
drop, the price floor becomes unknown and people refrain from buying. Share, bond
and real estate prices go down.
36
Debtors fail to pay bond debt services and the Bank must use its reserves to ensure
collection. Finally, the properties whose owners fail to pay must be auctioned. The
problem is that, in a context of general crisis, auctioning properties makes prices drop
even further and a recovery of credit value becomes unlikely.
There is a mismatch between assetswhere the value of collateral (the mortgaged
properties) fluctuatesand liabilities, whose values are fixed.
Why did the trend change? Not only because a further rise of assets seemed unlikely,
but also because at the new price level, the actual amount of money had been reduced
and, paradoxically, there was a shortage in currency in circulation and thus, a higher
demand. For this reason, people would get rid of assets to obtain cash. This situation
was magnified when access to credit was restricted and people started to search for bills
to buy gold and guard themselves against paper money depreciation.
Everybody was trying to sell off their assets, which led to a drastic fall in prices.
One of the signs of the future crisis was when, in June 1888, the stock market crashed in
what, according to the Syndical Chamber of the Stock Exchange, was the most violent
shock recorded in the institutions chronicles.
The securities that triggered off the alarm were that of Banco Constructor del Plata,
whose price fell from 235% to 160%, leading to huge losses, carry-overs and
bankruptcies within the Stock Exchange. By the end of July, the securities settlement
corporation was forced to auction 19,200 shares and 17,400 certificates.21
According to the same source, another sign was the strain in the real estate market.
Another symptom of the nearing crisis was that, by the end of the year under review, it
was already difficult to sell land in cash, which translated into long-term sales paid in
small monthly installments.22
The Year 1890. The Crisis
The onset of 1890 was grim. Joseph A. Terry, who later became Minister of Finance
and who was a contemporary observer of events, said in this regard: The year begins
on an ominous note. The critical moment is approaching. While land and securities
speculation becomes paralyzed under alarming conditions, owners of the first and
holders of the latter find it impossible to settle their obligations in due time, and full
renewals are being requested.
21
Jos Terry, La crisis 1885 1892, el sistema bancario, Buenos Aires, Imprenta Biedma, 1893, p. 129.
See also Memoria de la Cmara Sindical de la Bolsa de Comercio de Buenos Aires, 1888.
22
Jos Terry, 1893, op. cit.
37
Banks, in turn, are restricting credit; private banks, as a precautionary measure against
the prevailing uncertainty, and official banks, due to their depleted reserves. The
government and individuals have no access to foreign credit.
The general unrest is exacerbated by the political conditions. The lack of credit, the
scarcity of money and the lost illusion of endless richness has stirred patriotism among
the sons of this land, and those who used to be faithful admirers of the supreme chief
officer are already enlisting in the revolutionary ranks. The economic awakening has
brought about a political one.23
There followed deposit withdrawals from our official banks, which could not settle
their portfolios or recover their metallic reserve requirements, or guaranteed bank
deposits, pursuant to an 1889 Executive Order.
24
In mid March, both institutionsBanco Nacional and Banco de la Provincia de

Buenos Airesrequested from the government new issues to be bailed out. The possible
consequences of the proposed action made the government hesitate; the banks insisted
and threatened to suspend payments. On April 8, Banco Nacional had reduced its
metallic reserve requirement to 400,000 pesos and, on April 10, the government of the
Province of Buenos Aires requested 7 million for its bank, despite the possibility of
bankruptcy. Finally, the government yielded and signed the famous agreements, which
soon after caused a true scandal in Congress.25
The Development of the Crisis
The collapse of the Stock Exchange, bankrupted companies, defaulted banks,
unemployment and falling output were the most visible signs of the 1890 crisis. The
causes can be traced to the abandonment of convertibility in 1885, which increased the
fiscal deficit with the paper peso depreciation, which eroded state income (in paper
money). The creation of an enormous public debt to acquire gold and intervene in the
market in order to maintain the peso parity led to huge capital flights as well as deposit
and reserve runs and, finally, to the closure of banks which resulted in the crisis26.
23
Jos Terry, La crisis 1885 1892, el sistema bancario, 1893, op. cit., p. 150.
Jos Terry, 1893, op. cit., p. 156.
25
26
Roberto Corts Conde, Dinero, deuda y crisis, Buenos Aires, Editorial Sudamericana, 1989.
24
38
Chart 9
Share, Bond and Gold prices
In m$n
Chart 10
Government Securities Price
In m$n
Source: Roberto Etchepareborda, Tres revoluciones: 1890, 1893, 1905, Buenos Aires, Editorial
Pleamar, 1968.
39
Defeated, the government left a perfectly untenable financial situation: exhausted
banks, Treasury and national funds; a shattered administration; an accumulation of
unpaid debts, and a nation that believed that the arrival of a new administration would
by itself revive past times, speculation, price booming and wastefulness.
27
In the meantime, the crisis was on its way. Personal credits disappeared altogether,
and rumor has it that well-known millionaires were forced to give property as collateral
for small sums. Official banks were feeble and nearing bankruptcy; private banks could
not discount bills even for their own customers; corporations went bankrupt every day,
and all securities in the stock market plunged, even those with the best guarantees. In
contrast to the credit facilities granted in the past, now pesos could only be obtained
under a repurchase agreement (even mortgages were not accepted), and at 20% to 30%
rate year-over-year.
The paper money in circulation was disappearing from the market. Owners withdrew it
from both official and private banks, since none inspired any confidence. () Those
whose wealth was counted in millions only a few months ago were now ruined, holding
worthless lands and obligations whose terms had expired or were about to expire.
There was no one willing to buy for 10 cents per meter lands that used to be sold at 10
pesos per meter. Rural property surrounding the cities and urban property depreciated
along with paper money, producing the opposite result to what everyone had foreseen.28
() The losses were estimated in billions of pesos, considering the difference between
1888-9 and 1890 values of land, property, and public and corporate securities.29
Banco Hipotecario and the crisis
John Williams stated that the idea of a mortgage bank such as Banco Hipotecario in a
country like Argentina was very positive as a means to obtain funds for agriculture.
However, having been set up in the context of huge monetary disorder and speculative
fever in the second half of the 1880s, and with a board of directors under the strong
political influence of Miguel Jurez Celman (who was not known for the prudence of
his management style), it did not follow the rigorous criteria for appraisals required by
its Foundation Act. It is true that this was possible thanks to the unusual rise in property
prices, which raised expectations of continuous increases and which made operations
less transparent. But it was the same liberality shown by the government when it
27
Jos Terry, La crisis 1885 1892, el sistema bancario, 1893, op. cit., p. 160.
29
28
40
allowed the board to make repeated issuances that promoted speculation. At any rate,
Banco Hipotecario Nacional operations were more prudent than those of the Banco de
la Provincia de Buenos Aires, which resulted in lower losses.
Table 8
Average Price and Standard Deviation
of National Mortgage Bonds 1886 - 1891
against par value
Average price
Standard deviation
89.82
90
9.5
81.72
8.25
82.12
7.63
81.50
8.65
A gold
64.87
20.95
Note: For A series, the period is 1886 -1891; for B and C, 1887 1891; for D, E and A gold,
1888 1891.
Table 9
Average Price and Standard Deviation
of Provincial Mortgage Bonds 1886 - 1891
against par value
I
83.85
18.21
82.22
17.86
76.51
8.93
67.03
17.4
Note: For I and J series, the period is 1886 1891; for K and L, 1887 1891.
de Buenos Aires and La Prensa newspaper.
41
Chart 11
Trend in Banco Hipotecario Provincial Bond Prices

de Buenos Aires.
The large fluctuations in the exchange rate (the gold premium) had the strongest
influence on the prices of Banco Hipotecario Nacional bonds. The intervention of
Banco Nacional in the foreign exchange market (which was favored by gold inflows
from trading bonds abroad) achieved a relative stability in the exchange rate and
allowed bonds to retain their value until 1889. However, when the price of gold soared,
they plummeted.
42
Chart 12
Trend in Gold Price
against par value

de Buenos Aires.
Chart 13
Price of A, B (Deflated by Gold) and A Gold Series
of National Mortgage Bonds
against par value
43
de Buenos Aires.
In this regard, Williams said:

In theory, [Banco Hipotecario Nacional and Banco Hipotecario de la Provincia de
Buenos Aires] were good banks. Had they been well-managed, they could have
accomplished everything that was expected of them. Their operating mechanisms,
however, were delicate and complex, not at all suited for the turbulent times of the
Jurez Celman administration. Banks had no capital. If mortgage payments went into
arrears, in turn, banks had no resources to pay interest on the bonds. It was their
responsibility, of course, to be protected against this. Their main role was to appraise
lands in order to estimate how much could be obtained in a foreclosure auction.
European lenders could not travel thousands of miles to appraise lands. Everything
depended on the banks honest and accurate appraisals. However, it was in this respect
that banks showed their greatest flaws. When Banco Hipotecario Nacional was
founded, in November 1886, paper money had already depreciated and the relevant
prices had been inflated. Land speculation had already begun, and land prices were
rising at a fast rate. Loans were forbidden by law to exceed 50% of the mortgaged land
appraisal, and this margin would undoubtedly have been enough before the speculative
fever. However, loans made at a later stage, when land prices had been artificially
raised, necessarily had a much smaller surplus margin. Besides, with the ongoing land
boom, banks were tempted to continue on an upward trend because a drop in value
would undermine their own situation.
In addition, banks were under government control, which was a healthy and necessary
measure in normal times. With Jurez Celman in power, however, the official control
was a significant disadvantage. Banks were dominated by political cronies; boards of
directors were busy promoting their supporters; it was not difficult for an official party
cohort to obtain loans on worthless properties, despite the express prohibition of the
law. Wetlands and salt flats stood the same chance as prosperous farms, as long as the
owner was part of the political circle.30and 31
Williams continued:
30
31
John Procter, in The Bankers magazine, London, March 1891, I., p. 457.
John Williams, El comercio internacional argentino 1880 1890, 2004, op. cit., pp. 96-97.
44
By this time (1886), the land boom was at its peak and both banks printing companies
competed against each other for bonds issuance. Authorities agree that, before 1887,
bonds had arrived in Europe only in small quantities. Before the end of the year, they
were already circulating on every important European stock exchange. The opening of
a seemingly inexhaustible new market largely explains bond expansion in 1887.
()
Thus, a year after its foundation, the Bank had issued $50,000,000, the total amount
authorized by law. Sixteen branches had been opened in the provinces and 3,641
mortgage loans had been granted, 2,024 in the city of Buenos Aires and 649 in the
wheat-rich province of Santa Fe, and the rest in several other provinces and national
territories32. The mortgaged lands were appraised by the Bank at $111,506,605, so that
the $50,000,000 in loans granted as bonds accounted for 44.84% of the properties
value. At the time, the Bank seemed to prefer a conservative policy. The board
announced that, although applications for loans exceeded the $50,000,000 limit, no
more bonds could be issued33.
But soon the mood changed. The bonds had been welcomed. The A series was traded at
90, and the B series, at 84. Political pressure from speculators and government
supporters was aimed at increasing issuance. Applications for mortgage loans kept
coming in. An act passed on August 2, 1888, finally approved a new issuance of
$60,000,000.
()
In three years, the Bank had issued $89,500,000 in paper bonds and more than
$18,000,000 in gold bonds. This virtually put an end to the Banco Hipotecario Nacional
issuance at the time; the 1890 issuance, which reached about $2,000,000, completed the
$110,000,000 worth of bonds authorized by law.34
Compared to those at Banco Hipotecario Provincial, the operations at Banco
Hipotecario Nacional seem moderate. The effect can be seen in market prices. Although
the prices of national bond fluctuated wildly, in line with the gold premiumfrom 112
(A series, December 10, 1889) to 73 (E series, December 15, 1888), the range was
often restricted to between 80 and 90, even in April 1891, the worst year of the crisis.35
32
Memoria del Banco Hipotecario Nacional 1887, Buenos Aires, 1888, p.13.
Ibid.
34
John Williams, El comercio internacional argentino 1880 1890, 2004, op. cit., pp. 99-100.
35
John Williams, 2004, op. cit., p. 101.
33
45
Table 10
National Bonds
Gold premium
Gold pesos
against par value
Paper pesos
(annual average)
Paper bonds issued
90,000,000
as of 1890
Gold bonds issued
in 1888
Gold bonds issued
in 1889
Gold bonds issued
in 1890
Total in 1890
6,136,000
48
9,081,280
12,078,000
91
23,068,980
1,786,000
151
4,382,860
20,000,000
126,533,120
In the form of mortgage bonds acquisitions, the country received an inflow amounting
to 20 million gold pesos, which contributed to maintaining the exchange rate.
In this sense, bond operations abroad gave the national government the possibility to
obtain gold. They were another valuable tool, together with provincial debt issues, to
find metallic resources.
It is impossible to tell for sure what percentage of these mortgage securities reached
Europe. Informed opinions, however, agree that most of them had that destination.
Again, it is worth noting that the onset of the bond boom coincided with the emergence
of these securities in European markets, and that the main reason for setting up banks
was to attract European capital to Argentina. It was a young country with a population
of less than 4,000,000 inhabitants, and local capital was necessarily scarce. We may
also mention the Minister of Finances statement in 1884, to the effect that virtually the
whole public debt, both domestic and external, was in Europe.36
()
Inquiries made in 1900 by Argentine statistician A. B. Martnez, and again in 1904 by
a prominent Argentine banker, the late Ernesto Tornquistwhose services were so
valuable to the Government during the 1890s reconstruction, yielded the same
36
Memoria de Hacienda, 1883, p. 4.
46
results: in general terms, the A to F Series were entirely in Europe; in Argentina there
were, perhaps, a few millions of both G and H Series.37
Table 11
Annual Bond Service and Issuances 1887 1890
In million m$n
Year
Nominal value
Effective value
Interest and
issuance
issuance
amortization
1887
94,679
82,211
8,239
1888
93,618
92,951
15,616
1889
153,894
116,681
23,167
1890
59,987
38,699
35,033
After the fall of Jurez Celmans administration, the Bank's authorities were reelected in
September 1890, and Wenceslao Escalante was appointed president, serving until
March 1893.
The new board had to keep on lending in the face of many difficulties, paying for bond
debt services and keeping their collection up to date. The problem was that, if no further
operations were conducted, the Bank would enter into liquidation and its activity would
be limited to the collection of registered loan fees and the payment of bond coupons.
In September 1890, Act No. 2715 was passed authorizing the Executive Branch to issue
m$n 60 million38, 25 million of which would be made available to Banco Hipotecario
for mortgage-backed loans in legal tender bills.
37
John Williams, El comercio internacional argentino 1880 1890, 2004, op. cit., p. 103
When the national government, in April 1891, takes over guaranteed banks issuance, the bills are
denominated in pesos moneda nacional .By virtue of the 1899 Act that established the Currency Board,
the currency is legal tender national peso currency ($m/n c/l) until 1967.
38
47
Chart 14
Average Price of Banco Hipotecario Nacional bonds
against par value

de Buenos Aires.
The Act also authorized the issuance of m$n 15 million in bonds. However, these funds
were not given to Banco Hipotecario, because the government used them to pay part of
its external obligations. The institution suffered from the liquidation of the Banco
Nacional, where it had deposited around m$n 24 million.
Escalante said in the 1890 Annual Report: The September 6 Act was not enough to
strengthen the Bank, because of the way in which it provided for the issuance and
amortization of the $25 million allocated to the Bank. If that sum was to be used for
loans with an 11% annuity and, at the same time, 10% of the capital borrowed was
amortized for the Currency Board, there was only 1% left to meet expenditures and
minimum cash requirements.
The best solution was to reduce the reserve requirement for the Board, but it was not
adopted. It was proposed that the loan annuity should be increased, but the proposal
was not approved by the House of Representatives. Only $25 million were left, but those
were trapped in the Banco Nacional. 39
39
Memoria del Banco Hipotecario Nacional 1890, Buenos Aires, 1891.
48
In order to facilitate the collection of this credit, Banco Hipotecario was authorized to
transfer it to Banco Nacional debtors, upon request, offering property as collateral. In
fact, Banco Hipotecario was entitled to change debtors by replacing Banco Nacional
for the debtors of the latter who preferred to be its own. 40
In 1889, the situation of non-performing mortgage loans was serious. They amounted to
m$n 810,940, which was tantamount to 254,401 gold pesos.
The amount in arrears increased a year later, so debtors were urged to pay; otherwise,
their properties were auctioned. In order not to swamp the market with properties, only
those which were two or more semesters or three or more quarters in arrears were
liquidated. 41
In 1890 and 1891, the income collected only covered the coupon payment; however, the
measure allowed bonds to maintain their price.
In 1891, the National Congress passed Act No. 2838 exempting debtors from penalties
if they rectified their status within six months after enactment.
According to the 1891 Annual Report, when that bill reached the Senate, it eliminated
any incentive to pay before the six-month period was over. Once it was passed, in
addition to the cancellation of auctions, there was a significant reduction in the Banks
collection, and the amount in arrears increased.
As mentioned before, the latter amounted to m$n 810,940.50 in 1889; m$n
3,259,033.87 in 1890; m$n 5,538,981.37 in 1891; m$n 6,207,410.25 in 1891; m$n
6,207,410.25 in 1892, and m$n 7,827,049.12 in 1893. The latest figure accounted for
more than 10% of existing loans.
This was the worst time in history for the Bank, because in October 1891 it had to
meet the payment of coupons, including the four national currency series and the A gold
series. On top of all that, payments by Banco Nacional were suspendedwhere, by law,
Banco Hipotecarios funds were to be deposited, freezing 693,419 pesos.42
The depreciation of the peso. Gold bonds
The same report, in relation to the root cause of Banco Hipotecarios difficulties, stated
that it may be argued that they stem exclusively from gold bonds, because even the lack
of payment in due time of paper bond services by borrowers would not have been
40
Banco Hipotecario Nacional, Balance de un siglo 1886 1986 (volume I), Buenos Aires, 1986, p. 121
Banco Hipotecario Nacional, 1986, op. cit., p. 122.
42
41
49
enough to halt the progress of the institution; the challenges posed by these arrears
would have always found a way to be handled. But the difficulties posed by gold bonds
were beyond the Banks capacity and the governments means to help it. Most of these
loans had been granted with gold at 150% or 170%; when it reached 300%, debtors
were materially unable to pay services.43
The depreciation of the peso against gold was the main cause of arrears, because it
affected Bank reserves.
This difficult situation was overcome by the provisions included in Act No. 2842,
enacted on October 26, 1891, under which the Bank could convert gold bonds into
paper bonds, through a special issuance of the latter, with an annual interest rate of
8%. For bondholders who did not accept the conversion, coupon payments in gold were
suspended for two years, but during that time they could receive payments in national
public fund securities backed by gold at 5% interest and 1% amortization. The same act
authorized the issuance of these securities and commanded the Currency Board to issue
five million pesos in bills which would be made available to Banco Hipotecario
Nacional to make up its reserve fund. 44
This decision, made by President Carlos Pellegrini, allowed the Bank to continue
carrying out its activities and avoid liquidation.
As mentioned before, the conversion of bonds into gold was voluntary. By December
31, 1892, out of the original $20 million gold-backed issuance, 1,974,800 gold pesos
had been canceled, and Bank creditors had converted 10,200,850 gold pesos, a little
over 50%, to paper.
Two years later, as anticipated by Act No. 2842, bond holders who had not accepted the
1891 conversion had their gold-back bond services paid once again.
Once the payment of services in gold was resumed, the Bank suffered heavy losses,
since mortgage borrowers paid a rate of $10 legal tender for gold $7, while the
payment of revenues at the current exchange rate led to an average effective loss of
126%s. In the 1906 balance sheet, profit and loss caused by this amounted to m$n
13,445,377 (in the 1892 1906 period).45
In 1911, during the discussion of Act No. 8172referred to in later chapters, the
remnant of these bonds, amounting to 9,371,950 gold pesos, was requested to be taken
43
Ministry of Finance of Argentina, Memoria presentada al Congreso Nacional de 1892, p. 202.

Banco Hipotecario Nacional, Balance de un siglo 1886 1986 (volume I), 1986, op. cit., p. 123.
45
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su cincuentenario, Buenos Aires,
1936, p. 57.
44
50
out of circulation. As we said before, the payments for those bonds had been normalized
since 1893. Although debtors of this series accepted the conversion, bond holders did
not do the same.
This series foreign services in gold caused significant losses to the Bank. The
institution received from its debtors services with an 8% annual interest, plus 1%
commission and 1% amortization, in legal tender pesos. In addition, it had to pay 5%
interest plus 1% amortization and 1% commission fee in gold pesos, which led to a
considerable debit balance. All in all, the Bank collected the 10% legal tender and paid
7% gold, i.e., 15.91% legal tender. This loss, which sometimes exceeded the million by
far, amounted to an average of 700,000 pesos annually.
()
Therefore, it may be very well argued that these expenses were the contribution
required by the 1891 crisis from Banco Hipotecario Nacional, and what consumes its
profits until today. 46 47
During Wenceslao Escalantes term as governor, important amendments to the Charter

were proposed.
The 1890 Annual Report said that an official administration, appointed by public
authorities, encountered problems in times of crisis when there was a need to execute
mortgages, so it suggested the participation of private capitalists or bond holders. As
regards these operations, it points out that, although the law only allows loans in bonds
(which are allocated directly to these operations), they leave an insufficient margin for
the Bank due to real estate price fluctuations.
A proposal is made for the Bank to have the authority to perform other operations,
including the issuance of long-term mortgage bonds, with fixed interest and
amortization rates, which would be sold to capitalists, lending cash at an interest rate
2% to 3% higher.
Escalantes idea was to encourage the use of bonds as a short-term lending instrument,
preferably in the local market, while foreign investors were given the option of longer
term securities. According to the then Bank governor, European short-term rates were
3% and local ones, 8%.
46
47
Republic of Argentina, Diario de Sesiones del Senado, 1911.

Ibid., p. 76.
51
But Escalante also had a social aim. He claimed that producers could never have a sense
of belonging to their land because they would spend much of their lives working to pay
for them. Therefore, the maturity of bonds had to be reduced.
The bond must be a paper for domestic use, meant to serve the country; an
intermediary between capitalists and local borrowers. For operations abroad, longer
term mortgage securities would be more suitable.
Long-term mortgages affect the physical-mental bond between owners and their
property.
In 1893, Escalante left the governor position, which was taken over by former President
of Argentina, Carlos Pellegrini. The situation had improved, but there were still
problems with coupon collection, and it was necessary to conduct auctions.
As land prices had fallen dramatically, new properties were put up for auction that
produced a further fall in prices, which made it impossible for Banco Hipotecario to
collect outstanding debts.
Chart 15
Trend in Land Prices 1891 1894
In m$n by hectare
Source: Prepared in-house based on Roberto Corts Conde, El progreso argentino, 1979, op.
cit.
In the 1894 Annual Report, Bank governor Carlos Pellegrini argued:
52
Its operations having been suspended, the Banks mission is today reduced to a slow
liquidation through ordinary loan amortization, total cancellation of some loans or
forced liquidation of non-performing loans. () it is clear that ordinary amortization
and extraordinary cancellations cut good loans on a daily basis, thus reducing the
Banks real profits; and that non-performing loans are becoming more costly, as the
value of the unpaid services increases. The ratio between the active and frozen portfolio
is becoming increasingly unfavorable. The inevitable consequence of the current freeze
on Bank operations is a gradual road to hardship, despite all the efforts made in the
past by the national government and its current board to protect the institution from the
effects of a crisis that has witnessed the fall of many other banks. A mortgage bank like
Banco Hipotecario is essential in our country. If it did not exist, it would be necessary
to create itexplains Pellegrini. This makes the inaction dooming it to its
disappearance is all the more inexplicable, for it brings forth private usury, which kills
every industry and any initiative requiring the use of credit.48
In 1895, the Executive Branch authorized the issuance of m$n 15 million in bonds, as it
had been provided for by Act No. 2715 five years earlier. Thus, the Bank resumed its
activities.
According to El Banco Hipotecario Nacional en su Cincuentenario: In times of deep
economic distress, credit instruments are always very much affected, as a result of
collective distrustsometimes paniccaused by a general drop in values. The 1890
national crisis led to the bankruptcy of a giant banking institution, Banco de la
Provincia de Buenos Aires. Naturally, together with the Bank, the institutions
securities also fell, weakened by abusive handling. In a context of general confusion,
the public authorities had tried to prevent the Bank from plummeting into the abyss by
means of inconvertible fiduciary issues.
Argentine mortgage bonds, like every credit issue, had every general reason to have
their price affected, as can be seen. But it is in these difficult and serious times when the
prestige of a security is put to the test. While most similar securities were failing,
mortgage bonds maintained high prices during the crisis, as shown in the following
table:49
48
Banco Hipotecario Nacional, Balance de un siglo 1886 1986 (volume I), 1986, op. cit., p. 126.
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su Cincuentenario, 1936, op. cit., pp.
50-1.
49
53
Table 12
Maximum and Minimum Prices of Mortgage Bonds
Series
Date
Minimum
Date
Maximum
Dec 1, 1887
81
Dec 15, 1889
112
Dec 1, 1887
77
Jan 15, 1890
110
Dec 15, 1888
76.75
Jul 15, 1890
99
Dec 15, 1888
75
Jun 15, 1890
100
Dec 15, 1888
73
Jun 17, 1890
103
A gold
Feb 23, 1889
49
Jun 1, 1889
89
Source: Memoria del Banco Hipotecario Nacional
The Currency Board allocated an issue of 5,000,000 pesos to the Bank.

Five years later, in his capacity of national senator, Pellegrini responded to the criticism
he faced for authorizing said issue:
One day, the Banco Hipotecario Nacional governor approached me and said: In the
next coupon maturity date, the Bank will not have resources to pay for it and will have
to close its doors.
The bankruptcy of Banco Hipotecario, Mr. President, meant throwing to the market
another 100,000,000 depreciated bonds and ruining their holders, robbing the country
of that tool for progress and work, which had lent invaluable services to the national
industry, and destroying an initiative whose creation had entailed lengthy efforts.
We studied the situation of Banco Hipotecario and we found that, with five million
pesos, it could pay off its deficit during three or four years. It was certain that, once
order and prosperity were restored, it would be in good shape to continue operating.
Considering all this, five million pesos were lent to the Bank, and the institution was
saved.
Who would condemn that operation today?
Five million pesos were a burden for the country, but saving Banco Hipotecario
represented a huge benefit. The appropriateness of the measure must be considered
based on a comparison of its cost and its benefit.50
50
Republic of Argentina, Diario de sesiones del Senado, November 17, 1896.
54
Once the Banks solvency was assured with the above measures and new bond issues
were frozen, the institutions work was limited, in subsequent years, to liquidating the
consequences of the crisis.
The massive devaluation of real estate caused difficulties in selling mortgaged property
and heavy losses were incurred by the Bank. Execution debtors could not pay their
personal, mostly non-performing, loans. The Bank gradually liquidated its nonperforming loans, which were many, and canceled its losses with reserves and annual
profits.51
The drop in real estate value and its effect on bond prices
International specialized media reflected the distressed situation of Banco Hipotecario
and the 1890s crisis. In March 1890, already in full-blown economic crisis, The
Economist quoted the Buenos Ayres Standard paper:
Land speculation has been completely destroyed since the freeze on bond issues.
Owners offer property on the market at a price which barely three months ago would
have seemed ridiculously low. Suburban areas and hard grass ranches in national
territories are like drugs on the market. There is currently a general sell-off, and
landownersthat is, owners of speculation landsand security holders are the main
casualties. The losses incurred by both are simply enormous at current market
prices.52
In the middle of the crisis, losses from holding bonds in some cases were 10.5 points
over par value for the B series and 15 points over par value for the E series. It is worth
noting that these instruments began to be traded in London at 50% to 40% over par
value, which means that, in those difficult months, they were traded at 40.5% and 34%
of par value, respectively.
Regarding the exchange of securities of the A gold series for counterparts in paper
money, The Economist said in 1891: And then there comes Banco Hipotecario
Nacional, requesting the suspension of interest cash payments and gold debt
amortization for two years, offering in return securities in gold at 5%. (...) The authority
has power to convert gold bonds into paper, offering $200 for every gold $100. 53
51
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su cincuentenario, 1936, op. cit.
The Economist, March 29, 1890.
53
The Economist, October 31, 1891.
52
55
The 1890s Economic Recovery
Pellegrinis Administration
Following Jurez Celmans resignation in July 1890, Carlos Pellegrini, the new
President of Argentina, and Vicente F. Lpez, his Minister of Finance, took steps to
balance fiscal accounts. Nevertheless, they failed to prevent a second crisis from
sparking off, from November 1890 to April 1891, caused by the Baring Brothers
default, and a third one, in April 1891, as a result of deposit runs and local bank
bankruptcies (including the two official ones). New measures were taken, limiting the
working capital, increasing revenue, creating new taxes collected in gold and reducing
expenditures.
In the midst of this extremely difficult situation, the economic activity responded to
railroads and port investments, as Argentina, which produced grains at a lower cost,
took Eastern and Southern Europes place as a producer for European markets. In 1891,
following a drought in Russia, Argentine wheat arrived at the port of Antwerp. By 1893,
wheat exports amounted to 1,000,000 tons compared to 100,000 in 1888.
During the 1890s, the currency was stabilized and prices converged towards
international ones, which led to a budget surplus that was maintained for several years.
The drop in interest rates encouraged investment and contributed to a rise in GDP
which, after falling in 1889-1891, started to grow in 1892, a trend that continued until
1913.
After a severe crisis, Argentina not only recovered but also took the first steps in the
path of robust growth.
Public Debt
Public external debt amounted to some 33 million gold pesos in early 1880 and rose to
128 million gold pesos in 1890.
Loans for public worksmainly in the health sectorfor the Riachuelo and the
railroads were the most important items but, in the second half of the 1880s, most
Argentine provinces issued debt abroad to fund guaranteed banks, for over 70 million
gold pesos.
56
Financial Arrangements
In February, after the Baring Brothers default in November 1890, Victorino de la
Plazawho had since September been negotiating a loan for the institution signed an
agreement with the Bank of England Committee which avoided the default. The country
was granted a stand-by loan for 15 million (a higher figure than the amount originally
requested) with a Morgan Bank security to pay outstanding debts or guarantees granted
by the Government, which, in turn, gave that institution a general bond at 6% interest
and 1% amortization, guaranteed by customs duties.
The Argentine government recovered Obras Sanitarias de Buenos Aires, leased to a
British company in 1888. In order to pay for advances (14 million gold pesos) and the
outstanding debts for works, a loan of 31 million gold pesos was granted, which in 1892
raised the total debt to 198 million gold pesos. The 18861887 public works loan,
supported by customs duties, was paid regularly.
However, the relief offered by the funding loan was known to create a heavy debt. This
is why in 1893, Minister of Finance Romero proposed the Creditors Committee in
London to replace it for an interest payment of 1.5 million, which would be distributed
among creditors. Moreover, he stated that the total services and amortizations would be
paid as from 1901.
Once Morgan Banks initial resistance was overcome, a settlement was reached
providing for an orderly and viable payment plan, which was strictly followed, to the
point that the total payment was made in advance.
Despite criticism, the Morgan Agreement alleviated the governments difficult
financial situation and allowed a program to be designed thanks to which a new, more
favorable financing scheme (the Romero Agreement) was introduced in 1893.
From the point of view of expenses, service payments and debt amortization played a
considerable role in public finances, although they were a decreasing percentage of
exports and fiscal revenues.
Table 13
Debt and Exports
(1)
(2)
(3)
(4)
(5)
1889
16.70
67.64
24.69
65.40
37.75
1890
11.60
64.63
17.95
73.60
24.39
57
1891
9.90
76.66
12.91
80
16.14
1892
6.20
67
9.25
87.40
10.59
1893
15.80
62.17
25.41
90.10
28.21
1894
13.10
52.42
24.99
103.60
24.12
1895
12.40
76.75
16.16
127.30
12.69
1896
NDA
NDA
NDA
NDA
NDA
1897
10.10
80.95
12.48
106.50
11.72
References: (1) External debt payments (in million gold pesos). (2) Export prices in index numbers
(1883=100). (3) External debt payments as a percentage of export prices. (4) Export prices (per volume).
(5) External debt payment as a percentage of export prices.
Source: Roberto Corts Conde, La economa argentina en el largo plazo, 1997, op. cit.
Whereas the crisis affected mainly the financial sector, the government and public
construction, other sectors grew significantly, particularly regarding grain production.
According to the Ministry of Finances 1891 Annual Report, whereas the country was
facing its most difficult times, huge volumes of Argentine grain were being unloaded at
the port of Antwerp.
Crop failures in Russia, Europes major supplier, increased the demand for Argentine
grain, whose export had begun in the previous decade.
Since then, crop exports jumped dramatically. Wheat exports, had reached 100,000 tons
in 1888; five years later, in 1893, they had risen to 1,000,000 tons.
This was the result of a process that (although messy, often reckless and at times tinted
by corruption) stimulated strong growth. The great expansion of railroads and the influx
of European immigrants in huge numbers facilitated the exploitation of large stretches
of virgin land.
58
Chart 16
Trend in Cultivated Areas in Argentina
In million hectares
Source: Prepared in-house based on A. Martinez & M. Lewadowski, LArgentine au XX sicle,

Paris, Armand Colin, 1912.
In the 1890s, this was reflected in a significant export increase. Cereals became more
important than leather, wool and other livestock products.
Now, Argentine wheat had arrived in Europe.
59
Chart 17
Composition of Argentine Exports
Source: Prepared in-house based on Extracto Estadstico de la Repblica Argentina, Buenos

Aires, 1915.
Rail transport activity was another sign of this recovery.
Chart 18
Trend in Rail Transport 1886/1900
In million passengers and tons
60
Source: Prepared in-house based on A. Martinez & M. Lewadowski, LArgentine au XX sicle,
1912, op. cit.
This helped reduce the heavy burden of external debt. The relation between service
payment and total exports, which in 1889 reached 37.75%, decreased gradually to
11.72% in 1897.54
This, of course, was accompanied by a large drop in expenditures and a monetary

contraction, which enabled debt settlements. First with the Baring CommitteeMorgan
Bank bondsand then with the Romero Agreement, as from 1893, Argentina began
to orderly meet external debt interest payments and, by the end of the century, even
before the arranged date, the capital debt.
In the banking sector, after the terrible crisis of 1891, Banco Nacional, Banco de la
Provincia de Buenos Aires and several private banks were liquidated.
Table 14
Liquidation of Public Funds
Banco Nacional: m$n 41,333,333 in public funds deposited by the government in
accordance with Section 42 of the November 3, 1887 Act; over $26,318,000 in public
funds deposited pursuant to Section 1 of the July 18, 1890 Act.
Banco de Crdoba: the national government takes over the issue of m$n 15,553,796
and takes possession of $8,696,653 in public funds plus m$n 6,857,142 also in public
funds.
Banco de la Provincia de Buenos Aires: the national government takes over the issue of
m$n 57,918,200 and takes possession of m$n 32,958,574 in public funds plus m$n
24,959,625 purchased with notes and by deposit in compliance with the above Act
dated July 18. The definite liquidation of this operation is postponed.
Banco Provincial de Salta: pays off its 5,000,000 gold pesos debt with Banco Nacional
with m$n 4,432,000 in public funds. The national government takes over the issue of
m$n 4,432,000 with land mortgages and other securities.
Banco Provincial de la Rioja: pays off its 3,441,834 gold pesos and m$n 367,073 debt
with Banco Nacional with m$n 3,000,000 in public funds. The government takes over
54
Roberto Corts Conde, La economa argentina en el largo plazo, Buenos Aires, Ed. Sudamericana,
1997.
61
the issue through guarantees.
Source: Jos Terry, La crisis 1885 1892, el sistema bancario, Buenos Aires, Imprenta
Biedma, 1893.
The banking activity went back to normal in the same decade, aided by the dominance
of Banco de la Nacin Argentina, founded in the most critical times of the crisis.
Banco Hipotecario Nacional, which had gone through exceptionally difficult situations
(due to its debtors default and delinquency), overcame a period of suspension of
services in gold. It gradually went back to normal, and by 1895 it had returned to its
regular activity. On July 8, 1895 the Executive Branch issued an Executive Order
empowering the institution to resume operations and put into circulation m$n 15 million
in bonds, as required by Act No. 2715.
Pursuant to such authorization, the H series was created and construction loans, a
novelty, were introduced, with the aim of promoting urban development.
In the meantime, the main economic variables began to recoverreal estate prices,
exchange rates, the volumes and values traded in the stock market.
Table 15
Trend in Mortgage Bond Prices
in the London Market
against par value
Year
1896
1897
1898
1899
1900
1901
E
Max
33.45
32.13
41.00
38.50
42.50
46.25
F
Min
25.75
26.50
31.25
35.12
33.00
42.60
Max
31.50
31.85
39.85
38.60
41.80
46.25
Min
23.75
26.75
31.50
35.12
32.00
41.50
Source: Prepared in-house based on Anuario Estadstico de la ciudad de Buenos Aires.
62
Chart 19
Trading Volume on the
Buenos Aires Stock Exchange 1891/1900
In million m$n

de Buenos Aires y Anuario Geogrfico Argentino, 1941.
63
Chapter 3
Expansion in the First Decade of the 20th Century

The 1900s
After the difficult years of crisis, the 1890s recovery was followed by a remarkable
expansion in production and exports. Thanks to the clean-up of public finances and to
prudent monetary and credit management, the country had returned to normal, and
growth was steady.
Immigration flows picked up after two years of shrinkage. Investments took longer to
return, but when they did they gathered pace.
Railroads were built in order to transport output to the ports. Progress did not stop
despite the fact that the end of the decade saw a border dispute with Chile; thanks to the
both Governments prudence, however, confrontation was avoided through the Pactos
de Mayo.
The new century was starting on a promising note. The whole country grew and was
completely different from the terrible years of the crisis. Shortly before his death, in his
foreword to Martnezs and Lewandowskys book, Carlos Pellegrini reminisced about
that time:
Durant les dix dernires annes du XIX sicle, lArgentine a support toutes les
infortunas et connu tous les flaux qui peuvent frapper un peuple agricole et rural. La
sauterelle, venue des rgions tropicales, dvorait les rcoltes ; la fivre aphteuse,
importe dEurope, dcimait le btail ; les menaces dune guerre avec le Chili
imposaiment d`normes dpenses el puisaient tous les revenues de la nation ; enfin,
une crise commerciale et industrielle et des perturbations intrieures, consquence du
malaise gnral, compltaient le tableau des calamits qui mirent l`preuve la vitalit
de ce peuple
(...)
La Rpublique Argentine est sortie triomphante de la longue et dure preuve; elle est
sortie plus forte, plus riche, et pleine de confiance en sa prope destine plus qu` aucun
autre moment de son histoire55
55
A. Martinez and L. Lewandowsky, LArgentine au XX sicle, Paris, Armand Colin, 1912, pp. XLIII and
XLIV.
64
Banks. The Currency Board
Banks had suffered the collapse of the two great Government institutions, Banco
Nacional and Banco de la Provincia de Buenos Aires. Very few private banks were able
to overcome those hard times without closing, and some were wound up.
Towards the end of the decade, those which were still operating returned to the market
with a more cautious attitude and high reserves.
An important development in this part of the decade was the strong restriction on
currency issuance as a result of the agreement that settled the Baring situation, and the
high minimum cash requirementsreaching 45% for Banco Nacin.
"The lack of a central bank and a bank rediscount system prevented banking institutions
from relying solely on the mobilization of their portfolio as a way to address potential
withdrawals. After a marked drop in 1906, the average minimum reserves were around
36% of deposits.
As expected, domestic private banks maintained lower levels (28%), with a sharp
reduction between 1900 and 1903. Also predictable was the higher level in foreign
banks (56% in 1900 and 40% in 1912.) High percentages for Banco Nacin, which
peaked at 77% in 1903 and remained consistently above 40%, were even more
surprising. Its mission as a foreign exchange market stabilizer after the return of the
Currency Board may have been one of the causes of such a high level. Also, its
restrictive credit policy up to the beginning the century may have had an impact, which
would help explain the subsequent drop.56
The most remarkable fact was the emergence of numerous private commercial banks, as
well as many branches in the provinces.
Banco Nacin had significantly contributed, fostering the expansion of agriculture and
rural areas, as a result of railroad expansion. New towns were born next to railway
stations. The emergence of many rural towns was another consequence of this process.
In the province of Buenos Aires, Banco Nacin took over the role of Banco Provincia as
a driver for development, together with some commercial banks that also contributed
but to a lesser extent.
"The collapse of Banco de la Provincia de Buenos Aires had had a negative impact on
the broad area served by its branches. Although branches of the new official
56
Regalsky, A., in Tedde, P. and Marichal, C. (eds.), La formacin de los Bancos Centrales en Espaa y
Amrica Latina, Madrid, Banco de Espaa, Studies Service, 1994, p. 53.
65
institutionBanco de la Nacin Argentina were established right away, some
locations were not covered, and the allocated capital was not as much as before.
Fund availability and credit demand increased markedly in these areas as a result of
the exports boom. Shortly before the crisis, the first local institution was founded:
Banco Comercial de Azul. After the collapse of Banco Provincia, other institutions were
established in Mercedes (1892), Dolores (1893), and Ayacucho (1894).57
New non-commercial banks were numerous as well, including institutions for
financing housing construction and the creation of credit unions in general.58
Banks ceased to issue currencya role which, since 1899, was assumed by the
Currency Boardto focus on deposits and discounts.
The Currency Board, founded in 1890, did not start operating until 1899, under the law
that established a convertibility system by means of which the Board could issue bills
against gold deposits, at a ratio of m$n 2.2727 per gold peso.
This convertibility system operated until its suspension during World War I, and was
resumed from 1927 to December 1929, when it was abandoned on the eve of the 1930
crisis.
Specializing in discounts and deposits operations did not imply a setback for banking
activities, but produced a greater expansion in a context of overall economic growth.
57
Andrs Regalsky, La formacin de los Bancos Centrales en Espaa y Amrica Latina, 1994, op. cit., p.
49.
58
Andrs Regalsky, 1994, op. cit., p. 56.
66
Table 1
Argentine Banks Overview, as of December 31, 1909
In million m$n
Discounts
Deposits
Gold
Legal
tender
Gold
Bills
Legal
tender
Gold
Legal
tender
Alemn Trasatlntico
2.6
43
40.7
1.6
1.6
Anglo South Americano
1.2
7.2
1.3
17.9
0.9
0.9
British Bank of South America
2.2
42.7
2.7
39.7
3.4
3.4
Comercio
3.2
3.7
Espaol del Ro de la Plata
195.8
2.4
166.6
10.3
10.3
Francs del Ro de la Plata
8.9
58.1
5.2
78.4
2.9
2.9
Galicia y Buenos Aires
0.04
12
0.009
14.1
0.06
0.06
0.9
6,3
1.6
9.9
0.8
0.8
0.008
0.008
Germnico de la Amrica del

Sud
Habilitador del Ro de la Plata
0.04
0.2
Industrial Argentino
0.2
0.6
Inmobiliario Argentino
0.4
1.3
Italia y Ro de la Plata
1.7
84.4
4.2
68.9
2.4
2.4
London and Brazilian Bank
0.7
10.8
2.3
10.4
0.8
0.8
Londres y Ro de la Plata
6.9
139.6
4.1
86.5
7.8
7.8
Nacin Argentina
335
294.4
34.8
34.8
Nuevo Banco Italiano
0.3
29.9
0.7
25
0.09
0.09
Popular Argentino
0.1
12.2
20.1
0.1
0.1
3.3
4.6
3.2
0.03
0.03
87.7
0.5
0.5
Popular Espaol
Popular Italiano
0.02
Provincia de Buenos Aires
1.1
87.7
0.6
Source: Martinez, A. and Lewadowski, M., LArgentine au XX sicle, Paris, Armand Colin,
1912.
The Stock Exchange

This institution, trading gold and bills of exchange in gold, government securities and
shares in corporations, incorporated a new bond which had a wide circulation: the
mortgage bond.
Operations on the Stock Exchange were marked by sharp variations in the traded
volumes, with peaks of a little over m$n 77 million in 1892 to close to m$n 1.4 billion
67
in 1894. As noted earlier, gold was the preferred instrument, which in some cases
accounted for 95% of the total traded volume.
With the 1899 reform, gold was purchased at a fixed exchange rate of 2.2727 at the
Currency Board, and other papers were traded at the time as well.
In the 1890s, mortgage bonds gained wide popularity in Argentina, and became the
most accepted bond in the market. They were also in great demand abroad, trading at
London and Paris stock exchanges. Around 1910, Carlos A. Tornquist estimated that the
total mortgage bonds traded amounted to m$n 17 million and that 60% of those were
placed in Europe.59 Government securities gained greater acceptance since the 1905
conversion, when the whole of the old debt was replaced by a new bond, Crdito
Argentino Interno, whose various series would become the most heavily-traded
government securities.
Chart 1
Trading Volume on the Buenos Aires Stock Exchange by Type
In million m$n
Source: Prepared in-house based on Memorias de la Cmara Sindical de la Bolsa de Comercio

de Buenos Aires and Anuario Geogrfico Argentino.
59
Carlos Tornquist, El balance de pagos de la Repblica Argentina, Buenos Aires, Tailhalde y Rosselli,
1916.
68
Banco Hipotecario and Urban Housing
The Bank played an important role in granting construction loans with mortgages as
collaterals. However, in the early 20th century, smallholders did not have easy access to
Banco Hipotecario loans.
"Of the mortgages granted by Banco Hipotecario Nacional between 1903 and 1908,
90% were for rural properties. In the first half of 1910, during the real estate boom, the
Bank granted only 57 loans in the city in the m$n 1000 to m$n 2000 range. Although
interest rates offered by the Bank were favorable, procedures for obtaining small loans
were expensive and slow from an administrative point of view. 60
The 1911 amendments to the Charter sought to address this problem. To that end, three
kinds of construction loans were developed.
Three mechanisms for granting construction loans were established: by the first, the
debtor obtained 50% of the property value and the construction budget, and the
debtors sole obligation was to build under the strict supervision of the Banks technical
experts. By the second, owners of small lots were favored, with a limit of six thousand
pesos, but this operation granted up to 60% of the property value, and borrowers were
free to build according to their own plans presented. The third mechanism favored
workers, who also received 60% of the property value, although they had to abide by
the construction standards set by the Bank.61
Table 2
Banco Hipotecario Loans by Sector
In number of loans and m$n
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
No.
2580
781
990
NDA
0
0
0
0
NDA
NDA
NDA
Urban
Amount
31,892,150
16,129,800
15,470,050
NDA
0
0
0
0
NDA
NDA
NDA
No.
1061
339
543
NDA
0
0
0
0
NDA
NDA
NDA
Rural
Amount
No.
18,107,850 3641
12,469,800 1120
13,785,750 1533
NDA NDA
0
0
0
0
0
0
0
0
NDA NDA
NDA NDA
NDA NDA
Total
Amount
50,000,000
28,599,600
29,255,800
2,144,600
0
0
0
0
15,000,000
NDA
NDA
60
James Scobie, Buenos Aires, plaza to suburb, 1870 1910, New York, Oxford University Press, 1974,
p. 186.
61
Banco Hipotecario Nacional, Balance de un siglo 1886 1986 (volume I), Buenos Aires, 1986, p. 168.
69
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
3435
4295
4125
3281
1520
368
2008
2474
2603
1147
2117
5028
3393
4765
3851
4245
4774
4689
2892
2510
1637
540
2555
1935
3300
4717
4013
4758
3059
3571
4433
3535
3889
3466
4683
5295
7531
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
14,583,000
15,056,800
NDA
NDA
NDA
NDA
89,312,200
57,764,500
26,725,400
4,947,100
21,213,500
31,096,550
34,723,950
20,703,850
39,373,600
92,958,200
63,574,450
86,486,950
74,433,250
80,778,650
83,880,500
85,333,600
56,666,300
46,868,700
28,970,600
5,768,500
22,647,500
21,484,450
41,793,050
83,149,400
49,352,350
62,399,500
38,444,400
44,355,800
50,537,100
50,359,300
53,332,000
54,684,900
73,426,300
94,268,600
153,072,000
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
810
765
656
746
476
76
605
1029
1245
566
1678
3428
2462
2815
2745
2048
2421
2783
1330
1585
986
136
335
269
349
529
549
573
539
438
425
481
484
623
500
543
744
Source: Memorias del Banco Hipotecario Nacional.
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
13,323,500
11,778,750
NDA
NDA
NDA
NDA
51,335,700
33,298,200
23,200,900
4,358,200
28,481,700
50,193,400
60,173,750
30,034,400
89,423,750
180,669,650
83,999,150
72,561,750
67,370,500
56,311,800
58,614,900
62,276,300
30,229,000
39,011,300
17,758,300
2,910,400
12,809,600
6,622,450
16,120,700
26,825,600
22,164,150
25,677,100
15,563,500
16,377,200
13,452,200
16,921,300
16,859,300
24,423,800
16,165,400
19,990,600
24,249,100
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
4245
5060
4781
4027
1996
444
2613
3503
3848
1713
3795
8456
5855
7580
6596
6293
7195
7472
4222
4095
2623
676
2890
2204
3649
5246
4562
5331
3598
4009
4858
4016
4373
4089
5183
5838
8275
1,625,000
2,495,400
11,511,700
11,110,600
9,938,100
14,512,500
12,052,000
31,465,300
27,906,500
26,835,550
27,492,700
52,425,400
98,804,700
115,926,600
140,647,900
91,062,700
49,926,300
9,305,300
49,695,200
81,289,950
94,897,700
50,738,250
128,797,350
273,627,850
147,573,600
159,048,700
141,803,750
137,090,450
142,495,400
147,609,900
86,895,300
85,880,000
46,728,900
8,678,900
35,457,100
28,106,900
57,913,750
109,975,000
71,516,500
88,076,600
54,007,900
60,733,000
63,989,300
67,280,600
70,191,300
79,108,700
89,591,700
114,259,200
177,321,100
70
Chart 2
Banco Hipotecario Loans by Sector
In million m$n
Source: Prepared in-house, based on Memorias del Banco Hipotecario Nacional. For the years
in which total amounts were recorded, there is no information available as to which sectors
received the loans.
Table 3
Banco Hipotecario Loans and Urban Construction
In m$n
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
Urban Loans
31,892,150
16,129,800
15,470,050
2,144,600
0
0
0
0
15,000,000
NDA
NDA
1,625,000
2,495,400
11,511,700
11,110,600
9,938,100
14,512,500
12,052,000
Construction
134,000,000
211,000,000
320,000,000
225,000,000
94,000,000
170,000,000
203,000,000
169,000,000
109,000,000
315,000,000
148,000,000
238,000,000
182,000,000
142,000,000
142,000,000
191,000,000
178,000,000
280,000,000
Share
24%
8%
5%
1%
0%
0%
0%
0%
14%
NDA
NDA
1%
1%
8%
8%
5%
8%
4%
71
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
31,465,300
14,583,000
15,056,800
27,492,700
52,425,400
98,804,700
115,926,600
89,312,200
57,764,500
26,725,400
4,947,100
21,213,500
31,096,550
34,723,950
20,703,850
39,373,600
92,958,200
63,574,450
86,486,950
74,433,250
80,778,650
83,880,500
85,333,600
56,666,300
46,868,700
28,970,600
5,768,500
22,647,500
21,484,450
41,793,050
83,149,400
492,000,000
390,000,000
409,000,000
381,000,000
579,000,000
677,000,000
697,000,000
546,000,000
538,000,000
361,000,000
266,000,000
164,000,000
95,000,000
99,000,000
107,000,000
235,000,000
277,000,000
376,000,000
515,000,000
491,000,000
464,000,000
409,000,000
523,000,000
608,000,000
702,000,000
665,000,000
407,000,000
274,000,000
305,000,000
462,000,000
448,000,000
6%
4%
4%
7%
9%
15%
17%
16%
11%
7%
2%
13%
33%
35%
19%
17%
34%
17%
17%
15%
17%
21%
16%
9%
7%
4%
1%
8%
7%
9%
19%
Source: Roberto Corts Conde, in collaboration with Mara Marcela Harriague, Estimaciones
del Producto Bruto Interno de Argentina 1875 1935, Working Papers, Economics
Department, San Andrs University, Buenos Aires, 1994; and Memorias del Banco Hipotecario
Nacional. For the years 1900-1905 and 1908-1911, loan amounts represent total deeds; for the
rest, urban loans. The amounts for construction represent the values recorded in the building
permits.
Homeownership was the goal of a huge mass of immigrants, and a factor contributing to
the very significant social mobility process in Argentina.
As shown in the tables above, there is a marked increase in urban sector loans. The
impact of the Banks loans on construction is very important, especially in the 20s and
30s, taking into account that the share in the above table refers to all kinds of
construction and not only to housing.
72
Banco Hipotecario. Management Consolidation
The first decade of the 20th century would be crucial for Banco Hipotecario Nacional. It
was in this period when the foundations of a financial and managerial style were laid.
Since the beginning of the century, given the many issues and types of mortgage bonds
in circulation, a homogeneous tool was needed. In 1905 the issue authorized by Act No.
4500 ended with series H, total loans amounting to m$n 115,646,015. This Act provided
for issuances with an interest rate higher than 6%, thus, in 1905 two new series were
issued: series I (with a 6% interest rate, 4% depreciation and 1% commission) and series
J of 6%, 1% and 1%, respectively. Another important issuance was the 5% interest
series K, issued in order to lower market interest rates.
Series K was not very successful, given its poor performance. Consequently, it had to be
absorbed by the Bank and replaced by the 6% interest series L.
Series J and L would be the first to typify what would be known in the immediate future
as Cdula Hipotecaria Argentina.
The instrument is attributed to Eduardo Zenavillas effort, who struggled to expand the
issuance of bonds. The goal was successfully achieved, as shown in the chart below:
Chart 3
Mortgage Bond Issuance
In million m$n
Source: Prepared in-house based on Banco Hipotecario Nacional, Balance de un siglo 18861986 (volume I), Buenos Aires, 1986.
73
In the 1908 report, Zenavilla made an important appeal to the National Executive for the
creation of a new mortgage bond, Cdula Hipotecaria Argentina, to offer a single
instrument with the same soundness and backing of its predecessors. This bond,
comprised of uniform series, would not have the vices of the others, i.e., various rates
and terms. The key was to help the public overcome their fears and doubts about this
instrument.
Chart 4
Price of the First Mortgage Series against Par Value
Source: Prepared in-house, based on Memorias de la Bolsa de Comercio de Buenos Aires.
After their collapse during the 1890 crisis, mortgage bonds returned to par in 1905. It
should be remembered that this drop was caused by an extreme situation affecting the
bond, which recovered afterwards; therefore, long-term investors did not suffer.
As Zenavilla said: We need to promote love for these institutions so the country can
relate to them, and so public trust elevates and invigorates them, giving them the
momentum they need to become fully involved in the Republics economic development
for the benefit of all. (...) We need to make them richhe addedso they, as nonprofit government institutions, can in turn invest the accumulated wealth for the benefit
74
and protection of commerce and industries, and also of workers, whose labor and
savings are the source of public wealth.62
Cdula Hipotecaria Argentina
Act No. 6299 of 1909, which had favored a greater issuance of bonds, from m$n 160
million to m$n 250 million, regulated the creation of Cdula Hipotecaria Argentina,
with a 6% interest rate, 1% depreciation and 1% commission. The Bank claimed that
by this measure, the letters identifying the various series, which were confusing, were
eliminated. It regulated that, should the interest rate be modified, said rate would
become part of the name, thus, the first bond would be the 6% Cdula Hipotecaria
Argentina.63
The 6% Cdula Hipotecaria Argentina was in circulation as of January 1st, 1910. Its
initial price was $ 98.50. It reached par value very soon and, shortly afterwards, it rose
above 102.
Chart 5
Post-reconversion Mortgage Bond Price against Par
Source: Prepared in-house, based on Memorias de la Bolsa de Comercio de Buenos Aires.
62
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su Cincuentenario, Buenos Aires,

1936, p. 68.
63
75
Trend in Mortgage Bond Prices Selected series
In m$n
Table 4
First series
A (7%) B (7%) C (7%) D (7%) E (7%)
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
86.65
84.24
87.82
97.00
100.15
83.48
94.15
97.96
100.83
98.57
99.50
97.38
94.75
94.25
98.75
99.50
100.25
100.50
101.75
101.50
101.00
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
79.85
85.90
94.67
103.50
82.56
93.60
95.70
94.17
93.84
93.42
94.04
95.50
91.50
94.00
101.50
100.50
NPA
102.00
101.75
102.00
99.90
100.00
NPA
100.00
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
78.54
82.17
86.87
91.30
69.74
83.10
91.85
93.15
91.66
90.73
91.14
93.00
90.00
84.40
92.00
92.25
97.15
100.50
103.75
101.75
99.57
99.75
101.50
NPA
103.75
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
78.99
83.45
92.04
74.06
83.70
93.17
95.17
96.26
91.86
91.58
96.00
92.25
89.25
90.00
87.00
99.00
103.25
102.50
101.25
99.40
101.00
NPA
102.30
102.10
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
74.40
82.05
93.55
76.01
82.70
92.41
93.95
93.66
93.13
90.13
92.25
92.00
88.90
94.35
93.00
99.50
102.50
102.75
101.75
100.00
100.00
103.10
103.00
101.25
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
A gold
(5%)
NPA
NPA
80.00
79.34
65.00
35.20
30.75
49.94
51.45
NPA
71.00
66.75
72.00
66.50
70.30
69.00
69.00
81.00
91.50
95.70
97.80
100.25
98.50
97.65
96.00
96.25
NPA
94.50
94.50
NPA
95.50
91.60
95.40
90.35
76
Table 5
Later Series (before Cdula Hipotecaria Argentina)
F (7%) G (7%) H (7%) I (6%)
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
86.03
78.69
86.15
90.25
91.25
89.50
94.75
93.50
99.00
102.00
103.50
102.00
99.50
100.50
102.50
103.25
103.00
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
83.48
85.71
82.85
80.75
85.50
84.15
95.90
102.25
104.65
102.50
101.00
101.75
102.10
104.00
102.50
102.75
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
74.60
77.30
79.75
81.45
94.05
103.35
102.30
101.60
96.00
91.75
104.40
101.15
100.75
NPA
102.15
96.38
99.25
102.15
103.15
103.75
102.25
J (6%) K (5%) L (6%)
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
102.30 100.65
101.60 102.10
96.00 94.20
91.75 90.75
98.00 97.00
101.30 97.40
100.75 98.90
NPA 98.75
NPA 98.40
NPA 95.57
NPA 90.00
NPA 95.75
NPA 98.00
NPA 100.00
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
93.80
92.50
84.15
82.20
89.10
NPA
98.90
97.30
95.60
83.26
82.25
85.50
88.60
96.25
90.50
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
87.50
90.25
96.45
102.05
101.15
100.00
100.35
93.99
92.35
97.25
98.50
101.60
96.45
77
Table 6
Cdula Hipotecaria Argentina (1909) Series
and Later Conversions (1933 y 1941)
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
CHA (6%)
1st series
101.60
100.05
97.75
97.50
85.73
90.75
94.05
96.60
100.25
95.50
90.02
97.5
98.66
100.9
100.56
100.03
95.9
97.56
99.39
99.13
99.73
93.79
89.85
90.68
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
CHA 2nd
series
NPA
NPA
NPA
NPA
84.31
90.80
94.50
95.00
98.90
95.25
89.5
91.81
96.87
98.35
98.10
97.76
99
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
CHA 3rd
CHA (5%) CHA (4%)
series
1st series
1st series
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
NPA
93.35
NPA
NPA
94.00
NPA
NPA
98.35
NPA
NPA
94.55
NPA
NPA
89.40
NPA
NPA
91.40
NPA
NPA
94.89
NPA
NPA
96.37
NPA
NPA
97.26
NPA
NPA
97.50
NPA
NPA
98.40
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NDA
NPA
NPA
NPA
93.6
NPA
NPA
97
NPA
NPA
104.1
NPA
NPA
102.4
NPA
NPA
101.3
NPA
NPA
102.3
NPA
NPA
104.1
NPA
NPA
102.1
NPA
NPA
NPA
98
NPA
NPA
101.8
NPA
NPA
101.6
NPA
NPA
101.5
NPA
NPA
101.6
Source: Memorias de la Cmara Sindical de la Bolsa de Comercio de Buenos Aires;

Memorias de la Bolsa de Comercio de Buenos Aires; Informe y Memoria del Banco
Hipotecario Nacional.
General conditions in Argentina favored the rapid expansion of the Bank's operations.
Real estate regained value and mortgage bondsas has been already mentioned
offered operations without losses, which were even profitable due to its price above par.
78
Capital inflow for investment in bonds seemed guaranteed for a long time, given the
increasing popularity of these bonds among small capitalists in certain European
markets. Banco Hipotecario made good use of these circumstances to expand, for the
benefit of the country. The 250 million pesos were quickly registered, and an additional
50 million had to be authorized under Act No. 8102 of December 6, 1910.
As we have seen, Governor Dr. Eduardo Zenavilla created the 6% CHA, which
represents the hallmark of the Banks expansion. Past its growing pains, the young
institution grew into a vigorous and strong organism. In less than three years its
economic potential doubled. Its power and the country's situation allowed it to
successfully settle previous bad transactions. And the experience gained led the Banks
management towards a sound policy, based on prudent lending agreements and
adequate appraisals.64
Table 7
Average, Minimum and Maximum Price, and Standard Deviation for 1898 1946
Series
Observations
(years listed)
Average
Deviation
Min.
Max.
A
9
99
2.79
94.25
101.75
B
11
99
3.61
91.5
102
C
13
97
6.00
84.4
103.75
D
13
97
5.76
87
103.25
E
14
98
4.95
88.9
103.1
A gold
20
88
11.85
66.5
100.25
F
14
98
5.21
89.5
103.5
G
15
96
9.12
80.75
104.65
H
20
96
9.70
74.6
104.4
I
7
99
3.84
91.75
102.3
J
14
97
3.48
90
102.1
K
14
90
5.87
82.2
98.9
L
13
97
4.59
87.5
102.05
6% CHA 1st series
24
96
4.27
85.73
101.6
6% CHA 2nd series
13
95
4
84.31
99
6% CHA 3rd series
11
95
3
89.4
98.4
5% CHA (1933)
8
101
4
93.6
104.1
4% CHA (1941)
5
100.9
2
98
101.8
de Buenos Aires and Memorias del Banco Hipotecario Nacional.
Observations made on the mortgage bond performance abroad are noteworthy. Of the
m$n 500 million in circulation, approximately 300 million were in the hands of
64
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su Cincuentenario, 1936, op. cit., p.
69.
79
European investors. In this regard, Zenavilla reflected:
The market experienced
variations in general bond prices, but mortgage bonds were the most stable, and still
are, perhaps mainly due to the high level of orders received from Europe for the
purchase of securities. This suggests an idea that should be briefly mentioned, since its
significance calls for a more in-depth treatment. Domestic capital, preferred by another
kind of interest, or obtained from other types of operations, does not seek to invest in
securities, as should be expected, except in minute amounts, leaving foreign capital
alone in this productive application that yields a good and safe income (...) It is in
everybodys interest to reinforce the public notion that Banco Hipotecario, with its
mortgage bonds, largely guaranteed first by the property used as collateral and,
second, by the State according to express legal provisions, is one of the key elements in
the domestic economy. The peoples savings should flow into its coffers and be turned
into securities.
80
Chapter 4
War and Crisis. The Reform of 1919. The 1910s

War and Crisis. 1913-1917
On the eve of World War I, Argentina had grown considerably. Gone were the
centennial celebrations. Argentina had achieved peace and stability and was on the path
of progress. It could be said that, since 1870, despite the crises of 1876 and 1890, there
was a sustained almost 5% per capita growth in average.
Argentinas growth doubled global rates, reaching the income levels of the most
developed countries.
However, not everybody benefitted in the same way. Although reduced, there was still
poverty in some places. There was also a climate of unrest in various sectors which
translated into some significant social demonstrations.
However, the social mobility process had been very important, a fact that probably also
contributed to social unrest, and there was a significant expansion of middle sectors,
supported not only by the increased salaries (unskilled workers monthly wage had risen
from m$n 30 to m$n 80 between 1890 and 1912) but also by access to public primary
educationwhich had reached a high proportion of school-age populationand the
increase in literacy rates.
Table 1
Illiteracy per 100 inhabitants of 14 years of age and older
Year
Illiteracy Rate
1869
77.9
1895
53.5
1914
35
Source: Gino Germani, La estructura social de la Argentina, Buenos Aires, Raigal, 1955.
In a very open economy, growth was tied to the external sector, mainly to the global
demand for Argentine products and to international capital flows. They not only
provided imported consumer goods, but also inputs, energy and capital goods for an
industry that had taken important steps towards the transformation of raw material:
81
flour, sugar and meat processing plants for the external market, and drinks (wine, beer)
for the domestic.
Therefore, disruptions in foreign markets had a direct impact on Argentina. The first
sign anticipating difficulties appeared in 1912 with the Balkan crisis, when, fearing a
conflict in Europe, foreign investors tried to liquidate their foreign assets, for example,
in Argentina.
In the early months of 1913 (...) Argentina showed favorable conditions for trade, and
payments for railroad services had never been so high. (...) On July 16 it was reported
that trade is still very limited (...) due to a restriction on bank discounts and to
numerous bankruptcies (...) speculation on land in the provinces has been brought to a
halt, although construction in the city is booming (...)65
Reserves outflow did not last long, and capitals continued to flow into the country. In
August, 1914, however, with the declaration of war on the Central PowersGermany
and Austria-Hungary, which entered war against Russia and its allies, France and
Englandand a fear that the conflict would lead to a liquidation of assets and a massive
outflow of gold, convertibility was suspended at the Currency Board.
The war, expected to be very short-lived, lasted four years, during which millions of
lives and assets were lost, causing huge imbalances to the global economy.
Withdrawals affecting Argentine reserves were made because the countries at war
needed cash. Since they could not rely on credit, governments needed gold to deal with
emergencies.
Once war was declared, withdrawals began; banks saw their reserves at risk and asked
the government to suspend the convertibility system in force since 1899. The
government agreed. Also, for eight days, banking operations were suspended.
Once the initial shock was over, the impact of war was mitigated, as capitals in gold
returned to the country for safety, something lacking in Europe at the time.
65
A. Ford, The Gold Standard 1880 1914, Britain and Argentina, Oxford, Clarendon Press, 1962, p.
171.
82
Chart 1
Currency Boards Gold Reserves
Source: P. Baiocco, La economa bancaria argentina a travs de sus ndices ms significativos

en el perodo 1901 1935, Buenos Aires, University of Buenos Aires, School of Economics,
Banking Economy Institute, 1937.
Table 2
Gold Flows in Argentina. Monthly Balance
1913
In the
Currency
Board
1914
In
Country
Banks
Total
In the
Currency
Board
In
Country
Banks
Total
January
1.135
-2.566
-1.431
-4.027
0.133
-3.894
February
16.570
-1.971
14.599
0.215
-1.407
-1.192
March
17.185
1.691
18.879
2.272
9.004
11.276
April
4.249
4.038
8.387
0.196
1.393
1.589
May
1.480
-2.760
-1.280
-11.382
0.744
-10.638
June
3.040
-0.399
2.641
-7.481
2.815
-4.666
July
-7.004
-9.290
-16.294
-16.851
-5.158
-22.009
August
-3.682
-4.311
-7.993
25.522
-29.02
-3.498
83
September
-3.523
1.194
-2.329
0.005
0.467
0.472
October
-10.22
-1.636
-11.859
0.003
-0.166
-0.163
November
-2.678
-0.765
-3.443
0.007
0.386
0.393
December
-6.230
1.946
-4.284
2.729
12.526
15.255
Annual
10.322
-14.829
-4.507
-8.792
-9.056
-17.848
Source: P. Baiocco, La economa bancaria argentina a travs de sus ndices ms significativos

en el perodo 1901 1935, 1937, op. cit.
The situation at Banco Hipotecario Nacional was more complicated, because a

significant share of the bonds was placed in Europe, and it was feared that many holders
would start to sell them, which would have a negative impact on their prices and affect
the Argentine mortgage bond market. This fear turned to be an incidental phenomenon.
War, however, had other negative consequences. The decline in imports affected trade
and industry, but mainly the government, who was dependent on import taxes. Two bad
harvestsin 1913 and 1915aggravated the situation, and recessionary trends became
more pronounced, leading to a drop in the agricultural and domestic product. See the
trend in GDP in the following chart.
Chart 2
Trend in GDP by Sector
IN 1905 =100
84
Banco Hipotecario and the war

The beginning of hostilities in Europe had a strong impact on the Bank's institutional
life. This was due to the fact that many mortgage bonds were held by small European
capitalists, thus it was feared a massive rush toward liquidation.
Regarding mortgage bonds, the institutions Report states that the war prevented their
placement abroad.
"The facts marked a period of regression for the bustling business activity, accentuating
the crisis and demanding precaution and prudent measures. The first response to this
was the Boards resolution to temporarily cancel the new bond issues, while awaiting
for more favorable conditions, i.e., free from the pressures of the current and severe
economic disturbances, and with the high and widely accepted prestige with which they
have always been issued.
The war in Europe has considerably hinderedand for a period of time which is
difficult to predictthe potential issuance of this kind of securities, especially at those
markets where their placement was traditionally easy and advantageous.66
The mortgage bond trading volume fell slightly in 1914 and a little more in 1915, but
picked up in 1916. The heavy liquidation anticipated at the beginning of the war did not
occur. This shows that by then, in contrast with the crisis of 1890, the mortgage bond
had become a well-established instrument inspiring great confidence.
At the beginning of the war, however, the Bank had adopted several measures:
All auctions yet to be published were cancelled, except for court-ordered ones, and
administrative proceedings advertised for that week were suspended. The Bank ceased
to sell and purchase mortgage bonds and attachments of income in progress were
stopped.
As for loans being processed, the Board decided to immediately close the file on them,
returning title deeds and documents to the applicants. These measures were adopted
66
Memoria del Banco Hipotecario Nacional 1914. Buenos Aires, 1915.
85
because issuance was suspended and it was impossible to predict when normal
operations would be resumed.
Meanwhile, the bond had suffered the temporary effects of panic in the stock market and
its price hit a record low of 68.20. The market, however, reacted quickly and the price
stabilized at $ 89 by the end of 1914.67
Chart 3
Mortgage Bond Volume Traded at the Buenos Aires Stock Exchange
In million m$n
Source: Prepared in-house based on Comit Nacional de Geografa, Anuario Geogrfico

Argentino, Buenos Aires, 1941.
Mortgage bond holders feared the liquidation of European investments, amounting to

approximately 300 million pesos in bonds. But the European holders of these bonds, far
from parting with them, kept them zealously in times when all European bonds were
plummeting.
Not until the fiscal year of 1915 did bonds begin to arrive from Europe to be disposed
of; these bonds were easily identifiable, due to the foreign tax stamps on them. But they
were reduced in number and were easily absorbed by our domestic market. 68
67

1936, p. 79.
68
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su Cincuentenario, 1936, op. cit., pp.
79, 80 and 81.
86
As can be appreciated, during the conflict, mortgage bond prices remained stable. This
time, Banco Hipotecario easily overcame the external conflict. See the remarkable
stability of bond prices in the following chart.
Chart 4
Price of Mortgage Bonds in Circulation against par value
Source: Prepared in-house based on Memorias de la Bolsa de Comercio de Buenos Aires.
87
Chart 5
Trading Volume at the Buenos Aires Stock Exchange by Type
In million m$n

In September, 1914, just days after the outbreak of World War I, The Review of the
River Plate commented on the mortgage bonds giving an outlook that turned out to be
more pessimistic than reality:
"The beginning of the war immediately caused a marked drop in Cdula Hipotecaria
Argentina, which fell as low as 67 (against par value), because European holders
ordered their sale; despite the fact that the market has reacted this week, it must be
borne in mind that 300 million dollars in bonds are in Europe, and many of those bonds
will be realized in the market. Other series of mortgage bonds, held mostly by Argentine
investors, have not suffered such a marked depreciation as Cdula Argentina did.
Banco Hipotecario Nacional operations should remain on standby for a considerable
period of time, and should the Bank have any prospect of cash settlement, this would be
the right time to buy. This week, 100,000 dollars in Cdula Argentina bonds have been
amortized.69
69
The Review of the River Plate, September 11, 1914.
88
But later that year, the same publication mentioned a remarkable recovery of the capital
market, and especially of Cdula Hipotecaria Argentina.
"In the past few weeks there has been a favorable reaction in the local stock exchange,
and federal mortgage bonds have considerably increased their value, rising to 89-90
against par value. There have been many movements in every section and a significant
number of shares that were not being traded regained momentum. It is hoped that this
reaction continues, and this is another proof that investors are regaining confidence,
and that the money that was stored is back in circulation.
Circulation of paper money is growing thanks to gold being deposited in Argentine
offices abroad, contributing to improve business activities. The prices of all products
are stable, and everything indicates that they will continue to rise. A better tone is seen
in the market, and we have no reason to believe that this is a mere mirage; we consider
it an indication of the return of favorable trading conditions.
Regarding the effects the war, the Banks Report reads:

Arguably this conflagrationwhich has disrupted the economic institutions of the
world's leading nationsis closing the largest financial markets, and the needs it
originates will absorb all the productive energy of these nations for a long time, forcing
themand countries like ours, that have survived largely with the aid of foreign
creditto seek new guidance for the development of the national economy and
especially for those activities, such as the issuance of mortgage bonds, that require the
essential cooperation from capitals accumulated through development.
Bonds issued by the Bank have maintained a good price despite the disruption caused
by war and the expected instability this extraordinary event has caused in the vast
range of securities that are today mainly distributed among a considerable number of
small capitalists.
Since those issuances were largely absorbed by foreign savings, it seemed reasonable to
expect that the impact of war would lead a considerable number of those securities into
the market. Nevertheless, the opposite has happened.
In possession of a high yielding bond, holders were reluctant to part with it. There is no
information as to any relevant amount being sold and there are no reports of operations
of this kind conducted abroad due to the abovementioned events. So far, stock exchange
transactions with mortgage bonds show nothing out of the ordinary.
89
The same can be said about coupon payments. It can be said that, amidst the problems
of the current situation, mortgage bond coupon payments have been met so far almost
regularly, except for some small delays in the presentation of coupons, which can be
explained:
Intermediaries, namely foreign bankers, who in most cases would pay the coupons in
advance sending them to the Bank for redemption at maturity as a current and ordinary
operation, have altered the procedure, sometimes by eliminating themselves as
intermediaries or, in other cases, postponing the direct presentation of coupons. But
this small change has not prevented most of the remaining coupons from being paid on
the due date without major inconveniencies to holders, and the few unpaid coupons are
still being presented, and the Bank pays them at any time. "70
The Mortgage Bond Abroad
Despite the suspension of convertibility, foreign debt in gold continued to be serviced at
the same levels until 1917.
Carlos Tornquist analyzed the major components of the balance of payments, estimating
that, of the 17 million gold pesos for servicing mortgage bonds, 60% was placed in
foreign markets, so in 1914, about 10,200,000 gold pesos would flow out of the country
in that respect.
During the war the amount was approximately the same but, as from 1917, there were
fewer bonds placed in Europe, reducing liabilities in the balance of payments.71
The following chart shows the trend in mortgage bond services abroad, as estimated by
Tornquist:
70

Carlos Tornquist, El balance de pagos de la Repblica Argentina, Buenos Aires, Tailhalde y Rosselli,
several years.
71
90
Chart 6
Trend in Mortgage Bond Services Abroad
Source: Prepared in-house based on C. Tornquist, El Balance de Pagos de la Repblica

Argentina, Buenos Aires, Tailhalde y Rosselli, 1914-1920.
The conflict, however, had imposed some restrictions for services performed abroad.
The 1917 Report stated that there were coupons for m$n 9,150,333.875 and 422,715
gold pesos that were not serviced since the beginning of the war.
A year later that figure had increased by m$n 5,575,457.25 and 214,600 gold pesos,
whereas, in relation to drawn mortgage bonds, the frozen total amounted to m$n
3,341,500 in December 31, 1918.
These amounts were considerable. At the official exchange rate, and taking into account
the abovementioned Tornquists estimates, these amounts represented 25% of the total
transferred abroad.
In 1919, the situation returned to normal, and payable coupons were reduced to m$n
4,106,857.625 and 94,983.75 gold pesos.
After the war, bonds started to be placed mainly in the domestic market.
With agricultural prices rising since 1917, and the subsequent revaluation of rural
property, the Bank carried out the auctions pending since August, 1914.
91
The war brought the institutions operations to a halt that lasted two years. In 1916, the
Bank began to issue the series authorized by Act No. 9155, of which only the first one
had been introduced.
One of the phenomena of this period, already mentioned above, was the gradual
repatriation of mortgage bonds placed abroad, which gained momentum as of 1917.
On the process of bond repatriation, the 1919 Report stated that
(...) (mortgage bonds) placed in the country amounted to 460 million pesos, and
abroad, to 150 million; that was half the amount estimated for 1913 while in 1913,
bonds in circulation totaled 550 million, and in December 31, 1919, 610 million pesos.
An analysis of these figures reveals that the absolute 50% decrease in mortgage bonds
held by foreign investors is even more pronounced, because 300 million represented
more than half of the bonds in circulation in 1913, and 150 million, over a quarter in
1919. 72
The Reform of 1919. Colonization
Act No. 10676, passed during Governor Dr. Rafael Herrera Vegas term in office, in
1919, amended the Banks Charter established by Act 8172, expanding its functions.
The main reforms include, among others, the creation of insurance for mortgaged
properties, loans to federal employees, loans for the development of farming activities
and settlement loans.
These last loans could amount to 80% of the purchase price, subject to the Banks
involvement in the division, appraisal and public auction of the properties.
The effects of migration after the end of the war in Europe were also taken into
consideration:
After the conflict in Europe, our country must be a center of universal attraction and
we must be prepared for that. Banco Hipotecario Nacional has, in this regard, a
comprehensive mission to carry out; it concerns the Board to provide suitable small
lands for agriculture with long-term payments, a problem in which the Board focuses its
attention, hoping to submit the necessary amendments to its Organic Law to Your
Excellency in the next legislative session. The lands allocated to the Bank will be the
most effective foundation for future mortgage colonies, and the Bank may also
72
Banco Hipotecario Nacional, Balance de un siglo 1886 1986 (volume I), Buenos Aires, 1986, pp. 264
and 265.
92
coordinate its operations with private interests, granting loans for almost the total value
of the land that surrounds railway stations, within our agricultural area, once the lands
have been sold to settlers, under the agreements the Bank may enter into with the
owners, and in the manner that will be timely put forward.73
The fruits of these efforts were reflected in the enactment of the aforementioned Act
No. 8172. The main features of the new settlement loans are expounded below.
In short, the basic goals of the act would be: a) division of the land near ports or
roads, b) attachment to the land for the rural dweller, c) promotion of farms and
general mixed agricultural and livestock exploitation.74
73
74

Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su Cincuentenario, 1936, op. cit., p. 88.
93
Chapter 5
The 1920s. Recovery and Belle poque

The 1920s and the Recovery
Depression during World War I had a profound impact on a country that, in a few
decades, had made the necessary adjustments to successfully enter the global economy.
While Argentina benefited from trade and international capital flows during the
expansion phase of the global economy, as they declined, it faced the negative effects of
external shocks like the more open economies.
Chart 1
Argentine Foreign Trade
Source: Prepared in-house based on Anuario del comercio exterior argentino, Buenos Aires, Ed.
Peuser, 1931.
Table 1
Argentine Foreign Trade Standard Deviation 1910-1930
Exports
234
Imports
221
Source: Prepared in-house based on Anuario del comercio exterior argentino, 1931, op. cit.
94
The above chart shows the marked variation experienced by Argentine trade in times of
crisis, such as the 1914-1918 and the 1922-1923 periods. We have estimated the
standard deviation of Argentine foreign trade, which amounted to 221 million gold
pesos for imports (with an average of 633 million gold pesos) and 234 million gold
pesos for exports (with an average of 721 million gold pesos).
Once the war was over, the recovery was fast; nevertheless, problems continued for a
while after imports became normalized.
That was due to the fact that, in the years during which Argentina did not receive
manufactures from the countries in conflict, some alternative industrial activities had
begun to develop.
The return to global markets put an end to those activities and caused unemployment
leading to serious social conflicts, such as the riots at the Vasena metallurgical plant,
which caused violent responses during the infamous Tragic Week.
Table 2
Strikes and strikers during Radical Party administrations
Year
Strikes
Strikers
1917
138
136,062
1918
196
133,042
1919
367
308,967
1920
206
134,015
1921
86
139,751
1922
116
4,737
1923
93
19,190
1924
77
277,071
1925
89
39,142
1926
67
15,880
1927
58
38,236
1928
135
28,109
1929
113
28,271
1930
125
29,331
Source: Prepared in-house based on Banco Hipotecario Nacional, Balance de un siglo 18861986 (volume I), Buenos Aires, 1986.
95
These circumstances, however, did not affect the general economy, as it was favored by
the expansionary impact of the European countries heavy demand for food.
This led to an expansion of cultivated areas and the application of tariffs on livestock,
which led to significant stock increases and had a negative effect in 1921 whendue to
oversupply in international meat markets, where Argentina was the main supplier
prices dropped. This originated a reverse process of sell-off and, later, a farming crisis75.
The American crisis of 1921, which spilled over to some European nations, had little
impact on Argentina. After a great post-war boom during which the Fed (for fiscal
reasons) kept interest rates low, the entity, concerned about the outflow of gold, which
was reducing its reserves to close to the minimum requirement, rose the interest rates
causing a recession in the United States and in the economies more closely linked to
that country. In Argentina, the impact was weaker and the recovery was followed by a
significant growth during most of the decade.
Whereas at the beginning of the 1920s the peso was depreciating against the US dollar
and the pound, as from 1923, the Governments efforts to restore prewar exchange rates
resulted in an appreciation of the peso that led to a return to the gold standard in 1927.
Chart 2
Gold Reserves and Issuance at the Currency Board
75
See Ral Prebisch, Obras 1919 1948, Buenos Aires, Ral Prebisch Foundation, 1991.
96
Source: Prepared in-house based on P. Baiocco, La economa bancaria argentina a travs de
sus ndices ms significativos en el perodo 1901 1935, Buenos Aires, University of Buenos
Aires, School of Economics, Banking Economy Institute, 1937.
Whereas depreciation during the war (and the rise of imports) had a negative effect on
the purchasing power of wages, as from 1918, that trend was reversed and the following
years saw exceptionally high levels.
Halfway through a decade of remarkable expansion, serious imbalances began to
become apparent, which would later contribute to the 1930 crisis.
As a result of war, countries in conflict stopped supplying basic goods, which fostered
the expansion of cultivated areas and the extraction and production of foodstuffs and
raw materials in those which were not involved in the war. As from the 20s, countries
which had been involved in the war returned to the market; that, together with a slower
population growth, contribute to a reduction in raw material and foodstuff prices. In
order to prevent those prices from falling, stabilization policies were adopted, which led
to stock accumulation and, therefore, caused further price drops.
In turn, this created a trade imbalance, since industrialized countries reduced their
demand for basic goods. In the second half of the 20s, the gap in the capital account was
covered by U.S. loans. This gave rise to a more serious problem when loans were cut
off.
Whereas grain crops did not maintain the same pace of expansion, the production of
cotton, a resource that would be essential in the future development of the textile
industry, was gaining importance.
Although high, the rate of capital formation slowed down relative to the prewar years.
This was partly due to the fact that the most important infrastructure works had been
completed and that the new areas where infrastructure was being developed
(telephones) did not require similar amounts of capital. The source of investment also
changed, and the United States gained importance over Great Britain.
Finally, capital movements, which showed unusual volatility around the world, took
place mostly in financial markets and were very dangerously short term.
Immigration also picked up, although it did not return to prewar rates. See GDP
evolution for those years in the following chart:
97
Chart 3:
Gross Domestic Product by Sector
In million 1914 pesos
During the years when convertibility was suspended, the Currency Board continued to
issue money on the basis of gold inflow and, in 1927, there was a return to
convertibility. Thus, the peso was overvalued against the pound (even more so against
the US dollar and much more so relative to the French franc). Taking into account the
evolution of real wages in the 20s, Argentine wages should have fallen by 8% against
British wages relative to the prewar level, in order to remain competitive.
Banco Hipotecario in the 1920s
The 1920s were a decade of expansion for Banco Hipotecario, which made full use of
the tools provided by the amendments to its charter by Acts No. 8172 and 10676,
opening new lines, such as loans for construction and settlers.
Loans for colonization had a promising beginning, but started to decline steadily as
from 1929, and almost disappeared in 1934, as a result of the global depression in
agriculture. See the following table:
98
Table 3
Colonization Loans Trend
Year
Loans
Amount
1921
86
1,124,100
1922
121
1,187,700
1923
317
5,160,750
1924
868
11,341,150
1925
1289
21,996,600
1926
851
15,681,000
1927
924
17,860,100
1928
1370
21,990,300
1929
616
9,020,500
1930
511
6,883,200
1931
388
6,048,500
1932
62
904,100
1933
35
542,900
Source: Prepared in-house based on Balance de un siglo 1886 1986 (volume I), 1989, op.
cit.
The institution had launched, even before Act No. 10676 was passed, its colonization
credit policy through the various procedures outlined above. Thus, it prioritized loans
on lands of less than 500 acres when they resulted from the subdivision of larger lands
near railway stations, although those were granted as ordinary credits at 50% of the
land value. It also divided and sold assets of the same characteristics allocated to the
institution, in cash or loans, where buyers, in the latter case, had to pay only 20% at the
auction. And it subdivided delinquent properties brought to auction, as well as their
mortgages, to facilitate their sale. Through these procedures, as from 1920, the Bank
granted loans on lands that were suitable for building settlements, subdividing a total
area of about 45,000 acres.76
By the end of the 1930s, the results of this colonization policy were expressed as
follows: Since the enactment of Act No. 10676, loans for colonization, awarded for up
to 80% of property value, led to the subdivision of 1,820,709 acres; ordinary credits,
awarded for 50% of the value with the same purpose, affected 221,858 acres; and the
subdivision of assets offered by third parties that were auctioned in cash, affected
45,598 acres. This yields a total of 2,088,165 acres, which were subdivided into 10,932
lots, an average of less than 200 acres per lot. This figures are not comprehensive in
terms of the banks efforts towards a rational subdivision of land, since they do not
76
99
include the auctions conducted under Article 62 of the Charter, which stated that, when
the land was suitable, it was divided into lots of less than 500 acres, which were sold in
cash, or through loans with a 20% downpayment, the balance being secured by a
mortgage or by the mortgage that was already pledging the property, which was
divided among the new buyers. There are no statistics to support this, but the annual
reports emphasize that every year there were several properties that reached higher
prices in auctions, which means that, between 1921 and 1930, these properties could
not have covered less than 250 to 370 acres. Thus, the total area of the estates divided
by Banco Hipotecario Nacional can be rounded off to 2.5 million acres, which turned
into some twelve thousand small farms. 77
Urban housing loans were significant. In the 1920s, the bank had a relevant activity
awarding loans for construction.
Chart 4
Loans Granted by Area
Source: Prepared in-house based on Memorias del Banco Hipotecario Nacional, years 1919 1925.
77
100
Chart 5
Trend in Mortgage Loans by Amount and Area
In million m$n
The bank exercised the right granted by Act No. 8172 on a significant scale between
1922 and 1930. The effort was justified by a considerable demand for loans, which
could not be met due to a lack of mortgage bonds. From the standpoint of return on
equity, the operation paid higher interest than those generated by deposits in Banco de
la Nacin Argentina or any other bank. But the ensuing crisis (1930) revealed it was
necessary and advisable that Banco Hipotecario should always have a minimum
reserve, because, if no funds were available in times of need, statutory reserves created
with annual profits would not serve their purpose. Those loans had to be turned into
mortgage bonds, and the Bank slowly recovered that cash.78
Statistics are striking in this regard. Between 1920 and 1925, the bank awarded over
80 million pesos in loans for 50% of property valuation, with 2,659 buildings
constructed for a total of m$n 160,835,677, which yields an average of m$n 60,000
78

1936, p. 74.
101
each. This unit value suggests that each building was comprised of several housing
units.79
The figures by area indicate that, of the 80 million pesos above, 70 million were
awarded in the City of Buenos Aires, and the rest, in the provinces.
As a corollary to the 1920s, it was said that the number of loans for house construction
or acquisition granted to public servants, a practice whose benefits reached employees
of utility companies (railways, urban transport, telephone and telegraph) and members
of the security forces, amounted to 5,430 in 1930, for a total of m$n 90,078,350, which
yields an average of about m$n 16,500 per loan. In turn, ordinary construction credits
kept their pace and amounted to m$n 147,174,600 in 1930, doubling the figure for
1925.80
As from the end of World War I, mortgage bonds started to be placed mainly in the
domestic market. By 1926, about 86.5% of these bonds were held by Argentine citizens.
The placement of Banco Hipotecario bonds among Argentine savers was achieved
through clever advertisements and a strict payment of interest coupons and
amortizations; also, all savers had the opportunity to become investors through the
banks savings account, where deposits were placed in mortgage bonds. Total bonds
corresponding to those savings accounts amounted to m$n 24,225,700 in 1930, with
some accounts holding several million and others holding nearly m$n 25."81
There is no doubt that the 1920s represented a qualitative leap for the institution. In this
respect, it is worth mentioning that, by 1930, the Bank had a total of 54 branches and
authorized agencies in Argentina.
79
81
80
102
Chapter 6
The crisis of 1930 and the Great Depression

Argentina and the Crisis
Argentina felt in advance the impact of what would later become the great world crisis
of 1930.
In 1928, the country was still experiencing the euphoria caused by the great capital
inflows as a result of the Federal Reserves low interest rates, which had led U.S.
investors to seek higher yields abroad. Concerned about the Wall Street speculative
bubble, the Fed decided a year later to raise its rates, causing a marked reversal of
capital flows, which returned to the United States. This had adverse effects mainly for
Germany and the heavily indebted Latin American countries.
Table 1
US Federal Reserve Bank Discount Rate
Year
1927
1928
1929
Month
July
September
July
September
July
September
Rate
4
3.5
5
5
5
6
Source: Milton Friedman and Anna Jacobson, A monetary history of the United States, 1867
1960, Princeton, Princeton University Press, pp. 282 and 288.
Between 1928 and 1929, the Currency Board experienced steep fluctuations in gold,
caused by capital inflows in 1928, and their subsequent outflow. Total inflow amounted
to 12.08 million gold pesos, or m$n 27.4 million, which represented 2.5% of the
Boards reserves. The currency in circulation grew by 2% taking into account the yearend data, but growth was 9% when comparing figures from June 1928 against June
1927. This is because gold inflow was higher in the first semester, whereas the outflow
was larger during the second.82
82
See Roberto Corts Conde, La Economa poltica argentina en el siglo XX, Buenos Aires, Ed. Edhasa,
2005.
103
Chart 1
Gold Reserves and Issuance at the Currency Board
Note: Yearly average. Source: Prepared in-house based on P. Baiocco, La economa bancaria
argentina a travs de sus ndices ms significativos en el perodo 1901 1935, Buenos Aires,
University of Buenos Aires, School of Economics, Banking Economy Institute, 1937.
Not too long from the World War I experience, Hiplito Yrigoyens administration took
the lead in what would later become a widespread global response and ordered the
Boards closure. Thus, Argentina abandoned the gold standard.
The Boards closure prevented the gold outflow and the resulting monetary tightening.
The Government should have taken into account that a factor aggravating the crisis of
1890 was the need to resort to the market to buy gold and pay off external liabilities.
The States demand in a small market accentuated depreciation and entailed higher costs
for paying debts in foreign currency. Thus, the Government ensured the supply of gold
to meet its foreign commitments by buying it from the Board at the exchange rate of
convertibility times (1 gold peso = 2.22727 paper peso). As from the 1933 reform, gold
was purchased at an official exchange rate that was much lower than the market rate.
Aware of the foreign investmentss contribution to Argentinas development, the
Government was willing to strictly meet its international commitments.
104
These ideas are expressed in a speech by Minister Alberto Hueyo who, quoting
Avellaneda, declared that:
Domestic liabilities are always managed by thousands of creditors who are present,
but external commitments tend to be represented only by an anonymous sense of
national honor and by public authorities. It is thus their duty to prioritize the control of
external liabilities in case of problems or conflict.83
The New York Stock Exchange crack on Black Tuesday and Black Thursday, in
October 1929, did not affect Argentina in the same way (as it was already isolated after
abandoning the convertibility regime). The consequences, however, were very much felt
in the real economy, in the Government and in the financial system, due to falling
demand and domestic agricultural prices.
Since the mid-1920s, amidst the euphoria produced by volatile capitals, the agricultural
sector was already suffering the consequences of international oversupply of basic
goods, worsened by industrialized countries protectionist agricultural policies.
As was mentioned before, once the war had ended, the demand for food from a
devastated Europe led Argentina to expand cultivation areas and increase cattle stocks.
Europes recovery and slower population growth led to the cattle crisis of 1921 and, as
from 1925, to a reduction in international grain prices. This was aggravated by
protectionist policies that produced stock accumulation and accentuated the downward
pressure on prices.
In the 1930s, after the crisis became widespread, global demand and foodstuff prices
collapsed.
In a country whose economy was still so dependent on agriculture, this had disastrous
effects. Prices when farmers sowed doubled harvest time prices. As usual, based on
projections, they had obtained bank financing for sowing, but at harvest time prices had
plummeted. The decline in exports value had led to imports restrictions and this, in turn,
caused a dramatic drop in government revenue, which relied on customs duties.
Banks with debts from farmers and government securities in their portfolios found that
debtors were not able to meet their obligations and, in the case of private parties, even if
Banks were to realize their collaterals, these had lost their value.
83
A. Hueyo, La Argentina en la depresin mundial, 1932 -1933, Discursos y conferencias, pp. 286
287.
105
While the government accumulated a large floating debt, farmers faced huge losses and
banks, dealing not only with liquidity but also with solvency problems, stood on the
brink of bankruptcy. See the public sector situation in the following table:
Table 2
Trend in Revenue, National Government Expenditure, Deficit, and Consolidated
Public Debt
En million m$n
National
Government
Expenditure
1928
739
919
1929
748
988
1930
663
1092
1931
686
908
1932
742
850
1933
754
880
1934
764
934
1935
847
981
1936
873
1052
1937
991
1221
1938
991
1278
1939
1015
1460
1940
973
1321
Source: Roberto Corts Conde, La poltica econmica
Federal
Revenue
Consolidat Floating
ed Public
Public
Debt
Debt
-180
2252
623,7
-241
2208
827,8
-428
2214
1.181,4
-223
2231
1.341,8
-107
2557
1.009,2
-127
2749
888,4
-170
2835
872,4
-134
3350
110,7
-179
3607
77,2
-230
3743
172,2
-287
3851
427,5
-445
4399
391,5
-348
4510
687,2
argentina en el siglo XX, Buenos Aires,
Deficit
Ed. Edhasa, 2005.
The exports purchasing power had fallen 40%. See the following estimate by BulmerThomas:
Table 3
Change in Price and Quantity of Exports, Net Terms of Trade and Purchasing
Power in Argentine Exports for 1932
1928 = 100
Price of Exports
Volume of Exports
Net Terms of Trade
37
88
68
Purchasing Power
of Exports
60
Source: Victor Bulmer Thomas, The economic history of Latin America, Cambridge, 1994.
106
Chart 2
Argentine Trade
In million m$n

From the external sector, the crisis spread to the overall economy, causing a significant
drop in GDP.
Chart 3
Change in Gross Domestic Product
107
Chart 4
Trend in Gross Domestic Product by Relevant Sector
In million 1914 m$n
Producto Bruto Interno de Argentina 1875 1935, 1994, op.
An interim administration which took office after the September 6, 1930 coup had to
make major adjustments to address the crisis. The Currency Board scheme, which only
allowed the issuance of money backed by gold, was modified to authorize the institution
to issue money backed by commercial documents rediscounted by Banco Nacin. This
marked the end of the gold standard. Remittances were frozen, the tax law was amended
to include an income and sales tax and, in 1931, exchange controls were established. It
fell on a young Undersecretary of Finance, Raul Prebisch, to play a crucial role in the
design and implementation of these reforms. These Government measures prevented an
acute crisis. Additional decisions adopted by Minister Federico Pinedo during Juan B.
Justos administration included exchange control reforms and the Roca-Runciman
Treaty, which helped to normalize a situation that consolidated the strong recovery in
agricultural prices only as from 1934.
108
Chart 5
Trend in Wheat and Corn Prices
In m$n per 100 kg
Source: Prepared in-house based on Anexo Estadstico de la Memoria de la Bolsa de Comercio

de Buenos Aires, years 1926 1935.
The measures leading to the creation of the Central Bank of Argentina entailed the
completion of reforms that would initiate a new phase towards the modern Argentina
that would last throughout the 20th century.
Industry and Import Substitution

Following a widespread global trend, Argentina was moving away from world markets,
adopting protectionist measures and turning towards the domestic market.
The local industry, which was then developing mainly in sectors aimed at domestic
consumption, such as textiles, would become the hallmark of this new phase.
In 1935, the industry experienced significant progress, which would consolidate during
World War II. The following chart shows the industry trend:
109
Chart 6
Trend in Industrial GDP
In million 1914 m$n
Producto Bruto Interno de Argentina 1875 1935, 1994, op. cit.
Chart 7
Trend in Industrial GDP
In million 1950 m$n
Source: Prepared in-house based on ECLAC, El desarrollo econmico de la Argentina, E/CN.

12/429, Santiago, Chile, 1959.
110
Banco Hipotecario and the Crisis of 1930
The general economic crisis directly affected Banco Hipotecario although, due to its
consolidation in the previous decade, the Bank never came close to the risks it had faced
in the 1890s.
Chart 8
Trend in Loans Granted by Area
111
Chart 9
Trend in Mortgage Loans by Amount and Area
In million m$n
Once again, the problem during the years of crisis was caused by delinquency and nonperformance as, due to a fall in product and rural property prices, owners were not able
to pay. In turn, the Bank was trying to avoid a series of foreclosures that would have
only resulted in an additional fall of mortgaged property prices. The situation of urban
debtors was not easy either, as salaries were overdueincluding public servant salaries,
which were reduced by 10%and unemployment was on the rise. It is true, however,
that for private workers, when they kept their jobs, real income had not dropped.
In fact, the Government's policy was reflationary and prevented the full impact of the
global price depression from being felt.
112
Chart 10
Trend in Real Estate and Construction Markets for the City of Buenos Aires
In million m$n
Source: Prepared in-house based on Anexo estadstico de la Memoria de la Bolsa de Comercio

Chart 11
Trend in Real Estate Price in Buenos Aires
In m$n per m2
113
Source: Prepared in-house based on Boletn Estadstico de la ciudad de Buenos Aires, years
1925 1934.
Conversions of 1933 and 1941

Given the price deflation, the interest rate had increased in real terms. The Bank made a
move towards the conversion of outstanding securities that would reduce the interest
rate from 6% to 5%.
That measure, however, had to be coordinated with the Federal Government to ensure
that investors did not choose other government securities.
In 1933, Banco Hipotecario and the Federal Government converted notes from 6% to
5%, and the latter also converted the Crdito Argentino Interno security from 6% to 5%.
This was made possible by an improvement in public finances, which was achieved by
renewing market access to debt and to income from exchange margins.
Chart 12
Trend in Loans and Deposits in the Banking Sector
In thousand m$n
Source: Prepared in-house based on Anexo estadstico de la Memoria de la Bolsa de Comercio

The Government offered to exchange at par Crdito Argentino Interno securities of the
years 1907, 1909 and 1910 that were in circulation at an interest of 5.5% and 6% for
securities of different series, issued in pesos moneda nacional, to be known as Crdito
114
Argentino Interno at 5% interest and 1% annual cumulative amortization, by purchase
or auction when traded below par; and Emprstito Patritico at 5% interest and 1%
cumulative amortization that will be awarded by lottery at par.84
Likewise, the Cdula Hipotecaria Argentina at 6% was converted to new securities at
5%.
The Government explained that conversion would be voluntary and those who did not
accept it could collect their securities in cash at face value. In an attempt to lower
interest rates, the Government bought its own securities in the market, thereby
increasing their price.
The reasons for conversion are set forth in the annual reports, which read:
[Conversion] was rooted in two reasons: firstly, to harmonize mortgage bond profits
with the meager yield of general productive activities and with the interest rate of other
government securities, which was precisely 5%; an investment such as the mortgage
bond, safe and with a 6% interest, could take capital away from industry and
agriculture, as well as make it difficult to place other securities in the market. The
second reason was to relieve Banco Hipotecario debtors by reducing in one point their
mortgage payments. 85
84
85
F. Pinedo, Minutes of the House of Representatives, Meeting N 13, June 6, 1934, p. 840
115
Chart 13
Trend in Crdito Argentino Interno and Cdula Hipotecaria Argentina Prices up
to the 1933 Conversion
Against par value
Source: Prepared in-house based on Memoria de la Bolsa de Comercio de Buenos Aires, years
1926 1933.
Note that Cdula Hipotecaria Argentina has always traded above Crdito Argentino
Interno, the most important government security.
Mortgage bond conversion, in turn, entailed a novation of the Banks loans, since
existing 6% bonds had to be replaced for new ones at 5%.
Consequently, now debtors who until then (1933) had paid or were required to pay
8% per year, would now pay the new interest rate86, that is, 5% per year and 7%
afterwards, as a 1% commission and a 1% amortization were added.87
The operation was successful, since of the m$n 1,360,588,850 in circulation, m$n
1,337,872,350 (98%) were exchanged and only m$n 22,716,500 were redeemed.
The specialized literature widely disseminated this conversion process. On the subject,
The Review of the River Plate declared:
Mortgage Bond Conversion
The following is a transcript of the official statement whereby the Minister of Finance
86
87
By Act No. 11720, commission payments were suspended for a triennium.

116
announced, on Monday night, the Government's intention to establish the conversion of
all Banco Hipotecario Nacional bonds:
The first day of trading in the Stock Exchange, after the Federal Governments announcement of the
conversion of its 6% and 5 1/2% mortgage bonds to 5% securities, has been so encouraging that the
Government has decided to immediately implement the second stage of the conversion plan, designed to
relieve its finances and the countrys economy of the burdens that hinder their progress.
This second
stage consists in converting all the 6% Banco Hipotecario Nacional bonds in

circulation into 5% securities.
The Stock Markets upward pressure and the level reached by prices entirely justify the
decision taken. First, existing 5% securities, covering issuances encumbered many
years ago, closed today at a par value of 100 points, confirming beyond any doubt the
value attributed by the market to the new security issues that have precisely the same
nominal interest rate. Particularly, mortgage bonds have decisively contributed to the
general upward movement and have reached a position that shows that they are at the
level of conversion, especially when taking into account that the coupons income tax is
usually estimated in 3.20 to 3.50 points. Thus, bond conversion will have a more
favorable starting point than then Crdito Argentino bonds. As a corollary to choosing
this starting point, the Government is pleased to announce that the new 5% bonds shall
not be subject to the income tax that has recently reduced their value.
The conversion of mortgage bonds provides immediately noticeable benefits. The
interest reduction, combined with the relief caused by the Congress emergency
measures, should considerably improve the debtors situation. In this way, Banco
Hipotecario significantly strengthens its financial position by extending the
amortization of its bonds for a full term.
Also, the mortgage bond consolidates its prestige in two ways: It facilitates debtors
performance and places the Bank in a favorable position to fully comply, as it has
always done, with its commitments to the public that has entrusted their savings to the
institution.
As a result of the Governments decision to convert mortgage bonds, these will be taken
out of circulation as from tomorrow (November 14) through the Stock Exchange. At the
same time, the abovementioned 5% bonds will also be redeemed for the purpose of
unification with the new bonds that will have the same interest rate pursuant to the
requirements in the Budget Law in force.88
88
The Review of the River Plate, November 17, 1933.
117
A week after the Executive Order was published, The Review of the River Plate stated
that:
Everywhere in this issue we give substantial information about the Federal Executive
Order announced last Tuesday by the Minister of Finance, whereby 6% annual interest
mortgage bonds were converted to 5% bonds. As explained in the previous section, the
amount in securities is estimated in $1,372,199,675, and based on an initial estimate of
savings in interest and amortizations, the joint benefit for affected rural parties and
Banco Hipotecario itself amounts to no less than 20 million paper pesos annually. In
order to take care of repayment cases, and since the Government does not consider
itself authorized to give Banco Hipotecario the money needed to redeem the bonds
whose owners are unwilling to accept the conversion, it has been decided to issue
provisional certificates that may be kept until Congress gives the necessary
authorization. This is the provision included in Article 10 of the Executive Order,
whereby those seeking cash payments will be required to demonstrate having their tax
payments up to date.
Also, according to the terms of the Executive Order on mortgage bond conversion, the
income from the new 5% bonds will be exempt from income tax. In view of the success
of the conversion of 6% and 5% federal bonds, there are numerous reasons to believe
that the new bond conversion will be equally successful. The 1% premium as a reward
for voluntary conversion will apply to the bonds whose conversion has been formally
notified not later than November 29.
Those wishing to receive a cash payment at par value will have six days to apply for
provisional certificates. We believe, as our fellow La Nacin does, that these certificates
will become very scarce and difficult to obtain over time.
There is evidence to that effect; the atmosphere is not very pleasant for those seeking a
cash repayment, as was the case with federal bonds.
It is worth noting that federal bond holders who requested a cash repayment have been
notified that they can review their situation until tomorrow.
The initial conversion scheme, as was to be expected, proved entirely satisfactory.

Our Thursday prediction of a total of 5% cash repayment applications proved accurate,
even though today, on Wednesday, the complete and detailed balance of the operations
has not been published. The entire conversion process, as we said last week, has been
118
cleverly planned from the beginning and timely executed.89
One of the main reasons for this complex set of measures, which had not been explained
in detail, was that the banks debtors were increasingly in arrears. Various acts had been
promulgated to mitigate the institutions chronic problem, but none had yielded the
expected results.
The most important of these was Act No. 11720, passed in September 1933, whereby
the Bank would not charge the 1% commission set forth in the organic law during a
three-year period as sole retribution. Also, for the same period, debtors were allowed
not to pay the 1% credit amortization.
The institutions loss for failing to collect these charges was estimated in m$n 17
million in interest, and about m$n 25/30 million in amortizations.
Table 4
Non-performing Loans in Banco Hipotecario Nacional
Year
Percentage of non-performing loans
1916
5.18
1917
5.38
1928
3.58
1929/1930
4.96
1933
10
Source: Banco Hipotecario Nacional, Balance de un siglo 1886-1986 (volume I), Buenos Aires,
1986.
Once the three year suspension period ended, the period in which the Bank would not
charge a commission was extended for three additional years, which increased its loss in
m$n 58 million.
Therefore, in the following years during the 30s, the Bank's credit policy was aimed at
ensuring loans with strong collaterals, which in the early post-crisis days meant that
only a relatively small number of new loans were registered.
89
The Review of the River Plate, November 24, 1933.
119
Chart 14
Number of Registered Mortgages
Source: Prepared in-house based on Memorias del Banco Hipotecario Nacional, years 1933
1939.
In 1941 there was a new mortgage bond conversion that had the same purpose as the
one that took place in 1933.
With the beginning of World War II, Argentina received an important inflow of foreign
capital, leading to an appreciation of the 5% Cdula Hipotecaria Argentina, whereas
bonds with lower interest remained constant (between 1937 and 1940, mortgage bonds
were issued at a 4% and 4 % interest rate). Consequently, there was an attempt to
unify all government security rates and to reduce the costs of Banco Hipotecarios
loans.
To this end, the Executive Order 160560 was issued in November 1941 providing for
the conversion of Banco Hipotecarios 5% and 4 % interest bonds to a new series at
4%, a voluntary process the incentive for whose acceptance was a 6% premium.
120
Chart 15
Trend in Crdito Argentino Interno Series A and Cdula Hipotecaria Argentina
Prices up to 1941 Conversion
Against par value
Source: Prepared in-house based on Memoria de la Bolsa de Comercio de Buenos Aires.
As in the previous series, the price of Cdula Hipotecaria Argentina is above that of
Crdito Argentino Interno.
The success of the new conversion was similar to the previous conversions: m$n 1.349
billion over a total in circulation of m$n 1,235,412,325 in 5% interest bonds and m$n
137,014,250 in 4% bonds.
This conversion entailed a loss of m$n 23.5 million in interest for the Bank, without
taking into account the administrative costs of registering all loans at the new rate.
121
Chart 16
Trend in Volume Traded in the Buenos Aires Stock Exchange by Type
In million m$n
Source: Prepared in-house based on Memorias de la Bolsa de Comercio de Buenos Aires.
The Creation of the Central Bank90

In his report to the Argentine Ministry of Finance, the British expert Sir Otto Niemeyer
proposed the creation of a Central Bank with the aim, among others, of coordinating the
banking organization with relevant legislation that would take into account certain
aspects of the general banking system.
The Central Bank of Argentina was created by Act No. 12155. Article 35 stated that:
(...) throughout the entire period for which it has been constituted, the Bank shall have
the exclusive privilege of banknotes issuance in Argentina, except for the subsidiary
coins referred to in Article 4 of the Organization Act, and neither the Federal
Government nor the provincial governments or municipalities, banks or other
institutions shall issue any banknotes or other documents that might circulate as paper
money.
The Bank had to keep a reserve in gold or foreign currency equivalent to, at least, 25%
of its banknotes in circulation and demand liabilities. Also, the Acts final version stated
that gold reserves should take into account the significant peso depreciation that had
taken place since the Currency Board closure.
90
See Roberto Corts Conde, La Economa poltica argentina en el siglo XX, 2005, op. cit.
122
The Central Bank was created in order to have an institution with more functions and
flexibility than the Currency Board, and without the restriction of a fixed exchange rate
regime. Of no less importance was the fact that, through the revaluation of its assets
(owing to devaluation), funds were obtained and used to solve the problems that many
banks were facingespecially the official onesdue to non-performing loans and
rediscounts. The revaluation of gold reserves at the new exchange rate gave place to a
book profit of m$n 663 million, a similar amount to the currency in circulation held by
the public.
Since the money created by this revaluation was used to rebuild banks' minimum cash
requirements without increasing their lending capacity, there was no monetary
expansion and, consequently, no significant price increases. As Prebisch stated:
(...) the 500 million balance (...) has been sterilized by turning it into bank minimum
cash requirements so as to reach the amount recommended by law and prudence. Thus,
the creation of pesos, either as banknotes or in deposits available to the public, has
been avoided. The amount of currency in circulation remains unchanged and under the
strict supervision of the Central Bank.
() What must be prevented at all costs is that this balance which, regardless of the
chosen procedure, should be some way or other recorded in the Bank books becomes
a basis for inflation, either in the form of notes or credit (...). Gold has been
accumulated by the community for monetary purposes and, therefore, (...) it should be
used for clean-up, not to create disturbances.91
With higher reserves, thanks to improved terms of exchange and increased foreign
trade, the Central Bank was able to successfully carry out countercyclical policies,
neutralizing the money creation effect. This was achieved through the Bono
Consolidation, kept by the government as an asset. Share certificates were issued for
this bond, which were placed in commercial banks and yielded a remunerative interest.
In view of the onset of the war, in 1940, Minister Pinedo developed a project that would
give the Central Bank the power to guarantee, through rediscounts, long-term loan
operations at commercial banks. Whereas the agricultural sector resorted to short-term
loans (for harvest), the industrial sector had a longer evolution, especially for the
financing of facilities. However, although demand was mostly for the long term, there
was an oversupply of short-term loans. Thus, the issue was how banks could offer long91
See Ral Prebisch, Obras 1919 1948, Buenos Aires, Ral Prebisch Foundation, 1991, pp. 471 and
475.
123
term loans with a short-term portfolio. To solve it, the Central Bank would rediscount
the portfolios of banks suffering a temporary mismatch.
Pinedos proposed tool (which sought to expand industrial production when it seemed
that agricultural exports would be severely affected) was not used during those years, as
exports continued to increase during the conflict and the years immediately following.
The project was shelved but served as a precedent for a change which took place in
1946 in the Central Bank rediscount functions. This was critical for the new Banco
Hipotecario operations, as it replaced the mortgage bonds redeemed in the market and
resorted to rediscount as a funding mechanism for granting mortgage loans.
124
Appendix
The Executive Order on the conversion of Banco Hipotecario Nacional bonds was
issued on Tuesday, November 14, 1933. Its preamble stated that the Executive was
authorized to redeem government securities under Article 37 of Act No. 11821. Its text
reads as follows:
That the 'national mortgage bonds' were issued by a government institution, and they
have the status of federal securities.
That Banco Hipotecario Nacional has the power to rescue its own bonds by means of a
'sinking fund' without any amount or time limitation, and it is authorized to have bonds
in circulation yielding interest considered desirable by that institution.
That the conversion of 6% y 5 % public debt bonds into 5% bonds has been decreed;
the 6% bond, which is also a national liability, since the nation guarantees its principal
and interest, cannot survive without making certain adjustments to the bond market.
That, in the Buenos Aires Stock Exchange, many 'Cdula Hipotecaria series have
reached parity, despite the income tax levied on them.
That the value of these bonds in the open market and the sale of federal securities on or
above par imply that the market recognizes that this is a favorable moment to effect the
conversion of these securities and consolidate them with the new 5% federal securities.
That conversion must be carried out by the Government and the Bank; it is necessary
that the Bank authorities should adopt the appropriate measures for the enforcement of
this executive order.
That, in the meantime, the conversion having been announced, the Government cannot
turn its eyes away from the federal security purchases being made by investors at a
higher price than the nominal value, which expose them to losses that can and should
be avoided.
That it is only right that, while the State cuts its budget through a conversion that
reduces its financial obligations, the situation of Banco Hipotecario Nacional debtors
be taken into account, and the relief they need provided, given the money market
circumstances.
The Executive ORDERS
Article 1. - Banco Hipotecario Nacional shall exchange 6% interest and 1%
amortization bonds, Series L; 6% Cdula Hipotecaria Argentina; and Series 1 to 39
under Acts No. 8172, 9155, 10676, 11259, and 11576, for new 5% interest and 1%
125
amortization bonds under the terms and conditions to be defined in a timely fashion.
Article 2. - The National Public Credit will affect the conversion and consolidation of
the following 5% domestic loans.
Act No. 4569, Crdito Argentino Interno, 1905.
Acts No. 8121 and 8648, Crdito Argentino Interno, 1911.
Acts No. 9648 and 10067, Crdito Argentino Interno, 1916 (gold).
Act No. 10223, Crdito Argentino Interno, 1917 (gold).
Act No. 6499, Crdito Interno de la Nacin, Port of Mar del Plata.
Act No. 4973, Bonds for public health work, with the issuance of similar bonds to those
issued by Executive Order of November 11 of the current year, at 5% interest and 1%
amortization.
Article 4 - For the exchange and consolidation of the 5% loans specified in the
preceding article, the same provisions stipulated in Executive Order of November 11 of
the previous year will apply to all 6% and 5% loans.
126
Chapter 7
The World War II years
Argentina and World War II
Argentinas experience during World War II was different from that during World War
I. As was mentioned before, in 1914, Argentina had a very open economy and therefore
suffered the direct impact of a strong external shock. Before the onset of World War
IInearly a decade after the crisis of 1930Argentina was largely isolated. Following
a widespread trend, Argentina had abandoned the gold standard and established
exchange controls with differential exchange rates for the protection of local production,
with quantitative restrictions and prior import permits, among others; therefore, it was
less affected by this external shock.
At the beginning of the war, however, it felt the adverse effects of falling agricultural
prices, which did not improve until 1944.
Chart 1
Trend in Wheat and Corn Prices
In m$n per 100 kg

Although the Government, due to tax reforms, became less dependent on export
revenues, those still represented a significant portion of the total revenues. But it was
mostly the exchange marginsthe new and profitable source of resources based on the
127
difference between the price of foreign currency purchased from exporters and the
higher price at which the Government sold it to importersthat experienced a drop,
since there was a lower demand for foreign currency.
Moreover, despite the increased diversification, the role of agriculture and exports
continued to be very significant, as was observed at the beginning of the conflict, when
it was feared that grain crops would not be sold to Europe.
This feeling only proved right in 1940, because, after that, exports to the Allies were
resumed, because the United States had a greater demand for leather and wool, and
finally, because new markets emerged in Latin America for the incipient local industry.
As can be seen in the chart below, the years of war show marked positive trade
balances.
Chart 2
Imports and Exports
In million current USD
Source: Prepared in-house based on L. Llach and P. Gerchunoff, El ciclo de la ilusin y el

desencanto, Buenos Aires, Ariel, 2003.
Perhaps the most significant feature of the economic expansion that continued during
the years of war was the development of the industries that, since the crisis of 1930, had
begun to replace imports. The 1935 census revealed a considerable industrial production
growth also showing a structural change: whereas in 1914 the extractive industries
128
based on natural resource exploitation played a more prominent role, in 1935, it was the
textile industry that took the lead. This marked another difference: the sectors on the
rise were more labor-intensive, since the devaluation had cheapened the labor factor
which, in turn, was supplied by the new and continuous process of migration from rural
areas to the major urban centers (such as Buenos Aires, Rosario and their outskirts)
where, in the previous five decades, the population had undergone a process of
Europeanization. During the war, a population of a less pale Creole skin tone migrated
to these centers.
See the changes in the population structure by origin in the following table:
Table 1
Argentine Population and Foreigners
Census
Total Population
Foreigners
1914
7,885,237
30%
1947
15,893,827
15%
Source: Gino Germani, La estructura social de la Argentina, Buenos Aires, Raigal, 1955.
The population shift to urban centers in the provinces and to Buenos Aires was mainly
reflected in the cost of existing housing rather than in an increased construction.
Chart 3
Trend in built m2 for Buenos Aires
In million m2
129
As shown in the tables below, industrial growth was remarkable.
Table 2
Argentine Industrial Development
IN 1950 = 100
Industry
1916
1930
Chemical
31
48
Oil Refining (as of 1922)
29
Stone and Glass
31
84
Machinery and Vehicles
44
Total Mining
27
Total Manufacturing
19
45
Tobacco
49
68
Textile
22
Food and Beverage
30
59
Leather
44
65
Rubber (as of 1918)
Metal
35
Electric Appliances (as of
Paper and Cardboard
44
70
Clothing
43
70
Timber
30
82
Printing
28
103
1926)
Source: Vicente Vzquez Presedo, Estadsticas histricas argentinas II (comparadas). Segunda

parte: 1914 1939, Buenos Aires, Macchi, 1976.
The 1935 census reveals significant changes in the composition of Argentine industrial
production in relation to earlier estimates. Whereas food production fell from 53% to
32%, textiles rose from 13% to 18%. Workshops for equipment and vehicle (such as
buses, trains, etc.) assembly and repair were gaining importance. In 1935, total
130
industrial production reached m$n 3.054 billion (m$n 2.802 billion in 1914 pesos), with
an added value of m$n 1.160 billion (m$n 1.067 billion in 1914 pesos). The
capital/added value ratio was 2.24, while production growth was 2.3%/year (1.9% at
constant values).92
Throughout the 1940s, the textile industry share in value added generation remained
stable at 26% of the total, while metals and machinery and vehicles remained close to
7% and 7.65%, respectively.
In the years when, due to factual circumstances, there was a complete isolation,
manufacturing activities spread to other sectors in the light industry: household
appliances, refrigerators, stoves, fans, etc., which emerged in many small, improvised
workshops and were produced within their means by technicians and workers (who had
previously dealt with the repair of the imported products).
It was not until the end of the 1940s that dynamic industries took the lead in industrial
GDP growth, a process which continued in the following decades. This process, against
a backdrop of increasing complexity in production, implied a transition from light to
heavy
engineering
industry,
such
as
industrial,
agricultural,
electrical
and
communications equipment, transportation material, electrical appliances, and

electronics.
92
For further details, see Roberto Corts Conde, La economa Argentina en el largo plazo, Buenos Aires,
Sudamericana, 1997.
131
Table 3
Argentine Industrial Development
IN 1950 = 100
Industry
1937
1948
Food and Beverage
71.4
96.7
Tobacco
59.6
95.9
Textile
41.1
99
Clothing
64.7
115.9
Timber
59.1
108.6
Paper and Cardboard
43.3
88.8
Printing and Publishing
72.9
94.8
Chemical
40.3
91.3
Oil Products
49.4
80.3
Rubber
82.5
120.9
Leather
49.4
108.2
Stone, Glass and Ceramics
48.6
90
Metals excluding Machinery
61.8
92.1
63.7
145.2
Machinery and Electric Appliances
27.1
86.1
Miscellaneous
35.1
82.1
Vehicles and Machinery excluding

Electric Appliances
Source: Prepared in-house based on CEPAL, El desarrollo econmico de la Argentina,

E/CN.12/429, Santiago, Chile, 1959.
Despite the decline of imports, which disrupted the supply of capital goods, transport
and equipment, since Argentina had received quite a large investment inflow until
World War I and during the 1920s, the country was able to continue to produce with the
available capital, although it could not renew it.
For a long time, because of the limited imports, it was believed that the country was
very wealthy: there was a massive accumulation of reserves, some of which were
convertible and some others (the ones in the Bank of England) were not. The lack of
investment was not due to a lack of savings; on the contrary, savings greatly exceeded
investments.
132
The fact is that, when the war ended, the demand for imported goods to renew
equipments, machinery and transports was critical. Argentina faced several difficulties
to meet its needs: on the one hand, the United States policy restricting exports of
strategic goods as a response to Argentinas refusal, during the 1942 Rio de Janeiro
Conference, to break off relations with the Axis; on the other, the inconvertibility of
pounds (a substantial part of the reserves). The problem of pound conversion was
solvedprobably, in the least favorable way for Argentina, as the payment of the
British debt and the purchase of railroads exhausted the reserves (which were
accumulated because the necessary capital had not been amortized). In contrast, nothing
could be done to handle the need for imported products. This led, in 1949, to a balance
of payments crisis, the first in a series of events that would occur repeatedly during the
second half of the 20th century.
There were two new and remarkable circumstances during the war. Firstly, the Central
Bank purchased from exporters foreign currency. This currency was not being used for
imports, and therefore was added to the reserves. Since it was not sterilized, this
addition led to a great liquidity and early inflationary pressure.
Why did the BCRA, which had successfully implemented its sterilization policy in the
1930s, fail to employ the same strategy in the 1940s? The fact was that the decline in
imports and the exchange margins had an impact in the Governments revenue, which
had to place debt in order to get financing. If the BCRA, in order to prevent monetary
effects, sterilized foreign exchange purchases by placing its own debt, it would compete
with the Governments debt, causing an increase in interest rates or a Governments
request for financing.
The second event was associated with the great urban development and increasing
housing needs caused by major internal migrations.
133
Chart 4
Volume Traded in the Stock Exchange by Type
In million m$n
Source: Prepared in-house based on Memorias de la Bolsa de Comercio de Buenos Aires, years
1942 1946.
The Second Post-war Period

The End of World War II and the New Monetary Banking Regime
In early 1946, when Colonel Juan Domingo Pern had already been elected president,
the Government that took office after the 1943 coup, headed by General Edelmiro
Farrell, passed an Executive Order for a comprehensive banking and monetary system
reform.
All private bank deposits were nationalized and transferred to the Central Bank, private
banks acting as agents. In order to continue carrying out their commercial activities, and
to an extent determined by the Central Bank, they would receive rediscounts and use
those funds to grant loans.
During its first 10 years, the BCRA had issued money backed mainly by its reserves,
implementing, through absorption operations, a policy that attempted to smooth cyclical
fluctuations. As for cash requirements, the Charter only established minimum amounts
for deposit guarantees, and the Central Bank's influence was used only to ask
commercial banks for prudence when granting loans.
After the amendment of the Charter, in 1946, the rediscount became the main monetary
and credit policy instrument.
134
The Central Banks 1947 Report explained the objectives of the Governments policy:
The new, complex economic problems that have arisen in our country with the end of
the war have forced the Government to intervene more actively in the economy, in
defense of our true national interests, in order to centralize the monetary economic
policy so it can achieve the necessary unity (...) This mission was entrusted to the
nationalized Central Bank, whose considerably broadened attributions allow it not only
to act as an advocate and advisor in the economic sphere, but also to intensify the
regulatory activity already under development, although within much more defined and
precise guidelines, in order to grant the country greater freedom to design and reach its
economic goals, the way Argentina sees and wishes to pursue them.93
The Executive Order 8503, issued by General Farrell (probably at Perns request, to
avoid delays in Congress), established the new Central Bank structure in order to adjust
it to emerging needs, which were no longer related to monetary regulation but rather to
the promotion of the economy to improve the populations living standards. To that end,
the Central Bank must:
(...) Promote, direct and pursue, within its legal authority, the appropriate economic
policy to maintain a high degree of activity employing the maximum available human
and material resources, and an orderly economic expansion, with the aim of improving
the populations living standards through the increase of national wealth. 94
These reforms also reached Banco Hipotecario, whose operations were modified. The
mortgage bonds placed on the market were redeemed and purchased with rediscounts
granted by the Central Bank to BHN. Thereafter, rediscounts would become the primary
funding source for BHN (as well as credit recovery).
The chart below shows the trend in mortgage bond prices, which remained above par
during those years.
93
Memoria del Banco Central de la Repblica Argentina, 1947.

Act No. 12155. See Roberto Corts Conde, La economa poltica argentina en el siglo XX, Buenos
Aires, Edhasa, 2005.
94
135
Chart 5
Trend in Cdula Hipotecaria and Crdito Argentino Interno Bonds after the 1941
Conversion
Against par value
Source: Prepared in-house based on Memorias de la Bolsa de Comercio de Buenos Aires, years
1942 1946.
This implied a critical shift from the way operations of Banco Hipotecario had been
carried out during its first 60 years.
As noted earlier, in 1946, the Government, through the Central Bank, decided to redeem
the mortgage notes in circulation. To this end, a mortgage bond was issued, via the
Central Bank, which would be placed in the market.
Despite the fact that m$n 1 billion were issued, the operation was unsuccessful, as only
m$n 384 million of the bonds were placed. Consequently, the redemption had to be
done with Central Bank rediscounts.
On the subject, the Central Banks Report reads as follows:
Redemption of mortgage bonds also resulted in a partial settlement of securities,
because, out of m$n 1.497 billion in redeemed bonds, only m$n 384 (as of December
31, 1946) were reinvested in the new 2.5 % Bono Hipotecario. Since Banco Hipotecario
Nacional operations were financed with funds provided by the Central Bank, it was not
necessary to encourage the placement of the new bond, but rather to discourage it
avoiding payment of interests.
This redemption would have a significant inflationary impact between 1946 and 1955.
136
Chapter 8
Cdula Hipotecaria Argentina Profitability Study

Introduction
Cdula Hipotecaria Argentina (CHA) was, since the beginning of the century and until
World War II, the Argentine investors favorite bond.
It offered excellent liquidity, profitability, stability, and security conditions.
It was a security issued by Banco Hipotecario Nacional that was traded on the Buenos
Aires Stock Exchange from 1886 to 1946. The bonds were issued by Banco
Hipotecario, founded in 1886, which exercised the power conferred by Act No. 1804
and subsequent laws authorizing new series. They appealed mainly to small investors
whose only known alternative were savings accounts and who, because of their limited
knowledge of the stock market, did not have access to other commercial papers (shares
and debentures).
By offering this product, the purpose of Banco Hipotecario Nacional was for it not to
be purchased with Government or nominal investors capital. Both would be replaced
by anonymous investors who would acquire mortgage bonds whose amount would
range from twenty-five to one thousand pesos. This would ensure capital from all
economic levels, whose sole debtor would be the Bank, providing guarantees equally to
everyone, with the properties mortgaged to its favor, with its reserves and funds from
the National Treasury.95
Although CHAs were mainly aimed at small investors, they were also attractive to large
investors, not only domestically, but also abroad. As Louis Bordeaux said: A large
number of these bonds are circulating in Europe, and especially in France, where they
were introduced in April 1911 at the Paris Stock Exchange.96
Bonds were issued for a minimum value of m$n 25, most of them with a 6% interest
rate, and 1% amortization over 36 years.
The first issues were labeled with the letters from A to K. Later acts provided for new
issues which, in some cases, replaced existing ones. Act No. 6249, passed in 1909,
95
Louis Bordeaux, Les nouvelles legislation inombilieres et hyphotecaires. Etude de droi compar.
Neuchatel, Delachaux & Niestl, 1918, p. 357, as quoted in El Banco Hipotecario Nacional. Balance de
un siglo 1886 1986 (volume I), Buenos Aires, 1986, p. 172.
96
Ibid.
137
authorized the issuance of several series of the famous 6% Cdula Hipotecaria
Argentina.
The following table shows the issuance and circulation of the different series up to
1946.
Table 1
Nominal Bond Issues
In m$n
Series
A
B
C
D
E
A gold
F
G
H
I
J
K
L
6% CHA
Act No. 9155 1st
series
2nd series
3rd series
4th series
5th series
6th series
Act No. 10676 7th
series
8th series
9th series
10th series
11th series
12th series
13th series
14th series
15th series
16th series
17th series
18th series
Act No. 11259, 19th
Nominal
Issue
20,000,000
15,000,000
15,000,000
20,000,000
20,000,000
20,000,000
15,000,000
10,000,000
61,600,000
2,539,900
9,200,000
70,200,000
89,900,000
446,400,000
49,900,000
48,900,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
138
series
20th series
21st series
22nd series
23rd series
24th series
25th series
26th series
27th series
28th series
29th series
30th series
31st series
32nd series
33rd series
34th series
35th series
Act No. 11576 36th
series
37th series
38th series
39th series
3rd 1941 series
4th 1941 series
A (1941)
B
C
D
E
F
G
H
I
J
K
L
M
N
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
44,600,000
40,100,000
50,000,000
41,400,000
49,000,000
49,544,125
49,722,250
47,922,250
49,577,300
49,746,250
49,879,550
49,908,000
49,966,400
215,936,050
306,790,550
261,980,875
224,417,700
176,663,575
278,451,725
50,000,000
50,000,000
50,000,000
50,000,000
50,000,000
49,916,375
47,346,300
8,508,175
Source: Memorias del Banco Hipotecario Nacional.
For many years, mortgage bonds represented a major share of all the papers traded on
the Stock Exchange. That gave holders the possibility to cash them at any time, without
having to wait or pay significant costs.
The stability of the prices allowed buying and selling without losses.
139
The following chart shows the trend in mortgage bonds trading volume against other
securities and shares, and the total traded volume on the Buenos Aires Stock Exchange
between 1886 and 1946.
Chart 1
Trend in Mortgage Bonds Trading Volume on the Buenos Aires Stock Exchange
by Type
1886 1924
In m$n
Source: Up to 1899, Memoria de la Cmara Sindical de la Bolsa de Comercio de Buenos Aires;

from 1900 to 1925, Anuario Geogrfico Argentino. For the years 1886 to 1891, the category
Others includes Government securities and shares.
140
Chart 2
Trend in Mortgage Bonds Trading Volume on the Buenos Aires Stock Exchange
by Type
1925 1946
In m$n
Source: Up to 1940, Anuario Geogrfico Argentino; from 1941 to 1946, The category Others
includes provincial and municipal debt; as from 1940, also mortgage bonds (Province of Buenos
Aires) and external debt are included.
As can be noted, those who wanted to sell their mortgage bonds were able to cash them
very easily throughout the entire period in which they were traded, due to their high
trading volume.
Its dissemination also had a great impact on capital market mobilization.
Profitability
Mortgage bonds were among the highest yielding papers in the market. As can be seen
in the chart below, the interest rate earned by investors was never lower (on occasion, it
was ever higher) than what they would receive if they deposited their savings in banks;
and credit, i.e. the discount rate, was higher for that kind of deposits. This was due to a
very efficient management leading to the lowest spread between lending and borrowing
rates. In 1936, for example, savers earned a 2.20% interest for their 90-day deposits,
whereas a borrower had to pay 5.89%. That is, the spread between the lending and
borrowing rate was 3.08 points, whereas that of bonds was only 1%. If such was the
141
situation in the institutionalized financial system, interest in the non-institutionalized
system (brokers, general stores, private lenders) must have been much higher.
Chart 3
Market Interest for Discounting of Bills (borrowing rate) and Mortgage Bond
Rates
Percentage
Source: Prepared in-house based on Anuario geogrfico argentino 1941 and Boletn Oficial de la Bolsa
de Comercio de Buenos Aires.
Cdula Hipotecaria Argentina Profitability and Savings

Cdula Hipotecaria Argentina was an instrument for long-term savings.
For country inhabitantswhether Argentine or foreignwho began a life of work, the
mortgage bond was a safe and profitable instrument for investing their savings during
their working years and enjoying them when, due to age or health reasons, they retired.
In a country where few sectors were protected by a social security system, the bond
allowed savers to create their own retirement fund, with the aforementioned advantages
of its profitability, security and, above all, its low administrative costs.
Its four decades of good performance and its simplicity were the main appeal of this
instrument that worked as a self-managed pension fund.
It was a stable bond in a stable country: the consumer price index between 1890 and
1940 had grown 1% per year (absorbing the worldwide price increase during World
War I, which was lower in Argentina than in Europe).
142
In the following sections we have made an attempt at describing the scenario for a
worker who had saved part of his salary (we assumed an 11%, the current deduction
from gross salaries) for a 30-year period. To this end, we have considered the average
real wage of workers and employees for 1914, m$n 90 per month, and estimated an
investment of 11% of that amount, keeping the same proportion to real wage in the
following years. We assumed that these amounts were used to purchase mortgage bonds
that accrued to the ones purchased previously. Considering the Cdula Hipotecaria
Argentinas97 IRR (calculated on the basis of its annual price) after 30 years, by the time
of retirement, in 1944, the worker would have accumulated a capital of m$n 11,325
which, reinvested in a 6% sinking fund, would secure him an income of 73% of his
wage. See the various investment options for savers and their yields in the following
tables and charts:
97
Since it was the longest-standing and most nominally issued series, we assume that workers always
invest in 6% CHA (from 1909 to 1934, when they purchase the 5% post-conversion CHA.) As of 1941,
they acquire the 4% CHA after the second conversion.
143
Table 2
Savings, Bond IRR, Final Capital
Annual
Wage
90.43
1,085.16
81.12
973.44
75.80
909.60
65.16
781.92
55.86
670.32
75.80
909.60
78.45
941.40
97.08
1,164.96
111.71
1,340.52
114.37
1,372.44
113.04
1,356.48
118.35
1,420.20
119.69
1,436.28
125.34
1,504.08
134.32
1,611.84
132.99
1,595.88
121.02
1,452.24
130.33
1,563.96
138.31
1,659.72
127.67
1,532.04
131.66
1,579.92
134.32
1,611.84
126.34
1,516.08
127.67
1,532.04
127.57
1,530.84
129.00
1,548.00
130.06
1,560.72
131.14
1,573.68
132.22
1,586.64
133.31
1,599.72
Total for 1944
Wage
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
Savings
119.37
107.08
100.06
86.01
73.74
100.06
103.55
128.15
147.46
150.97
149.21
156.22
157.99
165.45
177.30
175.55
159.75
172.04
182.57
168.52
173.79
177.30
166.77
168.52
168.39
170.28
171.68
173.10
174.53
175.97
IRR
6.96%
6.50%
6.21%
5.99%
5.69%
6.05%
6.52%
5.84%
5.72%
5.49%
5.49%
5.49%
5.94%
5.63%
5.40%
5.36%
5.22%
5.81%
6.24%
6.08%
5.73%
5.28%
4.22%
4.40%
4.51%
4.19%
3.52%
3.76%
5.86%
3.72%
Capital in 1944
897.27
665.08
541.18
414.06
310.75
434.38
471.34
472.74
500.85
464.23
434.22
431.30
446.31
419.59
411.11
384.10
325.83
358.46
377.64
322.46
303.48
281.79
232.09
227.79
219.48
209.12
197.18
193.36
195.58
182.52
11,325.29
Investment options (in m$n)

Capital saved in 1944
Monthly wage for 1943
a) Yield under French System

(4%)
b) Yield under French System
(5%)
(6%)
11,325.29
133.31
Annual
Monthly income
income
Share of 1943 net wage

(%)
1,018.61
84.88
64
1,091.10
90.93
68
1,166.08
97.17
73
144
Chart 4
Time Deposit Interest and
Cdula Hipotecaria Argentinas estimated IRR
Source: Prepared in-house based on Anuario geogrfico argentino 1941.
Stability
As can be seen in the chart, in a period of over 50 years, the price range of CHAs is
quite narrow.
Except for the A gold series, whose price directly reflected the appreciation of gold, all
other series average values remained very close to par. The longest-standing and most
issued series (6% Cdula Hipotecaria Argentina of 1909) reached, in its 24 years of
existence, an average price of 96% of the par value, with a standard deviation of 4.3%
as a measure of price dispersion.
145
Table 3
Average, Minimum and Maximum Price, and Standard Deviation for 1898 1946
(in %)
Series
Observations
(years)
Average
Price
Standard
Deviation
Minimum
Price
Maximum
Price
A
9
99
2.79
94.25
101.75
B
11
99
3.61
91.5
102
C
13
97
6.00
84.4
103.75
D
13
97
5.76
87
103.25
E
14
98
4.95
88.9
103.1
A gold
20
88
11.85
66.5
100.25
F
14
98
5.21
89.5
103.5
G
15
96
9.12
80.75
104.65
H
20
96
9.70
74.6
104.4
I
7
99
3.84
91.75
102.3
J
14
97
3.48
90
102.1
K
14
90
5.87
82.2
98.9
L
13
97
4.59
87.5
102.05
6% CHA 1st series
24
96
4.27
85.73
101.6
6% CHA 2nd series
13
95
4
84.31
99
6% CHA 3rd series
11
95
3
89.4
98.4
5% CHA (1933)
8
101
4
93.6
104.1
4% CHA (1941)
5
100.9
2
98
101.8
Security
Coupon payments were regularly met, and even though some debtors fell into arrears,
Banco Hipotecario, the institution guaranteeing the bond, made the payments and, in a
few cases, had to resort to foreclosures. The nonperforming loans ratio for the first two
decades of the century did not exceed 5% or 6%.
In case of nonperformance, Banco Hipotecario Nacional handled the analysis of the
bonds, the administrative procedures, the collection of installments, the portfolio
management and the foreclosure procedures. The bank, under the Act that created it,
had the power to begin administrative foreclosure proceedings without resorting to legal
action. While the high cost of legal actions made mortgage loans unattractive, the bank
was able to offer this guarantee so that bonds could be redeemed quickly and cost
effectively.
It is a well-known fact that court-ordered auctions are usually more expensive than
those carried out by the institution. Formalities established in procedure codes are also
more complicated than those in an auction carried out by the bank.
146
Cdula Hipotecaria Argentina and Construction Loans

CHA, however, was not only an instrument for investing the savings of large segments
of the population. For people with a low income, it also meant access to home
ownership.
This gave the Argentine society of the time a very peculiar characteristic: many people
from low-income sectors could afford a house of their own.
This also gave a major boost to one of the most dynamic and job-creating industries: the
construction sector.
Construction financing was an element of significant impact on GDP, since it
contributed to the sectors growth.
From the above information, it may be concluded that mortgage bonds, in their six
decades of existence, were an efficient savings instrument due to their exceptional
combination of liquidity, profitability, stability, and security.
During all those years, given their high trading volume and large share they represented
in the whole set of listed securities, holders owned a highly liquid instrument that could
be cashed at any time for a reduced cost.
The mortgage bond was one of the highest yielding securities, partly due to its low
administrative costs.
Its price between 1886 and 1941 was very stable.
Investors were completely secured by mortgage collaterals, which were enforced by a
simple administrativenot judicial proceeding. Coupons were almost always paid
on their due date; nonperformance was minimal and there were very few foreclosures.
Finally, CHAs were, above all, a savings instrument for low- and middle-income
people, that allowed them to have an income at the end of their work life. They were
also an efficient mechanism for access to credit and homeownership.
From a general point of view, they had considerable impact on capital market
mobilization and on the promotion of the construction industry. Also remarkable were
their effects on job creation and GDP growth.
147
Conclusions
In the half century between its foundation in 1886 and 1946, when the mortgage bond
was in force, Banco Hipotecario Nacional explored different paths.
Throughout the period, the key funding instrument was Cdula Hipotecaria Argentina.
In a country with vast lands and scarce capital, the bond mobilized a huge amount of
savings, both foreignvery significant in its beginnings and domesticsince World
War I.
It was an innovative instrument, because in a market where savings were only placed in
short term positions, the mortgage bond was issued in the long term, i.e. 35 years in
average.
In a country where there used to be no capital market, the number of mortgage bonds
traded on the Stock Exchange represented a high share in the total volume.
The Bank had far from promising beginnings, suffered the consequences of a
speculative process in the 1880s and the influence of a government that used the bonds
to attract foreign savings in gold that were exchanged for the Bank debtors pesos.
When the 1890 crisis struck and real estate prices plummeted, the Bank faced arrears in
its portfolio, a fall in the value of properties used as collaterals, and a strong
appreciation of gold.
Depreciation was the most serious problem for bonds backed by gold, which suffered
the biggest price drop after the crisis. After the standstill, the Bank undertook the
conversion process, and consequently found itself holding liabilities in gold (mortgage
bonds) while its loans were converted to pesos. This lead not only to huge difficulties
for meeting payments, but also to a significant loss of equity.
This reveals the problems entailed by the lack of a fixed exchange rate regime for
borrowing in foreign currency when the debtors income is denominated in a
depreciating domestic currency.
Holders of bonds that had depreciated during the crisis, however, saw a price recovery,
which was faster for mortgage bonds in pesos, as bonds in gold did not bounce back
until the mid-1910s.
In turn, the drop in mortgage bond prices was less sharp for Banco Hipotecario
Nacional than for Banco Hipotecario de la Provincia de Buenos Aires, and similar to the
fall in real estate prices. In other words, mortgage bond holders did not suffer more than
those who had invested in land before the crisis.
148
Since its reconstruction in the second half of the 1890s, the Bank was able to
institutionalize itself and benefit from a professional management and board of directors
who would not be subjected to the ups and downs of politics.
Since then, in spite of two strong shocks during World War I and the crisis of 1930, it
succeeded in meeting its liabilities without the negative consequences of suffered in
1890, and at no time were the bond debt-service payments in arrears.
Except during the worst moments of crisesand only for brief periods even then,
prices remained close to par.
During the first half of the 20th century, CHA was undoubtedly the most important
savings instrument, with advantages in terms of profitability, security and liquidity.
It also played a key role in the promotion of urban construction and homeownership.
Moreover, it granted access to rural properties among low-income sectors, thereby
favoring the subdivision of rural land.
149
Appendices
Appendix 1
Volume Traded on the Buenos Aires Stock Exchange 1886 1925
In m$n
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
Gold
44,000,000
44,000,000
60,000,000
260,505,050
329,300,260
64,273,249
NDA
518,665,906
1,355,562,755
979,837,330
1,081,247,183
1,058,214,749
956,416,241
1,241,075,444
NDA
NDA
NDA
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Federal
Mortgage
Bonds
Provincial
Mortgage
Government
Bonds
Securities
0
14,911,720
NDA
13,737,048
11,003,359
NDA
7,862,840
7,553,642
NDA
6,028,380*
NDA
515,172
7,494,767
NDA
4,190,086
51,581,020 10,105,517
3,068,470
23,049,332 36,669,815
1,518,337
12,068,634 24,764,581
1,802,610
11,046,361 24,346,325
5,198,753
6,561,368
9,518,175
10,277,291
7,230,823
7,349,815
5,824,038
4,626,582
9,865,141
3,474,957
3,203,367 15,972,022
7,939,318
2,961,419 43,062,065
14,791,000
20,930,000 52,487,000
16,354,000
8,918,000 40,025,000
55,115,000
6,859,000 49,345,000
237,344,000
74,660,000 87,419,000
137,158,000 219,995,000 50,432,000
63,027,000 427,034,000 49,962,000
68,038,000
96,194,000 34,086,000
63,158,000
3,740,000 24,915,000
63,112,000
559,000 57,546,000
158,004,000
194,000 84,551,000
143,279,000
0 40,038,000
182,874,000
2,196,000 29,938,000
271,276,000
2,191,000 31,966,000
197,622,000
842,000 27,208,000
186,438,000
136,000 17,621,000
101,963,000
193,000 26,607,000
111,080,000
743,000 45,449,000
137,860,000
694,000 68,885,000
135,437,000
3,942,000 78,181,000
285,375,000
2,258,000 95,775,000
306,662,000
2,486,000 390,434,000
351,727,000
7,893,000 222,819,000
627,297,000
11,956,000 146,443,000
655,865,000
14,060,000 298,040,000
391,818,000
22,435,000 166,034,000
0 347,538,000
21,746,000
91,995,000
Shares
NDA
NDA
31,482,410
NDA
38,369,862
48,820,601
14,226,671
9,732,880
4,536,395
4,127,977
11,614,300
10,937,284
5,607,197
4,086,076
866,000
2,700,000
246,292,000
441,860,000
459,424,000
270,243,000
531,164,000
196,454,000
96,568,000
340,140,000
333,562,000
174,532,000
130,469,000
136,609,000
45,560,000
39,145,000
70,928,000
133,188,000
329,524,000
105,772,000
96,732,000
136,550,000
107,172,000
105,775,000
75,908,000
24,753,000
Total Minus
Total
Gold
172,632,579
128,632,579
254,007,988
210,007,988
432,531,710
372,531,710
496,099,481
235,594,431
375,680,061
46,379,801
178,970,473
114,697,224
77,014,288
77,014,288
566,750,338
48,084,432
1,397,294,446
41,731,691
1,005,243,603
25,406,273
1,117,719,412
36,472,229
1,089,467,794
31,253,045
984,673,784
28,257,543
1,299,124,322
58,048,878
89,074,000
89,074,000
67,997,000
67,997,000
357,611,000
357,611,000
841,283,000
841,283,000
867,009,000
867,009,000
810,266,000
810,266,000
729,482,000
729,482,000
288,267,000
288,267,000
217,785,000
217,785,000
582,889,000
582,889,000
516,879,000
516,879,000
389,540,000
389,540,000
435,902,000
435,902,000
362,281,000
362,281,000
249,755,000
249,755,000
167,908,000
167,908,000
228,200,000
228,200,000
340,627,000
340,627,000
547,084,000
547,084,000
489,180,000
489,180,000
796,314,000
796,314,000
718,989,000
718,989,000
892,868,000
892,868,000
1,073,740,000 1,073,740,000
656,195,000
656,195,000
486,032,000
486,032,000
150
Source: Up to 1899, Memoria de la Cmara Sindical de la Bolsa de Comercio de Buenos Aires;
from 1900 to 1925, Anuario Geogrfico Argentino.
* Total for federal and provincial mortgage bonds.
Volume Traded on the Buenos Aires Stock Exchange 1926 1946.

In thousand m$n
Mortgage
Bonds
Mortgage
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
Bonds
369,802
357,867
364,591
375,892
319,029
278,789
211,297
198,417
232,652
199,133
208,769
232,039
229,206
262,163
293,913
318,351
315,886
281,688
272,033
271,683
171,470
Shares and
Federal
Securities
56,229
75,262
101,251
62,884
60,546
78,130
90,159
305,278
205,159
193,066
470,040
569,765
310,355
340,558
413,619
708,949
568,398
1,018,842
1,471,244
1,012,194
1,466,859
(Buenos
Aires
Province)
35,848
40,137
46,696
63,635
79,832
64,051
45,387
67,951
47,402
35,422
32,074
35,875
44,772
55,921
56,337
NDA
NDA
NDA
NDA
NDA
NDA
Liabilities
65,845
76,915
76,124
73,318
47,185
41,490
16,740
18,984
32,422
27,991
74,619
143,138
80,725
160,115
121,162
129,036
215,086
246,148
592,926
351,838,147
485,116,709
External
Debt
11,453
6,330
10,620
4,921
7,110
4,338
2,953
4,039
14,549
7,126
9,778
4,943
2,693
3,215
1,925
NDA
NDA
NDA
NDA
NDA
NDA
Others
Total
49,702
65,155
90,461
77,168
91,317
79,444
56,607
77,450
270,418
420,224
454,638
434,070
274,018
284,882
286,189
529,816
390,631
549,312
345,496
655,833
555,248
588,879
621,666
689,743
657,818
605,019
546,242
423,143
672,119
802,602
882,962
1,249,918
1,419,830
941,769
1,106,854
1,173,145
1,686,152
1,490,001
2,095,990
2,681,699
2,291,548
2,678,694
Source: Up to 1940, Anuario Geogrfico Argentino; from 1941 to 1946, Memoria de la Bolsa
de Comercio de Buenos Aires.
151
Appendix 2
Price of gold; A, B, C, and D series deflated relative to gold; and A gold mortgage
bonds relative to par value.
Gold
A gold
Jan 89
151.80
57.64
55.34
52.70
49.93
79.80
Feb 89
155.26
58.93
56.04
53.30
49.72
74.50
Mar 89
158.98
57.55
55.98
53.62
49.88
75.30
Apr 89
158.98
58.34
55.04
52.84
49.44
80.40
May 89
158.98
58.66
56.77
53.78
50.57
87.30
Jun 89
158.98
59.19
57.87
54.19
51.83
87.00
Jul 89
158.98
60.01
58.18
53.97
52.05
82.00
Aug 89
158.98
60.89
60.86
54.41
52.30
83.80
Sep 89
199.38
51.16
49.90
43.38
43.64
79.50
Oct 89
210.25
49.23
49.23
44.11
44.23
75.80
Nov 89
221.15
47.37
47.48
42.39
40.70
NDA
Dec 89
233.33
47.57
46.71
40.07
39.32
67.50
Jan 90
224.67
47.85
47.85
40.50
41.17
68.30
Feb 90
223.60
46.29
46.74
40.25
41.14
70.30
Mar 90
255.34
39.95
NDA
NDA
35.44
61.80
Apr 90
256.32
40.38
39.79
33.36
35.01
64.50
May 90
233.45
42.62
NDA
38.45
40.80
70.30
Jun 90
237.36
45.08
44.24
40.70
41.29
68.00
Jul 90
293.80
34.63
NDA
32.68
33.87
67.00
Aug 90
257.62
37.65
NDA
38.04
35.32
61.00
Sep 90
242.79
39.13
39.95
37.89
36.04
62.00
Oct 90
249.74
37.84
NDA
34.84
35.84
62.00
Nov 90
285.12
32.27
NDA
31.57
31.21
60.00
Dec 90
298.00
33.05
35.23
29.70
30.20
NDA
Jan 91
321.60
31.41
30.32
29.90
29.35
NDA
Feb 91
333.98
29.04
29.34
NDA
27.55
52.20
Mar 91
340.52
26.65
27.64
25.02
26.76
51.00
Apr 91
348.18
25.27
26.14
24.84
24.41
40.80
May 91
408.60
19.33
20.56
14.68
17.99
31.00
Jun 91
385.45
21.01
NDA
15.57
16.54
30.50
Jul 91
374.60
18.89
19.15
15.82
15.90
28.00
Aug 91
401.84
17.73
17.54
14.97
14.99
NDA
Sep 91
405.32
17.89
17.09
15.37
15.22
NDA
Oct 91
422.93
19.09
16.08
15.74
16.49
20.00
Nov 91
368.25
23.63
23.08
18.54
19.12
NDA
Dec 91
375.42
22.04
21.04
16.70
17.93
28.10
152
Jan 92
380.74
23.19
23.64
18.00
18.45
27.80
Feb 92
367.00
24.80
24.05
18.60
19.62
26.80
Mar 92
347.56
26.84
26.99
20.63
20.92
29.30
Apr 92
345.31
27.58
27.44
23.66
23.76
28.00
May 92
328.31
29.24
28.78
26.87
27.34
30.80
Jun 92
317.05
29.96
29.49
28.70
28.39
32.00
Jul 92
324.22
30.23
29.30
27.70
26.99
33.00
Aug 92
327.49
NDA
28.70
26.57
26.53
31.00
Sep 92
327.70
29.91
28.68
25.63
25.94
31.50
Oct 92
322.17
NDA
29.57
27.16
28.17
32.00
Nov 92
291.67
33.68
32.91
31.20
31.54
38.10
Dec 92
284.00
34.95
33.98
32.39
31.80
NDA
Jan 93
301.22
32.20
31.54
29.13
29.38
NDA
Feb 93
315.76
30.24
NDA
27.39
27.87
NDA
Mar 93
313.07
30.82
30.66
28.59
28.91
44.00
Apr 93
306.68
32.44
31.30
29.84
29.67
49.00
May 93
313.77
NDA
30.91
29.88
30.91
NDA
Jun 93
328.26
NDA
29.63
28.94
29.32
NDA
Jul 93
333.35
NDA
29.17
28.50
29.25
NDA
Aug 93
346.45
NDA
27.57
26.56
26.70
50.00
Sep 93
352.16
NDA
NDA
26.12
26.98
NDA
Oct 93
326.41
NDA
28.64
28.11
28.42
56.80
Nov 93
324.27
30.84
29.14
28.83
28.68
NDA
Dec 93
325.03
30.54
29.23
28.92
29.54
NDA
Jan 94
340.25
29.02
27.77
27.85
27.63
53.00
Feb 94
353.67
28.27
25.87
25.31
26.01
52.00
Mar 94
353.89
28.68
26.42
26.28
27.13
52.30
Apr 94
362.10
28.17
26.65
25.82
26.37
NDA
May 94
400.95
25.94
23.19
23.32
NDA
50.00
Jun 94
398.96
NDA
23.56
24.19
24.06
NDA
Jul 94
368.32
27.29
25.93
25.11
26.06
NDA
Aug 94
354.56
28.27
26.93
26.65
NDA
NDA
Sep 94
324.59
30.81
29.11
29.11
30.50
50.00
Oct 94
334.52
NDA
28.40
27.65
28.10
NDA
Nov 94
350.54
28.67
26.10
26.25
26.82
NDA
Dec 94
362.06
NDA
26.24
25.13
NDA
NDA
Jan 95
357.00
NDA
26.05
25.70
27.45
NDA
Feb 95
350.83
28.22
26.72
25.94
NDA
NDA
Mar 95
352.29
28.10
NDA
26.11
28.24
NDA
Apr 95
364.05
NDA
24.45
24.17
25.27
NDA
May 95
361.12
27.69
27.14
25.75
27.14
NDA
153
Jun 95
347.13
28.23
27.37
26.50
27.76
NDA
Jul 95
347.80
28.46
26.74
26.60
28.32
NDA
Aug 95
335.23
NDA
NDA
28.19
29.46
NDA
Sep 95
322.60
NDA
29.29
28.83
29.60
NDA
Oct 95
327.07
NDA
28.89
NDA
NDA
NDA
Nov 95
333.48
28.79
NDA
27.59
28.04
NDA
Dec 95
331.60
29.86
NDA
26.69
27.90
NDA
Jan 96
326.54
29.40
28.17
NDA
NDA
NDA
Feb 96
310.21
NDA
NDA
28.69
28.69
NDA
Mar 96
311.83
NDA
NDA
29.50
NDA
NDA
Apr 96
320.13
NDA
NDA
28.11
28.43
NDA
May 96
305.12
NDA
31.54
NDA
NDA
NDA
Jun 96
297.42
NDA
NDA
NDA
30.93
NDA
Jul 96
284.89
NDA
NDA
32.12
NDA
NDA
Aug 96
274.54
35.88
32.96
33.33
33.69
NDA
Sep 96
277.23
35.89
33.91
33.19
33.91
NDA
Oct 96
280.22
NDA
34.08
32.83
NDA
NDA
Nov 96
282.72
NDA
33.96
31.94
32.19
66.75
Dec 96
281.65
NDA
NDA
32.66
NDA
NDA
Jan 97
288.78
33.24
31.86
NDA
NDA
NDA
Feb 97
307.52
NDA
NDA
28.94
28.94
69.50
Mar 97
309.38
30.87
NDA
29.74
NDA
NDA
Apr 97
298.19
NDA
NDA
30.18
30.52
NDA
May 97
296.56
NDA
32.46
NDA
NDA
NDA
Jun 97
294.02
NDA
NDA
NDA
31.29
NDA
Jul 97
286.07
NDA
NDA
31.99
NDA
NDA
Aug 97
289.90
33.98
31.22
31.56
31.91
NDA
Sep 97
288.36
34.51
32.60
31.90
32.60
NDA
Oct 97
285.02
NDA
33.51
32.28
NDA
NDA
Nov 97
277.08
NDA
34.29
32.59
32.84
66.75
Dec 97
276.23
NDA
NDA
33.31
NDA
NDA
Jan 98
263.76
NDA
NDA
34.69
36.02
NDA
Feb 98
263.80
NDA
NDA
NDA
36.11
NDA
Mar 98
267.22
NDA
NDA
36.11
NDA
NDA
Apr 98
265.86
37.43
NDA
NDA
NDA
NDA
May 98
260.13
NDA
36.52
36.14
35.79
NDA
Jun 98
267.97
NDA
NDA
NDA
NDA
NDA
Jul 98
274.81
35.84
NDA
33.30
34.75
NDA
Aug 98
270.19
36.83
34.14
35.16
36.64
NDA
Sep 98
262.67
37.88
36.36
37.69
NDA
NDA
Oct 98
249.45
NDA
38.48
NDA
NDA
NDA
154
Nov 98
226.23
NDA
NDA
42.88
NDA
75.00
Dec 98
212.13
42.90
40.54
41.01
NDA
NDA
Jan 99
208.48
NDA
NDA
NDA
NDA
NDA
Feb 99
219.16
NDA
NDA
NDA
NDA
NDA
Mar 99
219.44
NDA
NDA
NDA
NDA
NDA
Apr 99
229.02
NDA
NDA
NDA
NDA
NDA
May 99
224.72
NDA
NDA
NDA
NDA
NDA
Jun 99
218.93
43.05
41.79
41.11
42.14
66.50
Jul 99
225.17
NDA
NDA
NDA
NDA
NDA
Aug 99
235.19
NDA
NDA
NDA
NDA
NDA
Sep 99
237.97
NDA
NDA
NDA
NDA
NDA
Oct 99
235.10
NDA
NDA
NDA
NDA
NDA
Nov 99
229.73
NDA
NDA
NDA
NDA
NDA
Dec 99
229.20
NDA
NDA
NDA
NDA
NDA
Jan 00
229.20
NDA
43.19
NDA
NDA
74.00
Feb 00
228.02
NDA
NDA
NDA
NDA
NDA
Mar 00
227.46
43.63
40.01
NDA
39.57
NDA
Apr 00
227.30
43.11
NDA
37.84
NDA
NDA
May 00
228.19
NDA
NDA
37.91
38.35
NDA
Jun 00
229.26
42.96
NDA
38.60
37.62
NDA
Jul 00
234.36
NDA
NDA
NDA
NDA
NDA
Aug 00
235.85
NDA
NDA
38.27
NDA
NDA
Sep 00
235.57
NDA
NDA
38.21
39.48
NDA
Oct 00
233.48
NDA
NDA
38.55
38.55
NDA
Nov 00
232.59
NDA
42.78
NDA
NDA
68.00
Dec 00
230.76
NDA
NDA
38.57
38.57
NDA
155
Share of Mortgage Bonds in the Total Traded Volume on the Buenos Aires Stock
Exchange
Year
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
Share
7%
2%
3%
1%
4%
4%
3%
4%
20%
28%
19%
12%
14%
17%
24%
15%
28%
16%
8%
9%
22%
29%
27%
28%
47%
62%
55%
75%
61%
49%
Year
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
Share
40%
25%
58%
39%
49%
70%
61%
60%
72%
63%
58%
53%
57%
53%
51%
50%
30%
29%
23%
17%
16%
24%
24%
25%
19%
21%
13%
10%
12%
6%

de Buenos Aires; Memoria de la Bolsa de Comercio de Buenos Aires and Anuario Geogrfico
Argentino.
156
Chart 1
CHA Share in traded volume on
the Buenos Aires Stock Exchange

de Buenos Aires; Memoria de la Bolsa de Comercio de Buenos Aires and Anuario Geogrfico
Argentino.
157
Appendix 3
Price of Gold per 100 m$n
1889
January
151.8
February
155.26
March
158.98
April
NPA
May
NPA
June
NPA
July
NPA
August
NPA
September
199.38
October
210.25
November
221.15
December
233.33
1890
224.67
223.6
255.34
256.32
233.45
237.36
293.8
257.62
242.79
249.74
285.12
298
1891
321.6
333.98
340.52
348.18
408.6
385.45
374.6
401.84
405.32
422.93
368.25
375.42
1892
380.74
367
347.56
345.31
328.31
317.05
324.22
327.49
327.7
322.17
291.67
284
1893
301.22
315.76
313.07
306.68
313.77
328.26
333.35
346.45
352.16
326.41
324.27
325.03
1894
340.25
353.67
353.89
362.1
400.95
398.96
368.32
354.56
324.59
334.52
350.54
362.06
1895
357
350,83
352,29
364,05
361,12
347,13
347,80
335,23
322,60
327,07
333,48
331,60
1896
326,54
310,21
311,83
320,13
305,12
297,42
284,89
274,54
277,23
280,22
282,72
281,65
1897
288,78
307,52
309,38
298,19
296,56
294,02
286,07
289,90
288,36
285,02
277,08
276,23
1989
263,76
263,80
267,22
265,86
260,13
267,97
274,81
270,19
262,67
249,45
226,23
212,13
1899
208,48
219,16
219,44
229,02
224,72
218,93
225,17
235,19
237,97
235,10
229,73
229,20
1900
229,20
228,02
227,46
227,30
228,19
229,26
234,36
235,85
235,57
233,48
232,59
230,76
January
February
March
April
May
June
July
August
September
October
November
December
Source: Memoria de la Cmara Sindical de la Bolsa de Comercio de Buenos Aires.
158
Appendix 4
Price of Urban m2 in the City of Buenos Aires, and Price of Rural Hectares
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
Rural
Urban m2
Hectare
34.44
16
50.94
30.46
55.76
57.88
87.47
39.06
73.52
NDA
70.63
38.08
71.68
48.15
68.03
35.12
NDA
24.41
NDA
38.99
7.23
42.3
5.17
67.11
6.74
39.57
5.29
58.03
4.13
NDA
10.24
39.85
NDA
69.21
10.60
67.11
10.60
NDA
10.54
NDA
NDA
NDA
14.05
NDA
9.87
NDA
NDA
NDA
29.85
NDA
30.13
NDA
41.03
NDA
47.71
NDA
36.95
NDA
42.00
NDA
41.00
168
37.00
184
34.00
219
40.00
274
52.00
315
53.00
309
43.00
269
44.00
340
49.08
278
52.00
313
62.00
377
60.84
374
NDA
360
NDA
324
73.32
303
159
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
Source: Urban built m2, Anuario Estadstico
66.14
54.76
64.10
65.77
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
NDA
de la ciudad
278
245
168
200
216
227
332
305
284
277
268
282
290
304
357
398
de Buenos Aires; rural hectare,
Roberto Corts Conde, El progreso argentino, Buenos Aires, Ed. Sudamericana, and Norberto
Ras & Roberto Levis, El precio de la tierra, su evolucin entre los aos 1916 y 1978, Buenos
Aires, Sociedad Rural Argentina, 1978. The drop in urban real state value between 1896 and
1900 was due to the expansion of the metropolitan common land of the City of Buenos Aires to
include certain rural areas.
160
Appendix 5
Market Discount (borrowing) Rate
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
8.49
8.39
8.75
9.99
10.03
NDA
NDA
NDA
8.15
7.63
7.29
7.14
6.77
6.59
7.39
7.06
6.71
5.29
4.33
4.67
5.54
6.57
6.78
6.29
6.37
7.00
7.62
7.68
7.94
7.59
7.11
6.84
6.33
7.20
7.79
7.72
7.70
6.50
6.49
7.40
6.91
6.92
6.30
6.86
6.86
7.21
7.11
6.08
5.52
161
1935
1936
1937
1938
1939
1940
5.41
5.62
5.24
5.30
5.75
5.75
Source: Boletn Oficial de la Bolsa de Comercio de Buenos Aires.

Lending rates (90-day time deposits)
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
5.97
3.63
5.09
2.41
2.63
2.75
2.79
2.20
1.93
2.47
2.39
2.39
2.39
Source: Anuario geogrfico argentino 1941.

Chart 1
Market Interest for Discounting of Bills (borrowing rate)
Percentage
Source: Prepared in-house based on Boletn Oficial de la Bolsa de Comercio de Buenos

Aires.
162
Chart 2
Market Interest for Discounting of Bills (borrowing rate) and
Time Deposits (lending rate)
Percentage
Source: Prepared in-house based on Anuario geogrfico argentino 1941 and Boletn Oficial
de la Bolsa de Comercio de Buenos Aires.
163
Appendix 6
Calculation of Profitability
For workers with a saving capacity of 11% of their monthly wage, mortgage bonds were
an excellent means of saving, since a minimum investment provided them with a riskfree asset and a good rate of return.
The following calculation is based on these assumptions:
Cdula Hipotecaria prices correspond to CHA 1st series under Act No. 8172
(6%) up to 1933; 1933 CHA 1st series (5%) up to 1941; and 1941 CHA 1st series
(3%) up to 1943.
By the end of 1944, all assets are sold at market price.
Interest is accrued on a yearly basis.
The capital obtained in 1944 is invested in a sinking fund with monthly principal
and interest payments for 15 years.
Table 1
Savings, Mortgage Bonds IRR, Final Capital
Wage
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
90.43
81.12
75.80
65.16
55.86
75.80
78.45
97.08
111.71
114.37
113.04
118.35
119.69
125.34
134.32
132.99
121.02
130.33
138.31
127.67
131.66
134.32
126.34
Annual
Wage
1,085.16
973.44
909.60
781.92
670.32
909.60
941.40
1,164.96
1,340.52
1,372.44
1,356.48
1,420.20
1,436.28
1,504.08
1,611.84
1,595.88
1,452.24
1,563.96
1,659.72
1,532.04
1,579.92
1,611.84
1,516.08
Savings
119.37
107.08
100.06
86.01
73.74
100.06
103.55
128.15
147.46
150.97
149.21
156.22
157.99
165.45
177.30
175.55
159.75
172.04
182.57
168.52
173.79
177.30
166.77
IRR
6.96%
6.50%
6.21%
5.99%
5.69%
6.05%
6.52%
5.84%
5.72%
5.49%
5.49%
5.49%
5.94%
5.63%
5.40%
5.36%
5.22%
5.81%
6.24%
6.08%
5.73%
5.28%
4.22%
Capital in 1944
897.27
665.08
541.18
414.06
310.75
434.38
471.34
472.74
500.85
464.23
434.22
431.30
446.31
419.59
411.11
384.10
325.83
358.46
377.64
322.46
303.48
281.79
232.09
164
1937
1938
1939
1940
1941
1942
1943
127.67
1,532.04
127.57
1,530.84
129.00
1,548.00
130.06
1,560.72
131.14
1,573.68
132.22
1,586.64
133.31
1,599.72
Total for 1944
168.52
168.39
170.28
171.68
173.10
174.53
175.97
4.40%
4.51%
4.19%
3.52%
3.76%
5.86%
3.72%
227.79
219.48
209.12
197.18
193.36
195.58
182.52
11,325.29
Investment options (in m$n)

Capital saved in 1944
Monthly wage for 1943
a) Yield under French System

(4%)
(5%)
(6%)
11,325.29
133.31
Annual
Share of 1943 net wage (in
Monthly income
income
%)
1,018.61
84.88
64
1,091.10
90.93
68
1,166.08
97.17
73
Consequently, workers saving 11% of their salary and investing it in mortgage bonds
between 1914 and 1943 would receivedepending on the interest ratea monthly
income equivalent to 64%, 68% or 73% of their salary for 15 years.
165
Appendix 7
Deposits in Commercial Banks and Mortgage Bond Traded Volume
In million m$n
In Savings
Mortgage Bond
Accounts
Traded Volume
(3)/(1)
(3)/(2)
(2)
(3)
1908
811.18*
NDA
63
8%
NDA
1909 1,157.10
NDA
158
14%
NDA
1910 1,331.60
NDA
143
11%
NDA
1911 1,374.80
NDA
183
13%
NDA
1912 1,480.90
NDA
271
18%
NDA
1913 1,411.20
NDA
198
14%
NDA
1914 1,189.30
NDA
186
16%
NDA
1915 1,418.50
NDA
102
7%
NDA
1916 1,596.10
NDA
111
7%
NDA
1917 1,891.10
NDA
138
7%
NDA
1918 2,665.50
NDA
136
5%
NDA
1919 2,834.20
NDA
285
10%
NDA
1920 3,293.90
NDA
307
9%
NDA
1921 3,177.20
NDA
352
11%
NDA
1922 3,297.40
NDA
628
19%
NDA
1923 3,316.80
NDA
656
20%
NDA
1924 3,319.50
NDA
392
12%
NDA
1925 3,334.60
NDA
346
10%
NDA
1926 3,370.60
1,326.80*
370
11%
28%
1927 3,552.80
1,415.40*
358
10%
25%
1928 3,953.20
1,677.20
365
9%
22%
1929 3,903.20
1,770.80
376
10%
21%
1930 3,956.20
1,712.90
319
8%
19%
1931 3,517.30
1,647.50
279
8%
17%
1932 3,525.30
1,570.30
211
6%
13%
1933 3,466.60
1,533.20
198
6%
13%
1934 3,426.60
1,588.80
233
7%
15%
1935 3,356.70
1,580.20
199
6%
13%
1936 3,669.20
1,654.90
209
6%
13%
1937 3,880.70
1,809.80
233
6%
13%
1938 3,790.50
1,803.50
229
6%
13%
1939 3,912.60
1,798
262
7%
15%
1940 3,940.40
1,787
294
7%
16%
1941 4,584.70
1,898
318
7%
17%
1942 5,253.90
2,111.9
316
6%
15%
Source: Anuario geogrfico argentino 1941, except for * Baiocco, La economa bancaria
Total
(1)
argentina and Anuario geogrfico argentino 1942.
166
References
Baiocco, P., La economa bancaria argentina a travs de sus ndices ms significativos

en el perodo 1901 1935, Buenos Aires, University of Buenos Aires, School of
Economics, Banking Economy Institute, 1937.
Banco Hipotecario Nacional, Balance de un siglo 1886-1986 (volume I), Buenos Aires,
1986.
Banco Hipotecario Nacional, El Banco Hipotecario Nacional en su cincuentenario,
Buenos Aires, 1936.
Bulmer - Thomas, V., The economic history of Latin America, Cambridge, 1994.
ECLAC, El desarrollo econmico de la Argentina, E/CN. 12/429, Santiago de Chile,
1959.
Corts Conde, R., La economa poltica de la argentina en el siglo XX, Buenos Aires,
Ed. Edhasa, 2005.
Corts Conde, R., in collaboration with Mara Marcela Harriague, Estimaciones del
Producto Bruto Interno de Argentina 18751935, Working Papers, Economics
Department, San Andrs University, Buenos Aires, 1994.
Corts Conde, R., Dinero, deuda y crisis, Buenos Aires, Ed. Sudamericana, 1989.
Corts Conde, R., El progreso argentino, 18801914, Buenos Aires, Ed. Sudamericana,
1979.
Corts Conde, R., La economa Argentina en el largo plazo, Buenos Aires, Ed.
Sudamericana, 1997.
Etchepareborda, R., Tres revoluciones: 1890, 1893, 1905, Buenos Aires, Editorial
Pleamar, 1968.
Ford, A., The Gold Standard 18801914, Britain and Argentina, Oxford, Clarendon
Press, 1962.
Friedman, M., and Jacobson, A., A monetary history of the United States, 1867 1960,
Princeton, Princeton University Press, 1971.
Germani, G., La estructura social de la Argentina, Buenos Aires, Editorial Raigal,
1955.
Hotschewer, C., La evolucin de la agricultura en la Provincia de Santa Fe, Santa Fe,
Ministry of Finance, Economy and Industry of the Province of Santa Fe, 1953.
Hueyo, A., La Argentina en la depresin mundial, 19321933: discursos y
conferencias, Buenos Aires, El Ateneo, 1938.
167
Llach, L. y Gerchunoff P., El ciclo de la ilusin y el desencanto, Buenos Aires, Ariel,
2003.
Martinez, A. y Lewadowski, M., LArgentine au XX sicle, Paris, Armand Colin, 1912.
Prebisch, R., Anotaciones sobre nuestro medio circulante, in Revista de Ciencias
Econmicas, October, 1921.
Prebisch, R., Obras 19191948, Buenos Aires, Ral Prebisch Foundation, 1991.
Quesada, S., El Banco Hipotecario de la Provincia de Buenos Aires, Buenos Aires,
1895.
Ras, N. y Levis, R., El precio de la tierra, su evolucin entre los aos 1916 y 1978,
Buenos Aires, Sociedad Rural Argentina, 1978.
Scobie, J., Buenos Aires, plaza to suburb, 1870 1910, New York, Oxford University
Press, 1974.
Tedde, P. y Marichal, C. (Eds.), La formacin de los Bancos Centrales en Espaa y
Amrica Latina, Madrid, Banco de Espaa, Study Service, 1994.
Terry, J., La crisis, 1885 1892, sistema bancario, Buenos Aires, Imp. Biedma, 1893.
Tornquist, C., El Balance de pagos de la Repblica Argentina, Buenos Aires, Imp.
Tailhalde y Rosselli, 1916.
Vzquez Presedo, V., Estadsticas histricas argentinas II (comparadas). Segunda
parte: 1914 1939. Buenos Aires, Ed. Macchi, 1976.
Willians, J., El comercio internacional argentino y el papel moneda inconvertible 1880
-1890, Buenos Aires, National Academy of History and National University of Tres de
Febrero, 2004.
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Anuario del Comercio Exterior Argentino
Anuario Estadstico de la Ciudad de Buenos Aires
Boletn Mensual Estadstico de la Ciudad de Buenos Aires
Comit Nacional de Geografa, Anuario Geogrfico Argentino, Buenos Aires, 1941
Minutes of the National House of Representatives
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La Prensa newspaper
The Buenos Ayres Standard newspaper
168
The Economist newspaper
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Memorias de la Bolsa de Comercio de Buenos Aires
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Argentine Mortgage Bond

Cdula Hipotecaria Argentina

Roberto Corts Conde

The 1880s, until the foundation of Banco Hipotecario Nacional

Growth and convertibility crisis. The banking situation.

The abandonment of convertibility enabled banks to continue carrying out a policy of

Roberto Corts Conde, Dinero, deuda y crisis, 1989, op. cit.

Source: Curto Hotschewer, La evolucin de la agricultura en la Provincia de Santa Fe, Santa

The 1885 crisis

Something similar occurred with urban properties.

Background and creation of Banco Hipotecario Nacional

Republic of Argentina, Diario de Sesiones del Senado, 1884.

La Nacin newspaper, September 4, 1886.

La Prensa newspaper, August 29, 1886.

The Economist, March 5, 1887.

The Economy during the Banks First Years

Foreign capitals inflows continued, and a new immigration waveabout 100,000

There is also a marked increase in goods and passenger transport by rail.

Source: John Williams, El comercio internacional argentino y el papel moneda inconvertible

Average gold price

Amount of bonds sold abroad

13,334,000 11,003,359 16,711,000 13,373,048

Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio

The Bubble Bursts: The Banco Hipotecario Crisis

In mid March, both institutionsBanco Nacional and Banco de la Provincia de

Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio

Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio

In this regard, Williams said:

against par value

Memoria de Hacienda, 1883, p. 4.

Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio

Memoria del Banco Hipotecario Nacional 1890, Buenos Aires, 1891.

Ministry of Finance of Argentina, Memoria presentada al Congreso Nacional de 1892, p. 202.

During Wenceslao Escalantes term as governor, important amendments to the Charter

Republic of Argentina, Diario de Sesiones del Senado, 1911.

In the 1894 Annual Report, Bank governor Carlos Pellegrini argued:

Dec 15, 1889

Jan 15, 1890

Dec 15, 1888

Jul 15, 1890

Dec 15, 1888

Jun 15, 1890

Dec 15, 1888

Jun 17, 1890

Feb 23, 1889

Source: Memoria del Banco Hipotecario Nacional

The Currency Board allocated an issue of 5,000,000 pesos to the Bank.

Republic of Argentina, Diario de sesiones del Senado, November 17, 1896.

Source: Prepared in-house based on A. Martinez & M. Lewadowski, LArgentine au XX sicle,

Source: Prepared in-house based on Extracto Estadstico de la Repblica Argentina, Buenos

Rail transport activity was another sign of this recovery.

This, of course, was accompanied by a large drop in expenditures and a monetary

Source: Prepared in-house based on Anuario Estadstico de la ciudad de Buenos Aires.

Source: Prepared in-house based on Memoria de la Cmara Sindical de la Bolsa de Comercio

Expansion in the First Decade of the 20th Century

Anglo South Americano

British Bank of South America

Espaol del Ro de la Plata

Francs del Ro de la Plata

Galicia y Buenos Aires

Germnico de la Amrica del

London and Brazilian Bank

Nuevo Banco Italiano