CHAPTER XII

COMMERCE

Principal Exports of the Isthmus: Coffee, Bananas, and Precious Metals--Other Products--Imports--Condition of American Trade--Effects of the European War.

The foreign commerce of Central America is based upon the exchange of coffee, bananas, precious metals, and a few other products of minor importance for manufactured articles from the United States and Europe. The most important export, from the Central American point of view, is coffee; for the banana farms, which belong to foreign corporations and are cultivated by foreign laborers, are situated in districts so far away from the centers of population that they play a small part in the economic life of the country, and the gold and silver mines are also with few exceptions the property of European and North American capitalists. The mining companies give employment to many natives at wages somewhat greater than those paid in agricultural enterprises, but otherwise they do little to add to the general prosperity of the community. The owners of the coffee plantations, the majority of whom are natives, reside in Central America and spend their income there, and all employ exclusively native labor. Except in Honduras, where it is cultivated only for local consumption, coffee is the chief export of the mountain region on the West Coast where the great majority of the inhabitants of the Isthmus live.

Central American coffee is of an excellent quality, and brings a high price in the European markets, to which the greater part of it has always been sent. The product of Costa Rica is a favorite in England, while “Coban” and other Guatemalan varieties are well known in Germany and on the continent. The product of the Isthmus has not been so popular in the United States, where it has been unable to compete with the lower-priced, but inferior, coffee of Brazil or with certain other superior grades which have secured a better foothold in our markets. Table V indicates the disposition of the crop of each country of the Isthmus in normal times, and to some extent the change which has been brought about in export conditions by the European war.

TABLE I

EXPORTS OF CENTRAL AMERICA, 1913.

(Value in U. S. Gold.)

Guatemala Salvador Honduras Nicaragua Costa Rica

Coffee 12,254,724 7,495,214 116,302 5,004,449 3,605,029 Bananas 825,670 ...... 1,714,398 429,802 5,194,428 Precious Metals ...... 1,495,805 886,591 1,063,077 1,021,473 Hides 455,476 95,870 159,820 326,599 132,883 Timber 247,759 ...... 12,617 321,869 141,361 Rubber 100,323 18,092 14,289 278,763 44,482 Sugar 349,052 72,852 ...... 31,805 ...... Chicle 142,108 ...... ...... ...... ...... Balsam of Peru ...... 89,476 ...... ...... ...... Cocoanuts ...... ...... 219,968 ...... ...... Indigo ...... 52,984 ...... ...... ...... Cacao ...... ...... ...... 39,828 105,034 Live Cattle ...... ...... 251,361 288,009[73] ......

The ripe berry is prepared for the market at a cleaning and drying plant called a _beneficio_. The larger growers, who produce the greater part of the total crop, ordinarily have their own _beneficios_ on their plantations. Those who have not been able to install the rather expensive machinery which these plants require either ship their coffee

## partly cleaned, in the shell, or else have it prepared for the market

on the plantation of a neighbor or at establishments which exist for the purpose in such cities as Guatemala and Managua. The small landholders, many of whom have a few trees from which they secure a money income to supplement their food crops, ordinarily sell their coffee in the berry to the owners of the _beneficios_. The exportation is frequently, perhaps usually, undertaken by the planter himself, who ships his crop directly to an importer in some European city or on consignment to an agent in Hamburg or London, to be sold in the open market. This seems to be the general though not the universal practice in Costa Rica, Salvador, and Nicaragua. In Guatemala, on the other hand, there are several German and North American houses which buy the coffee from the grower and export it on their own account. Certain companies in the United States, with agencies in Central America, have done a large business of this kind, especially since the beginning of the European war.

The majority of the coffee plantations of the Isthmus belong to native Central Americans. This is true even in Guatemala and Nicaragua, where, as has been said in preceding chapters, nearly all of the largest and best equipped _fincas_ are the property of Germans or of other aliens.[74] In Salvador and Costa Rica there are few foreign owners. Even in these countries, however, the tendency which has been so strong in Guatemala, for the more valuable plantations to pass gradually into the hands of investors from abroad, has been at work in recent years. Foreign influence, moreover, is by no means confined to the ownership of the plantations themselves, for the native planters frequently have financial connections with European banking houses in the Central American capitals or in Hamburg or London which give the latter a large measure of control over the sale of their coffee and even over their methods of production. A very large proportion of the plantations is heavily mortgaged to these concerns, and even the annual crop is often hypothecated or sold to the banker several months before it is harvested, and is handled by him when ready for market. The terms of these arrangements are usually anything but favorable to the planter. In Guatemala, for example, the banker ordinarily not only receives interest on the sums advanced at the prevailing rate of ten or twelve per cent, but at the same time takes an option upon the entire crop, under which he can purchase it at twenty-five cents per bag less than the market price at the time of the harvest. This option alone is equivalent to the payment by the planter of about three per cent of his entire gross receipts, in addition to the interest. Under these conditions, especially in view of the improvidence and inefficiency of many of the native landowners, it is not strange that the most desirable plantations are passing one by one into the hands of Germans and Englishmen, who are able either to finance themselves or to secure money for moving their crops upon better terms.

TABLE II

THE WORLD’S EXPORTS OF BANANAS, 1911.

(From U. S. Daily Consular and Trade Reports, Dec. 26, 1912.)

Central America-- Costa Rica 9,309,586 bunches. Honduras 6,500,000 ” Nicaragua 2,250,000 ” Guatemala 1,755,704 ” ---------- Total 19,815,290 bunches.

Other Countries-- Jamaica 16,497,385 bunches. Colombia 4,901,894 ” Panama 4,261,500 ” Canary Islands 2,648,378 ” Cuba 2,500,000 ” Mexico 750,000 ” British Honduras 525,000 ” Other Countries 1,037,516 ” ---------- Total 33,121,673 bunches. ---------- Grand Total 52,936,963 bunches.

Total imports into United States, 1911, 44,699,222 bunches. (Commerce and Navigation of the U. S., 1911.)

Second only to coffee in the value of the total amount exported, and far more important so far as the United States is concerned, are bananas. In 1913, nearly twenty-two million bunches, or between two and three billions of bananas, were exported from Costa Rica, Honduras, Guatemala, and Nicaragua. Nearly all of this immense amount, which was about forty per cent of the total commercial production of the world, went to the United States. Less than fifty years ago, Mr. Minor C. Keith, who was building a railway from Puerto Limon to the interior of Costa Rica, began the cultivation of bananas along the line in order to provide freight for the road during the years which must elapse before it could reach the inhabited part of the Republic. Until this time, the hot and unhealthful forests along the East Coast of Central America had been an uninhabited and undeveloped jungle, but they proved so well adapted to the growing of bananas that the fruit farms soon became more valuable than the railway. Meanwhile other planters had engaged in the same business in Jamaica and elsewhere in the West Indies, and the banana, which had hitherto been a curiosity, was coming into general use in the United States. The more important producers around the Caribbean Sea joined in forming the United Fruit Company, which is now by far the most important business concern in tropical America. Its immense plantations in Central America, Jamaica, Cuba, Colombia, and Panama are traversed by hundreds of miles of railway, and their products are carried to the United States and Europe by a great fleet of its own steamers, which are the principal, and since the beginning of the European war almost the only, carriers of freight and passengers between Central American ports and the eastern part of the United States. Besides the numerous lines built expressly for carrying bananas from the farms to the wharves, the Fruit Company, or concerns allied to it, control the entire railway system of Guatemala, a large part of that of Salvador, and the most important road, from San José to Puerto Limon, in Costa Rica. The few independent growers along its lines are completely at its mercy, for they have no alternative but to sell their fruit to it under the conditions which it dictates. In Honduras and Nicaragua, there are a number of ostensibly competing companies, with their own railway lines and ships, but many of these are said to be actually under the control of the greater corporation. The latter has on more than one occasion shown itself ruthless and unscrupulous in dealing with real competitors, over whom it has every advantage through its control of the facilities for shipping fruit.

In the last few years, the bananas have been attacked by a disease which apparently shows itself in nearly all plantations after a certain period of cultivation. Its appearance has made it necessary to abandon large tracts of developed land and many miles of railway, especially in some portions of Costa Rica. No means of checking it has yet been discovered, and it has been found easier to plant new farms than to fight it where it has obtained a foothold. At present the disease does not seem likely to decrease materially the total production, for there are still immense tracts of virgin land suitable for banana growing around the shores of the Caribbean Sea, but it is a very grave menace to the prosperous communities which have grown up on the coast as a result of the fruit trade. Unless it is overcome, or unless some other product, such as cacao, can be grown on the abandoned farms, there seems to be serious danger that many sections of the East Coast will sink back into jungle.

Among Americans who have been on the Coast and have but a slight acquaintance with the interior, there is a tendency greatly to exaggerate the influence of the United Fruit Company in Central America. As a matter of fact, that corporation plays a smaller part than might be expected in the economic and political life of the five republics. On the Coast, especially in Costa Rica, it is all-powerful, for it absolutely controls the industry and the export and import trade of the banana country, and is the employer of the greater part of the population; but in the interior, where the great majority of the people live, its influence is confined to its control of the railway lines. These are not owned and operated directly by the Fruit Company, but by corporations closely connected with it. There are also many other enterprises, including street railways, mines, and electrical plants, which have been financed by some of the capitalists who are prominent in the Fruit Company, so that the total Central American investments of what are known as the “Keith interests” are very great. These investors, however, apparently interfere little in politics. Their relations with the governments, sometimes cordial, sometimes the opposite, are not so close that they can be said to exercise any important influence on the internal affairs of any of the five republics, and the native officials are apt to be jealous of their power and to regard with suspicion any concession which seems likely to increase their influence.

Notwithstanding the immense development of the banana trade, the full possibilities of this fruit in providing cheap fruit for the people of the temperate zones are still far from being realized. Exportation from Central America and other producing countries is at present limited to the amount necessary to meet the demand for the fresh fruit in the United States, because the European market has as yet been little exploited, and few facilities have been provided for exporting bananas from the Caribbean to transatlantic ports. A considerable proportion of the product of Costa Rica was sent to England in the years immediately preceding the war, but the total was insignificant in comparison with the consumption in the United States.[75] Millions of bunches of fruit now go to waste every year, for the amount cut each week on the plantations is arbitrarily limited with a view to the state of the market and the facilities for shipping, and thousands of bunches are rejected at the train or at the steamer as being overripe or otherwise defective. It ought to be practicable to convert this waste product into dried bananas or banana flour, both of which are now commercially possible, but few attempts have so far been made to do so. The two or three factories which have been established in Central American ports for this purpose have had little success, apparently from poor management or lack of proper equipment.

The precious metals, which rank third in the list of exports, are found in all parts of Central America, but as yet they have been exploited on a comparatively small scale. There are a few gold and silver mines, operated by foreign capital, in each of the republics except Guatemala, but the total exportations of the Isthmus, according to customs reports, amounted to less than four and one half millions of dollars in 1913.[76] The investment of foreign capital in mines has been discouraged by the disorder which has prevailed in some of the five republics, and the lack of adequate transportation facilities has been an obstacle to the introduction of heavy machinery and to the exportation of the product. These difficulties, which have held back the production of gold and silver, have of course made impossible the exploitation of the other mineral resources of the Isthmus, although these are known to be great. With the establishment of internal stability and the building of good roads to the metalliferous districts, however, mining should easily become a much more important industry than it is at present.

In comparison with coffee, bananas, and the precious metals, the other exports of Central America are of little importance. The herds of cattle, which are one of the principal forms of wealth in Honduras and Nicaragua, provide some horns and hides for shipment to foreign countries, but the quantity has hitherto been very small. The live animals are the chief articles of commerce between Honduras and Nicaragua on the one hand and their more densely populated neighbors on the other, but they have never been exported to any extent to other countries. Mahogany, Spanish cedar, and other forest products, such as rubber and chicle, which is used in making chewing gum, are exported, chiefly by foreigners, from the low country along the coasts. Sugar in various forms and cacao are grown in large quantities, but almost entirely for local consumption. Besides these products, typical of any tropical country, there are others which have importance in certain localities as articles of foreign commerce. Thus, some millions of cocoanuts are shipped from the North Coast of Honduras, and indigo and balsam of Peru from Salvador. None of these minor exports have received very much attention, because the interest of the native community has been centered in the production of coffee and of the staple food crops, and foreign capital has been invested chiefly in mines, banana plantations, and railways. With the comparatively good transportation facilities that now exist, it would seem that there should be a great opportunity for the cultivation of such products as cacao, vanilla, and rubber, or for the shipment to the United States, on the fast banana steamers, of some of the countless delicious tropical fruits which have hitherto been almost unknown in our markets. Countries of such rich and varied agricultural possibilities, with such easy access to the Gulf ports of the United States, must eventually acquire an importance far greater than that which they now have in supplying our markets with many kinds of food which we cannot ourselves produce.

TABLE III

SHARE OF THE UNITED STATES, GREAT BRITAIN, AND GERMANY IN THE COMMERCE OF CENTRAL AMERICA.

EXPORTS.

United States Great Britain Germany Total

Guatemala, 1913 3,923,354 1,857,105 7,653,557 14,449,926 1915 6,881,410 1,322,271 50,237 11,566,586 Salvador, 1913 2,676,637 668,823 1,611,085 9,411,112 1915 3,096,277 341,920 9,945 8,812,387 Honduras, 1913 2,974,000 18,000 164,000 3,421,000 1915 2,987,000 1,000 690 3,858,000 Nicaragua, 1913 2,722,385 998,564 1,887,698 7,712,047 1915 3,079,810 438,500 ...... 4,567,201 Costa Rica, 1913 5,204,429 4,319,085 504,506 10,324,149 1915 4,864,803 4,438,233 13,225 9,971,582 Total for Central ---------- --------- ---------- ---------- America, 1913 17,500,805 7,861,577 11,820,866 45,318,234 1915 20,909,300 6,541,924 74,097 38,775,756

(Compiled from official reports of the Central American governments. The values are given as in American gold, calculated at the prevailing rate of exchange for the year in question.)

Even before the beginning of the European war, the United States bought the greater part of Central America’s exports. Nearly all of the bananas went to American ports, as did by far the greater part of the gold and silver from the mines. With the coffee, the situation was different, but the partial closing of the European markets forced the planters to seek a market for this in the United States. This was especially true in Guatemala, where American buyers were almost the only ones in the field during 1915 and 1916. In the countries which had been less dependent on the German market, the change was not so marked, but all of them nevertheless shipped more coffee to the United States in those years than ever before. Costa Rica, however, retained her privileged position in the London market, at least during 1915, and Salvador found valuable new customers in the Scandinavian countries and Holland. The necessity for finding new purchasers has naturally involved a considerable loss for the Central American planters. Their coffee has on the whole met with a favorable reception in the United States, but the prices which they have received have not been so high as those to which they were accustomed in the markets in which they had long established connections, and they have encountered no little difficulty in making shipments because of the withdrawal of many of the steamers which formerly called at the ports of the Isthmus.

TABLE IV

IMPORTS OF COFFEE INTO THE UNITED STATES, 1913 and 1915.

(From Commerce and Navigation of the United States, 1915, p. 75.)

1913 1915 Guatemala 18,544,228 lbs. 44,605,039 lbs. Salvador 8,756,267 ” 15,823,350 ” Nicaragua 2,915,239 ” 6,430,600 ” Honduras 239,114 ” 665,912 ” Costa Rica 1,474,397 ” 6,770,964 ”

TABLE V

COFFEE EXPORTS OF CENTRAL AMERICA, 1913 and 1915.

(Figures in quintals of 100 lbs. Spanish or 46 kg. From Central American government publications.)

Guatemala Salvador Nicaragua Costa Rica 1913 1915 1913 1915 1913 1915 1913 1915 U. S. 211,886 386,080 107,796 142,337 36,753 62,439 16,032 38,969 England 106,666 .....[77] 34,151 29,127 32,854 40,816 231,382 204,711 Germany 432,329 .....[77] 121,201 994 75,634 ...... 25,451 1,304 Austria-H. 42,054 .....[77] 35,574 381 ...... ...... ...... ...... France ...... .....[77] 159,559 90,502 103,012 57,379 ...... ...... Italy ...... ...... 95,389 76,147 ...... 30,095 ...... ...... Holland ...... ...... ...... 92,763 ...... ...... ...... ...... Scandinavian countries ...... ...... ...... 218,619 ...... ...... ...... ...... Total ------- ------- ------- ------- ------- ------- ------- ------- exports 875,337 775,622 625,942 663,216 243,324 198,533 283,023 265,355

The imports of Central America are those of all tropical countries which have no manufacturing industries of their own. Machinery and tools for agricultural purposes; textiles; flour, lard, and other food products which are produced in insufficient quantities in the Isthmus; and in general, manufactured articles of all kinds, must be purchased abroad. The greater part of these are for the use of the upper classes, but even the ordinary laborers, whose standard of living in many places is otherwise little better than it was in the days when the country had no foreign commerce, use some foreign goods, such as cheap textiles and machetes.

In the import as well as the export trade, the United States easily occupies the leading place, supplying the greater part of the foodstuffs, hardware, and machinery, and a very considerable part of the textiles. Our share in the total, even before the war, was well over fifty per cent, with Great Britain and Germany respectively second and third. Tables VI, VII, and VIII will give an approximate idea of the nature and origin of the imports of the Isthmus in normal times. The predominance of the United States was due primarily to proximity and superior steamer connections. The Caribbean ports of the Isthmus, which are less than fifteen hundred miles from our Gulf ports, were connected with those ports by regular lines of swift steamers, whereas they had no adequate means of communication with Europe. The Pacific ports, on the other hand, although they were visited regularly by the small steamers of the German Cosmos Line, relied chiefly upon the service of the Pacific Mail between San Francisco and Panama.

This gave American trade an advantage which would have been even greater than it was if transatlantic manufacturers had not been favored by several factors which to some extent offset their geographical handicap. Freight rates to Europe, however, were not proportionately greater than rates to the United States, even in cases where the goods must be transshipped at a North American port. Furthermore, European merchants controlled the greater part of the import and wholesale trade in each of the five republics, and naturally bought articles from export houses in their own country, whenever they could, not only for sentimental reasons, but because they received better terms and longer credits. Even at the present time, when the war has caused a great reduction in the exports of all of the belligerent countries, the people of the Isthmus still continue to buy certain classes of goods from French or English manufacturers which might just as well be imported from the United States if American manufacturers made an effort to secure the trade.

TABLE VI

SHARE OF THE UNITED STATES, GREAT BRITAIN, AND GERMANY IN THE COMMERCE OF CENTRAL AMERICA.

IMPORTS.

(Compiled from Central American government publications; values in American gold.)

United States Great Britain Germany Total

Guatemala, 1913 5,053,060 1,650,387 2,043,329 10,062,327 1915 3,751,761 577,206 146,053 5,072,476 Salvador, 1913 2,491,145 1,603,846 713,855 6,173,545 1915 2,478,322 1,054,838 41,136 4,182,922 Nicaragua, 1913 3,244,008 1,150,611 619,212 5,770,006 1915 2,592,799 302,294 36,960 3,159,219 Honduras, 1913-14 5,262,000 460,000 522,000 6,625,000 1914-15 5,177,000 303,000 96,000 5,875,000 Costa Rica, 1913 4,468,946 1,289,181 1,341,333 8,867,280 1915 3,031,997 548,810 42,979 4,478,782 Total for Central ---------- --------- --------- ---------- America, 1913 20,519,159 6,154,025 5,239,729 37,498,158 1915 17,031,879 2,786,148 363,128 22,768,399

TABLE VII

PRINCIPAL IMPORTS OF GUATEMALA, 1913 and 1915.

(From U. S. Commerce Reports and Guatemalan official statistics; values in American gold.)

1913. 1915.

Cotton goods, total 1,734,832 758,570 United States 503,920 Great Britain 778,278 Germany 337,181

Linen, hemp, and jute manufactures (in large part coffee sacks). Total 222,320 252,481 United States 20,788 Great Britain 80,954 Germany 111,141

Woolen manufactures, total 253,107 52,308 United States 30,938 Great Britain 64,635 Germany 111,866

Silk manufactures, total 263,448 68,525 (Mostly from Japan, China, and France.)

Manufactures of iron and steel, total 685,548 121,198 United States 384,094 Great Britain 97,434 Germany 181,538

Glass, crockery, earthenware, etc., total 106,825 27,859 United States 24,783 Germany 58,944

Leather goods, total 156,688 94,661 United States 110,318 Germany 30,244

Foodstuffs, total 566,856 538,236 United States 260,854 Great Britain 54,859 Germany 86,923

Stationery, paper, etc., total 179,798 147,243 United States 87,420 Germany 60,491

Drugs and medicines, total 268,523 108,666 United States 99,359 Germany 62,375

Wheat flour, from United States 394,931 506,510

Agricultural and industrial machinery, total 350,366 127,433 United States 175,683 Great Britain 86,456 Germany 78,711

Lumber, from United States 179,880 78,667

Railway material, total 426,826 121,843 United States 424,235

Petroleum, from United States 184,936 110,925

Wines, liquors, etc., total 347,752 125,583 United States 73,752 Germany 73,415

Other articles, total 1,636,678 732,449 United States 1,079,007 Germany 406,214 Great Britain 50,298

TABLE VIII

PRINCIPAL IMPORTS OF COSTA RICA.

(From Costa Rican official statistics, quoted in U. S. Commerce Reports, Dec. 9, 1916. Values in American gold.)

1913. 1915.

Live cattle, from Nicaragua 323,067 95,964

Cotton goods, total 828,948 466,699 United States 243,802 266,333 Great Britain 355,042 129,848 Germany 124,699 4,491

Coal, total 261,975 106,953 United States 258,329 92,039

Drugs, total 150,142 115,903 United States 76,173 85,194 Germany 29,690 4,065

Electrical material, total 150,339 95,176 United States 121,416 86,773

Flour, total 258,407 224,480 United States 257,457 209,662

Lard, total 200,362 144,181 United States 194,968 142,270

Railway material, total 296,772 62,387 United States 272,242 59,725

Rice, total 143,391 108,649 United States 31,621 93,283 Germany 82,088

Wheat, from United States 219,487 323,567

Coffee sacks, total 88,958 98,531 United States 11,161 13,220 Great Britain 69,424 83,919

That they have not done so seems to be due chiefly to indifference. The reasons why American exporters fail to make a better showing in Latin American markets have been discussed so often and so fully in the last three years that there is little object in repeating them here. It is sufficient to say that the same story of carelessness in filling orders and in packing goods, of failure to send well-equipped salesmen, and of refusal to comply with the custom of the country in such matters as credits and accommodations, are heard in Central America as elsewhere. Since the European war has forced the importers of the Isthmus to depend more than ever before upon American manufacturers for their supplies, one hears many complaints of inconsiderate or discourteous treatment, and of general inefficiency in handling trade.

One of the chief obstacles to the increase of American trade in Central America has been the lack of banking facilities. Most of the banks which exist in the larger cities of the Isthmus at the present time are purely local institutions, and their operations are rarely such as to make them a strong force for good in the economic life of the community. They speculate in the rate of exchange, issue more or less depreciated paper money, engage in financial transactions with the government which consume a large part of their available funds, and make loans to planters and merchants at rates of interest which vary from ten per cent, with first-class security, to thirty or forty per cent in cases where the element of speculation is greater. These conditions, which are perhaps inevitable in a country where capital is so scarce and where the instability of political affairs makes the element of risk in all credit transactions so great, seriously detract from their usefulness. Unfortunately, moreover, there are some institutions which are not managed in accordance with the principles either of sound banking or of ordinary honesty, and these are necessarily a source of weakness to the whole financial community. Within the last five years, two of the largest banks in Central America have failed, under circumstances which aroused very grave suspicions of mismanagement and defalcation. The banks cannot afford adequate facilities for financing the export and the import trade, for they have neither the available funds nor the connections abroad which are necessary for this purpose. Moreover, they can obtain such high profits in other forms of operations that there is little inducement for them to engage in ordinary commercial transactions. Many of them are engaged in the coffee export business or in other forms of trade themselves and are consequently little inclined to aid other merchants who may wish to compete with them. The establishment of branches of American banks, dedicated to a legitimate banking business, and especially to the financing of American trade, would perhaps do more to stimulate commerce with the United States than any other one influence.

The question of credits has been another serious obstacle to the development of our trade. The average Central American merchant must have from three to six months to make payment for goods which he imports, because he in turn must grant a considerable time to the small retail dealers whom he supplies. American manufacturers are as a rule unwilling to grant credits for so long a period, and they have sometimes exposed themselves to heavy loss when they have done so because of the difficulty of ascertaining which of the local importers were deserving of confidence. This difficulty also could to a great extent be obviated if reliable American banks could be established in the five republics.

That our commerce holds first place in Central America despite these drawbacks is due partly to the fact that there are certain articles, such as flour, railway material, and petroleum, which the people of the Isthmus must almost inevitably purchase in our markets, and partly to the activity of a few great corporations which have stores or permanent agencies in Central America, and handle a very large amount of imports from the United States. The United Fruit Company and other fruit companies in Honduras and Nicaragua, as well as most of the mining companies, maintain commissaries where American goods are sold in great quantities. Grace and Company, in co-operation with the American International Corporation, does a considerable business in merchandise on the West Coast, and has offices in most of the important cities of the Isthmus. Several well-known American manufacturers also are more or less adequately represented by permanent agents in the important commercial centers.

Although our share in the total imports and exports of the Isthmus has been greater than ever before, since the beginning of the European war, the total of our trade has not been so large as might have been expected, because of the partial paralyzation of the commerce of the five republics. At the outbreak of hostilities the foreign credits upon which the normal business of the Central American community had depended were entirely cut off, and exchange on European centers rose to a prohibitive figure, especially in the countries which were not on a gold basis. Merchants were thus unable to obtain goods or even to pay their debts. At the same time, the purchasing power of their customers was seriously decreased, because the rise in the rate of exchange made prices inordinately high in the local currency, and because the planters, unable to secure advances from abroad to move their crops, were forced to cut down their expenditures and in some cases to lay off their workmen. Most of the governments, also, were in severe financial difficulties, for their revenues, which consisted chiefly of the import duties, had declined, and their expenditures, of which the money for the service of the foreign debt constituted an important part, had increased with the advance in the cost of foreign drafts. Some of them were thus unable to pay their employees, and the poverty of the latter intensified the general financial depression. For a time, the sale of foreign goods almost ceased. When it was found, however, that the products of the Isthmus could still be sold abroad, even if at somewhat lower prices, confidence began to return and commerce recovered to some degree, but imports are still far below normal, and seem likely to remain so for some time.

After the close of the war, it seems probable that the position lost by English and German exporters since 1914 will be regained by them, unless their American competitors make a more successful effort than they have yet made to secure a permanent foothold in the market. The European houses which control the import business of the Isthmus will probably turn back to their former correspondents at the first opportunity, for their experience with American firms in the last three years has not been such as to encourage them to continue it after they are able to resume their old connections. Many of the difficulties which merchants in Central America say they have encountered in dealing with American exporters have undoubtedly been due to war conditions in the United States and to an ignorance on both sides of the other’s methods of doing business, but many others can only have resulted from carelessness and indifference to new trade opportunities.

Nevertheless, there is every prospect that the share of the United States in the commerce of Central America will continue to increase in the future as it has in the past. Proximity and the excellent steamer connections created by the banana trade give our manufacturers an advantage against which European importers will find it increasingly hard to compete. The North American element in the Isthmus as a whole is increasing more rapidly than any other foreign element, especially in the banana towns on the East Coast, and North American investments are probably already greater than those of any other country. The richer classes among the Central Americans themselves, moreover, travel more and more in the United States rather than in Europe, and thus acquire a taste for articles of North American manufacture, where they formerly demanded French or English products. A great increase in our trade with the five republics waits only upon the establishment of proper banking facilities and upon the awakening of American exporters to a realization of their opportunities.

FOOTNOTES:

[73] Figures of Costa Rican government for imports from Nicaragua.

Note. These figures are compiled from official statistics, or from the United States Daily Consular and Trade Reports, which in turn are based upon the official statistics of the Central American governments. They are inexact, because the statistics upon which they are based are rarely entirely trustworthy.

[74] Special Agent Harris, in his Report on “Central America as an Export Field” (U. S. Dept. of Commerce, Special Agents’ Series, No. 113), gives the following figures in regard to the ownership and production of the coffee plantations of Guatemala:

Nationality No. of Plantations Product in quintals Guatemalan 1,657 525,356 German 170 358,353 North American 16 19,285 Other 236 143,242

[75] 2,763,111 bunches were exported from Costa Rica to England in 1913. (Costa Rica, _Anuario Estadístico_, 1913, p. 279.)

[76] It is probable that more than this was actually produced. Large amounts are said to be smuggled out of certain countries every year to avoid paying the export tax, and this assertion is to some extent borne out by a comparison of the export statistics with the import statistics of the United States.

[77] Figures not available.

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