credito agricuola en la provincia de buenos aires

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Agricultural Credit in the Province of Buenos Aires, Argentina, 1890-1914Author(s): Jeremy AdelmanSource: Journal of Latin American Studies, Vol. 22, No. 1 (Feb., 1990), pp. 69-87Published by: Cambridge University PressStable URL: http://www.jstor.org/stable/157167 .

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Agricultural Credit in the Province ofB u e n o s A i r e s , Argent ina , I89oIi9I4*JEREMY ADELMAN

IntroductionIn I879, for the first time, Argentina exported more wheat than itimported. A generation later the Republic figured among the top fiveexporters of wheat in the world and wheat had become its premier earnerof foreign exchange. The expansion was by any account remarkable.'

With the expulsion of the Indians from the Pampa Huimedan the lateI870s, hundreds of thousands of hectares of arable and highly fertile landwere suddenly made available to agriculturalists. Railways, built largelywith British capital, provided the means to ship new agricultural produceout of the region to the newly constructed ports. Immigrants flocked fromEurope to take advantage of the opportunities offered by the vacant land,either as new property owners, as tenants or as wage-earners. The surgein the supply of land, labour and capital initiated a period of growth inArgentina, a growth which was shared by other regions of recentsettlement which responded to similar opportunities.2

In 1978 Joseph Tulchin described the role of agricultural credit inArgentina from I910 to 1926, a period in which 'the great surge ofeconomic growth had already begun to decline'.' He showed how creditwas used by commercial interests to exert financial control overagriculture. My concern is different. How, when the formation andexpansion of the modern agricultural sector was at its most intense* I am grateful to Roberto Cortes Conde, Juan Carlos Korol, Eduardo Miguez,Christopher Platt and Hilda Sabato for their comments on an earlier draft of this article,and to the Riat family for allowing me access to their papers.For a general overview of the process of expansion see Roberto Cortes Conde, Elprogreso argentino.I880-19I4 (Buenos Aires, 1979); Carlos F. Dfaz Alejandro, Ensayossobrela historia econdmica rgentina(Buenos Aires, 1975), pp. 17-74.2 For an interesting comparison of two regions of recent settlement, see Carl E. Solberg,The Prairies and the Pampas: Agrarian Poligy in Canada and Argentina, I88o-r93o(Stanford,I987).3 Joseph Tulchin, 'El credito agrario en la Argentina, 1910-1926', DesarrolloEcondmicovol. i8, no. 71 (Oct.-Dec., 1978).

Jeremy Adelman is post-doctoral Fellow in History, University of Toronto.

J. Lat. Amer. Stud. 22, 69-87 Printed in Great Britain 69

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70 Jeremj Adelmanbetween I890 and 1914, was creditallocated o agriculture n the Provinceof Buenos Aires, which by the end of this period was producing more thanhalf of the Republic's cereals? And, given the allocation of credit, did ithave any bearing on the distribution of land? Finally, in what way did theoperation of the credit system reflect a certain rationality on the part ofeconomic agents?

The article serves also as an initial study of one aspect of the operationof the Argentine capital market during the economy's expansive phase.Thus far, no serious study has been conducted on the relationship betweenfinance and the productive sector, save a general article by Donna Guywhose main concern is to explore the weakness of the domestic capitalmarket.4 She argues that domestic finance did not contribute toindustrialisation, thereby reinforcing dependent links with Great Britain.The alleged malfunctioning of the local capital market is simply assumed,in which the landowners are said to have enjoyed preferential access towhat little finance existed. Jorge Sabato, in an interpretative essay on theArgentine economy from I88o to I914, suggests that resources, includingfinancial resources, were allocated with an eye to minimising risk andmaximising short-term flexibility.5 Such a broad description of the'rationality' of the financial system deserves further research. Ourconclusions here suggest that financial flows in the agricultural sectorwere characterised by a preference for less risky investment. The riskaversion was due both to the relatively unstable nature of Argentineagriculture and to the opportunity cost of not investing in other sectors.If Sabato's argument is correct, we find that the alleged risk-aversion wasprobably a rational way for lenders to treat the agricultural economy.Further research is needed to establish the characteristics of financial flowsin other sectors.The legagyof the i80os and the Baring crisisThe decade of the I88os witnessed two key developments in the Provinceof Buenos Aires: first, the uprooting of policies designed to fostercolonising efforts based on the example of Santa Fe and the United States,and secondly, the silencing of voices arguing for the need to lend tosmall- and medium-sized agricultural producers.The expansion of agriculture in the late I88os, following the removalof the Indian threat and the expansion of the railways, was not robust andit was concentrated in the northern partidos (counties). In contrast to the

4 Donna Guy, 'Dependency, the Credit Market, and Argentine Industrialization,i860-i940', BusinessHistory Review, vol. 58, no. 4 (Winter, I984).' Jorge Sabato, 'Notas sobre la formaci6n de la clase dominante en la Argentinamoderna (I880-I9I5)', unpublished manuscript, CISEA, May 1979.



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Agricultural Credit in BuenosAires 7'rapid expansion of Santa Fe, Buenos Aires was slow to develop itsagricultural capacity - by I896 less than 500,000 hectares were devoted towheat.National and Provincial governments aimed to use the abundance ofland to colonise the Province in the hope of fostering otherwise elusivegrowth. Earlier legislation was ineffectual. The most ambitious attemptwas made in I887, with the passage of the Agricultural Centres Law whichsought to establish 222 settlements around the Province. The Law wascaught up in the fever of speculation, however, and the failure of themeasure had catastrophic consequences, not the least being that it led to theliquidation of what remained of public land in Buenos Aires.The speculation that overwhelmed the Province in the late I8 8osundermined careful, deliberate policy. After I887 land prices trebled andspeculators interested in increasing land values rather than productionbought large tracts; they then mortgaged them and used the borrowedfunds to buy yet more land. The idea was to sell off smaller parcels laterat a handsome mark-up. In a frank and earnest letter to the ProvincialGovernor, Paulino Llambi Campbell, the President of the BancoHipotecario de la Provincia, showed his concern:I am very concerned that when you leave office, there will be a greatcelebration,not only among your correligionarios politicos to whom nothing needbe said for them to do it, but also especiallyafiestaof merchants,of the ranchersand, in a word, the most importantpeople who have interests n the Province.6The fiesta which came to pass not only ruined official land distributionpolicy, but it ruined the most important lending institution in theProvince, the Banco de la Provincia de Buenos Aires (BPBA). In absoluteterms, the BPBA lent more money than any other institution and was thebest represented throughout the Province. Of the 42 branches of theBPBA existing in I887, 23 yielded losses,7 but Bank officials expected theProvincial economy to expand rapidly, therefore justifying the immediatelosses. In the Memoria of i886, the President of the BPBA stressed theimportance of decentralising the institution and reducing the number oftransactions in the Federal Capital and in La Plata; the Bank, it wasargued, should also charge the same interest rate in branches as in thecentral office.The following year only I7 branches incurred losses. The gradualsettlement of the Province seemed to justify the risk. The new President,Daniel J. Donovan, waxed optimistic and tried to direct his Bank on moredesarrollista ines. The Bank should increase its lending facilities and6 Letter to Dardo Rocha, I March I884, Archivo Dardo Rocha, Archivo General de laNaci6n (herein AGN), Legajo I96. 7 BPBA, Memoria de 4&86.



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72 Jeremj Adelmangive the producerall the facilitiespossible so thathe may develophis industryandobtain betterresults from his own efforts, multiply the numberof producersbymeans of long term loans, facilitate he fraccionamientof our rural andholdingsby means of the creation and support of a small producer class .. 8

Branches of the Bank, according to Donovan, should be converted intobancoshabilitadores.The slow emergence of agriculture in the Provincerequired financial support and 'greater sacrifices borne by the creditestablishments, and especially by the State banks'. New bank policywould favour loans allocated to hacendados, agriculturalists andindustrialists, and exclude finance negociosde la bolsa.

Even if the new BPBA administration policy was genuine, it stood littlechance of surviving the financially reckless years of the late I88os.Whatever its intentions, the Bank was swept up in the fury to issue accionesfor sale abroad and, with the help of the Lgy de Bancos Garantidos,contributed to the increase in peso circulation from 94 million to 245million between I887 and I890. When the flow of fresh loans to theRepublic ceased, foreign debt service payments added to the imbalance inforeign trade and Argentina could not meet the obligations to itscreditors.9 The Baring crisis of I 890 led to the suspension of the BPBA'sactivities in I 89I . Whatever hopes existed of a financial institution gearedto the direct promotion of agriculture vanished.

In sum, the I8 8o decade, and the Baring crisis which brought the cycleto a close, led to the disposal of public land in large units to speculatorsand estancierosand to neutralisation of financial measures which mighthave counteracted the tendency to appropriate large tracts throughpreferential allocation of credit to modest producers. Attempts to generatefinance for an agricultural sector akin to that of North America wereabandoned.1890-1914: The allocation of creditFrancisco Segui, an official responsible for agricultural development in thei88os, once called the I89os a decade of 'convalescence', of generallyscarce credit. It was, according to the ex-official, a decade of severecontraction. In the wake of the crash, officials abandoned whateverillusions they might have had.How many banks existed in the Province? The I895 National Censuslisted 5 I banks (including head offices and branches), nine of which werelocated in La Plata. By reconstructing the census-slips (cedulas)we can

8 BPBA, Memoriade iVV7.9 For a recent treatment of the crisis see Roberto Cortes Conde, 'Nuevos aspectos en lacrisis de I890', Serie Documentos de Trabajo I45, Instituto Torcuato Di Tella (BuenosAires, I987).



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Agricultural Credit in BuenosAires 73acquire a more detailed impression of the location of banks.'0 The largestnumber (28) were located in the northern, more settled partidos, thirteenin central partidosand only ten in the south (four in Bahia Blanca). Therewere three types of banks: official banks with central offices in the nationaland provincial capitals, non-official banks with central branches in thecapitals and non-official local banks, often consisting of a single officebased in the capital of the partido. The BPBA accounted for 2 1 of the totalcredit outlets in the Province. Only three BPBA branches survivedliquidation after I89I, leaving only 26 banks (including head offices andbranches) operating in the Province. Nineteen of the 26 operative bankswere created after the crash of I890. The largest bank employed eight.Most were operated by three or four employees, with an average of 200to 400 clients. The largest banks, with the most employees and clients,were located in the provincial capital. Outside La Plata, the largest bankwasthe Banco de BahiaBlanca,with 2,200 clients.In short,after I 890, theregion beyond the cities, the rural sector, was not well represented. Onlythose agriculturalists with access to good transportation and the time tospare to make the tiresome trips to larger urban centres could availthemselves of bank services.The Banco de la Naci6n Argentina (BNA) became the single largestlending and savings institution in the I 89os, replacing the dormantprovincial bank. I 5 branches of the BNA were created between I 890 andI896. Together with the new local banks, the BNA gradually furnishedfunds to a capital-starved provincial economy. By I896, Francisco Seguiwas able to detect an improved situation for borrowers." By I905, 73banks were operating in the Province, including 37 branches of theBNA.'2 In I906 the moratorium on the Banco Hipotecario (the MortgageBank) and the BPBA was lifted and in I908 the latter was able to resumeactivities with 20 branches.'3 In I9II the National Government rewrotethe legislation governing the activities of the Banco Hipotecario Nacional,widening its activities, but allowing it to issue mortgages only up to 50 %of the value of a property; loans of over 250,000 pesos could not exceed40% of the value of the estate.'4By I9I4, any credit shortagecould be

0 The slips, 'cedulas', are located in the AGN, Segundo Censo Nacional, II, Econ6mico-Social, Legajos 3 56, 80.Congreso Nacional, In'estigacidn Parlamentaria sobre Agricultura, Ganaderia, IndustriasDerivadasy Colonizacidn,Anexo B, Informedel ComisarioD. FranciscoSegui (Buenos Aires,I898), p. 295.12 Boletin Mensualde la DireccidnGeneralde Estadistica de la Provinciade BuenosAires VII: 66

(Jan. I906).13 Banco Hipotecario de la Provincia de Buenos Aires, MemoriaCorrespondientelperiodojunio i9o6-mayo 1907; BPBA, MemoriajyBalanceGeneral(Dec. I908).14 Roberto Ramm Doman, Manual de la Bolsa de Comerciode BuenosAires (Buenos Aires,

I9I 2), p. 87.



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74 JeremyAdelmanblamed not on the lack of institutions, but rather on their lending policyand preferences.

It should be noted that most of the Province's lending activities tookplace in the national capital or in La Plata. Even as late as 1920, of theloans issued to agriculture and ranching by the BPBA, only 8 million goldpesos were loaned directly from branches in the Province, while 40million gold pesos were loaned from the Caja Central.'5

One might expect local banks to have filled the gap left by the officialbanks and to be especially conscious of the needs of the rural sector. Smalllocal banks, however, were often short of lending facilities and even morerisk-averse than official banks. The Banco Comercial de Dolores,established in I892, and serving 69I clients in the partido in I895,exemplified the lending preference of local banks. In I 898, a year of rapidexpansion of agriculture, high prices for wheat and high levels ofagricultural machinery imports, this bank lent only 45,050 pesos tofarmers, 78,3 I I to industrialists, I80,200 to ranchers and 240,8 II tocommerce. Calculations for all banks other than the BNA reveal that, forthe same year, 50 % of the value of all loans went to commerce, 40 % toranchers and I0 % to agriculture.'6 An article in La Agricultura of I900explained thatin various points of the Province of Buenos Aires there exist 'popular' Bankswhich areprosperingmore eachyearand offer real services to commerceas wellas to ranchersn the respectivecountiesin whichtheyareestablished. n general,the agriculturalist s not favoured by these establishments; hey are forced to goaboutwith both feet in the stirrups f they want to progressand not be left to themercy of the winds and currents."7

Given the general spread of banking in the Province, how muchlending, in aggregate, went to agriculture? We can only be sure for theseven-year period from I907 (the opening of the BPBA) to I9I 3. Before1908, direct lending by banks was slight. The dominant form of credit wasmortgages, which will be discussed later. Total direct loans to all sectorsin the Province amounted to 97,3 39,000 pesos in 1904, but rose rapidly to241,149,000 pesos by 1907 (see Table i).Several points should be made. Table I does not include loans issuedfrom central branches in the city of Buenos Aires, where industrialists,estancierosand comercianteswould be likely to have conducted a lot of theirborrowing activity. Agriculturalists, committed to the land, especially inremote areas of the Province, were less likely to make trips to the capital.15 BPBA, MemoriayBalanceGeneralDec. I920).16 Congreso Nacional, Investigacidn arlamentaria,p. 371.17 La Agricultura,VIII: 397, 23 Aug. I900. There were, however, exceptions, such asthe Banco Popular of Bragado. But the latter's pro-agricultural lending was notcontagious.



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AgriculturalCredit n BuenosAires 75Table i. Lending b.y the BPBA and the BNA in the Provinceof BuenosAires by sector, by branches utside the nationalcapital, 1907-13 (in thousandsof paper pesos)

Year Agriculture Industry Hacendados Commerce1907 19,923 9,o83 47,997 31,485I908 30,01I3 I4,22I 6i,305 50,842I909 33,353 i6,I26 I3,941 66,o26I9I0 40,221 I7,569 86,613 65,86oI9II 50,775 2 I,690 97,825 68,487I9I2 77,825 29,108 121,571 92,5961913 59,o68 42,741 113,378 86,I90

Source: Direcci6n General de Estadfstica de la Provincia de Buenos Aires, BoletinMensual.

Table 2. Total lendingby the BNA in Argentina by sector,selectedears(in thousands f pesos)Year Agriculture Industry Hacendados CommerceI894 II,74I I2,906 2I,I32 58,I541905 23,966 I9,429 69,837 87,I631913 7I,5 I 5 59,659 2I9,800 339,110

Source: Banco de la Naci6n Argentina, Memoriay Balance General.

Nonetheless, banks outside the capital tended to prefer lending tocommerce and estancieros ather than to agriculture. The aggregate biasagainst lending to agriculture is more evident in Table 2.The figures for Table 2 under-represent the flow of credit in total sinceonly the BNA figures are included, but they are indicative. Banks, officialand unofficial, were more enthusiastic about lending to estancierosandcommerce than to agriculture - the importance of agriculture to theeconomy notwithstanding. The bias is especially evident for bank lendingas a whole, but applies also, and surprisingly, to branches outside thefederal capital where one might have expected a bias towardsagriculturallending.Was there a geographical bias? In other words, did most agriculturallending take place in specific regions of the Province? The question isworth posing because, as Cortes Conde has demonstrated, the bulk of theProvince's agrarian expansion after I895 occurred in the central andwestern belts.'8 One might expect, then, that most agricultural lendingwould take place in the expanding regions. This was anything but thecase, as Table 3 shows.To simplify Table 3, I have taken three partidos for each region. The18 CortesConde, El Progreso,p. I07-17.



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76 JeremyAdelmanTable 3. Agricultural lendingby the BPBA and the BNA by regionof the

Provinceof BuenosAires, I907-13 (in thousands f paper pesos)Year North Centre Periphery1907 i,i66 1,119 3,o98I908 3,352 1,028 2,56II909 4,206 787 2,3 12I9I0 3,208 2,029 2,214I91I 2,659 3,795 I,6441912 10,266 4,I68 2,7341913 6,793 3,76I 1,214

Source: Direcci6n General de Estadistica de la Provincia de Buenos Aires, BoletinMensual. Note: North = Baradero, Chivilcoy, Pergamino; Centre = 9 de Julio, Olavaria,Tandil; Periphery = Trenque Lauquen, General Villegas, Coronel Pringles.figures cited include only the BPBA and BNA and exclude the non-officialbanks so active in the north. Not all the partidos had branches of either orboth banks and would therefore have to depend on competing sources ofcredit within and without the partido. Nevertheless, the trend is clear: theexpanding regions did not enjoy ample credit facilities. This is especiallyso when one considers the role of smaller private banks operating in thenorth and the greater proximity agriculturalists enjoyed to the large urbancentres. Agricultural expansion, it would seem, had little to do with theavailability of formal bank credit.

We can now ask why credit was not allocated to agriculture inproportion to its contribution to either employment or GDP. All threepartidos in the north were the subject of colonisation campaigns prior toI89o. In Pergamino, Baradero, and Chivilcoy, the proportion of owner-producers to all agricultural units was higher than the provincial averageand even higher than the central or peripheral partidos; it is likely that thefinancial privileges accorded to the north reflected the high proportion ofowner-operated units. Bankers lent to freeholders rather than lease-holders. It is also worth noting that, after I900, the northern belt ceasedto be a major wheat-producing region; it turned increasingly to cattlefattening and maize. Wheat, the principal staple of the Province (at leastin terms of its capacity to generate foreign exchange) was sown for themost part in the centre and periphery of the Province. Wheat productionwas less well served by formal credit than other agricultural land uses.In the peripheral partidosof the Province, bank lending was not active.Population density was much lower, so that in per caput terms, thepreference for the north appears less marked. However, the three partidosdiscussed were considerably larger in size than in the north and it is clearthat in terms of lending per hectare the peripheral areas were particularlydeprived. Moreover, most wheat was cultivated by sharecroppers



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Agricultural Credit in BuenosAires 77(medianeros) nd cash-tenants (arrendatarios). t is more than probable, aswill be discussed below, that lease-holding was not conducive to credit,so that wheat production was generally short of funds.Bankers preferred to lend to farmers who owned their land. If collateralwas required to procure a loan, the tenant had little to offer. In addition,wheat cultivation was considered an itinerant activity, a crop sown largelyto convert land from primitive pasture to high-quality grazing. The largeestanciero, Benigno del Carril, in a letter printed in the Anales de la SociedadRural Argentina, explained how he hired tenants on three- or four-yearcontracts to plough under the tough Pampa sod, breaking the topsoil,sowing wheat for several years and sowing alfalfa in the last year of thecontract. This left high-quality pasture for pedigree cattle."9

Del Carril, and many other estancieros ike him, provided an idealopportunity for European migrants, without capital of their own, to earna quick fortune and return to Europe or settle in the city. A short-termcontract did not bind them to the land for too long, and with luck, goodprices and fair conditions, the return could be handsome. Yet it was notalways the case. Locusts, drought and flooding were a continuous hazard.Moreover, prices did not always outstrip costs. In a word, the risk wasgreat - and it was precisely that risk which the estancierowanted to displaceonto the tenant that weakened the tenant's credit-worthiness. Thecombination of a lack of collateral, high risk, and more often than notsheer ignorance, made poor Italian tenants less eligible for loans frombanks already stung by the speculative fury of the i88os.Money was lent where returns were highest. For creditors, returns oncommercial loans were more remunerative and loans to estancierosmoresecure. Even in La Agricultura,a weekly journal devoted to farm interestsand generally opposed to the estancieroand country merchant, it wasconceded that commercial loans were lucrative.20 Merchants andindustrialists inspired more confidence, while the oscillations of prices andyields made farmers more risky borrowers. Moreover, merchants,industrialists and estancieros njoyed more personal contacts with bankers.To the capitalists,even if at some point they could have considered applying their capital to'rational'agriculture, he risks to which the harvestsare subjected,the attentionrequired to oversee an agricultural domain etc., appear as insurmountablemountainscompared o the absenceof riskand the small effortrequired o collectthe interest earnedon investment in bonds (bonos edulas).2"' Anales de la SociedadRural Argentina, vol. XXVI, I 892. William Walker, an estancieronGeneral Villegas, leased plots on a similar basis. For a sample, see Archivo Walker,Copiador de Correspondencia III, I June 1902.20 La Agricultura, ol. IX, no. 457, 31 Oct. I901.21 La Agricultura, ol. X, no. 515, ii Dec. I902.



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78 Jeremy AdelmanFarmers in search of funds found themselves in a cul de sac. Without

stability, they could not acquire loans, and without credit, stability waselusive. Yet stability was not always the objective of the tenant farmer -he would have preferred a quick speculative return. Nor was the tenantalways keen to take on a loan, which surely would have involved highoverhead costs - as farmers in the United States and Canada knew onlytoo well.22 The tenant, in short, was not concerned with fixed capital -land, fencing and livestock - which was the preserve and burden of thelandowner. In this, the tenant and the wage labourer were alike: they hadonly their labour to lose. But unlike the wage labourer, the tenant wasconcerned with variable capital -- the essential ingredient for bringing inthe harvest.

It should be noted that by furnishing land, fencing, some livestock oreven implements at times, landowners in fact provided an implicit credit,or more accurately, an advance of capital required by any farmer tocultivate; tenants were not required to look for long-term funds tobecome rural operators, though they could enjoy at least a share of theground rents by producing agricultural goods for the world market.However, the extent to which the tenant might earn a return on the capitaladvanced was offset by the rent charged by the owner. IThus, rising landprices after 190423 and the increase in the value of fixed capital explainpartially the inflation of rents which led to the tenants' revolt of I9I2.The problem of agricultural credit reflected the very peculiar nature ofcereal, and especially wheat, farming on the Pampa. It was a problem notof credit and the machinations of lenders nor of the stupidity ofagriculturalists. Rather, it was the outcome of the agricultural system itself- the way in which each protagonist (tenant, estanciero or lender)positioned himself in the ruraleconomy. The bias had as much to do withthe preferences of lenders as it did with the ambiguous position of tenant-farmers who did not need direct credit to gain access to means ofproduction, but required financing for the procurement of variablecapital. The problem this may have posed remained latent as long as thesystem expanded on the basis of vacant territory, good prices and informalcredit. By I9IO, it was running out of steam.The operation of agricultural creditA distinction must be drawn between mortgage credit and direct loans(either in the form of bonosssued by creditors to borrowers, who in turnsold titles on local bond markets, or in cash). Though mortgages were thelargest source of credit, they tended to favour urban-dwellers. Carlos22 Solberg, The Prairies and the Pampas, pp. 60-73.23 Cortes Conde, El progreso argentino,p. i66.



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Agricultural Credit in BuenosAires 79Girola observed that of the loans issued by the Banco HipotecarioNacional in the Province in I902, only i8 million pesos went to ruralborrowers, while 79 million went to urban borrowers.24 In thecountryside, mortgages were only issued to those who owned land. 'Theindustrialists and agriculturalists', noted one author, 'only on thecondition of being landowners can be the direct beneficiaries of mortgageloans .25

Between I892 and I897 the value of mortgages issued in the Provincegrew noticeably,26 but the real expansion occurred after the turn of thecentury with the general increase in lending activity and the reopening ofthe Banco Hipotecario de la Provincia. By 1904, 2.6 million pesos ofmortgages were issued, increasing to I69.6 million pesos in 19I 3.27Mortgages were the main credit instrument of large landholdings.28Tables 4 and S suggest that estancieroswere the principal beneficiaries ofthe dominant credit instrument in the countryside. Loans of over 50,000pesos accounted for 70 and 8o % of the value of rural mortgage credits in1905 and I912 respectively. Moreover, rural units over i,25o hectaresaccounted for 82 % and 76 % of the total hectares mortgaged in 1907 andI 9 I 2, but for a much smaller proportion of the areadevoted to agriculture.To give an idea of the value of these loans, consider that a thresher,trilladora, by far the most expensive of agricultural machines deployed atthe time, cost just over 2,500 paper pesos during the first decade of thecentury, while a reaper cost between 300 and S?opaper pesos. A mortgagefor 50,000 pesos was indeed considerable.Emilio Lahitte, usually less critical of the landholding system than someof his contemporaries, noted in 1902, with reference to the BancoHipotecario Nacional, that 'the allocations ... with relation to the loans ofsmaller values, exclude small-owning farmers from the benefits which thiscredit instrument might apport...' 2 Elsewhere, he noted that of the 263rural loans issued by the Banco Hipotecario Nacional in 1905, only 73went to units of less than 300 hectares (a mere 3 % of the total value ofmortgages issued by the Bank).Not only did mortgages flow disproportionately to large landowners,24 Carlos Girola, 'Investigaci6n Agrfcola en la Repuiblica Argentina', Anales del Ministeriode Agricultura (I904), p. 275. The urban bias in mortgage lending could well have beena legacy of the Baring crisis which struck rural financing harder than it did urbanfinance. 25 La ProduccidnNacional, vol. I, no. 7, I Aug. I895.26 CongresoNacional, Investigacidnarlamentaria,p. 394-404.27 Direcci6n General de Estadistica de la Provincia de Buenos Aires, BoletinMensual, vol.XVI, no. I75 (Feb. I9I5).28 This was clear even before the I890 crash. See Hector C. Quesada, El credito erritorialen la RepuiblicaArgentina (Buenos Aires, i888), p. iii.29 Emilio Lahitte, 'Cosecha I90I-I902', Boletln de Agriculturay Ganaderia,vol. II, no. 4I

(I5 Sept. I902).



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8o JeremyAdelmanTable 4. Rural mortgageloans by the Banco Hipotecario Nacional in theProvinceof BuenosAires by size of loan in selectedyears in thousands f paper

pesos)1905 1912

Number of Value of Number of Value ofSize loans loans loans loans$1-2,000 2 4 2 3$2-5,ooo 9 40 8 32$ -10,000 i6 130 42 322$IO-20,000 I9 315 48 762$20-30,000 21 579 30 780$30-40,000 6 223 12 443$40-50,000 8 387 15 714$5o-8o,ooo I9 1,284 35 2,384$8o-ioo,ooo 13 1,243 i6 1,538$100-150,000 8 1,040 i8 2,266$I50-200,000 6 I,110 5 927$200-600,000 2 460 22 6,8i8Total 129 6,814 253 I6,989

Source: Ministerio de Agricultura, Estadistica Agrzcola.Table 5. Rural mortgageloans by the Banco Hipotecario Nacional in theProvinceof BuenosAires by size of propertyin selectedyears

1907 1912

Number of Hectares Number of HectaresHectares loans mortgaged loans mortgagedUnder 25 I6 171 7 6526-50 3 95 26 8855I-I00 7 614 I9 I,506IOI-200 14 2,o66 57 8,564201-300 3 7I8 30 7,65630i-650 15 7,29I 45 I9,63365I-I,250 20 I8,305 21 i8,6i8I,25I-2,500 i6 25,444 22 38,680Over 2,500 22 107,768 30 I38,680Total ii6 I62,49I 253 234,3I4

Source: Ministerio de Agricultura, Anuario de la Divisidn de Estadz'sticayEconomzaiRural;Estadistica Agrzcola.but they also encouraged chronic speculation. Interest rates, though high,were lower than the annual increase in the value of land; borrowers coulduse loans to purchase land and then realise profits because the value oftheir land rose faster than the amount due to the banks. This wasespecially true after the turn of the century, once the austerity of the I 8gosbegan to abate and credit to flow. The discrepancy between interest rates



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Agricultural Credit in BuenosAires 8iand land prices was region-specific. Land prices rose especially in regionswhere sudden investments, such as the laying of railways, increased theproductive value of the land. Hence, in more peripheral areas of theProvince, which were connected by rail after 1900, speculators couldanticipate increased land values and bought lots with mortgage credit.30Belisario F. Arana, for instance, was able to acquire an estanciaof 4,800hectares in the western partido of Pehuajo in 1905 by taking out amortgage loan from the BPBA. In a letter sent to the Directors of theBank, Arana explained that he was then able to amortise his obligationsover time by selling off portions of the unit at higher and higher prices,in the end paying off his debt and simultaneously being left with a sizeableunit for himself.3' The archives of the BPBA house many documentssuggesting that Arana's use of the mortgage credit was not unique in areasof particularly rapid expansion.Large units were the main beneficiaries of the mortgage system. It alsogoes without saying that tenant farmers, who accounted for the vastmajority of agricultural producers, were excluded from mortgage servicesaltogether. For small- and medium-size farmers and tenants, the mainrecourse to credit was either through scarce direct loans in cash from thebanks, or more often than not, short-term loans from country-merchants.Farmers sought loans for two reasons: to invest and increase either thesize of their plot or their capital stock or to stabilise their income-streamover the crop-year. The former involved longer-term borrowing for fixedcapital purposes, while the latter implied borrowing in the short-run tomeet heavy seasonal expenses. The nature of bank and merchant lendingto farmers of modest endowment made short-term borrowing theprincipal form of credit. Lahitte calculated that in the 14 years prior toI899, direct cash loans to the rural sector amounted to only 74 millionpesos in total, and of that, only 8 % was distributed in sums of less than5,000 pesos.32

The experience was not unlike that described by Bogue and Bogue in the United States:Allan and Margaret Bogue, 'Profits and the Frontier Land Speculator', Journal ofEconomic History, vol. XVII, no. i (March 19 5 7). In this sense, speculation mayaccelerate the flow of resources. Financial capital, by being more mobile than otherresources, responds more easily to changing expectations. The inflow of financialconcerns acts as a magnet for less elastic resources, productive capital and labour. Ifthere is a perverse effect, it is that concentrated financial speculation distorts theallocation of land. This was much less the case in the United States, where financing,while speculative, was more accessible to small operators.31 Archivo del BPBA, CreditosHipotecarios,OI5-3-I, Documento IO.32 Emilio Lahitte, Cosecha I90I-I902', p. 977. It is worth noting thatLahitte'sviews ofcredit changed considerably. By 1912 he upheld the existing system and had becomea fierce critic of tenant farmers for being more like lottery players than genuine rationalproducers: see 'Cr6dito AgrIcola (I912)', Informesy Estudios de la Direccidnde EconomzaRuraly Estadstica, vol. II (Buenos Aires, I9I6).



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82 JeremyAdelmanTable 6. Loans by branchesof the BNA in the Provinceof BuenosAires in

I89J (in thousands f paper pesos)Loan value No. of loans Total value Average valueUnder $2,000 i6 23,424 1,464$2-4,ooo 20 70,227 3,5 1 I$4-I0,000 44 3oo,609 6,832Over $I0,000 I9 417,5 10 21,974

Loans by branchesof the BNA in the Province of Buenos Aires in I91 O(in thousands f paper pesos)

Loan value No. of loans Total value Average valueUnder $z,ooo 43 56,794 1,320$2-4,ooo 52 I72,284 3,3 I2$4-I0,000 175 1,330,199 7,60IOver $I0,000 2I6 7,899,879 36,574Source:Banco de la Naci6n Argentina, Libros de Actas.Table 6 compares the lending from the BNA branches in the Province

of Buenos Aires in i895 and I9I0. Provincial branches were farmers'primary source of official credit. The figures suggest that largerlandowners were the beneficiaries. Indeed, though small loans increasedsomewhat, BNA branches allocated the bulk of their increased creditfunds between I895 and 19I0 to large loans (over io,ooo pesos). Yet weshould not be surprised. Large owners were investing considerable sumsin fixed capital, namely land, livestock and fencing; and mortgages andcash loans were geared to capital formation on the estancia.If the supplyof official rural credit was more elastic for larger borrowers, it becameincreasingly so with time.

Cereal producers, especially smaller operators, were often required tosell their produce immediately after the harvest and in many cases soldtheir crop at a fixed price to owners of threshing machines or localmerchants before harvesting even began. By the eve of the harvest, manyfarmers, irrespective of whether they had land or not, would haveexhausted the savings held over from the previous year's crop. In suchcases they would turn to local agents who lent money, short-term, inreturn for rights on some proportion of the only resource the farmer had:the expectedcrop.33 Short-term lending, for 3o, 6o, or 90 days, allowedfarmers to even-out their stream of income over the period of a year andcover high variable costs, especially during the harvest. Workers werehired to help the agriculturalist bring in the crop and threshers were leased3 Boletin de la Liga Agraria de la Provinciade BuenosAires, vol. II, no. 5 (Jan. I 899); JoseVivares,Credito gricolaBuenos Aires, I907), p. 104.



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Agricultural Credit in BuenosAires 83Table 7. Loans by Aifredo Riat y Cia., Vella SuiZa, Coronel Pringles,Province of Buenos Aires, I89J (in paper pesos)

Loan value No. of loans Total value Average size$ I00-zoo 2 3,499 I67$20I-500 13 4,398 338$501-I,000 6 3,96I 66oOver $i,ooo 8 I8,65I 2,33ISource: Alfredo Riat y Cia., 'Libro Diario I895', Vella Suiza, Coronel Pringles,Provincia de Buenos Aires.

(accompanied by supervisors and hired workers) to thresh and bag theharvest. Borrowing to pay for seasonal costs may have stabilised thefarmer's income over the year, but in the long run cultivators experiencedincome losses. They paid heavily for short-term funds.In the period before the First World War, farmers depended onintermediaries for their loans. Emilio Coni, a professor of agriculturalengineering, wrote in 1923 thatthe countrymerchanthas playeda very importantrole in our cerealagriculturalsector ... he has constituted the binding link between the Banks and the colonist,providing essential credit to those with little or no responsibilityand to whomthe Banks could not loan directly.34

In the partido of Coronel Pringles in the south of the Province, Alfredoand Luis Riat, Swiss immigrants who had built up a wool-producingestancia,ran a small commercial operation which also served as a localoutlet for capital. The Riats, like many other rural intermediaries, wereable to borrow money from formal outlets and then re-lend it to localoperators at a higher rate. What exists of their papers provides aninteresting insight into informal credit systems. The only account bookwhich falls in our period is that for i895. Table 7 summarises the lendingactivities in that year.The Riats provided the small loans which banks were reluctant tofurnish, setting aside almost 40 % of their credits to allocations under1,OOO pesos, but they were not averse to large loans. Of the records ofloans which specify the rate of interest, ten borrowers were charged I %interest a month, while three were charged I 2 % annually. The Riats alsoaccepted deposits - mostly small sums between I,OOO and 3,350 pesoswhich earned between 6 and 8 % interest.Informal creditors occupied the institutional vacuum left by bankers,providing a service for which there was a demand, but which more formalnetworks were reluctant to supply. Since they were dealing in a higher risk3 Emilio Coni, Proyectode Ley Creando a Caja Nacional de ColoniZaci6n Buenos Aires,

1923), p. z86; Vivares, Credito Agricola, p. io.



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84 JeremyAdelmanmarket, the Riats and others charged higher premiums on their services.Merchants may have exercised local monopoly power, but there werelimits on the interest rates they could set. In any case, much more couldbe earned by fostering commerce with modest interest rates. The marginbetween informal rural rates and prevailing rates on national capitalmarkets (around 3 %) was not great compared, say, to the average annualincrease in the value of land up to 20 % during this boom period. Theoperation of country merchants like the Riats suggests that farmers reliedmore on informal than formal markets and were subject to marginallyhigher rates of interest that reflected greater risk. The argument made hereis admittedly based on a narrow choice of findings, due mainly to thescarcity of source material. Further study, preferably in local history, isrequired to test the critical role of informal lenders.

Country merchants, however, at times suffered from over-commitment.In January 1907, Luis Riat agreed to lend I0,000 pesos for two to threemonths at 9 % to his friend Domingo Rodriguez from the neighbouringpartido of Tres Arroyos.35 In the ensuing months Riat's initial sympathyfor Rodrfguez evolved into concern, and later impatience, as the borrowerfailed to meet payments (his difficulties arising from low wool prices sothat he could not liquidate the year's shearing). On 3I August, stillwithout word from Rodriguez, Luis Riat wrote to his brother-in-lawenlisting his efforts that he 'find out by post if there is any news, and ifhe (Rodriguez) is answering or not my telegrammes which Enrique sent,because this is no longer a joke'. The Riats in the end shared theproducer's misfortune.In general, country merchants applied stringent conditions for reasonsthat were understandable. This made it difficult for the agriculturalist, forwhomit is almost impossibleto get short-term unds .. becausemeetingthe obligationsdoes not dependon the will of the farmer,but ratherhis harvest,which runs therisk of collapsing and even disappearing completely, depending on naturalclimatic conditions.36The agricultural economy was unstable, exposed to natural disasters andto oscillations in world prices. Moreover, it was dominated by tenantswho seldom occupied the same plot for more than four consecutiveseasons before having to move on. It did not, in short, inspire confidenceamong creditors. The risk of collapse was very great for the creditor,while non-landowning tenants had little to lose, other than foregoneincome. The burden of risk was transferred to the creditors. Callingcultivation a 'game of chance', one colonist agreed:" The transaction is recorded in the volume 'Cartas', vol. I1, 1907-9.36 La ProduccidnNacional, vol. T, no. io (i6 Sept. i895).



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Agricultural Credit in BuenosAires 85The colonist looks for large amounts of land to cultivate wheat, linseed andmaize, and hopes, with one single big crop, to create the basis of his fortune, withno risk and little work ... No risk, I said, because he who is running the risk isthe merchant or almacenerowho offers the colonist, by offering his credit, themeans to play the card game of 'the great harvest'."

Tenant farmers could not 'lose' land, or any fixed capital investment,to which they had no title. The expected harvest usually served as theguarantee, which meant that a failure inflicted losses on the creditor aswell as the debtor. As long as creditors, country merchants or local bankscould find safer havens for their capital elsewhere, small farmers andtenants were not good business.

The position of the Sociedad Rural Argentina (SRA) the mainorganisation representing estanciero interests, is instructive. The SociedadRural objected to institutional reform which might provide credit to smallfarmers and tenants. When Senator Francisco Uriburu pushed for thecreation of rural credit cooperatives in 1904-5, the SRA supported themove to create credit facilities 'in general ', but was opposed to thespecifics:Here the rural population is too undeveloped, too recent, it lacks indispensablecommunity relations so that its neighbours and relatives may take full advantageof this initiative ...38

Though the Sociedad Rural position was bound by the class interestsof estancieros, for whom increased credit would put the agriculturalistsoutside their control, their position also reflected an 'objective' problem:agricultural credit to rough colonists was a risky business.

If facilities for short-term loans were few and costly, longer term loansgeared to helping farmers buy agricultural machinery, good seed orlivestock, were almost non-existent. One exception was lending bydomestic machinery and importing houses to promote sales. According toFrancisco Seguf, they played a significant role.39 Yet the evidence is scantyand it is more likely that the role of machinery producers and importerswas not great. Farmers interested in investing in fixed capital, orimproving the quality of the seed sown, were required to rely on theirown savings. In a report published in the Boletzn de Agriculturay Ganaderzain I906, Emilio Lahitte found that the distribution of property, thepreference for extensive rather than intensive agriculture, coupled withthe scarcity of long-term credit, must have depressed the rate of capitalformation in the countryside:the 8,ioo,ooo hectares brought into cultivation since the year I895 until now,37 La Tierra, vol. II: 59 (z Dec. 1913).38 Analesde la Sociedad ural,vol. XLIV, no. 5 (Sept.-Oct. 1905).39 Congreso Nacional, InvestigacionParlamentaria,p. 38I.



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86 Jeremy Adelmanhave required, for the necessary installations,some 250 million pesos; a veryexiguous sum if one compares it to that part of fixed capital deployed inagriculture n other countries of the world which are less favouredby nature."0

The effect of the credit system on technical diffusion cannot beaddressed within the scope of this paper. Yet it is worth noting thatLahitte was not surprised by his conclusions. Indeed, it was quite rationalfor Pampean agriculture to have been organised as it was. Put simply, theestanciero-basedrural economy, enriched by agricultural tenants, was areasonable model of economic organisation where capital and labour werescarce.4' Scarcity required deployment of land in place of labour orcapital, land being the more abundant resource. Large units and extensivepatterns of production, in Lahitte's view, was the optimal balance. Thecredit system merely reflected the structure of production.What Lahitte was reluctant to acknowledge was that capital and labour,by i900, were no longer scarce, as is manifest from the explosion oflending after the turn of the century. Bank lending continued to favourcommerce and large landowners and in doing so raised the relative costof machinery and capital investments for modest producers. Insofar as thedual credit market persisted - a more favourable climate for largelandowners and commerce paralleled by a more austere market for thoseof modest means - capital formation, while slow to develop in agriculture,deepened in pastoral production. Dual credit markets prolonged the life-span of extensive ruralproduction. After I 900, once the problem of scarcecapital began to abate, the extensive mode of production and the estanciadepended on the credit system to reinforce its superiority.

Credit, inasmuch as it facilitated the operation of the ruraleconomy, alsosupported a specific structure of property relations. In turn-of-the-centuryrural Buenos Aires, few operators had a great deal of land, while themajority were landless. According to the 1914 census, less than a third(7,493) of rural units were owned by operators. Of the rest, 14,036 weretenant-operated, while another 4,299 were sharecroppers. Given thepredominance of leased units, it is no wonder that credit flowed elsewhere.In so doing it reinforced the existing structure.ConclusionDirect formal financial services to agriculture were scarce. Bank creditfound its way into the hands of cultivators, but mostly through informalchannels. Increased risk meant more costly credit. Informal lenders (rural40 Boletinde Agriculturay Ganaderia,vol. VI, no. 99 (March, 1906).41 Lahitte. 'Credito Agrfcola', pp. 130-3 . Close readers of this piece, and of the explanationof the rural unrest of I9g2 on the part of Government officials, will note the similarity.Lahitte, it would seem, wrote speeches for the Minister.



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Agricultural Credit in BuenosAires 87merchants and suppliers) were willing to take the risk because they earnedprofits on the purchase and sale of merchandise, which the loansthemselves created. Merchants, unlike formal money lenders, were willingto forgo the risk because financial profits were not the basis of theirlivelihood. They were less risk-averse and more directly committed torural production than their cousins, the bankers. The limitations of thecredit system did not prevent agriculture from expanding, but itconditioned the path of its development.

Once the supply of vacant land was exhausted around I908, the mutualinterests of landowners and tenants disappeared. Owners began to chargehigher rents as the demand for land outstripped supply. Thus, when pricessagged suddenly in I9I2 on the heels of a disastrous harvest, tenants feltthe pressure and responded by refusing to till the land. Officials blamedmoneylenders for the unrest. Legislators suddenly came up with a host ofproposals to resuscitate the idea of the bancohabilitador,abandoned in thei88os. In the several years after the I912 revolt, rural credit belatedlydominated the congressional agenda for agrarian reform - to little avail asTulchin has shown.42 Looking back, it was clear even to conservativeCongressmen that two decades of phenomenal agricultural expansionowed little directly to banks.42 Tulchin, 'El credito agrario'.

credito agricuola en la provincia de buenos aires

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