538 THE ECONOMIC JOURNAL needed, with improvement in the currency. It is possible that the system of taxation might be varied so as to provide for the provincial and municipal loans which were too readily granted; though prob- abilities disincline an observer to conclude that local taxation will be increased without great difficulty. Suggestions have been hazarded relative to foreign financial control. Foreign financial control may be needed, and may be possible in the case of a feeble or a decaying state. It is not possible in the case of a vigorous or a growing state, nor is it necessary. Material wealth exists and is developing. We may refer, confidently, to the words Don F. Seeber quotes of Dr. AveHaneda, ' We will suffer thirst and hunger rather than not pay our debts.' W. H. BisHoP URUGUAY--A FINANCIAL INCIDENT. Tm?. exigencies of finance are sometimes such as to call for sacrifices by investors. An instance of the sacrifice forced upon the public has lately come out in the form of a practically compulsory reduction of the interest of the debt of Uruguay. It will be remembered that when Messrs. Baring Bros. & Co. went into liquidation last November their assets were taken over by the Bank of England, which, in company with a number of other banks and bankers, guaranteed the creditors of that firm against loss. Among the assets of Messrs. Baring was a sum of two millions nominal of 6 per cent. bonds, issued by the Uruguayan Government, but never offered to the public, or marketed. The said 6 per cents. seemed for some time to be little better than rubbish, seeing that Uruguay was in immediate risk of default, following upon the distress and incapacity of Argentina. The financiers who under- took the liquidation of Messrs. Baring's liabilities found it necessary to devise a plan for making these Uruguayan 6 per cents. marketable. They valued the said bonds at 50 per cent. of their face value. In other words, they reckoned upon getting one million sterling for the two millions nominal of Uruguayan bonds, which Messrs. Baring Bros. had bought wholesale from the Uruguayan Government. Unfortunately, these bonds were noi of a piece with any bonds quoted on the Stock Exchange, or otherwise marketable. The financiers thereupon made proposals to Uruguay, the upshot of which was that the whole debt of Uruguay should be reduced from 5 per cent. to 3? per cent. in perpetuity, and that these Baring bonds should be "unified" with the rest, so pro;qding an opportunity for floating off the unmarketable assets of the Baring estate. The objections to this scheme are obvious, sound, and, morally speaking, insuperable. Uruguay ought not to take advantage of the needs of a firm like Messrs. Baring to reduce the interest which it had solemnly engaged to pay to the holders of its bonds. By so doing, Uruguay ignores the mass of its creditors, and makes capital out of the temporary difficulties of the financial classes.
