ment of peace and of the economic benefits derived from its internal social reorganization. Mining companies, banks, exporters, manufacturers and others are laying their plans upon the supposition that this is true. Commercial travelers are crossing the border in ever increasing numbers; delegations representing chambers of commerce of various cities of United States are touring the country; transportation service is being renewed or increased; and mines, branch banks and other foreign enterprises are being reopened or initiated.

If, as appearances indicate, Mexico has entered upon a peaceful period of economic development it offers a field for American trade expansion that is perhaps the most favorable in the world. There are several reasons for this: (1) Mexico is not passing through a financial crisis such as is found in many of the countries of the world1; moreover, the exchange between Mexico and United States is not unfavorable to Mexican purchases, whereas it is very difficult for most countries to buy in the United States; (2) the proximity of Mexico is an advantage and (3) the wants of Mexico are varied, and the market is therefore attractive to almost all classes of exporters.

A critical financial situation is faced by many countries considered by American exporters as possible fields for trade expansion. There have been failures of mercantile houses and banks and, in certain countries, notably Cuba, it has been necessary to establish a moratorium. The causes of these conditions are: the declining prices of export commodities, thus indicating previous over-speculation and decreas

1 During December and January a crisis amounting almost to a panic swept over Mexico, resulting in the closure of several banks and a decrease in orders. However, this condition appears temporary and not as serious as in other countries.

ing the purchasing power of the people; the decline in prices of import commodities, embarrassing merchants who contracted for goods at high price levels; failure of the countries to secure foreign loans; and unfavorable exchange conditions. But, in the case of Mexico, there was no extensive speculation and there was not the same degree of dependence upon a few export commodities so that the worldwide slump has not been felt so severely, though hundreds of mines have closed and other industries have accepted decreased profits. Nor had the merchants of Mexico contracted for such large quantities of goods as those of many other countries, and therefore the price recessions did not affect them so seriously or lead to such widespread cancellations of orders. Furthermore, Mexican exchange has been stable and consequently it is relatively easy to make foreign purchases. If its condition is contrasted with that of Argentina, where the peso is at a discount of 33 per cent on the dollar, it is seen that the American commercial traveler will have considerably less difficulty in making sales in Mexico.

Mexico has been likened to a cornucopia whose concave side faces the Gulf coast of the United States and whose mouth borders the United States for over 1,800 miles. In spite of the desert that in part intervenes, the natural lines of trade of Mexico are with the United States. Railroads cross the border at several points. The distance across the Gulf between Vera Cruz and Galveston or New Orleans is easily covered by a freight steamer in four to five days. This decreases the packing problem in the minds of the American exporter; in fact to judge by results he loses his apprehension so far as to become inexcusably careless. Representatives can be sent quickly and cheaply to guard the exporter's

interest. Communication is rapid and there is little loss through delayed or garbled cables. Misunderstandings over quotations, orders and deliveries do not easily occur, or if they do occur, they can be quickly adjusted. All of these factors make the Mexican market very accessible and attractive to exporters and especially to that large group which knows but little of practical exporting.

Another feature that renders Mexico of interest to almost every class of manufacturer and exporting house is its demand for goods of all descriptions. It is a land of torrid heat and biting cold; of dripping rain and sun-swept sand; of forest and grassy plain; of mines, plantations, grazing lands, lumber camps, fisheries and manufactures; of untamed Indians and cultured rich. In it are represented all contrasts; and, since it is a nation with an area of 767,000 square miles and a population of 15,000,000 inhabitants, its demands are great.

Complete statistics covering Mexico's trade have not been published since 1913, and the accuracy of the summaries appearing since that time is open to question. According to the official statement, however, Mexico's imports in 1918 totaled 164,470,035 pesos, the United States contributing 86 per cent. During the first ten months of this year, the United States exported goods to Mexico to the value of about $152,000,000. Prominent among the exports to Mexico from the United States are foodstuffs, such as lard, milk, flour and sugar; textiles; iron and steel and manufactures thereof; lumber; petroleum products; coal; agricultural and mining machinery; automobiles. The country's needs during the next few years for these and other products will be greatly increased. Its railroads and highways must be rehabilitated; new construction work of

all kinds is being inaugurated; the mines and oil wells will require machinery and tools; plantations and farms will require agricultural machinery, pumps and engines; and the market for foodstuffs, wearing apparel, toilet articles and other goods will increase with peace and consequent prosperity.

In doing business with Mexico, however, American exporters may encounter a few obstacles which, it is believed, are mostly temporary and will disappear with the gradual development of the country and the realization of the plans of the new administration. Among the chief hindrances to the development of business with Mexico may be mentioned the lack of banking facilities, the credit situation, the need of loans for the reconstruction of highways, railroads, telegraphs, et cetera; possible legislation affecting trade; and the development of manufacturing in Mexico that would compete with imported products.

For several years the banking institutions in Mexico have been in a more or less disorganized condition, and until recently few banks have been able to continue business except in the City of Mexico. During the revolutionary period the banks, fearing raids and robbery, were obliged to send the larger part of their capital and deposits out of the country. For this reason exorbitant rates of interest had to be charged on the small amount of money retained. Under the old laws in Mexico, three distinct classes of banking institutions were created: the mortgage banks, banks of issue, and banks of promotion. The two mortgage or loan banks have been able to continue doing business, but are under government supervision. The banks of issue which were required by law to have a certain amount of reserves and, failing to comply, were taken over by the government are not now operating. Except for a few

private concerns, which handle drafts and do some banking throughout the republic, the only important institutions are foreign banks established in Mexico City. During the last few months, however, banking operations have been resumed or inaugurated. Favorable banking legislation has been introduced into the Mexican Congress, and it is felt, therefore, that the country will soon have an excellent banking system.

The American exporter has been rather skeptical, and perhaps unnecessarily so, about Mexican credits. He has made his competition with European merchants more difficult by demanding cash with order, sight drafts against documents in New York, draft against documents upon arrival of shipment at border, or other exacting terms. While Mexican banking facilities have not been so good as could be desired, long established and well-known houses have earned, and should be given, as much consideration as those of any other country. The financial responsibility of these houses can be verified through reliable credit agencies, the American Chamber of Commerce in Mexico, and American banks in Mexico City. When the European exporter is willing to give from four to six months' credit to houses of known reliability, it would appear that the American's demand for cash with order is unwarranted, and in fact, many Mexicans have called it insulting. The agent or representative of the American house in Mexico should be given the right to use his judgment in granting credit in accordance with the custom of competitors.

One of the greatest requirements of the new régime in the reconstruction of the country is adequate financial assistance. In natural resources Mexico is probably one of the richest countries of all Latin America; moreover,

the development of its resources is well advanced. The silver and gold mines have been worked for centuries; antimony, copper, lead, iron, coal and other minerals have been found and exploited. The production of petroleum is second only to that of the United States, and its possibilities can only be surmised. The forests of hardwoods in the south of the republic have scarcely been touched, and Mexico's varied climate and rich soil allow for greater agricultural development. Grains, legumes, cotton, tobacco, sugar, potatoes, coffee and cacao are now grown in large quantities, and fruits and vegetables are produced in sufficient amounts to supply the country. The revenue received by the government is now more than it has ever been, and it is believed that with a stable financial policy, interest charges on the foreign debt can be more than

met.

Perhaps the most pressing problem of the country is the repair of roadbeds and the replacement of railroad equipment. Little economic progress can be made until the railroad situation is improved. Some equipment has already been delivered, and some repair and new construction work has been started, but large sums must be advanced to and expended by the government before any appreciable improvement is made.

With each successive administration in Mexico, new laws are projected and put into operation, and the late President Carranza promulgated an entirely new constitution which became effective May 1, 1917. On December 1, 1920, President Obregon took the oath of office, and it is to be expected that he will continue the custom of his predecessors of issuing decrees and enacting new laws. Former Provisional President de la Huerta had extraordinary powers permitting him to issue

with trade. An effective channel of trade information has been reëstablished through the American Association of Commerce and Trade of Berlin, which recently has opened offices in New York under the name The American Chamber of Commerce of Berlin, and whose official organ, Transatlantic Trade, is devoted to German-American trade information.

Whether a rapid revival of trade can be expected after peace is finally declared and whether this trade will hold out large benefits to American industry are questions which can only be tentatively answered after a consideration of the principal factors involved.

Germany's unfavorable commodity balance of some $100,000,000 in 1913 is largely accounted for by the income of the German merchant marine, which at that time represented approximately 10 per cent of the total world tonnage, and by the income of foreign investments. The reduction of the merchant marine to 300,000 gross tons, the loss of the colonies, the liquidation of oversea investments, the confiscation of trademarks and patents, and the destruction of marketing organizations have cut into the means formerly available to Germany for the payment of its imports. German imports must in the future, to a larger degree than before the war, be paid for by exports. The higher the payment exacted under the terms of the Peace Treaty, and the lower the price at which commodities will be accepted in liquidation of the debts, the greater the flood of commodities from Germany must be.

RAW MATERIAL IMPORTS Territorial losses will compel Germany to import a larger share of its raw material. In order to maintain its iron industry on the same basis as in 1913, assuming that the building of new factories will equalize the loss of

the Alsace-Lorraine and Silesia plants, Germany will now be obliged to import at least 35,000,000 tons of ore yearly as compared with 14,000,000 tons before the war. The reduction in population resulting from territorial and war losses would, under normal conditions, have meant a decrease in the import of foodstuffs. The falling off of domestic production resulting from war neglect, lack of fertilizer and diminished labor efficiency, combined with territorial losses, make Germany at present, more than ever, dependent upon the outside world.

The amount which Germany must import in raw material and foodstuffs in order to reestablish a normal economic life is still further increased by the total exhaustion of all reserve stocks. Economically, Germany is living a hand-to-mouth existence, and it can not return to a normal economic life until the stocks necessary to give industry and commerce stability have been replenished, and the machinery of industry and transportation has been restored to its full productive capacity. The American business man must, therefore, realize that the country which has always been represented to him as his most dangerous trade rival is now placed in the position where its former enemies exert themselves to force it to increase its exports of manufactured goods and to restrict its imports to necessary raw materials.

Only through a rigid and unrelaxed control of imports and exports can Germany hope to meet the present emergency. This necessity of government control, though denied by many interests in Germany for reasons not difficult to fathom, becomes the more urgent on account of the depreciation of the mark. If Germany were to permit the laissez-faire principle to operate, as she saw it operate in 1919, she would very soon be depleted of the