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BANKING AND FINANCE IN ARGENTINA
IN THE PERIOD 1900–35
Leonard Nakamura
Carlos E. J. M. Zarazaga
Research Department
Working Paper 0108
Center for Latin American Economics
Working
Paper 0501
Center for
Latin American
Economics
Working Paper 0201
June 2001

FEDERAL RESERVE BANK OF DALLAS

CLAE WORKING PAPER NO. 0501
BANKING AND FINANCE IN ARGENTINA IN THE PERIOD 1900-35
Leonard Nakamura
Federal Reserve Bank of Philadelphia
Carlos E. J. M. Zarazaga
Federal Reserve Bank of Dallas
June 2001

The views expressed here are those of the authors and do not necessarily reflect those of the
Federal Reserve Bank of Philadelphia, the Federal Reserve Bank of Dallas, or the Federal
Reserve System. Victoria Geyfman provided excellent research assistance.

ABSTRACT
BANKING AND FINANCE IN ARGENTINA IN THE PERIOD 1900-35
Leonard Nakamura
Federal Reserve Bank of Philadelphia
Carlos E. J. M. Zarazaga
Federal Reserve Bank of Dallas
From 1900 to 1935, Argentina evolved from an economy highly dependent on external,
primarily British, finance to one more nearly self-sufficient. We examine the failure of
domestic finance to adequately fill the void left by the decline of London and the breakdown of
the world financial system in the interwar period, when neither the Buenos Aires Bolsa nor the
private domestic banks developed rapidly enough to fully replace British investors as efficient
channels for financing private investment. One consequence is that Argentine investable funds
were increasingly concentrated in a single institution, the Banco de la Nacion Argentina (BNA),
creating a lopsided financial structure that was vulnerable to rent seeking and to authoritarian
capture. Nevertheless, several measures, including gold reserves, interest rates, money supply,
bank credit, and the market capitalization of domestic corporations, attest to the very high level
of financial development achieved by Argentina.

BANKING AND FINANCE IN ARGENTINA IN THE PERIOD 1900-35

Introduction
Globalization and financial openness were defining themes of the world economy in the
last decade of the 20th century, much as they were in the first decade. Indeed, from 1900 to
1913, international financial flows in relationship to the size of the world economy were larger
than they are today.
In the wake of the East Asian financial crisis of 1997-98, however, economists and
policymakers have been questioning the value of the unhindered flow of international finance.
In particular, some have argued that such financial flows can destabilize domestic economies, as
overseas investors rush into emerging markets and as quickly rush out, exacerbating both booms
and downturns.
This article focuses on a crucial stage in Argentine financial development, the period
from 1900 to 1935, as Argentina evolved from an economy highly dependent on external,
primarily British, finance to one more nearly self-sufficient. This period permits a detailed case
study of the consequences, for one country that was highly dependent on foreign finance, of the
breakdown in the international financial system. Moreover, at least since Taylor’s seminal paper
(1992), this has been an important area of research for Argentina, so that data and analyses are,
while still incomplete, comparatively well developed. We thus are able to build on the work of
Taylor (1992), della Paolera and Taylor (1998, 1999), and Nakamura and Zarazaga (1998), to
examine the failure of domestic finance to adequately fill the void left by the decline of London
and the breakdown of the gold standard world financial system in the interwar period. In
2

addition, we extend the statistical series on the Buenos Aires Bolsa in Nakamura and Zarazaga
with data from 1931 to 1935.
The story that we tell is one in which neither the Buenos Aires Bolsa nor the private
domestic banks developed rapidly enough to fully replace the British investors as efficient
channels for financing private investment. One consequence is that Argentine investable funds
were increasingly concentrated in a single institution, the Banco de la Nacion Argentina (BNA),
creating a lopsided financial structure that was vulnerable to rent seeking and to authoritarian
capture. Despite this weakness, we should remain aware of the very impressive level of
development that Argentina did achieve during this period. Several measures, including gold
reserves, interest rates, money supply, bank credit, and the market capitalization of domestic
corporations, attest to the vibrancy of Argentine financial development.
In his pathbreaking article, Taylor (1992) used the example of Argentine economic
divergence from the mainstream to argue that Argentina’s financial dependence on Great Britain
in the early years of the century was a counterexample to the notion that foreign investment can
jump-start prosperity. He showed that Argentine financial dependence and its demographic
profile made it vulnerable to the decline of British financial leadership. Della Paolera and Taylor
(1998, 1999) pointedly analyze the decline of private banking relative to the quasi-public Banco
de la Nacion Argentina as a crucial element in the failure of Argentina’s response to the
challenge of British financial decline.
In the international arena, financial leadership after the Belle Epoque passed from
London to New York. This decline not only tended to raise world interest rates, favoring savers
over borrowers, but it also deprived Argentina of the benefit of British knowledge of Argentine
economic investment opportunities. Nakamura and Zarazaga (1998) and Taylor (2000)
3

document the improved relative reception of large Argentine issues in the 1920s, so that
Argentina was not, as an aggregate, deprived of access to international finance.
But in a period of creative destruction such as occurred in the early decades of the
century, the ability of financial intermediaries to make fine-grained determinations about capital
allocation can be crucial to the long-run success of economic enterprise. While the United States
was willing to take over the British role of investing in the official bonds of Argentina and of
Buenos Aires, and indeed did so at rates below those that would have been on offer in London, it
did not step into a similar role for direct private investment.
A second theme in this paper is thus the development of domestic alternatives to
international financial investors. The Buenos Aires Bolsa, domestic private banks, and the BNA
were all channels for directing domestic savings into private investment. Of the three, as we
shall see, only the BNA was able to rise in importance over the entire course of the period we
investigate. As a quasi-public entity, the BNA was in a strong position to provide inside money
to the Argentine economy, but it was probably not nearly as appropriate a provider of private
investment finance.
Indeed, a recurrent question in economics has been the relative economic importance of
the two sides of the banking ledger – loans on the asset side and deposits on the liability side. A
long tradition of monetarism has focused on the importance of the stability of the growth of the
money stock as a key determinant of the efficiency of economic regimes (for example, Friedman
and Schwartz, 1963.) From this perspective, the liability side of the banking ledger is of key
macroeconomic significance. On the other hand, at least since Bagehot (1920) and Schumpeter
(1934), economists have argued that the allocation of business finance has been a key

contribution of the development of the banking system, thereby emphasizing the asset side of the
banking ledger.
The policy relevance of this issue has risen rather than diminished over the years, as
economic theory has come to play an ever more decisive role in debates over public policy. For
example, if monetary and price stability are crucial prerequisites of development, and problems
of credibility and intertemporal consistency of behavior are paramount, then the development of
a regime such as adherence to a gold standard, a currency board, or dollarization may cut through
knotty problems of institutional development. But if the efficient allocation of private finance is
seen to be crucial to economic growth, then the development of legal and financial institutions
that encourage the growth of private monitoring intermediaries like commercial banks and
liquidity-enhancing markets like stock exchanges cannot be short-circuited.
In this paper, we seek to discuss Argentine financial development as seen through the
lens of its stock market, by examining in some detail the monthly stock returns of the banking
and nonbanking sectors of Argentina, as well as examining some basic banking balance-sheet
data.
One motivation to following stock returns is that they are less subject to the serious
measurement and methodological issues that arise on the reconstruction of the national accounts
of the time and which seem to have blurred the debate with potentially conflicting stories.1
Perhaps more important, a look at the relative valuation of stocks in different sectors of
the economy may provide some useful insights into the microeconomic details of the

For instance, according to the internationally comparable figures compiled by Maddison (1995), the
hopes that Argentina would resume the fast 3 percent annual growth rate in per capita terms that the country had
experienced in the period 1900-13 did materialize, since the equivalent growth rate for the period 1918-1829 was, on
average, around 4 percent, even higher than before the Great War. By contrast, a recent revision of the national
accounts of the time by Cortés Conde (1994) suggests that growth did slow down after 1914-18.

Argentinean development process that might escape the scrutiny of the usual macroeconomic
aggregates.
Our data show, for example, that the domestic private banking sector of Argentina seems
to have been struggling even before the Great War, while the industrial sector initiated a steady
expansion right after it. We argue, in detail, that the banking crisis of 1912-14 played a large role
in weakening the private banks in Argentina, and that this weakness contributed to the excessive
development of the quasi-public Bank of the Nation. In turn, the lopsided development of
Argentine finance made it vulnerable to the political economic chicanery described in della
Paolera and Taylor (1999).
Judging by the behavior of banks’ stock prices and returns, the markets do not seem to
have been particularly optimistic about the prospects of domestic banks after the Great War,
perhaps an early warning of the massive bailout that would have to be engineered in 1935, under
the auspices of the newly founded central bank, with characteristics that, in the view of della
Paolera and Taylor (1999), are reminiscent of the bailout implemented more recently in East
Asia, after the 1997-98 crisis.
It is unclear, however, why financial resources in Argentina were not channeled through
institutional mechanisms other than banks. Why did the stock market remain relatively small
during a period of rapid economic expansion? Was the regulatory body regarding corporate
finance or its legal framework important impediments to a more solid development of
Argentinean domestic capital markets? Did the fact that the London Stock Exchange listed the
most important Argentine issues inhibit the development of the Buenos Aires Bolsa? These are
urgent questions whose answers remain relevant to today’s economic and financial debates.

Section I. Analytical Framework
At least since Schumpeter, economic growth has been associated with financial
development. One theoretical strand in the literature has placed the efficient working of
delegated monitors at the center of our understanding of financial intermediation (Diamond,
1984, and Diamond and Dybvig, 1983). In a more nuanced view of the role of banks, private
banks are privileged as delegated monitors because their crucial role in the transactions
mechanism gives them a heightened ability to monitor credits (Black, 1975, Fama, 1985). As
such, public provision of deposit insurance that protects private banks from destabilizing runs
may be preferable, despite the moral hazard problems it may engender, to narrow banks that are
barred from making risky commercial advances. As Mester, et al. (2001) show, commercial
banks do have access to information from checking accounts that is valuable in monitoring
borrower activity.
This “credit” view of banking’s role in development has been emphasized for Argentina
by della Paolera and Taylor, 1998, in which they point out that private banking was sharply
curtailed during the crucial decade of the 1920s in the wake of the 1913-14 crisis. Below, we
take a modest further step toward the important task of analyzing that crucial crisis. In
particular, we point out that the Banco de la Nacion’s quasi-official status may have aided it vis a
vis private banks that lacked deposit protection.
King and Levine (1993) identify bank credit (loans by banks and other deposit-taking
institutions) and stock turnover rate as key financial variables that measure the ability of a
financial system to abet the economic development of a country. Levine and Zervos (1998) use
bank credit and stock capitalization as indicators. We use these variables to frame a more

detailed narrative of Argentine financial and economic development in the first third of the 20th
century.
In this paper, we have generally used the United States as our basis for comparison with
Argentine financial development. Arguably, the basis for comparison could be other small
settler countries such as Canada and Australia, rather than the outsized United States. But Taylor
(1992) points out that Canada and Australia, also closely tied financially to the London capital
markets, were also poor performers in the interwar period. Because the United States, given its
large size, was naturally more autarchic than other settler countries, it is a potentially more
telling comparison.

Section II. The World Capital Market and Argentine Finance
During the Belle Epoque, Argentina successfully joined the world on the gold standard
(Ford, 1962, della Paolera, 1988). Argentina provided for gold redemption and currency stability
in the wake of the Baring crisis by setting up two institutions, the Currency Board (Caja de
Conversion) and the Bank of the Nation (Banco de la Nacion Argentina). As described in della
Paolera and Taylor, 1999, the former was responsible for external convertibility and the
maintenance of the gold standard, while the latter dealt with inside money, engaged in normal
commercial banking operations, yet also was the state’s bank. For a substantial period of time,
these two institutions operated admirably. Unfortunately, a weakness in the system eventually
emerged. The BNA – in two steps, first in the banking crisis of 1913-14 and then in the banking
crisis of 1929 – bailed out bankrupt private domestic banks and, in the process, itself succumbed
and was folded into the newly created central bank in 1935.

This institutional setup enabled Argentina to attract and hold a large proportion of the
world’s gold for a country of its size. At the end of 1913, the total world stock of gold,
according to the Economist, cited in Keynes (1930), was 1.579 billion pounds sterling, of which
965 million pounds was in central banks and treasuries. According to the Economist, the gold
stock of Argentina, including gold in circulation, was 59 million pounds sterling, of which 55
million pounds was held in the Caja de Conversion (Caja) and the BNA. Thus Argentina had
some 3.7 percent of the world’s monetary gold and 5.7 percent of the gold held in the world’s
central banks and treasuries. Since, according to Maddison, Argentina’s economy represented
about 1.2 percent of the world’s output, and 2.8 percent of the world’s exports, these are
impressive figures. The figures in the Economist are notable because they represented the facts
as known to the business community of the time: it was evident to market participants that
Argentina, at the end of the Belle Epoque, was a considerable figure on world markets.
Moreover, as World War I began, even more gold entered the country to be held by foreign
delegations to Argentina. At the war’s end, foreign legations held 117 million gold pesos (23
million pounds sterling) in reserves.
According to Baiocco (1937), in December 1913, the gold reserves in the country (oro
visible) were 287.39 million gold pesos, with 233.45 in the Caja de Conversion, 32.27 in the
Banco de la Nacion (that is, the Caja and BNA held the equivalent of 53 million pounds, some 4
percent less than the Economist’s figure), 18.73 in foreign banks, and a total of 53.94 in banks,
implying 2.94 in other private banks. The numbers are close enough: in the first six months of
1913, 43 million gold pesos had flowed into the Caja, and then 33 million had fled back out in
the next six; given this instability, a 4 percent “miss” may be attributable to small differences in
accounting.
9

But as Table 1, column 4, shows, throughout the period from 1913 to 1928 Argentina
held an enviable fraction of the world’s gold, one that was more than ample given the size of its
economy and trade -- almost always between 4 and 6 percent. 2 Argentina’s ability to maintain a
substantial horde of gold no doubt bolstered its reputation on world financial markets.
Table 1, column 1, shows rates of return from long-term Argentine debt instruments,
primarily the 1886-87 5 percent custom loan regularly quoted on the London stock exchange
market.3 This “custom loan” was secured by Argentine custom receipts and was the largest loan
ever floated abroad by the Argentine government. Columns 2 and 3 show rates of return of
British consols and on US 20-year corporate bonds. Broadly speaking, world and Argentine
interest rates were somewhat higher in the period after 1922 than before 1914. From 1901 to
1913, the custom loan yielded just under 5.0 percent, and from 1922 to 1928 it yielded an
identical amount. (Similarly, in the earlier period the prime rate averaged 6.3 percent and in the
later 6.9 percent.) Over the period, the spread between the custom loan and the British consol
narrowed.
Thus, while it is evident that there was some upward drift in the real interest rate in
Argentina, its magnitude appears small and in keeping with changes in the world marketplace,
rather than suggesting an abrupt change in Buenos Aires’s role therein. For example, in New
York, 20-year corporate bonds yielded between 3 1/4 and 4 percent from 1901 to 1913, while
they yielded between 4 and 5 percent from 1922 to 1929. Indeed, if anything, we see that the
British consol rate was drifting higher with respect to long-term rates for US issues, while the
2

These data come from a third source, the U.S. Federal Reserve’s statistics from 1943. They generally agree with
Baiocco within about 10 percent.
3
From 1900 to 1913, della Paolera, (1988), from 1914 to 1919, the Boletin de Bolsa de Commercios, and from June
1920 to June 1935 (the Economist, last issue in June of each year). For 1931 to 1935, the rate quoted is for the

Argentine custom loan and prime rate were holding their own. Thus the transition from British
to US dominance of the capital markets appears to have been a relatively smooth one for
Argentine borrowing, in so far as sovereign, well-secured borrowing is concerned.
Moreover, as documented in Taylor (2000) although the risk premium on Argentine debt
expanded considerably in 1931 and 1932, it narrowed again in 1934 and 1935, with Argentine
spreads vis a vis US corporate debt being quite low. This is remarkable given that the gold
standard has been abandoned all around. In 1934, the spread between Argentine debt and US
debt was less than in 1912!
On the other hand, it remained the case that international financial flows in the 1920s and
1930s were much smaller than they had been, as Taylor (2000) also documents. The question
that arises is how well domestic financial markets were able to replace these financial flows.
The aggregate figures argue strongly that Argentine average saving rates were low in the first
decades of the 20th century. But domestic saving is calculated as a residual and thus is subject to
considerable error. So while it appears likely that domestic savings were inadequate for
Argentine economic development, there is value in examining to what extent quantitative
characteristics of financial institutions in Argentina resemble those in countries with relatively
well-developed ones. It is to this task that we now turn, first to the stock market, and then to the
banking system.

Section III. Equity Trading on the Buenos Aires Bolsa, 1900-1935
This paper documents one step in a long-term project to construct a complete series of
prices and dividends for all the firms that quoted on the Bolsa de Comercio de Buenos Aires
Argentine 4 percent rescission loan, maturing in 1952. The rates for the rescission loan and the custom loan are

(Buenos Aires stock exchange) in the 20th century. As of the current time, our data stretches
from 1900 to 1935.
We document the fact that new listings and the overall capitalization of the Bolsa were
relatively high, compared to gross domestic product, for an emerging market. However, the
overall rate of transactions was rather low. In part, this may be due to the fact that the largest
Argentine companies, the railroads, were listed on the London stock exchange rather than the
Bolsa; these shares would naturally have had the highest rate of trading. A slow rate of turnover
means that the stock market was less liquid and that the ability of the stock market to attract fresh
capital to entrepreneurs was weakened. In addition, a low quantity of transactions means that
brokerage commissions were also low, with the implication that the Bolsa was not an important
source of income for equity brokers. As a result, news and analysis of Argentine equities would
not have the monetary value that they would have had on a more active exchange.
On the other hand, by listing on the London stock exchange the railroads had access to
large quantities of capital at low rates and were thus able to efficiently finance growth. As the
development of the pampas and the port city of Buenos Aires as well as most industry in
Argentina was the direct beneficiary of railroad development, the tradeoff was no doubt to the
country’s overall advantage, as Lewis has emphasized. Moreover, the active attention paid to
Argentine affairs that the railroads inspired also aided other Argentine issues on the London
market, like the custom loan. Thus while the fact that the most important Argentine securities
traded there has implications for the development of the Buenos Aires Bolsa, it by no means
suggests that Argentina would have been better off floating them domestically.

almost identical in 1929 and 1930, when they are quoted side by side.

Data
Certainly, the collection of the necessary data for this project has proved to be extremely
time consuming, suggesting that investors at the time may have faced concerns regarding the
transparency of corporate governance and the protection of shareholders’ rights. This impression
is reinforced by the Banco Español scandal uncovered in 1924 (discussed below), an indication
of a potentially serious failure in supervision and regulation of the banking sector that contributes
to the picture of East Asia-like features in the early stages of Argentina’s development.
Several challenges had to be confronted in this task. The first and more serious one is the
lack of a single reliable source of data on prices, volumes, and dividends, until the year 1921.
The data for the period 1900-21 had to be collected, therefore, from a variety of sources, as
follows:
Period 1900-05:
The only source that summarizes monthly data on prices for this period is the Boletín
Estadístico of the Bolsa de Comercio de Buenos Aires, issued back then at about the 15th of each
month. Only a handful of companies were actively traded each month during this period.
Unfortunately, data on dividends and volumes for this period are not systematically
reported by any source, and it was necessary to reconstruct that information piecemeal from the
daily summaries of the newspaper La Prensa.
Even then, information on dividends is generally incomplete. For example, it’s not rare to
find La Prensa announcing the date of payment of a dividend without mentioning the amount.
That information had to be supplemented from other sources that occasionally reported annual
dividends, such as the Anuario Pillado and its successor, the Argentine Yearbook. Combining

these different sources, we are able to reconstruct all the dividends paid by the banks in our stock
market index in that period, Banco Español del Río de la Plata and Nuevo Banco Italiano.
Period 1906-13:
For this period, the Review of the River Plate provided weekly summaries of the prices of
most companies quoting in the stock market. We adopted the last price of the last week of each
month as representative of the monthly prices.
This source also reports information on annual dividends, although the assigned date is
that of the end of the fiscal year, rather than the actual date of payment and it misses most of the
time the payment of provisional dividends. To correct those problems, it was necessary again to
rely on alternative sources, such as the newspaper La Prensa until 1907 and El Monitor de
Sociedades Anónimas from that year on. This latter publication provided systematic information
also on annual dividends for the period 1907-35 and typically contained some references to
provisional ones, which, in combination with the other sources already mentioned--newspaper
La Prensa and the Review of the River Plate-- made it possible to determine, at least to a good
approximation, both the amount and date of payment of provisional dividends.
Unfortunately, volumes traded for this period were reported only in La Prensa, but it was
not possible to retrieve them at this stage of the project because of difficulties in the only two
public libraries of Argentina that have the necessary issues in their collections.
Period 1913-21:
Monthly prices were taken from the weekly reports of the Bolsa de Comercio because
starting in 1913 this source, unlike the Review of the River Plate, reports the exact amount of
provisional dividends, although not their exact dates, which had to be extracted or inferred from
the information reported in El Monitor de Sociedades Anónimas. Monthly prices were taken to
14

be the first price quoted in the report of the first week of the subsequent month or, if that was
missing, the price of the closest date to the last day of the month in which the stock was traded,
within a 15-day interval. Volumes traded for this period were also extracted from the Boletín
Oficial.
Period 1921-35:
The Boletín Oficial of the Bolsa de Comercio de Buenos Aires started to report the exact
dates and amounts of all dividends paid. Therefore, this single source could be used to compile
the information on prices, volume traded, and dividends. Occasional typos or inconsistencies
between partial dividends and annual dividends had to be cleared by consulting other sources,
such as the Review of the River Plate, or El Monitor de Sociedades Anónimas. Monthly prices
were assigned as in the previous period.
For all periods, the evolution of prices had to be monitored closely to filter spurious
changes originated in cosmetic institutional features, such as stock splits or changes in shares’
denomination. In the indexes constructed for this volume, we have limited our indexes to the
stocks with relatively continuous trading throughout the period. For these stocks we constructed
quarterly price indexes, annual average dividend-price ratios and annual total investment returns.
All these indexes are constructed on the principle used in constructing the Dow Jones index,
which is share-price weighting.4

Our data on market capitalization are not complete for all the years we cover, so consistent market capitalization
weights are not possible for this entire period. One natural alternative would be to average rates of return across all
stocks, therefore giving each stock a weight of one in each period. However, a chained ratio of growth rates series
introduces a systematic upward bias into the index. To give a simple example, suppose an index with only two
stocks, a and b, valued in years zero and year two at 100 each. In year 1 stock a rises to 150 while stock b falls to 50.
A share-weighted index would give a price of 100 in each year, while a chained growth rate series would show 100
in years zero and one, and 133 1/3 in year 2, because it would average a 100 percent increase with a 33 1/3 percent
decline.

The Market Capitalization of the Bolsa
The Buenos Aires Bolsa had a market capitalization of roughly 900 million paper pesos
(p.p.) in 1929, when the GDP was 9.7 billion p.p., so that the market capitalization was 9 percent
of GDP. In that same year, the market capitalization of the New York Stock Exchange (NYSE)
was $65 billion, when US GNP was $103 billion, or US market capitalization represented over
60 percent of US GDP. But the US stock market bubble in 1929 exaggerated the size of the US
market capitalization with respect to the economy. For the NYSE, 1924 would perhaps be more
representative, and in that year, market capitalization was 32 percent of GDP. To offer another
comparison, the Italian stock market in 1992 had a capitalization of less than 15 percent of
Italian GDP.
Two further points should be noted. First, the Argentine stock market did not list the
major railway issues -- the Southern, the Western, the Pacific, and the Central. Together, the
Argentine railway issues had a market capitalization in 1929 of 92 million British pounds, 1.1
billion p.p. at the average exchange rate of that year. If we were to add these issues to the
Argentine stock market, its capitalization would rise to above 20 percent of GDP. Second, we
have included only ordinary stock, while the NYSE figures include preferred as well.
Demurgic-Kunt and Levine (1996) show that for 18 non-OECD countries with formal
stock exchanges, using data from 1986-1993, the median ratio of market capitalization to GDP
was 21 percent, which is similar to the capitalization of Argentina’s equity issues, including the
railway shares, in 1929. For OECD countries, the ratio was 24 percent. Thus the market value of
publicly traded Argentine companies, including those listed on the London exchange, was quite
high, even for a modern economy. This comparison shows that the market capitalization of the
Argentine stock market was reasonably substantial for an emerging market. Although it did not
16

represent Argentina’s foremost industrial concerns, the railroads, it represented a high proportion
of the remaining ones and a substantial amount of asset values.
Turnover on the Bolsa
Turnover -- the extent to which outstanding shares are actively traded -- varies
considerably across stock markets and within stock markets over time. Trading on the Argentine
Bolsa represented some 5 percent of market capitalization during the 1920s, that is, on average
only one share in 20 turned over in a given year. Again, this figure does not include the most
heavily traded issues, the railroads. In the hectic New York market of the 1920s, trading volume
sometimes more than equaled the market capitalization. However, in the 1950s and 1960s,
trading volume on the NYSE was more like 15 to 20 percent of market capitalization, and today
it is roughly 50 percent. In 1992, trading on the Italian stock market was 20 percent of market
capitalization. Demirgic-Kunt and Levine present data that show that the trading turnover on
modern emerging markets (again 1986-93) is about 20 to 25 percent.
Thus the Argentine Bolsa’s trading rate in the 1920s was relatively slow, either by
contemporary standards or past ones, but by no means trivial. While the Bolsa cannot be
considered highly liquid, it would be a mistake not to take seriously this market as a channel of
finance.
Table 2 shows estimates of the volume of transactions in paper pesos on the Argentine
Bolsa from 1901 to 1907 and 1912 to 1930 for trades in stocks denominated both in paper pesos
and in gold pesos.5 In nominal terms, volume peaked in 1918, but just barely. As a fraction of
gross domestic product, transactions volume may have peaked as early as 1904. It should be
noted that the shares of the largest firms on the exchange traded regularly, to the extent that a

trade is recorded in virtually every week for which we have records. This rate of trade is
certainly sufficient to provide a reasonable record of valuations.
The railroads were the highest capitalization companies in the country and would likely
have been traded very actively on the Bolsa had they been listed there. The fact that they were
traded on the London stock exchange meant that the Buenos Aires Bolsa was deprived of trading
income and stature, and this may have substantially reduced the likelihood that stock trading in
general would thrive on the Bolsa. On the other hand, the greater liquidity and legal stature of
the London stock exchange bolstered the railroads’ ability to raise capital, and also raised the
value of information about Argentina in London, and information spillovers no doubt helped
other capital issues there as well.
New Issues on the Bolsa
Given the relatively high market capitalization of the companies on the Buenos Aires
Bolsa, it should not be surprising that new listings on the exchange were substantial. The paid-in
capital of these new listings is a good indication of the extent to which equity capital was being
used to fund industrialization. Table 2 provides data on the paid-in capital of new listings on the
Buenos Aires Bolsa, in comparison with some comparable data from the New York Stock
Exchange (NYSE).
New listings on the Bolsa, for the directly comparable period 1919 to 1935, show that the
new listings were about one-third the capitalization of those on the NYSE compared with their
relative GDPs. We judge this to be a remarkably high number, particularly considering that the
NYSE numbers are boosted considerably by the high numbers of 1928 and 1929, a period
generally regarded as being a classic example of a stock market bubble.
5

The comparable data in Nakamura and Zarazaga, 1998, show only the trading in shares denominated in paper

As a proportion of gross domestic product, new listings on the Argentine Bolsa peak – at
least for the periods when we have data – in 1910. But initial offerings generally remain robust
until the early 1920s - on average, between 1907 and 1923, they are 0.56 percent of gross
domestic product, about the average for the NYSE if we omit the bubble years of 1928 and 1929.
The decline in new offerings after 1923 – no single year reaches 0.4 percent of GDP - is
associated with the lack of forward momentum in the pace of transactions in the Bolsa. As
shown in Table 2, transactions on the Bolsa after 1923 are also about half of what they were
before. Thus while causation no doubt runs both ways, the fact that the liquidity of shares on the
Bolsa is not improving reduces the incentive of firms to list issues, and underscores the weakness
of the Bolsa as an instrument for new funds.
In particular, despite the rise in the number of listings on the Bolsa, the ability of the rate
of transactions to support new brokers and other sources of additional business information was
not expanding. On the contrary, it appears that arbitrage opportunities may well have been
declining, reducing the information flow from the stock exchange to the rest of the economy.
The importance of the downward trend in new offerings can be illustrated by the
following calculation. Suppose new offerings had continued at a rate of 0.6 percent of GDP
from 1921 to 1935. Then the size of the Bolsa (assuming the stocks held their value at par)
would have been 300 million paper pesos larger, or roughly larger by 30 percent.
Rates of Return on Equity
Dividend-price ratio. One measure of the expected return to stocks is the dividend-price
ratio. If price movements are difficult to forecast, as one expects on an equity market,
movements in the dividend-price ratio may reflect changing ex ante returns to the market. In this
pesos.

respect, there do not appear to have been enormous changes in the ex ante returns on the
Argentine Bolsa. Table 3 reports dividend-price ratios for a group of common stocks with
nominal capitalizations in excess of 10 million paper pesos. Generally speaking, these represent
the bulk of the Bolsa’s market capitalization.
In the period from 1900 to 1905, dividend-price ratios were low, and stock prices rose
rapidly. Thus it appears that in this period the exchange was dominated by stocks whose prices
were expected to appreciate, and did so. This seems generally appropriate for an era that ex post
was one of spectacular growth. For much of the rest of the period, dividend-price ratios are
relatively higher around 6 percent, until the bear market of the 1930s, and dividends rather than
capital gains bulk large in the ex post returns to the stocks. Returns are strong in the 1920s, and
then weaken in the early 1930s, with a bear market that extends from 1928 to 1934. The low
dividend-price ratios in the early 1930s suggest that during this period, investors remained
hopeful of a return to higher prices.
Price indexes. Table 4 and Figure 1 show Argentine stock prices based on continuously
traded stocks. From 1906 to 1912, in the Belle Epoque, the real value of shares on the Argentine
stock market was roughly stable. After 1912, however, the stock market dropped for two years
and continued to sink until 1920. Beginning in 1920, however, the stock market stabilized and
then rallied spiritedly from 1925 to 1928, and in 1930, the stock market was still well above its
level in the first half of the decade.
Figure 1 shows that bank and nonbank stock prices showed broadly similar secular and
cyclical movements, but after the 1920s, the bank stock prices are less volatile, and there seems
to be relatively little secular movement. This quieter behavior of bank stocks reflects a period in
which the private banks are not particularly robust.
20

Thus from a high plateau around 1910, bank stocks and nonbank stocks alike fall during
the great liquidity crunch and recession of 1912 to 1914. Both series rise but while nonbank
stocks rise above their 1910 level, bank stock prices on average manage only to rise to about
four-fifths of their peak. The divergent path of bank stocks will be discussed further below.
Real rates of return. Prior to the 1930s, real rates of return on Argentina’s Bolsa are
generally quite strong. The periodization here has been chosen to match that in a careful study of
international equity returns by Dimson et al. (2000). Table 5 shows that for our Argentine
stocks, real returns are above those in the US from 1900 to 1920, and then falter relatively in the
1920s. At least until 1929, then, stock market real returns do not appear to be the reason for the
weak turnover and declining initial offerings.
In summary, where the New York Stock Exchange continues to strengthen and provide
substantial finance as the 1920s develop, the Buenos Aires Bolsa falters as a source of capital
during this period. Nevertheless, for much of the period under consideration, the Bolsa is a
surprisingly strong source of capital funding and of good dividends.

Section IV. Banking Development and Banking Crises
Measuring Argentine banking development during the period 1900 to 1935 depends in
large part on how one conceives of banking development. We shall show that Argentine banking
development in the aggregate from 1900 to 1935 was quite substantial, but took place with a
highly significant drawback - the steadily increasing importance of the BNA.
Bank loans. As shown in Table 6 and Figure 2, the ratio of bank loans to GDP in
Argentina rises steadily for most of the period beginning around 20 percent in the early 1900s,
rising to over 40 percent in 1922, and thereafter remaining above 35 percent until 1935. On
21

average, over the period 1901 to 1935, bank loans average 32.8 percent of Argentine GDP. Over
the same period, US bank loans average 39 percent of GDP. For a somewhat shorter period,
from 1921 to 1935, loans at London clearing banks average 33.1 percent of UK GDP.6 Focusing
on the period after World War I but before the Depression, from 1921 to 1929 Argentine banks
lend an average of 37 percent of GDP, US banks 39 percent, and London clearing banks 34
percent. Thus, overall, banks in Argentina mobilized a large proportion of domestic funds
compared to two of the best developed banking systems in the world.
However, as documented in della Paolera and Taylor (1998, 1999), the Argentine
banking system during this period had an increasingly lopsided development, as the huge BNA
grew much more rapidly than either private domestic or foreign banks. The relatively slow
growth of private domestic banking during this period can in part be ascribed to the boom of
1910 to 1912 and the crash that succeeded it, as we shall show below.
In turn, the lopsided development of the Argentine banking system made the political
capture of the financial system increasingly inviting, and the bailout of the Argentine private
banks in 1935 documented in della Paolera and Taylor, 1999, was one of the outcomes.
Monetary development. Another measure of financial development is money. A measure
that is often used for international comparisons is M3: currency in circulation plus deposits at all
financial intermediaries. This measure has two virtues: one, it is available for more countries,
and two, by broadly defining depositories, it makes minor institutional differences between
countries less important.
During the period under consideration, 1901 to 1935, the ratio of M3 to GDP for
Argentina was 45.0 percent (Table 6 and Figure 3). Over the same period, the ratio for the US
6

During this period, London clearing banks account for 77 percent of gross bank deposits in the UK.

was 55.5 percent and for the UK 58.5 percent. Thus on average, broad money in proportion to
GDP was lower for Argentina than for the US, at a ratio of .82, and the UK, at a ratio of .77.
All three countries saw their ratios of M3 to GDP grow over the period, and broadly
speaking, at about the same rate, at nearly a percent a year. In the decade from 1901 to 1910
Argentina had a M3/GDP ratio of 41 percent, while in the decade ending in 1935 it had a ratio of
49 percent. For the US, the comparable figures are 50.2 percent and 62.8 percent. And for the
UK, they are 54.4 percent and 65.5 percent.
Argentine Private National Banks
The Argentine private banks (bancos privados nacionales) proved their mettle as early as
the Baring crisis. In that crisis, when both the national bank and the provincial bank of Buenos
Aires failed, a number of private banks weathered the storm. But almost all of them were forced
to suspend, at least briefly, during that period. Alone among domestic private banks,7 Banco
Espanol del Rio de la Plata had managed to keep its doors open throughout the crisis, relying on
a high reserve-to-deposit ratio, greater than 50 percent. Although founded just four years before
the Baring crisis, the Banco Espanol was soon able to replace Banco de Italia y Rio de la Plata as
the top private bank as the result of the reputation it had won with its conservative investment
strategy.
The period from 1900 to 1912 was a heady period for Argentine’s financial community,
as the economy flowered and deposits rose rapidly. Deposits and loans of the private banks grew
faster than GDP, indeed, their ratios to GDP roughly doubled. And they grew relative to
deposits and loans of the BNA. They may have grown too fast. Private banks used both security

The British Bank of London and the River Plate was the other private bank that did not suspend.

issues and deposits to grow, and while they generally used conservative banking principles,
reserves did shrink somewhat relative to deposits.
From 1900 to 1914, the Belle Epoque, Argentina had generally benefited from rising
world prices, and Argentine export prices rose faster than import prices, so there was a favorable
terms of trade effect. This boom time for Argentina was perhaps comparable to the boom in
Southeast Asia in the 1990s. As we shall see, weakness within the Argentine financial structure
appeared well before the London stock exchange holiday.
In London, the bank rate was raised in late 1912, and monetary pressure was not relaxed
until early 1914. The 1912-13 crop in Argentina was excellent. Yet bank stocks and dividends
appeared to be already under pressure.
In the first quarter of 1913, gold continued to be imported into Argentina at a phenomenal
rate (35 million gold pesos), and in the second quarter (10 million), gold was still being imported
at the rate of the previous year. But in the second half of the year, 42 million gold pesos were
exported.
The 1913-14 crop did very poorly. Cereal exports for October 1913 to September 1914
fall to 182 million gold pesos from 322 in 1912-13. By June 1914, a generalized depression had
resulted. Agricultural production had only one good year in the next three – 1914-15, and does
not fully recover until 1917-18. The nonagricultural sector’s production fell 15 percent from
1913 to 1914, and another 10 percent from 1914 to 1915. In all, from 1912 to 1917, Argentina’s
real gross domestic product slid 19 percent while population rose nearly 14 percent. Output per
capita thus fell nearly 29 percent, with consequences that have reverberated throughout the
century.

Beginning in 1912, the disturbances of the domestic economy began to lead to
widespread withdrawals of cash from the private banks, some of it in favor of the Bank of the
Nation ,which was clearly perceived as a safe haven.
The closure of the London stock exchange on Friday, July 31, 1914, in retrospect put a
definite period on the Belle Epoque, marking as it did the transfer of international financial
leadership from London to New York. June 27, 1914, was the date of the assassination of
Archduke Ferdinand at Sarajevo, the spark that set off the war. The outbreak of war during the
following month was accompanied by a desperate flight to liquidity, as foreign investors sold
securities at exchanges around the world. In particular, many investors were afraid that they
would not be able to liquidate and repatriate overseas assets as the war widened. They thus
dumped assets on markets and withdrew liquidity, causing prices to tumble. This in turn
threatened many institutions, particularly financial ones, with failure. In addition, the warring
nations themselves had a sudden pressing need to finance purchases of war materiel and the
raising of armies. These rising pressures, over the course of July 1914, forced one exchange
after another to close – most for extended periods. The world’s major bond exchanges remained
closed until the end of the year.
These liquidity needs naturally transmitted themselves to the Argentine markets, in
particular, to the private banks. The most important private banks – Banco Espanol, Banco
Italia, Banco Frances, and Nuevo Banco Italiano – were each identified with and dependent on
immigrant communities that maintained strong ties with their homelands. As their depositors
were naturally responsive to European calls for liquidity, these banks were subject to
extraordinary demands on liquidity.

In Diamond and Dybvig’s model of a bank run, depositors hold liquid deposits because
they expect to receive new information about the marginal utility of consumption. The events
during 1914 appear to closely match this description of the demand for liquidity. Total deposits
at Argentine banks fell by nearly 20 percent. The brunt of the hardship fell on the private banks,
which lost over 45 percent of their deposits. It is useful to compare these losses with those in the
US during the banking panics of the Great Depression, where between the end of 1928 and the
middle of 1933, commercial bank deposits fell by 39.5 percent. Thus the Argentine private
banks experienced a worse deposit loss in two years than US commercial banks did in the four
and a half years of the Great Depression.
As Table 7 shows, deposits at the five largest private banks fell by two-fifths. (Only
Banco Popular, the smallest of the five, had a deposit loss less than 20 percent.) It is remarkable
that these banks could survive such intense drains. However, it was not just a demand for
liquidity that propelled the deposit losses. For, as della Paolera and Taylor, 1999, point out, the
BNA actually gained deposits. On the one hand, then, a question arises as to whether the boom
years from 1900 to 1912 had not themselves led the private banks to overextend. On the other
hand, it could well be that some of the drain on deposits was due to contagious fears and a flight
to safety that could have been stemmed by deposit insurance. Although the BNA, by
rediscounting to the private banks, helped them weather the crisis, the BNA may also have, by
representing a safe haven, encouraged flight.
One interpretation is that the banking crisis in this period was due to the end of London’s
role as financier to the world in general and Argentina in particular. An alternative interpretation
argues that the extended boom from 1900 to 1912 had generated speculative conditions in
Argentina that were in any case liable to cause the domestic financial structure to fall. This
26

latter interpretation is close to that put forward in Ford’s study of the crisis. We turn to detailed
banking price data to shed additional light on this issue.

The Stock Market as a Window on Private Banks
Detailed analysis of stock price movements offers a window on the public’s view of the
business prospects of some of the major Argentine private banks. We review some of the
evidence below that shows significant stock price declines at the banks before the deep liquidity
squeeze that took place beginning in June 1914.
Nuevo Banco Italiano, the fourth largest private bank, had a stock price of 106 in
December 1899. The stock price hit a high of 420 in October 1912, but in January 1913, it fell
to 325, stabilized to 305 in November, fell in February 1914 to 250. It then steadied during
1914, to 270 in September, before falling to 165 in January 1915. NBI’s stock had a pattern of
falling around year-end during this period. For this bank there appears to have been an important
impact on its stock market value by the spring of 1914.
For Banco de Galicia, a medium size private bank, our data begin with the stock trading
at 138 in 1910. The price briefly shot up to 160 in January 1911, was still 160 in March 1911,
fell back to 135 in April 1911, and is still 128 in January 1913. Over the course of the year it fell
steadily to 85 in December 1913, then to 40 in September 1914, before recovering to 60 in
December 1914. When the generalized depression struck in July 1914, the Banco de Galicia’s
stock price had already fallen to 48.
Banco Frances del Rio de la Plata was a large, forward-thinking bank that invested in
industry – electricity, rails, and food manufacture – and came a cropper. Its shares peaked in
1911 at 175. The price fell steadily to 134 in December 1913, by which time it had lost nearly
27

one-quarter of its nominal value. In February 1914, the stock traded at 112.5, and on the eve of
war in June 1914, it had fallen to 92. But its true financial condition was revealed in the AugustSeptember hiatus, and when the Bolsa reopened in October 1914, the price was 37 and its group
was ruined as a financial force.
Banco Español stock price, which we first record at 128 in 1899, continued to do well
throughout the 1912-13 crisis and did not begin to fall until 1914 opened. From 180 in February
1914, the stock price fell to 150 in July and was next traded at 100 in October. Thus the fall of
Banco Español’s stock price followed the agriculture failure and the generalized depression; the
gold export in the second half of 1913 did not appear to be so important.
However, a decade later it was learned that Banco Español had, beginning in 1914,
entered into a policy of deception to avoid closing. The Economist of March 24, 1924, reported:
“It is now public property that the Banco Español del Rio de la Plata has, at an
extraordinary general meeting, held on February 2nd, written down ts capital by 75 percent –
from $100 million Arg. paper to $25 million – and admitted losses which at the lowest reckoning
total $103 million Arg. paper, and are generally believed to be in effect nearly thirty million
more than this sum.
“… As far back as 1914 the bank, taking the view that to suspend the dividend would
have led to closing down, decided to pay dividends out of ‘funds other than profits,’ i.e.,
presumably out of capital.”
The capital loss of about 100 million paper pesos represented roughly one-third of the
paid in capital of the private national banks as a group.
Thus it would appear that even before the end of the Belle Epoque, the boom of that
period had resulted in excesses that had severely harmed the major private banks in the domestic
28

banking system. The picture that emerges is one not dissimilar to events in Southeast Asia,
where lack of financial controls during an economic boom inspired in large part by financial
openness created banking sector weaknesses with dire economic consequences.
One consequence may have been that whereas the US was able to ship industrial and
military supplies to Europe and take advantage of the war boom, a similar growth in the
industrial sector in Argentina was difficult to finance. Moreover, it is not clear how soundly
banks were operating. In its report on the revelations at the Banco Espanol, The Economist notes
that, “in 1918, the bank indulged in the purchase of ships (trying by hook or by crook to obtain
the necessary profits.) But the Armistice came along, and the only result of the shipping
speculation was a further loss of $3 million m/n.”
Banco Espanol shares had gone from 100 in October 1914 and 120 in January 1915 to
153 in December 1918. Some of the loss on the ships may have been reflected in its shares
which declined from 141 in August 1919 to 107 in January 1920. In the period surrounding the
shareholders’ meeting at which its losses were announced, in February 1924, Banco Espanol’s
shares fall from 93 in September 1923 to 26.5 in January 1924 as the news leaked out, and then
further to 16 in July 1924. It drifts up to 20.5 in January 1925 and then jumps abruptly to 72 in
February 1925; it then stays at that level until 1930.
After 1923, as we saw in the previous section, stock market development tapered off,
with fewer initial offerings and a lower rate of turnover. This relative decline coincided with the
revelation that Banco Espanol had hidden losses for over a decade, amid tremendous losses for
shareholders. Did the revelations about Banco Espanol and the resulting increase in uncertainty
about shareholdings generally have a role in the deterioration of the stock market’s
development? Certainly the fact that both Banco Espanol and Banco Frances were ruined (one
29

publicly, the other to limp along with chicanery) at the end of the Belle Epoque had important
long-run consequences for the Argentine economy.
The melancholy demise of the BNA in 1935 detailed in della Paolera and Taylor (1999)
was due to bad loans arising predominantly in the private banking system. They calculate that
one-third of all private banking loans had gone bad by then. By the end, with the Caja
rediscounting to the BNA and the latter rediscounting on the collateral of bad loans, there was
simply no control in Argentine’s system of credit allocation.
Our analysis of bank stock prices suggests that the weakness in private banking arose in
large part from the excesses of the Belle Epoque, antedating the severe international financial
crisis touched off by the sudden start of World War I. Inadequate development of the institutions
for providing private credit must have been an important limitation to the Argentina’s economic
development during this period. The creation of two durable institutions for maintaining the
currency system was inadequate to the development of a sound financial regime.

Conclusion
The failure of most developing countries to attain high levels of per capita output during
the 20th century is one of the most important questions for economics. One important cause of
development failure is, no doubt, a failure of openness – countries that cut themselves off from
world trade are unlikely to capture the benefits of technological progress abroad.
But an open financial regime is not a guarantee of domestic financial development, since
the progress of domestic financial institutions is by no means automatic. The traumatic events in
Argentina associated with the close of the Belle Epoque certainly warped its financial
development. Despite a large stock market capitalization, good international credit, large gold
30

reserves, a strong money supply, and apparently abundant bank credit, a careful study of the
financial structure of Argentina reveals crucial weaknesses.

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Ford, Alec G., The Gold Standard, 1880-1914, Britain and Argentina, Clarendon Press, Oxford,
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TABLE 1

INTEREST RATES AND GOLD
ANNUAL AVERAGE INTEREST
RATES

1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935

Argentina
Custom
loan
5.4
5.2
5.2
5
4.9
4.9
4.9
4.9
4.8
4.8
4.8
4.8
4.8
4.9
4.9
5.1
5.3
5.3
5.1
5.3
5.6
5.4
5
5
5
5
5
4.9
4.9
5.3
5.7
7
9.05*
4.9*
4.3*
4*

UK
Consols
2.8
2.9
2.9
2.8
2.8
2.8
2.8
3
2.9
3
3.1
3.2
3.3
3.4
3.3
3.8
4.3
4.6
4.4
4.6
5.3
5.2
4.4
4.3
4.4
4.4
4.6
4.6
4.5
4.6
4.5
4.4
3.7
3.4
3.1
2.9

USA
Corporate
Bonds
3.3
3.25
3.3
3.45
3.6
3.5
3.55
3.8
3.95
3.82
3.87
3.94
3.91
4.02
4.16
4.2
4.05
4.05
4.82
4.81
5.17
5.31
4.85
4.68
4.69
4.5
4.4
4.3
4.05
4.45
4.4
4.1
4.7
4.11
3.91
3.37

ARGENTINA'S MONETARY GOLD
Caja and BNA gold stock
(percent of gold at world central banks and
treasuries)

5.27%
4.52%
3.83%
4.00%
4.03%
4.47%
4.95%
6.53%
5.87%
5.61%
5.39%
4.94%
5.01%
4.88%
5.52%
6.04%
4.20%
3.76%
2.23%
2.08%
1.99%

Sources: Column 1: see text; Columns 2: Mitchell and Deane; Column 3: US Historical Statistics; Column 4: Federal
Reserve Board, 1943

TABLE 2 STOCK MARKET TRANSACTIONS AND NEW ISSUES
Buenos Aires Bolsa
Transactions/GDP
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935

Capitalization of New Issues/GDP
Buenos Aires Bolsa

New York Stock
Exchange

0.47%
0.49%
0.94%
3.14%
2.08%
2.09%
0.96%

0.10%
NA
NA
0.09%
0.32%
0.58%
1.25%
0.75%
0.66%
0.72%
0.88%
0.56%
0.20%
0.54%
0.19%
0.13%
0.23%
0.94%
0.47%
0.38%
0.89%
0.74%
0.71%
0.21%
0.37%
0.62%
0.59%
0.74%
0.66%
0.44%
0.53%
0.45%
0.29%
0.22%
0.21%
0.16%
0.31%
0.22%
0.48%
0.35%
0.38%
0.26%
0.41%
0.13%
0.27%
0.19%
0.32%
0.13%
0.15%
0.04%
0.08%
Average, 1907-1935 0.40%
Average, 1919-1935 0.28%
Average, 1907-1923 0.56%

0.98%
0.64%
0.27%
0.39%
0.38%
0.59%
0.67%
0.69%
0.71%
2.15%
4.88%
1.21%
0.25%
0.02%
0.24%
0.05%
0.04%
0.83%

GDP data: Table 6
Argentine Source: Stock market data, El Monitor de Sociedades Anonimas y Patentes de Invencion;GDP,
Taylor (this volume)
US Source: Stock market data: U.S. Historical Statistics GDP, Balke and Gordon, 1989, before 1929, US NIA
afterwards.

TABLE 3

ARGENTINE EQUITIES
FREQUENTLY TRADED STOCKS
AVERAGE DIVIDEND PRICE RATIO AVERAGE TOTAL RETURNS
Nominal
1900
4.2%
22.4%
1901
4.1%
-0.2%
1902
4.6%
4.7%
1903
6.2%
38.1%
1904
4.4%
14.4%
1905
6.5%
24.2%
1906
5.9%
-1.1%
1907
8.2%
5.6%
1908
7.3%
12.3%
1909
6.8%
25.3%
1910
6.6%
29.9%
1911
6.9%
18.6%
1912
5.8%
10.9%
1913
8.3%
-16.0%
1914
6.2%
-12.5%
1915
7.2%
1.8%
1916
5.3%
11.7%
1917
2.5%
19.6%
1918
11.0%
44.6%
1919
6.3%
18.9%
1920
9.6%
7.2%
1921
7.3%
-5.0%
1922
7.4%
10.6%
1923
6.4%
9.0%
1924
6.7%
5.0%
1925
7.0%
5.2%
1926
6.8%
15.0%
1927
6.6%
14.1%
1928
5.5%
12.5%
1929
5.7%
1.2%
1930
5.3%
-8.3%
1931
6.3%
-11.0%
1932
5.7%
-10.7%
1933
4.9%
10.6%
1934
4.4%
-1.9%
1935
5.5%
1.6%
1900 to 1909
5.8%
13.9%
1910 to 1919
6.6%
11.4%
1920 to 1929
6.9%
7.3%
1930 to 1935
5.4%
-4.0%

Real
8.6%
13.4%
-4.1%
45.7%
12.0%
14.3%
-6.7%
2.8%
16.6%
14.5%
20.5%
19.6%
8.2%
-16.0%
-13.1%
-4.9%
-1.9%
-3.8%
32.3%
15.1%
2.5%
19.5%
22.0%
4.5%
-1.9%
3.5%
28.1%
16.2%
11.8%
4.4%
-4.1%
-8.3%
-11.8%
15.7%
-13.9%
2.8%
10.9%
4.5%
10.7%
-3.7%

Source: See text. Real returns deflated using wholesale price indexes from della Paolera, 1988, and Domenech, 1986.

TABLE 4 STOCK PRICE INDICES - BANKS AND
NON-BANK FIRMS
All stocks Nonbank Bank
stocks
stocks
1899Q4
100
100
100
1900Q1 101.2835 106.4267 97.00855
1900Q2 105.1342 109.7686 101.2821
1900Q3 110.5018 120.0514 102.5641
1900Q4 117.5029 130.3342 106.8376
1901Q1 111.4819 123.2391 101.7094
1901Q2 113.8856 127.5064 102.5641
1901Q3 114.2357 127.7635 102.9915
1901Q4 112.6021 127.7635
100
1902Q1 108.7515 125.7069 94.65812
1902Q2 107.5846 116.7095
100
1902Q3 108.3314 121.1825 97.64957
1902Q4 112.7188 123.9075 103.4188
1903Q1 119.9533 134.1902 108.1197
1903Q2 132.2054 152.4422 115.3846
1903Q3 140.8868 169.7686 116.8803
1903Q4 146.5578 174.8072 123.0769
1904Q1 140.9568 173.2648 114.1026
1904Q2 163.8273 214.3959 121.7949
1904Q3 151.2252 189.2031 119.6581
1904Q4 160.6768 205.9126 123.0769
1905Q1 160.6768 205.9126 123.0769
1905Q2 160.6768 205.9126 123.0769
1905Q3 186.1144 244.473 137.6068
1905Q4 187.3979 242.6735 141.453
1906Q1 185.4142 238.3033 141.453
1906Q2 183.6173 237.4293 138.8889
1906Q3 186.6278 244.0617 138.8889
1906Q4 175.0292 218.509 138.8889
1907Q1 171.2952 217.9949 132.4786
1907Q2
172.112 212.0823 138.8889
1907Q3 169.3349 205.964 138.8889
1907Q4 170.83
209.00
139.10
1908Q1 175.4726 213.3162 144.0171
1908Q2 177.8063 214.2416 147.5214
1908Q3 168.7748 194.9614 147.0085
1908Q4 178.8098 202.1594 159.4017
1909Q1 188.8915 217.1722 165.3846
1909Q2 201.5636 223.4961 183.3333
1909Q3 210.5718 238.9717 186.9658
1909Q4 209.8716 233.3162 190.3846
1910Q1 238.0397 281.2339 202.1368
1910Q2 250.1274 284.0377 224.3387
1910Q3 267.7169 314.4009 229.3092
1910Q4 235.4563 263.3282 215.3916
1911Q1 240.4796 268.2666 220.6936
1911Q2 251.0205 288.8486 221.1906
1911Q3
248.15 285.0254 219.2024
1911Q4 261.3062 313.6999 216.7171
1912Q1 259.5361 304.9064 222.1847
1912Q2
268.578 313.5725 231.9602

1912Q3
1912Q4
1913Q1
1913Q2
1913Q3
1913Q4
1914Q1
1914Q2
1914Q3
1914Q4
1915Q1
1915Q2
1915Q3
1915Q4
1916Q1
1916Q2
1916Q3
1916Q4
1917Q1
1917Q2
1917Q3
1917Q4
1918Q1
1918Q2
1918Q3
1918Q4
1919Q1
1919Q2
1919Q3
1919Q4
1920Q1
1920Q2
1920Q3
1920Q4
1921Q1
1921Q2
1921Q3
1921Q4
1922Q1
1922Q2
1922Q3
1922Q4
1923Q1
1923Q2
1923Q3
1923Q4
1924Q1
1924Q2
1924Q3
1924Q4
1925Q1
1925Q2
1925Q3
1925Q4
1926Q1

275.9136
273.7289
254.9912
251.164
217.6755
212.413
194.3132
190.3265
181.2367
174.7782
156.2798
159.7084
163.7749
166.9643
186.26
180.9178
176.054
176.0859
177.25
175.3523
191.666
208.0435
215.698
241.4683
264.2564
267.5893
267.4777
276.2246
282.117
284.2538
277.8432
291.302
286.6763
228.8074
209.3928
209.5507
203.808
201.5701
196.2142
205.1302
205.6393
207.889
211.0702
214.8158
214.4961
212.1911
207.5535
212.3806
211.2518
212.7516
218.5929
215.471
220.4479
217.5233
221.8688

314.2097
312.3936
303.7913
299.1715
243.734
241.5037
229.556
226.6885
215.5373
209.3245
205.5012
200.2442
217.9268
220.4757
241.8223
230.6711
224.6176
225.9557
230.8304
226.4018
255.4268
276.1044
286.2998
308.7934
354.0037
352.0602
354.7046
375.6848
389.0504
404.9488
397.8758
420.0467
412.8498
313.5155
280.7149
280.9912
267.4883
263.0887
254.8902
264.8292
265.0295
271.591
275.4588
280.1209
282.3242
287.5458
283.3257
289.2587
288.0431
290.4605
295.5992
289.4176
298.5415
293.6584
302.5475

246.5406
243.8896
213.9004
210.7524
198.823
190.2074
165.0231
159.7212
152.431
133.7025
111.0095
123.6017
113.6605
117.637
135.531
136.0281
132.2173
130.8918
128.2409
128.9036
132.615
145.1408
150.4428
180.5976
180.929
189.876
186.8937
183.2486
181.5917
169.4966
163.5319
166.0891
164.427
160.8469
158.6733
158.6733
165.0663
165.9613
163.7877
174.2721
175.5507
170.6921
173.8374
177.3407
172.2264
155.0932
147.882
152.5361
151.1296
151.5132
160.9236
162.2534
161.4862
161.0515
158.6733

1926Q2
1926Q3
1926Q4
1927Q1
1927Q2
1927Q3
1927Q4
1928Q1
1928Q2
1928Q3
1928Q4
1929Q1
1929Q2
1929Q3
1929Q4
1930Q1
1930Q2
1930Q3
1930Q4
1931Q1
1931Q2
1931Q3
1931Q4
1932Q1
1932Q2
1932Q3
1932Q4
1933Q1
1933Q2
1933Q3
1933Q4
1934Q1
1934Q2
1934Q3
1934Q4
1935Q1
1935Q2
1935Q3
1935Q4

228.9376
228.1364
232.9003
237.1668
247.9497
249.3508
252.4451
255.9223
260.8204
261.2861
259.4271
259.2456
254.2567
254.0831
246.4578
220.3966
217.4089
215.321
205.7893
190.0374
180.4702
169.1624
163.846
152.6567
146.6811
140.8121
134.1064
128.4782
124.3932
128.9124
136.0759
140.7608
132.8395
131.0042
127.5152
122.1553
124.0261
121.5554
119.3057

315.4702
313.7228
320.4155
325.6785
343.7675
348.3606
353.6305
359.3494
361.9671
362.7959
360.9241
360.1091
352.111
351.9591
340.3556
297.9682
292.7536
289.4866
275.1549
250.2005
234.7292
214.8305
206.1901
190.8362
180.8489
173.203
162.9877
153.6359
155.3833
164.8802
178.024
187.1341
172.3742
168.2922
162.7529
157.5037
159.7139
156.7578
156.3572

157.6504
158.2897
161.3328
165.4115
166.8563
162.8927
163.1612
163.8388
174.8603
174.8347
172.2775
173.1981
171.8428
171.5615
168.3395
162.3812
162.3556
161.6396
157.2924
152.4593
150.1067
150.3113
149.0839
141.2589
140.3894
135.5308
132.7179
131.7973
115.329
112.3883
111.2631
109.5754
111.2375
112.8486
111.8001
104.1541
106.1232
103.5915
97.04515

Source: See text

TABLE 5
Jan1 to Jan 1
1900 to 1910
1910 to 1920
1920 to 1930

REAL EQUITY RATES OF RETURN, SELECTED
COUNTRIES
Argentina US
UK
Australia Canada France Germany Italy Netherlands Sweden
10.9% 7.1% 1.8%
11.8%
6.3% 5.3%
3.6% 4.4%
4.8%
19.1%
4.5% -2.5% -1.4%
3.9%
0.1% -3.1% -12.7% -2.8%
1.3%
0.7%
10.7% 14.9% 9.3%
16.3% 15.5% 7.9%
13.6% 2.4%
1.5%
8.4%

SOURCE: TABLE 3 and Dimson, et al.

TABLE 6

CREDIT SUPPLY AND
(PERCENT OF GROSS DOMESTIC PRODUCT)
MONEY SUPPLY
BANK LOANS
BROAD MONEY SUPPLY
ARGENTINA
US
UK
Argentina US
UK
M3/GDP M3/GDP M3/GDP
ALL
PRIVATE FOREIGN BNA ALL BANKS London
BANKS BANKS
BANKS
Clearing
Banks
1901
26.9% 7.7%
7.8%
11.4% 33.0%
38.5%
45.8%
55.4%
1902
19.0% 7.6%
6.4%
5.0% 35.4%
36.9%
48.1%
55.4%
1903
20.3% 9.2%
6.6%
4.5% 36.1%
41.8%
48.3%
55.8%
1904
23.6% 10.3%
8.1%
5.1% 35.7%
43.8%
48.4%
55.4%
1905
26.2% 11.4%
7.9%
6.9% 36.5%
43.7%
49.0%
53.9%
1906
26.5% 11.3%
8.6%
6.6% 37.2%
40.9%
49.0%
52.4%
1907
26.1% 11.3%
7.9%
6.9% 39.2%
39.7%
48.7%
51.4%
1908
26.8% 11.8%
7.2%
7.8% 40.3%
39.4%
56.3%
54.4%
1909
28.1% 13.2%
6.9%
8.1% 38.6%
42.0%
54.3%
55.2%
1910
30.5% 15.3%
6.7%
8.5% 40.9%
42.2%
53.9%
54.5%
1911
35.1% 18.2%
7.4%
9.5% 41.1%
44.3%
55.8%
53.2%
1912
34.4% 17.8%
7.1%
9.5% 40.5%
42.0%
54.6%
51.9%
1913
35.9% 18.0%
7.4%
10.5% 40.5%
43.9%
53.7%
52.2%
1914
35.1% 15.5%
6.9%
12.7% 45.3%
43.2%
59.1%
55.5%
1915
29.2% 11.9%
5.5%
11.8% 43.9%
41.2%
63.4%
55.4%
1916
27.8% 12.0%
5.6%
10.1% 39.7%
40.8%
58.4%
51.4%
1917
27.4% 11.9%
5.5%
10.0% 37.9%
40.8%
54.9%
46.1%
1918
28.5% 11.2%
5.8%
11.5% 32.8%
40.8%
48.2%
45.8%
1919
32.4% 11.8%
7.2%
13.4% 32.5%
43.6%
50.0%
53.3%
1920
32.5% 12.1%
7.3%
13.1% 35.8%
44.6%
45.9%
54.9%
1921
39.5% 15.6%
9.1%
14.7% 39.9%
28.9%
54.0%
51.3%
65.1%
1922
40.4% 15.6%
8.2%
16.5% 38.4%
28.2%
55.0%
57.2%
69.1%
1923
37.8% 14.0%
8.2%
15.6% 35.9%
30.8%
50.0%
50.9%
67.6%
1924
34.6% 11.8%
7.0%
15.8% 36.4%
33.0%
44.3%
53.4%
65.1%
1925
35.1% 12.5%
7.0%
15.6% 37.6%
35.2%
44.7%
55.1%
60.6%
1926
38.0% 13.3%
7.1%
17.6% 37.6%
36.9%
48.1%
52.2%
63.8%
1927
35.8% 12.5%
6.6%
16.7% 39.4%
37.8%
47.6%
55.4%
61.1%
1928
34.0% 12.0%
6.2%
15.9% 41.0%
38.0%
48.6%
57.0%
61.8%
1929
37.1% 13.4%
7.0%
16.7% 40.4%
39.0%
49.7%
52.9%
60.9%
1930
42.4% 14.4%
8.2%
19.8% 44.9%
37.8%
52.8%
58.8%
61.6%
1931
47.6% 15.9%
8.7%
23.1% 46.2%
36.4%
55.6%
62.5%
66.7%
1932
45.4% 15.4%
6.9%
23.1% 47.7%
32.8%
53.8%
76.2%
69.4%
1933
43.6% 14.8%
6.1%
22.6% 39.6%
27.2%
53.2%
73.7%
73.6%
1934
35.6% 12.2%
4.9%
18.5% 32.3%
27.7%
43.3%
69.6%
67.6%
1935
29.1% 11.1%
4.6%
13.4% 27.6%
26.8%
41.7%
70.1%
68.5%
AVERAGE, 1901-35 32.8% 13.0%
7.0%
12.8% 38.5%
45.0%
55.5%
58.5%
AVERAGE, 1921-29 36.9% 13.4%
7.4%
16.1% 38.5%
34.2%
49.5%
54.4%
63.7%

Argentine Sources: Loans, Baiocco; Money, della Paolera, and Baiocco; GDP, Taylor (this volume)
US Sources: Loans, Federal Reserve, 1958; Money, Friedman and Schwartz, 1970; GDP, Balke and
Gordon, 1989, before 1929, US NIA afterwards.
UK Sources: Loans, Mitchell and Deane, 1962; Money, Capie and Webber, 1985; GDP, Feinstein, 1972.

TABLE 7

Total
Private Domestic Banks
Banco Espanol
Banco Italia
Banco Frances
Nuevo Banco Italiano
Banco Popular Argentina
Other Private Banks
Banco de la Nacion
Foreign Banks

DEPOSITS IN THE 1912-1914 CRISIS
Deposits (Millions of paper pesos,end of year)
1912
1914 Decline
1480.9
1189.3
-19.7%
674.3
365.4
-45.8%
229.9
126.9
-44.8%
101.5
62.4
-38.5%
84.7
55
-35.1%
41
27.2
-33.7%
20.4
17.4
-14.7%
196.8
76.5
-61.1%
478.3
552.7
15.6%
328.3
271.2
-17.4%

SOURCES: Baiocco; Regalsky

All stocks

Nonbank stocks

45
Bank stocks
1935Q4

1934Q4

1933Q4

1932Q4

1931Q4

1930Q4

1929Q4

1928Q4

1927Q4

1926Q4

1925Q4

1924Q4

1923Q4

1922Q4

1921Q4

1920Q4

1919Q4

1918Q4

1917Q4

1916Q4

1915Q4

1914Q4

1913Q4

1912Q4

1911Q4

1910Q4

1909Q4

1908Q4

1907 Q4

1906Q4

1905Q4

1904Q4

1903Q4

1902Q4

1901Q4

1900Q4

1899Q4

Figure 1: Stock price indexes
Source: Table 4

450

400

350

300

250

200

150

100

Figure 2: Loans to GDP
Source: Table 6
60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

ARGENTINA ALL BANKS

ARGENTINA PRIVATE BANKS

ARGENTINA BNA

US ALL BANKS

1935

1934

1933

1932

1931

1930

1929

1928

1927

1926

1925

1924

1923

1922

1921

1920

1919

1918

1917

1916

1915

1914

1913

1912

1911

1910

1909

1908

1907

1906

1905

1904

1903

1902

1901

0.0%

ARGENTINA FOREIGN BANK

Argentina M3/GDP

US M3/GDP
UK M3/GDP
1935