This group of 22 issues, with a total principal amount of $425,000,000, was sold to the public for $416,015,000. In return, upon redemption, holders received a total of $460,550,000, or a net profit of $44,535,000, equivalent to 10.705 per cent upon their original investment. In the meantime, as long as these respective issues were outstanding, a weighted average return of 7.85 per cent in current interest was received punctually by investors. CENTRAL EUROPE AND LATIN AMERICA Turning now to the foreign issues which have shown marked declines in recent months, we find in almost every case that these situations are aspects of the current world-wide business depression, and, therefore, must be considered as largely transitory. Particularly in the case of central Europe and Latin America, we feel that the wholesale depression of bond prices, without discrimination as to the merits of each separate issue, has been greatly overdone. The countries of central Europe have passed through a trying period of economic readjustment since the summer of 1929 and many serious problems remain to be solved. These difficulties have loomed large in the public press, but they appear less formidable if compared to the European situation of only seven or eight years ago. As late as 1923, postwar bitterness was still acute, the currency and banking systems of virtually all the countries of Europe were in a state of chaos, and, from surface indications, the Continent seemed to have been bled beyond power of recovery. Since then Europe's resilience and recuperative vitality have been demonstrated. Now, after a decade of reconstruction and growing stability, with sound systems of currency and finance firmly established, and with central bank cooperation initiated under the Bank for International Settlements, there is ground for confidence in the ability and willingness of European nations to honor their debts. In Latin America, similarly, all of the responsible governments have accepted as a corner stone of their policies the strict observance of external obligations. Furthermore, the revolutions which last year overturned in quick succession several of the leading governments in this part of the world were not of such nature as to arouse undue apprehension for anyone with a clear understanding of each situation. While economic distress and unemployment caused by the world-wide business depression and the decline in commodity prices provided added momentum to the popular support for the revolutionary movements, and thus insured their success, the basic reasons for the overthrow of the existing governments differed substantially in each of the countries involved. It was characteristic of each of the movements, however, that a growing civic consciousness appears to have caused the leaders of the revolution to seek the active support of the general public on the basis of honesty and efficiency in the public administration. Nevertheless, in most of the countries involved, the continued depression has resulted in lower government revenues, loss of gold and serious foreign exchange, currency and credit problems which contribute to make interest and sinking fund payments on external loans increasingly difficult. While it is not possible to anticipate much improvement while world prices for primary commodities remain at their present low level, any general recovery in conditions of world trade would probably be reflected most rapidly in the raw material producing countries of Latin America. REPATRIATION OF FOREIGN BONDS One reason for the stability of foreign bonds in certain cases has been repatriation through purchases by nationals of the issuing countries. This support of their own obligations has been particularly notable in the case of the French, Dutch, Belgian, Scandinavian, and Irish issues, and, to a lesser extent, in the case of Austrian and Greek securities. On the other hand, tight monetary conditions at home and the lack of internal investment power have been important factors in the recent price declines of central European and Latin American issues. As business recovers and confidence is restored we can anticipate that the current plethora of short-term funds in leading financial centers will seek an outlet in more profitable long-term investments, and thus cause a gradual easing of credit conditions throughout the world. Falling interest rates at home, together with the high yields now obtainable on dollar obligations, should lead in turn to a more rapid repatriation of these securities, and provide the basis for stronger and more stable markets in the United States. Already there is evidence of such a trend, particularly in the case of certain German issues, which are currently quoted in Germany at slightly higher prices than in the United States. In surveying the field of foreign investments, one should not overlook the fact that many of the issues currently selling at relatively low yields, or recently called at substantial premiums, were quoted only a few years ago at prices roughly comparable to those of the foreign bonds now so acutely depressed. Striking evidence of this change is afforded by the list of securities recommended in the first of these foreign bond circulars, which was published in 1924. This list with current prices contrasted with those in 1924 is quoted below and furnishes its own forceful commentary. Although of course no such analogy is strictly accurate, it is well to emphasize that these issues were underpriced in 1924 for much the same considerations as now affect central European and Latin American bonds, and there is good reason to believe that the present depressing influences are no more permanent in character than were those in 1924: Kingdom of Netherlands 6's, 1954. Austrian Government Gtd., 7's, 1943. In conclusion, we believe that foreign credits as a class are still sound, that their past record entitles them to confidence, and that the future abroad holds forth promise of eventual economic recovery just as it does in the United States. It is not our intention to make a blanket recommendation of all foreign bonds, nor do we believe that any investor should place too large a proportion of his funds in this class of securities. Careful discrimination and sound diversification in the field of foreign investments are no less essential than in the case of domestic securities. Within the limits of sound investment principles, however, we feel confident that many unusual bargains are now available in foreign dollar bonds which will attract a steadily growing number of investors. In some cases, depending upon conditions, we believe that sound diversification warrants placing 25 per cent of one's holdings in foreign issues, yielding, as they do at present, a higher average return than any other class of investments of comparable security. COMPARISON WITH DOMESTIC YIELDS The character of these bargains may be judged by comparing the current average yields on high-grade domestic bonds with yields on a selected list of foreign issues. As computed by the Standard Statistics Co., high-grade domestic bond yields on February 4, 1931, were as follows: We present on the following page a list of foreign issues, with prices and yields as of February 10, 1931, which we recommend both from the standpoint of fundamental security and attractiveness of yield. The present average yield on these bonds is 7.36 per cent, or 2.89 per cent more than the average yield on 60 high grade domestic bonds. THE NATIONAL CITY CO., NATIONAL CITY BANK BUILDING, NEW YORK Senator JOHNSON. I offer for the record a statement furnished me by Hon. R. P. Lamont, Secretary of Commerce, giving me such data as the Department of Commerce has upon the concessions which have been granted to American corporations and Americans in Latin America, and without reading, may I submit it as a part of the record, please. The CHAIRMAN. It may be printed as a part of the record at this point. (Letter from R. P. Lamont, Secretary of Commerce, to Senator Johnson, together with inclosure concerning concessions in LatinAmerica, are here printed in the record in full, as follows:) DEPARTMENT OF COMMERCE, Hon. HIRAM W. JOHNSON, United States Senate, Washington, D. C. OFFICE OF THE SECRETARY, MY DEAR SENATOR: In response to your letter of January 7, receipt of which was acknowledged on the 11th, requesting information on concessions in Latin America granted to a specified group of American companies, I take pleasure in sending you herewith such information as we have been able to develop on the subject. The information has been compiled from such data and works of reference as we have available, and although it is not complete for the reason that the activities of the American companies you specified in many instances are carried on through subsidiary organizations, affiliates and foreign incorporated entities not reported on, I hope you will find it helpful in your work. Again assuring you of my desire to be of service, I am, Very sincerely, R. P. LAMONT, Secretary of Commerce. FREDERICK SNARE & CO. Colombia.-Under Law No. 33, 1931, the Colombian Government was reported as having granted an option to Frederick Snare & Co. to build on a concession basis, new docks at Cartagena. It is believed the option has not been exercised due to failure to secure financing for the project. Peru. In February, 1928, the Peruvian Government awarded a contract to Frederick Snare & Co. for the construction of new port works at Callao. The work was said to have been undertaken on a lump-sum basis. By supplemental contract, Snare & Co. undertook the management of the Government's port works at Callao in the capacity of agents for the Peruvian Government. Details concerning the contracts are not available. WARREN BROS. Available information indicates that Warren Bros. have not obtained concessions from Latin American Governments, but performed their work mainly under contracts secured on a competitive basis. Argentina.-Warren Bros. Co. of Argentina, a subsidiary of Warren Bros. Co., obtained contracts in September, 1925, and November, 1926, from the municipality of Avellaneda for the paving of some 358 city blocks. Subsequent contracts covering paving in six other cities were obtained. Chile.-Warren Bros. incorporated a subsidiary company in this Republic in 1928. In the same year (July) they were awarded by the Government a 300,000 square meter paving contract in the city of Santiago. In August, 1930, the company was awarded, by the national Government, a 60,000 square meter paving contract in the city of Antofagasta. The company has also done paving work in two other Chilean cities. Colombia.-Incomplete information from Bogota indicates that that municipality awarded contracts, in 1928 and 1929, to Warren Bros., principally for street paving. Cuba.-Warren Bros. bid for and were awarded a contract in December, 1926, by the Cuban Government, for the construction of that section of the Cuban National Highway passing through the Provinces of Pinar del Rio, Habana, Camaguey, and Oriente. Guatemala.-Warren Bros. were reported as having obtained a contract from the municipality of Guatemala for street-improvement work. It appears that the contract was awarded either late in 1929 or early in 1930, and was obtained in competition with other contracting firms. ULEN CO. No detailed and complete knowledge is had of any concessions alleged to have been obtained by the Ulen Co. This enterprise has, at different times in the past, been awarded construction contracts in Latin America. The available information regarding these contracts is set out below. Bolivia.-The Government of Bolivia awarded the contract for the construction of the Atocha-Villazon Railway to the Ulen Co. in 1921. In 1925 the company was awarded a contract by the Government for the installation of sewerage systems in La Paz and Cochabamba. Brazil.-The State government of Maranhao entered into a contract with Ulen & Co., in March, 1923, covering the rehabilitation of the public utilities of the city of Sao Luis (population 50,000); modern system of sewers, water, light, power, traction. The arrangement also provided for management on the part of Ulen & Co. for a term of years. Chile. The Government of Chile was reported to have awarded a contract to Ulen & Co., in 1929, for the construction of the Recoleta irrigation works, also, the La Guna and Juntas del Carmen irrigation dams. Colombia.-In July, 1929, the Government of Colombia awarded a contract covering the Bocas de Ceniza project (dredging the mouth of the Magdalena River and construction of port works at Barranquilla) to the Ulen Co. The contract was closed out in 1929, although the work was still incomplete. STANARD OIL CO. OF NEW JERSEY Argentina.-The Standard Oil Co. of New Jersey, through local subsidiary companies, holds oil-land rights in the Territory of Neuquen and the Province of Salto. These rights, it appears, were granted some time prior to 1924; probably in 1922. The government of the Province of Salto contested the oil companies' rights to lands in the Province, but in 1931 entered into an agreement, which is to be ratified by provincial legislature before the end of 1932. whereby oil people, for a period of 30 years, will pay a royalty of 10 per cent on total monthly production, either in cash or in kind, to the province. Bolivia. The Standard Oil Co. of Bolivia, a subsidiary of the Standard Oil Co. of New Jersey, obtained a concession from the national Government of Bolivia covering 1,000,000 hectares of land in the Departments of Santa Cruz, Chuquisaca, and Tarija. In addition the company also holds 581,000 hectares of land in these Departments under fee concessions in accordance with the petroleum laws. The 1922 concession provided for: 1. Drilling a well for each 50,000 hectares, viz., 20 wells in 7 years or (a) renouncing portions not drilled, or (b) producing 2,000,000 barrels of oil an nually, or (c) paying increasingly heavy duty rentals. 2. Paying the Government 11 per cent royalties on oil produced. 3. Concessions valid for 55 years after which wells, pipe lines, refineries, etc. revert to Government without reimbursement. 4. Company to pay no taxes except land rentals and profits taxes. 5. All controversies to be decided by the Supreme Court of Bolivia. After 10 years difficulties to be settled by arbitration. Chamber of Deputies debated cancellation of concession in August, 1931, claiming company had not produced oil as required by terms of concession. Decided that failure to produce oil as required was proper in view of world oil situation. Colombia.-The Tropical Oil Co., a subsidiary of the International Petroleum Co. (Ltd.), a Canadian enterprise controlled by the Standard Oil Co., of New Jersey, operated in Colombia over a 30-year concession granted by the national Government on August 15, 1919. The original concession was granted to the Colombian General Demares in 1905 who later transferred it to American interests. It is believed that the Colombia Government receives a 10 per cent royalty on net production based on New York prices. The Andian Pipe Line Co., controlled by the Imperial Oil Co. of Canada, which in turn is controlled by the Standard Oil Co. of New Jersey holds a 50year concession, granted by the national Government of Colombia in October, 1924. It is believed that this company pays a royalty to the Government on the value of petroleum run through its pipe lines. The Andian Pipe Line Co. has expended to date approximately $30,000,000 in pipe lines, terminals, etc. Ecuador.-The International Petroleum Co., a subsidiary of the Imperial Oil Co. of Canada, controlled by the Standard Oil Co. of New Jersey, obtained |