The present system of commerce and speculation in this country is not yet of such inciting conditions; it is of slow nature and safe. What are the general effects of credit?

The effects of credit are comparatively good, if it is taken into consideration that the revenue records of the year 1852 to 1856 show that business in those days was performed here on a simple rude cash basis. Lower California was then forced to consume the second or third hand merchandise from the Mazatlan and Guaymas importers, paying enormous rates and running the risks of navigation. Since 1856, when the port of La Paz was opened to commerce for foreign entry, the new era commenced, and the credit system was established as above related. The country beyond doubt has from that time prospered considerably and the lower classes have been able to clothe themselves; if prosperity has not been comparatively in equality with the progress of present civilization, at least their happiness in life has had a great change. LAS. VIOSCA,

LA PAZ, MEXICO, July 10, 1883.

Consul.

YUCATAN.

REPORT BY CONSUL AYMÉ, OF MERIDA.

In compliance with your circular-letter dated May 15, 1883, in which you request a report on the systems of credit which prevail here, and in which you inclose certain interrogatories prepared by the Board of Trade of Scranton, Pa., I have the honor to inclose the desired report. The questions asked are very general; the answers partake of the same character.

There is in Merida no board of trade nor anything like one; each man is a law unto himself in such matters, and it would take months of earnest, special study to fully lay before you the extraordinary condition of business here; and such a report would be the mere recital of facts, and of causes and effects. I have endeavored to answer as briefly as possible, and would respectfully suggest either that this report be submitted to the said board that they may ask more explicit questions, or, that if it be published, some portion of this dispatch be printed therewith. Such a report is necessarily imperfect.

Yucatau is pre-eminently a "credit" country, cash transactions being extremely rare. This statement applies to all business, great or small, done here, almost without exception. Every laborer is in debt to his employer, and practically every employer in debt to his servants. The servant or laborer applies to the employer in the first place for money, which is at once given him; he then works at a certain rate or salary, a percentage of which is deducted toward reducing the original adanvce. But soon a fresh amount is asked for, and granted, or else the laborer would seek another employer who would assume the original debt and make the desired advances. Thus the laborer is always in debt, and the employer is liable at any moment to be called on to make forced loans.

In all and every condition of life, in all and every business, the credit system is rampant; it has always been so, it seems as though it always would be so. As there is practically no cash business done it is hard to make comparisons and draw conclusions as to the results on the pros

perity of the country. I shall, therefore, in this report confine myself to answering the various interrogatories submitted so far as in my power, simply premising that in the absence of any statistics of any kind I can only give as authority for the correctness of these answers my own limited observations and the opinions of the few foreign business men who have studied the subject and whom I have spoken with thereon. Without further remark, then, I proceed to the questions: 1. Does credit stimulate trade?

Yes. In all growing countries credit is essentially necessary. It frequently happens that capital does not lie in the hands of those who could best use it, and without credit the growth of trade would be dwarfed or perhaps stopped. Certain American houses have endeavored to introduce the cash system, and unavailingly. English and German houses on the other hand give long credits, and trade with both these countries is very rapidly increasing, and this great increase is due certainly not to the superiority of the goods sold, but solely to the long credit granted. A patent proof of this is to be found in the wholesale counterfeiting of American brands and trade-marks by English and German houses. Were American houses to give the same credits they would do all of the business. Stop credit and Yucatan would be utterly and completely ruined.

2. Are people averse to contracting debts?

Unfortunately, no. There are, however, two kinds of debts to be considered: 1st, those contracted in the country; and 2d, those contracted abroad. It is to the first class I more particularly refer in my general answer. Debts of the second class there is good reason for, in the great difference in the rates of interest here and abroad. For example: A, here in Merida, buys $1,000 worth of goods in New York or in London on six months' credit; he will have to pay not more than 6 per cent. per annum interest-that is, for six months, say $30. But interest in Merida is not less than 10 per cent. per annum, and, at this moment, nearly 18 per cent. Let us take the lower rate. Interest on $1,000 for six months at 10 per cent. is $50. Here is a clear gain of $20 to A by contracting a debt, and this gain may very probably in this transaction reach more nearly double this amount.

3. Are there any sumptuary laws or regulations regarding credits? The governing code in all business transactions is really the ancient Spanish Codigo de Billas. The civil code (Codigo Civil) touches on some points, but the whole subject is extremely obscure.

Provision was made in the constitution for the formation of a special code, but nothing has been done so far. Only the very best Mexican lawyers could answer this question, and even they, for reasons stated further on, not very certainly.

4. To what extent does credit prevail in proportion to the volume of business?

Practically 100 per cent. The reply to query No. 10 is probably the only seeming exception. There are absolutely no statistics to refer to, but seemingly all business is done on credit.

5. To what extent do losses incidental to business prevail?

A credit system always induces speculation, and in the export trade of Yucatan there is very much speculation and losses are very frequent. A credit system also induces rash competition and trusting in improper parties; in the wholesale trade, therefore, from these causes mainly losses prevail to a large extent. In the retail trade losses are not so great or frequent perhaps.

6. Do tradesmen extend credit to mechanics and laborers readily?

Yes; and generally lose thereby.

7. What advantage have cash buyers? Except in the small retail trade cash buyers are unknown. Cash buyers would have little or no advantage, but would most likely be losers. For if A buys $100 worth of goods and pays cash therefor, and B buys the same amount and pays only at the end of six months, B evidently makes the interest for this time, an important item for B, for he can loan this $100 for six months at from 1 per cent. to 2 per cent. per month. See, also, answer to next question.

8. Is interest demanded on time accounts?

As a rule, no. The usual plan is this: Goods are sold for a certain price, which may, at option, be paid "cash down," or in a few monthly installments, or at the expiration of a short, fixed period, without interest. The number of monthly installments and the duration of the lastmentioned period naturally vary with the amount of goods sold and the amount of confidence the seller has in the purchaser. I know of one case in which goods were offered at $450 cash or $470 in monthly installments of $20 each, it taking nearly two years therefore to cover the amount. Should monthly payment not be promptly made, interest is then usually charged at a rate stipulated in the document drawn up at time of sale. I would here call attention to a curious business custom. If A wishes to borrow $1,000 from B, say for three months, B may ask, say, 2 per cent. per month; that is to say, $60 interest. A does not, however, give his note for $1,060; but B subtracts $60 from the $1,000, hands A $940, and A makes his note for $1,000, at three months. Naturally he is paying much more than 6 per cent. on the amount really loaned. The practice is not extraordinary, but is the usual rule.

9. With what classes are the evils of credit most conspicuous? Very naturally with the middle classes. Officials also suffer. Credit leads immediately to extravagance, and the results are terrible among the two classes mentioned. Officials who are usually months behindhand in receiving their salaries very easily contract debts far beyond their means to pay. This opens up too great a field, and as the answer is almost one which might be predicted with certainty, I shall leave it at this.

10. What kind of produce or manufactured articles command cash returns?

All kinds of native products, &c., change hands rarely for cash, usually cash, at fifteen days. These transactions are those which most closely approach true "cash transactions," and can scarcely be called "credits." 11. Are credits of record (mortgages, judgments, &c.) prevalent; and, if so, among what classes?

Yes. Among owners of all kind of properties, small householders, farmers, hacienda-owners, &c.

12. When a person in business has once failed, or has been discredited, can he resume, and what are the obstacles to such resumption?

He can usually easily resume. The procedure for rehabilitation is similar to that in the United States, i. e., an arrangement and agreement with the creditors and an order from the civil court. However, the administration of justice in such cases is so involved, uncertain, and tedious, the existing regulations being so uncertain and insufficient, that the usual course is to enter into arrangements with the creditors and settle the affairs, neither side caring to enter into a practically useless, and enormously expensive, protracted, and annoying litigation. 13. Is bankruptcy frequent?

No.

68 A-No. 43—17

14. To what extent do relief acts in bankruptcy prevail?

Difficult to answer. (See replies to queries Nos. 3, 12, and 13.) In simple bankruptcy the civil court appoints a receiver, the property is valued and sold. If the amount realized is considered sufficient by a majority of the creditors, the bankrupt is discharged and may immediately enter into business again.

15. Are fortunes readily made and lost?

To the spirit of this question the answer is, No.

Fortunes have been, and are, readily made from the small risks in the main article of production, henequen fiber.

Fortunes are not readily lost, however, for wealthy people usually live far below their means. There are two classes-very wealthy people, whom the credit system cannot hurt, and the middle class, who live on credit.

16. What are the general effects of credit ?

Can be gathered from answers to previous queries. Considered bad. Credit creates a dangerous class of business, which is liable at any moment, from any cause, to hopelessly collapse. Financial crises frequently threaten, and were merchants generally to be called on to settle up on a cash basis, general bankruptcy would most immediately ensue. LOUIS H. AYME,

1. Does credit stimulate trade?

Yes, decidedly, and if not given judiciously, too much so. 2. Are people averse to contracting debts?

On the contrary.

3. Are there any sumptuary laws or regulations concerning credits? There are. Those relating to bankruptcy are indicated in replies to interrogatories 12 and 14. The legal rate of interest is 12 per cent. per annum, but any rate agreed upon can be sued for and recovered.

4. To what extent does credit prevail in proportion to the volume of business?

In wholesale transactions between importers and dealers, perhaps one-half. Formerly more than three-quarters, and in most cases the entire amount. Until lately importers obtained all the goods asked for in Europe on credits from six to twelve months, especially if the debtors agreed to consign coffee in payment in lieu of remitting bills; but several heavy failures of importers having occurred during the past few years, owing to excessive importations (the result of too much credit) and losses consequent upon giving credit too freely here, European credits have been greatly restricted, and some of the best London houses will now execute only the orders received through and recommended by their agents residing here. The effect has proved to be beneficial, and now the importing houses here that have survived the crisis through which this country has been passing for several years (and may

be said to be still passing) are generally sound, are much more careful in giving credits, using greater discrimination than formerly, and in many cases requiring good indorsers or other security.

5. To what extent do losses incidental to business prevail? Formerly to about the same extent as in the United States, but now considerably less, although the number of traders is greater here in proportion to the business done.

6. Do tradesmen extend credit to mechanics and laborers freely? Not freely, although to some extent. The latter generally obtain advances from employers, and so are enable·l to buy for cash.

7. What advantages have cash buyers?

As between dealers and importers, from 5 to 10 per cent.; as between consumers and dealers, a still greater advantage, the latter being generally in want of money, and seldom refusing an offer. (These remarks apply chiefly to imported articles.)

8. Is interest demanded on time accounts?

As a rule, no. Among traders notes of hand are generally required, even for small amounts less than $50, stipulating that if not paid at maturity, legal interest to be paid for the overtime, as well as all judicial costs in case of being sued.

9. With what classes are the evils of credit most conspicuous?

Apparently the middle classes, including salaried men. Their aspirations being generally in advance of their means, as a rule they will take all they can get on credit, including many things not actually necessary, except for the sake of keeping up appearances. But probably this country does not differ much from all others in this respect.

10. What kind of produce or manufactured articles command cash returns?

Every kind, as a rule; more than that, advances have to be made to producers and middlemen for coffee, hides, timber, rubber, bananas, &c., for export, especially the first-named article.

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11. Are credits of record (mortgages, judgments, &c.) prevalent; and, So, among what classes?

Yes; principally among planters; but much less now than formerly, as the unthrifty planters have mostly gone to the wall and their places filled by men of means, not only, but with that experience which begets prudence.

12. When a person in business has once failed, or has been discredited, can he resume, and what are the obstacles to such resumption? Much depends upon the character of the party failing, a great deal more than upon the causes of failure. In all cases of bankruptcy, if a full surrender of assets is made and no fraud proven, creditors receive their pro rata and the failing party can resume at once, often with improved credit if considered honest and capable.

13. Is bankruptcy frequent?

Strictly speaking, no, although a number of failures have occurred during late years; but they are becoming much less frequent, owing to greater caution and discrimination in giving credit on the part of European houses, and of the importers here, results of dearly bought expe rience. How long the lesson will abide remains to be seen.

14. To what extent do relief acts in bankruptcy prevail? Only as indicated in reply to the twelfth interrogatory.

15. Are fortunes readily made and lost?

At present, no; formerly, more so, credit being now restricted to proper limits; business is steady, speculations rare. At the same time good profit is realized, and merchants as a rule are prosperous.