British investment in Argentina

Argentina had a unique relationship with Britain during the period after Argentinian independence all the way up to World War 2. British Investment began in the 1820s, with investments into industries such as mining and agriculture, associated with prospective large-scale immigration from Europe. However, this investment would be worthless by the 1830s and would not prove to be profitable until the 1850s and later.[1] It was not until the 1860s that investment became continuous enough to have major effects on either the Argentinian or the British economy.[1] Early investment failed in Argentina because of multiple factors, such as the Cisplatine War with Brazil, bringing a blockade of the Río de la Plata that hampered exports, and an overestimated labour force that did not exist after the revolution.[1] These economic inhibitors were followed by the coming to power of the "cattle baron", Juan Manuel de Rosas, which also deterred foreign investment, and then defaults on loan payments from the time of the revolution.[1] All of these factors made Argentina appear unstable and therefore diminished foreign investors' willingness to invest in the new state. Therefore, industrialization of Argentina and its vast pampas (plains) would have to wait until the industrializing capital of Great Britain would be imported decades later.[2]

With the end of Juan Manuel de Rosas' dictatorship in 1852, and followed by liberal government, investment to Argentina was increasing.[3] A result of this investment was the building of infrastructure to enable international trade.[4] As development of industry grew, and the economy of Argentina strengthened, the quality of life for Argentinians came to be among the highest in the world. Argentinians towards the end of the 19th century were well-fed, well-educated, and industrious compared to most of the world.[4]

Towards the 1870s, it was clear that the British were extremely influential in the economics of Argentina. This set up a unique power dynamic between the two sovereign states of Great Britain and Argentina. Some scholars have even argued that Argentina was a product of British imperialism. A. G. Hopkins explains that for imperialism to occur, the sovereignty of one state is being diminished by another state with more structural power.[5] Susan Strange, an English political scientist, identified four main forms of structural power in her study States and Markets. One of these is "control over credit."[5] For a developing nation it is clear that a free line of credit is essential to nation-building. Capital is needed to build industries, and the Argentinians lost their line of credit when they declared independence from Bourbon Spain. Argentina as well as most of Latin America lacked the domestic capital to rebuild after the destruction of infrastructure during the revolutions.[6] Therefore, the City of London stepped in and funded the capital where Argentina could not.[5] In return for this foreign capital, the Argentinians were motivated to ensure political stability and keep the interests of the investors in mind.[5]

A map showing the extent of the Argentinian Railway system as of 1910. At this time it was the tenth largest system in the entire world. It was financed by British investors and this is shown by the use of wider tracks that were common to the British and not the Americans.[7]

An essential component of the investment and development of the Argentine economy was the importation of a modern railway system. The British were responsible for the creation of the Argentine railway system. From 1860 there were 39 kilometers of railways in Argentina; by 1910 there were 23,994 kilometers.[8] At the beginning of the twentieth century the Argentinian railway system was the 10th largest in the world, most of it being a product of English capital financing the new projects.[9] By 1937 there were around 40,000 kilometers of railways, of which 66% was British owned, a very high proportion of foreign ownership for an independent country at this time.[8] Since Argentina at this time did not have a well developed steel industry, the Argentinean railway projects needed to be funded by English capital since capital was limited domestically in Argentina.[8] Railway technology also needed to be imported into Argentina from Europe or the USA.[2]

The purpose of the Argentine railway system was not so much to transport people, as to ship out the agrarian products of the pampas.[7] Since Argentina was developing as an agrarian export economy, railroads were built to connect the rural farmland to the main ports of Argentina, as seen in the map of Argentinian Railways in 1910-1911.[7] Most of the lines centre on cities such Buenos Aires or Bahia Blanca and branch out to the pampas in order to retrieve goods to bring back and ship out to European markets, mainly the British. The British would send in industrial goods to make Argentinian agriculture more modern and productive, in exchange for primary products exported to Great Britain.

When a military coup occurred in 1943 in Argentina, and then with the populist president Juan Perón succeeding to power, investment in Argentina appeared less profitable for investment, especially in 1948 when Perón nationalized the Argentinian railway system which still was mainly owned by the British at the time. The military dictators of Latin America in the 20th century were keen to practice Import Substitution Industry, which meant isolating the Latin American economies from the economies of western European and North America. The method attempted to discourage the buying of finished goods from other countries and instead to produce such goods domestically.[10] Under the import substitution policy, Perón and other dictators in the latter half of the twentieth century nationalized industries, with the aim of building up the industrial sector without relying on foreign capital. This naturally resulted in decreased foreign investment.

• Economic history of Argentina