BUSINESS DIFFICULTY

New Zealand Herald, Volume LXXIII, Issue 22353, 26 February 1936, Page 9

BUSINESS DIFFICULTY

OPERATIONS IN ARGENTINA MORTGAGE MORATORIUM CONTROL OF EXCHANGE RATE The peculiar difficulties met with by the New Zealand and River Plate Land Mortgage Company, Limited, in conducting its Argentine business were referred to at the annual meeting in London by Mr. C. H. Pearson, chairman of directors. Mr. Pearson said that the problems of the moratorium law and the exchange were still present and the year had brought little or 110 alleviation. The effect of the moratorium law was ever continuing. The company had tho difficulty of action against a recalcitrant debtor, and the difficulty—notwithstanding the contractual obligations of the mortgage deed —of the limitations of collectable interest, while as far as exchange was concerned, the company was grievously affected in the transfer of funds. " Our earnings in the past year have been offset by a loss on exchange of no less than £36,173," said Mr. Pearson. " In other words, if our profits had been remitted at the par of exchange, the net profit, instead of £23,835, would have been some £60,000. There are at the present time two rates of exchange operating in Argentina—the Government controlled rate, which at October 31, 1935, was 17.02 pesos to the £1 sterling, and the so-called free market rate, which at the same date was 18.10 pesos to the £1 sterling. Our permitted exchange at the control rate is limited; the remainder must be bought 011 the free market at the best rate obtainable at the time remittances are required. To the one and the other is attributable the loss on exchange which our accounts reveal. " In the past year, in addition to the whole of our Argentine revenue, we felt it right, owing to repayments and absence of mortgage demand, to remit a certain amount of our accumulating funds. This meant covering by purchase in the freo market, with its consequential loss, but in the circumstances we deemed it the prudent stop. As a result our actual and total loss on exchange amounted to £63,522, but. with the exchange provision already made, the figure carried in the profit and loss account was reduced to £36,173. "The prudence of tho directors in the past, which is indicated by restraint from the optimism of ' what is will always be,' meant that at tho close of the financial year the Argentine assets, as valued and as written down in the balance-sheet, with our reserve and carry-forward were covered not only at the controlled but at the freo market rate of exchange. The exchange position has been dealt with very fully at meetings of British companies whose interests and commitments in Argentina aro of vast proportions, and we can only hope for the mitigation which seems so rightly asked. Our future very largely depends upon it."