fresh water 125 miles away. It is about the "livest wire" of any city in the world-at least that I have ever visited. It has over 100,000 population, and except for an Egyptian duty on many articles would be a great trading center for others than tourists.

Aden, situated on a strip of British territory in Arabia, on the Red Sea, where nothing grows and fresh water must be brought a long distance, has 50,000 population on account of its being a free port and city.

Punta Arenas, Chile, on the Straits of Magellan, the farthest south of any city in the world, is a free port and city, and has a population of 15,000. I was surprised at its importance and its fine stone buildings and good streets. The only local support of Punta Arenas is wool and sheep, mostly from the old Patagonia country of Argentina and the Island of Tierra del Fuego. Evidently its importance arises chiefly from its being a free city and free port.

The free exchange of commodities, on account of there being no duty, import or export, put the Island of St. Thomas, near Porto Rico, belonging to Denmark, on the map. It is a good example of what no export or import duty will do for a poor, out-of-the-way island. Nearly every excursion to the West Indies docks there to trade. Its one port carries the largest stock and does the greatest Panama hat trade in the world. Many vessels coal there. It has a great trade with all the West India Islands.

England has tried out the free port and free city idea thoroughly and this is what the Encyclopedia Britannica

says:

In countries where custom duties are levied, if an extension of foregin trade is desired, special facilities must be granted for this purpose. In view of this a free zone sufficiently large for commercial purposes must be set aside. English colonial free ports, such as Hong Kong and Singapore, do not interfere with the regular home customs of India and China. These two free harbors have become great shipping ports and distributing centers. The policy which led to their establishment as free ports has greatly promoted British commercial interests.

The reason I have brought this question up is because I believe it the paramount one in the development of our

commercial relationship with South America, and that it will make the Panama Canal pay. If we do not act soon some other country owning one of the West India Islands, well located to trade with ships passing through the Canal, will take advantage of the situation. The Panama Republic intends now to benefit from our investment in the Canal by creating a free city bordering on the Zone.

HOW TO SECURE AND RETAIN SOUTH AMERICAN TRADE

1. Make the goods the market requires; manufacture, pack, measure and invoice everything the way the South American people want it.

2. Build a large commercial city on the Panama Canal Zone and get as many merchants as possible from all over South America to visit, locate branch houses and buy goods there. They will not come to the United States; they do not speak English-they do not feel at home, but will be at ease in a city in a Latin country where Spanish will prevail and every language in the world is spoken.

3. Establish agencies at the capital of each republic and its chief seaport towns. Put in charge young unmarried men from the United States who can speak, or would soon learn, Spanish, and who would marry into the good families of the country. Their future will be secure and your trade also. This plan is followed by all other countries.

4. Work at home in every honorable way to secure a merchant marine that flies the Stars and Stripes. How can you expect South America to think of trading with us when they never see a ship from this country? I covered 40,000 miles in visiting South America and never saw our flag on a North American merchant ship.

5. Price your goods in the money of the country in which you offer them so they will understand your price and what they are paying. Be prepared to give as good terms, credit and prices as your competitor from Europe. Take your pay in drafts on London, Paris or Berlin, and stand the loss in exchange into Uncle Sam's dollars, or better still, keep agitating the question of a chain of United States banks

through South America-for there are none even if our Government finds it necessary to go into the banking business in foreign countries to extend and protect our trade, as well as visitors from the United States of North America. This is too large a question for me, but it is more necessary for us to have banks in South America than in China, as all our bills of exchange in the Far East naturally come through Europe, anyhow.

6. Establish confidence in our honesty and friendliness. The people of South America have been lied to about the United States by every European salesman for a century. They all know the story of the wooden nutmeg. They nearly all believe that the Monroe Doctrine simply means that we are keeping their country for ourselves until we are ready to take it over, etc. We tell them we do not want their country, and they say how about Porto Rico, Panama Canal Zone, and the Philippines?

7. Do business everlastingly on the square. They are not used to it, but will like it once they find it genuine.

8. Teach Spanish in all our schools. We must do business with South America, Central America, the West India Islands, and the Philippines, in Spanish.

With the highest appreciation of the honor you have conferred upon me, and hoping and believing in a greater nation and closer relationship with South and Central America through making a free port and city out of the Panama Canal Zone, I thank you.

SOME ECONOMIC FACTS AND CONCLUSIONS ABOUT SOUTH AMERICA

By Selden O. Martin, Ph.D., Graduate School of Business Administration, Harvard University

In preparation for the course now being given by the Graduate School of Business Administration of Harvard University upon the Economic Resources and Commercial Organization of Latin America I was sent to South America in October, 1910, to travel, to observe, and to interview. The object was to see the people; to see natural economic conditions such as climate, resources, products; and human economic conditions such as transportation facilities, industrial development, currency, banking; to see the goods that were being handled-for example, through how many middlemen between the countries, how many within the country; and to see changes that might be evident as taking place in the organization of the foreign and domestic trade.

Evidently this was a considerable subject or group of subjects. Of necessity in the time allowed it could be covered only superficially. Avowedly it was so planned. Only the main points could be touched upon. An economic perspective of South America that was approximately correct was sought for. With the frame work of the course constructed on general lines that were according to fact, it was felt that many additional details could be supplied from the material continually increasing at home, from current reports and from correspondence.

The trip lasted a trifle over a year, and amounted to some 26,000 miles of travel in every country in South America, except Venezuela and the Guianas. The Andes were crossed six times in the countries of Colombia, Ecuador, Peru, Bolivia, and Chile. The River Plate was ascended as far as Asuncion, Paraguay. In Brazil, the coffee country, the coast cities and the mouth of the Amazon were covered.

The course on Latin America in the Graduate School of Business Administration of Harvard University, of which much the largest part is devoted to South America, has now been given for five years. Each year has witnessed changes and additions with the increase of reliable information about South America. This sixth year will witness further changes in the course, but no reason has been seen yet for changing certain fundamental economic concepts about South America.

In the time allotted for this paper I should like to give you what seem to me to be important economic facts about South America and to present some economic conclusions which can be fairly arrived at in the light of present knowledge. These facts may be classified as physical facts, facts about the population, facts about trade.

PHYSICAL FACTS

First I should like to call your attention to certain physical features of South America which I believe are fundamental to a correct estimate of its possibilities.

South America is a century older historically than North America. The Spanish and Portuguese had permanent settlements in South America before Captain John Smith was born, yet South America today, with an area equal to that of the United States and Canada combined, has a population scarcely one-half that of the United States alone. Why? There are, of course, weighty reasons, political and racial, and the important economic reason of geographic remoteness. But these are not all the reasons.

One of the most eminent authorities upon the geography of South America has said that Nature must have been in her kindliest mood when she created North America, but not when she created South America. It was not until after my return from South America that I read this sentence and was struck by its pregnancy.