This shows a monthly average value of exports of $581,408. These tables show the great advantage accruing both to the United States and Porto Rico from the changes made in the tariff law by the constituent act.

It is interesting in this connection to note that since the American occupation the imports into Porto Rico have exceeded the exports from the island. There has been some disposition on the part of alarmists to exploit this fact and to call attention to the deleterious effect of "an unfavorable balance of trade" in reducing the circulating medium of the island. Arguments of this character do not commend themselves to the practical and intelligent mind. Since the days of Adam Smith no commercial fallacy has been more repeatedly or conclusively exposed than the argument that an excess of recorded imports over exports is an evidence of economic decline. The aggregate commercial movement of a country is the real index of its prosperity. It is perfectly normal for an agricultural community in the state of economic development in which Porto Rico finds itself to import more than it exports. This was the state of affairs in the United States in the many prosperous years before 1874, during which the country was rapidly growing from an agricultural to a manufacturing state. With the exception of 1896 and 1897, in which occurred an appreciable liquidation in anticipation of war with the United States, the ordinary course of trade in Porto Rico for years prior to the American occupation was an excess of imports over exports. This normal tendency has been accented since the American occupation by an unusual increase in imports and by an exceptional decline in exports. The activity in imports is explained by the delayed purchases and depleted stocks of local merchants due to the disturbances of war and the uncertainty of the tariff, and, on the other hand, by the heightened economic activity incident to American administration in road building, school construction, and public employment. The decline in exports is the normal consequence of a loss of accustomed markets and the destruction in part of staple crops by the hurricane of 1899. This unusual condition of affairs will tend to speedily correct itself, as, indeed, it is now already doing. But an excess of imports over exports may be expected to continue until Porto Rico has attained that stage of economic development in which the productions of the island will be enough to enable her to pay in kind for all purchases or be of so diversified a character as to render it unnecessary to import to so large an extent. There is no occasion for alarm in this prospect. The excess of imports over exports is liquidated in Porto Rico as in

every commercially active community, not by an influx of currency, but by the formation of credits and the creation of investments. Were the fact otherwise, Porto Rico would long since have been drained of every dollar of its currency.

It should be noted from the above figures that while the revenue collected from the operation of so much of the organic law as affects customs of the island could be expected to yield a larger proportion of the amount of money required for the annual budget, yet, by the operation of said law, all these collections upon articles from the United States cease entirely in March, 1902-less than one year.

To meet the loss of customs collections on merchandise passing between the United States and Porto Rico, the legislature, as heretofore stated, has enacted a revenue law, based upon the general features of such laws in the United States, under the operation of which it is confidently expected sufficient revenue will be yielded to meet the economical needs of government.

RETIREMENT OF PORTO RICAN COIN.

Under section 11 of the organic act Congress directed that the Porto Rican coins in circulation in Porto Rico on the 1st day of May, 1900, should be retired, and the Secretary of the Treasury was authorized to redeem them on presentation in Porto Rico at the rate of 60 cents in coins of the United States for 1 peso of Porto Rican money. These coins were to be recoined into American money, as directed in said

In accordance with this law, Treasury agents came to Porto Rico and up to the month of August last redeemed Porto Rican money amounting to 4,862,798.30 pesos, leaving in Porto Rico the proportionate amount of American coin. On the return of the agents of the Treasury to the United States Messrs. De Ford & Co., bankers, of San Juan, were appointed to continue the redemption, and have up to the present time redeemed 266,343.38 pesos, making a total retirement of 5,129,141.68 pesos, equivalent in United States currency to $3,077,485.08. Doubtless some sort of exchange from the Spanish silver currency of Porto Rico to American currency was necessary; but coming just as it did, about one year after the hurricane, it proved to be a hardship upon the people. This result ensued not from any injustice in the exchange nor from any lack of value in the 60 cents of American money given for a peso, but from the fact that the merchants of Porto Rico were slow to recognize the difference in value between a Porto Rican peso and an American dollar. Some of them continued to charge the same prices for their goods in American money as they had previously received in the depreciated currency of Porto Rico. The fruit venders and other peddlers of small wares could not be made to understand that a Porto Rican medio was only worth 3 cents, and bakers gave no larger loaf of bread for an American cent 21400-01-5

than for a Porto Rican centavo, the intrinsic value of which was only 6 mills. So it happened that the greed of one class and the ignorance of others caused great friction in the purchase and sale of commodities and in the transaction of business. In fact, owing to the peculiar circumstances of the case, the exchange from one currency to another amounted for a time almost to the contraction of the circulating medium to the extent of 40 per cent. Such an apparent disarrangement of prices necessarily requires some time to regulate itself, but matters in this respect have been gradually improving up to the present date, and no one regrets the fact that the money used in Porto Rico is now on a par with that of any other in the world. These people have at last realized the fact that one American dollar is as good as another, no matter whether it be composed of silver, paper, or gold, and that the Spanish coins and Mexican dollars are only worth their weight in the corresponding bullion.

Some attempt has been made to calculate the per capita circulating medium of Porto Rico, with a view to demonstrating that its currency supply is inadequate and that its urgent need is more money. To the economic sentiment of the United States this argument will have the familiar accent of inflation logic. In Porto Rico it is part and parcel of the economic fallacy which bases its demand upon the calamitous effects of "an unfavorable balance of trade" and which finds its panacea in a government loan to the farmers and planters of the island. Like every agricultural community undergoing rapid development, Porto Rico is likely to feel for some time to come the inconvenience of financial stringency. The prime need of the island is not currency, but capital; not coin, but credit.

BANKING.

Considering the number of the population, there are few banks, properly so called, in Porto Rico. Banking business, as far as exchange and deposits are concerned, is carried on by nearly every commission merchant of any considerable capital. However, in the principal cities of San Juan, Ponce, and Mayaguez there are several banks giving their entire attention to this business. A large capital is invested, but still inadequate to transact the business of the country.

Although it has been decided by the Attorney-General of the United States that the national banking act is now in force in Porto Rico, no person or association has taken advantage of it to establish a national bånk here. Perhaps the reason may be a desire to lend money on lands and city property, which is not permissible under the banking act of the United States. There can be no doubt that the establishment of a national bank at San Juan, by increasing the confidence of American investors, by establishing a more perfect communication between the island and American financial centers, and by affording the National

Government additional facilities for the deposit of Government funds, would be of great benefit to the country.

The Spanish Bank, or, as it is now called, the Bank of Porto Rico, was established in San Juan under a charter from the Crown of Spain. On the 6th day of June last Congress passed a joint resolution authorizing this bank to amend its by-laws so as to change its name from the "Spanish Bank of Porto Rico" to "Bank of Porto Rico," and to substitute for its capital in pesos the equivalent in dollars at the ratio established by law, and to dispense with the requisite that to be a councilor of said bank it was necessary to be a Spaniard, and to make such other changes in its by-laws as might be in accordance with the existing law, subject to the approval of the governor of Porto Rico. Under this joint resolution, this bank sought and obtained the approval of the insular government of the election of certain councilors. A further request was made that the governor would approve an amendment to its by-laws by which the bank should be allowed to issue notes of a minimum denomination of $1, which was refused, it being deemed unwise and likely to cause dangerous results. The bank has an authorized capital stock of $900,000, with power to increase it to $1,200,000. It has the authority to issue bank notes to three times the amount of its paid-up capital, which at present would give it an authorized circulation of $2,700,000, and the power to increase its circulation to $3,600,000. As this latter amount is nearly, if not quite, equal to the entire circulation of money in the island of Porto Rico, it is deemed a very dangerous power. The circulation of this bank is secured only by specie reserve to the amount of one-third of its total liabilities, no preference being given to the circulating notes above other claims upon the bank. The practice of issuing bank notes so inadequately secured and in such large amounts is deemed a very questionable one, and it may be necessary to call the attention of Congress to the matter in order to secure proper legislation.

DIPUTACION PROVINCIAL.

The diputacion provincial was constituted in the island of Porto Rico by virtue of a royal decree August 28, 1870, and established April 1, 1871.

Its jurisdiction and powers were said to consist in the government and control of the peculiar interests of the province and the material and moral promotion of the same. It exercised the right of inspection and performed the functions of a regulating power over the municipalities. As the said corporation was not in harmony with the new administrative system established by the American Government on its taking possession of the island of Porto Rico, it was abolished by virtue of General Orders, No. 17, on November 29, 1898. Since

the municipalities during the time of the Spanish-American war had not paid their contributions to maintain the diputacion provincial, and the lottery, which was its main source of revenue, was discontinued from the date of the American invasion, the said body was, on its being abolished, destitute of cash with which to meet its obligations and burdened with debts unpaid. In order to decide the claims which might be presented against the said defunct body the then secretary of finance, Dr. Cayetano Coll y Toste, was appointed liquidator. Several claims were decided upon and some payments made by him.

A commission to receive, hear, and decide upon all claims against the late diputacion provincial or arising out of contracts made with the same was constituted by virtue of General Orders, No. 84, Department of Porto Rico, dated April 18, 1900, for the purpose which its name indicates. Messrs. Rafael Nieto Abeille, J. H. Hollander, and J. R. Garrison were appointed members of said commission. The commission on April 26, 1900, at its first meeting, proceeded to appoint Mr. Nieto chairman and Mr. Hollander secretary. The funds in the hands of the liquidator, Dr. Cayetano Coll y Toste, were transferred to the treasurer of Porto Rico, those funds in Porto Rican currency amounting to the following:

Cash

Mortgage certificates (securities).

Total

$118. 73 9, 617.50

9, 736. 23

The creditors were granted, according to the provisions of paragraph 3 of the general orders above referred to, a period of six months for the presentation of their claims, the said period expiring October 18, 1900. One hundred and ninety-eight claims, amounting to $185,755.51, were presented up to that date at the office of the commission. Many of the claims presented are being considered and submitted to investigation. Claims to the amount of $2,877.85 have been favorably reported and the payment thereof made, after having been approved by the governor, and one claim, amounting to $1,043.90, has been rejected and the payment thereof denied. There are still pending claims amounting to $181,833.76 undetermined. Mortgage certificates, deposited as securities, out of those which were received by the treasurer from the hands of the liquidator have been ordered returned by this commission, amounting to 6,217 pesos 50 centavos, Porto Rican currency, because the contracts for which they were given as security have been faithfully performed.

As Chairman Nieto Abeille has lately resigned his office, Mr. Manuel F. Rossy has been appointed a member of this commission. It is presumed that the labors of this commission will ere long be concluded.