corporate issues guaranteed by foreign governments. These two classes comprise 88.3 percent of the total. The private corporate issues are located in Canada, 53 percent; Europe (primarily, Germany and Italy), 37 percent; Asia (principally Japan), 8 percent; and all other areas, 2 percent. Most of the issues included among miscellaneous portfolio investments are Canadian in origin.

Figure 10.-American direct investments in foreign countries, by geographic areas, end of 1936 (reprinted from American Direct Investments in Foreign Countries-1936, Economic Series No. 1, U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce, 1938)

Figure 11.-American direct investments in foreign countries, by industrial groups, end of 1936 (reprinted from American Direct Investments in Foreign Countries-1936, Economic Series No. 1, U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce, 1938).

The market value of foreign dollar bonds has been computed by pricing each individual issue, for most of which quoted market prices were obtainable. Table 21 gives the results for the last 4 years as they relate to the portfolio on the respective year-ends. In addition, table 22 gives the market value by areas for total foreign dollar bonds outstanding and table 23 the comparable value for defaulted issues only, after allowances for repurchases by foreigners.

The average market value of issues not in default as to interest, by areas, after allowance for repurchases by foreigners, was as follows on December 31, 1937: Canada and Newfoundland, 105.0; West Indies, 86.4; Central America, 57.0; South America, 68.4; Europe 84.4; Asia, 73.5; and Oceania and Africa, 102.2.

Table 21.-Market Value of Foreign Dollar Bonds, by Geographic Areas, Dec. 31,

'Figures in this column are computed on the basis of net amount held in the United States after allowing for repurchases by foreigners. All other figures relate to the "American share" outstanding. (See table below.)

REPURCHASES BY FOREIGNERS OF FOREIGN DOLLAR BONDS

Since 1930 published data relating to portfolio investments have been qualified by an estimate of net repurchases by foreigners. The estimate included both repatriations to the country of issue and purchases by the nationals of foreign countries other than the debtor nation. Data on this subject have been, and still are, highly unsatisfactory. In arriving at the estimate for 1937, an issue-by-issue analysis was made. Fiscal and paying agents for the various issues responded to a request for cooperation and were the primary source of the information used. Total net repurchases by foreigners were placed at $1,229,000,000, and their geographic distribution is indicated in table 22 below. The figures are subject to a wide margin of error, since for many issues, as well as for several important countries, little or no exact data were obtainable.

Table 22.-Foreign Dollar Bonds Outstanding and Estimated Repurchases by Foreigners, by Geographic Areas, Dec. 31, 1937

Except in those instances where more accurate information was available, the "American share" was calculated by allocating to the United States the proportion of the currently outstanding amount of each issue that was taken in this country at the time the issue was originally offered.

2 This figure represents the estimated American share of issues having a total outstanding par value of $7,831,000,000, of which $3,378,000,000 were Canadian and $2,110,000,000 were European.

* Includes about $27,000,000 of foreign currency issues, other than those payable only in Canadian dollars.

The highest percentages of repatriation and repurchase were found in the dollar bonds of France, Austria, Australia, and Japan. From the viewpoint of absolute amounts, however, Germany was in the fore, accounting for more than 50 percent of the repurchases of all European dollar bonds. It was followed by Japan, Australia, Italy, and France. It is evident that the estimates of repatriations and repurchases relate exclusively to the foreign dollar bonds outstanding on December 31, 1937. Total repurchases by any one country or area for any

particular period cannot be computed. Argentine dollar bonds, for instance, were purchased in large quantities by foreigners after 1931, but the extensive redemptions of the last two years have served to eliminate entirely most of the issues so repurchased.

INTEREST-DEFAULT STATUS OF FOREIGN DOLLAR BONDS

The interest-default status 6 of outstanding foreign dollar bonds is shown in table 23. Due primarily to the redemption of issues not in default, the percentage not receiving full interest service increased slightly during the year, from 35.3 to 37.0. These figures compare with 36 percent at the end of 1935 and 32 percent at the end of 1933. Issues in complete default showed a relative decrease, constituting 66.9 percent of aggregate defaulted issues as against 71.3 for the previous year, but the change was in some measure due to the transfer of certain Canadian defaulted bonds from the portfolio to directinvestment category.

Table 23. Interest-Default Status of Foreign Dollar Bonds, by Geographic Areas Dec. 31, 1937 1

This table is based on outstanding foreign dollar bonds of $3,804,000,000 (see table 20), after adjustments for repatriations estimated at $1,229,000,000. In order to facilitate comparison with the interest-default data as presented in The Balance of International Payments of the United States in 1936 (p. 39), the bottom row of figures relate to the total American share, $5,033,000,000, before adjustments for repatriations. Certain Mexican, Russian, and Chinese issues long in complete default as to both principal and interest are excluded from these estimates of United States portfolio investments.

Interest-default was based on the status of the last coupon payable Payment of interest confined to coupons previously due was not considered a proper basis for removing issues from the defaulted lists. Issues were considered as in partial default if they were serviced with payments of partial cash, scrip, or funding bonds. Issues on which interest payments were deposited in restricted foreign currencies in the debtor countries were by definition included among complete defaults.

Effect has been given in table 23 to estimated repurchases by foreigners. About 42 percent of the repurchased bonds still out

By interest default is meant the failure of the borrower to pay interest in conformity with the provisions of the bond indenture-the gold clause excepted. Negotiations often result in the lowering of the contract rate of interest, the cancelation of past-due coupons, the issuance of income bonds in exchange for the original bonds, or some other permanent solution. When such revisions are accepted by the bondholders and adhered to by the debtors, the contracts are considered as having been amended, and the issues are treated as no longer in default.

standing are defaulted issues. This figure is greater than the above percentage of 37.0 for all dollar bonds outstanding, because of Germany's importance as to both repatriations and defaults.

The number of countries showing an improvement during 1937 in the interest-default status of their foreign dollar bonds was about double the number of those whose position became worse, although half of all defaulting nations showed no real change at all during the period. Exactly the same countries whose dollar bonds were in default in 1936 made up the 1937 list.

Improvements in the status of foreign dollar bonds were noted among the issues of the Republic of Uruguay, the Province of Buenos Aires, Argentina, and the Los Altos Railway of Guatemala, all of which issued readjustment bonds in exchange for certain defaulted issues-Buenos Aires having begun such an exchange in 1936. Larger cash payments were being received at the end of the year from Bulgaria, Hungary, and, for noncurrent coupons, from Chile. Poland,

Figure 12.-Foreign long-term investments in the United States, by types of investment, end of 1934, 1936, and 1937.

whose issues went into complete default late in 1936, also made partial cash payments during 1937. Germany issued 3 percent dollar funding bonds in payment of certain past-due coupons.

The adverse side of the default picture was dominated by Brazil, which announced suspension of service in November 1937. The full effect of its default was not felt until 1938. Two issues of the Republic of Costa Rica, one issue of the Municipality of Panama, and two issues of the Kingdom of Yugoslavia went into complete default during 1937.

Since the close of 1937, some of the Austrian dollar bonds have gone into default, but the effect on the status of total portfolio investments was more than offset by the application of Cuba to list $85,000,000 of new bonds to be exchanged for issues long in complete default, by a new offer on the part of Yugoslavia to make partial cash payment, and by a clarification of the Chilean debt suspension decree which may make it possible for bondholders to accept the limited service without sacrificing their rights under the original contracts.

FOREIGN LONG-TERM INVESTMENTS IN THE UNITED STATES

As of the end of 1937 foreign long-term investments in the United States were estimated at $5,270,000,000. (See table 24.) This represents a decline of 14 percent from the 1936 total notwithstanding an inflow of foreign capital into United States securities during 1937 in the amount of $251,000,000.67 The decline in the total was the result of the sharp drop in the market value of common stocks in this coun

Figure 13.-Foreign long-term investments in the United States, by principal countries and areas and by

industrial groups, end of 1934.

try, which fell, according to the Standard Statistics Co. index of 420 stocks, from 123.5 in the first week of 1937 to 77.5 in the last week of December. Foreign-held common stocks comprised 35 percent of total foreign investments in this country at the end of 1937, and 44 percent at the end of 1936 (see fig. 12).

See section, "Capital Transactions."