PRINCIPLES OF VALUE AND PRICE 477 



The only escape from bankruptcy seemed to lie in a refinancing 

 of the government obligations and a definite plan for realizing on the 

 coffee holdings, and nearly the entire year 1908 was spent in negotia- 

 tions having this end in view. These recently (December, 1908) 

 reached a successful issue, but only after the federal government had 

 come to the assistance of the state by granting an unqualified guaranty 

 of a new loan of 15,000,000 to be used to refund the earlier obli- 

 gations. 



The essential features of this loan and the contract which accom- 

 panies it are: 



1. The federal government indorses it with an unqualified guar- 

 anty. 



2. The Sao Paulo coffee holdings, amounting now to 6,994,420 

 bags, are warehoused in New York and seven European ports, and 

 warrants for them are deposited with specific banks, which act as 

 trustees for the bondholders. 



3. This coffee is placed under the sole control of a committee of 

 seven residents of the United States or Europe, who are given full 

 power over its liquidation, saving only a proviso as to minimum sales 

 during the next ten or eleven years. 



4. The state of Sao Paulo raises the surtax from 3 to 5 francs per 

 bag, and guarantees the application of the proceeds to the sole pur- 

 pose of satisfying the interest, amortization, etc., of the loan. 



5. The state likewise agrees to restrict exports to 9,000,000 bags for 

 1908-9, 9,500,000 bags for 1909-10, 10,000,000 for succeeding years. 



The placing of this loan marks the official end of the valorization 

 experiment. 



In summing up the general results, one must bear in mind both 

 the state government and the planters. The credit of the state has 

 suffered severely. No proof of this statement is needed beyond the 

 fact of the extreme difficulty in raising the final loan and the insistence 

 of the financial world that federal guaranty must be secured. Prior 

 to 1906 the ability of Sao Paulo to meet its obligations seems to have 

 been unquestioned, and it was borrowing freely for many sorts of per- 

 manent improvements. The direct financial loss, though extremely 

 difficult to estimate, has in all probability reached a sum of several 

 millions of dollars. 



The results to the planter are somewhat clearer. Those whose 

 coffee the government purchased undoubtedly reaped a financial 



