Italy

«The Economist», 2 aprile 1938, p. 12

RECORD CAPITAL ISSUES. – Turin, March 14. – This will be a record month in the history of capital issues by Italian joint-stock companies. Shareholders’ meetings of both small and large companies have, one after another, approved of capital increases ranging from 10 per cent, upwards of existing capital. In recent years, capitalisation has been modest:

The total number of joint-stock companies now stands at 20,018, with a capitalisation of 47,695 million lire. The increases now projected will be mainly a matter of writing up. The force behind the movement is the recent tax of 10 per cent, on the capital of joint-stock companies. The tax decree authorised companies to issue new shares up to the amount required to pay the tax; and, to make the shareholders swallow the pill happily, authorised companies to issue, at the same time, up to two bonus shares for each paid-up new share. The issue of bonus shares can be justified by the writing-up of undervalued assets; for all assets, in a general way, can be deemed undervalued since the alignment of the lira in October, 1936.

The reaction to this enabling legislation will probably not be uniform among all the 20,018 companies. Most of them are one-man or family concerns, which will not be over-anxious to increase their capitalisation. The most important companies, whose shares are quoted on the Bourses, will, by watering their capital, achieve two objects: first, they will be able to distribute higher dividends, without increasing the percentage, and so without incurring the penalty of the new progressive taxation on dividends over 6 per cent; and, secondly, by writing up their assets, they will increase the yearly amortisation sums which, according to income tax regulations, they are allowed to deduct from gross income.

UPWARD TREND IN TRADE. – Signor Lenti has analysed in II Sole the recent trends in Italian foreign trade. Excluding trade with the colonies, the figures are as follows (in million lire):

Expressed in index number (1929=100), the volume and value of foreign trade have moved as follows:

Thus, the volume of imports has fallen by 32.05 per cent, since 1929; while exports fell only 19.58 per cent. But, since import prices declined only 8 per cent., while export prices fell 35.25 per cent., the terms of trade moved against Italy, and the surplus of imports in value reached a record high level.

This deterioration in the terms of trade is most marked in the case of semi-finished and finished products. As food and raw materials are a large part of imports, and semi-finished and finished products bulk largely among exports, improvement can only be achieved by a relative increase in the export price of finished products. How far such an increase could go without jeopardising exports is the crucial problem of Italian foreign trade.