Neighbor's Future

Valentim Boucas, amiable financial adviser to President Getulio Vargas, was in Washington last week. He concluded an agreement which raised the price of wild Amazon rubber and shifted to the Brazilians the responsibility for producing it (TIME, Feb. 28). Also on his mind was the dubious postwar future of Amazon rubber.

The present price of high-grade Brazilian rubber is 60-c- a lb., which is not far above the cost of gathering it from the scattered wild trees of the jungle. Far Eastern plantation rubber is much cheaper. Synthetic rubber may eventually prove cheaper still. Apparently the only hope for Brazil's war-built wild rubber industry is some sort of quota agreement with the U.S.

Forced Draught. Brazil has other worries. Her whole economy has been blown to white heat by the forced draught of war. Long dependent on raw material exports, and plagued by overproduction, Brazilians know that their wartime prosperity is largely a result of cooperation with the U.S. They hope that this cooperation will continue. But they cannot be sure.

"The Paratroopers." At first, the war brought only disaster to Brazil.* U-boats and the shipping shortage choked off exports; coffee piled up in Brazilian ports. But the tide soon turned. The U.S. Commodity Corporation underwrote the unshippable coffee. U.S. naval and air forces fought the U-boats, spent money and gave some employment.

U.S. war industries screamed for Brazilian raw materials, many of them obtainable nowhere else. Down from the States came a swarm of experts and near-experts to advise and plan and buy. So many arrived in the fall of 1942 that Brazilians called them "paraquedistas" (paratroopers). Not all were well chosen. At first they were new to the country, poorly coordinated, confused by Washington rivalries. But they gradually got together under the leadership of Ambassador Jefferson Caffery, did their big job fairly well. The only bad mess was the wild rubber program in the Amazon Valley, where Americans did not take proper advantage of native experience.

Brazil's strategic raw materials (mica, quartz crystal, industrial diamonds, manganese, chrome, tantalum) still have an insatiable market at excellent prices. Since foreign manufactures are hard to get, Brazilian factories have most of the domestic market to themselves. New industries have sprung up, old industries have expanded. A big gainer: the textile industry.

Native capital is abundant, adventuresome. When Panair do Brazil, subsidiary of Pan American Airways, put a new issue of stock on sale in Sao Paulo, hundreds of air-minded Brazilians stood all night in the street waiting to buy the certificates.

Biggest industrial venture is the steel mill at Volta Redonda in the State of Rio de Janeiro. Partly financed by a $45,000,000 Export-Import Bank credit for buying U.S equipment, it will process ore from the enormous, high-grade deposits at Itabira in the State of Minas Geraes. Eventually, Volta Redonda should supply Brazil with a good part of the steel which must now be imported. U.S. help in this project has won a lot of good will.

After the War. Much of Brazil's new industry will probably wilt when foreign manufactures re-enter the market. But Brazil is accumulating capital, machinery, know-how. Brazil's level of industrialization will probably remain well above what it was when the war began. Part of the money to equip her factories with the best foreign machinery will come from a steep excess-profits tax which may be avoided by putting twice the amount into government-issued "equipment certificates."

Britain has a keen eye on postwar Brazil, has made friendly overtures, recognizing Brazil's emergence as a producer as well as a buyer of finished goods. But, with more sense & sensibility than it has sometimes shown in the past, the U.S. has every chance to keep and nurture its biggest, friendliest commercial Good Neighbor.

*Brazil broke relations with Germany on Jan. 28, 1942, declared war Aug. 22. She has lost 23 ships, 748 passengers and seamen.

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