LATIN AMERICA'S NEED TO EXPAND

Why Good Neighbors Must Get Together

THE economic and financial policy-makers of the U.S. and the 20 Latin American states meet next week in Rio de Janeiro for a conference that will have serious implications for the future relations between the U.S. and its neighbors. At issue is how much help, and what kind of help, the needy countries south of the border can expect from the U.S.

The Latin Americans bring with them eager hopes for sweeping changes in U.S. trade and investment policies--changes that would mean U.S. loans to produce more industrialization, more opportunity, a better life for the millions of impoverished who dwell in the high Andes, on the lonely pampas, in the green jungles and the crowded cities. The U.S. agrees wholeheartedly with these hopes: they grew in part from the loans-and-aid recommendations of Milton Eisenhower, who toured Latin America a year ago on behalf of the President. But what the U.S. proposes to offer seems to be far short of what the Latin Americans would like. If the Latinos are let down at Rio, their disappointment may generate the most serious era of bad feeling since the Good Neighbor Policy began.

Good Traders. Latin America depends almost solely on the U.S. for the means to develop its immense resources. Since the turn of the century, the U.S. has poured more direct private investments into Latin America ($6 billion plus) than into either Europe, Canada or the combined remainder of the world. Between the Rio Grande and Cape Horn there are 2,000 U.S. enterprises: oil companies, mines, auto factories, power plants, banana plantations.

Latin America sells the U.S. more ($3.5 billion a year in coffee, sugar and militarily essential metals), and buys more U.S. goods ($2.9 billion a year in vehicles, chemicals and textiles) than any other continent. Its peoples number 167 million, and they are multiplying 2 1/2 times as fast as the rest of the world. But three-fifths of them are lowly tillers of the soil, and their per capita yearly income (about $275) is a meager one-sixth that of the U.S. citizen.

The U.S. and the Latin Americans agree that a raising of this standard of living can no longer be postponed. Says Henry Holland, the State Department's top official for Latin American affairs: "Perhaps the most important single economic development in the hemisphere is the growing determination among men everywhere somehow ... to feed, clothe, house and educate themselves and their families better." But what should be done, and how?

One possibility is outright grants; since the war, as Latin Americans often point out, rich Belgium and tiny Luxembourg have received almost three times more from the U.S. than the $209 million given to all 20 Latin American nations. Most Latinos, however, are beginning to agree with the U.S. that money gifts are not the cure. Another possibility is higher prices for the things Latin America sells, but the U.S. is cool toward price supports anywhere. A third way is more technical guidance from the U.S.; Latin America could use another 7,000 scholarships a year to train engineers and technicians in the U.S. But both the U.S. and the Latin Americans agree that the heart of the matter is Latin America's need for greater capital investment.

In recent years investments from all sources in Latin America have been running at about $4.4 billion a year. Of this, $1.8 billion is from domestic private capital (v. $50 billion in the U.S.), $2.2 billion from domestic government capital, $350 million in foreign private capital, mostly from the U.S., and $80 million from the World Bank and the U.S. Export-Import Bank.

A Billion a Year. The argument that will flame at Rio is over which of these sources of capital should be or can be expanded. The Latin Americans argue that their domestic savings already run to 16% of their combined real national incomes, which is better than the U.S. rate. As for foreign private capital, the remitting of profits (about 10%, after plowbacks) takes an ill-spared tenth of the dollars Latin America gets for what it exports; the Latinos feel that they cannot afford more of this kind of help. Moreover, private capital cannot finance such basic, productivity-boosting investments as roads, schools, health programs.

As the Latin Americans see it, that throws the burden on public loans. They would like the World Bank and the Export-Import Bank to step up loans (which commonly pay low interest, about 4%) to $600-$650 million a year. They also want a U.S.-financed development bank that would lend $50 to $100 million a year to individual Latin American industrialists and farmers. The U.S. Treasury, they point out, collects about that much in taxes paid by U.S. firms operating in Latin America. These loans, plus private foreign investments that would be held to $300-$350 million, add up to a round $1 billion a year from abroad.

The 20th Century Businessman. The Latin American argument is tidy, and in some ways dramatic. But in writing off private enterprise so fast, it slides unrealistically over the actual experience of many Latin American countries. Profit remittances are indeed heavy, but the very U.S. enterprises they reward are big dollar earners for the countries involved, e.g., Cuban sugar, Venezuelan oil, Chilean copper, Mexican lead and zinc.

Foreign oil investments in Venezuela pay a 20% return, yet bring in so many dollars in oil sales that the country has South America's hardest currency and never asks for loans. President Eisenhower thinks so well of this example that he recently awarded Venezuela's strongman, Marcos Perez Jimenez, the U.S. Legion of Merit for his "sane economic policy." Venezuela's neighbor, Brazil, by contrast, excludes foreign oilmen so rigorously that even Brazilians married to foreigners may not own oil stock. This attitude is an understandable product of proud nationalism, but the result is that Brazil must spend a third of the dollars she gets on fuel from elsewhere (including Venezuela).

"We believe," says Holland, in what represents the germ of official U.S.'policy for Rio, "that in the 20th century businessman, be he Brazilian, Mexican, North American or what you will, lies the greatest hope for prosperity for our hemisphere." This businessman does not need lavish incentives. But foreign capital will not come if: 1) the law flatly stops it, e.g., as in Brazilian oil; 2) expropriation is likely or governmental economic policies shift unpredictably; 3) profit remittances are curbed (when Argentina's Juan Peron raised remittance limits, Henry Kaiser promptly signed up to put $10 million into a badly needed car factory).

As for roads, schools, dams, pipelines and hospitals. Holland points out that the U.S. "proposes to intensify and expand the activities of the Export-Import Bank" for projects "for which private capital would not reasonably be available" in countries that "have taken the measures which would reasonably encourage private capital." How much the Export-Import Bank might lend, the U.S. was not ready to say, but its lending capacity has lately been raised by $500 million.

On the eve of the conference, the U.S. also decided to back the idea of a bank to lend to private enterprisers as a sort of internationalRFC(seeNATIONALAFFAIRS). The new bank will be small (capital: $100 million), and it will deal all over the world, not just with Latin America. But it is nonetheless a change in the seemingly firm U.S. stand, and it was a most propitious gesture.

For weeks, the U.S. has been acting and talking as if it would go to Rio with nothing but disappointments for Latin America. The new U.S. gesture was sufficient to brush some of the pessimism aside, and suggested the possibility that more compromises can be achieved at Rio. Assured of some help, Latin Americans may face up to the fact that their policies and governments often stand in the way of the foreign investments Latin America needs most. And the U.S. may find a stronger will to help the Latin Americans turn their valid hopes into realities. But it will require more than good will. "Good will," commented one Latin American, "is fine, but it will not grow potatoes."

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