Painful Dependence

Of the many maladies that afflict Latin American nations, one of the most worrisome is their dependence on one or two fragile commodities for the bulk of their export income. Last week, in Latin American Business Highlights, the Chase Manhattan Bank examined the dimensions of the malady. Of the 20 Latin American nations, 14 depend on one commodity for at least 50% of their export income (see chart). In two other cases, a pair of commodities bring in more than half the export earnings.

In good times, such basic commodities are the lifeblood of the economy, producing plenty of cash. But lately world surpluses have depressed demand, and prices have tumbled with unhappy results. Although the bank did not specify them, there are abundant examples to prove its point. The 11-c--per-lb. drop in coffee prices in 1957 cost Colombia $25 million--more than its annual education budget. In 1958, when Russia dumped tin, Bolivia's quota was cut 31% by the International Tin Council; Bolivia lost $20 million, almost canceling out U.S aid for 1958.

Commodity prices are not the only problem, says the bank. Major world importers of the hemisphere's commodities --the U.S. (lead, zinc, petroleum) and Western Europe (sugar, beef) in particular--are lending a more sympathetic ear to the protectionist pleas of their own producers, establishing quotas or tightening tariff barriers to favor agriculture and mining at home. The Latin Americans themselves further hamper things by placing restrictive measures on exports in the misguided notion that they are encouraging local processors and manufacturers. Brazil sometimes sets quotas on cotton and sugar exports; Uruguay imposes a 20% surtax on export wool. Other nations peg their export prices without making any provision for the inflation that gallops through most of Latin America.

The effect is to discourage production and exports. And without foreign exchange, one-crop nations are unable to industrialize and diversify. Latin America's export problem is illustrated in one set of statistics. While between 1947 and 1960 the Middle East increased the value of its exports by 70%, Asia by 109%, Western Europe by 184%, the total of Latin American exports grew only 27%.

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