Return of the Money

A worldly group of businessmen gathered in Buenos Aires last week to speak of Latin American investment in an unaccustomed atmosphere of hope. Eighty-five bankers and industrialists, dedicated to bringing together U.S. investment dollars and Latin American opportunities, had come from every part of the hemisphere for the annual meeting of the Inter-American Council of Commerce and Production. This year the meeting was more important than usual: after several years of growing disenchantment, U.S. investors are again showing interest in putting money into Latin America. It is, however, money with some strings attached. Speaking candidly, George Moore, president of New York's First National City Bank, told the Latin Americans: "We support only our friends--only those who help themselves."

More Stability. The investment climate has become friendlier since it reached a low in 1962, when foreign investors took more capital out of Latin America than they put in. New U.S. investment rose from $64 million in 1963 to $175 million in the first nine months of last year, and is still climbing. The chief reason for the rise is an improvement in Latin America's political posture. Castro's influence has waned, and so have fears of Communist takeovers. More governments are moving toward stability. A rise in commodity prices last year helped commodity-dependent Latin American economies. Even more impressive to the U.S. investor: the State Department has negotiated detailed agreements with 15 Latin American countries guaranteeing investors against losses from expropriation, currency inconvertibility, war, revolution or insurrection--the very losses that they fear most in Latin America.

Many American companies have revised their investment plans to include new facilities in Latin America, including Dow Chemical, General Motors and Chrysler, all of which are building large new plants. U.S. Steel, Union Carbide and Alcoa are considering multimillion-dollar expansions there. Chile's government has persuaded its U.S. copper companies--Cerro de Pasco, Kennecott and Anaconda--to invest $410 million by 1970. Venezuela has done such an effective job of mopping up its Communists that Jersey Standard's Creole and other oil companies, which transferred more than $100 million out of the country in 1962 and 1963, are pumping capital back in again, though not so fast as in the banner year of 1957. Mexico's President Diaz Ordaz recently set a new tone by declaring: "We need and welcome private capital." In the light of anti-inflation measures in Brazil, the World Bank, in which the U.S. has the greatest stake, has agreed to lend money to that country for the first time in five years.

Tax Holidays. There are still plenty of dangers and disappointments. Soaring prices and shaky governments bother Bolivia, Uruguay, Colombia and Argentina. The Latin American Free Trade Association has made scant progress, though the more modest Central American Common Market has been surprisingly successful. Almost everywhere Latin Americans still have a strong aversion to foreign investments in utilities, oil drilling, mining, and other enterprises that extract and export natural resources. Nonetheless, there is still great potential for investment in such growing fields as auto parts, petrochemicals, machinery and some appliances. And there is another strong incentive for Yankee businessmen to look south: several Latin American countries have begun to declare tax holidays for U.S. industrial investors.

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