Kicking the Gringo

We will not encourage United States private investment where it is not wanted, or where local political conditions face it with unwarranted risks. --Richard Nixon

Five months after the President enunciated his Latin American policy, U.S. business feels less wanted and more endangered than ever in several countries to the south. A new wave of nationalism, fed by currents of envy and insecurity, is breaking across South America. The mood finds its main outlet in anti-U.S. economic moves. Last year total U.S. investment in the continent hardly increased at all from the $9 billion level reached in 1968. In most of the countries along the west coast, today's most inhospitable region for Yanqui enterprise, private U.S. investment is actually declining, reports TIME Correspondent Mo Garcia.

Certainly, not all U.S. corporate policies in South America have been enlightened; nor have companies always sent their most imaginative managers to the south. Yet, U.S. companies have provided much in the way of money, motivation and manpower training. South American skylines are bright with signs advertising Sears, Willys, Ford, General Electric--symbols of yesterday's capital commitments that have raised today's living standards.

Old Latin American hands find much of the new nationalism to be particularly confused, erratic and emotional. Though aware that their countries need foreign investment to thrive, Latin ruling cliques have made much political mileage out of complaining that U.S. investment amounts to "economic imperialism." To demonstrate their independence of the U.S., some governments harass Yanqui enterprises while soliciting foreign investment elsewhere. As U.S. businessmen turn cautious, the Soviet Union is expanding its trade and technical aid to much of the continent. The current investment climate in major nations:

BAD

Peru tries to reassure foreign businessmen, but its militant ruling generals often act with a clumsy haste that defeats their aim. The first blow fell late in 1968 when International Petroleum Co., a Jersey Standard subsidiary that had earned a good deal of local unpopularity, was seized without compensation. Last June W.R. Grace's rich sugar estates were expropriated; the government has announced that the company will be compensated, but the amount has not yet been fixed and most of it will be paid in hard-to-redeem bonds. In January the junta decreed that the nation's mainly U.S.-owned auto industry--13 car and truck assembly plants worth $25 million-- must be "Peruvianized." By next year the companies must sell 51% of their stock to local citizens.

Chile has speeded up its "gradual nationalization" policy and now owns 51% of the stock in the country's major copper producers, all U.S. firms. Two of the three candidates in the current presidential campaign call for nationalizing the copper companies completely. Gradual nationalization has also been applied to the U.S.-owned Chilean Power Co., and the state expects to take over 44% of International Telephone & Telegraph's phone subsidiary by 1976.

Bolivia tries to outdo Peru in some ways. General Alfredo Ovando Candia, President of the shaky ultranationalist regime that seized power last September, alternates between accommodating private investment and threatening to nationalize it and form a "Bolivia-Peru-Cuba axis." Since Ovando nationalized Gulf Oil's subsidiary in mid-October, not a drop of its petroleum has been sold. A plan to market natural gas to Argentina is stalled because Gulf was financing the pipeline.

UNCERTAIN

Venezuela wants "selective investments"--those that conform to the government's priorities, notably petrochemicals and fertilizer. Investment by U.S. oil corporations is about $3 billion and still growing, but other North American businessmen have adopted a wait-and-see attitude. There is a strong nationalistic sentiment: influential politicians, including Juan Pablo Perez Alfonzo, the onetime Minister of Mines and architect of Venezuela's present nationalistic oil policy, openly question the benefits of foreign investment. More strikes have occurred in the past year than in the previous decade.

Brazil, which was issuing decrees against outside businessmen a year ago, is again encouraging North American investment--with lukewarm success. Early estimates are that U.S. investments last year were less than in 1968. Despite apparent calm under the harshly repressive military regime, the discontent that led to earlier discrimination against foreign investment is still powerful. It could erupt if the economy falters in the land that always seems to squander its potential.

GOOD

Colombia, which is dominated by a sophisticated entrepreneurial class, welcomes investment and lays out clear ground rules of the kind that entice foreigners. Occasionally, the country excludes projects--such as a U.S. bank buying control of a Colombian bank-- considered harmful to local business interests. U.S. investment amounts to $800 million and is rising by $25 million a year. Among other companies, Gulf Oil is substantially increasing its stake.

Argentina, rich in resources and confident about its future, has regained the best climate on the continent. No government approval is required for foreign investment, though the country discourages takeovers of domestic firms. Fifteen of the 25 largest companies in Argentina are U.S.-owned. Even so, the atmosphere could change. Twenty plants and offices owned by U.S. firms were bombed or attacked during last year's labor violence. But the pro-business attitude of the administration in power is considered the most important factor.

Caught between rising birth rates and inadequate sources of local capital, Latin America depends greatly upon foreign enterprise for its prosperity. But during an era when there is plenty of investment opportunity elsewhere, U.S. business usually shuns hostile territory. In a capital-shy world, revolutionary politicians are likely to find that the emotional satisfaction of kicking the gringo is an expensive pleasure.

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