Foreign Aid to Brazil - Priming the Pump and Waiting for the Trickle-Down
Yost, Israel
The massive flow of "development" aid into Brazil in recent years is not simply a phenomenon appropriate to its size. It is rather a measure of the unqualified support given the military regime...
...It is rather a measure of the unqualified support given the military regime by the United States and the U.S.-dominated international aid agencies...
...funds was committed for the development of the Northeast...
...Fortune, March, 1965...
...2 6 Combined with the private foreign debt, this total debt is so large that about 20 percent of Brazil's foreign exchange earnings are required just to service (i.e., make interest and principal payments) the existing debts...
...2 0 AID has recently introduced a novel capital market development plan in Brazil, hailed as a "new foreign aid and development concept...
...The Brazilian government favored World Bank financing, because its international competitive bidding would undoubtedly keep costs lower, and because the World Bank would provide more money for support facilities...
...As Furtado saw it, AID was to channel its aid through SUDENE for projects encompassed by this development plan...
...2. The "islands of sanity" policy is discussed (with frequent deletions) in hearings before the Senate Foreign Relations Committee, United States Policies and Programs in Brazil (Washington, 1971), especially p. 250...
...Indeed the Northeast of Brazil was singled out by the Kennedy administration as the most important target area of the Alliance--the Cuba that would not be lost...
...Steel and CVRD...
...This is not peculiar to the Brazilian case, but is the most consistent economic function of U.S...
...The selective use of loans to governors was not limited to the Northeast...
...bilateral program in Brazil was massive -- hundreds of aid officials occupied one of the largest buildings in Rio, and administered well over $200 million each year...
...In particular, the road links being built (with $47 million from IDB) between southern Brazil and Uruguay, lend even more reality to the threat of a Brazilian invasion should Uruguay move toward the left...
...companies and developed at the expense of popular consumption industries, Brazil is one of the few Latin American nations capable of utilizing such a program...
...Despite the objection of AID's own education officials that the problem with primary education was not facilities but curriculum and teacher training, the mission decided to build schoolrooms as dramatic evidence of the U.S...
...support was simply their fierce opposition to the Goulart administration and the popular forces that were mobilizing behind it...
...The Brazilian subsidiaries of Ford, DuPont, Owens-Corning, Bethlehem Steel, Hanna Mining, and Union Carbide have similarly benefitted from Eximbank money over the past several years...
...Actually, most procurement under AID remains tied, but the less developed countries are now averaging about $3 million a month in AID-financed sales to other aid recipients...
...that is, to bypass SUDENE and shortcircuit its regional development strategy...
...3. Despite scores of euphemisms and deletions, the Hearings give ample indication of the political intent of U.S...
...corporations...
...These U.S...
...vessels, the Brazilians decided the price was too high and the loan was canceled...
...Although this still represents a very small part of total AIDprocurement, Brazil (along with South Korea, Taiwan, Zambia and India) has managed to get a good chunk of this business...
...right after Olin bought the Celulose e Papel) company from a Brazilian group 1958 $ 2.5 Kaiser Industries* Jeep manufacturing American Overseas Finance The company has since been (Willys-Overland do Co...
...AID, however, has a declared commitment to the development of the countries in which it operates...
...exports, often make the credits available to U.S...
...2 4 Even if the trade resulting from this program never reaches high levels, Brazil will undoubtedly get the lion's share of this contracting, and extend further its already unequal trade relations with the other countries of Latin America...
...Under this program, Eximbank extends credits to participating foreign banks, which in turn relend them to local businessmen...
...1 2 Intended to double Brazilian output over a five year period, this massive effort involved Brazil's three largest steel mills and required $500 million in external financing...
...1959 $ 4.0 U.S...
...Yet while the AID effort has been toned down, funds from other agencies have increased rapidly...
...THE WILLING AND OWING ALLY Given the amount of aid that Brazil has received from the United States and the international agencies, it might seem surprising that Brazil has established a little foreign aid program of its own...
...Reported in Business Week, February 13, 1971, The Christian Science Monitor, February 18, 1971, The New York Times, February 22, 1971, and The Journal of Commerce, February 30, 1971...
...aid policy was governed by political rather than fiscal considerations...
...commodities...
...As reported in the Eximbank's Annual Report to Congress and Eximbank press releases...
...Eximbank ("long term loans") -- -- -- 6.0 16.9 30.0 50.8 27.9 65.6 74.0 n.a...
...But the progressive movements of the Northeast had to be curtailed, and thus the Embassy focused on "impact" projects designed to combat "communist influence" in the area...
...5. A "standby" agreement allows the recipient country to draw a stipulated amount of foreign (i.e...
...When the United States launched the Alliance for Progress in 1961, Brazil was immediately identified as the key nation in aid strategy...
...Agency for International Development 85.1 86.5 179.5 234.9 243.7 214.9 193.8 12.4 88.0 79.4 9.4 1,256.0 PL 480 (U.S...
...When asked about this loan, an AID economic officer replied that loan standards (i.e., the same type of fiscal requirements imposed in 1963) had to be "relaxed" because of "overriding United States political considerations...
...These loans extend general support to the government by providing foreign exchange (i.e., dollars) with which to import U.S...
...Since Brazil had the capacity to produce virtually all the secondary school equipment necessary, an AID loan to meet this development need would not result in direct dollar imports from the United States...
...Another purpose of the national road system, however, is to strengthen the political and military posture of the current Brazilian regime...
...Other examples of this concern over import generation, involving a power plant and a road maintenance project, can be found in an unpublished paper by Judith Tendler (University of California at Irvine) entitled "The Abundance of Foreign Assistance " (December, 1970...
...1 3 The International Finance Corporation (IFC), part of the World Bank group, specializes in investing "development" funds in joint ventures involving multinational corporations...
...government grew increasingly dissatisfied with the left-nationalist trend of the Goulart administration, aid (and its withdrawal) became an important tool in undermining Goulart's position...
...The electric power sector has been the largest recipient of aid credits in Brazil...
...Overseas Loans and Grants, July 1, 1945 to June 30, 1971 (Washington, D.C...
...approval of any move to oust the federal government...
...government has generally justified the suspension of aid to Goulart on purely fiscal grounds...
...Moreover, the IMF, which functions as the watchdog of From the Senator's Press Conference The United States, said Sen...
...In this case, The Brazilian government committed itself to provide matching contributions in local currency for a major project in secondary education and to implement important structural reforms in curriculum and methods of teaching...
...AID was unsuccessful in this attempt, as Arraes was elected...
...2.10TABLE II: International Finance Corporation Committments in Brazil Involving U.S...
...9. Carlos Diaz-Alejandro, "Some Aspects of the Brazilian Experience with Foreign Aid," in J.N...
...The increased investment required to solve these problems, however, was vehemently opposed by Brazilian nationalists of all stripes...
...The New York Times, February 18, 1968, Business Week, November 14, 1970, and Peruvian Times (Lima), April 21, 1972...
...Moreover, projects involving large direct imports from the United States, such as capitalintensive highway maintenance, which opened possibilities of diverting Brazilian imports from Western Europe toward the United States, tended to be favored over higher priority projects involving a high share of local costs...
...Export-Import Bank, the International Monetary Fund and the World Bank had already stopped lending to Brazil...
...The) Treasury (Department), therefore pressed AID to concentrate on higher education, in the hope that funds for a university program might divert purchases of university laboratory equipment from Germany to the United States...
...However, Brazil, which has the most developed industrial plant in Latin America, prohibits the importation of foreignfinanced equipment if an equivalent Brazilian product exists...
...THE LOWER PROFILE Where, then, has all this money gone...
...corporations, than to the needs of the Brazilian people...
...During 1972 alone, three of these agencies extended well over $1 billion in loans to the dictatorship, at the same time that the democraticallyelected government of Chile found nearly all its aid channels shut down...
...Under the leadership of the internationally-known Brazilian economist Celso Furtado, SUDENE had developed a comprehensive long-range plan for the Northeast, which sought the economic, political and social development of the region by circumventing the local oligarchies entrenched in the state governments...
...271.2 World Bank -- -- -- 79.5 49.0 100.6 61.9 74.9 205.0 160.4 437.0 983.8 International Finance Corporation -- -- -- -- 11.0 10.7 -- 9.4 8.4 10.9 27.5 77.9 Inter-American Development Bank 25.6 18.6 25.8 80.4 87.3 125.7 76.9 99.8 160.6 119.9 n.a...
...The Foreign Assistance Act stipulates that at least 50 percent of AID-financed goods must be shipped on U.S...
...1 And as U.S...
...In 1972, for example, Brazil surpassed Japan as the biggest borrower from the U.S...
...means not available...
...Eximbank (over $2.6.billion) and became the largest World Bank debtor as well...
...The Christian Science Monitor declared that "President Nixon 17 -will have to settle the dispute...
...Phillips also had the good fortune to buy into another AID-supported project...
...plied funds 1966 $ 6.1 ADELA Investment Co.* Kraft paper mill Bank of America The IDB and BNDE also pro1969 $ 1.0 (Papel e Celulose vided funds Catarinense, S.A...
...AID project loans for power have been numerous and large, and the IDB has provided about $240 mil- 19 lion since 1962, including the second largest in its history -- $70 million in 1972 for the Ilha Solteira hydroelectric plant...
...The events of the period, as well as recent statements made by U.S...
...aid to Brazil has served three essential functions: 1) to service the various activities (exports, shipping, overseas investment) of U.S...
...Bhagwati et al (ed...
...14.80 (5.5%, 15 years, repayable in cruzeiros to Brazilian Government) International Finance Corp...
...Food for Peace Program) 72.5 47.9 150.9 24.6 79.1 21.6 82.9 10.4 62.4 40.6 n.a...
...Military Apparatus...
...With a growing capital goods industry dominated by U.S...
...In addition, Brazil has increased its borrowing from private banks...
...insurance companies 1970 $ 8.4 National Distillers & Petrochemical plant Bank of America & U.S...
...When Kennedy adviser A.A...
...Brazil has recently extended credits of nearly $80 million to various Latin American nations, and prospects are for more in the future...
...Brazil in the Sixties (Nashville: Vanderbilt University Press, 1972), p. 81...
...The American figure, he added, did not include the more than 800 Brazilians working for U.S...
...Agency for International Development, U.S...
...Banzer's repressive government closely resembles the Brazilian regime, and provides a friendly buffer against - 21 - -- Israel YostReferences i. This discussion of the Northeast is based primarily on Joseph A. Page, The Revolution that Never Was (New York: Grossman, 1972), which is reviewed elsewhere in this issue, and Riordan Roett, The Politics of Foreign Aid in the Brazilian Northeast (Nashville: Vanderbilt University Press, 1972...
...The Banco do Brasil, for example, received a $100 million credit line in 1971, and the offer of an additional $100 million in guarantees.23 Brazil was also one of the first countries to be designated as eligible to supply goods under AID contracts when Nixon originally announced the "untying" of aid in 1969...
...Administration of U.S...
...472.5 U.S...
...AID has also YEAR (millions) (Brazilian name) Operation U.S...
...mission was much more concerned about the growing peasant and urban populist movements in the Northeast region...
...One planting season was lost entirely Before agreement was reached...
...This bolstering of the securities market is expected to divert capital flows from excessive consumption, speculation, and foreign bank accounts for use within the national economy, by making investments in the stock market more profitable...
...776.4 SOURCE: U.S...
...Data for 1972, where available, comes from the annual reports of the agencies involved (n.a...
...Vale do Rio Doce (CVRD), which insisted that it should develop the deposit at Aguas Claras...
...business extends beyond exporters to the shipping industry as well...
...7.75 International Finance Corp...
...Plywood-Champion Paper & pulp plant Deltec International, Ban- Brazil's national developPapers, Inc...
...1971 $ 6.0 Halcon International* Petrochemical plant None (Oxiteno, S.A...
...2 The intent of this so-called "islands of sanity" policy was to isolate Goulart economically and politically, and demonstrate U.S...
...1 9 BRAZIL: THE CHOSEN ONE Brazil is currently participating in several specialized aid programs that facilitate its newly-ordained role as the power in Latin America...
...products, and this - 16 - TOTAL AGENCY 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1964-72 U.S...
...vessels, which are the most expensive in the world...
...The Eximbank claimed that it was the logical financier, since it had already invested $150 million in the steel industry, beginning with a loan in 1942 designed to induce Brazil's break with the Axis powers...
...The exact figures for each agency are given in Table I...
...The subsidizing of U.S...
...aid policies in Brazil...
...The first, and probably the most blatantly political, of these select impact projects was a school construction program in the state of Pernambuco...
...See also the books by Page, Roett, and Onis and Levinson, cited herein...
...Raymond Mikesell, Foreign Investment in the Petroleum and Mineral Industries (Baltimore, Johns Hopkins Press, 1971), p. 358...
...21.50 44.00 Total...
...shipping was found to be well over twice the cost of other shipping...
...Suffice it to say here that the Brazilian regime has catered its "development" process to the foreign corporations and their local partners, and shown very little interest in the economic, social and political development of the Brazilian people...
...financial support of the regime was no longer important...
...Hanna Mining presents perhaps the best example of both the political and economic value of foreign aid to U.S...
...Business International, Brazil: New Business Power in Latin America (New York, 1971), p. 59...
...4 It is these same "overriding political considerations" that have prompted the United States to pump in over $2 billion in bilateral aid to the regime since the coup d'etat, in addition to some $1.5 billion from the international aid agencies...
...The fund, coupled with a tax incentive program from the Brazilian government, has made playing market almost as popular a sport as soccer among Brazil's newly rich...
...technicians using information from the major potential investors in the area (see article on mining in this issue...
...Much aid money has also gone into transportation facilities, primarily roads...
...Some of the U.S...
...Congress to review and criticize U.S...
...1 8 There is one other important aid-financed project that U.S...
...NOTE: ADELA, though registered in Luxemburg, is owned primarily by major U.S...
...aid in 1960 for Brazil's support of the Bay of Pigs invasion, Quadros vehemently refused, and sent Berle back to the airport without even the usual escort...
...The hope was that this aid would head off the populist movement centered in Recife, whose leader, Miguel Arraes, was running for governor...
...Olinkraft S.A...
...123-4...
...or foreign companies will sell about $120 million worth of equipment and engineering services for the expansion...
...Eximbank also particiChemical Corp.* Manufacturers Hanover pated in this deal (Poliolefinas, S.A...
...For a detailed discussion of Brazilian debt, see John Donnelly, "External Debt and Long-Term Servicing Capacity," in Rosenbaum and Tyler (eds...
...the socialist government of Chile...
...corporation in Brazil over the years...
...In fact, their real claim to U.S...
...4.90 Insurance companies...
...In fact, exports from its rapidly-expanding capital goods sector is absolutely necessary if Brazil is to continue the economic boom of the last few years...
...The AID program was supposed to operate as a complement to the Brazilian development agency of the Northeast -- SUDENE...
...aid programs throughout the world...
...2 2 Brazilian banks have also been prime participants in a similar Eximbank program, the Cooperative Financing Facility...
...The argument about the relationship between infrastructure, private investment, and development is a very complicated one...
...But there was also a shortage of American vessels at the time, which further complicated the argument as to just how the fertilizer had to be shipped...
...To cite a specific example of how this concern over import generation can pervert development priorities, consider the AID decision in 1967 to modernize Brazil's secondary education system...
...Banks NOTES 1958 $ 1.2 Olin Mathieson Chemical Paper & pulp plant None IFC's investment was made Co...
...The Alcominas aluminum operation is 50 percent owned by Alcoa and 23.5 per percent owned by Hanna, with another 20 percent of the original investment coming from the State Development Bank of Minas Gerais...
...seas Finance Corp...
...9 Helping U.S...
...1 1 The most striking illustration that aid is oriented more toward the needs of the donor than of the recipient was the squabble over Brazil's current steel expansion program...
...government continues to regard Brazil as an exemplary candidate for foreign aid support...
...ical overseas Finance Co...
...In February, 1972, Brazil floated a $30 million bond issue in Europe (its first international loan since 1931), and more recently obtained a $200 million loan from a consortium of Japanese banks...
...It must also be noted that in the process of receiving such tremendous amounts of aid, Brazil has accumulated a colossal foreign debt...
...but more often than not, it is the import criterion that prevails...
...Chase International bought by the Ford Motor Co...
...Despite the rhetoric about development and human progress, most U.S...
...foreign aid apparatus...
...Hanna has also benefitted from a prior World Bank loan of $22 million for development of the Alcominas bauxite mine at Pocos de Caldas...
...creditors, particularly if the present regime is replaced by a more progressive government...
...In the mid-60's, the U.S...
...AID signed and delivered a $50 million program loan (see below...
...2.50 25.75 Loans Agency for International Development (AID...
...Nothing less than a strong and compliant ally, ever ready to do its bidding...
...2 1 The Brazilian banking system has similarly benefitted from a new Eximbank program called the Relending Facility...
...suppliers (such as Westinghouse), knowing that they would lose in an open bidding, insisted that the Eximbank should supply the money and thus insure U.S...
...When Senator Church held hearings on "United States Policies and Programs in Brazil", he was repeatedly informed about the reduction of U.S...
...says the Alliance for Progress has failed...
...Corporations In addition to these political maneuverings, Hanna has managed to obtain direct capital assistance from the World Bank...
...Before looking in detail at the history and nature of foreign aid to Brazil in the last ten years, we should first understand the general purposes of this aid...
...corporations...
...BUILDING WHAT'S NEEDED Although these direct loans to U.S...
...See The Miami Herald, May 22, 1972, and the Hearings, p. 154, where the response to a question about Brazilian activities on the Uruguay border is completely deleted...
...The Alcominas operation discussed above, for example, depends for its enormous power needs on the Rio Grande hydroelectric system, which was built with loans from the World Bank...
...The Journal of Commerce, May 7, 1971 and May 10, 1972...
...6 million (see text) U.S...
...support, have evidently served their purpose...
...In the December 4, 1972 issue of Opiniao (Rio de Janeiro), the total foreign debt (both public and private) was given as $10 billion in 1972, up from $6.6 billion in 1971 (based on figures from the Brazilian Central Bank...
...In the case of a 1964 AID loan to Brazil for fertilizer imports, U.S...
...15 - The United States wasted no time in demonstrating its support for the new military regime in dollars and cents: within two months after the coup, U.S...
...Thus with the help of AID and IFC, Phillips made a "big investment" in Brazil without really making such a big investment...
...In - 14 -fact, the United States had never had any real "commitment" to the plan, and had only a rhetorical interest in long-range development...
...8. For a general analysis of the U.S...
...7.70 (8%, 5 to 9 years, convertible at IFC's option) Six US insurance companies...
...Another $150 million AID loan was signed in December, 1964, and the Eximbank, IMF and the World Bank promptly resumed their lending activities in Brazil...
...The World Bank has put in an additional $750 million, and the Eximbank has financed imports of U.S...
...Church, has twice as many officials there in proportion to the host-country's population, as the British had in India "when they were providing the government for that entire country...
...All figures on aid in this article, unless otherwise cited, come from the Annual Reports of the agencies involved...
...companies is not limited to exporters and shippers -- the overseas subsidiaries of U.S...
...Business Latin America, January 6, 1972, reports that Hyster, IT&T, Eaton Yale and Towne, MercedezBenz, Elgin, Ford, AMF, and Massey-Ferguson are "international firms that have used the program with happy results...
...corporations are perhaps the biggest beneficiaries of the foreign aid system...
...69.75 Standby Loans Thrce shareholders...
...In fact, Brazilian forces did mass on the Uruguay border during the elections in February, 1972, in which the leftist Frente Amplio was participating...
...An important function of the National Integration Plan, of which the road building is a crucial part, is to focus national (and international) attention away from the brutal injustices of the regime's policies...
...In what Business International has described as a "classic" case of clever financing, Phillips Petroleum (60 percent owner of Ultrafertil) was able to put together a $70 million package thaj 4 committed only $15.5 million of its own funds...
...Eximbank, which is specifically designed to stimulate U.S...
...These "cooperative" state governments (often referred to as the "democratic" forces) were the same staunch defenders of the status quo who had presided over the poverty of the Northeast for years...
...The Wall Street Journal, November 23, 1971...
...After the coup, however, the Castelo Branco government promulgated a new mining code which opened the way for Hanna (as well as other multinational corporations) to develop the deposit and the necessary support facilities...
...That is, money will be available to brokers so they can buy and sell stocks and bonds with greater ease...
...Some money has also gone for technical assistance grants and other specialized programs, but the amounts have been small, and their effects difficult to determine...
...The early transfusions, designed to put the regime on its feet financially and demonstrate U.S...
...The U.S...
...In foreign aid, then, as in so many other areas, Brazil is assuming the role of the sub-imperial power in Latin America...
...IFC has participated in this deal (see Table II...
...And despite clear evidence that Brazil has one of the most repressive governments in the world, the U.S...
...aid programs in Brazil, as if U.S...
...3) to strengthen Brazil's position as the gendarme of Latin America...
...2 7 Lyndon Branco in the So who Johnson fared better in 1965, when Castelo happily sent Brazilian troops to assist U.S...
...Of the loans Brazil has received under this program, $18.5 million have been in revolving credits to the Banco do Brasil, and $7.4 million in three special credit lines...
...As the U.S...
...15 Fortune was a bit more flamboyant, comparing the coup that saved Hanna's investment to "f last minute rescue by the First Ca*alry...
...And what has the United States ultimately gotten out of all the aid it has poured into Brazil...
...After undermining the Goulart government and supporting the 1964 coup, the United States has not faltered in giving the generals the assistance they need to maintain themselves in power...
...Aid has been bne of the several means employed by the United States in encouraging Brazil to be the strong-armed "sub-imperial power" in the southern hemisphere...
...The capital goods export promotion program of IDB, designed to stimulate exports of capital goods (heavy machinery and industrial equipment) among Latin American nations, and thus foster economic integration, has extended nearly half its credits to Brazil...
...corporations...
...aid officials were neither surprised nor disappointed...
...This aid to Bolivia will help strengthen a relationship that began when the Brazilian generals helped General Banzer overthrow the government of left-leaning General Torres...
...As cautious an observer as Raymond Mikesell has admitted that "it is conceivable that President Castelo Branco's decree of 23 December 1964 was timed to obtain these credits...
...bilateral funds have been used for extensive military and police programs in Brazil...
...exports, not Brazilian development, seems to be AID's primary consideration...
...1972 $21.2 IT&T (CIMINAS) Cement plant None * Indicates minority interest SOURCE: International Finance Corporation Annual Reports and press releases...
...Trade, Balance of Payments, and Growth (Amsterdam: North Holland Publishing Co., 1971), p. 467...
...2 5 In light of the way in which aid serves to subsidize exports from the donor country, it is almost natural for Brazil to "aid" the more underdeveloped countries of the hemisphere...
...agencies in Brazil or the more than 300 Peace Corps volunteers there...
...hard) currency from the IMF as the money is needed to meet an emergency balance of payments situation...
...A similar loan of $20 million for fertilizer was negotiated in 1966, but since an estimated $4-5 million of that would have gone to subsidize shipment on U.S...
...Berle offered President Quadros $300 million in U.S...
...In fact, it is likely that the plans for this road were drawn up by U.S...
...Brasil S.A...
...163.9 U.S...
...aid policies in Brazil...
...The only proviso is that the money must be relent for imports of specified U.S...
...The concession to mine this deposit is held by a joint venture between U.S...
...Also listed are those U.S...
...Hereafter cited as Hearings...
...Although nominally committed to working through the SUDENE plan, the U.S...
...Brazilian importers were of course reluctant to pay such exhorbitant prices, but the Brazilian government offered to pay the difference so the loan could be utilized...
...The Journal of Commerce, June 9 and September 20, 1972, and The Los Angeles Times, October 1, 1972...
...I6 To reduce the likelihood of any future frictions with the Brazilian government, Hanna has also taken on a local partner, the mammouth Antunes mining group, and formed Mineracoes Brasileiras Reunidas (MBR) for this venture...
...The basic plan calls for the establishment of a fund to provide revolving credits to underwriters so they can maintain inventories of securities...
...presence in the region...
...corporations are an important indication of who really benefits from the aid system, the vast majority of aid funds to Brazil have been utilized in the construction of infrastructure, mainly power and transportation facilities...
...bilateral to international sources of funding has made it more difficult for the U.S...
...The recipient country is required, in making the agreement, to follow certain financial measures favored by the IMF...
...The support is still there, but it is being channeled through agencies over which the Congress has little or no control...
...117-20...
...The U.S...
...It did not seem to matter what Brazil wanted, much less what it needed...
...aid is to subsidize the export of U.S...
...The Journal of Commerce, February 22, 1972...
...Champion kers International & Chem- ment bank (BNDE) also supCelulose, S.A...
...Jerome Levinson and Juan de Onis, The Alliance that Lost its Way (Chicago: Quadrangle Books, 1970), pp...
...The issue was finally resolved through a compromise involving the World Bank, the Inter-American Development Bank (IDB), Eximbank, and the export-funding agencies of the other supply sountries, whereby everyone got a piece of the pie...
...Most of the money lent to Bolivia (with $22.5 million, the largest recipient), for example, will be used to purchase Brazilian capital goods and machinery...
...AIDING THE MULTINATIONALS Support for U.S...
...Brazil's public external debt (borrowed or guaranteed by the government or one of its agencies) at the end of 1970 was nearly $4 billion, and is increasingly rapidly...
...Table II lists all the U.S...
...On the other hand, the United States negotiated aid agreements with various state governors who were politically opposed to the Goulart government, regardless of their ability to live up to the stated fiscal or political requirements of the Alliance...
...Phillips later bought 50 percent of the plant (adding it to its world-wide collection of carbon black companies), and thus reaped the benefits from the start-up risks that AID had taken...
...Investment Corp...
...The argument runs that since the Goulart government lacked sufficient commitment to the austerity measures (such as budget-tightening and wage controls) necessary to stem inflation, aid had to be suspended...
...1 0 Because of President Johnson's special interest in education loans, AID in this case stuck to its commitment to secondary education reform...
...equipment for power facilities, including $138 million for a nuclear plant near Rio...
...programs in Brazil required 588 official Americans, or "approximately one per 150,000 Brazilians," the testimony showed...
...Peter D. Bell, "Brazilian-American Relations," in Riordan Roett (ed...
...World Bank loans to Brazil in fiscal 1972 totalled $437 million, accounting for more than 45 percent of the $956 million it lent to all of Latin America...
...occupation of the Dominican Republic...
...6. For data and analysis of military and police aid to Brazil and the rest of Latin America, see the NACLA Handbook, The U.S...
...This shift from U.S...
...The dispute became an important political issue, and by the time of the coup in 1964, it appeared certain that Hanna would lose the concession...
...CVRD's opposition was stifled by a $28.8 million loan from IDB, which was signed around the same time that the new mining code was announced...
...Fiscal years, in millions of dollars)is done primarily through the "tying" of aid...
...2 & 3, and the aid section in the NACLA pamphlet, Yanqui Dollar...
...Similarly, since the new military government demonstrated a strong commitment to these measures, aid was quickly restored...
...They are not tied to any specific project or goal beyond bolstering the government and its foreign reserve position, though they are generally accompanied by stipulations concerning the recipient's fiscal policies...
...18 - The Financing of Ultrafertil Equity S million Phillips Petroleum (60...
...These companies utilized credits extended to Argentina, Mexico, Peru and Venezuela, as well as Brazil...
...As part of its program in the Northeast, AID invested $2 million in 1963 in a carbon black plant, though the loan was not actually disbursed until 1965...
...Although IDB says that no specific information is available as to which companies have utilized the revolving credits, it is easy to imagine that such exports as "jeeps, forklifts, power shovels, and highway construction equipment" were made and exported by such companies as Ford-Willys, Allis-Chalmers, and Caterpillar...
...THE POLITICS OF AID The history of aid to Brazil makes abundantly clear the political nature of the U.S...
...The British had approximately one civil servant there per 300,000 Indians...
...The $4 billion figure comes from the World Bank's 1972 Annual Report...
...3 If there is any doubt about this, one need only examine a similar situation in 1968 when a $100 million loan to the military government was approved despite many doubts about the economic situation in the country...
...Los Angeles Times, October 16, 1972, and The New York Times, April 9, 1972...
...Industrial development, of course, requires the existence of an adequate power supply, yet the location of aid-supported facilities corresponds more to the needs of U.S...
...In many cases these roads are vital to the profitable exploitation of the natural resources embedded in the more remote areas of Brazil -- exploitation which is being carried out primarily by foreign corporations...
...The roads constructed with these international credits run the length and breadth of the country, tying together the Various regions of Brazil, and connecting with the many countries that share her borders...
...IFC) (10...
...corporations depending on aid-built power plants for their operations and distorting the priorities of Brazilian development...
...Washington Post, July 25, 1971TABLE 1: Foreign Aid to Brazil, 1962 - 1972 international finance, has extended eight consecutive standby agreements to the regime (the first in 1965, and the last, for $50 million, in March, 1972).5 Not one of these agencies has found the repressive measures of the Brazilian government to be sufficient cause to even threaten a reduction or suspension of aid to Brazil...
...Alcan and Dow Chemical, also members of the Aratu community, will find the IDB-sponsored port especially handy -- both need it to receive ore shipments for their smelters in the park...
...7. The Journal of Commerce, February 14, 1972, and The Wall Street Journal, December 20, 1972...
...The United States, however, saw otherwise...
...Levinson and Onis, pp...
...The rest of the AID money has gone to project loans, which provide capital for specific development projects -- in the case of Brazil, specifically infrastructure development...
...The industrial park at Aratu, Bahia, which is considered the showcase of SUDENE's post-coup activities in the Northeast, has received an $8 million IBD loan for the construction of a deep water port...
...It should be noted that the U.S...
...Brazil has gotten nearly half of the credits authorized since the program began in mid-1970...
...2) to support fully the Brazilian military regime...
...but this first project set the tone for most of AID's efforts in the Northeast up until the 1964 coup...
...8 All of the dollars provided in the various program loans to Brazil, for example, had to be spent on U.S...
...About half of the AID funds have come in the form of program loans, totalling $550 million including the loan given immediately after the coup...
...goods, even if cheaper goods could be purchased elsewhere...
...Trust Co...
...Nonetheless, AID has managed to lend a helping hand directly to more than one U.S...
...IV, Nos...
...As the controversy mounted, Business Week reported that the "World Bank craves a slice of Ex-Im's pie," noting that "at stake is whether U.S...
...goods that have an "unduly low share" of the local market (i.e., goods which the United States would otherwise be unable to export...
...1971 $ 4.9 ADELA Investment Co.* Pulp mill None BNDE has a substantial invest(Industria de Celulose ment in this company Borregaard, S.A...
...This debt not only places a heavy burden on Brazil's current foreign exchange earnings, but more importantly, can serve in the future as a giant club in the hands of U.S...
...investments continue to pour into Brazil, the geographic coincidence of aid-sponsored infrastructure projects and U.S...
...Callously claiming that the governor of Pernambuco, Cid Sampaio, represented the "democratic" forces of the Northeast, AID designed the program to help Sampaio's candidate win the 1962 gubernatorial elections...
...One of Hanna's foremost opponents was the governmentowned iron ore company Cia...
...subsidiaries in other countries...
...banks for which IFC has made the job of overseas lending less difficult and risky...
...AID has contributed 5 g o s 5 S a ff H o - 20 -$15 million for this program, and IFC just recently added another $5 million...
...Contemporary Brazil: Issues in Economic and Political Development (New York: Praeger, 1972...
...Military Aid (all types) 49.6 17.5 41.2 11.2 28.9 32.1 36.6 0.8 0.9 12.2 n.a...
...6 The focus of this article, however, are the less controversial, but equally important, economic aid programs that constitute the bulk of aid funds to Brazil...
...The Transamazon Highway, financed partially by the World Bank, runs remarkably close to a large iron ore deposit at Serro do Carajas...
...The roads are also important militarily, providing the Army with ready access to all parts of the country, as well as most of the other countries of Latin America...
...IDB has lent $142 million, and the World Bank (since 1968 alone) $266 million...
...The police have been trained, the army equipped, and the investment climate completely cleared up...
...A detailed study would most certainly reveal numerous cases of U.S...
...One need only look at Chile today for an example of how a government can be strapped by the debt of previous governments, and how foreign creditors can use this debt to pressure, and even subvert, a progressive government...
...plan was to establish highly visible, shortterm projects with cooperative state governments...
...1972...
...companies that have received capital assistance from IFC for their operations in Brazil...
...In 1971, World Bank President Robert MacNamara announced a $96 million loan for the Aguas Claras operation-$50 million to MBR to develop the deposit, and $46 million to Rede Ferroviaria Federal to develop rail facilities for transporting the ore from the mine to a terminal under construction at Sepetiba Bay...
...The biggest contribution came in 1967, when AID made a $15 million loan to Ultrafertil for the establishment of a fertilizer complex...
...companies have undoubtedly taken advantage of the lucrative incentives given by the Brazilian government to investors in the Northeast, as well as the facilities in the park itself...
...Thus, when the military took power in April of 1964, U.S...
...AMOUNT U.S...
...Figures on foreign debt vary greatly...
...1967 $10.7 Phillips Petroleum Fertilizer plant First Pennsylvania Over- AID also supplied $14.8 (Ultrafertil, S.A...
...Now a lower profile is more appropriate...
...The park's tenants include American Cyanamid, Celanese, Allis-Chalmers, Union Carbide, General Electric, Ford, and Lone Star Cement...
...officials, have led most observers to conclude that U.S...
...corporate activities is likely to become increasingly visible...
...By contrast, the current AID program is relatively small -$79.3 million in fiscal 1971 (less than the AID program in Colombia), and only $9.4 million in fiscal 1972...
...In the early 1960's, Hanna was losing money on its Brazilian operations, primarily because of a lack of rail and port facilities for its Aguas Claras iron mining operation in Minas Gerais...
...1 As a result, the Agency for Internatitonal Development (AID) established a mission in Recife (the only regional office in AID history) to supplement the Rio de Janeiro mission, and $131 million in U.S...
...In fiscal 1972, for example, Goodyear do Brazil got a $4.25 million loan from Eximbank to expand its tire plant, in addition to an identical amount from First National City Bank guaranteed by Eximbank...
...BUY AMERICAN A fundamental purpose of U.S...
...15.50 Ultra Group (30...
...NOTE: The total from 1964-72 represents the total aid given to the military regime...
...4. The New York Times, April 26, 1971...
...aid program, see NACLA Newsletter, Vol...
...Before taking a more detailed look at how this money has been spent, we should note one recent trend in aid to Brazil...
...On the one hand, the United States cut off all aid to the federal government, which was saddled with a large debt from previous administrations...
...corporations have found quite attractive...
...Company Nature of Participatingparticipated in road-building projects...
...companies the contracts...
...In a sense, it is not surprising that these two agencies -- Eximbank and IFC -- are putting money in the big companies, since that is more or less their purpose...
Vol. 7 • April 1973 • No. 4
