Recession Hits Latin America

...The Caribbean area has been spared the worst effects of our crisis so far, but several countries are in line for trouble this year...

...For the danger always exists, when the economy of an underdeveloped country is hard hit, that the country will be forced into extremist measures—such as the expropriation of foreign holdings...

...Mexico weathered the crisis, as noted, because her economy is almost depression-proof thanks to powerful internal forces making for constant economic expansion and a widely-diversified industrial plant...

...Over the year, the whole Mexican economy was affected (though not critically, thanks to its basic good health and sound Government policies...

...The situation in 1958 is expected to be worse...

...slump felt in hemisphere By Daniel James Recession Hits Latin America Mexico City H^^urrent U. S. Depression ^^ Hits South America," read the front-page banner head in Mexico's biggest newspaper, Excel-sior, the other day...

...But that involves buying it from growers and storing it—an expensive proposition...

...The Latin Americans are worried, in the main, over our ability to get out of this crisis without doing a lot of damage to ourselves—and to them...

...An Argentine mission has just returned from the USSR, where it signed an agreement under which Argentina will get petroleum machinery and road-construction equipment...

...Since lead-zinc exports are important dollar-earners for Mexico, the price drop (and, in zinc's case, a heavy fall in exports, too) was quickly reflected in decreasing dollar income and decreasing dollar reserves...

...She has already asked the International Monetary Fund for a $37.5-million loan, but will need much more than that from Washington to tide her over the danger period...

...Argentina also signed a pact with Poland for 600,000 tons of coal...

...The cruzeiro, Brazil's unit of currency, fell from 65 to the dollar in June 1957 to 110 in mid-March 1958...

...Poland has contracted to sell Brazil more than 100,000 tons of rails and railway equipment, valued at $17 million, in exchange for 200,000 tons of high-grade Brazilian iron ore...

...Washington would then be the first to complain about "subversives" undermining free enterprise in Latin America...

...From nothing in 1953 when the first agreement was signed, Czech-Brazilian trade rose in 1957 to $45 million...

...Already, copper production has been cut back 10 per cent, with further cuts almost certain as long as the world market continues to deteriorate in reaction to the U. S. recession...

...Inevitably, too, these will be followed by diplomatic relations...

...Venezuela has been saved from economic trouble by her huge oil production and the continuing world demand for it...

...With a record-breaking $7.4 billion of direct private investments in Latin America, the United States, it is felt here, played a penny-wise, pound-foolish game when it did not take the relatively inexpensive but quick Government action required at the onset of the crisis to curb it and thus protect the huge U. S. stake abroad...

...In this case, however, we bear little or no responsibility for Argentina's sorry economic state, since it was largely induced by her own ex-dictator, Juan Peron...

...recession on Latin America...

...Now Russia is contemplating the purchase from Chile, again through West Germany, of another 35,000 tons of copper products...

...Argentina, which in 1957 had an unfavorable trade balance of $267 million, has long been trading with the Soviet Empire...

...Moreover, if Brazil can't sell her coffee to us, she must seek other customers—and she has sought and found them behind the Iron Curtain...

...Uruguay showed a heavy trade deficit of $60 million before the end of 1957 (complete figures not yet available), thanks to a fall in wool exports to us...

...About the only countries in South America which have not been seriously hurt—as yet—by the U. S. crisis are Peru and Venezuela...

...but the Latins would be much happier if we took the measures required to bring the various economies of the hemisphere into balance...

...One-third of the U. S. investment in Latin America is in petroleum, and the trend since 1938, when Mexico expropriated the foreign oil companies, has been toward nationalization...

...A profound economic crisis throughout Latin America, or the mishandling of Venezuela, could create the psychological and political atmosphere for the nationalization of Venezuelan oil...

...In June, Communist Czechoslovakia will have a trade mission in Rio to negotiate an $8-10-million agreement involving the sale of Czech machinery for Brazilian products (probably including coffee...

...Brazil, for example, is now going through an acute crisis—thanks in large part to ours, but also to internal factors...

...Torgbras, a Soviet trade agency in Rio de Janeiro, has suggested a trade plan involving an exchange of $400 million worth of goods...

...With West Germany acting as intermediary, Russia recently purchased from Chile 3,000 tons of copper and 1,500 tons of copper wire...

...Unable to sell her yield to the U. S., she has contracted to dispose of $30 million worth of coffee to the USSR, in exchange for 60,000 tons of Russian wheat and a Russian offer to help install a new tractor plant...

...Despite a two-way $8-billion trade between Latin America and the United States, and despite increasing industrialization in Latin America with the technical and financial support of both official U. S. agencies and private enterprises, economic relations between the two areas have been deteriorating...

...Thanks mainly to slackening U. S. demand, copper has dropped in two years from 50 cents to 21 cents per pound —a loss for Chile of three-fifths of its copper income...

...El Salvador, Haiti and Costa Rica, similarly dependent on coffee, may suffer likewise...

...Coffee sales and coffee prices have fallen drastically in recent months—a situation in which we were the most important single factor...

...Loan" means, in the last analysis, giving money: Brazil already owes us $233 million which she cannot repay and must ask us to amortize...

...In one week alone (March 6-13), the cruzeiro lost 10 per cent of its value...

...Ever so...

...In exchange, Russia will supply Brazil with machinery and heavy equipment, particularly for drilling oil-wells...

...Colombia is making similar deals with Czechoslovakia and East Germany...

...In the very first stages of the crisis, early last year, we started cutting our imports of lead and zinc...

...No wonder, then, that democratic little Uruguay is dickering with a Rumanian trade delegation over a $500-million trade pact...

...To try to sustain the market, Brazil (along with other coffee-growing Latin American republics) has been withholding coffee...

...Of course, more aid, much more aid than we have given, is needed...

...But, dependent for 82.4 per cent of her income on coffee, Guatemala is in for a rough time in 1958 if the coffee market remains sick...

...The falling coffee market has hit Brazilian trade and currency a real body-blow...

...Under the plan, Russia agrees to accept up to $300 million worth of Brazilian commodities, mainly coffee...

...Some Latin economies, for example, began to feel the effect of the U. S. crisis even before the U. S. itself—as witness Mexico...

...But we have been irritating the Venezuelans with threats to cut down our oil imports from them...

...During the first nine months of 1957, her dollar reserves fell 17 per cent...

...In this case, it is the biggest oil producers—Standard Oil, Phillips Petroleum, etc.—who take the "internationalist" position of favoring continued imports (largely because they control Venezuelan production...

...For the first seven months of 1957, Brazil's trade deficit ran up to $124 million (as against a favorable balance of $211 million for 1956...

...Copper is its prime source of revenue...

...The worst sufferers from the U. S. economic crisis, however, are the countries which are dependent, to a greater or lesser extent, on one or two export products...

...If we cut Venezuelan oil imports, Caracas will retaliate by slashing its imports from us—which in 1957 totaled $1 billion...

...Like Brazil, Chile has had to seek customers for her copper behind the Iron Curtain...

...Guatemala, too, is relatively unscathed...

...That led almost immediately to a fall in lead-zinc prices on the world market...

...the Peruvian sol is fluctuating again, dropping from 19 to 19.55 to the dollar, a loss of 3 per cent...

...To get out of this mess, Brazil is desperately applying to us for a big loan...

...Inevitably, with the Soviets dangling the prospect of being a regular customer for at least 50,000 tons of copper yearly, Chile will have to resume direct trade relations with Moscow (cut off in 1948...

...To hoot, Russia has offered Brazil up to $800 million in credit through a London bank...

...Only measures of this kind will attenuate the effects of the U.S...

...Brazil is dependent for 69.5 per cent of her income on coffee...

...in fact, 1957 was a record year for her exports, the value of which shot up to more than $120 million in spite of political disturbances...

...Whether you call it "depression," "recession," "downturn" or "slowdown," what is happening to the U. S. economy right now is top news from the Rio Grande to Tierra del Fuego...

...The reason is the refusal of the United States to face up to the basic economic problems of Latin America, and its naive belief that the magic phrase, "free enterprise," will solve them...

...Conference after conference held to tackle hemisphere economic problems has ended up without taking fundamental steps, mainly due to U. S. backing and filling, with the result that the Latin American delegations usually go home frustrated, empty-handed, and resentful of a country that will not use its power to remedy the situation...

...Colombia depends upon coffee for 76.8 per cent of her income...

...The pressure is coming from the so-called independent oil producers, who demand that the United States buy from them in preference to Venezuela...

...Agreements on copper, on lead and zinc, and on similar crucial Latin American exports would do more good than additional outright dollar grants...

...Chile is in a similar spot...

...Also, unlike the Administration in Washington, the Mexican Government intervened quickly to forestall real harm to the economy by cutting various export taxes and by other remedial measures...

...With lead comprising 10 per cent of her exports and zinc 5-6 per cent, Peru did feel the effects of the drop in the lead-zinc market, but this was cushioned by the diversity of her economy and of her export trade...

...Mexico Watching Effects of U. S. Economic Crisis," echoed the rival El Universal...