Trade and Foreign Aid
4. Trade and Foreign Aid THE economic policy of the United States in Latin America—and in more general terms, the foreign economic policy of any great nation in any area—may be conveniently...
...Foreign investments of the modern type appeared on the Latin American scene after the wars for independence, in the 1820s...
...The following paragraphs mention only the salient features.* The program mainly covers the four fields of health, education, agriculture and industry, but attention is also given to transportation, the productivity problem (labor), organization of modern public administration, and so on...
...This tendency will change both the composition and direction of the foreign trade of the continent...
...Currently, the Eximbank authorizes new credits to Latin America at a rate of roughly $200 million a year, but a part of authorized credits is usually cancelled, and new credits are partly offset by repayment of old debts...
...Of the original applications for loans totaling $4 billion, only 3 per cent (44 million) was requested by Latin American governments...
...Technical assistance in the field of industry inoludes specialized training, distribution of simple machinery and introduction of certain branches of production such as brick, cement, glass, fertilizers and canning...
...It can be operated by two men, and if necessary by one man...
...The program of technical assistance has been conspicuously successful in some countries but does not penetrate into other regions where it would be equally effective...
...Both institutions charge the same interest for their loans, usually 4.5 to 5.5 per cent, and reserve the right of control over the use of funds lent by them...
...Perhaps, the greatest achievement of our agricultural experts has been in gaining the cooperation of local agricultural colleges in training students for extension work in the villages...
...The Soviets have made some inroads in Latin American markets recently, but the Iron Curtain countries account for hardly more than 3 per cent of the foreign commerce of the area...
...Apart from military aid, which adds little to the economy of the receiving nation, the U. S. Government awarded the Latin American republics $225 million in loans and $165 million in grants in the three years 1954-56...
...meat, wool and other animal products...
...Direct grants and loans by the United States Government are another source of capital inflow to the area...
...Argentina and Uruguay are the only countries in the area where foreign trade is oriented toward Western Europe...
...It is obvious, however, that from the point of view of the economies of the Latin American countries, an expansion of loans from the World Bank would mean more than a much larger increment in foreign private investments...
...Almost half the total amount was designated for generation and distribution of electric power, some 40 per cent for building and rehabilitating railroads and highways, the rest for agriculture (farm mechanization, irrigation and flood control, and so on), industry (pulp) and communications (telegraph and telephone...
...They maintain over 100 hospitals and nursing schools, sponsor more than 1,000 primary schools, about 150 secondary sohools, about 60 commercial and vocational schools...
...This fact appears clearly in the ratio of the value of foreign trade (the sum of exports and imports) to national income...
...U. S. corporations in Latin America had 625,000 employes in 1955 and, as a rule, offered them better working conditions and higher wages than native employers...
...In both areas, the policy of the United States is necessarily determined by its national interest...
...Because of this geographic pattern, Latin America does not feel itself a part of the world market, subject to that market's ebb and flow...
...4. Trade and Foreign Aid THE economic policy of the United States in Latin America—and in more general terms, the foreign economic policy of any great nation in any area—may be conveniently examined under two broad headings: trade and aid...
...The economic development of Latin America in colonial times rested on the combination of local slave labor and Spanish capital (imported from the mother country or amassed by plundering the conquered land...
...An inclusive, internally consistent foreign economic policy requires reconciliation of both points of view...
...We ourselves saw a farmhouse in which a bedstead four inohes high had been installed for the first time...
...Such a picture is false, because the Colossus itself depends on trends in the world economy...
...Moreover, an investment of half a billion dollars in the oil fields of Venezuela can hardly be considered by people in Brazil, Mexico or Chile as an investment in the expanding economy of the continent...
...Moreover, the work of the missions in villages lost in the Andes or tropical jungles starts at a level of misery at which technical assistance cannot be separated from sanitary or welfare work or basic education...
...Similarly, people complain about the tremendous profits foreign capital receives, without noticing that domestic capital is even more rapacious, demanding annual interest of not less than 30 per cent, and in some cases as much as 90 per cent...
...Production for export is a typical operation of foreign capital in colonies and has never been popular with the indigenous populations...
...Sunlight in the house...
...We heard no complaints that U. S. firms underpay their workers, violate labor regulations, evade taxes or compete unfairly with local capital...
...It ranges from efforts to improve living conditions in villages, distribute fertilizer, improve seed and cattle breeds, to far-reaching projects of resettlement as in Guatemala, and regional development, as in Chilian, Chile...
...All in all $285 million had been spent in Latin American countries for technical assistance and economic aid in the past seven years—less than the cost of a modern battleship or aircraft carrier...
...Such a hole in the wall, the first step for introducing windows with glass panes, may mark the beginning of a cultural revolution in a village...
...Each project is carried out on the basis of cooperation between the United States mission and the host government and must be initiated by the latter...
...This was the high tide of European investment in that part of the world...
...Latin America accounts for 20-25 per cent of U. S. exports and nearly one third of its imports...
...People think that such operations are depriving Latin American nations of their resources...
...In the tiny republics of Central America and in Cuba, the Dominican Republic, Venezuela, Peru and Ecuador, this ratio ranges from 60 to V. Foreign Trade, 1956 , IMPORTS « , EXPORTS > Country Millionsof$ % of national income Millionsoff %of national income 31 22 Guatemala 138 33 106 25 El Salvador 105 37 113 39 Nicaragua 69 60 58 46 Honduras 59 28 73 Mexico 978 688 35 Costa Rica 91 73 64 51 Panama 83 44 17 9 Cuba 570 35 666 40 Dominican Republic 108 32 125 36 Haiti 47 14 43 13 Venezuela . 1,026 30 2,122 70 Colombia 657 22 537 18 Ecuador 81 19 94 22 Peru 361 40 308 34 Bolivia (1955) 81 27 98 32 Paraguay 95 17 37 24 Chile 354 17 546 27 Argentina . 1,128 22 944 19 Brazil . 1,234 10 1,482 12 Uruguay 206 29 211 30 Sources: UN Statistical Yearbook, 1957 and Yearbook of International Trade Statistici, 1956, Vol...
...VIII...
...Private Capital: Until 1929, U. S. capital favored sugar plantations in Cuba and oil wells in Mexico...
...People sat and had slept on the dirt floor, bitterly cold at night in that Andean village...
...British investments in Argentina were followed by loans to almost all Latin American republics, floated in London and later in Paris...
...Remitted corporate profits in that year amounted to $680 million...
...It was resumed in the 1860s and gained strength after steamers appeared on trans-Atlantic lanes...
...Export industries, especially the activities of large plantations and mining, dominate the Latin American economy...
...In relation to world income, th« value of foreign investment* in 1941-45 was less than a third, and probably not much more than a fourth, of that in 1914, cent or more of equity capital...
...Economic progress in the area could probably be accelerated if, along with changes in the psychological climate, economic practices and other conditions, the inflow of capital were to increase...
...it is comparatively low, under 30 per cent, in Haiti and Brazil...
...In each project the U. S. agency supplies specially trained technicians and funds covering their salaries and purchase of necessary equipment...
...Substantial contribution in the field of health services is also being made by the Rockefeller and Kellogg Foundations...
...All in all, people seem to realize that the inflow of foreign capital is in the interest of their country...
...Comparable figures are approximately 10 per cent for the United States, 20-30 per cent for West Germany, France and Italy...
...The uneven distribution of natural resources within the continent has determined the composition and, to some extent, the direction of the foreign trade of individual countries...
...But likewise we did not hear any local economist, businessman, journalist or government official refer to U. S. capital in the country in the eulogistic terms used by our Department of Commerce...
...Great attention has been given to the training of local personnel on all levels...
...The total amount of all foreign investments in Latin America in 1956 has been estimated by our ICA at $9.5 billion—-equivalent to $5.7 billion at 1944-45 prices and hardly more than $3 billion at 1914 prices...
...Before the turn of the century, United States capital likewise appeared in Mexico, Cuba and, on a smaller scale, in other Latin American republics.* By 1914, foreign investments in Latin America totaled $8.5 billion, with Great Britain leading ($3.7 billion), the United States in second place ($1.7 billion), France third ($1.2 billion), and Germany fourth ($900 million...
...In time, native workers who have received on-thejob training replace the United Staets technicians, and the share of the United States in financing the project declines while that of the host government increases until the U. S. mission withdraws completely and the project is continued by local personnel alone...
...A crowd of women in front of the building were almost overwhelmed by emotion: Was this not a miracle...
...the net return on equity capital was no less than 14 per cent...
...We observed this attitude in Brazil and Mexico, Chile and Colombia, and to some extent in other countries we visited, in provincial cities as well as in capitals...
...The total is higher than in the preceding three years because of unusually large private investments in 1956...
...The decisions of the latter, although wholly logical from the point of view of their stockholders, may appear erratic from the point of view of host countries...
...This may be due to the fact that they have to pay for transporting their products in foreign bottoms...
...At the time of our visit to Latin America, local newspapers and economists showed a considerable interest in the idea of a Latin American common market which would strengthen the economic unity of the area by stimulating trade between the sister-republics...
...But whatever the causes, the area needs a continuous inflow of funds from abroad, and a program of foreign economic policy in Latin America must meet this need...
...attention in Latin America...
...Current Supply of Foreign Capital: In all, in 1954-56 Latin America obtained almost $2 billion in loans, credits and grants from abroad: some $900 million in direct private investments from the United States, approximately $200-250 million from other countries, about $400 million in loans and grants from the United States Government, $300 million from the Eximbank-and $150 million from the World Bank...
...The supply of public funds (World Bank, Eximbank and U. S. Government) fluctuates from year to year and lacks the continuity necessary for long-run planning...
...There was no other furniture—no chairs, no benches, no tables...
...Latin America has not been left without economic and technical aid, 'and has not, I believe, been abused or mistreated by the United States in foreign trade...
...It covers: (1) the direct interest of American businessmen who continually claim protection on the domestic market and abroad, occasionally in disregard of the interests of other groups of the population...
...This chapter endeavors to clarify the environment in which our foreign economic policy must operate in Latin America ; the next chapter will explore the objectives of our economic policy in this area and outline a program which, in my opinion, would conform with both U. S. national interests and local conditions...
...of total Country Exports Imports Panama 94.8 60.0 Guatemala 74.1 64.1 Mexico 72.9 78.2 Colombia 71.4 61.6 Cuba 64.7Honduras 64.1 73.8 Ecuador 59.5 52.0 Bolivia 55.4 57.9 Brazil 49.6 28.8 Costa Rica 48.1 51.7 Dominican Republic 46.8 65.9 El Salvador 44.6 52.6 Chile 42.4 42.9 Venezuela 39.5 59.1 Peru 36.8 49.5 Haiti 34.1 62.1 Paraguay 18.1 13.4 Argentina 12.5 18.0 Uruguay 11.6 15.9 Source: UN Yearbook of International Trade Statistics, 1956, Vol...
...The World Bank: Most satisfactory to the Latin American countries, however, are the loans accorded by the World Bank...
...Trade among the Latin American countries is made difficult by geographical conditions, lack of adequate transportation and also partly by historical factors...
...From the point of view of Latin America, these loans and grants are more productive than the inflow of private capital not only because they are directed to proper targets but also because the country does not pay the high price demanded by private capital...
...Nor has it been overlooked or slighted in th economic and technical assistance programs of the United States and United Nations...
...In the long run, such a tendency would be in the interest of both the United States and Latin America...
...The normal flow of foreign capital is probably close to $600 million a year, with one third supplied by private capital and two-thirds provided by the World Bank and United States Government, either directly or through the Eximbank.® Taking into account the current national income of the area—approximately $40 billion—and growth of population at a rate of 2.5 per cent a year, Latin America needs net investments at an annual rate of $3 to $4 billion for adequate development of its economy (including the building of houses but excluding the maintenance cost of existing capital...
...In Argentina, Brazil and Mexico this idea has found its expression in almost hysterical opposition to exploitation of petroleum by foreign capital...
...The latter would strengthen its position on the world market while the United States would be freed of the charge of monopolistic or semi-monopolistic domination of Latin American markets...
...Latin American economists are fairly well informed on the affairs of foreign concerns in their countries, but the public at large knows little about this subject and believes that the rate of profits of the U. S. corporations is even higher...
...U. S. Technical Assistance by Main Activities Fiscal Year 1958 (Estimate, in thousands of dollars) Health, Indus-Transsanifa-Educa-Agrizul-fry, por-Country Total tion tion ture mining tation Labor Other* Mexico 680 64 15 — 373 I6 HO 102 Guatemala** .. 12,400 996 780 5,042 80 5,020 20 462 El Salvador . 1,000 206 119 374 70 — 84 147 Nicaragua 900 94 270 388 28 50 I0 60 Honduras .. 1,350 212 408 442 I8 II0 50 110 Costa Rica . 1,050 218 100 416 95 36 22 163 Panama , . 1,170 175 299 478 78 23 11 106 Cuba 570 — 94 245 27 92 26 86 Dominican Republic 190 — 183 — — 7 — — Haiti** . . 3,300 790 310 1,300 25 720 — 155 Venezuela 170 170 — — — — — — Colombia . . 1,290 381 111 565 — 80 — 153 Ecuador .. 1,880 446 327 725 U 6 — 266 Peru . 2,850 538 406 1,054 146 — — 706 Bolivia . . 4,200 526 525 1,552 87 943 76 494 Paraguay 1,480 231 352 356 — 195 — 346 Chile . . 2,500 308 — 1,000 580 280 — 332 Argentina 350 — 70 — 66 74 94 46 Uruguay 200 105 — — — — — 95 Brazil** 4,700 795 816 1,363 326 315 169 916 TOTAL 42,230 6,255 5,185 15,300 2,115 7,958 672 4,745 * Includes public administration, general and miscellaneous ** Includes pari of appropriation for economic aid...
...Our main advantage is that our ports are closer to Latin America—a fact that has less weight in Argentina, Uruguay and Brazil than in Central America, the Caribbean and on the Pacific coast of South America...
...It covers these imports with exports of coffee, cocoa, bananas and sugar...
...The first includes the exchange of goods plus the movement of private capital (investments) and the exchange of services (transportation, tourism, and the like...
...UN and OAS Technical Assistance: Along with the Point Four missions, other organizations are at work in similar fields in Latin America...
...Government: Along with the inflow of private foreign capital, Latin America obtains some funds for its economic development from the World Bank and Export-Import Bank of Washington (Eximbank) . The purposes and statutes of these two organizations differ but they often act concurrently, and many projects have been financed by both organizations...
...High profits from tin, copper and silver mines and sugar and coffee plantations in Brazil, Colombia, Chile, Peru and the Caribbean attracted investment capital...
...Indeed, when a foreign government uses a loan from the World Bank for purchasing machinery or industrial equipment in the United States, this loan operates like an Eximbank credit...
...Unavoidably, they have been spread rather thin in relation to the vast scope of the program...
...The holdings of the United States in Latin America grew steadily, from $3 billion in 1946 to $7 billion in 1956...
...The host government defrays all other expenses that demand local currency, including salaries of local personnel...
...This is a very primitive, clumsy-looking hand press that produces solid blocks out of almost any soil...
...In addition, the book value of the enterprises increased by one billion dollars in 1955, although only $148 million of new United States money went into production...
...The administrative changes, however, have not seriously affected the operations of the program in Latin America where even now it is known under its original names, IIAA or Point Four...
...The book value of U. S. investments in Latin American countries in 1956 was as follows (in millions of dollars) : Total 7,008 Central America*, Dominican Venezuela 1,817 Republic, Haiti 610 Brazil 1,209 Argentina 470 774 Peru 354 Chile 677 289 Mexico 675 Others 133 * Investmente in Panama exclude tanker and shipping operations ($400 million In 1956...
...I. There are indications that Latin American countries are moving toward a greater diversification of their agriculture and industry, designed to substitute domestic products for imported goods to some extent...
...Share in Trade, 1956 U.S...
...Of this amount, $3.2 billion was designed for financing exports to Latin America, but credits for $669 million were cancelled, so that $2.5 billion remained available...
...The U. S. Department of Commerce emphasizes that American capital accounted for 30 per cent of the exports of Latin American nations in 1955...
...The attitude of people in Latin America to the predominance of U. S. capital in certain economic sectors (mining, steel, plantations) is neither hostile nor enthusiastic...
...When the CINVA workers explained to us the advantages of their machine, we shared their enthusiasm and felt that their press was a greater achievement than some glamorous housing projects...
...Such a development would be desirable for many reasons, but it would require a drastic reorientation of the domestic economic policies of Latin American governments...
...Detailed discussion of it is not within the scope of this study...
...its share in our imports skyrocketed during World War II and has declined slightly in recent years: Share of Latin America in U.S...
...There are certain defects, however, in our trade policy, in the flow of foreign investments and in the economic and technical assistance accorded to this area: • The trade policy of the United States is determined without regard to its impact on the economy of Latin American nations...
...Products worth $2.1 billion were exported, mainly to the United States, and $2.8 billion was received on the domestic markets...
...Petroleum is the main field for U. S. capital ($2.0 billion in 1956) ; manufactures come next ($1.5 billion), followed by mining ($1.1 billion), plantations ($632 million) and trade ($495 million...
...The Special Fu,nd of $15 million appropriated in the fiscal year 1957 was used essentially for small loans to small countries: $3 million to Honduras, $2 million to Panama, $2 million to Costa Rica, $2 million to Ecuador, $2 million to Peru, $1 million to Paraguay, and the rest to the Organization of the American States...
...U. S. Technical Assistance: The efforts of Latin American countries to accelerate economic progress and improve the living conditions of the people are supported by numerous technical assistance programs of the United Nations, the United States and private organizations...
...Average Exports Imports 1891-1900 9.5 27.4 1901-1910 12.0 25.4 1911-1920 13.0 31.2 1921-1930 15.3 26.0 1931-1940 17.0 24.1 1941-1950 18.3 37.6 1951-1955 22.4 33.2 The exchange of goods between Latin American republics represents only a small fraction of their foreign trade...
...It feels, rather, an economic dependence on the Colossus to the North, which arbitrarily fixes the prices and volume of its exports and imports...
...Even in such prosperous nations as Brazil and Mexico, there remain vast areas with pathetically inadequate health conditions, while sanitation and health services in less developed countries are often limited to cities and very little progress has been made in rural areas...
...The funds were distributed among broad fields of activity and single projects according to the desires of host governments...
...Hospitals have been built, health centers organized, facilities for environmental sanitation introduced, campaigns waged against malaria and contagious diseases...
...They are usually directed toward the most urgent projects, are given on terms as favorable as those of the Eximbank, and imply no political obligation on the part of the receiving country to the creditor nation...
...It had been planned as a "do-it-yourself" device and can be made very cheap in mass production...
...It accounted for the following percentages of exports from Latin American countries and of world exports to these countries: 1953 1954 1955 1956 From Latin America ~9JT ~9 T ~9i5~ 7.8 To Latin America 12.0 10.5 II.O 9.0 Latin America is not an economic unit which meets its needs mainly through its own production and the interchange of products within its borders, as does Europe or North America...
...the main roadblocks are psychological and political, one of them being unproductive use and waste of available funds...
...The U. S. Department of Commerce estimates the flow of net direct investments of U. S. corporations into Latin America as follows (in millions of dollars) : 1946 71 1952 227 1947 457 1953 117 1948 332 1954 88 1949 332 1955 193 1950 40 1956 612 1951 166 Source: U.S...
...In imports, on the other hand, the United States faces many competitors in the Latin American market: Great Britain, West Germany, Japan and, for some articles, France, Switzerland, Italy and the Scandinavian countries...
...The area has not freed itself completely from the heritage of the colonial era, which left an economy oriented toward exports rather than satisfaction of domestic needs...
...The flow from abroad described above meets some 15 to 20 per cent of this need...
...Source: U.S...
...The comments on the objectives and philosophy of the Fund, as presented in the Report to Congress on Mutual Security, leave an impres sion that the program is more concerned with the cold war and promotion of principles of free enterprise than with the economic development of the respective countries...
...Because of the transfer of funds and considerable discrepancies between * An excellent analysis of this and other technical assistance programs in Latin America will be found in the report published by the National Planning Association under the title "Technical Cooperation in Latin America...
...Paraguay is the only country trading primarily with its immediate neighbors...
...Such forms of assistance in the field of primary education testify to a very low level of education in respective areas...
...All these are development loans...
...Their contribution is noteworthy although their work is stretched too thinly and the means at their disposal are utterly inadequate—some $4 million to be divided among in Bogota, Colombia, its attention was focused on a new soil-cement block making machine...
...But the Eximbank opens short-term as well as long-term credits and occasionally lends rather small amounts of money, while the World Bank concentrates on long-term loans for larger projects...
...Expenditures have increased gradually in recent years: $25.8 million in fiscal year 1956, $27.7 million in 1957, $29.1 million in 1958 (estimated...
...It is an open question, however, whether this speaks well for our investments in the area...
...The Eximbank and the U.S...
...Its share in our exports has been steadily increasing since the turn of the century...
...We had occasion to observe the medical and sanitation work of the United States missions, with American and local personnel, in various Latin American the roof, and with the school's building completed, the Ministry of Education is willing to provide a teacher...
...Most diversified is the activity of our technical assistance in the field of agriculture...
...Sometimes people seemed proud that American, British, French, German, Japanese and Dutch corporations were building factories around their city, but on the whole they were not happy about the way in which foreign capital is used in their countries...
...VI...
...Recommendations for the Future...
...In Ecuador, they took an active part in establishing a school for tropical agriculture for the sons of local farmers...
...It will hardly stimulate trade among Latin American countries but may contribute to an expansion of their trade with Europe and Asia while reducing, at the same time, their dependence on the United States...
...The head of one U. S. mission told us of his visit to a village where the first opening was made in an adobe hut...
...If one considers changes in the purchasing power of the dollar, it was also the high mark of all foreign investments, including those of the United States, in the expanse from the Rio Grande to the Straits of Magellan...
...The slogan "The Oil Is Ours" has become a part of the credo of economic nationalism...
...Indeed, the Center, working on a very modest budget, concentrates its attention on improving the housing conditions of the majority of the population in Latin America, while most of the ambitious housing projects merely supply greater comfort to those who can pay...
...The success of the program has been most striking in the field of health and sanitation...
...Likewise there is resentment, though less passionate, against exporting local raw materials such as ores, instead of processing them at the mouth of the mines...
...Loans at Work...
...Moreover, the $42 billion In 1944-45 was roughly equivalent to $25 billion at 1914 prices...
...Investments in the Latin American Economy, 1957...
...The Role of U.S...
...crude petroleum, copper, lead, zinc and tin ores, wolframite and saltpeter...
...We also saw traces of work of the U. S. missions in schools on all levels: equipment for teaching physics, for technical training in high schools and colleges, laboratories, electrical and optical instruments, movie projectors, etc...
...capital.' This general trend has continued...
...The Eximbank began operations in February 1934 and authorized credits totaling almost $9 billion up to the end of 1957...
...The flow of private capital from the U. S. and other countries to Latin America is utterly erratic from the point of view of local people and is often directed to objectives that have nothing to do with the needs of local economy...
...There has also been a steady but not very brisk inflow of capital from Europe...
...This represents a gain of 60 per cent in a decade, or an average growth rate of less than 4 per cent a year—a far cry from the spectacular expansion portrayed by the U. S. Department of Commerce in its 1957 report on U. S. investment in Latin America...
...Inversely, when an Eximbank loan permits the government or its contractors to buy railroad equipment, road building machinery, trucks or electrical-installation materials in the United States, the operation differs little from financial support of the respective projects by the World Bank...
...Imports from Communist-dominated countries into Latin America were of similar magnitude...
...Brazil has the largest program, followed by Bolivia, Peru, Paraguay and Guatemala...
...Thus, foreign trade is much more important to Latin American nations than to the United States...
...Indeed, the area as a whole relies on imports not only for capital goods and articles consumed by wealthy people in the cities, but also' for textiles, some staple foods, petroleum products, coal, metals and chemicals...
...The share of the USSR in the Latin American foreign trade is not impressive: In 1955, exports of Latin American countries to the USSR, the East European satellites and China totaled $115 million, a little less than 1.4 per cent of their total exports...
...For the United States, it also includes this country's contributions to United Nations assistance programs in Latin America...
...Very soon, however, all Latin American loans fell into default, and the flow of European capital to South America and the Caribbean ceased for three decades...
...All in all, people would prefer foreign portfolio investments in local private and public enterprises to the direct investments which have become the prevailing operation of private foreign capital in Latin America...
...I. 80 per cent...
...Summary: Certain conclusions may be drawn from this outline of the position of Latin America in world trade, its receipt of foreign capital and economic aid, and the technical assistance it obtains from the United States and international organizations...
...Of $50 million lent by the World Bank to Latin America in 1957, more than 80 per cent went for the development of power ($15 million to Chile, $1.6 million to Nicaragua, $25.5 million to Uruguay...
...Education and health problems have also attracted various religious groups to Latin America...
...Summing up, Latin America is a very important partner in the intraregional trade of the Western Hemisphere, but Latin American nations do not trade much among themselves...
...Mutual Security Act of 195B, Part XIV...
...This program does not undertake the more ambitious industrial projects, such as building of power stations and steel mills...
...The United Nations is represented mainly by UNESCO, WHO and FAO...
...European capital was lured by the myth of the fabulous wealth of the young overseas nations...
...More recently, Venezuela and Brazil have advanced to first place...
...Latin America is studded with medical institutions that have grown out of "servicios" founded by the IIAA...
...I have tried to show that the scarcity of capital is not the major obstacle to prosperity in Latin America...
...The amounts allocated and the pattern of distribution sug gest that the purpose was to give something to as large as possible a number of applicant states, without serious thought of helping Latin America in develop ing its resources...
...See Table VI, opposite page...
...The work, however, is far from completion...
...In contrast, the list of imported goods is much longer and varies little from country to country...
...Excluding Argentina and Uruguay, which have stronger ties with Europe than with nations in this hemisphere, the United States accounts for 72.5 per cent of all exports and 51.5 per cent of all imports of Latin America...
...Great Britain was the main creditor, followed by France, Germany, Belgium and the Netherlands...
...In relation to this area's aggregate national income or the value of its exports, foreign capital United Nations, Foreign Capital in Latin America (New York, 1955...
...The Development Loan Fund ($300 million for the first year) is in an early phase of operation and has not attracted much * Since the United States contributes more than, one-third of the capital of the World Bank, HB share in public funds flowing into the Latin American economy from abroad is close to 90 per cent...
...Thus, the net new credits of the Eximbank to the Latin American economy hardly exceed $100 million a year...
...We saw them at work with our people...
...The sales of U. S. corporations in Latin America grossed $4.9 billion in 1955...
...U. S. Technical Assistance and Economic Aid (In thousands oj dollars) TECHNICAL COOPERATION OTHER ECONOMIC AID Cumulative Cumulative through through Country 1956 1957 1958 19SS Mexico 705 888 1956 1957 1958 1958 Guatemala 1,983 2,238 680 5,841 2,400 8,974 16,193 El Salvador 934 1,069 1,000 5,400 15,280 10,000 46,281 Nicaragua 756 681 900 4,820 Honduras 1,156 1,324 1,350 7,266 Costa Rica 907 904 1,050 6,483 Panama 1,096 1,023 1,170 7,710 Cuba 471 569 570 2,564 Dominican Republic 265 156 190 1,634 Haiti 1,361 1,116 1,300 5,795 5,000 1,010 — 7,658 Venezuela 150 135 170 999 Colombia 1,323 1,156 1,290 7,872 Ecuador 1,660 1,809 1,880 10,215 Peru 2,819 2,594 2,850 16,419 Bolivia 2,500 3,300 3,100 17,000 22,900 20,000 17,000 74,100 Paraguay 1,801 1,530 1,480 10,656 Chile 2,174 2,456 2,500 12,656 Argentina — — 350 350 84 — — 84 Uruguay 154 254 200 1,650 Brazil 3,604 4,512 4,700 23,134 TOTAL 25,819 27,714 29,130 157,438 44,177 36,290 27,000 128,123 Source: Computed from the Report of the ICA for the Hearings before the Committee on Foreign Affairs, House of Representatives, 85th Congress...
...Considerable capital also went for railroad construction and loans to local governments...
...VII...
...It is, nevertheless, extremely difficult to explain the true situation to local economists and impossible to explain it to the man in the street...
...But this is precisely the merit of this system—it brings aid to people where such aid is most urgently needed...
...It can be dismantled and transported on mule-back to inaccessible areas...
...In most Latin American countries, this ratio fluctuates between 40 and 60 per cent...
...Foreign capital, especially U. S. capital, is ubiquitous in Latin America, but its contribution to the economic growth of the area is somewhat reduced by fluctuations in its flow, which are determined by the opportunities offered for investment elsewhere and largely by the far-fledged, often global, plans of leading corporations...
...We heard many complaints that foreign capital is guided not by the interest of the host countries but by the search for profits—which is, of course, equally true of domestic capital...
...The development of such a program for the United States in Latin America depends on two premises: first, clear understanding of the environment in which the program will operate (the level and trends of economic development of Latin America, the urgent needs of its people, the patterns of its foreign trade, the role of foreign capital, the extent and nature of the foreign aid it now receives, and so on) ; second, a clear definition of the aims and objectives of the United States in this area...
...Foreign Trade: Because of the relatively small size of the Latin American republics and the lopsided development of their economy, none of them enjoys the same degree of self-sufficiency as the United States or such nations as Germany, France and Italy...
...Their present industrialization policies, which often encourage the same industries in all parts of the continent, are not favorable to its economic unification on the basis of division of labor...
...We visited villages where agricultural extension agents are engaged in campaigns to introduce elementary stoves for cooking or bedsteads in farm houses, or to teach farmers to out an opening in the wall to let light into the room...
...The value of foreign investments in the world as a whole was estimated at $42 billion in 1944-45, as compared with $44 billion in 1914...
...Economic aid—partly as defense support, partly as emergency grants— was extended to Bolivia, Guatemala and Haiti, in response to the critical situation in these countries as a result of political upheavals...
...commerce with the United States predominates in the foreign trade of all other Latin American countries...
...The oldest and most important among them is the program inaugurated in the 1930s by the Institute for Inter-American Affairs (IIAA...
...The large part of increased value, therefore, represented capital gains of United States stockholders, bringing their total gains up to 30 per * What happened in Latin America after the outbreak of World War II conformed with much broader, worldwide trend...
...The ideas of this program were later applied on a much broader scale in the Point Four program...
...According to the survey presented by the Administration to the House Foreign Affairs Committee, the United States has spent a total of $157 million on technical assistance in Latin America, from the start of the respective programs through the fiscal year 1958...
...Resentment is widespread against the extraction of oil and ores by foreign enterprises...
...Foreign Capital: The problem of capital is the major issue in discussions of ways to accelerate economic progress in Latin America...
...When the change in the purchasing power of the dollar is taken into account, the latter amount is equivalent to $4.8 billion at 1946 prices...
...Up to the end of 1957, the World Bank had awarded 72 loans to 15 Latin American countries for a total amount of $745 million, distributed as follows (in millions of dollars) : Brazil 182 Uruguay 64 Nicaragua 23 Mexico 152 Peru 41 Guatemala 18 Colombia Ill Ecuador 33 Panama 7 Chile 74 El Salvador 24 Others 16 Source: International Bank for Reconstruction and Development...
...Subsequently the latter changed its name in line with the vicissitudes of U. S. politics—it was called Technical Cooperation Administration (TCA) in 1950-53, then became a part of Foreign Operations (FOA) and was integrated with International Cooperation (ICA) in 1955...
...Almost all Latin American countries report a higher value of exports than of imports: that is, an active balance in merchandise trade...
...Department of Commerce, US...
...The preceding discussion has not dealt with the operations of the new U. S. Development Loan Fund and the Special Fund for Latin America, both established in 1957...
...This was one of the brightest, most encouraging impressions we had during our trip...
...Department of Commerce, Balance of Payments, Statistical Supplement, Washington 1958...
...Prospects are good that in a short time, thousands and perhaps a hundred thousand such "sinve-Ram" presses will be put into action, and millions of people thus enabled to build better, weather-resistant dwellings for themselves...
...In many cases a single item predominates in the country's export...
...The average inflow of about $200 million a year in 1950-56 is a fairly meaningless figure when the amounts for single years vary from $40 million to $612 million...
...March 1958...
...Some Latin American economists complain that their countries are compelled to pay high prices for imported goods and are underpaid when little use for their cotton, meat and wool...
...and (2) the long-run interest of the nation as a whole, which may conflict with the immediate interests of certain groups of the population...
...cotton and sis?l...
...The National Planning Association has estimated that more than 60 United States religious groups—Catholic, Protestant, Jewish and interdenominational—are conducting programs of health, education and agriculture in every country of Latin America, doing the equivalent of the full-time work of 2,000 technicians...
...National interest, however, is a somewhat ambiguous term...
...We toured villages in the company of local agronomists trained by Point Four technicians, all young, full of energy and enthusiasm...
...Only $1.8 billion was actually disbursed, and almost half of this amount has been repaid...
...We saw such "improved" houses but had no opportunity to observe the impact of the innovation on the villagers...
...they conduct over 40 projects of agricultural extension education...
...appropriations and actual use of funds, it is difficult to obtain a perfectly clear picture of the program and its distribution among individual countries and fields of activities...
...The second comprises public grants, development and emergency loans, technical assistance and similar measures, either in the form of unilateral transfers or on the basis of bilateral or multilateral cooperation...
Vol. 41 • November 1958 • No. 43
