Latin America

ON THE WORLD TODAY

DURING the war years, the United States invested a huge sum in creating an emergency Hemisphere economy and making it function. The grand total still remains one of the most scrambled mysteries of Washington bookkeeping. But waste and all, — and unquestionably there was plenty of haste-made waste, — we spent in Latin America somewhat less than 5 billion dollars, or under 2 per cent of our total war bill of more than 300 billions.

We got an enormous money’s worth. The raw materials for fully a fourth of our war production came from Latin America, most of them crucial materials unavailable elsewhere. From the military bases granted us on the Latin American coasts — and our economic generosity helped us vitally in getting permission to use them — we were able to smash the 1942 German submarine offensive in a battle as crucial to Allied victory as Stalingrad.

And the emergency Hemisphere economy did work. While the Latin American countries were supplying us with a large share of our war necessities, we were supplying them with the basic commodities which enabled their economies to survive. In the light of these experiences, it makes business sense today to look on our 5 billion dollars as investment. If we can hold a Western Hemisphere economy together, put it on a permanent peacetime basis, make its productive capacities grow in line with the consumption needs of the 260,000,000 people of both continents —then even the “wasted” funds can be made to pay dividends.

Is economic progress possible?

Latin America is an area of some 8,000,000 square miles, with a population of more than 125,000,000, where economic conditions are very different from those in the United States, except in a dozen modernized cities. Outside these cities a modern economy has either to be planted or, where sparse roots already are in existence, to be given years of judicious cultivation.

The hindrances to economic development are these: —

1. Poverty. Economic production in Latin America is predominantly agricultural. Because most of it is conducted under an antiquated system of vast landed estates, using semi-peonage and hand-labor farming processes, more than half the family incomes in the twenty republics are estimated to be below $200 annually. Millions of Latin American families never in a single year see more than a small fraction of $100. From the standpoint of foreign trade, families on incomes of less than $200 simply are not in the market for imported products.

2. Ignorance. Because nations whose populations lack taxable wealth cannot afford to provide adequate public school systems, the by-product of mass poverty is mass ignorance. Despite varying educational standards in different republics, far more than half of Latin America’s 125,000,000 people are illiterate or barely literate. It is doubtful if 3 per cent have the equivalent of a United States high school education. Every Latin American republic, therefore, is short on the technical and managerial skills required for business and industrial development, and on the trained capacity for economic, social, and governmental administration.

3. Health deficiencies. Productive capacity and economic initiative are held down at almost every level of Latin American society by preventable diseases. For the twenty republics to pull their weight in a Hemisphere economy, public health and sanitation practices need to be instituted, and diet and climatic adaptions made, through which these diseases can be controlled.

4. Transport deficiencies. Where the United States has some 240,000 miles of railways and 3,000,000 miles of highways, all Latin America combined has, by the best available statistics, only 70,000 miles of railways, and 300,000 miles of highways. And this to serve nearly as large a population as the U nited States, and more than two and one-half times the area.

Even these figures do not tell the full story of the transportation lag. Except for considerable sections of the Pan American Highway, and two difficult transcontinental routes out of Buenos Aires, most Latin American all-weather roads penetrate little beyond the market-farming areas surrounding sizable cities. North of Buenos Aires, there are no transcontinental railways.

As a result, throughout Latin America economic circulation is checked — between neighboring republics, in each republic, often between near-by localities. The virtually moneyless rural regions remain moneyless because, without the facilities for heavy-volume transport, they cannot exchange products in quantity with the cities and with world markets.

5. Power problems. Although potential South American and Mexican fuel oil production may be sufficient, South America’s coal stocks are small and of inferior quality. While hydroelectric resources are practically unlimited on the eastern slopes of the Andes, most of them are in regions where climatic transport obstacles may prevent industrial development for generations. For the development of an intensive industrial economy, Latin America needs surveys and power-allotment programs — quite possibly on the TVA model — for regions suited to industrial development.

6. Financial dangers. The long, spotty record of credit and currency fluctuations in Latin American finance — not to mention the ghastly post-war inflationary fevers raging today in all but two or three of the republics — provides another hazard for a Hemisphere economy program. An early priority in the program, therefore, is the establishment of interAmerican financial facilities for maintaining the stability of the currencies and the debt and exchange practices of the republics.

7. Nationalist obstructions. One difficulty about newborn industries, especially in countries hitherto industrially undeveloped, is that they tend to foster among ruling economic and political groups protective passions akin to a mother jaguar’s. In the case of numerous industries recently improvised or expanded in Latin America to meet various war-supply emergencies in consumers’ goods, the list of trade restrictions erected by various republics for their protection is already formidable.

As further industries are developed in peace — or even fostered by a Hemisphere economy project itself — it is highly unlikely that this protective trend will be reversed. On the contrary, added to the normal give-and-take of nationalist rivalries and antipathies, trade barriers could conceivably impede the exchange of products within the Hemisphere to the point of stifling the over-all economy. The Hemisphere economy project requires, then, not necessarily an iron-clad customs union among the republics, but a truce on “dog in the manger” tariffs and import restrictions.

8.Competitive hazards. South of Rio de Janeiro, in subtropical and temperate zone South America, a climatic region begins whose natural soil products — grains, cotton, livestock, wool, vegetables, and fruits — are in competition with those of the United States. Moreover, industries there, because they utilize the same products as ours, also tend to be competitors of American industries. For this reason the main ties of the 35,000,000 people in southern Brazil, Argentina, Uruguay, and Chile — industrially the most advanced population in Latin America — have been with Europe rather than with the countries of the Western Hemisphere.

A main task in the establishment of a Hemisphere economy, then, is — without in any way interfering with this region’s overseas outlets — to center its economic interests more directly in the Americas: by raising purchasing power and demand for the regional products in tropical Latin America; and, through “three-way” trade arrangements involving the “regular” European customers, to make it possible for “deep” South America to absorb more of the special machine, automotive, and mechanized comfort products of the United States.

How we can help

The immense reservoirs of capital and technical skills in the United States can foster the economic development of Latin America, and the United States can provide markets for a vastly increased share of Latin American products. Widespread industrial development in Latin America will call for long-continued technical assistance and relatively large financial support from the United States.

Basically, in the creation of Hemisphere economy, four factors are involved: —

1. The normal agricultural and mining export commodities of Latin America must continue to move into the world markets — especially to the United States — to keep purchasing power as high as possible.

2. The profits of foreign transactions should be increasingly reinvested in the development of processing and manufacturing industries within the Latin American republics, as a means of commanding higher prices on their natural products and of further increasing mass purchasing power.

3. Profits of this increased industrialization should be used as far as possible to improve Latin America’s transportation and power facilities.

4. In all these developments, emphasis should be placed by all the American governments on the growth of trade within the Hemisphere: on trade between the Latin American republics as well as on trade between Latin America and the United States; and in general on trade in commodities that strengthen the Hemisphere’s economic independence.

A much greater degree of economic planning will be required of all the American governments: planning within the individual governments and “partnership planning" between them — planning which will make sure that a good share of the profits of developing industries will be used to raise the living standards of the people, and that the rest will be used to develop national resources still further.

Little Hitler?

Colonel Peron, decisively elected President of Argentina, has been doing his best since the election to refute the wishful conclusion of certain admirers and would-be appeasers, in the United States and other republics, that he is just another Latin American dictator with whom all reasonable persons can do business.

By a decree of the still existent administration of General Farrell, the government gained virtually complete control of the credit and rediscount operations of banks in the republic. Invoking a celebrated Nazi trick, the decree limits the volume of rediscount operations — without special government permission — to the registered amount of each bank’s capital.

Big-profit activities for all banks are thus rendered impossible without government favor. But American and other foreign banks are obviously the heaviest sufferers. With their merely nominal capitalization in Argentina — the National City Bank’s branch is capitalized, for instance, at slightly less than $3,000,000 — they are crippled in their capacity to rediscount all but the most trifling import shipments, unless they are willing to take both political and business orders from Peron and Company.

Leaders of Perdn’s Laborista Party have served notice on the principal universities that political agitations in class and lecture rooms must cease with the new administration; and that they are expected to discipline, or purge, their faculties accordingly. This directive means that — again according to European fascist patterns—only Peronist political ideology is to be taught in Argentina’s institutions of higher education.

The resignation of Roberto Repetto, Chief Justice of the Argentine Supreme Court, a stalwart, oldfashioned democratic leader whose bench opinions during the past three years have to some extent slowed the destruction of constitutionalism, has thrown the Argentine judiciary wide open to wholesale reconstruction by Peron.

The President-elect announced that he had chosen as his inauguration date June 3, the anniversary of the barracks revolt which overthrew Argentina’s constitutional government and replaced it with military totalitarianism. To all but die-hard defenders of the “just another Latin American dictator" theory in Washington, this was sufficient notice that Peron is proud of the revolution and will carry on with totalitarianism.

Peron throws his weight around

The heat was turned on Argentina’s democratic and relatively defenseless neighbor, Uruguay. The 50,000 tons of winter wheat customarily delivered to Uruguay were denied, on the ground that the Argentine surpus was committed to relief in Europe.

It was hinted that Argentinians might have difficulty getting passports to Uruguayan seaside resorts, unless Uruguay shortly mended its political manners. Unofficially, it was conveyed that the mending involved the dismissal of Eduardo Rodriguez Larreta, Uruguayan Foreign Minister and author of the proposal for dealing forcibly with American totalitarian states that are potential disturbers of the peace.

Trouble seemed to be developing, too, over wheat shipments to mildly anti-Peronist Peru. And on the Chilean border, Argentina continued to increase her armaments. Brazil, the only power in South America capable of checking Argentina, hesitated to protest. Instead, Rio de Janeiro commissioned one of Perón’s most intimate friends and advisers, Baptista Luzardo, as its ambassador to Buenos Aires.

Washington viewed these signs and portents grimly. Its conciliatory gestures of appointing the veteran career diplomat, George Messersmith, as ambassador to the incoming administration, and of suggesting a formula by which a mutual military assistance treaty might eventually be signed with Argentina, plainly had merely incited Peron to throw his weight around. If Argentine “interventions” in neighbor nations like Uruguay are to be stopped and Peron’s plans for detaching all of South America below the Caribbean from the influence of the United States are to be blocked, we shall need something more than conciliatory gestures.