The Economy of Latin America 9780231893503

An economic survey of Latin America as a whole, including analysis of production, agriculture, capital, international tr

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Table of contents :
Preface
Contents
PART I THE SETTING
I. Evolution of Economic Systems
II. Population, Income, and the Allocation of Productive Effort
PART II ORGANIZATION OF PRODUCTION
III. Agriculture and Land Tenure
IV. The Mining Industry
V. Transportation
VI. Manufacturing, Industrialization, and Types of Business Organization
VII. Public Utilities
VIII. Government and Business
IX. Labor and Social Security
PART III THE RAISING OF CAPITAL
X. Capital Formation
XI. Portfolio Investments
XII. Economic Imperialism
XIII. Public Finance
XIV. Money and Banking
PART IV PRICING AND PRODUCTION CONTROL
XV. General Statement on Pricing
XVI. Commodity Control Plans
PART V INTERNATIONAL TRADE
XVII. International Trade in General
XVIII. Trade Restrictions
XIX. Expansion of Trade
PART VI CONCLUSION
XX. Conclusion
PART VII APPENDIX
Statistical Tables
Bibliography
Index
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THE ECONOMY OF LATIN AMERICA

THE ECONOMY OF

LATIN AMERICA By W E N D E L L

G.

GORDON

NEW YORK • COLUMBIA UNIVERSITY PRESS

COPYRIGHT

1950,

COLUMBIA

UNIVERSITY

PRESS, N E W

YORK

First printing 1950 Second printing 195} PUBLISHED BY

IN G R E A T

GEOFFREY LONDON,

BRITAIN,

CANADA,

I N D I A , AND

PAKISTAN

CUMBERLECE:

OXFORD

UNIVERSITY

PRESS,

TORONTO,

MANUFACTURED

IN T H E

BOMBAY,

AND

KARACHI

U N I T E D S T A T E S OF

AMERICA

PREFACE book is designed to serve as a general economic survey of Latin America. Especially it is intended to serve two needs: (1) the need for a general survey to fill the requirements of the businessman and public official; (2) the need for a satisfactory text for survey courses on the economy of Latin America. First, it is an economic survey of one of the great regions of the world—a region especially significant for the United States today. T h e author has attempted not only to describe the economic relations of Latin America with the rest of the world but also to describe the internal economic order of the region itself. In most books on Latin America the nation is the basic unit and each country is separately analyzed. As a result, in many cases, the books in the field tend toward a scattering of material without presenting a coordinated picture. T h e more useful way to analyze a region is in terms of the different institutions which constitute it. T h e present work attempts to analyze such institutions in Latin America. T h e different types of productive activity are treated as units: labor, agriculture, mining, manufacturing, capital formation, money and banking, pricing, and international trade. Of course there are differences between the agriculture of Argentina and the agriculture of the Andes. But it is hoped that these differences are brought out with better perspective as a result of being treated together than is the case when the analysis is made nation by nation. Some of the institutions studied here have not previously been studied in any comprehensive way for Latin America as a whole. As a result the analysis presented here must be considered to be preliminary rather than definitive. Second, this book represents an effort to provide a source of information suitable as a text for the increasing number of courses on economic conditions in Latin America. It has been the author's experience in teaching a course on "Pan American Economic Problems" that there is no satisfactory text nor even any satisfactory group of three or four books to which the student can be sent to gain an over-all picture of the field. And many of the subjects, such as portfolio investments and exchange control, are sufficiently complicated so that the student really needs some definite material to fall back on in addition to the lectures. THIS

vi

PREFACE

T h e author would like to express a very considerable measure of thanks to Mrs. Carolyn Cott Webber for her assistance in checking the factual accuracy of the material and for her work in assembling much of the material in the statistical tables. Mrs. Webber's assistance was made possible by a grant from the Carnegie Corporation, which was obtained through the Institute of Latin America Studies of the University of Texas. T h e author would like to thank the Carnegie Corporation for making it possible to obtain this research assistance. WENDELL C . GORDON

University of Texas January, 1950

CONTENTS PART I • THE SETTING

I. II.

Evolution of Economic Systems

3

Population, Income, and the Allocation of Productive Effort PART II • ORGANIZATION OF

21

PRODUCTION

III.

Agriculture and Land Tenure

35

IV.

T h e Mining Industry

51

Transportation

81

V. VI.

Manufacturing, Industrialization, and Types of Business Organization

VII.

100

Public Utilities

126

VIII.

Government and Business

136

IX.

Labor and Social Security

146

PART III . THE RAISING OF CAPITAL

X.

Capital Formation

163

XI.

Portfolio Investments

172

XII.

Economic Imperialism

186

XIII.

Public Finance

206

XIV.

Money and Banking

216

PART IV • PRICING AND PRODUCTION

XV. XVI.

CONTROL

General Statement on Pricing

245

Commodity Control Plans

258

PART V . INTERNATIONAL TRADE

XVII.

International Trade in General

297

viii XVIII. XIX.

CONTENTS

Trade Restrictions

309

Expansion of Trade

332

P A R T VI • CONCLUSION

XX.

Conclusion

341 P A R T VII . APPENDIX

Statistical Tables

349

Bibliography

403

Index

415

STATISTICAL TABLES ì.

Population Estimates for Latin-American Countries

2.

Population by Races, in Percent of Total National Population

351 352

3-

Concentration of Population in the Cities

353

4-

Distribution of Population by Occupations

354

56.

National Income or National Product

355

Oil Production and Reserves

356

7-

Transportation Statistics

357

8.

Merchant Fleet

358

9-

A: Index Numbers of Industrial Production; B: N u m b e r of Workers in Manufacturing

io.

World Iron Ore Reserves

11.

Value of United States-Owned Assets in Latin America, May 31, 1943

12.

359 360 361

Dollar Bonds in Default as to Interest: Obligor Distribution, December 31, 1947

362

3-

British and French Investment in Latin America

363

14.

Foreign-Lending Operations of the Export-Import Bank

364

15-

Prices and Yields of Foreign Government Bonds in New

J

York and London 16.

Internal and External Public Debt of Latin-American Governments

»7-

365 366

Per Capita Debt Burden, T a x Burden, and National Income

18.

National Government Revenue

367 368

!9-

National Government Expenditures

369

20.

International Value of Latin-American Currencies

37°

X

21.

STATISTICAL

TABLEf

Amount of Medium of Exchange (Money Supply), December, 1948

371

22.

Capital and Surplus of Central Banks

37s

23.

Deposits in Central Banks, December, 1948

37?

24.

Domestic Credits of Central Banks, December, 1948

374

25.

Deposits in Banking System, December, 1948

37^

26.

Domestic Credits of Banks Other Than Central Bank, December, 1948

27.

Relation between Price Level Fluctuations and Various Forces Affecting T h e m

28.

37t

37*

Relative Position of Principal Commodities in the Export Trade of Latin America, 1947

38:

29.

Index Numbers of Price Levels in the United States

38»

30.

Production and Price of Raw Sugar

383

31.

Production and Price of Coffee

384

32.

Copper Statistics

385

33.

Nitrate of Soda and Chemical Nitrogen

386

34.

T i n Statistics

387

35.

Exports of Latin-American Countries Classified by Countries of Destination, 1937 and 1947

36.

Imports of Latin-American Countries Classified by Exporting Countries, 1937 and 1947

37.

390

Exports from Latin America Classified by Exporting Countries

39.

389

Latin-American Imports Classified by Importing Countries and by Commodities Imported, 1946

38.

388

391

Imports into Latin America Classified by Importing Countries

392

40.

Balance of Commodity Trade

393

41.

Balances of International Payments, 1947

394

STATISTICAL

TABLES

XI

42.

Relation between Imports, Exports, and Tariff Receipts

395

43.

Licensing Systems of Latin-American Countries, 1949

396

44.

Foreign-Exchange Rate Structure, March, 1949

397

45.

Values of Latin-American Currencies in Terms of the Dollar

46.

Percentage of Total Trade of Latin America Contributed by Principal Countries

47.

399

400

Percentage Participation of Leading Countries and Geographic Areas in Total Latin-American Trade

401

P A R T

I

THE SETTING

C H A P T E R

1

EVOLUTION OF ECONOMIC SYSTEMS E X P L A N A T I O N S of what takes place in a capitalistic economy have been made by men brought up in such an economy, who have used the evidence gained from their study of it to formulate their descriptions and arrive at an underlying theory. Mercantilism, laissez faire, instrumental economics, Keynesian theory, and imperfect competition theory have each been indigenous attempts to deal with the economic problems confronting the countries where they developed. However badly the industrially developing countries may have served themselves as a result of their use of laissez faire philosophy, the laissez faire school of thought provided, during the nineteenth century in England and the United States, some basis upon which individuals could work, act, and justify their actions. The system was developed by thinkers in those countries and was reasonably comprehensible to the people involved, even though it may not have been the best theory that could have been devised under the circumstances.

In Latin America the situation was far otherwise for four hundred years. From 1520 till 1910 there was no indigenous economic philosophy—however bad—to serve as the basis or explanation of economic action in those regions and to serve as a guide with regard to what governmental policy should be. PRE-CONQUEST CULTURE But this has not always been true. The advanced Indian empires of pre-Spanish times (the Aztec, Maya, Chibcha, and Inca) were possessed, each, of a fairly coherent economic system. This system provided a code to live by, which was at least intelligible to the people living under it. The individual knew and understood his position, and what he could, or could not, do about it. On the political side the system was an absolutism involving complete control from above. On the economic side it involved a type of communism. It is reasonably safe to say that in those Indian empires the village land was held in common. It was worked sometimes in common and sometimes by small plots. This was as true in the Inca ayllu as in the Aztec altepetlalli or calpulli. In Peru no one could remain idle under penalty of corporal punishment. These empires were surprisingly alike in economic organization, despite the dis-

4

THE

SETTING

tance between them and the dearth of transportation facilities. T h e function of the state was to protect the communal units in their work. T h i s economic order could be, on the whole, justified in terms of the general good or in terms of the conditions then existing. It is no doubt true that there were abuses. Some chiefs turned the system to their own benefit. And many received less than an equal share of the return. In fact, at best, the return among workers was on the basis of work done rather than on the basis of equality. Exploitation was present, however, even before the Spaniards came, and village elders were increasingly seeking and obtaining special privileges. Ample evidence of this fact certainly appears in Aztec Mexico. It was time for a change in 1520—but perhaps not for the type of change that occurred.

COLONIAL

PERIOD

T h e Spaniards and Portuguese changed much of this. T h e y completely revised the organization of society, both economic and political. T h e y introduced an economic system—mercantilism—which was comprehensible to them, but incomprehensible to the Indians. Since the conquerors had no particular interest in explaining it, the Indians were exploited by a system which they did not understand and which no one bothered to explain to them. Of course they could understand that forced labor in the mines was unpleasant. But how could they be expected to understand that the Europeans had a positive interest in preventing the development of any industry in the New World? How could they be expected to understand the devious workings of the economic system which made it to the advantage of Spain and Portugal to destroy manufacturing and much of agriculture in the New World? How could they intelligently combat those things if they never understood them? Spain and Portugal, as was also true of the other great mercantilistic empires of those years, desired colonies in order that they might obtain the precious metals from them; and, in order to have as good a market as possible in the colonies for the goods of the mother coun try., they suppressed colonial industry wherever possible. From the wealth in precious metals, the Crown received perhaps a fifth, perhaps a ienth, and the adventurers got the rest. Subsistence agriculture was permitted to develop, but beyond that point Spain and Portugal discouraged the economic development of the colonies.

EVOLUTION

O F E C O N O M I C SYSTEMS

5

By far the greatest part of the regulatory measures enacted by the Consejo de Indias (the body in Spain in charge of the political, judicial, and religious affairs of the colonies), by the Casa de Contratación (which controlled trading and commercial relations between Spain and the colonies), and by the Portuguese was designed to give effective meaning to the mercantilistic system of control. The conversion of the Indians to Christianity was a side issue in which only a small number of the conquerors were sincerely interested. T h e humanitarian laws sponsored by Las Casas were sincerely meant, but few were the administrators with any genuine interest in enforcing them. Because of the distance to America, because of the vast areas involved, and because of the depredations of English, French, and Dutch pirates, Spain and Portugal resorted to an assortment of restrictions in order to preserve for themselves the spoils of the New World. But it should be remembered that these measures were incidental to the main point at issue which was the enforcement of the mercantilistic system. Immigration to and emigration from the colonies were strictly controlled by the home government, at least to the best of its ability. Since it was difficult to control innumerable ships sailing to and from innumerable harbors, that difficulty was met by specifying a small number of harbors which must be used and by making the ships sail together in great fleets at rare intervals. The ports in Spain that came to serve the New World trade were Cádiz and Seville. T h e ports in the New World were Havana, Vera Cruz, Porto Bello, and Cartagena. Large fleets sailed once a year between these ports and Spain. Great fairs were held at the ports in the New World while the fleets were in. There is ample evidence that this system had a throttling influence on trade. How could that help but be true, since goods from Argentina, at least during some years, instead of going directly by water from Buenos Aires to Spain, had to go overland to the west coast, up the west coast to the Isthmus of Panama and thence on the fleet to Spain? Or, goods from the Philippines, in one galleon a year, came to Acapulco in Mexico, thence overland to Vera Cruz and by the fleet to Spain. Whether or not this system meant any real protection even from the pirates is open to question. If captured, the fleet was a greater prize than any number of individual vessels would have been. The English had begun to undermine this tight system of trade

6

THE

SETTING

control before the end of the colonial period. In 1713 at the close of the War of the Spanish Succession, the English forced upon Spain the Asiento agreement. It provided that the English could send one ship a year in the Porto Bello trade and also could sell Negro slaves in Spanish America. T h e one ship allowed into Porto Bello came to serve as a smuggling base and was reloaded over and over again by other English ships. T o this practice the colonists gave tacit consent, for they desired to augment the insufficient quantity of goods provided by the annual fleets and to sell to other than Spanish merchants if that could be done with greater profit. Despite these minor breaches, however, the system of trade controls was the dominating economic fact of the times. And Spain and Portugal were intent on maintaining it as best they could. Within the colonies other controls were used by the state. There were extensive price controls. T h e concept of a "just" price prevailed. Speculators who attempted to profit from price fluctuations, especially in connection with foods, were severely punished. Such practices as "cornering the market" were regarded as illegal as well as immoral. Monopolies were prohibited by law, if not in fact. And the economic order was theoretically controlled from above. Many laws from Spain, in addition to the price control laws, were intended by the Crown to benefit the Indians and the people generally. Wages and conditions of labor were largely regulated to the interest of the Indian, by law if not in fact. The guild system, a relic of medieval Europe, found a place in some of the craft industries of the New World. Its paternalistic structure was also designed to provide some protection for labor. But this was the legal, rather than the important part of the picture; and individual Spanish adventurers received great tracts of land or encomiendas, and the Crown also gave to them in trust the Indians who lived on the land. T h e royal grant of the land said, " T o you are entrusted (se os encomienda) the Indians, and they are to be instructed in the precepts of the Holy Catholic faith." A moral responsibility toward the Indians was realized by the over-all law— however badly the Indians may have been treated in specific cases, especially in the mines, where forced labor and virtual slavery prevailed. T h e church, although it functioned as a land-hogging institution on a colossal scale, also furnished an antidote in the form of religious consolation and hope of a better after life.

EVOLUTION

OF

ECONOMIC

SYSTEMS

>J

But the essence of mercantilism prevailed wherever the interests of local industry or agriculture in the New World crossed the interests of the industry and agriculture of Spain and Portugal. In those cases the home government was not only in a position to enact legislation beneficial to the "peninsular" (Spanish and Portuguese) interests, but most consistently did so. T h e raising of grapes in the New World might lead to a wine-making industry that would compete with that in Spain; so, the raising of grapes in the New World was prohibited. A steel industry in Brazil might compete with that in Portugal; so, a new steel industry in Brazil was ordered out of existence by Portugal. And in general the policy of Spain and Portugal in the New World was calculated to discourage manufacturing. T h e motive was simple, although not particularly commendable. Spanish and Portuguese producers desired to make as much profit as they could; therefore, they ruled out competition whenever possible. Spanish producers were in a better position for influencing the King of Spain than were the producers in the New World. Consequently royal decrees tended to favor Spanish and Portuguese producers at the expense of the New World producers—and all of the means previously mentioned for doing this were put into effect in the Spanish and Portuguese mercantilistic systems. It should be borne in mind that this type of exploitation was not a unique vice of the Iberians. T h e English applied a similar system in their relations with their colonies—such as the thirteen in North America. T o speak even more broadly, nations in general have tended to put such a system into effect when and where they could. INDEPENDENCE PERIOD Laissez faire. It is not difficult to see why there was tremendous pressure in Latin America for a change by 1800. T h e Creoles had had just enough contact with the English and Dutch to know that better, cheaper, and more abundant merchandise could be obtained from them than from Spain and Portugal. Also, and more important, they knew that other countries would be a valuable market for the products of Latin America if they could break down the systems of prohibitions of the Iberian colonial system. And, probably more important still, the colonists had come to realize that Spain and Portugal were taking all possible measures to hold them back from engaging in the production that might make them far more wealthy

8

T H E SETTING

than they were. A Chilean, Manuel de Salas, was a strong exponent of this position at the beginning of the nineteenth century. Also, at the beginning of the nineteenth century new ideas were abroad in the world. Political democracy had become a powerful force in the United States and France and was the great dynamic force of the times. In addition a new economic philosophy was coming into its own. Adam Smith in England in The Wealth of Nations (1776) had, by argument, apparently devastated the mercantilistic position. The new school in economics emphasized the general gain that accrues as a result of greater trade freedom. Different regions of the world should, Smith said, specialize in the production of the things they could produce most cheaply. The total produce of the world would then be greater than if each nation tried to keep out the goods of other nations and to produce whatever it needed regardless of cost. Latin Americans could see tremendous possibilities in this doctrine. It provided them with a valid, theoretical argument against the mercantilistic system of trade controls. Latin America gained its freedom from Spain and Portugal in the early part of the nineteenth century as the result of a revolution that avowedly espoused political democracy and free competition or, as it came to be called, laissez faire. This was not only true of Brazil, which separated peaceably from Portugal and retained the emperor, but also of much of Spanish America, where the revolution was violent. Some of the most important writers on Latin-American economic theory in that period were exponents of the new liberal economics. In Argentina in the i79o's there was Manuel Belgrano, who inveighed against the shackles of mercantilism and espoused a freer type of trade. And Mariano Moreno, in La Representación de los Hacendados (1809), argued forcibly in favor of opening the port of Buenos Aires to the English because of the general gains that would result from increased imports and exports and also (and this was the bait to gain official approval) because the customs collections would be larger. The Viceroy did open the port shortly thereafter. In Brazil there were two outstanding economists who wrote just about 1800. One was José da Silva Lisboa, Visconde de Cayrú, who was a follower of Adam Smith. His principal works were Principios de Economía Politico (1804) and Estudos do Bern Commun e Economía Política. The other was Azeredo Coutinho, who was an ad-

EVOLUTION

OF ECONOMIC S Y S T E M S

9

herent of the French physiocratic school and in particular of Quesnay. As such he was also opposed to the mercantilist»: system, but his views differed somewhat from those of Cayru. Even before independence was effected a report on the economic and financial situation of the country, which was made by the Conde da Ponte in 1807, recommended commercial liberty in the style of laissez faire. Indeed, José Bonifacio, the father of the Brazilian independence movement, himself was an adherent of the doctrines of Smith. In Mexico, José Maria Luis Mora (1794-1850), in addition to being an advocate of the new laissez faire economics, was a believer in the superiority of European stock over the native Indian stock. In fact Mora frankly despised the Indian. As will be seen later, this trend of thought was quite characteristic of what may be termed "liberal" thinking (nineteenth century variety) in Latin America. In Cuba there was Francisco de Arango y Parreno, a thinker of considerable importance in his time and country and a friend of Alexander von Humboldt. Arango y Parreno was something of a physiocrat and something of a follower of Adam Smith. But that is not too strange since physiocratic doctrines had their influence on Adam Smith. With Arango y Parreno, however, the situation cannot be dismissed this simply. Unquestionably he opposed the mercantilistic controls Spain was exercising in Cuba. But he went one step farther than those Latin-American writers who urged as an alternative completely free competition. He wrote, at times, in favor of protecting Cuban industry to Cuba's benefit. There is here a trace of mercantilism in his views (as in those of Alexander Hamilton at about the same time), so long as the policy was put into effect by and for Cuba. T o the Indian, the Creoles in the New World following 1810 had nothing to offer as a substitute for the way of life they were destroying except their own supremacy in the place of the supremacy of the Spanish government, a slight interest in the newly born laissez faire economic order, and an even slighter interest in democracy as a system of government. The Creoles in the New World desired to buy and sell goods in the world markets at advantageous prices. In this they were successful. After the Spanish viceroys departed, the English and Dutch traders could come and go as they pleased. But this new orientation, involving relative freedom of trade, was predicated upon an economic philosophy entirely different from that which Latin

10

THE SETTING

America had theretofore known. It was predicated on laissez faire and on the absence of state interference with business. The merchants and traders were thereby enabled to trade freely; and they made profits of a sort that had never been possible when the state supervised trade rigidly and limited it to Spain and Portugal. But the economic philosophy was still alien and incomprehensible so far as the indigenous population was concerned. And the creóles had no more interest in instructing the Indians than the gachupines (the Spaniards born in Spain) had had before them. Positivism. In the latter part of the nineteenth century there was little significant thought of a purely economic nature. So far as general philosophy was concerned the principal types of thought may be roughly grouped into two schools, the Positivist and the Idealist. Each had an economic aspect of genuine importance. In many ways the positivist school represented a continuation of the free competition, laissez faire school. It was a French philosopher, Auguste Comte (1798-1857), who was the formulator of the doctrines of positivism. The chief contribution of Comte was his emphasis on the need for study of the "world as it is" as a preliminary to formulating general principles to explain the nature of the world. He advocated research and case study at a time when philosophical thought was dominated by the grand systems of Leibnitz, Kant, Descartes, and Spinoza—systems which had been established by deduction, that is to say, conceived in the minds of their formulators after lengthy periods of introspection. The positive philosophy became extremely influential in Latin America in the latter part of the nineteenth century and the early part of the twentieth. As a revolutionary doctrine recommending study of actual conditions, preparatory to a formulation of policy, it must be admitted that there was much to recommend it. One of its leading exponents in Latin America was José Victoriano Lastarria (1817-1888), a Chilean, who spent much effort in trying to evolve a "law of progress"—so that man, knowing the law, could proceed to make the world better. Lastarria is, at least in part, responsible for the growth of the Black Legend of Spain, the idea that Spain's conduct toward the American colonies was completely and utterly reprehensible. Then there were: Valentin Letelier of Chile (1852-1919); Agustín

EVOLUTION

OF

ECONOMIC

SYSTEMS

Enrique Alvarez Suárez of Argentina (1857-1914); the two Ramos Mejías—Francisco (1847-1893) and José Maria (1849-1914), both of Argentina; José Ingenieros of Argentina (1877-1925); Enrique José Varona y Pera of Cuba (1849-1933); Eugenio María de Hostos y Bonilla of Puerto Rico (1839-1903); and Francisco Bulnes of Mexico (1849-1924). A l l of these were advocates of the direct study of social phenomena in the tradition of the positivist school. A n d the group of so-called Científicos, which was responsible for the economic planning in Mexico during the Diaz regime (1880-1910), was dominated by the positive philosophy. Brazil during the middle of the nineteenth century, when Maua was the principal figure, was also subjected to the influence of this viewpoint. Standing on the borderline between laissez faire and positivism were probably the two most important figures of all: Juan Bautista Alberdi (1814-1886) and Domingo Sarmiento (1811-1888), both of the Argentine. T h e positivists observed that life was better, in terms of the possession of material goods, in western Europe and the United States than it was in Latin America. T h e y therefore advocated, as good for Latin America, the various things which they believed to be characteristic of the civilization they admired. Some of the characteristics of Western civilization which were much admired may, however, seem a trifle ludicrous. A Mexican, Bulnes, drew from his study the lesson that the only truly progressive people eat wheat. T h e western European countries and the United States make their bread from wheat. In Latin America much of the bread (or the equivalent tortillas,, and the like) is made from corn or manioc. Bulnes concluded that the future of the Latin Americans would not be bright unless they began to eat wheat. But most important (and this is the thing for which they are most bitterly denounced in Latin America) the positivists favored the importation of foreign capital. T h e y had observed, they thought, that capital accumulation was the basis for the strength and prosperity of Western civilization. Therefore, they advocated the encouragement of the migration of capital to Latin America by all possible means. Alberdi said: " T h e peso is an immigrant that demands concessions and privileges. Grant them, because capital is the left arm of progress." Alberdi was also one of the most forceful advocates of the desirability

IS

THE SETTING

of inundating Argentina with a flood of skilled immigrants from Europe. He, like Mora, did not have a high opinion of the native Indian population. T h e positivists were reasonably enlightened and well intentioned. They should not be unduly blamed for failing to foresee all the evils that were to result from the introduction of foreign capital into Latin America. In fact in terms of a genuine attempt at making Latin America a better place in which to live they may be considered to have been more humanely minded than their rival school, the idealists. As will be seen, the idealists gained great popularity by denouncing the evils of foreign capital penetration. But they did little to bring into existence an alternative means for raising the standard of living in Latin America. Idealism. The idealist school has probably been more generally popular in Latin America than the positivist school. Its basic philosophy has a mystical or, perhaps, hero-worshiping connotation; it certainly has not involved the search after the ideal in any "standard of living" sense. The principal writer of this school was the Uruguayan José Enrique Rodó (1872-1917), the author of Ariel. Manuel Ugarte (b. 1878) of the Argentine was another outstanding leader, as also was Rufino Blanco-Fombona (1874-1944) in Venezuela. Because they were searching for a mystical ideal, these and other writers have been prone to criticize bitterly the capitalistic society and especially that of the United States on the grounds that it has been based on the pursuit of material gain. The crass, crude, materialistic culture of the United States, where the production of goods by the brute machine was emphasized, represented a culture to be spurned by one searching after the "ideal." It was natural that this group of writers should attack the manifestations of foreign, capitalistic imperialism which were an important influence in Latin America by the close of the nineteenth century. T h e strong-arm tactics, used in many cases by penetrating foreign capital, provided ample basis in many cases for such a denunciation; it became popular to denounce especially Tío Sam and his "big stick." By this process, the idealist school of philosophy, which had little indeed to contribute toward the genuine improvement of the region, came to occupy an influential position in a Latin America which was

EVOLUTION

OF ECONOMIC SYSTEMS

1J

to a large measure both jealous of and dominated by foreign capital. It is one of the great tragedies of the Latin-American culture that the positivists, the one group which to some extent was earnestly trying to advance the well-being of the region, became associated with foreign imperialism and that idealism unfortunately became the most popular school of philosophy because of a very doubtful contribution in terms of ego-gratification at a time when Latin Americans were affected by an inferiority complex. The Mexican Revolution and Aprism. Since 1910 a great change has occurred in Latin America. Its first major manifestation, the Mexican Revolution, began as a spontaneous, indigenous movement against the oppressors (great landlords and foreign capitalists). It was preceded by no theoretical formulation of policy; it had no Das Kapital or Mein Kampf to which its leaders could turn for guidance. But, nevertheless, it is one of the most profound social and economic upheavals which the twentieth century has seen. In view of its origin it is not surprising that the revolutionary movement has been eclectic, has drawn its doctrines from many different sources. Therein may lie its strength. As well as can be estimated at this time the characteristics of the movement are as follows: 1. From the communal landholding system of the pre-Cortez Aztecs has been drawn the idea for a communal landholding village, the ejido. 2. From the Spanish law was drawn the idea that the government is the owner of the minerals in the ground. In Article 27 of the Constitution of 1917, the Mexican government reclaimed the ownership of such minerals, which had very largely passed to foreign control. 3. From Marxian Socialism has been drawn the idea of a class struggle and much of the socialistic jargon. Some leaders of the Mexican labor movement are professedly Marxian Socialist. But Marxian Socialism, as a whole, has most definitely not been embodied in the new Mexican system. 4. From the school of progressive education influenced by John Dewey in the United States has come much of the inspiration for the revised Mexican educational system. 5. But more important than all these derived doctrines, Mexico is evolving what may well be a new economic and social system of a sort that has prospect for providing a solution for the types of problems that plague so many Latin-American countries.

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Several neo-Kantian philosophers have been part of the movement. They include José Vasconcelos, Antonio Caso, and Samuel Ramos. These men have enjoyed tremendous intellectual prestige, but somehow their philosophies have not provided the answer. And the writings of no one of them can be said to synthesize the economics or the spirit of the Mexican Revolution. Quite similar in many ways to the trend in Mexico, the movement called Apra has been gaining headway for some twenty years in Peru. The name is an abbreviation for Alianza Popular Revolucionaria Americana, and the leader is Victor Raúl Haya de la Torre. T h e movement, like that in Mexico, is indigenous. Unlike the Mexican Revolution it has had one leader and spokesman of sufficient stature to speak for the whole movement on matters of policy. T h e program of the Apra is much like that of the Mexican Revolution, in fact the programs are so strikingly similar that one is at first amazed that they could have been originated at so nearly the same time in countries so far apart. But on second thought it is not so strange. The cultural and economic heritages of Peru and Mexico have been quite similar. Those two countries were the seats of the two most highly developed Indian empires of pre-Spanish times. Both were the seats of Spanish viceroyalties. Their economies are characterized by a combination of subsistence agriculture and mining. The fact that the programs are so similar indicates quite strongly that a genuine indigenous economic system may be evolving in Latin America. Marxian Socialism. T h e Mexican Revolution and Apra may or may not be called socialistic—depending upon one's meaning for the term. But neither can be identified with Marxian Socialism. This, representing another current of new economic thought, is found widely spread over Latin America, but is not as strong in any one place as is, for example, the Mexican Revolution. In several Latin-American countries (Chile and Argentina especially) there are or have been active Second International Socialist parties, and in most of them there are fairly active Third International Communist groups. The Communist leaders are Rodoilfo Ghioldi in Argentina, Luis Carlos Prestes in Brazil, Elias Lafertte in Chile, Blas Roca in Cuba, and, perhaps, Vicente Lombardo Toledano in Mexico. In the field of creative writing, the leading Marxian Socialist in

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Latin America has probably been José Carlos Mariàtegui of Peru. And the Third International Communists have come to claim him as one of their intellectual leaders. But at one time he was almost read out of the movement on the ground that he was too much proPeru and pro-the-Peruvian-Indian-culture for the presumably international Communist movement. Membership in the Communist parties in Latin America in 1947 probably varied from less than one percent of the population in more than half of the countries, including Argentina, Mexico, and Brazil to a maximum of 3 percent of the population in Cuba (see World Report, 1 April 1947, p. 24). Thus, numerically, Communists are not of considerable importance in Latin America. But their vocalness gives them an importance considerably out of proportion to their numbers. That Marxian Socialism will adapt itself to Latin-American conditions, gain control of governments, and provide a satisfactory solution for the economic and social problems of the region seems doubtful. Other alien philosophies, such as mercantilism, laissez faire, and positivism, have not proved satisfactory. There is a basic presumption against the adaptability, without modification, of an alien philosophy to the conditions of a new region. Nationalism and Fascism. Fascism is economic and political dictatorship in the interest of purely national power and glory. It is the latter part of the definition, at least, that differentiates Fascism from Russian Communism. In terms of economic organization the form had become fairly well standardized by the end of the 1930's. Under Fascism each different line of economic activity was formed into a so-called corporation—agriculture was organized into one corporation, manufacturing into another, mining into another, and so on. Within each corporation, the employers were organized into one group and the employees were organized into another. Unlike areas where free trade unions exist, under Fascism employers and employees were forced to compose their own differences or submit them to autocratic settlement by a higher authority in the hierarchy of government. At the top of the pyramid of corporations stood the dictator. Private property still existed under Fascism, but there was no genuine freedom of action. On the contrary, the possessors of private property (and the labor union members as well) might be compelled to accede to the will of the state and of the dictator in matters

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T H E SETTING

where the state so desired. T h e state and the dictator were pursuing national power and glory as primary goals. In the course of seeking those goals the dignity of the human individual was sacrificed and a man who defied the dictator could expect little but the concentration camp. Of course transitory military or caudillo dictators have been constantly present in one area or another, ruling a disorganized country until removed by violent death or exile. T h e institution of the caudillo dictator is certainly to be condemned. But it is not to be feared to the same extent as is Fascism, with its effective economic organization and its goals of war, glory, and national aggrandizement. It is extremely important to ascertain to what extent this more efficient sort of dictatorship has found its way into Latin America. In 1937 the Vargas regime in Brazil placed in effect a constitution establishing what was called a New Order. T h e constitution established a corporate organization for the economic system on the Fascist model. T h e leaders of the New Order indicated most definitely that they thought of themselves as members of a "virile" race which must seek "power and glory" at the expense of other "decadent races." A l l the important elements of Fascism were present in the New Order in Brazil. They were not realized, however, from an administrative point of view. Brazilian society was not "ripe" for such organization. And during the recent war Brazil found it expedient to fight with the democracies rather than with the Fascist powers. T h e n , following the overthrow of Vargas in 1945 and the adoption of a new constitution, there came into power a regime that is, at least ostensibly, not Fascist. T h e situation is less encouraging in Argentina, where nationalism has had a long history. National pride and the spirit of militarism are far more deeply ingrained than in any other Latin-American country. Intellectually the most respected apostle of Argentine nationalism, Argentinidad, has probably been Ricardo Rojas (b. 1882). But Ihis writing (Prologo, La Argentinidad) states explicitly that he does mot advocate the ascendancy of one region over another. He advocaites democracy. He does not speak with scorn of the Indian as did so mainy of the positivists and idealists; and his advocacy of the development of a national culture is temperate. He favors the fusion of European and Indian influences in this culture and calls the result Eurindlia.

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I'J

He does favor, however, the development of a finely balanced, functional, national unit. And to the extent that present-day rabid advocates of Argentine nationalism look back to Rojas as a founder of their school of thought, it is to his idea of a national, integrated state that they look for comfort. At the time of the 1930 revolution which overthrew Hipólito Yrigoyen, General Uriburú wished to establish a corporate organization on the lines of the Italian Fascist state. But real "progress" along this line was delayed until after Juan Domingo Perón gained power in 1943. A complete, corporate organization for the economic system of Argentina has not, at least as yet, been set up. But there is every indication that the organization of the economy is proceeding apace under the complete control of the government. A large measure of government control of both business and labor has already been established. From the viewpoint of the advocacy of national power and glory the Perón regime has left little unsaid. T h e Argentine army and navy are being vigorously enlarged; and a large, but secret, amount of money is being spent on them each year. Individual freedom of expression is restricted. There are or have been several well-filled concentration camps. The national police force is large, active, utterly ruthless, and well-organized in the best Fascist tradition. And Perón has said that he believes war to be an "inevitable social phenomenon." Whether this bellicose, nationalistic country will ultimately seek self-expression in war with one of its neighbors, only time can tell. Catholic Economic Doctrines. Fundamentally the Catholic Church approaches economic problems from a moral viewpoint. Its economic doctrines do not, therefore, involve economic laws as laissez faire purports to do, nor do they involve an attempt to describe the world as it actually is. Rather, they describe how the world should be. The Catholic Church believes that for loans of money it is proper to charge a small interest to cover the cost of making the loan available. Thus, lending to industry for productive purposes is not condemned absolutely, as was lending to consumers during the Middle Ages. Pope Innocent X I said in 1679: "Present money being of greater value than money in the future, . . . creditors may make an interest charge on the borrower and not be accused of usury." Closely conditioned by its viewpoint on charging interest is the

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Church's opinion of capitalism. T h e Church opposes capitalism on the ground primarily, it would seem, that exploitation is involved in accumulating capital funds and in distributing profits. The capitalists have a bargaining position which is immensely stronger than that of the workers. T h e Church believes that it is immoral for individuals at key points in the capitalistic process to make excessive profits. Pope Pius XI has said: "It [capitalism] is not by nature vicious, but it violates the proper order of justice to have capital enslave workers or members of the proletariat." 1 The Church's bitter opposition to Communism has been much more widely publicized than its opposition to capitalism, and perhaps more emphasized by Church leaders. T h e Church still subscribes to a concept called the "just" price. During the Middle Ages the "just" price was a set price in terms of money. T o sell an item of goods for anything other than the "just" price was both criminal and immoral. At present the concept of the "just" price has a slightly different meaning: it is a price set as a result of free bargaining between buyer and seller under conditions such that each has equal bargaining power. T h e Church believes that private property rights in land should be protected—the possessor of land should not abuse his rights, but he does not lose his property rights merely because he does misuse the property. It also believes that there may be inequality in the distribution of income. T h e individual who receives more than an equal share should give "of" his excess as charity. But the Church does not consider that the individual is obligated to give all of his excess in this fashion. In some ways the most fundamental and influential of the doctrines of the Church involves the belief that society should be well ordered. This would seem to be tacit, if not explicit, in the position of the Church on many of the world's political and economic problems. T h e individual should know his "place"; he should be reasonably content therein and refrain from troublemaking. The important Catholic intellectual Luigi Sturzo 2 quotes evidence that Pope Pius XI was probably of the opinion that the authoritarian form of government was not only best for the Church but best for the state as well. And many Catholic thinkers have thought that nations should be 1

Joaquin Azpiazil, Moral Profesional EconAmica, p. 73. * Nationalism and Internationalism (1946), p. 67.

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organized into corporations of different industries, with employers organized in one group and employees in a n o t h e r — m u c h after the model of the corporate state that Mussolini actually established in Italy." In many of the countries of Europe and Latin America the Catholic C h u r c h has sponsored a labor movement in keeping with this viewpoint. But unions sponsored by the Church do not attempt to gain their goals by strikes, picketing, and assorted kinds of "strong-arm" pressure. Or, at least, they make much less use of these devices than do most other unions. T h e y attempt to help themselves by systems of m u t u a l insurance to give protection in case of sickness or of old age. T h e members are not encouraged to "kick against the pricks." In these troubled times it is difficult to bring about the wellordered society. T h e more responsible element in the C h u r c h undoubtedly believes that man's goodwill to man should lead people into such a society, but hardly considers it desirable to use strongarm methods to bring about that result. Various groups closely connected with the Catholic C h u r c h viewpoint however are not so scrupulous. T h e Franco government in Spain, supported undoubtedly by the Catholic C h u r c h hierarchy in that country, has imposed a "well-ordered society" on the people by force. T h e falange movement in Latin America is attempting, under the sponsorship of Franco, to do the same thing for the various N e w W o r l d countries. T h e notorious sinarquismo movement in M e x i c o is an offshoot which seems to be desirous of taking over the government of Mexico, by force if necessary, and of imposing a well-ordered society upon that country. Various of the Latin American countries have Christian Democrat (Catholic sponsored) political parties: the Civic U n i o n in Uruguay, the Popular Party in Argentina, the Christian Democratic Party in Brazil, and the Christian Popular Party in Chile. 4

PRESENT

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T h e sheer economic anarchy, as well as the resultant political unrest, of the last hundred and thirty years in Latin A m e r i c a can very largely be blamed on the fact that in that region there has been no economic order with a claim to general support, and, in the absence of such a system, no new theory of economic order has developed. tlbid., pp. 102-5.

* Ibid., p. 128.

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So far as Latin America is concerned neither laissez faire, nor the dregs of Spanish mercantilism, nor Marxian socialism, nor Fascist Nationalism offers a genuine solution to the problems of the region. They do not represent schools of thought, which, when adopted, could bring with them a degree of economic peace. There are not in Latin America innumerable economically well-educated individuals capable of competing one against the other in a market where price is determined by free competition. There is no rift between capital and labor which might lead to a successful dictatorship of the proletariat. T h e r e is no proletariat—in the sense of class-conscious workers in industry. Such industrialization as exists is either an undernourished image of the Great Society or else a highly specialized form, such as in mining, which exists by grace of foreign ownership and foreign markets, but can scarcely be said to touch the lives of most of the people. T h e r e is not, it is to be hoped, any basis in Latin America for a major development of Fascism and the ruthless warlike mentality that goes with it. It seems likely that the pure totalitarian state would here be even more of a hothouse growth than Marxian Socialism. Such a growth seems unsuited to the somewhat anarchical and independent temper of the people. Undoubtedly Fascism worked better in Germany than in Italy—where the people are more like the Latin Americans. But what concerns us most is the future order that may come into being in Latin America. At this point one enters the realm of conjecture and generalizations become dangerous, not only because of the inherent danger involved in conjecture about the future but also because the future of different regions in Latin America may lie along different roads. Still it seems justified to say that a really satisfactory economic system must have indigenous growth. This means that the Mexican Revolution and Aprismo are likely to be most important in shaping the future evolution of economic systems in Latin America. T h e form of these systems will no doubt be influenced, with the passage of time, by forces from the other regions in Latin America—especially Argentina, Brazil, and Cuba.

C H A P T E R

I I

POPULATION, INCOME, AND THE ALLOCATION OF PRODUCTIVE EFFORT AREA AND POPULATION General. Since this book is an economic rather than a social study of Latin America, many aspects of the population problem will be glossed over. A n understanding of some of its characteristics is, however, important as a background for study of the economic problem. Of the total population of the Western Hemisphere—some 300,000,000—about half, or 144,000,000, are to be found in Latin America, which also occupies about half the area of the hemisphere (7,700,000 square miles out of a total of 15,500,000). T h e population is rather sparsely spread over the region, the concentration being about 18 to the square mile as compared with 48 in the United States or 500 in Great Britain. T h e comparative figure for the world as a whole is about 40 (see Table 1). T h e population of Latin America is highly concentrated in certain regions—the Argentine pampa, the Valley of Chile, Sao Paulo in Brazil, the Central Plateau of Mexico, Cuba, El Salvador, and Hispaniola. O n the other hand, great areas like the Amazon and Orinoco valleys, Patagonia, the Gran Chaco, and northern Mexico are virtually uninhabited. T h e Caribbean islands, especially Hispaniola and Puerto Rico, are probably the only areas where the concentration is so extreme as to represent a definite impediment to raising the standard of living. Elsewhere the standard of living could probably be raised by an increase in population. Rate of Population Growth. According to Professor Kingsley Davis, the rate of population growth of the world during the last 40 years was .75 percent per year. In 1920-1940, in Latin America it was substantially higher—1.75 percent; if this continues, the importance of Latin America will be substantially increased. It is significant to note that the rate has been lower in the Argentina-BrazilChile region than elsewhere in Latin America. T h i s is of interest because the A B C countries are probably the most active in adopting measures designed to increase national wealth and improve the national standard of living. A t the time of the discovery of America the population of Latin

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America was probably about 3 percent of the world total, but that proportion slowly declined to a low of about 1.5 percent in 1750. Since that time it has increased, as Professor Davis's figures indicate, at a quickened tempo to the present figure of 7.5 percent. T h e s e figures indicate that the importance of Latin America on the world scene is increasing, insofar as relative population gives a clue to importance. Of course comparative population does not give exact evidence of importance. China and India are both substantially more populous than the U.S.S.R. and the United States. Nevertheless, a substantial increase in population in Latin America combined with increased industrialization may well lead to a situation in which Latin A m e r i c a is relatively far more important than formerly. THE RACES

T h e racial composition is, if possible, more mixed in Latin America than in the U n i t e d States; certainly races and combinations of races other than white represent a much larger proportion of the population (see T a b l e 2). In discussing racial backgrounds, in Latin America the f o l l o w i n g descriptive terms are u s e d — a t least fairly generally: 1) Creole, an individual of pure Spanish blood, born in the N e w World; 2) Mestizo, a mixture of Indian and white blood; 3) Zambo, a m i x t u r e of Indian and Negro blood; 4) Mulatto, a mixture of Negro and white blood; 5) Indian, an individual of the racial stock C o l u m b u s found in the New World. Cynics have been known to say that in Latin America a change of clothes makes an Indian a mestizo and the purchase of land makes him " w h i t e . " Such a statement, although exaggerated, does contain an element of truth. T h e r e social status assumes relatively greater importance than in the United States, where the principal issue is whether one has a microscopic amount of Negro blood. O n philosophical grounds one cannot condemn the L a t i n American distinction as being less meaningful or less moral. Caribbean Region. W h e n the Spaniards came in 1492, the Indian was, by definition (simply because C o l u m b u s named it so), the race that was f o u n d in the Western Hemisphere. North of L a t i n America there were plain or forest Indians of various t r i b e s — I r o -

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quois, Sioux, Apache. On the islands of the West Indies there were the Arawaks and Caribs. At the time the Spaniards came, the Caribs were in the process of ousting or exterminating the more peaceful Arawaks. The fierce Caribs had already occupied most of the Lesser Antilles, having started from the mainland of Venezuela, and their conquests extended to Puerto Rico. The Spaniards were much less successful in subduing the Caribs than the more peaceful Arawaks of Cuba and Hispaniola. That is one reason why the English, Dutch, and French were able to occupy many of the islands of the Lesser Antilles during the latter part of the colonial period without coming into direct conflict with the Spaniards. In general, the Spaniards conquered the Indians and then used them as forced labor in the mines or on the agricultural estates (encomiendas). This policy contrasted with that followed by the English toward the Indians. The Spaniards mingled with and assimilated the Indians much more effectively than did the English. However, in the West Indies the Spaniards did kill off the Arawaks and the English and French exterminated the Caribs. T h e Caribs were fighters who, perhaps, could not have been handled in any other way. The same is not true of the Arawaks, who were extremely peaceable and docile. The Spaniards put them to work on their estates and insisted on far more labor than the Arawaks were capable of performing (or perhaps psychologically willing to perform). T h e race simply died off. In connection with the Spanish conquest of the island of Cuba, the following legend is worth repeating as an indication of the nature of the Indian and Spanish cultural clash: Hatuey, a chief of the Arawaks who had led a token resistance to the Spaniards, was to be burned at the stake. A Franciscan friar offered to baptize him, telling him that the baptism would enable him to go to Heaven. The Chief asked if Heaven was the place to which the Christian Spaniards went when they died; when he was told that it was, he said: " I would rather not go to your Heaven if I am to meet Christians there." Hatuey is now the name of a brand of beer in Cuba. Through most of the islands, then, the Indians were wiped out, partially as a result of ruthless conquest and partly because the labor they were asked to perform—especially on the plantations—was too strenuous. The Negro, during the colonial period, slowly took the place of the Indian and proved fitted for, or at least willing to do,

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the heavy work under a hot sun that was required of the worker on the plantations of the Caribbean islands. T h e dominant white and the exploited Negro became the two principal groups in the region. In Cuba and Hispaniola there has been something approaching a fusion of the races, and the color line is not nearly as strictly drawn as in Jamaica, Barbados, Martinique, Guadeloupe, and other areas. In Haiti, in the western part of Hispaniola, the Negroes, or rather certain groups drawn from the Negro stock, have actually succeeded in dominating the government during the 140 years since independence from the French was gained. Brazil. In Brazil the situation is more complicated. T h e Indian was not exterminated by the Portuguese, but the European and African elements in the population have come to overshadow the Indian element completely, except in the wilds of the Amazon valley. Negroes were brought in, especially in connection with the sugargrowing industry in the northeast in Baia and Pernambuco. This meant that, in time, there were in Brazil pure Indians, pure Negroes, pure whites (Portuguese, Italian, German, Spanish, and so on) and all possible combinations thereof. T h e figures on the Indian (largely Tupi-Guarani and Tapuya) and Negro elements in Brazil's population of some 47,000,000 are uncertain. Whether 17,000,000 or 8,000,000 have some Negro blood, whether 20,000,000 or only 9,000,000 have at least some Indian blood is a question. Regardless of the precise numbers, the population of Brazil is a unique fusion of three very different races, and the nature of the race that will evolve is as important a single question as exists in Latin America. If the new race proves equal to using the immense resources of the country in developing an important industrial economy, then Brazil will become certainly the most important country in Latin America and a major world power. If the new race proves unable to perform this function, then Brazil will remain in a semicolonial status. Pampa. Argentina and Uruguay, in the far south of South America, present a rather different picture. These regions were conquered by the Spaniards and became part of Spain's colonial empire. Until the latter part of the nineteenth century they possessed within their borders large groups of Indians—just as was the case over much of the rest of Latin America. But in the latter part of the nineteenth century Argentina took action against the Indians

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in a way more typical of the United States than of Latin America. General Roca, in a series of campaigns, very nearly killed off the Indian population. As a result, Argentina is more nearly a white country than most of the Latin American countries. Such of the population as is not Spanish is Italian, German, or Pole rather than Indian. T h e gaucho, the part-Indian, part-white "cowboy" of the Argentine pampa, often regarded as typical of Argentina, is rapidly disappearing. He is a legend even now. And it is a matter mostly of historical interest to determine whether he was as violent and worthless a character as Sarmiento presents him to be in Facundo or whether he is indeed a hero type, worthy of emulation by small boys, as he is presented by José Hernández in Martin Fierro. Cordillera Region. From Chile northward through Bolivia, Peru, Ecuador, Colombia, Venezuela, Central America, and Mexico the picture is more uniform, despite the presence of considerable numbers of Germans in southern Chile, of Japanese and Chinese in Peru, and of Negroes in the lowlands along the seashores of tropical America. The population of this vast region, stretching from the Rio Grande to Southern Chile, is Indian, or Spanish, or the mixture of the two called mestizo. The Indian tribes were, at the time the Spaniards came, and still are, the Nahuatl (Aztec) and associated tribes in Mexico, the Maya in Guatemala and Yucatan, the Chibcha in Colombia, the Quechua (Inca) in Peru, the Aymara (around Lake Titicaca), and the Araucanian (about whom the epic poem of Chile centers) in Chile. T h e Indians who have in the past made the greatest cultural contribution, and in whom there rests some hope for a future cultural renaissance, are the Nahuatl, Maya, and Quechua. For the area as a whole there may be some question as to whether the pure Indian or the mestizo is racially the most numerous. There can be little question that the Spanish element in the population is least numerous—although at present, in an economic sense, it remains the most important. There is a considerable measure of difference among the various Indian tribes. Some are acclimated to lowlands, some to desert heat, some to rainfall, some to dry country, some to highlands. T h e barrelchested inhabitant of the high Andes is acclimated to conditions which give outsiders "mountain sickness." He has tremendous energy and endurance in the heavy tasks which he is called upon to perform

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in the tin mines and on the trails. However, the fact that the chewing of the coca leaf is customary on the high plateaus may help to explain his ability to perform remarkable physical feats. T h e Spanish-descended aristocracy still dominates the Cordillera region, but many signs indicate that its tenure in power is not at all secure. In Mexico the Agrarian Revolution, since 1910, has given much land back to the Indians; and the Indians, as a group, have asserted themselves in a manner unknown anywhere in Latin America since pre-Cortez days. And in Peru the Aprista movement stands for Indian rights and Indian opportunity of the sort that is being obtained in Mexico. Conclusion. T h e percentage of the population which is of European extraction is greatest at the northern and southern extremes of the Hemisphere in the United States and Canada, and in Argentina and Uruguay. In the area between, the Indian or mestizo dominates, and the Negro constitutes an important percentage of the total in Brazil as well as in numerous places around the Caribbean—especially in Haiti, and to a lesser extent in Cuba and in the Dominican Republic. O n the west coast the Indian and the mestizo are, by far, the dominating element in the population. IMMIGRATION

How many Indians there were in the Western Hemisphere at the time the Europeans came no one knows precisely. There may have been 13,000,000 or 35,000,000; more likely the former figure is nearer the truth. Added to this basic population, in the period since that time approximately 10,000,000 whites and a substantially smaller number of Negroes have immigrated to Latin America. T h e descendants of these groups, combined in uncertain proportions, make up the present population of some 144,000,000. Which element (Indian, Negro, or white) is increasing in relative importance it is difficult to say; but it is certain that the racial mixture is increasing in importance relative to the "pure blood" of whichever type. T h e mestizo, zambo, and mulatto, or an indistinguishable mixture of them, is almost certainly the race of the future in Latin America—except perhaps for the pampa region of Argentina and Uruguay. If we go back to the nineteenth century for some of the principal ideas which have influenced policy toward immigration, we find that many of the countries of Latin America have made determined efforts

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27

to encourage white immigration. T h e Argentine Alberdi, writing at the middle of the nineteenth century, placed great emphasis on the idea that " T o govern is to populate." By this he meant that the introduction of skilled workers from Europe would be a good thing for Argentina. He most definitely did not favor increasing the population by encouraging larger numbers of Indians or mestizos. Both Alberdi and the Argentine President Sarmiento were of the opinion that the Indian and the gaucho were undesirable types. Although immigration was officially encouraged, conditions in the Argentina of the latter part of the nineteenth century and the early part of the twentieth century were not particularly favorable to it on a large scale. Immigrants were welcomed on the great estancias as laborers and as share-croppers. But every few years the immigrant had to move on. He was in no position to build a permanent home; no school system was developed to train his children; and, in general, he was in no position to enjoy community life. In Argentina, in the period between the 1850's and the present day about half of the total number of immigrants returned to the country of origin. T h e estancia system was not an institution calculated to encourage largescale immigration. Immigration policy between World War I and World War II posed a problem to the government and upper classes of Latin America. Should they encourage white immigration to bolster their position against the mestizos and Indians? Should they encourage immigration so as to get as much manpower as possible for developing the country? Or should they discourage immigration so as to retain as much of the natural wealth as possible for themselves? T h e several countries could not decide definitely whether or not to follow the example of the United States and discourage immigration. T h e y enacted, in many cases, restrictive laws. But in economic development they were behind the United States and they had great need for technically skilled labor. Depressions in Latin America have not yet come to be characterized by unemployment as they are in the United States and in other industrially developed countries. In a society that has not yet been disrupted by movement to town and factory, where the mass of the population lives on the land, each one has a "place" from which he is not dislodged by any process similar to "firing." When hard times come, the peon eats less, but he does not join the unemployed proletariat of the industrial city. T h i s situation

28

T H E SETTING

explains, in part, why the demand for immigrant exclusion in Latin America has not been so strong as in the United States. After the totalitarian governments came into power in Europe there was some sentiment for providing the refugees with asylum in the New World. Some were settled at such places as Sosua in the Dominican Republic and some in Mexico. But by no means all Latin Americans viewed this influx sympathetically, and in some cases the refugees were refused asylum after their arrival at the Latin American port. T h e immigrants themselves in many cases looked upon these colonization projects as temporary stopping places en route to the United States; and Sosua and some of the other projects have not been especially successful. Since the end of World War II there has been considerable evidence to indicate that at least skilled workers will be welcomed as immigrants in Latin America. 1 T h e Perón government in Argentina has gone a long way in formulating a definite plan for bringing in agricultural workers and technicians from western and southern Europe. T h e plan calls for an initial quota of 100,000 a year and for constantly increased quotas until the population of the country has reached 40,000,000. It is 16,000,000 at the present time. In Brazil one of the outstanding figures in the country, J o a o Alberto Lins de Barros, has been head of the program to encourage immigration. T h e government has announced itself as desirous of encouraging the immigration of the technically proficient. Much the same sort of sentiment has been officially expressed in most of the Latin American countries and is the order of the day. One would suppose that great numbers of Europeans would take advantage of the opportunity to emigrate to Latin America. But the programs there are not the answer to the prayers of really needy Europeans; in general, these programs make it possible only for the technically trained to immigrate, and they quite generally require that the immigrant bring some capital funds with him. As a result of these complications only time can tell whether the present policy will actually bring about any substantial increase in the numbers of individuals of European stock in Latin America. 1 See International Labour Review, May, 1947. pp. 436-44.

POPULATION,

INCOME,

PRODUCTIVE

EFFORT

29

URBAN CONCENTRATION

T o an amazing extent the population of each of the Latin-American countries is concentrated in its largest city. It is especially interesting, from a sociological point of view, that this should be true of countries which are generally thought of as agricultural and rural (see Table 3). It means that fundamental among the problems of Latin America are those of land redistribution and slum clearance. For, in urban and rural areas alike, the conditions under which much of the population lives are nothing short of squalid. Of course a comparison of the population of the largest city with that of the country does not tell the entire story, but, lacking a more detailed study of the situation, a comparison of this sort has a considerable measure of utility. T h e backlog of population in the large Latin-American capitals may well provide the basis for an industrial population. But social as well as economic problems are involved in an adjustment which would change the mode of life for these large groups. One cannot say with certainty that the adjustment will be made; one can only say that it may be made. Meanwhile, the explanation for this concentration in the capitals is probably to be found in part in the fact that a large, strong bureaucracy exists in connection with most Latin-American governments. An additional, partial explanation is to be found in the predilection of the hacendados and estancieros for life in the cities.

INCOME AND DISTRIBUTION

BY

PRODUCTIVITY

INCOME

A comparison of the standard of living in the different countries will give a better understanding of the nature of their economies. T h e statistical problem is such as to make it virtually impossible to compare money incomes in different countries—although that is attempted later in this chapter. Probably the most satisfactory method of comparing real income (or standard of living) is to compare caloric food consumption. T h e Food and Agriculture Organization of the United Nations has conducted a survey of this sort for the immediate pre-war period. These figures probably come as near to providing an accurate basis for comparing the standard of living of different countries as it is possible to obtain. However, they obviously do not

JO

THE

SETTING

provide the entire answer. Argentina, for example, probably ranks much higher in per capita caloric and protein consumption than in per capita consumption of non-food consumer's goods. T h e Argentine forte is grain and cattle production, not manufactures or construction; there is a textile industry, but its production is not comparable on a per capita basis with that of the United States or England. T h e average daily consumption per person of calories and proteins immediately before the beginning of World War II was as follows: Calories Grams Protein Per Day Country Per Day Argentina 111 3.275 Brazil 2.552 73 2,813 Paraguay 99 102 Uruguay 2,902 Chile 2,481 70 Peru 2,090 58 Colombia 62 1.934 Costa Rica 2,014 49 Honduras 2,079 49 El Salvador !-944 52 Cuba 2,918 68 Dominican Republic 2,130 54 Mexico J.9°9 59 United States 88 3.249 United Kingdom 3,005 80 88 U.S.S.R. 2,827 Source: Food and Agriculture Organization, Proposals for a World Food Board World Food Survey, p. 37.

and

T h e Food and Agriculture Organization is of the opinion that a per capita caloric intake of 2,550-2,650 represents a minimum level for the low caloric countries. On the basis of these figures the situation is relatively satisfactory in Argentina, Uruguay, and Cuba, but quite unsatisfactory over much of the rest of Latin America. DISTRIBUTION BY

OCCUPATION

As a preliminary to the study of the major types of productive activity (which constitutes much of the material in Part II), it is desirable to classify the different industries in the order of their importance. T h i s may be done in several ways, among them, an ap-

P O P U L A T I O N , INCOME, PRODUCTIVE

EFFORT

praisal in terms of the number of people employed (see T a b l e 4). In this respect, agriculture ranks first. Probably well over half the population of Latin America is directly dependent on agriculture for a livelihood. Even in such countries as Bolivia, Chile, Peru, and Mexico, which seem generally to be considered " m i n i n g countries," a far larger proportion of the working population is active in agriculture than in mining. Incidentally, it is worth noting that countries with highly productive agricultural industries, such as the United States and Argentina, employ a small percentage of workers compared to countries whose agricultural industries are inefficient; the latter require a much larger percentage of workers in that field to produce enough foodstuffs for subsistence. Other industries employing substantial numbers of people include manufacturing, mining, transport, the professions, and government, as well as domestic service. NATIONAL

INCOME

OR N A T I O N A L

PRODUCT

A n y attempt to make a comparative study of national incomes presents real difficulties. However, because of the extremely important nature of the relationship, it seems desirable to make such an attempt, and this is done in T a b l e 5. Conversions into dollars are made, for the most part, at International Monetary Fund pars. T h i s means in some cases that the results do not accurately reflect relative purchasing power. However, within a certain margin of error, the results are quite significant. T h e y indicate that Argentina, Uruguay, Chile, and C u b a have a standard of living substantially higher than that in the rest of Latin America. But in this sort of a comparison the advantage of the United States over all of the Latin American countries appears to be far greater than was indicated by the comparison of food consumptions earlier in this chapter. It is probable that the figure for Venezuela is large because of special circumstances in connection with the oil industry. A n d the unusually high price level in that country means that the standard of living is not so high as the comparison of "per capita product in dollars" would seem to indicate.

ORGANIZATION OF PRODUCTION

C

H

A

P

T

E

R

I I I

AGRICULTURE AND LAND TENURE SYSTEMS OF LAND TENURE of agricultural land which is so important as a source of sustenance to so many Latin Americans, and from which well over half of the population derives its livelihood, is owned under several different systems of landholding: (i) latifundio, (2) community holding, (3) small individual properties, (4) land colonization projects. T H E PITTANCE

Latifundio. T h e latifundio is the large landed estate. During the colonial period it was called encomienda; in Mexico it is now called hacienda, in Argentina it is called estancia, in Brazil it is called fazenda, in other places (as Guatemala and Cuba) it is called finca. From the viewpoint of area and of value of land involved, it is the most important type of landholding in the region. According to Mario Farias Olave, 1 85 percent of the privately held agricultural land of Argentina is in estates larger than 500 hectares (1,250 acres); 500 landed proprietors hold 18 percent; while less than 1 Y¿ percent is found in farms of less than 50 hectares (125 acres). In Chile 64 percent of the privately held land is in estates of a size greater than 5,000 hectares (12,500 acres)—and is owned by only 570 proprietors; less than 1.8 percent is in farms of less than 50 hectares. T h e Hacienda R i o Colorado, near Santiago, is said to contain 160,000 hectares (618 square miles). Many other properties are almost as large. However, this maldistribution of land ownership in Chile has one meliorating factor: the smaller holdings probably contain a larger percentage of good land than the larger holdings. T h e Hacienda R i o Colorado, for example, despite its tremendous size, possesses only 250 hectares (625 acres) of level irrigated land. In Mexico, in 1910, before the land revolution began there, according to Manuel Hubner, 834 great landowners controlled twothirds of the country's area. Since that time the situation has somewhat changed. T h e changes are discussed later in the chapter. These examples are fairly typical of the conditions prevailing in land ownership in Latin America, wherever one turns: Venezuela, Peru, Brazil, or Cuba. It is the same short story. T o say that the land ownership is highly concentrated in few hands is to put the case mildly. How did it come to be so? Following their arrival in the New l Economía

Sudamericana

y Algunos Problemas

de Post Guerra, p. 15.

36

ORGANIZATION O F

PRODUCTION

World the Spaniards were not slow in altering the system of land ownership to suit their own wishes. Large tracts were granted to the Spanish conquerors by the kings of Spain. These were called encomiendas, from the expression "se os encomienda" ("to you are entrusted . . .") used in the grants. The Spaniards were not at all interested in obtaining large tracts of uninhabited land; they wanted Indian labor to go with it. What was "entrusted" by the king to the encomendero was the Indian, "to be instructed in the matters of the Holy Catholic faith." Whether or not instruction in the faith was of benefit to the Indian, the right to his services was of tremendous benefit to the encomendero and formed the basis of the semi-feudal rural economies which persist in many parts of Latin America even today. The encomienda form of organization proper, however, disappeared before the end of the colonial period, and, in its place was substituted debt peonage and the latifundio. Debt peonage involved a relationship between master and peon (the laborer on the latifundio) which was quite different from the "religious instruction—obligation to work" relationship characteristic of the encomienda. T h e hacendado, owner of the hacienda (or the latifundista, owner of the latifundio) acquired power over the peons by loaning them money, or advancing goods. The sum might be loaned directly as money but was more likely to take the form of an advance of goods by the hacienda store, the tienda de raya. In pre-1910 Mexico, so long as a peon was in debt to the hacendado, he could not leave the hacienda, and his chance of getting out of debt was almost nonexistent. In fact, the federal police—rurales—might be used to bring the escaped peon back by force. Several factors made this situation especially bad. Debts descended from father to son. The hacendado, or his agent, "kept the books," and the rare peon who managed to work out of a debt, which included obligations incurred at the time of birth, marriage, and death of relatives, as well as the fulfilling of daily needs, was likely to find that sleight of hand in connection with the bookkeeping rendered all of his efforts useless. The typical yanaconazgo, as the latifundio is called in Peru, according to Professor M. Poblete Troncoso has involved (1) a unilateral contract in which no wage or other obligation on the part of the landowner was specified. Wage might be paid but it was not so specified in the contract.

A G R I C U L T U R E AND LAND T E N U R E

37

(2) a situation in which the workers could not leave the land of their own free will, but were transferred with the land in the event of sale. (Thus the yanaconazgo was a form of pure peonage [slavery] even stronger than debt peonage.) (3) a 16-hour day—in violation of the 8-hour-day law. (4) workers having their own small plots on the estates and working three or four days per week for the landowner. (5) sometimes debt peonage as a result of purchases made on credit at the estate store.2 T h e illiterate Indian, ignorant of the law, was entirely unable to cope with this situation. "For four centuries a small, white Spanishdescended aristocracy dominated and ruled over an alien population like an armed colony amid a subject people." They did not feel constrained to improve education or health or othenvise ameliorate the lot of the Indians. The Mexican Revolution, which began in 1910, had as one of its principal reforms the making of debt peonage illegal. It is also now illegal in Chile and in several other countries. But it is doubtful whether the practice has been entirely stamped out even there, and it definitely continues, even to this day, in many parts of Latin America. The problem of agricultural labor in Argentina and Uruguay is somewhat different from the problem on the west coast and in Mexico. In Argentina and Uruguay, the Indians were killed off and the agricultural labor consists largely of European immigrants—especially Italians. On the west coast and in Mexico the agricultural laborers are Indians or mestizos. Both groups are exploited, but in different ways. The Italian is a low-paid transient, whereas the Indian is not paid in any monetary sense at all and does not move about, but has been, rather, bound to the hacienda on which he works. On the contrary, much of the Argentine farming is done by transient tenants. The hacienda is characterized by a form of unscientific, subsistence agriculture which is quite unproductive. T h e owner has typically desired only such return as would permit him to live in luxury in the national capital, or in Paris. The job of obtaining the return was largely left to hired overseers who were forced to concentrate on immediate production, in order to meet the immediate requirements of the proprietors for ready money, rather than on improvements of long-run importance. The result was an almost complete absence of 2 Based on Soule, Efron, and Ness, Latin America in the Future World, p. 91.

$8

ORGANIZATION O F

PRODUCTION

real improvements, of tractors, of farm machinery, or of scientific agriculture. This is certainly true of the cordillera region. Agriculture in Argentina has been somewhat more highly developed and scientific, but not outstandingly so. In Brazil absenteeism, although present, has not been as prevalent as in Spanish America. T h e owneroperator has been the typical landed proprietor. Much of the rest, however, that has been said of Spanish America is also true of Brazil. Community Holdings. When the Spaniards first came to Mexico and Peru, they found that the dominant form of landholding was communal in nature and much the same in both Mexico and Peru, whether the unit be called calpulli or altepetlalli as among the Aztecs of Mexico, or ayllu as among the Incas of Peru. Each village, at least in a sense, owned the land. T h e village land was the binding force in the community life. T o the extent that individuals possessed plots at all for their own farming, those plots were forfeit at the will of the group. Much of the land was actually used in common; this was especially likely to be true of grazing and forest land. T o generalize much farther with regard to the structure of those units would be dangerous. They differed not only as between Peru, Mexico, and Guatemala, but they also differed in various parts of those regions, and their character was slowly changing as the years passed. In fact, at the time the Spaniards came, this communal sort of property was by no means functioning perfectly. There was exploitation of the ordinary Indians by their chiefs, by the priesthood, and by the warrior class. In addition it should be pointed out that this sedentary Indian culture, in which a more or less communal sort of property holding prevailed, was characteristic of only very restricted areas on the plateau of Mexico, in Yucatán and Guatemala, and in the Andes of Peru. Over most of Latin America the Indians lived an unsettled existence in the hunting and fishing stage of development. In the areas where community holdings did exist, the Spaniards superimposed the encomienda on the Indian villages and used the Indian labor upon the land which they thereafter considered their own. But this did not happen in all cases. Communal villages still remained, but they were gradually pushed back into the mountains and on to worse soil. One fact should, however, be emphasized in fairness to the "crown" in Spain. T h e law encouraged communal village communities in a positive way, as well as providing them legal protection against unjust encroachments by the encomenderos. But

A G R I C U L T U R E AND LAND T E N U R E

39

the "crown" was far away. T h e measures were not effectively enforced, and, despite the halfhearted protection of the Spanish crown, the communal villages lost more and more of their land to the encomiendas. By the latter part of the nineteenth century the communal holdings, or ejidos, as they had come to be called in Mexico, were an unimportant type of landholding. T h i s process followed an amazingly parallel course in Mexico and Peru. T h e difference between the two cases is found in the fact that the process came to an end in Mexico in 1910, whereas it is still going on in Peru. T h e r e has been much discussion in Latin America, especially of recent years, as to whether the communal unit or the hacienda is the superior type of landholding unit. One point in this connection may now be made. It has frequently been alleged that the hacienda makes possible large-scale improvements of a sort not possible to the Indians, individually poor, who make up the ejido. For evidence that this charge is not true in its entirety one need look no farther than the case of the extensive irrigation projects built by the Incas in Peru to serve their ayllus before the Spaniards came. T h e Spanish hacendados let the Inca irrigation system fall into disrepair and abandoned large areas that had been farmed by the Incas. One may conclude that, in these areas, the hacienda has been less efficient than the communal system that preceded it. T h e importance of the community property holdings in Latin America declined for 400 years. But very recently in Mexico they have taken a new lease on life in the form of the ejido, which is the basis of the Mexican agrarian revolution. It was high time. Land ownership was exceedingly concentrated. If agriculture is to remain the fundamental industry in the region and if, at the same time, there is to be any measure of general welfare, either a wholesale land redistribution must be put into effect in all the region from the R i o Bravo to Tierra del Fuego, or an effective social security system must be applied to agriculture. Small Individual Holdings. T h i s sort of landholding was originally called peonía or caballería depending on the size. T h e peonía, given originally to foot soldiers, was the smaller unit; the caballería, given originally to horsemen, was the larger. Such tracts were given to the less important soldiers in the invading Spanish armies, and Indians were not generally bound to the land in this sort of grant. While the small holdings are less important than the large one?

40

ORGANIZATION O F

PRODUCTION

(although many haciendas have evolved from peonias and caballerias), they are worthy of mention because a system of this sort has frequently been urged as the most desirable type of landholding. For example, the Commission on Cuban Affairs in its report in 1935 recommended "the development of a greater number of independent, small scale colonos (growers) in sugar, coffee, and other crops." * In Mexico, where land redistribution has proceeded apace for thirty years, the issue has frequently been raised as to whether communal holdings in the form of ejidos or individual small holdings with something approximating fee simple title are the most desirable goal. At the present time middle-sized holdings of land which are farmed directly by the owner are called ranchos in Mexico, and they are protected against expropriation in the land redistribution program if they are not larger than a certain size. Colonization Projects. In some respects this is not a separate type of property holding. T h e land colonization project may be operated as a group of individual holdings or as an experiment in cooperation, and as such would actually constitute one of the preceding types of property holding. What is important here is the use of such projects in order to obtain a better distribution of land, to place good but unused land in cultivation, and to bring opportunity to people who have hitherto been denied it. T h e great areas of unused national domain (baldios) in most of the Latin-American countries serve as the basis for such projects, which are under way in many of the countries. In some cases the promotion of colonization projects involves the attracting of immigrants from Europe. Some are the work of groups independent of the government, as is the case with the Mennonites in Paraguay or with the White Russians at Varpa in Sao Paulo, Brazil. Besides these independent projects, most of the countries have enacted laws to encourage colonization. This has been true in Brazil, where it has been thought desirable to try to fill in the vast, rich, unused areas. It has been true in Argentina and Peru. T h e Commission on Cuban Affairs recommended colonization projects for Cuba. And the colonization of the Indians on unused land has been an integral part of the Mexican agrarian reform. » Problems of the New Cuba, p. 47».

AGRICULTURE AND LAND TENURE

41

LAND REDISTRIBUTION IN MEXICO I11 1910, in Mexico, land ownership was probably as maldistributed as it had ever been in the country's history. As was remarked earlier in this chapter, some 834 great landowners controlled two-thirds of of the country's area. At that time a political revolution, demanding electoral reform, headed by a wealthy hacendado named Francisco I. Madero, overthrew the dictatorship of Porfirio Díaz. After that the changes in Mexico followed with startling rapidity. Zapata raised the standard of revolt in southern Mexico and demanded land redistribution. He actually distributed considerable land in the state of Morelos among his followers. Zapata was in arms from 1911 until 1919. He was probably the one Mexican leader of the early period of the revolution who remained consistently true to the land reform, but he never gained control of the national government. Madero was murdered in 1913 by the reactionary Victoriano Huerta. Venustiano Carranza, seconded by Obregón and Pancho Villa, then revolted in the north against Huerta. Carranza, in a decree issued in 1915 at Vera Cruz, placed himself on record as advocating land redistribution. In this decree emphasis was placed on the restoration of such land as had been illegally taken from the Indians during the regime of Diaz. But provision for dotation was also made. Dotation (dotación) is the process by which the government takes land by expropriation (with promise of compensation) from the landlord and then turns the land over to those in need of it. Largely on the strength of this rather fainthearted advocacy of land reform, Carranza was swept into power by the mass of mestizos and Indians who were beginning to make the revolution their own. T h e Carranza government prepared a new constitution for Mexico. This duly became the law in 1917, and its Article 27 has become the basis for the land redistribution program. Provisions were made for four processes; (1) the repossession of land illegally acquired by the hacendados and its return to the Indian villages from which it had been taken (restitution); (2) the expropriation of land (with the promise of compensation) from the haciendas and the giving of it to the Indian villages in need of land (dotation); (3) the breaking up of the large estates as an end desirable in itself, this to be done by the state governments (fraccionamiento); (4) colonization of Indians



ORGANIZATION OF

PRODUCTION

needing land upon the public domain. T h e second of the processes, dotation, was to become by far the most important. As long as Carranza was in office the program found little actual application. O n l y in isolated cases, such as that of Zapata in Morelos, was land redistribution actually pushed. A n d Zapata was murdered, with the connivance of Carranza, in 1919. As a result of general discontent with Carranza, there took place in 1920 the Revindicating Revolution, and A l v a r o Obregón assumed the presidency. T h e tempo of the land redistribution increased perceptibly for about ten years under O b r e g ó n and Calles. For a time under Ortiz R u b i o and Rodriguez (1930-1934) the program might have ended, having fallen far short of its goal. T h e n in 1934 Lázaro Cárdenas became president, and for six years considerable progress was made. T h e average amount of land given in dotation in those six years was about 3,000,000 hectares per year, or 7,500,000 acres. By September 1, 1939, the Mexican government had distributed altogether 24,824,000 hectares. Some additional land was distributed during the presidency of Avila Camacho, but not a great deal, and there is little indication that A l e m á n will actively push land redistribution. In Mexico, as matters stand, the government protects from expropriation small property holdings (under 100 hectares—247 acres) with adequate water, and 200 hectares of land with intermittently adequate water. Large estates are, presumably, not to be reduced below this size. However, special-purpose farms, such as those used in cattle raising, may be protected even though larger. T h e s e form an approved sort of landholding aside from the ejidos. T h e r e are also the two types of ejidos: (1) those in which the land is distributed to the Indians to be worked in little plots and (2) those in which the whole is farmed as a unit, with division of labor and the opportunity to make greater use of machinery than would otherwise be the case. T h e latter type of communal holding is to be preferred in terms of productivity; b u t either furnishes far greater opportunity for useful cooperation than does the individual small plot divorced from any ejido. It is to be regretted that President A v i l a Camacho, after assumi n g office in December of 1940, turned away from communal agriculture and began to place emphasis on the giving of a sort of title to cach plot to the Indians farming it. A l t h o u g h these new titles were

A G R I C U L T U R E AND LAND T E N U R E

43

not the equivalent of the fee simple title as understood in the United States, since they did not give the Indian the right to sell his plot, nevertheless they approached it closely. But they offered little opportunity for large-scale farming on most of the ejidos. T h e earlier experiment in communal agriculture represented the greatest contribution Mexico could make toward a satisfactory sort of landholding which might be used in many other countries of the world where a similar problem exists. Avila Camacho and Alemán have, however, allowed the major experiments in communal agriculture to continue. In particular this is true of the Laguna project, centering around the city of Torreón in northern Mexico. The land was expropriated from its former owners, many of whom were British, in 1937. Since then its cotton fields have been farmed as large units with the assistance of funds and advice received from the Ejido Bank in Torreón. There are a few other large-scale experiments with communal agriculture, of a similar sort. One involves the henequen growers in Yucatán and another the sugar growers of Los Mochis in Sinaloa. As an indication of how far this Mexican land reform has gone, it may be said that at the end of 1946, 36,000,000 hectares, or 90,000,000 acres, had been redistributed. Since the total area of Mexico is about 200,000,000 hectares, title to over one-sixth of the area of the country had been changed; 8,000,000 of the 14,000,000 hectares of workable land had been distributed. Thus title to over half of the desirable land of the country passed to 1,800,000 ejidatarios living in 18,000 ejidos. The average area per ejidatario has been 19.5 hectares, of which 4.6 have been workable land. If one remembers that a hectare is about 2.5 acres, it becomes apparent that this is not a great deal of land from which to obtain subsistence—especially when the crop is inefficiently raised corn. T h e millennium has not arrived in Mexico; but the country has been courageously struggling with a major problem. Lest anyone be especially concerned that the Mexican program represents a type of communism, it may be remarked that, whereas the average holding per ejidatario has been 19.5 hectares, private property units are protected against being reduced to a size smaller than 100 and 200 hectares; and the program actually calls only for the distribution of 10 hectares (24.7 acres) of land with adequate

44

ORGANIZATION OF

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water or *o hectares of land with intermittently adequate water to be distributed to each head of family. T h i s does not sound like equal distribution of the land. Mexico has promised to pay for all land expropriated. Article 87 of the Constitution of 1917 provided for compensation, and for a brief time between 1925 and 1930 bonds in wholly inadequate amounts (25,000,000 pesos) were offered in compensation. However, no general provision for compensation has been made since that time. If Mexico desired to confiscate (without compensation) the land of her own citizens in such a program, that would be her own problem and foreign countries would probably not concern themselves particularly. But native Mexicans have not been the only ones to lose—Spanish, British, and United States landowners have lost large tracts of land. T h e Mexican government has alleged that international law does not require the payment of compensation in the case of "general and impersonal" reforms made in the public interest. But she refuses to submit her case to an arbitration board which would render a decision on this point. Her argument is that her domestic law already requires the payment of compensation, and therefore foreigners and foreign governments cannot interfere on the ground that international law must govern the time and manner of payment. T h e foreign governments whose nationals have suffered losses have been undeterred by this Mexican logic. However, their complaints have accomplished little, except in the case of the United States. In 1938 the Mexican government agreed to pay at least $10,000,000 toward the settlement of some of the claims of United States citizens who had lost small plots of land. In 1941, after $3,000,000 had been paid, the Mexican government agreed to further payments of $37,000,000 in complete settlement of all agrarian claims plus certain other so-called "general" claims by United States citizens against the Mexican government—the sum to be paid in annual installments of $2,500,000. And there the matter of compensation rests. United States claims have been met. But the problem of paying other foreigners has not been solved nor has the problem of compensating the Mexican hacendado. Perhaps the latter is not likely ever to receive compensation. Nevertheless it should be a matter of some regret that no gen-

AGRICULTURE

AND LAND TENURE

45

erally accepted rule has been evolved as to what is proper by way o f compensation for losses arising in connection with a general and non-discriminatory social reform.

OWNERSHIP

BY

FOREIGNERS

F o r the most part, foreigners may own land in the Latin-American countries on equal terms with nationals. T h e r e are exceptions, however. M a n y countries prohibit foreign ownership of land within specified distances from the frontier. Bolivia and Peru set the distance at fifty kilometers; the Constitution of Ecuador (Article 184) provides that it shall be determined by statute. In Guatemala it is fifteen kilometers (with exception made for property acquired in u r b a n areas previous to 1945). In Mexico the prohibition applies to 100 kilometers along the land frontier and 50 kilometers along the coast, and there is the additional provision (Article 27 of the Constitution of 1917): " T h e state may concede the same right to aliens provided they agree before the Ministry of Foreign Relations to consider themselves as nationals with respect to said properties and not to invoke the protection of their Government in reference to the same." T h a t there are important exceptions to this general rule is evidenced by the size of the Greene properties around Cananea in the state of Sonora, just across the border from Arizona. M o r e drastic is the statement in the C u b a n Constitution (Article 90): " T h e law shall restrictively limit acquisition and possession of land by foreign persons and companies, and shall adopt measures tending to revert the land to C u b a n ownership." O n the whole, however, these various constitutional provisions w o u l d seem to give to foreigners as extensive rights in the ownership of land as they could legitimately ask for.

AGRICULTURAL

CREDIT

H o w much the productive area of Latin America can be extended is a question. Most of the land that is easily adaptable for cultivation is b e i n g used. Irrigation could, however, make some additional land available. M e x i c o has embarked on an extensive dam building and irrigation program, as have other Latin American countries. Population movement into the Mato Grosso region of Brazil and into the montaña region of Peru may also provide new areas for cultivation. A n d improved techniques, made possible by improved agricul-

46

ORGANIZATION

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turai credit, would make possible a more productive agriculture everywhere. For the most part Latin-American governments have attempted to deal with the problem of agricultural credit by establishing government-financed credit institutions. In Mexico there are two institutions of this type which have been set up since the revolution: (1) the Ejido Banks, extending credit to the ejidos, (2) the National Banks of Agricultural Credit, extending credit to other sorts of agricultural enterprises. Similar institutions have been set up in other Latin American countries, as is indicated in the accompanying table. Agricultural Credit Institutions Owned or Controlled by Governments Argentina: Instituto de Crédito Agrario (of the Banco de la Nación Argentina) Brazil: Carteira de Crédito Agricolo e Industrial (of the Banco do Brasil) Chile: Caja de Colonización Agrícola; Caja de Crédito Agrario Bolivia: Banco Agrícola Peru: Banco Agrícola del Perú Colombia: Banco Agrícola Hipotecario (supervised by Caja de Crédito Agrario, Industrial y Minero) Venezuela: Banco Agrícola y Pecuario Panama: Banco Agro-Pecuario e Industrial Guatemala: Banco Agrícola Hipotecario; Banco Agrícola e Industrial; Banco de Crédito Agrícola Cuba: Banco Agrícola e Industrial Mexico: Banco Nacional de Crédito Agrícola; Banco Nacional de Crédito Ejidal United States: Federal Intermediate Credit Banks; Federal Land Banks; Agricultural Credit Corporation; Commodity Credit Corporation NOTE: T h e table, of course, lists agencies which have come to the author's attention. There may well be omissions.

In addition to the government-sponsored facilities, commercial or other types of private banks sometimes grant agricultural loans. But the government institutions were established primarily because this other source of credit was so unsatisfactory. T h i s combination of institutions has not yet solved the problem of agricultural credit. For example, in Peru the charge has been made that most of the lending by the Banco Agrícola has been to the cotton and sugar interests of the coastal river valleys. T h i s is trie most profitable type of agriculture and the least in need of aid; but

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because of the political power wielded by the industry it was able to influence the lending policy of the bank. T h e Indians of the Sierra have benefited little. In general it may be said that the amount of agricultural credit has increased substantially in recent years. But the problem of providing adequate machinery and other equipment, fertilizer, and so on, to Latin-American agriculture has not yet been solved. Types of Agricultural Loans. In colonial times and early in the period of independence, the Catholic Church was virtually the only source of credit. In Mexico the Reform movement of the 1850*5 destroyed much of the economic power of the Church and ended its role as a major moneylender. The following discussion of present-day agricultural credit systems in Latin America applies specifically to Mexico, but the procedures are very similar in most of the other countries. Short-term loans, for periods of less than six months, are used to finance the marketing of crops. Such loans include the prendario, secured by the harvested crop stored in a warehouse and amounting up to 80 percent of its value, and the quirografario, made without security, but guaranteed by the signatures of two persons known to have good credit standing. The maximum quirografario loan is 20 percent of the average annual value of the applicant's crop. Before the establishment of the governmental agricultural banks a similar kind of credit was available in a slightly different form. Individuals, called acaparadores, bought the crop from the farmer for a fraction of its value. The acaparador thus assumed the financial burden, or risk, of financing the crop marketing. But he frequently realized a 300 percent profit after only three months; and, by the same token, the grower of the crop actually received as little as onethird of its value. Medium-term loans run from six months to a maximum of eight years. T h e principal types of loans of this sort are avío and refaccionario. Loans de avio are made for periods not to exceed 18 months. They are intended to aid in financing the production of a crop and may be made at any stage in the process—to finance the purchase of seed, to make possible the purchase of fertilizer, to aid harvesting, and so on. Loans de avio may, in a very real sense of the word, take the place of wages and have done so in the Laguna area, around Torreón in Mexico. The farmer frequently has little or no reserve to

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see him through the growing season, and a loan of this kind tides him over until the crop is sold. Before the revolution, to the extent that the poorer farmers could obtain this sort of credit at all, they obtained it from the tienda de raya or from the hacendado himself. Refaccionario loans run for a period from one to eight years. T h e y are designed to finance the preparation of new land for cultivation, the purchase of work animals, the purchase of farm machinery, and so on. Long-term loans are of two kinds: inmobiliario and hipotecario. Inmobiliario loans are made for periods up to 30 years to finance permanent improvements, such as the building of a dam, the building of an irrigation system, or the handling of a colonization project. Under these loans hypothecation of the land is not involved and therefore they may be extended to the ejidos in Mexico. Hipotecario loans (mortgages), on the contrary, may not be extended to the ejidatarios (the farmers in the communal villages), who do not own their land and therefore cannot hypothecate it. Loans which involve the giving of a mortgage against land as a security, however, may be made to individuals who do own land. Mexico. T h e providing of adequate credit for agriculture was one of the most important problems with which the revolutionary governments in Mexico were faced following 1910—if they were to make their program of land redistribution work and ultimately obtain a higher standard of living for rural Mexico. T h e first major step was the establishment of the Banco Nacional de Crédito Agricola in 1926, for the purpose of providing credit both to small farmers and to ejidos during the period between 1926 and 1935. T h e purpose was unattained. T h e Bank dissipated its funds on favored individuals and was reluctant to make loans to the ejidos because they appeared to be poor credit risks. A second major bank was established in 1935 to provide credit to the ejidos in particular. This was the Banco Nacional de Crédito Ejidal. It has established several branches around the country. T o obtain money from the bank, an ejido forms itself into a local credit society, to which the loan is made, rather than to an individual. For the present, the ejido banks in many cases control the ejidos. T h e banks have come to supervise the operation of about one-third of the ejidos. This is true of ejidos which have established local credit so-

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cieties, and it is especially true of the major experiments at communal agriculture in the Laguna area around Torreón, in the henequen area of Yucatán, and in the Yaqui valley in Sonora. T h e banks make loans de avio, which virtually amount to the payment of wage during the growing period. In many cases the banks actually administer the marketing of the crop and deduct what the ejido owes them before turning the balance of the proceeds over to the ejidatarios. Probably two-thirds of the loans made by the ejido banks have been of this type. Not only does the bank, in such cases, finance the production and administer the marketing of the crop, it is also likely to advise or instruct the ejidatarios as to what to raise and tell them how to administer the ejido. T h e Banco Nacional de Crédito Agrícola and the Banco Nacional de Crédito Ejidal between them have provided some of all the different types of agricultural credit: prendario, quirografario, avío, refaccionario, and inmobiliario. They have supplied a greater amount of medium-term credit than has ever been available before. But they have not provided a substantial amount of long-term credit, and there is indication that funds for such major activities as dam building will be obtained from other sources. T o increase production substantially in areas of inadequate water supply, it will be necessary to build great numbers of dams and to farm most of the land in large blocks, that is, to farm most of the ejidos as collectives; it will also be necessary to make good machinery available—plows, tractors, reapers, even combines. T h e Mexican Revolution has a long way to go in the mechanization of agriculture so that the program for the redistribution of the land may actually result in substantial gain to those receiving the land. General. Communal agriculture should be encouraged in Mexico. It has a traditional basis in the agricultural system of the Aztecs of pre-Cortes Mexico, and it appears likely to fill many of Mexico's present-day agricultural needs. T h e communal system may well be desirable also in Guatemala, Colombia, Peru, and even in Chile, where the problem is in many ways similar to that in Mexico. Even Cuba and Brazil, with racial admixtures other than the Indian, might well deal with the problem of land maldistribution from much the same approach. But what of Argentina and Uruguay, where the land

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is concentrated in large holdings but the population is largely of European origin and there is no tradition of communal land ownership? T h e best hope for the future of agriculture in much of Latin America lies in the placing of emphasis on communal large-scale farming. However, in Argentina it may involve emphasis on treating agriculture as an industry and giving social security to agricultural workers. This process should be accompanied by sincere governmental efforts to provide the credit necessary to purchase the agricultural machinery which alone can make such experiments successful.

C H A P T E R

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T H E MINING INDUSTRY OWNERSHIP History. Under Roman law the owner of the surface owned the subsoil and the air above his property. At first, this was the law of Spain, and it meant that an individual did own the minerals under his land. A new interpretation of the Spanish law began to take shape with a decree of 1387, when the Crown declared that, in subsequent grants of crown lands, title to the gold, silver, and quicksilver was reserved to the state. One hundred and seventy years later the Crown increased the extent of its claim. Philip II, by decree of January 10, 1559, reserved title not only to all deposits of gold, silver, and quicksilver, but also certain other metals, regardless of whether they happened to be under public land or privately owned land. His design was to gain for himself a large share of the newly found wealth of the Indies. The decree was not especially intended to work a hardship on mining enterprises already established in Spain, and it provided for compensation in the event that enforcement involved the expropriation of mines already under private operation. The principle enunciated in this decree forms the basis for the statement that, under Spanish law, the state owns the minerals in the ground. However, such a statement is an oversimplification. During the eighteenth century a distinction came to be made between metallic minerals (as gold and silver) and hydrocarbons (coal and oil). The Mining Code of Charles III, which was promulgated in 1783 and which was intended to apply to the Spanish colonies in the New World, was the first major decree to make this distinction. It placed hydrocarbons, or bitumens, in the same classification as metals, insofar as ownership was concerned, but mentioned them specifically. This decree, taken alone, would have meant the ownership of the oil resources by the government and would have provided a fairly clear-cut precedent as to the law when the question came to a head over a hundred years later. But decrees in 1789 and 1792 placed coal in a different classification and provided that it should be the property of the surface owner. Coal was by far the principal hydrocarbon at that time. But oil is also a hydrocarbon. Was oil, then, the property

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of the Crown rather than the surface owner? It has been alleged that the Spanish government did not intend the later decrees concerning ownership of coal to be applied in the New World. If that was true, the decree of 1783 remained in force in the New World, and the hydrocarbons in the ground were the property of the government in the colonies at the time they became independent. When they became independent, the Spanish American countries took over the Spanish law intact, except where there were legislative enactments to the contrary. Therefore the Spanish precedents on ownership of the subsoil became the law in Spanish America. But this left a question as to whether the surface owner in the New World owned the oil in the ground under his property. Did the decree of 1783 or those of 1789 and 1792 apply? T h a t is not the whole story. T h e Spanish American countries could and did change the Spanish law after they became independent. Moreover, the Spanish law was subject to judicial interpretation. For example, the Mexican Supreme Court, in 1881, declared that the Spanish decrees of 1789 and 1792 had applied only to the Spanish peninsula. If that was true, Mexico's mining law was based on the Code of 1783, unmodified. Coal deposits, along with the valuable metals, were the property of the state. During the 1880's, however, the Mexican dictator Porfirio Diaz began to think in terms of the desirability of bringing in foreign capital to aid in the development of the country. In a new mining code, in 1884, he decreed that the owner of the surface should have exclusive property rights in a list of minerals including coal and petroleum, but excluding metals. Later mining codes in 1892 and 1909 changed the situation slightly, but it was fundamentally true at the time the Diaz regime fell in 1911 that the surface owner in Mexico had acquired title to the mineral fuels, but not to the metallic minerals. It was under these decrees that the foreign companies acquired much of their oil properties in Mexico. T h e revolution changed this. Article 27 of the Constitution of 1917 provided that: "In the nation is vested direct ownership (Dominio directo) of all minerals or substances which in veins, layers, masses or beds constitute deposits whose nature is different from the components of the land, such as . . . petroleum and all hydrocarbons." In Mexico the law is now quite explicit; all minerals, both metals and hydrocarbons, are owned by the state and may be ex-

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ploited by private individuals only with the permission of the government. B u t the law still does not specify the owner of the nonmineral part of the subsoil. A t the present time in Latin America, three possibilities exist as to the ownership of minerals in the ground: (1) by the surface owner, (2) by the state, (3) a compromise between the two. Probably in no country is the situation sufficiently clear-cut to justify the statement that possibility (1) or (2) provides the complete answer to the question of the type of ownership. Most of the situations are mixed, but in varying degree. For example, in C u b a the state owns most minerals and grants concessions for their exploitation, but rights to some minerals are possessed by the surface owner. In most cases, however, the state claims ownership of the valuable minerals (the precious metals, the industrially useful metals, and oil), and the right to exploit is obtained by concession from the state. Types of Concessions. T h e types of concessions under which mining companies operate in Latin America are fairly uniform from country to country. T h e r e is, for example, little difference between the Brazilian and Mexican concession systems, at least in broad outline, despite the distance that separates them and the linguistic and racial characteristics that differentiate them. First the concessionaire obtains an exploratory (cateo) concession for some such period as two years. During this period the concessionaire determines whether the property is really worth developing. H e can take ore out; and the government, to encourage the development of mining, grants him substantial tax exemptions. If the property proves valuable, a working (exploitation) concession is then obtained, and the concessionaire becomes liable for taxes. H e is also frequently required, thereafter, to keep the work of exploitation going continuously on pain of forfeiture if he fails to do so, or if he lets the property lie idle for some such period as six months. In Latin America the law frequently places emphasis on the social desirability of having an enterprise in continuous operation, whereas in the United States the much greater emphasis on private property rights has led to the conclusion that an owner of private property can shut down his operations whenever he wishes for as long as he wishes. A third type of concession (de beneficio) must be obtained to establish a smelter or refinery. Under the concession sort of title the concessionaire's claim to the

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land is less secure than if he held it in fee simple. For example, a concession can be summarily cancelled for nonpayment of taxes or for letting the property lie idle for a time. On the other hand, the process for the taking over of private property, even in the case of nonpayment of taxes, is somewhat more complicated. Restrictions on Foreigners. Latin-American governments have attempted in many ways to limit the degree of foreign economic infiltration. One of the most common restrictions has been upon the right of foreigners to obtain control of mineral deposits. Concessions may be granted to foreigners or foreign corporations on condition that they agree to Calvo Clauses providing for settlement of disputes in local courts rather than by reference back to the foreigner's home country. Such is the situation in Mexico with regard to metallic minerals, but not oil. Other countries may have more drastic restrictions. Brazilian law provides that neither foreigners nor foreign corporations may obtain permission to exploit Brazilian minerals. However, exception is made for rights obtained before 1934. In many places only companies chartered in the country may engage in mineral extraction. But such locally chartered companies may be owned and controlled by foreign companies. This is true in Venezuela and Colombia, and in Mexico in regard to mining. A new and growing trend is that locally chartered corporations must be at least half-owned by citizens. Mexico, for example, periodically threatens to enforce the law which would allow the government to require that new businesses be at least one-half locally owned. MINERALS T h e mining industry is of major importance down the whole stretch of the cordilleras from Mexico to Chile, and it is also important in the Brazilian highland area. T h e industry flourishes wherever raw materials are found, with little regard to location. As a result, population centers grow up in isolated areas and are not integrated into the national economy. In fact the economy that surrounds the mining camp is frequently very nearly divorced from the economy of the nation as a whole. Copper. T h e Western Hemisphere produces between one-half and three-fourths of the copper of the world, with Latin America producing about one-fourth of the world total. T h e principal Latin-

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American producer is Chile, followed at some distance by Mexico and Peru. The United States is the leading copper producing country of the world. T h e Guggenheims were the entrepreneur-promoters in the field of Chile coppers. After Jackling's development, on properties in Utah, of a process whereby the low-grade porphyry ores could be processed feasibly, it became possible to do something with Chile's low grade ores (of 3-4 percent copper content). And it actually became more profitable in many cases to mine the easily accessible low grade ores (perhaps using dredges) than to go down into veins for the high grade product. At any rate, it was about 1912 when the Guggenheims procured the Braden (El Teniente mine located at Sewell) and Chuquicamata mines. The Braden properties, 60 miles from Santiago, they continue to hold through the Kennecott Copper Corporation, which owns the Braden Copper Corporation. And they are still responsible for about one-fourth of the Chilean copper production. But in 1923 they sold control of the fabulously rich Chuquicamata mines to John D. Ryan of the Anaconda Copper Company for what was reportedly a certified check for $70,000,000. The Guggenheims had at that time become more interested in Chilean nitrates than in Chilean copper, and they consequently let the most valuable prize among the Chilean mineral deposits slip through their fingers. Anaconda's operating companies in Chile are now the Chile Copper Company and the Andes Copper Mining Company, controlling between them two-thirds of the country's production. Their most valuable property is undoubtedly the Chuquicamata mine in northern Chile. In Peru the principal copper mining properties are located around Cerro de Pasco and are controlled by the United States-owned Cerro de Pasco Copper Company. Exploitation of the Cerro de Pasco mines first became important about 1905. Somewhat later the company acquired the Morococha mine between Lima and Oroya, which also is an important copper producer. Silver and certain other minerals are obtained as by-products from these mines. In Cuba the principal producing company is the Minas de Matahambre, a locally owned enterprise which has mines in the westernmost province of Pinar del Rio. In Mexico, American Smelting and Refining (Guggenheim), Ana-

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conda, Phelps-Dodge, and American Metal are the principal operating companies interested in the production of copper. They are all United States-owned. A. S. and R. has major smelters at Monterrey and Rosita. Anaconda has, among others, a large mine at Cananea in northern Sonora. Lead and Zinc. Copper frequently occurs in close proximity to lead or zinc, and lead and zinc are frequently found in close proximity to each other. Therefore, it is not strange to find that the United States is the principal producing country insofar as lead and zinc are concerned; Mexico and Peru are also important producers, Mexico having at times ranked second in production of both. Chile is not, however, an important producer of either. It follows naturally that, for the most part, the leading copper companies are also the leading producers of lead and zinc. The most important mining company which largely limits its activities to lead is the St. Joseph Lead Company. Its principal Latin-American subsidiary is the Compañía Minera Aguilar in Argentina. Aluminum. Although aluminum in various forms abounds in the soil, bauxite ore—the only feasible industrial source at present —is rather scarce. In the New World, the principal deposits are found in the British and Dutch colonies in the Guianas; some deposits occur in Arkansas. Latin America, including the Guianas, was responsible for 28 percent of the world production in 1939, and it should be noted that it was colonies of European countries, rather than independent Latin-American countries, which were the principal producers. The deposits in British Guiana are exploited by the Demerara Bauxite Company, a subsidiary of Aluminum, Ltd., of Canada, which in its turn is controlled by the Aluminum Company of America. The bauxite of Surinam (Dutch Guiana) is largely exploited by the Surinaamsche Bauxite Mattschappij, also controlled by the Aluminum Company of America. Another United States company, American Cyanamide, is also operating in the Guianas, but on a much smaller scale. There are bauxite deposits of potential importance in Brazil; exploitation of several of them has already begun. One of the more important deposits, at Motuca, near Ouro Preto, belongs to the Sao Joao d'El Rey Mining Company, an English gold mining company. Tin. Bolivia ranks second behind the Federated Malay States in

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the production of tin. In 1929 Bolivian production was 24 percent of the world total; in 1938 it had slipped to 18 percent. This was probably due in part to the fact that Bolivian ores are of a poorer quality than those in the Far East, and, when price competition became acute, it was the poorer grade Bolivian product which suffered most. T h e situation in regard to Bolivian tin is fairly complicated. But the industry is of sufficient importance to justify some attempt at explanation. The principal enterprise in the field has been Patino Mines and Enterprises Consolidated, controlling just about half of the Bolivian production. Simon Patino was born a Bolivian mestizo (or Indian). But, because of the years he spent in Paris, New York, and Buenos Aires, he could scarcely have been considered a Bolivian at all. Patino died in 1947 in Buenos Aires, leaving the control of his properties to his son, Antenor. If one can assign a national identity to the Patino interests it would be British. However, it appears that Patino seriously considered supporting the Germans during World War II and barely saved himself from that strategic blunder. In 1939 the Patino interests controlled not only much of the Bolivian production but also much of the British production in the Far East. Their Eastern holdings are probably more valuable than their Bolivian holdings, and in addition they have a stake in tin smelting in England. Patino, before the war, was the dominating figure in the world tin cartel. T i n ore from both the Far East and from Bolivia was sent to England. Probably because of their financial stake in the processing industry in England, the Patino interests have been anxious to have Britain maintain the export duty arrangement on tin shipped from the Malay States, which gives lower duties to ore shipped to England, thereby subsidizing the British smelting industry. If that preferential duty were removed (as seems in the process of occurring) the ore might well be processed in the United States, where much of it is consumed, and the trip to England and back saved. These complications help to explain the manner in which the interests of the Patino group are tied to the interests of England and why they have opposed the establishment of smelters in the United States. Twenty-five percent of the Bolivian tin is produced by the Hochschild group, with lesser amounts by the Aramayo group and by smaller mines which have been sponsored by the government's Banco Minero. These latter mines live a hand-to-mouth existence. United States interests in Bolivian tin mining are not large; they

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include the Guggenheim-owned Caracoles T i n Company and W . R. Grace's International Mining Company. T h e United States government, during World War II, established a major smelter at Texas City, Texas, and periodically contracted for the purchase of virtually all of the Bolivian tin which was not controlled by the Patiño interests. After World War I an incipient United States tin smelting industry had been forced to shut down. Because of the greater interest this time in the problem of insuring access to strategic minerals, it is less likely that the United States government will allow the Texas City smelter to be forced out of business by the tin cartel. But only time can tell how much of a shift in the balance of power in the tin industry is actually taking place. If the American industry grows, the process may well involve the rise of Hochschild and the decline of Patiño. Nitrate. Yet another of the mineral resources of the cordillera region has had a dramatic history. This is the nitrate of Chile. Nitrate, with the accompanying reserves of iodine, accumulated in the Atacama Desert region because of the extreme scarcity of rainfall there. T h e principal companies in the field are now the United States and Guggenheim controlled Compañía Salitrera Anglo-Chilena and the Lautaro Nitrate Company. T h e other important company is the locally controlled Compañía Salitrera de Tarapacá y Antofagasta, which has absorbed virtually all of the small independent producers. T h e marketing of nitrate is handled as a monopoly by the Chilean government through the Chilean Nitrate and Iodine Sales Corporation. Gold and Silver. With the passage of the years Latin-American gold production has lost some of its relative importance. T h e Union of South Africa, the U.S.S.R., Canada, and the United States were all, in 1945, far more important gold-producing countries than any of the Latin-American nations. Mexico and Colombia in that year ranked seventh and eighth, respectively; each had a production worth about 118,000,000 at $35 a fine ounce. This figure compared with a production valued at $428,000,000 in the Union of South Africa. Gold is mined, at least in small quantities, in most of the countries of Latin America. But the most interesting single mine is located in Brazil. This is the British-owned Morro Velho mine of the Sao Joáo d'El Rey Mining Company (which has been mentioned as hav-

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ing bauxite properties also). The striking fact in connection with the mine is its tremendous depth, 7,500 feet. As was the case with gold, Latin America was also a major producer of silver during the colonial period. T h e region around Potosí in Bolivia, over a period of 400 years is said to have produced $1,000,000,000 (U.S.) worth of silver; through the years, it has probably been the most important silver-producing region in the world. But Bolivia is not now as important in this respect as Mexico or Peru. Mexico has produced an estimated $2,890,000,000 worth of silver since 1521 —at the arbitrary valuation of 44^ an ounce. However, the case of silver differs from the case of gold in that Latin America has maintained its relative importance in silver production right up to the present day. Quite frequently in recent years Mexico has ranked as the most important single country in silver production. Peru and Bolivia have also appeared as important producers. T h e principal companies in gold and silver are also the principal companies in copper and zinc. Other Minerals. There is a group of minerals which, although not produced in large quantities, are extremely strategic in small quantities in an industrial world. The United States Army and Navy Munitions Board has prepared a list of fourteen so-called strategic materials (principally minerals): antimony, chromium, coconut-shell char, ferrograde manganese, manila fiber, mercury, mica, nickel, quartz crystals, quinine, rubber, silk, tin, and tungsten. These materials tend to be found in areas of limited size outside the United States. For example, the nickel mines at Sudbury, Ontario, have produced about 90 percent of the world's nickel of recent years. Some of the remaining 10 percent has come from Goias state in Brazil and some from Oriente province in Cuba. The Freeport Sulphur Company, which produces sulphur on the Gulf Coast in the United States, has controlled the Nicaro Nickel Company in Cuba. This group in 194* succeeded in obtaining a $20,000,000 loan from the Reconstruction Finance Corporation to build a nickel recovery plant in Oriente province, but the plant apparently proved unprofitable and was closed in 1946. Manganese may well be the most important of the group of strategic materials. In steel production it is needed at approximately the ratio

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of 14 pounds to the ton of steel. Considerable manganese is produced in the Western Hemisphere—chiefly in the Brazilian states of Minas Gerais, Baia, and Mato Grosso. Over one-half of the Brazilian production is by the Companhia Meridional de Minera^ao, a subsidiary of the United States Steel Corporation. T h e Companhia has a mine at Morro da Mina near Queluz in Minas Gerais. It is rather significant that in 1929 to 1938 Brazilian production declined substantially, whereas the Cuban production expanded from almost nothing. In the same period the Latin-American share of the world production fell from 9.3 percent to 6.5 percent. Antimony, which gives hardness to steel and has the property of expanding on solidification (and which also is used in medicine and as a pigment), is found in Bolivia, Mexico, and, in small amounts, in Peru. Bolivia is in fact the second most important producer in the world, the principal mines being owned by Tramonti and H. Gerike. Chromium is the element which provides the gleaming decoration for automobiles. It is hard, brilliant, resistant to corrosion, and is used in the making of chrome steel. Cuba is the only important producer in the Western Hemisphere, furnishing about one-fifth of United States chrome imports. However, some chrome ore comes from the state of Baia in Brazil and some from Guatemala. T h e U.S.S.R. is the principal producer in the world. Mercury, the strange, heavy, liquid metal used in thermometers, is found in Mexico, Peru, Brazil, and the United States. T h e mines at Almadén in Spain have, however, made that country for centuries the leading producer. Latin America provides most of the beryllium imported into the United States, Brazil supplying about half the total. Aquamarines and emeralds are beryllium, but the ore has more practical uses in the steel industry. T h e principal sources of emeralds are Colombia and Russia, though at present the Colombian emerald business does not seem to be thriving, and the principal emerald mines in the country, at Muzo and Cosquez just north of Bogotá, which have been worked by the government, seem to be shut down. Mica has come primarily from British India, but some of it is available in Brazil and elsewhere in the Hemisphere. Mica has remarkable heat-resistant properties and is an essential as thin plates in certain radio parts and in electrical appliances and magnetos. T h e mica which exists as one of the major constituents in most granite in

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the United States is not commercially useful for these purposes. T h e principal commercially usable production in Brazil comes from the state of Minas Gerais. Because of its high melting point, tungsten is used in electric-light filaments; it is also used as an alloy in steel. China is at present the principal producer, but rather important deposits are to be found in Bolivia, Peru, and Mexico. Bolivia is responsible for some 10 percent of the world production. About two-thirds of the Bolivian production comes from the Conde Auqui mine of the United Statesowned Easley and Inslee Company. Platinum is used in chemical apparatus as a catalyst, for dental fillings, and in jewelry. In the Western Hemisphere it is found in Colombia, the United States, and Canada and, in minor quantity, in Brazil. In Colombia the United States-owned South American Gold and Platinum Company controls over one-half of the production through its subsidiary the Compañía Minera Chocó Pacífico. T h e Colombia-owned Intendencia del Chocó produces practically all of the rest. Peru is the world's largest producer of vanadium, a malleable, soft, ductile metal used to strengthen steel and to remove oxygen. Virtually all of the Peruvian production comes from the Minasragra mine of the Vanadium Corporation of America (United States). Brazil happens to be the only satisfactory source in the world for high quality quartz crystals on a commercial scale. Such crystals are valuable because of their use in electrical, radio, and optical equipment. The principal Brazilian states producing the crystals are Goias, Minas Gerais (Diamantina), and Baia. Diamonds, especially the black diamonds called carbonados, which have an important industrial use (as for rock bits), are found in Brazil near Diamantina in the state of Minas Gerais and in the states of Goias, Mato Grosso, and Sao Paulo. Molybdenum is produced in Mexico, Chile, and Peru, but the United States is the principal producer in the world. During World War II the United States was extremely anxious to obtain large quantities of all these minerals and to prevent the Axis countries from getting them. T o accomplish this, the United States entered into various agreements with the different LatinAmerican countries. At one time an agreement with Peru provided that the United States should purchase all essential Peruvian minerals

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not absorbed in the normal course of business in Western Hemisphere countries. This agreement included antimony, copper, lead, tungsten, vanadium, and zinc. It was the Metals Reserve Company of the Reconstruction Finance Corporation which actually advanced the funds in connection with many of these purchases of strategic materials. By agreement with the Bolivian government (involving all producers except Patiño) the Metals Reserve Company in the early part of the war agreed to buy 18,000 tons of Bolivian tin a year for a period of five years at a price of $ 1 7 a ton. And the Bolivians refused to sell to Japan at a price of $23 a ton, in part because of the policy of Hemisphere solidarity, in part because the Japanese were unwilling to guarantee to continue their purchases over a period of time. GOVERNMENTAL REGULA TIONS Government regulation has been directed toward at least two primary goals: (1) curbing the extent of the foreign control and (2) encouraging the expansion of that part of the industry which is under local control. Anti-foreign. In the Extracto Estadístico del Perú for 1939 some suggestive figures are given on the operation of the mining industry. So far as the Cerro de Pasco Copper Company is concerned (and it is almost the whole Peruvian copper industry) the situation is described as follows for 1938: Total value of sales Total money left in Peru (taxes, salaries, etc.) Value going abroad

80,879,450 soles 46,968,004 33,911,446 soles

Whether or not these figures are precisely accurate, they indicate a situation that prevails throughout the Latin-American mining industry, to the disquiet of the Latin American. A large percentage of the value of the product appears to go abroad and the foreign corporation is viewed as draining the country of its mineral wealth, making most of the profits in the process, and leaving little in exchange in the country. Typical of anti-foreign, or pro-national, legislation not only in the mining industry, but in industry in general, is the provision limiting the number of foreigners that may be employed by a company.

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Frequently, other provisions place domestically owned companies at an advantage in regard to taxes. For example, in Chile the tax on m i n i n g profits is 12 percent; an additional 6 percent is levied on profits not distributed in Chile, and an additional 10 percent is levied on copper companies that have over 200 employees. T h u s the taxes on the profits of the large foreign companies are substantially higher than the taxes on the small, locally owned companies. Moreover, for the large copper companies the rate of exchange is 19.36 pesos to the dollar whereas for most other purposes it is 25 to the dollar. A Brazilian law passed in 1934 provided that a majority of the stock of mining enterprises established after that date could not be foreign owned. T h e law did not apply to mining enterprises established before 1934. T h i s was changed somewhat by the 1946 Constitution which states that to obtain a concession to exploit minerals the concessionaire must be Brazilian or the corporation must be chartered in Brazil; in the latter case ownership of stock may be foreign. In Mexico the provision that mine owners, if they desire to shut down a mine, must pay a three months' discharge wage to each of the workers has induced many mine owners to turn their property over to workers' cooperatives, rather than shut down. Foreign mining companies in Latin America in recent years have thus been subjected to a variety of restrictions, including restriction of the amount of the stock of a mining enterprise which may be foreign controlled, restriction on the proportion of the employees that may be foreigners, and restriction on the transfer of money abroad. Developmental. As distinguished from anti-foreign legislation, there has been passed of late in many of the Latin-American countries a series of laws designed to give positive encouragement to locally owned mining enterprises. In order to establish these companies it is necessary to find capital. Latin Americans with idle funds have not, on the whole, shown much relish for investing in local industry. T h e y have been more inclined to back conspicuous land-hogging schemes or to invest in mortgages. As a result the domestic supply of private funds has not been sufficiently large, by itself, to finance locally owned mining companies of any consequence. But the governments of the countries involved have come increasingly to believe that the national well-being demands local ownership of a substantial percentage of local industry. Confronted with this prob-

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lem many of the countries have set up government agencies to provide the necessary capital funds. T h e Banco Minerò in Bolivia has been especially designed to help small Bolivian-owned tin mining companies to solve their marketing problem. In 1928, Chile set up a Caja de Crédito Minerò, which was empowered to make loans only to companies at least 75 per cent Chilean-owned. Colombia has set up a similar institution to make loans to mining companies. Called the Caja de Crédito Agrario, Industrial y Minerò, it has, as its name suggests, a larger function than merely serving this need in the field of mining alone. In Mexico there is the Comision de Fomento Minerò. In Peru there is the Banco Minerò del Peru, which is designed to make loans only to companies at least 60 percent Peruvian-owned. These developments in Colombia and Peru have taken place very recently. But this whole trend, which is becoming more and more typical of the attitude of Latin-American governments toward the industries of their countries, is very significant. Apparently the present method of handling these funds is not very satisfactory. The funds are derived from the great mass of the people by taxation or as forced savings in connection with an expansion of the circulating medium. These funds make possible enterprises which, if financially successful, will be profitable to a very few. If not successful, the loss is borne by the populace as a whole through the government. It might be a better arrangement if the state shared to a marked extent in the profits of the companies it has financed, or even if it shared in or took over the operation of a larger number of the enterprises financed in this way. A further drawback is the sheer lack of funds. The governments themselves do not have the resources to finance an industry such as mining on an important scale. The reason for this should be quite obvious when one considers that the essential ingredient in setting up a new mining industry is machinery or foreign exchange—not domestic funds—with which to buy it. A government can "manufacture" funds in the form of its own paper currency, but it cannot "manufacture" machinery, which must for the most part be imported and cannot be paid for in local currency. These difficulties may be overcome in the future and from the viewpoint of the well-being of the countries concerned it is highly desirable that they should be. But at present they remain a problem.

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OIL INTRODUCTION AND G E N E R A L STATISTICS

T h e oil industry is a remarkable phenomenon, no less so in Latin America than elsewhere. In the short space of fifty years it has grown to major importance, and in that brief period of time it has occasioned profound readjustments, both political and economic, wherever in Latin America it has established itself. Conflicts between local governments and foreigners, sharp in any event, have been rendered yet more sharp by the addition of the conflict over oil and the profits from oil. That these conflicts should become bitter was made certain by the fact that the local industry has been almost completely controlled by foreigners, who were accused of draining off an irreplaceable national resource and of exploiting local labor in the process. T h e bitterness remains, even though the chief concern of Latin Americans may actually have been the loss of monetary profit rather than the loss of oil. T h e tropics of Latin America are, on the whole, not rich in minerals, save for this one important exception. It is there that the oil fields are located. This is true of the Mexican fields around T a m p i c o and on the Isthmus of Tehuantepec and of the Venezuelan fields around Lake Maracaibo and also of those farther east. It is true of the Colombian concessions: Barco and De Mares. It is true of the Ecuadorean fields on the Santa Elena peninsula, and it is also true of the new fields, about which there has been much talk of late, in the upper Amazon valley—such as Ganso Azul in Peru. T h e only oil fields of any importance not in the tropics are in Argentina. Latin America is an extremely important oil supplying region from the world point of view. Venezuela, with a production running to 491,000,000 barrels in 1948, was the second most important oil producing country in the world—ranking after the United States. Mexico, Colombia, Argentina, and Peru also all rank well up in world petroleum production. T h e statistics in Table 6 indicate the overshadowing importance of the United States so far as the world oil situation is concerned. They also indicate (and this is extremely important) that the Middle East, in the future, is likely to rival or even exceed the United States in importance as a producing region. This is because of the tremendous size of the proved reserves in the ground in the Middle East,

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and not because the United States reserves are small. By comparison with the United States and the Middle East, Latin-American oil production and reserves are smaller but nevertheless considerable. DETAILS BY COUNTRIES

Mexico. Oil production on a commercial basis was first obtained by Edward Doheny (United States) in the Ebano field near Tampico in 1901. Until 1908 production remained small, but in that year the first of the great gushers "came in," in northern Vera Cruz, near the Laguna de Tamiahua. T h e well was cajled Dos Bocas, and though it burned and was, therefore, never a major producer, it had demonstrated the possibilities of the region. Production thereafter increased at a rapid rate until in 1921 Mexico, with an annual production of 193,000,000 barrels, was the second most important producer in the world. In 1916 Doheny's Mexican Petroleum Company had brought in its Cerro Azul No. 4 with the greatest production ever achieved— something over 250,000 barrels a day. Virtually all of the Mexican production still comes from the area in the northern part of the state of Vera Cruz (the Tampico fields, the faja de oro, and Poza Rica). But there is some production in the Isthmus of Tehuantepec region and in the lower Rio Grande valley. T h e legislation under which the industry developed was favorable. Porfirio Diaz, before 1910, had been desirous of encouraging the introduction of capital into Mexico and made important concessions to the foreigners to attract their funds. In particular, in the mining laws of 1884 and 1909, he gave to the owner of the surface land what amounted to a fee simple title to the oil in the ground. Under this legislation the foreign companies acquired most of their properties in Mexico by outright purchase or by lease from the landowner, and not by concession from the government. But the Mexican revolutionary movement which overthrew Diaz in 1910-1911 was not sympathetic toward the foreign oil companies. T h e new governments were of the opinion that the oil companies had acquired much of their property by force and violence and that they were making exorbitant profits. They desired to "revindicate" national control over the subsoil wealth. T o this end Article 27 of Carranza's Constitution of 1917 provided that "in the nation is vested direct ownership of all minerals." By this provision petroleum was put back

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in the status occupied all along by the metals, copper, lead, zinc, and silver. But Mexico found it difficult to give effect to Article 27. The foreign companies protested vigorously and their governments backed them in their protests. Between 1917 and 192 8 the developments in the oil controversy were many, tempestuous, and indecisive—the Texas Company amparo of 1921, the Bucareli Conference of 1923, the Organic Petroleum Law of 1925, and the rest. Eventually a compromise solution was reached in 1928—the Morrow-Calles settlement. The oil companies agreed to accept from the Mexican government, in place of their "quasi-fee simple" titles, new "confirmatory concessions" which were to last indefinitely. The expression "confirmatory concession" is a contradiction in terms. By "confirmatory" it was apparently meant that the oil companies were confirmed in all the rights they had held before 1917. If that were true, Mexico could validly allege that Article 27 of the Constitution had effected no confiscation of property and that, therefore, Mexico owed no one any compensation for loss —no one having suffered any loss. But the expression "concession" implied a weaker sort of claim to property than is implied in ownership. The government can cancel concessions much more easily than it can confiscate property. Be that as it may, no particularly valid objection could have been raised to the "confirmatory concessions" as long as the government recognized them and thereby enabled the oil companies to make as much profit as ever. In 1938 the most important companies in Mexico were the Aguila, owned by the Royal Dutch Shell, the Huasteca, owned by the Standard of New Jersey, some Sinclair subsidiaries, and several other minor companies. In that year the property of these and several other companies (seventeen in all), controlling almost all of Mexico's production of crude oil, was expropriated. These seventeen companies had refused to abide by a labor decision of Mexico's Board of Conciliation and Arbitration. This decision increased wages and other benefits paid to workers by a total of 26,000,000 pesos a year and also granted to unions certain managerial powers, particularly in connection with hiring and firing. The refusal of the companies to abide by the decision was the precipitating factor leading to expropriation. The companies alleged inability to pay an increase of 26,000,000 pesos a year —although in the final analysis, it was probably the question of di-

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viding control with the workers that they refused to consider, probably believing that it represented a dangerous precedent, which might be followed in other Latin-American countries. Lázaro Cárdenas, the President of Mexico, justified the subsequent expropriation on the grounds that the failure of the oil companies to abide by the Supreme Court decision would lead to a shut down of the industry. Since the industry had been declared by law to be of "public utility," expropriation was justified in order to keep it running. Following the expropriation President Cárdenas said that the oil companies would be indemnified for surface equipment taken but not for the proven oil reserves in the ground. Stalemate followed until in November of 1941 the United States and Mexico arrived at an agreement providing for joint appraisal by experts appointed by both governments. T h e settlement as finally worked out in 1942, agreed to by both governments and by the United States oil companies, albeit reluctantly, provided for compensation amounting to about $23,996,000. Previous individual settlements had netted Sinclair Oil Company $8,500,000 and Cities Service $1,000,000. Total compensation paid to the United States oil companies thus has totaled $33,595,000. In 1947 an agreement was finally worked out between the Mexican government and the British—with regard to the Dutch Shell-owned Cía Mexicana de Petróleo "El Aguila," which had been the chief loser at the time of expropriation, principally because it had the best field of all in Poza Rica. Mexico agreed to pay the British and Dutch $130,339,000 (632,144,000 pesos) in 15 annual installments. It was calculated that, of this sum, $49,089,000 represented interest and $81,250,000 represented principal. T h e British thus got a substantially better "bargain" from Mexico than did the United States (on the assumption that their properties represented about 60 percent of the value of properties expropriated). T h e total compensation which Mexico will pay for the expropriated properties will thus be $163,935,000. It has been estimated that the market value of the oil company properties in 1938 would have been about $100,000,000 (with future probable earnings discounted in the generally accepted fashion). 1 T h e oil companies themselves had claimed at the time of expropriation that the properties were worth about $400,000,000. T h e conflict between the oil companies and the Mexican govern1 Sec W. C. Gordon, Expropriation of Foreign Owned Property in Mexico, p. 130.

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ment has been one between two powerful economic forces, and the moral issues that have been raised—such as whether the companies stole the property in the first place or whether Mexico is stealing it now—merely confuse the issue. On the one side powerful corporations and on the other rising national interest have been pitted against each other in a major test of capitalistic imperialism in Latin America. If one wished to take sides on moral grounds, probably one should choose the side that is struggling to improve the lot of the greatest number of people—if one could be sure it was doing so honestly and sincerely. So far as present operation is concerned, an agency of the Mexican government, Petróleos Mexicanos, now controls almost all the exploratory, drilling, producing, refining, and marketing activities in the country. Whether this organization is as efficient as the companies is a question. Undoubtedly during 1946, there was a serious shortage of gasoline in Mexico, but it is difficult to determine what is cause and what is effect in this situation. Mexican consumers are now trying to use oil products for more purposes than ever before, and after 1938 were encouraged to do so by Petróleos Mexicanos. T h e trend toward increased domestic use of oil seemed a good thing until the shortage occurred, and it probably should not be condemned because of the shortage. Since 1938 the oil workers' union has been strong enough seriously to challenge Petróleos Mexicanos for control. Part of the reason for the agency's lack of financial success is undoubtedly to be found in the fact that the oil workers' union has been very effective in such measures as padding the payroll. In addition, the management of Petróleos Mexicanos has probably not been technically efficient either —even in terms of the resources at hand. But Petróleos Mexicanos has also had to cope with the open hostility of the major oil companies of the world and with the power which those companies are able to exert over those who supply equipment. Whether or not the advent of the Alemán government in December, 1946, has permanently improved the situation remains to be seen. There has been an administrative housecleaning in Petróleos Mexicanos. Efraín Buenrostro has gone out as the head and Antonio Bermúdez has come in. In addition, just after taking office in December, 1946, the government put down an abortive strike by the oil field workers, with a strong hand. It is to be hoped that all this will lead

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to greater efficiency in the oil industry and to new exploratory work in significant amounts. Mexico probably has large undiscovered reserves; the fact that production was 200,000,000 barrels as early as 1921 is a fairly reliable indication of this. And in 1948, production of 58,000,000 barrels was the largest in twenty years. In an effort to develop the reserves, Mexico has reopened the door part way to the foreign oil companies. In March, 1949, contracts (not concessions) were granted to Ed Pauley, to the Signal Oil Company (Sam Mosher), and to American Independent Oil Company (Ralph K. Davies) to drill in the Isthmus of Tehuantepec. If oil is discovered, Petróleos Mexicanos will operate the properties and the drillers will be remunerated with a share of the oil (50 percent of the gross yield until their expenses have been met and 15 percent of the gross as compensation for their trouble). If dry holes are drilled, the United States companies stand to lose their investment. This arrangement may represent a satisfactory solution to the problem. Prospect of sufficient profit has been offered the foreign companies to induce them to apply their "talents" to the search for oil in Mexico. But the foreign companies will not be granted continuous operation of the properties. There will not, therefore, be the incentive for them to meddle in the internal affairs of Mexico. Venezuela. The petroleum industry here is of a later growth than in Mexico. In fact the oil companies seriously turned their attention to Venezuela only after they began to feel that their titles in Mexico were genuinely threatened by the Constitution of 1917. Or to look at the matter from the other side, perhaps the oil companies were more willing to let Mexican production lag during the twenties when they found that Venezuela offered a more than ample substitute for troublesome Mexico. Taking major strides after 1920, Venezuelan production made that country the second most important producer in the world—although the reserves are now overshadowed by those of the Middle East. Venezuelan production in 1948 was 491,000,000 barrels—eight times that of Mexico. The Royal Dutch Shell, the great British-Dutch oil company, through its subsidiaries (Caribbean Petroleum Company, Venezuela Oil Concessions, Nederlandsche Olie Maatschappij, and Colon Development Company), controls about a third of the production. But the Standard of New Jersey, operating through the Lago Petroleum

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Company, Creole Petroleum Corporation, and Standard Oil Company of Venezuela, is the largest producer. Its major producing company, the Creole, in 1945 was actually responsible for slightly more than half of the total Venezuelan production. T h e late Andrew Mellon's Gulf Oil Company, through its subsidiaries, the Venezuelan Gulf Oil Company and Mene Grande Oil Company (25 percentowned by International Petroleum, 25 percent by Dutch Shell, and 50 percent by Gulf) controls much of the remaining production. Sinclair, the Texas Company, and Socony-Vacuum are also active. Most of Venezuela's oil has come from a rather restricted area around Lake Maracaibo and in particular from the Lagunillas field in that area. There is also some production along the flanks of the mountain chain extending across northern Venezuela and extending into Trinidad. And of late years the production along the flanks of the mountains to the east has increased in relative importance. T h e oil companies, both Shell and Standard, have exported most of their oil to the near-by Dutch-owned islands of Aruba and Curaçao. T h e r e they have large investments in refineries. Thence the refined product is shipped to the four corners of the earth, but principally to western Europe and the United States, with a small amount going back to Venezuela. T h e fact that these refineries were built outside the country has been a sore point with the Venezuelan government. But the oil company argued that if an investment can be made on soil owned by a European government whose policy can be counted on, it is foolish to make the investment on the territory of a LatinAmerican country which may confiscate it some day. They also pointed out that the shallowness of Lake Maracaibo made it necessary to take the oil out on shallow draft boats and that, since it would have to be transshipped at Aruba or Curaçao, it might as well be refined there. Of late the government has taken action to force the building of refineries in Venezuela and the oil companies have acquiesced, at least in part. By 1947, refineries built in Venezuela had a capacity of 124,000 barrels of crude oil a day. T h e oil companies operate under concessions from the government, which maintains that the state owns the minerals in the subsoil, including oil, just as did the Crown of Spain under the mining laws of 1783. Therefore, instead of leasing rights from the surface owners or acquiring them by outright purchase (as in Mexico before 1917 and in the United States even now), the oil companies have had to apply

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to the government in Caracas for permission to drill. As a result, the government has never needed to revindicate formal control over oil (as was the case in Mexico). T h e issue of cancellation of concessions has not arisen. T h e Venezuelan government has profited from this arrangement. It has profited to such an extent that it has been, until quite recently, the only Latin-American government with no foreign debt. The revenues from the charges for the concessions and the assorted taxes on the second largest volume of oil production in the world have accomplished this result. Under the 1943 law, the companies pay royalties amounting to 16% percent of the oil and gas produced. In addition there is a surface tax, increased from year to year, to expedite the exploitation of the oil. It has been said that this measure prevents speculators from merely holding concessions over a period of time in the hope of a price rise. But the measure warrants considerable objection from the viewpoint of the Venezuelans themselves. One of the charges frequently flung at the foreign corporations is that they "drain the wealth" out of the "semi-colonial" countries where they operate. If that is a valid complaint, one would expect to find legislative measures designed to slow down the rate of exploitation. T h e opposite is the case. Venezuela, up until World War II, has frequently received congratulation for having no foreign debt. As a matter of fact it was the revenue derived from the oil industry which made it unnecessary for one of the worst dictators in the history of Latin America, Juan Vicente Gómez, to borrow from abroad in order to maintain himself. Little of the oil wealth went to the improvement of the country. When Gómez died in 1935, Venezuela was as backward as any country in Latin America. The proportion of illiteracy was among the highest in the world. There were practically no highways and no railroads. T h e cost of living was excessive; prices of common necessities were higher than in most other Latin-American countries. Under those conditions the fact that Venezuela had no foreign debt was nothing to be especially proud of. Blaming the oil companies for this situation is popular but not entirely justified. Venezuela has, and has had for many years, one of the highest tariffs in the world. The tariff wall was in existence long before the oil companies arrived. In large measure, that tariff wall has protected a high-cost subsistence agriculture in Venezuela and has prevented the importation of cheaper food.

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Great landowners, farmers, and ranchers, such as Gomez, through the years have had their own selfish interest in continuing tariff protection. So, partly because of the selfishness of her rulers, Venezuela has not succeeded in using her oil wealth as a means of raising the domestic standard of living. T h e choice has lain between a system involving corrupt rulers on the one hand and foreigners on the other, each draining the country dry, but not in the way commonly supposed. T h e foreign corporations are after monetary profit, not goods exports, and the rulers are after money as a means to goods for themselves within Venezuela. Intelligent leaders could use both foreign capital and domestic ingenuity to raise the standard of living. The foreign exchange derived from oil exports could be used to finance goods imports. But instead an effort has been made by the use of the protective tariff to keep out the imports that might raise the standard of living—the only real gain to be realized from the export of oil. The presence or absence of foreign debt is of minor significance as compared with this far greater issue. T h e fortunes of the country have improved somewhat since the death of Gomez in December of 1935. The governments of Romulo Betancourt and Gallegos have been far more socially conscious than Gomez ever thought of being. However, the overthrow of Gallegos in 1948 by a military clique (that may have been, at least tacitly, backed by the oil companies and the United States State Department) does not bode well for the country. Colombia. While oil production in Colombia is at a rate far below that in Venezuela, it is nevertheless substantial—some 24,000,000 barrels in 1948. Title to oil properties is in most cases derived from concessions from the government, as in Venezuela, but in some cases from the right of ownership via purchase or lease. The principal production, however, comes from two concessions: Barco and De Mares. The Barco concession, located in northeastern Colombia not far from the Venezuelan Lake Maracaibo oil fields, has a melodramatic history. The area has long been thought to be extremely rich in oil. Hope of gaining the concession was to an important extent responsible for the ultimate willingness of the United States government to reach a settlement of the Panama Canal dispute with Colombia in the early twenties. Until that time the settlement had remained in

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abeyance lest it imply an admission of guilt on the part of the United States in connection with the methods originally used to effect the independence of Panama. But in the early twenties influential groups in the Republican party, perhaps desirous of helping certain companies to obtain the Barco concession, decided that an indemnity and some soft words was not too high a price to pay. And ex-Secretary of the Treasury Andrew Mellon's Gulf Oil Company shortly thereafter obtained the Barco concession. The concession was later sold, and at present the Texas Company, in cooperation with SoconyVacuum, controls the operating company, the Colombian Petroleum Company. Despite all the furor about the Barco concession and despite the building of an expensive pipeline from the coast, the concession has only quite recently become an important producing area. A larger producer for a longer period of time has been the De Mares concession in the Magdalena valley region near Barranca Bermeja, some distance north of Bogotá. This valuable concession was originally obtained in 1905 by a French engineer named de Mares; but it had, by 1920, passed into the control of the International Petroleum Company, the Standard of New Jersey subsidiary which is also active in Peru. The present operating subsidiary in Colombia is the Tropical Oil Company. Since 1920 eleven hundred wells have been drilled. Progress has been hindered somewhat by the distance from the coast and the difficulty of transporting the oil via the Magdalena River, which has many shoals and rapids. The building of a pipeline has removed some of these difficulties. Peru. The oil production of Peru in 1948 was slightly over half that of Colombia. The 14,000,000 barrels of production make the industry in that country of fair importance. Most of the production comes from the extreme northwest around the port of Talara, where it is controlled by the International Petroleum Company, itself controlled by a Canadian subsidiary of the Standard of New Jersey. International is now engaged in a program for expanding the facilities at Talara, which the company estimates will cost $12,000,000 and require five years. Minor, scattered production occurs in other parts of the country. The second largest producer is the Compañía Petrolera Lobitos. But the Ganso Azul field in the Amazon valley, being developed by the company of the same name,

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has major possibilities, and may well become the most important field in the country. In addition, the government of Peru itself is engaged directly in the business of oil production in a small way—having produced about 130,000 barrels in 1946. Argentina. The Argentine oil industry is unique in Latin America. Oil was discovered by the government in an attempt to drill a water well at Comodoro Rivadavia in 1907 on the exposed southern coast of Patagonia. It was not the great oil companies of the United States and England but the Argentine government which first discovered the oil and maintained a monopoly over it until 1916. In the meantime the government set up its own drilling, producing, and marketing organization, which in 1932 took much its present form as Yacimientos Petrolíferos Fiscales (YPF). After 1916, the major foreign oil companies moved in. The Standard of New Jersey, the Britishowned Dutch Shell (through its subsidiary the Diadema Argentina S.A. de Petróleo), and the Compañía Ferrocarrilera de Petróleo (British railway interests) were responsible for almost 7,000,000 barrels of Argentina's 21,000,000 barrels in 1946. The companies have alleged that, if allowed to compete on an equal basis with the YPF, their superior personnel and techniques would permit them completely to eclipse that organization. Without attempting to pass judgment on the issue of the superior techniques, it is worthwhile to point out some of the conditions prevailing in Argentina which do tend to give the YPF an advantage over the privately owned foreign companies. In the territories of Neuquén, La Pampa, and Chubut, the national government in 1924 reserved the oil to the YPF. The private companies were thus restricted to obtaining oil in the states that would allow them to do so. Even on properties where they can drill, the private companies find that the YPF can enter the field, drill offsets, and draw off much of the oil. On the marketing side of the problem, in Buenos Aires service stations become the property of the municipality after ten years use. In practice this means that the YPF may get the service stations of the companies, and perhaps more important, their location, after a short period of time. Provision in Buenos Aires against establishing filling stations close together has allegedly been enforced in some cases against the private companies but not against the YPF. Quotas, setting the amount of gasoline and oil that can be imported, also give the

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government a measure of control over the private companies. Thus various factors probably have placed the YPF at something of an advantage. Nevertheless it seems Shell and Standard have had sufficient influence to enable them in 1938 to work out with YPF a sort of cartel arrangement that assured them a fairly substantial proportion of the market. And Perón now seems to be far more friendly to foreign oil interests (for example, Glen McCarthy of Houston, Texas) than to foreign investors in certain other lines, such as the railroads. OIL IMPERIALISM

Minerals in general, and oil and gas in particular, because of their great importance in the modern world, raise some interesting questions with regard to right of access. Are minerals best considered as the ' 'property" of the nation in which they are found? Or should the mineral resources of the world be considered as the property of the whole world? Should the accidental fact that a deposit of minerals is located in a particular country give the people of that country undisputed control over it? LatinAmerican countries have waxed indignant about the manner in which they are "robbed" of their natural resources by foreigners. But the situation is not quite as it would be if those resources had been placed there by the labor of the local population. In a moral sense, can the local population be said to have any claim on such minerals? This problem is approached from a somewhat different angle in Chapter X V I I , where it is pointed out that nations continually strive to export more than they import. A favorable balance of trade is achieved by sending more goods to foreigners than are received from them. Exports of oil and other minerals from a Latin-American country tends to increase its export trade balance. Since governmental measures are usually designed to encourage exports, why do these countries complain about the draining away of their raw materials? T h e answer seems to be that payment for the minerals goes to foreigners. The objection is not to the draining off of the minerals (Venezuela has laws designed to speed up the extraction of oil from the ground); it is to the loss of monetary income. Very obviously the United States cannot legitimately be accused of engaging in a malicious conspiracy to drain the mineral wealth from Latin America and to give nothing in return. A moment's con-

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sideration of the foreign trade policy of the United States will show that, whatever crimes the system of United States capitalism is guilty of, it is not guilty of the crime of lowering the standard of living in the Latin-American countries by taking more goods from them than it would like to give them. If any positive principle controls United States foreign trade, it is the principle that exports should be encouraged and imports discouraged. Thus the United States has protective tariffs on imports but no tariffs on exports, and so on. United States capitalism would be delighted to send more goods to Latin America than it takes from that area. Why, then, all the furor about oil imperialism? In part it stems from the necessity for assured access to oil in the modern industrial society. And the efforts to secure oil lead, almost inevitably, to a measure of political domination by the oil company, or by its home country, over the affairs of the country in which the oil resources are located. Several pertinent comments can, however, be made in this connection. So far as the consumer is concerned, it makes no difference whatever who controls the deposits so long as he gets the oil. T h e economic history of the capitalistic world indicates that raw material producers are ready and willing to sell their wares abroad. It is no more true that Latin-American oil must be produced by United States oil companies if it is to be made available to United States consumers than that Brazilian coffee or East Indian rubber be so produced for the United States market. It is important to note that in World War II the United States had difficulty in obtaining East Indian rubber because an enemy country took over the rubber area. Exactly the same difficulty would have occurred if United States companies had been producing the rubber in the Far East. Production of oil in Venezuela and Saudi Arabia by United States companies does not insure the United States consumer of access to that oil. In peacetime he is able to buy it regardless of who is producing it; in wartime his ability to buy it depends exactly on whether the shipping lanes are open—not on who owns the oil. Therefore, so far as the question of assured access to oil is concerned, the great effort of the oil companies to obtain deposits in order to assure home supplies is not justified. Any particular oil company obviously wants the privilege of exploiting a deposit, wherever located, in order to profit from it. Under the capitalistic system this

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is entirely justifiable, but it cannot be justified by the pretense of rendering a nonexistent service to home consumers. The fact that the oil companies themselves do not believe that their ownership of foreign oil is necessary to insure a supply to the United States consumer is indicated by a statement in the Lamp of March, 1947, p. 1. (The Lamp is a publication of the Standard Oil Company of New Jersey.) Standard is said to have been interested in Saudi Arabian oil in order " T o meet expected increases in demand for petroleum products in the Eastern Hemisphere." Just why is this? There has been considerable talk of recent years to the effect that the United States has only enough oil to last about twelve years and must look around for new sources, and the Middle Eastern fields, if obtained, will automatically solve the problem. Actually, however, the statement that the United States is about to "give out" of oil should be heard with some skepticism. One way to measure oil reserves is to determine how long they will last at the prevailing rate of production. During the period since 1918 the proved oil reserves in the ground in the United States have been, at times, large enough to last 17 years (at the then prevailing rate of production), and they have been low enough so that they would only last 10 years. This latter was the case in 1923 and 1924. The figure in 1947 was 12.4 years ( W o r l d Oil—Yearbook, 1948, p. 178). But all through this period there has been a steady increase in the actual amount of proved oil reserves remaining in the ground. Despite the tremendous amount of oil used during World War II there were more proved oil reserves in the ground in the United States in 1947 than there were in 1939 or 1918. Proved reserves in the ground in the United States have been the following: Date

Jan. Jan. Jan. Jan. Jan. Jan. Jan.

1,1918 1, 1930 1, 1939 1, 1941 1, 1946 1, 1947 1,1948

Barrels (Crude Oil and Condensate)

5,900,000,000 13,200,000,000 17,348,000,000 19,024,000,000 20,827,000,000 21,924,000,000 23,067,000,000

Sources: Minerals Yearbook, various years; Oil and Gas Journal, 57 December 1947; World Oil—Yearbook, 1948, p. 178.

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Arid there is every reason to believe that there is considerable oil in the ground which has not yet been discovered. Figures presented by the Department of State in its March 23, 1947, Bulletin (p. 555), indicate that United States companies actually control an even more impressive proportion of the world's oil than is shown by the figures given in Table 6. World-wide oil interests of American nationals expressed in terms of reserves owned or under concession were approximately as follows (Russian reserves not being included in this tabulation): Continental United States 20 out of 21 billion bbls. Balance Western Hemisphere 6 out of 9 billion bbls. Middle East 10.5 out of 26 billion bbls. Netherlands East Indies .5 out of 1 billion bbls. Total 37 out of 57 billion bbls. United States nationals now control the exploitation of nearly 65 percent of the world's oil (outside Russia). It seems scarcely reasonable for the United States to pursue a vigorous program (at the risk of war with other countries) to extend its control still further. T o look at the problem from a slightly different point of view: It was remarked earlier that oil imperialism frequently leads to a measure of political domination by the oil company or by its home government over the affairs of the country in which the oil resources are located. Oil companies, in arguing among themselves about the privilege of exploiting a possible oil pool, may incite revolutions and even wars. Were various oil companies active in inciting Peru and Ecuador against each other during the warfare of the summer of 1941 ? In a work on economics rather than politics, such as the present book attempts to be, it may be said that such activities are to be condemned on moral grounds. Economics must look behind these examples of unjustified violence in an attempt to determine who profits therefrom. Obviously the company securing the concession will be in a position to secure also whatever monetary profits are to be derived from it. Some of these profits will reach the group of politicians interested in the oil company. It is useful to identify the individuals who make these profits. But identifying them does not answer the question as to which country gains the most. National gains must be measured in terms of goods rather than in terms of money. A nation can print money, but it can-

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not conjure up goods. In analyzing national gain an enigma is presented—as was indicated earlier in this section and as is discussed more at length in the section on international trade. Countries seek to export more goods than they import; and yet common sense would dictate that real national gain must be measured in terms of the amount by which imports exceed exports. In Venezuela the situation is as follows: If any real loss is suffered as a result of foreign exploitation of her oil, that loss takes the form of the oil going out—which tends to be a factor making Venezuelan exports greater than imports. Yet, the government, on its own initiative, has placed in effect one of the highest tariff barriers in the world. This barrier existed before the oil companies went to Venezuela and can be explained in terms of the measure of control which landowners (such as Juan Vicente Gómez) have had over the governmental policy. Such individuals have a personal financial interest in keeping out the food imports which would lower the prices at which they sell their goods to Venezuelan consumers. This is a clear-cut example of the enigma. T h e export balance cannot be the fundamental thing to which the Venezuelans object in oil imperialism. If it were, the government would encourage imports as far as possible. This, it does not do. ANTI-FOREIGN

MEASURES

A widespread anti-foreign attitude has led to the passage of considerable legislation designed to deal with the oil problem. On the whole, foreign exploitation of minerals and oil has been favored by laws enacted in Venezuela, Ecuador, Peru, Colombia, and Trinidad. But in Mexico, Bolivia, Argentina, and Chile, it has been discouraged by legislation and by the unsympathetic attitude of the government. Chile, Uruguay, Brazil, Mexico, and Bolivia have completely or largely nationalized the oil industry, and in these states the government itself is handling some or all phases of production, refining, or marketing. T h e Argentine industry is partially nationalized. At least for the present, the threat to foreign oil interests is being played down by the Latin-American governments. But undoubtedly the oil companies will not be permitted to regain the important role which they played in several of the countries of the area in the years before World War II.

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TRANSPORTATION RAILROADS parts of Latin America are well served by railroads. This is true of Argentina, of the Sao Paulo and Minas Gerais regions of Brazil, of Chile, and to a lesser extent of Mexico. By comparison with the world, exclusive of the United States, Latin America has a quite considerable mileage of railroad track. By comparison with the United States it does not have very much. In an absolute sense it is also true that Latin America does not have adequate facilities. Vast areas are unserved by railroads of any sort, and other areas are quite inadequately served. In many cases this has been due to the tremendous expense of building the track. This is true of the whole west coast region, where the Andes present a costly hazard to the engineer, and a barrier so difficult to surmount that even after a railroad has been built at great expense it cannot always be kept in service. T h e remarkable railroad through the Uspallata Pass, between Argentina and Chile, is a case in point. Snow and the attendant ills have frequently rendered this track useless, making it necessary to resort to bus or plane much of the time. In other regions, because of the slowness with which the trains must move over the steep grades and because of the high freight rates necessary to pay off the investment, it is still cheaper and more satisfactory to ship by llama or burro, even between points directly served by the railroad. This is perhaps fair enough, except when the llama delays the train by walking down the railroad track. (See Table 7.) CERTAIN

Financing. It has been commonly said that the original financing of railroads in Latin America was conducted in scandalous fashion; it has also been said that the financing was done by foreign capital. Each of these statements is a half-truth. T h e pattern of railroad financing has been so uniform throughout Latin America that a standard description applies to each country, with local variations. Funds (or financial assistance) were obtained from several sources: 1. Direct foreign investment in railroad stock and bonds. Most of these sums was raised through bonds, but the controlling foreign group held the stock. Contrary to general belief, however, not all the

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funds were obtained in this way, and it well may be true that most of them were not so obtained. i. Government subsidy. T h e separate governments consistently subsidized the railroads, using some such criterion as: "so many pesos to the mile." A substantial proportion of the capital was obtained from this source rather than from the foreign direct investor. It is true that in many cases the government did not raise these sums by taxation, but by borrowing abroad—in the process of which, flotation of a bond issue in London or New York was involved. 3. Tax exemptions. By this means, the railroad companies were relieved of a substantial financial burden in the initial period of existence, and were also encouraged to bring railroads into the area. 4. Land grants. Substantial land grants provided a strong inducement to enter the field. Indeed, in the early years in Argentina, much of the profit derived from railroading accrued from the sale or colonization of land grants. T h e really significant feature of a movement of capital is not the initial transfer of funds but the subsequent transfer of goods purchased with those funds. Thus, the funds put into railroads financed the transfer of locomotives and steel rails to the country concerned. When the transaction was honest and the goods received balanced the obligation to pay, it was a reasonably fair arrangement. But if there was stock watering and graft, and the Latin-American country became obligated to repay more than it received—to that extent the transaction was not reasonable. And it is undoubtedly true that there was, first and last, considerable stock watering and considerable graft in Latin-American railroad financing. However, this fact should not lead one to conclude that there is a fundamental cleavage of interest which can be identified as LatinAmerican versus foreign capitalists. T h e same sort of graft and stock watering and land grant grabs took place in connection with railroad development within the United States. Fundamental cleavages of interest are involved in these situations, but they cannot be accurately stated as the setting of the interests of one nation over against the interests of another. They are functional, instead. Argentina. Argentina has the most highly developed railway system in Latin America, with some 48,000 kilometers of track (slightly less than 30,000 miles). This was made possible not only because the country had the tremendous wheat and meat-producing

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potential, but also because the flat pampa offered little barrier to railroad building. The same conditions have prevailed, but on a smaller scale, in neighboring Uruguay. By comparison with the west coast of South America it was easy and cheap to build railroads in Argentina. T h e British developed several major systems: the Central, the Ferrocarril Sud, the Buenos Aires al Pacífico, the Ferrocarril del Oeste, and the Transandine. The Argentine government built and operated the Central Norte, and French investors built some lines serving Santa Fe. During the presidency of Justo in the ig3o's the government acquired the financially weak Cordoba Central Railway (Ferrocarril Central Córdoba) from the British. The railroad had about 2,000 kilometers of track and served the region northwest of Buenos Aires to Tucumán. That was the beginning. Later as part of the trade agreement between England and Argentina in the fall of 1946, it was agreed that the Argentine government should, itself, establish a new railroad corporation which would take over the operation of all railroads. The terms of the sale were finally arranged and signed on February 12, 1947. Argentina agreed to pay 2,482,000,000 pesos (m$n) or 150,000,000 pounds sterling for the properties of eleven British-owned railway lines, whose total trackage amounted to 25,000 kilometers. This was almost 55 percent of the country's total railway mileage. An independent tribunal selected by the railway companies is to handle the distribution of the money among the different classes of security holders. Apparently the bondholders will be paid off at par or slightly above (100-110 percent). In most cases the stockholders will receive a slightly larger sum than the market value of the securities just prior to the negotiation of the sale. In line with the policy being followed with the British, in December, 1946, the Argentine Trade Promotion Institute bought out the French-owned railroads: Compañía General de la Provincia de Buenos Aires, Compañía Francesa de Santa Fe, and the Compañía de Ferrocarril de Rosario a Puerto Belgrano. The Argentine government thus is gaining control of virtually all the railroads of the country, and one of the major foreign investments in Latin America is being liquidated under conditions indicating Argentine financial strength.

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Brazil. Railroad engineering has not been quite so easy in Brazil as it was in Argentina, although much easier than has been the case on the Pacific coast. T h e high escarpment which faces the Atlantic along much of the Brazilian coast, and especially at Santos, presented a difficult initial barrier to railroad building. No really suitable route has ever been found up the cliff behind Santos on the route to Sao Paulo. T h e grade is far too steep for an ordinary train, and cables and stationary motors are used to pull the trains up the steep face of the Serra do Mar. There are about 34,000 kilometers of railroad track in Brazil. At least half of this trackage is concentrated in the area around Rio de Janeiro in the provinces of Rio, Minas Gerais, and Sao Paulo. A smaller concentration of track radiates out from Baia and serves the northeast. Other minor lines proceed from some of the ports, such as Joao Pessoa, Bel£m, Fortaleza, Recife, Porto Alegre, or Rio Grande, inland for a short distance. In 1938 the federal government owned much of the railroad system—both owning and operating altogether about 10,000 kilometers of track. It owned, but leased to states, 7,000 more, and owned, but leased to private companies, some 2,000 more. About 3,000 kilometers are owned and operated by state governments, and 5,500 kilometers of state-owned track is operated by concessionaires. The balance is privately, principally British, owned. The federal government actually operates the Estrada de Ferro Central (Central of Brazil), the main line between Rio de Janeiro and Sao Paulo. This is, in a way, the key line in the country, and it carries a large number of passengers—perhaps 50,000,000 a year. But the government has been, in spite of this, operating the line at a loss a good part of the time. From another point of view, the short Sao Paulo Railway (Santos to Sao Paulo) is the most important in Brazil. It furnishes the route by which Brazil's principal crop, coffee, finds its way to the seaboard. This has been a British-owned railway and is, due to its strategic location, probably the most prosperous single railway in Latin America. In fact it has been almost unique in making a profit at all. Recently this railroad was taken over by the Brazilian government, and it is now being operated as the Estrada de Ferro Santos-Jundiai. The third important railroad in Brazil is the Paulista (Companhia

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Faulista de Estradas de Ferro)—which also serves the Sao Paulo region. T w o significant developments affecting the railway system are currently taking place. T h e first involves a loan by the United States to Brazil to help in the improvement of the Vitoria to Minas Gerais railway (Companhia Vale do R i o Doce). T h e United States desires to see this line improved in order to make it easier to get the high grade iron ore down to the coast from the deposits at Itabira. T h e second development involves a possible transcontinental transportation system between Santos and Rio de Janeiro on the Atlantic, and Arica, Chile, on the Pacific. There is already track from Arica to Vila Vila in Bolivia and from Santos to C o r u m M on the Paraguay River. Brazil, under agreement with Bolivia, is extending this line from Corumbd to Santa Cruz in the eastern part of Bolivia. T h e outstanding gap therefore is between Vila Vila and Santa Cruz. T h e United States loaned Bolivia $25,000,000 in 1942, some of which was intended to be used to complete the transportation link between those two places by either railroad or highway. T h u s a ground transcontinental link would be established far north of the Transandine of Argentina. T h e promoters claim that the line would have not only strategic value, but also economic value in opening up the region. Whether the road will ever make money is subject to considerable question, but it will achieve a valuable purpose if it opens the upper Paraguay valley to development. If railway development in general had been limited to lines guaranteed to make money there would have been very few railroads built in the world. West Coast. T h e railroads of the west coast of South America are as a rule short lines running from a port back to some center, generally a mining center, in the interior. As a result, these transportation systems, although they frequently involve a substantial mileage of track laid at great expense, do not serve to tie together the countries in which they are located. Chile is the exception, although even in Chile many of the lines are of this type. There is, however, in addition, a north-south line which does tend to tie the country together. In many ways the Chilean railroads are poor and expensive. There are many different gauges of track. T h e mountainous terrain has presented real barriers. But the government has faced the problem and has attempted to deal with the

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difficulties caused by the fact that private builders tend to construct lines where they may yield the greatest profit, without regard to the future economic development of the country. To counter this tendency and to see to it that the railroads served in the manner the government thought best, Chile long ago adopted the policy of state ownership of railroads. The government-owned and operated Chilean State Railways operates about three-fifths (or somewhat more) of the total of 9,000 kilometers of track. Its principal operation is the line down the center of the country from Pisagua to Puerto Montt. The rest of the lines, which are privately owned, are usually short—carrying produce from some interior mine to a port. The British are the chief owners of these railroads. Other lines on the west coast include several that are notable for one reason or another. A route from Antofagasta, Chile, goes back into the tin area of Bolivia. A line from Moliendo goes back to Arequipa and Cuzco in Peru. The Central Railroad of Peru goes from Callao through Lima to provide rail connection to Cerro de Pasco and Huancayo. This line and the Moliendo line were originally built by the United States engineer Henry Meiggs, in the latter part of the nineteenth century. The Central of Peru is now controlled by the British-owned Peruvian Corporation, an organization which is also active in many other phases of the Peruvian economy. Still another line goes up from Guayaquil to Quito in Ecuador. In Colombia the principal lines goes from Buenaventura to Cali and Bogotá. These railroads cross the Andes at tremendous elevations—especially tremendous by comparison with the 8,000 feet at which the Union Pacific crosses the continental divide in the United States. For example: Guayaquil and Quito Railroad, Ecuador Central Railroad of Peru Southern Railroad of Peru Arica-LaPaz Railroad Antofagasta and Bolivia Railroad Chile-Argentine Transandine Railroad

11,941 feet 15.665 feet 14,688 feet 13,986 feet 13,000 feet 10,452 feet

In the west coast countries in general a substantial number of the railroads are government-owned but many also are privately owned, some by British investors and some by United States investors. Mexico. The Mexican railway system has the third largest mileage of track in Latin America, surpassed only by Argentina and Brazil. The total is about 24,000 kilometers.

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Much of the total amount of track, including the trunk line from Laredo to Mexico City, constitutes the National Railways of Mexico. This line was built in the latter part of the nineteenth century by United States capitalists. About 1900, the Mexican government began to consider seriously the desirability of acquiring a substantial measure of control over the line; and the Diaz government, represented in this case by the Finance Minister, Limantour, succeeded in combining this system and several others comprising much of the railroad trackage in the country into the National Railways of Mexico, a corporation of which the Mexican government had formal control through possession of a majority of the voting stock, although bond interest was still owned by foreigners and actual supervision of operation was also left largely to the foreign interests. There followed a period, which lasted from about 1914 until 1925, when as a result of the revolution, the Mexican government actually operated the roads and no bond interest of any amount was paid. Efforts to straighten out this situation were made at various times; and, the railroads were finally returned to formal private ownership on January 1, 1926, with continued government ownership of a majority of the stock; but interest payments could not be resumed because of the unsatisfactory financial condition of the road. This situation continued until 1937 when the government expropriated the National Railways and promised eventually to pay the bondholders. In 1946 a settlement was worked out between the Mexican government and the International Committee of Bankers on Mexico (United States). Under this agreement settlement will be made for the equivalent of about 245,000,000 pesos, or $49,000,000 dollars (U.S.). The nominal value of the railroad debt (principal plus accrued interest) had been about 2,704,000,000 pesos—of which only about 1,000,000,000 was principal. Between 1937 and 1940 the railroad was run by the workers. T h e arrangement was not satisfactory, both because of the poor equipment and the poor state of the roadbed at the time the workers took over, and also because the management was inefficient. Perhaps it is as undesirable to entrust control of an enterprise designed to serve the general public to the workers alone as it may be to entrust it to any other limited group. Undoubtedly the workers in such an organization as the National Railways of Mexico, which had formerly been a private corporation (although the government had had the control-

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ling stock interest since about 1907), are entitled to reasonable wages and other benefits, but they are not entitled to have their interest considered the sole "reason for being" of the railroad. A railroad is there to serve the public. The Avila Camacho government, immediately after it assumed office in December of 1940, took back the balance of power in controlling the line. But major problems in improving equipment and service remain. There are several other less important shorter railroad lines which are still owned by foreigners. The Southern Pacific route down the west coast from Nogales, ultimately providing rail connection to Mexico City via Guadalajara, is an example. It is owned by the Southern Pacific of the United States. Another privately owned system has been the British-owned Mexicano route from Vera Cruz to Mexico City. But the Mexican government bought out the British interest in this line in 1946 for about $8,000,000 (U.S.). The Future. The railroads in Latin America have faced major problems. One has been the topography of the routes traversed by them. Building railroads through the mountain walls of the Andes and Sierra Madres has been expensive. Numerous switches, sidings, and rack-rails (cog railways) have been necessary. This has meant slow and costly service, which at the same time has had to provide sufficient revenue to pay off the extremely large investments necessitated by such difficult terrain. Over and above this problem there has been one of equipment. The Latin-American railroads are a long distance from the plants where steel rails, passenger cars, freight cars, and locomotives are made. It is difficult and expensive to obtain the equipment in the first instance, and equally difficult to obtain replacements. This is especially true if the railroad has lost its originally favorable credit position in the financial centers. In Mexico the 1910-1920 revolution destroyed much equipment and the roadbeds deteriorated from neglect. After 1920, foreign investors were not eager to finance the purchase of new equipment, because the Mexican government was looking with a covetous eye on foreign investment generally, and the status of the railroad properties was uncertain. After Mexico expropriated the National Railways in 1937, that country was definitely without the resources with which to buy new equipment because of distrust in the financial centers. The Mexican case is somewhat

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more aggravated than in most Latin-American countries, but it is generally true that the railroads are at present operating with equipment that is expensive and old. The Second World War did not improve this situation. Latin-American railways were able to obtain very little equipment between 1940 and 1946. As a result the war's end found them even more run down than formerly. Plans are now being made by Argentina, Brazil, Mexico, and other countries to improve railroad equipment. But much remains to be done. T h e railroads everywhere operate under circumstances making the fuel problem acute. Nowhere in Latin America are there major deposits of coal. As a result, at times certain strange sorts of improvisations have been resorted to. Argentina at times has burned corn for fuel in locomotives, and Brazil has burned coffee. T h e coal shortage is, in part, responsible for the extensive use of Diesel engines. In many parts of Latin America there has been pressure urging the governments to take over parts (or all) of the railway systems in order that the service may be rendered with a greater concern for the national interest than foreign investors are likely to have—whether in determining the route, setting rates, or in dealing with labor. Chile has established virtually complete governmental control of the railroad system, as Argentina also is in the process of doing. In Brazil the federal government, together with the state governments, controls something approaching three-fourths of the system. The Mexican government operates much of the railway system in that country. Whether this trend will continue until all Latin-American railroads are governmentally owned and operated, it is difficult to say. But that those governments will gain control over increasing percentages of the railroad services in the future seems highly probable. And the foreign financial stake will decline yet further. ROADS AND HIGHWAYS It is probably true to say that, undeveloped and unsatisfactory though the railroad system of Latin America may be, it is a great deal better than the highway system, which can, in fact, hardly be called a system at all. There are very few all-weather roads in Latin America, a mere 555,000 miles in all, as compared with 3,000,000 miles for the United States. And Latin America has two and a half times the area of the United States. Few regions are served in fairly satisfactory fashion—the Argentine pampa for example.

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T h e central highway in Cuba, built in Machado's time in the latter twenties, largely with short term funds borrowed from the Chase National Bank, provided the basis for a trunk highway down the middle of that island. Motor buses using this road have competed more than successfully with Cuban railroads. There is a notably long stretch of road in Mexico from Nuevo Laredo to Acapulco, and from Mexico City to both Vera Cruz in one direction and Guadalajara in another, and from Monterrey to Torreón, but that is virtually all. Stretches of surfaced road radiate for short distances from the capitals in most of the countries, and there are fairly substantial stretches of good road in Peru, Chile, and Brazil. Brazil has about 20,000 miles of fair roads and another 100,000 miles of wagon roads. Peru has recently completed a trans-Andine highway back to Tingo María; and Bolivia, Colombia, and Venezuela are also working on trans-Andine highways. But to say that any of these countries possess what might be called a satisfactory network of good roads would be an overstatement. A t least since the first Pan American Conference met in Washington in 1889 there has been talk of building a Pan American Highway. As broadly planned, this begins at Laredo, Texas, and proceeds to Buenos Aires, Argentina, with branches reaching into all the countries not on the direct route. Despite the fact that the highway might serve very little longdistance traffic, construction would nevertheless be highly desirable. In each country through which it passes it could serve as the basis for a national system of roads. For this reason it would probably be desirable to construct the Pan American Highway through the parts of the countries that have most immediate need of good facilities for short hauls. T h e selection of the shortest route from Laredo to Buenos Aires under these conditions would not be the most important consideration, or even a major consideration. T h e stretch of projected highway from Laredo to Panama is a special problem. As matters stand it is impossible to drive the complete distance. But an overland link between the United States and the Panama Canal is needed for military reasons. T h e sea and air routes would obviously not serve for the sending of quick, large-scale assistance to the Canal. T h e United States has, therefore, a unique interest in the speedy completion of this segment of the Pan American Highway and in the building of it in a fairly straight line, regardless of the interests of commercial or tourist users of the road.

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T h e original project for a Pan American Highway provided that each country should bear the expense of the stretch of road through its territory. This policy was not getting the road built with sufficient speed down toward Panama. For that reason the United States in 1941 offered to carry two-thirds of the cost to Panama—perhaps $20,000,000 in the Central American countries and $30,000,000 in Mexico. In the future the United States will, no doubt, make more money available for this purpose and for such strategic highways as one down the peninsula of Lower California. At present the road is completed a considerable distance below Mexico City, and recently as far as the Guatemalan border. Despite the fact that considerable work was done in Central America during the war, that section has not been completed. AIRLINES Of the major forms of transportation the airlines are the most recent. For Latin America, however, they are of exceptional importance, as Table 7 indicates. Doubtless these figures have changed considerably since 1943. They are nevertheless revealing: the mileage in Latin America exceeds that in the United States; in Argentina it is considerably less than in Brazil; air routes in the mountain countries of the west coast total a surprising number of miles. The Germans established the first commercial airline in Latin America, the Scadta line in Colombia in 1920. They extended their network as the years passed, and by 1939 their routes covered much of South America. Following 1927 one group of United States interests attempted to establish the New York, Rio, and Buenos Aires Line down the east coast. Another group established the Pan American Airways. It was not long before Juan Trippe's Pan American had taken over the other line and was the dominant United States company in the Latin-American field. This company's organization is rather complicated. On the west coast it is Panagra (or Pan American-Grace), and the Grace steamship company has an interest; in Brazil it is organized as Panair do Brasil. In most of the countries where it operates a local subsidiary is incorporated or is affiliated with some other local airline company. A rather unusual sort of air transport service is provided by the T A C A (Transportes Aereos Centro Americanos). This line was

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founded by a New Zealander named Lowell Yerex and originally had as its principal function the handling of freight rather than passengers. T A C A has provided transportation services to regions that were otherwise dependent on services little better than burro-back. It made itself especially useful in getting chicle out of the hinterland of Guatemala. T h i s was a lucrative business and tempted Pan American, which was already providing through passenger and mail service in Central America. In the resulting scuffle T A C A lost the chicle trade, but it continued its general freight-carrying activities and has entered the passenger-carrying business in competition with Pan American. In 1943 Howard Hughes' Trans-World Airways ( T W A ) bought into T A C A and seems now to control it—Yerex appears to have lost control. After the war began in Europe, in the late summer of 1939, the German airlines in Latin America constituted a sort of menace, especially was this true of the Scadta serving Colombia, so near the Panama Canal. As sentiment in the Americas crystallized against Germany, such airlines were slowly done away with, as the result of "cooperative" action by the Latin-American governments and the United States. By 1942 German lines had been eliminated in Colombia, Ecuador, Peru, and Bolivia on the west coast, and Condor and Lati (Italian) had been forced to close down on the east coast. Pan American Airways in many instances took over the control or operation of these routes, although the Latin-American governments themselves in some cases attempted to operate the lines through privately owned companies controlled by nationals, or through "mixed" companies. There is a legitimate question as to whether the taking over of much of the local air services in Latin America by Pan American Airways will in the long run be a good thing for either Latin America or the United States. A monopoly of that sort, which is in many ways above and beyond the power of a single country to control, may provide the service in very arbitrary fashion and charge high fares for so doing. This would hurt shippers and passengers in both the United States and Latin America. T h e general attitude of Latin-American governments toward the airlines is that they desire to control as much of the lines in their own country as possible. They lack, however, planes, other equipment, and trained personnel. T o them, therefore, the principal problem is

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one that involves bargaining for as much equipment as possible in the international financial centers. They desire to be served by the greatest possible airline mileage, but they are reluctant to permit foreign companies to increase the mileage. They, therefore, bargain with the foreign companies and governments in the effort to obtain equipment for their own lines and permission to fly lines into the foreign countries in exchange for allowing the foreign enterprises to extend their activities in their country—as little as possible. Active in doing this are Argentina through the Flota Aérea Mercante Argentina (FAMA), Chile through the Línea Aérea Nacional (LAN), Colombia through the Aerovías Nacionales de Colombia (Avianca), Venezuela through the Línea Aeropostal Venezolana (LAV). Various European countries have begun to resume airline service to Latin America. In doing so they are, for the most part, operating through "chosen instruments." The British South American Airways has already opened service to Argentina and Brazil. Air France is also operating in somewhat the same field, and the Dutch-owned K L M is flying from Europe into the Caribbean region. OCEAN TRANSPORTATION A varied assortment of steamship lines provides more or less regular service between Latin America and the north and east. Some lines are owned in Latin America, some are not. The more important ones are not. T o commence with the Latin-American-owned systems. There is first the Lloyd Brasileiro, the Brazilian government-owned line. Brazil has a larger merchant marine than any other Latin-American country (except for that of Panama which is a rather special case), and the Lloyd Brasileiro probably controls well over half of the total of about 670,000 dwt. tons. Brazil, unlike most other Latin-American countries, has a small national shipbuilding industry. In addition to ships locally built, Brazil acquired vessels from the belligerents in both the First and Second World Wars, chiefly by expropriating German, Italian, and Japanese ships in her ports. Other Latin-American countries did the same thing. The value of these ships will perhaps be counted as part of the reparations when a final settlement is made. The Chilean government has a steamship line of its own, serving the west coast of South America and providing a service to New York. Chile reserves the coastwise trade, except for the passenger trade, for

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the national merchant marine. Probably the reason for the exception is to be found in the desire of Chileans to travel in the far more luxurious Grace Line ships between Valparaiso and Antofagasta. Argentina began its Flota Mercante del Estado in 1941 with sixteen Italian ships which had been tied up in Argentine ports at the start of the war. The principal steamship lines, which are Argentineowned and also privately owned, are controlled by Alberto Dodero. Steamship interests in Colombia, Ecuador, and Venezuela have combined to form the Flota Mercante Gran Colombiana. The merchant marine of many of the countries was enlarged after the war began in 1939 as a result of the taking over of Axis ships in Latin-American ports. One method by which this was effected is exemplified by the agreement Argentina forced on Italy after taking over sixteen of that country's ships. Payment was provided for on these terms: half Argentine treasury bonds and half a credit to be used by Italy for purchasing Argentine products at the end of the war. So, the international law rule that payment must be made, at least eventually, in such cases was formally abided by. In many cases, however, payment will probably be cancelled against reparation claims. Panama acquired the large merchant marine which now sails under her flag because of special circumstances connected with United States neutrality legislation at the start of World War II. In order to be able to trade with Europe, several United States-owned shipping lines transferred substantial numbers of ships to the Panamanian flag. The Panamanian ships are not, therefore, government-operated. Despite these lines Latin America has not nearly enough ships to carry a major proportion of her products to market and is largely dependent upon United States and European shipping facilities. The United States companies which serve the east coast include the Moore-McCormack and its subsidiary the American Republics Line, the latter providing much of the passenger service, and the Delta Line (Mississippi Shipping Co.) out of New Orleans. The principal British lines are the Lamport and Holt, Royal Mail Lines, Furness Houlder, Blue Star Line, and the Norton Line. Then there are, or have been, other lines: Wilhelmsen (Finnish and Norwegian); Westfal-Larsen (Norwegian); Ivaran (Norwegian); Navifrance (French); Yamashita, K Line, Nippon Yusen Kaisha, and Osaka Shosen Kaisha (Japanese); and others.

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Most of the lines serving Latin America serve the Caribbean region, but three lines are especially active in that area. These are the Lykes Line, which is in the process of extending its range of activities; the New York and Cuba Mail (a subsidiary of Atlantic, Gulf and West Indies Steamship Lines), and the United Fruit Company, serving the Central American banana trade. T h e United Fruit Company is discussed in some what more detail in the last section of this chapter. In many ways the most important is the Grace Line, which serves primarily the west coast and, in passing, the Caribbean as well. It is much more than a steamship line, although that is its basic function. T h e company was begun by W . R. Grace, in the middle of the nineteenth century. Its function was to take food and other supplies from the Peruvian mainland to the Chincha Islands, which were then proving to be a fabulously rich source of guano. From those humble beginnings the line has amazingly expanded in the course of a hundred years. There is the Grace Bank in New York, where the present headquarters are located. There is also the substantial interest which the Grace Line possesses in PanagTa, the Pan American Airways subsidiary down the west coast. There are a large number of both freight and large passenger ships giving both a New York to Caribbean service and a New York to Valparaiso, or points between, service. In addition to these functions the Grace Line is a major economic factor within the countries of the west coast. It owns large haciendas at many points where sugar and cotton are grown. An example is the large Cartavio estate back from the harbor at Salaverry in Peru. Substantial amounts of rum are produced there. T h e Grace Line has also been interested in the mining industry in the Andes, especially in Chile and Bolivia, and has interests in copper, nitrate, and tin properties there. It owns a chain of retail stores in Chile. Its interests even extend to the east coast, where it is a large coffee dealer in Rio de Janeiro and Santos, Brazil. T h e Grace Line is in a powerful position. Its own properties assure it of a substantial and steady flow of freight. It is thus cushioned for rate wars with potential competitors, who would have the problem of providing the shipping and bargaining for freight as well, if they were to attempt to break the Grace Line stranglehold on west coast trade. T h e Grace Line has no rival in the luxury passenger service nor in the fast freight service. Its passenger fares have been extremely high.

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But neither that nor the fact that the company is economically strong in its own right deters the United States government from granting it substantial financial aid. Recently (1947) there seems to have been an agreement between the Grace L i n e and Lykes to operate a jointly owned subsidiary down the west coast. Under present conditions this step can hardly mean increased competition for the west coast trade. It merely means that an agreement has been reached with a potential competitor—no doubt to their mutual benefit. Several general possibilities exist with regard to the direction that development of the Latin-American shipping industry may take: 1 . As a general proposition it may be said that so far as the United States shipping service to Latin America is concerned there should either be (a) more competing lines to force the rates down, (b) more adequate United States government supervision of the rates charged by United States-owned lines, or (c) a Pan American board to supervise rate structures. Perhaps the latter procedure would be the most desirable. T h e shipping conferences, as at present organized, do not begin to deal with this problem in a satisfactory way. 2. T h e development of a merchant marine by the various LatinAmerican countries themselves seems to be desirable, but how far it can go is conditioned by the absence of heavy industry in the several countries. 3. In view of the general practice of granting subsidies or financial assistance to national merchant marines, the United States and the Latin-American countries may well find it advisable to follow the practice—merchant marines being useful trade promotion weapons and war weapons as well. But an elimination of the subsidies by all countries might be an even better thing. Special Case (United Fruit Company). T h e banana comes from the Caribbean area and is of great importance to the economies of the Central American countries, being by all odds the most important product in dollars and cents produced in the tropical lowlands of those countries. T h i s is true in Honduras, Guatemala, Nicaragua, Costa Rica, Panama, and in the British colony of Jamaica. Other important banana producers include Mexico, Colombia, and Cuba. T h e first important commercial shipment was Jamaica to Boston by Captain Lorenzo D. Baker. consumption of bananas has increased to major United States, which alone takes 70-80 percent of

made in 1870 from Since that time the proportions in the the Latin-American

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banana exports. In the producing countries the development of the trade has meant a revolution in internal economic structure and has had both a strengthening and a weakening influence. T h e banana has brought revenue and employment to those countries and relieved them of too great dependence on coffee as an export; and with the broadening of the market to include Europe as well as the United States, the position of the producers was strengthened still farther. But there have been difficulties involved in connection with the placing of very much dependence on a product like the banana. T h e market has proved fickle. Price fluctuations may be extreme. In any particular region banana prosperity has tended to be a transitory prosperity. T h e Panama disease, a root fungus, has rendered useless for the purpose much of the older banana land on the east coast of Central America. The industry has visited its transitory prosperity first on the Atlantic coast of Costa Rica, then on Honduras, and so on. Production of late years has become increasingly important on the Pacific coast of Central America. Superimposed on these problems there has been the problem of the administrative organization within the industry itself. T h e companies controlling the banana trade are few. T h e industry is oligopolistic (if not monopolistic); the United Fruit Company alone controls most of the trade, and Standard Fruit and Steamship much of the balance. Although they probably do not raise on their own land more than half of the bananas grown, the companies control the outlets to market through their ownership of the steamship lines which serve the region, and therefore can dictate the prices paid to private growers. In the producing countries, local interests have made some effort to circumvent these powerful foreign companies. There has been talk of government-subsidized steamship lines to compete with the United States companies, and something has been achieved along this line. Also resort has been had to local cooperatives as producers: in Jamaica there is the important Jamaica Banana Producer's Association, Ltd.; and in Mexico, La Nacional Platanera. T h e development of a cooperative by the growers in northern Colombia has virtually ended United Fruit activities in that region. But on the whole the cooperatives have not yet become a major factor in weakening the general position of the banana companies. Because of its singular dominance in the industry, the United Fruit Company is worthy of special mention. T h e company was formed in

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1899 by a fusion of the Minor C. Keith and L. D. Baker (Boston Fruit Company) interests which had been important in the banana business before that. Minor C. Keith had become interested in bananas in Costa Rica in the first place in order to find some freight to carry on the railroad he was building from Puerto Limón to San José. Control of the company was taken over by Sam Zemurray in 1933 on the strength of an ownership of one-tenth of the stock, acquired when he sold out his Cuyamel Fruit Company to United Fruit in 1929. Since its formation, the United Fruit Company has become a $200,000,000 corporation with extensive holdings in Honduras, Costa Rica, Colombia, Guatemala, Panama, Cuba, and Jamaica. It has built railroads—a special sort of railroad, many miles of short lines from the plantations to the ports. It has built some hospitals. It has cleared away jungle. It owns large banana estates. The bananas it does not grow on its own property (about half of what it handles) it purchases from private growers who must sell to it, in most cases, in order to sell at all. These private planters have been bound closely to United Fruit by contracts they must sign if they are to sell to the company. United Fruit generally has, in the contract, agreed to take all of their produce, but it possesses great power in the classifying of the goods. That is to say, it controls the price class into which the bananas fall. This power is in addition to the company's great importance in the initial price setting process. The combination of weapons gives the United Fruit Company a powerful control over the native growers with whom it is in contact. United Fruit even established a subsidiary to engage in radio communications before World War I. Called Tropical Radio, it has become a major factor in Central American communications, especially international communications. The interests of United Fruit are certainly diversified. They include sugar plantations in Cuba, and during World War II the company became active in encouraging the introduction of the production of abaca, rubber, and various other commodities in Central America. As was stated above, the basic factor in the fruit company's power is its control of transportation—both railroad and steamship. It built or was intimately connected with the building of a large proportion of the railroads in Costa Rica, Honduras, and Panama. The International Railroads of Central America, serving Guatemala and El Salvador, was founded by Minor C. Keith. The company tends to

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build the railroads where it pleases. For example, there is little banana business around Tegucigalpa; so, the railroad has never been extended back to the capital of Honduras. And yet the location of railroads has been a major factor conditioning the development of Central America. Probably the Great White Fleet is the most important factor in the power of United Fruit. In actuality the Fleet provides the best shipping service that Central America receives. T h a t fact alone would give the company a considerable power in the countries of Central America. But in addition, it is fairly difficult for transient competitors, such as tramp steamers (if there were many today), to provide local growers of bananas with facilities for circumventing the United Fruit "monopoly." A certain technique is involved in the use of continuous belts in loading and unloading bananas—enough to place competitors who do not have the proper equipment at a disadvantage. Such are some of the difficulties which potential rivals of United Fruit have to face. T h e governments of the countries of Central America have simply not been strong enough to challenge United Fruit. It may be that the men in control of the governments in several of the countries have not been of the highest calibre. Perhaps this has been due in part to the activities of United Fruit; or perhaps United Fruit's actions have been motivated in part by the fact that the company has been dealing with corrupt governments.

C H A P T E R

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MANUFACTURING, INDUSTRIALIZATION, AND TYPES OF BUSINESS ORGANIZATION BASIS

FOR

INDUSTRIALIZATION

O F LATE years there has been a deal of talk about the industrializa-

tion of Latin America. A question frequently argued is whether such industrialization is possible at all. But stated in such general terms the question is almost meaningless. Industrialization along some lines in Latin America is not only possible, it is occurring. Along other lines the region probably does not have an important industrial future. Before discussing in some detail the possibility of developing certain types of industry in Latin America, it seems desirable to discuss the general "basis for industrialization." Three questions may be raised: Does Latin America possess (1) sufficient technical skill, (2) sufficient purchasing power, and (3) sufficient capital to make industrialization possible? Can the Indian, mestizo, Negro, and mulatto populations of large areas adjust themselves to the industrialization that would change their way of life? Technical Skill. It is frequently said that the native populations are not possessed of either the mental attitude necessary for an easy transition to a machine economy or of the technical knowledge to use the machine with enough efficiency so that its product can rival in price the product of the older industrialized centers. This is without doubt true at present. But this line of logic rests on the assumption that the "egg came before the hen." Workers in general have acquired technical skill as industrialization has progressed. The worker did not already possess technical knowledge, full-blown, at the time, whenever that may have been, when the use of the machine began. There is no scientific basis for the statement that the mestizo and the Indian cannot adjust themselves to the use of machines. They may not react in precisely the same manner as does the Anglo-Saxon, but there is no basis for saying that they are incapable of using machines. On the contrary, there is every reason for saying that, with the gradual introduction of the machine into Latin America, the working population would acquire the necessary technical skill. Of course industrialization can occur more rapidly if technicians from the advanced

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industrial areas train the native labor. And during the period that the already "skilled" technicians from the industrialized area are training the "still mechanically inept" workers of the backward area, the latter will suffer by comparison. They will do foolish things and be held up to ridicule. It is extremely common for an engineer from the United States, who has worked for a while with native labor in Latin America, to be extremely disgusted with its quality. Such an engineer is undoubtedly correct in many cases in saying that the native labor has not done well. But he is not justified in saying that, if the Latin-American labor had had the advantage of the education obtainable in the United States and if he had had the lifelong contact with the machine which labor in the United States has had, he would still be less competent than the workman in the United States. T h e fact that the student is less able than the teacher does not prove that he is incapable of learning or is physiologically inferior to the teacher. Purchasing Power. It is also frequently urged that Latin Americans do not have the purchasing power necessary to provide a satisfactory market for the product of manufacturing industries. It is held to follow that, since there is no market, industrialization is useless. This is not necessarily true. T h e developing industry would itself, in its own payrolls and through its own profits, provide the purchasing power which, when diffused among the people, could take its product off the market. T h e market and the industry would grow more or less together. T o refer again to the hen and egg analogy: One cannot say that markets came before industrialization or that industrialization came before markets. They grew up together. So, the possibility exists that they may grow up together in Latin America. And most definitely the fact that extensive purchasing power does not now exist in Latin America by no means proves that it cannot come into existence. Capital. T h e third question involves the availability of capital, and it can be answered in much the same fashion as the first two. In the long run, capital (goods or funds) generates itself, provided the raw materials, which industry is technically equipped to handle at that time, are present. Capital did not exist before industrialization began, any more than did technical knowledge and purchasing power. Capital accumulates as, perhaps, the most important single factor in the industrialization process, in the accumulation of capital goods.

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Since the goods could not exist before industrialization, it is meaningless to allege that the absence of capital will prevent industrialization in Latin America. However, the problems of technical skill, purchasing power, and capital accumulation cannot be entirely disposed of in so summary a fashion. The speed with which industrialization might occur in Latin America would be accelerated considerably if the industrialized countries were to lend aid. On the other hand, Latin-American industrialization may be considerably retarded if the industrialized countries oppose it. For example, it was at one time the avowed policy of German industry to discourage new industrialization in backward areas, in the belief this constituted, in some fashion, a threat to her own economy; and she opposed it where possible. An entrenched industry, by temporary price cutting, dumping, and so on can make it very difficult for a new industry to get started. This is true even though, once started, the new industry might be amply able to compete with the established center. T h e present policy of the United States is to encourage industrialization in Latin America. The Export-Import Bank, the International Bank for Reconstruction and Development, and the InterAmerican Development organization are all designed to help rather than hinder this purpose. This assistance combined with the capital funds accumulated locally during the war can go far toward facilitating industrialization in Latin America; and temporary technical assistance from the United States can speed the process of acquiring technical skill and purchasing power. In any event, lack of technical skill, purchasing power, and capital in Latin America does not constitute an impossible barrier to industrialization. Lack of raw material resources does constitute such a barrier in some cases, but not in others. Against this background, it is desirable to analyze the raw material resources available. It is necessary to distinguish between Raw Material Resources. heavy and light industry—between the steel industry on the one hand and textile manufacture and meat packing on the other. The light industries are at present the most suitable for expansion. But heavy industry is basic to an economic order like that of the United States. And if Latin America is to become industrialized on a scale resembling that of United States in economic power, heavy industries are

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necessary. This fact justifies a rather detailed analysis of the possibility of developing a steel industry in Latin America. STEEL INDUSTRY Coking coal and iron ore are the two crucial ingredients in the development of a steel industry in the present state of technical knowledge. T o point out that the whole of Latin America now produces less than 2 percent of the world's iron ore and less than 1 percent of the world's coal is merely to prove that heavy industry does not exist there. T h e future might change that. More significant are figures concerning the coal and iron reserves. Of the World's iron ore reserves, Latin America appears to possess 21 percent, most of which is in Brazil and Cuba; but Chile, Peru, Mexico, and Venezuela, at least, all have fairly substantial deposits. In the state of Minas Gerais, Brazil probably has the largest undeveloped iron ore reserves in the world. Cuba's reserves are in the province of Oriente. Much of Chile's reserve is in the province of Coquimbo. Peru has some fairly substantial reserves in the province of lea; Venezuela has deposits in the lower Orinoco valley; and Mexico has at least one major deposit in the Cerro del Mercado in the state of Durango. On the basis of iron ore reserves, there is the possibility of the establishment of heavy industries of at least moderate size in several of the Latin-American countries—Brazil, Chile, Peru, Cuba, Venezuela, and Mexico—but not in Argentina. In contrast to iron ore, coal reserves are negligible. Mexico does not appear to have a significant proportion of the world's high-grade coal, and the same is true of Brazil in South America, though both of those countries do have a certain amount, especially low grade coal. Colombia and, to a much lesser extent, Peru, appear to have some bituminous coal, the source of most of the coking coal used in blast furnaces. T h e statement that Latin America, over all, possesses less than 1 percent of the world's coal reserves would seem to be justified. 1 The deposits of bituminous coal are not found reasonably close to the iron ore deposits of Brazil and Cuba, where they might be of use. Brazil is dependent on low grade coal from Santa Catarina and on coal imports from England or the United States. 1 Hugh B. Killough, Haw Materials and Industrialism,

p. »59.

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T h e brightest spot on the heavy industry horizon of Latin America involves the Brazilian steel industry. For several hundred years, an insignificant amount of steel has been produced there, but within the last very few years the idea of developing a steel industry of at least local importance has gained considerable ground. The Companhia Brasileira de Minera^áo e Metalurgia for example was established as early as 1925 near Santo Andre in Sao Paulo to produce steel. And the Companhia Brasileira de Usinas Metalúrgicas established mills at Santa Barbara in Minas Gerais and near Niteroi in the state of Rio at about the same time. But by the start of World War II, the Companhia Siderúrgica Belgo-Mineira had about half of the country's total production of pig iron and steel. In 1941 the United States Export-Import Bank loaned to Brazil the sum of $45,000,000 (U.S.) to be used in the establishment of steel mills at Volta Redonda by the Companhia Siderúrgica Nacional, which is controlled by the Brazilian government. The mills are to use Minas Gerais iron ore, of which there is an abundance, and Rio Grande do Sul low grade coal mixed with United States and English coking coal. A substantial percentage of the world's reserves of high grade iron ore are in the Itabira and near-by deposits of the state of Minas Gerais. The ore is largely hematite and magnetite, in some cases has as high as 68 percent iron content, is free of sulphur, and has a low phosphorus content (desirable characteristics in the making of steel). According to an arrangement established in 1942, although the deposits are actually now owned by the Brazilian government, the principal ones at Itabira will be worked by the Companhia Vale do Rio Doce, a government-controlled company with a fifty-year lease. This company is largely financed with United States capital. It is to be hoped that control of the new industry will actually lie with Brazilians in order to negate later allegations of United States imperialism. The agreed interest rate of 4 percent on the United States loan, although perhaps fairly high under the circumstances, is hardly exorbitant. The present significant imports, in connection with this developing industry, and the things which the money advanced actually pay for, are machinery and technical skill from the United States. It seems probable that there is here the basis for a steel industry which will become, in time, of sufficient importance to provide for the internal needs of Brazil and perhaps more.

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With the disappearance of the high grade iron ore reserves in the United States, it may be possible for this country and Brazil to work out a very profitable exchange of United States coal for Brazilian iron ore. Such a relationship might well become the most important fact in the world steel picture. But what of the possibilities for a steel industry in the rest of Latin America—or in Spanish America? It seems fairly well established that steel industries which can supply much of the local demand may develop in Cuba, Chile, Peru, and Mexico—and even in Argentina behind a tariff wall—but they are not likely to be of sufficient importance to transform those countries into major industrial powers. Most of the iron ore that Chile now produces makes the long ocean voyage to the United States to be manufactured. But a steel industry of sorts has been developed under the sponsorship of the Fomento Corporation. One of the companies which has been established is the Compañía de Acero del Pacífico; another is the Compañía ElectroSiderúrgica e Industrial de Valdivia, which built a blast furnace as early as 1924. Both of these companies have been aided by the Fomento Corporation, which also has recently established an enterprise called Industrias Metalúrgicas Mecánicas Unidas to merge several of the independent, locally owned companies. In Mexico the government, through Nacional Financiera, has sponsored the establishment of a steel mill at Monclova by the Altos Hornos company (1942). But the large steel company of longest standing in Mexico is the Compañía Fundidora de Fierro y Acero de Monterrey, which was set up in 1900 and which formerly produced two-thirds of the country's steel. It is locally owned. Other steel enterprises include the British-owned Compañía Hierro y Acero de Mexico, with mills in the Federal District, and La Consolidada, which was set up in 1942, with Shields 8c Company of the United States aiding in the financing. In Peru a government-sponsored corporation called the Corporación Peruana del Santa is engaged in developing a steel industry along the Santa River near Chimbóte. Overshadowing the developments in all the countries except Brazil has been the discovery of major new iron ore reserves in Venezuela. It has been known for some years that the deposits of the Bethlehem Steel Corporation at El Pao were of considerable size. But early in 1950 the United States Steel Corporation announced that it had dis-

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covered in the Cerro Bolívar a deposit rivaling the Hull-RustMahoning deposit in northern Minnesota. This development makes even more likely a reorientation of the United States industry, which is plagued with dwindling reserves, to the Atlantic seaboard and the increased dependence of the United States industry on Latin-American iron ore. As a corollary, ships going south may well carry coal to develop a steel industry in Venezuela and Brazil. T h e fact that Brazil has fairly important possibilities in the field of heavy industry, whereas Argentina does not, is highly significant for the future balance of power in Latin America. Argentina has no iron ore reserves of consequence, and would suffer the greatest relative decline if heavy industry were to develop in Latin America. Brazil, with the greatest iron ore reserves, would enjoy the chief relative advantage. These factors must be taken into account in explaining the present attitude of Argentina. She knows that time is fighting against her. T h e government is doing what it can. It is planning the establishment of a "mixed" steel company, part government and part privately owned, to be called Siderurgia Argentina Sociedad Anónima Mixta. Initially this will be 90 percent government-owned and 10 percent privately owned. T h e first major goal is to provide local finishing of semi-processed steel at prices not over 5 percent higher than those prevailing in the United States. Subsidies are to be provided to give the necessary protection not only to the Siderurgia Argentina but also to privately owned steel companies. Armco Argentina, the Argentine subsidiary of American Rolling Mills (United States), is to give technical assistance and to own part of the 10 percent of the stock of Siderurgia Argentina which is to be privately owned. Such is the plan. A small privately owned steel industry has developed in Argentina on the basis of imported raw materials. T h e German firms, Vereinigte Stahlwerke, and Mannesman, had plants in Argentina before the war. Argentina is in the process of liquidating the German interest in such firms—avowedly at least. T h e principal privately owned rolling mill has been operated by Cantábrica, S.A. Another enterprise with a foundry producing cast iron is T A M E T (Talleres Metalúrgicos San Martín) controlled by the Tornquist family. Light Metals and Atomic Power. A factor which limits the im-

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portance of the conclusions with regard to the steel industry should be mentioned. T h e world is progressing and obtaining greater and greater quantities of technical knowledge. W e may well be on the verge of a new industrial age, an age of light metals, plastics, chemicals, and unlimited power. There may be in the offing a great industrial revolution in which the center of economic power will shift, to an important extent, from the countries with the ingredients necessary for a steel industry to the countries with ingredients necessary for the manufacture of light metals. An additional fuel revolution may involve the use of atomic energy for purposes not now predictable. T h e change in emphasis from iron and coal to light metals and atomic energy may involve a shift in the balance of economic power in unforeseeable directions. T h e United States would seem to have an initial advantage in this development because of the technical knowledge present, but the location of the raw materials will also be a factor in controlling the long-run location. It is too early to tell what deposits will be the cheapest sources for the various raw materials. Light metal manufacturing, admittedly, has not developed as yet to any marked extent in Latin America. But the prospects are quite good. T h e raw materials are there. And eventually, the market, the technical knowledge, and the industry may well be there.

LIGHT

INDUSTRIES

It is in the field of light industries that the immediate industrial future of Latin America lies. T h e raw materials which may serve as the basis for such industries are already present. Capacity of the people to buy the output has been increased in many ways: in the southeast, by expanded agricultural production on a cash basis; in the Cordillera, to a lesser extent, by the mineral industry; and, most importantly, over Latin America as a whole, by the extremely large export trade balance of the war period. There exists, therefore, a significant amount of pent-up purchasing power. Of late years the population has been increasing rapidly all over Latin America. T h e r e has also been a growing percentage of concentration in urban centers. Both of these developments are probably an integral part of developing industrialization (although the concentration of population in the cities is also closely connected with the growth of bureaucracy in the governments of Latin America).

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Light industry in Latin America involves two principal types of activity: (1) the production of consumer goods for domestic consumption, and (2) the processing of raw materials (chiefly for export). Consumer Goods Industries. T h e textile industry has made good progress, at least by comparison with other industries, and it is due to develop much further. T h e necessary raw materials are present: cotton, wool, hemp, water power, and enough coal for this purpose. Some maladjustment is still evident, a result of the war. On the one hand the machinery is quite generally old and in need of replacement. O n the other hand Latin-American textiles actually have been in demand on the world market for the first time. This is probably a temporary situation. As soon as the European textile industry revives, it is doubtful that Latin-American cloths will be able to compete in that market. However, there is little doubt that, with adequate machinery, they could meet most of the local demand. T h e mills of Puebla, Mexico, the environs of Havana, Cuba, Sao Paulo, Brazil, and Buenos Aires, Argentina, may be expected to turn out large quantities of cloth. Major textile enterprises in Argentina at the present time are the Compañía General Fabril Financiera, Grafa, S.A. Fábrica Argentina de Alpargatas (British), and Sudamtex (affiliated with the United Merchants and Manufacturers Management, a United States enterprise). In Bolivia there is the Manufactura Textiles "Forno," which turns out woolens. In Brazil there are Votorantim and, in the state of Sao Paulo, Crespi. In Chile there is the Fábrica Nacional de Bellavista Tomé, which manufactures woolens. In Colombia there are the Compañía Colombiana de Tejidos, and Compañía de Tejidos de Bello (which is a subsidiary of Fabricato), and Tejidos El Condor. In Cuba the Hedges family has established the Compañía Textilera Ariguanabo as probably the principal cotton manufacturing plant on the island. T w o enterprises, La Industrial and La Internacional, operate integrated textile businesses in Ecuador. Safie Hermanos engage in textile manufacture in El Salvador and have a branch establishment in the United States. In Mexico there is Atoyac Textil, which was established in 1921. There are also two major retail outlets which engage in their own textile manufacturing: Centro Mercantil and Palacio de Hierro. In Peru important textile mills are operated by a British enterprise, Duncan Fox and Company, and others are operated by the

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Grace Line. Compomar and Sou las is the principal textile manufacturing company in Uruguay; it has as a subsidiary the Primera Hilandería del Uruguay, and its principal mill is La Nacional, which was established over eighty years ago. In Venezuela the largest concerns are Ernesto L. Branger textile mills, the Telares de Caracas, and the government-owned Telares de Maracay. Among the most important single enterprises in the textile field is Anderson, Clayton and Company of Houston, Texas. Anderson, Clayton handles the marketing of much of the cotton produced in Latin America. The company operates extensively in Argentina, Brazil, Peru, and Mexico, and is active elsewhere in Latin America, as well as all over the world. A somewhat different type of textile manufacturing of increasing importance is the making of silk synthetics. The Celanese Corporation of America, for example, has actively gone into the field. In Mexico its subsidiaries are Artisela Mexicana, Celanese Mexicana, and Viscosa Mexicana. A firm called Celulosa Argentina is active in the production of fiber from cellulose in the Argentine. The Hedges family in Cuba has formed the Compañía Rayonera Cubana with technical assistance from the Industrial Rayon Corporation of Cleveland. In Peru the locally owned Rayón Peruana is being established with the technical help of Oscar Kohorn and Company of New York. Leather working, tanning, and leather products form an important activity all over Latin America, although it is principally practiced as a handicraft. Cattle hides and alligator and crocodile hides are used —the latter chiefly for the making of curios for tourists. Shoe manufacture is an important activity everywhere. And in some places the United Shoe Machinery Company of the United States, active in the Latin-American field in fact since before 1914, provides the machinery and controls the industry. Although most of the leather enterprises are small, three tanning companies in the Argentine are worthy of mention: Franco-Argentino, Guelfi, and Ventura. A world-famous industry which provides a slightly different sort of wearing apparel exists in Ecuador. At Jipijapa and Monte Cristi, to the north of the Gulf of Guayaquil, the authentic Panama hats are made. Panama has had little to do with the industry, except for assisting in marketing the hats already made. Technically the Panama hat industry is still at the handicraft level.

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Food processing is probably the most important of the various industrial activities. But typically the enterprises are much smaller than is the case in the apparel industries. Flour mills exist all over Latin America to process corn, wheat, mandioca, and so forth. Among the largest firms in this industry (which is largely dominated by small enterprises) is Bunge and Born of the Argentine. Cigar and cigarette manufacturing is of considerable importance in Cuba, and of fair importance in several of the other countries of the tropical zone, in particular, Brazil. Major tobacco manufacturing companies in Latin America include Piccardo and Company (Argentina), Compañía Chilena de Tabacos (Chile), Compañía Colombiana de Tabaco (Colombia). In Cuba there is the Cuban Tobacco Company, which makes Corona, Henry Clay, and several other brands of cigars and controls quite a few minor manufacturing companies. In the Dominican Republic there is the Trujillo-controlled Compañía Anónima Tabacalera de Santiago, which has a monopoly of cigarette manufacture on the island and also makes cigars. Beer bottling is carried on in several places, under local rather than foreign sponsorship. Among the well-known brands are Bohemia Ale and Carta Blanca beer prepared at the French-owned Cervecería Moctezuma (Monterrey, Mexico), Hatuey (La Habana), Presidente (which is made at the Trujillo-controlled Cervecería Nacional Dominicana). Glass manufacturing—both plate and blown glass—is also to be found in Latin America. For the most part local sand is used to supply glass for local building trades or for bottles and other glassware. Moreover, the Corning Glass Works from the United States has established subsidiary plants in several areas: Cristalerías Rigolleau (Argentina), Vidreria Santa Marina (Sao Paulo, Brazil), and Cristalerías de Chile. Among the leading locally owned glass-blowing enterprises is the Vidriera Monterrey, owned by the beer company, Cervecería Moctezuma. Also made from common types of soil and important in the building trades is cement, which is manufactured in most of the countries of Latin America. T h e industry uses domestic raw materials, principally clay or shale and limestone, and sells its product to local building industries. Many of the cement manufacturing companies are affiliated directly or indirectly with United States companies. The

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United States-owned Lone Star Cement Corporation controls companies in Argentina (Compañía Argentina de Cemento Portland), Brazil (Companhia Nacional de Cimento Portland), and Uruguay (Compañía Uruguaya de Cemento Portland). In Chile the principal cement company is Cementos "El Melón." In Colombia there are the Cementos del Valle, the Compañía de Cemento Argos, the Compañía de Cemento Diamante, Fábrica de Cemento Samper, and Mármoles y Cementos del Nare. In Ecuador, cement production is largely in the hands of Cemento Nacional, a subsidiary of the all-embracing Ecuadorian Corporation. In Mexico there are several busy cement companies. Asbestos de Mexico, which manufactures asbestos-cement products, is a subsidiary of Johns-Manville (United States). Cementos Guadalajara is owned by the Atlas Cement Company. Several other companies are locally owned, and one in particular, Compañía de Cemento "La Tolteca," is sponsored by the government. In Peru the Compañía Peruana de Cemento Portland "El Sol" has a monopoly of production. In Uruguay, the Compañía Nacional de Cemento, is financed by Uruguayan capital (Supervielle interests). The Lone Star Cement Company, as mentioned above, has a subsidiary in Uruguay, the Compañía Uruguaya de Cemento Portland. The Uruguayan government proposes to take over most of the cement production through its agency AN CAP. Woodwork and furniture manufacture, although found in many places in Latin America, is very largely a handicraft industry. Of great weight in the field of industry and sometimes classified as a basic or heavy industry is chemical manufacturing. Major German, English, French, and United States firms are active in this field in Latin America. In Argentina the Monsanto Chemical Company (Missouri) and the Compañía Nacional para la Industria Química, S.A. Mixta Atanor, have merged to establish Monsantoatanor Industrias Químicas Argentinas. There, also, Industria Química Argentina Duperial is controlled by Imperial Chemical Industries (British) and by Dupont (United States). A similar firm, Industrias Químicas Duperial, exists in Brazil and is also jointly controlled by those behemoths ICI and Dupont. In Brazil the French-owned Companhia Química Rhodia Brasileira manufactures industrial chemicals and pharmaceuticals. Branches of the German chemical trust, I.G. Farbenindustrie, were active in several of the Latin-American countries before the war. T h e

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subsidiaries in Mexico and Peru were called General de Anilinas; in Uruguay, Argentina, and Colombia they were called Anilinas Alemanas. Mention should be made of the locally owned Industrias Reunidas F. Matarazzo (Brazil) and the Instituto de Química Industrial (Uruguay) established in 1912 to engage in chemical research. The latter has since expanded its activities to include the manufacture of industrial chemicals, fertilizers, and the like. A related industry is that of paint and varnish. Here there is an accelerating rate of development. Especially notable is the activity of Sherwin-Williams (United States), with plants in Argentina and in Cuba, and the lesser local concern of Condoroil Tintas (Brazil). Another industry in the chemical family and one which is already exceedingly widespread over Latin America is the manufacture of pharmaceuticals. T h e principal United States companies in the field are Abbott (branches in Argentina and Mexico), Johnson and Johnson (branches in Argentina and Mexico), Parke-Davis (Argentina and Mexico), and Squibb (Argentina and Mexico). There are also several other companies in the field, and those mentioned no doubt have other branches than those noted. Before the war, the principal German companies were Bayer (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Uruguay, Venezuela), Merck (Argentina, Brazil, Chile, Colombia, Mexico), and Schering (Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Uruguay, Venezuela). The French firms Caillon and Hamonet, Delale and Risse, and Millet and Roux are active in Argentina. And the French-owned Laboratories Silva-Araujo Roussel operate in Rio de Janeiro. During the war the Chilean-owned Farmo-Quimica del Pacífico bought out the Schering properties in Chile. Probably many other local enterprises in various of the other Latin-American countries are also emerging now as the owners of the former subsidiaries of the great German companies. In the field of household appliances several foreign companies have set up manufacturing enterprises. Nash-Kelvinator has established Darkel in Argentina to make refrigerators and stoves. In Mexico International General Electric established a light-bulb plant at Monterrey in 1930. With the technical assistance of Westinghouse, the Industria Eléctrica de México was set up in Mexico in 1945 to manu-

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facture electric goods; this company is 51 percent Mexican-owned and 49 percent United States-owned, 10 percent of the latter figure presumably being held by Westinghouse. The capitalization is $10,000,000 and the stock is listed on the New York Stock Exchange. The Mexican government agency Nacional Financiera, which is supposed to help with the financing of new industry, has also helped to finance the Industria Eléctrica de México. Several of the major United States automobile manufacturers have established subsidiaries in Latin America, which generally assemble cars from imported parts. General Motors has subsidiaries in Argentina, at Sao Caetano near Sao Paulo in Brazil, and in Mexico. Chrysler has an assembly plant at Rio de Janeiro. Ford has assembly plants at Sao Paulo and in Mexico. International Harvester is erecting a plant in Mexico to build agricultural machinery. Tire-manufacturing plants exist in several of the countries of Latin America. Principally, rubber is imported to make tires for local automobiles. But the rubber need not necessarily be imported by Brazil, for example, which has the Amazon basin to draw on for a supply of raw material. Much of the tire manufacturing is in the hands either of branch plants of foreign companies or of companies affiliated with them. So, one finds Firestone and Goodyear in Brazil; Goodrich in Cuba; Goodrich (Goodrich-Euzkadi), Goodyear (Goodyear-Oxo), and General Tire (Popo), and U.S. Rubber (Compañía Hulera Mexicana) in Mexico; Goodyear and Goodrich in Peru. Apparently Goodyear and Firestone established their early tiremanufacturing plants in Buenos Aires in the belief that this was necessary to enable them to compete with the French firm of Michelin, which, it was rumored, was about to set up a plant there. Michelin had no such intention, it seems, but was later forced to establish a plant in order to continue to compete with the American companies for the Argentine market. None of the tire companies wanted to establish a branch plant in Argentina, but all were forced to do so because of the sequence of events. It would seem that, although certain developments may appear logical enough as part of the long-run picture, actual accomplishment at a specific time may have been occasioned by some strange forces. Some of the tire-manufacturing enterprises are domestically owned, for example, the Companhia Brasileira de Artefactos do Borracha in

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Brazil. In Uruguay the government established in 1936 what was designed to be a monopoly called FUNS A (Fábrica Uruguaya de Neumáticos, S.A.) to manufacture tires and other rubber goods. Processing Raw Materials. The processing of raw materials often, but not always, involves the performing of only some stages in the manufacturing process and the subsequent export of the semi-manufactured product to some other country for further processing. A considerable amount of the manufacturing in Latin America is of this type. The sugar centrals in Cuba turn the cane into raw sugar which is then, for the most part, shipped to the United States to be refined. The Hershey refinery represents the exception rather than the rule. The smelting of minerals is a major manufacturing industry in Mexico, Chile, and Peru. The companies which own the important smelters are those which do the mining; chiefly, they are the American Smelting and Refining, and the Anaconda Copper Company. Latin-American countries are now making an effective effort to force the oil companies to refine the oil in the local producing country. Refineries in Venezuela now have a refining capacity of some 124,000 barrels of crude oil a day. Six or seven refineries in Mexico are operated by Petróleos Mexicanos, and several refineries in Argentina can handle somewhat over 100,000 barrels a day. In Brazil a National Petroleum Refinery has been established as a "mixed" company, half government-owned. Altogether, this represents most of the refining capacity in Latin America. Meat packing in the frigoríficos of Argentina, Uruguay, and Brazil by Swift and Armour (United States), by Anglo (England), and by governmentally owned organizations such as the Frigorífico Nacional in Uruguay is one of the principal industrial activities of those regions. Much of the meat is subsequently exported, chiefly to England. In this discussion of light industry in Latin America, Summary. two dissimilar sorts of activity have, unavoidably, been confused. Much of the activity included in the statistics on manufacturing actually involves handicraft work in the home or in small shops hiring only five or ten workers. This is true of wood-working and silver smithing, and comprises much of the glass manufacture, pottery, wine making, leather working, and so on. The inclusion of this sort of activity in the statistics tends to show that Latin America is considerably more industrialized than actually is the case.

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Manufacturing in large factories employing more than 50 or 100 workers characterizes very little Latin-American industry. Large manufacturing plants exist in only a few of the fields. INDUSTRIALIZATION AND TRADE Will United States industries suffer as a result of losing some of their foreign markets to the new industries of Latin America? Is it really to the disadvantage of an industrialized country to encourage the development of manufacturing in undeveloped regions? As was indicated earlier, it was the established German policy before World War I to discourage industrialization in undeveloped areas, precisely on the theory that a given industry, when developed, would take some of the market from German industry—and perhaps create new rivals for Germany in terms of industrial power. T o prevent this, Germany dumped goods of the same kind in the country where a new industry was trying to get a foothold. Her established industries could afford to sell a restricted number of items in a limited area for a limited time for almost nothing. But the new industries, in possession of meager resources, were very likely to be forced into bankruptcy. T h e Germans have not been the only ones to do this sort of thing. Many industries in many of the industrialized countries have done, discreetly and quietly, exactly the same thing that the Germans did admittedly as a matter of policy. At first glance it does seem probable that new industrialization will be detrimental to established industries elsewhere. But is that actually the case? If so, to what extent? In this discussion, one point should be stated, or admitted, at the outset. T h e possibility exists that a particular industry in the developed region will be injured by competition with the new industry. United States exports of farm machinery to Latin America might be reduced by the development of farm machinery manufacturing in Latin America. On the other hand, they might not. For the moment we will assume the worst possible situation—that such reduction will occur. What is the significance? If a new, more efficient industry is established and takes some of the market from the old, less efficient enterprise, this is a highly desirable process from the point of view of consumers in general. It may be true that in a developed country a particular industry

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is harmed by the industrialization of previously undeveloped areas. But there is a far more important point than this. Does the adverse effect extend to industry in the country as a whole? T h e answer would seem to be No. Instead, the new development will bring larger investment, larger payrolls, larger profits, and so on. It will bring an increase in purchasing power equivalent (more or less—there is, of course, much debate on this point) to the value of the new products which it is manufacturing. This increase in purchasing power will tend to diffuse itself, not only to other industries in the country of origin, but also to all countries all over the world. It may enable foreigners to purchase the new product, but this is only a fraction of the total effect. Therefore, established industries need not fear that the development of backward areas will mean loss of market to them through loss of purchasing power. With the development of manufacturing in western Europe and in the United States in the latter part of the nineteenth century and the early part of the twentieth, trade increased rather than declined, both among the countries of western Europe and between them and the United States. England, which at that time was already industrialized, also found that instead of losing by these developments, she was experiencing an expansion of total trade. Thus, contrary to the fear that new industrialization will result in a decline of trade, the exact opposite is accomplished through the diffusion of a greatly increased total purchasing power. There is considerable reason to believe that the development of industrialization in Latin America will, in the end, lead to a greater demand for the products of the United States. T o recapitulate, a particular industry in the United States might be injured; but industry in general in the United States would, almost certainly, be benefited. But this argument does not dispose of the question to the entire satisfaction of people who are fond of thinking in terms of power politics. They point out that, if industrialization goes far enough in the backward areas, the developed areas may find themselves eclipsed. In terms of power politics this would mean a shift in the balance of power. It may be argued that with the development of industrialization all over the world, even though the standard of living in England has continued to rise (at least up until World War II), England's relative power in the world has declined. Which raises the question as to whether England would have been well advised, fifty or a hun-

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1 1 T h i s figure may vary somewhat, but, since cane in Cuba gives about 12 percent of it* weight as raw sugar, this means that about 50 percent of the value of the sugar goes to the colono.

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raw sugar internationally. In part these provisions resulted from a commendable effort to give the worker or the farmer a large share of the profit resulting from a rise in the international price; but they also mean that the farmer is likely to feel very directly and disastrously the price drops. It is seriously alleged in some quarters in Cuba that the net result of this combination of forces makes the colono and the worker rather than the mill owner the real sufferer when price declines occur. In any event the establishment of a set of costs as a definite percentage of the sale price, regardless of the volume of production, does not seem justified in theory. Although the law is sufficiently complicated so that the percentage relationship is not exactly proportional, the relationship is rigid enough to support the general truth of this statement. Granted that it is unwise to tie one set of costs rigidly to another set of prices, it would seem even more unfortunate to tie the economy of Cuba so closely to the international price of raw sugar. Another characteristic of the colono system is of economic importance: for each colono the "central" will grind a specified quantity of cane based on his "permanent grinding quota" (factor permanente de molienda). T h i s quota is the percentage of the total cane ground by the mill which the particular colono provided in the year 1937. Thus, each year, the mill is granted by the Cuban government Instituto Cubano de Estabilización del Azúcar a quota which the mill is obligated to apportion among the colonos according to the amount of cane brought in by them in 1937. From an economic point of view, this is probably the most objectionable type of provision that appears in the raw commodity control schemes. And it appears over and over again. As long as the scheme is effective, each producer provides sugar in the same proportion that he provided it at some earlier time. In consequence, there is little or no incentive to improve, techniques and efficiency. Each producer, knowing that he has a guaranteed share of the total production, and also knowing that, regardless of how efficient he is, he can market no more than his quota, is strongly tempted to make no effort toward improvement. It is a notorious fact in Cuba that the machinery and techniques of the mills and the cane fields have not been markedly improved in years. T h e machinery is old; much of the work is done by the cheapest

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sort of migratory labor brought in from Haiti for the zafra (harvest) in January, February, and March. Ownership. Ramiro Guerra (Industria Azucarera de Cuba, pp. 75—76) has presented the following figures with regard to the ownership of sugar mills in Cuba in 1939: Nationality of Mill Owner

Percent of Cuban Production

Estimated Value of Mills

66

28.12%

59 si

55-93 9-87 4.41 .67 .61

102,615,483 203,397,679

Number of Mills

(*U.S.) Cuban United States Spanish Canadian English Dutch French

Total

7 1

2 1 »57

•39 100.00

35-903.594 i5.987.375 2,391,630 2,168,836 «.37>.503 363,836,100

These figures presumably cover investment in sugar mills or "centrals," and do not therefore cover total investment in the sugar industry. T h e Anuario Azucarero de Cuba, 1944 (p. 47), has estimated the total worth of the Cuban sugar industry to be $1,050,000,000 (U.S.) of which the United States share was estimated at $600,000,000. T h e fact that United States companies have such a large share in the ownership of the Cuban industry goes far to explain many of the features of the control schemes which will be discussed in the following pages. Evolution of Control Schemes. As of the turn of the century, many of the countries of continental Europe were vigorously engaged in supporting local beet sugar industries by extensive bounties, protective tariffs, and other means. T h e beet sugar industry was highcost and probably could not have maintained itself without governmental protection. But it had that protection and the low-cost cane producing areas of the tropics suffered substantial market losses. As a result of the various forces at work, the assorted beet and cane growers met at a convention in Brussels in 1902 to attempt to work out some type of production control. Nine European countries, speaking also for their colonies, agreed not to allow bounties on production or export. This was of some benefit to the cane producing countries. But despite a further agreement not to levy import duties

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for protection of the high-cost local industry, it appears that the continental countries continued to levy such tariffs. T h e Brussels Sugar Convention of 1902 did not solve the problem, and mounting stock and falling prices were plaguing the industry when war began in 1914. With the war came temporary prosperity for the cane growers of Cuba and Java, because the European production of beet sugar declined, whereas the demand was greatly increased by the wartime need for alcohol for industrial and other uses. During the war years the Brussels Sugar Convention was allowed to lapse. After 1918, the countries of continental Europe became more active than ever in protecting their local beet sugar industries by tariffs and bounties. England and France gave preference to the sugar from their own colonies as also did the United States. There was no longer a great demand for sugar for war purposes. T h e world was oversupplied. Raw sugar dropped from a high of 22.5^ per pound in 1920 to a low of 1.813^ per pound in 1921. Cuba was the principal sufferer. T h e wartime markets for her greatly expanded production were gradually closed, and she had little to offer in exchange for favorable treatment from the countries to which she desired to export her sugar. In 1926, 1927, and 1928 Cuba attempted to deal with the situation by restricting her own output through a process involving the setting of maximum production quotas for each of the "centrals." A prohibitive tax was laid on production in excess of the quota. T h u s Cuba attempted alone, or virtually alone, to restore the world price of sugar to a profitable level by restricting her own production. T h e Machado government thought, or hoped, that curtailment of Cuban sugar on the world market would raise the price. But, although Cuban production had been reduced, world production in 1928 was at an all time high and the price of sugar was dropping. (See Table 30.) With the 1928 crop Cuba's abortive effort to deal with the sugar problem was abandoned. Cuba had given one of the numerous demonstrations which the world has seen to prove that a single producer of a fraction of a crop cannot control the price by curtailing its own output. Its relative importance in the world market surely suffers and that is about all that is accomplished. T h e 1929 world sugar crop broke all records and the price continued to sag. In 1932 it fell to the all-time low of 0.57^ per pound, and the average annual price in New York (duty not added) was

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0.93^ per pound. The continued depression in the industry gave rise to the Chadbourne Plan and the Chadbourne Agreement of May, 1931. Thomas Chadbourne was a representative of New York banking interests which had a large financial stake in Cuban sugar and were, therefore, interested in placing the industry again upon a profitable operating basis. Representatives of the sugar industries of Cuba, Java, Germany, Czechoslovakia, Poland, Hungary, Belgium, Yugoslavia, and Peru were parties to the agreement. In several cases the government passed the necessary legislation to force recalcitrant producers to abide by the plan. United States and British producers were not parties to the agreement; that is to say continental United States producers, as well as Philippine, Hawaiian, and Puerto Rican producers were not parties. It is contrary to the anti-trust laws for United States corporations to be parties to such agreements as will affect the prices of goods to be sold in the United States. Nevertheless the large United States concerns with interests in Cuba "cooperated closely" with the scheme and gave it the necessary financial support. Those who signed the Chadbourne plan agreed to establish export quotas. T o administer the quotas, internal production restrictions were established, at least in Cuba and Java. There was provision for the gradual marketing of accumulated surpluses over later years when it was thought the price would be higher. It was necessary to float a bond issue to finance the storage of the surplus. Agreement was made among the parties with a view to apportioning the available markets among them. In 1935 the Chadbourne plan was given up, having proved a dismal failure. Under the circumstances failure was almost inevitable. It is a first essential for the possible success of such schemes that they must control a substantial percentage of the supply and that it shall not be easy for new sources of supply to come into production. All the signatories of the Chadbourne Plan together controlled only about 40 percent of the world sugar production. And while it was true that during the life of the agreement they restricted their output by almost 7,000,000 tons a year, the rest of the world increased its production by some 4,500,000 tons, thus largely offsetting their efforts to raise the price and certainly preventing them from benefiting in proportion to their sacrifice. The United States tariff-protected industry in the Philippines, Hawaii, and Puerto Rico thrived on the Chadbourne plan, as also did the production in British colonies

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and a m o n g non-signatory beet sugar producers on the continent of Europe. C u b a n exports of sugar to the United States dropped to an extremely low figure. A n d prices rose only from an annual average of .93^ in 1932 to a figure of 2.331^ in 1935. United States Government Role. Under the Treaty of 1902, C u b a enjoyed a 20 percent tariff preference over other foreign countries on all goods shipped into the United States market. In 1934 this tariff preference was changed to 40 percent. Actually the effective duty on C u b a n sugar in particular has been changed several times (as indicated in T a b l e 30), with C u b a enjoying a preference each time. Even without this preferential tariff C u b a could have undersold foreign producers in the United States, and it did not, and this fact was more important, protect her from the competition of insular possessions which could send their products into the United States market duty free. T h e effective tariff rates on C u b a n sugar have been sufficiently high to place C u b a at a definite disadvantage by comparison with duty-free sugar. For example, under the Hawley-Smoot T a r i f f of 1930 the rate on C u b a n raw sugar was a pound, which was the equivalent of an ad valorem duty of 340 percent in May of 1932. Naturally, shipments were low during the early i93o's, and those are the years on which her quota of supply to the United States market was based. T h e tariff rate was lowered to o.goff per pound in 1934, to 0.75^ per pound in 1941, and to 0.50^ per pound in 1948. In 1946, the Philippines, although obtaining their independence, obtained also the right to export 850,000 tons of sugar a year, free of duty, to the United States for eight years. Cubans have questioned whether this is in accordance with the 1934 treaty granting C u b a a preference over all other foreign countries. But the C u b a n government has chosen, apparently, not to make an issue of the matter. T h e most important United States sugar legislation of the prewar years was the Jones-Costigan Act of 1934 and its amendment in 1937. T h i s program differed somewhat from the cotton and other programs in that it included an effort to increase United States sugar production relative to foreign sugar imports. O n e of the important features of the law was the payment of a bounty to sugar growers in the U n i t e d States. Sugar was the only commodity subject to control w h i c h was not treated as a strictly domestic problem within the United States. T h e United States had had a rather unique relation

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with Cuba since 1898 and was under something of a moral obligation, following the Spanish-American War, to be as considerate of Cuba as possible. Therefore, when quotas were set to control the producers within the United States, Cuba was also granted a quota: 28.6 percent of the United States market. This represented less than half of her average shipments to the United States in the 1924-1929 period, based, as it was, on the abnormally low Cuban shipments of sugar to the United States during the early lggo's. T h e quota was low, but it was sufficiently large, in view of the deplorable state of the sugar market in the thirties, to offer some relief to Cuba. International Sugar Conference. One other major action took place in the field of sugar control before the outbreak of World War II. This was the International Sugar Conference which met in London in 1937. T h e governments of twenty-two countries, controlling a significant nine-tenths of the production (beet and cane) participated. A "scientific guess" was made as to how much sugar the world could absorb, and a five-year agreement was reached as to the quotas that each producer would provide. An International Sugar Council was established, with limited functions to change the quotas but not their relative size. T h e basic export quotas in the free market, of which the United States was not a part, were as follows (in metric tons): Country Belgium (and Belgian Congo) Brazil Cuba Czechoslovakia Dominican Republic Germany Haiti Hungary Netherlands (including colonies) Portugal (including colonies) Peru Poland U.S.S.R. (excluding exports to Mongolia, Tannu Tuva, and Sinkiang) Total

Quota 20,000 60,000 940,000 250,000 400,000 120,000 32,500 40,000 1,050,000 30,000 330,000 120,000 230,000 3,622,500

Voting power on the Council was divided as follows: the importers had 45 votes, the producers 55. T h e consumer thus did not have an

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equal voicc with the producer, but he at least did possess a substantial voice. Sugar control had evolved a long way from the unilateral Cuban schemes of the latter twenties. But the assortment of control measures had not raised the price substantially by the time World War II began, nor had it resulted in any substantial decrease in world production (see T a b l e 30). The War Years. T h e war temporarily rendered restriction of output unnecessary as a means of raising price. T h e international quota system became inoperative. But the International Sugar Agreement was renewed year after year by most of the signatories. During the war the Combined Food Board of the Allied Powers estimated the total world sugar available or subject to its control for a given year and then allotted it among the Allied governments. For example, for 1946 the crop was estimated at 11,800,000 short tons; of this the United States was allotted 5,711,000 short tons, the United Kingdom and Canada were allotted 2,637,000 short tons. Much of its share the United States has had to import, and Cuba was the natural, convenient source for much of the imports during the difficult war years. For this reason the United States Commodity Credit Corporation (or an equivalent organization) each year during the war negotiated a contract with the Cuban government (Instituto Cubano de Estabilización del Azúcar) for a substantial percentage of the Cuban crop. T h e price paid by the United States for Cuban sugar climbed slowly during the war years from an average of 1.905^ a pound in 1939 to 4.61 of! per pound for the 1946 crop. T h i s was largely the result of a provision for increasing the price if the domestic price level in the United States should rise to any marked extent. Since Cuba imports much of her necessities from the United States, the height of the domestic price level in the United States has been of very real importance to her. In addition, Cuba, as part of the sugar negotiations, was granted quotas on a number of staple articles coming from the United States, for example, rice, which is a staple food item on the island, even though the supply is almost entirely imported. Present Status of the Industry. President T r u m a n signed a new Sugar Act, August 8, 1947. It placed the quota system in effect again beginning January 1, 1948, the operation of the pre-war quota system having been suspended early in the war. T h e new law gives do-

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mestic sugar growers (including Hawaiian, Puerto Rican, and Virgin Island growers) a total fixed annual quota of 4,268,000 short tons (some 550,000 tons above the guaranteed minimum of the 1937 Act). It gives the Philippines a fixed quota of 952,000 tons. It gives Cuba a quota of 28.6 percent of the domestic consumption in the United States plus 98.64 percent of the increase when consumption substantially exceeds 7,000,000 short tons per year. Cuba will also be allowed to provide 95 percent of any deficit in the Philippine quota. T h i s is of some importance because it is doubtful that the Philippines will be able to provide all of their quota in the near future. T h e quota of domestic producers will be lowered, if necessary, to insure Cuba the 28.6 percent of domestic consumption. In fact, the actual quotas established by the United States Secretary of Agriculture for the domestic consumer market in the United States in 1948 were as follows (in short tons, raw value): Domestic beet producers Mainland cane Hawaii Puerto Rico Virgin Islands Philippine Islands Cuba Other Total

1.847.738 513,260 900,000 934->34 6,159 290,000 3.239.429 6g,28o 7,800,000

It was estimated that neither Hawaii nor the Philippines were capable of providing the full amount they would be allowed to supply under the act. So, their deficit was allotted, for the most part, to Cuba, as the law provided. But in years when the Philippines and the others supply their quota, the Cuban quota will be nearer to 2,000,000 short tons—if United States consumption remains 7,000,000 tons or slightly more. At present it would seem that the United States is allotting domestic growers a quota as large as they can possibly dream of supplying (a quota substantially larger than their production has actually been in recent years). Domestic beet sugar production has not been 1,800,000 short tons since the United States entered the war in 1941. It would seem also that the law will necessitate Cuba's reducing substantially her shipments of sugar to the United States. T h e

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fact that Cuba is allowed to provide virtually all of the sugar if consumption rises substantially over 7,000,000 short tons would seem to be an attractive mirage. With imports from Cuba in the future likely to be limited to virtually what they were under the quota acts of 1934 and 1937 (about 2,000,000 tons) and with domestic growers guaranteed more of the market than they have been able to supply with the benefit of tariff protection (0.75^ per pound) and excise tax assistance, it would seem that the United States is busily engaged in fostering in the sugar industry just the sort of reprehensible quota protection that it is trying through the International Trade Organization to induce other countries to abstain from developing. In fact, it is difficult to see how the quota provisions of the Sugar Act of 1948 can be reconciled with the goals of the International Trade Organization. T h e international quota system of the International Sugar Convention of 1937 was suspended during the war. However, the International Sugar agreement itself has been renewed from year to year by most of the signatories, and the International Sugar Council has maintained its organization. T h e framework is at hand for the reestablishment of the international quota system at such time as may suit the countries involved. Within Cuba the quota system has never been abandoned. Cuban domestic legislation all during the war has set quotas on the amount of sugar the "centrals" might grind. T h e United States, in buying Cuban sugar, has bought the difference between a stated amount that Cuba should retain and the total amount which the Cuban government allowed to be produced. During this time Cuba has not encouraged new planting and expansion of the industry. But her quota system has not actually operated to restrict the amount of mature cane which is cut or ground. During the war years the Cuban decrees on the subject have provided in some detail for production quotas for each mill and then, in the next paragraph, provided for an automatic procedure for revising the quota if any particular mill could grind more than its allotment. Cuban law for the control of the amount of cane which can be cut or ground is in force on the statute books. And it will, no doubt, again be placed in effective operation in its pre-war form as soon as the period of great demand, occasioned by the war, is over. T h e most important single international question which arises at

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present seems to be the likelihood of major overproduction within the next few years. If the " f r e e " forces of the market were allowed to operate, undoubtedly there would very soon be major overproduction accompanied by sharp price decline, much as occurred after the last war. But conditions are not exactly as they were in 1919. T h e industry is organized to enforce production restrictions. T h e framework of the world organization still exists, domestic legislation in Cuba is automatically ready to enforce such restrictions, and the United States has already passed a new act to forestall the possibility of unwieldy surpluses. In view of these facts the expansion of production will probably not be as great as that which occurred in the twenties. Nevertheless there will probably be a major expansion in sugar production within the next few years. T h e sugar production of J a v a and the Philippines will again be available for sale on the world markets. Beet sugar production in Europe will soon again be able to provide for the major part of the European demand. T h e production of Cuban and other Latin-American cane sugar may or may not expand as part of the trend. But the combination of circumstances is almost certain to lead to major difficulties in the next few years.

VALORIZATION

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COFFEE

Coffee is grown in many areas of Latin America. It comes from the highlands of Central America, from Colombia, from Venezuela. Those regions produce the so-called " m i l d " coffee. From Brazil, however, comes most of the coffee exports of the world, 55 percent in 1938, and the type grown is the so-called "strong" or "Brazil." Little of the world's coffee trade of late years has originated in regions other than these—only about 16 percent in 1938 (see T a b l e 31). On the other side of the picture, the United States, before 1939, took about onehalf of world imports; Germany and France together took another one-fourth: and England drank tea. Brazil is in a dominant position as the major producer, and it was in Brazil that the coffee control schemes first became significant. For these reasons primary consideration is given in this chapter to the manner in which Brazil dealt with the coffee problem. Coffee growing in Latin America is controlled largely by citizens of the countries involved. It is the commodity par excellence in which the individual Latin American, rather than the foreigner, has a stake as producer. For that reason, perhaps, the government of Brazil has

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taken an especial interest in the maintenance of a high price for the product. There are several characteristics of the coffee industry which should be emphasized at this point because of the influence which they have exerted on the control schemes. 1. Coffee grows to advantage on fairly high, well-drained soil. T h e most suitable soil for this purpose has been the terra-roxa of Sao Paulo. In the older coffee growing sections this soil has well-nigh been worked to death—and yet it is coffee growing on the older established estates which is encouraged by the quota system of the control schemes. 2. It takes new coffee trees several seasons to mature—six or seven years in fact. This circumstance has occasioned some delayed reactions of a disconcerting nature. Trees planted during times of high prices have matured during times of low prices and made the prices yet lower. 3. T h e demand for coffee appears to be fairly inelastic. At least the quantity does not vary greatly over any short period of time as a result of price changes. Thus, very substantial price rises have followed only moderately short crops. When the crop has been slightly oversized, all the sellers, bargaining against each other to sell all their crop in a market demanding no greater quantity than usual, have found that this competitive selling has resulted in very significant price drops. Sao Paulo is the leading coffee-producing state in Brazil. It was to the government of this state that the growers first turned following a large crop and low prices in 1905. This first "valorization" scheme was financed by a tax on coffee exports, and the proceeds from the tax were then used to support the coffee price. In 1908, another bumper crop led to another valorization attempt, in connection with which the financing was somewhat different. T h e state of Sao Paulo borrowed abroad the funds necessary to finance the withholding of large stocks from the market. Coffee held off the market under this scheme was all sold profitably by 1918, and the foreign lenders were paid off. Whether by accident or by the merits of the schemes themselves (probably the former), those early control schemes were a distinct success, and this fact made it likely that much the same procedure would be put into effect when difficulties arose again. This occurred in 1925.

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At that time a permanent law for the "defense of coffee" was enacted by the government of the state of Sao Paulo. And the policy which had earlier been resorted to "as the necessity arose" became the permanent policy of the government of the state. Under this plan all coffee had to pass through government warehouses. The state made advances to planters after their coffee had been deposited in the warehouse. Much of the funds necessary to finance the rather complicated credit operations involved were borrowed from abroad, but other funds were obtained from a transportation tax on coffee moved from the interior. The credits extended to the planters were perhaps overliberal. The scheme was perhaps a bit too successful at first in raising the price. T h e result was an overexpansion of the industry. T h e reckoning came in 1929-1930. Trees planted during the period of supported prices following 1925 began to mature. Foreign countries had also expanded production to take advantage of the prices the Brazilian controls were making possible. The price collapsed and then continued to drop as the trees insisted on continuing to mature. Partly, no doubt, because of the disturbances in the important coffee districts, 1930 was a period of political unrest in the country. Getulio Vargas took over the government of Brazil by force. This man, who ruled Brazil steadily from that time until 1946, was from the state of Rio Grande do Sul and not from the coffee country. It was obvious to him that something needed to be done about the coffee problem, but because of his origin his motive was not primarily to make things easy for the paulistas of Sao Paulo. During 1931-1932 the federal government took the coffee valorization out of the hands of the state of Sao Paulo and began to deal with the problem on a national basis. The Departamento Nacional do Café was set up in 1933. A federal export tax on coffee was established. T h e receipts were designed to provide funds for buying up large amounts of the coffee surplus, which would then be destroyed. It was necessary to destroy harvested coffee as well as to stop planting new trees because of the amount of productive capacity already in existence. But a prohibitive tax was also placed on new planting. In addition a socalled "sacrifice" quota plan was adopted, under which the growers had to deliver a certain percentage of their crop to the government at prices below those prevailing in the market. This coffee was destroyed by the government. From the beginning of coffee destruction until the cessation in 1944, 78,000,000 bags were burned. This is not

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a small figure for ten yean work if one remembers that the total coffee exports of Latin America in 1939 were only 25,000,000 bags. By these methods Brazil attempted to work out alone a problem which affected an industry located in many areas outside the boundaries of that country. By the latter thirties two forces were asserting themselves. On the one hand, producers other than Brazilian had begun to realize that their interests as producers might require them to cooperate in the control schemes. But also by 1938 it had become obvious to Brazil that a control scheme, in which restriction of Brazilian supply was the principal measure, merely amounted to turning the coffee industry over to rival countries. Brazil, therefore, desired to have all producers committed to the control schemes. In 1940 an agreement was finally consummated which virtually accomplished this. T h e Inter-American Coffee Agreement of that year included the major producers and the United States—fifteen countries in all. T h e producers were desperate as a result of the loss of the European market. Coffee exports had fallen from 24,894,000 bags in 1939 to 20,375,000 in 1940. T h e United States was desirous of lending a hand in order to assure, if possible, the support of the LatinAmerican countries in the event of ultimate hostilities with Hitler. Under the agreement the United States promised to import a considerable amount of coffee; a basic quota of 15,545,000 bags per year was allotted to the 14 exporting countries in the agreement. Each of the Latin-American producers was assigned a share. T h e United States quota for non-American coffee was set at a small figure (about 350,000 bags). In addition, shares in a quota of 11,612,000 bags which it was thought might be marketed in other places than the United States were divided among the producing countries. Adjustment of the quotas was the principal business of the Inter-American Coffee Board until quota restrictions were suspended on October 1, 1945. T h e votes on the Inter-American Coffee Board were divided as follows: twelve to the United States, nine to Brazil, three to Colombia, and one to each of the other twelve producers. T h e distribution of votes was of a very real importance. Of all the control schemes, this is the one in which consumer interest has probably been most effectively represented. And yet the United States, which was the only member speaking for consumer interest, did not control half the votes. And the United States government was primarily preoccupied with

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gaining Latin-American support for winning the war and was not especially concerned about domestic coffee consumers in the United States. T h e control system worked much as planned until October 1, 1945, when all restrictions on coffee imports into the United States were lifted. T h e nature of the problem had changed considerably from its earlier aspect. There had been a decline in production in Brazil. During the ig3o's Brazilian production averaged 22.5 million bags, but in the period from 1941 to 1945 it averaged only 13.2 million bags. Weather conditions have been unfavorable, Brazilian coffee trees are old, the soil of the region is becoming exhausted, and Brazil is proceeding with a crop diversification program. Meantime Far Eastern production was paralyzed by the war, and Colombian and other production had not increased enough to make up for the Brazilian and East Indian declines. T h e end of the war changed the nature of the problem. However, the world-wide shortage will probably outlast the sugar shortage. And in the meantime there is no need for the quota system because the producers can sell all they can supply meanwhile at advantageous prices. But the shortage will not last forever. When it is over there will again be the problem of gluts. What sort of control system will be utilized when that comes to pass, remains to be seen.

HENEQUEN T w o related fibers which have obtained considerable importance originally came from Yucatan: henequen and sisal. Henequen is a strong, yellowish, leaf fiber. Sisal is white. T h e y are derived from slightly different species of the agave cactus, which grows on the flat, limestone plain of Yucatan. Yucatan is still the principal source of henequen, but the growing of sisal has been largely transplanted to the East Indies. It seems that an almost unique combination of geographical and climatic factors has made Yucatan particularly suited for the growing of henequen. T h e amount of rainfall is moderate. There is little or no surface water, and there are few streams or rivers. T h i s seems to be due to the fact that there is a thin, porous layer of surface soil underlain by limestone. T h e water is available at a slight depth in limestone pockets and is brought to the surface by windmills. T h e great number of windmills is a distinctive feature of Merida and differentiates it from most Latin-

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American cities. Limestone and lime are the predominant elements in the soil. So far as climate is concerned the region is low and hot the year round. It is also characterized by high winds that blow across the area, especially the temporales that come in from the north. During the latter years of the nineteenth century and the early part of the twentieth the growing of henequen was the basis of the economy of Yucatan. Henequen was the principal product which entered international trade. It seems that during those years the region was fairly prosperous. Gustavo Molina Font in his book entitled La Tragedia de Yucatán has claimed that the region was very prosperous. Certainly the henequen economy brought prosperity to the owners of the large estates and to a group of traders and merchants. During the latter part of the nineteenth century the price of henequen was steadily rising. Between 1878 and 1892 it rose from 2%^ (U.S.) a pound to io¿. In regard to price, the principal conflict of interest was that between the growers in Yucatan and the makers of binder twine in the United States. In 1900, or thereabouts, J . P. Morgan sponsored the establishment of the International Harvester Corporation. Before that time the Yucatan sellers could play different United States buyers off against one another; not so after 1900, when International Harvester became for all practical purposes the only buyer. A movement developed in Yucatan which advocated the formation, under the control of the government, of a monopolistic selling organization which could bargain on equal terms with the International Harvester Corporation. In 1912 the government of Yucatan, a new revolutionary government, established the first Comisión Reguladora del Mercado de Henequén. For the funds with which to operate, the Commission obtained a one centavo per kilogram tax on all the henequen produced in the state of Yucatan and on the basis of the anticipated revenue the government was able to borrow 5,000,000 pesos. With this money it began to buy henequen in competition with the agents of International Harvester in Yucatan (Avelino Mones, S. en C.), and the price rose somewhat to 7< (U.S.) a pound in 1913. The commission then sold its holdings to International Harvester at that price and made a fairly substantial profit. This first effort at control in Yucatan was therefore a success from the point of view of the growers. But the growers began to question the desirability of continuing

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the Commission and of paying taxes to it, when those taxes were used to support the cause of an assortment of revolutionary generals during those rather turbulent years. However General Salvador Alvarado, who took over control in Yucatan in 1915, not only strengthened the Commission but raised the tax to 6 centavos per kilogram. More important, he gave the Commission an official monopoly of the henequen trade. T h e growers had to sell their henequen to the Commission, their final compensation being determined by the price the Commission was able to get for it. T h e monopoly power combined with the exceptional demand of the war years gave the Commission every advantage in selling its product. But following the end of the war the world demand for Yucatan henequen began to fall off. United States buyers of binder twine had sources of supply, such as Kenya and Tanganyika. By 1919 the Commission was bankrupt, partly because of the decline in the demand for henequen, partly because of politics and mismanagement. But the idea of control was not dead. In order to prevent International Harvester from buying up, at very low prices, the henequen which the demise of the first Commission had left hypothecated with various banks, it was deemed desirable in 1921 to establish a new controlling organization. This new organization was called the Comisión Exportadora de Yucatán. It was assured a monopoly over the henequen trade by virtue of a tax on production, which apparently only had to be paid by one not selling to the Commission. One of the characteristic features of commodity control schemes was added to henequen control at that time. T h i s was production control. T h e government of Yucatan decreed a 33% percent reduction in henequen production, in order to raise the price through scarcity. T h e Commission, although successful in moving the surplus existing at the time it was created, did not enjoy a long and brilliant life. It went out of existence permanently in 1924, and in its place the Cooperativa de Henequeneros de Yucatán was established. This was supposed to be a growers' cooperative, but it functioned much like the earlier control commissions. However, its span of life was somewhat longer; it existed until the major changes of 1937. Cárdenas came into office as President of Mexico in 1934 promising major changes in the henequen industry of Yucatan, which, despite the control schemes, was plagued with low prices and overproduction.

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I n 1937 he went to Merida himself to supervise the changes. T h e henequen estates were expropriated and turned over to the workers to be farmed collectively under the supervision of the Banco Nacional de Crédito Ejidal. It was provided that all the henequen produced in the collectivized project should be placed under a government agency. A certain amount of henequen land remained in private hands because of the legal provision allowing an owner to keep 300 hectares of land, if the land was semi-arid or not adequately watered. A new organization was established to supervise the marketing of henequen, Asociación Henequeneros de Yucatán. All henequen producers in Yucatan are members (the ejidos included), and they have been constrained to turn the total crop over to the Henequeneros de Yucatán, because of the tax of ten centavos a kilogram imposed on henequen marketed through other channels. T h u s the marketing of henequen has been quite closely regulated. D u r i n g the war years (1942-1945) the government of the United States purchased henequen directly. T h e prices ran substantially higher than the 1934-1938 level. However, renegotiation of prices since the war has been accompanied by further increases. T h e price which the United States government contracted to pay for Mexican henequen rose by 2 j a lb. in 1946 and by 3%^ early in 1947. Positive measures for production restriction have not characterized the henequen control schemes to the same extent that they have characterized many of the other control schemes. Nevertheless the organized, unilateral efforts made by Yucatan to raise the price paid by foreigners has led to a decline in Yucatan's share of binder twine fibers moving in international trade. O n the world market, the demand for binder twine was affected by two opposing factors: a natural decline resulting from the increasing use of the " c o m b i n e " in harvesting, and an artificial stimulus from the industrial expansion of the war years. T h e war demand temporarily solved the problem which the various control schemes had been established to solve. But a further decline will probably take place after the war, and further control schemes will be attempted, either inside or outside of the proposed International T r a d e Organization.

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COPPER There were at least two notorious efforts to corner the world copper market during the latter part of the nineteenth century. Secretan, the head of the French Société Industrielle et Commerciale des Métaux, made such an effort in 1887, and Standard Oil (Rockefellers) made a similar attempt at the end of the 1 Sgo's through the so-called Amalgamated Pool. The Pool succeeded in bidding up the price to 17$! a pound before it broke to 12$. Both efforts failed in the end, although they did succeed in raising the price temporarily—and as a by-product, in curtailing the consumption. Again in 1906-1907 the Amalgamated attempted to corner the market and bid up the price. The price was worked up to 25^ before it broke back to 13^. During the years of World War I the price of copper rose spectacularly, without the aid of control schemes. The annual average price in New York in 1917 was 29^. But the government then set the price, first at and then at 26^ (see Table 32). During the war years the United States copper companies spent some of their large profits to buy out numerous small-scale producers in Chile. The Chile Copper Company and Braden, which at that time were both Guggenheim properties, obtained most of the copper production of Chile—90 percent in 1918. In Mexico, meanwhile, most production was concentrated in subsidiaries of Anaconda (Cananea), Phelps-Dodge (Moctezuma), American Smelting and Refining of the Guggenheims, and the American Metal Company—all of the United States—and the French Rothschild's Cie. du Boleo, in Lower California. In Peru production was concentrated in the United States owned Cerro de Pasco Copper Co. (35,300 tons of a total Peruvian production of 49,000 tons in 1918). At the end of the war the industry was faced with the prospect of declining markets, price drops, and large surpluses. But fortunately for the copper companies the United States government in 1918 decided to permit United States exporters to cooperate in the export market in a manner that the Sherman Anti-Trust Act did not allow in the domestic market (Webb-Pomerene Act). Producers of 95 percent of the United States copper proceeded to organize the Copper Export Association in December, 1918. They also controlled virtually all foreign copper, except the deposits at Katanga in the Belgian Congo. It was evident to the Association mem-

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bers that production needed to be curtailed or the price drops would be disastrous—especially in view of the stock piles built up during the war and in view of the large amount of recoverable copper left on the battlefields of Europe. Between 1918 and 1921 world production was reduced from 1,402,000 metric tons a year to 557,000 metric tons. But the United States companies were responsible for most of the reduction and the Belgian government expanded production at Katanga. Nevertheless, the price fell from 25ft a pound in 1918 to 13^ a pound in 1921. In 1923 the Guggenheim interests and their affiliates, controlling 25 percent of United States production, withdrew from the Copper Export Association and the association was dissolved. T h e surpluses that had been on hand at the end of the war were about used up, and some of the producers thought they could gain more by competing than by cooperating. From 1923 until 1929 both world production and United States production expanded rapidly. T h e price was also rising, at least slightly, and the industry was extremely prosperous. In the midst of this period of prosperity the industry decided to reestablish an over-all cartel organization; and the United States copper companies organized the Copper Exporters, Inc., in 1926. But this time the United States companies, through the influence of C. F. Kelley of Anaconda, succeeded in drawing the Belgian Katanga interests into their orbit and thereby in controlling virtually all of the copper that entered international trade (that is, in controlling 95 percent of the world production). T h u s the leading companies in Canada, Chile, the Belgian Congo, Northern Rhodesia, and the United States got together to control the price and volume of copper production. Despite the fact that the anti-trust laws of the United States forbid United States companies from entering into agreements with foreign companies to control price in the domestic market, the Copper Exporters, Inc., representing the United States producers, apparently cooperated with the international cartel organization, and the subsidiaries in Chile of the United States companies have openly been members of the cartel organization. T h e cartel, between 1926 and 1929, was successful in forcing the price up from 13^ a pound to 24^ a pound (these figures are not annual averages, but highs and lows). But the industry was overexpanded, and the artificially high price led to new production in Canada and Africa. In 1929 the price broke. T h e cartel could not

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work out a successful production and price control scheme, and became ineffective. Its policy of rationing out copper to consumers by the week (in order to prevent the building of stock piles) had irritated a large group of European buyers with the cartel and its methods. Between 1929 and 1932 the joint share of Anaconda, Kennecott, and Phelps-Dodge of world production fell from 50 percent to 36 percent. Competitors were moving in. But the price was also falling, and the annual average was 6ff a pound in 1932. In that year the United States levied a tariff of 44 a pound. This protection was probably demanded by the Western producing communities rather than the big companies, which imported copper as well as producing it in the United States. At any rate the tariff broke up what was left of the international cartel, and it caused considerable loss to refineries in the United States which had formerly handled large quantities of foreign copper. Having cut the foreigners out of the United States market, the United States producers, in the interest of harmony with other producers, apparently were willing to come to a gentlemen's agreement with regard to the quantity of copper the United States would throw on the world market. This they were willing to do particularly because of their Latin-American holdings. They desired to ship copper from Chile, Peru, and Mexico to Europe and other places rather than bring it into the United States over the 44 tariff. In order to obtain a place in the international cartel quota system for their LatinAmerican subsidiaries they were willing to give some assurances concerning the dumping abroad of copper produced in the United States. In 1935 this new cartel was formed by the companies producing 50 percent of the copper mined outside the United States. Producers in the United States, Canada, Russia, and Japan were not members. But the United States companies, for the reasons mentioned above, agreed to limit their exports, and their subsidiaries in Latin America were members. The cartel restricted and regulated the output of members and thereby influenced the price. Following the establishment of the cartel the price remained fairly stable at about i2ff a pound until World War II. The cartel temporarily, at least, suspended operations during the war. During most of the war period, the production, use, and price of copper were closely controlled by the United States and by the United Nations.

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NITRATE Chile has virtually a world monopoly in the production of natural nitrate of soda (NaNO,). The deposits from which it is obtained, locally called caliche, are found in the arid Atacama Desert region of northern Chile—the "land where it never rains." The nitrate has been the source for nitrogen, which is necessary in the production of such diverse products as fertilizer and gunpowder. As late as the beginning of World War I two-thirds of the world's nitrogen was obtained from Chilean nitrate of soda. So profitable and important was this industry to Chile that the export tax on nitrates alone provided a substantial part of the total government revenue. In fact for the period of fifty years from 1880 to 1930, 42.8 percent of the ordinary revenue of the government was derived, on the average, from the export tax on nitrate of soda. (Stocking and Watkins, Cartels in Action, p. 120.) Thus, Chile really "won something" when she won the War of the Pacific (1870-1882) from Peru and Bolivia and took the nitrate deposits. In an effort to get as much profit as possible from their monopoly, Chilean producers entered into six different agreements of varying duration providing for the restriction of output between 1884 and 1914. These agreements, on the whole, not only allotted production quotas to each of the producers but export quotas as well. It was possible for new producers to come into the field, but under the agreements each new entry necessitated a reduction in the quotas of the older members. This was true because the cartels worked on the assumption that over-all profits were dependent on restricting total production or export. However, in view of the manner in which these early cartel agreements operated, according to Stocking and Watkins (p. 122), there was an influx of new producers to take advantage of the export quotas which they could obtain. That would indicate that in those days cartels had not yet worked out the most effective means for maximizing the profits of charter members. Beginning about the time of the first World War (as a result of the introduction of the Haber process for nitrogen fixation), the Chilean monopoly (% of the production) in nitrates was broken. No longer was natural nitrate the principal source for technically usable nitrogen. Germany, Norway, and other areas where the synthetic product was prepared outranked Chilean sources. However, because of the

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great increase in demand for nitrogen during the war years Chile did not feel the adverse effects until the decline in demand after the war was over. Then, in 1919, the government sponsored the establishment of the Chilean Nitrate Producers' Association, which included all the major producers. Four of the eighteen directors were appointed by the government which retained the power to veto price changes if it chose. T h e Association assigned sales quotas to the producers. Producers were encouraged to reduce production. Apparently substantial profits were made in 1920-1921, but by 1922 the expansion in foreign production more than counterbalanced Chilean restriction of production, and the price had fallen substantially. By the latter twenties, in effect, the competition of synthetic nitrates was so strong that Chile had lost all semblance of power to fix the world price. European countries encouraged the establishment of synthetic nitrate plants at home because of the strategic importance of nitrates in wartime and because they did not want to be dependent upon the Chilean monopoly. T o this end the European countries gave tariff protection and subsidies to the new industry and in some cases the government itself established the plant. In 1927 Chile abandoned her independent attempt to control the price, although she continued the effort to prevent competition among Chilean producers themselves. T h e Chilean nitrate industry was in desperate straits, in part because the production techniques were obsolete and inefficient. This was true in general with regard to the Chilean nitrate industry even though the Guggenheims, working through the Anglo-Chilean Consolidated Nitrate Corporation and the Lautaro Nitrate Company, made a determined effort to introduce improved techniques during the middle twenties. In 1926 they established a plant to use the new, more efficient, "Guggenheim process" for extracting the nitrate from the caliche. But the Guggenheim process supplanted the Shanks process too late to prevent the development of major synthetic nitrate production in Europe. And by the end of the ig2o's the Chilean nitrate of soda industry was in a desperate condition. T w o things were done to relieve the situation. Chile joined an international nitrogen producers cartel and established a new organization to control local producers. T h e first of these developments took place in 1929, when the

PRICING AND PRODUCTION

CONTROL

Chilean association of producers entered into a cartel with two of the leading European producers, I. G. Farbenindustrie of Germany and Imperial Chemical Industries of England. T h e cartel agreement provided for price uniformity, assorted export quotas, and production allocation among the individual producers. T h e agreement did not work very well—especially from the Chilean point of view. Her position was difficult. She did not consume her own nitrates, and could not use British or German nitrates, whereas Britain and Germany were both consuming and producing. They could allot meager quotas to Chile. Dissatisfaction with this arrangement led Chile to periodic disagreement with the other cartel members, to various temporary suspensions of the agreement and short price wars. But each time she would find it impossible to compete with European producers in the price war and would return to the agreement. A t about the time the international cartel was established the Guggenheims, in cooperation with the government, decided to reorganize completely the industry within Chile. They established an organization called Cosach (Compañía de Salitre de Chile) in 1930 (incorporated March 20, 1931). Cosach obtained all of the capital stock of a group of companies controlling 95 percent of the Chilean nitrate producing potential, the most important of these being the Guggenheim-controlled companies, Anglo-Chilean Consolidated Nitrate Corporation and the Lautaro Nitrate Co. In exchange Cosach gave those companies a part of its own capital stock. T h e government of Chile obtained the rest of the stock and in exchange turned over large nitrate reserves to Cosach. On the board of directors the representatives of the companies had eight out of twelve positions. But the government representatives had the power of veto in any matter affecting the national interest and in particular with regard to price and to the marked restriction of production. Cosach really never had a chance of success. It began to function during the worst part of the depression. Shortly after its establishment the sympathetic Ibáñez government lost power, and Arturo Alessandri became President, pledged to abolish Cosach "to which the national birthright had been alienated." In 1933 a governmental decree ordered its liquidation. T h e Anglo-Chilean and Lautaro (the Guggenheim companies) reobtained their properties, which had passed to Cosach, and a new company, Compañía Salitrera de Tara-

COMMODITY

CONTROL PLANS

«83

pacá y Antofogasta, obtained the properties of the numerous small independent companies which Cosach had absorbed. After the Cosach failure the Chilean government formed the Chilean Nitrate and Iodine Sales Corporation (1934), to which all nitrate producers were obligated to deliver their nitrate at a price set by the corporation on the basis of "cost in Chile plus the equivalent of $1.50 (U.S.) per metric ton." A lower price could be paid at the corporation's discretion. T h e corporation then served as a unified selling organization which could deal on as good terms as possible with the outside world. T h e government agreed to forgo the old export tax on the industry and other proceeds therefrom, and it was provided that 25 percent of the profits should go to the government, and the rest of the proceeds, after certain expenses, to the individual producers in proportion to their deliveries. Management was equally divided between the government and the producers. T h e Chilean Nitrate and Iodine Sales Corporation has handled the international marketing of Chilean nitrate since 1934, and it has dealt with the International Nitrogen Cartel (Convention Internationale de l'Azote [CIA]) through its subsidiary the Nitrate Corporation of Chile, Ltd. Chilean nitrate has obtained, as a quota, about 20 percent of the international market for nitrates, by agreement with the International Nitrogen Cartel. During the period from 1929 to 1934, as the depression worsened, the international cartel did not succeed in preventing a drop in the price. But it did succeed in curtailing production and probably prevented the price drop from being more extreme than it was. Although World War II temporarily dissolved the International Nitrogen Cartel, it was otherwise a boon to the industry. T h e demand for Chilean nitrate of soda increased, and the industry enjoyed a period of wartime prosperity. However, in the second post-war period, like the first, Chilean nitrate will again be at a disadvantage in the world markets. In view of this fact it becomes pertinent to enquire as to just how useful or desirable the nitrogen cartel has been. Chile has undoubtedly used the domestic export monopoly in order to protect the obsolete techniques. Chile, by law, has attempted to do all that she could to continue as much production as possible using the Shanks process, which employs more workers than the Guggenheim process. T o this end a

«84

PRICING AND PRODUCTION

CONTROL

law of 1934 provided for the distribution of production quotas by geographic areas, so that production would not be concentrated in the lower-cost Guggenheim-process plants. The result has been to place Chilean nitrate at a further disadvantage in the world market. And the general result of the production restriction and price-raising efforts of the international cartel have been to make less nitrogen available to consumers and probably to make prices higher than they would have been in the absence of the controls. On social grounds one can scarcely bemoan the fact that the price of gunpowder is high, but it is of a considerable social significance that the price of fertilizer is unnecessarily high. TIN Malaya and the Netherlands Indies have the largest deposits of tin in the world, and in normal times those two countries furnish more than half of the world supply. Bolivia has the only deposits of real importance in the Western Hemisphere. The principal companies there are (1) Patino, (2) the Hochschild group, and (3) the Aramayo group; and in the East they are (1) the Anglo-Oriental Mining Corporation (Patino), (2) the Dutch government (Banka deposit and a majority interest in the Billiton Company, which together have 97 percent of the cassiterite output of the Netherlands Indies), and (3) the Straits Trading Company (British). Patino and Anglo-Oriental jointly control the Consolidated T i n Smelters, Ltd., the biggest smelting concern, established in 1928. Actually the Anglo-Oriental, itself, is a holding company established by John C. E. Howeson and Simon Patino; and its interests include properties in Nigeria, the Federated Malay States, Thailand, Burma, Japan, and even Cornwall in England. It has controlled the British T i n Investment Corporation and the London T i n Corporation. It might be described as a British-Patino enterprise. It has been the leading force for consolidation in the industry and the leader in promoting the control schemes. Patino, a Bolivian, died in 1947, and his position at the head of the enterprises has been taken by his son Antenor. The years of World War I were characterized by large production and high prices. But following the end of the war the situation changed to one of surpluses; the price of tin dropped sharply from a high of 87^ a pound (annual average price of Straits tin in New York)

C O M M O D I T Y CONTROL P L A N S

285

to 30^ in 1921 (see Table 34). And there was general depression in the industry. Several efforts (cartels) were made to control the production and price of tin during the 1920's, despite the fact that the industry continued to be quite profitable during most of that period, and there was considerable new investment. As a result, after the start of the depression in 1929, the industry found itself with large capacity for production, with surpluses, and with falling prices. The price dropped from 45rC M C M m•«t c o rH « H H m^ C M f C M

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355

TABLE 5 NATIONAL INCOME OR N A T I O N A L PRODUCT® NI or NP (In million monetary units)

NI or NP (In million U.S. dollars)

Per Capita NI or NP (In U.S. dollars)

I6,740 b

4,190

260

91,200

5,067

108

63

21

20

800

421

184

43,000

1,390

253

5,050

120

34

2,164

334

48

1,440

107

34

1,098

628

63

2,640

790

184

129

129

205

532

95

134

315

63

61

136

68

58

257

103

55

304

304

88

706

706

141

270

54

20

180

180

89

Mexico (1946)

12,970

2,680

116

United States (1947)

202,500

202,500

1,405

Argentina Brazil

(1946)

Paraguay Uruguay Chile

(1941) (1947)

(1946)

Bolivia Peru

(1946)

(1942)

(1942)

Ecuador

(1943)

Colombia

(1940)

Venezuela Panama

(1941)

(1945)

Costa Rica Nicaragua Honduras

(1943) (1942)

(1943)

El Salvador Guatemala Cuba Haiti

(1943)

(1943)

(1943) (1941)

Dominican Republic

(1946)

Sources: See pp. 349-50, and see, particularly, International Finaneia1 Statistics, any issue. For other estimates see Economic Report (United Nations), 1945-47, p. 243; and Studies in Income and Wealth, X, 242. a

U n l e s s otherwise indicated figures are for National rather than for National Product.

^Gross national

product.

Income

356

TABLE 6 OIL PRODUCTION AND RESERVES (In million bbls.)

Cumulative

Pro-

duction Country

1938

1948

Jan.

(1857 1,

to

1949)

Proved

Crude

serves

in

of

Jan.

Re-

Gtound

1.

as

1948

it in-America Argentina

17

23

411

275

Brazi1

a

a

1

1

Chile

a

a

a

a

Bolivia

a

a

4

50

16

14

371

150

2

2

44

25

Colombi a

22

24

443

500

Venezuela

188

491

4, 523

8, 350

a

a

2

3

39

58

2,349

1, 058

1,214

2,016

37,099

21,718

U.S.S.R.

2 05

210

6,051

7,500

Middle East

120

412

2,857

19,505

18

21

372

300

1,988

3,405

58,330

61,914

284

635

8,520

10,362

Peru Ecuador

Cuba Mexi co in-Latin-America United States

Trinidad World Total Latin-American Total Latin-American Total as Percent of World Total Sources:

14.3

18.6

14.6

16.7

See pp. 349-50, and see especially

Oil

1947).

27

World

p.

23;

Oil

and

Oil-Yearbook,

Gas 1948,

ruary, 1949, p. 222. "Less than 500,000 barrels.

Journal, pp.

248,

Weekly Dec.

271;

(World

1947,

and

World

pp.

Oil

Atlas,

156,

268;

Oil,

15

Feb-

357

TABLE 7 TRANSPORTATION STATISTICS

Mileage Rai1

of

Number of Inhabitants

way

Track

(1941)

(Ki1ometers)

Country

Per

Auto

(1947)

Kileage

of

Highways Passable

Air for

1ine

Route

Motorcars

Hi

(1943)

Argentina

47,731

35

252,000

5,239

Brazil

34,204

202

128,000

32,321

Paraguay

1,147

570

4,000

580

Uruguay

2,970

33

22,000

1,743

Chile

9,112

87

23,000

2,285

Bolivia

2,290

465

10,000

3,495

Peru

4,448

189

17,000

6,435

Ecuador

1,164

405

3,000

1,750

Colombia

3,365

264

14,000

5,773

Venezuela

1,039

107

6,000

3,870

Panama

155

29

1,000

Costa Rica

664

144

1,000

Nicaragua

591

1,000

2,000

1,295

600

1,000

608

500

4,000

Gua temala

1,186

710

4,000

Cuba

4,941

101

2,000

Haiti

409

1,000

2,000

1

Dominican Republic

663

670

2,000

J

24,363

122

57,000

10,247

376,054

4

3,065,000

39,746

Honduras El Salvador

Mexico United States

Sources:

Interamerican

Statistical

Yearbook,

1942;

World

"



6,556

> 1,279

Trade

320

in

Com-

modities, Part 10, Vol. V, No. 36; W. A. M. Burden, Struggle for

Airways

in Latin

Amer ica,

p.

5.

35»

TABLE 8 M E R C H A N T FLEET (As of June 30,

1946)

Number of Ships

Country

Argentina

Pwt.

Tons

64

430,000

136

670,000

3

19,000

Chile

46

197,000

Peru

10

46,000

Ecuador

1

1,300

Colombia

2

11,000

28

97,000

164

1,329,000

Costa Rica

1

1, 500

Nicaragua

1

1,600

34

167,900

8

14,000

17

118,800

515

3,104,100

United States

4,881

50,389,000

British Empire

3,159

24,009,000

488

2,626,700

12,445

99,219,000

Braril Uruguay

Venezuela

Panama

Honduras

Cuba

Mexico Latin-American

U.S.S.R.

Total All Flags

Sources:

Total

See pp. 349-50, and, particularly, Comments (almost any issue).

on Argentine

Trade

A:

1938

100 100 100 100

Brazil® Chileb Mexico'5 States^

a

INDEX

1937

Country

United

TABLE 9 NUMBERS OF INDUSTRIAL

Heavy

industry

bn Manufacturing

PRODUCTION

1939

1945

1946

144

236

338

104

102

134

145

148

98

98

149

163

144

77

96

189

157

171

Total (in

only.

IN

MANUFACTURING

Number

Percent

1,000's)

of in

Total

Populat

Manufacturing

917b

Argentina®

5.7

1,412c

3

Uruguay®

105d

4.7

Chile®

116b

2.1

10e

Bolivia Peru

.3

380«;

5.6

Colombia®

52f

.5

Venezuela®

46«

1.1

Nicaragua

15h

1.4

Cuba

188b

3.7

Mexico

241c

1.1

United

15.7971

States

Sources:

See

pp.

tistics.

349-50

and,

passim;

®Total

personnel

b

c

1943,

1940,

establishments

382

only, Industries

Brazil

1947

120

B: N U M B E R O F W O R K E R S

Country

359

11

principally,

Monthly

Bu1 let in

in m a n u f a c t u r i n g ,

^1937, with

e

1939,

f

1942,

10 o r m o r e

Internaiiona1 of

including «1936,

workers

Financial

Statistics,

executives,

includes

only,

1

1947.

Sta-

passim.

mining

etc. and

ion

TABLE WORLD

IRON O R E

10 RESERVES

Country

(In

Total Ore million

tons)

7,000

Brazil Uruguay

80

Chile

441

Peru

564 3,000a

Venezuela

Panama

25

Nicaragua

25

Cuba

3,159

Haiti

41

Mexico

United

World

290

States

10,452

Total

57,812

Latin-American Latin-American as

Source:

a Percent

Total Reserves of

U.S.

Tariff

Part

III,

'There

12,170

have

World

Total

Commission,

Vol. been

I,

p.

21

Foreign

Trade

of Latin

Amer

ica,

216.

tremendous

recent

discoveries

in

Venezuele

36.

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0 o K % Q

V a •H V •J 0 0) 0) 4)

m u 9

37° c

e o •

o> > o>

«0 c

c

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•c

o i. >. i. n

c 0

0 c a o O *

*J ^ J= a Ul • H

-H M ro

« *

« te te « o te

-te

o in N CN| CM LO

i m m o ^

Ov o CM O

o o o O CM O

^

fc. *«-• o O

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te 3C « 0 te

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00

be c

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m CM CO







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te te


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«

C

O m 4) a

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CO be

k.

a c 0 %

M a ON u Tf 3 V ON U • t—K * T3 U V 0 -C 0) >•

U, c «0 * s> • S-. X o u « •c « •»i

*•
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0 c O 'H o ^ ^H w 4> O CO 0 a -Q Xi o

9 E a c a Qu

^H a O • c N T3 a o iJ 0 u £ —H 4> (ft O 4) O 3 4) u 0" a u

^

«

a u

u o CO T3 a o « •H 3 9 a u E « u 3 a 4) 4J a -D i/) 4J 0) u e a 3 O •H o ^ O Z X bJ Ü

4) 41 -o u 3 O bt)

o 0) 4) O.

rrt u W a "O o c -H A 3 a 4) ac

a XI 3 u

c 9 O U -H O •H c U U -H >H • H E X a o 4) x a s

E V) O V -o w be a c •M -o -o 4) 4) 4J • H •H C c

tab 1 i

0,

free"

m « 4. te c te «

C 0 c » c O a •c «0 0 « a

O Z c-4 •-< H 3 2 CQ < U. H O u 3

ja E

ca u NN O 2

4) 4J ffl Ih

V •—1 >. 3 s •W« u flj • o o c u cfl u V _Q 3 a. • a »V, •o > 0 s 3 h 4) U. a 0. 3 *0 UT3 « -c U V U. < w 4) U t3 O (T¡

TABLE 21 AMOUNT OF MEDIUM OF EXCHANGE (MONEY SUPPLY), DECEMBER, (In million units of the national currency unless otherwise indicated)

Total Currency in Circulationa

Coun(ry

Total Money Supply

Total Honey Supply in million U.S. Dollars

1948

Per Capita Honey Supply in Dollars

5,085

6,986

12,071

3,020

16,970

27,710

44,680

2,410

52

31

76

25

21

562

295

129

Argentina** Brazil b

Demand Depoaita outaide Central Bank

37'

45

Paraguay^

231

Uruguay

331 e

187

Chile

4,316

8,959

13,275

428

78

Bolivia''

1,782

1,037

2,819

67

17

Peru

712

1,070

1,782

274

40

Ecuador'3

319

308

627

46

14

Colombia

368

381

749

384

36

Venezuela

780

600

1,380

413

96

36

47 16

29

Panama 110

95

205

Nicaragua

48

41

89

18

Honduras

17

26

43

22

18

36

18

Costa Rica

El Salvador

60

29

89

Guatemala

36

19

54

54

15

586

437

1,023

1,023

203

58

110

22

7

Cuba Ha iti

52 d

c

18

19

37

37

17

2,117

1,861

3,978

820

35

25,700

85,800

111,400

111,400

775

Dominican Republic Mexico United States

Source: International

Financial

Statiatica,

any recent

issue.

a

I t is believed that the figures, in general, do not metallic money.

b

June,

include

1948.

""September,

1947.

"^Includes U.S. dollars circulating in the country. e

So-called " g r o s s " figure, which may mean that metallic money is included or that deposits in the central bank are included.

37« G • a -« -H o a « i. s • «o «0 « ä -1 c « o

ON • M CM CO CM

CO CM \0 m r-r-

O. - i « o e

«

« 3 « -« •w 0. V. a a « O)

LO f—4 o \o SO VO ON

co ' co o co so rHOW



'

Tf

CO I CM (M

r—i

TS SO 13 t - CS) C7N i i pir^H

U

>. a e « h U P

U •-H a c o •H

u •• e ta. M O « es JS

3 V. t> 0. n U ft> 3 as co

o vo co no n

CO

CO 00

1

r—t

00•H p H 9 1 B -H to 3 V N • tC te a fci 3 u b a h «"OC/} «J B M u B a CB O•H O -H 3 OLCJZXWU r—t

J3 O 3 0) UT) O U ft) ft) s D « X CQ —1 B — (B O B -H O O w -H •ri (B uZ-o a 3 Z u o< 3 ftl o crCC U B B « B a CQ « 03 ^ t) . . •H •H C a 4) -H .a-h E 3 ca o CJX Q

oc to B -« w ^ a O kl ««H U ft) o •h -o X ->t > U On ki ai Oi C B O ^H ft) 0 rt JB U U E a - t) ki 03 «) iH O e « ti J3 CO S •h ja -o *> E 3 • Ol .X ti H h u O B UO O ft) o CBft)B UIQQCQQH a O T3 ft) •»< ^

c m i On TÍ CO a a t) t> co n t) y kl 3 0 C/5

•—i 0 r~t

373 T A B L E 23 DEPOSITS IN CENTRAL BANKS, DECEMBER, 1948 (Figures, in million units of the national currency unless otherwise indicated, in general do not include deposits payable abroad)

Depoaita of Private Peraona

Country

Argentina8

Deposits of Banka

12,8508

Brazilb

8,179

Covernment Other DeDepoaita posits

Total Total Depoaita Dein 1,000.000 poai ta U .S. Doll

427 1,480

84

1,991

498

3,630 5,219

-

17,028

920

Paraguay0

-

-

-

-

Uruguay®

-

-

54

232

286

151

-

1,037

-

246

1,283

41

Chile 6

Bolivia '

0

_ _

Peru Ecuador

_ _ 144

-

_

Colombia Venezuela

-

_ _ _

-

Rica0

Costa

_

El Salvador Guatemala e

Haiti '

-

f

Dominican

-

_

_ _

4 15

154

78

253

75

63h

II*

44

9

-

-

-

4»* 676 h

1,779 23,381

4b 139h 23, 381

March, 1949, pp. 320-22.

1947.

A s of December, 1946.

c

D e p o s i t s in monetary or issue department

e

15 h

1

-

b

^October,

204 h

-

-

"As of December,

40

8

-

Bulletin,

5

258

16

-

Reaerve

222

16

-

20,479 1,123

-

20

-

States

Source: Federal

_

-

28 Republic

Mexico United

60

_ 12

15h

only.

1948.

A s of July,

1947.

^Deposits in commercial department

only.

®The so-called " nationalized" deposits, which are the ordinary deposits of the banking system but which the commercial banks hold for the account of the Central Bank. They are not included in the total. ^Demand deposits only.

374

TABLE 24 DOMESTIC CREDITS OF CENTRAL BANKS, DECEMBER, 1948 (III million units of the national currency unless otherwise indicated)

Country

To Businessei It InterIndividuBank ala Credits

Argent inaa

To the Government

To Official Entities

Total Domestic Credits

Total in 1,000,000 U.S. Dollars

-

17, 170

1,238

-

18,408

462

10,780

1,720

2,130

1,680

16,320

882

28

66

73

167

54

Uruguay

126

19

48

159

351

185

Chile

683

1,762

1,495

1,199

5,139

165

Bolivia

487

68

1,513

492

2,560

61

-

118

583

151

852

131

63

52

41

242

18

145

132

42

338

173

-

41

41

12

17

116

21

Braiil

b

Paraguay

Peru 86

Ecuador Colombia

19

Venezuela

-

Costa Rica

-

64

35

Nicaragua

-

39

36

-

75

15

Guatemala

-

6

4

-

10

10

9

2

-

11

4

-

-

-

-

19

4

-

-

5

-

5

5

2,490

513

El Salvador Haiti

c

Dominican Republic Mexico*^

-e

833

United States S o u r c e : International

1 Financial

-e

241

1,269

330 23,002 Statistics,

147 -

23,978*

23,978

passim.

'June, 1948. ^Banco do Brasil. c

As of Dec. 31, 1946.

^Includes investments. Negligible. ^There are some additional credits, other than those detailed, to make this total.

375

TABLE 25 D E P O S I T S IN BANKING SYSTEM, DECEMBER, 1948® (In million units of the national currency unless otherwise indicated)

Demand Depoaita

Country

Argentina

Government Depoaita

Time Depoaita

Total Depoaits in II i 11 i on U.S. Dollars

Total Depoaita

Per Capita Depoa i ta in U.S. Dollara

6,986

2,786

6,572

16,344

4,080

254

27,710

7,070

15,500

50,280

2,705

58

31

-

_

331d

-

-

-

-

-

8,959

2,750

3,472

15,181

480

88

Bolivia^

1,037

802

77

1,916

45

12

Peru

1,070

4

522

1,596

246

35

Ecuador^

308

63

88

459

34

10

Colombia

381

25

31

437

224

21

Venezuela

600

147

120

867

258

60

Brazilb Paraguay* 3 Uruguay Chile

Panama Costa

Rica

29

-

95

14

19

48

48

75

4

113

20

28

_ _

_ _

Nicaragua

41

-

-

-

Honduras

27

-

-

-

El Salvador

29

7

1

37

15

7

Gua temala

19

9

1

29

29

8

437

e

103

540

540

107

19

9

15

43

43

20

57,300

146,400

146,400

1,010

Statistics,

passim.

Cuba Dominican

Republic

Mexicod United

1,802 States

85,800

Source: International a

Deposits figures.

b

June,

Domestica11y

e

May

be

3,300

Financial

of banks with other banks are not included

c

^Gross

436

-

1948. owned deposits

only.

figure. included

in other

figures.

in the

376

TABLE 26 D O M E S T I C C R E D I T S O F BANKS OTHER THAN CENTRAL BANK, DECEMBER, (In million units of the national currency unless otherwise indicated)

Country A r g e n t i n a "b Brazil

To Governments

To Official Entities

3,143

6,642

To Business 4 Individua Is

7,344

0

Total Credits

Paraguay'

1

23

Uruguay Chile

1,409

168

14,261

Bolivia Peru Ecuador

Per Ca pita Credits in U.S. Dotlars

4,280

266

24

8

7

351

185

81

15,839

510

93

739

18

5

1,286

198

28

496

254

24

618

185

43

46

46

72

17,129 33,560

3

Total in million U.S. Dollars

1948 s

e

694

Colombia Venezuela

612

6

Panama Costa Rica

9

146

174

31

40

10

65

75

15

13

50

51

20

10

31

31

9

195 e

195

39

19

Nicaragua*^ El Salvador

1

Guatemala Cuba 13

1

12

26

26

12

106

50

1,376

1,532

316

13

United States

62,500

5,400

45,900

113,800

113,800

785

Source: In temation

a 1 F inaneia 1 Statistics,

Dominican Republic'' Mexico

a

Inter

bank obligations not shown.

b

June,

1948.

c

F,xcludes Banco do Brasil.

^Excludes Banco Nacional. e

Loans

and discounts

only.

any recent

i s sue.

377 —s

fe s fe >s9

te 3 3

<
e 4» 1 3 0 H • N T3 to Co a Os • TD C M C/3 4) • « 0 «J fi 0) E iH 0« — O fi o -û A u O U u •H o c to (0t- "O4f 1i e4) c 4) c M • H • H 4J 3 h Jt (M E T3 c h G 3 C 4) U 3 ce CJ fi a U C O •H 4J t—( M «-H U « >>•. 4J CQ- ) ce 0} r—i to e 3 LM • 0 c 4)

>s • H

•H

-o 9) *J C O • H u 0 C t- X c » _A U 4) 4) -o ««-< 9) 3*T3 U U 0 o U O U 0 ••1 3 Lb > c •"1 0 C o « e ** eo 3 O c M q •H V C -X «>» Ui Z 0 c c UJ •H (B U U • H a o U C 3 1) 4J J A •H "H ( d

64

24

a Belgium.

31

-

-

Financial

14k

2

49

International

-

1 9 b,i

76

Nicaragua

Source:

-

e

-

11

-

-

J J J J

22

-

d

1948.

-

1946.

-

10 1

-

any recent issue.

Dutch West Ind ies . i

J

2

Appendix;

2*

e

Panama.

J Negligible.

389

TABLE 36

IMPORTS OF LATIN-AMERICAN COUNTRIES CLASSIFIED BY EXPORTING COUNTRIES 1937 and 1947 (In percent of the total imports of the country)

1 Court try

Argentina

9

J

7

United Sta tes

United Kingdom

Germany

11

21

11

1 United States

Other

9

4

Uni ted Kingdom

7 Germany

Other

45

8

-g

a

61

7

-g

6'

II a

-

-

Brazil

24

13

20

Uruguay

14

17

11

7a

43

8

-g

Chile

29

-

26

8b

42 e

-

le

Bolivia

28

-

13 a

37 f

-

-

23 a ' f

Peru

36

10

20

8a

56 f

6f

.g.i

14a.f

Ecuador

39

10

24

-

71

7

-g

-

Colombia

47

17

13

-

72

4

-

-

Venezuela

S3

9

14

-

-

-

-

-

77

-

-

-

80

-

-

-

85

-

-g

-

77

-

2

-

78

2

75

-

-g

5d

-

Panama

52

-

-

Costa Rica

42

-

23

Nicaragua

54

15

-

10

15

14 -

-

Honduras

58

El Salvador

40

Guatemala

45

-

32

Cuba

69

-

-

-

84

-

-

-

Dominican Republic

52

-

-

13e

78

-

-

-

Mexico

62

-

-

89

-

-g

-

Source:

-

International

a Argentina . g Negligibl e.

31

11

16

Financia b

Peru.,

1 c

15

e

e

1 3 b,e

-

2d

-

Statistics,, Append ix, any recent issue.

Japan. ^ Mexico.

e

1948.

f

1946.

39° Z

• O a

•C i k «• e o o h o.

co

a • « COI. « « a » s. •h a » O k] ' i c 3 t. « 1«. « J5 O «

•D •a

a

« N N O H ^ ^ a N rt

O »-H

1/î \0

^

1 Ci « f - co ^ oo 1 m es 1 co rtN H «-H

1 •

m co • "«t

V (4 9 •H U •H to •H («H —H te « u •H z H «c -X s 5 0) d) (H tt U O s a 4J E U HH (S • U 9 • 4> c 0) .c « 4-> s u 0 O u Cl, 4) tri JC -O 0) 4-> C O a e 0} u

-H > « 8 •H U en Í4 « V (m -o (0 9 c Z U 4> « S •M 9 U e M CL -H hco CO

60 •n 1 es i es • ON i Os i "

«

••"S 1 1

>—


"c c 3 h. E u « I-

M M N \0 1/) ro «6

u 'O 0 o a o E o

00 ON 1 co 1 r« «—t vo co ^ Tf 00 es 00 A NO f- vO pH es co co es * • ON 1—( F—i PO es es VO -H co r—( r-
f—t

-û u •H ^

.o ^ **

c 3 0 u

-O -û C .a c ja « N Mi »-H S (B O 0) •H 60

J3 9 a 4) cc e a u

U

tO 3 o 60 s • E t-i m < 8 e

o

0 T3 « Œ —< > C C/} 4-> • -H

(0 •H CL z u

m

9 a

e

9 O o a

M

4> CO

en O •o U •H X •H V G s

M

»

^

o o VO

>—(

•H E C HH

U 0

»-H 4-) O C

m

»

co r— 1 co 1 Ov Tf

9 O e 4)

tt—

**

u 0 « «(0 c 3 01 « u.

*)

On t> m

t— i es à a. Ov Ov i—t

>s IH O 9 C CD

^

0) o ••i 9) ••i **

«

«ri

co •"i u c «c •H U, —H «3 C 0 •»u u c In C H

V U (-. 9 O CO

M V U 9 &c •H «4H S 03 •M •

0} V

kl 9 60 •H «H

E u V 4J 1 *J

tri 0 0} -a c CD

-o 4) 0 4J U) -H SO \o CO «-H \o ^ to « f-< rr-f co co «-H CM r-H t—i co SO i-H • • CM LO OD CO 1 t'- f - N 00 00 co N "t en co co CO co CO CO O N O N O\ O N O\ o\ «-H F-I 1—( ^H f-H

co co co co < t r— 00 hco co co ON ON Os i-H

ON CO 1 co t - ^o li» co 0\ ON ON »-H

CO co 1 N GO O IO co CO ^ ON ON ON & >-H > 4J >—I a c •H 9 4) N «C «8 S U u < CÛ Í3

u (B •H 0 TD > •H 3 M r-H U p O 4) o CQ CL U3

a a •H V -Q 3 E (4 O p—H ea> O 4) u >

0) « 4J la a a O o a -o 0 G QM 9 O 9 CO Ù C a U > a CC •N 0 « a u H 6 E 40 u s «B 4) e U « a 4J a a •H •H CO c < o SH i» c « u •H 6 0 .Û « H 0 4) h, 4) #>H J: « •H %* 4J 0 C O > M NH e 0 M 9 •» a) «4-t O 0 t> O M *J 0 «—t « "O a 0 C m« h) « B • U V «0 « V» ±J e M O w 0 O e •H U a 4) u H 0} 0 0 4) « »-H « 4> C je O •H 4J 4J VM > U «M O O a O •H U 6 kl •H » 0 « V 9 •H O > O U c 0) e » 4) NN >> « OJ3 U a e 0 u • 4) 3 « U 9 Cl. U 0 U •H Ol. •H h JJ a «J O (Q < U ««H • H 0 U a 0 U 4J « 4) 0 09 4) h 4) 4) 49 Confederación General del T r a b a j o (Argentina), 148 Confederación Inter-Americana de Trabajadores, 151 Confederación Regional Obrera Mexicana, 146, 149 Confirmatory concessions, 67 Confiscation, see Expropriation Consejo de Indias, 5 Conselho Nacional do Petroleo, 140 Consolidated T i n Smelters, Ltd., 284 Consumer goods, production of, 108-14, 1 1 7 , 118; as a government business, 138; in countries of limited industrialization, 170; see also Capital goods Consumers, cooperative organizations for, 122; struggle with producers, 194; credit institutions, 227; protection of, 292; see also Cooperatives Contract law, 152 Control de Cambios, Importaciones y Exportaciones (Colombia), 3 1 3 Cooperativa de Henequeneros de Yucatán, 275 Cooperatives, banana-growers', 97; government encouragement of, 121; types, 122; in public utilities, 135 Copper Export Association, 277 Copper Exporters, Inc., 278

INDEX

421

C o p p e r industry, in L a t i n America, 54-56, 177-79; g o v e r n m e n t r e g u l a t i o n in P e r u , 6a f.; price variations, 277; cartels, 278; in the U n i t e d States, 27g C o q u i m b o , Chile, 103 Cordillera region, South America, p o p u l a tion elements in, 25 C o r d o b a C e n t r a l Railway, 83 " C o r n e r i n g t h e market," 6, 139 C o r n i n g Class Works, 110 C o r p o r a c i ó n Argentina d e Productores d e

C u b a n T e l e p h o n e C o m p a n y , 135 Cuban Tobacco Company, 110 Curaçao, 71 Currencies, m a n a g e d , 219 f.; stabilization of, 220 f.; I n t e r n a t i o n a l M o n e t a r y F u n d , 223; e x c h a n g e rates, 320-22; see also Dev a l u a t i o n of currency Customs, supervision of, by foreigners, 174 Customs u n i o n proposals, 334-35 C u y a m e l F r u i t C o m p a n y , 98

Carnes, 140, 290, 291 C o r p o r a c i ó n d e Fomento d e la Producción (Chile), 143 f. C o r p o r a c i ó n d e T r a n s p o r t e s d e la C i u d a d d e Buenos Aires, 129 C o r p o r a c i ó n Municipal de T r a n s p o r t e s (Brazil), 128 C o r p o r a c i ó n P e r u a n a del Santa, 105 C o r p o r a t e state, 19 C o r p o r a t i o n s , Foreign, see Foreign corporations Cosach (copper organization), 282 Cosquez, Colombia, 60 Costa Rica, 226-27 C o t t o n , 108; Argentine p r o d u c t i o n , 252 Council of N a t i o n a l Economy (Peru), 141 C o u t i n h o , Azeredo, 8, 9 C r a f t industries, 6 Credit, long-term, 49, 144, 145; foreign exchange in relation to i n t e r n a l credit, 231, 234, 236; loans m a d e by commercial banks, 241; interest rate, 242; see also Banks a n d b a n k i n g ; C e n t r a l banks; Industrialization Credit, agricultural, see A g r i c u l t u r a l credit C r e d i t o r countries, ig4 Creole P e t r o l e u m C o r p o r a t i o n , 7 1 Creoles, in L a t i n America, 9, 22 Crespi (textile enterprise; Brazil), 108 Cristalerías de Chile, 1 1 0 Cristalerías Rigolleau (Argentina), 1 1 0 Cuba, p o p u l a t i o n concentration in, 2 1 ; Arawak I n d i a n legend, 23; laws relating to subsoil ownership, 53; c o p p e r m i n i n g properties, 55; c h r o m i u m p r o d u c t i o n , 60; roads a n d highways, 90; iron ore reserves, 103; sugar industry, 114, 258-69; t r a d e associations required by law, 124-25; telep h o n e service, 130; labor agitation against p u b l i c utility companies, 134-35; economic p l a n n i n g , 141; labor unions, 150; regulation of i n t e r n a l credit, 235; foreign interest in sugar industry, 299; exports, 302 C u b a n Electric C o m p a n y , 135

Dams a n d d a m b u i l d i n g , 49, 128, 344 Darkel (Argentina), 1 1 2 Davies, R a l p h K., 70 Dávila, Carlos, q u o t e d , 160 Davis, Kingsley, 21 D e a t h benefits, 157 D e b t o r countries, 194 Debt peonage, see A g r i c u l t u r a l l a b o r D e f a u l t i n g , o n f o r e i g n loans, 174; d e f a u l t s of t h e 1930's, 178-79; p a r t i a l r e s u m p t i o n of d e b t p a y m e n t s , 182; r e l a t i o n s h i p to balance of trade, 190 Delale a n d Risse, 1 1 2 Delta Line, 94 De Mares (oil) concession, Colombia, 44 D e m e r a r a B a u x i t e C o m p a n y , 56 D e p a r t a m e n t o N a c i o n a l d o C a f é (Brazil), 140, 271 Deposits a n d reserves, in L a t i n - A m e r i c a n banks, 238-41 Depressions, 27, 2 1 5 Devaluation of currency, 142; effect o n exports, 322 f.; influence of I n t e r n a t i o n a l M o n e t a r y F u n d o n f u t u r e , 324 D e v e l o p m e n t a l p r o g r a m s (fomento), 140 f., >43 fDewey, J o h n , 13 D i a d e m a A r g e n t i n a S.A. d e Petróleo, 75 Díaz, Porfirio, 41, 52, 66, 87, 144, 147 Diamonds, 61 Dictatorship, 16, 72 Diesel engines, 89 Direct taxes, in L a t i n America, 208-10 Discharge of workers, 154 Distribution, p r o b l e m of, 341 f. Diversification, in L a t i n - A m e r i c a n p r o d u c tion, 255 Dodero, Alberto, 94, 166 Doheny, E d w a r d , 66 "Dollar d i p l o m a c y , " 197 Domestic service, in L a t i n America, 3 1 ; u n affected by laws o n working hours, 155 D o m i n i c a n R e p u b l i c , telephone service, 130; g o v e r n m e n t monopolies, 136; financial ties w i t h U n i t e d States, 220

4 » Dotation, 4 t Drago, Luis M., 101, t o t D r a g o Doctrine, 200 Drugs, see Pharmaceutical* D u p o n t de Nemours, E. I. & Company, 111 Durango, Mexico, 103 D u t c h Guiana, 56 Dutra, Eurico Gaspar, 157 Dzitas, Yucatan, 146 Easley and Inslee Company, 61 Ebano oil field (Mexico), 66 "Economic conflict," 15t Economic development, 3, 4 Economic exploitation, 4, 7; regional, 188, >95 Economic imperialism, see Imperialism Economic philosophies, 3; of the nineteenth century, 8 f.; Latin-American writers on, 8 f.; laissez faire theory alien to Indians, 10; economic aspects of positivism and idealism, 10 if.; Marxian Socialism as an alien philosophy, 15; of Catholic Church, 17 f. Economic planning, 140 f. Economics, as a science, 341 Economic systems: mercantilism introduced by Spaniards and Portuguese, 4; regulatory measures during colonial period, 5 f.; importance of trade controls in colonial period, 6; lack of indigenous LatinAmerican, 19; influence of Mexican Revolution, 20 Ecuador, role of oil companies in PeruEcuador warfare (1941), 79; Panama hat industry, 109; telephone service, 130; radio broadcasting system, 131; government monopolies, 136 Ecuadorian Corporation, 111 Education, Progressive, 13 Ejido, 13, 39, 42; agricultural credit provided, 48 Ejido Banks (Mexico), 46, 48, 49 Electric Bond and Share Company, 126, 128, 129, 135 Electric power, 126-28; in Mexico, 133 f.; need of, in Latin America, 344 El Pao, Venezuela, 105 El Salvador, 21, 108, 13t Embargoes, 315 Emeralds, 60 Emigration, 5; see also Immigrants and immigration Employment, in relationship to capital investment, 168 f.; prevalence of full em-

INDEX ployment and low standard of living in Latin America, 170 Empresa Eléctricas Asociadas (Peru), 127 Empresa Mixta Telefónica Argentina, 131 Empresa Nacional de Transportes Colectivos (Chile), 129 Empresas Eléctricas Mexicanas, 126 Empresas Unidas de Energía Eléctrica (Colombia), 127 Encomiendas, 6, 35, 36, 38 Enemy property, g3, 94, 184 England, 5; financial interests in LatinAmerican railroads, 82, 83 f., 86, 88; in shipping, 94; relative power of, in nineteenth century, 116, 117; exports, 298; as a principal buyer of Argentine products, 290, 303; rivalry with Germany, 304 f.; post-war trade negotiations with Argentina, 328 "Equalization accounts," 220 Ericsson, L. M „ Telefonaktiebolaget, i2g, 130 Estancias, 27, 35 Estrada de Ferro Central (Brazil), 84 Estudos do Bern Commun e Economía Política (Cayrú), 8 Eurindia, 16 Exchange control, 143; simplification of exchange rate under International Monetary Fund, 223 f.; 324; availability of exchange, 316; tabulation of systems in Latin-American countries, 316-18; dollar payments, 320; exchange rates, 220, 32022; devaluation, 142 f., 322-25; bilateral trading, 325-29; state trading, 329 Exchange Equalization Account (United Kingdom), 320 Excise tax, 206 f. Expenditures, government, 213-15 Exploratory (cateo) concession, 53 Export duties, 206 Export-Import Bank, 102, 104, 145, 168, 180-82, 186, 198, 345 Export trade, its importance in Latin America, 2g8; foreign interests and control of, 299; dependence on policy of foreign nations, 300; analysis of trade statistics, 301-3; see also Balance of trade; Import trade; International trade Expropriation: of land, 41, 42, 44; of mines, 51; of foreign-owned oil properties, 67 f., 154, 202; of Mexican railways, 87; U.S. attitude toward, 199 f.; henequen estates, 276; see also Enemy property; Land Extracto Estadístico del Peru, 62

INDEX Fábrica Argentina de Alpargatas, 108 Fábrica Nacional de Bellavista Tomé (Chile), 108 Fábrica Uruguaya de Neumáticos, S A . , 114 Falange movement, ig Farbenindustrie, I. G., 1 1 1 , 112, 282 Farmo Quimica del Pacifico (Chile), l i s Fascism, as a Latin American manifestation, 15 f.; in Argentina, 16 Fazenda, 35 Federación de Asociaciones Católicas de Empleados (Argentina), 148 Federal Land Banks (United States), 46 Federal Intermediate Credit Banks (United States), 46 Federal Reserve Banks (United States), 226, 229; reserve requirements, 231 Fiat money, 217 Finca, 35 Firestone Tire 8t Rubber Company, 1 1 3 First National Bank of Boston, 228 Fisher, Irving, 238 Five Year Agricultural Plan (Colombia), 141 Five Year Plans (Russia), 1 1 7 Floating gardens (Mexico), 163 Flores Magón, brothers, 147 Flota Aérea Mercante Argentina, 93 Flota Mercante del Estado (Argentina), 94 Flota Mercante Gran Colombiana, 94 Flour mills, 1 1 0 Folk Culture of Yucatan, The (Redfield), 163, 245, 246 Fomento corporations, 105, 140-43, 241, 345 Font, Gustavo Molina, 274 Food and Agriculture Organization, 29 Food consumption, caloric, 29 Food products and processing, 110, 302 f. Ford Motor Company, 1 1 3 Foreign capital, 1 1 , 52, 66, 81, 82, 165, 168, 228; see also Balance of trade; Capital investment; Loans, Foreign Foreign corporations, establishment of, in Latin America, 122-24; ' n public utilities, 126, 129-31, 135; profits of, 196; production of export items controlled by, 298 ff. Foreigners, economic limitations on, 54 6» Foreign exchange, internal credit in relation to, 231, 234, 236; in bilateral trading, 326; see also Exchange control Foreign investments, see Capital investment; Loans, Foreign Foreign oil companies, see Oil industry

423 Foreign trade, see International trade Fox, Duncan, and Company, 108 Franco, Francisco, 19 Franco-Argentino (tanning company; Argentina), 109 Freeport Sulphur Company, 59 Frigorífico Nacional (Uruguay), 114 Furniture manufacturing, 1 1 1 Gallegos, Rómulo, 73 Ganso Azul oil field (Peru), 74 f. Gaucho, 25 General Commissariat of Necessities and Prices (Chile), 248 General de Anilinas (Mexico; Peru), 1 1 * General Motors Corporation, 1 1 3 General Theory of Employment, Interest and Money (Keynes), 164-65 Geneva International Trade Organization Conference (1947). 3 " ' 337 Geographical terms, economic imperialism stated in, 188, 193 Gerike, H „ 60 Germany, establishment of airlines in Latin America, 91; elimination of, during war, 92; policy of German industry to discourage new industrialization, 102, 1 1 5 ; pre-war steel industry in Argentina, 106; pre-war Latin-American public utility interests, 127; Latin-American resistance to Nazi pressure, 180; status of German property in Latin America, 183 f.; liquidation of banks in Latin America, 228; attempts in 1930's to obtain Latin-American market, 297, 303 ff.; use of aski marks in bilateral trade, 3(6 f. Gesellschaft fuer Elektrische Unternehmungen, 127 Ghioldi, Rodolfo, 14 Glass manufacturing, 1 1 0 Goias, Brazil, 59 Gold, 51, 58 Gold exchange standard, 218 Goldschmidt loan (1824), '7» Gold standard, adoption of, in Latin America, 217; suspension of, 219 Gómez, J u a n Vicente, 72, 80, 3 1 2 Gompers, Samuel, 150 Good-Neighbor Policy, 179, 202 Goodyear Tire & Rubber Company, Inc., "3 Government banks, see Central banks Government ownership, in Latin America, 136-38, 139; see also Business Grace, W. R., 58, 95

424 Grace Bank, New York, 95 Grace Steamship Company, 91, 95, 96, 109 Grafa (textile firm; Argentina), 108 Grain Regulating Board (Argentina), 250 G r a u San Martín, Ramón, 150 Great White Fleet, 99 G u a n o deposits, 210 Guatemala, telephone service, 131; government monopolies, 136; German property, 183, 184; regulation of internal credit, 235-36; bank reserve requirements, 239 Guayaquil and Quito Railroad (Ecuador), 86 Guelfi (tanning company; Argentina), 109 Guerra, Ramiro, quoted, 261 Guggenheim family, 55, 58 "Guggenheim process," 281 G u i l d system, 6 Gulf Oil Company, 71, 74 Haber process (for nitrogen fixation), 280 Hacienda Rfo Colorado, Santiago, Chile, 35 Haciendas, 35, 39, 41 Hague Conference (1907), 202 Haiti, Negro dominance in, 24; restrictions on foreigners in retail trade, 119; telephone and telegraph service, 130, 131; regulation of private business, 139; American occupation (1915), 199; failure to join International Monetary Fund, 223 Handicrafts, 114 Hatuey (Indian chief), 23 Hatuey (beer), 23, 110 Havana, Cuba, 5, 108 Havana Electric Railway, 129 Haya de la Torre, Victor Raúl, 14, 151 Heavy industries, see Industry; Steel industry Hedges family, 108, 109 Hematite iron ore, 104 Hemp, 108 Henequen, 43, 49, 246; leading industry of Yucatan, 273-76; price regulation, 274; expropriation of henequen estates, 276 Hernández, José, 25 Hershey (sugar) refinery, 114 Highways, see Roads and highways Hispaniola, 21 Hitler, Adolf, 198 Hobson, J. A., quoted, 188 Hochschild group, 57, 284 Honduras, 131 Hostos y Bonilla, Eugenio Maria de, 11 Hours of work, legislation on, 154 f.

INDEX Household appliances, manufacture of, 112 f. Howeson, John C. E „ 284 Huasteca (oil company), 67 Hubner, Manuel, 35 Huerta, Victoriano, 41 Hughes, Howard, 92 Hull, Cordell, quoted, 199, 200; 332 Hull-Rust-Mahoning iron ore deposit (Minnesota), 106 Hume, David, 234 Hydrocarbons, 51 Ibáñez, Bernardo, 151 lea, Peru, 103 Idealism, 12, 13; see also Positivism Illiteracy, 72 Immigrants and immigration, in Colonial period, 5; Latin-American policies, 26-28, 37 Imperfect competition theory, 3 Imperial Chemical Industries, 111, 282 Imperialism, attacked by writers of idealist school, 12; Mexican expropriation of foreign property a test of, 6g; issues involved in economic imperialism, 187 t.; motives, 198; political imperialism, 198; standard of living not lowered by, 193 Import duties, 206 Import trade, of Latin America, 302-5; sources of imports, 303 f.; see also Balance of trade; Export trade, International trade Incas, 3, 163 Income, National, comparison of national incomes, 31; loss of monetary income, 76 f.; measured in terms of goods rather than money, 79; relationship to capital investment, 168, 169; redistribution of, 343; see also Living, Standard of Income tax, 209 f. Incorporated business organizations, 120 f. Indian empires, 3, 14 Indians, at time of Conquest, 5, 6, 23, 38; supposed inferiority to Europeans, 9; definition of, 22; variations in, 25; as the important element in land grants, 36; colonization of, 40; adjustment to industrialization, 100; accumulation of capital funds and goods, 163; attitude toward commercial activity, 245 Indirect taxes, in Latin America, 206 f. Industria Azucarera de Cuba (Guerra), 261 Industria Eléctrica de Mexico, 112, 113, 144 Industrial accidents, 158

INDEX Industrial banks, 144 Industrialization, basis for, 100-103; possible foreign opposition to, 102; U.S. encouragement of, 102, 145; effect on U.S. and other developed areas, 115 f.; production of consumer goods and capital goods during process of, 117, 118; establishment of national development commissions, 142; relationship to standard of living, 160; capital investment in developed and less-developed countries, 169; viewed as main problem in Latin America, 170, 343; see also Credit Industrial Rayon Corporation, 109 Industria Química Argentina Duperial, 111 Industrias Metalúrgicas Mecánicas Unidas (Chile), 105 Industrias Químicas Duperial (Brazil), 111 Industrias Reunidas F. Matarazzo (Brazil), 112 Industry, colonial, 4, 7: classification, 30, 31; anti-foreign legislation, 62 f.; distinction between heavy and light, 102; light industries as industrial future of Latin America, 106, 107; two principal types of light industry: consumer goods industries, 108-14; processing raw materials, 114-15; German industrial policy, 102, 115; effect of Latin-American industrialization on industries of U.S. and other developed regions, 115 f.; LatinAmerican encouragement of local, 142 f.; types of long-term credit available to, >44-45 Ingenieros, José, 11 Instituto de Crédito Agrario (Argentina), 46 Instituto Argentino para la Promoción del Intercambio, 144, 251, 253, 330 Instituto de Crédito Industrial (Chile), 144 Instituto de Fomento Industrial (Colombia), 144 Instituto de Fomento y Producción (Venezuela), 144 Instituto de Química Industrial (Uruguay), 112 Instituto do Acucar y do Alcool, 140 Instituto do Cacau de Baia, 140 Instituto Mixto de Inversiones Mobiliaria» (Argentina), 204 Instituto Rio Grandense do Arroz, 140 Insurance, workers', 156 Intendencia del Chocó, 61 Inter-American Coffee Agreement (1940), «72

425 Inter-American Council of Commerce and Production, 124 Inter-American Development Commission, 102, 141. 143 Inter-American Economic and Social Council, 141 Inter-American Financial and Economic Advisory Committee, 141 Interest rates, 17; on foreign loans, 172 f., 182; charges made by commercial banks, 242 International balance of payments, 221 International Bank for Reconstruction and Development, 102, 145, 168, 182, 192, 199 International Chamber of Commerce, 124 International Committee of Bankers on Mexico, 87 International General Electric Company, 112 International Harvester Corporation, 113, 274 International investments, see Capital investment; Loans, Foreign International law, 199 International lending agencies, see Lending agencies International Mining Company, 58 International Monetary Fund, provision for removal of foreign exchange controls, 143; Latin-American membership in, 223 ff.; relative values of currencies as determined by, 320; influence on future devaluations, 324 International Nitrogen Cartel, 283 International Petroleum Company, 74 International Politics (Schuman), 198 International Railroads of Central America, 98 International Reference Service, quoted, 123 International Sugar Conference (1937), 265, 268 International Telephone and Telegraph, 129f. International Tin Control Scheme, 285 International trade, policies of United States and Latin America, 77 f.; promoted by industrialization, 116; role of Latin-America, 298-308; lobbies, 307; tariffs, 309-12; trade restrictions after 1929, 312 f.; quantitative trade controls, 313-15; exchange control, 316-25; bilateral trading, 325-29; private compensation arrangements, 329; state trading.

4*6

INDEX

International trade (Continued) j i g ; during W o r l d W a r II, 330-31; U.S. proposals for expansion, 331-34; customs union proposals, 334-35; see also Balance of trade; Export trade; Import trade; T r a d e restrictions International T r a d e Organization, 292-94, 3°». 336 Intervention, in Latin America, by European nations, 198; by United States, 199; statement of Hague Conference (1907) on, S02 Investment, see Capital investment Iodine, 58 Iron ore reserves, in Latin America, 103-5 Iroquois Indians, 22, 23 Irrigation systems, 45, 163 Itabira, Brazil, 85, 104 Ixtapantongo hydroelectric plant (Mexico), 128 Jamaica Banana Producer's Association, Ltd., 97 Jipijapa, Ecuador, 109 Johnson Act (1934), 197 Johnson and Johnson, 112 Johns Manville Corporation, 111 Jones, Jesse, 181 Jones-Costigan Act (1934), 264 Junta de Subsistencia Social (Peru), 248 Junta Nacional de Carnes (Argentina), 291 Junta Reguladora de la Producción Agrícola (Argentina), 140, 251 Justo, Agustín Pedro, 83 "Just" price, 6; endorsed by Catholic Church, 18; vestiges of, still remaining, «45- «47 Katanga, Belgian Congo, 277 Keith, John, 174 Keith, Minor C., 98 Kelley, C. F., 278 Kemmerer, Edwin W „ 228, 236 Kennecott Copper Corporation, 55 Kershaw, Joseph A., 323 Keynes, John Maynard, 3; quoted, analysis of unemployment, 168-70 K L M (airline), 93 Kohorn, Oscar, and Company, 109

164;

Labor, in colonial period, 6; technical training of, 101; dissatisfaction with public utilities services, 134-35; social legislation, 146-47; protection from arbitrary discharge, 154; working hours, 154, 155; wages, 155-56; social security legislation,

156-60; profit-sharing plans, 159; workers retained during depressions, 169; see also Agricultural labor Laboratories Silva-Araujo (Brazil), 112 Labor disputes, use of mediation and arbitration in, 153 Labor unions in Latin America: Churchsponsored unions, 19; organization of unions, 146, 148-51; government control, 147; international organizations, 150-51; strikes, 151; collective contracts, 152; mediation and arbitration, 153 La Consolidada (Mexico), 105 Lafertte, Elias, 14 Lago Petroleum Company, 70, 71 Laguna de Tamiahua oil fields (Mexico), 66 Laguna project, 43, 49 Lagunillas oil field (Venezuela), 71 La Industrial (Ecuador), 108 La Internacional (Ecuador), 108 Laissez faire philosophy, 3, 7, 10 iMtnp (periodical), quoted, 78 La Nacional (Uruguay), 109 La Nacional Platanera (Mexico), 97 Land, ownership of, 3; landholding systems, 35-40; colonization projects, 40; redistribution, 29, 41-45; ownership by foreigners, 45; see also Expropriation; Minerals La Pampa, Argentina, 75 La Representación de ¡os Hacendados (Moreno), 8 Las Casas, Bartolomé de, 5 Lastarria, José Victoriano, 10 Lati (airline; Italian), 92 Latifundios, 35-37, 38 Latin America, economic philosophies and systems in, 3-20; racial composition of, 21-26; immigration policies, 26-29; standards of living and national incomes, 29, 31; urban concentration, 29; systems of land tenure, 35-40, 45; subsoil ownership, 52-54; mineral production, 54-63; oil industry, 65 ff.; railroads, 8i-8g; roads and highways, 89-91; airlines, 91-93; industrialization, 100-103; steel industry, 103-7; light industries, 107; consumer goods industries, 108-14; processing of raw materials, 114-15; types of business organization, 118-25; establishment of foreign corporations, 122-24; water power resources, 126-28; communications, 12931; rate setting in public utilities, 132-34; paternalism, 136, 139, 140; economic plans and planning, 140 f.; protective

INDEX tariff, 142; labor codes, 146-47; labor organizations, 148-51; 153, 155; production of capital goods, 163 f.; sources of capital funds, 165-68; utilization of money ("crived from foreign loans, 175 f.; defaulting on foreign loans (19291940), 178, 179; resistance to Nazi pressure, 180; German property, 183 f.; effects of economic imperialism in, 186 it.; efforts to resist capital exporting countries, 200; restrictions on capital movements, 203-5; sources of revenue, 306-13; government budgets, 213-15; early history of money in, 216 f.; adoption of gold standard, 217; present monetary standards, 223; banks and banking systems in Latin America, 225-42; pricing techniques, 245-57; commodity contol plans, 258-94; in international trade, 297308; trade restrictions, 309-31; expansion of trade, 332-37 Lautaro Nitrate Company, 58, 281, 282 "Law of progress," 10 Lead mining, 56 Leather products industry and handicrafts, 109 Legal codes, regulation of labor by, 1461. Legufa, Juan, 176 Lending agencies, 144, 145, 241 f. Letelier, Valentin, 10 Lewis, John L., 151 Licenses, in international trade, 314-15 Light industries, see Chemical manufacturing; Consumer goods; Industry; Raw materials; T e x t i l e industry Lima, Peru, 151 Línea Aérea Nacional (Chile), 93 Linea Aeropostal Venezolana, 93 Living, standard of, positivist and idealist theories for improving, 12; relation to population in Latin America, 21; comparison of, in Latin-American countries, 29 ff.; failure of Venezuelan oil wealth to raise standards, 73; effect of U.S. foreign trade policies, 77; contrast between social legislation and actuality, 146; relationship to capital investment, 169; prevalence of low standard and full employment in Latin America, 170; foreign vs. local ownership of capital goods, 195; in terms of self-sufficiency, 298; see also Income, National Lloyd Brasileiro (steamship line), 93 Loans, Foreign, interest rates on, 172 f.; special guarantees demanded by lenders, 1731.; utilization of borrowed money,

427 175 f.; cessation of, from 1929 to World W a r II, 178; as a transfer of goods, 186 f.; necessity of repayment in goods, 187; need for integrity in international lending, 192; diplomatic and political significance of foreign investments, 196 f.; U.S. policies on, 196 f.; Capital investment; Foreign capital Lombardo Toledano, Vicente, 14, 149, 150, 151; quoted, 195 London T i n Corporation, 284 Lone Star Cement Corporation, 111 Los Mochis, Mexico, 43 Lotteries, in Latin America, 210-11 Louisiana sugar lobby, 191 Lykes Line, 95, 96

McCarthy, Glen, 76 Machado, Gerardo, 134 Machinery, 302 MacKay R a d i o and T e l e g r a p h Company Inc., 130 Madden, J. T . , 179 Madero, Francisco I., 41 Magdalena Valley, Colombia, 74 Magnetite iron ore, 104 Maize, 246 Manganese, 59, 60 Mannesman (German steel firm), 106 Manterola, Miguel, quoted, 193-94 Manufactura Textiles " F o r n o " (Bolivia), 108 Manufacturing, 31 Maracaibo, Lake, Venezuela, 71 Mariátequi, José Carlos, 15 Market price, 246 Malaya, 56, 284, 286 Markets, 101 Márquez, Javier, 334 Maternity benefits, 158 Max, Hermann, 231 Maximum Price L a w (Argentina), 254 Maya Indians, 3, 25 Meany, George, 151 Meat-packing industry, 114; in Argentina, 287-92 Mechanical skill, 100 Mediation, in labor disputes, 153 Meiggs, Henry, 86 Meirelles T e i x e i r a , J. H., 133 Mellon, Andrew, 71, 74 Mene G r a n d e Oil Company, 71 Mennonites, 40 Mercantilism, 3, 5, 7 ff. Merchant marine, see Ships and shipping

4«8 Merck (German pharmaceutical company), ut Mercury, 60 Merida, Yucatan, «73 Mestizo, 21, 100 Metals, see Minerals Metals Reserve C o m p a n y , purchase of strategic materials by, 62 M e x i c a n L i g h t and Power C o m p a n y , 127 M e x i c a n Petroleum C o m p a n y , 66 M e x i c a n R e v o l u t i o n : its origin and characteristics, 13, 14; as an influence in econ o m i c philosophy, 20; d e b t peonage outlawed, 37; advocacy of land redistribution, 41; state ownership of subsoil, 52, 66 M e x i c o , evolution of new economic a n d social system in, 13 f.; p o p u l a t i o n concentration in Central Plateau, 21; size and n u m b e r of landed estates before Revolution, 35; c o m m u n a l land and agriculture, 3g, 49; land redistribution, 41-45; loans a n d credit, 46, 47-49; oil industry and foreign ownership, 52, 66, 67, 70; state ownership of subsoil, 52; copper mining, 55, 56; silver deposits, 59; local owners h i p of mines, 63, 64; railroad service, 81; b u i l d i n g and financing of railroads, 8689; roads and highways, 90; coal and iron ore reserves, 103; steel industry, 105; cement production, 1 1 1 ; oil refineries, 114; foreigners in business, and foreign corporations, 119, 123; development of p o w e r facilities, 128; r a d i o broadcasting system, 131; electric power supplies, >33 f-. '851 regulation of private business, 139; economic p l a n n i n g , 141; government sponsorship of lending banks, 144; labor code, 146; growth of labor unions, 147, 149; collective contracts, 152; conciliation and arbitration procedures, 153; Goldschmidt, and other foreign loans, 172 f.; as a debtor nation, 193-94; regulation of incoming capital, 203; adoption of gold standard, 217; bank reserve requirements, 239; copper industry, 277; preponderance of foreign ownership of mines, 298 f.; exports, 302; agreement w i t h United States for maintenance of peso value, 321 M e x i c o City Conference (1945), 141 Mica, 60 M i d d l e East, 65, 78 M i l l e t and R o u x , 112 M i n a s de M a t a h a m b r e (Cuba), 55 Minas Gerais, Brazil, 61, 81, 84, 103

INDEX Minas ra gra m i n e (Peru), 61 Minerals, 4; government ownership, 13, 51; •tate property in Mexico since Revolution, 52; three types of subsoil ownership, 53; restrictions on foreigners, 54, 62 ff.; types of, 54-62; strategic, 59-62; government regulations, 62-64; general problem of ownership, 76 f.; light metals, 106, 107; smelting, 114; exports, 302 t. M i n i m u m wage laws, 155 M i n i n g Code of Charles III (1783), 51 M i n i n g industry, 6; as an important LatinAmerican industry, 31, 54-62; legislation favoring locally-owned mines, 63-64, 80; in early Latin America, 163 Mississippi S h i p p i n g C o m p a n y , 94 M o l y b d e n u m , 61 Monclova, Mexico, 105, 144 Monetary borrowing, 186 f. Monetary standard in L a t i n America, 224«5 Money, in Latin America, 216 if.; early history, 216, 245 ff.; quantity theory of, 234; see also Currencies Monocultures, 254 f. Monopoly, in colonial period, 6; government operated, 136 f., 139; as a means of encouraging new industries, 143 Monroe Doctrine, 196, 198 Monsantoatanor Industrias Químicas A r gentinas, 111 Monsanto Chemical C o m p a n y , 111 Monte Cristi, Ecuador, log Monte de Piedad (Mexico), 225, 227 Monterrey, Mexico, 56 Montevideo Conference (1933), 202 Moore-McCormack Lines, 94 Mora, José María Luis, 9 Moral Profesional Económica (Azpiazú), 247 Moreno, Mariano, 8 Morgan, J. P., 274 Morococha mine (Peru), 55 Morones, Luis, 149 Morro da Mina, Brazil, 60 Morro Velho gold mine (Brazil), 58 Morrow-Calles settlement (1928), 67 Mortgages, 164 Mosher, Sam, 70 Most-favored-nation clause, in U.S. tariffs, 333 M o t o r C o l u m b u s (electric power company), 127, 129 Motuca, Brazil, 56 Mulatto, 22, 100 Muzo, Colombia, 60

INDEX Nacional Financiera (Mexico), 105, 113, 144 Nadler, Marcus, 179 Nahuatl Indians, 25 Nash-Kelvinator, 1 1 2 National Banks of Agriculture (Mexico), 46, 48, 49 National City Bank, 176, 228 National Cotton Board (Argentina), 252 National domain, 40 National Economic Council (Brazil), 141 National Economic Council (Mexico), 141 National Food Supply Corporation of Peru, »49 National income, see Income, National National Industrialization Plan (Colombia), 141 Nationalism, 15 f. Nationalization of public utilities, 135 National Meat Board (Argentina), 252 National Petroleum Refinery (Brazil), 114 National Price Control Board (Venezuela), 249 National Railways of Mexico, 87 Natural resources: coal, 89, 103 f.; iron ore, 103 f., 105; water power, 126-28; draining of wealth from "colonial" to "imperialistic" country, 188; see also Raw materials Nederlandsche Olie Maatschappij, 70 Negro, 24, 100 Netherlands Indies, 284, 286 Neuquén, Argentina, 75 Neutrality legislation, 197 New York and Cuba Mail (steamship line), 95 New York city, as an international clearing house, 191 Nicaragua, 197 Nicaro Nickel Company, 59 Nickel deposits, 59 Niteroi, Brazil, 104 Nitrate and Iodine Sales Corporation, 208 Nitrate production and industry: Chile, 58, 206, 280-84; early quota systems, 280; effect of Haber process, 280 f.; synthetic nitrate competition, 281 f.; international cartels, 282 Nitrogen, 280 North American Dredging Company, 201 Obregón, Alvaro, 41, 42 Obregón y Blanco, José Emilio, 176 Occupational diseases, 158 Ocean transportation, see Ships and shipping Oil, ownership of, 51 f., 66 f., 76, 77

429 Oil industry and trade, political and economic readjustments occasioned by, 65; oil production in Mexico, 66-70; expropriation of foreign-owned Mexican properties, 67; production in Venezuela, 7073; in Colombia, 73-74; in Peru, 74; in Argentina, 75; refineries, 71, 114; oil exports, 73. 76; oil imperialism, 76 ff.; oil reserves in United States and other regions, 78, 79; political complications engendered by foreign ownership, 77 ff. Oil workers' union (Mexico), 69 Olave, Mario Farias, 35 Old age benefits, 157 Open-market operations, 233 Organic Petroleum Law, 1925 (Mexico), 67 Oriente, Cuba, 59, 103 Orinoco valley, Venezuela, 103 Packers Control Act, 1923 (Argentina), 288 Paint and varnish industry, 1 1 2 Palacio de Hierro (Mexico), 108 Pampa, Argentine, population concentration in, 21; population elements, 24; roads and highways, 89 Panagra (airline), 91, 95 Panair do Brasil, 91 Panama, merchant marine, 94; restrictions on foreigners in retail trades, 119; financial ties with United States, 220 Panama Canal, 90 Panama Canal dispute, 73 f. Panama Conference of Foreign Ministers (>9S9). >4i Panama disease (banana disease), 97 Panama hats, 109 Pan American Airways, 91, 92 Pan American Conference (1889), 332, 334 Pan American Conference (1933), 202 Pan American Federation of Labor, 150 Pan American Highway, 90, 91 Pan-American movement, 141, 332 Paper money, in Latin America, 217 Paraguay, 40 Parke-Davis & Company, 1 1 2 Partnership, 119, 120 Patagonia, 75 Paternalism, 6, 136 f., 248 Patino Simón, 57, 284 Patino Mines and Enterprises Consolidated, 57- 284 Pauley, Ed, 70 Paulista (Brazil), 84, 85 Paulo Alfonso falls (Brazil), 128 Peña, Lázaro, 150 Peonage, see Agricultural labor

43° Peonía, 39 Pension systems (old age), 157 Perón, Juan Domingo, 17, 76, 147, >37; political status of, 254 Peru, 3: Apra movement, 14; copper production, 55, 6a; silver deposits, 5g; vanadium production, 61; government efforts to encourage locally-owned mines, 64; oil industry, 74, 75; role of oil companies in Peru-Ecuador warfare (1941), 79; roads and highways, 90; coal and iron ore reserves, 103; steel industry, 105; telephone service, 130; government monopolies, 136; regulation of private business, 139; economic planning, 141; price control system, 248-49; copper industry, 277; foreign control of mining industry, 299; exports, 301 Peruvian Corporation, 86 Petroleum industry, see Oil industry and trade Petróleos Mexicanos, 69, 70, 114 Pharmaceuticals, manufacture of, 1 1 s Phelps-Dodge Corporation, 56, 277 Philip II (King of Spain), 51 Piccardo and Company (Argentina), n o Pinar del Rio, Cuba, 55 Pius XI, Pope, quoted, 18 Planned economies, in Latin America, 140 f. Platinum, 61 Political democracy: as a force in nineteenth century,8 Political imperialism, see Imperialism Ponte, Conde da, 9 Population, Latin-American: general characteristics, 21-26; urban concentration, 29, 107; mining centers, 54 Porter Resolution, 200, 202 Porto Bello, Panama, 5, 6 Portugal, 4 ff., 164 Positivism, 10-13; see also Idealism Potosí, Bolivia, 59 Power, see Electric power Power politics, 116, 198; see also Imperialism Prado, Manuel, quoted, 142, 159 Prendario (agricultural loan), 47 Presidente (beer), 110 Pressure groups, 307 Prestes, Luis Carlos, 14 Price control, 6, 139; in Chile, 248; Peru, 248; Venezuela, 249; Argentina, 249-54; see also Commodity control Prices and pricing techniques, historical background, 245 ff.; attitude of Catholic Church, 247; as influenced by free com-

INDEX petition and monopoly, 247-48; analysis of price system in Argentina, 149-54; fluctuations in prices of raw materials and of manufactured products, 255-57; ' n Cuban sugar industry, 258-69; valorization of coffee, 269-73; regulation of henequen, 273-76; of copper, 277-79; nitrate, 280-84; of tin, 284-87; Argentine meat, 287-92 Primera Hilandería del Uruguay, 109 Principios de Economía Política (Cayrú), 8 Private business, see Business Producers' cooperatives, 122; see also Cooperatives Production, 195,341 Professional occupations, in Latin America, 31 Profits and profit motive, 7; attitude of Catholic Church, 18; profit-sharing plans, 158; profit rates, 169 f.; in economic imperialism, 188 f.; production of greater importance, 195, 341; withdrawal of, by foreigners, 204 Promedio system (sugar industry), 259 Property, attitude of Catholic Church, 18; Roman law on ownership, 51; protection of, 199 Property tax. 209 Proprietorship, i i 8 f . "Pseudo-capitalistic" nations, 194 Public utilities: electric power, 126-28; urban transportation, i28-2g. 135; telephone, telegraph, and radio, 129-31; r a t e setting problem, 132-34 Puebla, Mexico, 108 Puerto Rico, 21 Purchasing power, provided by developing new industries, 101, 107, 116; necessity to increase, 195; in terms of raw material prices, 256 Purchasing power parity theory, 219-21 passim Quantity theory of money, 234 Quartz crystals, 61 Quebracho, 301 Quechua Indians, 25 Quicksilver, 51 Quintana Roo, Yucatan, 163, 245, 246 Quirografario (agricultural loan), 47 Quota system: sugar, 265 f.; coffee, 272 f.; copper, 279; nitrate, 280 f.; tin, 285; beef, 287 f.; International Trade Organization, 292-94; as direct control of imports and

INDEX exports, 313-14; tarili quota, 314; in bilateral trade treaties, 3x7 Racial origins, in Latin America, ! i Radio, establishment of, by United Fruit Line, 98; see also Communications Radio Corporation of America, 129, 131 Railroads, in Latin America, 81-89 Ramos, Samuel, 14 Ramos Mejias, Francisco, 11 Ramos Mejias, José Maria, 11 Ranchos, 40 Rate setting, in public utilities, 132-34 Raw commodity control, see Commodity control; Prices and pricing technique Raw materials, analysis of available resources, 102-15; processing of raw materials, 114-15; severance taxes on, 207-8; fluctuations in prices, 215, 255 f.; their importance in monocultures, 255; Cuban sugar industry, 258-69; Brazilian coffee industry, 269-73; Yucatan henequen, 27376; copper, 277-79; nitrate, 280-84; tin, 284-87; Argentine meat, 287-92; in LatinAmerican international trade, 297-308; see also Chemical manufacturing; Consumer goods; Industry; Natural resources; Steel industry; Textile industry Rayón Peruana, 109 Reciprocal trade agreements, 333-34 Redfield, Robert, 163, 245; quoted, 246 Refaccionario (agricultural loan), 48 Refineries, Oil, see Oil industry and trade Refugees, European, attempts to settle in Latin America, 28 Regional customs unions, 334-35 Reserve requirements, in Latin-American banks, 239-41 Retail trades, i i 8 f . Revenues, sources of, 206-13; see also Direct taxes; Excise tax; Income tax; Indirect taxes; Property tax; Severance tax; Stamp tax Revindicating Revolution (1920), 42 Rio de Janeiro, Brazil, 84 Rio de Janeiro Tramway, Light and Power Company, 126 Rio Grande valley, Mexico, 66 Rio Negro power plant (Uruguay), 127, 128 River Plate expedition (1845), 198 Roads and highways, in Latin America, 899' Roca, Blas, 14, 25 Roca-Runciman treaty (1933), 290 Rockefeller, Nelson, 141 Rodó, José Enrique, 12

43» Rodriguez, Abelardo L „ 41 Rojas. Ricardo, 16 Roman law, 51 Roosevelt, Theodore, 197 Rosita, Mexico, 56 Rothschild's Cie. du Boleo, 277 Royal Bank of Canada, 228 Royal Dutch Shell Croup, 67, 70, 75 Royalties, from natural resources, 189 Rubber, 1 1 3 Rubio, Ortiz, 42 Russia: Five Year Plans, 1 1 7 ; exports, 298; state trading, 330 Ryan, John D., 55 Safie Hermanos (El Salvador), 108 St. Joseph Lead Company, 56 Salas, Manuel de, 8 Sales tax, 207 Salinera Nacional (Dominican Republic), •56 Salt deposits, 136 Salaverry, Peru, 95 Santa Barbara, Brazil, 104 Santo Andre, SSo Paulo, Brazil, 104 SJo Joao d'El Rey Mining Company, 56, 58 Sao Paulo, Brazil, population concentration in, 21; White Russian settlement, 40; railroad service, 81; textile mills, 108; telephone rates disputes (1940), 133; coffee industry, 270 ff. SSo Paulo Electric Company, 126 SSo Paulo Railway (Brazil), 84 Sarmiento, Domingo, 1 1 , 25, 27 Saudi Arabia, 77, 78 Scadta (airline; Colombia), 91, 92 Schering (German pharmaceutical company), 1 1 2 Schuman, Frederick, 198 Schweizerische-Amerikanische Elektrizitaets Gesellschaft, 127 Second International Socialist parties, in Latin America, 14 Securities and Exchange legislation, 192 Self-sufficiency, in terms of standard of living, 298; of no particular merit, 344 Seligman, J . and W„ and Company, 176 Services, Inc., 127 Severance tax, 207 Seville, Spain, 5 Shaw, George Bernard, quoted, 188 Sherman Anti-Trust Act, 277 Sherwin-Williams Company, 1 1 s Shields & Company, 105 Shipbuilding industry, in Brazil, 93 Shipping industry, see Ships and shipping

432 Ships and shipping, in Latin America, 9399 Shoe manufacture, 109 Sickness benefits, 157, 158 Siderurgia Argentina Sociedad Anónima Mixta, 106 Sidro (public utility company), 127 Siemens-Schuckert Werke, 117, 129 Signal Oil Company, 70 Silver, 51, 58, 59 Sinarquismo movement, 19 Sinclair Oil Company, 68 Sindicato Industrial del Peru (trade association), 124 Sioux Indians, 23 Sisal, 273 Six Year Plans (Mexico), 141 Slum clearance, 2g Smelting industry, 114 Smith, Adam, 8 Smithfield and Argentine Meat Company, 289 Smoot-Hawley tariff (1930), 178, 264, 332 Smyth v. Ames (U.S. Supreme Court case), 13«. >34 Social legislation, 146 Social reform, 45 Social security, in Latin America, 146-56; legislation, 156-60 Socialism, Marxian, 13, 14 Sociedad Anónima (incorporated business), 120 Sociedad Anónima Radio Argentina, 130 Sociedad de Responsabilidad Limitada (business organization), 120 Sociedade Anónima (incorporated business), 120 Sociedade em Comandita por A^óes, 121 Sociedade em Comandita Simples, u g Sociedade em Nome Colectivo, 1 1 9 Sociedad en Comandita por Acciones, 121 Sociedad en Comandita Simple, 119 Sociedad en Nombre Colectivo, 119 Sociedade por Quotas de Responsabilidade Limitada, 120 Sociedad Rural Argentina (trade association), 124 Société Anonyme, 120 Société d' Electricité (Luxemburg), 127 Société en Commandite Simple, 1 1 9 Société en Nom Collectif, 1 1 9 Sofina (public utility company), 126, 127, 128 Sonora, Mexico, 49 Sosua, Dominican Republic, 28 South American Airways, 93

INDEX South American Gold and Platinum Company, 61 South American Power Company, 126 Southern Pacific (Mexico), 88 Southern Railroad of Peru, 86 Spain, 4, 6, 23, 164 Spanish law, 6, 13, 51 ff. Spanish Succession, War of the, 6 Specialization in production of goods, 194 "Specie-flow mechanism," 234 Squibb, E. R. & Sons, 1 1 2 Stabilization funds, 220, 222, 320 Staley, Eugene, 196 Stamp tax, 207 Standard Fruit and Steamship Company, 97 Standard of living, see Living, Standard of Standard Oil Company of New Jersey, 67, 7°. 74. 75. 7® Standard Oil Company of Venezuela, 7» State, T h e , 4, 6, 51, 66 f. Steamship lines, see Ships and shipping Steel industry, 7, 103 (I. Stocking, George W., 280 Straits Trading Company, 284 Strategic materials, 59, 61 f. Street-car transportation, see Transportation Strikes, 147, 151 Sturzo, Luigi, 18 Suárez, Agustín Enrique Alvarez, 10, 11 Subsidies, value of, 96, 97; as a means of encouraging industries, 143; on Argentine beef exports, 291 Subsoil ownership, 51-54; 66; see also Land; Minerals Sudamtex, 108 Sugar Act, 266, 268 Sugar industry, 43, 114; in Cuba, 258-69 Surinaamsche Bauxite Mattschappij, 56 Swift & Company, Inc., 114, 287, 289 Synthetic nitrates, 281 f. Synthetic silk, 109 T a f t , William Howard, 197 Talara, Peru, 74 Talleres Metalúrgicos San Martín (Argentina), 106 Tampico, Mexico, 66 Tariff, in Venezuela, 72, 80; policy of United States, 77, 332 f.; widespread use of protective, 142, 206; in Cuban sugar industry, 264; specific tariffs, 309 f.; tariff rates, 311-12; see also Exchange control Taxes, see Direct taxes; Indirect taxes

INDEX T a x exemptions, 14g Tax reform, 175 Technical skill, of native populations, 100 f. Tegucigalpa, Honduras, 99 Tehuantepec, Isthmus of, 66 Tejidos El Condor (Colombia), 108 Telares de Caracas (Venezuela), 109 Telares de Mara cay (Venezuela), 109 Telegraph, see Communications Telephone, see Communications Tenure of land, see Expropriation; Land Terreros, Pedro Romero de, 227 Texas City, Texas, 58, 286 Texas Company amparo (1921), 67 Textile industry, 108, 109 Third International Communist groups, in Latin America, 14 Three Year Plan (Cuba), 141 Three Year Plan (Venezuela), 141 Tienda de raya, 36, 48, 155, 247 Tin industry, in Bolivia, 56-58, 284-87: cartels, 285; International T i n Control Scheme, 285; Texas City smelter, 286 Tin Processing Corporation, 286 Tire-manufacturing plants, 113 Tornquist family, 106 Torre, Lisandro de la, 289 Torreón, Mexico, 43, 49 Trade, Balance of, see Balance of trade Trade, International, see International trade Trade Agreements Act (1934), 332 Trade associations, in Latin America, 124«5 Trade restrictions, during colonial period, 5 f.; in relation to defaulting, 190 f.; tariffs, 309-12; after 1929, 312 f.; quantitative trade controls, 313-15; exchange control, 316-31; devaluation, 322-25; bilateral trading, 325-29; state trading, 329; during World War II, 330-31; increasing use of trade barriers, 332; role of International Trade Organization, 336; see also International trade Tragedia de Yucatán, La, (Font), 274 Transition from War to Peace Economy (League of Nations), 256 Transportation, 31, 128-29, 135; see also Airlines; Railroads; Roads and highways; Ships and shipping Transportes Aéreos Centro Americanos, 91, 9» Trans-World Airways, see T W A Triffin, Robert, 231, 233-34, 235, 236 Trippe, Juan, 91 Troncoso, M. Poblete, 36

433 Tropical Oil Company, 74 Tropical Radio (United Fruit Line subsidiary). 98 Tungsten, 61 T W A , 92 Ugarte, Manuel, 12 Unemployment, 27; technical absence of, in Latin America, and its effect on capital investment, 16g Unemployment insurance, 158 Union of Railway Workers (Argentina), 148 Unions, see Labor unions United Fruit Company, 95, 96, 97-99, 299, 300 United Merchants and Manufacturers Management, 108 United River Plate Telephone Company (Argentina), 131 United Shoe Machinery Company, 109 United States, attitude toward expropriation of American-owned property, 44, 199-200; interests in Bolivian tin mining, 57, 58; agreements with LatinAmerican countries to purchase strategic materials, 62; oil industry, 65; possible backing of Venezuelan military coup, 73; settlement of Panama Canal dispute with Colombia, 73 f.; foreign trade policy, 77; financial interests in Latin-American transportation, 82, 85, 86, gi, 94; Pan American Highway, 91; subsidies to Grace Line, 96; banana importation, 96, 97; encouragement of Latin-American industrialization, 102, 115, 145; foreign corporations in, 123; loans to Latin America, 173, 180, 186 ff.; attempts to maintain expoTt balance of trade with Latin America, 189; policies on international lending in Western Hemisphere as revealed by Monroe Doctrine, 196-97; policies following World War I, 197 f.; intervention in Latin-American countries, 199; financial ties of Panama and Dominican Republic with U.S., 2(0; sugar legislation and its effect on Cuba, 264-65; copper companies, 277-79; role in Latin-American trade, 297; exports, 298; principal single buyer of LatinAmerican products, 303; use of trade restrictions during World War II, 330; proposals for trade expansion, 332-34; trade agreements program, 332 f. United States Army and Navy Munition* Board, 59

INIDEX

434 U n i t e d States-Cuban Sugar C o u n d l , 190 U n i t e d States Steel C o r p o r a t i o n , 60, 105 U r b a n concentration of p o p u l a t i o n , 19 U r b a n transportation, see T r a n s p o r t a t i o n Uriburti, José Francisco, 17 U r u g u a y , p o p u l a t i o n elements in, 14; agricultural labor, 37; railroad construction, 83; joint commission w i t h Argentina to plan use of water power, 128; government ownership of telephone facilities, 128, 131; government activity in business, 137. 138; old-age pension system, 157; u n e m p l o y m e n t insurance, 158; meat packing, 290 Usinas Eléctricas y T e l é f o n a s del Estado (Uruguay), 128, 131 Uspallata Pass, Andes Mountains, 81 Utilities, see P u b l i c Utilities

Valorization of coffee, »69-73 V a n a d i u m , 61 V a n a d i u m Corporation of America, 61 Vargas, G e t u l i o Dornelles, 16, 140, 147, «71, 554 V a r o n a y Pera, E n r i q u e José, 11 Vasconcelos, José, 14 Venezuela, oil industry in, 70-73, 77; military c o u p (1948), 73; export-import policies, 80; roads and highways, 90; iron ore reserves, 103, 105 f.; oil refineries, 114; legislation on foreign corporations, 123; telephone service, 130; economic planning, 141; development (fomento) corporation, 144; European intervention threat (190s), 199, 202: reserve requirements in commercial banks, 139; price control system, 149; foreign control of oil industry, 299; exports, 30s; tariff rates, 311 f.; state trading, 330 Venezuelan G u l f O i l C o m p a n y , 71 V e n t u r a (tanning company; Argentina), 109 V e r a Cruz, M e x i c o , 5, 66, 198 Vereinigte Stahlwerke, 106

Vestey, Sir E d m u n d , 290 Videla, Gonzalez, »37 Vidreria Santa Marina (Brazil), 110 Vidriera Monterrey (Mexico), 110 Villa, Francisco (Pancho), 41 Viscosa Mexicana, 109 Volta Redonda, Brazil, 104 Votorantim (textile enterprise; Braazil), 108 Wages, 6, 155 W a r of the Pacific (1870-82), 280 Water power, 108, 126-28 Watkins, Myron W „ 280 Wealth of Nations, The (Smith), 8 Webb-Pomerene Act, 277 Westinghouse Electric, 112, 113 W h e a t , consumption of, 11 W h i t e Russians, 40 Windmills, in Yucatan, 273 W i n e R e g u l a t i n g Board (Argentina), : «52 W o o d w o r k , 111 Wool. 108 W o r k i n g concession, 53 W o r k m e n ' j compensation, 158 Xochimilco, Mexico, 163 Yacimientos Petrolíferos Fiscales (Argçentina), 75 Yanaconazgo, 36, 37 " Y a n q u i " imperialism, 199 Y a q u i valley, Mexico, 49 Yerba mate, 252 Yerex, Lowell, 92 Yrigoyen, Hipólito, 17 Yucatan, Mexico, communal agricultuural experiment in, 43; types of a g r i c u l t u u r a l credit available, 49; Indian cultures, 1663; henequen production, 273-76 Zambo, 22 Zapata, Emiliano, 41, 42 Zemurray, Sam, 98 Zinc mining, 56