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Fourth International, Spring 1956


Theodore Edwards

Dollar Empire In Latin America

Wall Street’s Happy Hunting Ground


From Fourth International, Vol.17 No.2, Spring 1956, pp.56-58.
Transcription & mark-up by Einde O’Callaghan for ETOL.


THE offers of economic aid to the colonial world by the Soviet Union make the blood of Wall Street financiers run cold. Viewed in terms of quantity, actual Soviet aid may turn out to be quite small, but what makes the US investors see the handwriting on the wall is the nature of Soviet aid, its essentially non-exploitive, non-imperialist character.

Latin America today constitutes the biggest foreign field of investment for US Big Business, $6 billion, or more than 30% of total foreign investments, being concentrated there. No better illustration of the colonialism practiced by the US and of the imperialist nature of US “assistance” to “underdeveloped areas” can be found. The fact that 70% of US foreign investments are in the Western hemisphere (if the $5% billion invested in Canada are included) points up the extent to which US imperialism has been pushed back into its own homegrounds by the advance of the world revolution since the end of World War II. It also explains the gnashing of teeth with which the US imperialists greeted the offer of Soviet economic aid to what they consider their own private feeding trough of Latin America.

A year ago, the United Nations Bureau of Economic Affairs issued a report which showed that for the last 30 years US investors have been taking more money out of Latin America in the form of profits than they sent back in new capital investments. The same report also showed how the rate of return reaped by US capital in Latin America had increased steadily over the years.

During 1925-29, US investors pocketed 6% profits, repatriating a total of $300 million from Latin America. Since only $200 million new capital flowed back during the same period, Latin America was left on the short end by some $100 million. By 1950, however, the rate of profit extorted from Latin America reached 16.8% after taxes, and by 1951, 20.5% after taxes. In 1952, US investors took $336 million more out than they sent back in new capital.

Some Latin American countries are much worse off in this respect than the over-all figures would seem to indicate. As the Diario de Noticias of Rio de Janeiro pointed out, $97 million of new US capital had flowed into Brazil since 1937, while the profits repatriated in the meantime by US investors in Brazil totalled $807 million, or almost eight and a half times as much!

Three weeks after the publication of the UN report, the US Department of Commerce found it expedient to publish a report of its own in order to counteract the wave of indignation aroused in Latin America. In addition to the usual high-flown phrases about “the important and valuable contributions” made by US capital abroad, such as “providing employment” and imparting to native workers “training in managerial, technical and craft skills,” “expanding markets,” “developing raw material resources,” “leading to auxiliary and related industries,” the Commerce Department explained that $166 million of US profits are reinvested annually in Latin America, that US capital pays $1 billion in taxes, and that during 1946-53 repatriated profits amounted to $482½ million a year, new capital investments to $300 million – leaving Latin America on the short end by only $182½ million.

By taking the average over seven years, the tendency of this imbalance to widen was hidden, but even if we take these figures at their face value, the interesting fact presents itself that total US profits (before taxes) in Latin America amount to $1 billion plus $482½ million plus $166 million, or $1,648,500,000 a year on a $6 billion total investment – a modest 27.47% average annual rate of profit. (The latest figures for domestic capital in the US show an average rate of 16 to 17% profits before taxes.)

The 165 million people of the US produced a gross national product of $397 billion last year, while the 171 million Latin Americans produced a gross national product of only $60 billion, $6 billion less than the present budget of the US government. This low productivity continues in spite of the half century or so which US Big Business has had to show what “free enterprise” can do for “underdeveloped areas.”

One-tenth of all the values and services produced by Latin America are produced under the control and for the profit of US investors. Given the great specific weight of US capital in Latin America – due to its strategic position in an economy where 60% of the population is still engaged in agriculture – the US imperialists can impose at their leisure what they consider “a favorable environment” for US investments. This makes Latin America a showcase of what the happy life under the heel of the North-American giant is like.

In the N.Y. Times of Jan. 4 appeared a two-page ad by Ford, US Steel, GE, IBM, United Fruit Company et al. entitled Private Enterprise is the Key to World Economic Advancement. In a very succinct paragraph, entitled Ingredients of Favorable Environment, the US monopolists present their views on that subject:

“... nations ... will permit the employment of managers, technicians and other key employees without regard to nationality. They will assure to a foreign-owned enterprise the right to determine what proportion of its earnings is to be re-invested or remitted, and will not prevent or penalize, by inequitable exchange restrictions, the remittance of any part of such earnings. They will pursue policies which will inspire confidence that the sanctity of contract will be upheld; that owners will be secure in the possession of their property ...”

The pages of the N.Y. Times furnish ample proof that these “ingredients of favorable environment” are bounteously present in the case of Latin America. In January each year, the N.Y. Times devotes an entire section to a review of economic progress in the “Americas,” i.e., Canada and Latin America. Last year, this section bristled with two- and three-page ads like the following:

“A Message From General Somoza, President of Nicaragua: ... Nicaragua welcomes foreign investors and provides them with many attractive guarantees. Included is the right to transfer profits to the investor’s country of origin.”

“Haiti’s doors are open wide to investors ... Profits of industries with home offices in the US may be exported to the US Haiti belongs to the dollar area and movement of capital is free from all control ... LABOR COSTS ARE AMONG LOWEST IN THE WORLD IN HAITI.”

“Industrial opportunity awaits the investor in San Salvador.”

“Bolivia is high in favor with business men.”

“Generalissimo Trujillo of the Dominican Republic welcomes investors.”

“Trinidad’s fiscal policies favor the foreign investor.”

“Peru, land of profitable investment.” Etc., etc.

In the same section, a full-page ad from the Finance Minister of Brazil solicited foreign investments, since “US capital and profits may leave and enter freely.” We learn that in Colombia, profits and capital are also freely transferable to the country of origin; that in Chile, earnings on approved investments are repatriable after five years in five annual instalments; that there are laws exempting new capital from any kind of taxes for periods lasting from two to five years in Barbados, British Guiana, Honduras, Jamaica, and Trinidad. This year, in the Jan. 5 issue, though a trifle more circumspect in tone, the ads of the Latin American republics were again calculated to titillate the profit-lust of US investors, to assure them that, it is clear as the tropical sun at noonday that Latin America is the paradise of US imperialism.

Yet another ingredient of this Garden of Eden for US investors deserves mention. As Henry R. Luce, publisher of Time and Life, put it a year ago at the New Orleans Inter-American Investment Conference, “in order for the favorable climate for US investments to be maintained, a delicate balance must be struck between freedom and order.”

The Latin American satellites of US imperialism, made or broken at will by the US State Department, not only must offer their countries’ resources as free gifts and their fellow citizens as an abundant and cheap labor supply, but they must know how to strike a “delicate balance between freedom and order.” They must keep beating down their insurgent peoples, thwart their aspirations for economic emancipation and political freedom – so that the foreign exploiters “will be secure in the possession of their property” and the knowledge that their profits will keep rolling in.

Latin America not only is the happiest of hunting-grounds for the North American tribe of super-profiteers, it also constitutes a $3½ billion market for US manufactured goods. This makes it a larger outlet than Europe or Asia for US manufacturers. In order to obtain US dollars with which to buy US commodities, Latin America must provide foodstuffs and raw materials at bargain rates. The economic well-being – if it can be termed such – of the Latin American republics thus depends on the prices that a few assorted raw materials or foodstuffs bring on the world market – which usually signifies at whatever prices the US monopolists care to pay.

Eisenhower sent a message of greeting to the New Orleans Investment Conference in March last year, in the course of which he elevated US and Latin American from the relation of “Good Neighbors” to that of “Good Partners;” in other words, the “Good-Neighbor-Policy” under Roosevelt Partners”; in other words, the “Good-Partner-Policy” under Republican auspices. This does not prevent the Eisenhower administration from turning thumbs down on the perennial Latin American demand for stable raw material prices. The “Good Partnership” is strictly a one-way street. The US imperialists and their executive committee in Washington are dead-set against “price-fixing” – when it would work to their detriment, that is.

The “dollar gaps” created in the trade balances of the Latin American countries in this manner lead to the careful rationing of the import of US manufactured items. The consumer goods imported by this inequitable exchange are then distributed among a paper-thin layer of Latin American bourgeoisie and landlords, while the primitive living conditions of the immense majority of the population, engaged in agriculture and mining in the main, are far too low to permit them to buy any kind of manufactured item, imported or not.

The Wall Street tycoons turn a deaf ear when representatives of the colonial bourgeoisie, such as Carlos Davila (at the New Orleans Conference) attempt to warn them that

“private investments in Latin America should not exclude public credit, but make it all the more necessary, because public capital is needed to be invested in sanitation, highways, housing, hydroelectric plants, educational programs, transportation and irrigation systems. These are fields that yield no immediate financial return but are vitally important to make private investment attractive and safe.”

The Latin American satellites of the US are sitting on top of a volcano of native mass discontent. They are begging the US imperialists to consider raising the standard of living of their peoples by at least partially industrializing Latin America, before they and their foreign masters with them are blown sky-high by Latin American mass unrest. But why should the US financier, sitting in his plush office in Wall Street, or cruising on his yacht in the Caribbean, invest in public works in Latin America – in electric lights, modern plumbing, or housing, or roads, or even sidewalks, or schools, or water wells for the colonial masses – from, which he might, if he is lucky, pocket a 2 to 3% profit; when he can invest in petroleum in Venezuela, which brings a 31.1% profit, AFTER TAXES (!), or even in mortgages on the land, which yield 12 to 14% interest, after taxes?

It is true that in the long run the industrialization of Latin America and the consequent raising of the standard of living of the toilers there would in time create a larger market for US goods. But since when are the capitalists motivated by such considerations as raising the standard of living of the working people when they are casting about looking for spheres of investment? Given the “ingredients of favorable environment,” US Big Business is guided in its investment by the highest rates of profits and not by any appeals to its humanitarian feelings by the colonial bourgeoisie. What is more, the immediate effect of any industrialization of Latin America would be to shrink the present outlets for US goods by raising native competition – and US manufacturers have yet to show the slightest inclination to take kindly to potential or actual competitors.

At Bogota, Colombia, in 1948, the US gave its solemn pledge to provide economic aid in industrializing Latin America. That pledge has yet to be redeemed. In line with its general policy of attempting to cope with the tribulations besetting senile and decrepit capitalism in its death throes with the means and methods peculiar to its 19th century, “laissez-faire” period of youthful vigor, the Eisenhower administration views with even greater disfavor than Roosevelt or Truman any government-to-government loans at low interest rates, for public works or native industries in Latin America.

Rather, the Foreign Operations Administration instituted a guarantee program in March 1953 for the express purpose of encouraging the flow of private capital abroad, by “protecting the US foreign investor against inability to repatriate his profits and his principal in dollars as well as guarding him against expropriation.” The FOA insures the principal and up to 200% of the principal in anticipated profits (!). On an investment of, say, $1 million, the US government will cheerfully refund $3 million, if the unfortunate tycoon finds his profits unrepatriable or nationalized! (This is what US Big Business really means by economic “aid” to “under-developed areas.”)

In 1954, the United Nations Economic Commission for Latin America issued a report which estimated that $1 billion a year in public investments in basic capital would be needed to raise the standard of living in Latin America by 2%. Since the per capita income in Latin America amounts to only $351 a year (this is 14.6% of the per capita income in the US), a 2% increase would raise it by all of $7 a year. To attain this startling effect, the UN Commission proposed an Inter-American bank, financed largely by the US but under the control of the 20 Latin American republics themselves.

In November 1954, at the Inter-American Economic Conference in Rio de Janeiro, the Latin American delegates passionately defended this UN Commission project, but the US vetoed any such endeavour, no matter how modest its aim might be. The Latin American delegates were referred to the Export-Import Bank and the World Bank, both of which are tightly controlled by the US, their funds being administered by the US Treasury Department, and their directors designated by the US President. These banks, of course, grant loans only to governments friendly to Washington. Nor is the money loaned to be spent on any industrialization or public works, since the loans are stipulated to be spent on US goods and services which, moreover, have to be transported in US ships.

Thus, the true nature of US economic aid was once more revealed to be only the open or back-handed subsidizing of US manufacturers and shippers – part and parcel of the economic blood transfusions by the billions of dollars which the US government pumps into the sclerotic veins of superannuated “free enterprise.”

At Rio, the Latin American republics were also referred to the New Orleans Conference of March 1955, where the vaunted resources of “private enterprise” were going to be brought into play. The character of thfe latter conference can be summed up easily enough in the fact that 15 new US companies opened up offices in Venezuela, because of the “advantages which Venezuela offers new capital ...” (such as 31.1% rate of profit on petroleum, after taxes.) No $1 billion in public investments, such as schools, roads, electricity, housing, plumbing, was raised at New Orleans either.

The Latin American puppet regimes tend to forget that it was only the imminence of the socialist revolution in Europe in the immediate post-war era which forced US Big Business into rehabilitating their former competitors there. No aid in industrializing Latin America by the US imperialists has materialized or is in store in the future. If the Latin American satellites of the North American colossus are concerned about keeping their hungry and discontented peoples quiet and orderly, the US government is ready at a moment’s notice to send them shiploads of guns, ammunition, planes and bombs. The rulers of this country spend $40 billion a year (an amount equal in value to two-thirds of the total annual gross product of Latin America) on military expenditures. The US government thus has more than enough to spare for propping up bloody dictatorships in Latin America.

The highly touted US economic aid in industrialization has taken the quaint form of aiding reaction and counter-revolution everywhere, either through camouflaged or outright financial subsidies or through direct military aid or intervention.

Whatever the subjective motivation of the Soviet bureaucracy, its offer of economic aid to the colonial world points to the only real solution of the problems of the colonial peoples: The victory of socialist revolutions in the advanced countries and the consequent real aid which the workers of the advanced countries could send to their colonial brothers who at present are everywhere engaged in throwing off centuries of imperialist oppression.

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