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Graduate Student Theses, Dissertations, & Professional Papers Graduate School

1957

Some aspects of economic development and economic growth of Some aspects of economic development and economic growth of

Latin America Latin America

Jaime Francisco Acosta-Madiedo de Castro The University of Montana

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SOME ASPECTS OP ECONOMIC DEVELOPMENT AND

ECONOMIC GROWTH OP LATIN AMERICA

JAIME P. I. ACOSTA-MADIEDO DE CASTRO

B.Ao Montana State University, 1956

Presented in partial fulfillment of the requirements

for the degree of Master of Arts

MONTANA STATE UNIVERSITY

1957

Approved by:

Dean, Graduate School

K\uM // If ^7 Date

V J

UMI Number: EP40595

All rights reserved

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Dissertation Pjbfeh-ng

UMI EP40595

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"KNOWLEDGE AND MORALITY ARE OUR GREATEST

KEEDSW

Simon Bolivar

ACKNOWLEDGMENT

Whichever our purpose In life may be, Whatever we may accomplish, we can never say %e owe it only to ourselves©**

The '.writer is indebted to the works of many able

scholars for the ideas presented and developed in this

thesiso He is grateful for the assistance provided by

the Economics Department of Montana State University,

and its excellent faculty, in particular to Dr© Roy Ely,

and to his thesis advisor Dr<» George Eeliker, who gave

him confidence in his pursuit• He is also greateful to

Miss Mary Lou Flodin, who gladly devoted many hours

assisting the writer in the technical part of the language;

and also to his sister Betthy, who assisted him greatly

with the typing throughout the year of researcho

-iii-

'•TABLE OF CONTENTS

Page

LIST Or ±AtjLthj^> •oOooooeooooeoooooooeo oooo.oo*. V

Chapter

I. THE PROBLEM OF ECONOMIC . DEVELOPMENT AND GROWTH IN LATIN AMERICA 1

-II. THE ROLE OF FOREIGN INVESTMENT IN THE ECONOMIC DEVELOPMENT AND GROWTH OF LATIN AMERICA oooeoeo.e.ooooaooooo 31

III. -THE ROLE OF FOREIGN TRADE IN THE ECONOMIC DEVELOPMENT AND GROWTH OF XJCV X JLi\ o.oooeooo«oo*o*e.oo.o«oo*o«o.oo / TT

IV. BASIS FOR A SUSTAINED'ECONOMIC. DEVELOPMENT AND FUTURE ECONOMIC GROWTH OF THE LATIN AMERICAN NATIONS.. 98

BIBLIOGRAPHY . 113

ii.x JTJSIJXJ-LA. JJ, • •.eoooeooo.o .oooeooeoooo* •• •• • • • • . e -L<^D

1. Table of important data about each Latin American Nation •••••••••••••••. 125

2. Map of Latin America-

a. South. American Grouping e.......o« 135 bo Central American and Island

GrOUpin^ e o o o o » .ooeoe*. • ..•* o c « e « e JLOOJ-

APPENDIX B ..................... .•.............. 137

: 1. -■ Latin America j Exports, Imports and the Capacity to import ......o 137

-iv-

LIST OP T&BLES

Page

I. OWNERSHIP OF INVESTMENTS IN LATIN AMERICA, 1913 35

IIo MEXICAN COST OF LIVING SAMPLES, I /y C~loy 1' eeooo.oee o o o • . « e o « • ... .... . « • . o ug

IIIo He So PRIVATE INVESTMENTS IN LATIN AMtiKJLLA, loy /""iy4U eeee.ee. ..««•. •....see-. 4«0

IVe Ue S-e DIRECT INVESTMENTS IN LATIN AlViiuri J.UA , Xt7 <&y —J.y 4U ee..eee.ee.oe..e«.«oeo 4u

Vo U. Se DIRECT INVESTMENTS IN LATIN AMERICA BY COUNTRY, 1929, 1936, 1943, iy OU, iy OC> f AJNiJ iy OO • e o e o o e e .oe.ee.e o • e o 44

Vie Uo Se GOVERNMENT LOANS AND CREDITS TO i-iA -L -L1M AMiiiil jLUxi oee.e.«.ee.eeee.ec.e«.«««oo 4/

Vile MOVEMENT OP EXTERNAL CAPITAL IN LATIN AMERICA, 1945-1953 ...o 48

VIIIo U. Se DIRECT CAPITAL OUTFLOW AND REINVESTED EARNINGS IN LATIN AMERICA, Xy4O**Xy0O ee.eeeoeee.eeeeee.e.. •...««•*« O DU

IXe NET Ue Se DIRECT INVESTMENTS, INCLUDING REINVESTED EARNINGS, IN LATIN AMERICA BY INDUSTRIES, 1946-1953 oe .......... e. .<> 51

Xe U* Se DIRECT INVESTMENTS IN THE LATIN AMERICAN REPUBLICS,. BY MAJOR -LJNDU O lKIiio, iy 04 • oeee.oeooeeeeeeoeoeee.o D«C

XIo NET CREDITS AUTHORIZED BY THE EXPORT- IMPORT BANK TO LATIN AMERICAN. COUNTRIES, JULY 1, 1945 TO JUNE 30, 1954 ••••••.<•••• 53

Xlle Ue Se INVESTMENT POSITION IN LATIN AMERICA (END OF"YEAR DATA) ••••••••.•••.• 54

-v-

LIST OP TABLES - Continued

XIII. EARNING ON. Uo So S^UITY IN DIRECT INVESTMENT IN LATIN AMERICA, AS-A PERCENTAGE OP U. So EQUITY, 1950 AND iy55 eeoeo oooQ««ooo»oooac©ooo«e««» • « o . 55

XIVo IBRD LOANS rI0 LATIN AMERICAN COUNTRIES JUKOUuxi JiiN o 51) jJoOU ooooo.ooooeooo.oe.o o o 57

XVo TOTAL BRITISH INVESTMENTS IN LATIN AMJlK X Oil , JL v7 LO , iy idy , iy Oy ooeoeoeooo©.© « o o o &9

XVIo FUNCTIONAL COMPOSITION OF BRITISH CAPITAL IN LATIN AMERICA, PERIOD 1913-1939 . 62

XVII. TOTAL UNITED STATES INVESTMENTS IN LATIN JaMjuiit -LUA , - J.y J.«5 ooe«eooeeeo*oooooeoooooeo o o c o DO

XVIIIo TOTAL UNITED STATES INVESTMENT IN LATIN JiMiiiV ±. VA, Xy <vV7 oooeoeoeoeoeoo.ooo.o.eoeoooe DO

XIX* UNITED. STATES DIRECT AND PORTFOLIO INVESTMENT IN LATIN AMERICA, 1936, 1940 .. 66

XXe FUNCTIONAL COMPOSITION OF Uo S. DIRECT INVESTMENT IN LAT IN AMERICA 68

XXI*- RELATIVE POSITION OF PRINCIPAL COMMODITIES IN THE EXPORT TRADE OF

,,; LATIN. AMERICAN COUNTRIES, 1938 (BY VALUE)'. • .79

XXIIo ? FOREIGN TRADE OF THE LATIN. AMERICAN KJii UJDLI^O, iyoO*"iy4o ooooooo.oooeoo.ooseooo 0<&

XXIII*' LaTIN'AMERICA2 ' INDICES" OF INDUSTRIAL" " ' : * :, -, k -,, IRODUCTIO& (1950 -100) . •'••••••»•.••••.•••• » o 0 85

XXIV*- NATIONAL INCOME IN. NATIONAL CURRENCIES, IN Uo So DOLLAR EQUIVALENTS, AND IN

... •*, " s. ,- DOLLARS PICK Cft, FI To. oooooo«oeooe«.»o«*««.««e y ^

-vi-

CHAPTER I

THE PROBLEM OP ECONOMIC DEVELOPMENT AND GROWTH

IN LATEST AMERICA

Consideration of the economic development and growth,

of any region is complicated by questions of concept and

terminology© Much has been written concerning these matters,

but these questions remains What is economic growth? What

is its relationship to economic development? Is it possible

to have the one without the other? Most writers have tended

to use the two terms interchangeably© It is the point of

view of this essay that this practice is mistakeno

Through economic development the economic, social, and

political institutions which form the basis of any economy's

expansion and growth are establishedo Although development

takes place most of the time in a dynamic economy at a rapid

rate, in its early stages it takes shape slowlye Each insti-

tution continually attracts elements to itself from other

institutions which contribute to its development Through a

combination of new and old ideas, which usually arise out of

man's dissatisfaction with his present environment, or out of

curiosity about what may lie in the unknown, come innovations

which constitute the first steps toward economic development©

But human activity has meaning and purpose only in terms of

-2~

beliefs and aspirations- of a group© Hence, the sum of the

aspirations, thoughts and beliefs of men in groups brings

"about the establishment of the social and political insti-

tutions which form the important part of the process of

economic developmento Initial changes in methods require that

some groups in society have the will and the authority to

install and diffuse new ideas leading to the understanding of

new production techniques* for economic growth to be sustained,

it is necessary that leading groups expand in authority and

that society as a whole respond affirmatively to their leader-

ship© Social and political institutional changes must per-

petuate an initial increase in the scale of investment and

permit the regular acceptance and absorption of innovations©

Thus, economic development is the forming of the main economic

and non-economic institutions which are the basis of economic

growth© Economic growth is the result of this development

and cannot take place without ito

Itour types of economic development may be distinguished©

Th© first of these- I have- designated ^expontaneous" or natural©

It is the result of the free movement of individual forces© ■

The second is "deliberate,* or premeditated development

which*depends upon a plan of action devised and administered

by some authoritative group© The third is "accidental,* or

Expontaneous is used here to mean spontaneous, but to be differentiated or to imply "everyone on their and for their aiQo* < >.,-.--'.» J.

-3-

unexpected development© The fourth type will be known as

"parasitic,1*-or regressive development, indicating that it

is the result of the negligence or ignorance of the responsi-

ble authorities© Expomtaneous development receives its

impulse from individuals who, independently, form business

organizations and invest money with a view to profito The

individual does not think of, nor care about, his contribution

to societyfs development © Deliberate development is the result

of the setting of determinate goals by some planning authority,

normally the governmento This type of development is, for

Latin-America, the most important of the four© It is, for

those countries, the key to economic growtho Accidental

development entails unexpected discoveries, innovations, or

inventionso It is usually the result of the activities of

individuals who are neither profit-motivated nor thinking of

the potential effects of their interests on the nation's

economyo Parasitic development takes place through the actions

of a corrupt unite It implies the use of the more productive

sectors of the economy for the benefit of the less productive

or non-productive sectors© This type is usually found in the

economies of countries characterized by political instability,

dictatorships, or nations saturated with nationalism©

The tendency of many writers to identify economic

development and growth with the industrial revolution or

industrialization is also misleading*. Industrialization is

but one facet of economic development, and the fact that the

richest countries in the world are industrialized does not

-4-

justify industrialization as the only way to economic growtho

Indeed, the increase in the standard of living in Great Britain

during the nineteenth century was due to progress in agricultur-

al techniques, and their prime position in foreign trade poli- 1

cies, not to industrialization itselfo The form of economic

development that can best lead to sustained economic growth

is a balanced system of agricultural and industrial sectors*

Economic development is a precondition to economic

growth, but economic growth can take place in many ways© It

can be sudden and rapid, as in Venezuela; it can be sudden

and gradual, as in Japan; it can be slow and gradual, as in

most Latin American countries. Or it can be a combination of

two or more of these ways* The important consideration is

that each nation should be aware of its problems and able to

maintain and carry economic growth to its final stage© If a

country wants to grow, it must be willing to suffer the conse-

quences, good or bad, that arise from economic developmento

The nation must be prepared to respond actively to new possi-

bilities for productive enterprises and to accept the politi-

cal and social institutional changes which occure

Rostowfs approach to economic growth is helpful to an

Louis Mo Hackero Proceso y Triunfor del Capitallsmo Norteamericano» (Buenos Airess Editorial Sudamerlcano, 1956j;

-5- 1

understanding of this complicated subject© He analyzes

ecoaomic growth through a period which he calls the ntake-©ff*,

which is characterized by a sustained rate of increase in per

capita outputo In his views

The process of economic growth can usefully be regarded as centering on a relatively brief interval of two to three decades when the economy and the society of which it is a part transform themselves in such ways that economic growth is subsequently more or less automatic©

With some modifications, we may identify Rostow's preconditions

concept and period with the idea of economic development as

it has been presented in this paper© Rostow defines the take- 3

off period asg

oothe interval during which the rate of investment increases in such a way that real output per capita rises and this initial increase carries with it radical changes in production techniques and the disposition of income flows which perpetuate the new scale of invest- ment and perpetuate thereby the rising trend in per capita output©

In his study of the economic growth of several now well-

developed nations, Rostow detects three periods© The first

is usually a long period (up to a century or more) in which

the preconditions of take-off growth are gradually established©

1' ' ". '".."' " Wo W© Rostow© "The Take-off Into Self-sustained

Growth®, The. Economic Journal© LXVI, (March 1956) R© F© Harrod and E© G© Robinson, Eds© . (Londont Macmillan and Co Limited,. 1956) pp© 25-48©

2 Ibid0, po 25©

3 . .. ' ' ... '..-.T... - Ibid©, p« 25©

-6-

Ike second, or take-off period, usually comprises two or three

decades! and the third stage, which I call a new long period

of sustained growth, is not unlimited, but rather is an

indefinite stage© During the first stage society slowly

becomes aware of the possibility of, and need for, economic

expansion, and begins to build toward the second stage© la

the relatively brief take-off period, society experiences a

rapid transformation© Rostow explains this process as followsz

We start with a reasonably stable and traditional society containing an economy mainly agricultural, using more or less unchanging production methods,

. saving and investing productively little more than is required to meet depreciation© Usually from out- side the society, but sometimes out of its own dy- namics, comes the idea that economic progress is possible! and this idea spreads within the established elite or, more usually, in some disadvantaged group whose lack of status does not prevent the exercise of some economic initiative© More often than not the economic motives for seeking economic progress converge with some non-economic motive, such as the desire for increased social power and prestige, national pride, political ambition and so on© Education, for some at least, broadens and changes to suit the needs of modern economic activity© New enterprising men come forward willing to mobilise savings and to take risks in pursuit of profit, notably in commerce© Ihe commercial markets for agricultural products, domestic handicrafts and consumption-goods imports wideao Institutions for mobilising capital appear; or they expand from primitive levels in the scale, surety and time horizon for loans© Basic capital is expanded, notably in transport and communications, often to bring to market raw materials in which other nations have an economic interest, often financed by foreign capital© tod, here and there, modern manufacturing enterprise appears usually in substitutions for importso

Since public health measures are enormously pro- ductive in their early stages of application and, as

1 . Ibid©, ppo 27-28,

-7-

innovation go, meet relatively low resistance in most cultures, the death, rate may fall and the population begin to rise putting pressure on the food supply and the institutional structure of agriculture, creating thereby an economic depressant or stimulus (or both in turn) depending on the society's response0

A second case recognized by Rostow involves the

naturally wealthy nation, which has experienced some expon-

taneous development, has a favorable balance between population

and natural resources, and has a population derived from im-

migration from reasonable and acquisitive cultures© In this

situation, the steps to the take-off should be less intricate

and the problem of overcoming traditional values should be

lessenedo It will be easier to develop an elite effective

in the investment process and capable of completing the stair**

way to economic development© If take-off fails to occur, it

will be because the comparative advantage of exploiting land

and other natural resources distracts attention from other

forms of economic activity, or because the elite hesitates

t© take the initiative for fear of losing its established

positiono

The beginning ©f the take-off may be induced in various

ways© These could be political, sociological, technological,

or economic in nature♦ A political revolution may affect

directly the balance of social power and effective values,

the distribution of income, and the pattern of investment©

& technological innovation may set in motion a chain of

secondary expansion in modern sectors, which society exploitso

Or changes in the structure of social and economic institutions^

-8-

either domestic or international, may produce similar effects©

The important thing, however, is not the form of the stimuli,

but the fact of their acceptance and the rate of response to

them© Once the movement gains momentum, the forces which

created the aOtivity are reinforced© The growth of new

industries provides the means and opportunities for new in-

vestments c The former predisposition to accumulate money

capital In idle savings is changed as new institutions for

mobilizing savings increase in scope and efficiency© The

government and its policies acquire a dynamic quality© The

new techniques introduced into agriculture and industry

spread as increasing numbers of persons are prepared to accept

and take advantage of opportunities to improve their economic

position and social status© New possibilities for exports

and imports ariseo Neglected natural resources are exploited

as capital that previously flowed abroad out of fear of

domestic conditions is attracted to home investment opportuni-

ties© Bsreign capital Is attracted, finally, by the upward

surge of economic activity©

The third stage of economic growth In Rostow's scheme

is the long, fluctuating story of sustained economic processes©

The economy is in the process of reaching maturity© There is

a large and increasing change in the structure of the economic

systemo Those Industries which provided the initial surge of

growth during the take-off period - the key industries - have

-9-

a tendency to slow down "as diminishing returns operate on

the original set of industrial tricks and the original ."band

of pioneering entrepreneurs give way to less single-minded

industrial leaders in those sectors** However, the economy

does not come to a sudden stop nor even experience a diminish?*

iag growth rate as a wholeo Growth is maintained by a

succession of new and rapidly growing sectorso The establish-

ment of new industries attracts more workers from rural

districts, causing a decline in the agricultural sectors© The

establishment of new industries attracts more workers from

rural districts, causing a decline in the agricultural sectoro

This secondary growth process may confront the nation with

new sociological, political, and economic problems, and these

may tend to slow down the growth ratee By this time, however,

the society should be better prepared to meet these changes

and be able to adjust its institutions in such a way that no

fundamental crisis, will eventuateo

The fundamental difference between Rostow's three-

period scheme and the point of view of this paper is the

sharp; distinction made-by the latter between, the stages of

development and the stage of sustained, growtho In Rostow's

terminology, growth is divided into three periods» In my

view, growth is the result of the development encompassed

by Rostow's first two periodso

°""'"'"""""- Ibidog Po 30 o

-10-

Wlth the foregoing considerations in mind, we turn

now to the special problems of economic development and

growth in Latin Americao Before we are able to consider

the specific factors which are the major focus of this study,

however, we must refer briefly to certain general features

of the area which we habitually call "Latin America** With

due respect for limitations of time and space, we shall attempt

to generalize as much as possible about the area as a whole*

However, it is important to note that even though the Latin

American countries have many features in common, they vary

greatly in respect to their topography, climate, population

composition, stages of economic development, and potentialities

for future economic growthe Even within one and the same

country one may find great differences in these respects ©

Therefore, generalizations made on observations about one or

a few countries can be misleading*

Within our definition of .*Eatin America* we include

only those American Republics of the Western Hemisphere which

obtained their independence from Spain, Prance and Portugal*

The Latin American block is composed of twenty-one sovereign

states which can be subdivided into three regional groups©

Th.e first regional group, which will be known as the South

American group, the largest of the three, is comprised of the

Republics of Argentina, Bolivia, Brazil, Chile, Colombia,

Ecuador, Paraguay, Peru, Uruguay, and Venezuela© The second

regional group, which will be known as the Central American .

-11-

group, includes the Republics of Costa Rica, Bl Salvador,

Guatemala, Honduras, Mexico, and Panamao The third regional

group, which, will be. known as the Island group, i3 composed

of the republics of Cuba, Haiti, Santo Domingo, and Puerto

RiC0o

The Latin American countries gained their national

independence from European powers after the United States

had secured its own* The Latin American countries were

greatly influenced by their Mother countries from which they

derived their culture, language and traditions© The Haitians,

who are predominantly African in racial background, were

originally colonies of France and therefore speak Frencho

Portuguese is the language of Brazil, as it was originally

part of the Portuguese Empireo The rest of the Latin American

republics were former colonies of Spain and therefore speak

Spanisho However, most of the Latin American countries

possess much of a common historical heritage, with its

influence on present political, social, economic and cultural

traditions and institutions, some of which have become barriers

t@ the economic development and desired economic growth of

these independent republics© The economic-social and political

problems that Latin America faces today, which hinder or bar

it from progress toward a better and generalized standard of

living, are in part attributable to this common heritageo

1 See> map Appendix A©

-12-

, The; social and economic policies of the Spanish Crowrn

ia the* Nem World were more destructive than constructive*,

Their ecoaomlc policies did not encourage any spirit of enter**

prise* They destroyed the labor force, by encouraging peon-

age which brought about poor productivity* The will to labor

did aot exist among the Spaniards, for the majority of

migrating Spaniards regarded themselves as gentlemen, and

^Spanish geatlemea did not dirty their hands©* Their social

policies destroyed the social organization by promoting

indirectly lack of working habits, robbery, corruption, and

social resentment©

Social and political administration ■/is* important in

the life of any nation, but in studying the economic develop-

ment and growth of a nation special consideration should be

given to economic policieso In relation to the economic

policies of the Mother Country in her colonies in America, the

stage of economic development in Spain at the time of her

colonial expansion, and ecoaomlc policies within the Mother

Country is importanto

r- Many people would ask why the Colonies of England

managedrto obtaia a faster and earlier development* A brief

comparison of the economic conditions and policies between

the two colonizers gives aa answer to that question© When

the European nations rushed over to wcut the cake" that

Hubert* Herriago History of Latin America (New Yorks Alfred Ac Nopeo 1955), p© 189o

-13-

Golumbus had found, some were luckier than others „ The worst

part "of the cake fell in the southern half of the hemisphere©

Spain was not a wealthy country at the time she took over the

colonies, and her economic system and policies were as shaky

as the ones she wanted to introduce in the new world* Spain

was an agricultural country« T3ie adding of America to its

empire and the quick flow of gold and silver which followed

brought to her the ills of inflationo Revenues collected from

her colonies became an imaginary prosperity which was erased

by inflation and the drain of European Wars*. Her economy was

dependent upon production of raw materials and the buying of

finished products from industrialized lands, chiefly France

and England© But even as a producer of raw materials Spain

did not stand high© Her agriculture was the most retarded of

Western Europe© Even the mines of Spain, with their iron,

copper, and mercury were worked fitfullyo The great landholders

blocked mining and the government did nothing to stop them©

Industrially, Spain was behind countries like Prance and

Englando Spain continued to export much wool and to buy back

finished cloth, but she was just a middleman leaving the

large profits to industrialized nations© All these economic

ills, plus her emphasis upon the system of mercantilism, the

expulsion of the Moslems and Jews, who were skillful farmers,

miners and artisans, her shortage of labor for little industries

and.mining were more than enough problems to solve at the time

she took over the colonies of America*

-14-

North America, unlike nev Spain, was more fortunate•

She was colonized by a nation which had practical notions of

liberty, and by people with more advanced knowledge in public

administration, hence better prepared for self-government©

Eves though originally the English colonies were ruled in a

way similar to that of the Spanish colonies, they experienced

a different treatment, an earlier freedom, and were not s©

restricted as the colonies of New Spain© The results experi-

enced by England were achieved without great violence and with 1

advantages both to the mother country and her colonies ©

Aside from the unfortunate heritage of the colonial

period, certain other factors have been of major importance

in conditioning the development of Latin-Americao These may

be classified, with some over-simplication, under five headingso

These factors will not be analyzed in order of importance,

because the different causes of the present problems of Latin-

America vary in order of importance in different situations, .

time and circumstances©

The first major cause of the problems of Latin-America

ise the geographical limitations and handicaps that exist in

1 " ' ' - General Don Bartolome Mitre, The Emancipation of

South America© Trans© William Pilling (London? Chapman & Hall, Ltd© 1893), ppo 6-7-9„ See also? Curtis A© Wilgus© A History of Spanish America© (Washington, Do C©: Mime-o-form Service, 1^1), p<> 21© Spence Robertson, History of Latin American Nations (New York? D© Apple ton & Company© 1932 j© ppo 35—36©

-15-

every one of these Independent Republics, With the exception

of the area around the Plata-Parana-Paraguay basin and other

smaller isolated regions, geography in Latin America has been

a decisive obstacle to its economic development and growth*

Among the geographical factors are,.first, the scrabousness

of the terrain; second the inverted character of the geo-

physical order; and third, the tropicality of the climateo

These factors exceed by far the size of the obstacles which

the European civilization found in North America^ There

are several other problems which are brought about by

geographical limitationso One of these is the absence of

adequate sanitary conditions and of adequate diet© The un-

healthfulness of the tropical areas has forced the masses to

concentrate in elevated and more hygienic regionso But above

all, the scabrousness of the regions where most of the

population have concentrated has been the greater obstacle

because it creates othetr major barriers9 such as greater

difficulties of transportation and economic intercourseo

Thes^mountain barriers block and lessen the social currents

and, as a.result, they limit the possibilities of ideological

and"costly engineering methods© Another factor in connection

with geography is the absence of navigable rivers as outlets

or inlets for economic goods or as commumication media of

population and industrial centers, and absence of natural

as

-16-

harbors in the right places which may have a great value

economic or demographic cross-roads, or as gateways to such

places© The utilization of the weath of the tropical regions

entails burdensome sanitary projects which would require

gigantic flood control systems, and the titanic enterprise

of vanquishing the jungle and of keeping it subjugated©

The second cause of the problems of Latin America is

the disruptive social elements that have always existed within

the Latin American social structures, some inherited from

colonial days* The Latin American countries began their

independent life entirely unprepared to set up stable political

systems© They did not possess the fundamental requirements

for adopting, on a permanent basis, any form of government

known at the time, either an absolute or constitutional monarchy,

or a republic© They had but two possible political systems from

which to chooses dictatorship or monarchy© They experienced

both in alternating periods© In a less acute form, the two

systems still alternate, even though they may not be called

by these names * The only difference now is that the basic

elements for securing stability and progress have finally

made their initial but decisive appearance, at least in the

leading countries©

The political scene in Latin America during most of

the nineteenth c entury and a good part of the twentieth, is

enough to prove that the Latin American countries were not

prepared for a democratic kind of government when they broke

-17-

away from Hispanic rule© This could have been the mistake

that Simon Bolivar made after he gave independence to the

five countries of South America© In the light of history

it appears that the Latin American countries were not prepared

for democracy or monarchy© In fact they were not prepared for

any kind of government© They lacked the basic elements re-

quired for organized government, such as civic virtues, social

constitution and experience in public administration© None

of these elements existed or were promoted by the Spanish

absolutism© On the other hand, Latin America was equally

unprepared for the same, or even milder kind of monarchy that

existed in Spain, for there were uncontrollable forces in the

making© Liberalism, constitutionalism, the freedoms wpro-

claimed11 by the French Revolution, the United States Revolution,

the overthrowing of the French monarchy and the establishment

of the United States of America as a republic with a seemingly

ideal constitution - all this impressive array of new ideas

and will-o-the wisp promises of rosy horizons of liberty

and equality could not but weigh heavily against the crumbling©

ignoble despotism of the last Bourbonso

1 Simon Bolivar tried to apply the principles of

democracy in the five countries of Latin America after he gave independence to these nations© San Martin, on the other, hand, believed that a Monarchy was the only system that could work©

The Latin-iSmerican countries* had ao stroag hierarchi-

cally organized nobility or upper classes in support of a

ruling f amily, such asr is necessary for Monarchial absolutism

because the high classes, Spaniard, Creoles, and a few Mesti-

zoes, were divided by an irreconciliable gulf of passion and

sectarianism, of vested interests and revolutionary tendencies*

With the exception of a few leaders, neither did the Latim-

American countries have the political instinct© Political

instinct they could hardly have because they lacked the

training, the experience, and the concern for public services

which only a continued, traditional, and faithful adminis- 1

trative practice can develop©

A third problem is revealed in an examination of the

social classes of Latin Americao The population of New Spain

was composed of three classes of men? the whites or Spaniards,

the Indians, and the Caste3© The Spaniards represented the

tenth part of the total mass© Almost all the properties and

wealth of the Kingdom were in their hands* The Indians and

the Castes cultivated the land, served the well-to-do people

and lived only by the efforts of their hands© The castes:

descended from negr® slaves, were branded by law and subject

to tribute © Between the Indians and Spaniards appeared the^

1 ..* . : For further information sees Shepard B© Clough and.

Charles W© Cole, Economic History of Europe, (Bostons D© C© • Heath and Company, 1952), p0 214© See also Herring, og© citop ppo 100-249© Wllgus, 0£© citoj pp© 50-177© Robertson, ogo cito, ppo 61-210©

-19-

Mestizos and Mullattoeso Among the mixed breeds that is

among mestizos aad mullattoes, there were many families that

on account of their color, physiognomy, and manners, could

be taken as Spaniards, but the law kept them debased and

despisedo Because of the opposition of interests a reciprocal

hatred between owners and slaves developed*, On the one side

were jealousy and discord, cunning, theft, and the tendency

to injure the interests of the rich; and on the other side,

arrogance, hardness, and the desire to abuse the weakness of

the Indian on every occasion© These evils, which originated

between those who possessed everything and those who possessed

nothing, were the result of inequalities of condition that

could be found everywhere, but in New Spain they were worse

for there was no intermediate stageo The people were either

rich or destitute« These factors are still present today, 1

even though not as strongly as in colonial Latin Americao

The fourth major factor is the role of the Church in

Latln~American nations © This subject is of debatable nature^

since history records that one of the main contributions of

Spain to. her. colonies was the Christianization of the Indians,

and,the initiative of the Church was responsible for many ©f

the industries and enterprises which the colonies managed t©

•1' . . . " * Herring, opQ clt <■, pp<> 100-249 f Wilgus, OJD0 citoj>

pp© 50-177$ Robertson, op. cito, ppe 61-210©

-20-

developo But at the same time, the close tie between the.

Church and the State which existed in Spain was firmly

transplanted to colonies of The New Spain,, This close relation-

ship has proven beneficial in some Latin American nations as

a barrier to communism, but it has been exaggerated in some

nations and has created problems in relation to the economic

development of these countrieso In Colombia, for example,

the church must by law participate as an active member of the

government, and the formulation of most policieso In particu-

lar, those which might affect the Church in anyway must be

approved by the Cardinal or a representative of the Church in

the government© The welfare of the Church is conceived to be

the welfare of the nation* At the same time, because of its

past strong affiliation it has played a vital part in the

nation1s economic developmente The breaking of this barrier

has been a major problem.. Those countries which, in order to

speed up economic development, attempted to break away from

the Church, have not been successful. The results of these

attempts have been mostly negative, since now, instead of

having one problem, they have two major problemss the in-

visible tie between Church and State which still exists, and

the newly created problem of keeping their people united to •

both their government and the Churcho

Besides these problems or internal nature, Latin America

encountered others of external nature such as the political

and economic interference of foreign powerso This accounts

-21-

for the fifth problem© As could be expected, as a result

of lack of political-social and economic equilibrium, foreign

economic and political interests found it convenient and

remunerative to jump in and "help" in their own fashion

gaining in this way a key powition in the economic systems

of these nations, creating new problems, and taking advantage 1

of these inexperienced countries in every way they could.

In addition to the foregoing factors, which may be

classified as obstacles to economic development common in

significant degree to all Latin American nations, are the

following characteristics about which less ready generalizations

may be made© Concerning these, much detailed information has

been compressed into tabular form and will be found in

Appendix A together with a map of the areao

First among these matters is the rapid population growth

that everyone of these nations has experienced since 1920© In

Jo Fred Rippy, Ike Capitalists and Colombia (New York* Sie Vanguard Press, 1931), p© x-xxxi, 1-95o Jo Fred Rippy, Historical Evolution of Hispanic America, (New York? F© So Crofts & Co©, 1933)© See also Carlson, OJD© cito Herring, 0JD° Cito

2 References on these subjects will be found in the

footnotes to the table in Appendix A©

-22-

1920 the total population of Latia America was around 85

million, in 1950 it was 155 million, and today it is estimated

at 167 millions o This shows an increase of more than 80 per-

cent during the thirty year period from 1920 to 1950, while

the corresponding figure for the world as a whole is betwe

30 and 35 per cento This population, as shown by the per-

en

centages given on demographic density, urban population,

population of the capital cities and percentages of the popu-

lation of the capital city in relation to the total population

and territorial area of all Latin-American nations, is unevenly

distributed for both Latin-America as a whole and most indi-

vidual countries© Also it can be seen from these figures

that the urban population as a percentage of the total popu-

lation was almost the same, from 30 to 35 per cent for most

of the Latin-American countries, the exception being Haiti

(12©2), and Dominican Republic (26«>0), and Puerto Rico (20©0)©

And at the other extreme Mexico (42©6), Uruguay (65©0), Argenti-

na (62o0), Venezuela (53o8), Chile (60©4) and Cuba (57©0)©

Another common feature is that; most of the population

of these countries is concentrated in the capital citieso

This is due partly to the topographic obstacles mentioned

above, but it is also due to the fact that most of the

1 Sune Carlson tt,Hie Economic Potentials of Latin

America,® American Economic Review© XLVI (May, 1956)© Wisconsin* George Banta Company, Inc©,) ppe 419-420©

-23-

programming and main offices are in the capital cities. This

is a result of highly centralized governments as is the fact

that all the revenues collected in the departments are

directed to the Central government which is supposed to dis-

tribute them proportionally* The actual outcome is different

however, since most of the money stays in the capital city

and the departments do not receive their respective shares*

Therefore, the capitals of the departments, which are respon- "

sible for the development and welfare of their surrounding

communities, are unable to do so* As a result there is a

concentration of population in the big cities and the rest of

the towns are left almost a state of misery, with no highways,

paved streets, good schools, and necessary facilities for

progress© This makes the small towns stagnant and dependent

on the city for commodities and employment0 This is one of

the reasons why in most Latin American countries, with the

exception of Argentina, Mexico, Colombia and Brazil, the

number of cities of 100,000 or more inhabitants is limited

to from one to three©

A further common feature of Latin American nations is

their heavy dependence on foreign trade, but more important,

on imports of machinery, automobiles, mechanical implements,

and pharmaceuticalso As for exports, most countries in

Latin America produce similar products for export - which is

understandable, as every one of them, with the exception of

Bolivia and Chile, is mainly agricultural, and each of them

-24-

is usually dependent on the production of one or two products

in which they have some comparative or absolute advantage e

However, some countries like Brazil, Chile, Bolivia and Cuba

which have been heavily dependent on the exports of one or

two commodities such as coffee, copper, tin and sugar, respective*

ly, have felt the impact of changing world demand much more

than countries like Mexico, Colombia, Peru, which have a more

diversified export structure© It also should.be noted that

most of those countries depend mainly on the United States

export market even though they are also suppliers of European

marketso Another common characteristic, with the exception

of Venezuela, is their shortage of dollars or foreign exchange,

Venezuela being the only country in Latin America with a

surplus of dollars at present©

A common feature in the field of politics and government

is that most of these countries, with the exception of Brazil

and Mexico and Puerto Rico, have a centralized form of govern-

ment in which, because of the structure of their public

institutions and administrative bodies,.their local political

organizations and local administrative machinery are still

weako., This is due to the shortage of trained staff in govern-*

meat services© Hie few who are trained and able to strengthen

this field are either so poorly paid that most of them have

to depend on part-time jobs, or have to accept positions with

private companies which recognize their abilities and training

and provide them with an adequate income© Or they are not

-25-

called to fill government positions because of their

political affiliations or because the government will force

them to follow its own policy without regard to whether the

policy is the right one or noto Therefore, in order to

accomplish its goals, the government hires people who lack

the training and proper background, as long as they become 1

^corbatas** to their political machinery© This brings about

what I have called "parasitic development", which implies the

use of the productive sectors of the economy in order to

maintain the unproductive sectorso This is true in most

dictatorships where most of the personnel is part of the

army and is highly paid in order to maintain the dictator in

power<> In very few cases are the military personnel called

to fill a government civil position capable of carrying on

the job successfully*. The lack of trained staff is also

evident in engineering, agriculture, economics, and fores tryo

In the case of the legal profession, the lawyers who become

part of the machinery of the government, are usually politicos,

with very little or nothing to offer but a lot to take away

from the citizens or taxpayerso Administrative procedures are

generally slow and cumbersome, cluttered with checks and

counterchecks, the result of a common distrust of existing

administrative machinery* This confused and corrupt state of

1 Corbatas or government puppets employees who are in

the* pay roll but who do not perform their offices o They merely support the corruption of the government and get paid for it as regular employees«,

-26-

administration is inherited from the colonial administration

system© These factors are the cause of most of the

dictatorships and instability that have existed and still

exist in Latin America© Some Latin American countries have

attempted to solve this problem** A case in point is Uruguay

which has been in the vanguard of political maturity in

Latin America since 1911 when Jose Batle y Ordonez became

President and. began social and political reforms© During the

present decade other countries, formerly dictatorships, have

taken steps to return to, or establish the civil and democratic

forms of government which they had lost in previous years or

had never enjoyed before© Bolivia has experienced several

illegal seizures of power in recent years* However, on April 1

11, 1955, the military "junta" or dictatorship was finally

overthrown and a civil government was established with Paz

Estensoro as President© In Guatemala in 1954, General Castillo 2

Armas overthrew the communist dictatorship of Jose Arbenzo

1 ®Juntaw is the name given to a group of three or more,

usually composed by the leaders of the traditional political parties of the country and the heads of the army of the nation© A.junta sometimes may fail to re-establish the civil govern- ment and will attempt to remain in power• This is more likely to happen when the *juntaw is composed of military personnel© Ike outcome of a situation like this is usually a new overthrown of the existing junta by the leaders of the civil political parties, a new dictatorship, or a civil war©

2 For more information see The World Book Encyclopedia,

Volo 7, 1955, (Chicagos Field Enterprises, Inc©, 1955), pp© 3197-3199 a

-27-

presidential elections took place in that year and under the

presidency or Castillo Armas, the country is making plans

toward political stability© Honduras overthrew former

dictator Diaz in 1956 and a military junta took over and is

working toward the same goals, with presidential elections

promised for the near future* Argentina ousted former

dictator Juan D© Peron in 1953, and a military junta headed

by General Aramburu has been working towards the economic

recovery of the country© A new constitution was drawn up in

May, 1957, and elections for a civil government have been

called for next year© In Nicaragua, former dictator Anastasio

Somoza was shot to death by a Mcaraguan citizen and a

revolutionary movement started but did not succeed due to the

fact that Somoza1s family has almost complete control and

ownership of all the properties and government enterprises in

the country© Our traditional democratic Republic of Colombia

after four years of struggling for a return to the civil and

democratric form of government we always enjoyed, finally

ousted on May 10, 1957, dictator Rojas Pinilla, who had over-

thrown elected president Laureano Gomez, who was in exile in

Spain© Gomez is to return to the country to head the new

temporary government© Meantime, the country is working toward

economic recovery and has obtained the full cooperation of the

political parties and its people in general© Pinilla left the

country's economy in complete chaoso Unsuccessful movements

have taken place in Cubar to. overthrow, the government of

-28-

present dictator Fulgencio Batista* Other dictatorships still

exist in Latin America*, In Dominican Republic, Rafael Leonidas

Irujillo has been running the country for 22 years and has

placed his son, Hector Bo Trujlllo, who is just a ^corbata* as

President© As in Nicaragua, TrujilloTs family owns and controls

almost all the economic sectors of the nation© Trujillofs

regime has, however, contributed in his own fashion to the

economic development of the Dominican Republico Venezuela is

the only country in Latin America which, in spit© of a dictator-

ship is enjoying political and economic stability,, They are

enjoying this unusual stability partly because Dictator Perez

Jimenez has managed to run the country with success and with«

out taking much personal advantage of his position, and partly

because of the oil boom in Venezuela of recent years* The

country does not have economic worries because it has a surplus

of dollars and the people enjoy good incomes; therefore,

hunger is not present in the majority of the population, and

education is reaching almost everyone in the nation© These

latter two factors are vital forces which can break a non-

democratic governmento This is the decade of the downfall of

the dictators in Latin Americas every one of these countries

is.-* on the threshold of political stability which could bring

them a sustained economic development and future economic

growth©

Another factor which can also be the result of the

central form of government, lack of knowledge and trained

staff is not merely scarcity of capital - but scarcity of

-29-

economic knowledge and institutions capable of making the

capital available and assisting in the proper investment of

that capitalo It must be added that moat countries are in

the need of more foreign capital but this inflow of foreign

capital will not come in the sufficient quantities unless

these countries can gain political stability - which will

give the foreign investors confidence in the place of invest-

ment©

Another factor to be noted from studying Latin America

is the number of inflationary pressures. One of these is

caused by food output, which has not ke|>te pace either with

industrial output or with population increase© The.rise in

investment and industrial output has brought about a growth

in the non-agricultural incomes, a factor which has added

to the pressure of non-agricultural demand for foodo therefore,

the food gap, which has had to be covered by imports, has

kept increasing and has also brought about price-wage spirals

in many of the countries, with the exception of Argentina and

Uruguay who are the only exporters of cereals and livestock

products in Latin America* Other inflationary pressures in

the other countries derive from the absurd idea most of the

countries have that in order to attain economic development

and future economic growth, they must industrialize and

engage in the setting up of heavy industries in a short time,

as is the case for Colombia which put in operation the in-

tegrated steel mill of Paz del Rio against the advice of most

foreign.experts, instead of trying to improve and develop the

-30-

agricultural sector© Still-further inflationary pressures

have come about from parasitic development0 These factors

are at the same time the reason for political instability and

the key to the downfall of dictatorshipse

Another factor which the countries have in common is

the increased mechanization of large agricultural holdings,

and experiments in methods of helping the rural population

to improve their living conditions© Examples of this are

Argentina, Brazil and Uruguay© Ihese have been accomplished

through, the help of the IT© S© Bilateral Technical assistance

pro gram o

Another important factor is the burden of inheritance

in the landholding field, which creates an unhealthy rural

structure which hampers the future economic and social

development of these nations© From this we can say that even

though most Latin American countries long ago adopted social

services similar to those of the United States, they differ

widely in the extent to which they have been able to apply

their social measures and live up to those standards set - in

particular among the rural majority of their population©

CHAPTER II

1ES ROLE OF FOREIGN INVESTMENT IN THE ECONOMIC DEVELOPMENT AND GROWTH OF LATIN AMERICA

With the foregoing in mind, it will be possible to

trace the economic development and stages of economic growth

In Latin America© However, because there is a lack of in-

formation and statistical data necessary to accomplish this

goal, the attempt will be to present this picture by taking

isolated periods in the economic life of these newly growing

nations of Latin America^

Our main concern will be with the economies of the

first two stages, that is, the preconditions and the economic

development stages of these countries« The course of history

is punctuated by revolutions, each marking the transition to

a more advanced stage of historical development, and, following

the historians' approach, examining the story of a particular

economy and seeing that the seamless web of economic history

is but a long-period continuity of events, it will not be

hard to see that the preconditions of economic development can

be traced for a half a century at least, as In the case of

Britain's cotton-textile development of the 1780*3, or the

-31-

-32-

United States of 1840'a and 1850's, which had been preparing

itself for industrialization since the 1790's; or in the case

of Russia where the foundations for its noted development

during the two pre-1914 decades were laid in 1861, if not

before© In the same way it can be said that the (expontaneous)

preconditions for the economic development for most of the

Latin American nations can be traced back to the nineteenth

century just before the independence and after the independence,

and to the period when the expontaneous, accidental, and

parasitic development took place© In tracing the stages of

economic growth it is desirable to have figures for the net

national product and its components, output per capita, and

per-capita real Incomeo But these data are only spottedly

available or not available at all, and for most of the Latin

American countries none of these data was available until

after each country had passed the first and second stages of _

economic growth - that is the precondition, and the economic

development stage, and had passed into the third stage, or

stage of more or less regular economic growth© Nevertheless„

speculation on the stages of economic growth of Latin America

will do more benefit than harm* even though it is regretable

that more detailed and accurate measures are not at hando

The first case presented (Chapter I), of a reasonable

and traditional society containing an economy mainly agricul-

tural, which uses more or less unchanging production methods©

and saving and. investing productively little more than is

-33-

required to meet depreciation, is the case for the newly

growing nations of Latin Americao The second case presented,

of a reasonably wealthy nation with not much tradition

behind It, can also apply, with some reservations, to the

Latin American countries, as it is shown by the background

presented on these countrieso During the nineteenth century

came the first long period when the preconditions for

economic development were established and the expontaneous,

accidental and parasitic development took place in the form

of investments, foreign and domestic. The foreign investment

was mainly Kuropeano It was the beginning of the expontaneous

development but at the same time this development was para-

sitic to some extento This capital inflow, in spite of Its

effects (such as the building of railroads, public utilities,

the opening of mines, and the development of plantations

for expanding exports), failed to gain the momentum necessary

to reach the plateau of economic development or second stage<>

These investments were in the form of portfolio capital mainly 1

government obligations, and direct investments (see Table I

_ _ , . :

Direct and portfolio investments are defined as in U© So Bureau of Foreign and Domestic Commerce, Economic series I, pp© 2-3© Direct investments include all American (or British, etc*) investments in foreign corporations or enter- prises controlled or heavily influenced by a person or small group of persons (corporate or natural) domiciled in the United Stateso Thus, direct investments are classified as to the domicile of the control of the enterprise© Portfolio invest- ments include equity and other security investments in foreign governmentso In Latin America, governmental issues or issues guaranteed by governments constitute the major types of port- folio investmentso

-34-

page 35)o During this time several government investments

in the form of bonds were successful but they were followed

by periods of default, a fact which discouraged investments

for a few decadeso In many cases the funds were not

invested wisely and the main concern of the foreign promoters

was not promoting the kind of investment which would result

in benefits to both lenders and borrowers, but mainly the

selling of the securities © The movement of capital into

railroads, public utilities, communrications, mines, agri-

culture, banking and industries was also expontaneous and

parasitic, frequently poorly planned and managed, bringing

about speculative booms followed by losses and generally

depressed conditions© As a result, it sometimes failed to

gain momentum enough to carry on the development of Latin

America to the third stage© It did not promote the develop-

ment beyond the narrow confines of the export sector and

did not create any incentive for local enterprise and capital 1

accumulation©

At the end of the nineteenth century a new trend took

places the beginning of planned and deliberate development

for Latin America© Both from outside the society and from

its own dynamics the idea grew that economic development in

a more planned fashion could bring more benefits for the

T —— - For more detailed information see Simon Go Hanson,

Economic Development in Latin America© (The Inter-American Affairs £ress, 1950[, Chapter T2^

TABLE I

OWNERSHIP OF INVESTMENTS IN LATIN AMERICA

1913

(In billions of dollars)

Economic Government Total Enterprises

3.4 Obligations

1 .S United Kingdom 4o9

Prance 1.1 e5 lo6

United States lo2 o4 lo6

Other Europe n©a e n.a. o5

Total 806

n<ao - not available

Source? "Foreign Investments in Latin, America0 Economic Se r i e s, Pan American Union© Washington, Do C, 1955o

-35-

-36-

whole economy encouraged by the ideas of positivism and of

the "elite11 developed within the society. This was the case

of the Cientificos in Mexico, of whom Porfirio Diaz was the

best representative, hut again this new foreign investment

did not produce the effects expected© The building of rail-

roads, improvements of public utilities and ports and other

undertakings did nothing more than better the already existing

economic system, as unfortunately the landed estates, foreign

mining companies, and other investors merely exploited the

Latin American nationso The mercantilist story of the colonial

times took place again in a similar fashion, with profits

remaining abroad in one form or another©

What was then the fate of Latin America? Living

standards became worse© Foreign capital and landed estates

exploited their national economicso When, the, if ever,

was the beginning of their economic development going to take

root permanently? It did not take longo By 1910 the

beginning of their desperate struggle to reach the second

plateau took place, and this could be traced to the particularly

sharp stimulus created by the Mexican Revolution© It

was the result of the unscrupulous exploitation by foreign

companies© This- revolution affected the balance of social

1 Rippey, 0£o cito, ppo 184-394©

-37-

power, til© character of economic Institutions, the dis-

tribution of income, the pattern of investment outlays and

the - proportion of potential innovations which later were

applied© The oppressed peon demanding a new social order

with an economic orientation toward national economics away

from internationalism was the cause of this new sharp stimuluso

As can be seen from Table II, page 38, the living standards

of the Mexican rural classes before the 1910 revolution

were pitiful* I*or more than 156 years monetary wages had

remained stable in Mexico© Agricultural labor received

wages from 25 to 30 centavos a day© In 1908, as is shown

in the same table, the Mexican peon was paying 6 times as

much for beans and 3 times as much for corn as in 1792, and

these two commodities were necessary for their subsistence©

Another example of economic revolution in Latin

America was the experience of Uruguay© Up to 1904 the country

was facing not only economic difficulties, but political

problems © Its economic troubles had begun immediately after

the independence just as In the other Latin American nations ©

But Uruguay made an early start, even though its leadership

had been obscured by spectacular movements in larger countries,

and took the steps necessary to accomplish its policy© In

order to form its own economic policies it was necessary

first to attain political stability, and by 1904 with the

election of jose Batlle y Ordonez as president the country

TABLE II

MEXICAN COST OF LIVING SAMPLES 1792-1891

1792 1891 1908 Percent increase

Corn per hectoliter

Rice per 100 kilos

Flour per 100 kilos

Wheat per 100 kilos

Beans per 100 kilos

Chile per 100 kilos

lo75 2.50 4.89 179

7o60 12.87 13.32 1375

2.71 10.87 21.89 711

1.80 5.09 10.17 465

1*63 6.61 10.89 565

26.08 27.13 57.94 123

Sources K^rler R. Simpson, The Sjido-Mexico's Way Out (Chapel Hills North Carolina Press, 1937). p. 37o

-38-

-39-

entered a mew phase of social and economic development,, Ihe

revolution in Uruguay was not a violent or drastic revolution

It was a peaceful and planned revolution which became a model

for other nationso By 1911, during the second term of Batlle

y Ordonez, Uruguay had entered on the second stage of eco-

nomic growth© It had reached the stage of economic develop-

ment© Other countries started economic reforms following the

example of Uruguay and Mexico© For most of the countries in

Latin America the beginning of the take-off or economic

development stage could be traced to the sharp stimulus

created in the improvement of transportation such as the

opening of the Panama Canal<> Even though for Colombia it was

not pleasant at all, nevertheless the effects of the opening

of the canal were beneficial to all nations of Latin America9

especially the countries of South America, as it set in motion

a chain of secondary expansion in other sectors of the eco-

nomy, especially the export sector© Another spark that

stimulated economic development in Latin America was created

1 wISa 1911 JoseBatELe y Ordonez became president and began social reforms which have made Uruguay unique© By a plebiscite held on December 16, 1951, Uruguay adopted a nine- member National Council of Government as the executive branch of the Government, based on a concept of Batle after he studied the Swiss Model© The General Assembly or legislature branch has two chambers; the Senate and the House of Representatives©w Introduction to the Twenty Latin American Republics Members of the OAf^ Introduction to Uruguay© Pan American Union, (Washington, D© C© 1956)«>

-40-

by the challenge posed by the sharp fall in the terms of

trade during the 1930's and during the Second world ^Jar, which

forced many of the Latin American nations such as Apo-enti

to plan and develop substitutes for manufactured imports.

By 1913 foreign investment in Latin America was about

|8o6 billion (see Table I.page 35), about two-thirds of which

was direct investment and the remainder' represented investment

in government obligations. After 1913, total British invest-

ments had increased only from $999 million in 1913 to $1,128

million in 1939, while French investment decreased from $lo6

million in 1913 to about $450 million in 1938o

By 1930, most countries in Latin America had entered

the second stage and planned or deliberated development was

taking placeo The gDvernments had taken the steps necessary

for the new era. However, because of the comparative ad-

vantages of exploiting productive land and other natural

resources, and because of the topographic handicaps of many

of the countries and certain traditional attitudes, such as

the fact that many of the countries in Letin America did hot

follow until recently the Protestant ethic of profit making,

the time when self-reinforcing industrial growth would

profitably get under way was delayed.

1 Hanson, ope cit., p. 380; see also J. Fred Rippy ,

Inter-American Affairs, "Series of Articles." Also Paul R« Olson and C» Addison Hickman, Pan-American Economics (New York? John Wiley & Sons, Inc., 1950}, pp« 32-121. George Soule and others© Latin America in the Future World (New York? Farrar & Rhinnehart, Inc.,"T9?57,~ Chapter 8, pp* 100-124

-41-

Uo 3© investment in Latin America grew after the war

with Spain (see Table III, page 42). Previous to that

United States investment was confined to direct investment

in Mexico, Colombia and Cuba© Between 1914 and 1929 the

Uhited States took over Europe's investor position in Latin

America. During this period, the value of U. So investments

rose by $4 ©78 billion to a total of $5.24 billion© About

$>&o2 billion of the direct investment was in agriculture,

mining, and petroleum, $>0.9 billion in public utilities and

transportation, and over $0.2 billion in manufacturing (see

Table IV page'43). About $1.72 billion was portfolio

investment by 1929 (see Table III page 42).

Then came the depression of the 1930's. Nevertheless

the U. So investments were more or les;- successful from the

standpoint of the investor, and helped sustain the economic

development that was in process in Latin Americao (Table V

pages 44 and 45 shows the geographical distribution of U. So

direct investment in Latin America)© A large part of this

investment went into export market industries. By 1940,

the volume of Uo So direct investment had decreased consider-

ably (see Table IV page 43)© Portfolio investment, on the

other hand, had taken a different direction: nearly two

billions worth of Latin American bonds sold in New York

Rippey, The Capitallstlcs and Colombia, op, cit©, pp. 1-25©

TABLE III

U.S. PRIVATE INVESTMENTS IN LATIN AMERICA, 1897-1940

(IN MILLIONS OF DOLLARS)

Direct Investments

Portfolio Investments

1897 1914 1919 1929

a

n.a.* 367a >a

1940

308 1,281 1,987 3,519 2,771'

419~ 1,725° 1,04CT

Total . 308 1,648 2,406 5,244 3,811

""Not available.

Sources ? a Cleona Lewis, America *s Stake in International

Investment, The Brookings Institution, Washington, 1^38, p. 606.

American Direct Investments in Foreign Countries, 1940, TT» So Department of Commerce, 1942, p« 23«

cWilly Feurerlein and Elizabeth Hannan, Dollars in Latin America, Council on Foreign Relations, New York, 1941, p© 15o This figure represents the nominal value of Latin American dollar held in the United States at the end of 1939 o

-42-

TABLE IV

U.S. DIRECT INVESTMENTS IN LATIN AMERICA, 1929 AND 1940

(IN MILLIONS OF DOLLARS)

Industry 1929

Manufacturing 231

Distribution .... 119

Agriculture ... . ... .817

Paper and ?/ood pulp ,.

Pishing Fleets and packing

Mining and smelting 732

Petroleum ..... .... 617

Public utility and Transportation 887

Miscellaneous , 116

Total 3,519

1940

210

82

359

512

572

962

74

2,771

~ Sources American Direct Investments in Foreign Countries, 1940, U. S, Department of Commerce, 1942, p. 23*

-43-

TABLE V

U.S. DIRECT INVESTMENTS IN'LATIN AMERICA BY .COUNTRY

1929, 1936, 1943, 1950, 1952 AND 1953*

(IN MILLIONS OP DOLLARS)

Country 1929 1936 1943b

Argentina 331o8 348 o3 380 ol Bolivia 61o6 18o3 13o2 Brazil 193 06 194 o3 232o7 Chile 422o6 483o7 328o3 Colombia 124 oO 107 oO 117.0 Costa Rica 22,2 13 o3 30 o4 Cuba 919 «0 666 o3 526.3 Dominican Republic 69 .3 40c7 70.5 Ecuador ■11.8 4c9 10.8 El Salvador 29 o5 17*2 14.9 Guatemala 70o0 50,4 86.9 Haiti 14 o2 9,7 14.1 Honduras 71o5 36*4 37.0 Mexico 682o5 479.5 286.3 Nicaragua 3.0a 4.5 4.0 Panama 28 o5 26 o7 110.3 Feru 123 o7 96.1 70.8 Uruguay and Paraguay 40o5 19.0 14.8 Venezuela 232o5 186 o3 372o8

Total 3,461o9 2,803.0 2,721.2

^Sources; Foreign Investments of the United States, Uo So Department of Commerce 1953, p. 48; Survey of Current Business, November 1954, p. 11.

aMay 1943. All other figures end of year.

^Includes $26.2 million shown as "International.n

-44-

TABLE V — Continued

Country 1950 1952 1953

Argentina 355.6 393 406 Bolivia 10el 11 15 Brazil 644 „2 1,013 1.003 Chile 540.1 623 666 Colombia 193.4 234 235 Costa Rica 60.0 61 61 Cuba 642.4 686 686 Dominican Republic 105 o7 123 121 Ecuador 14.2 14 17 El Salvador 18e5 21 22 Guatemala 105 o9 108 107 Haiti 12o7 15 16 Honduras 61o9 81 82 Mexico 414.5 490 509 Nicaragua 9.0 10 9 Panama 348.0 383 398 Peru 144.5 230 259 Uruguay and Paraguay 61.0 77 82 Venezuela 993.0 1,184 1,308

Total 4,735.2 5,758 6,001

-45-

-46-

between 1921 and 1931 went In default by 1939?" me reason

was that they received treatment reminiscent of w,,™™ ~

19th Century investment; promoters had influenced Lati

American governments to borrow for non-prod-active purposes

disregarding the problem of servicing the loans. By the

end of 1939, the total foreign investment in Latin America 2

was one billion dollars less than it was in 1914. The

private credit of Latin America had been ruined and as a

result of currency controls, expropriations and government

restrictions, V• S« private investors were discouraged from

investing in these countries© However, Latin American credit

position was restored in the following years and by. 1940 to

1945 through the help of the Export-Import Bank, about §200

million were disbursed In Latin America for development

purposes. This inflow of capital into Latin America was

helped by the merchandise deficit the United States had with

Latin America during the war period (see Table VI page'47)o

From 1945 to 1953 the inflow of capital into Latin America

continued. (See Table VII page 48)o It averaged 550 million

dollars annually© This was accompanied by an average annual

out-flow of about 309 million dollars which took the form

of repurchasing European owned assets; the rest of the

1 Raymond Fo Mikesell, "Foreign Investments in Latin

America,w Economic Research Series, 1955, p» 4« o Mikesell, op_o cite, p„ 5.

TABLS VI

IV So GOVERNMENT LOANS AND CREDITS TO LATIN AMERICA*

(IN MILLIONS OF DOLLARS)

Credits Utilized Export- Import Ne-

Total 3ank Other Repayments Credits

July 1, 1945- Dec« 31, 1950

1951

1952

Jan 1, 19 53- June 30, 1954

July 1, 1945- June 20, 1954

#426 §396 $30

$134 #129 $5

#103 $101 $2

$438 $434 $4

147

$54

$88

$221

$350

$1,101 $1,060 $41 ;>39 6 $707

^Source: Semiannual Reports of the National Advisory Council on Internat ional Monetary and Financial Problems. (Quoted in Mikesell, 0£o cite, pe 20)•

-47-

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-49-

inflow of 241 million went Into direct private investment

(see Table VII page 48) o Since the end of world War II

the value of IT« So direct private investment has been more

than doubled (see Table VIII page 50) o This investment was

geographically distributed in Brazil, Chile, Colombia, Mexico

Panama, Peru, and Venezuela© The proportion of direct invest-

ments in Argentina, Bolivia and Cuba was small (see Table v

page 45)o

Prom 1946 to 1953, the largest increases in direct

investments were in petroleum (about 40 per cent) and in

manufacturing (nearly 25 per cent), but during the 1950-1953

period manufacturing accounted for the largest proportion of the

investment, followed by mining and smeltingo Investment in

manufacturing included chemicals, food, electrical equipment,

motor vehicles and rubber productse Investments in agriculture

and public utilities had been limited to the reinvestment of 1

earnings in recent years (3ee Table EC page 51 )• In 1954,

the total value of Uo So direct investment in Latin America

was $6,256 millions as compared with $3,094 millions in the

period from 1946-1954 (see Table X page 52)* This time petro-

leum absorbed the largest proportion followed by manufacturing

and public utilities* It should be noted also that most of

the investment in petroleum was in Venezuela* Brazil accounted

Tables XII and XIII present the Uo So investment position in Latin America for different years from 1945 to 19 53, and the earnings on U. So Equity and Investment for 1950 and 1953, respectively©

TABLE VIII

Xj. S. DIRECT CAPITAL OUTFLOW AND REINVESTED 'EARNINGS IN LATIN AMERICA, 19 46-1953*

(MILLIONS OF DOLLARS)

Net capital Reinvested Year outflow3- earnings of Total

subsidiaries

148

580

523

452

149

415

580

245

3,094

1946 71 77

1947 457 123

1948 333 192

1949 332 120

1950 40 109

19 51 166 249

1952 277 303

1953

•1953

93 152

1946- 1,769 1,325

Includes reinvested earnings of branches©

^Source: TJ« S« Department of Commerce (quoted in Mikesell, op* cit., p. 15 )„

-50-

TABLE DC

NET U.S. DIRECT INVESTMENTS, INCLUDING REINVESTED EARNINGS IN LATIN AMERICA BY INDUSTRIES, 1946-1953*

(IN MILLIONS OF DOLLARS)

Industry ig53 ig5Q iggl 1Q52 .lgg3

Manufac turing 791 113 212 174 -29

Trade 303 30 61 41 8

Agriculture 166 7 37 7 -12

Mining and Smelting 454 33 76 135 130

Petroleum 1,132 -55 7 167 108

Public Utilities 103 6 3 32 15

Miscellaneous 145 14 13 26 25

All industries 3,094 149 414 580 245

^Sources? Balance of Payments of the United States9 1949-1951; Survey of Current Business, January 1954, and Uc S© Department of Commerceo

-51-

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TABLE XII

TJ. So INVESTMENT POSITION IN LATIN AMERICA (END OP YEAR DATA: IN MILLIONS OP DOLLARS)

1945 1948 1950 1951 1952 1953

4,010 5,301 5,698 6,283 7,018 7,057 3,671 4,614 5,143 5,143 5,591 6,149

2,999 4,148 4,735 5,176 5,758 6,023 250 151 159 163 147 131

189 104 34 33 33 30 233 211 215 219 211 199

399- • - 687 555 692 869 674 51% i 50 65 50 53 52

288 - 637 490 642 816 622

private Long-Term

Direct Foreign dollar bonds Securities payable in local currencies

Other long-term

Short-term Deposits Other

Uo So Government

Long-term Short-term

248 404 &"<o 524 586 933

220 361 426 519 582 930 28 43 5 5 4 3

Totals 4,258 5,705 6,130 6,807 7,604 7,990

-^Source: The Balance of International Payments of the United States, 1946-1948. 17. S. Department of Commerce, 19 50, p. 163; Survey of Current Business, Department of Commerce, May 1954, p. 12o

-54-

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-56-

for the largest proportion in manufacturing, mining, and in

most of the other industries©

Prom 1945 to 1954, Uo So government credits and

International Bank for Reconstruction and Development (IBRD)

loans to Latin America have been about |l©6 billions, out of

which Export-Import Bank credits utilized by Latin American

countries average about f200 millions per year (see Table

XI page 52), and the IBRD loans average 65 millions annually©

From 1947 to 1954 Latin American countries completely

exhausted the resources of the International Monetary Fund,

most of this being accounted for by Brazilo All the IBRD

loans have been made for development orojects in the fields 1

of transportation, electric power and agriculture (see Table

XIV page 56)o It should be noted that the amount accounted

for by industry is very smallo The Export-Import Bank loans

went into the same fields© About 10 per cent went for the

development of strategic materials and over a third for the

liquidation of commercial arrears (see Table XI page 52)o

The largest borrowers in order of loans made have been Brazil,

Mexico, Chile and Colombiao

Since Great Britain and the United States have been

the two largest foreign investors in Latin American countries,

it will be helpful and enlightening to show the character,

1 Mikesell, 0£o cit0, p0 8©

TABLE XIV

IBRD LOANS TO LATIN AMERICAN COUNTRIES THROUGH JAN. 31, 1955-3

(IN MILLIONS OP DOLLARS)

Brazil --

Chile 3.8

Colombia 9o9

Ecuador

SI Salvador —

Mexico —

Nicaragua lo7

Panama lo5

Paraguay- 5.0

Peru 8.0

Uruguay —

0o5

" " Agriculture, Comrauni- " " • — Country Forestry Industry cations. Electric Total 1/

and Transport* Power "" Fisheries

20.0

37.6 156o5 194.1

— 13o5 37.3

55o9 8.5 74 .3

8o5 — 8.5

11.1 12 c5 23.6

6I0O 79 08 141 e3

7.0 0o5 9.2

— — 1.5

— — 5.0

2.5

606 26.4

10.5

33 oO

Totals 29.9 20o5 190o2 297.7 538.3

l/ Principal after cancellations

*Source: IBRD staff. Mikesell, op. cit., p. 13.

•57-

-58-

distribution and composition of the Investments of these

two industrial nations©

As explained, Britain took the lead as investor in

the early years of the nineteenth century© "It can be seen

also that the outlays of 3ritish Investments have been

centered in about the same areas decade after decade© The

geographical distribution of British investment shows that

in 1913 less than one-fourth was placed in the Caribbean

regions, especially in Mexico, Cuba and Guatemala (see Table

XV page 59)o Nearly one fourth went to Brazil, under one-

tenth was concentrated in the west coast region of South

America, with Chile and Peru accounting for almost all this

portion© Over two-fifths of the total British Investment was

in the east coast area of South America9 with Argentina

leading the field of her investment in this section© Argentina,

Brazil, and Mexico accounted for over three-fourths of Britain?s

total investmento By 1929, in spite of all the economic

turmoil that took place then and thereafter, Britain's invest-

ment In Latin America did not change much© There was only a

small shift of less than two per cent toward the Caribbean"

region with a complementary two per cent decline in Argentina

and the East Coast countries of South America (see Table XV

pages 59 and 60)* By the end of that decade, Argentina,

Brazil and Mexico were still leading-the field, accounting

for over three-fourths of the total of British investment in

Latin Americae By 1939, there was a decline only on the

TABLE XV

TOTAL BRITISH INVESTMENTS IN LATIN AMVPTPA 1913, 1929, 1939 ■ ''

(IN DOLLARS)

Latin American Nations

CARIBBEAN COUNTRIES:

Mexico Cuba Dominican Republic Haiti Costa Rica El Salvador Guatemala Honduras Nicaragua Panama Colombia Venezuela Totals for region

Amount

807,622,000 222,223,000

33,300,000 11,124,000 52,226,000 15,716,000 6,196,000

34,470,000 41,550,000

1913

1,224,227,000

Per cent of Total

16,21 4.46

0o67 0.22 lo04 0.32 0.12 • • • • • 0.69 0.33

24.57

BRAZIL 1,161,500,00C 23.31

WEST COAST, SOUTH AMERICAN COUNTRIES

Bolivia Chile Ecuador Peru Totals for region

2,099,000 331,691,000 14,505,000

155,292,000 481,587,000

0.04 6o65 0o29 2..67 9.65

EAST COAST, TEMPERATE ZONE, SOUTH AMERICAN COUNTRIES

Argentina Paraguay Uruguay

Totals for region

1,360,700,000 15,579,000

259,727,000

2,116,006,000

37.34 0.31 4.81

42.46

Totals for Latin America 4,983,320,000 100.00

*

pp. 416-418o Sources Constructed from Olson and Hickman, OJD. clt,.,

-59-

TABLE XV"- Continued

1929 1939

Amount Pe: p cent Amount Per cent

15.60 3.11 .... • • . o

0.42 0.10 0.97 0.15 0.04 . e « o

0.52 1.78

1,034,690,000 237,801,000

17o55 4.04 .... .... 0.47 0.18 0.99 0.44 0.08 0.14 0.65 1.58

765,550,040 152,577,560

27,368,000 9,746,000 57,682,000 25,470,000 4,003,000 7,500,000 37,870,000 92,141,000

20,846,380 4,878,940 47,458,780 7,540,180 1,774,160

25,725,230 83,829,060

1,534,271,000 26.12 1,110,180,620 22.62

1,413,589,000 23.97 1,157,639,400 23.59

12,512,000 389,749,000 22,683,000

140,897,000

0o22 6o62 0,39 2,39

19,959,300 381,444,400 19,515,760

129,957,220

0o40. 7.77 0.39 2.65

565,841,000 9o62 550,876,680 lle22

2,140,104,000 36o28 18,276,000 0o32

217,272,000 3*69

1,900,568,000 14,193,280

174,311,220

38o73 0.28 3o55

2,375,652,000 40.29 2,089,072,500 42o57

5,889,353,000 100.00 4,907,769,200 100 .OO

-60-

-61-

portion of Investment in the Caribbean section, with small

increases in the non-Brazilian regions of South Americao

By the end of this decade (1930-1940), British Investment

had declined some in relation to 1913 (see Tsble XV pages

59-60),but its three leading countries for investment were

still the former ones. The economic fields of investment

for the total British investment during the period from 1913.

to 1939 did not change imnch either and were concentrated in

a few fieldsj 32 per cent of the total was invested in

government bonds, 45 per cent in railways securities, four

per cent in banking and shippingp and 18 per cent in miscel-

laneous investments« In 1939, the ratios were 29 per cent

in government bonds, 42 per cent in railway issues, two per

cent in miscellaneous investments (see Cable XVI page 62 ) •

Ihe character, distribution and composition of the

U© So investments was of a nature different from that of

Great Britain* U. So investments were spread out all over

Latin America© In 1913, Uo S© investment was in the Carib-

bean countries« This accounted for nearly 86 per cent of the

total© The other countries of Latin America received from

four to six per cent of the total© Mexico and Cuba combined

accounted for over 80 per cent of all the U© S© investment in

the Caribbean section (see Table XVII page 63)© in 1929,

U© S© investment became more widely spread© Over 66 per

cent was in the Caribbean area and the residual 34 per cent

was directed toward the remaining areas of Latin America©

TABLE XVI

FUNCTIONAL COMPOSITION OF BRITISH CAPITAL IN LATIN AMERICA

PERIOD 1913-1939

1913 per cent of total

1929 per cent of total

1939 per cent of total

Government Bonds 32.0 n.a. 29 oO

Railway Securities 46.0 n.a. 42.0

Banking and Shipping 4.0 n.a 2.0

Miscellaneous Investment 18.0 n©a 27.0

Total Investment 4,827 n.a. 5,003b

(Millions of dollars)

aEstimated

bfc _ ._. Aggregated

n.a. - not available

#Construeted from? Olson and Hickman. 0g» cit., pp. 98-102.

Figures compiled from the Inter-American Statistical Yearbook, 1940, p0 475.

-62-

TABLE XVII

TOTAL UNITED STATES INVESTMENTS IN LATIN AMERICA 1913 (IN UNITED STATES DOLLARS)

•"" Per cent

Latin American Nations Amount of Total

CARIBBEAN COUNTRIES

Mexico 800,000,000 64o36 Cuba 220,000,000 17o70 Dominican Republic 4,000,000 0o32 Haiti 4,000,000 0o32 Costa Rica 7,000,000 0o56 El Salvador 3,000,000 0«24 Guatemala 20,000,000 I06I Honduras 3,000,000 0o24 Nicaragua 3,000,000 0o24 Panama 5,000,000 0o40 Colombia 2,000,000 O0I6 Venezuela 3,000,000 0o24

Totals for region 1^ ,07$,000,000 86o40

BRAZIL 50,000,000 4o02

vVEST COAST, SOUTH AMERICAN COUNTRIES

Bolivia 10,000,000 O08O Chile 15,000,000 1.21 Ecuador 10,000,000 O08O Peru 35,000,000 2,82

Totals for region 70,000,000 5o63

EAST COAST, TEMPERATE' ZONE, SOU1E AMERICAN COUNTRIES

Argentina 40,000,000 3o22 Paraguay 3,000,000 0o32 Uruguay- 5,000,000 0o40

Totals for region 48,000,000 3.94

Totals for Latin America! .,242,000,000 100oOO

^Sources Max Winkler, ££• cito, p.- 275o

-€3-

-64-

The effects of the investment on the Caribbean section spread

over the other regions which gained at the expense of this

region, especially the east coast countries of Latin Americae

In 1929, Mexico and Cuba still were leading in the amount

of U© So investment© Argentina experienced the greatest sain

on Uo So investment during this period (see Table XVIII, page 65)©

After 1929, the U. S© investment was partly direct but mainly

portfolio investment, most of which went to South Americao

Mexico and Cuba were still leading in the field of direct

investment (see Table XIX, page 66), but lacked portfolio

investment* On the other hand Argentina, Chile and Colombia

took the lead on the portfolio investment of the United

States© These three nations, together -.vith Peru, Bolivia,

and Uruguay, accounted for seven-tenths of the Uo S© total

investments in South America (see Table XIX, page 66). The

United States had direct and portfolio investment in every

Latin American nation with the exception of Mexico, Honduras,

Nicaragua,, Venezuela, Ecuador, and Paraguay. The composition

of the United States direct investment in Latin America in

the fields of public utilities and transportation was 34©7 per

cent; mining and smelting, 18©5 per cent; petroleum, 20©6 per

cent; agriculture, 13 per cent; manufacturing, 706 per cent;

distribution, 2©9 per cent; and miscellaneous, 2©7 per cento

These percentages show the changes that took place from 1936

to 1940 (see Table XX, page 68)© As can be seen in the

distribution, the U© So investment in Latin America, even though

TABLE XVIII

TOTAL UNITED STATES INVESTMENT IN LATIN AMERICA 1929*

(IN DOLLARS)

Latin American Nations Amount Per cent of Total

CARIBBEAN COUNTRIES

Mexico 1,550,096,000 27o68 Cuba 1,525,900,000 27o31 Dominican Republic 23,950,000 0o43 Haiti 30,743,000 0c55 Costa Rica 35,700,000 0*64 El Salvador 15,320,000 0o26 Guatemala 38,225,000 0o68 Honduras 12,967,000 0«23 Nicaragua 24,000,000 0o43 Panama 36,381,000 0o65 Colombia 260,000,000 4o66 Venezuela 161,565,000 2o91

Totals for region 3,715*379,500 66,43

BRAZIL 476,040,000 8.53

WEST COAST, SOUTH AMERICAN COUNTRIES

Bolivia 133,382,250 2*40 Chile 295,732,800 7.08 Ecuador 25,000,000 0o46 Peru 150,889,000 2o80

Totals for region 605,004,050 12o74

EAST COAST, TEMPERATE ZONE, SOUTH AMERICAN COUNTRIES

Argentina 611,474,750 10*95 Paraguay 15,250,000 0o28 Uruguay 64,345,800 lol6

Totals for region 691,070,550 12o39

Totals for Latin America 5,587,494,100 lOOoOO

-^Sources Max winkler, Ibid«, p0 278 o

-65-

TABLE XEC

TOUTED STATES DIRECT AND PORTFOLIO INVESTMENT IN LATIN AMERICA, 1936, 1940

(IN DOLLARS)

■

1936 ILS

Latin American Nations Amount wr cent of Total

CARIBBEAN COUNTRIES

Mexico 479,465,000 17 dl Cuba 666,254,000 23o77 Dominican Republic 40,705,000 lo45 Haiti 9,671,000 0o35 Costa Rica 13,286,000 0.47 El Salvador 17,164,000 0o61 Guatemala 50,387,000 1.80 Honduras 36,245,000 lc30 Nicaragua 4,466,000 0ol6 Panama 26,688,000 0o95 Colombia 107,549,000 3.84 Venezuela 186,266,000 6.65

Totals for region 1 ,638,326,000 58o45

BRAZIL 194,345,000 6.93

WEST COAST, SOUTH AMERICAN COUNTRIES

Bolivia 18,337,000 0o65 Chile 483,736,000 17o26 Ecuador 4,941,000 0.18 Peru 96,052,000 3c43 Totals for region 603,066,000 21.52.

EAST COAST, TEMPERATE ZONE SOUTH AMERICAN COUNTRIES Argentina 348,268,000 12o42 Paraguay 5,077,000 0.18 Uruguay 13,917,000 0.50

Totals for region 367,262,000 13.10

l Totals for Latin America 2, >802,999,000 - 100.00

^Not including $36,501,000 invested in the Bahamas, Bermuda, Jamaica, Netherlands West Uidies, Trinidad, and French West Indies; nor does it include 37,501,000 invested in the G-uianas©

-66-

TABLE XIX - Continued

Direct - Dec. 51, 1940 Portfolio - pec, .-yp Amount Per Cent Amount Per cent of Total

357,927,000 13.23 . .... 559,797,000 20.69 60,900,000 6.13 41,895,000 1,55 7,200,000 0o76 12,479,000 0..46 5,600,000 0*56 24,726,000 0.91 8,000,000 0.81 11,204,000 0o41 4,100,000 0.41 68,224,000o 2*52 2,700,000 0,27

• e • • •

• « • . 38,367,000" 1.41 8,858,000 0.55

36,815,000 1.36 11,100,000 1.12 111,616,000 4.13 122,000,000 12.28 262,576,000 9.70 ....

1,534,184,000 56.70 221,600,000 22.31

240,109,000- 8.87 255,300,000 25.71

26,829,000 0.99 53,600,000 5.40 413,983,000 15.30 183,500,000 18.48

5,107,000 0.19 .... 81,597,000 5.02 54,000,000 5.46

527,516,000 19.50 291,100,000 29.31

387,945,000 14.34 190,500,000 19.13 5,037,000 0.19 .....

10,918,000 0.40 54,6003000 5.48 2,705,709,000 100.00 995,100,000 100.00

aIncluding British Honduras© ^Sources U© S. Bureau of Foreign and Domestic Commerce,

Economic Series 20, p. 13. Paul Dickens, "Status of U. So Investment in Pbreign Dollar Bonds, End of 1940," Foreign morce Weekly, 4:4, July, 1941.

-67-

TABLE XX

FUNCTIONAL COMPOSITION OP TJ0 .3. DIRECT nnno™ ^xrt^ui INVBSTMENT IN

LATIN AMERICA

1913-1940*

Per cent of totala

1913 1929 1936 1940

Public utilities and Transportation

Mining and Smelting

Petroleum

Agriculture

Manufacturing

Distribution

Miscellaneous

Total (000.000) 2,771°

^Constructed from* Olson and Hickman, op« cit. a These percentages reflect the changes that took place

from 1936 to 1940©

Data not available

Aggregated

Source* Uo S© Bureau of R>reign and Domestic Commerce© Economic Series 20, pp© 12-15, 20-26, also Economic Series I, pp© 12-15, 18-25© See also Cleona Lewis, AmericaTs Stake in International Investments, Brookings Institution, Washington, D© C©, 1940©

_-b 34.7

— — 24.8 18.5

18.5

— — 15.9 20 ©6

— — 13.0

— — 7.6

-- — 2©9

■ — 2-7

-68-

-69-

heavy in the fields of public utilities and transportation,

was not as dominant as the British investment,, From thes

percentages, it is clear that the U.'S. investments of the

colonial type, devoted to the exploitation of raw materials

mining, petroleum, and agriculture, accounted for 52 per cent

of the total Uo So direct investment in Latin Americae TJ. s»

investments in fields of mining and smelting have increased 1

since 1934© The American-controlled mines, are estimated

to produce all the asphalt, bauxite, and vanadium mined in

South Americao The production of these mines also accounts

for all the iron ore, nine-tenths of the copper, seven-tenths

of the silver, two-thirds of the zinc, over one-half of the

petroleum, about one-half of the manganese and platinum, over .

one third of the lead, one third of the gold, one-tenth of

the tin, and considerable part of the coal and nitrates of

South America* Other industries developed through the Uo So

investment were in the field of agriculture, most of which

was concentrated in sugar plantations and cereals in the Island

Republics and Mexico, and in the production of bananas and

other fruits in the Central American Republics, the Island

Republics, and Colombia0 In the field of transportation and

public utilities, the investments were directed to almost

^According to H, P« Bain and T. T„ Read, "Ores and Industry in South America"* (New York? Harper '& Bros*, 1944) Po 5c

-70-

every nation of Latin America, but especially in Cuba, Mexico

and Central American nations. Another field which was benefit-

ed by U. S. investment was manufacturing, even though it was

not as large as the others. By 1940 there had been various

types of manufacturing investments in foodstuffs (meat-

packing ),chemicals, miscellaneous, textiles, automotive, rubber

electrical, machinery, metal products and lumbere

It should be recognized that some' of the foreign invest-

ments that went into agriculture and in extractive industries

producing for export had relatively little impact upon the

rest of the economy, but this was due to the fact that the

effort made to develop auxiliary or complementary industries

to provide goods and services used by the export industries

was little, and it was also accompanied by the failure of the

foreign enterprise to train local employees in technical and

managerial skillso

In the postwar period private portfolio invest- ment outside Canada has been negligible, and in.the period 1950-1952, investments in agriculture, mining and petroleum represented half of the total U. So di- rect investments outflow. But the impact of this investment differs substantially from that of the mine and plantation type of investment which took place before the war. For one thing royalties and taxes take a substantial portion of the gross earn- ings of the export type investments. Petroleum is generally on a 50-50 profit-sharing basis with the local governmento Local income taxes, to say nothing of other taxes and fees, accounted for 251 million dollars out of the |905 million in net earnings before taxes of United Stated owned corporations and branches operating in Latin America in 1950. In Venezuela 50 per cent of governmental revenue is derived from

-71-

the petroleum industries and nearly 40 ner cnnt of governmental revenues in 1951 were devoW to investment purposesol

Besides the receipts of larger shares of the gross earnings

from foreign investment, the foreign investors are contrib-

uting directly to development in areas other than export in-

dustries. Foreign companies have provided part of the ex-

penditures for transportation, power, water systems, harbors

and air-portso Examples of this have been the case of the

developments carried on by the Standard Oil Company, today

under the National Administration of many of the countries'

governments where they operate on a 50-50 basis, such, as in

Colombia, Venezuela, Peru and others. Ihe same can be said

for the German Air-line "Scadita", today under the name of

Avianca and totally ov/ned by Colombian capital whose invest-

ment in the first commercial air-line -a America created fur-

ther developments in the South American continent and espe-

cially in Colombia where the means of transportation were non-

existent prior to its arrivalo Other si0ns of the economic

development created by foreign capital is the fact that some

petroleum companies, as in Colombia, Venezuela,' and Peru, are

refining an increasing volume of petroleum in the producing

countries both for local and export use. Another stimulating

effect of foreign investment has been the trend of foreign

companies to provide a larger proportion of their materials,

skilled workers and managerial personnel from the local

communityo Local industries developed with financial and

Mikes ell, op. cit«, p. 51.

-72-

technical assistance from the foreign companies have created

new spurts of economic activity through the whole economy.

It would be incorrect, however, to evaluate the importance of foreign participation in Mexican industrial development solely on the basis of its financial contribution© It is in the area of technical and administrative services rather than in that of finance that foreign participation has been most fruitful for Mexican industryd

Though there is no record of any particular single

pattern or individual factor that generated the trend of

economic activities in these Latin American nations, it can

not be denied that one of the most important vitamins which

gave life to the dormant economies of these newly growing

nations was that of foreign investments . The role they played

after 1913 was decisive in helping these countries to reach

the second stage of economic development,

Most countries in Latin America .reached economic develop-

ment stage through the effects created by foreign investments©

It is true that the earliest European investments in Latin

America, and some of the U© S© investments were of the colonial

type and some of them did harm rather that promote economic

development. It is also true that during the 1930 depression

a great share of the portfolio investments was- in default;

however, it can not be denied that as a whole, especially

after the second World lar, most of the foreign investments

The Economic Development of Mexico, (Report of the Combined Mexican Working Party) IBRD, (John Hopkins Press, Baltimore, 1953), p. 82.

-73-

received by Latin American countries, together with the

Export-Import Bank loans and IBRD loans gave a sharp stimulus

to the economies of these newly growing nations of Latin

America* Most countries in Latin America have reached a

stage of development in which their economies have gathered

considerable momentum and capital expansion can proceed simul-

taneously along a number of fronts* In the long run, despite

all the drawbacks of foreign investment in the early days of

investment in Latin America, it has tended to improve the

general productivity of all these nations* Its effects

have varied from country to country, but this has been the

result of the actual realization of the possibilities peculiar

to each nation*

CHAPTER III

THE ROLE OF FOREIGN TRADE IN TEE ECONOMIC DEVELOPMENT AND GROWTH OF LATIN AMERICA

Another decisive element in the struggle of these

nations to reach the second stage of economic growth, one

which is very clearly related to the foreign investment

element, is the role played by foreign trade in the develop-

ment of export industrieso

Developing economies have created from their natural resources^and through the help of foreign investmentTmajor export industries; and the rapid expansion in exports has been used to finance the import of capital equipment and to service foreign., debt during the take-off /or economic development^

Direct foreign investments in most countries of

Latin America have been oriented towar." the export industrieso

This policy has been criticized by some economists as exert-

ing very little or no influence to promote, and in some

cases as being a barrier to,, economic development in the 2

host countryo Whatever the answer to this debatable issue

may be, it can be seen that the importance of foreign trade

and the role played by the export sector of these countries

has been vital and has contributed to the economic development

of each of theme But it should be borne in mind that if some

of the agricultural and extractive export industries did not

-""Rostow, OJD. cit♦, p. 40. See Hans Singer, nIhe Distribution of Gains Between

Investing and Borrowing Countries,n Proceedings of the American Economic Association, May 1950, pp0 475-495*

-74-

-74A-

exert much impact-on the rest of the economy, the answer

cannot be due to the inefficiency of the foreign direct invest-

ment, nor the foreign trade sector, but more likely to the

fact that little effort was made to develop auxiliary or

complementary industries to provide goods and services used by

the export industries and their employees and also the lack of

managerial knowledge and trained personnel which could have

been used in other industries in the domestic economy.

International trade is of very considerable importance to underdeveloped £riewly growing^ countries, and the benefits which they derive from trade and any variations in their trade affect their national incomes very deeply©!

It should be recognized also that without the huge

volume of foreign capital which has been Invested in Latin

America, export industries could scarcely, have been established

on the large scale they maintain today©

From the study presented up to this point, it can be

seen that few areas in the world are as dependent upon foreign

trade and investments as Latin America© It Is also known

that the economy of almost every country in Latin America is

based on agriculture, mining, and a few industries, but as a

whole these nations depend on'their ability to exploit these

sectors in order to create a strong export sector which will

bring them in return the importation of commodities which they

lack and need for the future development, diversification,

1 Rostow, OJD© cit©, p© 1

-75-

and expansion of the present industries and the creation

of future domestic or export industries• It is also a

fact that these countries devote most of their land and

limited labor and capital to the production of a few key

commodities, usually raw materials. Most of these countries

have one or two commodities common to all of them which

constitute their leading exports. And it is an accepted

theory that the export sector is the life of the import

sectoro These exportable ^oods are traded with Europe and

North America, and bring in return the semi-manufactured,

manufactured commodities, and machinery necessary in the

domestic economyo Therefore, it will be of great importance

in tracing the stages of economic growth of these nations to

analyze the effects that foreign trade has created in the

economies of these countries, and to see how much impact

foreign trade has exerted in these nations, and how vital it

has been in helping these Latin American nations to reach the

second plateau or economic development stageo However, since

a detailed analysis of the role of international trade in

each country individually would require a separate thesis

the attempt will be to approach this important issue by

taking the country-by-country study on the basis of the tables

that appear in Appendix A, and making reference to these

countries throughout the present analysise 'fie must keep in

mind that Latin America is not an economic entity. There-

-76-

fore the analysis shall be with some roSmrflf, reservations, since the economies of each individual country varv in ^~.» J vaxy m tneir degree of

development©

The fact that most of the economies of these countries

are dependent on foreign trade goes back to the colonial

periods As early as the colonial times the area of Latin Ameri-

ca came to be economically dependent upon its ability to export

to the natural industrial regions of Europe and North America,

However, because of the lack of accurate statistics since the

colonial period up to the time when these countries reached

the first and second stages of economic growth (1492-1929),

it will be sufficient to show the effects of foreign trade in

more recent times. Before this task i-.- accomplished, it will

be enlightening to recall the position of most of these

countries in the economic field, and to make reference to the

different, areas of production in Latin America and the leading

productive sector of most of them©

In the South American group the pattern of economic

activity can be subdivided into different groups« In Colombia,

Ecuador and Venezuela, which compose the northern South Ameri-

can grouping, the leading exports are coffee and cacao© Be-

sides this, each country produces certain major export products©

Platinum, gold, and petroleum for Colombia, petroleum and gold

for Ecuador, and petroleum accounting for almost 90 per cent

of total exports for Venezuela* Brazil, which can be included

in this group, is also a very large exporter of coffee and

-77-

cacao, in addition to its export commodities of cotton oil-

bearing, seeds, huts, manganese, iron ore, and rubber, m

Bolivia, Chile, and Peru, which compose the ^<*t-c™ „

group, minerals constitute the main exporto The leadins

exports are unrefined tin for Bolivia, which accounts with

other minerals for about 90 per cent of its total exports.

Petroleum and copper for Peru, which accounts, with other

minerals, for about 65 per cent of its total exports, and

copper and nitrates and other minerals for Chile, which

account for about 75 per cent of its total exports© Chile

also exports wool, meats, and vegetables, and Peru exports

also long-staple cotton, sugar, wool, and other fine animal

hairo In Argentina, Paraguay and Uruguay, which compose

the temperate zone group of the east o;/ South America, the

main production is pastoral products and cereals, and its

chief exports are-usually meats, wool, hides and skins, wheat,

corn and flaxseed© Ihe first two countries are the world's

only suppliers of quebracho extract used for tanning; they

are also taking the lead on cotton production in the world© In

the Central American grouping the leading exports are bananas,

coffee, cacao, and gold* Honduras .is the leading exporter of

bananaso Mexico's economy is more diversified than that of

the rest of Central American nations, and is based on both

mining and agriculture© Minerals make up more than three-

fourths of the total export trade; ?/ith gold, petroleum, zi

-78-

lead, copper, antimony, mercury, and graphite* In the agri-

cultural sector the leading exports are bananas, henequen,

chile, coffee, fresh vegetables, and cattle* in the Island

grouping the chief products and exports constitute susar and

its derivatives, tobacco, coffee, and sisal * Among this

grouping, Cuba and Puerto Rico are leaders in the coffee export,

One common characteristic of these nations1 economies

already mentioned is that all are engaged in the production

of raw materials and ©rude foodstuffs for export, and all of

them import a wide variety, of manufactured goods* In general .

most of the manufacturing activity of these countries had been

confined until recent years to the processing of commodities

for export and the production of consumer goods* Argentina*

Chile, Brazil, Mexico and Colombia have •■ sveloped a more

diversified type of economy and manufacturing and have achieved

a higher degree of development© Efforts have been made in Cuba

and Uruguay to stimulate domestic manufacturing* Prior to the

second World War, these seven republics were leaders in the

foreign trade field* (By 1938 they accounted for 85 per cent

of total exports from Latin America). The Exports of agri-

cultural products from the Central America area (see Table

XXI, page 79), accounted for almost seven-tenths of total

sales abroad* About nine-tenths of the export trade of Costa

Rica was concentrated in coffee, bananas, and cacao* Coffee

alone accounted for about nine-tenths of Fl Salvador's exports!

coffee and bananas made up over nine-tenths of Guatemala's ;

-79-

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-80-

bananas more than four-fifths of Honduras' trade; and about

three-fourths of Panama and Nicaragua^ exports were concen-

trated in coffee, and bananas (the figures of Mexico are not

available )o In the Island grouping the agricultural production

for export trade was very similar (see Table XXI, page 79) „

Sugar accounted for seven-tenths of Cuba's exports and six-

tenths of the Dominican Republic© Haiti's export sales were

made up of coffee, cotton, and sugar, with about four-fifth

of its sales. In the South American grouping, with exception

of Bolivia, Chile, Peru, and Venezuela, the. export of agri-

cultural commodities was also large (see Table XXI, .page 79).

About one-half of Argentina's export was linseed and wheat*

Brazil's exports of coffee accounted for1 one half of its ex-

ports;- besides this key commodity Brazil exported cotton,

cacao, and oil-producing seeds: this audition constituted

seven-tenths of its total exports* Peru exported about one-

fourth of its total exports in cotton; a similar amount was

accounted for by Paraguay* Colomgia's exports of coffee

accounted for nearly three-fifthso Ecuador's main export was

cocoa, with one-fifth of the totalo

In spite of these relatively good export figures, before

1930 and when the war with Europe started, the Latin American

economies had been greatly affected by world wide economic

fluctuations. The depression of the 1930's and the imposition

of riFid trade and exchange controls, especially in continental

-81-

Suropean markets, were some of the reasons for the decline

In their exports© However ironic as it may be Lati

American trade was stimulated .by the effects of the war

Their trade had been diverted from its usual channels be-

cause of the loss of the.European markets, but the demand

for strategic materials by the United States and England

and the inability of other areas to obtain their usual

consumer goods gave a sharp stimulus in the Latin American

economic sectors© Due to the vicissitudes of war and demand

for many necessary products, the prices of Latin American

exports increased. These effects were beneficial to their

export markets and harmful to their domestic markets, as

inflationary trends began to show in almost all these nationso

Most of their production went abroad and the domestic markets

suffered from lack of long established consumer commodities

and- high prices for those commodities that were available©

However, as during the First World War, industrialization

was stimulated in many of these Latin American republics,

particularly Brazil, Mexico, Argentina, Chile and Colombiao

The Imports during 1938 into the Latin American nations were

also great. The United States took the lead with about 33

per cent of the Imports from Latin America, even though

Continental Europe took 33 per cent of the total and Great

Britain had accounted for 12 per cento Intra-Latin American

trade grew also even though it amounted to 10 per cent of

the total (see Table XXII, page 82), The leadership of the United

TABLE XXII

FOREIGN IBADS OF THE LATIN AM3RICAN RSPII3T T^ 1938-1943* n^rudLIoS

Countir 1938 1959 1940 ^^ ■ Value In millions ot doiiaT.fl-

Exports tos

United States 545 646 763 1,091 1,138 1,340 Other American Republics 99 100 120 186 271 295

United Kingdom 306 323 304 364 315 280 All other countries 693 856 575 478 402 466

Totals 1,643 1,925 1,762 2 1.119 2 ,126 2 ,381 Per c ent of total value

United States 33 33 43 55 53 56 Other American

Republics 6 5 7 9 13 12 Uhited Kingdom 19 17 17 13 15 12 All other countries 42 45 33 23 19 20

Totals 100 100 100 100 100 100 Valu e in mi llions of dollars

Imports from? United States 495 534 729 915 786 771 Other American

Republics 142 121 174 214 334 379 United Kingdom 187 146 167 116 121 108 All other countries 668 527 341 224 136 151

Totals 11 ,492 1,328 1, ,411 1,469 1,427 1,409 Per cer Lt of total value

United States Other American Republics

United Kingdom All other countries

33 40

10 9 12 11 45 40

52 62

12 15 12 8 24 15

55

23 9

13

55

27 7

11 Totals 100 100 100 100 100 100

*The statistical data in this table represent a prelimi1

nary compilation from official trade statistics of the Latin American Republics,, It will be observed that there is a wide divergence between exports to the Latin American Republics and Imports received from them. This divergence between exports and imports may be explained in part by the addition to the recorded imports of shipping, insurance, and handling charges; the major cause, however, is probably the different methods of assessing and recording values employed by the exporting and importing countries« Estimated.

^•Sourcez International Economics and Statistics Unite Bureau of Foreign & Domestic Commerceo

-82-

-83-

States is explained by the fact that most of the Latin

American countries, in an effort to diversify their econo-

mies, directed their import policies towards the United States

who was the best customer for their exports and who could

supply them with the type of technology necessary for that

goal as well as the manufactured products for their domestic

markets which they could not obtain among themselves* The

position of the United States as the best customer of the

Latin American exports is explained by the fact that most

of the products received from Latin America are largely

complementary rather than competitive with those produced by

the United States, since most of these commodities are not

produced in large enough quantities to supply its domestic

markets, or are not produced at all in the United States

because they are the product of tropical zones instead of

the temperate zones, which characterize the United States©

The United States imports are mainly from the Caribbean

Countrieso But one of the most important reasons for the

United States to be the leading market for Latin American

imports of mechanized and manufactured products is based on

the well known theory of the International Trade: that

imports are paid usually for with exports (see Table XXII,

page 82)o

The Impact of the international trade in Latin America,

especially the trade with the United States was improving

the economies of these nations, since in return for their

-84-

exports they had obtained those commodities which were

complementary to their economies and the machinery and

other tools necessary to improve their agricultural sectors

and to develop and industrial sector which is necessary to

attain a more balanced economic system. During the period

of the war the intra-Latin American trade which had begun

to show signs of development before the war was also

stimulated with the result that trade among the countries

expanded from $99 millions in 1938 to §295 millions in 1943

(see Table XXII, page 82)• After the second world war in

1945, most of these nations experienced major adjustments

in their economies such as the re-organization of their trade

in the direction of peacetime channels, relaxation of economic

controls necessitated by the war, the realignment of prices

and production and the renewal of competition in world

marketso During the period 1945 to 1949 the increase in

exports was barely enough to stimulate much activity in other 1

economic sectors (see Table XXIII, page 85)« nevertheless

many new industries developed in most of the Latin American

nations, particularly the manufacture of consumption goods

such as textiles, shoes, furniture, building materials,

canned meats and household utensils© Goods for export

1 For detailed information see Economic Survey of

Latin America, 1949o United Nations, Department of Economic and Social Affairs. New York: k949, 1950, 1955o

TABLE XXIII

LATIN AMERICA: INDICES' OP INDUSTRIAL

PRODUCTION

(1950 100)

1951 19 52 1953 1954 1955

Latin America 107 109 113 121 128

Argentina 102 95 93 100 110

Brazil 110 116 121 134 139

Chile9" 92 107 115 121 116

Colombia 106 118 137 139 142

Ecuador 103 110 116' 126 134

Guatemala 99 104 102 102 105

Mexico 109 110 114 122 134

Venezuela 119 139 153 167 187

Source: Official Statistics *

On the basis of data from the Chilean Development Corporation**

(Table taken from Economic Survey of Latin America, 1955. United Nations, Department of Economic ancT"3ocial Affairs, New- York, 1956, p. 58).

-85-

-86-

were manufactured from minerals, agricultural, forests and

pastoral products. The nations that took the lead in these

spurts of industrialization were Argentina, Brazil Mexico

Chile and Colombia, and to some extent Cuba, Puerto Rico

and Panama; however, most of the industrial activity has

been concentrated in the old-established centers, usually

the capital cities of these republics and a few other cities0

From 1950 to 1955 all countries of Latin America, with

exception of Argentina, Paraguay, Chile and Uruguay experi- ^1

enced an increase in exports, which enabled them to maintain

their supply of imported goods, without, as a rule, incurring

undue pressure on the balance of payments. The amount of

industrial expansion could be deducted from the percentage

of urban population of each nation (se^ Appendix A), and the

indices of industrial production of tlsse countries (see

Table XXIII,page 85)9

Many of the new industries established during that

period are basic to the economy of the country in which

they have been established* Examples are the Volta Redonda

Steel plant in Brazil, the Mexican steel plant in Monterrey,

the Altos Hornos in Mexico, and the Siderurgica de Paz del

Rio in Colombiao

1 Ibid., 1956«

-87-

The other countries of Latin America also made plans

for similar projects. These spurts of industrial expansion,

improvements in agriculture, and establishment of new public

and private enterprises and new domestic markets of manufac-

tured products, stimulated in great part by the impact of

the export of commodities on their primary sectors, can not

account for over-all economic growth*. The over-all recovery

of some regions obscures the disparities in some of the

larger countries* In Argentina, income showed a slow upward

trend after 1953, but not enough to reach the levels of 1950

and 1951o Brazil suffered a setback in the growth attained

in previous years• Per-capita incomes in Colombia contracted.

In Mexico the economic development continued* Economic develop-

ment in Venezuela and Chile had a s imila'r experience even

though their economic development had been disturbed by

periods of decline in other sectors of the economy, as was the

case for most of the Latin American Nations.* The principal

determinant of the stinuli received by these countries in

their economic development stage was the improvement in the

terms of trade they experienced in 1954© This factor not

only raised the level of aggregate demand in the Latin

American nations, but at the same time, in conjunction with

the higher imports, caused gross Income to increase© External

demand remained the chief factor in the recovery of these

1Ibido, "External Demand, Aggregate Demand and the Rate of Growth", pp* 4-5*

-88-

countries and promoted intensive activity in the export

sectors, which led to an increase in their gross product©

The maintainance of this activity increased the benefits

of those producing for the domestic market© The year 1955

was characterized by an almost universal desire to encourage

exports which, in absolute terms, attained their peak level

(see Appendix B)© The high propensity for these countries to

import is characteristic of the Latin American countries due

to the urgent need to purchase capital goods, raw materials

and fuels on the world market, and because of the high

elasticity of demand for manufactured consumer goods • This

tends to result in a disequilibrium in the balance of payments

which usually leads to restrictions in many forms• But

usually the export sector is depended upon to offset this.

disparity© In.1955 the considerable expansion of exports

almost offset the trend towards an imbalance in the balance 1

of paymentSo

As a whole the role of foreign trade in most Latin

American countries was as important for the period of 1950

to 1956 as for prior years© However, the tendency toward

industrialization and unbalanced economic growth has been

more marked in the last period as there has been a tendency

toward a decline in agriculture©. The trade policy in 1955

was directed towards the principle of import replacement.

1 Ibido, p © 5 o

-89-

and a continued trend in the increase of exports which

were characterized by a decrease in their unit of value

due to the downward movement of world prices for agri-

cultural commodities which constitute the major elements

of their export sector» Nevertheless, industrial production

for almost every one of these newly growing nations of Latin

America continued to expand during 1955 and 1956 and it is

expected to follow the same upward trend for the rest of the

decade9 because of the plans and contracts set up in all

these countries for future years and the continued demand

for Latin American export from Europe and the United States.

The important determinants of the growth of the

industrial sectors were the improvement in demand resulting

from the increased volume of exports, the peak reached by

agricultural production, even though it has shown a tendency

to decline in a number of countries, and the increment in

investment - foreign and domestico Examples of the spurts

of economic development and beginnings of economic growth

in Latin America can be seen in the number of projects and

plans that have been adopted in some of these countries* In

Argentina the project for building an automobile factory at

Cordoba is under way* Brazil established a new aluminum

plant at Sao Paulo, together with a new oil refinery which is

already in operationo It also entered into mass production

of diesel engines© Chile made a contract with a Uo So

Company for the manufacture of agricultural tools and equip-

-90-

mento This project is already under construction© El Salva-

dor installed an up-to-date cotton mill under Japanese and

Salvador's administration and capital© lexicons steel plant

capacity was increased* This country also constructed its

first battery of coking plants at Monclova© In addition

the country put in operation two plants - one for the

manufacture of railway cars and the other for diesel engineso

Colombia, Peru, and Venezuela pooled capital for a petro-

chemical industry in each of these countries for the production

of nitrogenous fertilizer* Peru formed a company under the

technical assistance of a Belgian corporation for the.pro-

duction of explosiveso The Dominican Republic opened its

new furfural plant with an annual capacity of 9,000 tons,

which will be exported in its totality to the United States©

Finally, Venezuela which has taken the lead in the industri-

alization boom, and which is one of the few nations who has

reached the third stage of economic growth and has been able

up to the present to sustain its growth process, has started

building a large iron and steel works at Puerto Ordaz© This

project is under Italian and Venezuelan capital© The success

of this plant is expected to give Venezuela less dependence

upon imports in this line© It would be impossible to enumer-

ate all the projects that are underway in each of the Latin

American countries© However, it is important to note that

the industrial production indices showed an increase of six

Ife

-91-

per cent in relation to the period 1950-54© Also that many

of these new enterprises have taken place under European

capital and administration in conjunction with the different

countries© The degree of economic development of these

nations is outstanding©

All the nations of Latin America have reached the

second plateau or stage of economic development and each

of them to a greater or lesser degree are experiencing the

full swing of their economic revolution© Others have passed

the second stage or are in the midst of it and have reached

or are reaching the third stage of economic growth - even

though they are just in the beginning of their process of

economic growth© There is a new Latin America in the making©

Every one of these newly growing nations have realized,

although some of them not fully, that their place in this

world is not to remain only feeders of raw materials to the

great industrial powers© Ihe new trend is toward "balanced

economieso The nations of Latin America have exported vast

quantities of petroleum,. coffee, meats, wool, sugar, copper,

tin and other minerals, and have received in return for their

exports the purchasing power to obtain the manufactured goods,

machinery* and tools necessary to balance out their economic

system© They have created a better atmosphere for foreign

investments, technical aid, grants and loans from other

nations and the economic gains from this beneficial economic

-92-

inflow have enabled them to pay for their imports and to

repay their loans and other obligations© Latin America is

shaking-off its economic ills day by day at an accelerated

rate, partly by the improvement of their intra-American and

international trade o This stiinulus has been derived from

the vicissitude of war and world depressions»

Before the Pirst and throughout the Second World War,

a marked beginning toward the first and second stages of

economic growth of these nations had made its appearance©

Between 1935 and 1941, Argentina increased manufacturing

facilities, raised the number of operating plants, and organ-

ized and developed domestic and export markets and other

foreign and local private enterprises* Bolivia in 1943 set

up a development corporation to enlarge agricultural activity,

and encourage mining, petroleum, forestry and transportation

industrieso . Brazil spent over one hundred million dollars

in the establishment of. the steel plant of Volta Redonda,

besides the great number of industrial plants established

during the two decades previous to the war and many others

after the war was over^,. Chile created the Fomento Corporation

to survey postwar possibilities in the fields of transportation

mining,.and hydroelectricity© Colombia expanded industrial

activities toward the sugar, tanning, milk, chemical, and

steel industries© Cuba extended and improved its agricultural

and industrial sectors» Dominican. Republic and Haiti,

-93-

Ecuador,, Guatemala and Honduras set up the basis for future

diversification of agriculture© Mexico expanded transpor-

tation facilities, improved mining methods, encouraged

expansion of manufacturing, and took a prominent economic

position along with Venezuela and its great industrial ex-

pansion among the Latin American nations, which was the result

of its establishment of the Ministry of Promotion and Develop-

ment for the Petroleum industry expansion© Nicaragua, Panama,

and Paraguay also developed their agricultural sectors and

organized a few new manufacturing enterprises© All this

development has not only brought economic opportunities to

these nations, but in most of them has affected the social

and political settings to a small degree. (For example the

establishment of factories has called for workers from the

near-by towns to fill the gap created by the new employment

opportunities«)

However, in spite of all this inflow of foreign and

private investment, domestic and international trade, and

development of industries and improvement of. their agri-

cultural sectors created during the second stage of economic

growth of these countries, why has the economic development

failed^ to gain the momentum necessary for a sustained

economic growth of these nations? Ihe reasons lie in many

factors that can not be disassociated from the economic

cobweb ©

-94-

Initial changes in method require that some group in the society have the will and the authority to install and diffuse new production techniques; and the perpetuation of the growth process requires that such a leading group expand in authority and that the society as a whole respond to the impulses set up by the initial changes, including the potentialistics for external economies01

In most of these nations the purchase of imported comsumption

goods is limited to a small proportion of the population

concentrated in the capital cities or a few other large

cities (see Appendix A)* This brings, as a result, a lack

of proper distribution of the purchasing power among the

masses whose expending ability for articles that come from

abroad is almost an unknown quantity (see Table XXIV page 95)•

Ihe majority of Latin American population live in poverty and

indifferenceo Ihe proceeds from the production of most

commodities go to owners of larger states, commercial plan-

tations, and mines© In many cases the landowners are absentees?

conservatives interested only in keeping their status quo and

mixing up the interest of religion, politics, and economics

for their own benefits, which results in low standard of

living for the. great majority of the people, as reflected in

their inadequate diet, housing and sanitation, health,

hospital facilities, and low per-caplta income (see Table XXIV

page 95)o

The take-off, or/pconomic developmenj^requires, _ therefore a society prepared to respond actively to

.ROStOWg Opo Clto, po 25© :' - •-■■-

-95-

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new possibilities fop productive enterprise; and it is likely to require political, social and institutional changes which will both perpetuate an initial increase in the scale of investment and result in the regular acceptance and absorption of innovations©1

In the failure to fulfill these requirements (political,

social and institutional changes) lies the second reason

why economic development has not gained enough momentum

to carry the economies of most of the Latin American countries

to the third stage of economic growth© Ihe economic trends

in the past have favored most of these countries with proceeds

from exports and foreign capital which stimulated the agri-

cultural sectors and gave birth to part of the necessary

industrial sector© These factors, among others, resulted

in some minor changes in the political, social, and insti-

tutional framework of their societies© . However, the majority

of the Latin American nations have not yet attained political

stability and their societies have not been able to fully

associate themselves with the changes required by economic

growth© Many persons still confuse economic development

with industrialization or with economic growth (see Chapter

I).and that is and has been the key to the problem© In-

dustrialization such as has developed in the United States

and-England has more barriers to break and therefore it can-

Hostow, Ibid©, p. 25• Emphasis mine*

-97-

not take place in the same form in the Latin American

Republicso The nationalistic spirit, military controls,

attitudes toward wealth and class, and native customs tra-

ditional in these countries have acted as impediments in

the perpetuation of growth of these nations which have finally

reached the stage of economic development* This development

has not been a continuous and sustained process, but has

been hampered by traditional factors0 The future economic

outlook of the Latin American nations is bright© Economic

development has opened new fronts for the exploitation of

natural resources, industrialization, new native enterprises,

and technological improvements of their agricultural sectors

which, when supported by a better knowledge of political and

civil administration, will place these independent republics

of Latin America on a more dependable economic footing©

CHAPTER IV

BASIS FOR A SUSTAINED ECONOMIC DEVELOPMENT

AND FUTURE ECONOMIC GROWTH OP

THE LATIN AMERICAN NATIONS

What should be the policies to be -undertaken by most

of these Latin American nations which are still in the eco-

nomic development stage, and those few leading countries

which have passed to the third stage?

The first two policies to be considered here deal

with key problems and are based on the theories of economic

development and economic growth presented in the first

chapter, and with the theory of international tradeo These

two economic policies are important in the problems and

vicissitudes of growing economies of the third stage, and it

is with the third stage problems that the bulk of theoretical

economics is concernedo

The first of these deals with a policy of free trade

which is applicable to Latin America and will assist these

countries to reach the third stage and maintain economic

growtho

x It has been established that through foreign trade

these developing economies have created from their natural

-98-

-99-

resources major export industries, and the rapid expansion

in exports has been used to. finance imports of capital equip-

ment and to service foreign debt during the stage of economic

developments

Neither the policy of free trade nor the protectionist

theory is new. Free trade gained acceptance and proved

successful during the 19th century when England gained its

economic leadership with it* However, many modern economic

policy-makers believe that free trade is not possible In the

present world© In the case of these newly growing nations

many reasons have been advanced by their governments in

opposition to free trade© Most of these nations of Latin

America are not pleased with their position as suppliers of

primary commodities for the great economic and industrial

powers, commodities for which these Latin American nations

have become specialized producerso Every one of these nations

has been working towards diversifying its economic structure

in order to minimize its dependence on foreign markets© It

is expected that the vulnerability of economies based on -

exports will be lessened and their populations will be able to

attain higher levels of real income through the use of idle

labor power and other resources© [therefore, it is claimed

that In order to attain diversification of their economic

structures, protection is necessary to the growth of the new

industries on the ground that they are "infanttt industries

unable to stand competition from the more advanced and industri*

-100-

alized countries„ However, this argument is weakened by the

historical fact that once- the infant industry has obtained

protection and grown up under the shadow of a tariff it is

likely to continue to demand protection, since this protection

makes possible enormous profits which private entrepreneurs

are not willing to give up© This protection therefore results

only in gains for a few instead of spreading the gains through-

out the whole economic system of the nationo In the long run

protection becomes harmful to the infant industry since it

may never be able to reach stability and maturity because it

does not have to fear competition from foreign competitors©

The infant industry tariff also becomes a barrier to future

expansion of production for foreign markets, because of re-

taliation by other countries© Many of the Latin American

countries have followed unsound policies of unnecessary

protection and have maintained these devices, casting away

the opportunities that the United States has given them in

its proposals which would result in lasting and substantial

reductions in the world network of trade restrictions© An 1

example was the Havana Chartera -

lfEhe Havana Charter was only a modest first step in the direction of free trade and the newly growing nations of Latin America must take a great responsibility for its failure to achieve more radical progress in removing the barriers to. mutually profitable international division of labor© A second opportunity is not likely to come soon,, even the United States conversion to freer trade was only superficial, and. failure to exploit it when the opportunity was at hand may result in making it only a* transitory conversion© For more information sees Jacob Viner* "International Trade and Economic Develops ment®, Lectures Delivered at the National University of Brazil,, The- Free Press, Glencoe, Illinoisp 1952, p© 147o

-101-

It has been the experience of many nations that any

limitation on the free exchange of goods reduces their 1

potential prosperity© Professor Edward So Mason, referring

to the possibilities of an expansion in the supply from less

developed areas and to the financial means whereby this could

be accomplished, suggests that the return to freer trade

policies will result in raising the levels of world trade

sufficiently to make unnecessary the industrialization and

economic development of these newly growing nations under

protective deviceso

It is true that most of the Latin American countries

were forced to develop their industrial sectors during the

inter-war period because of the trade barriers imposed on

their export commodities, and that they were also forced to

develop their industries under tariff cover as a result of

retaliation But this does not prove that the only way to

develop their industrial sector is through protectionist

policies© It is true that these nations need to industrialize

and diversify their economic structure to a greater extent,

but the means they are using have been and will be harmful to

their economieso

T This leads us to the other important policy that should

be taken into consideration in setting up plans for the future

^Mward So Mason, rtF.aw Materials, Rearmament and Eco- nomic Development,1* Quarterly Journal of Economics, Volo IXVI,. August, 1952, No« 3, p. 333.

102-

economic growth of Latin America, that of striving for a

"balance between the agricultural and industrial sectors o ihe

expansion of industry is important and has been beneficial

to most of these countries, but when this expansion takes

place at the expense of the agricultural sector the effects

have been more harmful than otherwisee It has been the

tendency of most nations to concentrate their efforts on the

expansion of heavy industry in order to attain industrialization,

The belief persists that "industrializationn is the key to

economic growth, and that agriculture is a minor factoro The

economies of most nations of Latin America are dependent on

the production of primary agricultural commodities since

that is the sector favored by climate and topography*

Rostow saysi

A requirement for take-off £or economic development^ iscooo a class of farmers willing and able to respond to the possibilities opened up for them by new tech- niques, landholding arrangements, transport facilities, and forms of market and credit organizations o A small purposeful welitett can go a long way in initiating economic, growths but, especially in agriculture (and to some extent in the industrial working force) a wider- based revolution in outlook must5 come about©1

The leading sectors- in the economic development stage

are the primary growth sectors, where possibilities for

innovation, or the exploitation of newly profitable or hitherto

unexplored resources yield a high growth rate and set in

I.:' * - :.:-■/ Rostow, ogo cito, p© 42»

-103-

motion expansionary forces elsewhere in the economyo In

the case of these newly growing nations of Latin America*

the leading sectors are their agricultural and mining sectors©

It is admitted that the creation of an industrial sector is

necessary to the agricultural life of these nations, but the

industrial sector is complementary to the agricultural sectoro

It is obvious that the development of the industrials ector

without regard to its primary agricultural sector would be

self-defeatingo Therefore, we can assume as essential to

the economic growth of these nations the development and

improvement of agriculture in order to increase the per capita

production of this sectoro It is also a necessity to special-

ize in the production of those agricultural products in which -

each country possesses a comparative or absolute advantageo

The belief that Latin America should develop mainly its

industrial sector.is based on a misinterpretation of economic

history t that just because the richest, countries in the

world are mainly Industriar countries, other countries must

follow suit©, ■ This is analogous to the doctrine which, holds

that because many millionaires. drive Cadillacs, the thing for .

a poor1 person to do in order to become* a millionaire is to

drive a Cadillac also* On the contrary, it is a fact of

history that the rising standard of living in Great Britain

and. other nations of the West which went through the Industrial

Revolution was based mainly on. the. progress attained in agri-

cultural techniques,, and not in the expansion of their

industries© Th© primary necessity of any person is food, and

-104-

poor people spend most of their incomes in foodo If the

farmer produces only enough for his own subsistence, the

rest of the population will have to dedicate their lives

to farming also© Therefore, only when improvements of agri-

cultural techniques take place is it possible for a farm

family to produce enough food for other families which enables

them to engage in industrial pursuits©

It is known also that it was only after improvements

in transportation had taken place that Great Britain was able

to specialize in industrial production In the case of Latin

America, if the role of international trade is ignored, they

will be in the same position England was in before the In-

dustrial Revolution© It is also a fact that the agricultural

labor productivity in each nation is very low0 Therefore if

these nations are to improve the standard of living of their

population it is necessary to increase agricultural production©

As this is accomplished successfully it will be possible and

desirable to expand industrial production©

' Of course, the agricultural sectors of these countries

are not in such a stage of antiquity that every person in

agriculture produces only enough for his own family* Many

developments and improvements have been effected thanks to

technology borrowed from the advanced nations© But the fact

remains that the tendency of most of these countries has been

toward developing the industrial sector at a higher rate than

-105-

agriculture, creating a basic disequilibrium*,- Food production

has not kept pace either with industrial output or with

population increases© &a a result, the food gap which must

be covered by imports has increased and this has been one of

the causes of Inflationary trends© Iherefore, there is little

additional room for expansion for other activities as long as

the agricultural production remains low and the population

engaged.In agriculture has only a small surplus to exchange

for other commodities© One must admit that international

trade and foreign Investments have helped this situation in

Latin America, as they have stimulated specialization In the

primary sectors of these countries which has resulted in

raising somewhat the standard of living of their populations©

Why are their governments forgetting these benefits and

working toward heavy industrialization and diversification

of their less advantageous sectors? The only justification

for this tendency would be development and establishment of

new industries that could be added, to the export sectors and

maintained in spite of existing competition© It is not just-

ifiable for a, country like Colombia, for instance, to decrease

its coffee production, from which it derives its main export

revenues^ for the sake of producing china-ware which it can

obtain cheaper abroad© - Nor should the population of some of

the Caribbean countries have to abstain from importing

manufactured products such as shoes and chemicals which they

can* obtain at less cost and:higher quality from* Japan or the

-106«

United States in order to protect their local manufactures*

where" the domestic cost of these products, may be four times

highero

Diversification is justifiable in many cases and has

been successful in many instances in Latin American economies,

particularly when the industry established Is complementary

to the primary sectors or to the exploitation of abundant raw

materialso But it is also true that when there is no compara-

tive or absolute advantage for the industrial expansion it

may be harmful to the economy to engage In the establishment

of an industry which requires big fixed capital investments,

or high transportation cost or higher cost as a whole* A

typical case of this kind of industrialization took place in

Colombia, where, in spite of the advice of most foreign

experts, the government went ahead in the establishment of

the steel plant of Paz del RioG This plant was uneconomical

and was built only for nationalistic reasons, resulting in

decreased agricultural improvements that could have been

accomplished for less money and with more benefits for the

whole economyo It is obvious'that for the nations of Latin

America this type of diversification can result only in a

parasitic development with resulting retardation of their

economic development and growth©

""" With respect to the other*-problems of economic and

non-economic nature, which were described in the previous,

chapters, the following alternative policies are suggested

-107-

as the-best means by which the governments of these nations

may assist their respective economies to reach the third

stag© of sustained economic growth© These policies are of

social-political and economic naturae

In the social field it should be the duty of the

governments of these nations to raise the level of education

in their respective countries© Education should be spread to

every corner of the nations and should reach the majority of 1

their populationso In this writer's opinion, this is the

key to the solution to all the problems? social, political

and economico If it is solved the other ills will be easier

to deal with© This can be accomplished, not just by creating

compulsory education laws, which most of these countries

have, but by establishing and increasing the number of adequate

schools at both the elementary and secondary levels© The

numbar of colleges and universities in each country should be

increased also, in order to provide education in all fields

of learning© These colleges.and universities should be public

and run at the minimum cost, to the. students© This will

provide better trained and capable personnel in every field,

and in particular it will provide teachers, who are a primary

need in all levels of education* and trained personnel for

political and economic institutions© These schools can be

- I — ' — ' ' — ' For a detailed information on the level of education

of most of these countries see Soule, cj>© cit©, pp© 189-199©

-108-

established under a program financed by the government© They

should not be controlled and administered by the Central

government as at presento

The educational program should also provide for a

greater number of scholarships which should be granted on an

aptitude and scholarship basis, not on the basis of influential

position, prestige, connections, and bribery so prevalent now©

Host of the schools in Latin America are private schools, and

run by the Jesuits, who have contributed greatly to the edu-

cation of those who were able to attend© But the number of

private schools are not sufficient to meet the present demand

Tor themo Another improvement in the social field should be

bhe creation of a strong middle class which is of vital

Lmportance to both, economic and political stability© This

5an only be accomplished by providing the education mentioned

ibove, adequate diet, improved health, sanitation, and housing

jonditions© All these advances can be partially achieved by

>reaking up the semi-feudal system, that still exists in most

>f these countries© Some kind of programs that could start

;he. destruction.of the feudalistic system of land utilization

Include such measures as (1) a reclassification of land for

;ax purposes, such that low income farmers would receive some

relief from relatively burdensome taxation, and that large

.andowners would bear neavier burden of taxes; (2) an

.imposition of an income tax that would draw heavily upon high

.ncomes and lightly, if any at ail,, on, low? incomesy (3) anti-

-109-

monopoly laws that would prevent the accumulation of large

land holdings; (4) an adult education program that would

teach farmers (a) how to use more efficiently the methods

and capital they now possess and (b) acquaint them with

modern methods of agriculture; and (5) provide needy farmers

with capital from either private or public sources or both©

In the political field the centralized form of govern-

ment that characterizes most of these nations should be

modified© An attempt should be made gradually to obtain a

federal system of government with a balanced institutional

framework among the three dominant governmental units?

national, departmental and municipale

Another policy in the political field which is related

somewhat to the social field is that of working towards the

establishment of a balanced power between the Church and the

State© This is a problem whose importance and nature vary

from country to country© Therefore it cannot be solved in

the same manner in Colombia as would be appropriate In Brazil©

However, this end can be accomplished through a compromise

between the two bodies© The power of the Church to interfere

In the political life of the nation should be limited©

toong the other policies to be undertaken in the

political field ares (a) the education of the public

servants, in order to provide the government with a well

trained staff able and capable to perform the functions of

the governmentf (b) the recognition and adequate financial

-110-

reniuneration of government officials in order to develop

among them the principles of integrity, honesty, and pride

in the offices they represents- These measures will diminish

corruption and acceptance of bribes, which is typical of

many Latin American countries; (c) the selection of capable

governmental personnel without political fanaticism©

With respect to economic problems, there are other

policies of important character which should concern the

governments of these nations* Among these is the breaking

up of the barriers created by the topography of most of these

countrieso The economies of Latin America can be enriched by

the development of transportation which will permit the

utilization of idle natural resources and the labor force©

An adequate highway system throughout a country is a very

expensive and burdensome task, but it is of vital importance©

The financing of this undertaking can be accomplished through

taxation and loans from the International Bank for Recon-

struction and Development© Other programs should be under-

taken for the development of hydroelectric and irrigation

projects in order to increase the supply of power and land©

Developments in this direction will result in an increase in

food output which is necessary to raising the level of health

and nutrition©

Another policy worthy of consideration is the es-

tablishment of institutional Innovations such as converting

fixed cost into variable cost, by government leasing of

-111--

plants ta private managements <> The neeCt for this type

of innovation is to be found in the high degree of uncertain-

ty-associated with business ventures which is one of the

main obstacles these newly growing nations face todaye If

this type of institutional innovation is not feasible, an

alternative is the establishment of a publicly supported

market for equity capital, which will enable the entrepreneur

to share fixed cost by sharing ownership. This type of 1

innovation was tried in Kjakartao Even though it is too

early to evaluate the results, it may be applicable in the

Latin American nationso

Credit institutions are another form of institutional

innovation which is of great importance to the future growth

of these nations* Generally in Latin America, few insti-

tutions perform the normal function of extending long-term

credit, and those which appear to do so often impose pro-

hibitive collateral requirements.and interest charges which 2

make impossible the access of entrepreneours to loan fundso

The governments could help create the incentive necessary - c

for' investing by removing .the uncertainty and amount of risk

Charles Wolf, "Institutions and Economic Development«,** American Economic Review, Volo XVI (Dec. 1955) pp* 867-883o

2 Harris, ogo cite, pp„ 93-116

-112-

involved through permitting.the withdrawal of newly invested

funds at a fixed rate of exchange and removing the possibilities

of devaluation* This can only be accomplished by gaining

political stability, which itself is the best guarantee for

local investorso Improvements in banking are also in order©

Banking systems in Latin America vary from country to

country, but in spite of their difference most of these

countries suffer to some extent from the same ills in this

field© These problems have their roots in monetary management

and are determined by the dominating influence of international

trade and capital movements on the economic activity of the

nation, specially on the money supply; by the great fluctu-

ations in the international balance of payments of these

countries; by the heavy dependence of the Treasury on central

bank credit, and the usual conflicts between monetary and

fiscal policy; and finally by the lack of well developed

financial markets and the inefficacy of traditional central 1

banking weapons©

It must be understood that the application of these

policies will require adjustments of greater or lesser degree

in the different nations© But the fact remains that these

general problems must be solved© The nations of Latin

America face and must go through their own revolution, and

this will be not merely an industrial revolution, but a social,

political, and economic revolution©

^Harris, op© cit©, ppD 93-116©

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Schevill, Ferdinande A History of Europe from the Reformation to the Present Day, New Yorks Harcourt, Brace and Coo, 1954o

Schickele, Rainer© Agricultural Policy,, Farm Pro grams and National Welfare© New York, Toronto, London: McGraw Hill Book Coo, 1954o

Schumpeter, Ac Joseph© The Theory of Economic Developmento Cambridge, Mass: Harvard University Press, 1934, translated from German by Redvers Opie)©

Semple, Ellen Churchill• Influences of Geographical Environ- ment o New York: Henry Holt and Co©, 1911o

Simpson, Wo Kyler, The Ejldo-Mexicofs Way Out, Chapel Hill? North Carolina Press, 1937©

Soule, Ho George, and Efron David* Latin .America in the Future World, New York: Farrar & Rhineharlflnc,,

Staley, Eugene, The Future of Underdeveloped Countrieso New York: Harper & Brothers, 1954,

Swinburne, Jo Population and the Social Problem© London: George Allen & Unwin, Ltd., 1924©

Tannebaum, Frank© Whither Latin America© New York: Ihomas Y» Crowell Co©, 1935©

The Economic Development of Mexico, Report of the Combined Mexican Working Par£y7 IBRD, The John Hopkins Press, Baltimore, 1953© .

The Economic Development of Nicaragua © Report of A Mission Organized by the iS/Eernational Bank for Reconstruction and Development at the Request of the Government of Nicaragua© Published for the International Bank for Reconstruction and Development© Baltimore: The John Hopkins Press, 1953©

The Wo rid Book Encyclopedia, Vol© 7. Chicago: Field Enterprises, Inc© 1955©

Thompson S« larreno Danger Spots in World Population© New York: Alfred A© Knopf, 1930©

T

Ps-

-120-

Thompson So Warren© Population Problems©.. New York? McGraw- Hill Book Co© Ihc©, 1953o

Thorp, Lo Willard© Economic Institutions© New Yorki The Macmillan. Co,,, 1928©

Vandenbash, Amry and Willard No Hogan© The Unl ted Nations © New York? McGraw-Hill Book Co© Inc*

$hitebeck, Ro He and Frank So Williams© Economic Geography of South Amer 1 ca© New York and London? McGraw-Hill Book Coo, l§40o

Williamson, F© Harold, and John A© Buttrick© Economic Develop- ment Principles and bitterns o New Yorks Prentice Hall Inco, 1954o

Wilgus, io Curtis© The Development of Hispanic America© New Yorks Farrar & Rhinehart Inc©, 1941©

tinkler, Max© Investment of united States Capital in Latin Americao Bostons World Peace Foundation• 1929 o

Government Publications and Documents-

Bureau of Foreign Commerce © Operations Reports© "Basic Data Economy of Argentina1* Part .1, No. 55-56, 1955© Washington, D© C©s U© S© Government Printing Office, 1956©

. ^Basic Data on the Economy of Bolivia©^ Part 1, No© 55-103, 1955© .v .■ ... -

' "Basic Data on the Economy of ~~" Chile©" Part 1, No©55-87^ 1955©

' ^Basic Data on the Economy of Costa Rica© Part 1, No© 54-4^, 1955©

^asie Data on the Economy of Ecuador©Part 1, No© 55-10© 1955

"Basic Data on the Economy of El Salvador© Part 1, No© 55-10© 1955©

wBasic Data on the Economy of Guatemala© Part 1, No© 55-46© 1955

-121-

Bureau of Foreign Commerce <» Operations Reports .. "Basic Data on the Economy of Honduras. Part 1, No* 55-12, 1955.

m • "Basic Data on the Economy of Nicaragua. Part 1, No. 56-77, 1955o

"Basic Data on the Economy of the Republic of Panama© Part 1, No. 55-50o

__« "Basic Data on the Economy of Venezuelao Parti, No. 56-29, 1955.

"Economic Developments in Bolivia," Part 1, Noo 56-41, 1955o

"Economic Developments in Brazil," Part 1, No, 55-29 o I?54.

__^ "Economic Developments in Costa Rica, Part 1, No. 55-27, 1954.

Economic Developments in Cuba," Part 1, No. 56-26, 1955<>

"Economic Developments in El Salvador, Part 1, No. 55-67, 1954.

"Economic Developments in Guatemala,™ Part 1, No. 55-35, 1954.

- "Economic Developments in Honduras," Part 1, No. 55-42, 1954.

. ^ "Economic Developments in Mexico,w Part 1, No. 55-60, 1954.

_ ' _ ■ _•""' "Economic Developments^ in Mexico," Part 1, No. 56-24, 1955.

" ■ , ,_ ' "Economic Developments in Paraguay, Part 1, No. 55-71, 1954.

• ■ " "Economic Developments in Peru," Part 1, No. 55-70, 1954o

; '■ . . "Economic. Developments in Uruguay," Part 1, No. 55-41, 1954.

-122-

au of Foreign Commerce« Operations Reports . Economic Development in UruguayT** Part 1, Ho* 56-43, 1955 „

. "Free-Trade Zones of the World,,* Part 2, NOo 56-69, 1955.

- "Foreign Trade of Argentina," Part 3, NOo 55-22, 1952-53*

____ "Foreign Trade of Brazil,* Part 3, No. 55-10, 1952-53.

"Foreign Trade of Chile,* Part 3, No. 56-14, 1953-54.

"Foreign Trade of Colombia,* Part 3, No. 56-4, 1952-54.

"Foreign Trade of Cuba,* Part 3, No. 55-37, 1952-53.

"Foreign Trade of the Dominic Republic,™ Part 3, 56-34, 1954-55.

"Foreign Trade of Ecuador,* P 3, No. 55-4, 1952-53,

"Foreign Trade of El Salvador,* Part 3, No. 55-42, 1953-54.

; m "Foreign Trade of Haiti,* Part 3, No. 56-25, 1954-55.

"Foreign Trade of Mexico," Part 3, No. 56-11, .1953-54.

_____ "Foreign Trade of Nicaragua, * Part 3, No. 56-33, 1953-55...

"Foreign Trade of Peru,* Part 3, No* 56-1, 1953-54.

__________________ "Foreign Trade of Uruguay," Part 3, No* 55-50, 1952-54.

. ^Foreign Trade of Venezuela," Part 3, No. 56-9, 1953-54.

.. .»_>_ "Import* Tariff System of Brazil,* Part 2, No. 55-9, 1955o

an

r,* Part

-123-

3ureau of Foreign Commerce© Operations Reports0 "Import Tariff System of Colombia,CT Part &, Noo~55-i20, 1955©

"Import Tariff System of Cuba Part 2, No© 55-26, 1955 p

9 «v • <J*J—K*\J9

_„____ "Import Tariff of Dominican Republic,w Part 2, No*. 55-32, 1955©

_ "Import Tariff System of Ecuador,** Part 2, No, 55-56, 1955o

"Import Tariff System of Honduras," Part 2, No© 56-19, 1955o

"Import Tariff System of Nicara- gua, "Part 2, No. 56-17, 1955c

"Import Tariff System of Panama," Part 2, No. 56-44, 1955©

"Import Tariff System of Para- guay," Part 2, No, 55-42, 1945©

"Import Tariff System of Peru," Part 2, No* 56-25, 1955c

"Import Tariff System of Venezuela," Part 2, No. 55-44, 1955o

Economic Series I, pp© 2-3, 1948©

Peurerlein W© and Elizabeth Hannan© Dollars in Latin America© Council of Foreign Relations, New York, 1941©

Foreign Investments in Latin America© Economic Series© Pan- American Union, Washington, D© C», 1955©

Rippy, J© Fred© Inter-American Affairs, "Series of Articles," Inter-American Affairs Press, 1950o

Introduction to the Twenty Latin American Republics Members ' of the QEAo, Introduction to Uruguay© Pan American

Union, Washington, D© Co, 1956©

Mikesell, F© Raymond© "Foreign Investments in Latin America," Economic Research Series 9 1955©

U© S© Department of Commerce© American Direct investments in Foreign Countries, 1940$ 1942©

Foreign Investments of the United States, ,955©

-124-

Uo So Department of Commerce© Balance of Payments of the United States, 1950o '

Survey of Current Business Office of Business Economics, August 1955

Economic Survey of Latin America, 1949, 1950, 1951, 1952, 1953, "T954, 1955, 1956 • United Nationso Department of Economic Affairs* New York, 1951, 1953, 1955, 1956*

APPENDIX A

TABLE I

IMPORTANT CHARACTERISTICS AND STATISTICAL DATA OF LATEST AMERICA

Country Total Population Territorial Area

Argentina 18,928,536a 2,808,492° Bolivia 3,019,031 1,069,094 Brazil 51,976,357 8,516,037 Chile 5,941,750 741,767 Colombia 12,033,000 1,138,355 Costa Rica 800,875 51,011 Cuba 5,929,029 114,524 Dominican Republic 2,539,325 48,443 Ecuador 3,203,757 323,750 El Salvador 1,855,917 34,126 Guatemala 2,788,122 108,889 Haiti- 3o097,252 27,750 Honduras 1,368,605 112,088 Mexico 25,791,017 1,969,367 Nicaragua 1,056,000 148,000 Panama 805,285 74,010 Paraguay 1,405,627 406,752 Peru 6,207,967 1,249,049 Puerto Rico 2,210,703 12,324 Uruguay 2,353j000 186,926 Venezuela 5,034,838 912,050 -

^Sources Compiled from different sources© See foot- notes for each country in separate page© "a, b, c, d, e, f,

-125-

-126-

TABLE I- Continued

Demographic ; Population Urban Cities of Capital City Density Capital City Population 100,000 Population

hbts/km2 (Per cent) hbtso Per cent of total

6o7 5,617,259d 62o5e llf 29 o5^ 2o7 321,000 33o0 1 10 06 6o0 2,377,451 36 o5 14 4o6 8o0 1,503,713 60o4 3 25c5

10 088 648,324 29 ol 9 17 08 15o7 139,915 17o5. 1 17 0 5 50 o9 1,088,294 57 oO 3 18o7 44*01 255,000 26*0 1 10o0

9o9 209,932 44 eO 2 6o5 54<,0 161,951 36,5 1 8o7 25*6 284,922 30e9 1 10o2

115o0 135,687 12 02 1 4o38 12,21 72,385 31ol 0 5c3 14 o0 3,050,442 42 06 10 806

7«14 110,000 34 o9 1 9o46 14o01 174,000 36 oO 1 22o0 3o44 205,000 35 o9 1 14 06 4o7 520,528 36*0 1 7e4

645 oO 357,205 20o0 0 16 e3 12 o5. 837,621 65c0 1 35*2 5o5 ' 495,064. ,. 53*8 3 9 08

FOOTNOTES TO TABLE I APPENDIX A.

Argentina

aTotal Populations Servicio estadlatjco nacional e (informa- cion proporcionada por la Embajada Argentina en Washington, Do Co correspondiente al 1° de enero de 1955)e bTerritorial Area©

Ibido r» 2 Demographic Density (hbtSo per km )

Ibido '

Population of the Capital City

Population of Gran Buenos Aires (Great Buenos Aires) of 1955 including the population of the city and of 17 parties of the provinela (province) of Buenos Aires that form the ur- ban conglomerateo

eUrban Population

Information obtained from the Census of 1947, which considered urban the poblaciones (towns) of 2,000 and over© f Cities with 100,000 hbtSo or over*

Census of January 1, 1955o

^Percentage of the Population of the Capital City within the total, population©

Op© cltoj footnote ne*

Bolivia? -'•■*' "s- ■ aCensus taken on September 5, 1950© Servicio Estadlstlco Na- cional, (information provided by the l&bassy of Bolivia in Washington, D© Co)

b^- cit©, ^Introduction to Bolivia* *

Op© cit©, Footnote wa^

Ibid ©/Census of 1950.

-127-

-128- e Ibid»fl (This figure Is in relation to the total population)

f Ibid©

sIbidc

Brazil a United Nations, Department of Economic Affairs© Statistical

Office* Demographic Yearbook 1952 (New York: 1953)© b

Censo de Sstadlstlcas Nacionales (Information provided by the Embassy of Brazil In Washington, Do Co) 1950©

c, d, e, f, gIbido

Chile a Servicio Nacional de Estadistica y Censo• Algunos resultados

del XII Censo de Foblacion y Vivienda obtenidos por muestreo, Talleres Graficos "La Nacionn (Santiago de Chile: Mayo de 1955, 55 paginas) *Th.e figures Estadisticas published in this pamphlet are based in the special study of a systematic sample of 2 per cent of the cedulas censales and the 10 per cent of the districts© Maximum error probable 0ol0ff.

United States Department of Commerce, "Basic Data on the Eco- nomy of Chile,1* (Bureau of Foreign Commerce, part 1, No© 55- 87, 1956)o

C0£° cit©, Footnote *a*

d> e' fIbido

Colombia a Departamento Administrativo Nacional de Estadistica© Anuario General de Estadistica© 1954. Bogota, Colombia, diciembre de 1955o polo. Al 5 de julio de 1954, el Departamento Adml- nistratlvo Nacional de Estadistica estimaba una poblacion media de 12,381,160 habltanteso

b 2 Modified in 1941© Departamentoss 554©840 km © Intendenciass 200,505 km © Com!sarias* 403,010 km ©

°2S.° £i£°> footnote""a* d Censo de 1951© :An estimate made on July 5, 1954 by the

Departamento Administrative Nacional de Estadisticas gave Bogota a population of 765,360 habts© El Concejo Administra- tive de Cundinamarca, by the wordenanzaw No© 7, of December

•129-

15, 1954, incorporated other 6 municipios (Rmtibon, Bosa, Usme, Suba, Usaquen y Sngativa) to the area of the Municlplo of Bogota, forming this way the Special District, (Distrito Bspeeial) with an area of 920 km and a total population of over one million habitantes©

^Statistical Office of the United Nations© Demographic Year- book, 1952, United Nations, New York, 1952, p© 175© His information derives from the Census of 1938, which considered urban the population of centers greater than 1,500 hbts© and that are headquarters of municipios or districts© f Poblacion estimada de las ciudades colombianas el 5 de

Julio de 1954 (Departamento Administrativo Nacional.de Es- tadistica, obra citada. (0£© cit c, Footnote %*)

765,360 Hbtso 431,380 365,800 324,700 142,800 138,680 136,120 110,900 107,820

S0p© cito,

Costa Rica

Bogota Medellin Cali Barranquilla Cartagena Manizales Bucaramanga Ibague Cucuta

Foo tno te "a *

aStatistical Office of the United Nations* Department of Economic Affairs* Bgmographlc Yearbooks 1953, United Nations, New York, 1953}, p0 86© b0£* cit©, *Xntreduction to Costa Rica* c0po cito, Footnote waw

d Ibido, Census 1950©

Ibid. 1952, p© 171© f,groido

Cuba aCensus of 1953o Oficina Nacional de los Censos Demograficos y Electoral© Tribunal Superior Electoral© Censo de Poblacion Vlvienda % Electoral © Informe general. (P© FernancTez y Compania, La Havana, 1956)©

t,Cubaar Pan American Union, Washington, D© C©, 1950©

-130- c

Ogo £lte, footnote "a1*

Included in the Metropolitan Area of La Havana are the -urban von.es of T*» TT,*TTO«« f«7«K-45SY. Marianao f 219 .278L Guanabflcno

e0£e cito, Footnote "a*

Ope cito, Footnote wdw

gIbido

Ecuador aCenso tornado el 29 de Noviembre de 1950* Servicio Sstadis- tico Nacional. (Information provided by the Embassy of Ecuador, Washington, Do Co) 10Opo cito cQpe cito, Footnote f,arr

Ibid. Census 1950.

9' f« Slbld.

SI .Salvador

aDireccion General de Sstadisticas y Censos de Ministerio de Economiao Segundo Censo de Poblacion, San Salvador, Junlo de 1950* San Salvador 1954o *K Direccion General de Estadistica y Censos del Ministerio de

Economiao Primer Censo Agropecuario, Octubre-Diciembre de 1950o San Salvador, El Salvador, 1954©

c0£« cltoa, Footnote wa*

d'9'f'srbid.

Dominican Republic

aCensus of 1955o

b * nA look at the Dominican Republic1*. (Embassy of the Dominican Republic in Washington, Do C«, 1956), Vol.'1, No. 8.

-131-. C0£° cite, JFt>otnote J*SL

W

<*, e, f, gxbldp

Guatemala

aDireecion General de Estadistica© Oficina Permanente del Censo© Sexto Censo de Poblaclon© Abril 18 de 1950o (Imprenta UniversitarTa, 1953), p© 27 ©

°Seccion Cartografica y Graficas de la Dlreccion General de Estadisticas y Censoso

0£o cito, footnote ^a11

Op© cltgj Dlreccion General de Estadisticas p© 45©

e0p© cito, Itootnote "a*

Haiti

aInstitut Haitien de Statistique du Departement de LfEconomic Nationale© Bulletin Trimestriel de Statistique, No. 10, Septembre 1953, Port-au-Prince, 19 53"©" (The figures correspond to the Census of 1950)© bUnited Nations© Demographic Yearbook 1955, New York 1953, p© 72©

c0£o cito, R>otnote "a1* dIbid©, Census 1950© e* f»' gIbid©

Honduras aDireccion General de Censos y Estadistica© Secretaria de Estado en el Despacho de Governacion© Resumen General del Censo de Poblacion levantado el 18 de Junio de 1950, (Talle~ res Upograficos Nacionales, Tegucigalpa, 19515)© 384 pages© b Transo The Government of Honduras maintains that the frontier

with the Republic of Nicaragua, in the section between el Fortillo de Tectecacinte and the Atlantic Ocean, was defined on December 23, 1906, by the Lando Arbitral de su Majestad el Rey Alfonso XIII de Sspana© Note from the Ambassador of Honduras to the SecretaryGeneral of the Organization of American States, August 8, 1955© Ihe Qalculus of the total area of the Republic of Honduras have been ratified by the

-132-

Comision Geografica Sspecialo c

OPo citoB Footnote "a* d ■ . . ' According to the j&nuarlo Demografico of the United Nations

1952a including the data for the Census of 1950, gives to the city of Tegucigalpa 99,948 inhabitants0 According to Resumen General del Censo de Poolacion opo cito, gives the same figure to the Central District and divide it urban and rural, giving for the former 72,385 and for the later 27,563o

e' f> gIbid.

Mexico

Statistical .Office of the United Nations, Department of Economic Affairs© Demographic Yearbook 1952, United Nations, New York 1952 0

h> cIbido

This figure includes the Federal Districto

e> f> S ibido

Nicaragua

Census taken in May 31, 1950, (Information provided by the Embassy of Nicaragua in Washington, Do Co)

^For the publication of maps, the data established in the communication of the Inter-Departamental Advisory Committee, of August 9, 1955o c » United Nations? WE1 Transporte en el Itsmo Centroamericanow

Mexico, Sepo 1953 )o

Census taken on May, 31, 1950* Embassy, ago cito, in relation to the total

9'f'sibid.

Panama a Census of 1950o Servicio Estadistico Nacional, (Information

provided by the Embassy of Panama in Washington, Do Co) ■»_

This area does not include the Canal Zone which is 553 square mileso

-133- c Ogo cito, Footnote "a*

d Takes into account the extension of the limits of the City

of Panama approved by the Concejo Municipal in January 19550

Paraguay a Censo de 19 50* (Information provided by the Embassy of

Paraguay in Washington, Do Co)

0pe cito, "Introduction to Paraguay **

c0po cito, footnote "a*

d> er f> g Ibldo

Puerto Rico

Information provided ltInformation Please Almanac, 1955 **

Puerto Rico Office of the Commonwealth of Puerto Rico, Washington, Do C© (The figures given were in square miles, 3,423, the author converted them to km^,).

c> df e, ?, g 0£e cito Pbotnote *a"

Peru a nIntroduction tOooojOgo cltog ^Introduction to Peru"

"The area is based in the Censo of 1940 and calculated by the Sociedad Geograflca de Llma0 (Information obtained by the author in a xrip to Uma, 1956) •

c0po cltog Footnote "a*

Ibido e This percentage is based on the Census of Population taken

in January 9, 1940, which was to be 6,207,967© f £

°0po cito, ^Introduction to Peru*

Uruguay a The last census of the population was taken in 1908© At that

-134-

time it was 1,042,686 hbtso The figure stated in the table corresponds to the estimate made by United Nations in 1949* Demographic Year Book* 19520

b' °» d Ibid. 9Problemas de la Vivienda de Interes Socialo Washington, D« Co 1954, pe 27o

f > s Ibido

Venezuela a Oflcina Central del Censo Nacional, Direccion Nacional de

Estadisticas, Octavo Cens o General de Poblaclon, ffPrincipales Resultados NacTonales~p* Minis terio~cTe Pomento, (Caracas: Junio de 1955), p© 56 o

Wilhelm Sievers, Geografla de Ecuador, Colombia j Venezuela (Editorial Labor So Ao, 1932T7 P«c>i34p maintains "Venezuela covers an extension of 942,300 km2 according to the plani- metricos calculos del Instituto Geografico de Jesus Perthes, but the official data gives 1,020,400*o The figure 912,050 km2 was taken from The Demographic Yearbook 19 55, New Yorks United Nations, 195TJ7 1954, p« 74 o cThe Demographic Yearbook 1955, p© 74o Gives a median density of 6 hbts/km^, not considering the Indians grouped in tribes which amounted in 1950 to 56,705o

0po cito, footnote ,fa* Number of inhabitants cens ados (from census-to count) in 1950 in the metropolitan area of Caracas was 693,890o OjDo cito, pG 21...fl,.,According to the publication "Venezuela up to Date,™ Venezuelan Embassys Washington, Do Co informs in its publication number 8 Volo vi Dec© 1955, that the population of the metropolitan area of Caracas increased in October 1956, to one million inhabitants.1*

0£° cito, footnote ^a1** e «► 0£o cito, "Venezuela up to Date* 1956o

f 0po cito, footnote "a"

■a-Sourcess Most of this research was made in the different countries of Latin America during the summer of 1956; also in Washington, Do C« and Baltimore, Md« from 1951 to 1954*,

LIT T N AM^RIC*

Z7 British Guiana $ Surinan

French Guiana

C =1 v1 t ? "I ^ "1 ties

O-: ~ Jo To TO a -!. ■" .-»

c T -.' ,- ;-> £. c ~ - ' ~ c ° s 7. T,o Pp7

;8. Q,ui to q f *\ .c-ti melon

10. Mo ^ f DIH d90

-135-

British Honduras

-136-

APPENDIX B

Figure .1

LATIN .AMERICA: EXPORTS IMPQPTS *ND

THE CAPACITY TO IMPOPT

(Billions of Dollars at 1950 Prices) ■ Natural Scale

- /

T'\ i i \\ 1 \ t \ i 1 T occ;

'Source: Ecor.or^.ic S'irve" of 'Latii

Uni ted M^tior'S'. DGT,>3rtrioit: of ,,'(,.ono',,i c

Affoirs, Nevr York7, 1956. p.. '*K

-137-;

APPENDIX B

Figure .1

LATIN .AMERICA: EXPORTS IMPQPTS *ND

THE CAPACITY TO IMPOPT

4f

(Billions of Dollars at 1950 Prices) ■ Natural Scale

- /

T'\ i i \\ 1 \ t \ i 1 T occ;

'Source: Ecor.or^.ic S'irve" of 'Latii

Uni ted M^tior'S'. DGT,>3rtrioit: of ,,'(,.ono',,i c

Affoirs, Nevr York7, 1956. p.. '*K

•l£7- -137-;