Dance of the Billions

Latin America was at the crossroads. The 20 republics to the south, and their 134 million citizens, had emerged from the second world war as partners on the side that won it. Debtors, most of them for decades, they suddenly found themselves too rich for comfort, with some $4 billion in credits on the exchanges of the world. What they would do with it, what they could do with it, would shape the pattern of hemisphere life.

With their $4 billion the 20 republics wanted to buy economic independence. They talked economic nationalism. They wanted to industrialize. Last week, for the first time in history, the shares of a Mexican industrial firm--the new Industria Electrica--were quoted on the New York Stock Exchange.

Wines & Silver. The war cut the Latin republics from their normal source of manufactured goods, taught them to trade among themselves. In shop windows along Havana's Calle San Rafael appeared Mexican silver, Argentine pocketbooks, Chilean wines. Today, Argentina's chief supplier is no longer Britain but Brazil. Three Chilean companies now export more bananas from Ecuador to Chile than United Fruit ships to the U.S.

The world learned to look to Latin American cities for some manufactured exports. On ancient, hand-me-down Manchester equipment, Brazil's textile mills make some $60,000,000 worth of textiles annually for South Africa, Ireland, Sweden, the Belgian Congo, Australia. Even though war-made markets may vanish, the fact is that today Brazil's manufactures are gaining on her agricultural products in export value. Brazil is one of the world's largest exporting nations.

Most important of all, the republics set to work to make what they could no longer import. Argentines shipped fewer hides, turned them into finished leather goods themselves. Chileans proudly looked for the label Fabricacion Chilena on their tires, even though the rubber and cotton material still had to be shipped in. In Brazil's Sao Paulo alone, 300 new firms grew up during one year, to make such former import standbys as cotton and wool yarns, rayon, rails, leather goods cellophane, ceramic and chemical products.

Tomorrow's Plans. What the advocates of economic nationalism had accomplished was not a patch on what they planned. "The Latin Americans," said the Commerce Department's George Wythe, author of the current and authoritative Industry in Latin America (Columbia University Press; $4), "have gone hog-wild for industrialization."

Almost every country had its blueprint. One of the best was Fomento's (Chilean Government planning and financing corporation), sparked by vigorous Oscar Gajardo. Fomento had already spent $110,000,000, expected to put $140,000,000 more into economic landscaping this year. Its comprehensive plan reaches from steel to oil, from cattle to fish canning.

The national-minded Chileans wanted to develop and diversify, thus diminish their deadly dependence on outsize copper and nitrate exports. Basic to this program was a steel mill to be located at coastal Concepcion near soft coal (but some 400 miles from iron) deposits. By 1948 Chileans hoped it would supply the 180,000 tons of steel they would need annually. Hydroelectric power, vital everywhere in Latin America but paramount in Chile, was already well advanced under the Fomento program. Light metals, chemicals, forest and food products will be fitted into the picture in due course.

What Fomento lacked was oil. Four days after Christmas drillers brought in a gusher in remote Tierra del Fuego. The new field, said jubilant Economics and Commerce Minister Pedro Alfonso, "more than meets national demands."

Rich Uncle. To such long-term economic improvements, the U.S. has lent a hand through the Export-Import Bank. Besides its $33 million shares in the Concepcion steel project, the U.S. was interested in Latin America's most ambitious industrialization scheme--Brazil's $90,000,000 steel plant at Volta Redonda. and the railway to supply it with ore from the world's richest high-grade iron deposits at nearby Itabira. Two open-hearth furnaces were scheduled to start production May 1, 1946, but performance has run so far behind plan (two years, with doubled costs) that the Brazilian Magnitogorsk continued to look like a monumental disappointment.

Uruguay recently opened the impressive Rio Negro hydroelectric project financed with $12,000,000 U.S. aid. Peru looks to the U.S. for help in making herself "a Norway with a warmer sun." Ecuador hopes for aid in roadbuilding.

But all these planners are small operators beside the men who now control the life of Argentina. Practicing German ideas of Autarkic, the Peron Government sought to make itself totally self-sufficient during World War II. The result: Argentina is today closer to economic independence than any other Latin American republic, and possesses a third of all the Latin American dollar credits.

The Scissors. But where could Latin America spend its accumulated dollar credits on the machines and equipment that would bring greater economic independence? That--with Britain bankrupt and U.S. industry geared to enormous domestic demand and currently snarled in labor complications--was last week's $64 question.

In effect the hemisphere's war program had been a partnership: the U.S. had guaranteed the Latin republics' economies, buying their coffee crops as well as their strategic materials; they in turn had agreed to produce as much as they could toward the war effort. The U.S. had gone further, supplied the Latin Americans with from 70 to 90% of their wartime imports. But the war over, the U.S. was doing little, promising nothing.

To Latin Americans the partnership had been no temporary deal. In Boston last week Mexican Ambassador Antonio Espinosa de los Monteros put their case: the republics could not forget how after the last war they had been cut off from the world's manufactures. "The tragedy of the scissors," he said, was an experience the republics did not want to repeat. They looked to the U.S. for assistance now. warned that if the U.S. did not let them cash their credits they would be crushed by inflation.

To point up their pleas they could cite the grievous problems U.S. wartime purchases had created in Latin American life. The U.S. had induced countries like Mexico, Chile, Peru and Bolivia to mine copper, tin, lead and nitrates as never before. No one could reckon the effect when peons left subsistence farms to dig and scrabble in the frigid squalor of mining camps 14,000 feet above the sea, only to be turned loose again when the need for ore ended.

Rope's End. Whole crops and industries had been developed at U.S. urging: Ecuador's balsa (plane parts) and cinchona bark (quinine), Central American abaca (rope), Brazil's quartz (radio parts). War's end brought the need's end. In Cuba, industrial alcohol distillers, seeking to cushion the shock of the coming cancellation of U.S. contracts, proposed that Cubans burn carburante national ( 2/3 alcohol, 1/3 gasoline) in their cars. Cubans squawked (see BUSINESS).

But there was a more dangerous legacy: the accumulated $4 billion in credit now operated to push up pins inside every Latin American economy. Most of the gold and foreign exchange were held by central banks; they issued currency against it. There was not much to buy with the extra money. Already, prices had run from 30% in Uruguay to 200% in Bolivia. Every nation had begun to dance the tarantella of inflation. Rocketing living costs threatened the basic political and economic stability of every Latin American nation.

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