Investors Beware

One reason that Yankee dollars are traveling to Europe is that opportunities in Latin America look dark. Last year U.S. businessmen took $32 million more direct investment capital out of Latin America than they put in. Last week in Brazil, the U.S. -owned American & Foreign Power Co. found itself in the kind of mess that makes other risk cap ital feel like not taking such risks.

The biggest U.S. electric utility operator in Latin America, "Amforp" has dams, plants and transmission lines in Brazil worth more than $350 million.

But it has not kept pace with Brazil's growth. The company blames its troubles, and its current unpopularity in Brazil, on politics. Nationalistic politicians playing to the crowds have refused to allow rate increases to keep up with the country's rampaging inflation. Service has gone from bad to dreadful, the government has been crying for Amforp to sell out, and the company itself has been eager to convert its assets into cash. Last April a deal was struck: the government of President Joao Goulart agreed to pay Amforp $142.7 million over 25 years, and the company pledged to reinvest $101,250,000 in other government-approved ventures in Brazil.

Then left-wing Demagogue Leonel Brizola, Goulart's noisy brother-in-law decided to make an issue out of the settlement. "Instead of getting money, the gringos should pay indemnity to Brazil for rendering bad service," he thundered. Unexpectedly and inexplicably, Carlos Lacerda, the militantly anti-Communist Governor of Guanabara state, declared that the compact would cost the government $600 million and found a right-wing reason for opposing it. He called the contract an effort "to disguise Brazil's progressive entry into the Soviet orbit." Goulart's resolve melted under all the political heat; he ordered still an other detailed appraisal of Amforp's as sets "screw by screw, fuse by fuse." With the original deal scratched, Amforp is left with the thankless task of operating utilities that drain more money and make more enemies every day.

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