WHY THE LAG IN INVESTING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP73-00475R000100400018-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 27, 2016
• Document Release Date: December 30, 2013
• Sequence Number: 18
• Publication Date: March 10, 1964
• Content Type: OPEN SOURCE

F, -I-
Declassified in Part - Sanitized Copy Approved for Release @ 50-Yr 2013/12/30: CIA-RDP73-00475R000100400018-4
NEW YORK
HERALD TRIBUNT?
Latin Trade?No. 3,
y the Lag
In Investi
THE American business men whose capital
is urgently needed to ?make the Alliance
for Progress work .have been increasingly leery
of investment in Latin Americo. In the last
'article of a three-parr series, Herald Tribune
.correspondent Barnard L. Collier explains Why
some U. S. entrepreneurs think .the cards are
stacked against them.
By Barnard L: Collier'
Latin American Correspondent
WASHINGTON.
The Alliance fora Progress is supposed to ;lump $20
billion worth of outside investment into Latin America over
'a 10-year span.
The United States government was pledged to $1.1
billion a year, American business was to put in $300 million
and $600 million more was expected from world agencies
and European countries plus Japan.
r'sTo get this kind of massive capital transfusion, Latin
American countries made a few pledges at Puente del Este:
to curb runaway inflation; to push tax, land and adminis-
trative reforms; to move toward a more integrated hemi- ,
sphere-wide market, and to balance cockeyed budgets.
It was hoped that under these conditions the $2 billion
a year in new capital would generate '$4 for every $1 in-
vested in Latin America.
? Only the U. S. government' and the lending agencies
'stuck to the proposed goals, or almost did. The first year
of the Alliance, the U. S. put in $1.2 billion, of which $300
million was Export-Import Bank refinancing for Brazil.
By fiscal 1963 the figure had dropped to $972.4 million. It
is expected to be lower again this year.
U. S. businessmen grew more quickly skeptical of the
'Alliance's progress. In the past two years new private U. S.
Investment actually diminished below zero to a discourag-
ing disinvestment figure of some $74 million, ?
European and Japanese investment grew in the mean-
? while, but more slowly 'than it might have and then only
because, as one Italian businessman said, "We are used to
taking bigger risks and we are compelled by circumstances
to go outside our boundaries."
The slowdown on the part of private -enterprise raises
a key question: Is the Alliance helping or hurting business
in Latin America? A
THE OBSTACLES
It is apparent that U. S. businessmen, feel the Alliance
has not directly helped them and may even have dampened
their enthussm for Latin American ventures.
. In his revealing testimony before the Joint Subcom-
mittee on Inter-American Economic Relationships in Jan-
.uary, attorney Philip A. Ray, chairman of the Interne-
' tonal Bond & Share, Inc., summed up what many U. S.
executives feel are some of the most disturbing obstacles
In the way of greater Private investment in Latin America.
First on his list of ominous trends was increasing gov,-.
rrnment control of business and industry, which U. S. busi-
nessmen believe :belongs tn the Private sector_. ?
. . .
"Most of the Latin Americaa govenimenti own and
Operate a huge and growing array of business enterprises?.
confiscated, condemned, or built originally out of tax rev-
enues or Alliance for Progress aid or Export-Import Bank:
funds," testified Mr. Ray.
"Mexico owns over 500, including .steel, oil, chemicals,
movies and autos, and the story can be duplicated in sub-'
stantial degree almost everywhere. Many of these projects.
are built for prestige and nearly all are losers; hence they
cannot expand soundly." . .
Mr. Ray went on, "These things retard or prevent the'
formulation of new job-creating facilities in 'the private.
sector, due to the threat or reality of competition from
government enterprises not playing the same ? game of ,
profits and tax-paying, and to the fear of outright confis-,
cation."
But Mr. Ray was not wholly pessimistic about the pos-','
sibility of. solutions 'to the ,government-in-everything,
problem.
The U.. S. can do its part, he said, "by helping to.
finance the divestment of these enterprises into 'local pril:
vete hands and giving special incentives to enable U.
owned enterprises willing to share a significant share ,of
their stock to the local,people also."
In addition, he went on, "U. S. guarantees should' be
made available to any wholly-owned U. S. firm operatine
in Latin America and willing to .offer substantial.portione
of equity to employees and.locai people."
Mr. Ray also detailed other basic hurdles U. SI busi?;?i
nessmen want to see overcome:
TAXES?"The Alliance for Progress had laid emphasis i
upon a kind of tax reform generally signifying higher and
better-collected taxes from corporations and upper income?
groups. Yet, generally speaking, less-developed nations neectl
lower taxes in order to spark private sector growth." .
. GOVERNMENT INTRUSION?"In many Latin Amer- '
lean. countries wages are fixed by decree, without legislative,'
action. Rents are often controlled', frequently on sporadic,
and discriminatory basis. Frequently, executive decrees in
Latin America determine what .the hours of work should'
be, what days should be taken off, and what the maximum'!.
land, minimum wages should be."
INFLATION?"Any chance for the cycle to perfect'.
!itself fpr the mass of people is also destroyed by the ramp-
ant Inflation existing in most areas of Latin America. . . .1
IR is almost idle to talk of plans for the expansion of capital
lInvestment for productive facilities, or any kind of foreign:
'assistance, in the presence of this kind of inflation."
GOVERNMENT RESPONSIBILITY?". . . Much at-,
tentlon is paid to the question' of political stability. With-
out any doubt the political climate prevailIng?in much of:
' Latin America . . . is the largest contributor to economic
,underdevelopment. Nevertheless there is little we can do'
, within the limits of' government-to-government aid or di-
plomacy to affect the trend in any particular country." ? .
AGRICULTURE?"The concept of subsistence farming,.
I of small plots, especially in the production of crops In'
' which Latin America excels?wheat in Argentina, cotton'
in Mekco, sugar cane in Colombia, coffee in Brazil and;
!elsewhere, and, so forth, may .have some political appeal'
but it makes economic, nonsense. Hence, 'land reform':
often means collectivization a la Soviet. In' place of con- ?
fiscation, collectivization, and subsistence farming, Latin',
American governments should look to colonization, tax
relief end. private co-operatives for purchasing and mar-
keting.".:? ? I
? A NEW CLIMATE
? EXCHANGE CONTROLS?"There is no justification
in our providing aid while the Latin Americans refuse to
put their capital to work in their own-homela.nds. But on
the other hand it must be recognized that new direct
foreign capital will not go to Latin America unless, as to
it, there are reasonable provisions permitting the foreign,
i owners to. repatriate Income and_gapAta.1."
Continued
Declassified in Part - Sanitized Copy Approved for Release @ 50-Yr 2013/12/30: CIA-RDP73-00475R000100400018-4
Declassified in Part - Sanitized Copy Approved for Release @ 50-Yr 2013/12/30: CIA-RDP73-00475R000100400018-4
INVESTMENT GUAkANTEES,?"Guarantee concepts;
!have to be entirely revised. U. S. investment in a country
whose government offers adequate guarantees against
? tionalization and like risks and adopts Other measures.
, favorable to private operations should be accorded pref-,
erential treatment under If. S. guarantee programs." ,
ECONOMIC INTEGRATION?"An essential to the cre-
ation of an improved domestic investment climate in Latin
? America lies in a more rapid economic integration of the
:Latin American republics. ? . . The rapid elimination of,
!tariff, quota, and other barriers now existing between the.
republics of Latin America would generate substantial ex-
panded trade, -enlarged markets,. and new investments in,
Latin, America."
U. S. TAXES?"If Latin American nations will foregol
tax collections to stimulate, foreign investment, we should.,
exercise equal forebearance.. This concept has been em-,
bodied in several measures before 'this Congress and one.
measure, allowing a-30 per cent tax reduction to those- who,
'will invest 'in Latin America, is still pending, before the!
Congress."
Mr. Ray's testimony Is resoundingly echoed by the
vast majority of businessmen in the U. S. and many,
abroad. And with the problems encountered in the initial
years of the Alliance, for Progress, it appear i that these
!feelings are gaining currency in the Johnson administra-?
.tion. There is litt10,..question that the new Assistant .Secre7
?tarsi of State for*ter-America.n Affairs, Thomas 4 Inn,
.sub,sollbspAckmj9*,0.W. rqty'!1, criticism. and pr9p0
MAR 0 1964
Declassified in Part - Sanitized Copy Approved for Release @ 50-Yr 2013/12/30 : CIA-RDP73-00475R000100400018-4