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A study of the Inter-American bank

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A Study of the
INJBER-AMERICAN BANK
A Thesis
Presented to the School of Business Administration
University of Southern California
In Partial Fulfillment
of the
Requirements for the
Degree of Master in Business Administration
By
Luis Eduardo Laso
May, 15th, 1941
UMI Number: EP43151
All rights reserved
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UMI EP43151
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This thesis, written by
.........X3nS..^UARDQ.JLASQ.............
under the direction of hX§.. F ac u lt y Committee,
a n d a p p r o v e d by a l l its m em be r s, has been
presented to and accepted by the Council on
Graduate Study and Research in pa rt ia l f u l f i l l ­
m en t o f the r e q u i r e m e n t s f o r the de gr ee of
MSTSE.JN..3nSINES5..ADMIKISTEAIIDN....
Dean
Secretary
D a te ....
F a c u lty Com m ittee
C hairm an
.Contents
Chapter
Page
INTRODUCTION
I
I-II
HISTORY OP THE PROJECTED INTER-AMERICAN
BANK*
1-11
First Pan-American Conference
Second Pan-American Conference
Third Pan-American Conference
First Inter-American Finance Conference
Second Inter-Americah Finance Conference
Sixth Pan-American Conference
Seventh Pan-American Conference
Eight Pan-American Conference
First Meeting of Foreign Ministers of the
American Republics. Panama
II
2
3
3
4
6
7
7
10
1
PROPOSED LAWS FOR THE INTER-AHERICAB
BANK;
:I2-25
Study of the Convention
Study of the Charter of the Inter-American
Bank
Study of the By-laws of the Inter-American
Bank
IIJ
'
IV
INTER-AMERICAN COOPERATION
V
THE INTER-AMERICAN BANK AS AN INSTRUMENT
VII
14
15
ECONOMIC FOUNDATIONS OF INTER-AMERICAN
RELATIONS
VI
13
26-42'
43-59 ■
FOR HEMISPHERE COOPERATION
60-67
APPENDIX List of the appendix, see
next
page.
i
68-86
BIBLIOGRAPHY
87-88
Appendix
't* igm w
jm
r
Number
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
Page
First Pan-American Conference.-Washington,1890
Recommendations related with the adoption of
a common money, and the creation of an InterAmerican Bank - - - - - - - - - - - - - - - -
68
Second Pan-American Conference.-Mexico,1902,
Recommendation related with the creation of an
Pan-American Bank - - - - - - - - - - - - - -
69
First Inter-American Finance Conference,1905,
Washington D. C. Credits to Latin America - -
70
Third Pan-American Conference,1906, Brazil,
Recommendation related with Fluctuations in
Exchange — — — — — — — — — — — — — — — — — —
71
Sixth Pan-American Conference,La Habana,Cuba.
1928. Recommendation related with the adoption
of a common money - - - - - - - - - - - - - -
72
First Inter-American Conference for the
Maintenance of the Peace, 1936, Argentina,,
Recommendation related with monetary stabili­
zation- - - - - - - - - - - - - - - - - - - -
73
Imports of Latin American countries from the
United States and Germany.-1929,1932 and 1938-
78-79
Long Term Investment of the United States,
Great Britain, France and Germany in Latin
America - - - - - - - - - - - - - - - - - - - -
80
Foreign Exchange Rates in Latin America - - - -
81
Position of Latin America in the Foreign Trade
■ of the United States, 1929-1939
---World Trade.- United States Forfefegn Trade.-Latin
American Forfefegn Trade . 1929 to 1938
82
83
XII
Foreign Trade of the Twenty Latin American Countries
with selected countries 1929 and 1938
84
XIII
Approximate distribution of the total World’s trade
and the share of the Western Hemisphere, 1938
85
INTER-AMERICAN
BANK
INTRODUCTION
The problem of the Inter**American Bank may be studied
from various points of view. Peculiar problems and difficulties
are presented to the investigator because of the diversity and
extensiveness of the subject.
The difficulties of this work arise from many points.
Sometimes they come from the lack of agreement among the
economists about those principles which might be utilized as
tools for scientific investigation. It is a well known fact
that Economics as a social science does not have the facilities
of a mathematical science.
Other difficulties also arise when a person endeavors
to select the correct viewpoint. This problem is due to the
fact that changes in the complicated economic mechanism, accord­
ing to the different interestsf actually play a dominant role
in economic activity. Many of them are engaged in an opposing
struggle. Sometimes in a country these different interests may
be offset but the difficulties arise when on tries to place
them In relation to the interests of another country.
If we remember that a complete treatment of this subject
would involve a consideration of the diverse characteristics
II
of production and consumption in each of the American countries,
as well as the problems of foreign trade, custom tariffs, gold
problems, domestic and international credit, capital investments,
prices, and so forth, we get an idea of the number of different
factors which might be treated. Therefore, the scope of an
individual work must necessarily be limited.
However, in spite of these difficulties, the idea of
solidarity and good will come forth at this time with more
intensity than ever before perhaps among the several American
countries in the north and in the south. Common dangers and
common Interests have brought these ideas to the fore. To
clarify the way In which these institutions, dedicated to the
furtherance of continental solidarity, could be established
is a duty of Inestimable value.
This was the writer*s purpose when he selected the
thesis of the Inter-American Bank, and such a purpose, in
itself, Justifies all attempts and forgives all errors.
CHAPTER I
HISTORY OP THE PROJECTED INTER-AMERICAN
BANK
On September 23, 1939, amidst the world wide confusion
attending the outbreak of war in Europe, the Foreign Ministers
of the American Republics met in Panama to discuss measures to
be taken in order to keep the New World out of the conflict
and to devise means by which the nations of the Western
hemisphere could adjust themselves to the Impact of the European
war.
The numerous economic questions inevitably connected
with any discussion of hemisphere cooperation were referred to
an Inter-American Financial and Economic Advisory Committee.
Among the tasks of this committee was the drawing of plans for
the creation of an inter-American bank, designed to promote
"a fuller exploitation of the natural resources of Latin
America in order to Intensify economic and financial relations
among the American countries and to mobilize for the solution
of economic problems the best thought and experience in the
Americas.
Although given new impetus under the pressure of war
and threat of aggression, demands for a closer economic and
financial integration of the American Republics have been con1 "Inter-American Bank," Federal Reserve Bulletin,
Washington, D. C. June, 1940, p. 61?.
~
tinually voiced over a period of more than fifty years.
Ever
since the ideal of American solidarity was crystallized in the
formation of the Pan-American Union, the need for economic
cooperation among all American Republics was recognized as a
basic condition of peace and prosperity as well as of any po­
litical and oultural nappoiit among the several republics of the
South and North.
From the first International American conference in
1890 to the present day, questions of economic cooperation,
have been on the agenda of inter-American meetings.
Problems
of economic collaboration naturally brought into focus the
need for monetary stability and for greater unity and uniform­
ity in matters of banking and currency.
Stable exchange rates,
a common ourrency for all American countries, the gold stand­
ard, establishment of central banks for more effective monetary
control, and, finally, the creation of an inter-American bank,
were continuous topics of conversation.
The resolutions and
recommendations of the successive Pan-American conferences
clearly indicate how the desirability of, and need for, eco­
nomic and financial collaboration was recognized by all Amer­
ican nations.
The first International American conference, held at
Washington, D. C. in 1890, was called mainly for the purpose
of considering the adoption of a uniform coinage, to be issued
within each country by the respective governments.
This con-
ferenoe also brought up, for the first time, the project for
the establishment of an inter-American bank. ^
Both these proposals, however, remained in the stage
of discussion and failed to elicit positive action.
In 1902, the second International Conference of the
American Republics held at Mexico City.reiterated the recom­
mendations of the previous conference, again urging the ore­
s’
ation of an Inter-American Bank.
Another meeting was held in 1905, once more in Wash­
ington, D. C.
It was the first Inter-American Financial
Congress, whose main objective was to study measures to facil­
itate the extension of credits by United States business men
and bankers to Latin America.4
In the following year, 1906, the third International
American Conference met in Brazil.
The problems of exchange
fluctuations were the principal topics on the agenda of this
Conference.
Ways and means were discussed by which such fluc­
tuations could be avoided and stability of exchange rates as­
sured. P
^ See appendix 1
3 See appendix 2
4 See appendix 3
5 See appendix 4
In 1915, another International Financial Conference
was held in Washington.
The outbreak of the World War had
created special problems affecting all American Republics and
it was the task of the Conference to work out measures to cope
with these war difficulties.
The delegates stressed the fact that the financial and
trade dislocations attending the European War had found the
American countries unprepared and had plunged them into a de­
plorable state of economic disruption.
This state of affairs,
in the opinion of the representatives, demonstrated more em­
phatically than ever before, the need for the creation of some
sort of inter-American organization which could serve to co­
ordinate and equilibrate the economies of the several American
states.
Such an organization, they felt, would be a great
boon and the best defense for the economic, industrial, com­
mercial and financial, of the American nations.
Their concrete
suggestion for the creation of such an organization which could
serve as a center of balance was, once again, the establishment
of an Inter-American Bank.
At last it seemed as if, under stress of war and with
the inspiration of a common political cause, something might
be done to further the old project of an inter-American bank,
as well as of other methods of monetary and financial collab­
oration reiterated at each previous conference.
The time
seemed propitious for pushing these plans beyond the verbal
stage and actually to put them into operation.
The working out of details for specific proposals was
entrusted to a commission of experts, appointed for that pur­
pose hy the Conference.
The commission began its work a year
later and, at the conclusion of its studies, sent to the PanAmerican Union a Memorandum containing a series of recommen­
dations for monetary and banking cooperation among the Amer­
ican nations.
The memorandum emphasized the importance of exchange
stability and, to achieve this end, urged adoption of the gold
or gold-exchange standard by all American nations, as well as
the establishment of eentral banks in all those countries
which as yet had no such institutions.
In one of its memorandum, the commission also pointed
to the desirability of creating an Inter-American gold fund
in order to make unnecessary the shipment of gold between
countries in settlement of balances.
If each country had a
deposit in the common fund, the memorandum stated, all gold
movements would be reduced to simple debit and credit entries
on the books of the fund, while each country could continue to
use its share of the fund as part of its monetary reserve.
Such an arrangement would have represented an extension of the
United States gold settlement fund to the entire Western hem­
isphere.
The old idea of a uniform currency for all American
countries was also studied "by the commission.
But it con­
cluded that the adoption of a common coinage was an ideal im­
possible of realization and that the only advisable measure
would be the adoption of a common unit of account,
6
while the
coinages of the several countries were to be left unchanged.
The various suggestions and recommendations of the com­
mittee of experts were finally approved by a Second InterAmerican Financial Conference which met at Washington in 1920,
The prompt adoption of all the proposed measures wan urged
upon the countries of North and South America.
In response to
the Committee's appeals several countries established central
banks; Colombia, in 1923, Chile in 1925, Bolivia in 1926,
Ecuador in 1927, and Peru in 1929.
Several countries which
already had national banks, such as Argentina, Brazil, Uruguay,
Nicaragua, Costa Rica, changed the laws regulating their insti­
tutions in order to improve their capacity to function as cen­
tral banks.
Later Argentina, (1934) and Brazil (1939) also
created special central banking institutions.
Although these steps undoubtedly represented a con­
siderable advance in hemisphere financial cooperation, they
fell far short of the stated objectives.
Nothing further was
done about the plan for an inter-American bank, the common
6 The commission suggested a standard unit equivalent
to 0,33437 grams of gold, 9/10 fine, with fractions and multi­
pliers according to the decimal system.
standard unit of account and the gold settlement fund.
The sixth Inter-American Conference meeting at Havana,
Cuba, in 1928, therefore, reiterated these goals, stressing
in particular the need for greater unity and uniformity among
*7
the currencies of the several countries.' As usual, however,
the Conference adjourned with pretty speeches, but without
following them up with action.
The situation, therefore, was practically unchanged
when the seventh International Conference met at Montevideo,
Uruguay, in 1933.
The urgent need for action, however, had by
this time once more been driven home with great emphasis as a
result of the confusion and despair caused by the great eco­
nomic crisis.
The Hew World, as well as the old, was in a
mood for reform even if it involved drastic steps.
Under the
impetus of the Hew Deal economic policy in the United States
and the atmosphere of the “good neighbor11 sentiment, the
Montevideo Conference promised to be more fruitful than its
predecessors.
Quite naturally, this Conference again dealt very
largely with economic and financial problems, such as customs
duties, currency stabilization, the possibility of adopting a
'uniform monetary system, etc,, and again, as so many times be­
fore, this Conference unanimously approved the project for the
7 See appendix 5
creation of an international American bank.
Among the resolutions and recommendations pertaining
to economic and financial questions, the Montevideo Conference
passed three which appeared to be of outstanding significance
and, therefore, deserve special mention.
The first was a resolution® taken on a motion by the
Secretary of State of the United States and dealing with
matters of tariffs and of economic and commercial policy.
The Governments of the American republics, according to this
resolution were "impressed with the disastrous effects of the
obstruction to international trade upon the full and stable
business recovery of individual nations as well as upon gen­
eral world prosperity" and, therefore, were "desirous of aban­
doning economic conflict and of achieving some measure of eco­
nomic disarmament."
They were "confident that through mutu­
ally profitable exchange of goods they themselves and the
governments of the other nations of the world could reduce un­
employment, increase domestic prices, and improve business
conditions in their respective countries" and, therefore, re­
solved to promote trade by reducing high tariff barriers, by
the negotiation of reciprocity treaties, bilateral or multi­
lateral agreements, etc.
Thus, the keynote was sounded for a new epoch in the
8 Seventh International Conference of American States,
Minutes and Antecedents, Montevideo, 1933, Inaugural Session,
December 3, 1933, pp. 40-41.
international trade of the American countries.
Since that
time a large number of such agreements 'have been" negotiated and
trade nearly doubled.
The second resolution
9
referred to currency stabiliza­
tion and the possibility of adopting a common monetary system.
In its desire to achieve currency stability the Conference
reflected a universal demand which only a few months pre­
viously had been the chief topic of discussion at the London
Economic Conference.
But in the opinion of the delegates,
the traditional gold standard could no longer be regarded as
a satisfactory solution for monetary stabilization.
Instead,
a closer cooperation among central banks was urged as more
likely to achieve this purpose.
The third resolution dealt with the establishment of
an inter-American bank.’*'® Three delegations independently
TT
submitted plans for the creation of such an institution. M
"It is urgent," said the subcommittee, presenting the report
On that question, "to create an Inter-American organization
which shall be capable of putting coherence and order into
the life of international economic relationship among the
9 Ibid., pp. 39 ff.
10 Ibid., pp. 39 ff.
^■1 The institution was to be called "Inter-American
Organization of Economic and Financial Cooperation, compris­
ing two bodies: one a consulting Economic Commission, the
other an Inter-American Bank.
10
American States, and shall act as a real regulating factor
for moderating and tempering the pressure of the economic
forces which are today unbalanced."
The resolution urging the creation of this Inter-American Bank was referred to the third Pan-American Financial
Conference which was to take place in Santiago, Chile.
But the Santiago Conference never materialized and the
next meeting of the American States, the Inter-American
Con­
ference for the Maintenance of Peace, special conference,which
was held in Buenos Aires, 1936, did nothing to promote the
establishment of an inter-American bank, although it did take
up, in rather perfunctory manner, the question of monetary
stabilization.
problems of economic and financial cooperation were
once more taken up by the Eighth International Conference of
American States at Lima, Peru, in 1938.
That Conference re­
iterated the basic principles which had been adopted in 1933
and 1936, stressing particularly the need for eliminating re­
strictions and limitations on international trade, and urging
the extension of the most favored nation clause.
The Pan-American Union revived the question of an
inter-American bank by proposing the creation of such an
institution to the Conference. But the Conference limited
itself to a recommendation that "the Pan-American Union
should continue its activities in this field in order to give
full effect to the objectives sought in the afore-mentioned
11
13
proposal.”
Again, nothing had been accomplished.
Thus, over half a century, lip service had been paid
to the ideals of economic and financial unity in the Western
hemisphere, yet no significant steps were taken to bring
these ideals to fruition.
Minor successes were achieved,
especially when particularly bad economic conditions, for in­
stance in 1933, made action imperative.
But on the whole,
inter-American economic and financial relations have changed,
if at all, for the worse rather than for the better.
Espe­
cially the stability of currencies and exchange rates leave
much to be desired.
For many years the Latin American coun­
tries have suffered from exchange difficulties leading to
trade restrictions which, in turn, had adverse effects on the
prosperity of the several nations.
The creation of the inter-
American bank, so consistently advocated by successive InterAmerican Conferences might well have proved to be the means
of alleviating, if not of eliminating, these difficulties and
of assuring a greater prosperity for all American nations.
It remains to be seen, if, under the impact of the
present world crisis, words will finally be relinquished for
deeds; if the plea of the Panama Conference for the estab­
lishment of an inter-American bank as "a center of economic
stability and equilibrium" will meet with better success than
its predecessors.
12 j|ee appendix 6
CHAPTER II
PROPOSED LAWS FOR THE INTER-AMERICAN BANK
There are indications that the project for an interAmerican bank is nearer to being realized now than It ever was
before.
At any rate, the recommendations of the Conference of
Foreign Ministers have progressed from the verbal stage to
specific proposals which have been followed by action on the
part of several of the American governments.
The Inter-American Financial and Economic Committee
which was created by the Conference for the purpose of formu­
lating measures of economic defense began its work in Washington
in November, 1939 formulating plans for the Inter-American
Bank.
After three months of intensive work the committee pre­
sented three projects to the different American countries.
The first one related to a convention that might be
signed by the governments of the American Republics, who
wished to participate in the new bank.
A second project con­
sisted of a charter for the projected Inter-American Bank, to
be adopted by the Congress of the United States of America
and to be incorporated into a law establishing the bank as a
corporation operating under the jurisdiction of the United
States.
The third project was devoted to the by-laws of the
proposed Inter-American Bank.
Let us examine briefly each of the three projectst
13
I.
THE CONVENTION
The convention represents the agreement or contract to
he signed by all the American Republics desiring to participate
in the new institution#
The convention enumerates all the powers, rights, and
privileges which the several Republics agree to give to the
bank in order to enable that institution to engage in the
various activities, transactions, and operations envisaged in
the charter and by-laws#
Besides, it pledges these same
governments to the enactment of any legislation necessary to
effectuate and protect such powers, rights and privileges#
In addition, the convention contains a declaration by
the government of the United States of America to the effect
that the latter will grant to the bank a charter substantially
in accordance with the charter proposed by the committee#
Finally, the convention contains the declaration of the
participating governments to the effect that they agree to
subscribe to the minimum number of shares required for par­
ticipation in the bank as provided in the by-laws*
The rights, privileges, immunities, and exemptions that
the several governments grant to the bank are enumerated in
full in the text of the convention#
It provides, for the
protection of the bank, that its assets, obligations to it,
as well as its real and personal property of whatsoever nature,
shall be exempt and immune from requisition, seizure,
14'
attachment, execution, confiscation, moratoria, and expropiation, etc.
Also, each country agrees to make available to the bank,
regardless of any existing exchange restrictions, foreign
exchange and precious metals, which the bank may require in
exchange for local currency acquired by it as a result of
loans, discounts, extensions of credit, etc.
It is furthermore provided that the bank and its assets
shall be exempt and immune from any and all taxation.
Lastly,
the converit'fon deals with all the requirements of international
law,
XI.
PROPOSED CHARTER OF THE INTER-AMERICAN BANK
The Charter drawn up by the Committee was to bestudied
by the Congress of the United States and enacted into a law.
The Inter-American Bank was to function as a United States
Corporation,
Among the principal provisions of the charter are the
following:
1,
Authorization is granted for the functioning of the
Inter-American Bank in the United States, according to the
by-laws annexed to the convention.
2,
The bank may begin operations when at least a total
of 145 shares of stock of the bank have been subscribed
at least five governments.
to by
15
3*
The charter of the bank shall be valid for a period
of not less than twenty years, this period to be extended for
additional twenty year periods upon the request of the bank
pursuant to a four-fifths majority vote of the board of
directors of the bank*
4*
Authorization is granted for amendments to the by­
laws of the bank, by a four-fifths majority vote of the board
of directors*
This provision refers to all articles of the
by-laws except article 5A, which may be changed only with the
unanimous consent of the representatives of all the partici­
pating governments*
5*
The bank is authorized to adopt, alter, and use a
corporate seal; also to sue and to be sued, complain and
defend in any court of competent jurisdiction.
III.
BY-LAWS OF THE INTER-AMERICAN BANK
The by-laws of the inter-American bank are grouped in
six different chapters:
I.
II.
III.
Capital structure and participation
Management
IV.
Accounts and profits
V*
Purposes and powers
VI.
I.
Location
LOCATION.
Interpretations and definitions
The principal office of the bank is to be
located in the United States.
At least one branch, or agency
of the hank shall he established in the territory of every
Qther participating government*
II.
CAPITAL STRUCTURE AND PARTICIPATION.
A Capital of
$100,000,000 is authorized, consisting of 1000 shares having
a par value of $100,000 each.
Shares are to he paid for in gold or in United States
dollars.
Fifty per cent-of the issue price of each share is
to he paid at the time of subscription and the balance may he
called at a later date or dates, at the discretion of the
hoard of directors of the bank.1
The different governments are classified according to
the by-law, as follows:
Group A...Up to 25 million dollars:
Costa Rica, Ecuador, El Salvador,
Haiti, Honduras, Nicaragua, and
Paraguay...............................
Group B...Over 25 million dollars and up to
50 million dollars:
Dominican Republic, Guatemala and
Panama.
5 shares
10 shares
1
An exception is made for shares subscribed to by
Governments in groups A, B, and C, which are to be paid for
in the following manner: 25$ at the time of subscription,
another 25$ within 12 months after subscription. The bank
may call for payment of the rest at its discretion, but shall
not require any government in such groups to pay more than
25$ of the issue price within any twelve months period.
17
Group C...Over 50 million dollars and up to
75 million dollars:
Bolivia...... ...................... .
15- shares
Group D...Over 75 million dollars and up to
100 million dollars:
Uruguay.
............
20shares
Group E.,.0ver 100 million dollars and up to
150 million dollars:
........ ....... .
Peru
25 shares
Group F...0ver 150 million dollars and up to
250 million dollars:
Chile, Colombia andCuba..........
30 shares
Group G...0ver 250 million dollars and up to
500 million dollars:
............ .
Mexico and Venezuela.
35 shares
Group H •••Over 500 million dollars:
Argentina, Brazil and United States...... 50 shares
This number of shares in each case, represents the
minimum subscription required by the law.
However, each parti­
cipating government may subscribe for additional stock if it
so desires.
Governments of American Republics not participating in
the bank at the time of its formation or having withdrawn
from participation in the bank, nevertheless retain the privi­
lege of subscribing to the stock of the bank at any subsequent
time, provided they comply with the regulations of the bank.
The capital- structure of the bank, including the
number and par value of shares may be increased or decreased
by a four-fifths majority vote of the board of directors.
A unanimous vote of the representatives of all of the
participating governments shall be required to increase or
18
decrease the minimum holdings of participating governments*
The voting power of the participating governments on
the board of directors shall be distributed as follows:
twenty votes for each government for its minimum shares, and
one vote for each additional share.
However, regardless of
the amount of stock owned by it, no government shall have a
voting power in excess of fifty per cent of the total voting
power of all the other participating governments.
The chapter of by-laws dealing with capital structure
and, participation contains two paragraphs which require
special comment.
Paragraph (3) reads as follows:
If a government defaults on any other obligation to the
Bank, the Bank may, after taking reasonable action to
realize on any other collateral given to secure such obli­
gation and after giving reasonable notice to such government,
vest in itself title to an appropriate number of shares
belonging to such government and apply to the defaulted
obligation the fair value of such shares, as determined by
the Bank.
The purpose of this provision is to give the bank ad­
ditional security by empowering it to seize the shares of de­
faulting members.
A provision of this sort, while apparently desirable
from the point of view of strengthening the bank, must, never­
theless, have a discouraging effect upon the financially weaker
members of the American family of nations*
It might have been
better to omit this clause in the interest of promoting greater
confidence and a better understanding.
It should not seem
necessary to permit the bank to proceed against its stockholders,
who, after all, are friendly governments, in a manner more
drastic than is permitted to any ordinary corporation in
dealing with its stockholders.
Again in paragraph (4) it is provided that,
If, after a government has had a reasonable opportunity
to present its position to the Board of Directors, the
Board by a four-fifths majority vote finds that such
government has violated any provision of the Convention
relating to the Bank, such government shall cease to parti­
cipate in the Bank, but its obligations and duties with
respect to the Bank shall continue and the Bank may vest
in itself title to an appropriate number of shares be­
longing to such government and apply the fair value of
such shares as determined by the Bank to compensate the
Bank for such damages as the Bank determines it suffered
by reason of such violation.
This clause as the preceding one, seems unnecessarily
harsh and not calculated to promote the confidence and good
will of the smaller countries which are most likely to be
affected by it, but whose whole-hearted cooperation is, never­
theless, essential to the success of the project.
III.
MANAGEMENT.
The administration of the bank shall be
vested in a board of directors composed of one director and
one alternate appointed by each participating government.
Such directors shall serve for a period of two years.
Meetings
of the board of directors shall be held not less than four
times a year, and may be held either at the main office or any
branch office or at any other city in a participating country
as the board may determine.
The board of directors shall
select a president of the hank who shall be the chief of the
operating staff of the bank*
The board of directors may also
appoint from among its members an executive committee*
The
board of directors may appoint advisory committees chosen
wholly or partially from persons not regularly employed by the
bank*
IV.
ACCOUNTS AND PROFITS.
The financial year of the bank shall
end on December 31 of each year*
The books and accounts shall
be expressed in terms of dollars*
The bank shall publish an
annual report and at least once a month a statement of account*
The yearly net profits of the bank shall be applied as followst
25% or more into surplus j 5% per annum as dividends on the
paid up amount of the stock of the bank; the balance, if any
is left after these dispositions, to be transferred surplus,
or by a four-fifths majority vote of the Board of Directors,
to be disbursed as additional dividend*
V.
PURPOSES AND POWERS.
The bank is to carry out the follow­
ing purposes:
(1) Facilitate the prudent investment of funds and
stimulate the full productive use of capital and credit*
(2) Assist in stabilizing the currencies of American
Republics; encourage general direct exchanges of the currencies
of American Republics; encourage the maintenance of adequate
monetary reserves; promote the use and distribution of gold
and silver; and facilitate monetary equilibrium*
(3) Function as a clearing house for, and in other
way facilitate, the transfer of international payments*
21
(4) Increase international trade, travel, and exchange
of* services in the Western Hemisphere.
(5) Promote the development of industry, public utili­
ties, mining, agriculture, commerce and finance in the Western
Hemisphere*
(6) Foster cooperation among the American Republics
in the fields of agriculture, industry, public utilities,
mining, marketing, commerce, transportation and related eco­
nomic and financial matters.
(7)' Encourage and promote research in the technology
of agriculture, industry, public utilities, mining and com­
merce.
(8) Engage in research and contribute expert advice
on problems of public finance, exchange, banking and money
as they relate specifically to the problems of American
Republics.
(9) Promote publication of data and information re­
lating to the purposes of the Bank.
B.
In order to carry out the foregoing purposes, the
bank shall have specific power to:
(1) Make and grant short-terms, intermediate and long­
term loans and credits in any currency and in precious metals
to participating governments and to fiscal agencies, central
banks, political subdivisions and nationals thereof; provided
that any such loan or credit having a maturity exceeding two
years to any such fiscal agency, central bank, political sub­
division or national shall be guaranteed by the government
thereof, and provided further that any such loan or credit
having a maturity not exceeding two -years shall not be made
or granted by the Bank to any such fiscal agency, central
bank, political subdivision or national if the government
thereof makes a timely objection.
(2) Buy, sell, hold and deal in the obligations and
securities of any participating government and of”fiscal
agencies, central banks, political subdivisions and nationals
thereof, unless such government makes a timely objection to
the purchase thereof; provided that such obligations and se­
curities having maturities exceeding two years as are not the
direct liability of such government are guaranteed by such
government; and provided, further, that the Bank shall not
buy obligations and securities that are in default in whole
or in part as to principal or interest.
22
(3) Guarantee in whole or in part credits and loans
made from any source to any participating government and to
fiscal agencies, central hanks, political subdivisions and
nationals thereof, provided that such credits and loans
having maturities exceeding two years a3 are not direct obli­
gations of such government are guaranteed by such government,
and provided further that such credits and loans having matu­
rities not exceeding two years as are not direct obligations
of such government shall not be guaranteed by the Bank if such
government makes a timely objection*
(4) Act as a clearing house of funds, balances, checks,
drafts and acceptances*
(5) Buy, sell, hold and deal in precious metals, cur­
rencies and foreign exchange for its own account and for the
account of others; provided, however, that no such transaction
shall be entered into with a fiscal agency, central bank, po­
litical subdivision, or national of a participating government,
if such government makes a timely objection; and guarantee the
availability and the rates of exchange of the currencies of
participating governments*
(6) Iasure or sell debentures and other securities and
obligations of the Bank to pbtain assets for the purposes of
the Bank, provided that such debentures and other securities
and obligations shall not be issued or sold by the Bank in the
territory of any participating government which makes a timely
objection* The Bank may also borrow in any other manner from
participating governments, and from political subdivisions and
banking institutions thereof unless the government of the
lender makes a timely objection*
(7) Accept demand, time, and custoyd deposits and ac­
counts from others, including participating governments and
fiscal agencies, central banks, political subdivisions and
nationals thereof unless the participating government makes a
timely objection; provided that the Bank shall pay interest,
if any, only on deposits of governments, fiscal agencies and
political subdivisions thereof and central banks*
(8) Discount and rediscount bills, acceptances and
other obligations and instruments of credit of participating
governments and fiscal agencies, central banks, political sub­
divisions and nationals thereof, provided that such paper
having maturity exceeding two years as is not the direct obli­
gation of such government is guaranteed by the government, and
provided further that such paper having a maturity not exceed­
ing two years as is not the direct obligation of such govern­
ment shall not be discounted or rediscounted by the Bank if
such government makes a timely objection*
23
(9) Rediscount with any government, fiscal agency or
hanking institution hills, acceptances and instruments of
credit taken from the Bank's portfolio; provided, however,
that the Bank may not rediscount with a fiscal agency or a
hanking institution in the territory of a participating govern­
ment which makes a timely object ion*
(10) Open and maintain demand, time, and custody de­
posits and accounts with governments and hanking institutions
and arrange with governments and hanking institutions to act
as agent or correspondent for the Bank, unless such hanking in­
stitution is situated in the territory of a participating
government and such government makes a timely objection*
(11) Aet as agent or correspondent for any participat­
ing government and for fiscal agencies, central hanks and
political subdivisions thereof, unless the government makes
a timely objection*
(12) Engage in financial and economic studies and pub­
lish reports thereof.
(13) Buy, sell and deal in cable transfers, accept
hills and drafts drawn upon the Bank, and issue letters of
credit; all subject to the limitations herein provided with
respect to loans, extensions of credit, discounting and re­
discounting of paper, and dealing in obligations and securi­
ties *
(14) Adopt, alter and use a corporate seal; acquire,
own, hold, use or dispose of such real and personal property
as may be necessary for the transaction of its business; and
make contracts subject to the limitations herein provided*
(15) Exercise incidental powers necessary and proper
to carry out the powers expressly authorized herein*
C.
The Board of Directors shall determine the nature
of the operations which may be undertaken by the Bank in the
exercise of its powers and in order to effectuate its purposes.
The operations of the Bank shall at all times be conducted in
conformity with the laws of the territory where the Bank is
acting and, so far as possible, be conducted in conformity
with the policies of the participating government directly
concerned*
The comprehensive and extensive powers which would
24
enable the bank to function as an international central bank
and a supreme agency of economic coordination for all the
Americas may be summed up under these headings, as follows:
(1)
Powers relating to the investment of capital.
(2)
Powers relating to the stabilization of all
American monies.
(3)
Powers relating to the cooperation among the
American Republics in the scientific fields
research,
technical advice and statistical information.
The powers dealing with the investment of capital cover
a wide field, extending from the direct granting of long-term
loans to the indirect credit operation, such as, buying, selling,
holding, and dealing in the obligations and securities of any
participating government and the guaranteeing of credits and
loans made from any source*
The bank, also, has the power to
issue or sell its own debentures and other securities and
obligations in order to obtain the funds necessary for its
operations.
The powers through which the bank is to promote mone­
tary stabilization include:,
the granting of short-term and
intermediate loans in any currency and.in precious metal; the
holding of clearing funds, for the purpose of clearing
balances checks, drafts, acceptances and other obligations;
the maintaining of deposits and accounts.
Finally it is the purpose of the bank to encourage
25
and promote the technology of agriculture, industry, public
utilities, mining and commerce of all the American Republics,
and to contribute expert advice on problems of public finance,
exchange, banking and money as they relate specifically to the
problems of American Republics.
VI.
INTERPRETATIONS AND DEFINITIONS.
The last chapter of the
by-laws contains definitions, and interpretations of terms,
used in it.
The convention for the establishment of the InterAmerican Bank was signed, in May, 1940, by representatives
of the United States, Brazil, Mexico, Colombia, The Dominican
Republic, Bolivia, Ecuador, Nicaragua, and Paraguay.
Shortly,
thereafter, the Congress of the United States issued a charter
for the proposed bank.
All that remains to be done before the
bank can actually start operation is ratification of the Con­
vention by all the participating countries.
CHAPTER III
ECONOMIC FOUNDATIONS OF INTER-AMERICAN RELATIONS
At every one of the many inter-American meetings, at
which since 1390, the proposal for the establishment of an
Inter-American bank was brought up, the-objectives which such
an institution was expected to pursue were, of course, stated
But such statements were couched in the conventional highsounding and rather meaningless phrases of inter-national
meetings.
They affirmed the need for close cooperation among
the several American Republics, the desire of each to assist
the others in the realm of economic relations, and the need
for the establishment Of some “center of equilibrium*11
To obtain a clearer picture of what such economic co­
operation entails and of how an inter-American bank could
function as a center of equilibrium, it is necessary first of
all to keep In mind some basic facts about the economic con­
ditions of the several American Republics, of their economic
relations with one another and with the non-American world.
For purposes of description in economic terms the
western hemisphere must be divided into two great areas— not
the geographical division between North and South American,
the dividing line for which Is usually thought of as running
through the Panama Canal— but into the United States on the
one hand and all of Latin America on the other hand.
The
27
third great geographical area of this hemisphere, Canada, is
not, as a general rule, included in discussions of interAmerican economic problems, as it is also excluded from all
inter-American meetings*
The reason for this exclusion is
that Canada was, in effect, as part of the world's sixth
continent, the British Efopire.
Its economy was so closely
woven into the pattern of Empire economics that Canadian
interest have never been identified with the interests of the
other American Republics*
On the other hand, Canada has long
maintained close and extensive economic relations with the
United States, of whose economy it might, in fact, be said to
be simply an extension.
This close collaboration has been
notably furthered, in recent months by virtue of the common war
effort of the two countries*
In short, from the point of view
of the hemisphere economy, Canada must be excluded altogether
or viewed as part and parcel of the United States*
The United States is, by far, the largest industrial
power of the western hemisphere, in faet, of the entire world*
It is a country endowed with enormous wealth in material re­
sources which have been developed to a high degree*
In its
manufacturing power, this country exceeds any other— more
steel, more coal, more oil and chemical products, more manu­
factured goods of almost any description are produced in the
United States than anywhere else in the world*
At the same
time the United States is also one of the leading agricultural
28
producers#
In fact, until the beginning of the present
century, agricultural production accounted for the largest
part of the Income of the United States, and even today the
majority of those gainfully employed are engaged in agriculture.
Traditionally the world’s principal source of cotton, the
United States produces many other agricultural products such
as corn, fruits, wheat, tobacco, in excess of its domestic
consumption.
The United States is both a manufacturing and
an agricultural economy#
In contrast Latin America produces hardly any manu­
factured goods.
There are few factories in the countries of
South and Central America and the general capitalistic develop­
ment of these countries lags far behind that of the United
States#
Even transportation facilities such as roads and
railroads, as well as public utilities, gas, electricity, etc.,
are in a most rudimentary state of development except in the
very large cities.
But, like the United States, Latin America
harbors uncounted wealth in mineral and agricultural resources.
The economic role of Latin America has been that of providing
the rest of the world, specially the manufacturing States,
with many essential raw materials and foods.
Copper, tin, lead, zinc, manganese, silver and many
other important minerals are produced in large quantities in
Latin America.
In the production of oil Latin America ranks
second only to the United States with Mexico and Venezuela
29
the principal producers*
The most important copper deposits
of the world are found in Bolivia, Chile, and Peru*
has long been the world's only source of nitrates*
and Trinidad contain vast deposits of asphalt.
Chile
Venezuela
This list
could he extended indefinitely but the few examples given here
should suffice to indicate the importance of Latin America as
a supplier of raw materials.
There is, in fact, not a single
mineral which is not to be found in that rich area, most of
them are produced in large quantities, and for some Latin
America is the only- source.1
A similar abundance may be found in Latin America's
other resources.
Virtually inexhaustible supplies of woods
and other forest products are available there, among them the
finest cabinets woods, such as mahogany, rosewood, ebony, cedar,
and many other.
wood.
Venezuela alone produces some 600 species of
In addition a wide range of medicinal plants, nuts,
tanning materials and dyewoods are found in Latin America.
Agricultural production, too, is very extensive.
The
tropical and sub-tropical regions of Latin America produce
vast quantities of coffee, sugar, tobacco, cotton, fruits,
spices, etc., while in the more temperate areas are grown such
crops as wheat, corn, flaxseed, and other cereals, fruits,
1 U. S. Tariff Commission. The Foreign Trade of Latin
America, Part I, Washington, 1940.
30
and vegetables*
Here again as in the production of minerals
and forest products Latin America is in some cases the world’s
sole or principal provider while on the other hand there are
hardly any varieties of these products that may not be found
within its borders.
Finally Latin America also possesses an important
pastoral industry*
Particularly the countries of the South,
Argentina, Brazil, Uruguay and Paraguay contain vast resources
of livestock and produce huge quantities of meat.
In short Latin America possesses practically every
conceivable kind of raw materials and its economy is geared
entirely to the exploitation of these natural resources*
The
United States, on the other hand, while also a rich source of
raw materials, and also largely engaged in the exploitation of
these resources, has increasingly applied its economy to the
processing of these products and to the production of manu­
factured goods of all varieties.
Because of its economic universality the United States
has not only become the richest country but has also become
more nea.rly self-sufficient than any other country in the
world.
With a few exceptions the United States need not rely
on any foreign sources of raw materials and finds markets for
the great majority of its varied products in its own territory.
Foreign trade for this reason is of but secondary importance
to the United States.
This is borne out by trade statistics
which show that the total foreign trade of the United States
amounts to less than
10% of the total trade of the nation
while the comparable figure for England, for example, would be
more nearly 40$*
This is not to say, as many people hastily
do say, that the foreign trade of the United States is not of
paramount significance .to the welfare and prosperity of the
nation.
On the contrary, the country foreign trade, small
though it may be relative to its domestic trade, occupies a
strategic position in its economy,
A. falling off in the ex­
ternal trade may well be a prelude to more serious internal
economic disturbances and for this reason the United States
has jealously maintained its external trade position and
policy*
But it is true that a complete cessation of inter­
national economic relations would probably be less disastrous
to the United States than to any other civilized country, with
the possible exception of Russia.
Latin America is not in the same happy situation*
Despite its enormous potential wealth which could and possible
will eventually be the basis upon which that region could
achieve economic seIf-sufficiency, Latin America is today
almost entirely dependent upon its foreign trade*
Except for
some foodstuffs which can be used in their raw, unprocessed
state, and for some goods processed or manufactured in the
Latin American countries, the latter must import all the
articles of consumption and tools of production.
Conversely
32
they depend upon foreign countries to buy the bulk of the raw
products which are produced in excess of Latin American con­
sumption needs or which cannot be processed in Latin America
for lack of technical skill and equipment.
This dependency on external trade may again be ex­
pressed in percentages.
Although the total foreign trade of
the Latin American countries is less than that of the United
States, it accounts for a much larger proportion of the total
trade and of the total incomes of those Nations.
Statistics
of this two latter magnitudes are not available and therefore
only a guess may be ventured.
The foreign trade of Latin
America accounts probably for upward of 30$ of the total trade
as against the less than 10$ figure applicable to the United
States.
A further grave disadvantage arises to Latin America
from this dependence upon foreign trade.
While the Latin
Americans must buy manufactured goods in a sellers market,
they are forced to sell their own products in a buyers market.
A great many of the manufactured products sold to Latin
America, as indeed, all over the world, are produced by giant
corporations operating under conditions of monopoly, oligopoly,
or highly imperfect competition.
For this reason, these com­
panies are in a position to determine the prices at which they
will sell their goods, and furthermore, can also afford to
maintain their price policies even in the face of sharply
33
declining sales, since the Latin American market is not of
paramount importance to them.
For example, automobiles,
trucks and tractors are bought almost exclusively from the
United States.
Germany enjoys a virtual monopoly in pre­
cision instruments, e.g., optical and photographic products.
England has long dominated the market for certain textile
products.
The prices of these products are quite naturally
not established in a competitive market but depend exclusively
upon the decision of the sellers.
It is true in spite of the increasing monopolization
of manufacturing industries, some modicum of competition
still exists and that this competition has been particularly
evident in Latin America in recent years.
Since the advent
of the Hitler regime in Germany, that country has made a
powerful bid for Latin American trade, based primarily on
price competition.
In many cases on record, German exporters,
subsidized by their Government, have been able to offer their
products at one half and sometimes at as low as one tenth the
prices charged by their competitors in Great Britain and the
United States.
This development has, in fact, posed one of
the greatest problems in international relations to the
United States and Great Britain and will be taken up again
at subsequent points.
Nevertheless, the cut-throat German competition not­
withstanding, it is questionable whether this recent spurt
in competition has had as far reaching effects on the Latin
American economic condition as is generally supposed.
For,
after all, this competition is limited to a rather narrow
range of products.
In many cases competition is practically
if not entirely fictitious.
For instance, if a Latin American
wanted to buy an automobile from a British or a German firm,
he would still buy it from General Motors or some other
United States automobile manufacturer who controls the foreign
plants.
Again, if he wanted to buy an American rather than a
German optical good--camera or film--he would still buy it
from the same concern which controls the entire optical in­
dustry of the world*
In other words, many of the important
manufacturing industries are controlled by international
cartels which permit but a semblance of competition among their
constituent enterprises if they do not openly divide the world
markets among them.
Again, the offer of a lower price by a
foreign competitor frequently does not enable the Latin
American purchaser to make a choice in his favor, since he
may be forced by contract to purchase from a particular source*
In a majority of cases where loans were extended to Latin
American countries by the United States, Britain, Germany or
other capitalistic powers, the loan contract stipulated that
goods, materials, technical experts, and sometimes even labor
had to be procured from the lending country and from particular
firms in those countries.
Naturally, in almost every case,
55
the prices charged for such goods and materials and expert
advice were high if not exorbitant*
While import goods are thus dearly bought, the materials
exported by Latin America generally fetch very low prices*
The explanation for this condition lies in the fact that the
supply of these goods is in the hands of many competitive
producers and that the output is almost impossible to control
except on a world wide basis*
For example, many of the Latin
American covintries produce coffee and compete with each other
for the available demand*
If the supply of coffee turns out
to be so large as to drive down the price to or below the
level of costs of production, the producers will not for this
reason alone curtail their output*
To switch to some other
product would be a process entirely too lengthy and expensive*
It would involve the destruction of coffee trees and the
planting of some other tree or plant in their stead which
may require years to reach a productive stage*
Solving the
problem through some crop control scheme is also difficult
since it would usually require cooperation among several
producing countries.
Some such control schemes have been put
into practice, as for example, the Brazilian coffee control;
but in the majority of cases attempts to regulate the output
or sale of raw materials or agricultural products even if
such schemes are undertaken by powerful nations (e.g.,
Stevenson rubber control scheme) have not proved successful.
36
It has become axiomatic that colonial products sold in world
markets by many competing producers are almost invariably
available at less than cost and are most sensitive to any
fluctuation in demand which may send their prices to ruination
levels.
This vast disparity between the price of manufactured
goods and agricultural goods in Latin America is closely
parallel to the situation existing in the United States
between the agricultural South and West and the industrial
East.
There, too, industrial prices are maintained at arti­
ficially high levels, forcing the agriculturalist to pay
dearly for what he buys while he gets a mere pittance for the
products of hi3 own labor.
In the United States the New Deal
government was able to correct this situation, at least parti­
ally, through crop control devices and farm subsidies.
Latin
America however, the evil effects of this situation had to be
left largely unmitigated.
The United States is the largest single buyer of Latin
American products, accounting for upward of 30$ of all exports
from those countries.
of imports.
It is also the greatest single source
In spite of German competition which in the last
few years before the outbreak of the present war has enabled
Germany to displace the United States as the leading exporter
to some countries (Paraguay and Uruguay) and to curtail the
United. States* margin of leadership in practically all of
them. 2
The latter still accounted for 34$ of all exports to
Latin America in 1938, a3 compared with German*s 16.2$ and
Great Britain*s 11.7$.
In actual figures Latin American
exports to the United States have,.contrary to a widely pro­
long impression, always exceeded imports from the United
States,3 except in 1939 and 1940, when Europe's inability to
supply Latin America had forced the latter to turn to the
United States to obtain goods ordinarily purchased from
Europe.
In the.last prewar year, 1938, sales to the United
States exceeded purchases from the United States by 46 million
dollars.
Yet, although this Latin American trade balance with
the United States was favorable until the more recent past,
its balance of payments was unfavorable principally because
of the enormous sums required for debt service or withdrawn by foreign owners of Latin American enterprise.
Payments
for shopping and other services impose a further burden, which
however is offset by United States' tourist expenditures, etc.
Even though the United States leads all other countries
in Latin American trade, the great bulk of Latin American
exports, 70$ after Lalll, goes to countries other than the
United States, Europe absorbing by far the largest slice.
2 See Appendix No. 7.
3 Tariff Commission, p. 41.
38
In imports, too, the European countries, taken as a whole,
loom by far more important than the United States or the
Latin American economic scene. The Latin American economy
is unfortunately more dependent upon Europe than upon the
United States and is also much more complementary to the
former than to the latter, since Europe produces few of the
products available in Latin America within its own borders,
while the United States produces many of their goods in
competition with its southern neighbors.
The contrast between the United States and Latin America
is further emphasized by the financial situation of these two
areas. The United States is the world’s leading creditor natioa.
Since 1914 a continuous stream of capital has left that country
to find employement in other parts of the world. This external
investment activity of the United States has, of course^ been
made possible primarily by the rapidly growing accumulation of
interest owed to the United States by foreign countries.
Latin America, on the other hand, is a chronic debtor
and an insatiable consumer of foreign capital* In spite of
some 10 billion dollars worth of foreign Investment in
Latin America the countries of that region have no corres*pondlng increment in wealth to show for it, and, in fact,
may be said to be in a worse financial condition now than
in the past.
The explanation for this situation in
SIMpllfied terms, would run somewhat as follows: the Latin
American countries since 1930 have been unable to realize a
sufficiently large income form the sale of their products
abroad to finance the purchase of the needed and desired
manufactured products of Industrial nations and therefore
had to rely on foreign loans to make up the difference.Thus
a large part of the recent external debt was Incurred not
for the purpose of creating of productive equipment which might
have been reduced the Latin countries dependence of Imports,but
for the purpose of financing that part of consumers goods* imp­
ortation which could not be paid for with the proceeds of exports.
To a large extent therefore the Latin American countries
were in the same position as the borrower who obtains a loan
from the bank to finance consumption instead of production, and
who is likely to find himself plunging ever more deeply into
a spiral of debt. Most of the capital equipment actually
produced with the aid of foreign loans remained in the hands of
foreign owners who extracted enormous profits from their
Investments. In so far as the productive wealth of these countries
was owned by their own nationals who extracted similarly high
profits from their enterprises such ownership was typically in
the hands of ’'absentee landlords'* who spent their large profits
in rlotus living in European capitals,This situation naturally had
exactly the same effect,from an economic point of view,as if these
40
enterprises had actually been owned by foreigners. To these
circumstances must be added the well known and well advertised
fact that corruption was not unknown to exist among officials
of South American governments and that loans made to such
governments were to a large extent diverted into the pockets
of such officials Instead of finding their way into the
public improvements for which they were destined,Naturally such
governments were willing to pay almost any price for loans, the
responsabllity for payment of which they left to their successors,
while at the same time their reputed irresponsability and insta­
bility forced them to pay higher rates of interest. 4
The result of all this was that Latin America found its
resources drained by the ever increasing demand of foreign
creditors, without being able to meet these demands with increased
production capital, and was,therefore,compelled to go the way of
all debtors into more debt. By way of homely comparison, Latin
America may be thought of as being in a situation very similar
to that of a consumer caught in the ever Increasing regardless
of how hard he tries to catch up with them. Since today Latin
Amerlcancountries cannot easily achieve a large
enough favorable
balance of trade to produce sufficient surplus exchange to satisfy
the requirements of external debt service, that area must
continue to relly on foreign loans in order to meet its foreign
obligations.
See appendix No. 4
It is an interesting paradox that although even an
extensive inflow of foreign capital has not significantly
furthered industrialization in Latin America, manufacturing industries have grown more rapidly in time of severe economic
depression when the sources of foreign capital had dried up.
In such time the Latin American countries were unable to
purchase the required manufactured products from abroad and
the resulting shortage of such goods gave a greater impetus
to industrial development than the loans which, at least, in
name had been madet'for such purposes. Many concrete cases
could be adduced in support of this statement. In 1914, for
example, and again in the depth of the depression of 1929,
the textile Industry enjoyed a great upswing because of
inability to Import foreign textiles.
The unfavorable international financial situation of the
Latin American countries caused them to be continuously short
of gold and foreign payments. The slightest decline of exports
or of the Inflow of foreign capital, therefore, Jeopardize
these countries' ability to pay and as a result their currencies
are in constant danger of depreciation in the international
exchange market.
This instability of Latin American exchange rates and the
attendant monetary and fiscal disturbances have Indeed, become
the most obvious and glaring symptom of the basic economic
instability of these countries. Since the outbreak of war in
Europe in September, 1939, these difficulties have been further
aggravated. Latin America was practically cut off from its
European markets and, therefore, from its largest source of
income. This loss could not be offset by Increased sales to the
United States since the Latin American countries* products are
largely competitive with those of the United States. She inevitably
consequence was a further disturbance of Latin American exchanges.5
But it must be emphasized that such monetary and exchange
difficulties are a symptom only and not the disease Itself, as
should be clear from the foregoing discussion. Any attempt to
remedy Latin America’s difficulties and to create a "center of
stability and equilibrium" must, therefore, pierce the superficial
monetary and financial level and come ti grips with the fundamental
issues if it is to be at all successful.
5.
See appendix No.9
CHAPTER IV
INTER-AMERICAN ECONOMIC COOPERATION
The brief outline of the economic conditions and problems
of the American Republics, presented in the last chapter,brings
into focu8 the great obstacles facing any attempt to integrate
and coadlnate the interests of the United States with those
of the Latin American countries* On the one hand, the latter
have followed a pattern of economic development entirely
unlike that of the colossus of the North* Reconciliation
of the differences resulting from this unequalldevelopment
in themselves pose grave problems* Especially the great
inequality of living standards, for instance, would seem to
be a bar to economic unification. On the other hand, the
similarity in many respects of the economic Interests of the
two areas again threatens to nullify any attempts to effect an
economic rapprochement. The fact that the United States as
well as the Latin American countries is a producer of raw
materials and of agricultural products makes it dlfiiBicult for
the two areas to exchange goods on a large scale. The economies
of the two areas are complementary only to a small extent.
For this reason the economic orientation of Latin America
has always gravitated more toward Europe than toward the
United States.This orientation has been furthered and
supported by the greater cultural affinity of Latin America with
Europe.
1 See Appendix VII and XIII
The greater extent and Intensity of Latin American
economic relations with Europe was further emphasized in the
last few years when the relative trade position of the United
States in some countries of South America was severely cur­
tailed by the Inroads of German competition.
Ever since the
depression of 1929 the exchange difficulties of Latin America,
due to extremely low prices of export goods and to the lack of
gold and foreign exchange resources, had Imposed an economic
strangle hold on those countries from which there seemed no
hope of escape. Drastic exchange control measures, designed
to protect Latin American countries against severe currency
depreciation, at best served to freeze an Intolerable situation
and in some cases even aggravated existing difficulties. An
escape was offered by the development of new methods of inter­
national trade Initiated in 1932 by Switzerland and Hungary
and developed to a high degree of perfection in subsequent
years by Germany and known as the exchange clearing method.
The essence of this new method is very simple. For instance,
Germany allows the importation of so many milrels worth of
coffee from Brazil to be paid for not in the customary way by
draft on London or New York, but the proceeds of the sale
of Germany machinery or cameras or railroad materials, the
importation of which is authorized by
the Brazilian Government.
This method that is only one form of exchange clearing has two
very beneficial results for a country, which, like Brazil, is
dependent upon exports and suffers from exchange shortage. This
method than is limited only by possible consumption, in the first
place, it puts trade squarely on a basis of bilateralism. If
Germany wants to sell more manufactured goods to Brazil she
must buy more coffee, woods and other products from Brazil.
Secondly, the exchange clearing method circumvents the
international exchange market. Payment for Imports will not
involve Brazil in the necessity of drawing upon her scanty
foreign exchange reserirej which .might..become exhausted by
even a temporary excess of debits over credits. Settlement
of all exchange clearing transactions is made entirely
through credit and debit entries on the books of the central
banks.
It is not surprising that the exchange poor and foreign
trade hungry countries of Latin America gladly availed them­
selves of this new method of trading and that they diverted
an increasing proportion of their foreign purchases to the
countries which offered them this opportunity. A further ad­
vantage not necessarily implied in exchange clearing, was,
nevertheless, offered to the Latin American countries through
that device— lower prices for import goods. Purchasing manu­
factured wares from Germany not only made unnecessary for
the Latin American buyer to procure foreign exchange— an
advantage which by itself might have been sufficiently
decisive in diverting trade to Germany since the central bank
in many cases would have refused the allocation of the
necessary exchange— but it also enabled him to buy al lower
46
prlceB and at more favorable terms. In many Instances German
ftorms offered goods of the same quality as those of their
competitors, at half the price and allowed the purchaser three
times as long to pay.
In view of such conditions one would naturally expect
all trade to have gone to Germany. If such was not the case
the reasons are to be found in the fact that: 1) G-erman
sales were limited to the extent of German purchases; 2) some
products could not be obtained from Germany; 3) Latin America
purchasers were bound by contract to buy from other sources;
and, 4) other countries countered the German methods by
entering into trade agreements essentially similar to the
German type.
In some cases the reciprocal trade agreements
between the United States and Latin American countries^ also
compelled to some extent the latter to offset their sales to
the United States by equivalent purchases from the United
States.
Nevertheless, German trade with Latin America increased
by leaps and bounds and naturally undermined the position of
Great Britain and the United States in those territories.!
Even though United States trade with Latin America showed
substantial increases in the years since 1932, reflecting the
general recovery in world trade activity, the Increases in
1 See Appendix No.XII
47
German-Latin American trade during that same period, were sub­
stantially greater.
Naturally United States business interests
did not like to see this rapid rise of German competition in a
market which they liked to regard as primarily their own.
But
they were especially disturbed by the realization that the
competitor’s success was due primarily to the use of wtotalitarian11 methods of trade and finance so abhorrent to devotees
of laissez faire.
It was primarily this growing German competition and
the increasing inclination of some Latin Americans toward the
new trading methods which revived the interest in interAmerican economic cooperation and which gave rise to renewed
attempts for the establishment of an inter-American bank as
a central agency for such cooperation.
The question naturally arises; is it possible and
desirable to effect a close economic coordination between
Latin America and the United States?
What must be done to
coordinate the economic interests of Latin America and the
United States in such a way as to make a lasting cooperation
and economic unification possible?
How can the Latin America
economy be reorientated toward the United States and away
from Europe?
There are those who say that an economic rapprochement
between the two areas would be so difficult to effect as not
to constitute a desirable objective.
They point out that, on
48
naturally belongs into the orbit of European economic interests
>*•
the one hand, Latin America and especially South America
that as long as Latin America depends primarily on Europe to
buy its raw products, Europe must remain the chief source of
manufactured goods for Latin America; and that Latin America
could effect greater advantages by more closely its economy
to Europe in such a way as to eliminate United States com­
petition and as to become Europe*s sole source of supply for
such products as meat, wheat, etc*
On the other hand the United States too— it may be
argued— has little interest in effecting a reorientation of
the Latin America economy towards the United States.
Such a
program to increase the markets of United States manufacturers
would also necessitate the absorption of tremendous -quantities
of South American goods which would require far reaching ad­
justment in the United States economy.
The United States ■
interim may eventually prove more harmful that any benefits
arising from Latin American cooperation.
The United States
is generally more autarchice than the nations to the South
and their integration into the North America economic orbit
would only tend to disrupt the internal economic balance and
to aggravate facts of <st4sequilibrium in the United States.
For these reasons it has been suggested thaft the United
States might do better to turn away completely from Latin
America and to concentrate and solidify its autarbhibc position*
49
The United States— so the argument runs--would not lose much
by sacrificing
ti r eiyrijt^s foreign trade of which Latin
America trade is only a small portion.
Furthermore, it would
not be necessary for the United States to give up all of its
foreign trade since there are certain goods which Latin America
could: not obtain from any other sources: Hollywood films,
certain business machines, automotive equipment, etc., would
still have to be purchased from the United States, and in
exchange the United States could continue to buy those few
raw materials upon whibh it is chiefly dependent in Latin
America.
Whatever the merits of these contentions are the
problem must be approached from a wider viewpoint.
Immediately
economic considerations must be subordinated to the more
urgent requirements of Hemisphere defense.
In the last few
months especially the people of the United States have been
awakened to the danger of foreign military aggression even if
the North American continent must be considered as immune to
any invasion for over seas.
South America we are told is
definitely exposed to that threat.
In turn domination of
Latin America by a foreign and unfriendly power would be re­
garded as an immediate danger to the security of the United
States.
Therefore, the United States is committed to the
policy of maintaining intimate political relationswith Latin
America for the purpose of keeping the latter out of the hands
50
of the hostile powers. And this cooperation In the realm of
*
political defense in turn necessitates economic cooperation,
regardless of this desirability or undesirability in the short
run.
But also from the economic point of view collaboration
with Latin America appears to be imperative for the United
States if a long range view is taken. The world has apparent­
ly been divided into a few, self-contained political and
economic spheres of interest. Regardless of the outcome of the
war, Europe is gravitating rapidly toward unified control and
its planndd economy, will probably rely on Africa and perhaps
the near East, as areas of economic exploitation. Russia is
expanding her sphere of influence in threatening to achieve
control over all of Central and South Asia. In the far East the
processes of integration are rapidly neering a climax. All this
tends to narrow the field of economic activities of the United
States, leaving that country only Latin America on which to rely
as an outlet for investment, a market for surplus goods, and a
source of such raw materials are not produced in the North
American domain. If looked at in this light, the reason why the
United States must keep hold of Latin America and seek to
entwine that area more closely to itself becomes apparent.
For the United States to abandon control of Latin America
and to permit itself to become isolated in a totalitarian world
might have the most disastrous effects. It would, for one
5l
thing throw the country upon the mercies of foreign and prob­
ably hostile powers in obtaining any of the essential products
not produced domestically. In spite of the relatively great
self-sufficiency of the United States it still needs to rely
on Imports for some essential materials, such as manganese,
rubber and tin.
Again, it would have to sell its excess products on
totalitarian purchase terras which might be ruinous. In fact
the United States might find Itself in a position similar to that
in which Latin America is now and since many firms could not
show profits without exports, they might be forced out of
business. A grave and permanent economic crisis would be
threatened and the institutions of free enterprise be jeopardi­
zed.
On the other hand, the United States may assure itself
of Latin America*s sphere for economic exploitation without dire
results to be expected from the political and the economic
changes in the rest of the world. All necessary materials almost
without exception could be obtained fcom Latin America and in
turn Latin America could offer an almost endless field for
investment and an rich market for manufactured goods.
Once the need for inter-American economic cooperation
has been recognized and the desirability of an economic
reorientation of Latin America established at least from the
point of view of the United States the problem is no longer
why but of how.
52
It ia generally recognized that the first and foremost
requirement for economic cooperation would be the elimination
of exchange fluctuations.
Monetary stability in the sense of
stable exchange rates as well as in the sense of reasonable
stable price levels must be the basis for any further inter­
national economic cooperation.
The exchange difficulties from which so many countries
have suffered in the past two decades have been clearly shown
to be the high road to economic nationalism or to complete
economic collapse.
A few people gain at the expense of the
majority which suffers income reductions.
These shifts in
income involve further disturbances of the structures of
price and production.
Tax receipts fall short of public
expenditures, forcing governments further into debt, endanger­
ing the fiscal stability of the affected countries and thereby
inviting further pressure on its currency In the international
exchange market.
To call a halt to this vicious circle of monetary
depreciation means to impose more or less sever<.exchange re­
strictions.
These restrictions are designed to protect the
country from the impact of external forces by Isolating its
economy from the world economy.
This may be done in varying
degrees, but even in its mildest form it represents a move
in the direction of economic nationalism— the opposite of
economic internationalism or international economic cooperation.
By the same token, the countries not suffering from exchange
depreciation will also be affected since they will find their
trade shrinking as a result of the restrictions imposed upon
it by countries with weak currencies*
Such situations are
then usually met by retaliatory restriction which give a
further impetus to the collapse of international economic
relations*
Since this vicious circle has its origin in exchange
instability it becomes clear that any program of international
economic cooperation presupposes the stabilization of exchange
between the cooperating countries*
This is not to say that
inter-American cooperation would necessarily mean the main­
tenance of absolutely fixed rates of exchange between all the
American Republics, but it would mean that any fluctuations
in exchange rates would have to be held within such a narrow
range as not to produce a disturbance; that, furthermore, such
fluctuations should be a matter of deliberate policies based
upon international agreement rather than the chance effect of
the interplay of economic and speculative forces; and, finally,
that such an elasticity of exchange rates should not necessitate
the imposition of restrictions and retaliatory measures but,
on the contrary, should encourage a freer flow of trade between
the countries.
Although the maintenance of exchange stability is the
first and most obvious requirement of cooperation, the
54
analysis of the economic conditions of the American Republics
presented in Chapter III makes it clear that more fundamental
adjustments are necessary if exchange stabilization is to be
made possible and meaningful*
Exchange stabilization must be
the basis, not the objective of inter-American economic co­
operation*
Such cooperation would have to be aimed at elimi­
nating the conditions which in the past have led to exchange
depreciation and economic nationalism*
As has been shown, these conditions can be summarized as
follows: Latin America could not sell enough products at suf­
ficiently high prices to pay its external debt and to buy the
quantities of manufactured goods which the United States would
like to sell in that market*
One requirement of cooperation, therefore, would be to
assure a market for Latin American products*
This need is
particularly urgent today when Latin America is cut off from
its European customers*
Sincere cooperation would require the
United States to take Latin American products even if they
should be competitive with its own, such a3 meat and wheat*
If that is not done, cooperation will remain an empty phrase,
exchange stability of no avail, and the affected countries,
e*g., Argentina, unwilling to participate in the program*
Recognizing this need, President Roosevelt has recently
suggested the establishment of an inter-American marketing
board which would have full control of the foreign trade of
the Western Hemisphere and would be charged with the responsi­
bility of finding markets for export goods*
Such surpluses
as could not be sold to the external world presumably would
have to be absorbed by the United States Government through
agencies similar to the Wheat Stabilization Corporation and
the Surplus Commodities Corporation*
If the cost of such a
scheme would be high it would still be small in contrast to
the cost of other defense measures taken by the United States
Government and would be more likely to yield greater
benefits.2
Coupled with such a scheme steps must be taken to find new
markets for these excess products in the Western Hemisphere
to
eliminate that part of the output which can not be absorbed by
consumption and to shift production into such goods as could
find a market in the Western Hemisphere*
The consumption of many so-called surpluses could be
considerably increased by raising the incomes and therefore the
consumption power of the people in North and South America*
Many a Brazilian cannot afford to buy coffee because his wages
are too low while at thesame time his Government is forced
dump shiploads of coffee into the ocean* South America is
to
tbe
largest producer of meat, yet fifty per cent of its people
cannot buy meat because their incomes are not high enough to
permit them such a luxury*
Even in the United States, according
2 & e b v qh'b tatl’oh -pag-. ~'8§- o d »
56
to President Roosevelt's statement, one-third of the population
is under-fed in the face of huge food surpluses.3
in fact,
the potentialities of the American market are in themselves
almost infinite.
Nevertheless, as it exists today, the hemisphere economy
is lopsided and requires reconstruction.
may again serve as an example.
The meat industry
Even a sharply increased con­
sumption of meat would probably still leave a considerable
surplus.
Unless this surplus can be disposed of by sale to
foreign parts, cattle production, either of North America or
of South America, must be curtailed.
In this particular case
the principle of comparative costs would probably require a
reduction in the output of the United States.
The economic
policies of the latter country would, therefore, have to dis­
courage cattle production by permitting South American and
Mexican competition or by positive action, for instance,
"plowing under"every third cow.
Thirdly, some Latin American countries must be encouraged
to produce in greater quantities some raw materials such as
tin, rubber, and manganese, which the United States at present
imports from other regions.
In turn, Latin America must be given the opportunity
to buy more manufactured products from the United States at
Although 1940 was the most prosperous year in the
history of the nation, 8,000,000 families in the United States
were facing starvation with incomes of less than $800 a year.*
Figures taken from "The Bottlenecks of Business"by
T.W.Arnold . pag. 8
57
prices as low or lower than those charged by foreign competitors*
If subsidies must be given to exporters in order to achieve
this purpose, the United States Government will have to stand
the expense in the interest of hemisphere cooperation*
For,
unless this is done, there is no reason to expect the Latin
American countries to participate in a hemisphere economic
program*
While industrial prices must thus be kept low, the
United States must also raise Latin American export prices well
above the present bankruptcy levels.
It is only when profits
can be made that incomes in Latin America can be expected to
rise, and higher incomes, in turn, are necessary to enable
Latin America to consume more of its own products as well as
those of the United States*
Higher prices for raw materials,
conversely, would not reduce in any significant degree the
consumption of those products*
The consumer in the United
States has rarely had the benefit of low prices for colonial
products*
That benefit went almost entirely to the importer
and processor of these goods.
For instance, the United Fruit.,
Company, which enjoys a virtual monopoly in the fruit and trans­
portation trade of Central and Northeastern South America, buys
bananas in Ecuador and Colombia for the equivalent of ten cents
or less a bunch?' (In reality, the company pays for the bananas
with grapes bought in Chile and costing five cents).
But the
United States consumer pays from ten to thirty cents a hand or
*-A bunch has approximately 200 bananas.
58
somewhere between $1,50 and $4*00 a bunch*
Obviously, a
doubling of the price paid to the Ecuadorian exporter would
affect the United States consumer infinitesimally, if at all*
When the profitability of Latin American products has
been increased by higher prices obtained for export products
and the purchasing power of the Latin American population has
been raised through higher incomes received and through lower
prices paid for import goods, a new impetus will be given to
investments by the United States*
These investments will have
a further stimulating effect on incomes and imports, and would
tend to bring into motion a cycle of economic expansion attend­
ed by greater prosperity for all the Americas*
could probably be undertaken in
Such investments
large part by a private enter­
prise guided by the profit motive and encouraged in its foreign
ventures by the promise of monetary stability*
But it may
have to be supplemented by loans to Governments for the purpose
of public improvements designed both to increase the level of
living standards in Latin America as well as to provide better
facilities for transportation, power, etc*, which may be in­
valuable aids in defense.
The completion of the Pan-American
highway, additional railroad and harbor facilities, the cpnstruction of army and navy bases, are examples in point.
This, in brief, would be the general nature of a program
for inter-American economic cooperation*
The responsibility
for carrying out such a program obviously rests entirely with
the United States*
It is the United States which will have
to make temporary sacrifices in order to achieve the greater
goal of securing for itself economic domination of Latin America.
The latter could have, no interest in cooperation and would
readily turn to the totalitarian Governments if the benefits
from economic reorientation toward the United States are not
sufficient and sufficiently assured*
In effect, a program
for inter-American economic cooperation could be more aptly
described as a program for the relief of economic distress in
Latin America*
Such a program would be similar to and, in a
sense, simply an extension of the Agricultural Adjustment
program followed by the United States Government under the
Hew Deal*
While the burdens of the program would rest on
the United States, its incommensurable benefits would accrue
to practically all classes of all the nations in South as well
as in North America*
CHAPTER V
THE INTER-AMERICAN BANK
AS AN INSTRUMENT FOR HEMISPHERE COOPERATION
An investigation of tlie question: is Western Hemisphere
economic cooperation desirable and beneficial, has yielded the
almost unequivocal answer; yes, especially for the United
States*
In the last chapter the problem, how the American
Republics could cooperate, was analyzed*
A skeleton outline
of the essentials of economic cooperation between the United
States and Latin America could be summarized as follows:
one, stabilization of exchange rates; two, raising the standard
of living, especially in Latin America; three, purchase of
Latin American surplus commodities by the United States; four,
adjustments in production designed to make the Western Hemisphere
entirely self-sufficient and to eliminate duplications in
production; five, reduction of the disparity between industrial
and agricultural prices; sixth, improvement of the productive
capacity of Latin America (expansion of transportation and
industrial facilities with the-aid of United States materials
and skilled labor); seven, large scale export of United
States capital to Latin America*
The more specific question which remains to be answered
is; how can an inter-American bank be the means of putting
such a program for economic cooperation into effect?
61
At first glance, it is obvious that some parts of this
program could not be carried out except with the help, and on
the initiative, of the Governments.
The problems of price ad­
justments, for instance, involving, as it prdaably would, sub­
sidies to exporters and possibly to importers or outright
price regulation could not be handled by a bank.
Again, the
purchase of surplus commodities could be handled only by
Governments, particularly the United States Government.
Similarly, all investments for defense purposes in Latin
America would have to be undertaken by Governments.
The policy
of raising living standards would entirely transcend even the
widest possible sphere of activity of an inter-American bank
and would have to rely on concerted action by the several
Governments.
Since the program for economic cooperation must be
regarded as indivisible, it is necessary for it to rest on a
sound foundation of Government policy and collaboration.
It
is not primarily a financial, monetary, or banking problem,
but rather a problem of hemisphere planning.
Nor could any­
thing be achieved by simply establishing another institution
engaged in the financing of international trade.
Some of the
provisions of the by-laws of the proposed bank, as well as
some questions in a questionaire submitted to the several
American Governments, indicate that the Financial Committee
thought of the proposed bank as primarily an institution for
62
tli© financing of foreign trad© to fill a supposed gap in such,
facilities.
Nothing could he more erroneous than such a view.
There is no shortage whatever of hanking facilities in Latin
America and obviously none in the United States.
Latin America,
on the contrary, is suffering rather from an excess of such
facilities.
In addition to local domestic hanks and central
hanks, able and anxious to get whatever business they can in
the financing of domestic and internal and external trade,
there are many foreign hanks, mostly British and United States
--the outposts of economic imperialism.
Yet, even if purely financial facilities are unnecessary
and the economic program must rely on Government action and
collaboration, the inter-American hank would constitute an
invaluable and even indispensable tool of such cooperation.
Most of the international economic policies would have to be
translated into action by just such an institution.
The plan for its establishment provides that the interAmerican bank is to be a joint venture of the Governments, not
of the central banks of the several American Republics.
In
this respect the proposed inter-American bank differs from
the bank for International Settlements at Basle which was set
up as a central bank of central banks.
The inter-American
bank, moreover, is to be an instrumentality not merely for
financial, but for economic cooperation.
Since it correctly
reflects the political as well as economic, in addition to
63
the financial problems of inter-American collaboration, the
bank if and when it is finally established will have every
opportunity of becoming a truly great inter-American institu­
tion.
More specifically, the bank would, of 6ourse, be
charged with the determination and execution of exchange policy.
In so far as that policy would be primarily directed toward
maintenance of exchange stability, the function of the bank
would be to advance the necessary short term funds to nations
suffering temporarily unfavorable balances of payments, and
thus enable them to meet their obligations without endangering
their exchange rates.
These advances could take the form of
bills discounted or bills or securities bought in the open
market of the country affected in much the same way as the
Federal Reserve System operates in the United States.
By the
same token, the inter-American bank would relieve the several
central banks of the need to maintain gold and foreign ex­
change reserves, enabling them instead to keep their national
reserves in the form of inter-American bank credit and to make
all international payments by draft upon the inter-American
bank.
The problem of exchange difficulties could thus be
overcome with one stroke.
The inter-American bank, by virtue of its holdings of
the several national reserves and aided by the accumulation
and concentration of statistical information relative to the
64
economic conditions of each country, would also be able to
determine the desirability of adjusting the exchange rates
from time to time*
In this manner, the inter-American bank
could fulfill one of the basic requirements for the program
of hemisphere cooperation#
It could also play an important
part in the matter of inter continental investments*
Such
investments as have been indicated would be encouraged im­
mediately with the return of confidence in exchange stability,
and would receive a further fillip from the inauguration of
economic policies increasing Latin American purchasing power.
Nevertheless, especially in the beginning, the interAmerican bank would probably have to act as a guarantor on
loans made by the United States investors to Latin America*
In this respect it could model its activities on the invest­
ment subsidiaries created by the Bank of England in 1929 and
1930*
(The Securities Management Trust, Limited and the
Bankers1 Industrial Development Company, Limited).
These
subsidiaries were most helpful in the revival of British in­
vestment activities and in the rationalization of industry*
The inter-American bank could, through an appropriate sub­
sidiary company, operate as an investment trust for Latin
American securities, or could, at any rate, by its recommenda­
tion and guarantee of specific issues, increase the flow of
funds from North to South.
A further function it could per­
form In this connection would be to study Investment
65
opportunities in Latin America, to make information regarding
such opportunities available to investors, and to sponsor the
formation and rationalization of industry.
In these ways the
bank would be an invaluable instrument for carrying out the
program of hemisphere economic coordination.
Finally, the inter-American bank, in order to achieve
a maximum of usefulness, would have to maintain a large research
organization which would continually study all phases of the
economic problems of all the nations; which could act as a
clearing house of information for Governments as well as for
individuals engaged in inter-American economic affairs; and
which could periodically submit to the several Governments
suggestions for economic and financial policies.
If an inter-American bank, operating on this basis as
outlined in the Convention, Charter and By-laws submitted by
the Finance Committee, would have such highly valuable and
desirable effects, it is a pity that it has not been established
long ago.
The question naturally arises; why has it not been
established and why even this last effort which brought the
project nearer to realization than ever before, has still,
thus far, fallen short of realization?
Might it be that
narrow nationalistic interests have proved more powerful than
the desire for international cooperation?
Might it be that
some particular interests in the several nations could have
had a greater advantage from chaos and instability and that
66
theae interests were able to nullify the efforts of the
majority?
Might it be that failure to act was simply due to
the notoriously slow grinding of the mills of democracy where
words are plentiful and actions rare?
To what extent these
forces have been at work, how powerful they were, is probably
impossible to establish.
Some immediate obstacles to such a far reaching plan of
operation as the one here suggested are obvious; one, deep
seated differences in political philosophy and allegiance
between Latin America and the United States; two, the immediate
advantages of economic nationalism which no nation seems to be
willing to give up in exchange for greater but more distant
benefits; three, the tradition of economic imperialism still
deeply ingrained in some United States circles in spite of more
recent emphasis on the good neighbor attitude; and, four,
closely connected with this is the apparent unwillingness of
the Federal Government of the United States to give up its
present political power over Latin America.
Loans extended
by the United States through the Import-Export Bank are always
used to extort political concessions from the borrowing nation.
Inauguration of a policy of true cooperation would deprive the
United States Government of this instrument of control.
TUftiatever the reasons for hesitation and procrastination,
it is certainly to be hoped that better insight will prevail,
that greed and imperialism will give way to an era of
cooperation which will turn resentment into friendship.
Of
this new era in inter-American relations, the inter-American
hank would he hoth a foundation and a monument.
APPENDIX No.l
FIRST INTERNATIONAL CONFERENCE 1890 - WASHINGTON, D- C
I.
ADOPTION OF A COMMON MONEY
The International American Conference is of opinion that
great advantages would accrue to the commerce between the nations
of this continent by use of a coin, or coins, that would be
current, at the same value, in all the countries represented
in this Conference, and therefore recommends:
(1) That an International American Monetary Union be
established.
(2) That as a basis for this union an international coin
or coins be issued which shall be uniform in weight and fineness,
and which may be used in all the countries represented in this
Conference.
(3) That to give full effect to this recommendation there
shall meet in Washington a commission composed of one delegate or
more from each nation represented in this conference, which shall
consider the quantity, the kind of currency, the uses it shall
have, and the value and proportion of the International silver
coin or coins and their relations to gold.
(4) That the Government of the United States shall invite
the commission to meet in Washington within a year, to be counted
from the date of the adjournment of this Conference.
II.
INTER-AMERICAN BANK
The Conference recommends to the Governments here rep­
resented the granting of liberal concessions to facilitate interAmerican Banking, and especially such as may be necessary for
the establishment of an International American Bank, with branches
or agencies, in the several countries represented in this
Conference.
APPENDIX
NO.2
SECOND INTERNATIONAL CONFERENCE
1902
-
MEXICO
PAN AMERICAN BANK
On January 21, 1902, the Conference discussed and approved
the following:
Recommendation
The undersigned, Delegates of the Republics represented
at the Second International American Conference, duly authorized
by their Governments, have approved the following Resolution; The
Second International American Conference, Considering: That a
powerful Banking Institution established in a great mercantile
center of the Continent with branches in the principal cities of
the American Republics, would develop mercantile relations among
them;
And that, if said Institution should adopt uniform
rules for the granting of credits and charging of commissions, it
would afford even greater advantages to industry, and be well
received by all the American Nations;
RECOMMENDS: That there be established in New York,
Chicago, San Francisco, New Orleans, Buenos Aires, or any other
important mercantile center, a Bank of the character before
mentioned, and that it be assisted by the Republics of American
in every manner compatible with the Internal legislation of eahh
country.
Made and signed at the City of Mexico, on the twentyfirst day of the month of January nineteen hundred and two, in
three copies, written in the Spanish, English and French languages,
respectively, which shall be deposited in the Department of
Foreign Relations of the Government of the Mexican United States,
so that certified copies thereof may be made in order to transmit
them through the diplomatic channel, to each one of the signatory
States.
Signed by the Delegates for: Argentina, Bolivia,
Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala,
Haiti, Honduras, Mexico,Nicaragua, Paraguay, Peru, El Salvador,
United States of America, Uruguay.
APPENDIX
NO. 3
FIRST FINANCIAL CONGRESS
CREDITS
TO
LATIN
1905 -
WASHINGTON
AMERICA
The first financial Congress which met in May, 1905,
in the city of Washington had considered this subject favorably
and, although no definite project was approved, stated unanimously
that:
. . .one of the essentials for the development of commerce
and of better relations between the Latin American countries
and the United States is the concession by the business-men
and bankers in the United States of ample credits to LatinAmerica and the early adoption of measures to create the
mechanism means to this purpose.
APPENDIX
No.
4
THIRD INTERNATIONAL CONFERENCE OF AMERICAN STATES
RIO DE JANEIRO, BRAZIL
-1906
FLUCTUATIONS IN EXCHANGE
In this Conference, the following Resolution was
approved:
The undersigned, Delegates of the Republics represented
in the Third International American Conference, duly authorized by
their Governments, have approved the following Resolution:
The Third International American Conference Resolves:
1. To recommend to the Governments that they cause to
be prepared- for the next Conference a detailed study of the
monetarysystem in force in each one of the American Republics,
its history, the fluctuations in the rate of exchange which have
taken place during the last twenty years, together with tables
showing the Influence said fluctuations have exerted upon commerce
and their industrial development;
2. To further recommend that these studies be trans­
mitted to the International Bureau of American Republics in order
that the latter may prepare and publish a resume of said studies,
and distribute the same to the several Governments at least six
months previous to the meeting of the next International Confe­
rence.
Made and signed in the city of Rio de Janeiro on
August 23, 1906, in English, Portuguese and Spanish,
APPENDIX
SIXTH
NO.
INTERNATIONAL
LA
ADOPTION
HABANA
OF
A
5
CONFERENCE
'.-CUBA
COMMON
MONEY
The Sixth International Conference of American States
resolves:
To recommend to the Governments of the States the
consideration of the adoption of a common unit of currency for
all of them, the following data to be given in the studies and
reports which may be Issued: value of the unit of currency; its
weight, fineness, name and standard; and other pertinent special
circumstances.
It recommended further that the states communicate with
each other* for greater accuracy of the study, the projects which
they have prepared respectively, and that, once the studies have
been completed by the states they communicate them to the Pan
American Union not later than two years from the date of the
present resolution.
Taking as a basis the aforementioned studies and projects
prepared by the states, the Pan American Union shall draft the
definite project. One the project of the Pan American Union is
drafted, it shall be communicated to the States so that they may
express their opinions.
Finally, the project of a common unit of currency, prepared
by the Pan American Union, together with the observations made by
the States, shall be submitted to the Seventh International
Conference of American States for the definite adoption of the
common unit of currency. (February 13, 1928).
APPENDIX
NO.
6
INTER-AMERICAN CONFERENCE FOR THE MAINTENANCE OF PEACE
BUENOS AIRES
MONETARY STABILIZATION
The Int fen-American Conference for the Maintenance of
Peace resolves:
To recommend to the Ban American Union to determine,
as soon as possible after consultation with the various American
Governments whether it would be opportune to hold a meeting of
delegates of the Ministries of Finance and of the Central Banks
of the American countries to study and endeavor to bring about
monetary stabilization and the lifting or termination of the
systems of exchange control of the various States members of the
Pan American Union as a result of the depression.
APPENDIX
NO. 7
IMPORTS OP LATIN AMERICAN COUNTRIES FROM THE UNITED STATES AND
GERMANY.
1929,
1932
and
1938.
In thousand of dollars
ARGENTINA
From
U. S.
Germany
1929
216.112
94.247
1932
28.968
19.918
1938
74.903
44.270
1932
36.765
6.550
1938
63.027
20.668
1932
27.653
2,134
1938
75.152
4,684
1932
6.014
3.834
1938
28.620
26.534
1932
12.254
4,469
1938
45,643
15,398
1932
10,523
2,875
1938
54,939
11,681
1932
4,669
1,736
1938
20.005
11,681
1932
2.502
2.503
1938
5,039
7,001
MEXICO
From;
U. S.
Germany
1929
127.200
14.812
CUBA
From;
U. S.
Germany
IS 29
127.051
7.477
CHILE
From:
U. S.
Germany
1929
63.348
30.419
COLOMBIA
From
U. S.
Germany
1929
56,169
17,634
VENEZUELA
From;
U. S.
Germany
1929
48,057
8,021
PERU
From:
U. S.
Germany
1929
31,767
7,605
URUGUAY
From:
U. S.
Germany
1S29
27,796
8,905
Cont.
APPENDIX
No. 7
(pag. 2)
IMPORTS OF LATIN AMERICAN COUNTRIES FROM THE UNITED STATES AND
GERMANY.
1929,
1932,
and
1938.
In thousand of dollars.
COSTA RICA
From:
U. S.
Germany
1929
9,682
3,532
1932
2,874
643
1938
6,195
2,496
1932
1,142
582
1938
6,556
4,618
1932
3,662
533
1938
3,828
2,668
BOLIVIA
From:
U. S.
Germany
1929
8,641
3,493
ECUADOR
From:
U. S.
Germany
1929
6,929
2,142
PARAGUAY
From;
U. S.
Germany
1929
2,467
1,244
1932
481
299
1938
860
1,027
APPENDIX
NO. 8
LONG-TERM INVESTMENTS OF THE UNITED STATES,GREAT BRITAIN,FRANCE
AND GERMANY OUTSTANDING IN LATIN AMERICA.-Source:Compiled by
Tbe Conference Board.- MILLIONS OF DOLLARS - United States
Port­
Direct
Total
folio
346
579
£31
Argentina
77
18
59
Bolivia
Brazil
194
366
560
484
697
Chile
213
158
108
266
Colombia
— —
5
5
Ecuador
- —
5
5
Paraguay
182
86
96
Peru
14
56
70
Uruguay
186
186
Venezuela
—
~
8
8
Guiaaas 7
2,635
TOTAL SOUTH AMERICA 1,466 1,169
Country
Costa Rica
Cuba
Dominican Rep.
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Panama
Other West Indies
GRAN TOTAL L-A-
13
666
41
17
50
10
36
480
4
27
37
2.847
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Paraguay
Peru
Uruguay
Venezuela
GuAjtaas
TOTAL SOUTH AMERICA
10
129
16
12
1
8
—
349
1.773
a
498
295
12
a
a
112
101
92
23
795
57
29
51
18
36
829
A
—
18
—
1.712
FRANCE
a
a
a
a
Great
Direct
45
37
4.559
425b
10
Britain
Port­
Total
folio
2.085
3l£
22
a
771
1.269
418
123
28
16
21
a
a
16
31
143
191
90
—
92
—
— -
—
a
a
4.285
a
154
a
13
23
167
—
--
—
a
a
a
652
a
m
a
a
—
a
188
a
5
52
—
8
840
2
i
.a
a
GERMANY
a
a
a
a
—
—
a
5.382
2501
—
a
—
—
a
a
—
— -
—
—
—
—
—
—
—
—
-
—
-
-
—
-
—
-
—
-
—
-
-
—
a
a
—
—
-
a
a
—
—
-
7
—
-
_
—
—
A
a
—
-
a
Cont.
a
APPEMDIX NO. 8 Pag. 2 (continuation)
LONG-TERM INVESTMENT OF THE UNITED STATES,GREAT BRITAIN,ETC.IN L.ACountry
a
Costa Rica
_ _
Cuba
—
Dominican Republic
El Salvador
Guatemala
- Haiti
- Honduras
Mexico
a
—
Nicaragua
—Panama
—
Other West Indies
TOTAL BATIN AMERICA a
FRANCE
a
GERMANY
a
3d
4d
a
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
a
—
—
- -
—
—
—
—
—
a
—
—
_ _
a
290e
—
—
— —
1,158g
a
a
—
a
—
a
—>
75
—
—-
—
—
20
—
—
—
a
905h
bonds, while direct investments represent all. other investments. The
latter include Investments in foreign corporations or enterprises which
are controlled by a person or gropp domiciled in the investing
country,or in the management of which such person or group has an
lmportan voice. Also,in this latter group would be enterprises of
almost every type such as railroads, mining,petroleum, hotels,
factories, etc. All data listed are estimated for the most recent
years for which data are available. For this reason and because of
slight differences in classifications, the data are not strictly
comparable as between countries; par or book values are used.
2Sources.-United States Department of Commerce, 11American Direct
Investments in Foreign Countries-1936M; “The Statistical Analysis
of Publicly Offered Foreign Dollars Bonds,"published by the Institute
of International Finance, New York, May, 1940.etc.
3The latest estimates are those of the end of 1936, as compiled by
Mr.P.M. Dickens of the U. S. Departament of Commerce. An omission
estimate of # 10 millon for Mexican Border Enterprises is included.
4Taken from the study of the Institute of International Finance
fentitled "The Statistical Analysis of Publicly Offered Foreign
Dollars Bonds,M published May, 1940. The estimates are as of December
31,1939. Under portfolfcfl)^ are listed national government bonds as
well as those of states, prfcvfltnee and departments, municipalities and
corporations.
5 Railway and miscellaneous securities as of December 31,1939
6 Government bonds only, as of December 31,1939
7 Dutch, Fremch and British Guiana,
a Not available b End of 1913 c End of 1933 d End of 1932
f Mr. H.Trueblood of the Foreign Policy Association thinks $ 5 billion
is too high a figure in view of defaults and expropiations. He arrives
a figure of about $ 2 billion by capitalizing the British return on
their investments at the American rate of return.
APPENDIX
No. 9
Pag. 1
FOREIGN EXCHANGE RATES
1926 - 1940
YEARLY AVERAGES
1926
1927
1928
1929
1930
1931
1932
96.4
92.1
96.2
96.4
95.1
83.5
66,7
58.4
Bolivia
36.5
34.0
34.3
35.3
- —
---
---
—
Brazil
11.9
14.4
11.8
11.9
11.8
10.7
7.0
7.0
Chile
12.1
12.0
12.0
12.1
12.0
12.0
12.0
7.9
Colombia
97.3
98.4
97.6
97.6
96.5
96.4
96.5
95.2
Ecuador
20.0
20.0
18.9
19.9
20.0
16.6
16.6
12.5*
PERU
486.6
374.0
373.1
397.0-
---
-----
-----
Uruguay
103.4
101.4
101.3
102.6
19.3
19.2
18.9
19.2
100.0
99.9
99.9
99.9
99.9
99.9
99.9
99.9
49.8
48.3
47.2
H
.
CO
Gountries 5ar,
Exch.
48.1
47.1
35,4
31.8
Argentina
Venezuela
Cuba
Mexico
98.6
-----
85.8
-----
55.3
-----
47.0
-----
Figures from 1926 through 1928 from the Federal Reserve
Bulletin, January, 1929, p.35.
Figures from 1928 through 1932 from the Federal Reserve
Bulletin, December, 1934, p.811.
APPENDIX
NO• 10
POSITION OF LATIN AMERICA IN THE FOREIGN TRADE OF THE UNITED
STATES, 1929-1939
Values in thousan of U. S. dollars
YEARS
1929
IMPORTS ( GENERAL )
EXPORTS (INCLUDING
From all
From
% from . To all
To
countries L. A*
L. A._____ countries L. A.
5,241
911
1.014
23,1
4,400
REEXPORTS)
% to
L« A.
17,4
1930
3,060
667
22,1
3,843
628
16,4
1931
2,090
478
22,9
2,424
312
12,9
1932
1*323
323
24,4
1,611
195
12*1
1933
1,449
316
21,8
1,674
215
321,9
1934
1,665
370
22,4
2,132
307
14,4
1935
2,047
460
22,5
2,282
344
15,1
1936
2,422
501
20,7
2,455
395
16,1
1937
3,083
672
21,8
3,349
578
17,3
1938
1,960
453
23,1
3,094
494
16,0
1939* 2,318
518
22,4
3,177
569
17,9
* PreliminarySource: Compiled from official statistics of the U. S.Department
of Commerce.
United States Tariff Commission THE FOREIGN TRADE OF LATIN-AMERIC&
Part I Pag. 64
APPENDIX
WORLD TRADE.
NO. XI
UNITED STATES TRADE.
YEARS: 1929 TO 1938
LATIN AMERICAN TRADE-
FIGURES IN MILLION DOLLARS
YEARS
WORLD
TOTAL
U. S.
EXPORTS
L. A.
EXPORTS
U. A.
IMPORTS
L. A .
IMPORTS
1929
68,606
5,241
2,912
4,400
2,425
1930
55,161
3,842
1,992
3,060
1,791
1931
39,390
2,424
1,489
2,090
1,024
1932
26,395
1,611
1,038
1,323
618
1933
24,224
1,674
1,145
1,449
781
1934
23,375
2,132
1,676
1,665
1,027
1935
23,772
2,282
1,738
2,047
1,135
1936
25,722
2,455
1,911
2,422
1,241
1937
31,223
3,349
2,420
3,083
1,656
1938
27,440
3,094
1,833
1,960
1,488
Source: Compiled by the U. S* Tariff Commission from
official statistics of the Latin American
countries.
United States Tariff Commission.-THE FOREIGN TRADE OF LATINAMERICA.-Part. I
APPENDIX
No. XII
FOREIGN TRADE OF THE 20 LATIN AMERICAN COUNTRIES WITH
SELECTED COUNTRIES, IN SPECIFIED YEARS: 1929 AND 1938
(Value in thousand of U.S. dollars)
Country
Value
1929
Percent
of total
Value
1938
Percent
of total
Exports to:
All countries
United States
United Kingdom
Germany
Japan
Italy
France
All other count.
2 ,912.270
100.0
1.808.300
100.0
988.054
535.904
234.775
3.818
91.399
181.794
876.526
33.9
18.4
8.1
.1
3.1
6.3
30.1
543.989
302.457
188.915
24.128
28.383
73.487
640.941
30.2
16.8
10.5
1.3
1.6
4.1
35.5
2 .415.398
100.0
1 ,467,071
100.0
931,014
362f039
261,944
14,767
113,411
124,479
607.744
38.5
15.0
10.8
. 6
4.7
5.2
25.2
498,305
171,228
237,794
37,679
43.918
48.267
429.880
33.9
11.7
16.2
2.6
3-0
3.3
29.3
Imports from:
All countries
United States
United Kingdom
Germany
Japan
Italy
France
All other count.
Source: Compiled by the U. S. Tariff Commission from
official statistics: of the Latin American
countries
United States Tariff Commission.-THE FOREIGN TRADE OF,
LATIN AMERICA.- Pag.41 Part;. I
APPENDIX
NO.
XIII
APPROXIMATE DISTRIBUTION OF THE TOTAL WORLD'S TRADE AND THE
SHARE OF THE WESTERN HEMISPHERE IN 1938.
---- 6 .$
Canada
United States— 20.$
Latin America— 1 2 % _______
TOTAL AMERICAS-------- 38.$
TOTAL E UROPE-----------3?.$
TOTAL ASIA
---------- 18.$
TOTAL AFRICA — ------7.%
TOTAL WORLD— 100.$
THE TRADE OF THE WESTERN HEMISPHERE
EXPORTS
CANA DA -- 193Q
IMPORTS
66.%
To United States
t
250
32.$
To Europe
H
400
H
150
To Latin America
H
25
51.% From Europe
3.% From Latlh America
it
35
21.%
5.%
To Asia
II
90
11.% From Asia
H
50
7.%
To Africa
II
26
n
5
1.%
To Europe
560
tII 1.269 42.% From Europe
$
n 250
To Canada
470 16.% From Canada
To Latin America:
From Latin America:
To 1? countries
From 17 countries with
with exception of
exception of Chile,
Chile,Argentina,*
Argentina, & UruUru.guay
$
450
guay
# 400
To Chile,ArgenFrom Chile,Argen­
tina & Uruguay "
115 19.$ tlna AUruguay
" 70
(Cont.)
29.$
13.$
From United States $ 470
3.% From Africa
UNITED STATES. 1938
EXPORTS
IMPORTS
24.$
APPENDIX NO. XIII(continuation)
THE TRADE OF THE WESTERN HEMISPHERE
UNITED STATES. 1938
EXPORTS
To Asia
To Africa
To Russia
(continuation)
IMPORTS
520•
120.
70.
*n
ii
19.$
4.$
2.$
1557$
From Asia
From Africa
From Russia
570.
#
«?
55.
it
25.
30.$
3.$
1.$
Too.$
LATIN AMERICA,. WITH EXdEPTION OF" C)HILE, ARGENTINA.& URUGUAYEXPORTS
To United States
To Europe
To Argentina,Chi
le & Uruguay
“
To Canada
To Asia
$ 400. 45.$
" 350. 39.$
M
w
M
75.
35.
35.
8.$
4.$
4.$
ibb.$
IMPORTS
From United States
From Europe
From Argentina,Chi,
le &Uruguay
From Canada
From Asia
T.%
$ 450.
M 325.
52.$
37.$
H 46.
" 25.
H 25.
5.$
3.$
3.$
1057$
LATIN AMERICA.: CHILE, ARGENTINA AND URUGUAY : 5.$
EXPORTS
IMPORTS
— f
c
w
Q
i
To UnitedStates
$ 70. 11.$
To Europe
” 590. 81.$
To the rest ofthe
Latin American
Countries
# 45. 7.$
To Canada
” —
To Asia
" 10. 1.$
Io57f
T
i— »
M
From United States $ 115. 20.
From Europe
$ 300. 57.
From the rest of
the Latin American
countries
M 75. 14.
From Canada
"
6.
1.
From Adia
H 45.
8,
100.$
87
BIBLIOGRAPHY
A-
BOOKS
Alberts, Mario, Guerra de Monedas,Cadiz,Portugal, 1939
Arnold Thurman W. The Bottlenecks of Business, New York,
Reynal and Hitchock, 336 pp.
Baudin Luuis. La Moneda, Buenos Aires, Argentina, 1939
Frank Waldo, America Hispana, Santiago, Chile,Translation
from English, 1937
Frlman, Samuel Guy, Latin America,Its Place in World Life.
New York, Wlllet Clark,Co.1937
Kelchner, Warren H. Inter-American Conferences, 1826-1933
B. PERIODICAL ARTICLES
Evans, John W. "Economic Policy and Latin America", The Yale
Review, (Spring 1941) p.569
Llppmann Walter. "The Economic Consequences of a German Victory"
Life, July 4, 1940
Trueblood, Howard J."Loans to Latin America As Anti-Nazi Weapons"
The New Republic, July 1, 1940
United States News. "Four New Orbits of World Power" Vol.IX,
August 16, 1940 p.24
Wilson, Charles Morrow, "Buy Hemisphere Products", Haprers
Magazine, Vol.182, January 1941, pp.147-155
C. ESSAYS
Williams, John H., The Lessons of Monetary Experiency, (Essays
in honor of Irving Fisher) New York, Farrar and R-Inc.
26 pp.
88
D. PUBLICATIONS OF LEARNED ORGANIZATIONS
Monthly Bulletins, Central Banks of Argentina, Colombia, Chile,
Peru and Ecuador. 1940~41
Inter-American Bank, Federal Reserve Bulletin, Washington,D.C.
June 1940 pp.51?*»525
Reports of Committees and Discussion Thereon, 1889-1890.
Washington D. C. Gov. Print.
Reports of the Delegates of the U. S. of America.. Hateana,1928
Washington, D- C. Gov. Print.
Minutes and Antecedents, Montevideo, 1955, Washinton, Gov.
Print. 3 Vols.
Foreign Trade of Latin America.-United States Tariff Commission,
Washington, D- C. Gov. Print.
89
QUOTATION
from an article by Howard J. Trueblood, The New Republic,July,1-1940
As an emergency measure in the economic and political
defense of the Western Hemisphere against a Nazi-dominated Europe,
establishment of an Inter-American Marketing Board, with full
control over the foreign trade of the Western Hemisphere, might be
a key feature of the new Pan-Americanism. Such a Board- of necessity
financed in large part by United States capital, perhaps through the
intermediary of the inter-American bank- would preferably represent
all twenty-one republics, although almost inevitably control and
responsability would devolve upon the United States.
The first task of such a board would be to shift United
States imports to Latin America in so far as possible, apportioning
purchases among the individual Latin American countries of the
especific commodities Involved. The board would also be empowered
to acquire and market all other Latin American exports products.
Such exports would be used to fill the demands of the U.S.and other
American republics, while the surplus would be disposed of in
accordance with both the political policy of the New World and the
economic needs of the Old.
How much would it ’’cost” the U. S. to underpin the Latin
American exports markets? Assuming, under the circumstances out­
lined, an immediate increase of at least $ 200,060,000 in this
country’s Latin American imports, there would remain- on the basis
of the 1936-38 average- a surplus of about $ 1,000,000,000 worth
of goods normally outside the Western Hemisphere. This surplus, in
the single year 1938 included approximately lo,000,000 bags of
coffee, 700,000 tons of meat, at least 5,600,000 bags of sugar,
200.000 tons of wool, 1,500,000 bales of cotton, 200,000 tons of
hides and skins, 1,950,000 tons of wheat and 2.737,000 tons of
corn, to mention only a few major commodities. For economic reasons,
an Inter-American Marketing Board could not throw these products
on the U.S. market without serious internal repercussions on the
price structure and normal trade channels. On the other hand,
Latin American products bought in the interests of defense would
Include many commodities now brought in part elsewhere: for
example, wool, hides and skins, cacao, fibers, various nuts, waxes
and vegetable oils and a number of. minerals-includlng tin,
provided smelters are established. Presumably a board with the
powers contemplated would find opportunities to dispose of most
surplus Latin American products without subjecting the Individual
countries to the danger of dealing directly with Germany. Even
if the $ 1,000,000,000 were pure loss to the U. S., moreover, it
would still be a small price to pay for strengthening Latin American
resistance to Nazi economic penetration.
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