Eugene register-guard., March 21, 1962, Image 16

Page 16A , EUGENE REGISTER-GUARD, Wed., March 21, 1862
Despite the Risks
U. S. Capital Still
Flowing to Latins
By DAVID U BO WEN
Of the AnocUted Preii
Last month the governor of the Brazilian
state of Rio do Sul expropriated the local
telephone company, a subsidiary of IT&T.
He claimed the company provided very
poor service.
IT&T officials immediately cried foul.
Their anger was not addressed directly to the
expropriation, which is legal under Brazilian
- law and not unprecedented in South America
: or most anywhere else. What infuriated them
was the size of the preferred compensation.
. i Brazilian law says .lt must be "just." Gov.
Leonel Brizola thought $400,000 sufficient and
: put up that amount. IT&T officials termed the
' figure ridiculous and insisted the property was
; worth $10 million.
The argument seems destined to become a
: lengthy and legalistic dispute, with the U. S.
! State Department doing what it can to induce
a fair settlement The incident, however,
: draws attention to one of the thorniest areas
of relations between the United States and the
restless nations of Latin America.
. Every economist agrees that Latin Amer-
lea's big need is for capital investment: the
money it takes to build factories, improve
transportation, create jobs and get an economy
: spiraling upward. The possible sources of this
- money are Latin Americans themselves, for
eigners willing to invest in Latin America, or
: aid programs of foreign governments.
' The much-publicized "Alliance for Prog
ress" involving a U. S. government aid of
$20 billion over the next decade represents
'. the Kennedy administration's determination to
increase the flow of capital from the third
source. No one, however, believes that Uncle
Sam at his most generous could single hand
edly generate the economic steam it will take
to substantially raise the Latin American level
of economic activity or the region's standard
of living.
LATIN AMERICANS CRITICIZED
Latin Americans have been criticized for
not re-investing more heavily In their own
economies and have been urged to better their
performance.
And American businessmen are being en
couraged to increase their rate of investment:
to join Uncle Sam in priming the Latin Ameri
can pump for the benefit of all and the con
sternation of Communists.
The stormy petrel of Latin American pol
itics is Fidel Castro. As an expropriator of
: American property he has few peers. His state
economy has absorbed practically all of the
$900 million U. S. business had invested in
Cuba before he took over. There have been no
serious signs of reimbursement.
If the Castro example spread through Latin
America, U. S. businessmen would take a
shellacking. On the other hand, if the capital
isn't risked, if U. S. business doesn't actively
participate in Latin American development,
the resulting lack of progress will only in
crease the pressures threatening to topple
friendly Latin American governments.
In a recent study, marketing and foreign
trade specialist John M. Dyer of the Univer
sity of Miami pointed out that private direct
investment is always more successful than gov
ernment investment. He put the ratio at one
to three: "a dollar of private investment
achieves the total effect of approximately
three dollars of governmental investment."
Despite hazards real or imagined, U.S. pri
vate capital has been steadily flowing into
Latin America over the last decade. From less
than $3 billion at the end of 1945, U.S. direct
investments rose to over $9 billion by 1961.
INVESTMENTS FLATTENED OUT
Since 1958, however, the pace has slowed.
For the past four years the rate of growth of
U.S. direct investment has accelerated in Can
ada and Europe, but flattened out in Latin
America.
While extractive Industries (ott, mining,
agricultural commodies) have in the past been
most interested in Latin America, manufac
turing is taking hold. The size of manufac
turing investment jumped 100 per cent be
tween 1950 and 1960 with the fastest growing
category In this sector being machinery and
automotive equipment.
One of the most frequent charges leveled
at American businessmen in South America is
that they are there not to assist in the devel
opment of the country but only to extract
profits. Governor Brizola echoed this senti
ment in a news conference after publication
of his expropriation decree:
"We in Latin America have two problems
holding back our programs," he said. "One is
Latifundistas extreme large lanwowners
and the other Is the foreign economic group
or those local economic groups allied with
them. Unless we get rid of these groups, the
Alliance for Progress will not work they will
eat ail the dollars provided for aid, and in less
than 10 years, if these problem groups remain,
all the dollars will be back in the United
States."
American businessmen categorically deny
this charge. According to Chase Manhattan,
the average level of earnings has been running
at a little over 9 per cent of invested capital
during the past decade, a rate lower than in
most domestic U.S. industries.
Another report, for 1955, puts the total
local payments (for wages, rental taxes, etc.)
of American-owned companies in Latin-America
at $4.3 billion. Total remittances to the in
vestor that year was $650 million, or a ratio of
$6.6 paid out locally to $1 paid to the investor.
i
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Third 'Star'
Joins Race
For Senate
'BOSTON (in Another famed
name was added Wednesday to
the star studded cast seeking
U.S. Senate teat from Massachu
setts. The latest candidate is Har
vard history professor H. Stuart
Hughes, 45, grandson of the late
Chief Justice Charles Evans
Hughes.
Hughes said he will announce
his candidacy next week as an
independent.
His grandfather was the Re
publican nominee for president
in 1916. Hughes said he "had
been a Republican but more
Democrat than anything else."
In the race for the Democrat
ic nomination are Edward M.
Kennedy, the President's young
est brother, and Massachusetts
Atty. Gen. Edward J. McCor
mack, nephew of House Speaker
John W. McCormack, D-Mass.
George Cabot Lodge, son of
former United Nations Ambas
sador Henry Cabot Lodge, is
seeking the Republican nomina
tion as is U.S. Rep. Lawrence
Curtis.
Hughes said he hopes to make
his candidacy a forum for his
views of world disarmament and
peace.
"I believe in the United
States taking independent steps
to disarmament and peace," he
said.
Hughes, a native of New
York, is a 1937 graduate of Am
herst College. He earned master
and doctor degrees at Harvard.
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