David Rockefeller, What Private Enterprise Means to Latin America, 1966

The grandson of John D. Rockefeller, the founder of Standard Oil, David Rockefeller was the Chief Executive Officer of The Chase Manhattan Bank, among the largest financial companies in the United States. In the 1960s he was deeply involved with business groups seeking to promote investment in Latin America.

Communist propaganda stridently blames the United States and United States business for all the readily visible ills of Latin America. Soviet, Castro and Chinese Communist agents move through city and village spreading half-truths and whole falsehoods. North American capitalists, they say, are out to exploit resources and markets to the detriment of the host nations; the capitalists want to keep the people in poverty so they can take over their minerals and metals; they are obsessed with excessive profits and have no concern for the land or its inhabitants.

Although these charges are largely without foundation, United States companies, with a few notable exceptions, are doing little to refute the misinformation and clear up the suspicion spread by Communist propaganda. Yet combat it we must, for otherwise we are in grave danger of losing our investments, our markets and—more importantly—our friends and allies in a critical sector of the world…

Perhaps we can best arrive at an understanding of the situation by examining a few of the more widely held misconceptions reflected in a significant body of Latin American opinion… It seems to me that four myths are especially important and generally representative:

Myth I: The United States Government and U. S. business want to perpetuate a primitive economy in Latin America.

Not only is this contention not supported by the facts, but it ignores the novelty and complexity of the whole global economic development problem. So novel is this problem that few minds have yet begun to produce meaningful answers. Two-thirds of the world’s people, living in countries where the per capita income averages between a dime and a quarter a day, have suddenly become aware that their poverty is not inevitable, and they are resolved to overcome it. The result is a massive determination in scores of countries to move from purely agricultural subsistence economies into the kind of world that lives by buying and selling, by making and assembling things...

Industrialization is desirable, inevitable, indeed crucial in the economic growth of any area. Quick to acknowledge that the nations of Latin America should have a rapidly expanding industrial plant, the United States Government and the American private sector have contributed significantly to the industrial development that leads to eventual economic sophistication. Our assistance has been extended to a host of enterprises, ranging from retail stores to paper mills to heavy industry. Loans by the United States Government played an important part in building Altos Hornos in Mexico, Volta Redonda in Brazil and Huachipato in Chile, to mention but three major Latin American steel mills. But the bulk of United States Government aid has properly gone for infrastructure projects, which certainly are essential to any industrial growth. Loans from the Agency for International Development (A.I.D.) have helped finance rural electrification projects in Chile and Ecuador, highway studies in Peru and the first hydroelectric plant in Honduras…

Myth 2: United States private investors seek to exploit Latin America economically.

This simply does not square with reality. A few statistics will give some idea of the nature and magnitude of the direct contribution being made. United States businesses operating in Latin America supply one- tenth of Latin America’s production, pay one-fifth of all taxes and account for a third of all export earnings. An estimated 1,500,000 Latin Americans are employed by United States businesses, in many cases at higher wages than they would earn in other, local industries. United States citizens, on the other hand, account for only 2 percent of all employees of United States firms in Latin America. The United States investment in Latin America has fortunately been moderately successful on balance, but it can hardly be called “exploitative.”

…The Latin American businessman can do much to help encourage investment. By pooling the vast resources of talent, initiative and knowledge of local conditions which he has at his command, he can work with governments to sustain a business climate that attracts foreign capital and retains local funds. United States investors seek no special favors, but like most other businessmen they look for stability, for guarantees that contracts between the two parties are binding on both and will be honored, and for evidence that threats of expropriation will not cast ominous shadows on capital investment.

Myth 3: United States private business does not want Latin America to share in the ownership or management of promising enterprises.

It is true that certain types of enterprises do not readily lend themselves to joint ventures. But a growing number of United States companies are seeking Latin American participation in the management of investments they have in Latin America…

A model joint venture has been Brazil’s manganese ore company, Industria e Comercio de Minerios, with 51 percent ownership by Brazilians and 49 percent by Bethlehem Steel. In 1949, backed by loans from the World Bank and the Export-Import Bank, this company laid a 122-mile railroad through the jungle, dredged part of the Amazon for ocean-going ships and built docks and roads. Since its first manganese shipments in 1957, the company has netted between $12,000,000 and $15,000,000 each year and has been able to pay back its Export-Import Bank loan three years early. The venture also made possible Brazil’s first private foundation to support agricultural research, education and development in backward areas. Its workers enjoy modern homes, a fully staffed hospital and some of the best schools in Brazil.

Kaiser Industries started automobile companies in Brazil and Argentina and then turned a majority of the stock over to Latin Americans. All but a handful of employees are now local nationals. Kaiser sought out local industries to produce parts for the cars. The company established educational programs to train skilled technicians and sent bright young men abroad for further training.

The International Basic Economy Corporation, better known as IBEC, has introduced modern merchandising techniques in supermarkets in Venezuela and other countries, enabling housewives to save as much as 20 percent on their food bills. The supermarkets buy most of their wares from local suppliers whom they have trained in mass production, packaging and marketing. Ninety percent of the employees are recruited in the local area and taught how to stock supermarket shelves, to keep up the inventory and to run the checkout counters.

All these companies and many others like them are demonstrating American economic democracy at work—and working successfully. Their partnership approach is a rebuttal to contentions of economic imperialism.

Myth 4: Latin American economic integration is opposed by U. S. businessmen.

On the contrary, most businessmen I talk with consider it absolutely imperative for true progress. Without such integration, there is inefficient division of markets and costly duplication of effort. Only by closer cooperation can the Latin nations make the best of their own resources and provide the broadest appeal to additional foreign investments…

Most U.S. businessmen recognize that as tariff barriers between nations are dropped, the increased demand for finished goods will create a broader general market. Agricultural nations will be buying within the Latin American market many of the goods they now import from other areas. The resulting generation of domestic capital will decrease the emphasis on foreign aid and open up new opportunities for investment. To suggest that businessmen in the United States oppose such developments is not only untrue but illogical as well…

One of the most formidable barriers to private investment abroad, in my judgment, is the barrier existing in the minds and emotions of those who need foreign investment most. Because they wrongly tend to equate it with colonialism, they are reluctant to accept it, adopting instead a coldly anti-capitalist attitude and challenging the profit motive which in the industrialized nations of the Western world has been the prime generating force producing economic growth since the Industrial Revolution.

This hostility to profit among many people in Latin America is based, in part, on a lack of understanding of its essential role in attracting investment and, in part, on a misconception of the magnitude of profits actually made by foreign investors in Latin America. On this latter point it is generally believed that profits have been exorbitant and have resulted in the exploitation and impoverishment of the host country. This belief was brought out in a special Gallup Poll conducted not long ago in fourteen nations of the non-Communist world. Participants were asked what percent of profits they thought a typical United States industrial firm earned. The estimates ranged from 25 percent profit in Rome to 60 percent in Montevideo. Actually, a recent survey of 100 large North American corporations showed that foreign assets returned 14 percent before taxes and domestic assets returned 13 percent; close to half the companies studied had pretax profits of no more than 10 percent.

David Rockefeller, “What Private Enterprise Means to Latin America,” Foreign Affairs 44, 3 (April 1966) 403-416.