a. ECONOMIC DEVELOPMENTS INSOUTH AMERICA) HEARINGS BEFORE THE SUBCOMMITTEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES EIGHTY-SEVENTH CONGRESS SECOND SESSION PURSUANT TO Sec. 5(a) of Public Law 304 (79th Congress) MAY 10 AND 11, 1962 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 84089 WASHINGTON: 1962 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington 25, D.C. -Price 40 cents JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) WRIGHT PATMAN, Texas, Chairman PAUL H. DOUGLAS, Illinois, Vice Chairman HOUSE OF REPRESENTATIVES SENATE Alabama RICHARD BOILING, Missouri JOHN SPARKMAN, HALE BOGGS, Louisiana J. W. FULBRIGIIT, Arkansas HENRY S. REUSS, Wisconsin WILLIAM PROXMIRE, Wisconsin Island MARTHA W. GRIFFITHS, Michigan CLAIBORNE PELL, Rhode THOMAS B. CURTIS, Missouri PRESCOTT BUSH, Connecticut Maryland CLARENCE E. KILBURN, New York JOHN MARSHALL BUTLER, York WILLIAM B. WIDNALL, New Jersey JACOB K. JAVITS, New WM. SUMMERS JoHNsoN, Erecutive Director JOHN W. LEHMAN, Deputy Executive Director JOHN R. STARK, Clerk SUBCOMMITTEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS SENATOR JOHN SPARKMAN, Alabama, Chairman RICHARD BOLLING, Missouri JOHN MARSHALL BUTLER, Maryland HALE BOGGS, Louisiana MARTHA W. GRIFFITHS, Michigan THOMAS B. CURTIS, Missouri WILLIAM Ht. MOORE, Economist II CONTENTS STATEMENTS Page Barnes, William Sprague, Harvard Law School, Cambridge, Mass_______ 9 Brandwein, Seymour, economics, research department, AFL-CIO, Wash- ington, D.C----------------------------------------------------- 18 Butler, William F., vice president, the Chase Manhattan Bank, New York, N .Y _-- -- ----- ---- ------ ----- ----- -- -- -- ---- ----- ------ --- ------ --- 4 4 Davis, Tom E., University of Chicago, Chicago, Ill-------------------- 5 Gallagher, John F., vice president, foreign administration, Sears, Roe- buck & Co., Chicago, Ill-------------------------------------------- 78 Kamsky, Leonard, vice president of the general development division of W. R. Grace & Co., New York, N.Y--------------------------------- 75 Kybal, Elba Gomez del key de, and Milic Kybal, Washington, D.C ------ 21 Nehemkis, Peter R., Jr., Washington counsel, Whirlpool Corp----------- 49 Penn, Raymond J., University of Wisconsin, Madison, Wis__------------ 12 Rockefeller, Rodman C., vice president and director, International Basic Economy Corp., New York, N.Y------------------------------------- 60 ADDITIONAL INFORMATION Announcement of hearings------------------------------------------- 3 "Housing in Latin America-Its Present Status and How To Improve It," an address by William F. Butler, vice president, the Chase Manhattan Bank, New York, N.Y., April 3, 1962_____----____________________ 69 Palacio, Hon. Jorge Mejia, Governor for Colombia of the Inter-American Development Bank, address in Buenos Aires, Argentina, April 23, 1962_ 86 "Six Billion Dollars Invested Abroad-Flight of Native Latin Capital Threatens U.S. Alliance Plan," article in Washington Post, May 5,1962. 4 "The Future of American Enterprise Abroad," summary of remarks to a meeting of American businessmen in Venezuela on March 7, 1961, by Alfred De Grazia, professor of government at New York University and editor of American Behavorial Scientist…---------------------------- 74 APPENDIXES Appendix A. "The Growth of Output, Employment, Capital Stock, and Real Wages in Basic Sectors of the Chilean Economy," by Tom E. Davis--------------------- -------------------------------------- 97 Appendix B, "Measures Implementing the Purposes of the Act of BogotA and the Spirit of the Alliance for Progress," excerpts from "The Social Progress Trust Fund," First Annual Report, 1961, Inter-American Development Bank------------------------------------------------ 115 Appendix C. "Economic Development in Latin America," article by Elba Gomez del Rey de Kybal and Milic Kybal in the Iowa Business Digest, fall 1961, report on Latin America---------------------------------- 133 Supplemental statement by Mrs. Kybal, "Why More Taxes-Mobilizing for the Alliance"-------------------------- ----------------------- 138 Appendix D. "An Analysis of Venezuelan Agriculture," by Raymond J. Penn-------------------------------------------------------------- 142 Appendix E. "Possible U.S. Government Actions To Stimulate the Con- struction of Private Housing in Latin America," International Basic Economy Corp----------------------------------------------------- 149 III ECONOMIC DEVELOPMENTS IN SOUTH AMERICA THURSDAY, MAY 10, 1962 CONGRESS OF THE UNITED STATES, SUBCOMMITTEE ON INTER-AMERICAN ECONOMIC RELATIONSHIPS OF THE JOINT ECONOMIC COMMITTEE, Washington, D.C. The subcommittee met at 10 a.m., pursuant to call, in room 4200, New Senate Office Building, Hon. John Sparkman (chairman of the subcommittee) presiding. Present: Senators Sparkman and Javits; Representatives Griffiths and Curtis Present also: John W. Lehman, deputy executive director, and William H. Moore, economist. Senator SPARKMAN. Let the committee come to order. The Latin American States have reached a stage in historic de- vrelopment in which longstanding social and economic imbalances seem to require new solutions if these countries are to grow, as is their natural bent, along Western democratic lines. The United States, for its part, has long recognized the closeness of the Latin American countries as neighbors, and felt the desirability of closer association in the interests of trade, culture, peace, and security. This awareness on the part of the United States, dating back to the Monroe Doctrine in 1823 and, coming down through various Pan American conferences, has, admittedly, not always been as well implemented as it might have been, and has been often mis- understood. Progress toward mutual trust has been slowed partly by differences in tradition and temperament. The people of the United States find the political instability and at times the political organization of our neighbors to the south difficult to understand. The people of Latin America, on the other hand, with strong natural, cultural, and ethnic ties to Western Europe, tend to have an exaggerated fear of Yankee paternalism, and may respond with evidences of a distrust or resistance that are discouraging and frustrating to what we mean to be helpful efforts. Faced today with the world ambitions of an irreligious and un- scrupulous aggressor, neither Latin America nor the United States can afford to indulge any longer these differences in temperament or tradition. The Alliance for Progress, with its mutual obligations, is an at- tempt to overcome these inter-American differences and to present a cooperative and united front. It needs all the support it can be given on both sides of the Rio Grande. 1 2 ECONOMIC DEVELOPMENTS IN SOUTH AMERICA These hearings carry on the inquiry begun by this subcommittee last fall by conferences in South America on how inter-American poli- cies can be more closely meshed and the Alliance made genuinely effective. We reported our observations based on several score of conferences held in South America in a recent report entitled "Eco- nomic Policies and Programs in South America." The hearings today and tomorrow continue that study with a view to confirming or modifying the findings of our on-the-spot conferences. We especially hope to get suggestions on how our policies and pro- grams can be improved still further. We are well aware that many people, overwhelmed by the difficulties of a good program, are inclined to pass it off by saying we are "too late with too little" in South America, or, more recently, criticize the Alliance for Progress for not having shown greater results in the short year since its conception and formalizing at Punta del Este last August. We are fully aware of the great task and the great competence for overcoming these problems that the officials of the Alliance bring to the task. It is our hope that in these hearings, in addition to in- forming ourselves, we will be helping these officials by providing an opportunity to gain additional views and experiences from non- governmental experts as to how our policies and programs can be improved and made more effective. Incidentally, each of these wit- nesses is appearing to give us the benefit of his own views and experi- ence which do not necessarily represent or coincide with the views or policies of the organization with which each is associated. Without in any way suggesting a list of exclusive or inclusive ques- tions, an appropriate frame of reference for our inquiry involves such questions as these: What are the chief present deterrents to private investment in Latin America? What are the relative roles of "people to people" and "govern- ment to government" aid, loans, and programs? WAThat are the hopes for diversified production to reduce the traditional dependence of the several countries on a few primary commodities? Are the Latin American countries themselves willing and able to do what is necessary to bring about the kind of economic and social changes contemplated by the Alliance for Progress? What can we, in all our sincerity and zeal as good neighbors, best do to win the understanding and trust of Latin America? As far as possible, we will hear the opening statements from each of the members of the panel without interruption and then pro- ceed to the questioning. I will ask that the panelists, as suggested in our invitation, to