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AS THE situation clears in Europe it is rapidly becoming more evident that the recovery of the old world involves, and is in fact largely dependent upon, the intimacy of its economic contacts overseas. With the gathering momentum of the Dawes Plan, the restoration of a "business government" in Great Britain, the surprising economic rehabilitation of Italy, and the industrial and commercial recovery elsewhere on the continent, it is quite clear that the economically "new" lands of Latin America are to play a prominent part in this new era.
In certain cases, in fact, notably those of England and Belgium, a definite part of the recent industrial recovery has been directly traceable to long established financial and commercial reserves in the American Republics, which have stood the older countries in good stead during their recent years of need. Some-what similarly, Italy's transatlantic assets, namely her emigrant colonies which in recent decades have had such a notable growth to the south of the Equator, have provided an invaluable source of necessary capital for the new Italian régime. On the other hand, the recovery of French trade and industry from 1919 to 1923, striking though it was, would undoubtedly have been even faster and more complete had it not been for the concentration of French pre-war investments almost entirely in Europe, particularly in Russia.
The old ties between Europe and the southern republics are taking on new forms. For instance, South America's most promising area, the southeast coast, which in pre-war years was almost entirely served by European shipping lines, is likely to have a conspicuous share in the new age of transatlantic air traffic. French exploitation of Dakar on the western tip of Africa as a terminal for such traffic is showing signs of something more than academic interest. The recent announcement of the contemplated transfer of the Zeppelin works to Seville is another instance of the same tendency, and is further of international concern as a part of the post-war revival of Germany's well-known interest in the Pan-Hispanic as a counter-balance to the Pan-American movement.
Even more significant, of course, is the marked intensification since the war of blood relationship between Europe and Latin America. Latin America has long been a favored destination for those flying fragments of population which are constantly thrown off by the whirling economic and political turmoil of the Old World. The recent restrictive immigration policy adopted by the United States has accentuated this link between the two areas. Incidentally, the recent triumphal tour of the Italian Crown Prince through Brazil, Argentina, Uruguay, and Chile is worth bearing in mind in connection with Mussolini's pronouncement on the immigration policy of the United States.
One phase of this social relationship which is not sufficiently appreciated is the constant ebb and flow of the harvest hand "golondrinas" or "swallow" migrants, whose annual visits back and forth across the Equator provide an intimacy and continuity of contact which is much less evident in the North Atlantic migrations. In many important instances of agricultural and industrial (particularly mining) advancement in Spain, Italy, and Portugal the inspiration can be directly traced to these annual visitations of thousands of aggressive and ambitious workers from those countries to the New World and their observation there of the latest American machinery and methods.
It is well, too, to bear in mind that this factor of two-way immigrant traffic in considerable numbers each year will be a lasting advantage in favor of European shipping in Latin American traffic as against that of the United States. The well-known axiom of the merchant marine, namely, that the steerage supports the line, while not always valid, still carries a good deal of weight, and there is no prospect of heavy steerage traffic between North and South America for decades to come. The policy of the American shipping lines, therefore, has been rightly, and it should be noted quite successfully, concentrated on the high-grade passenger business in which it has now established a clear leadership. In fact, its tonnage to both coasts of South America has increased about 40 percent since April, 1923.
In this connection it will be well to note the repercussions of our restriction of Japanese immigration upon the relations between the Island Empire and the Latin Republics on the Pacific seaboard, where post-war shipping and commercial contacts are being extended by Japan with characteristically close collaboration between governmental and private agencies. Whenever the development of this situation requires recognition through the negotiation of new commercial treaties between Japan and the various republics, we may expect to find that the question of immigration, which is so vital a part of any shipping program, will undoubtedly be given careful attention. As yet Japanese commercial and maritime enterprises have given no indication of competing seriously in Latin America. It would require unusually heavy governmental subsidies and other aids to overcome the formidable economic and geographic obstacles which confront the Japanese merchant marine in such traffic, though Japanese requirements for cotton, copper, iron ore, nitrate, and other bulky raw materials may serve as a partial corrective of this situation.
From the Latin American point of view, one of the most important reactions from the inauguration of the Dawes Plan was its stimulation of the demand for raw materials necessary for the European revival. The consequent stabilization of old world currencies almost instantaneously had its effect in every important Latin American market. This was particularly true in the important areas of temperate South America, the products of which in many instances had their only outlet across the Atlantic. An interesting phase of this strengthened relationship through the purchase of more Latin American raw materials by Europe is found in the overtures by various European nations for preferential tariff treatment for their fabricated exports in the southern markets. In several important Latin American countries such proposals have been advanced by the representatives of various European governments, in some instances with preliminary success. It will be interesting to observe the progress of such negotiations, particularly in view of the fact that the commercial policies of the American Government are being shaped in the opposite direction, namely, away from any proposals of preferential treatment. In fact, in some instances there has been a tendency in Latin America to concur with the general policy of the northern neighbor as to the dubious value of any such bargainings in preferential advantages. (A minor phase of this topic may be noted in the probable revival of the question of imperial preference under the new Baldwin Government in connection with the British West Indies, which have for some time been the scene of special trade promotion on the part of Canadian representatives. An intensification of this policy might well have considerable significance for the American flour trade, and possibly for one or two kinds of manufactured goods, in the lesser Caribbean markets.)
This naturally raises the question as to the effects upon the United States of the new European trade outlook in Latin America. Are we likely to be relegated to a minor position in this field, or has our undisturbed preeminence during the past decade given our economic interests in those regions something more than a surface foundation? There can be no doubt that our proportion of the trade in these lucrative markets has fallen since the peak years of 1917-21; but it is well to remember that our share in the import trade of the so-called ABC countries now stands at about 24 percent as against 16 percent in 1913. It should be carefully noted, however, that this was not entirely a war-time acquisition. There were ample indications as early as 1911 that America's advance in those three countries was gathering momentum far more rapidly than Germany's or Britain's. In fact, it could probably be demonstrated statistically by those who are fond of such hypothetical speculations that our present percentage of the trade of the three leading South American countries is not far from what we would have had if there had been no war.
Britain has already recovered her pre-war leadership in Argentina and Brazil. The United States still retains first place in Chile. Germany is making notable progress, especially in Chile, though she is still third in all three of the ABC countries. In the markets of the northern republics, particularly Mexico and Cuba, there are no indications of any serious inroads upon the supremacy of the United States. Whereas a decade ago Europe was supplying about half of their needs, it is now contributing a bare 30 percent, and this figure is showing signs of further diminution at an early date. The interesting feature of the trade struggle in this particular section of Latin America is the rivalry between Britain and Germany. In Mexico, for instance, each of them supplied about 13 percent of the pre-war import trade, whereas today each contributes slightly more than six percent. Germany is now again on even terms with her rival; she has far outdistanced France, which held a momentary advantage during the years immediately after the armistice.
Certain potent factors will bring about the concentration of the European drive very largely on the lucrative markets of the River Plate and Brazil. Elsewhere in Latin America the European trades is confronted with formidable opposition in the shape of greatly improved American shipping service, made especially effective in the case of the West Coast through the agency of the Panama Canal; the heavy expansion of American investments and of American branch banks; the creation of a dozen new American Chambers of Commerce since 1912; the establishment of direct commercial agencies; and the growth of vastly improved communication facilities, and other ties of similar nature.
A significant feature of this commercial advance by the United States is the fact that much of it is what might be called new trade, made up of commodities which previous to the war had been sold only in small quantities--such lines as cheap automobiles, films, office furniture, construction material, readymade clothing, machinery for new industries, etc. These at present represent important elements in the Latin American import trade which formed only a very small item in the trade before the war. Even in such an apparently competitive line as textiles it is evident that although the United Kingdom is about holding its own in Brazil, Peru, Mexico, and elsewhere, the United States is taking a larger proportion of the new business which has grown out of the recently increased purchasing power of those countries.
It is true that hereafter Europe will be laboring to a lesser degree under the disadvantage of quoting prices in wildly fluctuating currencies. Furthermore, the decreasing uncertainty of her own industrial conditions will facilitate that long-distance planning and operation which is indispensable to any successful export policy. But even allowing for these advantages she will find the United States in a decidedly formidable position, thanks to certain important factors which have always been contributory to success in foreign trade.
Of these factors there first of all is the trebling, during the past decade, of American industrial and commercial investments (exclusive of government bonds) throughout Latin America. They now stand well over three billion dollars as against a little over one billion in 1913. American capital has a dominant position in such basic industries as mining on the West Coast and in Mexico, meat packing in the River Plate region, petroleum in Mexico, Colombia and Peru, and sugar and tobacco in Cuba. Significant advances are also probable along certain lines in Brazil. This participation by America capital in the economic development of Latin America not only stimulates the growth of an important market for American supplies incident to such large scale operations, but makes an even more important contribution by bringing into use hitherto untouched sources of wealth and well being, which has reacted profoundly upon the standards of living and the general social and economic outlook for great masses of population in the southern republics. The striking feature of this investment situation is the tendency toward a diversification of our interests. Whereas before the war American capital was concentrated in a few great mining and meat packing enterprises, it is now seeking a wide range of development opportunities.
But we are not to have a completely undisturbed monopoly of this business of supplying new capital to the Latin Republics. Just before the war British investors were each year sending about $460,000,000 worth of new capital abroad. About half of it was going to Latin America. Their annual investments during 1919-22 averaged far below this figure, but in 1923 they ran considerably above half a billion dollars, an ample indication of the revival of British investment activity along the pre-war lines. This was particularly noticeable in Brazil in connection with the work of the British financial mission to that country last year, an important phase of their interest was being centered on the possible expansion of the Brazilian cotton industry with the aid of British capital. We may look for a rapid expansion of British interests along this line in various parts of Latin America as one phase of the new Baldwin Government's program. It is well to remember that British holdings in Argentina and Brazil alone are about equal to the entire three billions or more of American investments throughout the twenty Republics. Her nationals still hold nearly a hundred railway and tram-line companies and more than forty light and power stations throughout Latin America; and there is every indication that this formidable total is likely to be increased, especially in leading industrial fields.
One of the most important contributions to American commercial advancement in Latin America is the notable increase which has been made since 1914 in the number of direct representations--agencies and branches--of American trading firms and banks. Before that date a very large proportion of American trade was being handled through European agencies which have now been largely replaced either with American or with non-competing native contacts. This new development, which has found expression in the organization of American Chambers of Commerce in most of the important trade centers along the Latin American seaboards, is counterbalancing to a certain extent the old advantage which Europe had always enjoyed in the possession of large colonies of young, expert, commercial personnel resident overseas. These colonies played a prominent part in the maritime and trade advancement of Britain and Germany, though they had in many instances been kept alive through their service as intermediaries for American firms.
It is well to note in this connection that the nationals of many smaller European countries have been active in such commercial operations in Latin American trade centers. Witness the Jugoslav bankers in Antofagasta and wool traders in Punta Arenas, the Scandinavian insurance and ship-chandlery concerns in most South American seaports, the Spanish retailers in Cuba and Mexico, the Poles in the timber trade of South Brazil, and the Italian grocery dealers in all parts of the Southern Republics. This inconspicuous but none the less active participation in the last stages of foreign trade, namely, transactions with the ultimate native consumers, has given and still gives our European rivals an important advantage in Latin American commerce which will probably be theirs for many years to come. Conditions in the United States will not for decades or even generations be such as to force any considerable numbers of young men to seek commercial futures abroad. As was indicated, however, there is a rapidly expanding appreciation among American export firms of the desirability of direct trade through nationally owned agencies and a nucleus of such outposts is steadily growing in each important Latin American trade center.
The tax policy prevalent among European nations with reference to overseas enterprises is lenient in comparison with the policy of the United States. Their general practice of exempting incomes earned abroad from the payment of income taxes has given their overseas nationals a decided advantage which must eventually be overcome by their American rivals if the latter are to prosper. This is particularly true in such highly competitive markets as Argentina, where the margin of superiority one way or another is apt to be very slight.
One notable advance which has been made by American interests in the past decade is in the field of cable service. European owned cables in Latin American waters now total about 25,000 miles, which is slightly less than the pre-war figure. The American mileage, however, has increased from about 14,000 before the war to 34,000 at the present time. There were few things which contributed more directly to European prestige in the eyes of the average Latin American before 1914 than the vastly superior news service from the Old World in comparison with that from the United States. Today the situation is precisely reversed; the average large Latin American newspaper now carries as much material on the United States as it does on all the rest of the world put together. The result is that the episodes of our day-to-day existence are being viewed in a much fairer light than was the case before the war.
Latin American technical experts and graduate students are now coming to the United States in hundreds as against the few scores of a decade ago. There is an increasing appreciation of the fact that our economic evolution confronted us a generation or so ago with precisely the same type of problems and obstacles as those which are now before the peoples of the south. The technique of Latin American agriculture, mining, road-building, hydro-electric and irrigation development is being inspired from American rather than European schools. It would be difficult to over-estimate the importance of this factor in the future relationships among the American republics.
From the European point of view, however, the fundamentally significant thing about this new era is not the possibility of American commercial or economic preeminence in a field which a generation or so ago was largely under the sway of Old World trade, shipping, finance, and industrial enterprise. The participation of the United States in the great new development of South America will bring advantages not to this country alone; our contribution toward the new economic life and strength of the southern empires will also be a vital contribution toward the increase of essential resources that are absolutely necessary for the recovery of the Old World. Latin America's truly extraordinary advance during the past decade offers secure ground for the conviction that there is not only ample room but an actual need for the United States and Europe to join together in collaboration with the rapidly growing native commercial, financial, and industrial communities in bringing that territory into its deserved position in the world's economy.