Courtesy Reuters

Foreign Loans and Politics in Latin America

THE need for solidarity and understanding among the nations of the Western Hemisphere is perhaps more obvious than at any time in our history. If we are to preserve the national independence and sovereignty which we each deeply cherish we must come closer and closer together, depending more and more on each other's support. There is even less chance for isolated, individual survival today than there was in the Nazi era.

Although we may agree fully on the necessity of bringing our peoples more closely together, the opportunities for misunderstanding are great. This is especially so in cases where anti-Americanism can pay political dividends. Misunderstanding can be much reduced, however, if no action is ever taken by the United States abroad in the interests of a special group or even a party in power but only on behalf of the welfare of a people as a whole. This is particularly true in the case of loans and other financial operations, where the greatest good--or the greatest mischief-- can be done. No matter how well-meaning the United States may be, great care should be exercised when a helping hand is extended to any country. This is not an easy thing. It can be done only by people who are familiar with local conditions and know what the real needs of the country are.

Take as an example the case of a government with an unbalanced budget. There is no capital market in Latin America such as is known in the United States and some European countries, and a budgetary deficit cannot be made good by an issue of bonds. Private investors will not buy them. The Treasury then has recourse to the central bank which, by increasing the circulation through issuing more notes, can supply all the money that is wanted.

The consequent inflation causes a rise in the cost of living which is very soon felt by everyone. Workmen, employees and, in fact, the whole population feel the pinch and become

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