What Is Ahead in the Americas
By J. C. ROVENSKY, Vice President, Chase National Bank of New York
Delivered at the War Service Meeting of the American Bankers Association, New York, September 14, 1943
Vital Speeches of the Day, Vol. X, pp. 14-17.
IN thinking about what lies ahead for the Americas in the post-war period it is necessary for us to try to visualize what the general picture will be when peace comes. If the succession of events should develop as now seems probable, the end of the war in Europe will come first. Then later, after victory has been achieved in the Far East, the world will be at peace again. And peace as it comes in each area will confront us with the problems of post-war reconstruction. Therefore, the road back to normal peace time conditions will be long and will be marked by successive stages of progress. The machinery of recovery and rehabilitation will start in low gear, then go into second speed, and finally into high speed.
At home, the conversion of our war industries to fit into a peace time economy also will swing through successive stages but at a swifter pace than can be achieved in reconstruction overseas. It may be possible to commence assisting in European reconstruction while the war still is being fought in the Far East, but such assistance probably cannot be rendered on a great scale until final victory over Japan has been won.
The building of a new Far East will be a stupendous task. There will be so much to do. The Philippines, along with Australia, the Dutch East Indies, and other areas will be revitalized with new hopes and new ambitions. This situation will bring us, as Americans, great opportunities and, if we accept them, great jobs to perform.
However, much will depend on the attitude of our own people. Will we really become internationally minded, and in which parts of the world will we have a greater interest? Which will seem more attractive? Which will bring the greatest opportunities? After we consider these questions in the aggregate, as a nation and as individuals, in the light of a world which has been largely torn by war, there is no doubt that we shall focus much of our attention on our neighbors in the western hemisphere. We shall be inspiredby the forward march of the Americas, now more closely bound together than ever before.
It is important to note the changes which have occurred in inter-American relations during the war years, as the necessities of war time have produced mixed blessings. The peoples of the Americas were forced into greater interdependence by the loss of world markets and world sources of supply. This made it necessary for us to cooperate more intelligently and more thoroughly with each other.
At the same time, scientific and technological development have brought us substitutes and new materials, some of which are here to stay. Just as the war created a new situation in this respect, so with the coming of the peace still another pattern will develop. There will be new dislocations and new problems affecting raw materials. The marvelous development of synthetic rubber in the United States is a case in point. Many authorities have expressed the opinion that the synthetic rubber industry is here to stay. However, the supplementary natural rubber that has been produced in certain countries of the Americas under the spur of war necessity doubtless will be used within the producing countries to meet their own needs.
The production of fibres, twine, rope and burlap likewise can survive in the Americas, as well as the production of edible and inedible vegetable oils, which has been greatly accelerated during the war.
It is an exceedingly important fact that the countries to the south of us in this hemisphere constitute the only part of the world which on balance will emerge better off at the end of the war than before. As a result of the sale of vast quantities of materials needed in the war effort of the United Nations, without which our fighting machine would have been slowed down, the countries of Latin America have been able to accumulate a substantial reserve of dollar balances. These reserves of dollar exchange have mounted highbecause of our inability to supply in wartime much of the manufactured goods and other commodities needed by the countries to the south of us. Naturally, those countries will be more "U. S. dollar-minded" than ever before. They will have incurred a deficiency of at least three years in many things which they greatly need and for which they have looked to us in the past. Naturally, they will be eager to absorb the products of our great manufacturing industries in the United States.
However, as the markets of the world gradually reopen, the natural trend will be for each country to expand its buying from those areas in which they are able to sell their products. That trend in turn depends on the kind of a world we will have and the pattern of trade that the world will adopt. If agreements and understandings cannot be reached which will make for a free world in which to trade, then man-made shackles again will restrict the free flow of goods.
There is little doubt in my mind but that the countries of the western hemisphere are on the threshold of a great development. But here again much will depend on post-war conditions and also on the degree of mutual interest which develops between our country and the various other countries of this hemisphere with respect to post-war cooperation.
For instance, the areas of South America that lie in the temperate zone, where the agricultural products are basically the same as those of the United States and Canada, naturally must compete with us on the world market in disposing of whatever surplus of those commodities may be produced. This economic fact ought not to be permitted to continue as a source of irritation and misunderstanding.
The American industrial and business interests which are wisely giving consideration to the extension of their operations in South America will receive the collateral benefits of the pioneer work which our industry has done in the past in the countries to the south of us. Many pioneer companies, including Singer Sewing Machine, the Linotype, National Cash Register, and International Harvester, have made it easier for our automobiles, refrigerators, radios and aircraft to be accepted, because United States products were found to be good. The radio, the movies, the catalogues and our North American merchandise are making us all kin.
I have endeavored to draw up a hypothetical balance sheet of our inter-American relations as such a balance sheet might appear at the end of the war. On the asset side, the pluses, are the following items:
1. We have shed blood in a common cause,—there can be no stronger bond.
2. We have developed a closer understanding.
3. The Latin American republic will have more United States dollars than ever before and they will be more dollar-minded.
4. Certain of their industries, notably the mining industry, have been materially expanded, and the production of rubber, fibres, and oils has been sharply increased.
5. The nations to the south of us have greatly developed their trade with each other—a most useful trend.
6. Air transportation has conquered distances and natural barriers.
7. The peoples of the Americas to the south of us have set their sights higher. They have the ability and the ambition, as well as the resources, to go ahead.
Now on the liability side of the ledger may be listed some minus items, as follows:
1. There will be some remnants of Nazi influence here and there working hard to poison inter-American relations.
2. There may be some degree of resentment over the inability of the United States to provide urgently needed materials to our southern neighbors during wartime.
3. There will be in some countries great expectations of liberality from the United States.
4. There will be a number of unsolved defaulted debt situations.
5. I fear that in some areas there will be a growing nationalistic trend, a feeling of self-sufficiency, tending to induce restrictive legislation affecting immigration and activities of foreign companies. This trend may retard and greatly hamper commercial and industrial developments where outside assistance would be useful.
However, one can see at a glance that on the whole this balance sheet presents a very favorable picture. It is my opinion that in this attempt to take a frank and realistic look at the inter-American scene we may find many reasons for encouragement and optimism.
A large number of individuals and companies in the United States are contemplating and investigating possible opportunities for post-war business in South America. I hope that they realize that the peoples in the South American countries themselves are doing some planning and investigating of their own. After all, each country belongs to its own people and they properly will set the pattern and decide what they think comes first. However, if we on our side and they on theirs in this western hemisphere fail to find a formula for development which will work out to our mutual benefit, then we both will be the losers.
All of us as businessmen may rightfully take pride in the outstanding achievements which capital and management from the United States have made in developing the natural resources of many countries in the western hemisphere. The real significance of teamwork and cooperation in that field becomes apparent when we stop to consider that millions of tons of copper in the Andes mountains were of no practical value lying dormant deep below the surface. But the enterprise, large capital investments, and great engineering skill of men from the United States, together with rugged native workers, have made it possible to extract that copper from the mountains, transport it to factories, and fabricate it into gleaming wire and other products which serve mankind in a thousand ways. At the same time, the people of those copper mining countries in South America have benefited in wages and tax revenues that have contributed substantially to the life of their communities.
Similarly, let me remind you that it needed more than the combination of fertile soil and tropical climate to lift the banana plant from its secluded place as a rare table luxury to its position as a great staple food used by millions of people. It was the vision, the organizing genius and marketing skill of businessmen from the United States, together with large capital investments, which accomplished that transformation and at the same time brought about an inflow of wealth and an improvement in the living standards of those areas where the banana industry flourishes.
At this point I should like to attempt a brief appraisal of some of the problems in the area of finance and investment. Most of the countries in the Americas have substantial, long-established commercial banks of their own. Those banks handle most of the local and domestic business and there is no important conflict between them and the branches of United States banks and other foreign banks which operate in the various countries. The North American branch banks comprise a useful part of the financial machinery in those countries and are constructive factors in developing theirforeign trade. There is a need and a place for both the domestic and the foreign commercial banks and it is quite important, in accordance with the principles of commercial banking, that these institutions, the bulk of whose funds belong to their depositors, should confine themselves to commercial banking transactions.
In the field of investment capital, involving stock participation and long term loans, the supply of accumulated local capital probably will be inadequate to meet the contemplated expansion in many of the countries of the southern hemisphere after the war. As a result, there will be a need for considerable outside capital which is willing to make investments on a long term basis.
The exchange rates on currencies of the Americas during the wartime period have remained fairly stable, whereas the past record was spotted with wide fluctuations. With the greatly improved financial position of all those countries which have been accumulating holdings of gold and foreign exchange, the nations of the Americas should embrace the opportunity to join with the other countries of the world in a comprehensive plan of post-war monetary stabilization and the elimination of trade-retarding controls, when a satisfactory plan finally is evolved.
I am hopeful that in the years to come some of our neighboring countries will be able to work out a broader foundation for their fiscal revenues so as to eliminate the excessive duties that are now placed upon imports of essential products, such as foodstuffs in some instances. It is perfectly obvious that if there is a 100 per cent tax on flour in areas where flour is greatly needed, that tax merely acts as a brake on improvement in the standard of living.
In trying to appraise the various types of financial operations which may be necessary in our inter-American relations in the future, I am inclined to make three general classifications:
1. The first consists of new enterprises which will be started by private business alone, financed with private funds. I hope and believe that this will comprise by far the largest classification. An example would be the development of a food processing plant in a situation where private enterprise is confident that the venture will prove to be profitable.
2. The second includes new projects financed by private capital but with some assistance from the United States and/or South American governments. An example of this type would be a hydro-electric project which would require a large amount of capital and would need some governmental assistance for a period of time until it reaches the stage of profitable operations.
3. The third includes projects not appropriate for development by private capital where government financing alone would be necessary. Examples would be drainage projects, clearing of lands, and the opening of new areas where government action must first be taken in order to create conditions under which individuals and private concerns can start new activities.
In past years the attitude of our government for rendering financial assistance to the countries south of us has been prudent and conservative. The management of the Export-Import Bank has been intelligent and farsighted. The bank has not squandered our money. It has cooperated with American industry and has been of material assistance to other countries of the Americas. On the whole, I think it has done a good job.
As we contemplate the future development which appears to be possible in the Americas to the south of us, there are certain fundamentals which should be clearly stated. In thefirst place, financial assistance from private sources in the United States can be obtained only on merit. I know of no magic credit formula. Long term capital will flow only into areas where political and economic conditions are reasonably stable, where the past record is good and where the prospects for the future are right. Under those conditions, capital will seek investment at normal rates of interest.
Both from the standpoint of the nationals of South American countries and from the standpoint of our interests as citizens of the United States, I favor joint partnerships and stock participations in commercial or industrial organizations. In all ventures where a group or individual from this country is making a South American investment I would favor a goodly participation in that enterprise by the nationals of the country where it is to be started.
I would accept as fundamental the principle that as the capital resources of the various South American countries increase, more and more of the ownership of these joint enterprises should be purchased by the citizens of those countries. I have no fears of minority or majority holdings under reasonable conditions. Much of the great expansion of transportation facilities and industries in our own country during its pioneer period was financed with the help of foreign capital.
I do not favor our going into the development of projects where our financial, technical, and manufacturing assistance are not required. We must pay more attention in the first instance to what contributions can be made toward needed expansion than to what we are going to get out of it, as the long-run test is that of mutual benefit. I strongly feel that since this kind of collaboration is essential for the development of the many opportunities which exist in South America, progress will be retarded unless these basic factors are really understood and a spirit of mutual confidence and cooperation exists.
There is one type of financial mechanism which is wholly inadequate in South America. That is in the field of facilities for consumer credit, which are available only on a limited basis in a few countries of that area. During the past thirty years we have developed in the United States an effective financial machinery for consumer credit which has stood the test of good and bad times and has stimulated large scale production of many useful things. If anything like a comparable volume of sales of automobiles, radios, refrigerators and other equipment is to be anticipated in South America, then the facilities for financing consumer credit on an instalment basis will have to be greatly augmented. This is one problem to which the financial minds of our country and the other American countries might well apply themselves.
The approach to the further development of commercial relationships among the American Republics has been greatly assisted by the establishment of the Office of the Coordinator of Inter-American Affairs, as well as that of the Inter-American Development Commission, which two offices work in close collaboration. Both are under the able direction of Nelson A. Rockefeller. The facilities of those offices are available for the use of bankers and businessmen.
In conclusion, let me say that I think it is highly appropriate that the bankers of the United States should post themselves on future possibilities within this western hemisphere. It might indeed be a helpful move if the American Bankers Association should give consideration to organizing an inter-American division.
It is significant that this Association is devoting an entire session of this convention to the discussion of inter-American relations. That is more than a straw in the wind. It is significant also that a distinguished Canadian banker was invited to address us at this session, representing the great nation to the north of us with which we enjoy so close andso friendly a relationship. It is equally encouraging to have with us as a guest speaker at our session today a prominent member of the banking fraternity in Mexico, our neighbor to the south which likewise is standing side by side with us in the grim battle against the forces of the Axis.
The membership of the American Bankers Association represents more than a cross section of the people of our
nation. It represents responsible leadership in local communities and it is that type of leadership which must give impetus to the sound policies and wise financial statesmanship of our country in the post-war world. We face immense responsibilities and great opportunities in that period. We must ask ourselves this one primary question: How good a job are we going to do?