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Henry Judd

Latin America:
How Is Good Neighbor Policy Working Out?

(August 1942)

From Labor Action, Vol. 6 No. 32, 10 August 1942, p. 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

To the south of us lie the twenty-one Latin American nations sometimes politely referred to as republics. Our relation with these countries is, presumably, guided by the “Good Neighbor” policy and ten of them (Mexico being the largest and most important) have joined with the U.S. in declaring war against the Axis. Of the remaining eleven, all but two (Argentina and Chile) have broken off all relations with the Axis Powers and stand by the side of the big friendly brother of the North. The South American bloc is thus an important part of the United Nations and it is worth our while to see how things are going with the 100-odd million people “Down Mexico Way.”

All of the Latin American countries are poor agricultural areas depending upon whatever prosperity comes their way in the form of export and import trade. Each of them specializes in one or another product or raw material (coffee, sugar, bananas, cocoa, meat, etc.) which it sells to the world and the profits of which are used to buy manufactured goods. None of these countries has any real industrial development; all of them are (by comparison with America, England, Germany, etc.) primitive and backward – nations whose populations live at sub-standard levels of housing, clothing and food. The masses of Latin America are poverty-stricken workers and peasants.

U.S. Replaces European Customers

When the war began Latin American trade with Europe (except England) was wiped out. This meant a drop of one-third in exports and resulted in a serious depression and great unemployment during the year 1940. Latin America simply lost its markets and, if the United States were to continue to hold these countries in line, it meant that the big imperialist neighbor from up North would have to replace the European customers;

This is exactly what has happened – to such an extent that Latin America is now experiencing somewhat of a business and trade boom, with big profits rolling in. America is now importing goods at the rate of $1,000,000,000 a year from South America – a rate DOUBLE that of 1939, a bad year. This has more than made up for the lost European trade. There is no doubt that 1942 will be the best year for Latin America since 1929 and that large favorable balances of trade (excess of exports over imports) will be rolled up by many Latin American republics: This new wave of prosperity has brought much joy to South American exporters, big cattlemen, bankers and the like. The flow of new American dollars from the Export-Import Bank (for the purpose of stimulating new industrial enterprises like Brazil’s first steel mill and rubber production in Bolivia, etc.) is also something quite welcome to the small but ambitious capitalist classes of the various South American nations.

“Prosperity” Raises New Problems

But these obvious gains are bound to be short-lived and the dangers that accompany them are far more serious than the superficial advantages of the moment.

In the first place, only a small section of the population – the native capitalist class – draws any serious benefit from them. The lives of the South American masses remain as before. As for the leaders – while they eagerly grasp the American dollars with one hand, in their minds is a growing fear of this new American imperialist penetration and a growing knowledge of how this means a complete dependence upon American capitalism for their further existence.
Furthermore, this “prosperity” is accompanied by many new problems’ of its own:
(a) Shipping losses not only threaten to disrupt the flow of trade, but the Nazi U-boat warfare tends to drag unwilling countries into the war;
(b) South American consumers’ goods (like sugar, coffee, wool, cocoa, food products, etc.) are not being purchased. Non-war materials that South America has always sold are accumulating and rotting on the docks at Buenos Aires, Rio de Janeiro and Montevideo. This depresses one section of South American economy for the benefit of that section that produces the war materials (rubber, tin ores and metals). The older capitalists and plantation men are hard hit.
(c) Because of shortages in America production of manufactured goods, South America cannot buy from us with their accumulated profits. We do not have the consumers’ goods to ship to them – only money. As a result, there is a shortage of steel, metals and all industrial equipment.

The favorable balances of trade that the new “prosperity” creates thus turn out to be largely an illusion, benefiting only the greedy bankers, etc., and in no way raising the general living standards of the country. They ship us their raw materials, receive nothing but credits in exchange; thus disrupting the very basis upon which their economy has rested.
Latin American nations – as a result of this influx of new capital from abroad, as well as the increased trading – now contend that they have an inflationary problem. Argentina would tend to bear this out, as an example. For, in that country, wholesale prices have gone from 100 (1939) to 183 (March 1942). Prices of all imported goods have naturally skyrocketed since the situation we describe above became acute. Of course, this inflation problem affects primarily the native capitalists and the more prosperous middle class layers, since the masses of Latin America never have had the “problem” of purchasing autos, radios, washing machines and other American exports. What price the trade boom, then?

Boom Rests on Shaky Basis

All in all, it is clear, that Latin American boom days are resting on a temporary, shaky and insubstantial basis. It is a pure speculation, resulting from the peculiar war conditions and does not represent any normal, healthy and rounded growth in the economic systems of these countries. On the contrary, it represents a special form of imperialist penetration by the grasping hand of “Yankee imperialism.” Instead of occupying the Latin American nations by force, we seize control of them with the American dollar by offering ourselves as the only possible customer and the only source of the small dole of manufactured products we are willing to hand out.

Next week we shall discuss American relations with Argentina – a subject that the American press is full of and which is of great importance since Argentina is the most powerful and important of all the Latin American nations.

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