The Atlantic Report on the World Today: Latin America

THE story behind the Venezuelan iron discoveries reads like an industrial melodrama. A year or two before Pearl Harbor, Bethlehem Steel explorers found a small mountain called El Pao a short distance south of the Orinoco River, 300 miles or so above its mouth, with an ore content at the surface reaching 72 per cent. The company arranged a mining concession with the government. Then for eight years it abandoned the site because of war conditions in the United States.

This year scoop-mining machinery is being moved in, crusher mills are being set up at the foot of El Pao, and a railroad is being built to the town of Palua on the Orinoco, from which the treated ore will be shipped to a new Bethlehem port of El Hierro (Iron) on Venezuela’s Paria peninsula opposite the island of Trinidad. There the iron ore will be transshipped to oceangoing ore ships and brought to the United States to be converted into steel at Bethlehem’s Sparrows Point plant in Baltimore. First shipments are expected to arrive by the middle of the year.

Approximately 75 million tons of high-grade ore are estimated to be in the El Pao tract. When production reaches its peak in 1952, it is expected that shipments to the United States will average 3 million tons a year. By agreement with Venezuela, Bethlehem will get all the profits on the first 50 million tons of output over taxes, but will split fifty-fifty on the rest.

Venezuela’s iron bonanza

Venezuela’s biggest iron bonanza, though, came in April, 1947, with United States Steel’s discovery of a bigger and better “iron mountain,” estimated, with a few outlying tracts, to hold 1.3 billion tons of ore. Half mile of test tunnels have shown that for 150 feet below the surface the ore is between 63 and 67 per cent pure iron, and that the deposits probably run deeper than 500 feet. The mountain, originally known as La Parida, has been rechristened Cerro Bolivar by U.S. Steel public relations experts, in honor of the liberator of Venezuela.

U.S. Steel’s development problems, however, are somewhat more complicated than Bethlehem’s, so that it may be five years before any Cerro Bolivar ore reaches the United States. The Cerro is situated further inland south and west of El Pao, and a 90-mile railroad will be required to bring the iron to the Orinoco. From there it can be transported either by the railroad for 275 miles to the port of Barcelona on the seacoast or, after expensive dredging operations over a period of years to clear the Orinoco, by seagoing ore ships of big tonnage.

In any case, U.S. Steel expects to begin shipping approximately 15 million tons a year of Cerro Bolivar ore to the United States by the early 1960s, and plans are being considered for a new steel plant at the head of tidewater near Trenton, New Jersey, to handle it. The net effect of the South American ore developments, indeed, may be to shift a considerable fraction of the steel industry of the United States eastward from Pittsburgh.

Meanwhile the Venezuelan iron development program is bound to have a deeper impact on the Hemisphere economy than any of these factual industrial arrangements suggest. There definitely appears to be more iron in the Venezuelan deposits than there is of high-grade ores — an estimated 1.25 billion tons — left in the famous Mesabi range of Minnesota. This means that, even at the present consumption rate of 100 million tons a year, fatal depletion of United States reserves can be put off for a considerable period. And if heavy stockpiling should be required by some future emergency, production could be stepped up to meet the crisis.

Furthermore, scores of thousands of Venezuelans will find steady, well-paying jobs in the iron mines and in all the construction, transportation, and supply operations that go with them. Hundreds, if not thousands, of individual Venezuelans will get training in the technical and executive processes of industrial big business. Cities and towns will grow up, with schools and progressive health and sanitation programs, in the backward but potentially rich agricultural region of the lower Orinoco plains. A large fraction of an impoverished people will live close to and prosper by the energizing impulses of a great American industry operating at full power.

These should be elective talking points for Edward G. Miller, Jr., new Assistant Secretary of State for Inter-American Affairs, in his campaign for reasonable openings for United States private investments in Latin America. Brazil, for instance, has iron resources apparently as rich as, if not richer than, Venezuela’s. They are deeper in the interior, and therefore more difficult to bring into the current of world trade. But when the Mesabi reserves and the Venezuelan stocks are exhausted, they will become as essential to United States needs and the world supply as Venezuela’s are today regardless of the high cost of transportation and development.

If a deal for a Venezuelan iron program can be worked out now, satisfactory both to the investing corporations and the Venezuelan government, so can one be worked out between United States private investors and the Brazilian government when the time comes. So can deals for rubber and hemp fiber, for vegetable oil, for chemical, mineral, and medical substances, be worked out with all the Latin American republics.

If U.S. Steel and Bethlehem keep out of Venezuela’s domestic politics and avoid all unnecessary labor troubles, the case for United States investments in Latin America will have been proved. It is not a question of economie imperialism; it is a case of share and share alike in the benefits of the Western Hemisphere’s economic advancement.

What chance for private investment?

So far there has been little emotional ballyhoo or effort at political leadership in the revival of the Good Neighbor policy. The emphasis is chiefly on closer economic ties with the Latin American republics, and on United States assistance, largely through private investment and big business operations, in the development of economic productivity in the Hemisphere.

Assistant Secretary Miller has spent a large part of his time since his appointment last summer traveling in Latin America and talking with government. leaders and business groups there. Although Mr. Miller by no means has refused to face up to certain political regimes south of the border, the main burden of his sales talk has been to the effect that Latin America’s best hopes of prosperity and stability lie in giving a better break to foreign investors.

Latin American industries can develop faster, the argument runs, and Latin American resources can start moving out of the ground and into the stream of world trade as soon as foreign investors — mainly from the United States — become reasonably secure from expropriations, ruinous taxes, and operating restrictions, and are free to transfer a fair share of their earnings out of the countries invested in. The general idea is to convert the Good Neighbor policy, and all that it has aimed at in the way of economic improvement in the Western Hemisphere, into a private-enterprise operation.

Back of this campaign lies a complex set of motives. United States policy would like to see the Latin American countries develop healthier economies, which would contribute to stable political conditions and progress along the lines of political democracy. It would like to provide attractive openings for American investment abroad, especially in fields where increase of foreign trade within the Western Hemisphere may be fostered.

It would like to educate the Latin American governments away from the nationalistic and totalitarian ideas of economic regulation which they have picked up from Europe, by giving them plenty of experience in dealing with American business and industry.

Finally, it would like to see more sources of strategic raw materials opened up through the agency of American business as a hedge against the possible loss of Southeast Asian and East Indian sources. The more these sources within the Hemisphere are owned or managed by American business, the less we shall have to depend on emergency measures and cumbersome government-togovernmont arrangements, in order to get the materials out if some future global crisis should lead to the isolation of the Hemisphere.

It was with these considerations in mind that Assistant Secretary Miller took an extensive trip through Latin America in February and March, accompanied by George M. Kennan, veteran State Department expert on Russia and chief of its policy-planning organization. Their conversations dealt with the problem of economic coöperation within the Hemisphere and with the means of furthering it. This was also a main topic at the first meeting of United States ambassadors in the Caribbean area in Havana in January, and at a later conference of United States ambassadors to the South American republics in Rio de Janeiro early in March. Then, in the week of March 20, when Washington played host to the first meeting of the new Inter-American Economic and Social Council of the Organization of American States, the Miller drums of persuasion sounded all over again.

Rich country, poor people

The development of the Venezuela iron reserves by the Bethlehem and United States Steel corporations has provided Mr. Miller with a spectacular example of economic coöperation. But economic conditions in Venezuela weaken the force of his claims for the benefits of the free-enterprise system. By profit-sharing agreements made with United States and British oil companies a quarter of a century ago, the Venezuelan government has been drawing into its coffers millions of dollars each year.

As a result Venezuela has no foreign debt, and has a regularly balanced budget. Several thousand huge family fortunes in the republic are founded on oil royalties. The strongly unionized Venezuelan oil workers are among the best-paid labor groups in Latin America.

Yet almost none of this wealth is distributed among the population at large. Unskilled and semi-skilled workers in the Venezuelan city slums live miserably. Seventy per cent of the country’s 4 million people live on the land; but their system of agriculture is so backward and inefficient that close to 100 million dollars’ worth of food has to be imported annually. The poor in both country and city are harassed by chronically inflationary prices caused by excess prosperity at the top and a villainous set of high tariff’s on necessary imports.

New American enterprise

Now a new type of American freeenterprise operation is at work in the republic trying to overcome these obstacles to a free domestic economy. It is the Venezuelan branch of the International Basic Economy Corporation, headed by the wartime Coördinator of Inter-American Affairs, Nelson A. Rockefeller. And its aim is to show that reasonable profits can be made by deliberately fostering social and economic benefits.

Up to this point IBEC — or VBEC, as ils Venezuelan subsidiary is called — has been responsible for the investment of 16.5 million dollars in its projects. These include four model farm operations for crops, livestock, and poultry in four distinctive climatic regions of the republic; a warehouse and wholesale foodstuff’s chain to improve the distribution of Venezuelan farm products by introducing modern storage and refrigeration methods; a self-service retail grocery store in the Maracaibo oil center to demonstrate the possibilities of cheap merchandising methods; a dairy products corporation, and a fisheries corporation to popularize the use of Caribbean catches as a food staple in the heavily populated coastal regions.

None of these operations dates further back than November, 1947. Most of them, therefore, are slid too much in the experimental stage for Assistant Secretary Miller to use as concrete arguments in his plea for a warmer welcome to United States investment capital.

All but the milk products corporation, in fact, are still in the red. The fisheries corporation, for instance, ran into a $200,000 deficit in 1949, apparently for the simple reason that Venezuelans, after too long an experience with unrefrigerated fish, have the idea that all fish must be bad.

Under the surface, though, the talking points are stronger. Ten million dollars of VBEC’s investment in Venezuela has been provided by the oil companies already operating there. Another 5 million dollars is available from these sources as expanding operations may require.

At the end of live years of operation half the stock in BEC enterprises will be offered for sale to Venezuelan capital; at the end of ten years all of it. And the Rockefeller plan for IBEC, if the Venezuelan operations and some smaller but already more successful ones in Brazil prosper, is eventually to ring the continent with a series of enterprises designed to make the basic domestic economies of all the neighbor republics function for the general welfare of the people.

In a word, the IBEC program is seeking to strengthen the Miller program at its weakest point — by proving that in giving fair breaks to yanqui private capital, the Latin American nations will be importing, along with technical proficiency and power for developing their resources, a new sense of social responsibility and international good will.