Inviting Investment

The fruits of Milton Eisenhower's recent tour of South America include at least one plum rather sour to Latin tastes. United States embassies throughout South and Central America have received notice that future money for loans to private industry must come more from commercial investors and less from the Government.

Unwilling to continue its large scale capital exports, the Administration hopes that South American industry will route loan requests through civilian banking channels. Such loans would model inter-American business relationships on those of this country. Already the Export-Import Bank, the main agency for Washington's foreign loan arrangements, has diminished the flow of capital to private industry in South America. And this policy is a wise one. While loans to Latin governments for national improvements will continue, it is wrong for Washington to compete with private banking houses in a field that offers a legitimate area of profit. Nor is the Government willing to continue using budgeted funds to finance private gain in foreign countries.

Unfortunately, the United States must sell this new policy to governments and industrial leaders who can remember a time when Yankee investors looked upon the Marine Corps as their first line of economic guarantee. Furthermore, South American economics equates private investment from the United States with a strong desire to dominate built-up enterprises and drive out the native entrepreneurs. Aside from South American fears, the new Administration faces the problem of inducing domestic capital to leave the local security of equitable laws and sane SEC regulations for Latin America's often inhospitable economic policies.

To relieve South American anxiety, the Government is printing hosanas to the capitalist system, trying to show that its evils do not apply to the "American" form of investment. More effective would be a pledge that, while each country abides by its own investment laws, and so long as just compensation is made for any future nationalization of industry, the United States will in no way interfere with the economic dealings between the countries and the investors.

With such a pledge in effect, the problem of luring investment will be up to the individual countries. Argentina's recent law allowing investors to remove only eight percent of the profits they make on their capital investment looks, by comparison to other Latin countries, like the last word in progressive legislation. With a guarantee that the United States will respect internal laws prohibiting complete exploitation, South American countries will have to liberalize their economic regulations to a point that will encourage private investment.

If the days are gone when United States investors could strip a South American industry of its profits and end by exporting more money than they brought in for initial capital or improvements, over also are the gravy train days when easy Government loans were the watchword. Established on a basis of mutual dependency and profit between capital supplies in this country and the South American industries--each protected by reasonable South American laws--loans could, in the future, act as another bulwark to inter-American mutual aid and understanding.