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Digital Archive International History Declassified

1960

SOVIET REPORT, 'ECONOMIC COOPERATION BETWEEN LATIN AMERICA AND THE COUNTRIES OF THE SOCIALIST CAMP'

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    In this draft report circa 1960, the Socialist economic position in Latin America is analyzed.
    "Soviet Report, 'Economic Cooperation between Latin America and the Countries of the Socialist Camp'," 1960, History and Public Policy Program Digital Archive, Archive of the Russian Academy of Sciences, f. 1798 op. 1 d. 88 ll. 124-136. Obtained for CWIHP by Vanni Pettina and translated by Gary Goldberg. http://digitalarchive.wilsoncenter.org/document/122358
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THE ECONOMIC COOPERATION BETWEEN LATIN AMERICA AND THE COUNTRIES OF THE SOCIALIST CAMP

The current situation is characterized by deep shifts in the international relations of the countries of Latin America. The opening of the Soviet exhibition in Mexico and in Cuba, the trips of trade delegations to Brazil, Chile, Colombia, and Cuba to the Soviet Union and other socialist countries, and the broad discussion of the question of the establishment of diplomatic relations with the countries of the socialist camp - all this clearly demonstrates the upsurge of the liberation movement in Latin America.

More than any other underdeveloped regions the countries of Latin America are dependent on the United States economically and in foreign trade. This circumstance has been a very important factor determined

a) by the especially serious position of Latin America in the foreign market. The exports of Latin America have developed more slowly in the postwar period than the general volume of the exports of underdeveloped countries.

b) by the weakness of economic ties with the countries of the socialist camp.

The United States, which has seized the main part of the foreign trade of Latin America, has also monopolized the benefits from international exchange. It dictates the structure of the exchange and the price levels. The US buys only raw materials in Latin America. The US meets attempts by individual Latin American countries to begin exports of manufactured articles and even semi-finished goods with customs barriers.

At the same time the United States forces Latin America to buy industrial products, but not to produce them, and moreover to buy chiefly on the North American market. The US prefers to create branches of its companies, striving to thereby keep Latin America in the sphere of its economic and political influence.

The United States demands Latin America pay for its goods in dollars. At the same time Latin America on the whole has a negative foreign trade balance with the US. The dollar problem arising in connection with this is leading to an increase of financial dependence on the US.

The stagnant nature of the economy and foreign trade of Latin America, on the one hand, and the constant improvement of the socialist economy, on the other, have demonstrated that the lack of economic ties with the socialist countries has caused harm to only the countries of Latin America. Artificially-created trade barriers have led to the accumulation and even the destruction of unsaleable export production with an acute shortage of imported manufactured and consumer goods. Consequently not only the workers, but also the broad circles of the national bourgeoisie realize that in the current conditions the underdeveloped countries cannot be isolated from the socialist camp. This has special importance for the countries striving to create an independent economy.

One of the features of the economic cooperation of Latin America with the socialist countries is that henceforth it can receive aid for its state sector. The national capital, at the stage of development and primarily concentrated in sectors of light industry and the distribution chain, [undertakes] heavy industry with difficulty. In connection with the limited nature of private national capital the state takes on the entrepreneurial role and initially stimulates the development of insufficiently profitable sectors of heavy industry.

The United States is obstructing the creation and expansion of the state sector in Latin America, viewing it as a dangerous competitor for its trade and industrial monopolies. For example, it is known that Argentina, Brazil, and Mexico have received refusals [in their attempts] to get oil equipment for their state enterprises.

In contrast to this the technical and economic aid of the socialist countries are [inserted by hand over crossed-out text: offering support] to the state sector, which is the foundation for the industrialization of the Latin American countries. Argentina has received oil equipment from the Soviet Union. The first oil refinery in Uruguay has begun to operate on Soviet oil.

When offering support to the Latin American countries, the socialist countries are agreeing to pay for their industrial goods and fuel not with hard currency, but with hard-to-sell export goods to Latin America. Along with the elimination of the hard currency problem the readiness of the socialist countries to ship their goods on Latin American ships plays a great role. The point about freight has great importance for the countries of Latin America with developing shipping on which constant pressure is exerted by American and British shipping companies. On the one hand, it demonstrates recognition of the still weak, but growing Latin American shipping. On the other hand, it relieves Latin America from the need to search for money to pay for the freight. As a rule, the trading conditions with the US prescribe obligations that goods bought in the US are to be transported only on American ships.

The Latin American countries have discovered a new kind of credit relations in cooperation with the socialist camp. At a time when capitalist banking organizations and firms, including international ones, are offering Latin American countries credits at 4-7% per annum, the percentage rate of the socialist countries is approximately 2.5%.

At the same time the socialist countries do not demand the payment of the credits which are offered in hard currency, which is in very short supply in Latin America, and have agreed to receive ordinary goods of Latin American exports as payment. In conditions of a chronic shortage of foreign currency such an opportunity [inserted by hand: not only] facilitates a reduction of the negative balance of payments, but also opens new markets for [those] experiencing constant difficulties in selling Latin American export goods. The fact that the Argentine Congress unanimously ratified the Soviet-Argentine credit agreement concluded in October 195[?] becomes understandable.

[In] February 1960 the Soviet Union gave Cuba a credit of $100 million at 2.5% interest per annum. As the chairman of the central bank of the country declared, "This is the lowest percentage rate in the history of international relations".

It is being proposed to use the Soviet credit to build a metallurgical enterprise and a refinery. This concerns the construction of new national enterprises, that is, the strengthening of the Cuban national economy. The same thing can be said of the credits of the other socialist countries directed at strengthening the foundations of the national economies of the Latin American countries.

Meanwhile, as a rule the loans offered by American banks go for the financing of branches of American companies, that is, to increase the economic dominance of the US in Latin America.

[three lines crossed out and illegible]

[inserted by hand: The new nature of the economic laws of socialism allow the socialist countries to steadily expand their foreign trade. The high rates of development of socialist foreign trade and its steadiness make the economic relations of Latin America with the socialist camp especially advantageous.

This is displayed most clearly in periods of economic crises.]

In crisis conditions the US strives to mitigate the crisis upheavals at the expense of Latin America. It reduces its purchases in the Latin American countries to a minimum, simultaneously flooding their markets with their surplus production.

Only the socialist countries, whose economies do not know cyclic fluctuations, express readiness during a crisis period to trade with underdeveloped countries not only on a mutually profitable basis, but also taking the difficulties of these countries into account.

If one looks at the trade of the Latin American countries with the Soviet Union in the prewar period, then the first and main thing that catches the eye is the favorable trade balance for Latin America. At the time these assets grew to the greatest degree in the crisis years of 1929-1933. In a period when Latin America was forced to destroy part of its production, exports to the USSR exceeded imports from there by several times. The large sales to the Soviet Union helped the Latin American countries to overcome the crisis with little damage.

Take the economic crisis of 1957-1957 [sic]. The sharp decline of not only the volume, but also the prices [inserted by hand: for] export goods led to a reduction of the rates of industrial production and the rapid development of inflation. The situation did not improve in 1959. Latin America exported one-tenth more goods to the US than in 1958. However, the size of the hard currency earnings remained the same. The additional efforts of Latin American workers were used by the American monopolies.

At the same time exports to the countries of the socialist camp grew in these years. It was in 1958 that Argentina, Brazil, Uruguay, and Chile expanded their trade with the countries of socialism.

During the period when the problem of foreign trade rose especially sharply the objective laws of the market broke the Procrustean bed of the "Pan-American community" and pointed Latin America toward the socialist camp. Take Uruguay, for example. Uruguayan exports to the USSR grew so rapidly than in 1958 the Soviet Union occupied second place (after Britain) in the number of purchasers of Uruguayan goods. In one year the sales of Uruguayan goods to the socialist countries tripled, comprising one-fourth of all exports. In 1959 Uruguay sold the countries of the socialist camp a third of its export products.

Brazil, the largest country in Latin America, can serve as a no less clear example. The enormous reserves of unsold coffee and other raw commodities presented Brazil with the problem of expanding trade with the socialist countries with a unprecedented acuity. Numerous meetings, rallies, and conferences of merchants, industrialists, and Brazilian workers took place under the slogan, "Brazil should trade with the Soviet Union". The restoration of relations with the Soviet Union was advocated by many press outlets, organizations, and people who had been opponents of such a restoration.

As a result of this a trade delegation was sent to the USSR in November 1959, a consequence of which was the conclusion of a Soviet-Brazilian trade agreement, the first in the history of the trade relations of the two countries.

At the initiative of Chilean President Alessandri, in January 1960 Chile's first trade delegation was sent to the Soviet Union. Regarding the trip of this trade mission Alessandri stressed that Chile will trade with any country if it to the advantage of the Chilean national economy.

The conclusion of a trade agreement with the Soviet Union in February 1960 was a great event in the life of the Cuban people. This agreement showed the least developed countries of Latin America that trade with the Soviet Union not only does not threaten the loss of markets for them, but also carries all sorts of benefits. The Soviet Union concluded a multi-year agreement. This means that for the next five years Cuba is assured of the sale of one-fifth of the harvest. On the whole Cuba will receive not those goods which foreign monopolies desire to sell on the Cuban market, but [inserted by hand: industrial goods, which the national economy needs very much].

At the present time all the countries of Latin America have trading relations with Czechoslovakia. The Latin American countries buy various [goods] of the machine-building industry in Czechoslovakia, which is one of the largest exporters of machines and equipment in foreign markets. The deliveries of compact Czechoslovak equipment have a great role in the industrial development of the countries of Latin America. For example, the coal-concentrating plant built between 1957 and 1959 in Rio Turbio, the largest coal basin in Argentina, was supplied with Czechoslovak equipment. [Illegible] Czechoslovakia in 195[8]-1959 delivered and installed generators for a thermal power station.

[Illegible] countries of Latin America, Poland. [illegible] occupies first place in the foreign trade of the Polish People's Republic with the economically underdeveloped countries of Latin America. In the process Polish imports from the countries of Latin America are growing. According to an agreement concluded in 1958 Poland is building 14 seagoing vessels for Brazil.

Considering the special economic tasks with which underdeveloped countries are faced, Polish export organizations are striving to sell these countries the most economical modern types of machine tools and machines.

Many Latin American countries have also established trade ties with Hungary, Romania, Bulgaria, the GDR, Albania, and the PRC.

Agreement has been reached between Uruguay and Poland concerning the construction of a [large] railway bridge.

Polish specialists are helping Brazilian workers to master new production processes.

[Inserted by hand: The countries of Latin America increasingly distinctly see that economic cooperation with the socialist camp] will bring them not only direct, but also indirect aid and benefit. This new form of cooperation forces the imperialist powers to agree to more generous terms of economic relations with Latin America, to change the methods of trading, to reduce the percentage rates for credits, to make concessions, etc. The United States is no longer able, as before, to impose its dictatorial trading relations in all cases without fear, for there exists a socialist camp which is practically capable of offering any kind of industrial product and so without any political or economic pressure whatsoever when this is being done. At the same time the countries of the socialist camp can buy such a quantity of production which will ensure the employment of entire sectors of the economy. In these conditions the imperialist monopolies have been forced to reckon with the demands of the Latin American countries which are feeling the breath of the powerful socialist camp at their backs, ready to come to the aid of the underdeveloped countries. It is therefore unsurprising that in spite of all sorts of threats to reduce the purchases of Cuban sugar to stifle the popular revolution in Cuba, the US is not deciding to employ economic sanctions, but in 1960 the International Sugar Council even increased the Cuban sugar quota. For example, the Soviet Union demonstrated in practice a desire and ability to buy the entire quantity of sugar from Cuba outside of an international agreement. Cuba was convinced with its own eyes of the correctness of the path it had chosen to which Jose Marti had once pointed, "With the whole world, and not with one part of it".

Uruguay is a case in point. Uruguay has long strived to replace the exports of unprocessed agricultural raw material with semi-finished and manufactured articles. Such a policy facilitates the creation of their own processing industry, a lessening of the problem of employment, a savings of currency reserves, and a general strengthening of Uruguay's position in the world capitalist economy. Such independence by Uruguay is naturally not to the liking of the United States. And right in 1953 it introduced special taxes on the imports of Uruguayan tops. These taxes struck a painful blow to the Uruguayan textile industry. A reduction of American imports of wool was reflected in the animal husbandry, trade, and finances of Uruguay. The total amount of exports of wood obtained in 1953 was not achieved in any of the succeeding years. In 1957 Uruguay exported less than a third of the 1956 level. But here the Soviet Union became a large purchaser of wool in 1958, including tops. And all right then. Beginning in January 1959 the United States abolished the taxes which had existed for many years. Now the United States is ready to trade with Uruguay without restrictions, for the continuation of the previous trade policy could no longer keep Uruguay on [its] knees.

Ever-broader circles of Latin American trade and industrial circles are convinced of what harm the imposed policy of self-isolation brings them. This policy closed broad markets to the countries of Latin America. Latin America was prohibited from supplying the socialist countries with coffee, and they had created moon rockets and spacecraft.

American imperialism was alarmed at the clear craving of the Latin American countries for cooperation with the socialist camp. Trying to discredit economic cooperation of Latin America with the socialist countries, the US used the entire list of resources available to it, from slander to political pressure.

After Argentina bought Soviet oil in 1958 the oil monopolies, which had counted on capturing the Argentinian market, initially declared that the Soviet Union had sold the oil at dumping prices, and then at the beginning of 1959, when world prices fell, they were allegedly [sold] at inflated [prices]. As a consequence of the clear absurdity of such attacks a representative of Argentina was forced to deny the changes of the oil trusts.

The emotion of the attacks on socialist trade is curious. The imperialist circles initially asserted that by virtue of the technical and economic weakness of the socialist countries Latin America there was nothing to buy from them. When this was denied by the Latin American countries themselves they started to declare that there was nothing for the socialist countries to buy in Latin America.

However, the many years of experience of economic ties of the individual countries of Latin America with the socialist countries has shown that there exists a firm foundation for a mutual trade exchange. The economic ties could be expanded from year to year if they were not hindered [meshali] by those who want to preserve the role of Latin American as a "periphery" and a "raw material depot".

As the head of the Argentinian delegation, Raul Ondarts, declared when visiting a number of socialist countries in 1958, "The benefits are so obvious that it is unnecessary to search for political or any other motives".

Increasingly broad circles of [Latin American] industrialists and merchants are convinced of what harm the policy of self-isolation has imposed on them. It is good in this connection, said Ricardo [M]ongrut, a deputy of the Peruvian Parliament. "Peru is an underdeveloped country. That is why it is not able to allow itself such a luxury as [inserted by hand: a trade exchange of benefit to it being closed. For such a country as Peru [it is] an absurd conduct of a discriminatory trading policy"].

The countries of Latin America increasingly realize that at the current level of the international distribution of labor, with the enormous potential of industrial production of the countries of the socialism, and with those advantages which cooperation with the socialist countries promises them one cannot live in isolation from the powerful socialist camp.

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