The Jones Family of Nations

Most expensively wooed friends the U. S. State Department has are the 20 Latin-American Republics. From the beginning of 1939 to last September, the U. S. Export-Import Bank authorized loans of $143,000,000 for Latin America. Two months ago the Bank was voted another $500,000,000, has begun lending that, for projects ranging from $20,000,000 for Brazil's proposed new steel industry

(TIME, Oct. 7) to a $4,600,000 loan to Costa Rica to help finance the Pan-American Highway. Since some of these loans will prove as sour as did the J. & W. Seligman Peruvian bond issue of 1927, some Wall Streeters have called the whole thing a boondoggle. But to the State Department, Latin-American loans are not to be judged by banking standards alone. They are instruments of diplomacy too.

Chief objectives of this Rich Neighbor Policy are three: 1) to help Latin America recover from the loss of its European export markets, so that Hitler's trade ambassadors will not find the Western Hemisphere easy prey; 2) to stimulate Latin-American trade with the U. S., which has dropped dismally since summer; 3) to help Latin America arm. Of its new $500,000,000 capital, the Export-Import Bank has already earmarked some $280,000,000 for arms programs below the Rio Grande.

Since Latin America has no munitions industry to speak of, the orders will be added to the already huge backlogs of U. S. armorers.

No.1 U. S. moneybag, Federal Loan Administrator Jesse Jones, is also the No.

1 cold-fish artist of the Roosevelt Administration. His deputy lender since last month is also less New Dealer than old trader: Cottonman Will Clayton, old Texas friend of Jones. Few deals are likely to leave their desk from which the U. S.

does not get a return. Chief deals on their desk last week: >-A $50,000,000 U. S.-Brazilian trade bank, under which Brazil would trade some air bases and strategic materials for industrialization loans. Last week, to help her pay for purchases here, Jesse Jones lent Brazil another $25,000,000, started talks with Brazilian experts about a new U. S.-type aircraft factory in their country.

^ A U. S.-Bolivian trade agreement to assure U. S. imports of Bolivian tin; also to help the Bolivian economy stand the future shock of resuming service on Bolivia's $60,600,000 debt to the U. S.

>-A new deal for Mexico, predicted on a final settlement of her three-year-old row with U. S. oil companies. As though he were already back in the Western Hemisphere economy, President Cardenas last week talked of building $600,000,000 worth of naval defenses.

^ A $20,000,000 loan to Chile, whose Popular Front Government is eager for a steel industry just like Brazil's.

Fortnight ago, after six weeks of good-willing through Uruguay, Brazil, Argentina, Chile, Bolivia and Peru, back to Washington came ruddy Warren Lee Pierson, president of the Export-Import Bank.

Ostensible purpose of Banker Pierson's jaunt was to clean up some details of the $20,000,000 Brazilian steel loan. Actually, this could just as well have been attended to without Pierson leaving Washington.

But his trip was important nevertheless.

A tail-coated plenipotentiary with a title, Pierson was just the man to give ceremonial lustre to Jesse Jones's deals. Nowhere was this lustre more useful than in Argentina, No. 1 thorn in the Good Neighbor Policy's side.

Argentina's exports (mainly farm products to Europe) were $43,010,000 last January, by September had sunk to $14,030,000. Result: in the first nine months of 1940 she had an unfavorable trade balance. This has forced her to ship $28,400,000 of her $403,000,000 gold reserve to the U. S. since September, in order to maintain her cash balances. Argentina's politicos have their own idea of what kind of Good Neighbor the U. S. ought to be.

Their idea: the U. S. ought to drop its farm tariffs, import as much grain and meatstuffs as Argentina has to sell, come what may in Kansas, Iowa and Texas.

With much ceremonial ado, "Ambassador" Pierson announced from Buenos Aires last month that the Export-Import Bank was lending Argentina $20,000,000 for any use she might want to put it to in the U. S. (TIME, Oct. 7). Since Argentina needed industrial equipment and supplies for her new 1,000,000,000-peso arms program, Pierson's announcement seemed to forecast a new era of U. S.-Argentine cooperation.

Two weeks later, the new era came to an end. Argentine Finance Minister Federico Pinedo picked this time to talk cold turkey to Buenos Aires sales agents of U. S. exporters. Said he: "If you want more dollar exchange for United States exports to Argentina you must produce it by buying more of our products." To drive home his point, Minister Pinedo brought to bear a kind of pressure he has used before : he cut off dollar permits to importers of U. S. manufactures. Immediately three U. S. auto-assembly plants came back with an announcement that without sub-assemblies irom the U. S. they would have to shut down, drop 2.500 Argentine workmen from their payrolls.

This maneuver transferred the good-will negotiations from Plenipotentiary Pierson's hands to those of Jesse Jones, who thrives on cold turkey. He pointed out that, although Argentina complained because she had no dollar exchange, she had not yet touched a penny of the $20,000,000 waiting for her in Washington. And $20,000,000, he added, comes to more than two-thirds of her nine months' unfavorable trade balance with the U. S. As the other $10,000,000, the Rich Neigh bor could promise two other favors to the Colossus of the South. One was to keep U.S. wheat out of Brazilian markets, where U. S. dumping in 1938-39 drove Argentine farmers wild. The other was to stand aside on $160,000,000 of beef and corn orders now being placed by the British letting Argentina have first crack.

Thus were these noncomplementary economics forced into partial yoke for diplomacy's sake. In the offing was a still more difficult problem : How could the U.S. arm Latin America while arming itself and Britain too? With the U. S. steel industry at an all-time production peak and domestic priorities threatening, Latin America's orders stood at the end of the queue. Japan was still importing steel sheets and shapes for its Navy from U. S. mills last week. One possible halfway step: to give Latin-American orders priority over Japanese.

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