Alliance in Danger

In conceiving of the Alliance for Progress as a bold ten-year program to develop Latin America, planners counted on massive U.S. Government aid--but also on at least $300 million a year in direct U.S. private investment. Instead of plunging in, U.S. investors are pulling out of Latin America; in the first nine months of 1962 brought home $37 million more than they invested. From three sources last week came ringing indictments of the Alliance and its failure to generate any enthusiasm among businessmen.

Profits Low, Risks High. The first indictment came from the 26-man Commerce Committee for the Alliance for Progress (COMAP) appointed by Secretary of Commerce Luther H. Hodges to make a businesslike appraisal of the program. Reported COMAP's Chairman J. Peter Grace, 49, international-minded president of W. R. Grace & Co: the Alliance "in its present size and form cannot succeed." Investors are frightened away by the "unfavorable business climate" in Latin America. Profits are low, risks high. The U.S., continued Grace, should adopt a "carrot-and-stick approach." with grants and loans to encourage Latin Americans to enact laws more hospitable to private investment. The committee recommended greater tax incentives and deductions as a cushion against heavy losses. Even then, concluded Grace, "it is unlikely that normal conditions attractive to foreign capital can be created for a number of years."

In a separate opinion--later endorsed by Grace--David Rockefeller, president of the Chase Manhattan Bank, and two other COMAP members argued that the incentives and grants are only "stopgap" remedies. In the long run, "encouragement of private enterprise, local and foreign, must become the main thrust of the Alliance." The U.S., says the Rockefeller group, "should concentrate its economic aid program in countries that show the greatest inclination to adopt measures to improve the investment climate, and withhold aid from others until satisfactory performance has been demonstrated."

No Joint Effort. Still a third powerful criticism came from the Harvard study group of businessmen and intellectuals who in 1960 sounded the original call for a hemisphere-wide "alliance of progress." The study group complained that the Alliance "is not an alliance. It has lapsed into a unilateral U.S. check-writing program." The solution, said the group, is for Latin Americans, like Europeans during Marshall Plan days, to join in a regional organization to establish priorities for spending aid money.

In 18 months the U.S. has committed $1.6 billion to the Alliance. But the results so far, as COMAP's Grace says, indicate only that "we are in great danger of suffering a major defeat to our strategic interests in this hemisphere."

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