Business: -HELP FOR LATIN AMERICA-

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How Good Neighbors Can Become Partners

THE U.S. and Latin America should be a well-matched economic team. The U.S. needs Latin America's coffee, copper, zinc and other raw materials; Latin America needs the know-how, capital and consumer goods of the U.S. Latin America is already the second biggest foreign customer for U.S. goods (21% of all exports), while the U.S. is Latin America's No. 1 buyer (48% of its exports). Yet it is far from a happy business partnership. The reason is that the southern flow of U.S. capital is far below the level needed to raise the standard of living of Latin America's population, now expanding 25% faster than that of the U.S.

Part of the trouble lies with the Latinos, whose national pride sometimes makes them suspicious of North American money, and whose unstable governments and unpredictable economic policies discourage U.S. investment. On the other side, many U.S. businessmen have not bothered to investigate the opportunities in Latin America. For every real obstacle to greater trade and investment, there are almost as many illusory barriers. One illusion widely held by Latin Americans is that U.S. capitalists are itching to invest their money south of the border and that ultimately the North Americans will have to invest on Latino terms, with no change in the investment climate. Another illusion, held by many U.S. businessmen, is that nationalistic rules and regulations make it almost impossible to do business anywhere in Latin America. The truth is that many countries readily allow U.S. firms to come in.

As proof of that fact, private U.S. investment in Latin America already totals $7 billion. But to give a modest 2% annual boost to its low standard of living, Latin America needs $7.25 billion a year in new investment, v. the $5.9 billion now being generated from all sources. Even if Latin American capital could be tapped more effectively, another $1 billion annually will be needed from abroad.

Many a U.S. company has discovered the rich rewards—both to itself and to Latin America—of doing business south of the border. One notable example is Sears, Roebuck, which has spent $26 million setting up 26 stores in five Latin American countries. Last year Sears grossed $79 million on its Latin American sales—and Latin America profited in several ways. Since Sears's sales of locally produced products averaged anywhere from 35% (in Cuba) to nearly 100% (in Brazil), thousands of new manufacturing jobs were created, in addition to the 6,000 jobs supplied directly by Sears (only 100 of its Latin America employees are U.S. citizens).

But for every success, there are many failures and unfulfilled needs. Alberto Marulanda, owner of the biggest ranch in Colombia, needed a million pesos to put cattle on his 70,000 acres, but could not raise the money since U.S. investors argued that cattle are the first victims of civil disturbances. Chile, whose forests and minerals beckon paper and chemical industries, has liberal tax-exemption provisions for foreign capital. But they are meaningless, since employers must add 25% to their government-cushioned wage bills in the form of social-security payments. Brazil is so queasy about foreign exploitation that citizens married to foreigners may not even own oil stocks. Result: Brazil's potentially rich oil reserves are virtually untapped.