¹ This contrasts with early post-war optimism that inflation somehow would hasten economic development. Cf. Bulhoes, Octavio, “Fundamentos y Aplicación de Control Cualitativo de la Moneda,” Primera Reunión de Técnicos Sobre Problemas de Banca Central del Continente Americano (Mexico City, 1946), pp. 103–10.Google Scholar Bulhoes, then Brazilian Treasury Minister, wrote, “The increase in prices linked to the creation of business profits is a satisfactory norm for policy.”

In a similar vein, Dr. Hermann Max, Research Director of the Chilean Central Bank, wrote, “The lesson which can be drawn from the economic history of Latin American countries … is that in practice material progress and monetary depreciation are inseparably linked with one another.” “Diagnóstico de la Inflatión en América Latina,” Tercera Reunión de Técnicos de los Bancos Centrales del Continente Americano (Havana, 1952), II, 42.Google Scholar

² Thus, Mosk distinguishes between the “New Group” of parvenue Mexican industrialists, vigorous partisans of industralization as a broad social and highly nationalistic effort, and the older, established industrialists in textiles, food processing, etc., who have regarded such appeals as dangerous demogoguery. Mosk, Sanford A., Industrial Revolution in Mexico (Berkeley: University of California Press, 1950), chs. ii, iii.Google Scholar Similarly, the Chilean business community initially denounced the Chilean Development Corporation as a “Marxian scheme,” see Bernales, Florencio Durán, El Partido Radical (Santiago: Editorial Nascimento, 1958), pp. 205–07.Google Scholar

³ Flores, Antonio Carrillo, “El Desarrollo Económico de Mexico: Reflexiones Sobre un Caso Latino Americano,” Cuadernos Americanos (Sept.-Oct. 1948), 48.Google Scholar

⁴ Regressivity may have increased in Chile and Brazil. In Chile, for example, direct taxes, excluding those on foreign mining companies and on wages and salaries, fell from 3 per cent of GNP in 1940–41 to 2.5 per cent in 1955–56, while total taxes rose between the same two periods from 12 per cent to 14.5 per cent. See Felix, David, Desequilibrios Estructurales y Crecemiento Industrial: El Caso de Chile (Santiago: Instituto de Economía de la Universidad de Chile, 1958), Cuadros 14, 15.Google Scholar Four similar trends in Brazil see, United Nations, Analysis and Projections of Economic Development: The Economic Development of Brazil (New York, 1956), pp. 157–62.Google Scholar Mexican direct taxes, on the other hand, rose in relative importance, although remaining small as a per cent of profits. See Combined Mexican Working Party, Economic Development of Mexico (Baltimore: Johns Hopkins Press, 1953), ch. ix.Google Scholar

⁵ Mexico has not resorted to multiple exchange rates, but has used differential tariff rates, import quotas, and tax exemptions for this purpose.

⁶ Caio Prado Junior, Historia Económica do Brazil, as quoted in Morse, Richard M., “São Paulo in the Twentieth Century,” Inter-American Economic Affairs VIII (Summer, 1954), 18.Google Scholar

⁷ For government employment estimates see Instituto de Economía de la Universidad de Chile, Desarrollo Económico de Chile, 1940–56 (Santiago: Editorial Universitaria, 1956), pp. 203–04.Google Scholar For budget expenditures trends, see Desequilibrios Estructurales, Cuadros 3, 17.

⁸ This is due in part, no doubt, to the propensity of successful businessmen of non-agricultural origin to purchase estates both as part of the effort to be “taken up” by the aristocracy, and because the tax privileges still enjoyed by Brazilian and Chilean agriculture makes owning an estate a useful device for hiding one's non-agricultural income from the tax collector.

⁹ A partial exception was the cotton textile industry, which processed local cotton in Brazil and Mexico and was also the recipient of substantial tariff protection. Moreover, a degree of tariff protection was granted other industries, although tariffs were applied more for revenue than for industrial protection.

¹⁰ In Brazil and Mexico foreign enterprises have assumed part of this task.

¹¹ In steel only Brazil's Volta Redonda plant approaches the million-ton capacity judged to be the minimum efficient size for basic steel plants. On the relation between unit cost and scale in steel, see United Nations, Iron and Steel Transforming Industries in Selected Latin American Countries (New York: August 29, 1955), p. 22.Google Scholar However, lack of good quality coking coal, a common problem in the Latin American steel industry, is an independent costraising factor for the Volta Redonda plant. Ibid., p. 23.

¹² Reasonably homogeneous national income data are available only from 1939 on (1940 for Chile). These show, for all three countries, a substantial rise in real volume over the initial year, but no marked change in the rate of investment. It seems reasonable, however, to suppose that the prosperous 1940's had a higher rate than the depressed 1930's.

¹³ The statistical evidence leaves much to be desired. But for Brazil see Economic Development of Brazil, pp. 19–21. In Mexico, net investment in manufacturing plant and equipment (excluding investments by foreign manufacturing firms and Nacional Financiera) as a percentage of manufacturing profits after taxes, averaged 15.8 per cent in 1939–41, 10.2 per cent in 1942–46, and 15.7 per cent in 1947–50. For the same three periods, net private fixed investment, including foreign financed investment, averaged 9.7 per cent, 6.5 per cent and 12.3 per cent respectively, as a percentage of total profits after taxes. The 27 per cent increase in the ratio between the first and last period corresponds to a 46 per cent increase in the share of total profits after taxes in net domestic product. Data from Economic Development of Mexico, Statistical Appendix, Tables 1, 3, 4, 14, 15, 79, 89, 118. In Chile, gross private investment declined gradually as a percentage of gross internal product in the post-war period. See Desequilibrios Estructurales Cuadro 2.

¹⁴ The Chilean marginal capital/output ratio, 1.7 for 1940–45, rose to 2.6 for 1946–54. See Corporación de Fomento de la Productión, Cuentas Nacionales de Chile, 1940–54 (Santiago: Editorial del Pacífico, 1957), p. 51.Google Scholar

For Mexico the ratio, 1.5 for 1940–45, rose to 2.8 in 1946–50, Economic Development of Mexico, Statistical Appendix, Table 26.

In Brazil the average capital/output ratio fell irregularly until 1947–48, when it began a slow rise. The post-war ratio, however, is somewhat distorted by the sharp rise in world coffee prices which substantially increased the value yield of coffee capital, offsetting in part the upward impact on the ratio of shortages in public services and heavier investments to overcome these shortages. See Economic Development of Brazil, pp. 22–23, 27.

¹⁵ Contrary to the expected for economies shifting from backward agriculture to more modern industry, total energy consumption per unit of product fell 20 per cent in Brazil and 13 per cent in Chile between 1939–44 and 1950–55. In Mexico there was a less than 2 per cent increase. Energy estimates include firewood, and hence are only roughly reliable, but the possible error would not reverse the above trends. Between the same two periods, moreover, the percentage of total energy obtained via imports—chiefly petroleum—rose from 12 per cent to 32 per cent for Brazil and from 27 per cent to 33 per cent for Chile. United Nations, Energy Development in Latin America (Geneva, 1957), pp. 140–42, 149–50, 154.Google Scholar

¹⁶ For example, in 1950, 87 per cent of Brazil's locomotives were over 20 years old, and 62 per cent over 30 years old. Economic Development of Brazil, p. 137.

¹⁷ In Mexico, a major petroleum producer, the subsidy consisted in unprofitably low prices charged by Pemex.

¹⁸ The comparative fall in real electric power rates for industrial users (KW rates ÷ the cost of living index) is illustrated by the following:

Energy Development in Latin America, p. 41.

¹⁹ Hirschman, Albert O., The Strategy of Economic Development (New Haven: Yale University Press, 1958), pp. 160–64.Google Scholar

²⁰ Between 1939 and 1953, Brazilian import prices rose 46 per cent less than the general price level. Economic Development of Brazil, p. 16. For the relative distribution of exchange rate subsidies in Chile in the early 1950's, see Unidas, Naciones, Boletín Económico para América Latina (Santiago, 1956), I, 49.Google Scholar

Source: United Nations, Economic Survey of Latin America, 1956 (New York, 1957), pp. 155–56, Tables III, IV.Google Scholar

²² See Desequilibrios Estructurales Cuadro 24, for output trends of an array of appliances in the 1950's.

²³ See Iron and Steel Transforming Industries, pp. 1–163 for a detailed survey of Brazilian metal working industries as of 1953.

²⁴ Economic Survey of Latin America, 1956, pp. 143–47.

²⁵ Oscar Lewis considers the bracero movement to have been a major safety valve. “Mexico Since Cárdenas” Social Research (Spring 1959), 23–26. For a time, movements across the Argentine border served on a much smaller scale as the Chilean equivalent of the bracero movement. This has been thwarted, however, in the 1950's by Argentina's own accumulating economic difficulties.

²⁶ Less so for Chile, which retarded copper expansion by its excessively discriminatory copper exchange buying rate, than for Brazil, whose large share of world coffee output plus the price inelasticity of coffee demand, makes it doubtful that a more favorable export rate would have helped much. In both countries, the rate needed to induce a substantial expansion of the minor exports, given also the timidity and high profit expectations of domestic producers, would have removed one of the major props to industrial expansion. This might draw no tears from critics of Latin American industrialization, but the point is that Mexico has been able to have it both ways. It has been able to accede to the ideological imperatives (and, I believe, real ones as well) for industrialization while developing new sources of exchange with which to finance public investment and industrial growth relatively painlessly.

²⁷ The International Bank-FAO team of technicians to Chile included in their report the gratuitous observation that the institutional structure of Chilean agriculture was no obstacle to development, evidently in order to overcome the suspicions and with the support of Chilean agriculturalists for a proposed long-term agricultural and transport development plan. See IBRD-FAO, The Agricultural Economy of Chile (Washington, 1952).Google Scholar The observation, picked up gratefully by spokesmen for the Chilean agriculturalists, has been publicized frequently as a definitive expert judgment. But the plan has been dormant for lack of financing.

²⁸ See, for example, United Nations, World Economic Survey, 1957 (New York, 1958), ch. ii.Google Scholar

²⁹ That is, disregarding changes in the food basket and assuming a unitary price elasticity. If the elasticity is less than 1, the effects outlined would be accentuated.

³⁰ In relatively high income Santiago, the sample on which the new cost of living index is based, indicated that in 1957, Santiagueno blue collar workers spent 57 per cent of their income on food and white collar workers, 38 per cent.

³¹ In all three countries, the long-run supply curve for urban undifferentiated labor is probably fairly flat due to underemployment, and the rise in money wages would probably be considerably reduced in the absence of collective action and wage legislation.

³² See Desequilibrios Estructurales for an algebraic demonstration of this outcome.

³³ Per capita agricultural output apparently dropped 14 per cent between 1940–41 and 1956–57. Food consumption per head probably rose slightly, although with massive shifts among protein foods, meat consumption dropping significantly, but milk and fish consumption per head rising. See Desequilibrios Estructurales Cuadro 8, and United Nation-FAO, The Selective Expansion of Agricultural Production in Latin America (1957), Table 41.

³⁴ See Desequilibrios Estructurales Cuadro 11. Apart from one very favorable harvest, 1957–58, there has been no notable acceleration of agricultural output to account for the relative price reversal.

³⁵ Economic Development of Brazil, p. 16. The export crops, coffee, cacao, and cotton, rose 115 per cent more than industrial prices.

³⁶ Ibid., p. 75, Table XXI. Selective Expansion of Agricultural Production, p. 32. Table 1.

³⁷ This was accomplished with no increase in per hectare yields. Economic Survey of Latin America, 1956, Table 116, p. 173. For a pessimistic appraisal of the prospects for continuing slash and burn agriculture, see James, Preston, “Brazilian Agricultural Development” in Simon, Kuznetz ed., Economic Growth: Brazil, India, Japan (Durham: Duke University Press, 1955).Google Scholar

³⁸ Hillman, Jimmye S., “Some Aspects of Brazilian Agricultural Policy,” Inter-American Economic Affairs, XII (Summer, 1958), 17.Google Scholar

³⁹ Selective Expansion of Agricultural Production, pp. 24, 54.

⁴⁰ Ibid., p. 26, 32.

⁴¹ For a detailed description, see David Felix, “Structural Imbalances, Social Conflict and Inflation: An Appraisal of Chile's Recent Anti-Inflationary Effort.” To appear in a forthcoming issue of Economic Development and Cultural Change.

⁴² The foreign debt service for 1959 is $320,000,000, or almost 25 per cent of Brazil's average annual export earnings in 1956–58. See The New York. Times, June 12, 1958.

⁴³ Argentina and Chile are leading examples among the industrializing countries, with Brazil now under heavy pressure to take the plunge.

⁴⁴ See, for example, the observations in the Report of the Managing Director of the Fund to the 27th session of the Economic and Social Council. International Financial News Survey, XI (April 10, 1959), 312–13.Google Scholar