The Costs of Cooperation: Latin American
Wartime Exports to the U.S.

Myron J. Frankman
McGill University, Montreal

Abstract
The United States is generally one of the foremost proponents of open markets, but during the Second World War it was even more energetic in organizing to assure supplies at guaranteed price levels. Contracts for most of Latin America's mineral and many of her agricultural exports were negotiated by the United States. Details of pricing arrangements for coffee, sugar, copper, petroleum, and tin are presented and comparisons of price stability during the war relative to the experience before and after are offered.


A central element on the agenda of the South for cooperation with the North has been the stabilization of either the prices of or income from the sales of their raw material exports. Out of the UNCTAD deliberations, for example, came in the 1970s a proposal for a Common Fund intended to stabilize the prices of 10 "core" commodities. Little, however, has come of this ambitious proposal. Southern countries have opted to either work on a product-by-product basis to hammer out international commodity agreements (ICAs) with Northern countries, as they have since the 1930s, or to act alone through producers' cartels, such as OPEC and CIPEC, to improve their situation. Cooperation from the North has been fairly limited and has consisted principally of participation in ICAs, the European Community's Lomé Convention and the IMF Compensatory Finance Fund.
In peacetime the United States is one of the foremost proponents of open markets. During the Second World War, however, the United States was even more energetic in organizing commodity markets to assure supplies, particularly of strategic raw materials at predictable price levels (and by so doing to cutoff the Axis powers from goods they needed). Contracts for most of Latin America's minerals and many of her agricultural exports were negotiated by the United States. The war years were certainly not a time when "the metropolis was otherwise occupied" as André Gunder Frank has suggested [1]-- the United States was more involved with Latin American affairs than it has been before or since. Not only did the U.S. agree to absorb Latin American goods, but it took an active role in encouraging the expansion of production of various commodities, such as rubber, or to allocate output on a hemispheric basis, as with oil.
By many of the conventional measures that we use today to evaluate the external performance of developing countries, the years of the Second World War were very good ones indeed. Export earnings were growing, trade balances were for the most part favorable, foreign exchange reserves of the various central banks were growing annually and the prices of exported goods were stable. All of this was a reflection of wartime relations with the United States and limitations on the ability of the Latin American countries to obtain imports. In a certain sense, one may argue that the Latin American countries, in involuntarily accumulating dollar balances, were making forced loans at substantially negative rates of interest to the United States for the war effort. Might there be lessons from the sacrifices and cooperation during hostilities that could be applicable to the quest for economic development in the Third World? Could we imagine the development effort becoming an "economic equivalent for war"?
Price stability in and of itself is not a desideratum. The level at which a price is set and the range of permissible variation are key considerations. These have been the subject of lengthy and often unsuccessful bargaining in the various attempts to negotiate international commodity agreements for coffee, tin, cocoa and other products. In the Second World War the U.S. set fixed prices with no range of deviations to allow for changes in market conditions. The operation of markets was not deemed to suit the needs of waging a war. Windfall profits were not to accrue to raw material exporting countries as they had in the First World War. Both unexpected gain and loss from price fluctuation were excluded by the purchasing arrangements imposed by the United States on a largely compliant Latin America.
My intent in this paper is to try to evaluate the extent of gain or loss to Latin America of cooperating with the United States, based on comparisons with earnings from exports during other periods of equal length. The Latin American response to wartime needs is offered as a contrast to the rather limited response of the industrial countries to the call for a New International Economic Order.
The question of gain or loss resulting from certain circumstances necessarily involves one in considerations of what might have been, but wasn't: the world of counterfactuals. [2] My observations will be somewhat impressionistic: it is by no means clear what it is the ideal norm against which comparison should take place: should one use as a gauge price trends during the First World War, price trends in the 1920s, price trends in the 1930s or some arbitrary number of immediately preceding months?
And what exactly are we referring to when we speak of prices? Economics is said to be the science of price, [3] however, we are often rather vague about which price is being referred to, how it was assembled and, more importantly, who gets what. More commonly, we find a single price paraded as the price for a commodity. That single price then becomes the focal point of all analysis. The Nobel Prize winning economist Wassily Leontief has taken our profession to task precisely for its disinclination to delve beyond the standard compilations of published data to search for more appropriate numbers. [4]
I, too, shall speak mostly of the price series which appear in published sources. Nowhere are there readily available price series , if they even exist, detailing the price at the port of export of Latin American products. [5] How much of the often quoted per pound price of raw sugar actually remained in Cuba, for example? Does the fact that the domestic price of tin in the United States remained constant during the war years allow us to use that figure as a first approximation for the price of Bolivian tin? These details are of major consequence for developing countries. Chile has been one of the few countries to calculate the returned value of copper exports, i.e., that share of the earnings from copper exports which remains in the country. There is little benefit to the country if at the same time that the price of copper goes up there is an offsetting increase in profit remittances by foreign-owned copper companies. Alternatively, increasing benefit may accrue to the country even though price is constant or falling (assuming constant volume of exports) if returned value is increasing. Where possible, I shall comment on these aspects.
My focus will be on five commodities, each of which was the single major export of a largely monoexport economy. Three of these were of strategic importance during the Second World War (copper, petroleum, and tin) and two were agricultural products whose consumption was subject to rationing and price control in the United States. The figures in Table 1 below give an indication of the importance of total trade and of trade in each of these products with the United States for six of the Latin American countries.
[Table 1 here]
The Wartime Experience

In the case of each of the subject commodities, its U.S. purchase price was fixed and unchanged for lengthy periods: 54 months in the case of coffee; 48 months for sugar; 58 months, copper; 62 months, tin and 58 months for crude petroleum. No period before or since has been characterized by such lengthy price stability. Such price stability as did exist in peacetime also reflected market control, either by large oligopolists or intergovernmental agreements. Nonetheless, except for the war years, price changes did occur with some frequency and market conditions were certainly not ignored.
Price control in the U.S and, by extension, for the bilateral trade with its cooperating supplying countries came early in the Second World War, indeed before the U.S. actually entered the war. The determination was firm to avoid allowing out-of-control prices to inflate the cost of armed conflict as had occurred during the First World War (I shall examine that experience later in this paper). In the case of strategic materials, associated with and indeed, in some instances, preceding price control were exclusive purchasing arrangement for all of a country's exportable surplus. American initiatives began as early as mid-1940 with the start of negotiations for a long-term purchase agreement for Bolivian tin. The resulting five year agreement signed on November 4, 1940 [6] served as a model for the U.S. Metals Reserve Company's long term purchasing agreements, inter alia , for Bolivian tungsten (May 1941) and lead (October 1941) [7] and for Chilean copper (January 1942). [8]
Sumner Welles wrote on behalf of Secretary of State Cordell Hull to all the U.S. Chiefs of Mission in Latin America on April 1, 1941 asking each of them to meet with the Minister of Foreign Affairs of the country to which he was accredited to urge the establishment of export controls on strategic materials. Among the items in the extensive list were cobalt, copper, lead, magnesium, manganese, mercury, phosphates, platinum, quartz crystals, quinine, rubber, tin, tungsten, uranium and zinc. [9] Welles speaks of regulation of the exports in such a way as to give the U.S. "prior opportunity to acquire them." [10] On May 14, 1941 Brazil became one of the first Latin American countries to sign such an accord. Brazil agreed to restrict to the U.S. the export of a number of products, among which were bauxite, ferro-nickel, manganese, mica, quartz, rubber and titanium. [11] Similar arrangements were completed with most of the other Latin American countries.
In August l941 the State Department again contacted the U.S. diplomats in Latin America instructing them to obtain the cooperation of each of the various countries in establishing a National Oil Pool Committee. [12] These committees were to assist in allocating oil on a hemisphere-wide basis, a task which became particularly urgent in 1942 with the wholesale sinking of oil tankers in the Caribbean by German submarines.
Fixed purchase prices for the commodities with which we are concerned were generally imposed in 1941. A maximum price of 52¢ per pound came into effect for tin on August 14, 1941. On August 28 a ceiling price for copper of 11.78¢/lb. was established. In the case of sugar, the ceiling price of 3.50¢ per pound on raw sugar imposed in mid-August was raised in January 1942 to 3.74¢. In each case, except that of coffee, the price was merely set at a level which reflected prices in the preceding months, rather than an estimate of a price deemed "appropriate" in some sense. Presumably, the intention was to alter the price when and if necessary. No need appears to have been judged to have arisen, however. In April 1943 a recommendation came from the Petroleum Administrator for War that crude oil price ceilings be increased by 35¢ per barrel. The Office of Price Administration rejected that request in May and was sustained in October by the Office of Economic Stabilization. It was judged that oil prices in 1941 and 1942 were already at record levels and that the proposed increase would double the already too high profit margins of the largest producers. [13] For coffee the price set in December 1941 reflected the price prevailing in November and December, but was a full 47 percent higher than the average price in October. For petroleum, copper and tin the prices established were lower than annual average prices that been realized for copper and crude petroleum in 1937 and for tin in 1939.

Sugar
In the case of sugar the duty-paid price established, while higher than the annual average price for sugar for any year since 1929, was below the annual average price recorded in every year but four from 1901 through 1929. [14]
The price series available for sugar gives the duty-paid price in New York for raw sugar (96°). To determine the price to the Cuban "producer" or, to be more precise, the price at the Cuban port of export, one would have to net out ocean freight and the US import duty. At a time in 1940 when raw sugar was quoted in New York at 2.78¢ per pound, the duty on Cuban sugar was 0.90¢ and freight was estimated to be 0.20¢, yielding an f.o.b. export price in Cuba of 1.68¢. [15] As we have just noted sugar was the only one of the five commodities whose U.S. purchase price was altered after it was first fixed in 1941. At the same time, a new trade agreement which came into effect on January 5, 1942 brought a one-sixth reduction in the tariff on Cuban sugar from 0.90 to 0.75¢ per pound. [16] If we make the unlikely assumption that freight rates were unchanged, [17] this would have brought a 16.3 percent increase in the Cuban export price per pound from 2.40 to 2.79¢. In fact, Henry Wallich reports that most of the Cuban sugar crop was purchased by the U.S. Commodity Credit Corporation in 1942, 1943 and 1944 under a contract which set the price at the Cuban port of export at 2.65¢/lb. [18] We know from the diplomatic correspondence that an export price of 3¢ per pound had been insisted upon by the U.S. in early 1945, with the Cubans initially bargaining for 3.25¢. The Americans held firm, insisting that a higher price would upset the structure of controlled sugar prices in the U.S., until a strike of Puerto Rican sugar producers in March forced their hand: the price was set at 3.10¢ for the remainder of 1945. [19]

Coffee
For coffee, the picture is the opposite from that of sugar: in only 10 years from l901 through 1941 was the price equal to or higher than that established during the Second World War. Coffee prices were on average higher only in 1911, 1912, 1919 and from 1923 through 1929. The low level of coffee prices during much of the the first four decades of this century prompted Brazil to act alone to try to maintain prices. These efforts included massive destruction of coffee: Brazil destroyed more coffee in 1933 and 1937 than was consumed in those years by the United States. In the latter year, Brazil destroyed coffee amounting to two-thirds of that year's world consumption. [20]
The depressed state of coffee markets and the American desire for Latin American support in a conflict in which the nominally neutral United States had already clearly shown its colors led the US to support the signing of the Inter-American Coffee Agreement in 1940. The agreement entailed both the allocation of export quotas to the participating Latin American countries and an undertaking that market shares would remain unaltered.
For coffee we will be examining the average spot price in New York of Brazilian Santos "D" (no. 4), rather than that of Colombian Manizales. For the years we are considering the movement of the two prices was roughly similar, with the Colombian coffee consistently selling for at least 2¢/lb. more than the Brazilian. What was the actual Brazilian export price? Carlos Manuel Peláez gives figures that allow one to calculate the average annual price in U.S.¢/lb. for all grades of Brazilian coffee during part of the time when the New York price for Santos no. 4 was 13.4¢/lb: these were 10.4¢ in 1942, 10.6¢ in 1943 and 11.0¢ in l944. [21] The U.S. Commodity Credit Corporation bought some coffee directly in Brazil and in 1943 it was offering for Santos no. 4 "strictly soft" 11.20¢/lb. net f.o.b. maximum price. Here, as elsewhere, the U.S. fixed price served as a reference point in contracts made with Latin American producers.

Crude Petroleum
The price of petroleum which we will be using is apparently the wellhead price of Oklahoma-Kansas oil. How does this relate to the f.o.b. export price of Venezuelan oil? According to J.E. Hartshorn: "The netback value of Caribbean crude oil could be no higher than the price of comparable oil shipped from the U.S. Gulf to eastern seaboard refineries, less the duty, less the freight from the Caribbean to the same refineries." [22] The Central Bank of Venezuela has published the following figures as the unit sale price of Venezuelan oil: 1942, 101¢/barrel; l943, 103¢; 1944, 105¢; and 1945, 105¢ [23] at a time when the Oklahoma-Kansas price was 111¢.
Once again prices only tell a part of the story and possibly a misleading part as well, as our discussion of returned value of copper should have suggested. In an early comment on the phenomenon of transfer pricing by multinational corporations, Hartshorn noted that "more than 60 per cent of the crude moving to market in the United States is never actually sold, at posted or any other price: it is simply transferred to a refining department or affiliate of the same integrated group." [24] This point was well understood by the Venezuelan government which saw oil company profits growing at a time when it was facing fiscal deficits. In 1943 the Venezuelan government introduced a new Hydrocarbon Law as well as an income tax. Sale price in the United States may have been fixed, but there was no reason why the Venezuelan government should simply cede gains to
foreign producers.

Tin
The preceding must be modified for the case of tin. While the domestic sale price did remain unaltered, the special contracts entered into between the U.S. Reconstruction Finance Corporation and the largest of the Bolivian tin producers were renegotiated during the war. From an initial price of the higher of 48.5¢ per pound or market price less 1.5¢ per pound, the price paid to the Bolivian producers was raised first to 60¢ and then to 62¢ and 63.5¢. At the same time the controlled price in the United States was 52¢ c.i.f. New York for higher quality Straits tin and the controlled price in Britain was first 49.41¢/lb. (£275 per ton) and later 53.91¢/lb. (from January 1, 1944 to September 26, 1946). [25] Contracts entered into by the United States with China and the Belgian Congo each specified 53¢ per pound. It is important to stress that these contract prices were not c.i.f., but rather f.o.b. the nearest point of export, which for Bolivian tin were the Chilean and Peruvian ports. As the cost of long distance transport was borne by the United States, the Bolivian producers did not have to absorb this additional cost from the fixed unit price they received.
The higher price to Bolivian producers was justified in terms of the strategic need for tin (the U.S. was totally dependent on imports for primary tin) and the higher cost of production of the Bolivian mines. President Roosevelt is even reported to have suggested to Bolivian President Peñaranda that price differentials based on cost differences be incorporated in postwar arrangements for a government-run international cartel. [26]
Between 1942 and 1945 Bolivia provided three-quarters by value of U.S. imports of tin in concentrates. [27] As the newly constructed Texas City tin smelter relied primarily on Bolivian tin, Bolivian producers were able to exact a better price than were producers of most other commodities. There were limits, however, to how much they could obtain. This point was made to the Bolivian Ambassador in Washington by Sumner Welles during the fruitless discussions for a revised contract in 1943:
“You will realize that the purchase of tin is accomplished with public funds appropriated by Congress. The Metals Reserve Company is already paying Bolivian producers a price substantially in excess of that for which tin can be acquired in other producing countries, and a further increase could hardly be justified under existing circumstances.”[28]
Nonetheless, one month later Cordell Hull communicated to his ambassador in La Paz the willingness of the U.S. to increase the price from 60¢ to 63.5¢. [29]

Copper
In early 1942 a contract was concluded by the Metals Reserve Company to acquire all the exportable surplus of Chilean copper that was not sold to private interests in the United States or to other Latin American countries with export control systems parallel to that of the United States. Chile had little bargaining advantage given that the U.S. was a major copper producer and that prices in Canada had also been fixed, but at a level slightly below that established in the U.S. The discussions leading up to the signing of the Chilean contract are rather remarkable in that the U.S. endeavored to specify the division of price differentials between the Chilean government and the producing companies. [30] As we shall see below, the Chileans, although unable to influence price, did achieve their objective of increasing the portion of copper earnings remaining in the country.

The Comparative Price Experience

Despite the fixing of price of the various commodities at levels that represented relatively low points in terms of the prior experience in the century, exports grew and foreign exchange reserves grew as well. The figures in Table 2 are less dramatic than those of the change in these exports to the United States cited previously, but even in the case of the smallest relative increase (copper), the average compound growth rate was 6.5 percent per year.
[Table 2 here]
From the end of December 1938 to the end of December 1945, Brazil's official reserves of gold and foreign exchange increased over eleven-fold; those of Chile more than tripled; those of Bolivia and Colombia increased seven-fold and 6.6 fold respectively. [31] The Chairman of the Board of the Federal Reserve System made a plea to the U.S. Senate Committee on Banking and Currency in early 1944 for a continuation of price controls after the end of the war. He based his argument on the desirability of sheltering from inflation those who had sacrificed domestically for the war effort. [32] But many of those who sacrificed were not within the confines of the United States: remark was made in 1948 by Henry Wallich about the rapid loss in purchasing power of the foreign exchange reserves accumulated by Latin American central banks and monetary authorities. [33] If, however, we consider the data in Table 3 on Central Bank holdings of foreign exchange and gold, it would appear that these fears were not borne out.
[Table 3 here]
To help put in perspective the experience of the Second World War we shall consider the historical record in the twentieth century and consider in particular the years of the First World War and the five year period immediately preceding and immediately following the Second World War.
Consider the relation between the minimum and maximum annual average prices in U.S. cents per pound over the quinquennium 1914-1918: [34]

Minimum
Maximum
Max/Min
Coffee
7.5 (1915)
9.4 (1916)
1.25
Copper
13.31 (1914)
29.19 (1917)
2.20
Sugar
3.81 (1914)
6.45 (1918)
1.69
Tin
35.70 (1914)
86.80 (1918)
2.43

Alternatively, we may examine the percentage change in prices over the period of the First World War in relation to the comparable months of the Second World War. [35]


July 1914-Dec. 1918
52 months
Aug. 1939-Dec. 1944
52 months
Per cent %

Inflation Peak

Copper
93
165
15
Petroleum
200
367
25
Tin
138
224
7
Steel plates
187
696
0
Bituminous coal
135
675
24

Note that the increases in the U.S. purchase price for copper, tin and petroleum which appear in the last column all occurred in the months prior to mid-1941.
An article which appeared in the U.S. Survey of Current Business in 1943 provided calculations of what prices would have been in September l943 had they moved in a manner similar to that of the First World War. [36] Had the 1939 average retail price of sugar risen by the same percentage by which the l920 average price exceeded that of 1914, it would have been 17.8¢/lb. rather than 6.8¢. The wellhead price of crude petroleum would have been $4.04/barrel rather than $1.11. [37]
Let us turn next to a comparison of the five year period of American involvement in the war, with the periods immediately preceding and following the war. Some of the salient points for comparison are summarized in Table 4. By including 1941 in our war year grouping we capture the months prior to the fixing of prices: for none of the five commodities was there any variation in the officially reported fixed U.S. purchase price between the start of 1942 and the end of 1945. Only in the case of coffee does the inclusion of the 1941 data provide values suggesting greater variability of price during the war than in either of the comparison periods. In January 1941 a record low average monthly price had been reached for coffee (5.3¢/lb.) owing to the loss of much of the European market for the product.
[Table 4 here]
The price fixed for each of the commodities was above the average price for 1936-40: by 55.6 percent for coffee, 7.3 percent for copper, 31.2 percent for petroleum,17.5 percent for sugar and 6.9 percent for tin. However, for each of the products except coffee there had been prewar (i.e., 1936-1940) monthly average maximum which exceeded the fixed wartime price. The postwar picture is a very different one: prices rose and varied substantially between 1946 and the end of 1950. In no instance did prices fall back to the wartime level.
Another aspect of the experience with price controls was the squeezing of the profit position of producers, particularly the smaller ones as prices increased. As John Kenneth Galbraith notes in his classic work on price control: ". . . in South American countries among others, most price control consisted merely of decrees by remote central governments. There was no machinery for enforcement . . . As a result, there was virtual immunity from penalties for violation." [38]
In the United States special arrangements were made for high cost producers of copper and petroleum, which increased substantially their per unit receipts. Stripper oil wells in the U.S. with an output lower than five barrels per day were allowed 35¢ per barrel above the controlled price beginning in August 1944, while 75¢ per barrel extra was allowed for "Pennsylvania grade oil" produced in Pennsylvania, New York, West Virginia
and Ohio. Domestic copper mines extracting low grade ore were entitled to bonuses as early as 1942. By 1945 over one-quarter of U.S. copper production was receiving a price greater than the ceiling; in some instances as much as double the ceiling price. [39] In Bolivia and Chile small tin and copper mines simply closed down. The U.S. position on high-cost Bolivian tin mines was "that while some of the high-cost mines might close, no reasonable price would maintain them in operation." [40]

Splitting the Gains

The fixing of Latin American commodity prices and the assurance of a market in the United States brought substantial increases in export volume and revenues and it would appear in the profits of large producers as well. These profits did not go unnoticed by Latin American governments [41] and the war years were a time of major changes in tax levels applied to exports.
Changes in taxes treatment and other measures affecting the foreign copper companies in Chile brought a substantial increase in the returned value of copper and in government revenues from copper production. Only for Chile have calculations been made for the net proceeds to the country from the sale of a major export. Table 5 show that returned value increased to exceed one-half the value of production by 1943. Direct taxes and other government revenues from copper represent only a portion of returned value (at its maximum that share reached 43 percent in 1942). Viewed from a different perspective, the share of Chilean government revenue derived from Gran Minería (the three large foreign-owned mines) went from 9.1 percent in 1939 to 25.7 percent in 1945. [42] In fact, Clark Reynolds suggests, without providing estimates, that government revenue from copper were even higher by virtue of "a growing differential between the 'official' and 'free' exchange rates which acted as an indirect tax on operating costs." [43]
[Table 5 here]
A somewhat similar picture can be drawn for Venezuela, although the data available is more limited. Again we find changes in taxes and other treatment, including the introduction of an income tax in Venezuela in 1943.
Enrique Baloyra provides indices of the growth of total government revenue (which includes revenue from petroleum) and revenue from oil sources: with l938 as a base (=100) for both indices, by 1945 the total revenue index had

grown to 194.1, while that for petroleum had reached 298.0. [44] In Venezuela, as in Chile, exchange rate differentials were used as a form of tax on petroleum exports and provided yet additional revenue to the government.
Conclusion

An assured market at fixed prices was provided by the United States to the Latin American countries during World War II. The answer to the question of who gained, who lost and by how much by such arrangements seems very much to be in the eye of the beholder. John Hillman refers to a "conservative estimate" of a $900 million subsidy by Bolivia to the Allied cause. [45] Clark Reynolds cites an estimate of returned value lost by Chile through foregone price increases of $500 million. [46] Theodore Moran, in his study of multinational firms and copper in Chile, traces postwar Chilean nationalism in part to wartime pricing arrangements which are said to have given Chileans "their first idea of dependencia."[47]
A very different view is offered by Thomas H. Lockett, The American Chargé in Colombia, following hostile reactions by the Colombians to a smaller than anticipated increase in the U.S. controlled price of coffee in late 1945:
“In the general interest I would like to see coffee producers the world over receive a just and fair price, but, at the same time, I am glad to see that the interests of our own people are being given due consideration. During the period of the war we were so liberal in many respects with our neighbors that it is now very difficult for some of them to realize that we must now take into consideration the welfare of our own people.” [48]

There was much complaining about the level at which those prices were set, but it seems clear that they were sufficiently attractive to large-scale producers to occasion a substantial increase in the export earnings of the countries that we have been considering. Moreover, several of these countries altered taxation arrangements during the Second World War in such a way as to bring substantial increases in revenues.
While the Latin American countries may have had to defer many import expenditures until after the War, it seems reasonable to conclude from the data in Table 3 above that changes in the terms of trade did not deplete their reserves. The prices of the exports we have considered rose by substantially more than the increase in the price index for U.S. exports (the unit value of U.S. exports rose by 20 percent between 1945 and 1948 and then declined in 1949 and 1950). As we have noted, only two of the six countries experienced reserve declines in the five postwar years.
Much was possible in the realm of intergovernmental cooperation during the war years. Free markets and the unfettered operation of private enterprise were not regarded as being equal to the task at hand. Although we have seen many initiatives ostensibly in the interests of the developing countries in the four decades since the end of the Second World War, it is clear that the North does not perceive the tasks of development in the South as being at all comparable in urgency to the war effort. The fascination of the study of the war years is in the glimpse that it gives us of the mountains that can be moved when nations are united in common purpose.

Table 1. Exports from Selected Latin American Countries to the United
States, 1938 &1945 (million U.S. dollars)

Total exports to U.S. from
1938
1945
Principal export to the U.S.
1938
1945
Bolivia
1.6
49.8
Tin
0.01
33.9
Brazil
101.5
326.3
Coffee beans
72.0
191.5
Chile
18.2
116.2
Copper
14.1
97.5
Colombia
42.6
109.9
Coffee, green
39.1
94.4
Cuba
108.2
386.0
Sugar, raw
63.7
183.7
Venezuela
37.1
69.2
Petroleum, crude
32.1
50.8
Total
309.2
1057.4

231.5
661.4
Share of total (percent)
0.75
0.63

Source: U.S. Dept. of Commerce, Office of International Trade (1968).
Table 2. Principal Exports from Selected Countries, 1938 & 1945
Exports
1938
1945
1945/1938

Million U.S. dollars

Bolivia, tin
27.8
61.4
2.21
Brazil, coffee
147.5
230.9
1.57
Chile, copper
71.5
110.9
1.55
Colombia, coffee
49.6
104.0
2.10
Cuba, sugar
127.6
259.2
2.03
Venezuela, petroleum
162.5
312.1
1.92

Source: U.S. Dept. of Commerce, Office of International Trade (1968).
Table 3. Central Bank Foreign Exchange and Gold Reserves 1939-1950
(million U.S. dollars)
Country
1939
1945
1946
1947
1948
1949
1950
1945/39
1950/45
Bolivia
5.2
35.4
33.7
30.6
31.4
28.6
39.7
6.81
1.12
Brazil
67
666
760
785
757
719
665
9.93
1.00
Chile
33.2
110
69.1
55.8
53.1
42.9
54.9
3.31
0.50
Colombia
24
177
176
111
84
111
101
7.38
0.57
Cuba
1
232
266
346
316
343
418
232.00
1.80
Venezuela
31
190
216
216
345
392
340
6.13
1.79
Total
101.1
1410.4
1520.8
1544.41
1586.5
1636.5
1618.6
13.95
1.15

Source: IFS, various issues.
Table 4. Commodity prices and variations, 1936-50

Coffee: Spot price in New York of Santos No 4, U.S. cents per pound
Years
Average
Minimum
Maximum
Max/Min
Variance
1936-40
8.61
6.8
11.8
1.74
2.45
1941-45
12.43
5.3
13.4
2.53
4.97
1946-50
30.88
13.4
56.1
4.19
57.12






Copper: Spot price in New York of electrolytic copper, U.S. cents per pound
Years
Average
Minimum
Maximum
Max/Min
Variance
1936-40
10.98
8.78
15.78
1.80
2.47
1941-45
11.78
11.78
11.82
1.003
0.0001
1946-50
19.55
11.78
24.20
2.05
12.7






Petroleum: Price of crude petroleum at Oklahoma-Kansas wells (33°-33.9° gravity to and 36°-36.9° thereafter), U.S. cents per barrel
Years
Average
Minimum
Maximum
Max/Min
Variance
1936-40
84.63
96
116
1.21
76.74
1941-45
109.96
96
111
1.16
12.77
1946-50
214.14
111
257
2.32
2618.02






Sugar: Duty-paid price of raw sugar (96°) in New York, U.S. cents per pound
Years
Average
Minimum
Maximum
Max/Min
Variance
1936-40
3.15
2.7
3.9
1.44
0.13
1941-45
3.64
2.9
3.7
1.28
0.02
1946-50
5.63
3.8
6.3
1.66
0.42






Tin: Spot price of Straits tin in New York, U.S. cents per pound
Years
Average
Minimum
Maximum
Max/Min
Variance
1936-40
48.65
36.84
63.50
1.72
33.42
1941-45
52.00
50.16
53.35
1.06
0.1
1946-50
85.27
52.00
144.78
2.78
439.02

Note: Average, minimum and maximum prices are based on average monthly prices.
Sources: Survey of Current Business , various issues and Commodity Research Bureau, various issues.
Table 5. Copper prices and Returned Value, 1936-1950


% U.S.: Average Production
US¢/lb
Chile: Price from Company data
US¢/lb
Chile: Returned Value Price
US¢/lb
Chile: Ret’d value as of total value of percent
1936
9.48
9.1
2.58
33
1937
13.18
12.7
3.46
29
1938
10.00
10.0
3.45
28
1939
10.97
10.0
3.93
36
1940
11.30
11.3
4.48
38





1941
11.80
9.6
4.47
40
1942
11.78
10.5
5.91
45
1943
11.78
11.3
6.44
53
1944
11.78
12.8
6.60
58
1945
11.78
13.2
6.64
58





1946
13.82
13.6
7.66
58
1947
20.96
19.7
10.29
51
1948
22.04
22.0
13.35
61
1949
19.69
20.0
12.64
63
1950
21.24
20.8
14.71
70

Notes: Chilean data refer only to "Gran Minería", that is, the three large foreign-owned mines.
"Returned value" is that share of the value of production and capital formation retained by domestic factors of production.
Source: Average price from Survey of Current Business , various issues; remainder from Reynolds (1965), pp. 372, 378, 379.


[NOTES]

The author is Associate Professor of Economics at McGill University, Montreal, Canada. The original version of this paper was presented at the 46th International Congress of Americanists in Amsterdam, July 1988. Revision was completed while the author was Professeur Visiteur at the Centre d'Etudes en Administration Internationale (CETAI) of the Ecole des Hautes Etudes Commerciales, Montreal.
1Frank (1967), pp. 148-49. In this paper I follow the parochial U.S. tendency to associate the start of the Second World War with the entry of the United States in December 1941.
[2]The ultimate sendup of counterfactuals is provided by McAfee (1983), in which the social saving of the discovery of America is judged by what the world would have been like in the almost five centuries since that event had it not occurred.
[3]Ayres (1962), pp. 3-22.
[4]Leontief (1983). Constantine Vaitsos relates how his quest for the "international price" of specific products imported by Colombian firms required in excess of one man-year man-year of labour and the cooperation of the Colombian Government in making available to his team of researchers files which are normally confidential. Vaitsos (1974), pp. 32-35.
[5]Two recent compendia of historical statistics for Brazil and Cuba neglect to include any price series for the commodities (coffee and sugar) which were major influences on the economic well-being of each. Schroeder (1982) and Ludwig (1985).
[6]U.S. Dept. of State (1940), V, 524-48 contains correspondence detailing the negotiations. See also U.S. Department of Commerce, National Production Authority (1953), pp.15-9 to 15-13.
[7]U.S. Dept. of State (1941) VI, 452-64.
[8]Ibid.., 578-96.
[9]Welles for Hull to Chiefs of Mission in the American Republics, Dec. 12, 1940, U.S. Dept. of State (1941) VI, 149-51.
[10]Ibid.., p. 152.
[11]U.S. Dept. of State (1941) VI, 538-43.
[12]Hull to Diplomatic Missions in American Republics, August 30, 1941, U.S. Dept. of State (1941) VI, pp.171-72.
[13]Harris (1945), p. 150.
[14]Commodity Research Bureau (1939)
[15]Commodity Research Bureau (1941), p. 517. Between September and December 1939 the tariff on Cuban sugar rose from 0.90¢ per pound to 1.50¢. Smith (1960), p. 187.
[16]Commodity Research Bureau and Smith, p. 187.
[17]Information available for other commodities gives a clear indication of increases in freight rates: freight charges for a 60kg bag of coffee from Santos to New York went from 60¢ in July 1939 to 70¢ in February 1940 and to 90¢ in February 1941. In ¢/lb, this amounts to 0.45, 0.53 and 0.68 respectively. Survey of Current Business , 21 (April 1941) p. 15. A 2.5 fold increase in freight rates for tin in 1941 is reported by Hillman (1988), p. 13.
[18]Wallich (1950), pp. 142,150-51.
[19]U.S. Dept. of State (1945) IX, 918-30.
[20]Commodity Research Bureau (1942), p. 49.
[21]Peláez (1973), pp. 292-93.
[22]Hartshorn (1962), p. 133.
[23]Banco Central de Venezuela (1966), p. 62. The Central Bank derived the price by dividing the value of production by the volume of crude produced.
[24]Hartshorn, p.120.
[25]American Bureau of Metal Statistics (1947), p. 102.
[26]Memorandum of Conversation, by the Chief of the Division of the American Republics (Philip W. Bonsal), May 5, 1943, U.S. Dept. of State (1943) V, 562.
[27]U.S. Department of Commerce, National Production Authority (1953), table 12-3.
[28]Welles to Bolivian Ambassador (Luis F. Guachalla), Aug. 19, 1943, U.S. Dept. of State (1943) V, 569. The Metals Reserve Company was a purchasing agency of the Reconstruction Finance Corporation.
[29]Hull to Pierre de L. Boal, Sept. 22, 1943, U.S. Dept. of State (1943) V, 571.
[30]See U.S. Dept. of State (1941) VI, 578-96.
[31]IMF, Vol. 1, No. 1 (Jan. 1948).
[32]Eccles (1944), p. 330.
[33]Wallich (1948), p. 156.
[34]Commodity Research Bureau (1939).
[35]Harris (1945), p. 14. I've included steel plates and bituminous coal on the list to give a sense of the experience which prompted the imposition of price controls in the Second World War.
[36]Haskell (1943).
[37]Ibid.., p. 15.
[38]Galbraith (1952) p. 14.
[39]U.S. Bureau of Mines (1945), pp. 136-37 & 1093.
[40]Memorandum of Understanding between Dept. of State and the Foreign Economic Administration Concerning the Purchase of Bolivian Tin, U.S. Dept. of State (1944) VII, 492. For a discussion of small mines in Chile, see Reynolds, (1965) p. 237.
[41]The Bolivian Ambassador to the U.S. remarked, for example, that without excess profit taxes, the negotiated increase in tin price from 60 to 63.5¢/lb. would place two million dollars in the pocket of Simón Patiño, the largest Bolivian tin producer. Memorandum of Conversation, by Mr. Louis J. Halle, Division of Northwest Coast Affairs, November 20, 1944, U.S. Dept. of State (1944) VII, p. 494.
[42]Reynolds, p. 388.
[43]Ibid.., p. 237.
[44]Baloyra (1974) p. 36.
[45]Guillermo Bedregal, cited in Hillman, pp. 3-4. Bedregal's estimate is well over three times the value of all of Bolivia's tin exports from 1941 through l945, implying an assumption that prices would have increased four-fold in the absence of controls.
[46]Estimate by Wacholtz, cited by Reynolds, p. 240.
[47]Moran (1974) pp. 54-57.
[48]Thomas H. Lockett to Bainbridge C. Davis, Division of North and West Coast Affairs, Nov. 23, 1945, U.S. Dept. of State (1945) IX, 882.
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