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BRAZIL THE FORGOTTEN ALLY

5)BRAZILIAN WARTIME ECONOMY


WHAT DID YOU DO IN THE WAR ZE CARIOCA?

By Frank Mc D. Cann. University of New Hampshire.


The war brought an almost immediate improvement in Brazil's interna- tional trade status. Even though cut off from most of continental Europe, its exports elsewhere rose dramatically. An increasingly favorable balance of trade gave Brazil large hard currency reserves for the first time since the Great Depression. Its 1942 exports were valued about $388,000,000, giving it a surplus of $148,000,000, more than double the 1941 figure. At the end of 1942, it held gold reserves of $121,000,000 compared to $40,000,000 in 1939. Its textile factories especially were finding ready customers in Argentina and South Africa.


Various sectors of the economy responded to the stimulus of domestic demand caused by the sudden inability to import foreign manufactures. The American publication Business Week proclaimed that "... there is no question but that Brazil has the biggest potential of any nation in Latin America." The war benefitted Brazil financially and at the same time increased the political clout of industrial workers and their unions. Vargas used the onset of war to broaden popular support for the regime, promising better protection for workers. Almost inconspicuously, government authorities began using Estado Nacional in place of Estado Novo.


When Brazil joined the Allies, it was their economic dependant. Of the $2,242,200,000 foreign investment, the British held 48%, the Americans 25%, the Canadians 18%, and a mix of others 9%. Foreigners controlled street car lines, electric power, coal and oil importation, much of the flour milling, all of cement production, many of the tugs and barges in Rio's harbor, and telegraphic communications with the rest of the world. A British company had owned the sewers of the older parts of Rio since 1857.


Many of the movie theaters in big cities were owned by Paramount, RKO, and Twentieth- Century Fox, who actively discouraged development of the national cinema industry. Newspapers received subsidies from foreign embassies, the news wire services were foreign Associated Press, United Press, Reuters, and the German Trans-Oceanic- and all newsprint was imported. The air force's aircraft carne from abroad, as did the army's heavy weapons, equipment, and 50% of expendable ordnance.


Moreover, because a high proportion of inter- state commerce travelled by sea, rather than overland, the economy was overly exposed to potential collapse due to well-aimed torpedoes. The war highlighted Brazil's dependency on foreign investments, imports, and markets, but it also offered a unique occasion to construct an infrastructure that would allow nationally-controlled economic development. With Europe occupied by Nazi legions and Britain weakened, Brazil was more dependent on the United States. No longer able to juggle European and American interests, it now bargained comprehensively with Washington.


Clearly, this potentially threatened national sovereignty, but Brazil had the distinct advantage that the United States desperately needed certain Brazilian products and the strategically important air and naval bases. Brazil was then the sole source, for example, of quartz crystals used in military communica- tions equipment. The American war factories also needed Brazilian ¡ron ore, rubber, chrome, manganese, nickel, bauxite, tungsten, industrial diamonds, and thorium-rich monazite sands (this last used in atomic energy research). The Brazilians, therefore, held some important cards and their president was a good poker player.


They negotiated guaranteed price agreements with the United States that, for the f¡rst time, assured Brazil of a consistent return on its exports. Moreover, Washington wanted to reduce Brazilian dependency on American goods because its factories were straining to supply the Allied forces and it required its over-burdened shipping for other missions. It encouraged import substitution and the improving of internal transportation. The war was an opportunity for Brazil to move towards development, and, until 1944, the United States had the motivation to assist.


One of the results of this scenario was the late 1942 American Technical Mission, headed by Morris Llewellyn Cooke, a respected New Deal administrator, and composed of a chemical engineer, an economist, an industrial relations specialist, a geologist, a lawyer, and fuel, power, metallurgical, transportation, and production technicians. These experts worked with a highly talented and well-connected Brazilian team to draw up a comprehensive set of recommendations that sought to satisfy both the immediate demands of wartime and long-range growth with a carefully drawn development program that employed electrical power, light metals, and the airplane to substitute coal, steel, heavy industry, and railroads.


The joint report made proposals related to such diverse subjects as cargo planes and gliders, land transportation, fuel, petroleum, electric energy, textiles, paper, mining, metallurgy, the chemical industry, commercial associations, food production, markets and prices, education, translation of books into Portuguese, industrial financing and sources of credit, manufacture of electrical equipment, economic mobilization, and regional development planning.


The Cooke Mission's work, combined with the activities of the Rubber Reserve Company in Amazonia, the Basic Economy Program to improve food supply, health and sanitation in the northeast, and the wide- ranging projects of Nelson Rockefeller's Office of the Coordinator of Inter- American Affairs created a revolution of rising expectations that caused Brazilians to think that the oft-predicted era of future greatness was about to dawn. An example of the startling proposals that came out of the wartime emergency was one to build an elaborate system of canals, railroads, and highways through the interior of South America, linking the Orinoco, Amazonian, and Rio de La Plata river systems.


Once the Allies had neutralized the submarine threat in the Atlantic, the idea was filed in the archives. United States officials stimulated the belief that industrialization, electrification, increased trade, housing, and education would be among the immediate consequences of Allied victory. Post-war relations would be soured by the rapid decline of American interest in such expensive ventures in peacetime. But even if all the dreams did not become real, the wartime centralized planning set a powerful example that influenced post-war economic development efforts.


The wartime economic boom was somewhat limited geographically to the south-central region, with the greatest impacts being felt in the cities of Rio de Janeiro and Sáo Paulo. The urban working class expanded apace with the increase in factories. In 1945, about 2,000,000 could be classified as urban workers (about 15%) out of the approximately 14,000,000 salaried employees in the 40,000,000 plus population. Two decades earlier, manufacturing had been limited largely to textiles and food and beverage processing.


By 1945, some 70,000 small and medium-sized factories employed more than 50% (1,100,000) of urban workers, who were producing, in addition to textiles, food, and drink, metal goods, chemicals, pharmaceuticals, cement, tires, and assembled vehicles. The growing government agencies employed a consider- able number of white-collar workers.


But the bulk of the working population, two-thirds of it, was still found in rural areas, in agriculture, stock raising, and collection of rubber, nuts, and herva mate. As industrialization stepped up its pace after the war, it would cause a huge rural to urban migration that would make Brazil, a half-century later, a highly urbanized country.


 

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