ting up some commissaries where they buy food at half cost, and yet they are almost on the verge of expropriation; but they are in the program for aid under this particular program.

Mr. CALE. The question that we have to ask ourselves is whether or not we would actually improve the position of United Fruit Co. and our position generally in Guatemala if we cut out this very small

program.

The program in Guatemala is under constant review. It is exceedingly small. We feel that it is one way of helping the masses of the people whom we believe are friendly to us. At the same time we are concerned over the attitude the Government is taking toward the United Fruit Co.

We have already taken up with that Government the expropriation of land in Guatemala belonging to the company and we expect to follow up with the normal and accepted procedures for protecting the interests of our citizens abroad in that regard.

Senator DIRKSEN. Do you do it by rewarding further incursions by Guatemalans into the rights of Americans down there by saying, "Be good boys and we will give you more and more and more"? The situation has definitely deteriorated in Guatemala since 1948. Can there be any doubt about it?

Mr. CALE. I think you are correct in stating that the situation has deteriorated.

Senator DIRKSEN. And we continue to reward them. I have not seen the night papers but somebody brought to my attention the fact that the situation has become quite aggravated in the last few days in Guatemala. Is it not about time that we throw in the sponge and use a stick on occasion when it becomes necessary?

Mr. CALE. I may say that the problem is under constant review. Senator FERGUSON. You say: "under constant review" and it has been getting worse. What good does it do to constantly review something that is getting worse and do nothing about it?

Mr. CALE. If it were possible to change the situation with respect to United Fruit

Senator DIRKSEN. Let's leave out United Fruit.

Mr. CALE. Toward American investments in Guatemala and to improve our general position in Guatemala by cutting out this program, I am sure that that would be done.

Senator DIRKSEN. The way you punish a naughty child is to take away the lollipop, not give him a second one. If he gets into mischief say, "Here is a second little lollipop."

Senator FERGUSON. Every time he does something wrong give him

another.

Mr. STASSEN. If one of the children in the family misbehaves you do not punish the whole family. That is what you have got in Guatemala, not the matter of the whole people being unfriendly to the United States. You have a situation involving the Government.

In this whole overall question as to whether or not you should insist on the convertibility of earnings in all of these countries you come, as a matter of fact, smack up against this overall question of the payments in international trade for dollars and the reason I asked this chart to be put up is it shows the 1952 situation and just how the dollar picture is with the rest of the world.

(The following chart was submitted:)

1932

(In Millions of Dollars)

UNITED STATES EXPORTS AND IMPORTS

If they let you exchange dollars in most countries of the world without restriction you would drain out all dollars and gold in a very short time. The United States is so productive and so strong a creditor nation in this postwar situation that it has a tremendous balance in its favor toward the rest of the world. You see it here. This is what we shipped out in exports. Wheat, tobacco, cotton, meat, cotton textiles, chemicals, machinery: 16 billion out of a total financial transaction of 22 billion. You see what we took back in, just 11 billioncoffee, sugar, rubber, fish, chemicals, medicines, machines, miscellaneous. During the year you have the various financial transactions and you have loans and grants. With that they had to send us $378 million worth of gold last year with all the aid. Now if they had liberalized and they did send in, they received due bills for United States capital eranings abroad $1,911,000,000, and those they paid. Now if they had liberalized further they would have had a greater deficit here to be met by gold or by further aid grants.

You have this fundamental question of the balance in dollar exchange with the rest of the world. You either have to expand private investment abroad or expand it, expand the tourists and all the other indirect earnings or expand the imports of physical goods or a combination of them or further restriction on United States exports. Those are the various factors that come in because the countries in the period in the last decade have been so stripped on their gold and it is in Fort Knox as you know and on their dollar reserves that they cannot make any more payments of any consequence without completely destroying the backing of this country's currency. That is why this has to move so gradually and with such care that you do not upset the currency and economic picture of other countries as you more rapidly open up investments and convertibility and the bringing back into the United States of earnings. You cannot do it with one fell swoop or you bust every country in the world and wind us up with a temporary spurt only of dollar exchange and then economic chaos and the kind of restrictions that came in the late twenties and early thirties that threw the whole world into a depression condition. This is an intricate decision that has to be approached with great care and step by step and we are now engaged in a process of facing up to this and phasing out on these loans and grants of stepping up on the dollar earnings of these countries in various ways including expanded tourist business, expanded receipts of raw materials and in the overall picture, trying to create an economic balance step by step without such large grants and without pulling the gold out of the rest of the world.

REPAYMENT OF LOANS

Senator FERGUSON. How will they ever repay the loan? You are pyramiding those on the opposite side?

Mr. STASSEN. These have to be looked upon as a long-term loan approach. They have to earn more dollars by doing more things and selling more goods to tourists and that is a very substantial item that is growing; I think it can grow still more. One of the dividends that the United States people can get from the rest of the world by reason of the great productivity is the pleasure of travel more

abroad. They can get that back as a dividend. Another thing they can take in is more raw materials from the rest of the world. They can take in more of other products if they get specialty goods and things of that kind.

You can have a greater United States private investment in the rest of the world to counterbalance the picture.

Senator FERGUSON. Aren't they putting up tariff barriers and quotas to keep these goods out?

Mr. STASSEN. Some of them are so concerned by the level of United States imports that they cannot pay for that. They have to cut that level down and it gets into these media guaranty and many of these special problems.

Senator DIRKSEN. Getting back to the thesis laid down by Mr. Robinson, it is not as complicated in my judgment as it would appear because what you deal with finally is just the human equation, whether it is a bank, whether it is a Standard Oil Co. or General Motors or whoever it is.

They will go into Columbia or Turkey or Germany or any other place if they believe they can produce an article at a profit and there is some chance of first, saving their capital against expropriation— that has to be the first guaranty because why should any corporation or any bank venture a single dollar in a foreign country if they were dubious that they could get their money out in terms of dollars?

Secondly, why should they invest if they are going to be the victims of discriminatory legislation?

Third, why should you set up a factory in a foreign country if, in the case of a broken-down machine you had to send to the United States for a part; you set up a depreciation reserve and it takes 6 months to get the part so the factory can run.

The whole question of luring capital abroad-goodness knows, there is plenty of capital-is: Is it safe and are you going to get it back because the enterprises does not own the capital? He is a trustee.

PROFITMAKING

Mr. STASSEN. The interesting thing is that with all those difficulties United States capital is earning more abroad than it is in the United States even under these conditions. They overcome all these obstacles and still make a good profit overseas.

We want to improve the atmosphere so they have greater chances of making good profits overseas and we hope then they will invest and reinvest and expand their holdings overseas without constantly pulling the dollars back so quickly. That will develop a favorable situation worldwide that we trust in time can lead to general convertibility of currency. If you get to the point of general convertibility again then you do not have these balance-of-payment problems and these special transactions. In the underdeveloped areas in petroleum the annual earnings rate is about 32 percent compared to 22 percent in the United States.

Senator DIRKSEN. They have not any use for that petroleum.

Mr. STASSEN. Much of this goes into Europe and is in turn converted back into dollars.

Senator DIRKSEN. You take Saudi Arabia.

Mr. STASSEN. While there are all these difficulties in the way of doing business, nevertheless United States capital is overcoming all

the difficulties and making a profit. We want to increase their opportunities for expanded investment and expanded profits because it is the only way that the United States in its creditor role toward the rest of the world can adjust its position and do so on a sound economic basis.

Senator DIRKSEN. Take that petroleum. These countries that are selling us that petroleum are going on to do so because they have not any use for it. Saudi Arabia has none, the whole theater there has no real use for it. Therefore they are getting American dollars for it. That is why.

Mr. STASSEN. What is your point?

Senator DIRKSEN. You say that they are getting more out of petroleum.

Mr. STASSEN. United States capital is showing a better profit

overseas.

Senator DIRKSEN. That is one item. What about the other items?

EARNINGS ON INVESTMENTS ABROAD

Mr. STASSEN. In distribution like Sears, Roebuck, and so on, they are making 20 percent overseas instead of 17.9 in the United States. Senator ELLENDER. That is because of taxes, is it not? It is cheaper to operate, labor is cheaper.

Mr. STASSEN. There are various factors on the plus side that overcome some of the minus side that Senator Dirksen correctly pointed

out.

There are many obstacles but also some advantages. In_manufacturing they are making about 1 percent better overseas. In mining and smelting they are making about 2 percent better overseas. This is United States private capital invested overseas. In public utilities, with reference to the question of awhile ago, they are doing very badly overseas, 1.8 compared to 6.7 in the United States.

Public utilities overseas is not a sound United States private investment at present.

Senator FERGUSON. Have you a chart showing South America, the figures on profits in South America?

Mr. STASSEN. This is worldwide and it varies in a particular item but this shows-Latin America has 39 percent of all the United States private investment overseas.

Senator FERGUSON. What is the profit compared to here?

Mr. STASSEN. We do not have an analysis separated out by these areas but there is no indication that it is significantly different. It might be a little better in one business than another, but this shows the geographical division.

Senator ELLENDER. In the case of petroleum in Venezuela the American companies make a net profit of over 400 million per year, almost a half billion dollars.

Mr. STASSEN. I am not familiar with the figure but you get a variation.

Senator ELLENDER. The profits are 50-50 between the Government and the operators.

Mr. STASSEN. A United States business that gets active in say 9 or 10 foreign countries so that if 1 goes sour the others pick it up or if 2 go sour the others still pick it up are the kind that have been most suc