Friday, Mar. 29, 1963

The Grabbers

Many of the world's impatiently developing nations almost inevitably turn to a form of do-it-yourself foreign aid: simply nationalizing any foreign-owned properties around. Often the biggest banks and businesses belong to foreigners, and the hosts suffer from both the weakness of envy and the need for cash. Last month Burma's government nationalized 14 foreign banks, and this month Nyasaland seized a German-controlled brewery on the pretext that its beer was designed to lull natives out of any fight for independence. Last week in Manhattan, even while seeking U.S. aid, Brazil's Finance Minister San Thiago Dantas reaffirmed his country's intention to nationalize all foreign utilities. The U.S. State Department accepts the likelihood that before long almost all Latin American nations will expropriate their foreign utilities.

Something for Nothing. The one restraint on many nations in their get-rich-quick desire to seize foreign holdings is their acute need to attract more foreign investment. Many of the new African nations, who have all too little to expropriate as it is, have pledged to protect foreign capital; so have the oil sheikdoms of the Persian Gulf, which profit so hugely from the presence of foreign-owned oil companies. But in many other places, nationalization is growing along with nationalism.

Syria, which nationalized all its banks and insurance companies after it melded into Nasser's United Arab Republic and later denationalized some when it broke away, is now expected to enter a new period of nationalization. Iraq last year nationalized virtually all the exploring concessions of the Iraq Petroleum Co., which is controlled by British, Dutch, French and U.S. oil companies. Indonesia is pressuring three major oil companies—Caltex, Stanvac and Shell—to turn over their refineries and sales outlets to the government, and Tanganyika last week informed a Belgian-controlled dock company that it will be nationalized.

As for compensation, one U.S. State Department official says: "A lot of times we have to be happy with anything we get." Only the more mature nations are apt to pay up. Brazil intends to nationalize five refineries that it identifies as being U.S. financed, promises to pay a fair price for all expropriated properties. Mexico, after its costly oil expropriations in the '30s, now shuns such crude methods, instead is enforcing "Mexicanization" laws and decrees that call for the sale to Mexican citizens of majority capital in many foreign-owned industries. The U.S. Congress last year wrote the Hickenlooper Amendment into the Foreign Assistance Act to cut off foreign aid to any country that expropriates U.S. properties without compensation. Ceylon was the first to be hurt, losing out on U.S. aid because it neglected to pay for the U.S.-owned gasoline stations and oil depots that it grabbed a year ago.

High Losses. Have-not governments usually justify their expropriations by claiming that they can do more for their people than foreigners. All too often, however, expropriation leads only to money-losing bureaucracy and featherbedding, frightens off new foreign investors and inspires the remaining ones to kick up their prices to reap a quick profit before they too are grabbed. Through its anti-Dutch expropriations, Indonesia lost its best technicians and much of its export earnings, and is now nearly bankrupt. Argentina's $365 million budget deficit is due almost wholly to its losses from the nationalized railways and utilities that it took over during the Perón era from their British and U.S. owners. Warned a U.S. report on foreign aid, released last week by the Clay committee (see THE NATION): "Agitation for the expropriation of foreign enterprises is destructive to rapid economic progress."