1940: El Salvador

Under the chairmanship of an El Salvadorean, Hectór David Castro, a sub-committee of the Inter-American Financial and Economic Advisory Committee (see CUBA) has been studying the problem of coffee surpluses. As a consequence an agreement was signed Nov. 28, by representatives of the fourteen coffee-exporting countries of Latin America and the United States, which is to remain in force until October 1943. It was hailed by its framers as the first major cooperative step towards the economic defense of the Americas. Its purpose is to promote orderly marketing of coffee and to create purchasing power in the coffee-producing countries. Its two principal provisions are: (1) the allocation of basic annual quotas for the exportation of coffee from the signatory countries to the United States; and (2) the creation of an Inter-American Coffee Board, representing all fifteen nations, whose functions shall be to administer the agreement and to study further the problem of surpluses of this commodity. The total United States market is fixed at 15,545,000 bags (of 60 kilograms net), of which El Salvador is allotted 600,000 bags. Brazil and Colombia share in about 78 per cent of the quota. For the non-United States trade the total is 11,612,000 bags. The agreement will come into effect as soon as all the signatory countries have ratified, or failing such ratification within 90 days of its signing, it may be put into operation by the ratifying governments through a special protocol. So far about one-half of the governments have approved.

The European War has cut off the export of about 37 per cent of South Central American coffee. Unprecedented surpluses have forced coffee-growers to take the lowest prices in the history of the industry and cutthroat competition has resulted. Moreover, many of the Latin American republics, being virtually monocultural countries with restriction to this single commodity, are facing serious crises in their basic economy because of the difficulty of marketing coffee. For example, in the case of El Salvador coffee represented 84 per cent of the total value of Salvadorean exports in 1939; in 1937, as high as 91 per cent.

Similar studies of cotton and cacao are being made by the Inter-American Financial and Economic Advisory Committee. Cotton presents a very different problem because the United States is a cotton producer and exporter. The solution here is not one of apportioning the United States market but of finding new outlets and new uses for cotton.

With 25 per cent of El Salvador's exports in 1939 shipped to countries all but one directly involved in the war in Europe (Germany, Norway, Sweden, Holland, Finland and Italy), normal trade relations, as well as coffee prices, have been seriously affected. The ordinary budget for 1940 estimated revenues at 20,782,000 colones; expenditures at 21,317,000 colones.

Since uniformity of training tactics is believed essential to hemisphere defense plans, it was reported at the close of the year that El Salvador would probably follow other Latin American countries (see ECUADOR) in employing a United States military mission as technical adviser to its military forces, which are the best trained and equipped in Central America. The last technical adviser was General Eric Bonstedt of the German Army.