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 Inter-American Studies
Occasional Papers

I. LATIN AMERICA:
DEVELOPMENT PROGRAMMING
AND UNITED STATES INVESTMENTS

The Northeastern Council for Latin American Studies

and
The Foreign Policy Research Institute,
University of Pennsylvania
Latin America: Development
Programming and United
States Investments
CLEMENT G. M O T T E N
VIRGIL SALERA
RICHARD L. DAVIES
H. W. BALGOOYEN

UNIVERSITY Of

flÄSCfi

WH?

PHILADELPHIA:
U N I V E R S I T Y OF PENNSYLVANIA PRESS
© 1956 by the Trustees of the University of Pennsylvania

Published in Great Britain, India, and Pakistan

by Geoffrey Cumberlege: Oxfprd University Press
London Bofthay, and Karachi

Printed in the United States of America

American Book-Stratford Press, Inc., New York
 Northeastern Council
for
Latin American
and Inter-American Studies

Organization and Membership

The Northeastern Council for Latin American and
Inter-American Studies had its origin in two round-
table conferences held under the auspices of the Pan
American Union at Columbia University in 1952, and
at the University of Delaware in 1953. In October 1953
the Council was chartered as a non-profit educational
organization under the laws of the State of Delaware.
It held its organizational meeting at Princeton Univer-
sity in February 1954, its first annual meeting at Brook-
lyn College, on November 19-20, 1954, and its second
annual meeting at the University of Pennsylvania on
November 11-12, 1955. Its third annual meeting will
be held at Princeton University, November 16-17, 1956.
Membership in the organization is open to teachers,
students, business, labor, the press, museums, and other
cultural organizations.
Purposes
The purposes of the Northeastern Council are:
1. To promote inter-disciplinary research programs and
v
vi NORTHEASTERN COUNCIL

publications relating to the problems of Latin Amer-

ican and inter-American relations.
2. T o promote and facilitate the establishment of
scholarships, grants, and the exchange of students
and teachers.
3. T o encourage the development of Latin American
studies programs, on both the undergraduate and
graduate level, and the holding of inter-university
seminars on the Americas.
4. T o work in cooperation with other regional coun-
cils, the Pan American Union, the universities of
Latin America, and other interested organizations in
order to stimulate the formation of an international
association of specialists on Latin America.
OFFICERS, 1955-1956
President
A R T H U R P. W H I T A K E R , University of Pennsylvania
Vice-Presidents
P R E S T O N E. J A M E S , Syracuse University
H E R B E R T D O R N , University of Delaware
Secretary-Treasurer
P H I L I P S H E I N W O L D , Brooklyn College
BOARD OF DIRECTORS
In addition to the above officers
H A R R Y B E R N S T E I N , Brooklyn College
M I R O N B U R G I N , Department of State
B A I L E Y W . D I F F I E , The City College of New York
D A N A G. M U N R O , Princeton University
C A R L E T O N S P R A G U E S M I T H , New York Public
Library
INTER-UNIVERSITY SEMINAR
Executive Secretary
HARRY BERNSTEIN, Brooklyn College
 Preface

The importance of the problem of the world's under-

developed areas to the United States was highlighted
more than seven years ago by the famous Point Four
passage in President Harry Truman's annual message
to Congress in January 1949. Since then both the gov-
ernment and the people of the United States have de-
voted much thought and effort to this problem, but
there is probably no one who would claim that it has
been solved. Indeed, it has just been given added com-
plexity and fresh urgency by the new turn of Soviet
policy which has made Moscow a competitor with the
economically advanced nations of the free world in the
matter of aid to the underdeveloped areas.
Among these areas Latin America is the one to which
the United States is most closely bound by ties of all
kinds, traditional and actual, spiritual and material.
For one thing, it is the area in which the United States
has its largest economic stake as measured by both
trade and investments. Latin America is also the area
in which the United States made the first beginnings of
its foreign aid policy. As a result, while the political
and military exigencies of the cold war have channeled
most of the United States foreign aid into other areas,
the experience in Latin America has now been going
on long enough to provide perspective on that part of
the worldwide problem of underdeveloped countries.
Accordingly, "Latin America: Development Pro-
vii
viii PREFACE

gramming and United States Investments" was chosen

as the theme of the first day of the second annual meet-
ing of the Northeastern Council for Latin American
and Inter-American Studies, at the University of Penn-
sylvania on November 11 and 12, 1955.
T h e four papers published in the present volume
were read and discussed at the morning and afternoon
sessions on November 11. Grateful acknowledgment is
hereby made to the Foreign Policy Research Institute
of the University of Pennsylvania, and particularly to
its Director, Robert Strausz-Hupé, for aid in arranging
and conducting these sessions and in facilitating the
publication of the papers.
Separate publication will be given the addresses de-
livered at other sessions of this annual meeting, includ-
ing one by W. Rex Crawford, "Social Aspects of Latin
American Economic Development," at the Council's
annual dinner, at which Charles C. Griffin was toast-
master, and two at a meeting of the Council's Inter-
University Seminar under the chairmanship of Harry
Bernstein: " T h e Adjustment Problem and the Theory
of Economic Development in Latin America," by
Herbert Dorn, and "Urban Development in Latin
America," by Anatole A. Solow.
The present volume is the first of a series of "Occa-
sional Papers" which the Council plans to publish
under the management of its Committee on Research
and Publication, whose members for the year 1955—
1956 are as follows:
Preston E. James, Chairman
Harry Bernstein
Charles C. Griffin
Thomas Palmer, Jr.
Carleton Sprague Smith
 Contents

Preface

The Historical Background

by Clement G. Motten

Enterprise and Development

by Virgil Solera

Establishing Operations in Latin

America: A Case History
by Richard L. Davies

Problems of United States Investments

in Latin America
by H. W. Balgooyen
 The Historical Background
by CLEMENT G . MOTTEN

Associate Professor of History, Temple University

Latin America is an underdeveloped area, but the

people who live there have given ample evidence that
they do not wish it to remain underdeveloped. A t
many conferences, ranging from the top level meeting
of the Organization of American States at Caracas to a
local seminar for visiting Latin American journalists
held in this city, inevitably the question of Latin
American development has come up. And Capital has
been the magic word. Capital in the broadest possible
sense of the word: investments, grants, credits, loans;
cash, rebates, easements, technical assistance; anything
that money will buy. At these meetings North Ameri-
cans have been reminded of fortunes made in Latin
America by United States investors, of dollar diplo-
macy, of the occasional overweening influence of
American big business abroad, of boom and bust eco-
nomic stories that grew out of war-time attempts to
cooperate, of an apparently greater interest in our ene-
mies than in our friends once the victory had been won.
And now the cry is for more and more capital and we
are being chided with our responsibility: "He that hath
the capacity," so the saying goes, "hath also the respon-
sibility."
1
* LATIN AMERICA

We have answered with murmurings to the effect

that capital flows normally in the direction of greatest
return, that when private investment, which must ex-
pect a return, goes into underdeveloped areas the po-
tential return must be proportionate to the inevitable
risk. We have pointed out that expropriations, na-
tionalizations, and currency-export restrictions have
underscored that feeling. Public monies may be a dif-
ferent sort of thing, but then maybe we should be call-
ing it philanthropy and discuss the capacity of a people
to support virtually unlimited giving. We demur by
saying that perhaps we should first ask what other
sources of outside capital are available. We find our-
selves wondering if full use is already being made of
Latin American resources and funds. Just how is our
money to be used? What sort of development planning
is going on and how does United States investment fit
into the picture?
That is our current problem. And we can best un-
derstand it by understanding the historical background
of this situation.
Hundreds of thousands, perhaps millions, of Ameri-
cans dream about making that nest egg in Latin Amer-
ica. As early as 1800 North Americans were engaged
in the highly profitable and then illegal South Ameri-
can trade, and Philadelphia, incidentally, was one of
the most important points of departure. After the
winning of independence individual norteamericanos
drifted all over Latin America—men like Wheelwright,
and Meiggs, and Keith—but generally they had little
capital. Down to about 1890 it was the United States
that was underdeveloped and we were building our na-
tion with European gold. We already had technical
assistance to export in those days but little capital, and
 T H E HISTORICAL BACKGROUND 3

so Latin America, for most of the nineteenth century,

looked primarily to London for its investment money.
By the time World War I broke out the situation
showed definite change. The United States had be-
come a creditor nation and we had begun to build up
our Latin American investments. We were rather spe-
cialized—sugar mills in Cuba, meat-packing plants in
Argentina, and railways, mines, and agricultural prop-
erties in Mexico comprised our principal interests.
Inasmuch as I have here for the first time mentioned
individual countries, now is a good time to point out
that all investment and development considerations
ultimately must be on a country by country basis.
Needs, desires, customs, and laws change with every
border. For any detailed work the generalization
"Latin America" is much too vague, but inasmuch as
this is a broad-stroke picture, I am going to use my in-
dividual brushes only when needed to clarify.
World War I touched off our race to investment
dominance in the Latin American area. This was en-
gendered at first by a demand for raw materials. T o be
sure, North Americans had been interested in these,
particularly basic metals, before the war, but ample do-
mestic production had made large-scale foreign opera-
tions not a particularly lucrative business. With the
end of the war there occurred certain cutbacks, some
of them spectacular like sugar in Cuba, but for the
most part the 1920's were booming years for United
States investment south of the border. By the end of
the decade our total Latin American investment had
reached the five billion dollar mark, equal to England's
and surpassing all others.
Our chief fields for direct investment were public
4 LATIN A M E R I C A

utilities and transportation, petroleum, mining and

smelting, agriculture, and manufacturing and distribu-
tion. Area-wise our greatest interests were in Cuba,
Mexico, Venezuela, Colombia, Brazil, Chile, and Ar-
gentina.
This was a time when substantial units of United
States industry branched southward. Firestone, Stand-
ard Oil, Colgate-Palmolive-Peet, and International
Harvester—to pick a few at random—joined pioneers
such as Singer Sewing Machine, United Shoe Ma-
chinery, and Swift and Company. This movement was
to have various interesting repercussions, but actually
did not comprise a great share of our total investment
picture and was certainly overshadowed by the snap-
ping up of Latin American bond issues by United
States investors.
This type of investment, called portfolio to distin-
guish from direct where the investor usually exercises
a control, was something of a phenomenon of the
1920's. Our holdings reached the figure of $1.6 billion
by 1930. A high figure, but still substantially lower
than the $3.5 billion direct investment figure. But the
wholesale defaultings of the next decade reinforced
United States interest in other types of financial ac-
tivity.*
The depression years depreciated almost all values of
foreign investments, but particularly those in agricul-
ture, mining, and railways. The end of the 1930's saw

• There are several good texts covering this period. I have found
Latin-American Trade and Economics by Paul V. Horn and
Hubert E. Bice particularly useful. The figures and facts for
the pre-World War II period have been checked against their
Chapters 13 and 14.
 T H E HISTORICAL BACKGROUND 5
a tapering off of the decline and then World War II
burst upon the scene.
To try to work out an orderly story of just how much
money that might be classified as investment capital
went to Latin America during those war years is quite
beyond the scope of this sketch. To the normal in-
creases brought on by war-time expansion must be
added United States government expenditures, includ-
ing capital expenditures to increase production facili-
ties, extraordinary purchases, lend-lease grants and
other assorted credits. The important consideration
in this whole business is that the Latin American body
economic received massive injections of capital with
proportionate stimulation. While the injections con-
tinued life was exhilarating, but the headache came
suddenly with the end of the war and the abrupt shift
of United States policies, interests, and spending. Latin
America, asserting that she had given her all in an at-
tempt to aid the war effort, was not prepared to be
dropped as suddenly and summarily as she was. Seduc-
tion and rejection were the words that came to her
mind and even more bitter ones followed and were
shrieked when United States policy employed a Mar-
shall plan to aid Europe but said that there would be
no such grandiose scheme for our good neighbor allies.
Consideration of the immediate and ultimate wisdom
of United States policy at this time has too many sides
to be discussed here. We can only note what happened
and get on to a review of the post-World War II in-
vestment picture.
Now I am going to skate out on the thin ice of sta-
tistics. To the person who does not normally use the
figures compiled by experts in international finance,
the picture can quickly become jumbled and meaning-
6 LATIN AMERICA

less. Part of this is because different groups use differ-

ent data for the accumulation of their figures—figures
which may agree in general, if not in detail. Some-
times substantial differences may seem apparent be-
cause different groups use the same basic figures but
adjust them to be more relevant to their particular
uses. Unless otherwise noted, my figures are drawn
from the United States Department of Commerce or
from the United Nations Economic Survey of Latin
America.
As previously noted, the most important figure for
our consideration of United States investment in Latin
America is that which shows direct capital investment.
In 1929 this figure, rounded, was $3.46 billion. The
depression years drove it down to $2.8 billion in 1936,
and it sagged to a recent low of $2.72 billion in 1943.
By 1950, however, it had climbed to $4.74 billion and
here we shall pause to do a bit of breaking down.
Certainly the most important single type of invest-
ment was petroleum at $1.4 billion, nearly thirty per
cent of all our direct activity in Latin America. Trans-
portation, communication, and public utilities, old
favorites, were in second place, just over one billion
dollars. Two other old favorites, mining and agricul-
ture, had slipped to fourth and fifth place respectively;
only $628 million for the mines and $520 million for
the farms. The new third place, indicating an invest-
ment change, was occupied by manufacturing at $780
million.
A further breakdown shows the situation a bit more
clearly. Although there seemed to be something of a
trend away from the old raw materials-basic develop-
ment pattern it was still the big story. Petroleum was
the biggest single figure in this category and in the
 T H E HISTORICAL BACKGROUND >J

transportation-communication-public utilities field, al-

though railroads were down, basic electric light, power,
and gas accounted for $546.2 million investments. In
manufacturing, chemicals at $205 million and food
processing at $158 million, both quite basic, led the
list.*
One aspect of this investment picture does begin to
change, though, and I would like to call attention to
it. It is the trend toward the type of Latin American
company which is associated with a United States con-
cern, but is not nominally under its control, nor is it a
real branch. The best example of this is the arrange-
ment worked out for the manufacture of Westinghouse
electrical products in Mexico. A company, with its
own Spanish name, was set up, and under the plan one-
half of the capital was to come from Mexico, the other
half from the United States. Local laws were to be fol-
lowed and the company was to have full use of all
Westinghouse patents and developments. This would
seem to get around many of the old objections to yanqui
big business. Things have not worked out entirely as
hoped for; there seems not to have been fifty per cent
Mexican capital even with some probable dummy hold-
ings, and profits have not been as great as generally
forecast; but this experiment does seem to be rather
typical of a new trend in United States investment in
Latin America.
Now I am going back to figures. I stopped at 1950
because the best breakdown figures I had were for that
date but I want to come now to the most recent total-
picture figures. Since the mid-century our interest in
Latin America has continued to grow. By 1953 our
• All figures for these two paragraphs were taken from The Sta-
tistical Abstract of the United States, 1955, p. 889.
8 LATIN AMERICA

total private, direct investment had gone over the six

billion dollar mark and in 1954 was $6.256 billion.*
That seems to be quite a bit of money, but it is appar-
ently not enough and the Latin Americans and some
United States citizens are complaining that private cap-
ital is not flowing south in sufficient amounts.
Inasmuch as our total foreign investment figure is
over the seventeen billion dollar mark it is interesting
to see how Latin American investments measure up
against other world areas. Comparison figures show
that Latin America is our special love. Even our
northern neighbor Canada trails at $5.96 billion and
Western Europe is an out-distanced third.
There is evidence, though, that in the past two or
three years the rate of capital flow to the north has in-
creased greatly with a subsequent sharp decline in the
southward flow. For example, in 1954 fifty per cent
of our addition to foreign capital investment went to
Canada and only fifteen per cent to Latin America.
The International Development Advisory Board in its
September, 1954, report, expressed this in a different
way by claiming that since 1950 new capital has been
going south at the rate of only $15 million a year. I
»emphasize new, since reinvested capital already in
Latin America is not included in this figure.
That does not seem to me to be a completely fair
argument; since reinvested capital is very useful, and
when it is in the amounts left in Latin America it is
substantial. But the Board had a point to make and it
does raise the question: Why has not and why does not
more private investment capital go to Latin America?
The answer does not lie solely in Canada's boom; there
* Survey of Current Business, August, 1955, p. 12.
 T H E HISTORICAL BACKGROUND 9
is another side to the Latin American story which we
must now take up.
Foreign capital investment in underdeveloped areas
has usually had something of the sporting element con-
nected with it and Latin America is no exception.
Plunging on El Dorado Unlimited was much more ex-
citing than buying some nice, safe British bond. The
return just might turn out deliriously better, but there
was also greater risk to be hazarded. In the nineteenth
century it might be at the hands of some capricious
caudillo, in the 1930's expropriation became an ugly
word for Standard Oil and March 18 became a national
holiday for Mexico. A subsequent variation, more
genteel in nature, has been called nationalization.
Some potential investors probably have been fright-
ened away from Latin America because of these well-
known tendencies toward what my broker friends call
political unreliability. But it would seem that the
over-all generous rate of return has kept the capital
flowing freely until recently. With the over-all stabil-
ity picture no worse than formerly and perhaps a bit
better than in the old "two-for-one" days, it would
seem that a new factor had entered the picture.
A study prepared by the Industrial Conference
Board in 1951 sheds some light on this. T h e board
queried firms engaged in Latin American trade as to
the nature of obstacles encountered doing business
south of the border. Under "obstacles corresponding
largely to difficulties specifically encountered by foreign
capital" by far the most important was "convertibility"
—that is, the ability to take out profits, and, if wanted,
capital, too. This would seem to suggest one good rea-
son why new capital has become chary of going to
Latin America. T h e profits may still be there and the
IO LATIN AMERICA

host country may be gaining increased capital invest-

ment by forcing profits to be plowed back, but the man
with new capital to invest is clearly going to be wary of
a situation where he will find it unusually difficult to
withdraw or where he may have to go abroad to spend
his profits.
Now we come to the question of what the Latin
Americans have been doing to help themselves. Have
they tried any sort of development programming?
They most certainly have. T h e best known organiza-
tions that have worked on this have gone under the
general banner of Fomento. T h e most famous is prob-
ably the Corporación de Fomento de la Producción,
Corporation for the Development of Production, in
Chile. Established in 1939 this home-grown product
has involved itself in over one hundred different proj-
ects ranging from the simplest to its shiny showpiece,
the pride of all Chile, the Huachipato steel plant.
T h e Fomento's primary function is the over-all de-
velopment of Chile's economy. It is a planning board
that is concerned with problems that are both basic to
most of Latin America and also of special concern al-
most exclusively to Chile. It is governed by a board
made up of representatives of both public and private
organizations and has five key executive officers con-
cerned with the major fields of mining, agriculture, in-
dustry, fuel and energy, commerce and transportation.
Set up originally with tax money, Chile's Fomento
has subsequently drawn resources from a variety of di-
rections and is today at least supposed to be part of the
national budget.
It is not supposed, however, to function as an all-
powerful political body. Ideally, it likes to give direc-
tion and aid to economic activity that fits into the
 THE HISTORICAL BACKGROUND 11

broad development picture and then to retire from ac-

tive participation as quickly as possible. Sometimes
this has meant simply looking into a small business's
problem, lending it the necessary funds for reorganiza-
sion or expansion, and then keeping no more than an
average banker's eye on its loan.
Sometimes the participation has had to be greater.
Fomento has joined companies as a sort of partner
until a mutually agreed upon program had been car-
ried out. But most interesting of all have been the
actual companies which it has set up, such as the Com-
pañía de Acero del Pacifico—the steel plant mentioned
above—or ENDESA, the Empresa Nacional de Elec-
tricidad, SA., charged with basic electrical expansion.
In these big affairs Fomento has tried to encourage
private, domestic capital to drop its predilection for
putting money back into land, and to come in and par-
ticipate in the nation's growth.
Along these lines it has not been as successful as
hoped. The dream was that eventually Fomento
would be able to pull out completely and go on to
other tasks. This has not come to pass, but a start has
been made in changing traditional Latin American in-
vestment habits. It would seem, though, that all
ground gained here has probably been lost in the ruin-
ous inflation of the past five years. T h e old Chilean
diehards who invested in land probably still have their
land and it is hard to see what anybody else can have
by now.
Before going on to mention other similar organiza-
tions, it must be pointed out that Fomento has received
capital aid from outside. This has come from the Ex-
port-Import Bank in Washington and from the Inter-
national Bank for Reconstruction and Development in
12 LATIN AMERICA

Latin America. This general source of capital will be

commented upon later.
Although the present political situation in Argentina
has made the picture a bit obscure, this neighbor of
Chile has also had a development body known as the
Argentine Trade Development Corporation. In recent
years it has been concerned with Perón's five-year plans
aimed at trying to make Argentina an important heavy
industry power. Because the goals were somewhat im-
practical and the objectives of questionable nature,
and, one might add, because the boss is no longer on
the scene, the projects have not been as successful as
on the other side of the Andes.
In Peru, the Corporación Peruana del Santa has
aimed at industrialization. Hydroelectric power, rail-
road expansion, and more recently an iron and steel
industry have been the targets.
Venezuela has its Corporación Venezolano de Fo-
mento, whose objectives have been almost identical
with those of Chile, somewhat broader in scope and
more intense in activity than those of Peru.
As befits its size, Brazil has a broad development as-
sistance program, but, instead of concentrating func-
tions in one board, Brazil has tended toward the crea-
tion of several mixed corporations, each with special
tasks. A well-known example is the Companhia Si-
derúrgica Nacional, which was given the responsibility
for the Volta Redonda steel plant in Minas Geraes.
Other companies tackled such projects as alkali pro-
duction, hydroelectric power and the production of air-
planes and tractors. Sao Paulo had its own four-year
plan. Petroleum development, exploration, refining,
trading, and transport were placed under the eye of
Petroleo Brasileiro. And so on.
 THE HISTORICAL BACKGROUND 13

One last example—Mexico. Here the Nacional Fi-

nanciera has undertaken a broad program of public
works and social progress and then shifted to electric
power and consolidation of established industries, and
finally has taken to investing in desirable enterprises
where private investment seems unwilling to make an
initial venture.
T h e Banco Nacional de México has taken over the
other functions that Chile's Fomento handled under a
one-body development program.
All of these bodies and others I have skipped over
are to be found in virtually all of the countries of
Latin America. They have tried to mobilize resources
and bring to bear what outside help they could. Yet,
the continued cry for more capital, and what capital
will buy, must furnish one measure of their lack of
success.
Another aspect of the problem is suggested in the
figures of Latin American capital invested in the
United States. I do not have the figures for Latin
American capital invested elsewhere in the world, but
the United States figures alone are thought-provoking.
In 1946 Latin America had a total investment in the
United States of just over one billion dollars. This fig-
ure has continued to grow, and in 1954 it reached the
mark of $1,747 billion.
While Latin America has been crying for United
States investment, her own people have sent abroad
one and three-quarter billion dollars, a considerable
part of which could conceivably be employed at home.
The rather unhappy question arises: Is not Latin
America asking the United States and its citizens to
undertake an aid program that her own citizens regard
as too risky?
»4 LATIN AMERICA

Earlier I mentioned government monies for Latin

America. This is not strictly investment, unless per-
haps in a political sense, but it has meant considerable
capital and much of that has been supplied either di-
rectly or indirectly by the United States. We must
therefore review it briefly.
This type of capital falls into three classifications:
military grants and credits, non-military grants and
credits, and loans from international governmental
banks, a substantial portion of whose capital has been
supplied by the United States. It is in the breakdown
of world figures in the first two categories that Latin
Americans have found their greatest source of resent-
ment.
By October of this year, 1955, the Survey of Current
Business reported that we have made a total post-
World War II military disbursement of $14,663,000,000.
Of this staggering figure, only $224 million has gone to
the American Republics and most of that since 1952.
T o be sure this does mean an average of more than $20
million a year has flowed south, and this has not been
capital on which a profit had to be returned, nor in-
vestment which might be suddenly withdrawn. It is in
fact almost a gift, but the Latin Americans quite for-
givably look more at the comparison, thinking not of
how much they got, but of how much was received by
others who had not been such good neighbors.
In the non-military area, although the funds have
been made available on a somewhat different basis,
including credits and loans in addition to grants, the
story is similar. T o be sure the Latin Americas have
received only about one-thirty-sixth of our total post-
war disbursement, but this has amounted to the rather
tidy sum of $1,008,000,000. Two countries, Brazil and
 THE HISTORICAL BACKGROUND 15

Mexico, have profited most with $458 million and $221

million respectively.
The figures, and comparisons too, become even more
impressive when we move into the area of interna-
tional organization fund distribution. Because there
is a wide variety of these, such as the International
Bank, the International Monetary Fund, the Interna-
tional Children's Fund, and the various organizations
of the United Nations and American States, and be-
cause it is a bit difficult to calculate the precise share
of the United States I shall cite only one. This is the
Export-Import Bank, whose funds are supplied entirely
by the United States of America. During the period
June 30, 1945 through June 30, 1955, the post-war dec-
ade, the American Republics utilized credits from this
bank totalling $1,174,434,000.
I am not going to attempt a summation of how much
United States capital of all forms has gone south, even
since World War II. Any figure would probably be
inaccurate, or so hedged with reservations as to be al-
most meaningless, but it would be impressively large.
Not large enough however to impress the Latin Ameri-
cans, already staggered by their own problems. They
feel they need more United States capital. We can
point to the mountainous sums they have had. Obvi-
ously the discussion of United States investment and
Latin American development is more than just an aca-
demic question.
 Enterprise and Development

by VIRGIL SALERA

Pan-American Union •

In this discussion I shall present essentially an old-

fashioned approach to some problems of economic de-
velopment in Latin America, realizing full well that I
am unlikely to appeal to the taste for analytical ele-
gance or intellectual novelty. My reading of the litera-
ture, coupled with experience in the field, persuades
me that far from enough attention has been paid to
the role of private initiative and the free economy in
all of the quite voluminous discussion of development,
or, alternatively, that there is an unjustified lack of
enthusiasm for economic individualism in matters de-
velopmental. T o appreciate what this means imposes
a requirement: it will be necessary to try to visualize
the parts of what I have to say in the context of a very
broad economic, political, and social whole. Anything
less is likely to create misleading impressions and pos-
sibly to lead to the mistaken identification of construc-
tive comment with destructive criticism.
The full scope for the potentials of economic indi-
vidualism and economic development itself in most of
• The views expressed in this paper are entirely the author's,
and do not necessarily represent the official views of his or-
ganization.
16
 ENTERPRISE AND DEVELOPMENT »7
Latin America largely awaits quite extensive govern-
mental reforms. In saying this, I am not unmindful of
the very complex human and social issues involved in
accelerating economic growth in many areas of the
world. Anyone familiar with Arthur Lewis' The
Theory of Economic Growth, as yet the only mature
general work, on the subject, will know what I mean.
Nor am I unmindful of the socio-political problems of
implementing a vast reform program, which might
more appropriately be referred to—with apologies per-
haps to President Eisenhower's script writers—in the
more appealing terms of a Crusade for Production.

II

At the risk of oversimplifying matters, we can sum-

marize the strengths and weaknesses of the Latin Amer-
ican economies, from a restricted point of view, namely,
the requirements of an intensive drive to expand per
capita output. The factors of strength include a grow-
ing population and an increasing realization of mini-
mum requirements for economies of scale, reasonably
favorable land-population ratios, a fairly widespread
desire for material advancement, inconsequential re-
ligious barriers to economic growth and innovation,
liberal immigration policies in many cases, good ex-
port bases despite much of the inspired comment on
the problems of the terms of trade, not inconsiderable
entrepreneurial nuclei in both industry and agricul-
ture, and close economic and political ties with the
United States.
This is a rather respectable list. Admittedly, the
enumeration would not be the same if use were made
i8 LATIN AMERICA

of a different criterion, for example, the fashionable

but elusive concept of "economic welfare."
The weaknesses, or obstacles in the way of sizable ex-
pansion of per capita output, are not easy to explain
without more extensive comment than is possible at
this time. Again, for much of the documentation, I
suggest a reading of Professor Lewis' new book, even
though it is a general work that is not addressed spe-
cifically to the Latin American economy. One of the
weaknesses is found in the administrative and political
framework within which private enterprise functions.
This situation does not necessarily characterize each of
the countries, or show up in a uniform way where it is
present. Reduced to its simplest terms, it amounts to
loose administration of laws and regulations there-
under, with uncertainties, costs, and delays that mate-
rially increase the risks and burdens of enterprise. One
effect is to make some persons in public administration
non-risk taking, quasi-participants in private business,
on burdensome terms that usually cannot be known in
the planning stage. Initial capital requirements are
also increased arbitrarily as a result. Another effect is
to make it difficult to schedule production efficiently in
all cases because license applications are granted or
turned down on an unpredictable basis. An invisible
effect may also be mentioned: income payments made
under the system increase the attraction of consump-
tion over investment, to the detriment of capital for-
mation.
A second obstacle to the rapid expansion of output
per head is the relative dearth of capital. The effects
of this of course are very generally known; they are
also commonly exaggerated by persons who do not be-
 ENTERPRISE AND D E V E L O P M E N T ig

lieve in individualism, or who refuse to believe in the

enormous capacity of the free economy.
In the third place, technical knowledge is not widely
distributed nor the means for imparting it available as
yet on an extensive basis. T h e effects of this cause
are less efficiency especially in non-export production,
a lower tempo of innovation, a reduced volume of re-
sources for development by virtue of the resulting
higher level of non-industrial imports in relation to
exports, and a loss of business cohesiveness vis-à-vis gov-
ernment that would result from business-sponsored, in-
dustry-wide work in the field of technology.
There are also removable barriers to the rapid expan-
sion of output in the form of unsound policies respect-
ing agriculture and land use. As a result, agricultural
production remains well below levels that are attain-
able without sizable drafts on capital, with undesirable
consequences for the most backward half of the popu-
lation in a majority of the countries.
In the fifth place, tax policy and administration leave
much to be desired. Unlike most observers, I am not
disturbed by the relatively regressive character of the
Latin American tax systems, since I am mindful of two
facts: first, that more progressive systems would have
an adverse impact on capital formation and, second,
that luxury imports are already fairly heavily taxed in
most cases. Incidentally, conventional views on taxa-
tion need to be reconsidered before being applied to
cases of rapid growth of per capita income. In my
view, much of our thinking about tax incidence has
been colored by the artificialities of static and distribu-
tion-oriented analysis, so that our preconceptions yield
a distorted picture when the focus is the growth of an
underdeveloped economy in which nearly every income
SO LATIN A M E R I C A

group is able to effect some improvement of its abso-

lute economic position and many of the less fortunate
obtain not unimportant satisfactions from the numer-
ous evidences of physical growth all around them and
the connections they see between such growth and un-
folding economic opportunities.
Sixthly, educational levels are too low and an exces-
sive number of children are still without formal school-
ing. It is the investment service quality of education
that is most in need of emphasis, mainly to expedite
the growth of agricultural output and to prepare increas-
ing numbers of rural people for industrial or mining
activity. An illustration of what is meant, for instance,
is that experience everywhere has shown that labor
venturing from the countryside into industry or min-
ing operates at a far lower level of productivity than
labor already accustomed to industrial life.
T h e handling of social security and the content of
labor legislation are additional weaknesses from the de-
velopment point of view. In fact, it may be argued that
the value of such policies viewed from the development
angle varies rather inversely with their humanitarian
appeal. I am not arguing against social protection with
respect to minimum needs of people struck by misfor-
tune. What I have in mind are systems of dismissal
pay on a lump-sum basis in which a premium is placed
upon loyal employees turning disloyal because of the
monetary gains involved;, or the rules of the game
under which employees are theoretically non-dismiss-
able after X years only to find that dismissal occurs
regularly on the eve of the Xth year in order that em-
ployers may avoid saddling themselves with non-dis-
missable workers. I also refer to the excesses of the
Christmas bonus system, outlays under which are an-
 ENTERPRISE AND DEVELOPMENT SI

other on the long list of factors that expand consump-

tion at the expense of developmental investment.
Shaky currencies—and associated laxity in fiscal policy
—coupled with abuses of related exchange control sys-
tems, are additional weaknesses of a serious sort. It is
about time that production-minded people recognize
that unstable currencies work powerfully to restrict
savings, distort the structure of production, expand the
sphere of government intervention, and overencourage
man's speculative instincts of an economically subversive
kind.
Finally, something needs to be said about the insuf-
ficient security of property. This is partly a by-product
of underdevelopment itself, in the sense that property-
less masses cannot be expected to have much respect for
the possessions of a small minority of relatively unenter-
prising people. It is also a by-product of long experi-
ence with slow economic growth, in the sense that most
people do not see a connection between property and
growth of physical resources when secular expansion
proceeds at a snail's pace. Once the developmental ice
is really broken on an enterprise basis, however, sup-
port is likely to be forthcoming from quite unexpected
sources. To say this is not to argue that communists
and crypto-communists in the Hemisphere are going to
see the ideological "attractions" of their faith suddenly
melt before the fires of economic development. The
condition of the security of property is also the result
in part of the lax administration of the law, to which
reference has already been made. Finally, it is to an im-
portant degree the consequence of relatively unstable
political systems and the arbitrariness that is frequently
associated with changes in regimes.
I have dwelt at greater length upon the weaknesses
22 LATIN A M E R I C A

than upon the strengths of the Latin American econo-

mies for two reasons. The strengths are more generally
known, and they also involve some matters that are
found to exist in other regions of the world. More im-
portantly, I have said more about the weaknesses be-
cause I wish to establish a basis for constructive com-
ment. In this connection, you will note that most of
the shortcomings on my list are of an institutional char-
acter, but of the kind in which Oriental traditionalism
does not bulk large. This is of course a very favorable
situation. It is worth emphasizing, since so much that
is written on the subject of development has reference
to the rather different conditions found in much of con-
tinental Asia, where so many ominous concessions are
being made to communist pressures.

Ill

I now turn to a discussion of some specifics in the

field of governmental reform. The sphere of public ad-
ministration ranks high. A pressing need is for a con-
certed effort, preferably under pressure from business
interests, to effect rapid improvement in the quality
and integrity of the public service. Modernization of
physical facilities, appointment of superior personnel
to ministerial posts and increased tenure of office by
such people, upward revision of salary scales, promotion
based solely on merit, ruthless opposition to graft, and
the indoctrination of public-spiritedness are the means
by which a satisfactory situation may be realized in a
relatively short span of time if the proper sort of drive
is employed with all the weapons at the disposal of the
modern state.
 ENTERPRISE AND DEVELOPMENT SJ

It is of course easy to assume an ivory-tower pose about

the whole business. There has already been too much
of that. What is needed is a program that meets the
issues realistically and that wins converts on a wide scale.
In such an effort the strategy and tactics are sure to
challenge the intelligence and courage of the best men
in public life today. In fact, I doubt that there will be
the remotest chance of success unless the campaign is
part and parcel of a broad-gauged development effort
with dramatic appeal. I can only offer a few general
suggestions to indicate roughly what I have in mind,
since the separate national economic "revolutions" will
have to be tailored to the peculiarities of each country.
Carefully pre-arranged measures should cover every
major area of the economy, but the attack should only
proceed marginally and gradually rather than frontally.
The currency, taxation, social security, land reform, a
great variety of promotional measures in agriculture,
reassessment of tariffs with a view to eliminating im-
pediments to efficiency that are inherent in some duties,
interest rate policy in the field of mortgage credit, in-
vestment incentives, the whole galaxy of regulatory meas-
ures affecting business, operations of official development
institutions, and the like, should be dealt with as a uni-
fied whole, in a manner that bends over backwards to
be pro-capital. Each of the specific features should meet
the requirements of internal consistency, of course. It
is also worth the emphasis of repetition to remark that
they must be mutually re-enforcing both as to the un-
mistakable character of implications for near- and long-
term growth and the real security afforded new and old
investments.
The program might best focus on a short-term saving
target that is, say, twenty-five to thirty per cent above a
24 LATIN AMERICA

recent average. T h e promotion of savings should be tied

as much as possible to the other specific features of the
program, though there should also be a place for a per-
suasive special campaign in which use might profitably
be made, among other things, of relatively short-term
projections of per capita national product to dramatize
the program's expected outcome in terms that the aver-
age individual is likely to find both interesting and
comprehensible. Illustrations that are correlated with
national product figures might consist of typical savings-
financed investments and the goods-and-services benefits
that would flow therefrom. Simple cases of the type
referred to could include small investments in high-
yield seed by the farmer; modest investments in better
tools by the representative artisan; and savings-financed
small expansion of plant and equipment by the pint-
sized manufacturer. Such self-financed expansions
would, of course, be in addition to bank-financing or
official lending that would be going on.
As implied in what has just been said, the higher in-
come groups, who comprise the main savers and who are
generally well informed, would not be impressed by a
savings campaign as such as much as by estimates of the
total effects of the over-all program. I shall return in a
moment to the position of this group.
At this point one can visualize the usual objections
to the impact of the program on consumption levels.
Sympathies will pour out from the only partly informed
"humanitarians" regarding the burden that is expected
of people who are at or near so-called subsistence levels.
T o this I reply that the efforts will be voluntary and
that we should not too readily accept stories based on
the comparability of national income statistics. Com-
plaints are also likely to point to the deflationary effects
 ENTERPRISE AND DEVELOPMENT 25

that may be expected in the consumer goods industries.

T o this I need only remark that I am not proceeding
k la model building upon restricted ceteris paribus as-
sumptions. High marginal saving during an upsurge
need not involve more than spotty and short-lived de-
clines in the domestic consumer goods sector. Moreover,
the larger declines in consumption will probably take
the form of a drop in purchases of foreign origin, which
should be a welcome change at such a time.
The major appeal, clearly, will have to be to the
investing and entrepreneurial groups. They are the
economically and politically sophisticated citizenry. T o
them, the over-all picture and prospects are the things
that count. An appeal to such people should be in terms
of a drive for economic expansion primarily and over-
whelmingly on a private basis. These people have been
operating within a relatively restrictive institutional
web, with the result that they are reasonably certain to
respond well to a national drive to expand enterprise
and output as well as their own absolute position in the
society. T o them the prospects for a noticeable growth
of micro-capitalists outside agriculture are all to the
good, since such newcomers provide needed breadth
to the confidence base. They will also appreciate the
growth of enterprise in the traditionally more slowly
moving field of agriculture, of course. But they will be
most interested in the other features of a positive and
unprecedented program. In particular, I feel that they
are likely to be truly fired by the prospects of thorough-
going reforms in the areas of government that touch the
economy.
These reforms include matters over and above those
already discussed. A general statement about planned
currency reform is called for, except of course in those
26 LATIN AMERICA

cases in which currency stability is a well-established

fact. Fortunately, there are a number of Latin Amer-
ican countries in which strong currencies exist. T h e
statement to which I refer need only be general in char-
acter, mainly to insure against deflationary expectations
that might result from an overplaying of the currency
aspects of the over-all program. Specifically, the state-
ment on currency policy might be limited at first to
strong declarations on the goal of internal financial sta-
bility and general hints as to how stability might be
achieved.
In the field of social security, a sensitive area politi-
cally, policy declarations could stress the combination
of the eradication of abuses and the strengthening of the
truly protective features of the system.
T a x policy might emphasize the determination to
effect full enforcement at an early date coupled with
the use of promotional measures, transitionally, for the
purpose of helping to increase saving and augment in-
vestment. T h e enforcement measures would be of the
kind which some finance ministers have already put into
effect, with excellent results. T h e promotional feature
might consist of a system of credits against income tax
based on the percentage of income that is devoted to
investment of specified types; thus, there might be a tax
credit of, say, one-half to one per cent for each five per
cent by which non-inventory investment exceeds ten per
cent of income. A question immediately arises as to
what this will do to the yield of the tax. T h e yield at
unchanged rates need not decline and could well in-
crease in view of the enforcement aspects of the pro-
gram; in addition, of course, the result after a short lag
should be an expansion of the tax base, provided that
government investment is of the right kind (as will be
 ENTERPRISE A N D D E V E L O P M E N T

indicated below). It must also be remembered in this

connection that income taxation in Latin America does
not dominate the revenue picture.
My tax suggestions, if implemented, are not likely to
have a sharp short-term impact on the supply of private
investible resources. As has already been hinted, how-
ever, the countries could simultaneously effect a down-
ward adjustment in rates, in which case the system of
tax credits could serve to expand investment rather con-
siderably in relation to consumption. Even with such a
change, concentration on the purely short-term effects in
the narrow tax field could easily give a distorted picture
of the probable eventual benefits over a wider area.
Specifically, tax reform has long been overdue on social
grounds—incidentally, in France no less than in Latin
America. There has been little reform of a striking char-
acter, partly because of the obvious resistance to change
on a piecemeal basis, but basically because of an un-
imaginative and largely negative view of the problem.
A system of promotional tax credits within the indicated
framework could well break the ice in a wholly desir-
able way, producing some expansion in investment over
the short-run and creating valuable long-term invest-
ment benefits while simultaneously reassuring the ordi-
nary citizen on the administration of income taxation.
Another part of the over-all program could consist of
a thoroughgoing re-examination of the tariff structure,
an action that ought to be taken periodically anyway. It
would be possible to reduce duties to modest proportions
wherever the evidence showed that existing margins of
protection encouraged laxity and unduly burdened con-
sumers. Several countries have already done this with
fairly good results. The action could very well spur
modernization, increases in productivity, and the expan-
28 LATIN AMERICA

sion of the domestic market. T h e last mentioned devel-

opment would of course redound to the benefit of firms
awaiting the growth of demand justifying investment in
plants providing tolerable economies of scale. T h e same
general re-examination should also concern itself with
the import licensing system, especially in connection with
the potentials of currency reform, so as to increase the
scope for enterprise in the whole arena of foreign trade.
T h e field of interest policy also awaits a considerable
overhaul in many countries, perhaps as part of the broad
approach to internal financial stability. I refer in par-
ticular to controlled and unduly low rates in the mort-
gage market. Many of such rates have actually been
negative in real terms. Under such policies it is inevita-
ble that government rationing, and the bickering that
generally attends the use of this arrangement, is forced
to act as a substitute for the free market. The result
is yet another discouragement of saving, and partly in
consequence of this the tendency is strong to perpetuate
centralized and demonstrably ineffective control over
the use of economic resources.
Land reform urgently calls for action, but by no means
in all of the countries. This is not necessarily a prob-
lem of size, since many of the larger farm operations are
modern in every sense and in the vanguard of agricul-
tural efficiency. Land that is either not being worked
or that is in a demonstrably low-order use by virtue of
inattention on the part of the owner or his agent pre-
sents the real problem. T a x reform may help in this
department. Or this approach coupled with workable
and equitable compensation arrangements must come to
grips with objectionable phases of land tenure. Action
in this field may also become surprisingly feasible within
the framework of our suggested over-all program. Im-
 ENTERPRISE AND DEVELOPMENT *g

provements could well result in respectable additions to

national savings without commensurate drafts on sup-
plies of goods available for consumption.
Next, a word about the great variety of promotional
measures that should be taken or extended in order to
raise agricultural output. This is the arena in which
government has much to contribute to the growth of pri-
vate enterprise and national product, and on the basis
of very attractive returns per unit of resources employed.
For example, as Lewis points out, many countries can
expect an annual return of fifty per cent on their invest-
ment in efforts to increase agricultural productivity. This
result will be achieved if agriculture produces half the
national product and if the annual expenditure of one
per cent of the national income increases agricultural
productivity, as is not improbable, by one per cent per
year. The means to this end are all well known, and
they have been tested in the field. I refer to agricultural
extension, supervised credit, improved methods of irri-
gation, improved work in agricultural experimentation,
soil surveys, systems of market news, the use of systems
of standards especially in marketing farm output, and
the spread of knowledge regarding everything from the
use of fertilizers to methods of on-farm storage.
The operation of official development institutions
should also be re-examined in the light of our suggested
program. Some of them operate conservatively, in the
sense of avoiding much above ordinary bank risks; others
attempt to move into areas of production which are more
efficiently operated by private business; in still other
cases informed observers have revealed that the lack of
sufficient disinterestedness on the part of officials has
thwarted many soundly based private ventures and in
 LATIN A M E R I C A

the pfocess contributed to increasing the attractions of

consumption in relation to investment.
T h e several fields of government investment and poli-
cies related thereto are of vital importance. I doubt
whether there is an underdeveloped country in the
Americas that could not for some time effectively use all
available revenues that are earmarked for development
to make investments in social overhead capital or basic
services. T h e technical and other problems connected
with such investment are bound to challenge the whole
governmental hierarchy, so that there should be no limit
to excitement and fascination for the individuals in-
volved. In fact, I know of nothing government could
do that would be more reassuring to private capital and
more stimulating to the spirit of enterprise than a per-
suasive policy declaration of the indicated kind, backed
by a will to implement it effectively. It would inject a
constructive philosophy of partnership in development
that could unleash impressive forces of growth. Inci-
dentally, now is the time to take this sort of thing seri-
ously, given the early commencement of operations by
the International Finance Corporation.
Finally, let me say a word about the whole array of
regulatory measures affecting business. If these too are
re-examined by disinterested parties of stature, within
the framework of a dynamic program to expand national
output by fostering a maximum of private initiative
and enterprise, I venture to predict that all manner of
streamlining operations will be shown to be feasible and
very beneficial to the nation's productive labor. A re-
vival of the pre-classical distinction between productive
and unproductive labor might even be called for, at least
for purposes of dramatizing aspects of the over-all pro-
gram. But this is in the realm of the public relations
 ENTERPRISE AND DEVELOPMENT 31

specialists. Theirs is the job of devising means of "sell-

ing" the program, first to outstanding citizens and then
to the whole national audience. Help from an impor-
tant outside source can reasonably be expected: any such
program that gets off the ground will assuredly attract
additional private and public foreign capital as well as
increased technical assistance. With the resulting team-
work, the battle for production is sure to be won—and
sooner than most people think.
 Establishing Operations in Latin
America: A Case History

by RICHARD L . DAVIES

President, Pennsalt International Corporation

OPERATION
As used here, an operation is a business organism for
creating good things for people. It is the living miracle
by which the confidence and desire to serve, of various
components, are put together for the multiplication of
benefits for those components and for others.
In the classical operation of the feeding of the five
thousand people by the Sea of Galilee, five loaves of
bread and two fishes were the seven components. In the
business operation of today, which is generating benefits
for so many, it is interesting to consider the necessary
ingredients as likewise being seven, with five of one type
and two of another: manager, customer, supplier, em-
ploye, investor, science, government.
T h e establishment of an operation is the selecting of
these components and the putting of them together into
a common undertaking.

OPERATION ABROAD
When an operation of these seven components, all
from a single country, proves particularly successful in
38
 ESTABLISHING OPERATIONS IN LATIN AMERICA 33

generating benefits, it is natural that one or more pro-

poses an operation in another country. Although the
purpose would always be to generate benefits for all con-
cerned, each component would have a special motivation
for establishing the new operation abroad:
1. Manager
The manager wants to establish the new operation
because he has learned how to conduct an operation
successfully in his own country and sees an opportu-
nity to convert this proficiency into the generation of
more benefits in a particular area outside his own
country.
2. Customer
The customer is especially interested in an opera-
tion abroad because he feels that such an operation
will generate benefits for him by supplying his needs
more favorably, while at the same time generating
sufficient benefits for the other components of the
new operation to justify its healthy existence.
3. Supplier
The supplier is interested in the establishment of
a new operation abroad because it will generate bene-
fits for him in the form of an advantageous foreign
market for his goods, while at the same time generat-
ing adequate benefits for the other components of
the new operation.
4. Employe
The employe welcomes a new operation in an area
where his skills are especially needed and therefore
where the new operation can afford to deliver increas-
ing benefits to the employe while at the same time
generating benefits for the other components.
34 LATIN AMERICA

5. Investor
T h e investor is interested in the establishment of
a specific operation outside his own country when he
feels that the new operation can deliver more benefits
in the form of safe net earnings on investment while
still delivering adequate benefits to the other com-
ponents of the new operation.

6. Science
T h e science component will urge the new operation
abroad in the area where its contribution of technol-
ogy can bring the greatest benefits for itself as well as
for the other components.

7. Government
With regard to the government component, the gov-
ernment concerned will encourage a new operation
when it feels it will be of greatest benefit to the entire
people over which the government presides, as well
as to the specific components making up the opera-
tion. T h e benefit to the people over which the gov-
ernment presides may be in the form of increased tax
revenue because of the new operation, or simply by
the generation of general benefits to the economy.

OPERATION IN BRAZIL, VENEZUELA, PERU,

AND MEXICO
In 1950, after a century of operations first in Pennsyl-
vania, then on the Eastern Seaboard, then in the East
and Middle West, and finally in the entire United States,
our company felt it was desirable to establish operations
abroad. This required, for any such operation, the
selecting of the seven necessary components and putting
them together in a common undertaking. Naturally in
 ESTABLISHING OPERATIONS IN LATIN AMERICA 35

this process of selection there were some countries which

seemed to have many more ideal components than others.
After exploration of conditions and opportunities in
many parts of the world, we found four countries in
which we felt we could best, at this time, establish oper-
ations similar to those which we had been carrying on
in the United States.
It developed that these countries are all in Latin
America—that is, Brazil, Venezuela, Peru, and Mexico.
The reasons for selecting these countries, from the point
of view of the seven components of the operation, are
the following:
1. Manager
From our point of view as a manager, we felt that
the operational experience which we had developed
in the United States, together with the knowledge
which we had acquired of countries outside the
United States, best fitted us to take responsibility for
operations in these four countries.
2. Customer
From our point of view as a customer, there were
great potentialities for operations in these countries
to supply us with minerals for our manufacturing and
selling activities in the United States.
3. Supplier
From our point of view as a supplier, we had found
a growing market in these four countries for products
of the type which we manufacture in our United
States operations.
4. Employe
With regard to employes in these four countries,
we found that there were many people who wanted
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Night settled early, for long before twilight the sky became heavily
overcast and a wind rose, sweeping the dust up in clouds as it drove
through the town, and auguring a rainstorm. The doctor placed a
light in his office, then took his station at a window in an unlighted
front room.
The minutes dragged. Eight o’clock struck, and nine.
“Mebbe that sick feller did die,” he said to Letty over the telephone.
“But——”
He hung up the receiver abruptly. There was a sound of galloping in
the street. It ceased at the gate, when heavy steps came hurrying to
his porch. It was the man with the scar.
“Doc,” he began, panting with his hard ride, “you said you’d operate
——”
“Ready in a jiffy,” answered the doctor, and turned away to pick up
hat and case.
The next instant there was a choking cry from the porch, then loud
curses and the sound of fierce scuffling. The doctor whirled.
The man with the scar was flat on his back at the threshold, his
wrists manacled, his shins ironed; over him stood a smooth-shaven,
thick-set, middle-aged man armed with a revolver—the man who had
halted the doctor on the Blue Top road; and Eastman was there.
“He stole my boy!” the father called out furiously. “I’m going to kill
him!” He flung himself forward.
The man with the revolver pushed him back. And, “No! No!”
expostulated the doctor. “Eastman! You’re makin’ a mistake!”
The prisoner gave a loud, hard laugh. “You bet your life he’s making
a mistake!” he declared.
“We got you just the same,” said the man with the revolver
triumphantly.
“Put him on a horse,” ordered Eastman, maddened more than ever
by the taunting laugh. “He’ll take me to my boy or I’ll kill him.”
The captured man ignored the father. His look was on the doctor,
and it was full of hate. “Ah, h—l!” he exclaimed disgustedly. “I could
kick myself! Last night I had my finger on the trigger. But like a fool
——”
Eastman was sobbing in baffled rage. “My baby!” he cried. “Four
days with this brute! Think of it!”
“No more monkey business.” The man with the revolver was
speaking, and he gave his prisoner a rough poke in the side with his
boot. “You’re in the hands of the Sheriff, and you’re going to take us
out to that cañon. We start right off.”
“No, we don’t,” was the answer. “You’ve trapped me, the three of
you. Send me up if you can. My word’s as good as this doctor’s, and
I don’t have to take you anywhere to hunt for evidence against me.”
“Get up,” commanded the sheriff. He unbuckled the irons from his
prisoner’s legs.
The man with the scar rose. “Nobody’ll ever find that cabin or what’s
in it,” he said doggedly. “And when Bill dies——”
“Oh, my God!” It was the father.
The doctor was leaning in the doorway. “What’d you do this for, Mr.
Eastman?” he asked.
The tears were streaming down Eastman’s face. “We thought the
Sheriff ought to come,” he faltered. “The boy’s mother is frantic. And
this seemed the surest way.” The doctor shook his head. “I’m afraid
we’ve lost our best chance,” he said.
“See here, Doc,” broke in the sheriff. “I made the capture. And I want
you to understand when we find the boy I’m entitled to the reward.”
The other turned astonished eyes upon him. “Reward?” he repeated.
“You mean to say you didn’t know there’s five thousand offered?”
“So that’s why you done this,” said the doctor, and shrugged his
shoulders. “You know, I’ve heerd tell of fellers that put their foot in it.
You’ve got your’n in plumb to the knee.”
“I’ll come out all right,” retorted the sheriff boastfully. “I’ll send for
dogs. There’s three in Sacramento. I can have ’em here in eighteen
hours.”
“If I don’t git to Bill,” said the doctor, “he’ll be dead before that.” He
looked at the man with the scar.
“Eighteen hours!” repeated Eastman miserably.
Now the sheriff advanced upon his prisoner. “You’re going to take me
to that cabin,” he said threateningly. “You don’t think so now, but I
can make you change your mind. Come along.” He seized his
prisoner by a shackled arm and jerked him toward the gate.
Eastman started after the two, pleading incoherently. But half-way to
the gate he stopped. A girl blocked the walk. It was Letty.
“Depend on the doctor,” she said. “He took his life in his hands to
find the boy. He was going to risk it again to bring him to you. And he
didn’t even know there was a reward.”
Eastman turned and went stumbling back.
“But he doesn’t know the way,” he protested. “He said he didn’t.”
In answer, the doctor took his arm and led him down the street to the
wide gate opening into Bobby’s corral. “I’ll have a horse here for you
in a minute,” he said. “I’ll ride this one. You see, there’s another
scheme. But it really don’t depend on me—it depends on this little
bronc.”
When Bobby was saddled and bridled Letty put her cheek against
his soft nose. “Do your best,” she whispered; and to his rider: “Don’t
fail.”
The doctor took both her hands in his. “I’m a-goin’ to make it,” he
declared. “Stay with the boy’s maw, little gal, till we come.”
Bobby was eager to be off, pawing as the doctor mounted and
backing in a circle when his rider held him in to wait for Eastman.
The reins loosened, the little horse sprang forward at a brisk canter,
leading the way out of town.
It was at the forks of the road that the first halt was made. Here the
doctor, having first tied the bridle reins to his pommel assumed the
exact position in the saddle that he had twice been compelled to
take, and laid his hands on his saddle-horn.
“Now, Bobby,” he said, touching the mustang gently with his heels,
“here we are. Go on.”
Bobby moved forward, but hesitatingly, and, when he had gone a
few steps, stopped, looking about him.
Again the doctor urged him kindly. “Want your supper, Bobby?
Come, now.”
The little horse made forward at a brisk walk then, travelling straight
south along the road that followed the track. Presently, however, he
turned sharply to the right and entered the brush.
“Do you think he’s going right?” called out Eastman anxiously.
“Wal,” answered the doctor, “he acts like he means business. You
see, for two days I ain’t give him a bite to eat except when he was
out yonder in that cañon.”
Bobby was taking a westward course that was almost at right angles
to the road he had just come down. He wound through scrubby
liveoaks and bristling chaparral, evidently along no path. Behind him
the other horse had to be urged constantly, for the undergrowth was
heavy and hung across the way. But soon the brush parted to leave
a straight, open track, so narrow, however, that it seemed only a
path. The doctor got down and lit a match. They were on a trail that
showed recent use. Upon it, stamped plainly in the dust, were the
round, eastward-pointing hoofprints of a mule.
“Are we right?” asked Eastman.
“So far.”
Now both horses were pushed to a canter—until the path grew rough
and steep. The doctor recognised this descent and listened for the
sound of the rushing stream he had crossed both times under the
guidance of the man with the scar. When the stream was washing
the hoofs of their horses the doctor reached out to lay a hand on
Eastman’s shoulder.
“My friend, we’re half-way!”
Eastman would have pressed ahead then, but the doctor would not
permit it.
“Leave it to Bobby,” was his counsel. “Mr. Nick didn’t blindfold
Bobby.”
The path ascended the long slope of a hogback. Pine needles
covered the slope, and though the doctor dismounted a half-dozen
times no path could be seen. But each time, as he stepped into the
saddle again, the little horse went forward eagerly.
The hogback ended abruptly. Bobby turned to the left. The trip had
seemed so short that now, as the doctor looked into the darkness
below him, he could scarcely credit his senses.
“Eastman,” he said. “See below there!”
It was a spot of light.
From then on it was a wild ride. The horses did not leave the steep
path; but they stumbled, slid or scrambled for a footing down the
whole of the black descent. The doctor kept his eyes on the light.
Eastman, divided between joy and fear, shouted out frenziedly
toward the nearing shanty.
At the edge of the clearing both men flung themselves out of their
saddles, then ran. Eastman led. And as he entered the low door he
still hoarsely called: “Laurie! Laurie! Laurie!”
A faint cry answered. It came from beyond the bed, on which lay a
quiet form. The doctor reached to shove at the boards forming the
blind door. They gave, disclosing a small inner room.
The next moment a little figure in soiled rompers came out of the
darkness of the room, toddling unsteadily on bare legs, for the baby
stockings were down over worn sandals. Fair hair hung uncombed
about a face that was pitifully thin and streaked by tears and dust.
The doctor lifted the boy up and swung him out, and the father
spread his arms to receive him and caught the child to his breast.
The doctor laid back the rumpled covers of the bed then. “Bill,” he
said kindly, and began to unbuckle the strap of his case.
“So that’s the other one.” It was Eastman, on his knees, the child
clasped tight.
The doctor laid back the bedcovers very gently. “It was the other
one,” he answered.

Midnight, and the lost boy was in his mother’s arms, with Eastman
hovering beside the two, and the doctor across from him, sitting on
his heels, with a baby hand in his big, gentle grasp.
“Doctor, we’ll never be able to make it up to you,” said the father. “I
don’t feel that the reward is half enough. But I want you to accept it
with our lifelong gratitude.” They were in Mrs. Eastman’s sitting-room
at the hotel. Her husband crossed to a desk.
The doctor stood up, colouring bashfully. “Aw, I can’t take money for
findin’ the little feller,” he protested; and when Eastman came back,
holding out a slip of paper to him, he shook his head decidedly. “No,
sir, I just can’t,” he declared. Letty entered then, carrying a tray
hidden under a napkin. He hastened across the room to take it from
her.
“We’ll see about this later on,” answered Eastman. “You must accept
it. And there’s another thing I want to offer. You know, Doctor
Fowler’s been up from San Francisco to look over the Blue Top
position. But he won’t suit. Do you think he’s been worrying about
the finding of my boy? Not a bit of it. He’s been worrying for fear the
bungalow wouldn’t be big enough to please his wife. There’s one
thing I didn’t realise the other day, Doc. What we need is a physician
that doesn’t put on so much style—the kind of a man that can meet
any emergency, you understand—take a horse over a trail if it’s
necessary.”
“Yas?” returned the doctor. The tray was still in his hands. And now it
began to tremble so that there was a faint clink of glass. He stood
looking down at it.
“In fact,” went on Eastman, “we need a doctor like you at the mine.”
The doctor raised his eyes to the girl standing at Mrs. Eastman’s
side. And he saw that there was a look of great happiness on her
face, like the happiness on the face of the young mother.
“Blue Top!” he said. Then: “Letty, do you think the little shingled
house is too small?”
 THE BOOMERANG
WHEN darkness settled a figure began to follow Patton—a tall,
ungainly, heavy-shouldered figure. It shadowed him down the single
street of the desert town to the depot, where he bought two tickets
and checked two beribboned trunks; it lurked at his heels when he
went back along the dirt sidewalk to Conley’s restaurant, the largest
of the score of unpainted pine shacks that made up Searles. The
restaurant faced the single track of the railroad line, and as Patton
ate his supper, the figure stood on the ties, quiet and watchful. When
Patton left the restaurant for the barber-shop farther along the street,
it moved parallel with him, and took up its station outside a front
window of the place.
Patton entered the shop hurriedly and dropped into the only chair.
He was a man of, perhaps, forty, with black hair that was brushed
away slickly from a narrow forehead, and black eyes set deep and
near together. His nose was long and sharply pointed. His mouth
was too full for his lean jaws, which gave his cheeks the appearance
of being constantly sucked in. But he was far from ill-looking. And
when he got out of the barber’s chair presently, fresh-shaven, there
was a healthy glow to his dark skin under its trace of powder.
He arranged a spotless collar and a fresh tie, settled his soft hat on
his carefully combed hair, adjusted his coat before a mirror, and went
out. The figure moved with him, going toward the depot once more.
A building beyond the station was brightly lighted. Patton made
toward it, walking fast and whistling. The figure walked faster than he
—until it was almost at his heels.
“Patton!”
Patton halted. “Hello,” he returned cheerily. “Who is it?”
The figure halted. “It’s Jeff Blandy,” was the answer.
“Oh.” The tone showed displeasure. Patton backed away a step.
“Well, what can I do for you?”
Blandy did not reply at once. Then, “You can’t do nothin’ for me,” he
said. “I just want to say a word or two about—Polly Baker.”
“Yes?” inquired Patton impatiently. “Well, hurry up. The ceremony’s
at nine-thirty. The west-bound goes through at eleven.”
Again there was a short silence. When Blandy went on, his voice
was lowered. “She ain’t got no paw nor maw, nor no brother. That’s
why I’m a-speakin’ to you.”
“I’ll look after her,” said Patton coldly.
“I’d like to feel right shore of that. You see, she and me has been
good friends for a long while. And I want to ask you, Patton, to play
fair with her, and——”
“Say! look here!” broke in the other man. “You’re putting your lip into
something that’s none of your business.”
“Do y’ think so?” retorted Blandy with sudden spirit. “Wal, out here in
the West, a man’s likely to find hull crowds that’ll make it their
business if he can’t see his way to treatin’ a woman white.”
“What do you mean?” demanded Patton.
“Just this: I happen to know about that Galindo business at Paicines.
There’s one place you didn’t act on the square. Wal, the Galindo
girl’s a greaser, and her men folks oughta took better care of her. We
won’t say nothin’ more about it, Patton. But don’t forgit this: A feller
owes his wife somethin’ more’n just the weddin’ ceremony.”
“Oh, I see,” sneered Patton. “You’re trying to kick up a rumpus. You
wanted Polly yourself.”
Blandy gave a short laugh. “Me?” he said. “Me? Why, you’re crazy!
All I’ve got to keep a wife on is my prospectin’ outfit and a’ old mangy
mule. Me! Huh! No girl’d look at me—no fine, pretty girl that’s had
lots of chances. I ain’t nothin’ but a slob.”
To that, Patton made no comment.
“No, you’re the kind of a man that a girl likes,” Blandy went on. “And
you git a couple of hunderd from the East every month. You can take
her away from this hole and make her nice and comfortable in Los
Angeles, and give her a hired girl to wait on her, and decent clothes.
Wal, that’s fine. But a’ easy time and good clothes don’t amount to a
hill of beans with a woman if she ain’t happy. So—play fair with her,
Patton. In the long run, it pays to do what’s right. You know that. Nine
times outen ten, when a man picks up a club to take a’ underhanded
shy at another person, Mister Stick comes whizzin’ right back and
gives him a crack in the head like one of them——”
“That’ll do, Blandy,” interrupted Patton. His voice was hoarse with
anger. “I haven’t any more time for your damned gossip.” He turned
abruptly and strode away.
Blandy stayed where he was, his heavy shoulders stooped, his arms
hanging loosely at his sides, his weight shifted to one foot. He saw a
door of the near-by house open wide to admit Patton; heard a chorus
of gay voices greet the other man, and following a short wait, heard
the tones of an organ, playing a march. He waited until the organ
ceased; then, head lowered, and hat pulled down to his brows, he
walked away slowly, going to the depot.
He halted in the shadow of the station and stayed there until the
head-light of the west-bound train shone in the distance like a fallen
star. The star grew. And through the night air came the thin shriek of
the nearing engine. It was then that a laughing, chattering group left
the brightly-lighted house and came hurrying toward the depot.
Blandy turned from the approaching light.
The centre of the group was the bride, a slender girl in a white dress.
As she stepped upon the platform, under the station lamps, Blandy
leaned forward a little to catch a glimpse of her face. Her childish
eyes, long-lashed and the blue of lapis lazuli, were bright with
happiness, her cheeks an excited pink.
She saw the tall figure standing half in and half out of the shadow,
and ran to him. “Jeff,” she began reprovingly, “you didn’t come to the
wedding!”
He took her outstretched hand. “No,” he agreed; “no, I—I didn’t, but
——” He paused awkwardly.
“I missed you, Jeff,” she declared. “Why, I wanted you there more
than anybody else. And I wanted to wait till someone could go for
you. But nobody’d seen you, and they didn’t know where you were—
What was the matter, Jeff?”
“I—I had business to attend to,” he explained.
“Business! And you my best, best friend——”
The train was close. Voices began to summon her back to the
wedding-party.
Blandy leaned down to her. “Dear little Polly,” he said huskily, “your
old side-pardner wishes you all the luck that’s in the world.”
Then she was gone again. She smiled back at him from the steps of
the car, and answered the chorus of farewells that was shouted up to
her. The engine-bell clanged, the train moved. Patton sprang to the
girl’s side amid a shower of rice. There was more shouting, which
was answered from the car platform, and the west-bound pulled out,
the green lights on the rear of the last coach glowing like the eyes of
a serpent.
Blandy lifted a hand to his breast, then to his throat, then to his eyes.
The group of wedding guests gone, and the depot platform dark, he
crossed the railroad track, walking a little uncertainly. Out in the
blackness, among the sage-brush, something was moving about—
an animal. He went up to it, untied a rope, spoke a word of
command, and started off northward—away from the town into the
desert.

Jeff Blandy, staggering across the last mile of his journey, directed
his way over the railroad track to Conley’s restaurant. The dust of
many days and nights was upon him, powdering hair and clothes to
the colour of his grey hat. The weariness of trudging over yielding
and uneven ground was in his long legs and in the stoop of his
shoulders. And the leathern sallow of his face wore a fresh gloss of
vivid red that was like the reflection of a torch-flame. Yet in his eyes
—as brown and big and appealingly honest as the eyes of a great,
friendly dog—was a gleam that neither the sand-laden winds nor the
scorching sun had dulled. And there was a smile lurking among the
long bristles at the corners of his wide mouth.
Entering the restaurant, he found it unchanged, though a year had
passed since he had left Searles. There were the two oilcloth-
covered tables that reached from end to end of the room, and the
counter, with its cash-register. But no one was on hand to take his
order. Stiffly, he let himself down upon a chair at one end of the first
table. Then, leaning back and dropping his hat to the floor at his
side, he picked up a knife and rang a sharp summons on the rim of
an empty glass.
The door into the kitchen swung open to admit a young man in shirt-
sleeves and soiled apron,—a short, thick-set young man with the
curly flaxen hair, full blue eyes and apple-red cheeks of a boy doll.
He was carrying a pitcher of water.
Blandy drained his glass before he gave the other a nod. Then,
“Gimme some ham and eggs and fried potatoes,” he began. “A
steak, if you got it, too. And coffee. And some pie. And fruit——”
“Oranges is the only fruit,” interrupted the waiter.
“Orange’ll do. And could the cook mix me some flap-jacks?”
“I guess.”
“Then that’ll be all.”
The young man in shirt-sleeves went out, kicking the swinging door
open before him and shouting his order. Left alone, Blandy helped
himself to a second glass of water, after which he stretched his legs
far under the table, folded his arms upon his breast, and took a deep
breath. Then, as he waited, the smile at the corners of his mouth
began slowly to spread, until his burned cheeks were wrinkled with it,
and his moistened lips were parted to show a double line of strong
white teeth. Thus he sat, all a-grin, dreaming.
Beyond the swinging doors, dishes were clattering, and there was a
sound of sputtering and frying. The voice of the waiter rose and fell,
too, amid the din of crockery and cooking; and mingled with his
voice, now and then, was the voice of a woman. Presently, the
tempting smell of ham was wafted out into the dining-room. It was
then that Blandy drew in his feet and sat erect, turning his eyes
kitchen-ward.
Soon the waiter appeared. Pyramided upon his towel-draped left arm
were numerous plates and platters, topped by a huge cup of inky
coffee that steamed as it washed gently from side to side with every
sway of the arm. As the order was placed upon the table, together
with some cutlery, which the waiter scattered with his right hand,
Blandy picked up a knife and fork, pulled a platter into place before
him, and began to eat, ravenously. Someone—a man—entered the
front door and took a seat behind the cash-register. Blandy did not
look up. One by one the platters and plates were emptied. At last,
refreshed and satisfied, Blandy picked up an orange and began to
peel it leisurely.
It was now that for the first time he chanced to look across at the
man behind the counter. That glance brought him to his feet, the
half-peeled orange in his hand. “Harvey Patton!” he exclaimed in
amazement.
“How are you?” answered Patton, indifferently. The tip of his nose
moved up and down a little as he spoke.
Blandy strode toward the counter. “What under the shinin’ sun are
you doin’ back in Searles?” he demanded.
“Keeping restaurant.”
The other was silent for a moment, his astonished eyes still fixed
upon Patton. Then, “Where’s—Polly?” he asked.
Patton jerked his head sidewise toward the kitchen. “She’s doing the
cooking,” he explained, smiling.
Blandy’s staring eyes narrowed. He turned abruptly, crossed the
room to the swinging door and struck it out of the way before him.
Just within the kitchen, he halted. It was a small room, reeking with
smells, and suffocatingly hot. On the side farthest from Blandy was a
sink. And bending over the sink, with her back to him, was a girl. As
he looked at her, the red on his face slowly deepened, as if he were
holding his breath. After a while, his glance travelled to the stove,
upon which some pots were steaming; to the long kitchen table piled
high with unwashed dishes; to the heaping oil can of scraps at the
foot of the table; to the floor, spattered and unswept. When at last his
look went back to the girl, the hairy skin at either side of his mouth
was twitching with the effort of self-control.
“Polly!”
She turned. The perspiration was streaming from forehead and
temples, so that her face and throat glistened, as her arms were
glistening with the water that was streaming from elbows to finger-
ends. Her face was more scarlet than his own. Out of that scarlet
looked her eyes, which were shadowed by wide, dark circles.
“Why—why, Jeff!”
He shook his head, slowly and sadly. “And so you married to come
to this,” he said in a low voice.
There was a bench beside the sink. She sank to it, as if too weary to
keep her feet. As she sat there, leaning on a hand, he saw her, not
as she was before him, tired and blowzy and wet with sweat, but as
he had seen her last. He took a step toward her. “How does it come
that you and Patton’re keepin’ a’ eatin’-house?” he asked.
“We—we got short of money,” she answered falteringly. “Harvey
wouldn’t work in Los Angeles where he’s acquainted. He’s so proud.
So we came back here. And—and this was all we could see to do.”
“We,” repeated Blandy.
“Well,” she answered. “Well——”
“How about that two hunderd he used to git every month from the
East?” He watched her keenly.
“Never comes any more,” she declared.
“That’s too bad. Makin’ any money with the rest’rant?”
“I—I don’t know. Mr. Conley didn’t when he had it. But then he had to
pay his cook.”
“Huh!” commented Blandy, between his teeth, and fell silent again.
“This work’s too hard for you,” he said finally, when he could trust
himself to speak. “You’ll drop in your tracks. Why, I could pick you up
in my two hands like a rag and wring you.”
Her lips trembled. But she kept her face raised to his. “Oh, I don’t
mind a little work,” she declared.
The flaxen-haired waiter entered the kitchen by the rear door. Blandy
turned and went out through the other one. There was a gleam in the
dog-like eyes once more, but it was not a gleam that was good to
see.
Patton was still seated behind the cash-register. He smiled at Blandy
again, and gave another sidewise jerk of his smooth head toward the
kitchen. “It’s a pretty complete plant, isn’t it?” he questioned
boastfully.
Blandy made no reply, only reached a big, freckled hand into a
pocket, brought forth two silver dollars, and tossed them ringing
upon the counter. Then he picked up his hat and went out.
But just in front of the entrance, he halted. Before him, across the
wide, dusty street and the shining rails of the track, lay the level
desert. It was mid-afternoon. And the grey wastes were swept by
waves of heat that sank and rose unceasingly, now almost as plain
to the eye as flames would have been, now shadowy. Blandy
measured every blistering mile, from the rough, unroofed porch on
which he stood to the distant horizon, where a mountain range
traced an uneven line upon the misty blue of the sky. And as he
stood, his arms hanging loose at his sides, his shoulders lowered,
his head sunk between them, he was the very figure of indecision.
Finally, he straightened, turned about, opened the restaurant door
and re-entered. Patton was smoking, a long cigar in one corner of
his mouth, and tilted upward; one knee crossed upon the other.
Blandy walked to the counter. “Patton,” he began, “this ain’t no kind
of a business for you. You won’t make your salt here in Searles.
Now, I’ve got a proposition to make you—you and Polly. But it
mustn’t go no further.” He gave a quick glance about him.
“I’m not dying to stay in Searles,” observed Patton, blowing smoke.
“Wal,”—Blandy dropped his voice—“you go into pardnership with
me, Patton, and you don’t have to stay.”
The other took out his cigar and eyed Blandy half-suspiciously.
“You’ve changed some,” he commented. “You didn’t used to care
much about me. But—what’s your proposition?”
The gleam of triumph came back into Blandy’s eyes. “I’ve made a
strike,” he said.
“A mine?”
Now, Blandy straightened, shoulders back, head up, face all a-grin
once more. “That’s what,” he declared proudly.
Patton slipped down from his stool. “Where?” he asked excitedly.
Blandy lifted a long arm to point out through the front window toward
the north. “Four days from here,” he answered.
“When’ll we go?” questioned the other. He reached across to lay a
hand on Blandy’s sleeve. “We’ve got to locate, you know. That’s the
law. We mustn’t miss a trick, old man.”
“Oh, I located, all right,” declared Blandy. He drew back a step.
“But you didn’t locate for me,” went on Patton. “So I’ve got to go out,
haven’t I? And there’s another reason, too. You’re the only person
that knows just where the lead is. Well, suppose anything were to
happen to you—a railroad accident, or a bad sickness. Where would
I be? That’s the way all the lost mines’ve come about, Blandy.”
“We’ll talk it over to-night. Then Polly can hear about it, too. There’s
enough for the three of us out there,—and some over. So she can
have a claim separate.”
“Oh, I’ll look after her,” said Patton carelessly.
“No.” There was determination in Blandy’s tone. “I’m lettin’ you in on
this with the understandin’ that she has her holdin’. She can lease it,
or she can work it, just whichever she likes. You know, it’s kinda
stylish for a lady to have her own bank-book.”
“All right,” agreed Patton impatiently.
It was close upon four then. Patton was for calling his wife in and
breaking the news at once. “And we’ll close up and cut out supper,”
he declared, “and have a little celebration.”
But Blandy flatly objected. “Don’t shut down just a’ hour or two
before a meal,” he advised. “Put a sign on the front door to-night.
Say on it that the rest’rant is closed ’cause your wife is plumb wored
out. We can’t afford to give ourselves away, Patton. There’s plenty of
men in Searles that can smell a strike forty mile. Look out or some of
’em ’ll be follerin’ us.”
“You’re right,” declared Patton.
Thus it came about that Polly cooked supper in ignorance of the
sudden good fortune that was to make such further toiling
unnecessary. Blandy went out into the hot kitchen a second time. But
he had little to say, and devoted his efforts to the washing and drying
of the dishes, which he received in pyramids from the swinging left
arm of the flaxen-haired waiter; and when, shortly after seven
o’clock, the last guest was gone, and the last dish clean, Blandy
swept and mopped the kitchen floor.
At eight, by the light of a single candle, there was a conference of
three at one of the oilcloth-covered tables in the front room. The
waiter had taken himself off in the direction of the main saloon down
the street, out of which were floating the strains of a violin and the
voices of singing women. Nevertheless, Blandy told his story in a
half-whisper, and without pointing.
“The ledge is in a spur of the range back of Salt Basin,” he confided.
“And clost to—what do you think?”
“What?” questioned Patton.
“The bowl in the rock!”
Patton turned to his wife. “That’s the spring I told you about,” he
explained. “I went out there four years ago with a prospector. You
wouldn’t believe, Polly, that water could be found in a place like that
—a regular ash-pile, you might say. But there it is. The bowl is
hollowed out as pretty as can be. And the water comes in drop by
drop—just at night, though. It leaks in through a split that’s so fine
you couldn’t get a knife-blade into it. But what comes in doesn’t run
out, because the bowl’s good-sized, and if the buzzards don’t drink
the water up, the sun does.”
Polly made no comment. She sat very still, watching Blandy steadily.
Her face was as pale as it had been scarlet at mid-afternoon.
“The lead ain’t more’n a stone’s throw from the bowl,” went on
Blandy; “—to the right up the slope. Say! think of the feller’s that’ve
missed it!—’cause they was so all-fired glad to find water that they
forgot all about gold. But I found it. I was comin’ down the slope,
headin’ for a drink, when my darned feet got all tangled up and I took
a double-ender. Wal, sir, when I sit up to feel if any bones was broke,
here was the blossom rock, lookin’ me straight in the eye!—yeller
chunks, Patton, as big as pine-nuts!”
Patton’s black eyes were glistening. “How high’ll that rock run?” he
asked.
“Turrible high—even where it don’t show colour. There was a fortune
right in sight—without thinkin’ of what’s laying behind. There’s all
we’ll ever want out there—a chance to do a few things for our
friends, and our relations—them that we like; and grand houses, and
outomobiles, and fine clothes, and horses, and folks to wait on us,
and travellin’, and edication, and—and what’ll make Polly a queen!”
“Did you put up a written notice?”
“Shore.”
“Have you got some specimens?”
“About a mile from here—buried.”
“A few samples aren’t enough,” asserted Patton. “Anybody can get
hold of a dozen pieces of rich rock. Why, there are men who make a
good living by selling ore that’s used to draw suckers on.”
“A-course, that’s so,” agreed Blandy.
“What we ought to have is about four barley-sackfuls. There’s
nothing like making a great, big hit at the very start.”
“Yas, I know,” said Blandy. “But when one of them millionaire fellers
is considerin’ a lease, he sends out a’ expert.”
“If you have a hundred pounds of quartz and an assay, there won’t
be any need of an expert,” argued Patton. “We’ll lease without a bit
of trouble. Of course, we might make more by taking some rich man
in as a partner, and working the mine on shares——”
“Why, there’s half a million apiece in it for us without doin’ that.”
“Half a million,” repeated Patton. “Huh! I mean to ask one million flat
for my share.”
Blandy laughed. “Oh, leave a little for the gent that’s a-going to put
up the cash,” he advised.
Patton went on arguing. “As a matter of fact,” he declared, “it
wouldn’t take us any time at all to land three hundred pounds of ore
at the track if we used an auto.”
“No.” Blandy was decisive. “No, I don’t trust none of them
flyshuffers.”
“But I’ll drive.”
“Take a machine and leave tracks, eh?” demanded Blandy. “Not on
your life! Burros is what we need. A burro can travel on a washout
and never turn a stone.”
“All right, burros then,” assented Patton eagerly. “Let’s start to-
morrow night.”
“Oh, what’s your sweat?” asked Blandy.
“Just this: The quicker we leave, the quicker we get out of Searles.”
“But—but maybe Jeff’s tired,” suggested Polly timidly.
Patton gave her a warning glance. “I know he’s tired,” he answered.
“But we won’t have to rush. We can take it easy, and only travel at
night. If we wait around here, people’re sure to begin trying to find
out where you’ve been and what you’ve been doing. The whole town
knows you’ve been on a long prospecting trip—I heard it when I
came. So (just as you said yourself a while ago) first thing you know,
we’ll have a regular gang on our trail.”
Blandy nodded, more than half-convinced.
“And when we’ve got our ore,” went on Patton, “I’ll go to Los Angeles
with you. I’m the man that can advise you when it comes to a lease.”
In the end Blandy agreed to an immediate trip to the mine.
But next morning it was he who set to work preparing for the journey.
Patton made off down the street almost immediately after breakfast,
and disappeared into one of the half-dozen drinking-places of the
town. When he did not return at noontime, Blandy consulted Polly.
“Don’t you think I’d better go find him?” he asked. “You see he might
take a glass or two and git to blabbin’.”
Patton was found at Rourke’s. Outside the resort, Blandy turned
upon him. “Say! You’re up to your old game, ain’t you, Patton?” he
demanded curtly.
Patton tried to laugh the matter off. “Oh, you don’t understand,” he
declared confidentially. He started homeward beside the other man.
The leather of Blandy’s face was pale. Out of the paleness burned
his wrathful eyes. “Don’t try to soft-soap me,” he went on. “I know
now where that remittance of your’n goes. But you got to cut it out! I
ain’t a-helpin’ you to a fortune so’s you can hurt Polly by slatherin’
money on some other woman.”
Patton gave a loud laugh. “Don’t think I’m a fool,” he answered. As
they entered the front room of the restaurant, he gave Blandy a look
of hate. “You aren’t giving me a claim because you like me. You’re
doing it on Polly’s account.”
“That’s right,” declared Blandy. “What in thunderation is there about
you that’d make any man hand you over half a million?”