Latin America and Nazi Economic Policy
In Nazi theory, the economy served the purpose only of generating funds and exchanges for a reorganization of the world based on race. An important part of this theory was that ideally German trade would be conducted exclusively by ethnic Germans.
The creation of a world based on racial concepts required change through war. However, in 1933 the Nazi leadership faced an established network of ethnic German traders in Latin America, and most of them did not subscribe to Nazi racial thinking or trade based on exclusive ethnic networks. These importers, managers of shipping agencies, and independent merchant bankers appreciated capitalism and political conservatism. By coincidence, the ongoing world economic depression and the failure of the 1933 World Economic Conference in London paired ethnic traders and Nazis in a way that neither group had envisioned. Before trade with Germany could become nazified, it somehow had to be revived and restructured. There were several difficulties to overcome: exclusive British and French trade policies, the U.S. Smoot-Hawley tariff, and drastic devaluation of the Japanese yen all contributed to the collapse of the gold standard. Proud ethnic German traders who had rebuilt their businesses independently after World War I once again found themselves forced to follow German government exchange rate policies. Nazi economic theorists, too, recognized that racially based trade could not be implemented at that point. Issues such as exchange rates, insurance, and foreign exchange reimbursement were paramount over racial ideals. Hitler’s priority was mediation between private German economic sectors in order to earn more national income for rearmament financing. In the first years of the Hitler administration, racial economics moved to the back burner. And the failure of the 1933 London World Economic Conference offered Hitler a smoke screen to blame capitalist actions for his determination to use trade not for profit but for rearmament and world conquest. Inside Germany economic and trade policy was developed by a top secret trade-political committee. It institutionalized rivalries between the Foreign Ministry, the Ministry of Economy, Germany’s Central Bank, and newly appointed Nazi officials. Between 1933 and 1936 infighting over policy dominated meetings. In the background, the German army and Hitler expected these ministries to put their power struggles aside and to manage raw material procurement for the expanding arms industry. Only their cooperation could generate funds to pay for the planes, tanks, and ships that would fight the coming war.In Latin America ethnic German traders were not privy to Hitler’s policy priorities. They expected their governments to help them gain access to increasingly rare foreign exchange. Other burning issues were international trade insurance and protectionist trade measures by British, U.S., and French companies. Hitler’s anti-Jewish laws and the incarceration of leftist party members triggered business boycotts and political harassment by Latin American unions and Socialist parties. Finally, Nazi branch leaders had begun to force community organizations into Nazi Party organizations, regardless of political and social differences. This meant replacing conservative business leaders. The leading merchants in the community often also chaired the community organizations. Now that political and racial priorities were moved to the top of the agenda, the Nazi leadership wanted traditional leaders removed as they, as national conservatives, did not share such views. In the midst of this confusion, ethnic companies looked in vain for guidance from Berlin. Economic activity of ethnic communities abroad the Hitler administration simply expected to dovetail with economic priorities at home. In the first half of 1934, the Nazi economy repeatedly came to the brink of collapse. In response Minister of Economy Hjalmar Schacht brought all exchange rate and import regulations under his control.
The secret trade council continued to manage business on monthly and geographical bases, as well as plan the annual amounts of national imports. Importing and exporting required increasing government regulation. In fall 1934 this policy became known as the New Plan. It was a crude accounting mechanism that assured that Nazi Germany would no longer spend more foreign exchange on raw material imports than it earned through manufacturing exports. From then on, essential imports of raw materials were covered financially. This new form of trade quickly brought alternative trade methods such as barter trade and artificial currencies into the center of Nazi export relations. During this crisis, Nazi economists and diplomats gained a new appreciation for Latin American raw materials.Raw material imports from Argentina, Brazil, Chile, the Andean region, and Mexico moved next to the primary import focus of southeastern Europe. Agricultural products were most important. Precious metals and ores took second place. This policy contained an anti-British strategic component, a revival of World War I economic warfare practice, preceding an open violent conflict. A German government commission traveled to major South American countries in the second half of 1934 to explain the new trade and currency tools. Argentinean, Chilean, and Brazilian economists received it with reservations. There was little interest in departing permanently from free trade practices. The German commission returned to Berlin with only short-term exclusive bilateral economic treaties. In 1935 ethnic German traders in Latin America found themselves in the middle of this radically changing trade environment. Nazi Party leaders talked ethnic solidarity, but the practice in the field was in stark contrast. The help from Berlin was not the type of support that struggling private traders required. To make matters worse, Nazi branches compiled ownership inventories of ethnic companies, trying to single out Jewish owners.
In case a German Jewish business was the least bit economically vulnerable, Nazi branches harassed it and, if possible, excluded it from future economic involvement. The business climate remained confused. Nobody could predict what would happen in the coming years. A second policy toward Latin America emerged. Adolf Hitler, Hermann Goring, and army leaders decided that the best way to increase raw material imports further, regardless of price, would be arms exports to South America. In the summer of 1935, the Nazi leadership violated the limitations imposed by the Treaty of Versailles and began large-scale arms-for-raw- material barters. Nazi economic experts followed Italian experiments in Brazil and reconfigured future economic exchanges based on armament orders. This policy offered several advantages for the governments of Brazil and Nazi Germany. Arms orders were expensive. Their enormous cost encouraged large-volume raw material barters. At the same time Latin American countries had extreme difficulties selling raw materials, even at depressed prices, for foreign exchange. One exception was Argentina, whose economic house was in relative order, allowing Buenos Aires to dictate to Germans the terms of contracts. Ethnic trading houses that represented German arms manufacturers benefited most. Outside the arms sectors, smaller importers and exporters, even though ethnically German, found themselves out of the loop. However, rival British, U.S., and French traders assumed that all German ethnic traders eagerly cooperated with Berlin. Increasingly, the first fog of war reduced all ethnic traders to extensions of Nazi plots. In fact, illegal activities existed in the communities before 1939. The German navy had begun to reconstruct its global naval supply and intelligence service. After 1935 a growing number of select ethnic Germans in Latin America were recruited as suppliers and secret agents. Their commitment turned German merchants and their local business connections, banks, and financial reserves into parts of a global Nazi economic warfare operation. Branch managers of German South American banks and leading merchant bankers backed intelligence agents with their financial networks, preparing to fight U.S. and British raw material procurement in the Americas. By 1937 trade policy, rearmament barters, ethnic community life, and Nazi war preparations were fusing into one culture. It opened German ethnic communities once again to Allied economic warfare countermeasures.United States Secretary of State Cordell Hull had tried to commit Latin American economists against Nazi financial and trade tools since 1933. At conferences and on paper, most Latin American government negotiators and ministers of finance, economics, and trade agreed to reject Fascist methods. But in practice they disregarded the noble political imperative, at least as long as the British Parliament, the U.S. Congress, and private banks failed to provide alternative financial tools. In this context, after 1936 a third Nazi Latin American economic link emerged. German diplomats came to see barters as a technical specialty that allowed them to serve the Nazi state without having to participate in Nazi policies inside Germany. The South American trade world became a professional exile for conservative German economic expansionists who rejected war on behalf of a racial Nazi state. In Latin America, economists also appreciated German diplomats more. Their contacts inside the Nazi economy provided access to required technology for national industrialization. Of course, this linkage raised troubling political and ethical questions among political parties, Jewish organizations, and anti-Nazi unions. But as long as the private credit market could not offer cheap dollar and pound loans, bartering with the Nazis provided, by coincidence, technology free from rare foreign exchange. It supplied authoritarian governments with steam turbines, pipes, ship engines, electrical cables, machinery, and even key-ready fertilizer plants. Exports manufactured in Nazi Germany gained an unprecedented prominence in state—led Latin American infrastructure projects.
By 1937, U.S. and Nazi economic practices confronted each other directly in Latin America. The trade-for-rearmament versus trade-for-profit clash further intensified after Ambassador Karl Ritter relocated to Rio de Janeiro and conducted the next round of Nazi trade offensives on location. Under his guidance, Berlin tried to break the currency monopoly of the Brazilian government and projected more economic force into Argentina and Chile. Also, in Mexico a joint venture with the German navy in the national oil business was ready for signature. In the Andean countries, Latin American airlines used more German planes and advisers. Ritter’s machinations were reinforced by the refusal of many members of the U.S. Congress to recognize Nazi economic methods as a serious threat requiring the immediate abandonment of their policy of financial and trade isolationism.
The influential Nazi economic position in Latin America that diplomats and salesmen developed between 1935 and 1938 was eventually challenged—not by a foreign power, however, but from inside the Nazi regime. Beginning in 1936 Goring was in charge of the Four-Year Plan. Still facing the dilemma of how to balance export trade, civilian economy, and rearmament, Hitler backed him and made rearmament once again the focus of all efforts. In addition, Goring preferred economic alliances with Italy and Spain. Latin America was seen as less critical than before. The September 1938 Munich crisis suggested to world traders and bankers that artificial Nazi currency could be worthless if war broke out. It was foolish not to return to the predictable, but expensive, U.S. dollar and British pound. Latin American economic planners began to accept the support that the White House had developed independently of the U.S. Congress. It was obvious that during the next German British war, trade with Europe would reduce sharply, perhaps even stop because of a blockade. The Munich agreement postponed war once more. A coup in Bolivia brought the caudilla German Busch to the presidency. Suddenly, in the Andes, Nazi Germany and imperial Japan found eager business partners. Both entered into far-reaching cooperation agreements in the mining sector. For a short time, it seemed that Nazi Germany might take away Bolivia from British influence. However, after Busch was assassinated, his successor closed Bolivia to Germany. During 1939 German efforts concentrated on protecting assets and companies by hiding German ownership behind third-party nationals. A second effort focused on the preparation of the naval supply service that would redirect German trade to Italy and Spain, two countries projected to be neutral during the next war. The German attack on Poland in fall 1939 brought about the expected interruption in European—Latin American trade. As trade retooled toward neutral countries, it no longer served rearmament but the conduct of aggressive, long-term global war. German victories in Poland and in 1940 in Western Europe encouraged German diplomats to talk about the resumption of Latin American—European trade after the war’s conclusion in rosy colors. Diplomatic talk used carrot- and-stick tactics, trying to keep Latin American economists from working closer with U.S. economic warfare specialists. Propaganda prepared Latin Americans for a fascist-controlled European trading block. In the summer of 1940, the fall of France created such a fascist-dominated European trading zone. Regardless, many Latin American economists signed new agreements with the Allied powers in 1940.
At the same time they promised profascist Europeans that they would be open to return to business once the war had concluded. The decision depended on the future of Great Britain. The majority of civilian trade with Europe came to a halt. In contrast, secret trade of essential raw materials intensified. The Hitler-Stalin pact provided Nazi Germany a new transport route through Siberia, and Imperial Japan remained neutral, acting as a place for transshipment in Asia. Ethnic German business owners found themselves caught in the middle of this constellation. Nazi policy had cut them off from their European suppliers. Nazi leadership had used them as much as possible before 1939, only to disregard them now and to focus on Europe and the Soviet Union. When the attack on Great Britain and the invasion of the Soviet Union did not lead to immediate success, Latin American business continued to seek Allied contracts. After the attack on Pearl Harbor and Hitler’s declaration of war against the United States, British and U.S. economic warfare destroyed the remaining crippled ethnic German economic base in Latin America. Ethnic Germans found their economic existence destroyed as a consequence of German policy, for a second time within thirty years. A small group of ethnic Germans carried on secret economic warfare and intelligence work. Nazi economic relations with Latin America never recovered. Ethnic Germans had to await unconditional surrender and the post—World War II order to locate themselves in the future international world system.
Friedrich E. Schuler
See also Latin America, Nazi Party in; Treaty of Versailles
References and Further Reading
Ebel, Arnold. Das Dritte Reich und Argentinien. Die Diplomatischen Beziehungen unter besonderer Berucksichtigung der Handelspolitik (1933—1939). Cologne/Vienna: Bohlau, 1971.
Hilton, Stanley E. Brazil and the Great Powers, 1930—1939: The Politics ofTrade Rivalry. Austin: University of Texas, 1975.
Humphreys, Robert A. Latin America and the Second World War, Vol. 1 1939—1942, Vol.
2 1942-1945. London : Athlone ; Atlantic Highlands, NJ: Humanities Press, 1981/1982.
Newton, Helmuth C. The Nazi Menace in Argentina 1931-1937. Stanford, CA: Stanford University, 1992.
Pommerin, Reiner. Das Dritte Reich und Lateinamerika. Die Deutsche Politik gegenuber Mittel und Sudamerika, 1939-1942. Dusseldorf: Droste Verlag, 1977.
Schuler, Friedrich E. Mexico between Hitler and Roosevelt. Albuquerque: University of New Mexico, 1998.
Volland, Klaus. Das Dritte Reich und Mexiko. Studien zur Entwicklung des deutsch- mexikanischen Verhaltnisses 1933-1942 unter besonderer Berucksichtigung der Olpolitik. Frankfurt am Main/Bern: Peter Lang, 1976.
Wirth, John D. The Politics of Brazilian Development. Stanford, CA: Stanford University, 1970.