by Gerard Colby
THE LAND OF BEAUTIFUL HORIZONS
For his first postwar experiment in Latin America, Nelson chose the state of Minas Gerais, in Brazil’s central plateau directly south of oil-rich Bahia. It was a wise choice. Somewhat larger than France, Minas Gerais was a rural mining and cotton stronghold of the conservative exporter wing of the Social Democratic party. This was the party that had broken with President Vargas in 1945 and supported the coup of General Eurico Gaspar Dutra.
In November 1946, Nelson had visited Rio. His offer of AIA’s services—and his cocktail party for some 300 guests—were widely regarded as evidence of continued U.S. support for the Dutra regime, and Dutra reciprocated by awarding him Brazil’s highest honor for foreigners, the Order of the Southern Cross. During his stay, Nelson learned that many of the poor who lived in the restless slums around Rio had been farmers who had migrated from Minas Gerais, the state directly north of the city whose small farms had been devastated by the reckless abuse of land resources. This migration to Rio had resulted in overcrowding and mounting political unrest. Nelson decided to address this problem by making small farming work in Minas Gerais.
Minas Gerais had been a mining center since the late seventeenth century, when the Portuguese had mined gold there using African slaves. The state had known deposits of limestone, beryllium, zinc, silver, lead, fluorite, titanium, sulphur, potassium, rock salt, and molybdenum. Most important, it had iron, developed by the government-owned Companhia Vale do Rio Doce, and manganese, the steel-hardening alloy mined and exported to the United States by Bethlehem Steel, the largest builder of U.S. Navy warships. Following the iron and manganese boom of the 1920s, the exporters who ruled the state had decided to build a new state capital in the interior. Perched 2,700 feet above sea level, the city was called Belo Horizonte, Beautiful Horizon. A symbol of the new era in mining and of the conquest of the interior, the city’s construction was a dress rehearsal for the later creation of a new national capital, Brasília.
Indians, of course, had lived in Minas Gerais. The Botocudos had called the woodlands between the Rio Doce valley and the Rio Jequitinhonha their home; most of them were killed, the survivors pacified by Rondon’s Service for the Protection of the Indian (SPI) in 1911–1914 and resettled at SPI posts in the state, where they quickly despaired and disappeared into graves. The Kayapó do Sul Indians had lived along the state’s eastern border with São Paulo. Pacified and integrated into Brazilian society, they also were now extinct. Only the Maxakalí remained, some 200 survivors struggling peacefully to maintain their culture.
Minas Gerais was a prime example that most of the Indians who suffered extinction in the twentieth century were not the victims of European settlers. Rather, they stood in the way of extractive industries—rubber, nuts, diamonds, and other valued resources—operating mostly for export to Europe and the United States.8
At first, Nelson, too, looked at Brazil from an extractive industrial perspective. By January 1947, his engineers had already completed a survey of Brazil’s phosphate deposits. Nelson was hoping to start a fertilizer industry as part of his grander scheme to bring midwestern farming to Brazil.
The only problem for Nelson was that there was yet no large market for chemical fertilizer anywhere in Brazil. Few Brazilian farmers had any knowledge of its use, nor could they afford it if they did. Nelson would have to create a market himself.
Nelson’s financial wizards at Room 5600 whirred into action. Just two weeks later, on February 6, Laurance received a report proposing a three-step program for increasing consumption: Educate the farmers on how to increase their yields, organize the means of buying the farmers’ surplus at attractive prices, and improve the means of transportation in Brazil to deliver fertilizers to the farmers at appealing terms.9
To overcome the individual farmer’s reluctance to use fertilizer and his poor creditworthiness for both the fertilizer dealership and the factory (both of which were foreseen as at least partly Rockefeller owned), local farmers’ cooperatives would be established.
Neanderthal right-wingers in the United States might think this was socialism, but Nelson knew better. It was in the Standard Oil Trust tradition to seek economies of scale, including lowering the cost of credit, through consolidation.
Rockefeller’s men devised a strategy that was decidedly political. This would be a joint venture by three partners: the Rockefellers, “a powerful and reliable Brazilian group” to enable the Rockefellers to circumvent Brazil’s prohibition of foreign ownership of mining concessions, and “an American group with capital” to participate in financing the factory. Meanwhile, the group would supply U.S.-produced fertilizers to stir Brazilian farmers’ interest and test the market for future orders.
In 1948, Nelson and Milton Campos, the governor of Minas Gerais, signed a joint agreement to establish a farm-credit agency, ACAR (Associação de Crédito e Assistência Rural). Rockefeller’s AIA managed the agency, which was given control over farmers’ access to 8 percent loans from a state bank. Even the farmers’ spending was controlled by technical teams from a local agency, who were given countersigning authority over farmers’ checks.10 Where some of this money went was predictable: Rockefeller agribusinesses. IBEC set up a hog-production company to raise and sell hogs from an imported breed that was resistant to cholera.
As AIA teams promoted poultry raising, Nelson set up an IBEC chicken-feed enterprise. As AIA teams pushed the virtues of chemical fertilizers, IBEC sold fertilizer. As AIA encouraged better-yielding seeds, IBEC raised and sold hybrid seeds.
As AIA spread the gospel of pesticides and herbicides, IBEC set up a crop-dusting company. The western plains of Paraná state offered suitable land for extensive mechanized farming. Here, AIA’s gospel of the American tractor in the fruited plains of the Midwest found eager listeners. IBEC’s Mechanized Agriculture Services Company (known as EMA) found ready sales as dealers for an American company with a large Rockefeller holding, International Harvester. More than $1 million worth of machinery was imported into Brazil within four years, and EMA cleared over 100,000 acres of forest under contract.
It seemed like old times. Nelson’s AIA was replicating in South America what his father’s General Education Board and the Rockefeller Sanitary Board had done in the American South and Midwest: promoting fertilizer, crop rotation, irrigation, sanitation, and mechanized agriculture, all the ingredients of a social formula that brought agribusiness to the United States at the expense of small farming. Besides what International Harvester paid the Rockefellers in continuing dividends on their original $30 million investment, Nelson, through his EMA subsidiary, was able to get a direct cut from Harvester’s sales. He actually went much further than his elders in pursuing vertical integration in agribusiness, setting up a grain-storage company with the United States’ largest privately owned grain company, Cargill. Cargill Agricola e Comercial, S.A., bought and stored grain throughout northern Paraná and in the fertile region just west of São Paulo.
These areas were all strongholds of the Brazilian Establishment that had forced President Vargas’s removal from office in 1945.
BRAZIL’S COUP SPREADS
Hearing of Nelson’s first visit to Rio and of his agricultural proposals, Rómulo Betancourt, Venezuela’s new president, decided in 1947 to invite Rockefeller to Caracas. He wanted to talk about Nelson setting up projects similar to those proposed for Brazil.
When Nelson landed in Caracas, he was greeted by government aides and driven to the yellow-walled Miraflores Palace. It took some nerve on both men’s part to shake hands. Betancourt had been a severe critic of Nelson’s activities as an oil man in Venezuela before the war. Moreover, he had come to power just over a year ago by overthrowing a corrupt general staff and government controlled by former president General Eleázar López Contreras, heir of the old Gomez dictatorship. López Contreras, in the heady days of democratic rights restored by popular demand after Gomez’s death, had inspired the building of Caracas’s Ávila Hotel, whic
h Nelson had just completed; it was fast proving to be one of Nelson’s greatest financial successes.
But Betancourt was now prepared to let bygones be bygones. He was planning a breathless series of economic and social reforms, as well as Venezuela’s first honest presidential election in this century. Nelson’s former nemesis was now trying to run a government saddled with debts to foreign, mostly American, banks. To raise capital to pay these debts and to diversify Venezuela’s industrial growth beyond oil, Betancourt had adopted a policy of sembrando el petroleo, or sowing the oil. He pledged that 40 percent of government oil revenues would be reinvested in the country.
It was not really a new pledge. Every regime in the past decade had made an identical promise. But Betancourt seemed to mean it. He imposed a 50 percent tax on oil-company profits to ensure that the companies lived up to the 50–50 partnership that had been decreed ineffectually during World War II.
At first, Nelson seemed happy to cooperate. One of his promises when he founded IBEC in January 1947 was to give aid to Venezuela, and his development proposals had been endorsed by the Caracas press. He showed up in Caracas in June, glowing with confidence and good cheer, and signed a pact for agrarian and industrial development with the government’s Venezuelan Production Development Corporation. To much press fanfare, Nelson announced the founding of three IBEC subsidiaries to promote development in fish and dairy production and food distribution. All were to be controlled by a holding company, the Venezuelan Basic Economy Corporation (VBEC).
Betancourt still had reason to worry. His 50 percent tax on oil profits and support for the oil workers’ unions had raised the hackles of Creole, Gulf, and Sinclair Oil. Even before Nelson’s arrival on the scene, American businessmen had petitioned the U.S. ambassador to save their holdings from the specter of international communism.11 Three attempts at military coups had followed in rapid succession. Betancourt survived each only by his tenuous alliance with junior army officers who had helped overthrow the old regime. To keep these officers’ loyalty, he had signed an agreement with Washington that brought a new U.S. military mission into Venezuela as their adviser.
This agreement proved to be his undoing. Although the military uprisings ended with the arrival of the Pentagon mission, it was merely a temporary calm before a greater storm. As relations with the U.S. Embassy began to deteriorate under pressure from the oil lobby, the young officers developed close relations with the embassy’s new military attaché.
Shortly after the presidential candidate of Betancourt’s Acción Democrática party, novelist Rómulo Gallegos, was elected in December 1947 by a three-to-one margin, the first signs of foreign intervention appeared. Over Venezuela’s protests, Brazil, with no objection from Ambassador Pawley, shipped arms to the anti-Betancourt Trujillo dictatorship in the Dominican Republic. Two months later, Betancourt formally protested that the Somoza dictatorship in Nicaragua also was aiding a plot to disrupt President-elect Gallegos’s inauguration by bombing Caracas on the day he was to take office. Betancourt revealed that the planes to be used in the bombing were American, as were the pilots.
Betancourt’s revelations blew the cover off the conspiracy, and Gallegos’s inauguration went off without a hitch.
There was an ominous portent of the coming new era when Nelson officiated at a meeting later that day in his Hotel Ávila. Reorganizing VBEC, Nelson decreed the termination of all its service activities, assigning all its engineering to a new profit-making subsidiary, IBEC Technical Service Corporation. He trimmed AIA down to demonstration projects, making them little more than a symbol of good works.
In much the same way that Townsend’s Summer Institute of Linguistics served as the scientific face for a religious mission called the Wycliffe Bible Translators, so Rockefeller’s AIA had become the philanthropic face for what was basically a profit-making operation, IBEC. The distinction was not lost on American oil companies. They gave IBEC $15 million in pledged donations; AIA was given only $3 million.12
Gallegos’s new government, lacking a loyal army, was doomed from the start. After his inauguration, Gallegos was wined and dined on a whirlwind tour of the United States as President Truman’s guest. In retrospect, he would consider the tour the kiss of the Godfather. Three months later, in November 1948, he was overthrown by a military coup led by Lieutenant Colonel Marcos Pérez Jiménez, leader of the young officers who had supported Betancourt’s movement but had gradually come under the influence of the U.S. military mission.
Fleeing into exile, Gallegos charged that U.S. Military Attaché Colonel Edward F. Adams and American oil companies, including Creole Petroleum, were involved in the coup. He blamed his downfall on military coups occurring all over Latin America.13 Creole joined the State Department and Adams in issuing firm denials.
Pérez Jiménez assumed complete control within two years, his two fellow junta members dead by sudden illness or more sudden bullets. By 1950, he would ignore charges of human rights violations before the United Nations by having an investigation requested by Guatemala and Uruguay shelved under U.S. pressure.14 He reciprocated by breaking up the oil workers’ union, stifling all talk of a national petroleum company, and reopening the national oil reserves to the highest American bidder (eventually done in 1956). Colonel Adams, meanwhile, was elevated to the U.S. Command Staff of the OAS’s Inter-American Defense Board.
CHILLING THE ROSE
With his ties to the oil companies, Nelson’s operations survived the fall of the Acción Democrática government. But within two years, his operations in Venezuela and Brazil were developing serious financial troubles. His father had warned him to start small. That was never Nelson’s way. He believed he could change the world almost single-handedly by demonstrating the superiority of the “American Way.” A big splash was needed to make big waves.
Nature responded to the invasion of Rockefeller technology in disarmingly simple ways. Bulldozers scraped the land clear at his 18,000-acre Agua Blanca farm in Venezuela, and corn and rice were planted under clouds of insecticides. But the weeds grew faster than the corn, and Nelson’s spraying machines did not arrive in time to save the crop. The same happened to his rice; what the weeds did not destroy, the heavy rains did.
It was no better with his fish company there. He poured $1.5 million into the company and built an $800,000 refrigeration and ice-making plant at Puerto La Cruz. But the Caribbean stubbornly hid its sea life from his fishermen, and when fish were found, prices at the fish market had gone up and the fishermen were unwilling to sell at lower rates.
His 7,800-acre cattle farm at the southern end of Lake Maracaibo came under criticism from local labor organizers and farmers. “With modern methods the North Americans may increase production a hundred times and prices will fall so low that we will be ruined,” one farmer lamented. “Yes,” shouted another, “and they’ll buy up our bankrupt farms and turn the whole area into a mechanized operation!”15
Nelson tried to point to the relatively small size of his operations compared to Venezuela’s output. But the fact that he himself called his farms pilot demonstrations for wide-scale operations in the future left many Venezuelans unconvinced.
His plantation at Monte Sacro, where Simón Bolívar had once lived, could produce citrus with superphosphate fertilizers and herbicides and pesticides, and his food-distribution company could build five warehouses and scatter them around the country to scoop up the farmers’ output. But if wages were too low to purchase the food, the larger inventories would not generate profits. Frustrated, Nelson shifted from wholesale to more profitable retail operations, opening a modern supermarket at Maracaibo that catered to the American oil managers and their better-heeled retainers.
From store owners and employees, his criticism moved on to Mother Nature. He blamed his difficulties in Brazil on the weather. Drought, for instance, raised the cost of feed for his hogs, preventing his breeding farms from making a profit.
No one outside Room 5600 knew anything about these
problems. Nelson touted his programs around Washington as success stories that demanded replication on a global scale. His self-promotion continued to go nowhere. Truman showed no inclination to end Nelson’s exile from the nation’s capital.
Cold-shouldered by Washington and discouraged by failures in Latin America, Nelson chose again to concentrate on the one arena of power where no one, not even his father, could stop him: Room 5600. He was now the dominant force there, easily outracing his shy older brother for the tireless loyalty of its staff. Although John 3rd had been president of the Rockefeller Brothers Fund since its inception, it was Nelson who really ran the show. And now even the Rockefeller Foundation, with John replacing Ray Fosdick as president, increasingly fell under Nelson’s Cold Warrior eye.
Junior sensed the peril that would come if the foundation’s carefully cultivated reputation for professional independence was lost. Yet it was precisely the part that Junior, and Senior before him, wanted the foundation to play in American corporate society—a leading role capable of creating a broad consensus—that undermined any chance the foundation had of ever being above Cold War goals.
The Cold War was seen as the defense of democracy. “Americans in Europe appear unanimous in the feeling that every possible step must be taken to combat communism,” a foundation internal memorandum stated, but “the U.S. program should not be anti-communist but all out for democracy.” Defending democracy meant helping Europe “get their economies going again—raise their standard of living—and to give them an understanding of democracy and the U.S. so that they can make their own decision between communism and democracy.”16 Out of this grew a concern for shaping mass opinion not only in Europe, but worldwide, even in the United States.
Policymaking—particularly toward Asia—became another imperative of the foundation. In the summer of 1949, the Truman administration appointed Fosdick to a secret fact-finding committee in Asia. Fosdick’s retirement from the foundation the previous year did not negate the foundation’s role in guiding government policy. Fosdick had been chosen precisely because of his career at the foundation and his ongoing ties with the Rockefellers.