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foundation it had inherited operations: Cuba, Guatemala, and Panama.260
In 1926, it bought a Canadian free standing company located in Camaguey,
Cuba, extending its vast operations on that island. By 1929, every small
town in Cuba was electri¬ed, virtually all of them by American & Foreign
Power, and the latter™s gross earnings from its Cuban subsidiaries were
much greater than from its subsidiaries in any other country.261
During 1928, American & Foreign Power acquired the Mexican and
Chilean electric power interests of the English-owned Pearson ¬rm
Whitehall Electric Investments Ltd. and in 1929 (1) the Argentine holdings
of the English free standing company Atlas Light and Power Co. Ltd.,
(2) control of the Canadian free standing company Northern Mexican
Power & Development Co., and (3) a 50 percent interest in the English free
standing company Tata Hydro-Electric Agencies Ltd., Bombay.262
American & Foreign Power not only replaced prior English and
Canadian enterprises, but the American giant also took over the properties
of other U.S. investors. Thus, in 1928 American & Foreign Power acquired
the majority of the outstanding bonds, preferred stock, and common stock
of Mexican Utilities Company, a U.S. holding company that had earlier in
the decade united hydroelectric properties in Mexico, including those in
and adjacent to the states of Guanajuato (including the cities of Leon de los
´
263
Aldama and Celaya) and San Luis Potos±. American & Foreign Power™s
´
Mexican expansion that year swept up electric light and power companies
in Merida, Torreon, Aguascalientes, Saltillo, Durango, Zacatecas, and
´ ´
Mazatlan. By the end of 1928, its operating subsidiaries in Mexico supplied
´
electric light and power (and/or other public utilities) to 89 communities; by
the end of 1929, the number was 108 communities.264
By the end of 1929, American & Foreign Power supplied electric light
and power services to 246 communities in Brazil. That year, its annual
report recorded new concession contracts, new hydroelectric developments,
high-voltage lines, and arrangements to interconnect with the power system
of Brazilian Traction, Light and Power.265 In Argentina, where it had
acquired the properties of Atlas Light and Power as well as numerous other
facilities, its 1929 annual report indicated that ˜˜to permit a proper and
orderly development of power generation and transmission by zones, your
Company has assisted the of¬cers and directors of these properties to work
out a complete corporate reorganization of such Argentine interests . . . .™™
The company™s principal properties in Argentina were reorganized into ¬ve
separate companies, which later came to be called the ANSEC group.266
One of the largest acquisitions of American & Foreign Power was its
takeover of control of the Shanghai Power Company in 1929. This electric
Chapter 4: War, the First Nationalization 185

light and power company was in the International Settlement of Shanghai,
and American & Foreign Power assumed control from the Municipal
Council of the International Settlement. American & Foreign Power
obtained a concession contract that was unlimited in duration (according to
the ¬rm™s annual report); other sources indicate that its monopoly rights
were for forty years, and the Municipal Council reserved the right to
repurchase the plant at the end of the four decades. Local ¬rms and resi-
dents were encouraged to invest in Shanghai Power, which was American
& Foreign Power™s global practice. At the same time as American &
Foreign Power had control and provided the managerial expertise, shares
in Shanghai Power were purchased by investors of British, Chinese, and
Japanese nationalities. American & Foreign Power anticipated a vast
expansion and modernization of the existing facilities.267
The enlargement of American & Foreign Power™s span of in¬‚uence,
especially in 1928“1929, was awesome, as it built new facilities and took
over existing ones. While often its expansion was favorably perceived, in
other instances it was greatly feared. Thus, on January 10, 1929, the
Calcutta Electric Supply Corporation Ltd., London, passed a resolution
designed to bar hostile takeovers by foreign (not British) ¬rms: No more
than 20 percent of issued shares of any class could be controlled by for-
eigners, and all the directors of the company were required to be British
subjects.268 This was designed as protection against a possible move by
American & Foreign Power. In 1929, its Asian expansion was not only to
China but to India (with the aforementioned investment in the Tata
company in Bombay).
By 1929, American & Foreign Power was the largest multinational
enterprise in public utilities. It explained its own procedures: (1) to inves-
tigate and to acquire properties; (2) to rearrange the contractual relations
with the governing authorities so as to open the way to development; (3) to
reorganize the ¬nancial structures of the operating companies to permit
improvements and plant additions at the lowest practicable cost; (4) to
prepare plans for development and construction of new power plant
capacity and modern transmission and distribution systems; (5) to apply the
latest, most modern commercial development to the property, in the pro-
cess selling new electrical merchandise in well-lighted, attractive stores;
(6) to introduce new operating and accounting methods, so as to improve
ef¬ciency while upgrading service and lowering operating costs; and (7) to
involve customers, employees, and the general public in the locale served by
offering preferred stock. It summarized its goals as offering better, less
costly, and more dependable service, while increasing pro¬ts to the com-
pany through larger volume and more hours of service.269
From the start, this had been no easy task. When, for example, American &
Foreign Power took over Whitehall Electric Investments™ holdings in Chile,
the British Pearson group interests in that country had been in numerous
Global Electri¬cation
186

disputes with Chilean governmental authorities. Indeed, when negotiations
had broken down with the municipality of Santiago in 1927, Compan±a ˜´
270
Chilena had worried about expropriation. Yet at the end of the 1920s,
American & Foreign Power was con¬dent that it could make a difference.
By December 31, 1929, it provided light and power to some 755
communities in Latin America and Asia and was very much in a growth
mode.271

conclusions
During the late 1920s, there had been a formidable extension of electri¬-
cation around the globe stimulated by the availability of domestic and
international capital and private-sector economic activities. Webs of
international interrelationships characterized the management and ¬nanc-
ing of the expansion. Direct investments were interwoven with portfolio
ones. Holding companies with cross-ownership were ubiquitous. Canadian-
registered and sometimes -directed ¬rms rationalized prewar companies.
Canadian ¬rms remained as important players in mobilizing money needed
to encourage the international spread of electri¬cation. The Canadian role
was more one of continuity than discontinuity, although there was the
greater use of holding company structures and more sophistication
in international ¬nance, and, in certain cases, Canadians did abdicate to
U.S. corporate expansion. The new involvements of So¬na in the Canadian
story did not materially change the Canadians™ role, for So¬na decentralized
its activities.
After a searing interruption caused by World War I, by the late 1920s
German electrotechnical equipment manufacturers had resumed exporting
and were attempting to reestablish themselves worldwide, but there was
little available German capital; throughout the decade, Germany was an
importer of capital, having become a great debtor nation. Its public utilities
(and its electrotechnical manufacturers) borrowed abroad. Attempts at
revival notwithstanding, Germany™s pre“World War I role as a pioneer in
global electri¬cation had disappeared, although there was not yet a full
awareness of this. The structures that had been set up before the war “ the
once German-dominated So¬na, Elektrobank, and Indelec “ assumed lives
of their own, yet many of the prewar personal networks and relationships
endured. Informal associations often replaced more formal ones, and
toward the end of the decade Germans began to reappear on corporate
boards of companies outside Germany.
Great Britain failed to prosper in the 1920s, and the British global role in
electri¬cation had, if anything, diminished over the postwar years. Great
Britain not only had a relatively backward electrical manufacturing (and
electric utilities) sector, but it had lost its premier position in ¬nance.
Securities issues were ¬‚oated in London; free standing companies persisted,
Chapter 4: War, the First Nationalization 187

operating from Hungary to Malaya (Malaysia) to the Sudan; from a global
perspective, however, British involvement (like that of Germany) had
become far less signi¬cant than in the pre-1914 years. The United Kingdom
was still a creditor nation, yet in Latin America and Canada and even
in Asia, British direct investment was in retreat, challenged by the rise of
U.S. businesses.
From the immediate aftermath of World War I onward, Belgian, Swiss,
and French ¬rms participated in the international spread of electri¬cation,
and there were some new outward Italian corporate involvements abroad.
Among the Belgian ¬rms, So¬na, in particular, took on more importance.
The Japanese had foreign direct investments in electric utilities in Asia,
mainly in Korea and Manchuria.
It was the monumental U.S. outward foreign investments in ¬nance and
in direct investments in electric utilities, however, that captured the spot-
light during the 1920s. At year end 1929, the sector™s most important U.S.
corporate investor, American & Foreign Power™s subsidiaries, had over
47,000 employees, virtually all stationed abroad.272 American & Foreign
Power™s main involvements were in Latin America, where it dominated the
supply of electric light and power. By 1929, it had made giant investments
in China and smaller ones in India. At the end of the decade, outward U.S.
foreign ownership and control in the electric utilities sector were far greater
than before the First World War by every measure: (1) total value,
(2) percentage of U.S. business abroad, and (3) percentage of global
investment in the sector.
While U.S. foreign investments in electric utilities were global, the
strategies and actors were different in different locations. The largest
amount of the U.S. outward foreign direct investments was in the western
hemisphere, from Canada to Argentina. This was supplemented with
additional ¬nance, often arranged by the direct investor. Within Europe,
America™s stakes in foreign electric utilities were widespread, but with the
exception of the giant direct investment interests in the United Kingdom by
Utilities Power and Light Corporation, they tended to be in various forms
of partnership with key European players. Holding companies had direct
investments, typically minority interests. Aside from certain enclave type
investments, there was a marked absence of U.S. direct (or ¬nancial)
investments in Africa. American & Foreign Power was the rare U.S. ¬rm
with direct investments in Asia in electric light and power. Likewise, Japan
was alone in Asia in obtaining large amounts of U.S. ¬nance.
Although by 1929 U.S. international investment in utilities was the
largest, ¬rms such as So¬na were more than minor players. Second only in
size to Electric Bond and Share/American & Foreign Power, So¬na, from its
Brussels head of¬ce, was involved globally in encouraging new electri¬ca-
tion projects. So¬na was the center of a far-¬‚ung business group; its
˜˜ownership™™ as well as its operations were international; its major activities
Global Electri¬cation
188

were in Europe. Its chief executives referred to its ˜˜partners™™ in interna-
tional investments. By decade™s end, So¬na had renewed its associations
with the Berlin-based Gesfurel. In addition, the Belgian-based Empain
¨
group maintained its international business, as did other Belgian-French
connections.
Over the course of the decade, the Canadian outward role in foreign
investments had become more embedded in networks involving European
investors. Canadians were still key international investors in Latin America,
where Americans, British, and Swiss (albeit in a smaller role) “ and to a
lesser extent, Italian entrepreneurship (along with capital) “ were very much
in evidence in ownership of electric utilities. CHADE was technically
Spain™s largest multinational enterprise, with its giant stakes in Argentine
electri¬cation (actually, it is far better seen as part of the So¬na network).
Indeed, for a very brief interval in the late 1920s, to many observers it
seemed that the global economy of the pre-World War I era had been
re-created and that this was re¬‚ected in the growth of electri¬cation. To be
sure, to some extent public-sector involvements were now infringing more
than in earlier times on the rise in foreign direct investments in electric
utilities; new public ownership and new regulations were unquestionably
more in evidence than before World War I. There had been, of course, the
dramatic Soviet takeover of foreign-owned properties during the Russian
Revolution, prior to which time electri¬cation in Russia had been over-
whelmingly by foreign direct investors. From Australia to Finland, pro-
vinces and municipalities had replaced much of the pre“World War I
foreign ownership with domestically run activities. In some countries “ such
as Germany, Italy, and Japan “ there was clearly domestic management of
public utilities, the large foreign ¬nancing notwithstanding. Understanding
what were and what were not foreign direct investments in electric utilities
(and how to consider ownership and control with pyramided holding
companies) became increasingly dif¬cult.
In the new nations carved out of the Austro-Hungarian, German,
Russian, and Ottoman empires, the prewar German interests had to a large
extent been replaced by both the renewal of and the new activities of
Belgian, French, Swiss, Swedish, and, to a lesser extent, British investors. In
Poland, there was sizable interest by American investors. Table 1.4, in
Chapter 1, suggests that in many (but far from all) countries the foreign role
was probably less as sovereign states wanted to set the rules of the game.
But if the dominance, measured in these crude percentages, was smaller, the
size of (the amount of, the quantity of) foreign private-sector involvements
appears to have been far greater.
Overall, while there had been an immense increase in foreign ¬nancing
without foreign direct investments, nonetheless in 1929“1930 multina-
tional enterprises continued to be highly signi¬cant in the spread of elec-
tri¬cation, in the construction of large-scale power stations, and in the
Chapter 4: War, the First Nationalization 189

rationalization of systems. Foreign direct investment was substantial in the
numerous enclaves around the world and in less remote places, where
power-hungry industries made investments. In Latin American urban areas,
¬ve giant companies, owned and run by foreign investors, towered over
markets: American & Foreign Power (with operations in Argentina, Brazil,
Chile, Colombia, Costa Rica, Cuba, Ecuador, Guatemala, Mexico, Panama,
and Venezuela ), Mexican Tramways/Mexican Light and Power Co. Ltd.,
Brazilian Traction, Light and Power Co., CHADE (with Argentine busi-
ness), and International Power Company Ltd. (with operating companies in
Bolivia, British Guiana (Guyana), El Salvador, Mexico, and Venezuela).
In some parts of the world in 1929, inward foreign direct investments
were far more evident than they had been in 1914. This was the case from
Canada, to China, to Great Britain, to Greece. In Canada, the big U.S.
developments at Saguenay made the difference. In China, American &
Foreign Power controlled Shanghai Power, the largest power company in
the entire country. In Great Britain, Utilities Power and Light Corporation
of Europe™s subsidiary the Greater London and Counties Trust, with its
acquisition of Edmundson™s Electricity Corporation, had become a leader
in that nation™s electri¬cation. In Greece, new British and French foreign
investments had laid the groundwork for extensive electri¬cation. In
colonial Africa and Asia, there were new foreign direct investments in
providing light and power, typically, but not always, by ¬rms set up in the
home of the imperial power.
Throughout Europe in 1929, there was a fear of an American invasion
by multinational enterprises. In India, at least one company introduced
˜˜poison pill™™ defenses to prevent a U.S. corporate takeover. Concerns
notwithstanding, worldwide the new ¬nancial structures established in the
1920s, combining multinational enterprises with ¬nance, seemed destined
to create the possibilities of worldwide electri¬cation. Given the many
interconnections, especially among holding companies, was international
consolidation of ˜˜control™™ of a vast global system conceivable?
5

Basic Infrastructure, 1929“1945




On October 24, 1929, and in the weeks following, the stock market crashed
in the United States. There were multiple problems in the workings of the
international economy before the Wall Street crisis. Given America™s pivotal
role in the world economy, its aftermath meant cascading, albeit uneven,
consequences around the globe.1 Initially, however, it did not appear that the
operations and growth of electric utilities would be seriously affected. People
cut back on their electricity consumption very little. The expansion of elec-
tri¬cation in the 1920s had created a global demand for more access to electric
power and added supplies. There was a demonstration effect: As the average
consumer became aware of the comforts that came with electricity and new
ef¬ciencies brought down its price, demand rose on a worldwide basis. To be
sure, electric utilities would incur losses in revenues with the downturn, but
contemporaries assumed that this would be merely temporary and that electric
utility companies were fundamentally sound. Thus, when the prices of utility
securities fell in 1930, along with those of other stocks and bonds, know-
ledgeable foreign investors saw this as an opportunity to buy American public
utility securities on the cheap. The important Swiss holding company Bank fur¨
Elektrische Unternehmungen (Elektrobank), Zurich, for example, made its
very ¬rst U.S. investments in 1930.2 In that year and even in early 1931,
respectively, J. P. Morgan & Co. had no problem arranging to ¬‚oat loans for
Toho Electric Power Company and Taiwan Electric Power Company.3 In
1930, the leading foreign businesses ¬nanced by publicly offered securities in
the United States were those in electric light and power.4 National City Bank “
through National City Company “ had a Rhine-Westphalia Electric Power
Company (RWE) issue of $20 million in March 1930 and another, far smaller
one, $7.5 million, in February 1931. RWE™s impressive new plant at Herdecke
on the Ruhr River, its construction long underway, began operations on


Authors: Mira Wilkins, Harm Schroter, and William J. Hausman.
¨

190
Chapter 5: Basic Infrastructure, 1929“1945 191

January 28, 1930.5 During 1930, Deutsche Bank und Disconto-Gesellschaft
raised its investments in the American ¬rm Public Utility Holding Corporation
(formed in September 1929), as the latter acquired interests in Argentina,
France, Germany, and Luxembourg.6
Indeed, in July 1930 the New York Times commented that the rapid growth
of public utility holding companies in the United States “ Insull, Electric Bond
and Share, and United Corporation, as well as dozens of smaller ones “ had
˜˜exhausted the possibilities of further expansion by consolidation in this
country.™™ The result was, in the newspaper™s view, that leading U.S. utility
executives and investment bankers were ¬nding business abroad more attrac-
tive. Berlin City Electric Company (all of the stock of which was owned by the
city of Berlin) had issued $15 million in sinking funds in April 1930. This was its
third outstanding loan in the U.S. market (the other two were for $20 million in
1926 and $15 million in February 1929), all issued by Dillon, Read & Co.7 This
was pure ¬nance, not foreign direct investment. Yet it was part of what seemed
to be the on-going ability of foreign ¬rms in electric utilities to get U.S. ¬nancing
into 1930, U.S. economic problems notwithstanding. Berlin City Electric and
the earlier mentioned RWE ¬‚otation were ˜˜government-guaranteed™™ loans.8
The New York Times, in its July 1930 story, noted that not only were
American banking groups interested to an unprecedented extent in Euro-
pean utilities, but ˜˜the backward conditions of electric power and light . . .
of most foreign countries leaves room for numerous investment opportu-
nities which American bankers are eager to seize in collaboration with
¬nancial groups abroad.™™ The paper identi¬ed Bonbright, Field Glore,
Harris Forbes, as well as Chase Securities, Guaranty Co., E. Rollins & Sons,
J. G. White & Co., G. L. Ohrstrom & Co., Aldred & Co., and National
City Co., among the clusters of U.S. ¬rms taking part in mid-1930 in
the ¬nancing of electric utilities that operated abroad.9 That July 1930,
Bankers Trust, New York, was preparing plans for a new Superpower
Corporation, which in cooperation with Deutsche Bank und Disconto-
Gesellschaft, would acquire a number of German utilities.10 The concen-
tration so evident in the United States would be further extended.
Not only U.S. bankers and brokers saw opportunities outside the United
States. There were numerous U.S. outward foreign direct investments. In
1930, for the ¬rst time, the Insull group, the Utilities Power and Light
Corporation, and Iowa Southern Utilities invested in Canada. All (except
perhaps Iowa Southern Utilities) had earlier made other outward foreign
direct investments. By far the most important outward U.S. foreign direct
investments in electric utilities in 1930 were those of American & Foreign
Power Company, which obtained signi¬cant new properties in Argentina,
Brazil, Chile, and Venezuela (while at home it borrowed heavily and paid
no dividend on its common stock).11
As in 1928“1929, so in 1930, there were newly organized public utility
holding companies in the United States and Canada, designed for international
Global Electri¬cation
192

business. One was the European Electric Corp. (EElC), incorporated in
Montreal, Canada, on February 3, 1930. EElC acquired substantial holdings
in (1) Societa Adriatica di Elettricita (SADE), the key Italian electricity supply
` `
company headed by Count Giuseppe Volpi; (2) Compagnie Italo-Belge pour
´
Entreprises d™ Electricite et d™Utilite Publique, a Belgian corporation (another
´ ´
unit in the Volpi group), (3) Compagnie Europeenne pour Entreprises
´
´
d™Electricite et d™Utilite Publique (Europel), and (4) Iberian Electric Ltd., a
´ ´
Spanish corporation. The reader will recall from Chapter 4 that Volpi had
been involved in obtaining substantial sums in the U.S. market for Italian
public utilities. He ¬gures as an important individual in the overlapping net-
works of ¬nance. By 1929“1930, he had his own cluster of companies. His
new Canadian holding company (EElC) had minority interests in electric
utilities in Austria, Germany, Greece, Italy, Poland, and Spain. Initially, EElC
announced that it anticipated its income would be derived from investments,
but it explained that it was ˜˜expected that as the activities of the company and
its subsidiaries increased, income from the supervisory and engineering con-
tracts and from commissions and fees incident to the ¬nancing and develop-
ment will form an increasing part of the company™s total revenue.™™ Volpi was
president of EElC. Directors included Marshall Field (investment banker and
grandson of the namesake Chicago retailer), Giovanni Fummi (Morgan™s
representative in Italy), C. H. Minor (of International General Electric), and
S. Z. Mitchell (chairman of the board of American & Foreign Power). EElC
immediately had a debenture issue of $12.9 million, offered at par by Bonb-
right, Field Glore, and Banca Commerciale Italiana Trust Co. (New York).
The last-named company was a subsidiary of the Italian bank BCI. Even
though EElC was Canadian-registered, the interest on its debentures was to
be paid in U.S. gold coin at the of¬ce or agency of the EElC in New York.
Its Canadian registration notwithstanding, EElC was essentially an Italian-
sponsored U.S. ¬‚otation. The individuals involved were those participating
in the U.S. ¬nancing of the Italian electrical industry in the 1920s (see
Chapter 4).12 Volpi joined the board of directors of Societe Financiere de
´´ `
Transports et d™Entreprises Industrielles (So¬na) in 1930; in a reciprocal
manner, Dannie Heineman of So¬na was elected to the board of Volpi™s
Italian utility Societa Adriatica di Elettricita (SADE).13
` `
Harold James has argued that the ˜˜depression™™ did not cross over the
Atlantic from the United States to Europe until 1931; and if we consider
electric utilities, this seems evident.14 In 1930, for example, the Pearson
group (Whitehall Securities/Whitehall Electric) in England had no qualms
about making sizable new investments that would enable Greek electri¬-
cation to expand and in the process give the Pearson group control over the
Athens Piraeus Electricity Company Ltd. In addition, in December 1928
Fuerzas Motrices del Valle de Lecrin SA had been established in Spain to
construct a large hydroelectric plant in the province of Almer±a. The con-
´
tract for the work had been awarded to a Spanish company that was then
Chapter 5: Basic Infrastructure, 1929“1945 193

unable to complete the project. Thus, in December 1930 the Pearson group
obtained 91 percent of the share capital of this enterprise, with the goal of
stepping into the breech.15 The Pearson group also continued negotiations
for other large projects “ for example, in Belgrade, Yugoslavia.16
Remember that the Pearsons had sold out to American & Foreign Power in
Mexico and Chile and had both resources and experience to develop
activities elsewhere.
In 1930, the British & International Utilities Ltd. (BIU), a corporation
with plans to acquire stocks in utilities in the British Isles and the British
Empire, was registered in England; control was shared by (1) Compagnie
´
Italo-Belge pour Entreprises d™Electricite et d™Utilite Publique (Italo-Belge) “
´ ´
we have noted its participation a few months earlier in the formation of
European Electric Corp. “ and (2) Dawnay, Day & Co. Ltd., a new London
issuing house. Volpi was chairman, and Lord Barnby of Lloyds Bank and the
Earl of Westmoreland decorated the BIU board.17 Earlier, a leading British
engineer, Borlase Mathews, had obtained a franchise for a rural area in
Lincolnshire that seemed to have great potential for bulk supply of electricity
when the local grid lines had been constructed. When in 1931 Mathews
found it dif¬cult to raise money, he turned to the newly formed BIU, which
took advantage of the opportunity. BIU (with its sister companies Italo-Belge
and EElC) would in time extend its control to four other British power
projects in Altrincham, Windermere, Thurso, and Campbell. These were
relatively small investments, but they were indicative of the continuing inter-
national involvements and the continuing entrepreneurial role of Volpi.18
The French Durand group made new plans in 1930 for electrical
developments in Constanta, a port city on the Black Sea in Romania.19
Other ¬rms explored more possibilities for electrical developments in
Central and Eastern Europe. This was the case even as Harriman™s grand
plans for Poland “ indicated in Chapter 4 “ were being rejected by the
Polish government. The new Swedish holding company Electro-Invest
(formed in 1929) acquired concessions in Latvia, Poland, Romania, and
Yugoslavia.20 In Belgium in 1930, the reorganizations of the late 1920s
took on new clarity: Societe Generale de Belgique, Brussels, arranged a
´´ ´ ´
secret agreement between So¬na and Electrobel to ˜˜demarcate their
respective zones of in¬‚uence.™™21 There were continuing attempts to ratio-
nalize the business in electric utilities, with Societe Generale assuming an
´´ ´ ´
ever larger role. The rivalry between Banque de Bruxelles and Societe ´´
Generale seemed to be resolved in the latter™s favor. According to Rene
´´ ´´
Brion, from 1931 So¬na and Electrobel would be jointly managed through
the association between So¬na and Societe Generale.22 After the elections in
´´ ´ ´
Egypt in January 1930, temporarily dormant negotiations between the
Empain group and the Egyptian government on the Shubra power plant in
Cairo were revived, and the Empain group would defeat its British/Belgian
and British/German competitors in the Egyptian contest for contracts.23
Global Electri¬cation
194

During 1930, American bankers were reported to be increasingly active
in the ˜˜Heineman-Oliven utility groups of Belgium and Germany, which,
headed by So¬na and Gesfurel [Gesellschaft fur Elektrische Unterneh-
¨ ¨
mungen], [had] electric power holdings throughout the world.™™ Dannie
Heineman (of So¬na) and his long-time friend Oscar Oliven (of AEG and
the German holding company Gesfurel) were putting forward plans for the
¨
rationalization of electric utilities throughout Europe with a connecting
grid.24 Heineman and Oliven had dreams of a united Europe. Their plans,
which seem to have taken shape in late 1929, were made public by Oliven
in Berlin in June 1930 at the Second World Power Conference. In Cologne
on November 28, 1930, and in Barcelona on December 2, 1930, Heineman
(who described himself as an ˜˜engineer™™) gave a presentation titled ˜˜Out-
line of a New Europe,™™ the text of which was published in 1931 in English
as well as in French and German. Heineman and Oliven envisaged a Europe
united by an electrical grid that crossed national borders. These two engi-
neers, with their access to ¬nancial and managerial resources, would par-
ticipate in creating a new Europe. There would be three North“South
transmission lines and two East“West ones: The North“South lines would
go: (1) Oslo“Hamburg“Berlin“Zurich“Genoa“Rome, (2) Calais“Paris“
Lyon“Lisbon, and (3) Warsaw“Vienna“the Dalmatian coast across from
Italy. The East“West lines, which intersected with the North“South lines,




map 5.1. The Project Heineman-Oliven
Source: Adapted by the authors from Rene Brion, ˜˜Le Role de la So¬na,™™ in Monique Trede-
´ ˆ ´´
´
Boulmer, ed., Le Financement de l™Industrie Electrique, 1880“1980 (Paris: PUF, 1994), 229.
Chapter 5: Basic Infrastructure, 1929“1945 195

would extend from (l) Katowice (Poland) to Berlin“Calais, connecting to
Paris, and 2. Rostov (Russia) to Budapest“Vienna“Lyon, connecting to
Lisbon.25
From Katowice to Lisbon, So¬na and/or AEG (directly or indirectly) had
a tranche in the electricity supply companies.26 The plans for a united
European energy market were remarkable. Heineman™s vision, in Outline
of a New Europe, was even broader. He called for a ˜˜Europe, organized by
statesmen, who with the co-operation of industrialists and business-men
strive to attain economic ends by technical means,™™ ˜˜a banking organiza-
tion which, by careful utilisation of the gold reserves, assures the still
precarious stability of many European currencies. . . . ,™™ and a European
customs union. European unity rested on ˜˜three pillars, the ¬rst technical,
the second administrative, the third ¬nancial.™™ Heineman said, ˜˜Federation
is a necessity for Europe; it is bound to come.™™27

1931
Robert Kindersley, who published an article in The Economic Journal in
September 1931 on British overseas investments in 1928 and 1929, never
mentioned the 1929 U.S. stock market crash.28 To be sure, there is always a
time lag with publications in academic journals. September 1931 was when
the United Kingdom ¬nally abandoned its gold-backed pound. By then, the
problems of the U.S. economy had engulfed Britain as well as the European
continent. Remarkably, it was not until Kindersley™s annual survey of
British overseas investments for 1930, published in June 1932, that he
acknowledged retrospectively that the close of 1929 ˜˜saw the beginning of
a severe slump in the Stock and other markets, accompanied by the liqui-
dation of international and other securities on a large scale.™™29
It was well over a year into the crisis before there came to be a worldwide
awareness that the U.S. downturn was not an ordinary business cycle and
that the entire international economy was at risk. The vision of Heineman
and Oliven for a Europe united by electrical facilities across borders went
unrealized. Technologically, it was entirely feasible, but it was an impossible
dream, both economically (¬nancial resources dried up) and politically
(governments were turning increasingly to cope with purely domestic dif¬-
culties). Indeed, by the time Heineman™s 1930 presentations were in print, in
1931, they were ˜˜dead on arrival.™™30
By the spring of 1931, it was unmistakable: There was a worldwide
economic disaster. Capital ¬‚ows from creditor nations (as measured by the
balances on current account, gold, and foreign currency) plummeted from a
high of $1,980 million in 1928 to a low of $510 million in 1930; ˜˜creditor™™
nations became net importers of capital by these measures.31 There was by the
spring of 1931 an awakening globally to how bad the situation was: Every-
where, banks were failing. The capital-intensive public utilities sector had
Global Electri¬cation
196

relied heavily on renewals of ¬nancing from sources outside the operating
¬rms. When the funding stopped, plans made could not be pursued.
As for Britain, Kindersley himself and his ¬rm, Lazard Brothers, were in
trouble by the summer of 1931. In July 1931, Kindersley, who was a
director of the Bank of England, had gone to that bank with a plea for
˜˜rescue.™™ Precipitating the problem was fraud at Lazard™s Brussels of¬ce.
Kindersley told the governor of the Bank of England that although help
from S. Pearson & Son and Lazard™s French parent house could be
expected, it would be inadequate. (The reader will recall, Lazard Brothers
was half owned by the former and half by Lazard Freres, Paris; Kindersley
`
as chairman of the British Lazard house was acting on behalf of S. Pearson
& Son.) The Bank of England stepped in and lent £3.5 million (ca. $17
million), not directly to Lazards but to S. Pearson & Son, which put the
money at the disposal of its af¬liate. And then, in May 1932, Lazards again
had to be bailed out by the Bank of England (and the National Provincial
Bank), this time to ˜˜the tune of™™ £2 million (ca. $6.8 million, after the
devaluation of the pound).32 According to Ioanna Pepelasis Minoglou, ˜˜in
1931 . . . with the intervention of the British government, the Whitehall
Securities Corporation [an S. Pearson & Son af¬liate] provided advances
amounting to £2,000,000, thus enabling its [Athens electric power] sub-
sidiary to bypass the foreign exchange shortage during the world ¬nancial
crisis.™™33 Was some of the £3.5 million loaned by the Bank of England to
Pearson in 1931 devoted to that purpose? Probably. Our readers will recall
from Chapter 4 that in 1926 Prudential Assurance had made a £2 million
loan to the Athens company, guaranteed by the British Treasury.
Early in 1931, Dudley Docker reactivated his project proposal for
Egyptian electrical developments, pressing the British Foreign Of¬ce for
aid, in vain. In February, the British government™s response was that such
˜˜super schemes for electric power development are so gigantic that we must
walk delicately.™™ At the end of March, Bernard Docker (Dudley™s son) had
arrived in Cairo, and London learned in May that Bernard had ˜˜ ˜nobbled
the principal potential customers of [electric] current™ and was trying ˜to
absorb the existing concessionary companies.™ ™™ He was not successful in
the big Aswan Dam project.34
The Italian electrical industry, which had depended on a steady stream of
U.S. ¬nance, faced major distress. By mid-1930 in Italy there was already a
profound awareness that this was no ordinary downturn. In June 1930,
Banca Commerciale Italiana had made plans to separate its banking from
its industrial operations, which were to be transferred to its subsidiary
Societa Finanziaria Industriale Italiana (So¬ndit). In 1931, the electrical
`
sector had dif¬culty in meeting its obligations.35 The Italian economy was
in peril.
When the Berlin City Electric Co. was in dif¬culty in March 1931,
depression conditions notwithstanding, Heineman of So¬na stepped in and
Chapter 5: Basic Infrastructure, 1929“1945 197

arranged U.S. and other ¬nancing. Under the conditions of the loan, a new
company “ Berliner Kraft und Licht (Bewag) AG “ was established in May
1931 to acquire from the city of Berlin the city owned plants and the leases
of Berlin City Electric Co. Oliven became a vice chairman of the new
venture.36
After the Creditanstalt crisis in May 1931, there was a run on German
banks, and U.S. banks got nervous. The very banks with the broadest
international banking contacts were those most involved in electric utility
¬nance, domestically and internationally. The June 1931 Hoover Mora-
torium on reparations (affecting inter-Allied debt payments) was designed
to deal with public (intergovernmental) debts, not private ones. Bankers
insisted that there should be no moratorium on private obligations; and
while there was none, that did not deter defaults. Borrowers stopped paying
interest. Foreign bond prices depreciated sharply. This was true of corpo-
rate as well as government bonds. The problems that U.S. and U.K. lenders
faced were not only in Europe; the crisis extended to Latin America, too,
where countries put new restrictions on foreign remittances. On December
1, 1931, for example, interest on its debt was not paid by Intercontinents
Power Co. That U.S. holding company “ set up in the boom year 1928 to
raise money for South American investments, which had had a $3 million
debenture issue in 1930 “ explained that it was defaulting on its interest
payments because with the ˜˜sharp declines in exchange values of curren-
cies™™ in Argentina and Brazil, ˜˜together with the necessity of providing
locally for ¬xed capital expenditures from earnings . . . made it impossible
for funds to be paid by [its] subsidiaries to Intercontinents Power. In
Chile, . . . prohibitions on the transfer of money from that country have been
in effect.™™37
In Asia, the 1931 Japanese invasion of Manchuria was the ¬rst step in
aggression that would ultimately lead to World War II. The following year,
the Japanese action in Shanghai in 1932 frightened lenders. There were no
Japanese defaults, but from 1932 until the end of the decade no new money
from abroad would be forthcoming. Japanese electric utilities, as we have
seen, had been giant borrowers in the late 1920s.38

1932
In 1932 came the fall of the vast Insull empire. All through 1930 and 1931,
with the shaky economy in the United States, the Insull investments in
public utilities had seemed to the public to be a bulwark. The Insull collapse
was caused in part by the group™s inability to get additional domestic or
international ¬nancing to re¬nance its debt.39 By 1932, electric utilities
everywhere were swept up in the worldwide ¬nancial maelstrom. The
¬nancial architecture (the pyramided structures and business groups) that
had been so successful in drawing in money to new endeavors was
Global Electri¬cation
198

vulnerable under the altered conditions. With Insull™s defaults, nothing
seemed safe any longer. In the United States, the holding company edi¬ce
became a target for government investigators and critics of the nation™s
˜˜capitalist™™ institutions. Everywhere around the globe, economic problems
escalated. Countries cried out for banking reform. Yet throughout, the
basic demand for electri¬cation persisted. Financial crises notwithstanding,
customers still required electric power, for electricity was no longer a
luxury “ it had become a necessity.40
The Public Utility Holding Corporation (PUHC), formed in the United
States in 1929 and expanding in 1930“1931, had acquired a one-third
´
interest in the French utility Union Electrique Rurale, which in 1932 PUHC
sold off to the French Durand group. In Germany, PUHC had obtained
securities convertible into a one-half interest in the voting stock of the
important utility Vereinigte Elektrizitatswerke Westfalen GmbH (West-
¨
phalia United Electric Corporation), Dortmund. In 1932, it seems to have
traded that stock for the German bank holdings in PUHC. Thus, by 1933
PUHC had divested both of these French and German investments.41
Chicago-based promoter Harley Clarke, who had engaged in a sub-
stantial amount of pyramiding in the 1920s and in 1930, was involved with
General Theaters Equipment Inc. and Fox Film; their defaults were linked
with the ¬nancial excesses of the 1920s. Clarke™s Utilities Power and Light
Corporation (UPLC), at the height of its glory in 1930, was serving 488
communities in Britain through subsidiaries of Greater London and
Counties Trust (GLCT)-Edmundson™s and 587 more communities in the
United States and Canada through other subsidiaries. By 1932, control of
UPLC was held by the holding company Public Utilities Securities Corpo-
ration (Pusco). On top of Pusco was another holding company, which in
turn was controlled by Clarke “ and this hierarchical structure encountered
grave ¬nancial woes. While the British would have liked to have had greater
equity participation in GLCT, the American owners desired to keep control
(this was a direct investment), and thus they sought out borrowings (British
¬xed-interest capital) to meet the group™s ¬nancial requirements.42 It was
not atypical for multinational enterprises to assemble capital wherever it
was available. Throughout the worst years of the early 1930s, UPLC™s
management kept the holding company alive and maintained control over
its sizable British properties, as well as its Canadian acquisitions.43

american & foreign power co., 1929“1932
In the contextof the worldwide economic crisis, it is useful to trace the
experiences of one of the largest multinational enterprises in electric utili-
ties, American & Foreign Power Co., which by year end 1929 operated in
thirteen foreign countries, eleven in Latin America and two in Asia (China
and India). In many ways, its experience mirrored the overall story. The
Chapter 5: Basic Infrastructure, 1929“1945 199

company™s annual report for 1929 (dated May 20, 1930) re¬‚ected some of
the burgeoning economic distress, but there was no mention of the U.S.
stock market crash. American & Foreign Power™s expansion momentum
seemed to be moving forward, with new acquisitions made after October
1929. In March 1930, American & Foreign Power was able to sell to a
bankers™ syndicate $50 million of gold debentures, 5 percent series due
2030; it also sold to its parent, Electric Bond and Share, $20 million of
twenty-year 6 percent debenture bonds of Compan±a Cubana de Elec-
˜´
tricidad, one of its many underlying operating companies. The proceeds
from these two transactions were then used to pay the indebtedness of
American & Foreign Power “ as shown on its December 31, 1929, balance
sheet “ and also to provide extra working capital.44 American & Foreign
Power took advantage of its own well-established network relationships to
obtain the outside ¬nancing. Its 1929 annual report discussed the depressed
business conditions in Cuba, where American & Foreign Power had huge
investments; but the company did not stop its on-going expansion there.
The report also noted the worldwide drop in commodity prices, which
˜˜affected business conditions in many of the countries served during the last
two months of 1929.™™45
American & Foreign Power™s annual report of 1930 (dated June 12,
1931) revealed that the company™s operating revenues had grown when
compared with 1929 revenues, but so had its operating costs “ and much
faster. Foreign exchange problems in the markets of the af¬liates of
American & Foreign Power were escalating, causing earnings, when
translated into U.S. dollars, to plummet. The most serious depreciations in
currencies were in Argentina, Brazil, and China, where American & Foreign
Power had major operations. Despite these dif¬culties, during 1930 the
company had maintained its expansion, even more so than in 1929, carrying
out planned construction for new, principally hydroelectric power plants and
building and rebuilding distribution systems.46 Its initial (1929) operations in
India were enlarged with the acquisition of majority interest in United
Eastern Agencies Ltd. of Bombay. A minority of the stock in United Eastern
was owned by prominent Indians living in Bombay, some of whom also
participated with American & Foreign Power in Tata Hydro-Electric
Agencies Ltd.47 United Eastern Agencies was the managing agent for the
operating companies that supplied light and power to Poona, Broach, and
Karachi.48 During 1930, American & Foreign Power reorganized its
subsidiaries in Argentina, rationalizing the corporate structure of its by now
very large “ and dispersed “ operations.49 In Brazil, Chile, Colombia, Cuba,
Mexico, and Venezuela, American & Foreign Power bought new companies
and properties.50 And to ¬nance its expansion, American & Foreign Power
issued additional bonds.51
American & Foreign Power realized that if it was going to be successful
in developing electric utilities, it would be wise to involve citizens of the
Global Electri¬cation
200

host countries. Its 1930 annual report read: ˜˜In whatever country your
Company may engage in business its ¬xed policy is to co-operate with the
nationals of that country for the better development of the country, to
foster its industries and to add to and improve the conveniences of the
home. As a part of this policy the properties are operated to the fullest
extent practicable by the nationals of the country.™™ The annual report
explained that ˜˜nationals™™ were trained to carry on the business activities in
an ef¬cient manner, following company policies. Of the total number of
individuals that American & Foreign Power employed, about 85 percent
were nationals of the countries where the operations took place; about
15 percent were nationals of other countries; and less than 1 percent were
U.S. citizens.52 Where possible, American & Foreign Power also encouraged
the participation of local capital, without, however, sacri¬cing ˜˜control.™™
American & Foreign Power™s annual report for 1931 (dated June 15,
1932) turned gloomy, re¬‚ecting the bleak outlook in the global economy.53
Currency depreciations in the countries that the company and its af¬liates
operated were taking their toll. While revenues were up in local currencies,
they were down 17 percent when translated into dollars. Some dividend
payments on American & Foreign Power™s stock (it had various classes of
preferred and common stock) had been suspended in 1930 and 1931, and
more were suspended in April 1932.54 Its annual report for 1931 and 1932
(the latter dated September 15, 1933) surveyed the sorry conditions in Latin
America, China, and India “ the ˜˜derangement of foreign exchange.™™55 By
the end of 1932, about 64 percent of American & Foreign Power™s af¬li-
ates™ income was ˜˜subject to of¬cial regulations [within host countries]
restricting conversion into United States currency.™™56 The dismal ¬nancial
situation notwithstanding, the company continued to invest in additions to
properties, but on a much more constrained basis.57

1933“1939
England had gone off the gold standard in September 1931. While this
meant its exports were more appropriately priced, worldwide demand had
dropped. New barriers to trade proliferated. Britain turned inward, looking
to the problems at home. The United States would abandon the gold
standard in 1933. It had had larger foreign lending in the 1920s than any
country, and by 1933 defaults were adding up. There were perils to being a
creditor nation. Congressional (and then after 1934, the Securities and
Exchange Commission) investigations of investment bankers paid special
attention to the electric utilities sector; there were heightened concerns
about the vulnerability in the ¬nancial architecture that had emerged in the
1920s.58 Germany, as it sought to rebuild its fractured economy, turned
inward to national needs, and often there were defaults on the borrowings “
governmental and corporate. On June 9, 1933, the German (now Nazi)
Chapter 5: Basic Infrastructure, 1929“1945 201

government passed legislation allowing the suspension of payments on
contractual obligations.59 The world economy was in shambles.
President Franklin D. Roosevelt had taken of¬ce in the United States in
March 1933, following his promise to the American people of a New Deal.
Roosevelt had long been an advocate of public power, and public versus
private power had been a major issue in his presidential campaign. In May
1933, Roosevelt signed an act creating the Tennessee Valley Authority
(TVA), a federal power and development project, which would become one
of the largest power producers in the United States.60 In 1935, the Rural
Electri¬cation Administration was started to provide subsidized govern-
ment loans and to encourage cooperative utilities, aiming to bring electri-
¬cation to rural America. The Roosevelt administration did not look kindly
on the pyramiding by public utilities, and after extensive debate in 1935 the
Public Utility Holding Company Act (PUHCA) was enacted, seeking to
cope with the seeming abuses. The act gave primary jurisdiction over utility
holding company ¬nances and operations to the just established (in 1934)
Securities and Exchange Commission (SEC). The act also contained the
famous ˜˜death sentence,™™ which limited (with a few exceptions, including “
important for our purposes “ foreign-owned subsidiaries) a utility holding
company to ownership of a single integrated public utility system. For much
of the rest of the decade, U.S. public utilities tried to get clari¬cation of the
extent of applicability of the PUHCA. In addition, the U.S. Congress passed
legislation setting up a ¬rewall between commercial and investment
banking (the Glass Steagall Act of 1933) and took steps not conducive to
corporations™ expansion, at home or abroad.
Meanwhile, U.S. capital markets dried up. The British increased domestic
investments at the expense of international ones. There was no money for
international ¬nance in general nor for public utilities in particular, which
required immense outlays of capital. Companies in Canada, Germany, Italy,
and Japan, which had been especially large borrowers for electric utilities,
faced straitened circumstances. Canadian ¬rms weathered the problems,
managing to keep current on interest payments. It helped that much of the
borrowing was associated with foreign direct investors. Of the German
corporate dollar loans outstanding in 1935 (totaling $485 million), virtually
all were in default as to interest.61 We do not know what percentage of these
corporate loans were for electric utilities, although German electric utilities
(many of which were in the 1920s and 1930s completely or partly govern-
ment-owned and where the loans may have been classi¬ed as government
rather than corporate) had raised money on the U.S. market and now were
unable to pay interest on those borrowings. The Bankers™ Trust planned
Superpower Corporation (referred to above as part of the momentum of
1930) never materialized, so there was no U.S.-based holding company
structure playing a signi¬cant role as foreign direct investors in the German
electric utilities sector. Individual Americans (and some holding companies)
Global Electri¬cation
202

who did own German securities tried to extricate themselves from their
German holdings, but the German government imposed stringent controls on
capital out¬‚ows (the 1933 suspension of interest payments was extended),
which meant for foreigners not only losses on interest but no means to
withdraw their investments.62
Increasingly, German companies with business in utilities abroad had to
justify them to the German government or, alternatively, had to develop
various means to cloak those investments.63 When the crisis came, German
foreign stakes in utilities had been small, and by the end of the 1920s had been
more for information purposes than otherwise. As we have noted, the con-
siderable expansion abroad by Siemens and AEG in the late 1920s and into
1930 “ in exporting, sales of¬ces, technical service of¬ces, and manufacturing “
did not have its counterpart in investments in public utilities (and also, in
general, did not involve big sums). Even so, in 1933 Reichbank president
Hjalmar Schacht advised large German corporations to shelter their foreign
assets from attachment. To the surprise of Siemens™s ¬nance chief, Max Haller,
his counterpart at AEG had already taken such steps.64 Particularly in Eastern
Europe, the Germans had interests, mostly indirect ones, in electric utilities.
Gesellschaft fur Elektrische Unternehmungen (Gesfurel), the Berlin
¨ ¨
holding company associated with AEG, divested some of its attempted
post“World War I“ revived activities; and probably for safety reasons (and
to avoid German nationalistic controls), in 1935 it transferred its holdings
in CHADE, for example, to a Swiss subsidiary. It seems to have kept its only
substantial foreign direct investment in a Hungarian utility (as well as a
minor stake in Sidro, which re¬‚ected its relationship with the So¬na/Sidro
group). At some point in the 1930s, according to one source, So¬na acquired
a majority interest in Gesfurel.65 It is likely that Gesfurel got approval from
¨ ¨
the German government to continue its holdings in Hungary.66
The rise of Hitler had more personal impacts: Oliven (who was in charge
of Gesfurel™s international and domestic activities) and Heineman (of
¨
So¬na) were both Jewish. In 1933, Oliven ¬‚ed to Zurich, where he died in
1939. (While in Zurich, he may well have had in¬‚uence on Gesfurel™s ¨
activities from a distance.) He was removed from the board of Berliner
Kraft und Licht (Bewag), AG. Heineman was an American citizen, living in
Belgium for many years, and until 1938 German anti-Semitism did not
seriously affect him. However, he worked to avoid having Gesfurel ¨
completely absorbed into the more Nazi¬ed AEG. And naturally, German
nationalism and the rise of Nazism repelled him and thwarted his inter-
national aspirations (and negatively affected the So¬na balance sheet). In
1937, Bewag was incorporated into the Hermann Goring Werke.67
¨
In Yugoslavia, the Swiss holding company Elektrowerte, Basel main-
tained its interest in power facilities. For business in Bulgaria, there was the
Swiss company AG fur Elektrische und Industrielle Unternehmungen
¨
im Orient. It did not fare well, and in 1937 it cut down its capital by
Chapter 5: Basic Infrastructure, 1929“1945 203

90 percent.68 At the same time, the Bank fur Elektrische Unternehmungen
¨
(Elektrobank), Zurich slowly reduced its interest in German utilities that it
had held over the years. One could almost describe these interests by the
1930s as ˜˜round-tripping.™™ AEG appears to have continued its small
interests in Elektrobank; but Elektrobank™s interests in German utilities do
not appear to have had any characteristics of Swiss direct investments.69
Elektrobank™s portfolio of securities was diversi¬ed within Europe and in
the United States.70 The dominant in¬‚uence in that Swiss holding company
appears to have been Credit Suisse. By 1938“1939, the geographic distri-
bution of Elektrobank™s assets was as follows: United States (24.5 percent),
Switzerland (17.2 percent), Italy (14.6 percent), France (13.3 percent),
Germany (7.5 percent), Spain and Portugal (6.6 percent), South America
(6.1 percent), other countries (10.2 percent).71 The ˜˜other countries™™ stakes
seem to have included direct investments in Hungary.72 The sizable
investment of Elektrobank in the United States came to be associated with
the sheltering of assets.73 The U.S. stakes were all portfolio investments.
Historically, Elektrobank, Zurich, had been associated with AEG, while
Schweizerische Gesellschaft fur Elektrische Industrie (Indelec), Basel, had
¨
been tied in with Siemens. During the 1930s, Siemens “ in sales and
manufacturing “ enlarged its international business, and Indelec provided
short-term credits. Indelec™s key bank connection continued to be with Basler
Handelsbank, although Swiss Bank Corporation, Basel was also involved. As
for long-term investments in electric utilities, by 1938“1939 Indelec had a far
smaller portfolio of securities than Elektrobank. It seems to have kept a
number of its long-standing interests in Italy, but it did not enlarge these
stakes. As Siemens had expanded in Eastern Europe, Indelec had played a role
in Poland and Czechoslovakia. The composition of its portfolio in 1938“1939
was: Italy (30.7 percent), Germany and Czechoslovakia (28.0 percent),
Switzerland (21.0 percent), France (11.0 percent), Poland (6.5 percent) and
Luxembourg (1.9 percent). (Germany and Czechoslovakia are put in one
category, because after the Munich agreement in September 1938, the
Germans had absorbed much of Czechoslovakia.) The French investments
were with the Mercier and Durant groups; So¬na also was involved. Indelec™s
main French interests were in Alsace, which had been German before World
War I.74
During the 1930s, Belgian holding companies maintained their role “ as
in earlier years, overlapping with Swiss companies. But the Belgian pattern
was different. After the First World War, the Germans were not welcome to
use Belgian intermediaries. And, while in 1930“1931, as noted above, there
had been a close relationship between Heineman and Oliven, the Belgian
story in the 1930s diverged from the German one. We will return with more
details on the Belgian holding companies; but before we do so, we need to
look more closely at what was happening to the other principal corporate
borrowers in the electric utilities sector.
Global Electri¬cation
204

If Canadian utilities had been the top borrowers in the 1920s and
German utilities probably in second place, Japanese electric utilities prob-
ably ranked third. In the 1930s, as Japan moved from a civilian to a military
economy, Japanese-government subsidized electri¬cation went forward.
The Japanese utilities paid their debts throughout the decade without
default. Yet no new money came from England or the United States.75 The
Japanese had never had inward direct investments in their electric utilities.
As the Japanese took over Manchuria (and established Manchukuo),
electri¬cation went forth along the Japanese-owned South Manchuria
Railway. During the 1930s, electri¬cation in Taiwan and Korea, under
Japanese direction, also went forward. The Japanese felt that electri¬cation
at home and in their colonial territories was essential; they had no tech-
nological or managerial constraints in proceeding; and they managed with
government assistance to mobilize adequate funding.
Italy, as we have seen, had been the object of much foreign capital (direct
and portfolio investments) over many decades. In Italy, as foreign (and
domestic bank) investors failed to provide the added capital needed to
continue the large-scale electri¬cation projects embarked on in the 1920s,
the state substituted. IRI (Istituto per la Ricostruzione Industriale) was
formed in 1933 to take over the industrial securities of Banca Commerciale
Italiana and Credito Italiano (actually of the holding companies set up by
these two key Italian banks), planning to sell industrial securities to private
parties and to loan, long-term, to Italian companies adversely affected by
the economic crisis. In 1937, IRI™s status became permanent, as it could not
¬nd buyers for the industrial securities. IRI came to play a major role in
Italian electri¬cation, ¬lling in for the lack of portfolio and direct invest-
ments from outside Italy. Indeed, by the late 1930s “ even after IRI returned
to the Edison company the securities that it had acquired from it “ some
27 percent of electric energy output in Italy remained under IRI control.
The rest stayed in the private sector, dominated by Italian entrepreneurs. By
the late 1930s, there was little that approximated foreign control of the
major companies in the Italian electricity supply sector.76 Indeed, in a 1936
study of U.S. direct investments abroad published in 1938, U.S. investments
in Italian public utilities that were ˜˜previously carried as direct investments
in the amount of $66 million™™ were reclassi¬ed by the U.S. Commerce
Department as portfolio investments.77
The two sizable U.S. holding companies that we described in detail in
Chapter 4 “ International Power Securities Corporation (IPSC) and Italian
Superpower Corporation “ lasted through the 1930s, but they took on
different attributes. The former (John Aldred™s company) at year end 1929
was the larger of the two, with assets of $43.7 million; at year end 1937, it
was the lesser one, with assets reduced to $28.8 million. As for Italian
Superpower, it also was smaller at year end 1937 than in 1929 (1929 assets
$38.9 million; 1937, $31.9 million). At the close of 1937, Italian Superpower
Chapter 5: Basic Infrastructure, 1929“1945 205

still owned shares in a number of Italian utilities; the voting shares of Italian
Superpower continued to be jointly Italian-U.S. owned, now 50 percent by
IRI and 50 percent by Floyd Odlum™s Atlas Corporation (see below).78
As for Aldred™s company, International Power Securities, at the end of
1937 it had no Italian or French of¬cers or directors. In addition, it had no
subsidiaries. Over the years, it sold off assets. By the end of 1937, it no
longer had any interests in French public utility ¬nance. As of September
30, 1938, it owned 4,500 shares of the Italian Edison company (compared
with the 60,000 shares in its portfolio as of September 30, 1929), and it had
shares in several Canadian public utilities, but not suf¬cient interests to
exercise control. Its principal holdings were its own bonds, issued in
December 1925 and January and February 1927; these were direct obli-
gations of IPSC, secured by mortgages on key Italian hydroelectric facili-
ties.79 There was no new money going from the United States (or the United
Kingdom) to the Italian (or to the French) electric utilities industry.
The private-sector Italian outward direct investments in electric utilities in
the United Kingdom were retained (we will say more about them shortly).
These, as in the case of other outward Italian foreign direct investments
(except those within the empire) were not through companies registered in
Italy. By 1938, some of the Italian outward investments seemed clustered
under Italo-Belge (or CIBEE), the Belgian holding company dominated by
Volpi, which described itself as ˜˜engaged chie¬‚y in the engineering and
construction ¬eld for which work it has had at its disposal the engineering
staff™™ of Volpi™s Italian company SADE. In 1938, its subsidiary and af¬liated
companies were in Greece and Romania, while its British interests had been
transferred to other sister companies, but it played a ˜˜supervisory role.™™80 In
addition, certain Italian outward investments seem to have been through
Canadian intermediaries. Other outward Italian investments, those in Latin
America (jointly with the Swiss holding company Motor-Columbus) con-
tinued during the 1930s. And then there were the relatively small outward
Italian investments in electric utilities within the Italian empire (principally in
North Africa).
The Swiss ¬rm Motor-Columbus, Baden, which had been highly
entrepreneurial in the 1920s, had a dif¬cult 1930s. It had cut back its
dividend in 1930“1931 and then stopped paying dividends. In 1935“1936,
it divested its sizable interests in Societa Meridionale di Elettricita (Meri-
` `
dionale or SEM) and some other Italian utilities. It concentrated more of its
activities within Switzerland. In 1936, it went through a reorganization,
partly owing to its own problems and partly because the Swiss franc was
devalued that year. Nonetheless, Motor-Columbus continued in business. It
maintained its connections with Brown Boveri and still ranked as a
prominent Swiss holding company, keeping some investments in Italy and,
through Foreign Light and Power (a Canadian holding company), in
Romania. It had interests in Argentina and Ecuador, as well as in Lima,
Global Electri¬cation
206

Peru and Bogota, Colombia, where it owned directly or indirectly securities of
companies that furnished power to South American cities. Some of its Latin
American investments were through the holding company Schweizerisch-
Americanische Elektrizita ¨ts-Gesellschaft (SAEG), Zurich. Some were linked
with Italian interests (Compan±a Italo-Argentina de Electricidad, for exam-
˜´
ple). In the 1930s Motor-Columbus reduced its interests in Germany. With
exchange controls, it was dif¬cult to get any current payments much less
capital retrievals from either Germany or Italy. By 1938“1939, Motor-
Columbus™s investment portfolio was divided: Switzerland (45.0 percent),
South America (41.2 percent), Italy (12.2 percent), Canada (0.7 percent),
Germany (0.4 percent), and France (0.3 percent).81
Each European country had a distinct story of inward and outward
investments in the electric utilities industry. The investment networks grew
weaker in the 1930s as everywhere nationalism and autarchic polices pre-
vailed. Yet as we have seen so far, the links, however tenuous they had
become, had for the most part not disappeared. There was, however, a
reallocation of resources within Europe. Swiss holding companies “ including
Elektrobank and Motor-Columbus but also Indelec and others “ became
relatively more important as ˜˜holding or investment™™ units rather than direct
investors. In the interwar period, Belgium had resumed its central importance
for electric utility supply ¬nance. Problems in its economy in the 1930s and
the major bank reform in the early 1930s did not interfere with the key place
of Belgium in terms of electrical holding companies. History mattered, and
the ¬rst-mover advantages were still sustained.
Most important, among the Belgian companies was Societe Financiere de
´´ `
Transports et d™Entreprises Industrielles (So¬na), Brussels, which, still under
the direction of Dannie Heineman, completed a number of projects in the early
1930s in France.82 It survived the 1930s, sustaining most activities notwith-
standing the dif¬cult economic conditions. When the Spanish Civil War
started in 1936 and a Spanish Workers™ Committee took over the operations
of the So¬na-controlled Barcelona Traction, Light and Power, it stayed the
course.83 And despite the adversities Heineman reported in September 1940
that ˜˜only slight damage was done to [Barcelona] hydraulic works and
transmission lines in the civil war™™ and ˜˜the output of electricity in Barcelona
now is within 90 per cent of the 1935 ¬gure.™™84 What Heineman probably did
not realize was that during the civil war Juan March, a wealthy Spaniard with
close connections to General Francisco Franco, was beginning to buy on the
market the greatly depreciated sterling bonds of Barcelona Traction, Light and
Power “ purchases that would later mount and ultimately have profound
consequences for the enterprise™s future.85
With the Spanish Civil War in progress in 1938, the owners of Compan±a ˜´
Hispano-Americana de Electricidad (CHADE) securities, now principally
Belgian and Swiss (with So¬na in control) sought to protect these assets and,
with shareholder approval, the assets of CHADE were transferred from
Chapter 5: Basic Infrastructure, 1929“1945 207

´
Spanish registration to a new Luxembourg company: Societe d™Electricite
´´ ´
(SODEC). Before that occurred, in Argentina in 1936 Compania Argentina
˜
de Electricidad (CADE) became the holding company for Argentine assets
of CHADE; CADE continued (through CHADE and then through the
Luxembourg intermediary) to be controlled by So¬na.86
With problems in the French economy, in 1936 So¬na reduced its holdings

in Societe Financiere Electrique, Paris (Finelec), its af¬liate that had been so
´´
active in France; it retained its interests, however, in important French light
and power companies.87 The French government had started regulating
electricity prices and by decree, under the government of Pierre Laval in 1935,
it lowered electricity prices by 10 percent. That did not make for good opera-
ting conditions and could explain the reduction in So¬na interests. In 1938,
So¬na sold its Turkish electric utilities to the Turkish government. In contrast,
in October 1936 and subsequently, So¬na made sizable new investments in the
United States, in Middle West Corporation (the reorganized Middle West
Utilities Company, one of the key Insull companies). Through all of the 1930s,
So¬na remained an international business.88
Heineman, by 1938, was deeply disturbed with the rise of nationalism
worldwide. His address to So¬na shareholders that year was devoted to the
˜˜tendency amongst some governments to view with suspicion or even
animosity the participation of foreigners in . . . the management of . . . public
utility undertakings.™™ He presented a plea for ˜˜international co-operation
in privately managed public utility undertakings,™™ by which he meant
cooperation between foreign private capital and nationals within host coun-
tries. For host governments ˜˜to reject the co-operation of foreign talent is not
rational; the goodwill of experience gained abroad is yeast to the technical
progress of any country, however advanced it may be. . . . There is nothing
humiliating about opening the doors to foreign collaboration.™™ Foreign
involvement was not exploitation, but rather was to the advantage of all. The
ever optimistic Heineman concluded his remarks with the comment, ˜˜ . . . [I]n
most countries in which So¬na has its undertakings the authorities show that
friendly and loyal spirit which is the natural outcome of mutual con¬dence.
And even where it has to cope with an attitude that can hardly be described as
amicable, I trust the attitude the authorities have taken re¬‚ects no more than a
transitory outlook.™™ During the decade, for So¬na with its many af¬liates,
most of its foreign direct investments survived, battered by exchange controls,
depreciating currencies in the host countries, ever increasing government
regulation and interventions at the local, provincial, and national levels, and
new taxation. All the while, Heineman maintained ˜˜hope™™ that what was
happening to the world economy was ˜˜transitory.™™89
Other Belgian companies “ dif¬culties aside “ kept their foreign invest-
ments and even made some new ones. Second only to So¬na was its sister
´
company Compagnie Generale d™Entreprises Electriques et Industrielles,
´´
Brussels (Electrobel). Beyond its sizable investments in Belgium and France,
Global Electri¬cation
208

Electrobel had smaller interests in Italy and Spain. It also had made and
continued to hold in the 1930s important investments in Eastern Europe and
the middle east, in Bulgaria, Egypt, Lithuania, Poland, Romania, and Syria.
´
Electrobel was said to direct Societe d™Enterprises Electrique en Poland (set
´´
up in Brussels in 1923). Unlike So¬na (which had the large Argentine holdings
and through its af¬liate, Sidro, large ones in Mexico and smaller ones in Brazil;
see below), aside from some small holdings in Brazil, Electrobel had virtually
no investments in Latin America.90 And then there was Compagnie Financiere `
d™Exploitations Hydroelectriques SA (Hydro¬na), Antwerp, formed in 1928,
´
which developed business in Romania (in tandem with the Swiss Motor-
Columbus); it was said to be controlled by Electrobel.91
´ ´
Societe Internationale d™Energie Hydro-Electrique, Brussels (Sidro), the
´´
one-time Loewenstein company, did not manage as well as So¬na or even
Electrobel. Sidro stopped paying dividends in 1936. It was heavily invested
in Barcelona Traction and during the civil war no returns were forthcoming
from that company. Sidro also had holdings in Mexican Light & Power and
in two highly regulated French utilities. So¬na/Sidro seems to have con-
tinued to have shares in Brazilian Traction (see below). In the late 1930s,
Sidro increasingly took a back seat to So¬na. So¬na was the dominating
element in Sidro, so what was ˜˜controlled™™ by Sidro could be called part of
the So¬na/Sidro group or sometimes simply So¬na ˜˜controlled.™™
The Empain group “ in particular, Electrorail (Compagnies Reunies ´
´ lectricite et de Transport) “ also retained most of its investments of the
d™E ´
1920s and earlier years. It had a number of long-standing tramway
investments. Its Belgian-French characteristics remained pronounced. It
continued to be important in France, the crises of the 1930s notwith-
standing. Its signi¬cant stakes in Egypt were also maintained.92
Overall, foreign direct investors in the years 1933“1939 found doing
business an unhappy experience. Yet only a very few important ones
retreated in full from investments abroad. One that did was Utilities Power
and Light Corporation (UPLC). Because Harley Clarke™s Chicago based
UPLC was in ¬nancial trouble, Clarke accepted a series of deals by which
added British capital was brought into Greater London and Counties Trust
(GLCT)-Edmundson™s. Lazard Brothers, the British Lazards (now revived),
came to play a material role in sustaining GLCT and encouraging Pru-
dential Assurance to provide funds for the ailing parent UPLC. At every
interest date, Clarke managed to keep UPLC out of receivership. But by
1935, it was obvious that the latter was ready to withdraw from its large
British investments.
Meanwhile, another American entrepreneur stepped into the picture:
Floyd Bostwick Odlum. Odlum was a lawyer, who had for many years been
involved in Electric Bond and Share and in developing American & Foreign
Power. He had been with Simpson, Thacher and Bartlett, the important law
¬rm that handled complicated international negotiations for American &
Chapter 5: Basic Infrastructure, 1929“1945 209

Foreign Power. Odlum became a director of American & Foreign Power
and, from 1928 to 1932, was its vice chairman.93 With another director of
American & Foreign Power, in July 1929 he formed in Delaware the Atlas
Corporation, an investment company.94 In the 1930s, Atlas acquired con-
trol of a wide variety of companies whose securities had hit rock bottom. In
the early 1930s, Odlum had started to buy UPLC debentures. Then he
gained control of the Public Utilities Securities Corporation (Pusco), which
in turn controlled UPLC. This effectively gave Atlas control of UPLC,
although Clarke stayed on as president. Next, Odlum arranged the
divestment of the U.K. company GLCT. The proceeds of this sale (about
$25 million) would allow UPLC to buy up its own outstanding bonds and
leave it with some working capital. Thus, in 1936 Odlum sold back to
British subjects the largest U.S. direct investment in the United Kingdom,
and GLCT-Edmundson™s became British-owned. The British were delighted
at the repatriation. Edmundson™s, the former sub“holding company, now
became the parent, and the process of domestication was complete.95
This left only the Italian British & International Utilities Ltd. (BIU)
involved as a multinational enterprise in providing electric power in Britain.
Its was not a large investment, but in 1938 the British Ministry of Transport
worried about strategic information on electricity supplies and munitions
factories being passed on to the German General Staff through BIU™s Italian
management. Finally, on May 28, 1940, after the outbreak of World War
II, the Ministry of Transport ordered (under wartime emergency powers)
the U.K. government takeover of these properties.96 Because these small
rural utilities represented only a tiny percentage of British electricity output,
for all practical purposes signi¬cant foreign ownership and control within
the British public utility sector was over in 1936 with the UPLC divestment.
Interestingly, as we mentioned earlier in this chapter, Odlum™s Atlas Corp.
by 1938 had acquired 50 percent of the shares in the American holding
company Italian Superpower. While Italian Superpower did not have shares
in BIU (remember that cross-holdings were commonplace), there were
links. BIU was established by Volpi, and Volpi was on the board of Italian
Superpower; Italian Superpower also owned shares in some of the sister
companies of Italo-Belge (which was part of the Volpi group).97
Yet the retreat of UPLC from its sizable foreign direct investments in
Great Britain was atypical. In September 1939, UPLC also disposed of all the
Canadian investments of its subsidiary Central States Power & Light Com-
pany (the Canada Electric Co. Ltd., the Eastern Electric & Development Co.
Ltd.; Moncton Electricity & Gas Ltd.; and Maritime Coal Railway & Power
Co. Ltd.) These became the properties of Eastern Utilities Ltd., a Canadian
enterprise.98 There were some other pullbacks in foreign investments, which
we have already mentioned “ the 1938 sale by So¬na of its Turkish properties
to that government, for example. Overall, however, the principal Swiss and
Belgian holding companies, as well as the key North American holding
Global Electri¬cation
210

companies, preserved their international business during the decade but
added little. Under their auspices, the provision of electricity grew, although
not as rapidly as many consumers (or potential consumers) would have liked.

1933“1939: latin america
In Latin America in the 1930s, the Roosevelt administration had inaugu-
rated a ˜˜Good Neighbor™™ policy. The president of American & Foreign
Power, Curtis E. Calder, wistfully re¬‚ected in 1941 on the ˜˜strange mis-
understanding™™ of that policy in some nations, where ˜˜there seems to be a
feeling that . . . [the United States] has gone soft and that we and our
investments are fair prey for any leader who can trump some sort of excuse
to abuse us, however ¬‚imsy.™™99
In Mexico, Compan±a Electrica Mexicana, SA, one of American &
˜´
Foreign Power™s Mexican operating subsidiaries, ˜˜abandoned in 1937 a
hydroelectric project which it had acquired for investigation and develop-
ment in 1930.™™ The Mexican subsidiary forfeited its concession, and
American & Foreign Power wrote off about $1 million.100 The Toronto
management of Mexican Light and Power (Mexlight) was similarly hesitant
to invest in Mexico.101 Then, in 1938 there was the Mexican government
expropriation of foreign-owned oil companies. Economist Miguel Wionczek
wrote of a ˜˜cold war™™ between the state and the electric power industry from
the mid-1930s on. It was quite possible, he claimed, that the electric power
industry might have been nationalized in 1938 along with the oil enterprises.
The threat was there.102 The Mexican electric power industry was almost
entirely under foreign ownership and control, with the key players the So¬na-
dominated but Canadian-registered and managed Mexlight, American &
Foreign Power, and the somewhat smaller Canadian-directed International
Power Co. Ltd. (which supplied the industrial city of Monterrey). There was
also a U.S. investment in the Compan±a Hidroelectrica de Chapala, which
˜´ ´
serviced the Guadalajara region; the Chapala company went bankrupt in
1940 and was purchased by the Mexican federal government from its U.S.
owners. Further, in 1929 the U.S. holding company Standard Gas & Electric
Co. had taken over a group of small public utilities on the west coast of
Mexico; it seems to have kept them until 1940, when it had them no longer.
All of the foreign multinational enterprises suffered under the rising tide of
nationalism and anti-foreign sentiment that developed in Mexico during the
1930s and the greatly enlarged government regulatory role in this sector.
Those foreign direct investors that remained cut back on new investments.103
In Brazil, foreign companies were similarly ˜˜under ¬re.™™ The largest
investments were by the long-standing Canadian-registered, So¬na-associ-
ated Brazilian Traction, Light and Power. It supplied the Rio and Sao Paulo
˜
areas, where much of the Brazilian population was concentrated. Duncan
McDowall documents the company™s history in the 1930s. Demand rose
Chapter 5: Basic Infrastructure, 1929“1945 211

rapidly, but Brazilian Traction found it dif¬cult to meet the demand.
Canadian management was wary about making investments, ˜˜committing
ourselves to unknown dangers in the future.™™ In 1928, Miller Lash had
become president of Brazilian Traction; he was a lawyer and was part of the
Toronto business establishment. Although he traveled annually to Brazil, he did
not speak Portuguese and he had no desire to live there. To be sure, the
Canadians did have on the spot a resident executive vice president, English-
born Herbert Couzens, as well as the experienced American Asa Billings,
who had been hired away from the New York ¬rm Pearson Engineering.
McDowall writes nothing about any role of So¬na in the 1930s. Heineman “
who ¬gured in McDowall™s rendition of the late-1920s disputes with
Loewenstein of Sidro “ is never mentioned in McDowall™s history there-
after. Likewise, there is nothing on Brazilian Traction in the So¬na annual
reports for 1929 or 1939. And yet, there is no indication that So¬na
relinquished its existing interest, although in the 1930s, unlike its activities
in Mexico, So¬na does not seem to have considered Brazilian Traction
among its ˜˜principal interests.™™ The ˜˜unknown dangers in the future™™ that
the Canadians worried about were that ¬nancial returns on any large new
investments would fail to be forthcoming, owing to the weakness of Brazil™s
currency and to the restrictive legislation enacted by Brazil™s leadership
(in this, the Getulio Vargas era), which ˜˜challenged the very existence of
foreign utilities in Brazil.™™ In 1934, a Water Code was promulgated that
seemed to jeopardize foreign investment in hydroelectric supplies. In 1935,
the vice president of Brazilian Traction Couzens reported that ˜˜Bank of
Brazil is so much disorganized internally that they hardly know where they
are.™™ Regulation in Brazil was by states and municipalities until, in 1937,
federal authorities began to regulate electric utility concessions. That year,
the new Brazilian constitution prohibited any company with foreign share-
holdings from obtaining new hydroelectrical concessions. While industry
developed rapidly in Brazil in the 1930s, doing business there proved to be a
constant frustration to foreign multinational enterprises, especially those in
the public utilities sector.104 American & Foreign Power had ¬fteen separate
operating companies in Brazil, for the most part spread out along the very
long coastline. By 1939, it was serving 309 different communities, with an
estimated population of 5.4 million.105 In the northeast, it supplied Natal
and Pernambuco; in the south, it furnished power to Porto Alegre and
Pelotas.106 During the decade, the number of communities and population it
serviced had risen. Both Brazilian Traction and American & Foreign Power™s
subsidiaries depended on imported equipment for their facilities, which was
dif¬cult to pay for with the depreciating currency and the blocked payments.
In Argentina, cities asserted themselves with a multiplicity of new rules
and regulations, but there was no national regulation of electricity. Here the
largest investments were still by CHADE (Compan±a Hispano-Americana
˜´
de Electricidad) and after 1936 by its subsidiary Compan±a Argentina de
˜´
Global Electri¬cation
212

Electricidad (CADE). CADE™s territory was Buenos Aires and its environs.
In Chapter 4, we saw Heineman singing CHADE™s praises.107 Even though
a May 1936 So¬na tribute to Heineman referred to CHADE™s founding as
destined to become ˜˜Le plus beau ¬‚euron de la couronne de la So¬na [the
most beautiful ¬‚ower in the crown of So¬na],™™ the hyperbole seems to have
re¬‚ected history rather than the reality of 1936. Over the years, there seems
to have been a de¬cit of good management in Argentina. During the 1930s,
Heineman had become preoccupied with European matters. So¬na™s range
was so wide that there seems to have been by necessity a decentralization of
management; Heineman left the administration of Mexlight and Brazilian
Traction to the Canadians, who had developed, for the most part, com-
petent operating teams, but somehow the management and direction of
CHADE/CADE seems to have fallen between the stools. Although CHADE
added to its large Buenos Aires power station in 1931 and 1934, it seems
that its power facilities became run down. Where was the old spirit of
renewal and rationalization? It seems to have been absent. Mexlight and
Brazilian Traction had developed their own managerial operating staff,
based on their Canadian origins (with Americans and Britishers also par-
ticipating), hiring and training Mexicans and Brazilians, if not at the highest
level, certainly throughout the organization. These companies appear to
have been competently run. That does not appear to have been the case
with CHADE/CADE. Moreover, between 1932 and 1936 CHADE was in a
major dispute with the Buenos Aires city council, which looked like it might
culminate in expropriation.108 The revised 1936 concession was said to be
written in Brussels by So¬na of¬cials and passed by the Buenos Aires city
council after ˜˜secret contributions™™ were made to the Radical Party™s 1937
election campaign. (The Radical party was ˜˜radical™™ only in name.)109
CHADE was not by itself among the foreign investors in electric utilities
in Argentina. American & Foreign Power was new to Argentina in 1929. It
arrived just as the depression hit. Its plants were all acquisitions, and they
were widely dispersed around the country. Its capable management made
an initial effort to rationalize the properties.110 By 1939 in Argentina,
American & Foreign Power served 182 separate communities, with an
estimated population of 2.6 million.111 Most appear to have been provided
for by separate power plants. It supplied electricity for Cordoba, Jujuy,
´
Mendoza, Salta, San Rafael, and Tucuman, as well as numerous other
´
Argentine cities (see Map 5.2). In 1929, it sought to rationalize its business
by setting up regional grids of companies that served the Andes and the
north, south, east, and center of the nation. The properties that it acquired
needed care, managerial attention, and new investments, but the U.S.
depression made such pursuits nearly impossible. There was no readily
available capital to pour into this activity.
So¬na had two other investments in Argentina, one of them in a Buenos
Aires tramway company. The city of Buenos Aires took over the service of
Chapter 5: Basic Infrastructure, 1929“1945 213

Anglo-Argentine Tramways on February 16, 1939. (Lengthy litigation
followed, not to be resolved until 1963.) So¬na™s interests in the tramway
company dated back before World War I. The other So¬na investment was
also long-standing and continuing, in the Argentine port city of Rosario.
There were additional foreign companies in Argentina, including CIAE
(Compan±a Italo-Argentina de Electricidad; also called Italo-Argentine
˜´
Electric Co.), which served parts of Buenos Aires and several other cities.112
CIAE and some sister companies were linked with the Swiss Motor-
Columbus. The electric power they furnished was small relative to the giant
CHADE/CADE (or for that matter American & Foreign Power). South
American Utilities (the 1936 successor to Intercontinents Power; see above)
owned properties in Argentina and in 1938 had more than 49,000 customers
in 89 communities in that country.113 There were additional foreign-owned
companies, but overall Argentina was not well served. During the 1930s,
sizable new investments were required, but they were not made. In most of
the country outside of Buenos Aires, small, costly, inef¬cient plants existed.
Electric cooperatives began to spring up to meet local requirements.114
It is frequently asked why Argentina, which had been so prosperous before
World War I, fell behind. In looking at the electric power story, one wonders
if the lack of a good electric power infrastructure was to a certain extent
responsible. As the 1920s ended, it seems that CHADE had not attended
properly to Buenos Aires or the rest of the country, and by the time American
& Foreign Power was making investments the global economic crisis acted as
a deterrent. Argentina did not have coal, there were not yet adequate dis-
coveries of oil, and hydroelectric possibilities were not effectively employed.
(The possibilities of hydroelectric power were in areas far away from popu-
lation centers and would have required expensive transmission lines.) The
nation did not manufacture the equipment needed and had to import. The
political environment was not conducive to new investments.115
If problems for foreign investors in electric utilities abounded in
Argentina, Brazil, and Mexico, in 1935 the Chilean government charged
American & Foreign Power with having dealt on the black market for three
years, seeking to avoid foreign exchange restrictions in order to remit
pro¬ts. The issue was resolved in 1936, but the agreement required Chilean
subsidiaries of American & Foreign Power to be placed under an eleven-
person board of directors, seven of whom had to be of Chilean nationality.

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