Part II
Development Is a Voyage with More Shipwrecks than Navigators

4. Tales of Premature Death

A Declaration of Independence Hailed by British Warships

When George Canning, the brains of the British Empire, was celebrating its worldwide triumphs in 1823, the French charge d'affaires had to swallow the humiliation of this remark: "Be yours the glory of victory followed by disaster and ruin, be ours the inglorious traffic of industry and an ever growing prosperity . . . The age of chivalry is gone; and an age of economists and calculators has succeeded." London was entering a long period of festivity; Napoleon had finally been "beaten some years earlier, and the curtain was rising on the era of Pax Britannica. In Latin America, the power of landlords and rich port merchants had been secured in perpetuity by independence, at the cost of the new-born countries' imminent ruin. The former Spanish colonies and Brazil were markets hungry for English textiles and pounds sterling at so much percent. Canning did not err when he wrote in 1824: "The deed is done, the nail is driven, Spanish America is free; and if we do not mismanage our affairs sadly, she is English."¹

The steam engine, the mechanical loom, and the perfection of textile machinery had precipitously matured Britain's Industrial Revolution. Factories and banks multiplied; the internal combustion engine modernized navigation and big ships sailed to the uttermost parts, expanding British industry. The British economy paid with cotton textiles for the hides of Rio de la Plata, the guano and nitrates of Peru, [192] the copper of Chile, the sugar of Cuba, the coffee of Brazil. Throughout the nineteenth century industrial exports, freightage, insurance, interest on loans, and profits on investments fed British prosperity. Actually, much of the legal commerce between Spain and its colonies, before the wars of independence, was British-controlled -- apart from the steady flow of contraband to Latin American coasts, effectively screened by the slave trade. The overwhelming majority of goods passing through Latin American customs houses was not Spanish. Spain's monopoly had never in fact existed: "The colony was already lost to the metropolis well before 1810, and the revolution was no more than political recognition of this state of affairs."2

British troops had taken Trinidad with but one casualty, but the commander of the expedition, Sir Ralph Abercromby, was convinced that other military conquests in Spanish America would not be so easy. Soon afterward, British invasions of Rio de la Plata failed. The defeat confirmed Abercromby's view on the ineffectiveness of armed expeditions and the ripeness of the hour for diplomats, merchants, and bankers: a new liberal order in the Spanish colonies would offer Britain the opportunity to secure nine-tenths of Spanish American commerce.3 Latin American lands burned with independence fever; after 1810, London applied a devious and two-faced policy which fluctuated with the need to favor British trade, keep Latin America from falling into United States or French hands, and avert Jacobin infection in the newly independent countries.

When the revolutionary junta was formed in Buenos Aires on May 25, 1810, British warships saluted it with a salvo of guns from the river. The captain of the Mutine made a glowing speech on His Majesty's behalf, and the jubilation warmed British hearts. Buenos Aires waited barely three days to repeal certain bans on trade with foreigners; twelve days later it cut the taxes on external sales of hides and fats or tallow from 50 to 7.5 percent. Six weeks later, the ban on exporting gold and silver coins was removed, so that they could flow tranquilly to London. A triumvirate replaced the junta in September 1811, and the export and import taxes were again reduced and in some cases abolished. After 1813, when the Assembly declared itself the sovereign authority, foreign traders were exempted from the obligation to sell their merchandise through native businessmen. In 1812, [193] British traders were reporting to the Foreign Office that they had succeeded in replacing German and French textiles; they had also replaced Argentine textile production, which was strangled by the free-trade port. The same occurred with variations elsewhere in Latin America.

From Yorkshire, Lancashire, the Cheviot Hills, and Wales poured an endless stream of cotton and woolens, iron and leather, wood and porcelain goods. Manchester's looms, Sheffield's foundries, Worcester and Staffordshire potteries flooded Latin American markets. Free trade enriched the ports which lived from exports, lifted sky-high the extravagance of oligarchies determined to enjoy every known luxury, but ruined budding local manufacture and frustrated expansion of the internal market. Some weak and technically backward colonial industries had grown up despite metropolitan prohibitions, and were on the rise on the eve of independence as Spain's oppressive bonds loosened and war in Europe created a shortage of supplies. In the nineteenth century's first years, factories were recovering from the blow of the royal decree of 1778 authorizing free trade between Spanish and American ports. The resulting deluge of foreign goods had crushed colonial production of textiles, pottery, and metal objects, and the artisans had little time to get back on their feet; then independence flung open the door to free competition from Europe's already developed industries. Under the vacillating customs policies of independence governments, Latin American manufactures continued fitfully, with one foot in the grave and with no possibility of sustained long-term development.

The Dimensions of Industrial Infanticide

At the beginning of the nineteenth century Alexander von Humboldt estimated the value of Mexican manufactures -- mostly textiles -- at some seven or eight million pesos. Woolen and cotton cloth were turned out in specialized workshops: Queretaro had over two hundred looms and fifteen hundred workers; twelve hundred cotton weavers worked in Puebla.4 In Peru, the colony's crude products were never as perfect as the native textiles of Pizarro's time but economic performance was very great. The industry was based on [194] forced labor by Indians who were locked into the shops from before dawn till late at night. This development -- annihilated by independence -- had been precarious but of some magnitude in Ayacucho, Ca-camorsa, Tarma; the community of Pacaicasa, which formed one great weaving establishment with more than one thousand workers, is now extinct, and Paucarcolla, which supplied a large area with wool blankets, is disappearing. In Chile, one of Spain's most far-flung possessions, isolation favored the development of industrial activity from the beginnings of colonial life. It had spinning mills, textile mills, and tanneries; all the ships of the South Seas were equipped with Chilean rigging and cordage; it manufactured metal objects, from retorts and guns to ornaments, fine tableware, and clocks, and built boats and vehicles. In Brazil, too, textile and metal works, which took their modest first steps in the eighteenth century, were wiped out by foreign imports. Both manufactures had managed to prosper despite obstacles imposed by Lisbon, but after 1807 the Portuguese monarchy, installed in Rio de Janeiro, was a toy in British hands and London had strength of a different order. "Until the ports were opened up," writes Caio Prado, "the shortcomings of Portuguese commerce had provided a protective barrier for a small local industry -- a poor artisan industry, true, but enough to satisfy part of the local demand. This small industry could not survive free competition from abroad, even in the most insignificant products."⁵

Bolivia was the Rio de la Plata viceroyalty's most important textile center. At the end of the century, according to Intendente Francisco de Viedma, eighty thousand people in Cochabamba were engaged in making wool and cotton cloth and tablecloths. Oruro and La Paz also had factories which, together with those in Cochabamba, supplied blankets, ponchos, and warm flannel to the population, troops of the line, and frontier garrisons. From Mojos, Chiquitos, and Guarayos came the finest linen and cotton cloth, hats of straw, vicuna and lamb's fur, and cigars. "All these industries have disappeared in the face of competition with similar foreign-made articles," testified a book published on the first centenary of Bolivia's independence.6

In Argentina, the coast was the most backward and least populated region until independence moved the economic and political center of gravity from inland to Buenos Aires. Only one-tenth of the [195] population lived in Buenos Aires, Santa Fe, and Entre Rios at the beginning of the nineteenth century. A rudimentary native industry had slowly developed in the center and north while, as Procurador Larramendi observed in 1795, "not one craft or manufacture" existed on the coast. Textile workshops wove three types of ponchos, and factories produced sturdy carts, cigars and cigarettes, leather and shoe soles in Tucuman and Santiago del Estero -- both pockets of underdevelopment today. All kinds of cloth, fine woolens, and clergymen's black flannel came from Catamarca; Cordoba turned out more than seventy thousand ponchos, twenty thousand blankets, and forty thousand Spanish yards of flannel a year, along with shoes and leather goods, sailing cinches and yards, carpeting and cordovan. The important tanneries and saddleries were in Corrientes. Salta was famous for its fine saddles; Mendoza produced between two and three million liters of wine a year, rivaling that of Andalusia; and San Juan distilled 350,000 liters of aguardiente a year. Mendoza and San Juan, situated between the Atlantic and the Pacific, were the "throat" of South American commerce.

Commercial agents from Manchester, Glasgow, and Liverpool toured Argentina and copied Santiagan and Cordoban ponchos and Corrientes leather goods, as well as the local wooden stirrups. Argentine ponchos cost seven pesos, Yorkshire ones three. The world's mo'st advanced textile industry won at a gallop over the products of native looms, and it was the same with boots, spurs, iron grill work, bridles, and even nails. Interior Argentine provinces were ruined and promptly rose against the dictatorship of the port of Buenos Aires. The top merchants (Escalada, Belgrano, Pueyrredon, Vieytes, Las Heras, Cervino) had assumed the power wrested from Spain, and trade enabled them to buy English silks and knives, fine Louviers cloth, Flanders lace, Swiss sabres, Dutch gin, Westphalian ham, and Hamburg cigars. In exchange, Argentina exported hides, tallow, bones, and salted meat, and the cattlemen of Buenos Aires province extended their markets thanks to free trade. The typical tough gau-cho of the pampas was described thus in 1837 by the British consul in La Plata, Woodbine Parish: "Take his whole equipment -- examine everything about him -- and what is there not of raw hide that is not British? If his wife has a gown, ten to one it is made in Manchester; [196] the camp-kettle in which he cooks his food, the earthenware he eats from, the knife, his poncho, spurs, bit, are all imported from England." 7 Argentina even received the stones for its sidewalks from Britain.

In about the same period James Watson Webb, U.S. ambassador in Rio de Janeiro, reported:

In all of Brazil's haciendas the master and his slaves dress in the products of free labor, and nine-tenths of them are British. Britain supplies all the capital needed for internal improvements in Brazil and manufactures all the utensils in common use, from the spade on up, and nearly all the luxury and practical items from the pin to the costliest clothing. British pottery, British articles of glass, iron, or wood are as common as woolens and cotton cloth. Great Britain supplies Brazil with its steam and sailing ships, and paves and repairs its streets, lights its cities with gas, builds its railways, exploits its mines, is its banker, puts up its telegraph wires, carries its mail, builds its furniture, motors, wagons . . .⁸

A mid-century Swedish traveler arriving at Valparaiso witnessed the extravagance and ostentation free trade had produced in Chile: "The only way to rise in the world," he wrote, "is to submit to the dictates of Paris fashion magazines, to the black frock coat and all accessories thereof . . . The senora buys a new hat that makes her feel eminently Parisian, while the husband dons a high, stiff cravat and imagines himself at the pinnacle of European culture."9 Three or four British concerns had taken over the Chilean copper market and [197] juggled prices in the best interests of foundries in Swansea, Liverpool, and Cardiff. The British consul general reported to his government in 1838 on the "prodigious growth" in sales of copper, which was exported "chiefly, if not entirely, in British ships or on behalf of Britons." 10 British businessmen monopolized commerce in Santiago and Valparaiso, and Chile was the second most important Latin American market for British products.

Latin America's big ports, through which the wealth of its soil and subsoil passed en route to distant centers of power, were being built up as instruments of the conquest and domination of the countries to which they belonged, and as conduits through which to drain the nations' income. While ports and capitals strove to be like Paris or London, behind them stretched the desert.

Protectionism and Free Trade: The Brief Flight of Lucas Alamdn

The expansion of Latin American markets speeded accumulation of capital in the nursery gardens of British industry. The Atlantic had for some time been the main highway of world trade and the British had shrewdly capitalized on the location of their island -- surrounded by ports, halfway between the Baltic and the Mediterranean, and facing out to the coasts of America. Britain was organizing a world-wide system and becoming the great factory supplying the planet: the entire world supplied it with raw materials and received its manufactured goods. The Empire had the greatest port and most potent financial apparatus of its time, the highest level of commercial specialization, a world monopoly on insurance and freight, and control of the international gold market. Friedrich List, father of the German customs union, once observed that free trade was Britain's chief export. [This German economist, bom in 1789, preached in the United States and his own country the doctrine of protectionism and industrial development. He killed himself in 1846, but his ideas took hold in both countries.] Nothing roused such British anger as protectionism, and they sometimes gave vent to it in violent language, as during the Opium War against China. But free trade only became revealed truth for [198] them after they became sure of being the strongest power, and after they had developed their own textile industry under the umbrella of Europe's toughest protectionist legislation. In the difficult early days, when British industry was still at a disadvantage, an Englishman caught exporting raw wool was sentenced to lose his right hand, and if he repeated the sin he was hanged. It was prohibited to bury a corpse without prior certification from the parish priest that the shroud came from a British factory.

"All the destructive phenomena which unlimited competition gives rise to within one country," wrote Marx, "are reproduced in more gigantic proportions on the world market." ["If the free-traders cannot understand how one nation can grow rich at the expense of another, we need not wonder, since these same gentlemen also refuse to understand how within one country one class can enrich itself at the expense of another."¹¹] Latin America's entry into the British orbit -- which it would leave only to enter the U.S. orbit -- took place within this general framework, and within it the dependence of the new independent countries was consolidated. Free circulation of merchandise, and of money for payment and transfer of capital, had dramatic consequences.

Vicente Guerrero came to power in Mexico in 1829, writes Chavez Orozco, "on the shoulders of the artisans' despair, fanned by the great demagogue Lorenzo de Zavala who loosed a hungry, desperate crowd on shops stuffed with British marketplace items." Guerrero soon fell amid the workers' indifference, since he did not want or was not able to dam up European merchandise, "the abundance of which spread unemployment among urban artisan masses who before independence -- above all in periods of war in Europe -- enjoyed modest comfort." ¹² Mexican industry had been short of capital, labor, and modern techniques, had not been efficiently organized, and had lacked communications and transport to and from markets and supply sources. "The only things it probably had too much of," writes Alonso Aguilar, "were interference, restrictions, and every kind of obstacle." 13 Nevertheless, as von Humboldt noted, industry had grown when foreign trade was stagnant, sea communications were being interrupted or obstructed, and the manufacture of steel and [199] the use of iron and mercury had begun. The liberalism that accompanied independence added new pearls to the British crown and paralyzed the textile and metallurgical workshops in Mexico City, Pue-bla, and Guadalajara.

Lucas Alaman, an able conservative politician, gave timely warning that the ideas of Adam Smith contained poison for the national economy, and set the stage, as minister, for a credit and loan bank to promote industrialization. By taxing foreign cotton textiles, Mexico could buy machinery and equipment abroad in order to supply its own needs in cotton cloth. The country had the raw material and hydraulic power -- cheaper than coal -- and could train good workers quickly. The bank opened in 1830 and soon afterward modern cotton-spinning and weaving machinery from the best European factories arrived; the state also hired foreign experts in textile techniques. In 1844 the big Puebla plants produced 1.4 million lengths of heavy cotton. The country's new industrial capacity exceeded internal demand; the consumer market in the "kingdom of inequality," mostly consisting of hungry Indians, could not sustain the dizzying industrial growth. The effort to break the inherited colonial structure collided against this wall. Yet the industry had been so modernized that in 1840 U.S. textile mills averaged fewer spindles than did those in Mexico. Ten years later the ratio had been more than reversed. Political instability, pressure from British and French merchants and their powerful domestic partners, and the paltriness of an internal market strangled in advance by the mining and latifundista economy, wrecked the experiment. By 1850 Mexico's textile industry had stopped progressing. The creators of the credit and loan bank had broadened their field of action and, when the bank died, its credits also included woolen mills, carpet factories, and iron and paper producers. Esteban de Antufiano insisted on Mexico's need to create, as soon as possible, a national machine industry "to resist European egoism." The great merit of the Alaman-Antunano industrializing cycle was that both men reestablished the identity between political independence and economic independence, and extolled industrialization as the only defense against powerful and aggressive nations. Alaman himself became an industrialist, building Mexico's biggest textile plant of the day (it still exists), and organizing fellow industrialists [200] as a pressure group against successive free-trade governments. [Various protectionist statements were published in 1850 in El Siglo XIX: "With the end of the conquest by Spanish civilization and its three centuries of military dominion, Mexico entered a new era, which can also be called conquest, but a scientific and mercantile one ... Its power is merchant shipping; its faith is absolute economic freedom; its mighty principle with less advanced people is the law of reciprocity . . . 'Bring to Europe,' we were told, 'what manufactures you can (except, however, those we prohibit); and in return let us bring you what manufactures we can, though they may ruin your industries.' . . . If we adopted doctrines that they (our lords across the ocean and the Rio Grande) give but do not take, our exchequer would perhaps benefit a little . . . but we would not be promoting the labor of the Mexican people but that of the English, French, Swiss and North American peoples."¹⁴] But Alaman, conservative and Catholic, never took up the agrarian question since he felt ideologically linked to the old order. And he did not realize that industrial development was condemned in advance to remain up in the air, without bases of support, in that land of countless latifundios and general poverty.

The Montoneros and Juan Manuel de Rosas' Legacy of Hate

Protectionism versus free trade, the country versus the port: this was the essence of the struggle in Argentina's nineteenth-century civil wars. Buenos Aires, which in the seventeenth century was no more than a big village with four hundred houses, took power over the whole nation after the May revolution and independence. It was the only port: all that entered or left the country was forced to pass through it. Today the deformations that its hegemony imposed on the nation are plain to see: the capital and its suburbs embrace more than a third of the country's population and in various ways play the role of procurer to the provinces. In that period, with its monopoly on customs revenue, banks, and the issuance of currency, Buenos Aires prospered dizzily at the expense of the inland provinces. It appropriated the national customs receipts -- almost all of the port city's income -- for its own benefit, spending more than half on wars against the provinces -- which thus paid for their own destruction.

From Buenos Aires' Sala de Comercio, founded in 1810, the British kept watch on shipping through telescopes; they supplied the city folk with fine cloth, artificial flowers, shoelaces, umbrellas, buttons [201] and chocolate, while the flood of ponchos and factory-made stirrups played havoc up country. To appreciate the value the world market then placed on Rio de la Plata hides, the imagination must travel back to an age when plastics and synthetic fabrics did not exist, even as a gleam in a chemist's eye. Nothing could equal the fertile coastal plains for grand-scale cattle production. In 1816, a new system was discovered for the indefinite preservation of hides by treatment with arsenic; at the same time, slaughterhouses were prospering and multiplying. Brazil, the Antilles, and Africa were opening their markets to imported dried meat, and as that product gained foreign consumers, Argentinians felt the change. Taxes were imposed on internal meat consumption and removed from exports; in a few years the price of calves tripled and ranches upped the value of their land. The gauchos were accustomed to hunting calves freely under the open sky of the unfenced pampa, to eating the best meat and discarding the rest with the sole obligation of delivering the hide to the owner. Things changed. Reorganization of production involved submitting the nomad gaucho to a new servile dependence: a decree in 1815 proclaimed every propertyless countryman a servant, with the obligation to carry a card and have it checked every three months by his master. Either he was a servant or a vagrant, and vagrants were forcibly recruited into frontier battalions. The untamed criollo of yore, who'had served as cannon-fodder in patriot armies, was turned into a pariah, a wretched peon, or a buck private. Or else he got himself a weapon and joined the rebel montonera bands. [The montonera band "is born in the plains like a whirlwind. It strikes, roars, and smashes like a whirlwind, and suddenly stops and dies like one."¹⁵ In Martin Fierro, Argentina's most popular book, Jose Hernandez (who was a federal soldier) puts the plight of the gaucho exiled from his haunts and persecuted by the authorities into song:

The eagle lives in his nest,
The tiger lives in the jungle,
The fox in any cave,
And in his fickle fortune,
Only the gaucho lives a-wandering
Wherever fate takes him.

Because:

For him there are calabooses,
For him grim prisons,
Nothing he says is right,
Although he has right a-plenty --
The right of a wooden churchbell,
The right of the poor.¹⁶

Jorge Abelardo Ramos notes that the two real surnames appearing in Martin Fierro are Anchorena and Gainza -- names representing the oligarchy that exterminated the armed criollos; today both have been fused into the family that owns the daily La Prensa.

The other face of Martin Fierro appears in Ricardo Güiraldes' Don Segundo Sombra (1939): here it is the domesticated gaucho, tied to his daily wage, fawning upon his master, a useful type for the folklore of nostalgia and pity.] This fierce gaucho, [202] dispossessed of everything except glory and anger, swelled the cavalry charges that repeatedly defied well-equipped armies sent from Buenos Aires. The rise of the capitalist cattle ranch in the damp coastal pampa subjected the whole country to the exporting of hides and meat, and went hand in hand with the dictatorship of the free-trade port. Until his defeat and exile, the Uruguayan Jose Artigas had been the outstanding leader of the criollo masses' struggle against merchants and landlords tied to the world market; years later Felipe Varela was able to set off a big rebellion in northern Argentina because, as he proclaimed, "to be a provincial is to be a beggar without country, liberty, or rights." His rising drew a response from the entire hinterland. He was the last of the montoneros; he died in 1870, tuberculous and in poverty. [In 1870 Paraguay, the only Latin American country that still had not entered the imperialist prison, also fell in a bloodbath by foreign invaders.] In history as taught in Argentine schools, this defender of the "American Union" -- the dream of reviving the fragmented Great Fatherland -- remains as much a bandit as Artigas did until recently.

Born in a village lost among the Catamarca sierras, Varela had been an unhappy witness of the poverty inflicted on his province by the remote arrogant port. In 1824, when Varela was three, Catamarca could not pay the expenses of the delegates it sent to the Constituent Congress in Buenos Aires, and Misiones, Santiago del Estero, and other provinces were in similar plight. Catamarcan deputy Manuel Antonio Acevedo pointed to "the ominous change" brought about by foreign competition: "Catamarca has had to stand by helplessly, while its agriculture is primitive and costly, its industry without [203] consumers . . . and its commerce by now almost non-existent."¹⁷ In 1830, the representative from Corrientes province, Brigadier General Pedro Ferre, summed up the possible consequences of the protectionism he advocated:

Yes, certainly a few wealthy men will be deprived of fine wines and liquors with their dinners . . . For the less well-off classes the difference will hardly be noticeable in the wines and liquors they now drink, only in the price, and consumption will go down, which is not such a bad thing. Our country folk won't wear English ponchos or carry British-made bolas and lassos; we won't get clothing, and other things we can make ourselves, from abroad; but on the other hand, the condition of all the Argentine communities will begin to be less miserable and the frightful poverty to which we are now condemned will no longer pursue us.¹⁸

In an important step toward reconstruction of the national unity that war had torn apart, the Juan Manuel de Rosas administration introduced a decidedly protectionist tariff. It banned the importation of iron and tinplate manufactures, riding equipment, ponchos, belts, wool or cotton waistbands, coarse woolen cloth, farm products, carriage wheels, tallow candles, and combs, and levied heavy duties on coaches, shoes, cordage, clothing, saddles, dried fruits, and alcoholic beverages. There was no tax on meat transported in Argentine flagships, and saddlery and tobacco-growing were encouraged. The effects were soon observable. Until the battle of Caseros that brought Rosas down in 1852, ships built in the Corrientes and Santa Fe yards sailed the rivers, more than one hundred factories prospered in Buenos Aires, and all travelers agreed on the excellence of Cordoba- and Tucuman-made textiles and shoes, Salta cigars and crafts, and Men-doza and San Juan wines and brandies. Tucuman cabinet-makers were exporting to Chile, Bolivia, and Peru. Ten years after passage of the law, the guns of British and French warships smashed the chains across the Rio Parana to open up the interior waterways that Rosas had kept firmly closed. Blockade followed the invasion.

Ten appeals from Yorkshire, Liverpool, Manchester, Leeds, Halifax, and Bradford, signed by fifteen hundred bankers, traders, and industrialists, had urged the British government to take measures [204] against the restrictions on trade in La Plata. The blockade showed up the limitations of the national industries which, despite the progress made under the tariff law, were incapable of satisfying internal demand. Since 1841 manufacturing had in fact been languishing rather than gaining in vigor. Rosas represented above all the interests of the beef ranchers in Buenos Aires province, and no industrial bourgeoisie existed or was created to promote the development of a genuine national capitalism: the big ranch occupied the center of the economic stage, and no industrial policy could be independently and vigorously undertaken without destroying the omnipotence of the exporting latifundio. Basically, Rosas always remained true to his class. The best rider in the province, guitar-strummer, dancer, and noted horse-breaker, who on stormy starless nights chewed some blades of grass to locate his whereabouts, was himself a big ranch owner producing cured meat and hides, and the big landowners had made him their chief. The black legend that was later spun around his name cannot conceal the national and popular character of many of his administrative measures, [In his well-known Tablas de sangre, Jose Rivera listed Rosas' crimes in order to horrify European sensibilities. According to Atlas (London), the British banking house of Samuel Lafone paid the writer a penny per corpse. Rosas had hit the Imperium hard by banning gold and silver exports, and had dissolved the National Bank, which was an instrument of British trade.¹⁹] but class contradictions explain the lack -- except for the customs-house surgery -- -of any dynamic, sustained industrial policy. This lack cannot be attributed to instabilities and shortages resulting from domestic wars and foreign blockade, for was it not in the whirlwind of a besieged revolution that Artigas, twenty years earlier, had combined in-depth agrarian reform with policies aimed at industrializing and uniting the country? In a substantial book, Vivian Trias has compared Rosas' protectionism with the series of measures spread by Artigas from the Banda Oriental (now Uruguay), between 1813 and 1815, to bring true independence to the area of the La Plata viceroyalty.20 Rosas neither barred foreigners from trading in the internal market, nor returned to the nation the tariff revenues which Buenos Aires still appropriated, nor ended the dictatorship of the one and only port. But the nationalization of internal trade and the abolition of Buenos Aires' port and customs monopoly had been [205] foundation stones -- along with the agrarian question -- of Artigas' policy. Artigas had wanted free navigation on internal waterways, but Rosas never gave the provinces this key to the door of foreign trade. Rosas also remained basically loyal to his privileged province. Despite all these limitations, the nationalism and populism of the "blue-eyed gaucho" still inspire hatred in Argentina's ruling classes. Rosas remains "guilty of treason to the fatherland" -- as a never annulled law of 1857 put it -- and the country still refuses to provide a tomb for his bones, which are buried in Europe. His official image is that of an assassin.

With the suppression of Rosas' heresy, the oligarchy rediscovered its destiny. The chairman of the rural exhibition committee of 1858 opened the show with these words: "We, still in our infancy, are humbly content to send our products and raw materials to European markets so that they may be returned to us transformed by the powerful means at Europe's disposal. Raw materials are what Europe wants, so as to change them into rich artifacts."²¹

The illustrious Domingo Faustino Sarmiento and other liberal writers saw in the rural montonera only a symbol of barbarism, backwardness, and ignorance, the anachronism of the countryside confronting urban civilization, the poncho and chaps against the frock coat, the spear and knife against the troops of the line, illiteracy against the school. Sarmiento wrote to President Bartolome Mitre in 1861: "Don't try to economize on gaucho blood, it's all they have that is human. This is a fertilizer that must be made useful to the country." Such scorn and hatred were an expression of antipatriotism clearly tinged with political economy: "We are neither industrialists nor navigators," said Sarmiento, "and Europe will provide us for many centuries with its artifacts in exchange for our raw materials."²² Beginning in 1862, Mitre launched a war of extermination against the provinces and their last leaders. Sarmiento was put in charge, and troops marched northward to kill gauchos, "biped animals of the most perverse stripe." In La Rioja, rebels under General "El Chacho" Penaloza, whose influence extended over Mendoza and San Juan, put up one of the last stands against Buenos Aires, which felt that it was time to finish Penaloza off. They cut off his head and nailed it up in the Plaza de Olta. The railroad and highways [206] completed the collapse of La Rioja that had begun with the 1810 revolution: free trade had brought on a crisis for its craftsmen and had deepened the region's chronic poverty.

In the twentieth century, La Rioja peasants flee from their villages in the mountains and on the plains and flood into Buenos Aires to offer their labor: like the peasants of other poor provinces, they get no further than the city's outskirts, where they settle down beside seven hundred thousand other inhabitants of the "villas miserias" and make out as best they can with crumbs from the great capital's banquet table. A few years ago sociologists asked the one hundred and fifty survivors of a La Rioja village if they saw any change in their former neighbors who had left and returned on visits. Those who had remained said enviously that yes, Buenos Aires had improved the emigrants' clothing, manners, and way of speaking. Some also found the emigrants to be "whiter."²³

How the War Against Paraguay Wrecked the Only Successful Attempt at Independent Development

The man sat beside me in silence. The strong noonday light outlined his sharp-nosed, high-cheekboned profile. We had left the southern frontier bound for Asuncion in a bus for twenty persons which by some alchemy contained fifty. There was a halt after a few hours. We sat in an open patio under the shade of thick leaves. Before us stretched the blinding brilliance of the red earth, immense, unpopulated, untouched: from horizon to horizon nothing disturbed the transparency of the Paraguayan air. We smoked. My companion, a Guarani-speaking peasant, strung together a few sad words in Spanish: "We Paraguayans are poor and few." He explained that he'd gone down to Encarnacion to look for work but had found none. He'd managed to scrape up some pesos for the fare home. Years earlier, as a child, he'd tried his fortune in Buenos Aires and southern Brazil. Now it was cotton-picking time and many Paraguayan hrace-ros were taking off, as they did every year, for Argentina. "But I'm sixty-three. All that crowd going after the jobs -- my heart can't take it."

In the last twenty years, half a million Paraguayans have left their [207] country once and for all. Poverty drives out the inhabitants of what was, until a century ago, South America's most advanced country. Today Paraguay's population is barely double what it was then and, with Bolivia, it is one of the poorest and most backward countries in the hemisphere. The woes of the Paraguayans stem from a war of extermination which was the most infamous chapter in South American history: the War of the Triple Alliance, they called it. Brazil, Argentina, and Uruguay joined in committing genocide. They left no stone unturned, nor male inhabitants amid the ruins. Although Britain took no direct part in the ghastly deed, it was in the pockets of British merchants, bankers, and industrialists that the loot ended up. The invasion was financed from start to finish by the Bank of London, Baring Brothers, and the Rothschild bank, in loans at exorbitant interest rates which mortgaged the fate of the victorious countries.

Until its destruction, Paraguay stood out as a Latin American exception -- the only country that foreign capital had not deformed. The long, iron-fisted dictatorship of Gaspar Rodriguez de Francia (1814-1840) had incubated an autonomous, sustained development process in the womb of isolation. The all-powerful paternalist state filled the place of a nonexistent national bourgeoisie in organizing the nation and orienting its resources and its destiny. Francia had used the peasant masses to crush the Paraguayan oligarchy, and had established internal peace by erecting a cordon sanitaire between Paraguay and the other countries of the old La Plata viceroyalty. Expropriations, exilings, jails, persecutions, and fines had been used -- not to consolidate the internal power of landlords and merchants, but for their destruction. Political liberties and the right of opposition neither existed nor would come into being later, but in that historical stage the lack of democracy only disturbed people who were nostalgic for lost privileges. There were no great private fortunes when Francia died, and Paraguay was the only Latin American country where begging, hunger, and stealing were unknown; [In official histories, Francia appears as a star in a chamber of horrors. The optical distortions imposed by liberalism are not a monopoly of Latin America's ruling classes; many Left intellectuals who look at our countries' history through alien spectacles accept certain myths, canonizations, and excommunications of the Right. Pablo Neruda's Canto General pays moving homage to the Latin American peoples, but clearly reveals this disorientation. Neruda pays no attention to Artigas, or to Carlos Antonio or Francisco Lopez, and instead identifies with Sarmiento. He calls Francia a "leprous king" and is no more amiable with Rosas.²⁴] travelers of the [208] period found an oasis of tranquillity amid areas convulsed by continuous wars. The U.S. agent Hopkins informed his government in 1845 that in Paraguay there was no child who could not read and write. It was also the only country that did not have its eyes riveted on the other side of the ocean. Foreign trade was not the axis of national life; liberal doctrine, the ideological expression of the global market, had no answer to the defiant attitude that Paraguay -- forced by its inland isolation to grow inward -- adopted from the beginning of the century. Extermination of the oligarchy enabled the state to gather its economic mainsprings into its own hands, to put this autarchic internal development policy into effect.

The succeeding governments of Carlos Antonio Lopez and his son Francisco Solano continued and vitalized the task. The economy was in full growth. When the invaders appeared on the horizon in 1865, Paraguay had telegraphs, a railroad, and numerous factories manufacturing construction materials, textiles, linens, ponchos, paper and ink, crockery, and gunpowder. Two hundred foreign technicians, handsomely paid by the state, made a decisive contribution. From 1850 on, the Ibycui foundry made guns, mortars, and ammunition of all calibers; the arsenal in Asuncion produced bronze cannon, howitzers, and ammunition. The steel industry, like all other essential economic activities, belonged to the state. The country had a merchant fleet, and the Asuncion shipyard turned out many of the ships flying the Paraguayan flag on the Parana and across the Atlantic and Mediterranean. The state virtually monopolized foreign trade; it supplied yerba mate and tobacco to the southern part of the continent and exported valuable woods to Europe. The trade balance produced a big surplus. With a strong and stable currency, Paraguay was wealthy enough to carry out great public works without recourse to foreign capital. It did not owe one penny abroad, yet was able to maintain the best army in South America, hire British technicians to serve the state instead of putting the state at their service, and send some university students to finish their studies in Europe. The [209] economic surplus from agricultural production was not squandered by an oligarchy (which did not exist); nor did it pass into the pockets of middlemen and loan sharks, or swell the profits of the British Empire's freight and insurance men. The imperialist sponge, in short, did not absorb the wealth the country produced. Ninety-eight percent of Paraguayan territory was public property: the state granted holdings to peasants in return for permanently occupying and farming them, without the right to sell them. There were also sixty-four "estancias de la patria," haciendas directly administered by the state. Irrigation works, dams and canals, and new bridges and roads substantially helped to raise agricultural production. The native tradition of two crops a year, abandoned by the conquistadores, was revived. The lively encouragement of Jesuit traditions undoubtedly contributed to this creative process. [Fanatical monks of the Society of Jesus, "the Pope's black guard," had become defenders of the medieval order against the new forces bursting upon the European stage. But in Hispanic America Jesuit missions developed along progressive lines. They came to cleanse by abnegation and ascetic example a Catholic Church which had surrendered to sloth and the untrammeled exploitation of the goods the Conquest had made available to the clergy. It was the Paraguayan missions that reached the highest level; in little more than a century and a half (1603-1768), they fully justified the aims of their founders. The Jesuits used music to draw in Guarani Indians who had sought shelter in the forest, and who had stayed there rather than join in the "civilizing process" of the encomenderos and landlords. Thus 150,000 Guaranis were able to move back into their primitive community organization and revive their traditional arts and crafts. The latifundio system was unknown in the missions; the soil was cultivated partly to satisfy individual needs and partly to develop projects of common concern and to acquire the necessary work tools, which were common property. The Indians' life was intelligently organized; musicians and artisans, farmers, weavers, actors, painters, and builders gathered in workshops and schools. Money was unknown; traders were barred from entering and had to transact any business from hotels at an appropriate distance.

The Crown finally succumbed to the criollo encomenderos' pressure and the Jesuits were expelled from Latin America. Landlords and slave traders went in pursuit of the Indians. Corpses hung from trees in the missions; whole communities were sold in Brazilian slave markets. Many Indians took to the forest again. The Jesuits' libraries were used to fuel ovens or to make gunpowder cartridges.²⁵]

The state pursued a tough protectionist policy -- much reenforced in 1864 -- over national industry and the internal market; internal waterways were closed to the British ships which bombarded the rest [210] of Latin America with Manchester and Liverpool products. British commerce did not hide its concern, not only because this last bastion of national resistance in the heart of the continent seemed invulnerable, but also and especially because of the dangerous example set to its neighbors by Paraguayan obstinacy. Latin America's most progressive country was building its future without foreign investment, without British bank loans, and without the blessings of free trade.

But as Paraguay progressed, so did its need to break out of its seclusion. Industrial development called for closer and more direct contacts with the international market and with sources of advanced techniques. Paraguay was effectively blockaded by Argentina on one side and Brazil on the other, and both could starve its lungs of oxygen by closing the river mouths (as did Rivadavia and Rosas) or imposing arbitrary taxes on its merchandise in transit. In any event, it was indispensable for the consolidation of the oligarchical state to cut short the scandal of this odious country, which was sufficient unto itself and objected to bowing down before British merchants.

Britain's minister in Buenos Aires, Edward Thornton, played a substantial role in preparing for the war. When it was about to break out, he participated as a government advisor in Argentine cabinet meetings, sitting beside President Mitre. The web of provocations and deceptions, which ended with a Brazilian-Argentine agreement that sealed Paraguay's fate, was woven under Thornton's fatherly gaze. Venancio Flores invaded Uruguay, aided in his intervention by its two big neighbors, and after the Paysandu massacre he set up an administration in Montevideo subservient to Rio de Janeiro and Buenos Aires. The Triple Alliance was on the road. Paraguayan President Solano Lopez had threatened war in the event of an attack on Uruguay: he knew that this would close an iron pincers around the throat of his country, corraled as it was by geography and the enemy. Nevertheless, liberal historian Efraim Cardozo stoutly maintains that Lopez stood up to Brazil merely because he was offended: the emperor had refused him the hand of one of his daughters. The conflict was inevitable, but it was Mercury's work, not Cupid's.

The Buenos Aires press called Lopez "the Attila of America": "He must be killed like a reptile," thundered the editorials. In September 1864, Thornton sent a long confidential report to London, datelined [211] Asuncion. He described Paraguay as Dante described the inferno, but put stress where it belonged: "Import duties on nearly all articles are 20 or 25 percent ad valorem; but since this value is calculated on the current price of the articles, the duty that is paid often amounts to 40 to 45 percent of the invoice price. Export duties are from 10 to 20 percent of value . . ." In April 1865 the Buenos Aires English language daily, The Standard, was already hailing Argentina's declaration of war on Paraguay, whose president had "violated all the usages of civilized nations," and was announcing that Argentine President Mitre's sword "will hold high in its victorious course, in addition to the weight of past glories, the irresistible thrust of public opinion in a just cause." The treaty with Brazil and Uruguay was signed on May 1, 1865; its draconian terms were published a year later in the London Times, which got the text from banker-creditors in Argentina and Brazil. The future victors divided up the spoils of the vanquished in advance. Argentina was to get the whole territory of Misiones and the vast Chaco; Brazil got a fat slice west of its frontiers. Uruguay, ruled by a puppet of both powers, got nothing.

Mitre announced that he would take Asuncion in three months, but the war lasted five years. It was a carnage from the beginning to end of the chain of forts defending the Rio Paraguay. The "opprobrious tyrant" Solano Lopez was a heroic embodiment of the national will to survive; at his side the Paraguayan people, who had known no war for half a century, immolated themselves. Men and women, young and old, fought like lions. Wounded prisoners tore off their bandages so that they would not be forced to fight against their brothers. In 1870 Lopez, at the head of an army of ghosts, old folk, and children who had put on false beards to make an impression from a distance, headed into the forest. The invading troops set upon the debris of Asuncion with knives between their teeth. When bullets and spears finally finished off the Paraguayan president in the thickets of Cerro Cora, he managed to say: "I die with my country!" -- and it was true. Paraguay died with him. Lopez had previously ordered the shooting of his brother and a bishop who accompanied him on this caravan of death. The invaders came to redeem the Paraguayan people, and exterminated them. When the war began, Paraguay had almost as large a population as Argentina. Only 250,000, [212] less than one-sixth, survived in 1870. It was the triumph of civilization. The victors, ruined by the enormous cost of the crime, fell back into the arms of the British bankers who had financed the adventure. The slave empire of Pedro II, whose armies were filled with slaves and prisoners, nevertheless won more than twenty thousand square miles of territory -- plus labor, for the Paraguayan prisoners who were marched off to work on the Sao Paulo coffee plantations were branded like slaves. The Argentina of President Mitre, who had crushed his own federal leaders, came out with thirty-six thousand square miles of Paraguayan territory, as well as other booty: "The prisoners and other war materiel we will divide in a convenient form," he wrote. Uruguay, where the heirs of Artigas had been killed or defeated and an oligarchy ruled, participated in the war as a junior partner and without reward. Some Uruguayan soldiers sent into the Paraguayan compaign had boarded the ships with bound hands. The financial bankruptcy of the three countries deepened their dependency on Britain. The Paraguay massacre left its mark on them forever. [Solano Lopez lives on in memory. When, in September 1969, Rio de Janeiro's Museo Historico Nacional announced it would dedicate a window to the Paraguayan president, the military was furious. General Mourao Filho, who had set off the coup d'etat in 1964, told the press: "A wind of madness is sweeping the country. ... Solano Lopez is a figure who should be erased forever from our history, as a paradigm of the uniformed South American dictator. He was a butcher who destroyed Paraguay, leading it into an impossible war."]

Brazil had performed the role the British had assigned it when they moved the Portuguese throne to Rio de Janeiro. Lord Canning's instructions to the ambassador, Viscount Strangford, early in the nineteenth century, had been clear: make Brazil an emporium for British manufactures designed for consumption in all South America. Shortly before going to war, the Argentine president, inaugurating a new British railway line, made an impassioned speech: "What is the force driving this progress? Gentlemen, it is British capital!" In defeated Paraguay it was not only the population and great chunks of territory that disappeared, but customs tariffs, foundries, rivers closed to free trade, and economic independence. Within its shrunken frontiers, the conquerors implanted free trade and the [213] latifundio. Everything was looted and everything was sold: lands and forests, mines, yerba mate farms, school buildings. Successive puppet governments were installed in Asuncion by the occupation forces. The war was hardly over when the first foreign loan in Paraguay's history fell upon the smoking ruins. It was, of course, British. Its nominal value was £1 million, but a good deal less than half of this reached Paraguay; in ensuing years refinancing raised the debt to more than £3 million. The Opium War had ended in 1842 with a free-trade treaty signed in Nanking, consecrating the right of British traders to introduce the drug unrestrictedly into China; now the flag of free trade flew over Paraguay too. Cotton farming was abandoned and Manchester ruined textile production; the national industry never came back to life.

The Colorado Party, which now rules Paraguay, makes breezy mileage with the heroes' memory, but exhibits at the foot of its founding charter the signatures of twenty-two traitors to Solano Lopez, "legionnaires" who served with the Brazilian occupation troops. Dictator Alfredo Stroessner, who has spent the last fifteen years turning Paraguay into a large concentration camp, did his military training under Brazilian generals, who sent him back with high marks and warm eulogies: "He is worthy of a great future . . ." During his reign Stroessner has bestowed on Brazil and its U.S. masters- the dominant place occupied in previous decades by Anglo-Argentine interests. Brazil and Argentina, which "liberated" Paraguay in order to gobble it up, have taken turns since 1870 enjoying the fruits of the plunder. But they have their own crosses to bear from the imperialist power of the moment. Paraguay has the double burden of imperialism and subimperialism. The British Empire used to be the main link in the chain of dependencies, but today the United States, understanding only too well the geopolitical importance of this country at the center of South America, maintains countless advisors who train and advise the armed forces, cook up economic plans, refashion the university to their taste, invent a new "democratic" policy for the country, and reward the generous services of the regime with burdensome loans. [Before the 1968 elections General Stroessner visited the United States. "When I interviewed President Johnson," he told Agence France Presse, "I showed him that I had been fulfilling the prime ministerial function for twelve years by mandate of the polls. Johnson replied that that was another reason for continuing to exercise it in the next period."] Paraguay is also a colony [214] of other colonies. Using agrarian reform as a pretext, the Stroessner government annulled the legal ban on selling frontier lands to foreigners, and today even state lands have fallen into the hands of Brazilian coffee latifundistas. The invading wave has crossed the Rio Parana with the complicity of the president, in partnership with Portuguese-speaking landowners. When I arrived at Paraguay's shifting northeastern frontier, I had banknotes engraved with the face of the defeated Solano Lopez, but found that only those bearing the likeness of the victorious Emperor Pedro II are valid. After the passage of a century, the outcome of the War of the Triple Alliance takes on burning actuality. Brazilian guards demand passports from Paraguayan citizens who want only to move around in their own country. The flags and the churches are Brazilian. The land piracy also takes in the Guaira falls, the greatest potential source of energy in all Latin America; it is now called -- in Portuguese -- Sete Quedas. There, it has been announced, Brazil will build the world's largest hydroelectric station.

Subimperialism has a thousand faces. When President Johnson decided in 1965 to drown the Dominicans in blood, Stroessner sent along some Paraguayan soldiers to help him out. In a sinister jest, the battalion was called "Marshal Solano Lopez." The Paraguayans were under a Brazilian general's orders, for it was Brazil that received the Judas honors: its General Panasco Alvim headed Latin America's uniformed accomplices in the massacre. There are other similar examples. Paraguay gave Brazil an oil concession on its territory, but the fuel distribution and petrochemical business in Brazil is in U.S. hands. The Brazilian Cultural Mission reigns over the philosophy and education departments of Paraguay's university, but North Americans now run Brazil's universities. The Paraguayan army's general staff receives advice not only from Pentagon technicians but also from Brazilian generals who, in turn, are to the Pentagon as an echo to a voice. Through open contraband channels, Brazilian industrial products invade the Paraguayan market, but the Sao Paulo factories [215] that produce them have belonged to U.S. corporations since the denationalizing avalanche of recent years.

Stroessner considers himself the heir to Lopez. How can the Paraguay of a century ago be mentioned in the same breath with the Paraguay of today, the emporium of La Plata basin smuggling and the kingdom of institutionalized corruption? Yet at a political demonstration where the government party claimed both Paraguays at once to stormy applause and cheers, a boy openly hawked contraband cigarettes from a vendor's tray: the fervent gathering puffed nervously at Kents, Marlboros, Camels, and Benson & Hedges. The scanty middle class in Asuncion drinks Ballantine's whiskey instead of Paraguayan aguardiente. In the streets one sees late-model luxury cars made in the United States or Europe, brought in as contraband or after payment of a trifling customs duty, moving beside ox-drawn carts slowly bringing fruit to the market: the soil is worked with wooden plows and the taxis are 1970 Impalas. Stroessner defines contraband as "the price of peace": the generals fill their pockets and hatch no plots. Industry, of course, enters its death throes before it can grow. The state does not even implement the decree requiring preference for domestic products in public spending. In this area the only triumphs proudly displayed by the government are the Coca-Cola and Pepsi-Cola plants, installed at the end of 1966 as a U.S. contribution to the progress of the Paraguayan people.

The state declares that it will only intervene directly in the creation of enterprises "when the private sector shows no interest," x and the Banco Central informs the International Monetary Fund that it "has decided to establish a regime of free exchange and abolish restrictions on trade and on currency transactions." A booklet published by the Ministry of Industry and Trade advises investors that the country grants "special concessions to foreign capital." Foreign concerns are exempt from taxes and customs duties so as "to create a propitious climate for investment." The National City Bank of New York recovers all its invested capital in one year of business in Asuncion. The foreign bank appropriates the national savings and extends external credits to Paraguay, credits which further deform its economy and further mortgage its sovereignty. In the countryside, 1.5 percent of proprietors own 90 percent of the cultivated land, and [216] less than 2 percent of the total land area is under cultivation. The official colonization plan in the Caaguazu triangle offers hungry peasants more graves than gain. [Many peasants have finally opted to return to the minifundio region in the center of the country, or have joined the new exodus to Brazil, where they offer their cheap labor to Curitiba and Mato Grosso yerba mate plantations or Parana coffee plantations. Most desperate is the phght of the pioneer, who finds himself face to face with the jungle, totally without technical know-how or credit assistance, with government-"granted" lands from which he must wrest enough to eat and to meet his payments -- for if he fails to pay the stipulated price he does not get the land title.] The fatherland denies its children the right to work and daily bread, and Paraguayans emigrate en masse.

The furnaces of the Ibycui foundry, where the cannon used in the defense of the invaded fatherland was forged, were constructed in a place now called Mina-cue, which means "It was mine" in Guarani. There, among the swamps and mosquitos, near a crumbling wall, you can still see the base of a chimney blown up by the invaders a century ago, and pieces of rusted steel that were part of the structure. The few ragged peasants who live in the area don't even know which war it was that caused the destruction, but they say that sometimes at night you can hear the sounds of machinery and hammers, the roar of cannon, and the shouts of soldiers. The Triple Alliance has been a great success.

How Loans and Railroads Deformed the Latin American Economy

Rene Chateaubriand, France's foreign minister under Louis XVIII, wrote in presumably well-informed disgust: "In the hour of emancipation the Spanish colonies turned into some sort of British colonies."²⁷ He cited some figures. Between 1822 and 1826, he said, Britain had extended to the liberated Spanish colonies ten loans for a nominal value of around £21 million, but after deduction of interest and middlemen's commissions scarcely £7 million had actually reached Latin America. At the same time, more than forty limited stock companies had been created in London to exploit Latin America's natural resources -- mines, agriculture -- and to establish public service enterprises. Banks mushroomed in Britain: in one year, 1836, [217] forty-eight were founded. British railroads appeared in Panama around mid-century, and the first streetcar line in Latin America was inaugurated by a British firm in 1868 in the Brazilian city of Recife. The Bank of England also directly financed government treasuries: Latin American public bonds actively circulated, with their crises and booms, in the British financial market. Their public services in British hands, the new states from their inception faced a flood of military expenditures and also had to cope with external payment deficits. Free trade involved a frenzied increase in imports, especially of luxury articles; governments contracted debts, which in turn called for new loans, so that a minority could live fashionably. The countries were mortgaging their future in advance, moving away from economic freedom and political sovereignty. Except in Paraguay (whose contrary effort was crushed), the process was similar throughout Latin America -- and still is, although the creditors and the mechanisms are different. The need for external financing became, like the addict's need for morphine, indispensable. Holes were dug for the sake of filling them. Nor is the deterioration of commercial terms of exchange a phenomenon peculiar to our own day. According to Celso Furtado, the prices of Brazilian exports fell 40 percent between 1821 and 1830 and between 1841 and 1850, while foreign import prices remained stable: Latin America's vulnerable economies compensated for the decline with loans.²⁸

"The finances of these young states," writes Robert Schnerb, "are not sound . . . They must resort to inflation, which produces depreciation of the currency, and to onerous loans. These republics' history may be said to be that of the economic obligations they incur to the all-absorbing world of European finance."²⁹ In fact, bankruptcies, payment suspensions, and desperate refinancing were frequent. Pounds sterling ran out like water between the fingers. Of the £1 million loan that the Buenos Aires government negotiated with Baring Brothers in 1824, Argentina received only £570,000, and that not in gold (as stipulated) but in paper. The loan consisted of drafts on orders sent to British businessmen in Buenos Aires, who had no gold with which to pay since their real mission was to send all precious metals that came their way to London. So Argentina received paper but was required to pay in gold; it was not until early in this [218] century that Argentina canceled the debt, which successive refinancings had inflated to £4 million. Buenos Aires province had been completely mortgaged -- all its revenues, all its public lands -- as guarantee of payment. As the finance minister in the period when the loan was contracted said: "We are not in a position to take measures against foreign trade, particularly British, because we are bound to that nation by large debts and would expose ourselves to a rupture which would cause much harm . . ." The use of debt as an instrument of blackmail is not, as we can see, a recent U.S. invention.

Such usurious operations put bars around free nations. By the middle of the nineteenth century, servicing of the foreign debt absorbed almost 40 percent of Brazil's budget, and every country was caught in the same trap. Bailroads formed another decisive part of the cage of dependency: when monopoly capitalism was in flower, imperialist influence extended into the colonial economies' remote backyards. Many of the loans were for financing railroads to bring minerals and foodstuffs to export terminals. The tracks were laid not to connect internal areas one with another, but to connect production centers with ports. The design still resembles the fingers of an open hand: thus railroads, so often hailed as forerunners of progress, were an impediment to the formation and development of an internal market. The imperialist nations also achieved this in other ways, especially through a tariff policy cut to the British pattern. For example, freightage on articles processed in the Argentine interior was much higher than on unfinished goods. Railroad charges became a curse that made it impossible to manufacture cigarettes in tobacco-growing areas, to spin and weave in wool centers, or to finish wood in forest zones. True, the Argentine railroad developed the Santiago del Estero timber industry, but with such results that a local author groaned: "Oh, that Santiago had never had a tree!"³⁰ The cross-ties were made of wood, and charcoal served as fuel; the lumber camps created by the railroad broke up rural communities, destroyed agriculture and cattle-farming by razing pastureland and shade trees, enslaved several generations of Santiagans in the forests, and furthered depopulation. The mass exodus has not stopped and today Santiago del Estero is one of Argentina's poorest provinces. When the railroads switched to fuel oil, the region was plunged into a deep crisis. [219]

It was not British capital that laid the first tracks across Argentina, Brazil, Chile, Guatemala, Mexico, and Uruguay. Nor in Paraguay, as we have seen; but the railroads built by the Paraguayan state, with the help of European technicians, passed into British hands after the defeat. The other countries' railroads went the same way without producing a single centavo of new investment; furthermore, the state contracts took care to assure the companies a minimum profit level, to avoid possible unpleasant surprises. Decades later, at the end of World War II, when the railroads yielded no more dividends and had fallen into relative disuse, the public authorities got them back. Almost all of the states bought the scrap iron from the British and thus nationalized the companies' losses.

When the railroads were booming, the British concerns had often obtained considerable land concessions on either side of the tracks, in addition to the railbeds themselves and the right to build new branch lines. The land was an additional business bonanza. A fabulous gift to the Brazilian railway in 1911 led to the burning of countless huts and the eviction or death of peasant families in the concession area. It was this that triggered off the "Contestado" revolt, one of the greatest outbursts of popular fury in Brazilian history.

Protectionism and Free Trade in the United States: A Success Due Not to an Invisible Hand

When the Triple Alliance was announcing Paraguay's imminent destruction in 1865, General Ulysses S. Grant was celebrating Lee's surrender at Appomattox. The Civil War brought victory to Northern industrialists -- unblushing protectionists -- over the free-trade cotton and tobacco planters of the South. Thus the outbreak of the war that sealed Latin America's colonial fate coincided with the end of the war that enabled the United States to consolidate its position as a world power. As the newly elected president said:

For centuries England has relied on protection, has carried it to extremes, and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it [220] thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within two hundred years, when America has gotten out of protection all that it can offer, it too will adopt free trade.³¹

Two and a half centuries earlier, adolescent English capitalism had sent to its North American colonies its men, its capital, its way of life, its incentives, and its projects. The thirteen colonies, safety valves for Europe's surplus population, soon turned to account the "handicap" of their poor soil and subsoil, and from early days developed an industrializing philosophy which the metropolis did little to discourage. In 1631 the recently arrived colonists in Boston launched a thirty-ton sloop, Blessing of the Bay, which they had built themselves, and from then on the shipping industry grew rapidly. White oak, abundant in the woods, was ideal for the framing and hulls; decks, bowsprits, and masts were made of pine. Massachusetts subsidized production of hemp for rigging and ropes, and also encouraged local manufacture of canvas and sails. To the north and south of Boston the coasts were dotted with prosperous shipyards. The colonial governments extended subsidies and premiums to all kinds of manufacture. There were incentives to promote the production of flax and wool, raw materials for crude fabrics which, if not over-elegant, were weatherproof and national. To exploit Lynn iron deposits, the first foundry went into operation in 1643; soon Massachusetts was supplying iron to the whole region. When the stimuli to textile production seemed insufficient, this colony opted for compulsion: in 1855 it imposed heavy penalties on any family failing to keep at least one spinning wheel continuously active. In the same period each county of Virginia had to select children for instruction in textile manufacture. It was also prohibited to export hides, so that these could be used domestically for making boots, belts, and saddles.

Economic historian Edward Kirkland wrote that the handicaps with which colonial industry must contend come from every direction except British colonial policy.³² Indeed, three thousand miles' distance and the difficulties of communication made proscriptive legislation lose nearly all its force and favored the trend toward self-sufficiency. The Northern colonies sent no gold, silver, or sugar to [221] England, while their consumption needs produced an excess of imports which had somehow to be checked. Trade across the ocean was light; hence development of local manufactures was indispensable for. survival. England paid such scant attention to these colonies in the eighteenth century that they were able to introduce the latest metropolitan techniques into their factories, turning restrictive colonial pacts into scraps of paper. This was far from true of the Latin American colonies, which delivered their air, water, and salt to ascendant European capitalism and, in return, received a largesse of the finest and costliest luxury goods to pamper their ruling classes. The only expanding activities in Latin America were those oriented toward export, and so it continued in succeeding centuries: the economic and political interests of the mining and landlord bourgeoisie never coincided with the need for internal economic development, and businessmen were linked less with the New World than with foreign markets for the metals and foodstuffs they wanted to sell and with foreign sources of the manufactured articles they wanted to buy.

When the United States declared its independence, it had the same population as Brazil. The Portuguese metropolis -- as underdeveloped as the Spanish -- exported its underdevelopment to the colony. Throughout the eighteenth century, Brazil's economy had been orchestrated into the British symphony as imperial supplier of gold. This function was reflected in the colony's class structure. Unlike the United States, Brazil's ruling class was not made up of farmers, manufacturing entrepreneurs, and domestic businessmen. The chief interpreters of ruling-class ideals in the two countries, Alexander Hamilton and the Viscount de Caini (one of the main figures influencing the opening of the ports in 1808), expressed the difference clearly. Both had been disciples, in England, of Adam Smith. But while Hamilton had become a champion of industrialization and a promoter of state protection for national industry, Caini believed in the invisible hand that worked the magic of liberalism: laissez faire, laissez passer, laissez vendre.³³

By the end of the eighteenth century, the United States had the world's second merchant fleet, consisting entirely of ships built in its own yards, and its textile and steel mills were in surging growth. Soon afterward its machine industry got under way, eliminating the [222] need for its factories to buy capital goods abroad. The zealous Mayflower pilgrims had laid the foundations of a nation in the New England countryside; along its coast of deep bays and great estuaries an industrial bourgeoisie had continuously grown and prospered. In this, as we have seen, the Antilles trade -- including the sale of African slaves -- had played a major role, but the U.S. achievement would not have happened if it had not been kindled from the outset by a fierce nationalist flame. George Washington had advised in his farewell address that the United States should pursue a lone course. Emerson proclaimed in 1837: "We have listened too long to the courtly muses of Europe. . . . We will walk on our own feet; we will work with our own hands; we will speak our own minds."³⁴

Public funds broadened the internal market. The states built roads and railroads, bridges and canals. In mid-century, the state of Pennsylvania participated in launching more than one hundred and fifty mixed-economy enterprises, in addition to administering the $100 million invested in public works. The military operations which grabbed more than half of Mexico's territory also contributed substantially to the country's progress. But the state participated in the development process with more than capital investment and the military costs of expansion; in the North a tough protectionist policy had been inaugurated. The landlords of the South, on the contrary, were free traders. Cotton production doubled every ten years, and while it brought a large commercial income to the whole country and fed Massachusetts' modern textile mills, it depended above all on European markets. The Southern aristocracy, like that of Latin America, was primarily linked to the world market; 80 percent of the cotton spun in European mills came from the toil of Southern slaves. When abolition of slavery was added to Northern industrial protectionism, the contradiction set off the war. North and South confronted each other as two opposed worlds, two historical eras, two antagonistic philosophies of the national destiny. The twentieth century won this nineteenth-century war.

Let every free man sing . . .
Old King Cotton is dead and buried,

Before the Civil War Grant had participated in the plunder of Mexico; after it he was a protectionist president: all part of the same process of national affirmation. Northern industry was conducting the orchestra of history and, as political master of the state, seeing to its interests from the seat of power. The agricultural frontier moved westward and southward at the expense of Indians and Mexicans, but it was with small holdings, not latifundios, that it filled the new open spaces. The promised land not only attracted European peasants; masters of the most varied crafts and workers skilled in mechanics, metallurgy, and steel production also came from Europe to enrich the country's industrialization. By the end of the century the United States was the leading industrial power; in thirty years after the Civil War its factories had multiplied its production capacity by seven. It produced as much coal as Britain and twice as much steel, and had nine times as many miles of railroad. The center of the capitalist world was beginning to move.

After World War II the United States began to emulate Britain in [224] exporting the doctrine of free trade and free competition, so that other people could consume. The International Monetary Fund and World Bank emerged together to deny to underdeveloped countries the right of protecting their national industries, and to discourage state action in those countries. Infallible curative properties were attributed to private enterprise. But the United States did not abandon an economic policy which still remains rigidly protectionist, and which listens carefully to the voice of history: in the North the disease was never confused with the remedy.

1. Letter from Canning to Lord Grenville, as quoted in William W. Kaufmann, British Policy and the Independence of Latin America, 1804-1828 (New Haven: Yale University Press, 1951), p. 178.

2. Manfred Kossok, El Virreinato del Rio de la Plata: su estructura economico-social (Buenos Aires, 1959).

3. H. S. Ferns, Britain and Argentina in the Nineteenth Century (Oxford: Clarendon Press, 1960), p. 11.

4. Alexander de Humboldt, Political Essay on the Kingdom of New Spain (London, 1811), Book IV, Chapter XII.

5. Caio Prado Jr., Historia economica del Brasil (Buenos Aires, 1960).

6. The University Society, Bolivia en el primer centenario de su independencia (La Paz, 1925).

7. Sir Woodbine Parish, Buenos Ayres and the Provinces of the Rio de la Plata (London: John Murray, 1839), p. 338.

8. Paulo Schilling, Brasil para extranjeros (Montevideo, 1966).

9. Gustavo Beyhaut, Raices contempordneas de America Latina (Buenos Aires, 1964).

10. Hernan Ramirez Necochea, Historia del imperialismo en Chile (Santiago de Chile, 1960).

11. Karl Marx, "On the Question of Free Trade," in The Poverty of Philosophy (New York: International Publishers, 1963), p. 223.

12. Luis Chavez Orozco, La industria de transformacion mexicana, 1821-1867. Coleccion de documentos para la historia del comercio exterior de Mexico, vol. 7 (Mexico: Banco Nacional de Comercio Exterior, 1962).

13. Alonso Aguilar Monteverde, Dialectica de la economia mexicana (Mexico, 1968).

14. Banco Nacional de Comercio Exterior, Coleccion, vol. 3.

15. Dardo de la Vega Diaz, La Rioja Heroica (Mendoza, 1965).

16. Literal translation. (Trans.)

17. Quoted in Miron Burgin, The Economic Aspects of Argentine Federalism, 1820-1852 (Cambridge, Mass.: Harvard University Press, 1946), p. 141.

18. Juan Alvarez, Las guerras civiles argentinas (Buenos Aires, 1912).

19. John F. Cady, La intervention extranjera en el Rio de la Plata (Buenos Aires, 1943).

20. Vivian Trias, Juan Manuel de Rosas (Montevideo, 1970).

21. Speech by Gervasio A. de Posadas, cited in Dardo Cuneo, Comportamiento y crisis de la close empresaria (Buenos Aires, 1967).

22. Domingo Faustino Sanniento, Facundo (Buenos Aires, 1952).

23. Mario Margulis, Migracion y marginalidad en la sociedad argentina (Buenos Aires, 1968).

24. Pablo Neruda, Obras completas, vol. 1 (Buenos Aires, 1967), section entitled "La Arena traicionada."

25. Jorge Abelardo Ramos, Historia de la nacion latinoamericana (Buenos .Aires, 1968).

26. National Technical Planning Secretariat, Plan nacional de desarrollo economico y social (Asuncion, 1966).

27. Quoted in R. Scalabrini Ortiz, Politico britdnica en el Rio de la Plata (Buenos Aires, 1940).

28. Celso Furtado, The Economic Growth of Brazil (Berkeley & Los Angeles: University of California Press, 1963), p. 117.

29. Robert Schnerb, Le XIXe. siecle: Vapogee de Vexpansion europeenne, 1815-1914 (Paris, 1968).

30. J. Eduardo Retondo, El bosque y la industria forestal en Santiago del Estero (Santiago del Estero, 1962).

31. Quoted in Andre Gunder Frank, Capitalism and Underdevelopment in Latin America (New York and London: Monthly Review Press, 1967), p. 164, and retranslated from the Spanish.

32. Edward C. Kirkland, A History of American Economic Life (1932; reprint ed., New York: Appleton, 1969).

33. Furtado, Economic Growth of Brazil, p. 109.

34. Ralph Waldo Emerson, "The American Scholar," in The Complete Essays and Other Writings of Ralph Waldo Emerson (New York: Modern Library, 1950), pp. 62-63.

35. See C. Vann Woodward, Origins of the New South, 1879-1913 (Baton Rouge: Louisiana State University Press, 1951).

Additional Bibliography for Chapter 4

Alberdi, Juan Bautista. Historia de la guerra del Paraguay. Buenos Aires, 1962.

Alen Lascano, Luis C. Imperialismo y comercio libre. Buenos Aires, 1963.

Bazan, Armando Raul. "Las bases sociales de la montonera." Revista de historia americana y argentina (Mendoza), 1962/1963.

Bazant, Jan. "Estudio sobre la productividad de la industria algodonera mexicana en 1843-1845." In Coleccion de documentos para la historia del comercio exterior de Mexico. Mexico: Banco National de Comercio Exterior, 1962.

Box, Pelham Horton. Los origenes de la Guerra de la Triple Alianza. Buenos Aires/Asuncion, 1958.

Busaniche, Jose Luis. Rosas visto por sus contempordneos. Buenos Aires, 1955.

Cardozo, Efraim. El imperio del Brasil y el Rio de la Plata. Buenos Aires, 1961.

Chaves, Julio Cesar. El Presidente Lopez. Buenos Aires, 1955.

Levene, Ricardo. "Introduction" to Documentos para la historia argentina (1919). Buenos Aires, 1962.

Manchester, Alan K. British Preeminence in Brazil: Its Rise and Fall. Chapel Hill, N.C.: The University of North Carolina Press, 1933.

Mitre, Bartolome and Gomez, Juan Carlos. Cartas polemicas sobre la guerra del Paraguay. Buenos Aires, 1940.

Normano, J. F. Evoluqao economica do Brasil. Sao Paulo, 1934.

Ortega Pena, Rodolfo and Duhalde, Eduardo Luis. Felipe Varela contra el Imperio Britdnico. Buenos Aires, 1966.

Pereyra, Carlos. Francisco Solano Lopez y la guerra del Paraguay. Buenos Aires, 1945.

Perez Acosta, Juan F. Carlos Antonio Lopez, obrero mdximo: labor administrativa y constructiva. Asuncion, 1948.

Pierce, H. H. The Railroads of New York: A Study of Government Aid, 1826-1875. Cambridge: Harvard University Press, 1953.

Ramirez Necochea, Hernan. Antecedentes economicos de la independencia de Chile. Santiago de Chile, 1959.

Rippy, J. Fred. British Investments in Latin America: A Case Study in the Operation of Private Enterprise in Retarded Regions, 1822-1949. Minneapolis: University of Minnesota Press, 1959.

Romero, Emilio. Historia econdmica del Peru. Buenos Aires, 1949.

Rosa, Jose Maria. La guerra del Paraguay y las montoneras argentinas. Buenos Aires, 1965.

Santos Martinez, Pedro. Las industrias durante el Virreinato, 1776-1810. Buenos Aires, 1969.

Veliz, Claudio. "La mesa de tres patas." Desarrollo economico (Santiago de Chile), September 1963.