5. The Contemporary Structure of Plunder

An Impotent Talisman

Of all the direct private investment in Latin America coming from abroad, less than one-fifth was from the United States when Lenin wrote Imperialism in the spring of 1916. Today, nearly three-quarters is from the United States. What was the imperialism Lenin knew? The rapacity of industrial centers seeking world markets for their merchandise; the fever to capture all possible sources of raw materials; the plunder of iron, coal, and petroleum; the railroads which linked the control of dominated areas; the voracious loans of the financial monopolies; the military expeditions; the wars of conquest. It was an imperialism that poisoned any place where a colony or semi-colony might dare to build a factory of its own. Industrialization was the privilege of the metropolis; in the poor countries it was incompatible with the rich countries' system of domination. The end of World War II found European interests in full retreat from Latin America, and U.S. investments triumphantly advancing. Since then there has been an important change in the focus of investment. Step by step, year by year, capital put into public services and mining has lost importance, while investments in petroleum and, above all, in manufacturing have grown in proportion. At the present time $1 of every $3 invested in Latin America is invested in industry. [Forty years ago U.S. investment in transformation industries was only 6 percent of the total U.S. capital invested in Latin America. In 1960 it grazed the 20 percent mark, and has continued rising to become nearly one-third of the total.] [226]

In return for insignificant investments, the affiliates of giant corporations jump over customs barriers erected -- paradoxically -- against foreign competition, and take over the internal industrializing process. They export factories or, not infrequently, corner and devour those already existing. For this they can rely on the enthusiastic aid of most local governments and on the power of extortion with which international credit organizations endow them. Imperialist capital captures markets from within, appropriating the key sectors of local industry: it conquers or constructs the decisive strongholds from which to control the rest. The OAS describes the process thus: "Latin American enterprises continue in control of already established and less sophisticated industries and techniques, while private investment from the United States -- and probably from other industrialized countries also -- rapidly increases its participation in certain dynamic industries, which require a relatively high technical level and are more important in determining the course of economic development."¹ Thus the dynamism of U.S. factories south of the Rio Grande is much more intense than that of Latin American industry in general. The figures for the three biggest countries are eloquent: with an index of 100 in 1961, Argentina's industrial product amounted to 112.5 in 1965, while in the same period sales by Unaffiliated concerns rose to 166.3. For Brazil the equivalent figures are 109.2 and 120; for Mexico, 142.2 and 186.8.

The interest of the imperialist corporations in appropriating Latin American industrial growth and capitalizing it for their own benefit does not, of course, imply a disinterest in traditional forms of exploitation. It is true that United Fruit's railroad in Guatemala stopped being profitable, and that nationalization by Brazil was splendid business for Electric Bond & Share and International Telephone and Telegraph, which received indemnities in pure gold for rusty installations and museum-piece machinery. But if public services are abandoned for more profitable activities, raw materials are a different matter. How would the Imperium make out without Latin America's oil and minerals? Despite the relative decline in mining investment, [227] the U.S. economy cannot, as we have seen, do without the vital supplies from the south and the juicy profits they bring. Furthermore, the investments that turn Latin American factories into mere cogs in the giant corporations' machinery do not in any way alter the international division of labor. There is no change in the system of intercommunicating arteries through which capital and merchandise circulate between poor countries and rich countries. Latin America continues exporting its unemployment and poverty: the raw materials that the world market needs, and on whose sale the regional economy depends. Unequal exchange functions as before: hunger wages in Latin America help finance high salaries in the United States and Europe. Brazil, despite its industrialization, continues substantially dependent on coffee exports, Argentina on sales of meat; Mexico exports very few manufactures.

There are always politicians and technocrats ready to show that the invasion of "industrializing" foreign capital benefits the area invaded. In this version, the new-model imperialism comes on a genuinely civilizing mission, is a blessing to the dominated countries, and the true-love declarations by the dominant power of the moment are its real intentions. Guilty consciences are thus relieved of the need for alibis, for no one is guilty: today's imperialism radiates technology and progress, and even the use of this old, unpleasant word to define it is in bad taste. But when imperialism begins exalting its own virtues we should take a look in our pockets. We find that the new model does not make its colonies more prosperous, although it enriches their poles of development; it does not ease social and regional tensions, but aggravates them; it spreads poverty even more widely and concentrates wealth even more narrowly; it pays wages twenty times lower than in Detroit and charges prices three times higher than in New York; it takes over the internal market and the mainsprings of the productive apparatus; it assumes proprietary rights to chart the course and fix the frontiers of progress; it controls national credit and orients external trade at its whim; it denationalizes not only industry but the profits earned by industry; it fosters the waste of resources by diverting a large part of the economic surplus abroad; it does not bring in capital for development but takes it out. As various ECLA reports have shown, the hemorrhage of profits from direct [228] U.S. investments in Latin America has been five times greater in recent years than the infusion of new investments. To enable the corporations to take out their profits, Latin American countries mortgage themselves to foreign banks and international credit organizations, thus multiplying the flow of the next bloodlettings. The result is the same for industrial investment as it is for the "traditional" kind.

In the rigid framework of a global capitalism integrated around the big U.S. corporations, the industrialization of Latin America has increasingly less to do with progress and national liberation. The talisman was robbed of its power in the decisive defeats of the past century, when ports triumphed over interiors and free trade crushed new-born national industries. And the twentieth century produced no bourgeoisie strong and creative enough to reshoulder the task and follow it through to its end. Every effort petered out halfway to the goal. What happened to Latin America's industrial bourgeoisie was what happens to dwarfs: it became decrepit without having grown. Our bourgeois of today are agents and functionaries of prepotent foreign corporations. Truth compels us to admit that they never did anything to deserve a better fate.

The Guards Themselves Open the Gates: The Guilty Sterility of the National Bourgeoisie

The present structure of industry in Argentina, Brazil, and Mexico -- the three touted poles of Latin American development -- shows deformations characteristic of a reflected development. With rare exceptions, the satellization of industry in other, weaker countries has been easily achieved. There is certainly nothing competitive about a capitalism that today exports factories as well as merchandise and capital, that penetrates and hogs everything: this is a global industrial conglomeration by capitalism in the age of the multinational corporation, of the giant monopoly embracing every kind of activity in every corner of the earth. U.S. capital is more tightly concentrated in Latin America than in the United States itself; a handful of concerns control the overwhelming majority of investments. For them the nation is not a task to undertake, a flag to defend, or a destiny to fulfill: it is [229] no more than a hurdle to leap -- for sovereignty can be inconvenient -- or a succulent fruit to devour. But is the nation a destiny to fulfill to the ruling classes in each country? The grand march of imperialist capital has found local industry defenseless and unaware of its historic role. The bourgeoisie has enlisted in the foreign invasion force without shedding tears or blood; and with the Latin American economy getting steadily weaker over the past two decades, the state's influence upon it has been reduced to an all-time low by the good offices of the International Monetary Fund. U.S. corporations went into Europe like conquistadors and grasped the reins of the old continent's development so firmly that before long, we are told, U.S. industry in Europe will be the world's third industrial power after the United States and the U.S.S.R.² If the European bourgeoisie, with its tradition and power, has not been able to dam the flood, what hope is there that, at this stage of history, Latin America's bourgeoisie will lead the impossible venture of independent capitalist development? In fact, the denationalization process in Latin America has been much speedier and cheaper and has had far worse consequences.

The growth of Latin American manufacturing was sparked, in our century, from outside, rather than by planned national development policies. It has not been a maturing of productive forces; nor was it the result of an explosion of internal conflicts -- conflicts allegedly "overcome" -- between landlords and an ascendant artisan class, for that class was short-lived. Latin American industry was delivered from the very womb of the agro-export system, in response to an acute disequilibrium provoked by the fall of external trade. Two world wars, and especially the capitalist depression that followed "Black Friday" in October 1929, abruptly and violently curtailed the region's exports and consequently its capacity to import. Prices of suddenly scarce foreign industrial products soared. No industrial class free from traditional dependency emerged: the manufacturing impetus came from capital accumulated by landlords and importers. It was the big cattlemen who imposed exchange controls in Argentina. The chairman of the Sociedad Rural, who had become Minister of Agriculture, said in 1933: "The isolation in which we have been placed by a dislocated world obliges us to manufacture here what we can no longer buy in countries that buy from us."³ Coffee hacendados [230] hurried to put much of their capital accumulated from external trade into the industrialization of Sao Paulo: "In contrast with the industrialization of already developed countries," a government document said, "Brazil's industrialization was not a slow process, a part of a general process of economic transformation. It was rather a rapid and intense phenomenon, superimposed on the previously existing socioeconomic structure without entirely modifying it, giving rise to the profound sectoral and regional differences which characterize Brazilian society." ⁴

From the start, the new industry dug itself in behind protective customs barriers erected by the governments, and it grew thanks to measures taken by the state to restrict and control imports, fix special exchange rates, avoid taxation, buy or finance production surpluses, build roads for the transport of raw materials and merchandise, and create or extend sources of energy. The nationalist and broadly popular governments of Getulio Vargas (1930-1945 and 1951-1954), La-zaro Cardenas (1934-1940), and Juan Domingo Peron (1946-1955) expressed the need of Brazilian, Mexican, and Argentine industry to "take off," to develop or consolidate according to place and period. In Latin America, the "spirit of enterprise" that defines certain basic characteristics of the industrial bourgeoisie in developed capitalist countries was a characteristic of the state, especially in these decisive periods. Instead of the social class for which history clamored with small success, it was the government of the populist caudillos that embodied the nation and gave the masses political and economic access to the benefits of industrialization. The industrial bourgeoisie hatched in this incubator did not differ essentially from previous ruling classes. Peron, for example, inspired panic in the Union Industrial -- whose leaders, not without reason, saw the ghost of the provincial montoneras reappearing in the rebellion of the Buenos Aires suburban proletariat. Before Peron defeated it in the February 1946 elections, the conservative coalition received a famous check from the industrialists' leader; ten years later, when Peron fell, it was again clear to them that their contradictions with the oligarchy -- of which they for better or worse formed a part -- were not fundamental. In 1956 the Union Industrial made a united front with the Sociedad Rural and the Bolsa de Comercio in defense of free association, free [231] enterprise, freedom to trade, and freedom to hire. In Brazil, an important sector of the manufacturing bourgeoisie closed ranks with the forces that drove Vargas to suicide. The Mexican experience had distinctive characteristics and promised much more to the Latin American process of change than it finally contributed. The Cardenas nationalist cycle was the only one that broke lances with the landlords by carrying out the agrarian reform for which the country had agitated since 1910. In other countries -- not merely in Argentina and Brazil -- industrializing governments left the latifundio structure intact, so that it continued to strangle the internal market and agricultural production. [Chile, Colombia, and Uruguay also did some industrializing as a substitute for importing in the periods referred to here. Uruguayan President Jose Battle y Ordonez (1903-1907 and 1911-1915) had previously been a prophet of the bourgeois revolution in Latin America. Uruguay put the eight-hour day into law before the United States. Batlle's welfare-state experiment was not limited to implementation of the most advanced social laws of the time; it also gave a strong impetus to cultural development and mass education, and nationalized public services and various economically important productive activities. But it neither touched the power of the landlords, nor nationalized banking or foreign trade. Today Uruguay suffers the consequences of the prophet's perhaps inevitable omissions and of his successors' betrayals.]

Generally speaking, industry landed as an airplane does, without affecting the airport: conditioned by and serving the needs of a previously existing internal market, it never broadened that market enough to make great structural changes possible. Industrial development required more and more imports of machinery, spare parts, fuel, and intermediate products, ["The transfer of a particular product to internal production only 'substitutes' for part of the aggregate value previously generated outside the economy. ... To the extent that consumption of this 'substituted' product expands rapidly, the resultant demand for imports can rapidly overtake the foreign-currency economy . . ."⁵] but exports, the source of foreign currency, could not pay for these since they came from an activity condemned to backwardness by its masters. Under the Peron regime, the Argentine state achieved a monopoly of grain exports but did not touch the land-ownership system; nor did it nationalize the big U.S. and. British meatpacking plants or the wool exporters. Thus the official push toward heavy industry was extremely weak and the state did not realize in time that if it did not give birth to a technology of [232] its own, its nationalist policy would take flight with clipped wings. By 1953 Peron, who had come to power in direct confrontation with the U.S. ambassador, was giving Milton Eisenhower a rousing welcome and soliciting the cooperation of foreign capital in promoting dynamic industries. [The Minister of Economic Affairs replied thus to a representative of the magazine Vision on November 27, 1953:

"Apart from the oil industry, what other industries does Argentina want to develop with the cooperation of foreign capital?"

"To be precise, let us cite in order of priority oil . . . Secondly, the steel industry . . . Heavy chemistry . . . Manufacture of transport units . . . Manufacture of tires and axles . . . And construction of diesel engines."⁶] The need for a "partnership" between national industry and the imperialist corporations became pressing as substitution for imported manufactures was speeded up and as the new factories required rising levels of technology and organization. The same trend emerged in Getulio Vargas' industrialization plan, and was dramatized in Vargas' final tragic decision. Foreign oligopolies, with their ultramodern technology, steadily and not very secretly took over the national industry of all Latin American countries, including Mexico, by the sale of manufacturing techniques, patents, and new equipment. Wall Street had definitely taken the place of Lombard Street, and it was the U.S. concerns which settled down to enjoy superpower in the region. To this penetration of the manufacturing field was added ever increasing interference in banking and commerce: the Latin American market was being integrated into the internal market of the multinational corporations.

In 1965 Roberto Campos, economic czar of the Castelo Branco dictatorship, announced that "the era of charismatic leaders surrounded by a romantic aura is giving place to a technocracy."⁷ The U.S. embassy had directly participated in the coup against the Joao Goulart government; the fall of Goulart, Vargas' heir in style and aim, rang down the curtain on populism and mass politics. "We are a beaten, dominated, conquered, destroyed nation," a friend wrote to me from Rio de Janeiro some months after the success of the military plot: the denationalization of Brazil meant iron-fisted rule by an unpopular dictatorship. Capitalist development could no longer be fitted in with the great mass mobilization around a caudillo like Vargas. [233] To contain runaway inflation at the expense of the greater poverty of the poor, the regime had to ban strikes and destroy unions and parties, to jail, torture, and kill, to cut workers' wages by any means necessary. A survey in 1966-1967 showed that 84 percent of Brazil's big industrialists thought the Goulart government's economic policy had been harmful. Undoubtedly, among them were those captains of the national bourgeoisie Goulart tried to lean on in order to stem the imperialist bloodletting of the national economy. The same process of repressing and strangling the people occurred under On-gania in Argentina -- actually, it had begun with Peron's defeat in 1955, just as in Brazil it began with the shot that killed Vargas in 1954. In Mexico, too, denationalization of industry coincided with increasingly repressive policies by the party that monopolizes the government.

As Fernando Henrique Cardoso has noted, light or "traditional" industry, which grew under the benevolent protection of populist governments, requires increased consumption by the masses, the people who buy shirts or cigarettes.8 But "dynamic" industry -- the production of intermediate and capital goods -- is directed toward a restricted market, one which has the big concerns and the state at its top: a few consumers with big financial resources. Dynamic industry, now in foreign hands, rests upon and subordinates previously existing traditional industry. In the traditional sectors, technologically at a low level, national capital retains some strength; the less the capitalist is tied to international modes of production by technological and financial dependence, the more he tends to favor agrarian reform and the raising of mass consumer-power through the trade union struggle. On the other hand, those with closest foreign connections, representing dynamic industry, simply want strengthened bonds between the dependent countries' islands of development and the world economic system, and they subordinate internal transformations to this priority. Here are the throats from which the song of the industrial bourgeoisie emerges, as is shown in all the recent Argentine and Brazilian surveys Cardoso uses as raw material. The big businessmen are firmly opposed to agrarian reform; most of them deny that the manufacturing sector has different interests from the rural sector and believe that nothing is more important for industrial development than [234] the cohesion of all productive classes and the strengthening of the Western bloc. Only 2 percent of the great industrialists in Argentina and Brazil think the workers are of primary political importance. Most of those interviewed were "national entrepreneurs"; and most were bound hand and foot to foreign power centers by the myriad bonds of dependency.

Could anything else be expected at this point? The industrial bourgeoisie is a dominant class dominated in turn from abroad. The chief latifundistas on the Peruvian coast, now being expropriated by the Velasco Alvarado government, are also owners of thirty-one transformation industries and many other assorted enterprises. The situation is similar in all the other countries: a few hundred families own the factories and lands, the large businesses and banks.⁹ Mexico is no exception: the national bourgeoisie, subordinated to big U.S. concerns, is much more afraid of mass pressure than of imperialist oppression, in whose bosom it is developing without independence -- and without the creative imagination attributed to it -- and has efficiently multiplied its interests. [As Alonso Aguilar says: "Mexican capitalists are more and more versatile and ambitious. With business freedom as their point of departure for acquiring wealth, they -- or at least the most prominent -- enjoy a network of channels through which to multiply and interweave their interests by friendships, business partnerships, marriage corn-paternity [compadrazgo] of children, extension of mutual favors, membership in certain clubs or groups, frequent social gatherings and, of course, affinity in their political positions."¹⁰] In Argentina, the founder of the Jockey Club, center of latifundista social prestige, was also the leading industrialist, and thus an immortal tradition was born at the end of the past century." [He was Carlos Pellegrini. The Jockey Club honored him by publishing his speeches; those in which the industrialists' points of view were supported were omitted."¹¹] Manufacturers with fattened bank accounts marry landlords' daughters to gain entry to the oligarchy's most exclusive salons, or buy land for the same purpose; and not a few cattle ranchers have -- at least in boom periods -- invested capital surpluses accumulated in their hands in industry. Faustino Fano, who made a good part of his fortune as a textile merchant and industrialist, held the presidency of the Sociedad Rural for four terms before his death in [235] 1967: "Fano destroyed the false contradiction between agriculture and industry," his press obituaries proclaimed. Industrial surpluses are turned into cows. The powerful Di Telia brothers sold their auto and refrigerator factories to foreign capitalists and now raise prize bulls for Sociedad Rural shows. Half a century ago the Anchorena family, which owned Buenos Aires province up to its borders, built one of the city's biggest metallurgical plants.

In Europe and the United States, the industrial bourgeoisie made a very different kind of entrance onto the stage of history, and grew and consolidated its power in quite a different way.

Which Flag Flies Over the Machinery? [Which flag flies" is part of a famous saying by Jose Artigas. (Trans.)]

The old woman stooped and fanned the fire with her hand. Back bent, wrinkled neck extended, she looked like an ancient black tortoise. But her ragged dress certainly gave less protection than a shell, and, after all, it was only the years that made her so slow. Behind her the wall of her hovel, made of bits of wood and tin, sagged like its occupant; beyond were similar hovels of the Sao Paulo slum. Before her the water for coffee was boiling in a blackened kettle. She lifted a small tin can to her lips and, before drinking, shook her head and shut her eyes. "O Brasil e nosso," she said -- Brazil is ours. In the center of the same city, and at that same moment, the executive director of Union Carbide was thinking the same thing -- but in another language -- as he raised a crystal glass to drink to the firm's capture of still another Brazilian plastics factory. One of the two was mistaken.

Since 1964 Brazil's successive military dictators have marked the anniversaries of the various state enterprises by announcing their imminent denationalization, now known as "recuperation." Ministers flock to celebrate every opening of a foreign factory. Law 56,570, passed on July 6, 1965, reserved the petro-chemical industry for the state; Law 56,571, passed the same day, annulled Law 56,570, opening up petro-chemicals to private investment. Thus directly, or through "partnership" with the state, Dow Chemical, Union Carbide, the Rockefeller group, and Phillips Petroleum won the most [236] coveted "filet mignon," the oil derivatives industry in which a boom in the 1970s was anticipated. What happened in the few hours between the two laws? Rustling curtains, footsteps in the hallway, desperate hangings on the door, green bills in swift motion, a flurry in the palace: from Shakespeare to Brecht, many would have enjoyed describing it. A government minister admits: "In Brazil, apart from the state itself, and with honorable exceptions, only foreign capital is strong."¹² And the government does its best to avoid any irksome competition with U.S. and European corporations.

Foreign capital for manufacturing began copiously flowing into Brazil in the 1950s, and got a strong impetus from the development plan President Juscelino Kubitschek put into effect between 1957 and 1960. Those were the days of growth euphoria. Brasilia emerged as if from a magician's cauldron, in a wilderness where the Indians had not yet heard of the wheel; highways and great dams were built; automobile factories produced a new car every two minutes. The industrial curve climbed steeply. Doors were flung open to foreign investment, the dollar invasion was hailed, the dynamism of progress was felt in the air. Banknotes circulated before the ink dried; the leap forward was financed by inflation and a heavy external debt that would be unloaded on the backs of successor governments. A special type of exchange for remitting profits to the foreign concerns' head offices and amortizing their investment was introduced and guaranteed by Kubitschek. The state assumed co-responsibility for payment of debts contracted abroad by these concerns, and arranged a cheap dollar for amortization and interest on these debts: according to an ECLA report, over 80 percent of all investment between 1955 and 1962 came from state-guaranteed loans.¹³ In other words, more than four-fifths of these concerns' investments came from foreign banks and became a further addition to the Brazilian state's millstone of external debt. Special benefits were also granted for the importation of machinery. [Eugenio Gudin, an economist much in favor of foreign investment, estimates that under this heading alone Brazil made a present to United States and European concerns of no less than $1 billion. According to Moacir Paixao, privileges extended to the auto industry in the period of its inception were equivalent to the national budget. Paulo Schilling notes that while the Brazilian state showered benefits on the big international corporations, permitting them maximum profits with minimum investment, it refused help to the Fabrica Nacional de Motores, created in the Vargas period.¹⁴ Later, during the Castelo Branco regime, this state enterprise was sold to Alfa Romeo.] National enterprises did not enjoy the benefits extended to General Motors and Volkswagen. [237]

The denationalizing effects of this seduction of imperialist capital emerged in the findings of the university's Instituto de Ciencias So-ciales when it investigated Brazil's great economic groupings.15 Of conglomerates with capital exceeding four billion cruzeiros, more than half were foreign and most were United States' owned; of those with more than ten billion cruzeiros, twelve were foreign and five Brazilian. "The bigger the economic group, the more likely it is to be foreign," concluded Mauricio Vinhas de Queiroz in analyzing the results of the investigation. Equally or more eloquent was the fact that of the twenty-four Brazilian groups with over four billion in capital, only nine were not linked by shareholdings to U.S. or European capital, and two of the nine had interlocking foreign directorships. The survey showed that ten economic groups had a virtual monopoly in their respective lines, and that of these, eight were affiliates of big U.S. corporations.

But all this was child's play compared to what came later. Between 1964 and mid-1968, fifteen auto and auto parts factories were swallowed up by Ford, Chrysler, Willys Overland, Simca, Volkswagen, and Alfa Borneo. In the electric-electronic sector, three important Brazilian concerns passed into Japanese hands. Wyeth Laboratories, Bristol Meyers, Mead Johnson, and Lever Brothers gobbled various laboratories, reducing national production of drugs to one-fifth the market. Anaconda pounced on nonferrous metals and Union Carbide on plastics, chemicals, and petro-chemicals; American Can, American Machine & Foundry, and other colleagues took over six Brazilian machine and metallurgical concerns; the Companhia de Mineracao Geral, owner of one of Brazil's biggest metallurgical plants, was bought for a song by a Bethlehem Steel-Chase Manhattan-Standard Oil consortium. A parhamentary commission set up to investigate the matter reached some sensational conclusions, but the [238] military regime closed the doors of Congress and the findings never got to the Brazilian public. [The commission found that in 1968 foreign capital controlled 40 percent of the capital market in Brazil, 62 percent of external trade, 82 percent of ocean transport, 67 percent of external air transport, 100 percent of motor vehicle production, 100 percent of tire manufacturing, more than 80 percent of the pharmaceutical industry, about 50 percent of the chemical industry, 59 percent of machinery and 62 percent of auto parts production, 48 percent of aluminum and 90 percent of cement production. Half of the foreign capital was that of U.S. concerns, followed by German. It is interesting to note in passing the increasing weight of the Federal Republic of Germany's investments in Latin America. Of every two autos made in Brazil, one comes from the Volkswagen plant, the biggest in the whole region. The first auto factory in South America was German -- Mercedes-Benz Argentina, founded in 1951. The German firms Bayer, Hoechst, BASF, and Schering control a substantial part of Latin America's chemical industries.]

Under Castelo Branco, an investment-guarantee agreement was signed which gave foreign concerns virtual extraterritoriality: taxes on their profits were cut and they were given extraordinary credit facilities, while tourniquets applied by the Goulart government to the profits drain were removed. The dictatorship hawked the country to foreign capitalists as a pimp offers a woman, and put the stress where it belonged: "The treatment of foreigners in Brazil is among the most liberal in the world ... no general restrictions are in effect with reference to the nationality of owners, partners, or shareholders . . . There is no limit to the percentage of the registered capital that may be remitted as profit . . . No limitation is placed on the repatriation of capital, and reinvestment of profits is considered as an increase of the original capital . . ."¹⁶

Argentina competes with Brazil for the role of imperialist-investment favorite, and its military regime did not lag in singing the benefits during the same period. In his 1967 speech defining Argentine economic policy, Juan Carlos Ongania reaffirmed that the hens granted equal opportunity to the fox: "Foreign investments in Argentina will be considered on an equal footing with investments of internal origin, in accordance with the traditional policy of our country which has never discriminated against foreign capital."¹⁷ As in Brazil, Argentina puts no limitations on the entrance of foreign capital, its movement within the national economy, the export of profits, or the repatriation of capital; payments for patents, royalties, and technical [239] assistance are made freely. The government exempts the concerns from taxes and extends to them special exchange rates, in addition to many other stimuli and exemptions. Between 1963 and 1968, fifty important Argentine enterprises -- twenty-nine of which passed into U.S. hands -- were denationalized in such varied sectors as steel, autos and auto parts, petro-chemicals, chemicals, the electrical industry, paper, and cigarettes. In 1962 two private-capital Argentine concerns, Siam Di Telia and Industrias Kaiser Argentinas, were among the five biggest industrial enterprises in Latin America; in 1967 both had been generously surrendered to imperialist capital. Of the country's largest enterprises, those with sales exceeding seven billion pesos a year, half the total value of the sales belongs to foreign firms, one-third to the state, and barely one-sixth to private companies with Argentine capital.¹⁸

Almost one-third of U.S. investment in Latin American manufacturing is in Mexico, which also puts no restrictions on the transfer of capital and the repatriation of profits; its exchange restrictions are conspicuous in their absence. The obligatory "Mexicanization" of capital, under which nationals must hold the majority of shares in some industries, has, according to the Secretary of Industry and Commerce, "generally speaking been well received by foreign investors, who have publicly recognized various advantages in the creation of mixed enterprises." He continued: "It should be noted that even internationally renowned enterprises have adopted this form of partnership in companies they have established in Mexico, and it should also be stressed that the policy of Mexicanization of industry has not only not discouraged foreign investment in Mexico, but that after this investment flow broke a record in 1965, the volume reached in that year was again exceeded in 1966."¹⁹ Of the one hundred most important enterprises in Mexico in 1962, fifty-six were wholly or partly controlled by foreign capital, twenty-four belonged to the state, and twenty to private Mexican capital. These twenty accounted for slightly more than one-seventh of the one hundred concerns' total sales volume.²⁰ Big foreign concerns now control more than half the capital invested in computers, office equipment, machinery, and industrial equipment; General Motors, Ford, Chrysler, and Volkswagen have consolidated their power over the auto industry [240] and its network of auxiliary factories; the new chemical industry belongs to Du Pont, Monsanto, Imperial Chemical Industries (British), Allied Chemical, Union Carbide, and Cyanamid; the chief laboratories are in the hands of Parke-Davis, Merck, Ross Laboratories (a subsidiary of Abbott), and Squibb; the influence of Celanese plastics is decisive in the manufacture of manmade fibers; Anderson, Clayton and Lever Brothers have an increasing hold on edible oils; and foreign capital participates overwhelmingly in the production of cement, cigarettes, rubber and its derivatives, housewares, and assorted foods.

Bombardment by the International Monetary Fund Helps the Conquerers to Land

Testifying before the parliamentary commission on the denationalization of Brazilian industry, two government ministers admitted that indigenously owned factories had been put at a disadvantage by the Castelo Branco regime's measure permitting the direct inflow of external credit. They were referring to the famous Order 289 of early 1965, which allowed foreign concerns operating in Brazil to get loans from abroad at 7 or 8 percent interest, with a government-guaranteed exchange arrangement in case the cruzeiro was devalued. Brazilian concerns had to pay almost 50 percent interest on credits they obtained -- with difficulty -- at home. The inventor of the measure, Roberto Campos, offered this explanation; "Obviously the world is unequal. Some are born intelligent, some stupid. Some are born athletes, others crippled. The world is made up of small and large enterprises. Some die early, in the prime of life; others drag themselves criminally through a long useless existence. There is a basic fundamental inequality in human nature, in the condition of things. The mechanism of credit cannot escape this. To postulate that national enterprises must have the same access to foreign credit as foreign enterprises is simply to ignore the basic realities of economics . . ." [This testimony appeared in the report of a parliamentary commission investigating transactions between national and foreign enterprises, dated September 6, 1968. Soon afterward Campos published a curious interpretation of the Peruvian government's nationalist stance. According to him, the Velasco Alvarado government's expropriation or Standard Oil was no more than an "exhibition of masculinity." The only objective of nationalism, he wrote, is to satisfy the human being's primitive need for hate. However, he added that "pride does not generate investments or increase the flow of capital . . ."²¹] [241] According to this brief but meaty "Capitalist Manifesto," the law of the jungle is the natural code governing human life; injustice does not exist, for what we know as injustice is merely an expression of the cruel harmony of the universe: poor countries are poor because . . . they are poor; our fate is written in the stars and we are born only to fulfill it. Some are condemned to obey, others are appointed to command. Some put their necks out and others put on the rope. The author of this theory was the creator of International Monetary Fund policy in Brazil.

As in other Latin American countries, application of IMF formulas opened the gates to let foreign conquerers into an already scorched land. From the end of the 1950s economic recession, monetary instability, the credit drought, and a decline in internal purchasing power all helped to capsize national industry and put it at the mercy of imperialist corporations. With the magical incantation of "monetary stabilization," the IMF -- which not disinterestedly confuses the fever with the disease, inflation with the crisis of existing structures -- has imposed on Latin America a policy that accentuates imbalances instead of easing them. It liberalizes trade by banning direct exchanges and barter agreements; it forces the contraction of internal credits to the point of asphyxia, freezes wages, and discourages state activity. To this program it adds sharp monetary devaluations which are theoretically supposed to restore the currency to its real value and stimulate exports. In fact, the devaluations merely stimulate the internal concentration of capital in the ruling classes' pockets and facilitate absorption of national enterprises by foreigners who turn up with a fistful of dollars.

In all Latin America, the system produces much less than the necessary monetary demand, and inflation results from this structural impotence. Yet the IMF, instead of attacking the causes of the production apparatus' insufficient supply, launches its cavalry against the consequences, crushing even further the feeble consumer power [242] the internal market: in these lands of hungry multitudes, the IMF lays the blame for inflation at the door of excessive demand. Its stabilization and development formulas have not only failed to stabilize or develop; they have tightened the external stranglehold on these countries, deepened the poverty of the dispossessed masses -- bringing social tensions to the boiling point -- and hastened economic and financial denationalization in the name of the sacred principles of free trade, free competition, and freedom of movement for capital. The United States, which itself operates an enormous protectionist system -- tariffs, quotas, internal subsidies -- has never earned a glance from the IMF. Toward Latin America, on the other hand, the IMF is inflexible: for this it was brought into the world. As soon as Chile accepted the first IMF mission in 1954, the country swarmed with its "advisors"; and today most of the governments blindly follow its directives. The therapy makes the sick man sicker, the better to dose him with the drug of loans and investments. The IMF extends loans or flashes the indispensable green light for others to extend them. Born in the United States, headquartered in the United States, and at the service of the United States, the Fund effectively operates as an international inspector without whose approval U.S. banks will not loosen their pursestrings. The World Bank, the Agency for International Development, and other philanthropic organizations of global scope likewise make their credits conditional on the signature and implementation of the receiving governments' "letters of intention" to the all-powerful Fund. All the Latin American countries put together do not have half as many votes as the United States in the direction of the policy of this supreme genie of world monetary equilibrium. The IMF was created to institutionalize Wall Street's financial dominion over the whole planet, when the dollar first achieved hegemony as international currency after World War II. It has never been untrue to its master.

It is true that the Latin American national bourgeoisie, with its vocation for living above its income, has done little to stop the avalanche of foreigners; but it is also true that imperialist corporations have used a bewildering range of demolition methods. With the IMF's preliminary bombardment facilitating the penetration, some enterprises were taken by a mere telephone call, after a sharp drop in [243] the stockmarket, in exchange for a little oxygen in the form of shares, 0r by calling in some debt for supplies or for the use of patents, brand names, or technical innovations. Such debts, multiphed by currency devaluations -- which oblige local enterprises to pay more in national currency for their commitments in dollars -- thus become a death trap. Technological dependency costs dearly; the corporations' know-how includes expertise in the art of devouring one's neighbor. One of the last of the Mohicans of Brazilian national industry remarked shortly before the military government sent him into exile: "Experience shows that the profit from sales by a national enterprise often never reaches Brazil, but remains, bearing interest, in the financial market of the purchasing country." w The creditors collect by taking over the installations and machinery of the debtors. Banco Central del Brasil figures show that no less than one-fifth of new industrial investments in 1965, 1966, and 1967 was in reality a conversion of unpaid debts into investment.

On top of the financial and technological blackmail is the unfair "free" competition between strong and weak. As part of a global structure, the big-corporation affiliate can permit itself the luxury of losing money for a year, or two, or whatever is necessary. Prices fall, and it sits down to wait for the victim to surrender. The banks collaborate in the siege: the national enterprise is less solvent than it looked, supplies are denied it, and it soon raises the white flag. The local capitalist becomes a junior partner or functionary of his conquerors. Or else he brings off the most coveted feat -- he retrieves his property in the form of shares in the foreign concern and ends his days as a well-heeled coupon-clipper. An eloquent story with regard to price "dumping" is that of Union Carbide's capture of the Brazilian tape factory, Adesite. Scotch Tape, part of the multitentacled Minnesota Mining and Manufacturing, began steadily lowering the price of its products in Brazil. Adesite's sales kept going down. The banks cut off credit. Scotch Tape continued lowering its prices -- by 30 percent, then by 40 percent. Then Union Carbide appeared on the scene and bought the desperate Brazilian concern for a song. Later Union Carbide and Scotch Tape got together to share the national market: they divided up Brazil, taking half each, and agreed to digest what they had eaten by raising the price of tape by 50 percent. [244] The antitrust law of the old Vargas days had been annulled years earlier.

The Organization of American States admits that the abundant financial resources of U.S. affiliates "in times of very low hquidity for national enterprises, has on occasion enabled some national enterprises to be acquired by foreign interests." In fact, the scarcity of financial resources, sharpened by the IMF-imposed contraction of internal credit, smothers local factories. But the same OAS document tells us that no less than 95.7 percent -- 80 percent in the case of manufacturing industries -- of the funds U.S. enterprises require for their normal functioning and development in Latin America come from Latin American sources in the form of credits, loans, and reinvested profits.

The United States Is Generous with Other People's Savings: The Invasion of the Banks

The siphoning off of national resources into imperialist affiliates is largely explained by the recent proliferation of U.S. branch banks pushing up their heads throughout Latin America like mushrooms after rain. The offensive against local savings in satellite countries is linked with the United States' chronic balance-of-payments deficit, which compels the restriction of its own investments abroad, and with the dollar's dramatic deterioration as a world currency. Latin America provides the saliva as well as the food, and the United States limits its contribution to the mouth. The denationalization of industry has turned out to be a gift.

According to the International Banking Survey, there were 78 branches of U.S. banks south of the Rio Grande in 1964. By 1967 there were 133; they had $810 million in deposits in 1964 and $1.27 Million in 1967.23 In 1968 and 1969 the foreign bankers' advance picked up speed: today First National City alone has 110 branches scattered through seventeen Latin American countries -- the figure includes various recently acquired local banks. Chase Manhattan Bank acquired the Banco Lar Brasileiro (34 branches) in 1962, the Banco Continental (42 branches, in Peru) in 1964, the Banco del Comercio (120 branches, in Colombia and Panama) and the Banco [245] Atlantida (24 branches, in Honduras) in 1967, and the Banco Argen-tino de Comercio in 1968. The Cuban Revolution had nationalized 20 U.S. banking agencies, but the bankers more than recovered from this blow: in 1968 alone more than 70 U.S. bank affiliates were opened in Central America, the Caribbean, and the smaller South American countries.

No one knows the precise extent of the simultaneous growth of parallel activities -- subsidiaries, holding companies, finance companies, agencies. What is known is that an equal or greater amount of Latin American funds have been absorbed by banks which, while not operating openly as branches, are controlled from abroad through decisive blocks of shares or by the opening of conditional external lines of credit.

This banking invasion has served to divert Latin American savings to the U.S. enterprises established in the region, while national enterprises are strangled by lack of credit. The public relations departments of the various U.S. banks operating abroad unblushingly announce that their chief aim in the countries in which they operate is to channel internal savings into the multinational corporations which are their head offices' clients. Let us indulge in a flight of the imagination: could a Latin American bank establish itself in New York and capture the national savings of the United States? The bubble explodes: such an outrage is expressly prohibited. U.S. banks, through numerous branches, dispose of Latin America's national savings at their pleasure. Latin America watches as the United States takes over its finances as tenderly as does the United States itself. In June 1966, however, the Banco Brasileiro de Descontos consulted its shareholders about a great and vigorous nationalist step which it proposed to take. It printed the phrase "Nos confiamos em Deus" on all its documents. The bank pointed with pride to the fact that the dollar bears the motto "In God We Trust."

The credit policies of such Latin American banks as have not been captured, infiltrated, or surrounded by foreign capital follow the same lines as National City, Chase Manhattan, and Bank of America affiliates: they, too, prefer to meet the requirements of foreign industrial and commercial enterprises, which enjoy solid guarantees and operate on a large-volume basis. [246]

An Empire That Imports Capital

The Government Economic Action Program worked out by Roberto Campos anticipated that, in response to such a benevolent policy, foreign capital would flow in to promote development and would contribute to economic and financial stability in Brazil.²⁴ [Speaking on December 22, 1966, at Mackenzie University in Sao Paulo, Campos insisted: "Since economies in the process of organization lack resources to dynamize themselves -- for the simple reason that if they had them they would not be backward -- it is right to accept the aid of all who want to run with us the risks of the marvelous adventure that is progress, in order to receive from it a part of the fruits."] New direct investments from abroad of $100 million were announced for 1965; $70 million arrived. There were assurances that the projections for 1965 would be surpassed in succeeding years, but the conjuring was in vain. In 1967, $76 million came in; the flight of profits and dividends, together with payments for technical aid, patents, royalties, and the use of brand names, amounted to more than four times the new investment. And on top of all this there were the clandestine remittances. The Banco Central admits that $120 million left Brazil in 1967 outside of legal channels. As we can see, far more went out than came in. Actually, new investments in the key years of industrial denationalization -- 1965, 1966, 1967 -- were well below the 1961 level. [According to the Ministry of Planning and Economic Coordination, "The flow of interest, profits and dividends, royalties, and technical assistance payments from Brazil has shown a marked increase since 1965, when legislation altering the foreign investment law of 1962 became effective."²⁵] Most U.S. capital in Brazil is invested in industry, but it amounts to less than 4 percent of global U.S. investment in manufacturing. In Argentina it is a bare 3 percent; in Mexico 3.5 percent. Swallowing up Latin America's biggest industrial establishments has not meant great sacrifices for Wall Street. It has brought in few dollars and taken out many.

"Under modern capitalism, when monopolies prevail, the export of capital has become the typical feature," wrote Lenin.²⁶ In our day, as Baran and Sweezy have pointed out, imperialism imports capital from the countries it operates in. In the period 1950-1967, new U.S. investments in Latin America (not including reinvested profits) totaled $3,921 billion. Profits and dividends sent abroad in the same [247] period totaled $12,819 billion. The siphoned-off profits were more than three times the new capital invested in the region. [President Kennedy has already admitted that in 1960, "from the under-developed world, which needs capital -- we took in $1,300,000,000 and we sent out in capital for investment $200,000,000 . . ." ²⁷] According to EC LA, the profit bloodletting has since increased to five times the new investments; Argentina, Brazil, and Mexico have suffered the greatest widening of this escape hatch. But this is a conservative calculation. A substantial part of the funds repatriated as debt amortization is in fact identical with profits on investments, and the figures include neither remittances abroad for patents, royalties, and technical-aid payments, nor other invisible transfers customarily concealed under the rubric "errors and omissions." [Between 1955 and 1966, for example, the mysterious "errors and omissions" amounted to over $1 billion in Venezuela, $743 million in Argentina, $714 million in Brazil, and $310 million in Uruguay.²⁸] Nor do these figures take into account the profits that accrue to the corporations when they inflate the prices of the supplies they ship to their affiliates and -- with equal enthusiasm -- innate their costs of operation.

The enterprises are equally imaginative with respect to the investments themselves. In effect, as the technical progress fever keeps shortening the periods of fixed capital renewal in advanced economies, most of the installations and factory equipment exported to Latin America have already completed a cycle of their useful life in their place of origin. Thus they have been partly or wholly amortized. This factor in investment abroad is overlooked: the value arbitrarily placed upon machinery is often a small fraction of what it is if the wear it has previously undergone is taken into account. Furthermore, the head office has no reason to involve itself in the expense of producing in Latin America the goods formerly sold to it from afar. And Latin American governments undertake to prevent this by advancing resources to the local affiliate, which has access to local credit from the moment it puts up a sign on the lot chosen for its factory. It gets exchange privileges for its imports -- purchases the enterprise customarily makes from itself -- and in some countries can even be assured of a special exchange arrangement to pay its external debts, which are often debts to the financial arm of the same corporation. [248] A Brazilian magazine estimated that foreign currency input by the auto industry in Argentina between 1961 and 1964 was 3.5 times more than would have been needed to build seventeen thermoelectric and six hydroelectric stations, with a total power of more than 2,200 megawatts; and that it equaled in value the machinery and equipment that the dynamic industries would have to import over an eleven-year period to produce a 2.8 percent annual increment in product per inhabitant.²⁹

Technocrats Are Better Hold-Up Artists Than Marines

In taking out many more dollars than they bring in, the enterprises whet the region's chronic dollar hunger; the "benefited" countries are decapitalized instead of capitalized. And here the loan mechanism goes to work. International credit organizations are important in helping to dismantle the weak citadels of nationally capitalized industry and in solidifying neocolonial structures. "Aid" works like the philanthropist who put a wooden leg on his piglet because he was eating it bit by bit. The U.S. balance-of-payments deficit is the result of military spending and foreign aid, and is a critical sword of Damocles over U.S. prosperity. At the same time, it makes that prosperity possible: the Imperium sends forth its Marines to save its monopolists' dollars; more effectively, it sends its technocrats and loans to extend business and assume raw materials and markets.

At its global center of power the capitalism of our day exhibits a clear identity of interest between private monopolies and the state apparatus. Multinational corporations make direct use of the state to accumulate, multiply, and concentrate capital, to deepen the technological revolution, to militarize the economy, and by various means to assure success in the crusade to control the capitalist world. The Export-Import Bank (Eximbank), AID, and other smaller organizations function in this role, as do some purportedly international organizations in which the United States has unchallenged hegemony: the International Monetary Fund, its twin the International Bank for Reconstruction and Development (IBRD), and the Inter-American Development Bank (IDB). These assume the right to decide the economic policy of countries asking for credits, pouncing successfully on [249] the countries' central banks and decisive ministers. They get hold of all the secret economic and financial data, draft and impose national laws, and ban or authorize steps proposed by governments whose course they chart down to the last detail.

International charity does not exist; it begins at home, for the United States as for everyone else. The role of foreign aid is primarily domestic -- the U.S. economy aids itself -- and it was denned by none other than Roberto Campos, when he was the ambassador for Gou-lart's nationalist government, as a program of broadening foreign markets to absorb U.S. surpluses and alleviate superproduction in U.S. exporting industries. In the early days of the Alliance for Progress, the U.S. Department of Commerce pointed to its successful creation of new businesses and job sources for private enterprise in forty-four states.³⁰ In January 1968, President Johnson assured Congress that more than 90 percent of U.S. foreign aid in 1969 would be applied to financing purchases in the United States, and that he had personally and directly intensified efforts to increase this percentage. In October 1969 cables sizzled with statements by Carlos Sanz de Santamaria, chairman of the Alliance's Inter-American Committee, who said in New York that the aid had turned out to be excellent business for the U.S. economy and for its treasury. After the disequilibrium of the U.S. balance of payments became critical at the end of the 1950s, loans were conditioned upon buying U.S. industrial goods, usually costing more than similar products from other countries. More recently, certain mechanisms were put into effect, among them "negative lists" to see that the credits are not used for exporting articles which the United States can sell on the world market under good competitive conditions without recourse to auto-philanthropy. Subsequent "positive lists" have made possible the sale through "aid" of certain U.S. manufactures at prices from 30 to 50 percent higher than the same goods from other sources.

"Tied aid" (so called by the OAS document cited earlier) bestows "a general subsidy on U.S. exports." In Brazil, "sales of U.S. capital exporters are faced with increasing competition from other exporters . . . [and] are at a serious disadvantage unless they can take advantage of the more liberal financing available under the various aid programs." ³¹ When, in a speech late in 1969, Richard Nixon promised [250] to "untie" the aid, he referred only to the possibility of alternative purchases in Latin American countries. Such had been the case with the loans that the Inter-American Development Bank granted and charged to its Special Operations Funds. But experience shows that the United States -- or the Latin American affiliates of its corporations -- always ends up as the chosen supplier in the contracts. Loans from AID and Eximbank, and most of those from the IDB, also require that at least half of the shipments be made in U.S. bottoms. Freight rates on U.S. ships run as much as double those of other available shipping lines. The firms insuring the transported merchandise, and the banks through which the operations are effected, are also usually U.S. owned.

The OAS has made a revealing estimate of the extent of real aid received by Latin America. When chaff is separated from grain, one must conclude that a mere 38 percent of the nominal aid can be considered as real aid. Only one-fifth of the authorized total of loans for industry, mining, and communications, and compensatory credits, constitutes aid. In the case of Eximbank, the aid travels from south to north: the financing it extends, says OAS, means not aid but extra costs for the region in view of the inflated prices of U.S. articles exported via the bank.

Latin America provides most of the ordinary capital resources of the IDB. But IDB documents carry the Alliance for Progress emblem in addition to its own insignia, and the United States is the only member country with veto power; the votes of the Latin American countries, in proportion to their contributions of capital, fall short of the two-thirds majority necessary for important resolutions. In his famous report to President Nixon in August 1969, Nelson Bockefeller admitted that "while the United States' veto power over IDB loans has not been used, the threat of its use for political purposes has influenced decisions." On most of the loans it extends, the IDB imposes the same conditions as do openly U.S. organs: the money must be spent on U.S. merchandise, at least half of which must be transported in ships flying the Stars and Stripes -- and the Alliance for Progress is expressly mentioned in the publicity. The IDB determines the tariff and tax policy of the services it touches with its fairy wand: it decides how much must be charged for water and fixes the taxes for water [251] mains and housing on the basis of proposals by U.S. consultants named with its gracious approval. It approves work plans, drafts the bidding terms, administers the funds, and keeps watch on how the job is done. [For example, in Uruguay, the text of the contract signed on May 21, 1963, between the IDB and the Montevideo departmental government for the extension of water mains.] In the task of restructuring higher education in the region according to the standards of cultural neocolonialism, the IDB has played a fruitful role. Its loans to universities block the possibility of modifying laws and statutes without its knowledge and permission; at the same time, it imposes specific pedagogical, administrative, and financial reforms. [For example, in Bolivia, the text of the contract signed on April 1, 1966, between the IDB and San Simon University, Cochabamba, to improve the teaching of agricultural sciences.] In the case of a difference of opinion, the OAS' general secretary names the arbitrator.

Agency for International Development contracts not only mandate U.S. merchandise and freightage, but also ban trade with Cuba and North Vietnam and make the administrative tutelage of AID technicians obligatory. To compensate for the divergence of price between U.S. tractors or fertilizers and those more cheaply obtainable on the world market, the elimination of taxes and customs duties for products imported with credits is stipulated. AID aid includes jeeps and modern weapons for use by the police in safeguarding law and order in the countries concerned. Not for nothing is one-third of the credits payable immediately, while the other two-thirds are conditional on approval by the IMF -- whose recipes normally kindle a fire of social agitation. And as if the IMF had not succeeded in dismantling all the mechanisms of sovereignty as one dismantles a watch, AID generally throws in the requirement of approval of specific laws and decrees. AID is the chief vehicle for Alliance for Progress funds. To cite but one example of the labyrinths of generosity, the Alliance's Inter-American Committee got the Uruguayan government to sign a commitment whereby the income and expenditures of state bodies, and the official policy on tariffs, wages, and investments, would pass under the control of this foreign organization.³² But the most pernicious conditions rarely appear in the published texts of contracts and [252] commitments, and are hidden in secret codicils. The Uruguayan parliament never knew that in March 1968 the government had agreed to limit rice exports in that year so that the country could receive flour, corn, and sorghum under the U.S. agricultural surplus law.

Numerous daggers glint beneath the cloak of aid to poor countries. Teodoro Moscoso, who was chairman of the Alliance for Progress, confessed: "It may happen that the United States needs the vote of a particular country in the UN or the OAS, and it is possible that the government of that country [following the sacred tradition of cold war diplomacy] may ask a price in exchange."³³ In 1962 the Haitian delegate to the OAS Punta del Este conference changed his vote in return for a new airport, and thus the United States got its majority in its attempt to expel Cuba. [The Duvalier dictatorship was also promised, as a token of gratitude, a road out to the airport. Several authors agree that this was a case of bribery.³⁴ But the United States did not keep its promise to Haiti, and "Papa Doc" Duvalier, guardian of death in voodoo mythology, felt he had been swindled. The old sorcerer is said to have invoked the Devil's aid to bring vengeance on President Kennedy, and to have smiled contentedly when the bullets in Dallas felled the president.] Ex-director Miguel Ydigoras Fuentes of Guatemala said he had to threaten the United States with withholding his country's vote at Alliance for Progress conferences to make the United States keep its promise to buy more Guatemalan sugar.³⁵

It might at first sight seem paradoxical that during the Goulart regime Brazil was the country most favored by the Alliance for Progress. But the paradox vanishes as soon as one realizes the internal distribution of the aid received: Alliance credits were sown in Goulart's path like explosive mines. Carlos Lacerda, governor of Guanabara and at that time leader of the extreme Bight, got seven times more than all of the Northeast: Guanabara, with scarcely four million inhabitants, was thus able to create beautiful gardens for tourists on the shores of the world's most spectacular bay, while the Northeast remained the open sore of Latin America. In June 1964, after the coup d'etat that successfully put Castelo Branco in power, Thomas Mann, Undersecretary of State for International Affairs and right arm of President Johnson, explained: "The United States distributed among the efficient governors of certain Brazilian states the aid that had been [253] destined for the government of Goulart, thinking to finance democracy in this way; Washington gave no money for the balance of payments or the federal budget, because that could directly benefit the central government."³⁶ The U.S. administration had decided to deny any kind of cooperation to Belaiinde's government in Peru "unless it would give the desired assurances of following an indulgent policy towards the IPC. This Belaunde refused to do and, as a result, by late 1965 he was still not receiving the share of Alliance for Progress funds that his government has earned the right to expect."³⁷ Later, as we know, Belaunde compromised -- and lost both oil and power: he had obeyed in order to survive. In Bolivia, U.S. loans did not provide a centavo for the country to build its own tin smelter, so that crude tin continued journeying to Liverpool and from there, smelted, to New York. "Aid" gave birth to a parasitic commercial bourgeoisie, inflated the bureaucracy, built large edifices and modern auto highways and other white elephants in a country that competes with Haiti for the highest rate of infant mortality in Latin America. The credits from the United States and its "international" organs denied Bolivia the right to accept Soviet, Czech, and Polish offers to create a petro-chemical industry, extract and smelt zinc, lead, and iron, and install smelters for tin and antimony. At the same time, Bolivia was obliged to import products exclusively from the United States. When the Movimiento Nacionalista Revolucionario (MNR) government finally fell, its foundations eaten away by U.S. aid, U.S. Ambassador Douglas Henderson began to attend Rene Barrientos' cabinet meetings regularly.

The loans indicate as precisely as thermometers the general business climate of each country, and help clear political rainclouds or revolutionary storms from the blue sky of the millionaires. "The United States," announced a group of businessmen led by David Rockefeller in 1963, "will arrange its economic aid program in countries showing the greatest inclination to favor the investment climate, and will withdraw aid from other countries not showing a satisfactory performance." [David Rockefeller's daughter Peggy decided shortly afterward to go and live in a Rio de Janeiro favela called Jacarezinho. Her father, one of the world's richest men, went to Brazil to look after his multimillion-dollar affairs and personally visited the humble family house Peggy had chosen; he sampled the modest dinner and discovered with alarm that the house leaked and rats entered under the door. On his departure he left a check with a string of zeros on the table. Peggy lived there for some months, collaborating with the Peace Corps. The checks kept coming in, each one worth as much as the master of the house could earn by ten years' work. When Peggy finally left, the Jacarezinho house and family had been transformed. Never had the favela known such opulence. Peggy had come straight from heaven. It was like having won all the lotteries at once. The master of the house then became the mascot of the regime. TV and radio reportage, newspaper and magazine articles, publicity ran wild: the man was a model whom all Brazilians should imitate. He had emerged from poverty thanks to his indomitable will to work and his capacity to save: look, look, he doesn't spend what he earns on booze, and now he has a TV, a refrigerator, new furniture, shoes for the kids! The propaganda left out one detail: the visit of Peggy, the fairy godmother. Brazil has ninety million inhabitants and the miracle had been performed for only one of them.] The text of the foreign aid law provides [254] categorically for the suspension of aid to any government that has "nationalized, expropriated, or acquired property or control of property belonging to any U.S. citizen, or any corporation, society, or association" that belongs not less than 50 percent to U.S. citizens.³⁸ [It is no accident that this legal text explicitly refers to measures adopted against U.S. interests "on January 1, 1962, or a later date." On February 16, 1962, Governor Leonel Brizola had expropriated the phone company, a subsidiary of ITT, in the Brazilian state of Rio Grande do Sul, and this had hardened relations between Washington and Brasilia. The firm did not accept the indemnity proposed by the government.] Not for nothing does the Alliance for Progress Trade Committee include among its most distinguished members top executives of Chase Manhattan, National City Bank, Standard Oil, Anaconda, and Grace. AID clears the road for U.S. capitalists in many ways -- for instance, by requiring approval of agreements guaranteeing investments against possible loss through wars, revolutions, insurrections, or monetary crises. In 1966, according to the U.S. Department of Commerce, U.S. private investors received these guarantees in fifteen Latin American countries, for one hundred projects involving more than $300 million, under the AID Investment Guaranty Program.³⁹ ADELA is not a Mexican revolutionary song, but the name of an international investment consortium. It was started by First National City Bank, Standard Oil of New Jersey, and the Ford Motor Company. The Mellon group joined enthusiastically, and so did major European corporations because, as Senator Jacob Javits remarked, [255] "Latin America provides an excellent opportunity for the United States to show, by inviting Europe to 'enter,' that it does not seek a dominant or exclusive position."⁴⁰ In its 1968 annual report ADELA offered special thanks to the IDB for the parallel loans it had extended to promote the consortium's business in Latin America, and also saluted the performance along the same lines of the International Finance Corporation, an arm of the World Bank. ADELA is in continuous contact with both institutions to avoid duplication of effort and to evaluate investment opportunities.⁴¹

Many more examples of such holy alliances could be given. In Argentina, Latin American contributions to the resources of the IDB have served as very convenient loans benefiting such concerns as the Electric Bond & Share affiliate Petrosur (over $10 million for construction of a petro-chemical complex), and The Budd Company (Philadelphia) affiliate Armetal (to finance an auto parts plant). AID credits made possible the expansion of Richfield's chemical plant in Brazil, and Eximbank extended loans to ICOMI, a Bethlehem Steel affiliate in the same country. Also in Brazil, contributions from the Alliance for Progress and the World Bank enabled the Dutch Phillips' Industries to install Latin America's biggest complex of fertilizer factories in 1966. It all comes under the heading of "aid" -- and all adds further to the weight of external debt on the countries so favored.

In the first days of the Cuban Revolution, Fidel Castro took the problem of rebuilding foreign currency reserves drained by the Batista dictatorship to the World Bank and the IMF; they replied that he must first accept a stabilization program, which implied -- as it did everywhere else -- the dismantling of the state and a freeze on structural reforms.42 The World Bank and the IMF function in close harmony and for common ends; they were born together at Bretton Woods. The United States has one-fourth of the votes in the World Bank: the twenty-two countries of Latin America have less than one-tenth. The World Bank responds to the United States like thunder to lightning.

As the Bank explains it, most of the loans are for building roads and other communications links, and for developing sources of electrical energy, an essential condition for the growth of private enterprise. [256] In effect, these infrastructure projects facilitate the movement of raw materials to ports and world markets and the progress of already denationalized industry in the poor countries. The World Bank believes that

to the greatest extent practicable, competitive industry should be left to private enterprise. This is not to say that the Bank has an absolute bar against loans to government-owned industries, but it will undertake such financing only in cases where private capital is not available, and if it is satisfied, after thorough examination, that the government's participation will be compatible with efficient operation and will not have an unduly deterrent effect upon the expansion of private initiative and enterprise.

Like all the other one-armed bandits of international high finance, the Bank is also an efficient instrument of extortion for the benefit of very specific circles. Its chairmen since 1946 have been prominent U.S. businessmen. Eugene R. Black, chairman from 1949 to 1962, later became a director of several private corporations, one of which -- Electric Bond & Share -- is the world's top monopolist of electrical energy. [According to Black, "Foreign aid stimulates the development of new overseas markets for U.S. companies and orients national economies toward a free enterprise system in which U.S. private firms can prosper."⁴⁴] By chance or otherwise, in 1966 the World Bank made Guatemala accept a "gentlemen's agreement" with Electric Bond & Share as a condition for implementing the Jurun-Marinala hydroelectric project: the agreement was to pay the firm a fat indemnity for possible damages in a river basin site which had been given it as a present some years earlier, and included a state commitment not to interfere with Electric Bond & Share in its fixing of electricity rates. By chance or otherwise, the World Bank, in 1967, made Colombia [257] pay a $36 million indemnity to the Electric Bond & Share affiliate Compaiiia Colombiana de Electricidad for its old, recently nationalized machinery. The Colombian state thus bought what belonged to it -- but the concession to the enterprise had run out in 1944. Three World Bank chairmen are stars in the Rockefeller power constellation. John J. McCloy, who presided from 1947 to 1949, moved on into a director's chair at Chase Manhattan Bank. His successor, Black, crossed the road in the opposite direction, coming from the Chase Manhattan board. Black was succeeded in 1963 by another Rockefeller man, George D. Woods. By chance or otherwise, the World Bank directly participates -- with one-tenth of the capital and substantial loans -- in the biggest Rockefeller venture in Brazil: South America's most important petro-chemical complex, Petroquimica Uniao.

More than half the loans Latin America receives come -- after the IMF's green light -- from private and official U.S. sources; international banks also provide an important percentage. The IMF and the World Bank put more and more pressure on Latin American countries to reshape their economies and finances in terms of payment of the foreign debt. But the fulfillment of commitments -- the essence of international good conduct -- gets more and more difficult and at the same time more necessary. The region is experiencing the phenomenon that economists call the "debt explosion." It is a strangulating vicious circle. Loans increase, investments follow investments, so that payments grow for amortization, interest, dividends, and other services. To pay off these debts, new injections of foreign capital are resorted to, generating bigger commitments, and so on and on. Servicing the debt consumes a growing proportion of income from exports, which in any case, due to the unremitting fall of prices, cannot finance the necessary imports; new loans to enable the countries to supply themselves thus become as indispensable as air to the lungs. In 1955 one-fifth of exports went for amortization, interest, and profit on investments; the proportion has kept growing and is approaching the explosion point. In 1968 these payments amounted to 37 percent of exports.⁴⁵ If Latin America continues resorting to foreign capital to fill the "trade gap" and finance the flight of profits on imperialist investment, by 1980 no less than 80 percent of the foreign [258] currency will remain in foreign creditors' hands, and the total debt will be more than six times the value of exports. The World Bank had foreseen that in 1980 debt-servicing payments would completely cancel out the flow of new foreign capital to the underdeveloped world. But in fact the flow of new loans to Latin America in 1965 was already less than the capital drained out merely as amortization and interest to fulfill previous commitments.

The Organized Inequality of the World Market Is Unchanged by Industrialization

The exchange of merchandise, along with loans and direct investments abroad, are the straitjacket of the international division of labor. Third World countries exchange rather more than one-fifth of their exports among each other, and three-quarters of their foreign sales are made to the imperialist centers whose tributaries they are. Most Latin American countries are identified in the world market with a single raw material or foodstuff. [In the three years 1966-1968, coffee earned Colombia 64 percent of its total export incpme, Brazil 43 percent, El Salvador 48 percent, Guatemala 42 percent, and Costa Rica 36 percent. Bananas earned 61 percent of its foreign currency for Ecuador, 54 percent for Panama, and 47 percent for Honduras. Nicaragua depended 42 percent on cotton, the Dominican Republic 56 percent on sugar. Meat, hides, and wool brought Uruguay and Argentina 83 percent and 38 percent respectively of their foreign currency. Copper was responsible for 74 percent of Chile's commercial income and for 26 percent of Peru's; for Bolivia tin represented 54 percent of the value of its exports, and 93 percent of Venezuela's foreign currency came from petroleum.⁴⁶

As for Mexico, it "depends more than 30 percent on three products, more than 40 percent on five products, and more than 50 percent on ten products, mostly unmanufactured and having their main outlet in the U.S. market." ⁴⁷] Latin America has abundant wool, cotton, and natural fibers, and a traditional textile industry, but only a 0.6 percent share in European and U.S. purchases of yarns and fabrics. The region has been condemned to sell primary products to keep foreign factories humming; and it happens that those products "are mostly exported by strong consortiums with international connections, which have the necessary world-market relations to place their products under the most convenient conditions"⁴⁸ -- the most convenient for them, suiting the interests of the buyer countries: that [259] is to say, at the lowest prices. In international markets there is a virtual monopoly of demand for raw materials and of supply of industrial products, while suppliers of basic products, who are also buyers of finished goods, operate separately. The former, grouped around, and dominated by, the United States -- which consumes almost as much as all the rest of the world -- are strong; the latter are isolated and weak: the oppressed competing against the oppressed. The so-called free play of supply and demand in the so-called international market does not exist; the reality is a dictatorship of one group over the other, always for the benefit of the developed capitalist countries. The decision making centers, where prices are fixed, are in Washington, New York, London, Paris, Amsterdam, Hamburg, in cabinet meetings and on the stock exchanges. It means little or nothing that international agreements have been signed to protect the prices of wheat (1949), sugar (1953), tin (1956), olive oil (1956), and coffee (1962). A glance at the descending curve of these products' relative value shows that the agreements have only been symbolic excuses offered by strong countries when the prices of the weak countries' products sank scandalously low. What Latin America sells gets constantly cheaper and -- also in relative terms -- what it buys gets constantly dearer.

For the price of twenty-two bullocks, Uruguay could have bought a Ford Major tractor in 1954; today more than twice as many are needed. A group of Chilean economists who made a survey for the trade unions calculated that, if the price of Latin American exports had risen since 1928 at the same rate as the price of imports, Latin America would have received $57 billion more for its sales abroad between 1958 and 1967 than it actually received.49 Without going back that far, and taking 1950 prices as a base, the United Nations estimates that due to exchange deterioration Latin America lost more than $18 billion in the decade 1955-1964. The fall continued after that. The "trade gap" -- the difference between import needs and income from exports -- will continue to widen if present external trade structures do not change, and each year the abyss gets deeper. If in the immediate future the region attempted to slightly step up its development pace over that of the past fifteen years -- which has been snail-slow -- the import needs it would confront would considerably [260] exceed the foreseeable growth of its foreign currency income from exports. According to the Instituto Latinoamericano de Planificacion Economica y Social, the trade gap will rise to $4.6 billion in 1975 and to $8.3 billion in 1980. This last figure is no less than half the value of exports foreseen for that year. Thus the Latin American countries, hats in hand, will be knocking ever more desperately on the doors of the international loan sharks.

Arghiri Emmanuel holds that the curse of low prices does not weigh upon particular products but upon particular countries.50 After all, coal -- until recently one of Britain's chief exports -- is no less a raw material than wool or copper, and there is more labor in sugar than in Scotch whiskey or French wine. Sweden and Canada export timber, a raw material, at excellent prices. According to Emmanuel, the world market bases the trading inequality on the exchange of more work-hours in poor countries for less work-hours in rich countries: the key to the exploitation is that while there is an enormous difference between the wage levels of the poor and rich countries, it is not accompanied by differences of the same magnitude in the productivity of the work. It is the low wages that determine the low prices, says Emmanuel, not the reverse: the poor countries export their poverty -- further impoverishing themselves in the process -- while the rich countries get the opposite result. According to Samir Amin, if the products exported by underdeveloped countries in 1966 had been produced by developed countries with the same techniques but with their much higher wage levels, the prices would have differed to such an extent that the developed countries would have received $14 billion more.⁵¹

Certainly the rich countries have used and are using tariff barriers to protect their high wage scales in areas in which they cannot compete with poor countries. The United States uses the IMF, the World Bank, and GATT (General Agreement on Tariffs and Trade) agreements to impose the free trade and free competition doctrine on Latin America, forcing the reduction of multiple exchanges, quotas, and import and export permits, and of traiffs and customs duties. But it in no way practices what it preaches. In the same way that it discourages state activity in other countries while protecting monopolies at home through a vast subsidy and privileged-price system, in its [261] foreign trade the United States practices an aggressive protectionism with high tariffs and severe restrictions. Customs duties are combined with other taxes, and with quotas and embargoes. What would happen to the prosperity of Midwest cattlemen if the United States permitted access to its internal market -- without tariffs and fanciful sanitary prohibitions -- of better and cheaper meat from Argentina and Uruguay? Iron enters the U.S. market freely, but if it has been converted into ingots it pays $16 a ton, and the tariff rises in direct proportion to the stage of refinement. The same is true for copper and countless other products: let bananas be dried, tobacco cut, cacao sweetened, timber sawed, or dates stoned, and tariffs are implacably piled on them. In January 1969, the U.S. government ordered the suspension of purchases of Mexican tomatoes -- which give jobs to 170,000 peasants in Sinaloa state -- until Florida tomato growers got the Mexicans to raise the price to avoid competition.

But the most startling contradiction between theory and reality in the world market emerged in the open "soluble coffee war" in 1967. It then became clear that only the rich countries have the right to exploit for their own benefit the "natural comparative advantages" which theoretically determine the international division of labor. The sensationally expanding soluble coffee market is in the hands of Nestle and General Foods: before long, it is believed, these two will be supplying more than half the coffee consumed in the world. The United States and Europe buy coffee beans in Brazil and Africa, concentrate it in their industrial plants, and sell it worldwide in soluble form. Brazil, the biggest coffee producer, does not have the right to compete by exporting its own soluble coffee, thereby taking advantage of its obviously lower costs and providing an outlet for the surpluses which it once destroyed and now stores in state warehouses. Brazil only has the right to supply the raw material to enrich foreign factories. When Brazilian factories -- a mere five in a world total of 110 -- began offering soluble coffee on the international market, they were accused of unfair competition. The rich countries yelled to high heaven and Brazil accepted a humiliating imposition: it placed a huge internal tax on its soluble coffee to put it out of the running in the U.S. market.

In erecting customs, tax, and sanitation barriers against Latin [262] American products, Europe does not lag behind. The Common Market piles on import duties to defend the high internal prices of its agricultural products, and at the same time subsidizes those products in order to export them at competitive prices: it finances the subsidies with what it gets from the duties. Thus the poor countries pay their rich customers to compete against them. The price of a pound of sirloin in Buenos Aires or Montevideo is multiplied by five when it hangs from a butcher's hook in Hamburg or Munich. As a Chilean government delegate at an international conference justifiably complained: "The developed countries are willing to let us sell them jet planes and computers, but nothing that we have any likelihood of being able to produce." ⁵²

Imperialist investments in Latin American industry have in no way modified the terms of its international trade. The region continues to die as it exchanges its primary products for the specialized products of metropolitan economies. The expansion of sales by U.S. concerns south of the Rio Grande is concentrated in local markets, not in ex-. ports. Indeed, the proportion that is exported has tended to shrink: according to the OAS, U.S. affiliates exported 10 percent of their total sales in 1962 and only 7.5 percent three years later.⁵³ [A thorough survey of U.S. subsidiaries in Mexico, made for the National Chamber Foundation in 1969, showed that half the concerns answering the questionnaire were barred by their U.S. head offices from selling their products abroad. The affiliates had not been set up for that.⁵⁴

The relation between exports of manufactures and gross industrial product did not exceed 2 percent in 1963 in Argentina, Brazil, Peru, Colombia, and Ecuador; it was 3.7 percent in Mexico and 3.2 percent in Chile.⁵⁵] Trade in Latin American industrial products only grows inside Latin America: in 1955, manufactures were 10 percent of the exchange among countries of the area; in 1966 the proportion had risen to 30 percent.

John Abbink, head of a U.S. technical mission in Brazil, had a prophetic moment in 1950: "The United States must be prepared to 'guide' the inevitable industrialization of the undeveloped countries if we want to avoid the shock of intensive economic development outside U.S. aegis . . . Industrialization, if not controlled in some way, would bring a substantial reduction of U.S. export markets." M Indeed, would not industrialization -- even though teleguided from [263] abroad -- substitute national products for merchandise that each country previously had to import? Celso Furtado has noted that to the extent that Latin America advances in substitution for more complex imported products, "dependence on input from the head offices tends to increase." Between 1957 and 1964, the sales of U.S. affiliates doubled while their imports -- apart from equipment -- more than tripled. According to Celso Furtado, "This tendency would seem to indicate that 'substitutive' efficiency is a declining function of industrial expansion controlled by foreign countries."⁵⁷

Dependence is not broken but undergoes a qualitative change: the United States today sells to Latin America a greater proportion of more sophisticated and technologically higher-level products. "In the long run," the Department of Commerce says, "as Mexican industrial production goes up, opportunities are greater for additional U.S. exports of industrial raw materials or components . . ."⁵⁸ Argentina, Mexico, and Brazil are very good customers for industrial machinery, electrical machinery, motors, equipment, and spare parts made in the United States. The affiliates of big corporations supply themselves from their head offices at deliberately inflated prices. As Is-mael Vinas and Eugenio Gastiazoro have written about foreign auto concerns in Argentina: "Paying for these imports at very high prices, they sent funds abroad. The payments were often so large that the enterprises not only showed a loss (despite the prices for which cars were sold here), but began to go bankrupt, with rapid depreciation of shares held in the country. . . . The result was that of the twenty-two enterprises 'established,' ten now remain, some on the brink of bankruptcy." ⁵⁹

Thus for the corporations' greater glory their subsidiaries dispose of the scanty foreign currency of the Latin American countries. The operating plan of satellized industry does not differ much from the traditional system of imperialist exploitation of raw materials. Antonio Garcia maintains that "Colombian" export of crude petroleum has in fact always been the physical transfer of crude oil from a U.S. oil field to refining, marketing, and consumption centers in the United States, and "Honduran" or "Guatemalan" banana export a transfer by U.S. companies from certain colonial plantations to certain U.S. marketing and consumption areas.⁶⁰ But the "Argentine," [264] "Brazilian," and "Mexican" factories -- to mention only the most important -- also occupy an economic space that has nothing to do with their geographical location. Along with many other threads, they make up an international web of corporations whose head offices transfer profits from one country to another, invoicing sales above or below the real prices according to the direction in which they want the profits to flow. [The mechanism is certainly not new. The Anglo meatpacking plant has always run at a loss in Uruguay in order to get subsidies from the state and pyramid the profits of its six thousand London butcher shops, where each pound of Uruguayan meat sells for four times the price at which Uruguay exports it.⁶¹] The mainsprings of external trade thus remain in the hands of U.S. or European concerns, which orient the countries' trade policies according to the criteria of governments and directorates outside Latin America. Just as U.S. affiliates do not export copper to the U.S.S.R., nor sell oil to Cuba, neither do they get raw materials and machinery from the cheapest and most convenient sources.

This efficient coordination of global activities, completely outside of any "free play of market forces," is not of course translated into lower prices for local consumers, but into profits for foreign shareholders. The auto industry is a graphic example. Latin American countries offer an abundant and extremely cheap labor force and an official policy in every way favoring expansion of investments -- free gifts of land, privileged electricity rates, state rediscounts to finance sales on credit, easily accessible money; and as if this were not enough, some countries have even exempted the companies from income or sales taxes. Control of the market is further facilitated in advance by the magical prestige attached, in the eyes of the middle classes, to makes and models promoted by global publicity campaigns. Yet far from making Latin American-produced cars cheaper than those produced in the companies' home countries, all these factors make them far more expensive. True, Latin American markets are much smaller; but it is also true that in these countries the corporations' appetite for profits is more leonine than anywhere else. A Ford Falcon made in Latin America costs three times as much as in the United States,⁶² an Argentine-made Valiant or Fiat more than [265] double its price in the United States or in Italy,⁶³ and the same goes for the relation between the Brazilian Volkswagen and its price tag in Germany.⁶⁴

The Goddess Technology Doesn't Speak Spanish

Congressman Wright Patman considers that 5 percent of the shares in a big corporation can often suffice for an individual, family, or economic group to control it.⁶⁵ If 5 percent is enough to control one of the United States' mighty enterprises, what percentage is needed to dominate a Latin American enterprise? In fact, it can be done with less: the "mixed" company, one of the few remaining objects of pride for the Latin American bourgeoisie, merely adorns foreign power with a national capital participation that may constitute the majority but is never decisive over the foreign elements. Often the state itself goes into partnership with an imperialist enterprise which, thus transformed into a "national" concern, gets all the desirable guarantees and a cooperative -- even an affectionate -- climate. The "minority" participation of foreign capital is usually justified by the need for technical and patent transfers. The Latin American bourgeoisie, a bourgeoisie of merchants lacking any creative character, tunbilicaHy tied to the power of the land, prostrates itself before the goddess technology. If foreign shareholdings (however small) and technological dependence (rarely small) are evidence of denationalization, how many factories can really be considered national in Latin America? In Mexico, for example, foreign owners of the technology often demand shares in an enterprise, in addition to decisive technical and administrative controls, the sale of the product to specific foreign middlemen, and the importation of machinery and other goods from their head offices, in return for contracts to transmit patents or "know-how."⁶⁶ And not only in Mexico. Countries of the so-called Andean Group (Bolivia, Colombia, Chile, Ecuador, and Peru) have worked out a plan for common treatment of foreign capital in the area, stressing rejection of technology-transfer contracts that contain such clauses. But to countries that will not accept the plan, it proposes that foreign concerns holding patents should fix the prices of [266] products resulting from the patents, or ban their export to specific areas.

The first system of patents to protect ownership of inventions was created almost four centuries ago by Sir Francis Bacon. Bacon liked to remark that "Knowledge is power," and it has since become clear how right he was. There is little universality in scientific universals; objectively they are confined within the frontiers of the advanced nations. Latin America does not apply the results of scientific research to its own advantage for the simple reason that it has none; consequently it is condemned to suffer the technology of the powerful, which attacks and removes natural raw materials, and is incapable of creating its own technology to sustain and defend its own development. The transplantation of the advanced countries' technology not only involves cultural -- and, most definitely, economic -- subordination. It has also been shown, after four and a half centuries' experience of proliferating modernized oases amid deserts of backwardness and ignorance, to resolve none of the problems of underdevelopment. This vast region of illiterates invests two hundred times less than the United States invests in technological research. There are less than one thousand computers in Latin America and fifty thousand in the United States; the electronic models and programming languages that Latin America imports are, of course, designed and created in the United States. Latin American underdevelopment is not a stage on the road to development, but the counterpart of development elsewhere; the region "progresses" without freeing itself from the structure of its backwardness and, as Manuel Sadosky points out, the "advantage" of not participating in progress with its own programs and goals is illusory.⁶⁷ [To illustrate the nature of the developmental illusion, Sadosky cites the testimony of an OAS specialist: " "The underdeveloped countries,' says George Landau, 'have some advantages over developed countries because when they introduce some new process or technique they usually select the most advanced of its type, and thus reap the benefit of years of investigation and the fruit of considerable investments that more industrialized countries had to make to achieve those results.' "] The symbols of prosperity are symbols of dependence. Modern technology is received as railroads were received in the past century, at the service of foreign interests which model and remodel the colonial status of these countries. [267] "What happens to us is what happens to a watch that loses time and is not regulated," Sadosky writes. "Although its hands continue moving forward, the difference grows between the time it shows and the real time."

On a small scale, Latin American universities turn out mathematicians, engineers, and programmers who can only find work in exile: we give ourselves the luxury of providing the United States with our best technicians and ablest scientists, who are lured to emigrate by the high salaries and broad research possibilities available in the north. At the same time, whenever a Latin American university or center of higher learning tries to stimulate the basic sciences, to lay the foundations for a technology that is not copied from foreign patterns and interests, a timely coup d'etat destroys the experiment on the pretext that it is an incubator of subversion. The University of Brasilia, crushed in 1964, was an example of this. And the truth is that the armor-plated archangels who guard the established order are not mistaken: an autonomous cultural policy, when it is genuine, requires and promotes deep changes in all existing structures.

The alternative is to depend on foreign sources: to imitate, apelike, the advances spread by the great corporations, which monopolize the most modern techniques of creating new products and improving the quality or reducing the cost of existing ones. The electronic brain has infallible methods of calculating costs and profits, and thus Latin America imports production techniques designed to economize on labor, although it has labor to spare and in several countries the unemployed may soon be the overwhelming majority. And thus our own impotence puts the progress of the region at the will or whim of foreign investors. For obvious reasons, control of the technological levers gives the multinational corporations a hold on other decisive levers of our economy. The head offices never, of course, give their affiliates the latest innovations or promote an independence which would not suit them. A survey made by Business International for the IDB concluded that "clearly the subsidiaries of international corporations operating in the region make no significant efforts in the direction of 'research and development.' In fact, most of them lack any department for this purpose and only in very rare cases take on the job of technical adaptation, while another small [268] minority of enterprises -- almost invariably located in Argentina, Brazil, and Mexico -- undertake modest research activities."⁶⁸ Raul Prebisch notes that "U.S. enterprises in Europe install laboratories and undertake research which helps strengthen the scientific and technical capacity of those countries, something that has not happened in Latin America," and makes a very serious point: "For lack of specialized knowledge ('know-how') on the part of national entrepreneurs, most of the transferred technology consists of techniques that are in the public domain but are licensed as specialized knowledge."⁶⁹

Technological dependence costs dearly in more ways than one: in hard-cash dollars, for instance, although the companies' versatile sleight-of-hand in declaring their remittances abroad makes the amount hard to estimate. Official figures nevertheless indicate that the dollar drain for technical aid to Mexico rose fifteen fold between 1950 and 1964, while in the same period new investments were not even doubled. Three-quarters of the foreign capital in Mexico today is in manufacturing industry, a rise from one-quarter in 1950. This concentration of resources in industry implies only a reflected modernization, using second-hand technology, for which the country pays as if it were the very latest. The auto industry has drained $1 billion from Mexico in one way or another, but a United Auto Workers leader wrote after touring the new General Motors in Toluca: "It was worse than archaic. Worse, because it was deliberately archaic, with the obsolescence carefully built in. . . . Mexico's plants are deliberately equipped with low-production machinery."⁷⁰ [The foreign affiliates are, however, far more modern than the national enterprises. For example, in the textile industry -- one of the last bastions of national capital -- the degree of automation is abysmally low. According to ECLA reports, in 1962 and 1963 four European countries invested six times more in new equipment for their textile industries than all of Latin America invested for that purpose in 1964.] What should we say of the gratitude Latin America owes to Coca-Cola and Pepsi, which collect astronomical industrial licensing fees from their concessionaries for providing them with a paste that dissolves in water and is mixed with sugar and carbonation? [269]

Surplus People, Surplus Regions

"Grow with Brazil." Display ads in New York newspapers exhort U S. businessmen to join the precipitous growth of the giant of the tropics. The city of Sao Paulo sleeps with its eyes open. The din of development shatters its eardrums; factories and skyscrapers, bridges and highways, sprout with the suddenness of tropical plants. But if accuracy had a place in publicity, the slogan would be: "Grow at the expense of Brazil." Despite its deceptive splendors, this development is a banquet to which few are invited and whose main dishes are reserved for foreign stomachs. Brazil already had ninety million inhabitants and will double that number by the end of the century, but its modern factories economize on labor and, in the hinterland, the intact latifundio is no more promising a source of jobs. A small boy in rags gazes with shining eyes at the world's longest tunnel, recently opened in Rio de Janeiro. The ragged boy is rightly proud of his country, but he is illiterate and steals in order to eat.

Throughout Latin America the invasion of foreign capital for manufacturing, received with so much enthusiasm, has sharpened the contrast between "classical models" of industrialization as described by the developed countries' historians, and the process characteristic of our part of the world. The system vomits men, but in Latin America industry sacrifices labor more than it does in Europe. There is no coherent relation between the labor available and the technology applied, unless the convenience of using one of the world's cheapest labor forces can be so described. Rich land, richer subsoil, poverty-stricken people, in this kingdom of abundance and dereliction: the legion of workers the system sweeps onto the roadside frustrates the development of an internal market and holds down the wage level. The perpetuation of the established land-holding system not only aggravates the chronic problem of low rural productivity through waste of land and capital in large unproductive haciendas, and of labor in proliferating minifundios; it also involves a copious and increasing stream of unemployed workers toward the cities. Rural underemployment turns into urban underemployment. Bureaucracy grows, slums spread out as bottomless sewers for people robbed of the right to work. Factories cannot absorb the surplus labor, but the existence [270] of this huge, always available reserve army keeps wages fifteen or twenty times lower than those of workers in the United States or Germany. Wages can remain low while productivity rises, and productivity rises at the expense of cuts in the labor force. The nature of "satellized" industrialization is to exclude: in this region with the highest demographic growth rate on earth, the masses multiply at dizzying speed but the development of dependent capitalism -- a voyage with more shipwrecks than navigators -- marks many more people "surplus" than it is able to use. The proportion of workers in manufacturing industry to Latin America's active population falls rather than rises: in the 1950s 14.5 percent were factory workers; today it is only 11.5 percent. In Brazil, according to a recent study, the total number of new jobs that need to be created will average 1.5 million a year during the next decade.⁷¹ Yet the total number of workers employed by factories in Brazil, Latin America's most industrialized country, is barely 2.5 million.

A myriad of laborers flees the poorest areas of each country: the cities attract and cheat whole families with hopes of work, of a chance to better their condition, of a place in the magic circle of urban civilization. But hallucinations do not fill stomachs. The city makes the poor even poorer, cruelly confronting them with mirages of wealth to which they will never have access -- cars, mansions, machines as powerful as God or the Devil -- while denying them secure jobs, decent roofs over their heads, full plates on the midday dinner table. At least 25 percent of Latin American city populations, according to a United Nations estimate, live in "quarters that fall short of modern standards of urban construction"⁷² -- a technician's lengthy euphemism for slums: the favelas of Rio de Janeiro, the callampas of Santiago de Chile, the jacales of Mexico, the barrios of Caracas, the barriadas of Lima, the villas miserias of Buenos Aires, and the cantegriles of Montevideo. In tin, mud, and board, hovel-colonies on the cities' outskirts sprout new additions every night; the marginal populations drawn by poverty and hope keep piling up. Huaico means landslide in the Quechua language, and that is what Peruvians call the human avalanche let loose from the mountains upon the coastal capital: nearly 70 percent of Lima's inhabitants come from the provinces. In Caracas they are called toderos because they do a [271] hit of everything (todo). The surplus people get an occasional nibble at a job, or perform sordid or illegal tasks; they become servants, sell lemonade or what-have-you, get pick-and-shovel or bricklaying or electrical or sanitary or wall-painting odd-jobs, beg, steal, mind parked cars -- available hands for whatever turns up. Since the human surplus grows faster than the "integrated" element, the United Nations survey foresees that within a few years "the makeshift camps will house the majority of the urban population." The defeated will he the majority. Meanwhile, the system prefers to hide the dirt under the rug. It is clearing the favelas from the bay area and the villas miserias from the national capital at gun point, sweeping the human surplus out of sight by the thousands upon thousands. Rio de Janeiro and Buenos Aires conjure away the spectacle of the poverty the system produces: soon only the mastications of prosperity, but not its excrement, will be seen in these cities where the wealth created by all of Brazil and Argentina is squandered.

The international system of domination suffered by each country is reproduced within each. The concentration of industry in particular areas reflects the previous concentration of demand in the big ports or export zones. Eighty percent of Brazilian industry is located in the southeastern triangle -- Sao Paulo, Rio de Janeiro, and Belo Hori-zonte -- while the famished Northeast participates less and less in the national industrial product. Two-thirds of Argentine industry is in Buenos Aires and Rosario. Montevideo embraces three-quarters of Uruguayan industry, as do Santiago and Valparaiso in Chile. In Lima and its port is concentrated 60 percent of Peruvian industry.⁷³ The growing relative backwardness of the great hinterlands, submerged in poverty, is not, as some maintain, due to their isolation, but on the contrary to direct or indirect exploitation by the old colonial centers now converted into industrial centers. According to an Argentine trade union leader: "A century and a half of our history has witnessed the violation of all the solidarity agreements, the breaking of the faith sworn in hymns and constitutions, the domination of the provinces by Buenos Aires. Armies and customs houses, laws made by few and endured by many, governments that with some exceptions have been agents of foreign powers, built this proud metropolis that accumulates wealth and power. But if we seek the explanation [272] of that grandeur and the penalty of that pride, we will find it in the missionaries' yerba mate plantations, in the dead communities of the Forestal Land, Timber, and Railways Company, in the despair of Tucuman sugarmills and Jujuy mines, in the abandoned ports of the Parana, in the exodus from Berisso: [Berisso is a meatpacking center with high unemployment. (Trans.)] a whole map of misery surrounding a center of opulence secured by the exercise of an internal domination which can no longer be dissimulated or accepted."⁷⁴ In his study of the development of Brazilian underdevelopment, Andre Gunder Frank observed that while Brazil is a U.S. satellite, the Northeast plays internally the role of satellite to the "internal metropolis" located in the southeast. The polarization shows itself in numerous phenomena: not only in the concentration of the immense majority of private and public investments in Sao Paulo, but also in the city's fraudulent appropriation -- through unfavorable trade exchange, an arbitrary price policy, privileged internal tax scales, and a massive cornering of skilled brain and labor power -- of capital generated in the whole country.

Dependent industrialization further concentrates income at the regional and social level. The wealth it generates does not spread through the whole country or the whole society, but consolidates and deepens existing inequalities. Not even its own -- ever less numerous -- "integrated" workers benefit to an equal extent from industrial growth; the fruits of higher productivity, bitter for so many, go to the highest strata of the social pyramid. In Brazil between 1955 and 1966, the mechanical, electrical, communications, and auto industries raised productivity by about 130 percent, but in the same period their workers' wages only grew 6 percent in real value. Latin America offers cheap labor: in 1961 the average hourly wage in the United States was $2; in Argentina it was $.32, in Brazil $.28, in Colombia $.17, in Mexico $.16, and in Guatemala barely $.10. Since then the gap has widened. To earn what a French worker gets in one hour, the Brazilian now has to work 2.5 days. A little more than ten hours' work gets the U.S. worker the equivalent of a month's work by a Brazilian. And to earn more than a Rio de Janeiro worker gets for an eight-hour day, the British or German workers puts in less than [273] half an hour. Latin America's low wage scale is reflected in the low nrices the region gets for its raw materials in the international market to the benefit of consumers in the rich countries. In the internal markets, where denationalized industry sells manufactured goods, nrices are kept high to maintain the inflated profits of the imperialist corporations.

All economists agree on the importance of growing demand as a catapult of industrial development. But Latin America's foreign-dominated industry shows no interest in widening and deepening the mass market, for this could only be achieved on the basis of practical steps to transform the socioeconomic structure, which would involve troublesome political storms. With trade unions dominated or annihilated or tamed in the more industrialized cities, the growth of a wage earner's purchasing power is too small, and prices of industrial articles do not go down. This, then, is a vast region with an enormous potential market and a real market shrunken by the poverty of its masses. The consumers to whom big auto and refrigerator plants direct their products are only 5 percent of the Latin American population. Hardly one in four Brazilians can really be considered a consumer. Forty-five million Brazilians have the same combined income as 900,000 privileged citizens at the other end of the social scale.⁷⁵ [According to this same ECLA study, "A significant process of progressive income redistribution took place in Argentina in the years prior to 1953. Of the three years for which more detailed information is available, this was precisely the one in which there was least inequality, while it was much greater in 1959. ... In Mexico, in the more extended period from 1940 to 1964 . . . , there are indications to suggest that the loss was not only relative but also absolute for 20 percent of the lowest-income families."]

The Integration of Latin America Under the Stars and Stripes

Some innocents still believe that all countries end at their frontiers. They say that the United States has little or nothing to do with Latin American integration, for the simple reason that the United States is not a member of the Latin American Free Trade Area (LAFTA), or of the Central American Common Market. Integration, they say, is as the liberator Simon Bolivar wanted it: it goes no further than the border separating Mexico from its powerful northern [274] neighbor. Those who sustain this seraphic notion suffer from a form of amnesia which may not be wholly disinterested. They forget that a legion of pirates, merchants, bankers, Marines, technocrats, Green Berets, ambassadors, and captains of industry have, in a long black page of history, taken over the life and destiny of most of the peoples of the south, and that at this moment Latin America's industry lies at the bottom of the Imperium's digestive apparatus. "Our" union makes "their" strength to the extent that our countries, not having broken from the molds of underdevelopment and dependence, integrate their own respective serfdoms.

Official LAFTA documents exalt the role of private capital in the development of integration -- and we have seen in previous chapters in whose hands that private capital lies. In mid-April 1969, the Consultative Council on Business Affairs met in Asuncion. Among other things, it reaffirmed "the orientation of the Latin American economy, in the sense that economic integration of the zone must be achieved fundamentally on the basis of the development of private enterprise." It recommended that the governments introduce common legislation for the formation of "multinational enterprises, made up predominantly [sic] of capital and entrepreneurs from the member states." All the keys were handed over to the thief. Back in April 1967, in the final declaration of the Punta del Este conference -- on which Lyndon Johnson himself placed his golden seal -- the creation of a common market of shares was even proposed, a kind of integration of stock exchanges, so that enterprises located anywhere in Latin America could be purchased anywhere in Latin America. Official documents went so far as to recommend openly the denationalization of public enterprises. The first gathering of the meat industry within LAFTA, in Montevideo in April 1969, resolved "to request the governments ... to study suitable methods to achieve progressive transference of state meatpacking plants to the private sector." At the same time, the Uruguyan government, one of whose members chaired the meeting, pursued an all-out policy of sabotage of the state-owned Frigorifico Nacional packing plant in favor of those privately owned by foreigners.

Tariff disarmament, which is gradually freeing the circulation of merchandise within the LAFTA area, is intended to reorganize the [275] distribution of Latin American production centers and markets for the benefit of the great multinational corporations. The "escalation economy" now prevails: the first phase, carried out during these recent years, has seen the consolidation of foreign power over the launching platforms -- the industrialized cities -- from which the regional market as a whole is to be dominated. The enterprises in Brazil with the greatest interest in Latin American integration are precisely the foreign ones and, above all, the most powerful ones.⁷⁶ Of the multinational corporations -- mostly United States-owned -- replying to an all-Latin American questionnaire sent out by the IDB, more than half were planning or proposing that their activities in the second half of the 1960s be in the extended LAFTA market, creating or strengthening regional departments.⁷⁷ [Sixty-four percent of the enterprises, taking advantage of LAFTA concessions, were exporting within the region chemical products and petro-chemicals, artificial nbers, electronic materials, industrial and agricultural machinery, office equipment, motors, measuring instruments, steel pipes, and other products.] In September 1969, Henry Ford II announced at a Rio de Janeiro press conference that he wanted to join in the Brazilian economic process "because the situation is very good. Our initial participation consisted of purchasing Willys Overland do Brazil." He said he would be exporting Brazilian vehicles to several Latin American countries. Caterpillar Tractors -- "a firm that has always treated the world as one single market," according to Business International -- took advantage of the tariff reductions as soon as they were negotiated, and in 1965 was already supplying various South American countries with bulldozers and tractor spare parts from its plant in Sao Paulo. With equal speed, Union Carbide began showering electrotechnical products on Latin American countries from its Mexican factory, availing itself of customs, tax, and advance-deposit exemptions in the LAFTA area.⁷⁸

The Latin American countries -- impoverished, incommunicado, decapitalized, and facing serious structural problems within their own frontiers -- progressively dismantle their economic, financial, and fiscal barriers in the monopolies' favor. The result is that the monopolies, which are still strangling each country separately, can move outward and consolidate a new division of labor on a regional scale [276] by specializing their activities by countries and spheres of activity, fixing optimum sizes for their affiliated enterprises, reducing costs, eliminating competitors outside the area, and stabilizing markets. The affiliates of the multinational corporations can point to the conquest of the Latin American market in certain spheres and under certain conditions not affecting the global policies of their head offices. As we saw in an earlier chapter, the international division of labor continues functioning as it always did for Latin America: the changes are only within the region. The presidents declared at Punta del Este that "foreign private initiative will be able to perform an important function to assure achievement of the objectives of integration," and they agreed that the IDB should increase "the sums available for export credits in intra-Latin American trade."

Fortune in 1967 assessed the "enticing new opportunities" which the Latin American Common Market opens to northern business: "In many a boardroom, the common market is becoming a serious element in planning for the future. Ford Motor do Brasil, which makes Galaxies, thinks it could mesh nicely with Ford of Argentina, which makes Falcons, thus deriving economies of scale by producing both cars for larger markets. Kodak, which now makes photographic paper in Brazil, would like to make exportable film in Mexico and cameras and projectors in Argentina."⁷⁹ The magazine cited other examples of "rationalizing" or "expanding" operations by corporations such as ITT, General Electric, Remington Rand, Otis Elevator, Worthington, Firestone, Deere, Westinghouse, Air Brake and American Machine & Foundry, Nine years ago Raul Prebisch, a vigorous advocate of LAFTA, wrote: "Another argument I often hear, from Mexico to Buenos Aires, passing through Sao Paulo and Santiago, is that the Common Market will offer foreign industry opportunities for expansion that it does not now have in our limited markets. . . . It is feared that the benefits offered by the Common Market will be taken advantage of principally by foreign industry, and not by national industries. ... I shared and share this fear, not only in imagination but because I have verified the reality of that fact in practice."⁸⁰ This verification did not prevent Prebisch from later signing a document concerning integration in progress in which it is stated that "foreign capital undoubtedly has an important role in the development of our [277] economies,"⁸¹ and proposing that mixed companies be founded in which "the Latin American entrepreneur may participate efficiently and equitably." Equitably? Yes, "equality of opportunity" must of course be preserved. Anatole France aptly said that the law in its majestic equality forbids the rich as well as the poor from sleeping under bridges, begging in the streets, and stealing bread. But it happens that on this planet and in this epoch one enterprise alone, General Motors, employs as many workers throughout the world as the entire active population of Uruguay, and earns in a single year four times as much money as the whole Gross National Product of Bolivia.

The corporations know, from their experience of previous integrations, the advantages of acting as "insiders" in the capitalist development of other areas. The fact that the total sales of worldwide U.S. affiliates are six times the value of U.S. exports tells its own story.82 In Latin America as elsewhere, the United States' inconvenient antitrust laws do not apply. Here, with full impunity, countries become pseudonyms for the foreign concerns that dominate them. The first LAFTA implementation agreement was signed in August 1962 by Argentina, Brazil, Chile, and Uruguay, but in fact it was an agreement between IBM, IBM, IBM, and IBM. It eliminated import duties in the four countries on computers and their components, while raising duties on these machines imported from outside the area: IBM "suggested to the governments that if they eliminated duties on trade between themselves, it would build plants in Brazil and Argentina . . ."⁸³ Mexico added its signature on the second agreement: this time it was RCA and Phillips (Dutch) which promoted the exemption for radio and TV equipment. And so on. The ninth agreement, in the spring of 1969, divided the Latin American market in electrical generating, transmission, and distribution equipment between Union Carbide, General Electric, and Siemens (German).

The Central American Common Market, an effort to join the rachitic and deformed economies of five countries, has served to blow down with one puff the feeble national producers of cloth, paint, medicines, cosmetics, and biscuits, and to expand the profits and trading orbit of General Tire & Rubber, Procter & Gamble, Grace, Colgate-Palmolive, Sterling Products, and National Biscuit. In Central America, liberation from customs duties has also gone hand in [278] hand with raising the barriers against "external foreign" competition (as it might be called) so that "internal foreign" firms may sell at higher prices and greater profits: "The subsidy received through tariff protection exceeds the total value added by the domestic production process."⁸⁴

No one has a better sense of proportion than these foreign enterprises: their own and other enterprises' proportions. What, for example, would be the point of installing a big auto plant, ;,teel blast furnaces, or an important chemical factory in Uruguay, Bolivia, Paraguay, or Ecuador, with their minuscule markets? The springboard sites are chosen elsewhere on the basis of the size and growth potential of the internal markets. FUNSA, the Uruguayan tire plant, depends substantially on Firestone but it is Firestone's affiliates in Brazil and Argentina that expand with a view to integration. The growth of the Uruguayan plant is braked, applying the same criterion that determines that Olivetti, the Italian firm invaded by General Electric, will make its typewriters in Brazil and its calculating machines in Argentina. "The efficient assignment of resources requires an unequal development of the different parts of a country or region," says Paul Rosenstein-Bodan, and an integrated Latin America will also have its Northeasts and its poles of development.⁸⁵ Weighing the eight years of life of the Montevideo Treaty which sparked LAFTA, the Uruguayan delegate said that "differences in degrees of development" between the various countries "tend to sharpen," for the mere increase of trade in an interchange of reciprocal concessions can only augment the previously existing inequality between privileged poles and submerged areas. The Paraguayan ambassador made a similar complaint: absurdly, he said, the weak countries were subsidizing the industrial development of the free trade zone's most advanced countries, absorbing their high internal costs through customs exemptions. He added that the deterioration of the terms of trade punished his country as severely within LAFTA as outside it: "For every ton of products imported from the zone, Paraguay pays with two." The reality, said the spokesman for Ecuador, was that of "eleven countries in different degrees of development, which means greater or lesser capacities to take advantage of the free trade area and leads to polarization of the benefits and handicaps." [279] The Columbian ambassador drew "just one conclusion: the program of liberation benefits the three big countries in conspicuous disproportion."⁸⁶ [Integration as a simple process of reducing trade barriers will maintain "highly developed enclaves within a generally depressed continent," according to the director of UNCTAD.⁸⁷] As integration proceeds, the small countries will be renouncing their customs income -- which in Paraguay finances nearly half the national budget -- in exchange for the doubtful advantage of receiving, for example, cars from Sao Paulo, Buenos Aires, or Mexico made by the same firms that sell them from Detroit, Wolfsburg, or Milan at half the price. [The auto industry is 100 percent foreign in Brazil and Argentina, and mainly foreign in Mexico.⁸⁸] This is the solid fact beneath the frictions increasingly provoked by the integration process. The successful emergence of the Andean Pact, bringing together the Pacific nations, is one result of the three big countries' visible hegemony in the broader framework of LAFTA: the small countries propose to unite separately.

But despite all the problems, thorny as they may appear, the markets expand as the satellites keep bringing new satellites into their orbit of dependent power. Under the Castelo Branco dictatorship, Brazil signed an agreement guaranteeing foreign investments which saddles the state with the risks and handicaps of each business deal. Significantly, the official who arranged the agreement defended its humiliating conditions before Congress with the statement that "in the near future Brazil will be investing capital in Bolivia, Paraguay, or Chile and will then need agreements of this type."⁸⁹ [For example, Uruguay agreed to increase its imports of machinery from Brazil in exchange for such favors as a supply of Brazilian electrical energy to northern Uruguay. Today the Uruguayan departments of Artigas and Bivera cannot raise their consumption of energy without Brazil's permission.] In the Brazilian governments following the coup d'etat of 1964, a tendency has in fact developed to assign to Brazil a "sub-imperialist" function vis-a-vis its neighbors. A very influential military clique pictures the country as the great administrator of U.S. interests in the region, and calls on Brazil to become the same sort of boss over the south as the United States is over Brazil itself. In this connection, General Golbery [280] do Couto e Silva has invoked a new "manifest destiny": "All the more so," wrote this ideologue of "subimperialism" in 1952, "when our manifest destiny does not conflict in the Caribbean with that of our northern elder brothers . . ."⁹⁰ The General is now chairman of Dow Chemical in Brazil. Certainly the desired subdominion structure has plentiful historical antecedents, from the annihilation of Paraguay on behalf of British bankers after the war of 1865 to the sending of Brazilian troops, just a century later, to head the solidarity operation when U.S. Marines invaded Santo Domingo.

Recent years have seen a revival of the competition between the agents for imperialist interests installed in the Brazilian and Argentine governments on the troublesome question of continental leadership. Everything suggests that Argentina is in no condition to resist the powerful Brazilian challenge: Brazil has double the land area and four times the population, produces nearly three times as much steel, double the cement, more than double the electric energy, and renews its merchant fleet fifteen times as fast. Furthermore, in the past two decades, its rate of economic growth has been considerably greater than Argentina's. Until recently Argentina produced more cars and trucks than Brazil, but at the present rate Brazil's auto industry will be three times larger than Argentina's by 1975 and its fleet -- equal to Argentina's in 1966 -- will be as big as that of all Latin America put together. Brazil offers foreign investors its' far-flung potential market, its fabulous natural wealth, the strategic importance of its territory -- sharing boundaries as it does with all the South American countries except Ecuador and Chile -- and all the conditions for U.S. enterprises on its soil to advance with seven league boots. It has cheaper and more abundant labor than its rival: the average wage level is three times lower than in Argentina and the unemployed run into the millions. It is no accident that one-third of the processed and semi-processed products sold within the LAFTA zone come from Brazil. This is the country called upon to become the axis of all Latin America's liberation or servitude. Perhaps Senator Ful-bright was not aware of the full significance of his words when, in public statements in 1965, he attributed to Brazil the mission of directing the Common Market of Latin America. [281]

As Simon Bolivar Prophesied: "We Shall Never Be Happy, Never!"

For U.S. imperialism to be able to "integrate and rule" Latin America today, it was necessary for the British Empire to help divide and rule us yesterday. An archipelago of disconnected countries came into being as a result of the frustration of our national unity. When the peoples in arms won independence, Latin America stood on the stage of history with a common bond of tradition between its diverse regions, territorially united, speaking two languages of the same origin, Spanish and Portuguese. But lacking one essential condition to form one great nation -- economic community.

The poles of prosperity that flourished to supply Europe's need for metals and foodstuffs were not interconnected: the ribs of the fan had their vertex across the ocean. People and capital were displaced according to the rising and falling fate of gold or sugar, silver or indigo, and only the ports and the capitals, the leeches of the productive regions, had a permanent existence. Latin America was born as a single territory in the imaginations and hopes of Simon Bolivar, Jose Artigas, and Jose de San Martin, but was broken in advance by the basic deformations of the colonial system. The oligarchies of the free trade ports consolidated this structure of fragmentation, which was their source of profit: those sagacious traders could not incubate the national unity that was the essence of the European and U.S. bourgeoisie. Throughout the past century the British, Spain's and Portugal's heirs since before independence, perfected this structure by means of diplomats' white-gloved intrigues, bankers' extortions, and the merchants' capacity for seduction. "For us the fatherland is America," Bolivar proclaimed; but Gran Colombia was divided into five countries and the liberator died defeated: "We shall never be happy, never!" he said to General Urdaneta. Betrayed by Buenos Aires, San Martin stripped off the insignia of command and Artigas, who called his soldiers Americans, went to a solitary exile's death in Paraguay: the Rio de la Plata viceroyalty had been divided into four. Francisco de Morazan, creator of the federal republic of Central America, died before a firing squad, [As Gregorio Bustamante Maceo described it: "He ordered them to ready their arms, bared his head, ordered them to aim, corrected the aim, gave the command to fire, and fell; still he raised his bleeding head and said, I am alive; another volley ended his life."⁹¹

In the plaza of Tegucigalpa, the band plays light music every Sunday night at the foot of Morazan's bronze statue. But the inscription is wrong: this is not the equestrian likeness of the champion of Central American unity. The Hondurans who went to Paris soon after the shooting to commission a sculptor on the government's behalf spent the money on a spree and ended up buying a statue of Marshal Ney in the flea market. Central America's tragedy rapidly became a farce.] and the waist of America was [282] split into five pieces -- Panama, the canal with the rank of republic invented by Teddy Roosevelt, was added later.

Today the world sees the result: any of the multinational corporations operates with more coherence and sense of unity than the congeries of islands that is Latin America, broken up by so many frontiers and such a lack of communication. What integration can be achieved among themselves by countries that have not even been able to integrate internally? Each country suffers from deep fissures in its own body, bitter social divisions and unresolved tensions between its great marginal deserts and its urban oases. The drama is reproduced on the regional level. The railroads and highways, created to transport foreign products by the shortest routes, still bear irrefutable witness to Latin America's impotence or incapacity to make the national dream of its heroes come true. Brazil has no permanent land connections with three of its neighbors, Colombia, Peru, and Venezuela; Atlantic seaboard cities have no direct cable communications with Pacific cities, so that telegrams between Buenos Aires and Lima, or Rio de Janeiro and Bogota, have to go through New York; the same with telephone communications between the Caribbean and the south. Each Latin American country still identifies itself with its own port -- a negation of its roots and real identity -- to such an extent that almost all intraregional trade goes by sea: inland transport is virtually nonexistent. Furthermore, the global freight cartel fixes rates and itineraries to suit itself, and Latin America merely endures the exorbitant charges and ridiculous routes. Of the 118 regular shipping lines operating in the region only seventeen fly regional flags; freightage bleeds the Latin American economy of $2.6 billion a year.⁹² Thus merchandise shipped from Porto Alegre to Montevideo arrives faster if it goes via Hamburg, and the same for Uruguayan [283] wool bound for the United States; freightage from Buenos Aires to a Mexican gulf port is more than 25 percent lower if the shipment goes via Southampton.93 Shipment of timber from Mexico to Venezuela costs more than double the shipment of timber from Finland to Venezuela, although the maps still insist that Mexico is closer. A direct shipment of chemical products from Buenos Aires to Tampico in Mexico costs far more than if it is routed via New Orleans.94

What the United States set out to achieve for itself, and did achieve, is certainly different. Seven years after their independence, the thirteen colonies had doubled their territory, already extending beyond the AUeghenies to the banks of the Mississippi, and four years after that they forged their unity by creating a common market. Purchase of the Louisiana Territory from France in 1803 again doubled the land area; then came Florida and, at mid-century, the invasion and amputation of half of Mexico in the name of "manifest destiny." Then the purchase of Alaska and the usurpation of Hawaii, Puerto Rico, and the Philippines. The colonies made themselves a nation, and the nation made itself an empire, putting into practice aims clearly expressed and pursued from the remote days of the "founding fathers." While the north of America grew, developing internally within its expanding frontiers, the south developed outwardly and blew into fragments like a grenade.

In the present process of integration we neither re-encounter our origins nor come nearer to our goals. Bolivar prophesied shrewdly that the United States seemed fated by Providence to plague America with woes in the name of liberty. General Motors or IBM will not step graciously into our shoes and raise the old banners of unity and emancipation which fell in battle; nor can heroes betrayed yesterday be redeemed by the traitors of today. It is a big load of rottenness that has to be sent to the bottom of the sea on the march to Latin America's reconstruction. The task lies in the hands of the dispossessed, the humiliated, the accursed. The Latin American cause is above all a social cause: the rebirth of Latin America must start with the overthrow of its masters, country by country. We are entering times of rebellion and change. There are those who believe that destiny rests on the knees of the gods; but the truth is that it confronts the conscience of man with a burning challenge.

1. OAS Secretariat-General, El financiamiento externo para el desarrollo de la America Latina (Washington, 1969); restricted document of the Sixth Annual Meeting of the InterrAmerican Economic and Social Council at the Ministerial Level.

2. J.-J. Servan-Schreiber, The American Challenge (New York: Atheneum, 1968), p. 3.

3. Quoted in Alfredo Parera Dennis, "Naturaleza de las relaciones entre las clases dominantes argentinas y las metropolis," Fichas de investigacidn econdmica y social (Buenos Aires), December 1964.

4. Ministry of Planning and Economic Coordination, A industrializaqdo brasileira: diagnostico e perspectivas (Rio de Janeiro, 1969).

5. Maria de Conceicao Tavares, O processo de substituiqdo de importaqoes como modelo de desenvolvimento recente na America Latina (Rio de Janeiro: ECLA/ILPES, n.d.).

6. Reply of the Minister of Economic Affairs to a representative of the magazine Vision, November 27, 1953; quoted in Parera Dennis, "Naturaleza de las relaciones."

7. Quoted in Octavio Ianni, O colapso do populismo no Brasil (Rio de Janeiro, 1968).

8. Fernando Henrique Cardoso, Politica e desenvolvimento em sociedades dependentes: ideologias do empresariado industrial argentino e brasileiro (Sao Paulo, 1968).

9. For irrefutable examples, see Ricardo Lagos Escobar, La concentration del poder economico. Su teoria. Realidad chilena (Santiago de Chile, 1961); and Vivian Trias, Reforma agraria en el Uruguay (Montevideo, 1962).

10. Alonso Aguilar Monteverde, in Alonso Aguilar Monteverde et al., El milagro mexicano (Mexico, 1970).

11. See Dardo Ciineo, Comportamiento y crisis de la close empresaria (Buenos Aires, 1967).

12. Speech by Minister Helio Beltrao to the Asociacion Comercial de Rio de Janeiro, as reported in Correio do Povo, May 24, 1969.

13. ECLA/BNDE, Quince anos de politica economica en el Brasil (Santiago de Chile, 1965).

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

15. Mauricio Vinhas de Queiroz, "Os grupos multibilionarios," Revista do Instituto de Ciencias Sociais (Universidade Federal do Rio de Janeiro), January 1965.

16. New York Times, January 19, 1969, p. 12E.

17. Sergio Nicolau, La inversion extranjera directa en los paises de la ALALC (Mexico, 1968).

18. ECLA, Economic Survey of Latin America 1968 (New York: United Nations, 1969).

19. Vision, February 3, 1967.

20. Jose Luis Ceceiia, Los monopolios en Mexico (Mexico, 1962).

21. O Globo, February 25, 1969.

22. Fernando Gasparian in Correio da Manha, May 1, 1968.

23. Journal of Commerce, International Banking Survey, February 25, 1968.

24. Ministry of Planning and Economic Coordination, Programa de Agdo Economica do Govemo, Rio de Janeiro, November 1964.

25. International Commerce, April 24, 1967, p. 26.

26. V. I. Lenin, Imperialism: The Highest Stage of Capitalism, in Selected Works, vol. V (New York, n.d.), p. 56.

27. Speech to the AFL-CIO Congress in Miami, as reported in the New York Times, December 8, 1961, p. 18.

28. ECLA, Estudio economico de America Latina 1968 (New York/Santiago de Chile, 1969).

29. Fichas de investigacion economica y social, June 1965.

30. International Commerce, February 3, 1963, p. 21.

31. Ibid., July 17, 1967, p. 10.

32. This document was published in the daily Ya (Montevideo), May 28, 1970.

33. Panorama (Centro de Estudios y Documentacion Sociales, Mexico), November-December 1965.

34. Irving Pflaum, Arena of Decision: Latin American Crisis (Englewood Cliffs, N.J.: Prentice Hall, 1964); John Gerassi, The Great Fear in Latin America (New York: Macmillan, 1965).

35. Georgie Anne Geyer, in Miami Herald, December 24, 1966.

36. Statement to a House of Representatives subcommittee, cited in Nelson Werneck Sodre, Historia militar do Brasil (Rio de Janeiro, 1965).

37. Frederick B. Pike, The Modem History of Peru (New York: Praeger, 1967), p. 319.

38. Hickenlooper Amendment, Section 620 of the Foreign Assistance Act.

39. International Commerce, April 10, 1967, p. 44.

40. NACLA Newsletter (New York), May-June 1970.

41. ADELA Annual Report, quoted in ibid.

42. Harry Magdoff, The Age of Imperialism (New York and London: Monthly Review Press, 1968), pp. 145-146.

43. World Bank, IFC, IDA, Policies and Operations (Washington, D.C., 1962).

44. Eugene R. Black, "The Domestic Dividends of Foreign Aid," Columbia Journal of World Business, no. 1, 1965, p. 23.

45. ECLA, Economic Survey of Latin America, 1968, 1969.

46. Ibid.

47. Pablo Gonzalez Casanova, La democracia en Mexico (Mexico, 1965).

48. Marco D. Pollner, in INTAL/BID, Los empresarios y la integracion de America Latina (Buenos Aires, 1967).

49. Central Unica de Trabajadores de Chile, America Latina, un mundo que ganar (Santiago de Chile, 1968).

50. Arghiri Emmanuel, Unequal Exchange (New York: Monthly Review Press, 1972).

51. Samir Amin, L'accumulation a l'echelle mondiale (Paris, 1970).

52. New York Times, April 3, 1968.

53. OAS Secretariat-General, El financiamiento extemo.

54. Miguel S. Wionczek, "La inversion extranjera privada en Mexico: problemas y perspectivas," Comercio exterior (Mexico), October 1970.

55. Aldo Ferrer in INTAL/BID, Los empresarios.

56. Jornal do Comercio (Rio de Janeiro), March 23, 1950.

57. Celso Furtado, Um prajeto para o Brasil (Rio de Janeiro, 1968).

58. International Commerce, April 24, 1967.

59. Ismael Vifias and Eugenio Gastiazoro, Economia y dependencia, 1900-1918 (Buenos Aires, 1968).

60. Antonio Garcia, "Las constelaciones del poder y el desarrollo latino-americano," Comercio exterior, November 1969.

61. Guillermo Bernhard, Los monopolios y la industria frigorifica (Montevideo, 1970).

62. Statement made by President Salvador Allende as reported in Agence France Presse dispatch, December 12, 1970.

63. La Razon (Buenos Aires), March 2, 1970.

64. "Resultados de industria automobilistica," special study in Conjuntura economica, February 1969.

65. NACLA Newsletter, April-May 1969.

66. Miguel S. Wionczek, "La trasmision de la tecnologia a los paises en de-sarrollo: proyecto de un estudio sobre Mexico," Comercio exterior, May 1968.

67. Manuel Sadosky, "America Latina y la computation," Gaceta de la Universidad (Montevideo), May 1970.

68. Quoted in Gustavo Lagos et al., Las inversiones multinacionales en el desarrollo y la integracion de America Latina (Bogota, 1968).

69. Raul Prebisch, "La cooperation internacional en el desarrollo latino-americano," Desarrollo (Bogota), January 1970.

70. Leo Fenster in The Nation, July 2, 1969.

71. F. S. O'Brien, The Brazilian Population and Labor Force in 1968, Ministry of Planning and Economic Coordination document for internal discussion.

72. ECLA, Estudio economico de America Latina, 1967 (New York/Santiago de Chile, 1968).

73. Ibid., 1968.

74. Raimundo Ongaro, "Letter from Prison," De Frente (Buenos Aires), September 25, 1969.

75. ECLA, Estudio sobre la distribution del ingreso en America Latina (Santiago de Chile, 1967).

76. Vinhas de Queiroz, "Os grupos multibilionarios."

77. Lagos et al., Las inversiones multinacionales.

78. "LAFTA: Key to Latin America's 200 Million Consumers," Business International, June 1966.

79. "A Latin-American Common Market Makes Common Sense -- for U.S. Business Too," Fortune, June 1967, p. 56.

80. Raul Prebisch, "Problemas de la integracion economica," Actualidades economicas financieras (Montevideo), January 1962.

81. Raul Prebisch et al., Proposiciones para la creacion del Mercado Comun Latinoamericano, document presented to President Frei in 1966.

82. United States Department of State, Office of External Research, The Multinational Corporation (Washington, D.C., 1969),

83. "LAFTA: Key to Latin America's 200 Million Consumers."

84. Roger Hansen, "Time of Trial for the 'Other' Common Market," Columbia Journal of World Business (September-October 1967), cited in NACLA Newsletter, January 1970.

85. Paul N. Rosenstein-Rodan, Reflections on Regional Development, cited in Lagos et al., Las inversiones multinacionales.

86. LAFTA Permanent Executive Committee, Extraordinary Sessions, July and September 1969, Apreciaciones sobre el proceso de integracion de la ALALC [LAFTA] (Montevideo, 1969).

87. Sidney Dell, "Obstacles to Latin American Integration," in The Movement Toward Latin American Unity, ed. Ronald Hilton (New York: Praeger, 1969).

88. LAFTA, La industria automotriz en la ALALC [LAFTA] (Montevideo, 1969).

89. Vivian Trias, Imperialismo y geopolitica en America Latina (Montevideo, 1967).

90. Golbery do Couto e Silva, Aspectos geopoliticos do Brasil (Rio de Janeiro, 1952).

91. Gregorio Bustamante Maceo, Historia militar de El Salvador (San Salvador, 1951).

92. ECLA, Los fletes maritimos en el comercio exterior de America Latina (Santiago de Chile, 1968).

93. Enrique Angulo H., in Integracion de America Latina: experiencias y perspectivas (Mexico, 1964).

94. Sidney Dell, Latin American Common Market (New York: Oxford University Press, 1966).

Additional Bibliography for Chapter 5

Aguilar Monteverde, Alonso, and Carmona, Fernando. Mexico, riqueza y miseria. Mexico, 1968.

Baptista Gumucio, Mariano, et al. Guerrilleros y generates sobre Bolivia. Buenos Aires, 1968.

Baran, Paul A., and Sweezy, Paul M. Monopoly Capital. New York: Monthly Review Press, 1966.

Bourricaud, Francois; Bravo Bresani, Jorge; Favre, Henri; and Piel, Jean. La oligarquia en el Peru. Lima, 1969.

Canelas, Amado. Radiografia de la Alianza para el atraso. La Paz, 1963.

Cecena, Jose Luis. Mexico en la orbita imperial. Mexico, 1970.

Cheprakov, V. A. El capitalismo monopolista de estado. Moscow, n.d.

ECLA. El financiamiento externa de America Latina. New York/Santiago de Chile: United Nations, 1964.

Frank, Andre Gunder. Capitalism and Underdevelopment in Latin America. New York and London: Monthly Review Press, 1967.

Garcia Lupo, Rogelio. Contra la ocupacion extranjera. Buenos Aires, 1968.

Gunther, John. Inside South America. New York: Harper & Row, 1967.

Instituto Latinamericano de Planificacion Economica y Social. La brecha comercial y las integration latinoamericana. Mexico/Santiago de Chile, 1967.

Inter-American Development Bank. Annual Report, 1969. Washington, 1970.

Jalee, Pierre. The Pillage of the Third World. New York and London: Monthly Review Press, 1968.

Lichtensztejn, Samuel and Couriel, Alberto. El FMI y la crisis economica national. Montevideo, 1967.

Lizano F., E. "El problema de las inversiones extranjeras en Centro America." Revista del Ranco Central (Costa Rica), September 1966.

Maggiolo, Oscar J. In Hacia una politica cultural autonoma para America Latina. Montevideo, 1969.

Martins, Luciano. Industrializacdo, hurguesia national e desenvolvimento. Rio de Janeiro, 1968.

Quijano, Carlos. "Los victimas del sistema." Marcha (Montevideo), October 23, 1970.

Romanova, Z. La expansion economica de Estados Unidos en America Latina. Moscow, n.d.

Trias, Vivian. La crisis del imperio. Montevideo, 1970.

Urquidi, Victor L. In Obstacles to Change in Latin America, edited by Claudio Veliz, et al. New York: Oxford University Press, 1965.