Open Veins of Latin America: Five Centuries of the Pillage of a Continent

by Eduardo Galeano

  Likewise in Argentina, the foreign concerns and their native echoes have always insisted that the subsoil contains little petroleum, although investigations by technicians of Yacimientos Petrolíferos Fiscales (YPF), the state organization, have established beyond doubt that deposits exist beneath almost half of the national territory and the Atlantic coastal shelf. Each time talk of the Argentine subsoil’s poverty becomes fashionable, the government makes a new concession to some member of the cartel. YPF has been the target of continuous and systematic sabotage since its inception. Until a few years ago, Argentina was one of the last historical settings for the interimperialist conflict between declining Britain and the ascendant United States. Cartel agreements did not prevent a dispute, sometimes involving violence, between Shell and Standard Oil over Argentina’s petroleum: the coups d’état that have followed one after the other in the past forty years provide some eloquent coincidences. The Argentine Congress was ready to pass the oil nationalization law on September 6, 1930, when José Félix Uriburu’s barracks putsch ousted nationalist leader Hipólito Irigoyen from the presidency. The Ramón Castillo government fell in June 1943 when it was signing an agreement to promote oil extraction by U.S. capitalists. In September 1955, Juan Domingo Perón went into exile when the Argentinian Congress was about to approve a concession to Standard Oil of California. Arturo Frondizi set off more than one acute crisis in the three branches of the armed services by announcing that the country’s entire subsoil would be put up for bids by concerns interested in extracting petroleum. In August 1959 the offer was called off for lack of bidders. The plan was promptly revived and again called off in October 1960. Frondizi made various concessions to U.S. members of the cartel, and British interests—decisive in the navy and in one political group in the army—played a part in his fall in March 1962. Arturo Illia annulled the concessions and was overthrown in 1966; Juan Carlos Onganía’s hydrocarbons law the following year showed the United States to be the final victor in the internal struggle.

  Petroleum has not only sparked coups d’état in Latin America: it also set off a war—the Chaco War of 1932-1935—between South America’s two poorest peoples. René Zavaleta called the mutual massacre of Bolivians and Paraguayans “the war of the naked soldiers.”21 Louisiana Senator Huey Long shook the United States on May 30, 1934, with a violent speech accusing Standard Oil of New Jersey of provoking the conflict and of financing the Bolivian army so that it would appropriate the Paraguayan Chaco on its behalf. It needed the Chaco—which was also thought to be rich in petroleum—for a pipeline from Bolivia to the river. “These criminals,” Long charged, “have gone down there and hired their assassins.”* At Shell’s urging, the Paraguayans marched to the slaughterhouse: advancing northward, the soldiers discovered Standard Oil’s perforations at the scene of the dispute. It was a quarrel between two corporations, enemies and at the same time partners within the cartel, but it was not they who shed their blood. In the end Paraguay won the war but not the peace. Spruille Braden, the notorious Standard Oil agent, chaired the negotiating commission which retained for Bolivia and for Rockefeller thousands of square miles claimed by the Paraguayans.

  * Long took off the adjectival brakes regarding Standard Oil, calling it “criminal… evil… wicked … domestic assassin … foreign assassin … international conspirator … a gang of rapacious highwaymen and thieves … a bunch of vandals and thieves.”22

  Close to the battlefields of that war lie the oil wells and great natural gas deposits which Gulf Oil, the Mellon family concern, lost in Bolivia in October 1969. “The days of indignity for Bolivia are ended,” cried Alfredo Ovando in proclaiming nationalization from the Quemado Palace balcony. Two weeks earlier, before he had taken power, Ovando had sworn to a group of nationalist intellectuals that he would nationalize Gulf; he had drafted the decree, signed it, and kept it undated in an envelope.†

  † Five months earlier, René Barrientos’s helicopter had tangled fatally with telegraph wires in the Arque ravine. Human imagination could not have conceived of a more perfect death. The helicopter was a personal gift from Gulf Oil; the telegraph wires belong to the state. Burned up along with Barrientos were two suitcases full of money he was taking to distribute among the peasants, as well as some machine-guns which began spraying bullets around the flaming helicopter, preventing anyone from coming to the rescue as the dictator was roasted alive.

  In addition to decreeing nationalization, Ovando annulled the Petroleum Code, called the “Davenport Code” in homage to the lawyer who drafted it in English. In return for accepting it Bolivia had obtained a U.S. loan in 1956; on the other hand, Eximbank, private New York bankers, and the World Bank had always turned down requests for credit to develop YPFB, the state petroleum organization. The U.S. government always makes common cause with private oil corporations.* Under the Code, Gulf received a forty-year concession to the country’s richest fields. The Code provided for ridiculously low state participation in the companies’ profits: for many years, a mere 11 percent. The state became a partner in the concessionaire’s expenses but had no control over the spending, making this the last word in giveaways: the state took the risks, Gulf took none. In the “letter of intention” signed by Gulf at the end of 1966, during the Barrientos dictatorship, it was even provided that in joint operations with YPFB, Gulf would recover 100 percent of the capital it invested in exploration of an area if petroleum was not found. If it was found, expenses would be recovered through later exploitation, but meanwhile would be charged to the state organization as liabilities. And Gulf would appraise the expenses to its own taste.24 In this same “letter of intention,” Gulf appropriated ownership of gas deposits which had never been conceded to it—the Bolivian subsoil contains much more gas than petroleum.

  * Examples abound in recent and remote history. Irving Florman, U.S. ambassador to Bolivia, reported to the White House’s Donald Dawson on December 28, 1950: “Since my arrival here I have worked diligently on the project of throwing Bolivia’s petroleum industry wide open to American private enterprise, and to help our national defense program on a vast scale.” He went on: “I knew that you would be interested to hear that Bolivia’s petroleum industry and the whole land is now wide open for free American enterprise. Bolivia is, therefore, the world’s first country to denationalize or to have nationalization in reverse, and I am proud to have been able to accomplish this for my country and the administration.”23

  The party was not yet over. A year before Ovando expropriated Gulf in Bolivia, Velasco Alvarado had nationalized the deposits and refinery of Standard Oil of New Jersey’s Peruvian affiliate, International Petroleum (IPC). Velasco had taken power at the head of a military junta and on the crest of a political scandal: the Belaúnde administration had “lost” the last page of the Talara agreement between the state and IPC. The vanished page contained the guarantee of the minimum price to be paid by IPC for crude petroleum produced at its refinery. The scandal did not end there. It was also disclosed that the Standard Oil subsidiary had swindled the state out of more than a billion dollars in unpaid taxes and other kinds of fraud and corruption over half a century. The head of IPC had had sixty interviews with President Belaúnde before reaching the agreement that sparked the military rising; for two years the U.S. State Department had suspended all aid to Peru while the negotiations proceeded, were broken off, and reopened.* There was hardly time to restore the aid since the submissive president’s surrender sealed his fate. When the Rockefeller concern protested before a Peruvian court, people threw coins in its lawyers’ faces.

  * When the scandal broke, the U.S. embassy failed to observe a prudent silence. One of its officials even said that no original copy of the Talara agreement existed.25

  Latin America is a Pandora’s box; the tortured subcontinent’s capacity to spring surprises is never exhausted. In the Andean region, military nationalism has come impetuously to the surface like a long-hidden subterranean river. The same generals who today are pur
suing a contradictory but well-aimed policy of reform and patriotic affirmation were only yesterday mowing down guerrilleros. Thus many of the banners of the dead have been picked up by those who killed them. In 1965 the Peruvian officers were spraying guerrilla zones with napalm, their know-how supplied by IPC at the Las Palmas air base near Lima. The corporation could not foresee what lay in store for it.

  VULTURES OVER LAKE MARACAIBO

  Though its participation in the world market has dwindled by half in the past decade, Venezuela is still the top petroleum exporter. Almost half the profits U.S. capitalists take from Latin America come from Venezuela. One of the world’s richest countries, it is also one of the poorest and most violent. It boasts of Latin America’s highest per-capita income and most complete and up-to-date highway network, and no country consumes as much Scotch whiskey per inhabitant. Immediately exploitable iron, petroleum, and gas reserves in its subsoil could multiply by ten the wealth of every Venezuelan; the population of Germany or England could fit into its enormous virgin lands. In half a century, oil rigs have extracted an income double the resources of the Marshall Plan. Since the first well blew, the population has multiplied by three and the national budget by 100, but most of the people scramble for the plush minority’s leavings, still as poor as when the country depended on cacao or coffee. The capital, Caracas, has grown 700 percent in thirty years: the old city of airy patios, central plaza, and silent cathedral is covered with skyscrapers as Lake Maracaibo is covered with oil wells. Today it is a supersonic, deafening, air-conditioned nightmare, a center of oil culture that might pass as the capital of Texas. Caracas chews gum and loves synthetic products and canned foods; it never walks, and poisons the clear air of the valley with the fumes of its motorization; its fever to buy, consume, obtain, spend, use, get hold of everything leaves it no time to sleep. From surrounding hillside hovels made of garbage, half a million forgotten people observe the sybaritic scene. The gilded city’s avenues glitter with hundreds of thousands of late-model cars, but in the consuming society not everyone consumes. According to the census, half of Venezuela’s children and youths do not go to school.

  Every day Venezuela produces 3.5 million barrels of petroleum to move the capitalist world’s industrial machinery, but four-fifths of the concessions owned by Standard Oil, Shell, Gulf, and Texaco are untouched reserves and over half the value of the exports never returns to the country. Creole (Standard Oil) publicity brochures point with pride to the corporation’s Venezuelan philanthropies much as the Royal Guipuzcoan Company proclaimed its own virtues in the eighteenth century; the profits milked from this wonderful cow, in proportion to capital invested, are only comparable with those obtained by old-time slave merchants and pirates. No country has yielded as much for world capitalism in so short a time: the wealth drained from Venezuela, according to Domingo Alberto Rangel, exceeds what the Spaniards took from Potosí or the English from India. Some estimates put the real profits of Venezuelan oil concerns at 38 percent in 1961 and 48 percent in 1962, although the profit rates announced in their balance sheets were 15 percent and 17 percent respectively. The difference is attributable to the juggling of accounts and to hidden transfers. In the complex mechanism of the oil business, with its multiple simultaneous price systems, it is hard to estimate the profits hidden behind the artificial reduction of the price of crude oil—which from well to gasoline pump always circulates through the same veins—and the artificial raising of production costs which include fancy salaries and inflated publicity expenditures. But by official figures, Venezuela, far from receiving new investments from abroad, has experienced systematic de-investment in the past decade. It suffers an annual bloodletting of more than $700 million, “convicted and confessed” as “interest on foreign capital.” The only new investments are provided by the country itself. Meanwhile, oil extraction costs are falling sharply as the companies use less labor. From 1959 to 1962 alone, the work force was cut by 10,000; somewhat more than 30,000 workers remained active, but by the end of 1970 petroleum only employed 23,000. Yet production has greatly increased in the decade.

  Growing unemployment sharpened the crisis in the Lake Maracaibo oil camps, The lake is a forest of towers. Within these iron structures the endlessly bobbing pumps have for half a century pumped up all the opulence and all the poverty of Venezuela. Alongside, flames lick skyward, burning the natural gas in a carefree gift to the atmosphere. There are pumps even in houses and on street corners of towns that spouted up, like the oil, along the lakeside-towns where clothing, food, and walls are stained black with oil, and where even whores are known by oil nicknames, such as “The Pipeline,” “The Four Valves,” “The Derrick,” “The Hoist.” Here clothing and food cost more than in Caracas. These modern villages, of cheerless birth but quickened by the euphoria of easy money, have discovered that they have no future. When the wells die, survival becomes something of a miracle: skeletons of houses remain, oily waters lick abandoned shores and poison the fish. Mass firings and growing mechanization bring misfortune, too, to cities that live from exploiting still-active wells. “Oil has come and gone for us here,” people were saying in Lagunillas in 1966. “It would have been better for us if these machines had never come. …” Cabimas, which for fifty years was Venezuela’s biggest oil source and brought so much prosperity to Caracas and the oil companies, does not even have privies. It has two asphalt streets.

  The euphoria began in the 1920s. Around 1917 oil co-existed in Venezuela with traditional latifundios, those enormous extensions of thinly populated or idle land where hacendados kept up production by whipping their peons or burying them alive up to the waist. At the end of 1922 the La Rosa well started gushing, 100,000 barrels a day, and the petroleum orgy was on. Lake Maracaibo sprouted rigs and derricks and was invaded by helmeted men; peasants swarmed in to build plank-and-oilcan huts on the bubbling ground and offer their muscles to petroleum. Plains and forests resounded for the first time with Oklahoma and Texas accents, and in the bat of an eye seventy-three companies were born. The carnival king of the concessions was Juan Vicente Gómez, an Andean cattleman who spent his twenty-seven years as dictator (1908-1935) making children and business deals. While the black geysers spouted on all sides, Gómez took petroleum shares from his bursting pockets to reward his friends, relations, and courtiers, the doctor who looked after his prostate, the generals who served as his bodyguard, the poets who sang his praises, and the archbishop who gave him a special dispensation to eat meat on Good Friday. The great powers covered Gomez’s breast with gleaming decorations: the automobiles invading the world’s highways needed food. The dictator’s favorites sold concessions to Shell or Standard Oil or Gulf; the traffic in influence and bribes provoked speculation and set mouths watering for subsoil. Native communities were robbed of their lands and many farm families lost their holdings in one way or another. The petroleum law of 1922 was drafted by representatives of three U.S. firms. The oilfields were fenced in and had their own police. No one could enter without a company pass, and even the roads on which the oil was transported to the ports were barred to other traffic. When Gómez died in 1935, oil workers cut the barbed wire surrounding the camps and proclaimed a strike. The following years were dangerously explosive.

  The fall of the Rómulo Gallegos government in 1948 ended three years of reform. The victorious military brass rapidly cut state participation in the petroleum extracted by cartel affiliates. Tax cuts in 1954 afforded Standard Oil $300 million in additional profits. A U.S. businessman had said in Caracas in 1953: “Here you have freedom to do what you like with your money; for me, this freedom is worth more than all political and civil freedoms put together.”26 When dictator Marcos Pérez Jiménez was overthrown in 1958, Venezuela was one huge oilwell, surrounded by jails and torture chambers and importing everything from the United States: cars, refrigerators, condensed milk, eggs, lettuce, laws, and decrees. In 1957, the biggest of Rockefeller’s enterprises, Creole, had declared profits equaling almost half its
total investment. The ruling revolutionary junta raised the tax on its profits from 26 percent to 45 percent; in reprisal the cartel promptly lowered the price of Venezuelan petroleum and began to fire workers en masse. The price fell so low that despite the tax raise and increased oil exports, the state collected $60 million less in 1958 than in the previous year.

  The governments that followed did not nationalize the oil industry, but neither did they grant new oil-extracting concessions to foreign companies until 1970. Meanwhile, the cartel speeded production from its Near Eastern and Canadian deposits; in Venezuela, prospecting for new wells virtually ceased and export was paralyzed. The policy of denying new concessions only made sense if the state petroleum corporation would fill the breach; but the corporation has only drilled a few wells here and there, confirming that it has no other function than that stated by President Rómulo Betancourt: “Not to achieve the dimension of a major enterprise, but to serve as intermediary for negotiations on the new concession formula.” The new formula was proclaimed several times but never put into practice. In 1970, under the Christian Democratic regime of Rafael Caldera, progress was said to be well advanced toward signing “service contracts” under which the companies would explore and exploit 250,000 hectares in partnership with the state. Another form of fig-leaved imperialism, the mixed-enterprise system, had previously been used to deliver most of the petrochemical industry—synthetic rubber, polyethylene, ammonia, urea—to Union Carbide and a Standard Oil subsidiary.