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

by Eduardo Galeano

  * Before the 1968 elections General Stroessner visited the United States. “When I interviewed President Johnson,” he told Agence France Presse, “I showed him that I had been fulfilling the prime ministerial function for twelve years by mandate of the polls. Johnson replied that was another reason for continuing to exercise it in the next period.”

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

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

  The state declares that it will only intervene directly in the creation of enterprises “when the private sector shows no interest,”26 and the Banco Central informs the International Monetary Fund that it “has decided to establish a regime of free exchange and abolish restrictions on trade and on currency transactions.” A booklet published by the Ministry of Industry and Trade advises investors that the country grants “special concessions to foreign capital.” Foreign concerns are exempt from taxes and customs duties so as “to create a propitious climate for investment.” The National City Bank of New York recovers all its invested capital in one year of business in Asunción. The foreign bank appropriates the national savings and extends external credits to Paraguay, credits which further deform its economy and further mortgage its sovereignty. In the countryside, 1.5 percent of proprietors own 90 percent of the cultivated land, and less than 2 percent of the total land area is under cultivation. The official colonization plan in the Caaguazú triangle offers hungry peasants more graves than gain.* The fatherland denies its children the right to work and daily bread, and Paraguayans emigrate en masse.

  * Many peasants have finally opted to return to the minifundio region in the center of the country, or have joined the new exodus to Brazil, where they offer their cheap labor to Curitiba and Mato Grosso yerba maté plantations or Paraná coffee plantations. Most desperate is the plight of the pioneer, who finds himself face to face with the jungle, totally without technical know-how or credit assistance, with government-“granted” lands from which he must wrest enough to eat and to meet his payments—for if he fails to pay the stipulated price he does not get the land title.

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

  HOW LOANS AND RAILROADS DEFORMED THE LATIN AMERICAN ECONOMY

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

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

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

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

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

  PROTECTIONISM AND FREE TRADE IN THE UNITED STATES: A SUCCESS DUE NOT TO AN INVISIBLE HAND

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

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

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

  Economic historian Edward Kirkland wrote that the handicaps with which colonial industry must contend come from every direction except British colonial policy. Indeed, 3,000 miles’ distance and the difficulties of communication made proscriptive legislation lose nearly all its force and favored the trend toward self-sufficiency. The Northern colonies sent no gold, silver, or sugar to England, while their consumption needs produced an excess of imports which had somehow to be checked. Trade across the ocean was light; hence development of local manufactures was indispensable for survival. England paid such scant attention to these colonies in the eighteenth century that they were able to introduce the latest metropolitan techniques into their factories, turning restrictive colonial pacts into scraps of paper. This was far from true of the Latin American colonies, which delivered their air, water, and salt to ascendant European capitalism and, in return, received a largesse of the finest and costliest luxury goods to pamper their ruling classes. The only expanding activities in Latin America were those oriented toward export, and so it continued in succeeding centuries: the economic and political interests of the mining and landlord bourgeoisie never coincided with the need for internal economic development, and businessmen were linked less with the New World than with foreign markets for the metals and foodstuffs they wanted to sell and with foreign sources of the manufactured articles they wanted to buy.

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

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