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

by Eduardo Galeano

  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 reform.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. 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.

  Loans are conditional upon application of the IMF stabilizing formula and prompt payment of the external debt, and are incompatible with policies of control of the enterprises’ profits, “so restrictive that the utilities cannot operate on a sound basis, still less provide for future expansion.”43 Since 1968 the World Bank has to a considerable extent channeled its loans toward birth-control promotion, educational plans, agro-business, and tourism.

  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 and Share—is the world’s top monopolist of electrical energy.* By chance or otherwise, in 1966 the World Bank made Guatemala accept a “gentlemen’s agreement” with Electric Bond and Share as a condition for implementing the Jurún-Marinalá 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 and Share in its fixing of electricity rates. By chance or otherwise, the World Bank, in 1967, made Colombia pay a $36 million indemnity to the Electric Bond and Share affiliate Compañía 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 petrochemical complex, Petroquímica União.

  * 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. firms can prosper.”44

  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 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.* 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 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.

  * In the three years 1966—1968, coffee earned Colombia 64 percent of its total export income, 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

  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 exceed the foreseeable growth of its foreign currency income from exports. According to the Instituto Latinoamericano de Planificación Económica 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 tariffs 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 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 Nestlé 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 5 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 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 Río Grande is concentrated in local markets, not in exports. 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* 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.

  * 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

  John Abbink, head of a U.S. technical mission in Brazil, had a prophetic mom
ent 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.”56 Indeed, would not industrialization—even though teleguided from 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 Ismael Viñas 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