Open Veins of Latin America

by Eduardo Galeano

  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 240

  metropolitan economies. The expansion of sales by U.S. concerns south of the Rio 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 sale's 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."56Indeed, 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 importsapart 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,

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  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 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 has been a transfer by U.S. companies from certain colonial plantations to certain U.S. marketing and consumption areas. 60 But the "Argentine," "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 profics of its 6,000 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 USSR, nor sell oil to Cuba, neither do they get raw materials and machinery from the cheapest and most convenient sources.

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  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 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 ob'ects 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 243

  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, umbilically 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 t
echnology-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 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, conomic--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 200 times less than the United States invests in technological research. There are less than 1,000

  computers in Latin America and 50,000 in the United States; the electronic models and programming languages that Latin America imports are, of course, 244

  designed and created in the United States. Latin American underdevelopment is not a stage can 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 resylts'") 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. "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 i-nethods of calculating costs and profits, and thus Latin

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  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 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

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  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 nacional enterprises. For example, in the textile industry--

  one of the last bastions of national capital--the degree of automation is abysmally low.

  According ro ECLA reports, in 1962 and 1963 four European countries invested six times more in new equipment for rheir 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?

  SURPLUS PEOPLE, SURPLUS REGIONS

  "Grow with Brazil." Display ads in NewYork 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 90 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

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  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 landholding 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 miniflindios; 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 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." Yet the total number of workers employed by factories in Brazil, Latin America's most industrialized country, is barely 2.5