We raised $1.5 million—one-third contributed by me—to renovate the building and incorporate a small gallery on the ground floor where both historical and contemporary works of Latin art could be shown for the first time in New York.
Then in 1970, with my responsibilities as Chase’s CEO becoming more demanding, I stepped down as chairman of both organizations, although I remained active on their boards.
The 1970s were not kind to the Center for Inter-American Relations. While the Council of the Americas flourished with the support of its two hundred member corporations, the CIAR, dependent on donations from a relatively few individuals and foundation grants, had a hard time making ends meet. I contributed substantial funds each year to cover operating deficits, but there seemed to be no end in sight. In 1976, somewhat out of desperation, we launched a $3 million endowment campaign. I persuaded the Rockefeller Brothers Fund to contribute $1 million, half of it as a challenge grant. I added half a million dollars, but even then the endowment campaign sputtered. It was hard to find New Yorkers interested in supporting Latin American cultural programs. When all looked bleakest, once again Margaret de Cuevas came to our rescue.
By the late 1970s, Margaret had become involved with another man, who persuaded her to leave New York permanently. This led me to approach her about her two 68th Street town houses. But this time I found myself in a dilemma. Margaret’s houses abutted the Council on Foreign Relations, which needed more space. The CIAR didn’t need more space but desperately needed a larger endowment. The situation was further complicated by the fact that I was chairman of the CFR as well as a founder and past chairman of the CIAR. Which hat should I wear when I asked Margaret to make a gift of the houses?
I thought the CFR’s need was more compelling and approached Margaret on their behalf. It turned out that the Council had done something to annoy Margaret a few years earlier, so she refused to consider it as a recipient. She felt differently about the CIAR. She agreed to give her houses to it, with the understanding that we did not need the space and would undoubtedly sell them. A year later the CFR bought the property from the CIAR for $1.6 million. So both organizations got what they needed most—all because of the generosity of Cousin Margaret.
DISMAL DECADES
Beginning in the mid-1960s a powerful tide of intense nationalism, strident anti-Americanism, and revolutionary populism swept across Latin America. In country after country, civilian governments were unable to manage the extreme social tensions that had emerged during the process of modernization. Most were toppled, sometimes violently, and replaced by authoritarian military regimes.
By the end of the 1960s the hope for hemispheric cooperation raised by the Alliance for Progress was shattered and replaced by a miasma of confrontation and suspicion. Latin American nations, with a few exceptions, closed their borders ever more tightly to foreign, especially American, companies and capital. The Andean Pact, for instance, formed in 1970 by Chile, Bolivia, Peru, Ecuador, and Colombia, and joined later by Venezuela, severely restricted the operations of foreign corporations, and there were a number of outright expropriations.
I was so concerned about the situation that I met with Secretary of State William P. Rogers and National Security Advisor Henry Kissinger to discuss what might be done. Among other things I suggested that President Nixon, as an indication of the importance he placed on improved relations with Latin America, ask my brother Nelson to tour the region as his special emissary. Both Bill and Henry liked the idea and persuaded Nixon to ask Nelson to tour South America on a fact-finding mission. Unfortunately, by this time relations were so bad that even Nelson met animosity almost everywhere, including a massive anti-American demonstration in Venezuela. I was concerned by the depth of hostility Nelson encountered. Clearly it would take more than a presidential emissary, no matter who he was, to repair hemispheric relations.
Most emblematic of these dismal years in Latin America was Chile during Salvador Allende’s presidency in the early 1970s. The story has become well known and quite controversial. Allende, an avowed Marxist and leader of the Chilean Socialist Party, campaigned in 1970 on a platform of radical land reform, the expropriation of all foreign corporations, the nationalization of banks, and other measures that would have put his country firmly on the road to Socialism.
In March 1970, well before the election, my friend Augustin (Doonie) Edwards, publisher of El Mercurio, Chile’s leading newspaper, told me that Allende was a Soviet dupe who would destroy Chile’s fragile economy and extend Communist influence in the region. If Allende won, Doonie warned, Chile would become another Cuba, a satellite of the Soviet Union. He insisted the United States must prevent Allende’s election.
Doonie’s concerns were so intense that I put him in touch with Henry Kissinger. I later learned that Doonie’s reports confirmed the intelligence already received from official intelligence sources, which led the Nixon administration to increase its clandestine financial subsidies to groups opposing Allende.
Despite this intervention, Allende still narrowly won the election. The Chilean congress confirmed his choice a few months later even though the CIA continued its efforts to prevent Allende’s accession to power. Once in office the new president, true to his election promises, expropriated American holdings and stepped up the pace of land seizure from the elite and its redistribution to the peasantry. Most of Doonie Edwards’s property was taken, and he and his family fled to the United States where Donald Kendall, CEO of Pepsico, hired Doonie as a vice president, and Peggy and I helped get them established.
Allende’s radical program swiftly alienated the Chilean middle class. By September 1973 economic conditions had worsened and political violence had increased. The Chilean military, led by General Augusto Pinochet Ugarte, revolted. Army units stormed the Moneda presidential palace, and Allende committed suicide. What followed can only be described as a reign of terror as old scores were settled and Allende loyalists, trade union leaders, and others were tortured, killed, or driven into exile.
Despite my own abhorrence of the excesses committed during the Pinochet years, the economic side of the story is a more constructive one. Faced with high inflation and huge budget deficits, and cut off from the international capital markets, Pinochet sought the advice of a group of young economists, many of them trained at the University of Chicago. They counseled the general to free Chile’s economy from the restraints and distortions it had labored under for many years. Their daring economic experiment became the basis of Chile’s strong recovery after 1985 and the model for other hemispheric nations.
THE DEBT CRISIS
During the 1970s many Latin American countries suffered the same fate as Chile—brutal urban guerrilla warfare, military dictatorships, repression of democratic institutions, and faltering economies. In fact, by the early 1980s Latin America was in the midst of an economic cataclysm. Decades of protectionism and state control had substantially lowered economic growth. Worse, most countries had borrowed heavily abroad after the huge oil price increases of the 1970s to support their overvalued currencies, fund their growing public sector budget deficits, and finance large public infrastructure projects. The severe recession that followed in the early 1980s knocked the bottom out of world commodity prices and drove world interest rates to almost unprecedented levels. The result was economic chaos in Latin America. By the mid-1980s annual inflation rates averaged 150 percent in the region and had reached the astonishing level of 217 percent in Brazil and 1130 percent in Argentina; unemployment rose to 15 percent; and capital flight attained epidemic proportions. The net transfer of assets out of Latin America rose to $30 billion a year, and external debt soared to an astounding $400 billion.
In my long experience in banking and finance, I had never seen a comparable situation. I must acknowledge, however, that banks like Chase must bear a large share of the responsibility. They should have seen what was happening and turned off the loan spigot to Latin American governments and businesses sooner than w
e did.
In August 1982, Mexico, owing more than $80 billion abroad, unilaterally suspended service on its debt, and many feared the other large debtors—Brazil, Argentina, and Peru—would follow suit. The International Monetary Fund and the U.S. Treasury cobbled together emergency loan packages to forestall threatened defaults, which enabled Mexico and the other countries to continue making interest payments on the debt they owed to foreign banks. Many people criticized this “bailout,” but I spoke out in favor of it. Without prompt stabilization the world’s financial system could have been at risk. Even though it took years and two debt reschedulings to completely stanch the hemorrhaging, the economic crisis had one salutary effect: It set the stage for basic change in Latin America.
By 1985 there was a growing realization throughout the region that sustainable economic growth would require fundamental political and economic reform. I believed the Americas Society and the Council of the Americas could make a real contribution to this process.
REJUVENATING THE INITIATIVE
In 1981, soon after retiring from the bank, I reassumed chairmanship of both the Council of the Americas and the CIAR. Even though the council had played a constructive role in the national debate over the Panama Canal during the late 1970s and the CIAR had firmly established itself as New York City’s primary Latin American cultural organization, there was a general feeling that both needed to be reenergized and placed on a more solid financial footing.
As a first step we formed the Americas Society to absorb the assets of the CIAR and enable the council to continue to lobby the federal government. That was the easy part. The hard part was infusing both organizations not only with a new program, but also with a renewed sense of purpose. For that we needed to gain the support and active participation of prominent Latin Americans.
I discovered during three trips to South America in 1982 and 1983 that our organizations, which had been in existence for almost twenty years, were virtually unknown. While we were cordially received everywhere, it was largely because of my previous role with the Chase. The Americas Society and the Council had little visibility and no constituency in Latin America. If it was to be effective, that had to change.
To begin the process I wrote many of my friends in Latin America and invited them to a meeting in New York in late 1983. I told the gathering we wanted to create a Chairman’s Latin American Advisory Council for the Americas Society and asked for their reactions. Their response was universally positive. In short order the Chairman’s Council was formed with representation from every Latin American nation.
At one of our first meetings it became clear that there were many issues we could fruitfully explore. Foremost among them was the devastating impact the debt crisis had had on most Latin American economies. As a result I approached former Assistant Treasury Secretary Fred Bergsten of the Institute for International Economics, where I was a board member, about examining Latin America’s economic problems to see how they could be overcome. Fred agreed to sponsor the project.
The research led to the publication in 1986 of Toward Renewed Economic Growth in Latin America, a landmark work that went a long way toward replacing the prevailing economic orthodoxy with a new set of assumptions that would eventually become known as neoliberalism or the Washington consensus. Superbly written and based on exhaustive research, the book outlined the steps by which Latin American nations could reignite economic growth—by lowering trade barriers, opening investment to foreigners, privatizing state-run and -controlled enterprises, and stimulating entrepreneurial activity; in other words, by ending the symbiotic relationship between government and the oligarchs over the economies of the region.
The study had a strong impact. Three of its four authors were distinguished Latin American economists whose prestige gave added heft and substance to the study’s recommendations. The book was published in Spanish and Portuguese as well as English, making it more accessible to those we wanted to reach, and members of the Chairman’s Council were behind the project from the start. Not only did our Latin American members insist on providing half the financing for the research to demonstrate that it was not just a “Yankee plot,” but many of them reviewed the text before publication and made thoughtful changes. Some hosted public meetings in their own countries and made a concerted effort to bring the document to the attention of the media, government officials, academics, and labor leaders. Partially as a result of the study, by the late 1980s there was a discernible movement away from statist solutions and toward more reliance on market mechanisms to stimulate economic growth in many Latin American countries.
TOWARD HEMISPHERIC FREE TRADE
The pressure of the debt crisis forced Latin countries to act. Miguel de la Madrid, the young Harvard-educated president of Mexico, led the way. De la Madrid’s courageous initiatives were expanded and consolidated by his successor, Carlos Salinas de Gortari. The Council of the Americas played a supportive role in this difficult and delicate process.
In the early 1980s my nephew Rodman Rockefeller, Nelson’s oldest son, became chairman of the Mexico-U.S. Business Committee, an organization affiliated with the Council of the Americas. Rod and the American members of the committee convinced their Mexican business and banking counterparts to abandon their traditional support for high tariffs and other protectionist policies—not an easy feat to achieve. The Mexican members then informed President de la Madrid that a reversal of Mexico’s traditional protectionist policy would have their full support. With important elements of the business establishment behind him, de la Madrid, in 1986, took the initial steps. These included unilaterally reducing tariffs, selling off some state-owned companies, and announcing that Mexico would join the General Agreement on Tariffs and Trade—steps that fundamentally altered Mexico’s relationship with the rest of the world and set its course for the future.
If the economic reforms being implemented by Chile and Mexico were to be sustained and emulated by others, however, they had to be reinforced by positive changes in the rules that governed trade within the hemisphere. As one country after another adopted the export-driven model of economic growth, they needed a destination for their goods, particularly the U.S. market. Indeed, the authors of the Growth study had strongly recommended that the major industrial nations not only initiate a new GATT round of tariff reductions, but also avoid adopting any new import restrictions. It is ironic that just when Latin Americans began to accept the criticality of export markets to their own economic and social well-being, the United States began to seek tariff protection for our own threatened industries.
An exceptionally strong dollar ballooned the U.S. trade deficit to a record $160 billion in 1987, wreaking havoc in many domestic industrial sectors (particularly automobiles, steel, and textiles) and sparking demands for quotas, domestic content legislation, retaliation, and outright increases in tariffs. It was against this backdrop that those of us interested in maintaining the liberal trading regime had to do battle against labor unions, the protectionist right wing of the Republican Party, and environmentalists.
I vigorously opposed this protectionist reaction and encouraged the movement toward freer and more open trade. In a speech in Caracas in 1989 I called for intensified efforts toward economic cooperation for the mutual benefit of the U.S. and Latin America. Three years later, at the Council-sponsored Forum of the Americas in Washington, keynoted by President George Bush, I proposed creating a “Western Hemisphere free trade area” no later than the year 2000.
Indeed, in the wake of the passage of the North American Free Trade Agreement (NAFTA) in 1993, the idea of hemispheric free trade gained more general acceptance. President Clinton called for a “Summit of the Americas” in Miami in December 1994 that would consider the entire spectrum of issues that confronted our part of the world: drug trafficking, environmental degradation, and population growth as well as economic relationships.
In the months before the meeting, several of us at the Council of the Americas met often wi
th members of the White House staff, State Department officials, and representatives from Latin countries to press the point that the summit would be an opportune moment to hammer out the framework for the “Free Trade Area of the Americas.” A key player in getting the President to move ahead was Thomas F. (Mack) McLarty, Clinton’s chief of staff, who became our liaison in the White House.
The Miami summit was an exhilarating moment for those who had fought for closer hemispheric relations. When the heads of state of all thirty-one American republics (all except Cuba) signed the protocol establishing the framework for the Free Trade Area of the Americas, there was a tangible sense that we could and would solve our many problems together. It appeared Chile would soon join NAFTA and that it would be only a matter of time before other Latin American nations would be added as well. Alas, that did not happen.
President Clinton had come to Miami politically wounded by the Republican triumph in the 1994 midterm elections. Partisan political considerations soon took center stage in Washington as the duel between President Clinton and House Speaker Newt Gingrich intensified. In addition, soon after the summit ended, the Mexican peso crisis unfolded and the so-called Tequila Effect placed pressure on these new and fragile reforms throughout the region. Trade issues swiftly slipped into the background.
It was not until the inauguration of George W. Bush as president in 2001 that this situation began to change. In the final years of the Clinton administration a strongly protectionist Democratic Party, insistent upon unrealistic and unworkable labor and environmental standards, joined with the isolationist wing of the Republican Party in the House of Representatives to thwart most trade initiatives—especially granting the president authority to negotiate trade agreements on a “fast track” basis, which Congress could then accept by a simple majority vote, rather than the two-thirds majority required by the Constitution. During a period of unprecedented economic growth and global trade expansion this was not a particularly acute problem, but in early 2000, as worrying signs of recession began to appear, U.S. failure to pry open new markets overseas began to hurt.
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