There can be few areas of the world as complex or as rich in paradox as Latin America. Although most of the republics are strongly Iberian in culture, share a common colonial and historical background, a common religion and legal system, a common political culture and a common intellectual and educational tradition, it is the enormous variation, the startling contrast, not the common pattern, that prevails. Ethnically, Argentina, Uruguay and Chile are largely homogeneous societies of European stock; Peru, Bolivia, Ecuador, Paraguay and Mexico are dualistic Indian-Spanish societies; Brazil, Venezuela and Cuba are blends of Indian, Iberian and African. For most of the twentieth century, the countries have varied from repressive authoritarian regimes (Paraguay until 1989) to liberal and democratic societies (Costa Rica). Even military regimes have been intriguingly different: rightist, leftist, nationalist and a variety of mixed civilian-military regimes exist. Economic conditions are equally diverse. Capitalism, socialism, semi-feudalism and mercantilist economies exist alongside each other. Argentina, Mexico and southern Brazil are industrially developed economies. Ecuador and Paraguay, among others, are essentially agricultural economies. Brazil and the Caribbean nations share a distinct plantation tradition. The countries vary all the way from virtual feudalism, with rigidly stratified social structures, to increasingly egalitarian conditions (Map XX).
Since the end of the nineteenth century, Europe's influence on Latin American affairs has declined, while that of the United States has grown. Even before the twentieth century began, in 1895, the US Secretary of State, Richard Olney (in dealing with
Latin American Republics
With dates of independent statehood
Malvinas (Falkland Islands)
1. Antigua and Barbuda 1 2 1981
2. Argentina 3 1816
3. Bahamas 2 1973
4. Barbados 3 1966
5. Belize M 981
6. Bolivia 4 1825
7. Brazil3 1822
8. Chile 41818
9. Colombia 1886
10. Costa Rica 1821
11. Cuba 1898
12. Dominica 2 1978
13. Dominican Republic 1844
14. Ecuador 1830
15. El Salvador 1841
16. Grenada 21974
17. Guatemala 1839
18. Guyana2 1966
19. Haiti 1804
20. Honduras 1838
21. Jamaica 2 1962
22. Mexico 1821
23. Nicaragua 1838
24. Panama 1903
25. Paraguay3 1811
26. Peru 1824
27. Saint Kitts and Nevis 21983
28. Saint Lucia 2 1979
29. Saint Vincent and the Grenadines 2 1979
30. Suriname 2 1975
31. Trinidad and Tobago 2 1962
32. Uruguay3 1825
33. Venezuela 1830
Rio de Janeiro San Pauio
Economic groupings in 2000
CACM (Central American Common Market)
Andean Group
CARICOM (Caribbean Community and Common Market)
LAIA (Latin American Integration Asssociation, formerly LAFTA)
Map XX LATIN AMERICA IN 2000
Britain's boundary dispute between British Guiana and Venezuela), declared his country's supremacy throughout the region. 'The United States', he said, 'is practically sovereign on this continent, and its fiat is law upon the subjects to which it confines its interposition.' It was a conclusion the British did not contest. In 1901, in the Hay-Pauncefote Treaty, Britain gave the US a free hand in the Caribbean. (Britain had more pressing problems with the Germans in the North Atlantic, the Russians in Manchuria, the Dutch in South Africa and the French on the Nile.)
Also in 1901, as a result of a power vacuum created by the Spanish-American War of 1898, the US extended its rule to Cuba and Puerto Rico. Under the Platt Amendment to the new Cuban Constitution (1901), the US assumed the right to intervene in Cuba and to set up a naval base at Guantanamo Bay, which it still occupies. In 1903, by which time Britain had definitely conceded primacy in Latin American affairs to the US, President Theodore Roosevelt, who advised his countrymen to 'speak softly but carry a big stick', supported a revolution in Colombia's northern province, which eventually became the state of Panama. In 1904 the new nation authorized the US to build the 51-mile-long Panama Canal joining the Gulf of Mexico and the Pacific. 'I took the Canal Zone', Roosevelt declared forthrightly, 'and... while the debate goes on the Canal does also.'1 Begun in 1904, the canal was completed in 1914. It gave the US naval forces easy access to either ocean.
Under a corollary (announced by Roosevelt in 1904) to the Monroe Doctrine2 the US reserved the right of unilateral intervention in the western hemisphere to rectify 'chronic cases of wrong doing' or an 'impotence which results in the general loosening of the ties of civilized society'. Subsequently, under the presidencies of Taft, who became known for his 'Dollar Diplomacy', Wilson, who seemed determined to recreate Latin America in the image of the United States, Warren G. Harding (b. 1865, president 1921-23) and Calvin Coolidge (b. 1872, president 1923-29, d. 1933), the US assumed the right not only to police Latin America, but to judge it as well.
Nor did the US fail to match words with deeds. In 1904, 1912, 1916, 1924 and 1965, the US Army intervened in the Dominican Republic. Similar interventions were made in Honduras (1912-19, 1924-25), Nicaragua (1909-10, 1912-25 and 1926-33) and Haiti (1915-34, 1994). There were also military incursions into Panama and Colombia. During Mexico's Revolution (begun in 1911 by the Indian sharecropper Emiliano Zapata [1879-1919]), in 1914 the US Navy bombarded and seized the Mexican port of Vera Cruz. From 1914 to 1917 - the year Mexico adopted a new constitution - the US continued its military and naval intervention in Mexico. Altogether, between 1898 and 1924, citing threats to the lives and property of its citizens, the US intervened directly no less than thirty-one times in the internal affairs of Latin America.
By the end of the nineteenth century, the earlier admiration of the Latin American countries for the US had given place to growing distrust. Conscious of the need for common action - despite their own deep-rooted divisions3 - they sought to improve relations with each other. Anxious to increase its own commercial, political and diplomatic influence throughout the hemisphere, the US encouraged the movement. To that end, it hosted the First International Conference of American States in Washington DC in 1889. From this meeting sprang the Washington-based International Union of American Republics, which in 1910 became the Pan American Union.
With the outbreak of the Great War in 1914, Latin Americans showed a reluctance to follow Washington, which favoured the Allied cause. The US had to use considerable pressure before eight of the twenty republics (seven of them tiny Caribbean and Central American nations under the financial control of either Britain or the US) declared their nominal support for the Allies. Cuba and Brazil, most dependent upon US markets and money, were offered military aid; suitably persuaded, five others broke relations with the Central Powers; seven, including Argentina, Chile, Colombia and Mexico (which openly sympathized with Germany),4 remained neutral. Important to the Allied cause were the indispensable supplies of primary produce, from Latin America. Ironically, although President Wilson at the Paris Peace Conference in 1919 had argued for national self-determination for European people, Cuba, the Dominican Republic, Haiti, Nicaragua and Panama remained under US military occupation.
Whereas US political pressure and direct intervention in the period 1900-1918 was felt primarily in the lands around the Caribbean, US economic activity was much more widespread. In the closing decades of the nineteenth century (as the world demand for the region's food and raw materials grew) it had shared in the growing prosperity of the whole area. By 1914 the US had become Latin America's largest trading partner. By 1918 it was providing about one-third of the imports and took a little more than one-third of the region's exports. A decade later, in 1929, the figures were about 40 per cent of the region's total imports and one-third of its exports. In the countries of the Caribbean and Central America, US influence was overwhelming. Like colonial trade elsewhere, the area's raw materials and tropical foods were exchanged for northern manufactures and investment capital.
With little intra-regional trade, and with Europe's share of total trade dwindling, by the 1920s foreign trade with North America had become crucial for many Latin American countries. Their economic destiny relied upon changes in North America and Europe to which they were peripheral and over which they had little influence. The wartime policy of import substitution adopted by Argentina, Brazil, Mexico, Chile, Uruguay and others, which led to the region's first industrialization (especially in Brazil), did little to change this.
Latin America's growing reliance upon its northern neighbour for trade was accompanied by a growing dependence upon US money. Although the US remained the world's leading debtor-nation until the First World War, it had been lending money to its southern neighbours since the 1890s. By 1914 US funds invested in Latin America stood at $1.7 billion, with Mexico and Cuba accounting for 30-40 per cent. By then US investors had acquired 50 per cent of Mexico's oil industry, and 40 per cent of its land. Yet US holdings (many of them invested in commerce, public utilities, mines, railroads, shipping and agriculture) were small compared with Europe's ($7 billion).5 Until the First World War, Europe and North America between them provided much needed development capital.
The First World War gave the North Americans a tremendous opportunity to increase their financial stake in Latin America. Overall, US investments in the war years increased by 50 per cent. In contrast, Germany and France suffered considerable losses. Growing sums of US direct business investments were used to develop electrical utilities, railroads and mining.6 In 1920 Latin America was receiving almost half of US direct investments placed abroad. These sums were not transferred without paying a political as well as a financial price. To safeguard its investments, the US proceeded to impose control on the fiscal and monetary policies of Nicaragua (1911-24), the Dominican Republic (1905-41), Cuba (1920-23) and Haiti (1915-41). In Brazil, Venezuela and Chile, the US also acted to extend its financial and political control whenever it felt its investments threatened.
Latin America emerged from the First World War with a new spirit of independence and a new sense of world responsibility. A number of the republics joined the League of Nations (the US Congress had declined membership) not only to play a greater role on the world stage, but also to provide a counterweight to what they thought were the growing colonizing ambitions of the US. The German challenge in the Atlantic had died at the Paris Peace Conference of 1919; the possible threats from Britain and Japan had been removed by the Washington Naval Conference of 1921-22. This left the US almost invulnerable. Brazil was large enough to lead an opposition to US hegemony in Latin America, but its dependence on the coffee market of the US ruled out any such action. Argentina was antagonistic to the US but could not obtain support from its neighbours. Except for rare intervention by the League of Nations,7 there was no counterbalance to US power in the western hemisphere.
Fearing no one either inside or outside the region, from 1918 onwards the US intruded in Latin American affairs whenever it thought fit. In January 1926, it landed troops in Nicaragua to overthrow Emiliano Chamorro's government, which it had refused to recognize. Latin American countries denounced the invasion at the Inter-American Conference at Havana in January 1928.
Relations between North and South took a turn for the better with the election of President Hoover in 1929. Early on in his presidency he embarked on a goodwill tour of eleven Latin American countries. In 1930, he renounced the Roosevelt Corollary to the Monroe Doctrine (which had given the US the right to intervene in the western hemisphere). In March 1933, in his first inauguration address, President Franklin D. Roosevelt declared his 'Good Neighbor Policy'. In contrast to its earlier stand, in December that year at the Seventh Conference of American States at Montevideo, Uruguay, the US conceded that no state in the Pan American Union 'had the right to intervene in the internal or external affairs of another'. In 1934 the Platt Amendment of 1901, which had limited Cuban sovereignty, was abrogated by the US Senate. The surrender of treaty rights to intervene in the Caribbean basin followed. US troops were withdrawn from Nicaragua (1933) and Haiti (1934); the financial control, which it had exercised in Nicaragua, Haiti and the Dominican Republic, was relinquished. Gradually a sense of growing equality and mutual respect replaced the earlier domineering attitude of the US.
On the economic front, by the mid-1920s, the countries of Latin America had all been hurt by the rapid decline of world trade. As was to be expected, the dependent economies of South America were hurt more than the developed economies of the north. Overall, between 1929 and 1932, the value of Latin American exports fell by two-thirds - a perilous situation for a region so heavily dependent for its livelihood upon overseas markets.8 In the late 1920s and early 1930s, the price of food and raw materials fluctuated widely. Brazilian coffee, which sold at 22.5 cents a pound in 1929, sold at eight cents a pound in 1931. The abandoning of the sterling bill of exchange - the most reliable means of financing foreign trade - and the breakdown of the international gold standard compounded the problems. With every country trying to save itself, there was a marked resurgence of economic selfsufficiency. So bad did things become that several of the republics were forced to resort to bilateral barter arrangements with European countries.
Efforts made by the US to halt these trends were unsuccessful. Having agreed at the Geneva Conference on Trade in 1927 that 'the time had come to put an end to the increase in tariffs', it then enacted the Smoot-Hawley Act of 1930, which did the exact opposite. Nor did the subsequent bilateral scaling down of its tariff levels (under the Reciprocal Trade Agreement Act of 1934) give much relief. By 1929 widespread default had occurred in Latin America. By 1934 four-fifths of US financial holdings in South America and the Caribbean were in default. 'The bulk of the foreign loans in these years [1926-28] to public authorities in debtor countries', wrote one authority in 1932, 'would better not have been made.'9 It took a Second World War with its demand for food and raw materials, especially for oil, to make good the losses in both trade and investment.
Helping to change the outlook of the US towards Latin America in the 1930s was the fear of communism. Different kinds of socialism had affected Chile, Brazil, Argentina and Mexico since the depression of the late 1920s. A growing sense of class conflict had developed. Unless Latin America found a way to end its dependency for markets and money on the capitalist developed countries of the world, the exploitation of Latin America would continue. The rich countries of the northern hemisphere would get richer, the poor countries of the southern hemisphere would get poorer. In Brazil in the 1920s and 1930s, and in Argentina in the 1930s, there were armed uprisings of communists, which caused several governments to outlaw the Communist Party. In 1938 under the presidency of Lazaro Cardenas (b. 1895, president 1934-40, d. 1970) Mexico nationalized its foreign-owned oil resources. Yet the only major communist attempt to seize power by force was the unsuccessful 1935 insurrection led by Luis Carlos Prestes in Brazil.
By then the menace of communism had given place to the much greater menace of world war. So great was the threat of war perceived to be, that in December 1936 at the Buenos Aires Conference, Roosevelt warned Europeans that they would 'find a hemisphere wholly prepared to consult together for our mutual safety and our mutual good'. The Eighth Pan American Conference held at Lima two years later in December 1938 - by which time both Europe and Asia were poised for war - not only reiterated a willingness to guarantee the territorial integrity of member states, it also expressed a determination jointly to resist foreign intervention in the American hemisphere. In spite of opposition by Argentina, which preferred to seek hemispheric security through the League of Nations rather than through a collective defence pact based in Washington, the North American outlook prevailed.
When war came in September 1939, the Foreign Ministers of the Pan American states quickly convened at Panama to devise a neutrality zone for the whole western hemisphere. The collapse of the Low Countries and France during the German invasion of May 1940 brought matters to a head. At a meeting in Havana later that year representatives of Latin America and the US undertook to oppose the transfer of Dutch and French possessions in the Caribbean and the northeast coast of South America to the victorious Germans. It was further agreed that any foreign attack on any country of the western hemisphere should be considered as an attack upon them all. While some countries with close relations to Germany, such as Argentina, Chile and Uruguay, still feared the North Americans more than the Germans and the Japanese, the majority were persuaded to follow the US lead. In time all the countries joined the Allies; Chile, Argentina and Uruguay delayed doing so until 1945. As in the First World War, the unprecedented quantities of Latin American food and raw materials proved vital to Allied success.
The war over, the republics met with the US in Chapultepec in Mexico to work out a common position towards postwar development. Unwilling to sacrifice their independence of action to the United Nations, which was then dominated by European and US interests, the Latin Americans insisted upon a regional organization within the global network. This was a reversal of their attitude in 1919, when unlike the US which had repudiated the League of Nations, they had insisted upon a global rather than a regional organization.
President Truman was persuaded to insert Article 51 into the United Nations Charter, which sanctioned the right of member states to establish regional organizations with powers of enforcement outside the United Nations' authority. The outcome was the Treaty of Reciprocal Assistance (a defence alliance from aggression from outside and inside the hemisphere) signed by the US and twenty-one American republics at Rio de Janeiro in September 1947.
As a sequel to the Mexico and Rio meetings, the Ninth International Conference of American States held at Bogota, Colombia, in 1948, adopted the US-sponsored Charter of the Organization of American States (OAS).10 The aims were to establish peace and justice throughout the hemisphere, to ensure collective security, safeguard the territorial integrity and independence of the republics, and to facilitate their economic, social and political co-operation. While the United States' primary concern in helping to found the OAS was hemispheric security, the main concern of the republics was to safeguard their sovereign rights. With the onset of the cold war in 1948, the US began to look upon the OAS as a military alliance in its fight against communism - an attitude the Latin republics disputed. When the US called upon the republics, at meetings in Caracas, Venezuela, in March 1954, to condemn the domination of any member state by 'the international communist movement', its opinion was accepted only under the threat of economic reprisals.
The reluctance of the Latin Americans to support the US in the cold war against the Soviet Union meant that Washington had to act alone. The fall of the agrarian reformist, left-wing government of President Jacobo Arbenz of Guatemala in June 1954 (Arbenz had antagonized the foreign landowners, investors and the military) was widely attributed to the covert actions of the US, which used armed Guatemalan exiles to topple Arbenz. Arbenz was followed by Carlos Castillo Armas who revoked the land reforms, suppressed the left-wing political parties, and concluded a mutual defence pact with the US. The Guatemalan affair added to the smouldering fires of resentment against the US. When in 1958 Vice-President Nixon made a goodwill tour of eight of the republics, he was met with extreme hostility.
The US took similar direct action against Fidel Castro (b. 1927-) and his Marxist-Leninist regime in Cuba.11 Angered by Castro's nationalization of American companies, in January 1961 it broke off diplomatic relations. In April, President Kennedy launched the disastrous Bay of Pigs invasion by Cuban exiles, who had been mobilized and trained in Guatemala and the US. Castro's request to the Kremlin for military protection led directly to the missile crisis of October 1962. By putting missiles in Cuba, the USSR challenged the hegemony of the US in its own hemisphere. It challenged a policy that had been in place since the Monroe Doctrine. The US responded by imposing trade sanctions upon Cuba, which were still in effect in 2001.
The threat of nuclear war, and a possible communist takeover in other Latin American countries, changed the more tolerant attitude of many Latin Americans toward Castro. Two years later, in 1964, when Cuba was accused of providing arms to guerrilla movements in the region, the OAS broke off relations with Castro. With the exception of Mexico (which went on trading with Cuba and China), economic sanctions were upheld by the OAS until 1975. Castro's hopes that Cuba would become the centre of revolution - Bolivia, Paraguay, Haiti, Venezuela, Colombia and Central American states were thought to be ripe for revolt - ended with the expedition in 1967 of the Cuban guerrilla leader Ernesto 'Che' Guevara (1928-67) to Bolivia, and his death there. Since then, until the collapse of the Soviet Union in 1991, Castro has been little more than a pawn in superpower rivalry.
While Kennedy's handling of the Cuban missile crisis undoubtedly raised US prestige, his death in November 1963 led to a worsening of hemispheric relations. In 1964 the Johnson administration used strong-arm tactics against rioters in Panama. In 1965, claiming 'to save the lives of our citizens and all people', as well as 'to prevent another communist state in this hemisphere', Johnson, in violation of the OAS Charter, mounted a unilateral military intervention against the Dominican Republic.
Johnson's counterinsurgency policy was continued by Richard M. Nixon (b. 1913, president 1969-74, d. 1994), who abandoned the social and humanistic Kennedy goals. In 1973, Nixon helped to topple Chile's government led by Salvador Allende (1908-73), the first democratically elected Marxist president in the hemisphere. While rampant inflation, government deficits and social tension were important in sealing Allende's fate, his support of the ongoing nationalization of copper and other foreign corporate assets was his undoing. The repressive military junta, led by General Augusto Pinochet (b. 1915-), which succeeded Allende, at once initiated a process of privatization.
Under President Jimmy Carter (b. 1924, president 1977-1981), the US terminated military assistance to several right-wing dictatorships for violation of human rights. In 1977 Carter endeared himself to the republics by obtaining recognition of Panamanian authority over the Canal Zone.12 What he was unable to do was to bring peace to Central America.
With Ronald Reagan's election, US policy once more returned to unilateral military intervention. Reagan lifted restrictions on military assistance to governments that had been in violation of human rights. The US intervened militarily in Jamaica in 1980 and in Grenada in 1983 (to prevent the establishment of a Cuban-dominated regime). It invaded Panama in the autumn of 1989 to capture General Manuel Noriega, head of state, who was suspected of drug trafficking and who had opposed American policies. Noriega was tried under US law and jailed.
American invasions of Grenada and Panama were clear violations of the Charter of the OAS. In Nicaragua13 in the 1980s the US, fearful of yet another communist state, gave military aid to armed exiles (the Contras). As an alternative to more war, Nicaraguans elected a US-sponsored president, Violeta Arrios de Chamorro (b. 1929-) in 1990. In El Salvador, where more than 60,000 people have died in civil war since 1980, the US also provided military aid to right-wing governments. In 1982, during the Malvinas (Falkland Islands) War, the US unilaterally assisted its NATO ally, Britain. In doing so, it was accused by Latin Americans of practicing a double standard; to the traditional charges of subversion and intervention was added the charge of betrayal. Political reality was that the US was still the superpower in the area and that, despite the OAS Charter and its regional structure, it would intervene wherever it felt its interests threatened.
The United States' apparent disregard for the OAS stems from the disunity and instability existing within the Latin republics themselves. Between the 1930s and 1980s well over one hundred heads of state were replaced by other than constitutional means. Bolivia has experienced almost two hundred coups since its independence in 1825. Even Brazil, which has been spared the worst abuses of caudillism (and which in 1989 returned once more to popularly elected civilian rule) experienced Getulio Vargas' (18831954) seizing of dictatorial power in 1937. His overthrow in the bloodless revolution of October 1945, and the military coup that once more ousted him from office in 1954, led to his suicide. With US assistance, Brazil's Joao Goulart was likewise ousted by the military in 1964. Juan Peron (1895-1974) came to power in Argentina in 1946 with military support. He was overthrown by the military in 1955 and reinstated by them in 1973. His death in 1974 was followed by a period of military dictatorship in which 20,000 Argentinians lost their lives. In the past thirty years Argentina has had almost a score of military coups. Following Argentina's defeat in the Falkland Islands in 1982, a peaceful transfer of power was made from military to civilian rule. In 1973 Uruguay and (with US support) Chile became military dictatorships. In 1989 Chile returned to its long democratic tradition. Criminal charges were made against Chile's previous president, General Augusto Pinochet. In 2001 he was considered unfit to stand trial. In 1990, a military coup overthrew the Suriname government. In April 1992 the military took charge in Peru. Alberto Fujimori suspended the constitution and dismissed the congress. In July 2000, amid violent disturbances, Fujimori was re-elected to an unprecedented third term. Forced by scandals, including a rigged election, he stepped down as president and left the country. In August 1999 Venezuela's President Hugo Chavez, who scorns representative democracy, made an undisguised bid to seize absolute power. Preferring to rule by plebiscite, he won a fresh six-year term in July 2000. In 1995 a coup removed President Jean Bertrand Aristide in Haiti; in 2001 he was re-elected under bizarre conditions. The government of Ecuador returned to civilian control in 1979, but was overthrown by a bloodless military coup in 2000.
Since 1997, illegal armies operating in Colombia have continued to threaten the democratic process. For the first time, the dreadful battles between left-wing guerillas and right-wing paramilitary vigilantes are beginning to reach the urban areas. In 2001 democracy was most insecure in Haiti, Nicaragua, Guatemala and Paraguay. Disunity, instability and discontinuity remain the scourge of Latin American political life.14
Since the end of the Second World War, the region has continued to be precariously dependent on the outside world; especially those countries that rely on one or two major exports, such as Bolivia (tin and coca), Chile (copper), Mexico and Peru (cotton and oil), Uruguay (wool and hides), Venezuela (oil), Colombia (coffee and cocaine), Cuba (sugar and tobacco), Central America (bananas) and Argentina (wheat and beef). To add to Latin America's difficulties, the fluctuating price of primary produce has been tilted, since the 1880s, in favour of the manufacturing countries of the northern hemisphere. The price of imports averaged about 10 per cent more than exports. Until the oil price rises in the 1970s,15 which brought temporary prosperity to oil-producing countries such as Venezuela and Mexico (and increased fuel costs for those countries without oil), the divergence in favour of imported manufactures became greater. Overall, since 1945, the outflow of funds (as flight capital, profits, interest and royalties) exceeded the inflow.16
Since the 1960s Latin America's disadvantages in world trade and investment were always about to be reversed by political and economic reform. The first and greatest outside effort to promote these changes was President Kennedy's Alliance for Progress17 launched in 1961. The target set was an annual overall increase in per capita income of 2.5 per cent. The total cost was estimated at $100 billion over the next decade, of which the US undertook to pay $20 billion. Though progress was made in some quarters, the Alliance, like all the efforts at integration, proved to be disappointing. The necessary political, social and economic changes, agrarian reform and more equitable tax structures were never made. Gradually, Kennedy's optimistic view about America's role in the economic development of the area gave way to a more realistic outlook. 'We must face the fact', he said, 'that the US is neither omnipotent nor omniscient. . . that we cannot right every wrong or reverse each adversity - and therefore there cannot be an American solution to every world problem.' With the assassination of Kennedy expectations receded, the momentum of reform was lost.
The Alliance failed primarily because it was unrealistic. US theories of growth dealing with the 'take-off' of an economy, as well as the 'stages of growth' and 'self-sustained development', which were all the rage at the time, have had little relevance. The idea that a grandiose scheme and $100 billion could change the nature of Latin American life was visionary. The proposed agrarian18 and financial reforms, which some leaders feared would bring revolution to the region, received little more than lip service. The first goal of the Alliance - democracy - proved to be impossible to achieve. The collapse of the Alliance not only caused growing dissatisfaction with US policy, it encouraged the leaders of Latin America to cultivate their economic relations with other countries. While the US remained the dominant overall trading nation,19 since the 1970s West Germany,20 Canada and Japan, and more recently China, have all grown in importance. So has interregional trade. After the US, Japan has become a major customer of Mexico, Peru and Brazil. Chile's major export areas in 2000 were: Asia (34 per cent), European Union (25 per cent), US (15 per cent). There has been a similar increase in the flow of money from Europe, Canada and Japan. Yet the US still retains the leading position in private and public investments.21
In 2001 hopes for reform remain unfulfilled. What economic reform there has been in Mexico, Argentina, Chile, Uruguay and Brazil has not provided economic stability or independence. On the contrary, in very recent years, Mexico, Brazil and Argentina have all been close to bankruptcy. Modernization in the southern hemisphere has never been the dynamic element it was in the north. There never was the same tendency for the technology of the more developed sectors of the economy to spread spontaneously nation-wide. Instead, the dynamic element for economic change remains not the independent profit-seeking, risk-taking entrepreneur, but what it has always been: the state. Whatever industrialization occurred, the southern hemisphere has found it impossible to compete with the cheaper, better manufactured products of the north or of eastern Asia.
Stimulated by the inundation of Arab petro-dollars during the 1970s, Latin America's foreign debt has also grown enormously. By 1990 it had risen to approximately $500 billion. Borrowing on this scale would not have mattered if it had been used to create sufficient funds to service the debt and improve economic development. Instead, much of it was used to re-equip and enlarge the military, conceal budget deficits, increase imports, offset flight capital and assuage political allies. Some of the money borrowed from international agencies such as the Inter-American Development Bank, the IMF and the World Bank was used to finance barren projects.
The end of the borrowing spree came with the second oil price shock of 1979. Because of steeply rising interest rates, between 1978 and 1981, Brazil's net interest payments on its foreign debt more than tripled (from $2.7 billion to $9.2 billion). During the 1970s and 1980s debt service payments as a percentage of exports rose sharply. Countries such as Brazil, Argentina, Peru, Ecuador and even oil-exporting countries such as Venezuela and Mexico were by 1984 paying almost half their foreign earnings in servicing their debt.22 Relief was sought by trying to control the drastic price fluctuations in some of the region's principal exports: oil, copper, bauxite, tin, fruit, coffee, cocoa, iron ore, phosphates and mercury. Most of these efforts proved unsuccessful. Attempts were also made to seek relief through the Latin American Free Trade Association (LAFTA),23 1960; the Central American Common Market, (CACM),24 1960; the Andean Group,25 1969; the La Plata Basin Group,26 1969; and the Caribbean Community (CARICOM),27 including the Caribbean Common Market, 1973.
One should not allow the seeming intractability of Latin America's political and economic problems - and its acute vulnerability to outside forces - to obscure the richness and potential of the region. Nor should one overlook the region's resilience; it has survived repeated economic storms. With US help, Mexico's debt crises of 1982 and 1995 were resolved; the necessary adjustments were made; recovery was achieved. A similar crisis in Brazil in 1998 was also defused. The region as a whole has successfully grappled with the problem of hyperinflation. Inflation in most countries is at a record low. Until the sharp fall in the world demand for raw materials in the 1980s, many countries, including Mexico, Brazil (which together account for half of Latin America's population and 60 per cent of its GDP) and Venezuela, had experienced remarkable rates of growth and development. State control, protectionism and inflation are gradually giving way to privatization (except for oil), liberalization of trade and balanced budgets. The economic reforms going on in the 1990s in Brazil - now the eighth-largest economy in the world - demonstrate its growing strength. In August 2000 it was Brazil, not the US, that convened the first summit meeting of South American heads of state. Brazil has been bold enough to make plain its aversion to US policy in Colombia and Washington's grandiose plans for free trade throughout the hemisphere. The Brazilians do not wish to see their industries (in 2000 Brazil's major export was manufactures) swamped by the cheaper products of the more industrialized north America, western Europe and Asia.
Mexico is also showing new strength. Helped by a North American Free Trade Agreement (NAFTA) with the US and Canada, which came into effect in January 1994, for the first time in ten years Mexico's economic growth exceeded population growth. In July 2000, with the defeat of the Institutional Revolutionary Party, Mexicans changed their ruling party for the first time in more than seventy years. In that year Mexico's growth rate (7 per cent) was the highest rate since 1981.
In addition, the 1990s saw improvements in Chile's growth rates, investment, exports and debt reduction. Now there is talk of Chile joining NAFTA, or MERCOSUR, a free-trade agreement between Argentina, Bolivia, Brazil, Chile, Paraguay and Urugay. Established in 1991, MERCOSUR developed fast (from $4 to $22 billion in 1998) and showed signs of becoming a southern counterpart to NAFTA. Since then, partly because of disputes between Argentina and Brazil, partly because there are no fixed rules, MERCOSUR's upward climb has been halted. The proposed Free Trade Area of the Americas (FTAA), to be implemented in 2005, will challenge its existence.
Latin America is an area of such volatility that progress made by countries such as Mexico, Brazil and Chile is likely to be undone by one or other crisis. Historically, no matter how bright present prospects seem to be, default is an ever-present threat. Indeed, the economic and political gains of the early 1990s throughout the region were lost in the second half of the decade. In December 1994 Mexico's hailed 'economic miracle' was undone almost overnight by a precipitous recession. A badly handled devaluation caused money to pour out of the country. For the second time in twelve years Mexico came close to defaulting. Only an austerity plan and pledges of US loans amounting to $20 billion saved Mexico's currency from collapse. In May 2001 the Argentine economy was once more becoming unstable. The hopes held out for Chile are being reassessed.
Helping to fuel the region's chronic instability and discontent are the problems of mass urbanization, high levels of population growth, poverty, unemployment, labour unrest,28 hyperinflation29 and corruption. Corruption exists throughout the world; in Latin America it is endemic. In 1992 the entire cabinet of Brazilian President Fernando Collor de Mello was dismissed on the grounds of alleged corruption; Fujimori sought help from the Peruvian military in April 1992 because the police, the judiciary and the Congress of Peru were all accused of being corrupt; respect for Peru's legal system was almost zero. A large part of the country had fallen under the sway of the Shining Path guerrillas. In 1996 Mexico was accusing its ex-President Carlos Salinas de Gotari of having siphoned off tens of millions of dollars out of the treasury. In 1996 Colombia's President Ernesto Samper was accused by Washington of being in collusion with Colombia's drug barons. In 1997 the extraordinary economic achievements of Brazil's President Cardoso were tainted with charges of corruption. In May 2001, new allegations of corruption were being made against Argentina's former president Carlos Saul Menem.
What emerges from Latin America's experience in recent decades is the difficulty of trying to help that area from the outside. As in Africa and the other poorer parts of the world, the economic development of Latin America, even allowing for the large differences between the different countries, appears to have been much too volatile and complex, and much too paradoxical for the outside world to be able to introduce fundamental and lasting change. Changes proposed by the IMF and the World Bank, which are seen as US-dominated institutions, have resulted in greater austerity and insecurity. Currencies may have been stabilized, but the gap between rich and poor is wider in Latin America than in almost any other part of the world. Real per capita income in 2000 was lower than it was in the 1980s. In Brazil, Venezuela, Peru and Argentina, it was less than it was in 1970. The more the Latin American worker works, the less s/he seems to receive. Too often, the internationally controlled industrial, commercial and financial sectors of an economy prosper, while the urban and rural poor get poorer. The outcome is violence, cynicism, discontent and revolt. Demonstrations by students in Tlatelolcho Square in Mexico City on 2 October 1968 were crushed by President Luis Echeverria Alvarez at the cost of hundreds of lives. Riots in Caracas in 1989 were accompanied by wide-spread bloodshed.
Anyone who tries to improve the workers' conditions pays a heavy price. Latin America is considered to be the world's most dangerous place for trade unionists, with ninety slain in 1999. In Colombia more than 1,300 unionists have been murdered since 1991. There is growing scepticism about US pledges to the area; doubt is expressed whether the Free Trade Area of the Americas (a main topic of discussion at the third summit of the Americas held in Quebec in April 2001) will ever be realized.
In 2001, the landowning, commercial, financial and industrial oligarchies - in allegiance with the hierarchy of the Church and the military - continue to resist change. Most countries of the region are still committed to the past. Indeed, one might say that most violence has been exercised not to change the status quo - the colonial legacy - but to uphold it. Decolonization has still to take place. Some believe that the Church might provide a solution. While it has always resisted change, in Brazil, Chile and El Salvador segments of the Church have become progressive; in Chile the Church initiated agrarian reform; in El Salvador it has championed human rights. A Theology of Liberation flourishes in this continent; the communidades de base (Church-sponsored grassroots groups) are an important dynamic element.
Whatever happens in the southern half of the American continent will affect the north and vice versa. Neither region can isolate itself from the other. Increasingly they are joined in trade, industry, business, finance, people and cultural influence. Mexico is now the second largest trading partner of the US after Canada. The US takes more of Mexico's exports (much of them coming from American-owned businesses in Mexico) than any other country. Legal and illegal immigrants have given the US the fourth largest Spanish-speaking population in the western hemisphere. Latin American debt, illegal immigrants and narcotics threaten the stability of the US. Claims are being made that Mexico has become a global centre for money laundering and the drug trade. Washington's support of Colombia's President Andres Pastrana in his fight against left-wing guerillas threatens to involve the north in a quagmire of a war. With a population of 518 million, Latin America might well become North America's Achilles heel. President Clinton's brief visit to Venezuela, Brazil and Argentina in October 1997, and the Bush administration's pledge that Latin America will no longer be marginalized, offer a new beginning in relations between North and South America.
World History
