During the 90s, Latin America has been
subjected to a new cycle of imperialist penetration, only comparable in its intensity and
depth to the US onslaught in the postwar period.
This has lead to a an increased semi colonization of Latin America, and it chained the
region as a whole to unprecedented dependence and submission to imperialism, probably not
seen since the 20s and 30s.
This has also fuelled the restructuring and relative "modernization" of Latin
America, which has thus plunged into a renewed and violent spiral of uneven and combined
development, fostered by international finance capital.
The by-product of these have been dramatic changes not only in the economy, but in the
class structure and the political sphere as well, a process that certainly has not ended.
The long term crisis of capitalist accumulation that started in the early 70s has both
increased the parasitic nature, and a worsening of the systematic plundering brought in by
the imperialist rule.
This is starkly revealed in the massive financial looting that took place during the
"lost decade" of the 80s, and also in the decomposition of the productive forces
of the region that the imposition of "neoliberalism" in the 90s has brought in
its wake.
For imperialism, particularly the US’, it was just a matter of resorting to a
massively increased exploitation of the semicolonial periphery and the former
bureaucratized workers’ states, pushed to decomposition, to cushion their own crisis.
In the early 90s, due to a combination of conditions that we will summarize in the point
1.2, this offensive took the form of a drive towards the "emergent markets",
mainly those in the Asian countries, and in second place Latin America’s.
This allowed Latin America to regain its lost ground in the world market, attracting
international finance capital flows, which then coupled to the phase of "weak
growth" in the world economy that we have seen during the first years of the decade
and whose main driving force has been the growth of the United States.
A spiral of unequal and combined development
Such "coupling" took place starting from Latin America’s
subordinate position in the world capitalist system as part of the backward periphery.
As Trotsky pointed out, the specific features of a national economy, however important,
"constitute to an increasing degree, the elements of a superior unit called the world
economy." 1 The latter cannot be considered as a simple sum of national economies,
but like a superior reality created by the international division of labour, dominating
upon the national markets.
The fundamental structural features of Latin American countries are their backwardness and
dependence with regard to the advanced capitalist nations.
Now then, "The unequal development that is the most general law of the historical
process, is not revealed, anywhere else, with the evidence and complexity with which it
reveals itself than the destiny of backward countries.
Whipped up by material necessities, the backward countries are forced to leap forward.
From this universal law of unequal development flows another one that, for lack of a more
appropriate name, we shall call a law of combined development, referring to the
telescoping of the different stages of the road and to the combination of different
phases, to the amalgam of archaic and modern forms.
Without resorting to this law, which must be naturally grasped in the integrity of its
material content, it would be impossible to understand the history of Russia or any other
country of backward cultural advance, whatever the extent of the latter."2 This gives
us an essential key to understand the nature and limits of the relative "
modernization " of Latin America during these years.
Let us point out here that although, like Trotsky said: "it is in fact in the
economic field where the law of combined development manifests itself with all its
intensity" 3, the latter not only bears its marks on the economy but on the social
structure as a whole, and ultimately, on all the aspects of social, cultural and political
life.
Since "a combined formation blends elements that are derived from different levels of
social development. Therefore their internal structure is highly contradictory. The
opposition of its components not only imparts instability to the formation but rather
guides it to its ulterior development." 4
This dynamics governs the modest "leaps forward": capitalist modernization
transforms, alters, and breaks down archaic forms, but it cannot overcome the backwardness
or undermine the subordinate and dependent position of local capitalism.
Thus, those partial " leaps " obtained with enormous sacrifices for the masses,
end up in new frustrations, in stagnation and decay. That is to say, they lead to a new
historical crossroad, highlighting even more acutely the necessity of a revolutionary
transformation of society.
Against those who assume that "globalization", hand in hand with the
"emergent markets" and the "opening up of the economy", would work
against the dependent and semicolonial nature of the Latin American capitalism, the living
process of the decade demonstrates the validity of the Marxist interpretation of
imperialism: imperialist rule consolidates and widens the gap separating Latin America
from the advanced capitalist countries.
For imperialism, the region won importance like an area receptive of both finance and
direct investment capitals, as a market for their exports and as a supplier of raw
materials and commodities. It also worked as a source of financial rents and monopolistic
superprofits as well as high profit rates in general. In some areas, it was also a source
of cheap labour (Mexico) and finally, since it remains a significant portion of the world
market, Latin America was the background for a growing concurrence between the big
monopolies and for inter imperialist rivalry. These highlight all the essential features
of imperialism that were already pointed out by Lenin almost a century ago, i.e.,
parasitism and the tendencies to decomposition. 5
On the other hand, "when approaching the different countries between them on the
sphere of the economy and when evening out the level of their development, capitalism
works with its own methods, that is to say, with anarchical methods that continually
undermine its work, opposing a country and a branch of production to another, favouring
the development of certain parts of the world economy, holding back or paralyzing that of
other regions. Only the combination of those two fundamental tendencies, one centrifugal,
leveling and inequality, both a consequence of the nature of capitalism, explains to us
the living intermingling of the historical process" .6 This drives to an
extraordinary exacerbation of uneven and combined development that is reproduced inside
Latin America as a whole, and also in each country taken individually: backwardness
combines with state-of-the-art technology.
Now then, such renewed evolutionary spiral finds each Latin American country in a
different stage, one that is shaped by all their previous history, and the specific
dynamics of their insertion in the world economy.
From the point of view of methodology, this is an indispensable tenet to avoid blurring
the concrete dynamics of each country, with all the its broad economic, social and
political contrasts, in that of the region taken in abstract.
In the pages that follow, we sketch a general picture that does not seek to equal Costa
Rica with Brazil, or say, Chile with Santo Domingo, but, above all, to give a key for
appraising the dramatic changes endured by Latin America on the verge of the twenty first
century.
Decadence and recovery
Latin America traditionally occupied a relatively advanced position in
the semi colonial periphery. However, since the late 60s the region saw a decline in its
position in the world market and in the international division of labour.
Since the onset of the world economic crisis in the early 70s, Latin America has fallen
prey of a staggering financial plundering via a massive indebtedness that lead to the debt
crisis in the 80s and to a long economic prostration (this came to be known as the
"lost decade"). Meanwhile, Southeast Asia became the most dynamic area in the
periphery of the world.
The protracted agony of a pattern of accumulation known as imports substitution was at the
base of the crisis in the region 7.
This came to life after the Great Depression of the 30s as the result of the fragmentation
of the world market, the retreat of the European powers and the obstacles blocking the
road for the United States to become the dominant power in the region.
This "model" matured under the extraordinary conditions brought in by the Second
World War, and saw its definitive decline with the end of the postwar capitalist boom in
the late 60s.
Under these conditions, Latin America achieved a certain partial industrialisation in some
Latin American countries (especially Argentina, Brazil and Mexico). Relying on the thrust
of the proletariat, it was able to temporarily limit the greediness of foreign capital,
boosting the internal market and the development of a local bourgeoisie by means of
state-managed investments and some concessions to the proletariat as a bulwark against
class struggle.
This mechanism prevailed with the help of the postwar boom. When it ran out of steam in
the early 70s, it ushered in the end for the postwar model.
Latin American capitalism suffered a deep crisis of accumulation that combined economic
causes, with the effects of a chronic political crisis and, essentially, the extraordinary
development of the class struggle that would culminate in the revolutionary upsurge of the
70s (that pushed the bourgeoisie into the arms of imperialism).
It was not until the late 80s that the bourgeoisie and imperialism were faced with a
combination of favorable regional and international conditions that allowed for a certain
recovery of accumulation. This would take place as a part of what we have called the
"unstable balance" of the 90s on an international scale 8.
Among the internal conditions, it was fundamental the strong ebbing of the class struggle
that took place as a result of the accumulated effects of the defeats of the 70s and the
80s, while the bourgeoisie as a whole was willing to submit itself to the imperialist
plan.
In the meantime, the recession caused by the siphoning off of the foreign debt "hit
rock bottom" (thus lying the basis for a recovery through wage reduction and a
lowering of the living standards of the masses). These local conditions combined with the
relative strengthening of the United States and a mass of financial capital available in
the advanced countries.
On these bases, by means of a series of agreements like the so-called "Consent of
Washington" and the Brady Plan, the Latin American bourgeoisies accepted a new
strategic pact with imperialism: they opened up the doors to a new cycle of penetration by
foreign capital on a massive scale, giving in the levers of the economy and of national
life to the unrestricted control of big monopolies (both national and foreign ones), in an
attempt to kick-start accumulation and to find a way out of stagnation.
The vulgarly called "neoliberal model" was all about this. It relied on a
systematic attack against the working conditions and living standards of the masses, to
bring in a rise of the profit rate. It went hand in hand with the so-called
"opening", and wholesome privatization aimed at handing profitable areas over to
great capital and to facilitate the take over of the productive, commercial and financial
spheres by the monopolies. Finally, "deregulation" sought to allow the free flow
of capitals and turn both the States and governments alike in disciplined agents of the
IMF plans.
In this way, at the beginning of the decade, the United States and the European powers
showed a renewed interest in Latin America as a whole.
Countries like Mexico and Brazil figured in the list of ten priorities for the US
international commercial and financial strategy, on a par with China, Russia and India.
Chile, Mexico and Argentina were portrayed as model "emergent markets". In this
way, Latin America was incorporated in the weak and unstable cycle of recovery of the 90s
in the world economy, subject to those mechanisms typical of imperialistic penetration,
covered up with the ideology of "globalization". Latin America became the second
area of destination for foreign capital, after East Asia (see chart 1).
In contrast with what happened during the 70s and the 80s, a growing part of the flow of
foreign capitals went to direct investment, and no longer to new loans (see chart 2).
This injection of foreign funds, along with booming markets and good prices for regional
exports of raw materials, and the recovery of the domestic market, fed an economic
recovery, although of an unstable and weak nature.
This plan would come across abrupt oscillations: what we have called a "short cycle
of growth" in the first quarter of the decade that was abruptly interrupted by the
recession caused by the "tequila" crisis in 1994-95, and then a more unstable
and shorter expansion in 1997-98 (that would end in the current recession).
However, the weakness of the growth of the 90s and the tendencies to stagnation are not
only illustrated in this series of "stop-go" convulsive movements, typical in
the life of Latin American capitalism, but also highlight the fact that the achievements
of Latin American capitalism have been very modest.
There has been a certain recovery regarding the prostration of the 80s, but it has
remained very weak as to the levels of the 50s or the 60s. Such weakness of the growth was
expressed in the tendency to financial convulsions (as the "tequila" crisis) and
to relapse in stagnation. Still taking into account the best period in the decade, the
CEPAL recognizes that: "the rates of growth of the gross product have been
moderate,(3% a year in 1990-96), below historical average performance (5,5% a year between
1945 and 1980)"11. The short recovery of 1997 and 1998 has ended up in the deep
current recession, highlighting strong tendencies to stagnation. This is all the more
noticeable if we chart the evolution of the GNP per head of population, (see chart 3).
But still more important is that under conditions so favourable to capital such as those
imposed during the 90s, "the rate of domestic savings had fallen to 25,8% of the
regional GNP in 1980, to 18,8% in 1995 (...) The rate of investment in Latin America
-around 21% of the GNP in 1995 – reached a historical low that bears no comparison
with other regions of the world." 13 In spite of the "opening ", Latin
American economies have not been able to leap forward in terms of international
competitiveness (a reflection of the low relative productivity of the region). The
dynamism of its exports is based, to a great extent, on interregional trade, and the
external trade still has, except for Mexico, little weight compared with that of the
domestic market, in comparison, for example, with Southeast Asia. This, along with the
outlets and composition of international trade, are good indicators that show the limits
of Latin America’s dynamism of the 90s.
Commodities have become an increasing proportion of Latin America’s exports, and the
latter are more and more subordinated to the MNCs (the industrial exports of Mexico
churned out of the "Maquilas" are just an annex of US industry). While above
half of Southeast Asia’s GNP is made up of external trade, in Latin America this
proportion is considerably lower (except for Mexico, due to its links with NAFTA and
Chile) ( see chart 4). A growing proportion of this trade is made within the region
–between neighbouring countries- while it loses ground in the big markets of the
world (a converse dynamics to that underpinning the ascent of South East Asia).
"Opening" and "regionalization"
A characteristic feature of the economy in the 90s was the widespread
"opening up", in response to the need of an increased internationalization of
capital that sought to offset the crisis of accumulation worldwide.
This was expressed in Latin America both in a massive "opening" to foreign
capital and the import of all kinds of goods on one hand, and in the signing up of
regional and sub regional agreements in pursue of big scale economies suitable for the
requirements of big capital, on the other.
This development entails just an increased subordination as a whole to the strongest
faction of capital: Yankee monopolies that have played a major role in the different
"integration agreements" (followed by European MNCs and some big Latin American
trusts). It is also instrumental in the strategy pursued by the MNCs in this period: a
massive expansion of trade within a given concern, by means of which these giants
dominating the world economy organize production to a virtually planetary scale.
"Regionalization", then, is one of the "new" aspects of this renewed
cycle of colonization, its impact being all the more evident in Mexico and the Caribbean
basin.
AFTA, NAFTA and MERCOSUR
The project of an Agreement of Free Trade for the Americas is the cover
up for the US strategy of subordinating the whole continent to a much more direct and
unrestricted dominion by its monopolies. It highlights an objective tendency of US
imperialism that will cast its shade on the twenty first century. The NAFTA agreements are
part and parcel of such strategic move by US corporations, to tie the hands of Canada and
transform Mexico into an appendix of the US economy, as a closed market that supplies oil
and other raw materials, and mainly a reservoir of cheap labour through its
"maquilas". Such "integration" constitutes a qualitative leap
backwards from Mexico’s modern record, leads to a deep fragmentation of its economy
and accumulates insurmountable contradictions between the imperialist master and the
oppressed nation.
The "Mercosur", an "integration" fostered by those
MNCs based both in Brazil and Argentina and by big local corporations, looks forward to
negotiating their entry in the bloc engineered by the Americans for 2005 15 in the best
conditions possible. Hand in hand with the "opening", "deregulation"
and privatization, it is an attempt to enlarge their narrow domestic markets, moving to
"big scale economies" attractive for big capital. On the other hand, the growing
presence of European investments in this part of the region, that is regarded by the local
bourgeoisies as off setting US pressure, stands as a potential source of clashes with US
monopolies.
The growing trade war between Brazil and Argentina, highlights the
narrow limits of "integration". The Mercosur was in full swing until mid 1998.
Both recession and the devaluation of the real delivered a harsh blow to it. The exchange
between its members has been in free fall ever since, a 25% drop. 16 This crisis
reflects a hard fight for the markets (footwear, dairy products, steel,
cars, sugar, etc. are some of the disputed branches)17 confronting the different local
bourgeoisies. It is also manifest in the wave of devaluation across the region (Brazil,
Mexico, Colombia, Chile, etc., have all switched from "exchange bands" to the
"free flotation" of their currencies).
The bourgeoisie is unable to overcome the barriers of the national
states on whose existence depends its accumulation and rule. It cannot mount a truly
unified market or bring in a full harmonious integration. "Integration" at the
behest of monopolies and imperialism just deepens the decomposition of the national
productive forces, and leads to increased concentration and a massive centralization of
capital in the hands of imperialism that collides with national frontiers.18
Those who imagine a harmonious "mundialization" of capital
and a peaceful evolutionary "integration" of Latin America to it are totally
wrong. The organization of a big unified bloc ranging from Alaska in the north, to Cape
Horn in the south, under the direction of US capital, is an endeavour that exceeds the
economic and financial might of US imperialism. A decisive advance by it entails a
gigantic enterprise of direct colonization that cannot be imposed by peaceful means. This
means that it will depend on the outcome of political, economic and class struggle
developments of historical magnitude and a world scope.
Latin America, a minor scenario of the international capitalist
competition
The onslaught launched by the US monopolies on Latin America is a major
prop underpinning their trade disputes with Japan and Europe. Between 1990 and 1997, Latin
America has been the most dynamic outlet for the USA, buying a 20% of US exports (Japan
and East Asia buy a 25% altogether)19. This has allowed the US to off set part of their
trade deficit with Japan and Europe. The trade deficit with Mexico is instrumental in its
fight against the Japanese, Chinese and Asian competition in general (a driving force
underpinning the extension of "Maquilas", not only in Mexico but to other
countries of the Caribbean basin as well).
Thus: "The American companies concentrate manufacturing industry
and in the services (telecommunications and energy). In this way, they profit from certain
advantages in the manufacturing sector (low wages, geographical vicinity and privileged
access to the American market) to increase their competitiveness in their own market and
challenge the Asian companies." This is clearly seen in the case of the NAFTA with
Mexico and in the spread of the Maquilas to several countries of Central America and the
Caribbean by means of the so-called HTS 9802 regulation". 20 Of their production of
passengers' vehicles in Mexico, three quarters go to the American market. Resorting to the
textile industry based in the Caribbean basin, US companies compete against the
"Chinese challenge" in their own market.
A report issued by the CEPAL states: "The United States, main
investor in Latin America and the Caribbean. In the nineties, the region has become the
developing region with more interest for American investors, what explains that it has
ended up representing 20% of its total FDI (if the financial centers are excluded, the
regional participation decreases to 11%). American direct investments in the region
increased from 10,14 billion dollars to a historical record of 23,78 billion between 1990
and 1997." 21 For US-based MNCs, Latin America makes up 8,3% of the total sales, and
8,5% of their exports. In the case of manufacturing, this proportion is of 9,9% in sales
and 6,2% in exports, out of the total share worldwide. Quite a significant proportion,
indeed.
In this way, US monopolies reassure a dominant position for themselves
in the region in most of the big industrial branches. In 1997, of 48 major companies of
foreign capital operating in the region, 24 were American, 22 Europeans (6 German, 4
French, 4 British, 3 Spanish, 2 Swiss and 1 Dutch), 1 was Australian and 1 was Japanese.22
However, if this hegemony is complete in Mexico, it is weakened and
comes up against a strong concurrence in the South Cone and Brazil. The US corporations
are at the head of the car making sector (52,4% of the sales) but with a strong European
concurrence (41,7% of the sales)23 that has a bigger influence inside the Mercosur, where
European corporations are dominant.
An aspect of the massive penetration by foreign capital that has been
left in the shade is that Latin America becomes even more an scenario for the concurrence
among the giants of world capital.
The most spectacular fact today of this concurrence is the mergers and
acquisitions (M&A) frenzy that is transforming the map of big MNCs.
The big local corporations, some of them with operations worth billions
of dollars (like in Brazil, Mexico or Argentina) are dwarfed by these monstrous
corporations that operate at the level of the whole globe, manage dozens of billions worth
of capital and have hundred of thousands of workers in their staff.24 This entails growing
economic and political repercussions.
Let us take a look at some examples:
The French group Carrefour, after its merger with Promodès will be the
second world giant -competing with Wal Mart- in its field (retail trade and distribution),
and it will be at the top of the ranking in Mexico, Brazil, Argentina, Colombia, Venezuela
and Chile 25.
In turn, the agreement sealed in Paris has changed the perspective of
the whole retail market in Argentina, since it has unified in a single group to
North-Tía, Carrefour, Unimarc, Lozano, and Día. It is a very strong blow in the trade
war at home opposing Wal Mart and the national supermarket chain Coto.
The Spanish oil corporation Repsol, thanks to the acquisition of most
of YPF’s shares in Argentina and other businesses in the region, has become the tenth
oil company of the world.
Another Spanish giant of the electric industry, Endesa, took over
Enersis, thus keeping a virtual monopoly of electricity distribution in Chile and enjoying
a privileged position in the South Cone.
Brazil produces half of Latin American steel, up to now in the hands of
mostly local capitals. Now, the French group Usinor has taken over the steel mills at
Acesita and Tubarao and the German giant Thyssen is looking for a participation in CSN.
The Brazilian company Gerdau has bought a steel plant in United States and is positioned
as the biggest regional group, with a total production of 9 million tons and investments
in Chile, Argentina, etc. The Argentinean group Techint, would be the second regional
group, with investments in Italy, Mexico, Venezuela and Brazil. The entry of MNCs, fuelled
by the privatization in Brazil, gives a new dimension to the "steel war" that up
to now had seen clashes between those local trusts. "All this takes place in a market
ridden with overproduction, low prices and dumping" 26 This way, the Mercosur
–and the whole region with it-, is nothing but a platform for an ongoing trade war of
world scope waged by monopolies.
Concentration and centralization of capital
In the 90s, the concentration and centralization of capital have both
undergone a massive growth, a development that is typical of the imperialist phase of
capitalism that in semi colonial countries benefits foreign capital first and foremost. In
Latin America this takes place amid widespread backwardness and a congenital weakness of
local capitalism, under pressure of foreign capital and the control of the MNCs operating
in the region, along a handful of big local corporations –native monopolies -,
increasingly linked to them.
The decisive levers of the Latin American economy are thus increasingly
left in the hands of imperialist capital that is a source of growing disintegration for
the local economies, along with an increased financial, technological dependence on
imported inputs, etc. We have a glimpse of the enormous concentration of capital if we
take into account that barely a thousand companies control half of the Latin American GNP
churned out by a 400 million-strong population.
For Marxism, concentration means the expansion of existent capitals,
that hold control of the market and displace the weakest competitors. Centralization is a
merger of capitals, via a take over, acquisition, etc., under a unified capitalist
control. Both developments -that in real life mingle with each other- have endured a
colossal expansion, fuelled by the application of the so-called "neoliberal
model" ("opening", privatization, "deregulation", etc.) and the
massive inflow of foreign capital has also played a major role in it.
Through different ways (participation in privatization, associations,
joint ventures, technological transfer, financial and stock market mechanisms, etc.) this
has led to a close intermingling between foreign capital and the superior layers of the
native bourgeoisie.
The weight of foreign capital
The historically decisive role of foreign capital has increased still
further. Latin America was a receptor for a renewed massive inflow of capital exports
spurred by so-called "globalization". This flow was first a combination of new
loans, portfolio investment (in shares, bonds, etc.) in the stock exchanges of the new
"emergent markets" and the acquisition, in exceptional conditions, of
state-owned companies and privatized utilities.
Later on, mainly in the second half of the decade, an increasing
proportion of direct investments went to oil and mining facilities, the car industry,
wholesale trade, the "agro business", mainly to the acquisition of already
existent local companies. This inflow of FDI aimed to conquest a dominant position in the
local markets, and also to exploit exportable raw materials and commodities. A reduced
part of it went to the construction of new plants, taking advantage of tax breaks and all
sort of perks guaranteed by the local states.
Privatization played a fundamental role, since it allowed the transfer
of public services at low prices (through debt-capitalization) into the hands of foreign
(and to a lesser extent native) capitalists. Privatized utilities were transformed into
highly profitable companies and sources of monopolistic super profits, such as
telecommunications, the energy, etc. "The CEPAL informs that the value of the
privatised utilities in Latin America was worth 59,94 billion dollars between 1990 and
1995, standing out the sale of Mexican public assets, worth about 25 billion and those of
Argentina, worth above 16 billion." 27
Let us also point out that this includes a very unequal dynamics
between those bigger economies, attractive for foreign capital and with bigger borrowing
capacity, and the poor and smaller economies whose backwardness and vulnerability were
vastly increased in the decade. The inflow of capitals has gone mainly toward three or
four countries: Brazil, Mexico, Argentina and Chile (that together account for 85% of it).
An enormous proportion of such inflow went, first to privatization and then to the
acquisition of companies of local capital, to a handful of highly profitable branches
(telecommunications, services, finance, mining, etc.) producers of raw materials for
export, or else those yielding monopolistic rents. Secondarily, FDI went to the car
industry since they captured a relatively profitable domestic market. The expansion of
manufacturing (cars, electric appliances) in the Maquilas in Mexico and secondarily in
Central America responds to the peculiar conditions of the NAFTA. In sum, CEPAL sums up
the three goals pursued by the Multinationals as follows: search of raw materials, search
of "efficiency" (cheap labour); and access to domestic and regional markets.
Hence, "In 1996 the 50 biggest foreign companies operating in
Latin American economies had a 110 billion dollar turnover in sales, an amount above the
GNP of several countries of the region, even those of middle size such as Colombia, Chile,
Peru or Venezuela" .28 Another paper by CEPAL points out: "Between 1994 and
1997, the foreign companies increased their relative presence among the 500 biggest
companies in the region, from 29% to 33% of the total sales of this group. In 1997 they
concentrated in only three countries (88%) -Brazil, Mexico and Argentina - and in just six
economic activities (84%) -car industry (26%), food, beverages and tobacco (19%), trade
(11%), electronics (10%), oil (9%) and the chemical industry (9%). Almost 50% of these
foreign companies are American and 38% come from European Union countries". 29
Moreover, the combined sales of the 20 main MNCs in the region were worth above 144
billion dollars in 1997." 30
Thus, in 1999, of the top 1000 Latin American companies, 58% are in the
hands of foreign capital, 34,7% of local capital and only 7,3% are state-owned (let us
point out in passing that the 4 at the top of the ranking are among the latter: Pemex,
PDVSA, Petrobrás and Eletrobrás). Of the total turnover in sales of these thousand of
giants, foreign companies account for 47,2% of it 31 and their sales amount to 27% of the
regional GNP (only a part of them are made by the whole foreign companies in the region).
In Brazil, according to a report, in the period of 1994-98, 39
state-owned companies and 650 private companies were taken over by foreign corporations.
The 6.322 existent companies of international capital in Brazil have 1.400.000 workers and
their net capital is worth US $273 billions. 32 Let us recall that the process of
privatization and "opening" still has a long road to go in this country.
Argentina has undergone, along with Chile, the most spectacular take over by
"foreigners" (as illustrated by the article about the Argentine economy), and
foreign capital has conquered key positions there.
The dominance of international capital has grown apace both in the
finance and banking systems. In Argentina, foreign-owned banks account for 40% of the
deposits, in Mexico and Brazil still stands around 12 or 15%. However, of the 200 major
Latin American banks, at least 70 are already branches of world banks 33, in a quick
denationalization process. Spanish banks such as Santander, Bilbao Vizcaya (BBV), Central
Hispano (BCH); the Hong Kong Shanghai Banking Corp (HSBC); the Canadian Bank of Nova
Scotia, along with big US banks: Chase Manhattan Bank, Citicorp, Bank Boston, etc. all
regard Latin America as a major base of operation.34
The big Latin American corporations
The nineties have also been a "golden age" for Latin American
big capital. Let us point out that the enormous concentration and centralization of
capitals that benefited foreign companies mainly, has also boosted the ascent of a handful
of big local corporations in each country.
They profited from state protection, joined in privatization, supported
the implementation of "neoliberalism" and the offensive against the working
class. This native big bourgeoisie combines businesses in the industry, banking, the land,
trade and services. Top corporations have spread abroad, turning into regional trusts,
part and parcel of the emergence of a local finance capital, tightly subordinated and
closely intertwined to imperialist finance capital, acting both as an agent and minor
partner of the latter in the plundering of the region.
Conspicuous representatives of this cream of the bourgeoisie are the 24
families or corporations in Mexico, as Carso, Vitro, Televisa, Banacci, Cifra, Ica or
Cemex. In Brazil: Bradesco, Gerdau, Votorantim, Camargo-Correa. In Argentina: Bunge y
Born, Macri, Sodati, Techint, Pérez Companc. In Chile: Luksic, Matte, Angellini. In Peru:
Romero, Bentín, Nicolini, Brescia. In Venezuela: Cisneros o Polar. In Ecuador Noboa
stands out. In Colombia: Grupo Santo Domingo, Sindicato Antioqueño, Ardilla-Lulle,
Mendoza. In Uruguay: Strauch y Soler, etc. 35
In the ranking of the thousand major companies of the region published
by the Gazeta Mercantil, 347 private groups have sales worth 270 billion dollars,
i.e., 20% of the regional GNP in 1997. Half of these groups are Brazilian, what highlights
the decisive weight of Brazil’s economy in South America. These GGE (Big Economic
Trusts), although they face the growing concurrence of imperialist monopolies, still
retain dominant positions in a handful of productive branches: steel, foods, agriculture,
construction, communications, etc., or important participation in others.
This local economic power, instead of allowing for certain autonomy as
to foreign capital, as proposed by Mexican president Salinas de Gortari and now by
Brazilian head of state, Cardoso, has been helpless even to defend its own terrain in the
face of the concurrence of worldwide giants. At the same time, it has been a valuable
agent of the take over by imperialism, on which they depend for financial, commercial,
technological and even political support.
The boom of "business agriculture"
The 90s have witnessed a strong drive towards capitalist modernisation
of agriculture in the whole region, a development that goes back long ago and that started
to grow apace already in the 70s. It encompassed not only export sectors, fuelling the
growth of Latin American sales abroad in the 90s, but also those that supply industry and
the domestic market. This has led to a significant revaluation of the land and an increase
of agrarian rent. The boom of "commercial" or "entrepreneurial"
agriculture, as opposed to traditional landed property (minifundio-latifundio- big estates
and small plots) was encouraged by a price recovery and enhanced export prospects for a
whole series of products: cereals, coffee, tropical fruits, soya bean, meat, timber, etc.
Capital inflows to the land thus soared, even foreign capital (dominant in
commercialization, seed and fertilizers production, etc.) took over the lands and
introduced new techniques and equipment.
Nestlé, Cargill, Bunge y Born, Nidera and a handful of monopolies, the
Standard Fruit and United Fruit among them control the trade of agricultural products,
fertilizers, seeds and credit all alike.
The other side of the coin of the advances made by agrarian capitalism
is a true agrarian counter reform that has been at the base of the upsurge of rural
movements from the Chiapas revolt onwards.
The massive displacements of peasants in Guatemala and Colombia
affecting more than a million and a half people, and fuelling the tendencies to civil war
in the countryside, are a reflection of this development. We do not have global data on
this process at hand, but it is enough to take a look at a point in case: Brazil. In
1995-96 the establishments above one thousand hectares that in 1970 were 0.7% of the total
and possessed 40% of the land, today represent 1.0% and own 45% of land. In the meantime,
from 1985-86 to 1995-96, some 941.944 concerns disappeared, most of them -662.448- with
less than 100 hectares. 36 Meanwhile, a single landowner owns a estate in the Amazon whose
surface is bigger than Bélgica’s 37 ,while there are 4,5 millions of land less
peasants. 38
This process went along an increased intertwining between the big
agrarian landowners and the national bourgeoisie, and also a leap in an irrational
exploitation of all the resources: the soil, the forests, fishing, etc.
A massive leap in the exploitation of labour
It is a common place for international agencies to claim that
"Latin America is the most unequal of regions". A tenth of the population stands
at one end, the bourgeoisie and the well off layers of the middle class concentrate in
their hands above 40% of income, and a handful of rich Latin Americans figure among the
biggest fortunes of the world 39. Above half of the population stands at the other end,
with a 10% of national income.40 In the last two decades, the concentration of wealth in
great scale has grown apace, an intense process of transfer of revenues and property into
the hands of foreign capital, the big bourgeoisie and the privileged layers of the middle
class. This went hand in hand with an enormous increase in the rate of exploitation of the
working class.
Alongside this leap in the exploitation of the proletariat, the
spoliation of the toiling masses as a whole has also increased, thus boosting the
concentration of a massive surplus in the hands of big capital through multiple
mechanisms: financial usury, commercialization, taxation, high prices of the services,
tolls, etc. This process of regressive distribution of revenues not only affects the
working class, as we pointed out, but also the peasantry, small farmers, owners of
workshops and artisans in the cities, shopkeepers, etc.
The exploitation of the proletariat
The most general condition underpinning this recovery of capitalism in
the region and the massive inflow of foreign capitals was the imposition of a brutal
increase in the exploitation of the work force. It took two decades for the bourgeoisie
and imperialism to impose the current levels of exploitation, in what constitutes a deep
economic counterrevolution against labour. They did it by pushing ahead with
casualisation, outsourcing, precarious jobs, the lengthening of the working day, wage
cuts, the elimination of old labour conquests, etc. Furthermore, the bourgeoisie has also
thoroughly capitalised on a swelling vast army of unemployed.
Country after country, the statistics show a steady lowering of real
wages that already are well below the wages in the advanced capitalist countries. Along
this, the production per worker has massively increased, specially in big industry. On
these basis there has been a relative, weak recovery in productivity (essentially based on
an increased exploitation of the labour force, and not in the increment of investment). In
this way, the rates of exploitation of the proletariat have sky rocketed. Chart 5
illustrates this dramatic development.
According to the ILO, "59% of Latin American workers labour in the
"informal sector" (i.e., they do not have a permanent job). The indexes of open
unemployment would reach 9,5%, that is to say, an average above that registered during the
crisis of the Latin American external debt in the 80s." 42 Official statistics
conceal a dramatic reality: in several countries, open unemployment is around 20%. Above
half of the labour force is either unemployed or underemployed, and "self
employment" of those in the informal sector ("cuentapropistas") in many
cases is tantamount to the most desperate forms of survival.
However, in spite of the "downsizing" of labour (by means of
privatization, the concentration of capitals, outsourcing, etc.), there is a notorious
high percentage of the labour force concentrated in the big companies.
A more detailed survey would enable us to analyze the role played by
this massive concentration of profits in the hands of big capital that underpins the high
rates of return, interests, etc. charged by finance capital for its
"contribution" to production. In the second part of this article we shall deal
with the significance of these data from the point of view of the social structure, the
composition of the working class and the perspectives for the class struggle.
A regressive rationalization and "modernization"
Instead of bringing in harmony and uniformity, the process of
"modernization" endured by Latin America during the 90s under the dictates of
finance capital has fuelled more violent contradictions on all grounds.
As Trotsky wrote: "because of the universal nature, mobility and
dispersion of finance capital that penetrates everywhere, a driving force of imperialism,
this fuels even more those two tendencies. Imperialism forces diverse national and
continental groups to come together as a whole at a much faster and deeper pace, brings in
the most intimate vital dependence among them; it approaches their economic methods, their
social forms and their evolution levels. At the same time, it pursues this
"goal", its main purpose, with procedures of such antagonistic nature, leaping
forward, and bringing in such convulsions in the backward countries and regions that it
disrupts the unification and leveling of the world economy, with a violence and
convulsions with no precedent in history." 44
The validity of this thesis is recognized, to a certain extent, by a
renowned investigator, Pierre Salama:
"Liberalization has two apparently opposed, but complementary,
effects. On one hand, it deepens the convergence of the modes of accumulation and labour
of the underdeveloped countries with that of the developed countries; on the other hand,
their heterogeneity increases. This paradoxical aspect of growth in an open economy was
pointed out by Parvus and then Trotsky, at the beginning of century, but also by certain
researchers of the development of Latin America (...) to defend a view contrary to those
surveys carried in terms of dualism. With liberalization, these two aspects become
predominant". 45
The reason is that, far from bringing in a harmonious development of
the productive forces in the region as a whole, liberalization entails a massive process
of decomposition and rebuilding of the latter with a strongly regressive nature. Big
capital concentrates and breaks through in some areas or branches of high profits, in a
drive that is instrumental to its necessities of accumulation, both at home and abroad, at
the expense of a disintegration and degradation of the whole economy.
"Growth" is fundamentally concentrated in a few countries
that get the bulk of foreign capital inflows, Brazil and Mexico mainly, and to a lesser
extent Argentina and Chile, while most of the countries in the region lose ground and lag
still further behind.
Meanwhile, the gap between Latin America and advanced capitalism grows
abysmally: "The evidence of the steady increase in the unevenness among the Latin
American countries, on one hand, and between these and the developed economies on the
other, is irrefutable. Already in 1978, the income per head of population in the countries
at the core of the world economy was positively five times above that of those lower-
revenues economies, and 12 times above that of lower-revenues economies in Latin America.
By 1995 the gap had widened almost 7 and 30 times respectively." 46 This polarization
is reproduced within each country, where some few branches concentrate investment while
entire regions stagnate or directly collapse.
An intense geographical reorganization takes shape, reproducing both
the concentration and centralization of capital and the unevenness of capitalism’s
tempo on the map: the Mexican frontier and some industrial hubs (Monterrey, etc.), the
corridor of the Mercosur from San Pablo to Buenos Aires, Santiago, and some other
restricted areas. Thus, while some branches as a whole are evened up (like
telecommunications or finance), the existing gaps have been widened (e.g., the relative
industrialization of each country). This results, once again, in an unheard-of sharpening
of all the economic, social and political contradictions.
Sequels of a renewed spiral of unequal and combined development
Let us highlight some aspects of this process:
a) The "reshaping" of industry
A deep restructuring of the regional industry took place, a
contradictory "reshaping" process, a regressive process of disintegration and
partial dismantling of the old national productive infrastructure in most countries, built
during the "imports-substitution cycle". The disappearance or radical shrinking
of whole branches, coexists with a renovation and the introduction of new equipment in
some areas of interest for the domestic market or exports (such as the car, iron and steel
industries or else food processing).
For example, the state-owned company Codelco in Chile, has a decisive
position in the copper world market (16% of the world production) and is the most
profitable and modern facility there. The recently privatized Embraer is one of the few
aeronautical companies that is able to compete in the business jets market on an
international level, with a 1.3 billion dollars annual turnover. Petrobrás is the leader
in off shore oil extraction technology. Techint dominates the world market of seamless
tubes for the oil industry. However, they are a handful of "success stories"
(fostered by the state in previous years) against a background of widespread economic
decline.
The industrial infrastructure, even in those countries that had
conquered a certain level of development, as Mexico, Brazil and Argentina, has
disintegrated, and those most complex, or cutting edge branches are abandoned altogether
in favour of imports.
Industry thus loses its vertical integration and becomes dependent on
imported inputs, while Latin American goods, except for a certain number of raw materials
and semi manufactured goods (and some special production niches) disappear from the world
market, since they are helpless to compete with a qualitatively superior industry in the
metropolises or with cheap Asian exports. Besides, part of the regional markets are taken
over by US, European, Japanese and Asian imports.
All in all, the average productivity of the Latin American economy is
just a fraction regarding that of the advanced capitalist countries. The relatively modern
foreign investments overlap to the average backwardness of a disintegrated local industry,
technologically backward and retreating.
The car industry, the "pride and joy" of the 90s, provides an
interesting example. Mexican car makers have a productivity in tune with international
levels, almost twice as much (33 cars per worker) the one registered in Argentina and
Brazil (19,5 and 17,8 vehicles per worker respectively). The difference is that in
Mexico’s case, it was all about taking advantage of the low wages to supply the US
market and challenge Japanese competition in it.
US companies, in particular Ford, made strong investments in
state-of-the-art equipment while Mexico reduced the "national" component of auto
parts to hardly 30%. Thus, we are confronted with big "assembly plants" for the
most important market, such as that of the USA, taking advantage of a cheap and
"disciplined" work force. The aim of Mercosur, on the other hand, is to profit
from the local markets taking advantage of substantial tax breaks and state subsidies. 47
In this way, the contradictions and the backwash in Latin
America’s "pseudo industrialization" drive 48 are further deepened,
becoming more dependent that ever on foreign inputs, equipment and technologies alike.
This development has increased its disproportion and deformations to their utmost, under
the aggressive pressure of the world market and the impositions dictated by both the MNCs
and imperialism. The relative weight of a rickety-born and deformed industry has decreased
in the whole national economies, while services, trade and finance have all grown
disproportionately. Additionally, while there has been a steady renovation in those
branches of services and transport deemed the most profitable and tempting for big capital
(as the telecommunications), there is a strong delay in infrastructure, since the states
cannot afford a sustained modernization drive there, and private capital has no interest
in it. These disproportions as a whole reveals the regressive character of the
restructuring and modernization imposed by big capital.
b) The "agrarian question"
The quick capitalist drive and penetration in the land, so much in
traditional areas of the export agriculture, like in new areas with a growing
participation of foreign companies (e.g. Central America) was fuelled by the
"agribusiness" boom. This combines with the stagnation and even the ruin of vast
sectors of small farmers and an enormous devastation of the soil, the forests and the
water, with proportions of an environmental catastrophe: forest razing, soil exhaustion,
pesticide pollution, etc.
Next to the unproductive big estates (latifundios), millions of low
-productivity small properties subsist. The "modern" sector controlled by a
reduced layer of capitalists encompassing both old big landowners and new
"investors" blocks the expansion of a strong agrarian market for industrial
production and, ruled by profit-making as it is, brings strong imbalances in rural
production. For example, the replacement of crops for domestic consumption by export
agriculture has lead many Latin American countries to the absurdity of having to import
basic staples, such as rice, wheat or beans. Barefoot and hungry journeymen go to work in
estates equipped with modern machinery and state-of-the-art biotechnology for exports. An
increasingly impoverished peasant agriculture, in turn, remains the basic source of food
supply for the cities.
The unequal, regressive and strongly polarized
"modernization" of agriculture has reinforced the wall already built by rural
backwardness blocking the advance of the productive forces in agriculture. Far from
alleviating or superseding the fundamental problem posed by the agrarian question –at
the heart of Latin American capitalism’s backwardness -it hardly modifies its ways of
manifestation, increasing the contradictions and the urgency to remove this obstacle.
c) The massive drive to finance in the Latin American economy
The massive drive to finance in the Latin American economy stands in
sharp contrast with sub industrialization, and illustrates the extreme weakness of the
constrained capitalist accumulation, rather than its maturity.
Banking and finance have undergone a hypertrophic growth in a region
that badly needs to import capitals to sustain its economic dynamism, feeding it with a
massive indebtedness by national and provincial states, companies and middle class
households all alike. Speculation of all kinds, in the stock exchange, currency markets
and financial instruments, attracts a growing proportion of capital that is not reinvested
in production, but is exported abroad towards international financial circuits. At the
same time, credit for agriculture and the industry is costly and scarce.
The parasitic behaviour of the banking system threatens to bankrupt
entire states, forcing them to carry out onerous bail outs of the businesses of the
national bourgeoisie, like in Mexico, Colombia, Ecuador, Paraguay, etc. 49 It is also the
source of growing financial convulsions and a major driving force fuelling the
intertwining of interests between the national bourgeoisie and foreign capital, through
outstanding financial mechanisms such as the stock markets and the national debt. It comes
as no surprise that four of the main creditors of the broken Ecuadorian state are
Ecuadorian magnates.
Another remarkable element is the boom of "illegal business"
by the banking system and those layers of the bourgeoisie closely connected to the drive
to finance, as well as those linked to drug smuggling (money laundering, etc.), arms
smuggling, tax evasion, etc. All of them are worth hundred of billions and use the fiscal
havens of the Caribbean basin and Panama as a base for their operations. Let us also say
that drug smuggling along with other "dirty business", besides being a source of
colossal enrichment for some bourgeois cliques, is also an agent of decomposition in the
main institutions of the state, as illustrated by Colombia, Bolivia, Paraguay, Mexico,
etc. The mass of capitals accumulated in the hands of national and foreign big capital,
seeing the lack of investment opportunities in the local economies, move to the
international financial circuits, lowering even further the already low levels of
investment and reproducing the paradox of the chronic lack of capitals in economies that
are net exporters of these.
An aggravated backwardness and dependence
Therefore, the result of these developments as a whole is a
deepening of the backwardness and the dependence of the region. These features, from the
economic point of view, concentrate both the nature and the dynamics of the process that
Latin America has gone through during this decade.
The "leap forward" of Latin America under pressure of both
the world market and imperialist capital reproduces the backwardness and the
subordination, slips into stagnation sluggishly (through a series of convulsions)
exacerbating and deepening the contradictions. Furthermore, it has not led to the
"take off" dreamt of by bourgeois economists (it does even usher in a phase of
relative expansion), but is leading instead to renewed stagnation, to new crisis and the
most severe convulsions.
Some people have pointed out that the new capitalist "model"
imposed in the 90s was to put an end to the drawn out historical crisis opened up in the
30s that import substitution was unable to overcome. They claimed that, in allowing for
the incorporation of Latin America now in a "globalised" capitalism, it would
unleash a renewed phase of long term growth.
However, the spurt of recovery and relative growth of the Latin
American economies, as we have just seen in this decade now coming to an end, enshrines
the embryo of its own failure. The command of the economy has been put in the hands of
international finance capital, which has been given the mission of pulling it out of the
quagmire and to "modernize" it, and has sustained Latin America with a rope tied
around the neck that tightens all the time.
The initial "reviving" effect that allowed for a certain
recovery of the economy and a rerun of capitalist accumulation , is no longer able to
offset the more parasitic and retrograde character of imperialist dominion, which has been
exacerbated due to the decadence of the world capitalist-imperialist system. Latin
American capitalism thus enters the twenty first Century bearing its mark.
The "open veins of Latin America"
This was the title of a famous book in which Eduardo Galeano denounced
the imperialist plundering of Latin America. Its proceedings have massively intensified in
these years, boosting an increasing siphoning off of resources from the region towards the
centers of world capitalism. Let us take a closer look at the main mechanisms of this
untenable bleeding.
A renewed cycle of indebtedness
The whole cycle of the 90s was based on a renewed monumental leap in
the indebtedness of the region, an expression of the acutely parasitic nature of
international finance capital. The Latin American external debt that is already
well above 740 billion dollars, increases around 7 or 9% annually 50,
while an astronomic amount of liabilities that must be paid with new loans keep piling up
in the short term. To this, we must add an enormous mass of foreign loans taken by
companies and private banks that add up to a global sum (private and public debt
altogether) worth above 820 billion. 51 The paybacks of this debt, i.e., the payments
already done, added up to an astonishing 722 billion 52. Almost the equivalent of the
total debt! This unpayable mortgage that pushes constantly to stagnation and leads to
impose recessive policies to upkeep a steady flow of payments will drive, sooner or later,
to a renewed "crisis of the debt."
We will resort to several charts provided by James Petras and Henry
Veltmeyer in their "Latin America at the end of the millennium", an article
published in Monthly Review of July-August of this year, to trace the evolution of the
debt (see charts 7 and 8).
An incessant bleeding
Along with the debt paybacks, that are the main mechanism of financial
plundering, one that already demonstrated its terrible sequels in the 80s, the outflows of
earnings have also gained new weight, including all sorts of financial services that
constitute a massive exaction of indispensable resources of the whole continent. This
highlights a wholesome imperialist plundering, in its most parasitic and destructive
forms.
a) Payments of patents and royalties
As J. Petras and Veltmeyer denounce, the rates of profits of US FDI
amount to 12% (according to estimates of the US Department of Trade) but they would be up
to 22 and 34% according to CEPAL estimates. Less than half of them are reinvested.
"Even according to official reports, the magnitude of the benefits sent home -on the
base of CEPAL estimates - would total 157 billion dollars for the last three years alone.
This provides a crucial source of fuel for the process of global accumulation and the
expansion of the US imperialism." 55 To these we shall add patents, royalties and
licenses. As Petras points out, "Between 1982 and 1992 these flows of payments [to
the US alone] totalled above US $1.30 billions, but through the 90s they were well above a
billion per year." 56 In 1997, the remittances made by US corporations branches
reached to 1.7 millions, and these have grown quickly ever since. Another report points
out that in 1998 alone, some US 6 billions were sent abroad from Brazil in concept of
profit.57 Around 3 billion a year leave Argentina for payments of this kind 58 (see chart
9).
b) Markets and exchange terms
Latin America was an outlet for the glut of goods in United States in
particular. Both currency stabilization and the beginning of a renewed cycle of massive
indebtedness accommodated this development. Latin America thus was flooded by imports,
mainly from the USA, which hence enjoyed a sizeable commercial surplus with the region
that has enabled it to cushion an important part of its own deficit with Japan and Europe.
This increase in Latin American imports has worsened the trade deficit, which is covered
by means of a ceaseless stream of renewed borrowing. Against what the pundits of economic
opening claim, capital goods constitute quite an exiguous proportion of the imports (that
also replace goods previously manufactured at home), with consumption goods for a middle
class and luxury market at the top of them.
This results in all-round increase of both the trade deficit that is
financed with renewed borrowing, and of the current account deficit. The latter has soared
to around US 75 billion for the whole region (3,5% of the GNP), having been reduced
through a harsh recessive austerity drive to the level of 1998 (4,5% of the region’s
GNP, a level only comparable to that of the early 80s, before the onset of the crisis of
the debt).60
c) The "flight of capitals"
The sums of money kept abroad by wealthy Latin Americans are
astronomical. According to some estimates, there are "US 200 billion in deposits of
Mexicans abroad". 61 The Argentine bourgeoisie might have deposited around US 70
billion in overseas accounts. A similar amount has been stashed away by the Brazilian
bourgeoisie. The same happens in every single country. The free flow of finance capital
along with Panama’s "fiscal havens" and those in several islands of the
Caribbean are key levers for such all-round siphoning off of cash by native capitalists.
To the latter we must add the fraudulent accountability of MNCs (which
include overvalued self-imports, self-loans), freight and transport fees charged by
shipping MNCs, the bleeding caused by sumptuary expenses (tourism and real estate
investment abroad, etc.) made by the Latin American bourgeoisie and the upper layers of
the middle class. All these mechanisms that we have analysed lay bare the true nature of
imperialist spoliation.
The meaning of the current recession
The recession unleashed in mid 1998 engulfed South America mainly and
had two epicentres: the Southern cone and the Northern Andean region. It brought about a
harder and deeper fall than the so-called "Tequila effect" of late 94-95. During
1999 most South American countries saw their GNP fall from 3 to 7%. Industry went down
still more abruptly in several countries. This recession entailed an extremely high cost
for the workers and the masses in the whole region (unemployment reached its highest level
ever in the last 20 years, a fact even reckoned by the ILO), and lead to the imposition of
hard austerity packages by most governments, to keep up with debt paybacks no matter the
cost.62 Output fell to the level of the previous two years, while borrowing and fiscal
deficit both grew in most countries, ushering in financial crises such as those in Brazil
and Ecuador, and sparking off a trail of devaluation. Brazil, Mexico, Chile, etc., all
surrendered currency parity and moved on to the flotation of their currencies, i.e., a
devaluation spree that sought to "let their currencies fall", frightened by the
perspective of capital stampedes like those that shattered Ecuador and brought Brazil on
the verge of a financial explosion (see chart 10).
After more than a year in recession, the bourgeois media have shown a
reborn optimism predicting that a recovery is in the horizon. The argument relies on the
modest signs of revival in Japan and Southeast Asia, and in the relative recovery of oil
prices and other regional products for export.
Furthermore, the recession did not seriously hit Mexico (its GNP grew
3%, "benefiting" from the NAFTA), and Brazil’s retraction was more benign
than expected.
However, such optimism appears at best as premature and groundless.
It is premature, because it remains to be seen what will be the
dynamics of the world economy, particularly the United States’. The enormous
instability running deep in the world economy, the jittery volatility of Wall
Street’s oscillations,
the growing difficulties of China - where many predict a likely
devaluation -, the feeble position of Southeast Asia; all of them are sings warning us
against writing off renewed convulsions, including a worsening of the international slump
opened up in 1997.
It is groundless, because the devastating situation in the
region forces us to ask the "optimists": why do you keep smiling? The
uncertainty of the world market for the Latin American products and the strong decrease in
cash inflows (and the ensuing rise in the price of new loans) both point out to a
reversion in the situation of the early 90s. The access of Latin American products to the
world market has become more difficult and the prices are unstable. The flow of foreign
capital is drying up, and the burden of paying for its services is growing, overwhelming
an extremely destabilised region with liabilities. Latin America is in a severely weakened
internal position, and more vulnerable than ever to renewed shock waves coming either from
the international crisis, or else the most vulnerable countries in Latin America itself.
Of course, a recovery cannot be ruled out. So far, both the bourgeoisie
and imperialism were able to stave off an economic explosion (like the one that was
looming in Brazil), and prevented the recession from turning into an open depression.
Except for Ecuador, and to a lesser extent other countries of the Andean area, the masses
have not come to the fore, thus making time and a giving new lease of life to the ruling
class.
Although the current situation in the region cannot be worked out from
that of the whole world economy, or the developments in the United States in particular,
Latin American capitalism has its own dynamics. The issue at stake here, considering the
fundamental tendencies of Latin American capitalism in the current period is: what is the
meaning of the current recession? Is it a temporary mishap, after which the upward curve
will be resuscitated? Or does it point out to a watershed followed by a downward curve?
The ups and lows in the tempo of the economy are inherent to capitalism, as much as
breathing for an individual.
As Trotsky wrote, it all boils down to establishing whether these
oscillations reveal a state of health or of underlying disease. 64 Applying this method,
it seems quite evident, along the lines of our analysis above, that the prognosis of Latin
American capitalism remains "serious condition".
The dynamics of Latin American capitalism, also tributary of the curve
of the world economy, particularly that of the US, is towards stagnation and decline. The
abrupt oscillations are part and parcel of this tendency. The recovery that followed the
post "tequila" recession has been more short lived and restricted than that of
1990-94. The current recession, in turn, is far deeper and widespread than that of
1995-96. In the march of regional capitalism, the "start ups" have been every
time shorter and weaker, and the "stoppage" more abrupt and sharper.
However, this hardly explains anything. The "tequila" slump
of late ‘94 exposed the limits of "neoliberalism", highlighting that the
game was over for the so-called emerging markets in Latin America. The current recession
is a watershed pointing to the exhaustion of the limited chances of expansion brought in
by the drive to semicolonization in this decade, under the impact of the world economic
crisis on the region.
Latin America has plunged into an enormous instability, which heralds
turmoil and convulsions. For that reason, the recession is a catalyst, a developer and
accelerator of the deep antagonisms and economic, social and political contradictions
accumulated in the previous period. The "vivifying" influx in the short term of
the inflow in foreign capital can no longer conceal the parasitic sucking of resources
-via the new open veins of Latin America- indispensable to avoid stagnation and
prostration. If a recovery were to gain momentum -when, how and how deep still remains to
be seen -, it would be very unlikely that it might absorb the contradictions and the
ongoing turmoil across Latin America.
It is worth noting the remarkable "sensibility" that both
Washington and the IMF showed before the difficulties of the Latin American countries.
With the precedent of the Mexican bailout in the aftermath of the 1995 "tequila"
crisis, 1999 has witnessed ample commitments to "help" Brasilia (to stave off a
collapse in the summer), the current negotiation of a "package" with Bogotá
(maybe worth 3 billion), the "offer" made by the IMF to Argentina (around 10
billion) and even the "patience" shown towards Ecuador in the negotiation of a
new bailout. Only imperialism’s fear of a major collapse in his "backyard"
is to account for such solicitous attitude. To illustrate the enormous contradictions
simmering in the Latin American economy, let us dwell on the financial "bottle
neck" created by imperialist plundering.
The "powder keg" of the current account deficit
The issue of the external deficit, the Achilles’ heel of the
economies of the region that so much concern has risen among the analysts, boils down to
the question of whether the fragile balance achieved will uphold, under pressure of the
bleeding caused by rent-hungry foreign capitals on one hand, and the access to new
resources on the other.
"The payments of debt interests and remittances rose to 2,5% of
the region’s GNP, but in some countries (Chile, Costa Rica, Mexico, Dominican
Republic among them, above all Ecuador, they took a much bigger share)", the CEPAL
points out. Brazil has to pay back more than 35 US billion worth of liabilities next year.
In Argentina, "the pile-up of foreign debt payments will force the country to
refinance around 15 to 20 US billion next year". 65
According to the World Bank, between 1997 and 1999 the flows in the
financial markets towards countries in the periphery have fallen 47% (US 135 billion in
1997 against 72 billion in 1998); bank loans have gone down 58% (60 billion in 1997
against 25 billion in 1998) .66 Furthermore, the cost of new loans has tripled. Therefore,
capital inflows nourishing the economy have increasingly dried up.
Only the relative maintenance of direct foreign investment (apparently
during this year, it would stand around US 60 billion, a very considerable amount,
although half of it went to Brazil 67), has ameliorated the untenable position of the
external flank. Meanwhile, there has been a credit crunch and the issuing of fresh bonds
of Latin American debt was jeopardized and their cost soared.
The recession was compounded by a fast increase in the weight of
financial liabilities (paybacks of both public and private debt, remittances of profits,
etc.), and was aggravated by a more restricted access to higher cost credit. Meanwhile,
those states already running swollen fiscal deficits, and with enormous internal debts
(Brazil!) have seen a fall in their revenues. All these are an explosive combination
clouding the horizon of Latin American capitalism.
Another element in the crisis is given by the position of regional
banking in several countries: the Ecuadorian financial system broke down during the
previous currency stampede, whereas in Mexico, the banking system is tottering on the edge
burdened by US 65 billion-worth liabilities. It has been hardly propped up by means of the
state-run FOBAPROA.
Massive indebtedness is also threatening to drive some big Latin
American trusts to the wall: several Argentine companies, Soldati plc and Alpargatas among
them, have to renegotiate debts worth above 2,5 US billion. The Brazilian BNDES was forced
to manoeuvre to bolster the restructuring of the foreign debt of 90 Brazilian companies
that have issued equities abroad, Globopar, a media trust controlling Rede Globo among
them. 68
The warning launched by Ecuador whose recent moratorium on its 96
million-worth interest liabilities "represents the first de facto default of a Brady
bond", is a clear symptom of things to come, in spite of the small amounts of funds
involved. From now on, "Brady bonds will never look the same". 69 That is
because Ecuador has to earmark 54% of its budget to debt-servicing, what puts it on the
verge of a wholesome default, and other countries might follow suit (the Dominican
Republic government is facing a critical economic situation and a strong mass resistance,
and it has threatened a few days ago to go down the same road).
Such financial picture resembles in several key aspects the conditions
prior to the crisis of the debt in 1982 that ushered in a serious economic prostration in
the 80s. The prospect of renewed shake outs as the "tequila" crisis, the
Brazilian "hyper devaluation" or the Ecuadorian bankruptcy are all looming in
the horizon. Brazil’s contradictions, Argentina’s vulnerable position, the
tottering Mexican banks, all of them could spark off renewed shakes that can make true the
nightmare of new defaults, runs on the currency and capital flight.
But there is also an intensified struggle for the markets of the region
between the MNCs (like we have illustrated above), and with the big local trusts,
threatened by the frenzy of purchases, mergers and acquisitions that are the most
outstanding feature of capitalist competition worldwide. Within each country there are
also growing disputes between the different capitalist fractions (between exporters, those
dependent on the domestic market, the banks, the weakest sectors of the bourgeoisie) that
revolve around who is to bear the brunt of the crisis. This results in an intensified
pressure on the governments and fuels all sort of political tensions.
Ultimately, this picture of crisscrossed conflicts is a clear example
that the bourgeoisie does not regard the current recession as a temporary mishap. On the
contrary, they feel acutely that there will not be enough for all. Recession has
precipitated an extraordinary development of all the economic antagonisms, and these are
beginning to translate to the relationships between the classes and to the core of the
ruling class, openly bursting out in the sphere of politics.
It has also inchoately reflected in the policies of both the United
States and Europe toward Latin America, in the differences as to strategic orientation
between close partners like Brazil and Argentina (they are evident in the case of Colombia
or else in the "dollarization" debate). These rows have fuelled the realignments
of different capitalist wings from Venezuela to Argentina, and a growing political
instability in the whole area.
Notes: