Book Report on Latin america

This essay has a total of 6298 words and 34 pages.

Latin america

Colonialism and Dependence

In "Imperialism, the Highest State of Capitalism", Lenin warned, in
refuting Kautsky, that the domination of finance capital not only
does not lessen the inequalities and contradictions present in the
world economy, but on the contrary accentuates them.

Time has passed and proven him right. The inequalities have become
sharper. Historical research has shown that the distance that separated
the standard of living in the wealthy countries from that of the poor
countries toward the middle of the nineteenth century was much smaller
than the distance that separates them today.

The gap has widened. In 1850 the per capita income in the industrialized
countries was 50 per cent higher than in the underdeveloped countries.
To have an idea of the progress that has been achieved in the
DEVELOPMENT OF INEQUALITY, we have only to listen to President Richard
"...and I think about what this hemisphere, the new world, will be like
at the end of this century. And I consider that if the present growth
rates of the United States and the rest of the hemisphere have not
changed, at the end of this century the per capita income in the United
States will be 15 times higher than the income per person of our
friends, our neighbors, the members of our family in the rest of the

The oppressed nations will have to grow much more rapidly just to
MAINTAIN their relative backwardness. Their present low rates of
development feed the dynamic of inequality: the oppressor nations are
becoming increasingly rich in absolute terms, but they are richer still
in relative terms.

The overall strength of the imperialist system rests on the necessary
inequality of its component parts, and that inequality is achieving ever
greater proportions.

Capitalism is still capitalism, and unequal development and widespread
poverty are still its visible fruits.

"Centralized" capitalism can afford the luxury of creating and believing
its own myths of opulence, but myths cannot be eaten, and the poor
nations that constitute the vast capitalist "periphery" are well aware
of this fact. Imperialism has "modernized" itself in its methods and
characteristics, but it has not magically turned into a universal
philanthropic organisation. The system's greed grows with the system

Nowadays imperialism does not require the old-style colonial
administrations. The archaic Portuguese model of control over Angola
and Mozambique is no longer the most "convenient". Lenin described the
reality of his time, saying that " capital finds it
most 'convenient', and is able to extract the greatest profit from a
subordination which involves the loss of the political independence of
the subjected countries and peoples".

In his report to the Twenty-second Congress of the CPUSSR in 1961,
Nikita Khruschev reached the conclusion that "imperialism has
irrevocably lost its control over most of the peoples of the world."
According to his report, 40.7 percent of the population of the world,
without counting the socialist countries, had won their independence
after 1919, and the total number of people living in colonies, semi-
colonies, and dominions included, at the beginning of the 1960s, less
than 3 percent of the world's population. "The revolutions of national
liberation have dealt a demolishing blow to the colonial Bastille",
Khruschev said. "Forty-two sovereign states have emerged on the ruins
of the colonial empires."

In this connection, it can well be said that Latin America is a
prophetic zone within the Third World. The political independence of
almost all the Latin American countries dates back to the beginning of
the nineteenth century. IT WAS AS A RESULT OF THAT INDEPENDENCE,
from the "foreign" viceroys to "national" merchants advocating free
trade, but it was precisely then that all obstacles were removed for the
total incorporation of the entire region into the international division
of labour that was centered in England.

The words "sovereignty" and "independence" were not then, and still are
not in most cases, more than the lip service that vice pays to virtue.
In reality, most Latin American countries have never controlled their
own internal markets nor the destination of the economic surplus
generated by their productive forces.

The control of their basic resources has always been in foreign hands,
either through direct appropriation of the sources of the production of
raw materials and food, or through the monopoly of demand in the foreign

The humiliating conditions under which they have received "foreign aid"
have always facilitated the penetration of foreign products and capital.
Exactly one century after Argentina achieved its "independence", Lenin
was able to describe that country as a British semi-colony, and he
warned that "finance capital is such a great, it may be said, such a
decisive force in all economic and international relations, that it is
capable of subordinating to itself, and actually does subordinate to
itself, even states enjoying complete political independence".
Subsequently this Latin American nation, perhaps the most fortunate in
its relations with imperialism, passed through a rather intense process
of industrialisation and accelerated urbanization: Buenos Aires is one
of the largest and most attractive capitals in the world. But this does
not keep Argentina from being today a U.S. semi-colony, at least in
regard to its oppressive financial dependency on Washington and the
omnipotence that direct investments by U.S. corporations enjoy in its
internal market.

The threads that make up the dense web of imperialist power have
multiplied and become more subtle. It is not by chance that the world-
wide process of capitalist integration under the hegemony of the United
States, a process filled with tension and conflict, has coincided with
the irreversible decline of the old colonial powers and their methods
of control.

The eminent Brazilian anthropologist Darcy Ribeiro described the new
situation in America as follows:

"Hegel, in his classic study on the philosophy of history, foresaw the
war between the Latin and Anglo-Saxon peoples of the Americas. This
war is already taking place. However, instead of troops movements and
pitched battles, it is being waged by conspiracies, bribery, contracts,
intimidation, coups, programs of sociological studies, economic plans,
and publicity campaigns. Through these means of pressure and
compulsion, the United States is implementing, extending, and
strengthening its own plan for exploiting our resources, organizing our
societies, regulating our political life, determining the size of our
population, and determining our destiny." (2)

The Investments Change Their Direction

The First World war was followed by the well-known withdrawal of
European interests from certain underdeveloped areas of the world. In
Latin America, due to obvious geopolitical reasons, the devastating
advance of U.S. imperialism took place before and with greater speed
than it did in other regions; already by the end of the nineteenth
century the Caribbean was the MARE NOSTRUM of the United States.

When Lenin wrote his book on imperialism, however, U.S. capital still
represented less than a fifth of all private, direct, foreign investment
in Latin America; today it represents close to three fourths.

What concerns us most here is to point out that after the Second World
War there was an important change in the direction of these investments.
The tendency is clear. Capital invested in public services and mining
has been losing its relative importance, while the proportion invested
in petroleum and, above all, in manufacturing industries is increasing.
Forty years ago U.S. investments in manufacturing represented only
6 percent of the total value of U.S. capital in Latin America; in 1960
the proportion had come close to 20 percent; and at present almost a
third of total U.S. investments is in manufacturing.

The three largest countries in Latin America -Argentina, Brazil, and
Mexico- are the ones that offer the most attractive markets for foreign
industrial capital. The Organization of American States (OAS), the
United States' traditional "Ministry of Colonies", describes the process
as follows:

"Latin American enterprises are beginning to achieve superiority over
already established industries and technologies of lesser
sophistication, and private North American investments and probably
also investments from other industrialized countries are rapidly
increasing their participation in certain dynamic industries that
require a relatively high degree of technology and are more important
in determining the course of economic development." (3)

The penetration has been successful; the potential of U.S. factories
located south of the Rio Grande is much greater than that of Latin
American-owned industry in general. It can be seen from data released
by the U.S. Department of Commerce and the Inter-American Committee of
the Alliance for Progress that, based on an index of 1961=100,
industrial production in Argentina rose to 112.5 in 1965, while during
the same period sales by U.S. subsidiaries in Argentina rose to 166.3.
The respective figures for Brazil are 109.2 and 120; and for Mexico,
142.2 and 186.8.

Of the fifty largest Argentinian businesses (those with a sales volume
in excess of 7 billion pesos annually), half of the sales volume
originates in foreign businesses, a third in state enterprises, and only
a sixth in private Argentinian businesses.(4)

In 1962, two enterprises operating with private Argentinian capital
ranked among the five largest industrial enterprises in Latin America;
by 1967 both of them had been taken over by foreign capital.(5)

A study carried out by the Institute of Social Sciences of the Federal
University of Rio de Janeiro and published in 1965 revealed that of the
fifty-five multi-billionaire private groups in the Brazilian economy,
twenty-nine were foreign, twenty-four Brazilian, and two of mixed
foreign and Brazilian capital; of the Brazilian groups, only nine had
no links through stockholders with foreign groups or enterprises. A
subsequent study by the Brazilian Congress provided new data which spoke
eloquently of the denationalization process that is proceeding at
breakneck speed in that country's industry.(6) A minister of the
Brazilian government said publicly in 1969 that "with a few honourable
exceptions, the only strong sector in Brazil, besides the government
itself, is foreign capital".(7) His statement is valid not only for
Brazil. According to figures published in 1962, fifty-six of the hundred
most important enterprises in Mexico are totally or partially controlled
by foreign capital, twenty-four belong to the state, and twenty to
Mexican private capital.(8) These twenty private Mexican concerns
account for barely 13.5 percent of the total sales volume of the one
hundred enterprises under consideration.

Except in the case of petroleum and some public services -activities in
which the state clearly predominates in Argentina, Brazil, and Mexico-
almost all of the other enterprises included in the above-mentioned
studies are manufacturing industries, and it is precisely in this sector
that foreign capital is most prominent.

If this is the situation in the strongest countries in Latin America, it
would be redundant to offer examples of foreign penetration of the few
industries in the weaker countries. By far the largest part of these
investments in manufacturing belongs to U.S. corporations, although
there are European enterprises with quite considerable interests in
Latin America. For example, Volkswagen do Brasil, the largest
manufacturer of automobiles in Latin America, is a German concern.

The interest of imperialist corporations in appropriating the fruits of
Latin American industrial growth for themselves and capitalizing it for
their benefit does not imply, certainly, a lack of interest on their
part in all the other traditional forms of exploitation. It is true that
the railway which used to belong to United Fruit in Guatemala was no
longer profitable and that Electric Bond and Share and the International
Telephone and Telegraph Corporation made a splendid profit when their
properties were nationalized in Brazil and they were paid indemnities in
gold for outmoded installations.

But this abandonment of public services in search of more lucrative
activities does not occur in the case of many raw materials and
foodstuffs. While a relative decline has been registered in the total
volume of new investments in minerals, the U.S. economy cannot do
without the supply of vital materials coming from the southern part of
the hemisphere.

In THE AGE OF IMPERIALISM, Harry Magdoff has shown that the
United States' need for iron, copper, and long list of strategic
materials is steadily increasing; the proportion of imports is growing
as the internal production of the United States declines. This is also
the case with petroleum. After all, the splendid iron deposits in the
Brazilian valley of Paraopeba caused the fall of two Presidents before
the deposits were graciously ceded to the Hanna Mining Company; copper
certainly has something to do with the disproportionate amount of
military aid that Chile receives from the Pentagon; bauxite was
certainly a factor in the conspiracy to overthrow Cheddi Jagan in
Guyana; Cuban nickel explains the blind fury of the Empire even better
than sugar; while the largest U.S. military mission in Latin America is
located in Venezuela, the great oil preserve of Standard Oil and Gulf.

But all of this should not keep us from emphasizing the importance of
this new phenomenon, which has occurred long after Lenin's period: the
capture of markets FROM WITHIN. The affiliates of U.S. and European
corporations jump at a single leap over Latin American tariff barriers,
paradoxically erected against foreign competition, and seize control of
the internal processes of industrialization. They export factories or,
frequently, take control of and devour the already existing national
factories. For this they can count on the enthusiastic aid of the
majority of the governments of Latin America.

Under the Sign of Progress?

"The export of capital," wrote Lenin, "greatly affects and accelerates
the development of capitalism in those countries to which is exported".
Historical experience has demonstrated that this is not so. The
imperialism that Lenin knew -the greed of industrial centers in the
search for world markets for their excess production and the capture of
all the possible sources of raw materials; the extraction of iron, coal,
and oil; the railways cementing their control of the areas under
exploitation; the usurious loans made by the financial monopolies; the
military expeditions and the wars of conquest -certainly did not
accelerate anything except "the development of underdevelopment", as
Andrew Gunder Frank expresses it so well. Contrary to Midas, imperialism
has turned everything it touched into scrap.

But now some are tempted to deny this, basing themselves on the
supposedly different situation that exists today. It is possible that
Lenin was mistaken when he attributed an accelerated effect on
development to the "old model" of imperialist exploitation, they argue,
but this is not the case with the "new model". There is no lack of
technocrats today prepared to demonstrate that foreign capital, in its
new positive guise, benefits the areas it penetrates. To the degree that
the model of exploitation has changed, they tell us, its consequences
have also changed. Previously, imperialism razed the places where a
colony or semi-colony might have dared to erect its own factories, but
now the rich countries stimulate the industrialisation of the poor
nations. This "industrialising imperialism" of our day, they maintain,
contrary to the imperialism of past times, has an inevitable civilizing
effect on a universal scale. Now guilty consciences no longer need
alibis, since they are no longer guilty; modern imperialism radiates
technology and progress, and it is even in bad taste to use that hateful
word to describe it.

What actually are the effects of the increasing shift of foreign
investment toward manufacturing industries in Latin America?

In the first place, it is necessary to note that this process of
industrial denationalisation has not required a large influx of capital.
After all, direct investments of U.S. origin in 1966 in Argentinian,
Brazilian, and Mexican industry, so important for the virtual
monopolization of "key" manufacturing industries, was barely 3, 3.8, and
3.6 percent respectively, of the total amount of U.S. capital invested
on a world-wide basis.

And it must be noted that even those investment figures are inflated. In
effect, since the rapidity with which technology is advancing is
shortening at an ever increasing rate the length of time needed for
amortization of fixed capital in the advanced economies, the vast
majority of the manufacturing installations and equipment exported to
Latin America has already passed through a complete productive life
cycle in its country of origin and has been completely or partially
amortized before it is exported. This "detail" is not considered for the
purposes of calculating the amount of foreign investment -the value
placed on the machinery is fixed at an arbitrarily high level and would
not be even remotely so expensive if the frequent cases of prior
depreciation were taken into account. But why should the parent company
incur expenses to produce in Latin America goods which were previously
sold there after being manufactured in the home country?

The Latin American governments themselves make sure that the foreign
companies do not incur these expenses, by extending aid to the
affiliates that are being installed, they say, to redeem the Latin
American countries from their condition of underdevelopment. The
affiliates have access to local credit from the moment they first post
a sign on the land where the factory is to be built; they can count on
foreign exchange privileges for their imports -imports which the
companies usually purchase from themselves- and in some cases (such as
Brazil) they can even count on special exchange rates for the payment
of their foreign debts, which frequently are debts that they owe to the
financial branch of the same corporation.

The affiliates are also exempted from numerous taxes over long periods
of time, and it is even common for them to receive guarantees against
the risk of expropriation and monetary devaluation.

They finance their subsequent expansion by reinvestment of part of their
juicy profits, and, above all, by means of the credit they receive in
the country where they are operating. According to the OAS, an
unimpeachable source in this respect, barely twenty cents of every
dollar that U.S. industrial affiliates use for their operations and
expansion come from the United States. The remaining eighty cents come
from Latin American sources, through credits, loans, and the retention
of profits. U.S. affiliates employ Latin American capital almost
exclusively to finance their various operating needs. (9)

This channeling of national resources into foreign enterprises is due in
large part to the proliferation of U.S. bank branches spread throughout
Latin America in order to pour national savings into foreign hands.
There were 78 branches of U.S. banks in the area in 1964; in 1967, the
number had risen to 133.(10) The Bank of New York acknowledges publicly
that the most important among its new goals in Latin America is the
capture of domestic savings for the benefit of the multinational
corporations, so as to meet their productions and sales needs. (11)
It is worthy to note that the number of national banks which, without a
change of name, are coming under foreign banking control is growing.
Even those Latin American banks which have not been infiltrated or
captured find it highly convenient to satisfy the credit requests of
foreign affiliates, which are solidly backed and have a very
considerable sales volume. The mobilization of local resources does not
have, of course, the slightest effect on the capital structure of these
enterprises. In general, 99 percent of the affiliates' stock is
controlled by the parent corporation. (12)

A form of foreign penetration which does not require any investment at
all is becoming increasingly common in Latin America. Even the OAS
itself recognizes in the above-cited document that the development of
U.S. companies in Latin America is due to a great degree to "the
acquisition of Latin American industrial enterprises by U.S. interests,
a phenomenon that has been observed over the last few years". Every
method of financial coercion is employed for this purpose, including
dumping, financial blackmail, and the infinite possibility for exerting
financial pressure provided by an overwhelming technological

The old mechanism by means of which the creditor acquires the debtor's
property, for example, is employed on a large scale. Debts acquired
through the purchase of supplies, the use of patents and trademarks,
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