Latin America: During and After World War II

 

Hoping to be rewarded after the war with good economic and political relationships, Latin American countries provided support to the U.S. during WWII, allowing it to unilaterally administer price controls on the raw materials. However, at the end of the war, the United States removed price controls for its exports to Latin America, in the name of “free market practices,” at the same time that prices of raw materials froze. This was recognized in 1950 by the Assistant Secretary of State for Inter-American Affairs, Edward Miller.” (La Feber, 1993)

U.S. companies created economic dependency in Central America since before 1920 by turning those countries into one or two crop producers for export. The U.S. foreign policy for Latin America changed from military interventions to providing counter-insurgency training and weapons to the local military. The U.S. also created the National Guard, which together with the military was charged with the task of helping local dictators to keep the status quo and stability for U.S. investors. Thus the U.S. created military dependency in many countries and big debts product of the sale of weapons to them. (Ibid) US AID programs were created to support military programs, and a small percentage for developmental programs to make it appear that U.S. politicians were concerned about the poor. Most of that small percentage for development never reached the people who needed it, but disappeared in the central bureaucracies of the receiving governments.

NICARAGUA

Nicaragua was victim of many U.S. interventions since 1909, alleging that a Nicaraguan canal project interfered with the U.S. projects for Panama, that Nicaragua was a destabilizing force in the hemisphere, because president José Santos Zelaya tried to unite Central America into one Union, and tried to regulate foreign access to its natural resources. (http://en.wikipedia.org/wiki/nicaragua)

The U.S. intervention in Nicaragua led to “twenty years of U.S. armed occupation, a forty-five year dictatorship (42 year of Somoza dynasty), and finally an indigenous radical revolution in the 1970s” (La Feber, 1993). That was not all. The Reagan administration launched new interventions with the purpose to overthrow the Sandinista government by helping the contras. The help was channeled through the Salvadoran military, which allowed the U.S. to use their air bases, and harbor an organizing team within its territory, including a man named Luis Posada Carriles.

Posada, among many Cuban exiles was trained by the CIA in Florida, mainly to carry out plans to kill Fidel Castro and terrorist attacks against Cuban exiles, of which Castro would be blamed for. Posada did succeed in one attack against a Cuban airplane in October, 1976, which had been carrying back home a team of students and coaches after their participation in sport events in Venezuela. According to a CIA memo, there were also rumors that Posada was involved in cocaine smuggling from Colombia through Venezuela to Miami, which lead to the official termination of relations between the CIA and Posada. (Bardach, 2002)

After the attack of the Cuban airplane, Posada was captured and sent to jail in Venezuela. Nine years later, old friends of his helped him escape from prison. He was taken to El Salvador under a different name and with a fake driver’s license provided by the CIA. There he met Felix Rodriguez, a comrade from the CIA. Named as deputy of the covert contra operation lead by Colonel Oliver North, Posada was delighted to be back in good relations with Washington and in their pay roll (Ibid).

Christians from Catholic and Evangelical background expressed their opposition to U.S. involvement in Nicaragua and aid to the Salvadoran army. “By the mid-1980s at least 60,000 Americans had signed a pledge to disrupt cities and government operations through civil disobedience if U.S. forces invaded Nicaragua.” (La Feber, 1993)

U.S. officials, including Oliver North and Edwin Corr, the U.S. ambassador to El Salvador, forced the Costa Rican government to open Costa of Rica’s air bases for them to send supplies to the contras in Nicaragua. The operation ended in 1986 when the Contras shot down one of the U.S. air planes. Two soldiers died in the crash and one survivor confessed all he knew about the operation (Bardach, 2002).

After the WWII, the U.S. set out to consolidate its control in the rest of Latin America. Trade agreements and a military pact of American States in Rio de Janeiro were designed to integrate Latin America to the U.S. controlled economic system. (La Feber, 1993) This pact allowed the establishments of regional groups to act outside the auspices of the U.N. in case of “emergency.” As the economic concerns of Latin American nations were not dealt with, a new meeting was convened to take place in Bogotá. The OAS (Organization of American States) was created in this meeting, with a loophole introduced by the United States, granting itself the right to intervene any time in the name of maintaining peace and order. (Ibid).

 

World Financial Organizations

World War II (WWII) provided the shock necessary to establish a new world order. In 1944, corporate representatives and political representatives of 23 countries met in Bretton Woods, New Hampshire to set up The International Monetary Fund and the World Bank (International Bank of Reconstruction and Development), under the umbrella of the United Nations. “The creation of the U.N. during the war was presented to the world as international cooperation to prevent future wars …” (Howard Zinn). Creating the IMF and WB as U.N. dependent organizations made it appear that their only purpose was to promote economic cooperation between countries and reduce poverty, war, and hunger in the world. However the IMF and World Bank worked always independently from the United Nations.

“Averell Harriman, ambassador to Russia, said in early 1944: ‘Economic assistance is one of the most effective weapons at our disposal to influence European political events in the direction we desire.” (Zinn, 1998)

The purpose of the IMF and WB were, supposedly, to provide help for the reconstruction of Europe after the war. But Europe did not want loans; they needed grants to rebuild their production facilities. The Marshal Plan did that, not the WB.

The framework of a third global institution, called the International Trade Organization (ITO) was also prepared in the Bretton Woods meeting. But there was concern, even among members of the U.S. congress—that it would intrude too much in the sovereignty of the nation. In 1956 the ITO was called General Agreement on Tariffs and Trade (GATT), and it was approved in 1948 in Havana, Cuba. But the U.S. Congress announced that it will not seek ratification, leaving it inconclusive. However the GATT became the international organization for trade, although without much power to submit the world under corporate rule. The WTO was created in 1995, and approved by the Clinton administration, as the successor of the GATT. The purpose of its creation is to enforce GATT trade rules.

Having failed to make big loans in Europe in the 1950s and 60s, the IMF implemented a policy of pushing loans to Third World nations, under strict conditions as expressed in the clauses of the GATT.

1- The loan’s purpose was to build projects designed and directed by North American companies. The projects included roads needed by mining companies and petroleum companies, oil pipelines, highways and malls around big cities.

2- The borrowing countries were required to start a process of elimination of tariffs on imports, elimination of restrictions to foreign investments, and give equal treatment to foreign industries as to local companies. Complementary agreements were introduced by the U.S. government, which submitted third world countries to the rulings of an international tribunal with base in London. It would deal with business affairs between foreign companies and states. These agreements were similar in content and clauses to the so called “Free Trade Agreements” that the Bush administration (2001-2009) so desperately wanted other nations to sign.

3- Less government control of the local economy, which included the privatization of public or partly publicly owned companies, less regulation, and the surrender of the local monetary policies to IMF control. This allowed the IMF to decide when the country had to devaluate its currency, supposedly in order to make its products more competitive in the international markets.

4- Emphasis in production for export and less for domestic consumption, even though this was the major cause of hunger in Central America since the colonial times.

In 1981, U.S. President Ronald Reagan, in common agreement with Prime Minister Margaret Thatcher of England, launched the Structural Adjustment Loans (SALs), which were attached to tight conditions to the borrowing nations, so that the IMF could get the right to write economic policies for them. Resistance to take these loans and attempts to govern independent from Washington’s suggestions cost the life of at least two Latin American presidents in the 1980s: Omar Torrijos from Panama, and Jaime Roldos from Ecuador. Chile had already lost its democratically elected president, Salvador Allende in 1973 because he nationalized the Chilean copper mines. His successor, dictator Augusto Pinochet, approved by the United States government, returned control of the mines to foreign companies, and killed thousands of political opponents.

Most people also know about the US AID programs, which U.S. politicians frequently mention to remind the world that the United States is doing its part to help the poor of the world. Unfortunately, as David Korten, a former US AID advisor came to realize in the 1990s, such programs were not designed in accordance to the needs of local communities. Instead of empowering the local people to use the resources they already have, it transfers control over their resources to distant groups of power and central bureaucracies who have no concerns for their communities’ needs.

Furthermore, most of the US AID was military aid, which allowed unpopular and corrupt governments to stay in power for long periods of time.

World Trade Organization

Conservative politicians and economists frequently try to win people’s support by saying that the capitalist model of the United States is the best economic system ever devised. As we have heard many times during elections, they express confidence in the resilience and hard work of the American people, which, they say, will continue to generate so much prosperity as it had in the past and made the United States the greatest nation in the world. What they are not saying is that corporate America has been growing in power and influence, slowly taking over the government and changing the rules and institutions of governance.

The approval of the World Trade Organization (WTO) in 1995, marked the fall of the last political barriers for corporate control of the world markets and resources. European and Japanese industries were eager for WTO rule because they wanted open access to North American markets and public subsidies. Industries from WTO member countries do not have to pay attention to local laws because WTO law overrides local rules. If they find any interference from local governments or communities, they can sue the country and demand payment for loss of profits they expected to earn from their investments. (see, Korten, p. 167)

China was accepted as a WTO member during the Clinton administration, in spite of its dictatorial system of government. China’s acceptance of WTO business rule allowed many U.S. corporations to move their facilities there, where labor is very cheap, environmental laws are weak, and protection of workers’ rights is almost non-existent.

The corporate empire also worked hard to convince de Senate and the Clinton Administration to bring the Mexican economy under corporate rule.  The North American Free Trade Agreement—NAFTA, was presented to the Mexicans as the greatest opportunity for them to become part of a privileged group of three North American countries: Canada, the Unted States and Mexico. The agreement was approved in 1994. Although news magazines as Forbes and Businessweek anounced that the new billionaires of the world were Mexicans and Chinese, most of the common people were not better off, but worse.  Millions of farmers and indigenous people, like those in Chiapas lost their livelyhood as a result of corporate invasion of their country. People in Chiapas were abused and robbed by Mexican soldiers because they resisted displacement. These communities decided to organize to defend themselves. The organization was called "Movimiento Zapatista." Human rights observers from the U.S. frequently travel to Chiapas as witnesses against human right abuses. Military men did not want international witnesses with cameras recording the facts.

NAFTA destroyed the livelihood of millions of Mexican farmers, thousands of them have been displaced from their lands and have moved to the big cities hoping to find jobs.  Some of them were employed by foreign companies earning very low wages and  under hazardous conditions. Those unable to find jobs decided to take their chances and go to the United States. Contrary to what NAFTA advocates predicted, the agreement only worsened the problem of illegal immigration to the north. Under NAFTA, cheap corn and processed foods subsidized by the U.S. government inundated the Mexican markets causing the local farmers to go bankrupt. Genetically modified corn and other agricultural products contaminated native crops, making people dependent on bio-tech companies who own the patent of those altered species.

The Bush-Cheney administration promised their corporate friends that they would speed up the integration of Latin America and other third world countries into the WTO system through “Free Trade Agreements," such as CAFTA and the FTAA. Brazil and Argentina, after the deep crisis of the end of the 1980s and 90s, were not interested. These countries decided to challenge IMF’s economic rule. After losing some $50 billion dollars in the first six months of 1998, despite of their submission to IMF’s policies, Brazil decided to take things in its own hands to stop the bleeding of their economy. (Michel Chossudovsky article, 1998)

This incident was not something isolated. It started with Russia’s default on its debt payment to the IMF, which was followed by the crisis in South East Asia and then South America. The Brazilian economy was pushed into the crisis by IMF's managers to force its government to accelerate the privatization of state owned or partly owned enterprise. In this case the target was Telebras, a part public and part privately owned telephone company. The second objective was to destroy MERCOSUR, the South American trade agreement between Brazil, Argentina, Uruguay and Paraguay, which became the hope for a South American Free market that would balance the international markets. Ecuador, Bolivia, Chile and Peru are associate members of Mercosur. IMF’s economic manipulations had partial success against Mercosur, which still survives, although with internal disputes about trade and investments.

In 1997 IMF’s representatives and U.S. dignitaries visited Ecuador, demanding the change of its currency for the U.S. dollar. They also demanded a large increase in oil export to the United States. Remembering similar demands in 1993, which lead Ecuador to separate itself from the OPEC, the Ecuadorian Congress opposed both, and the IMF threatened the country with big economic inflations. Because the IMF controlled its economic policies, it succeeded in creating the worst economic crisis Ecuador has ever had. The crisis was worsened by harsh wheather conditions caused by a hot current in the Pacific Ocean called “El Niño” in 1997, which destroyed most crops and infrastructure with floods and mud slides. The heavy and long rain storms also caused the destruction of roads and landslides in the Andes. Oil pipes were broken and production was stopped.  The IMF demanded Ecuador to borrow petroleum from Colombia in order to maintain the rate of oil exports.  Such project made necessary to place a temporary pipeline to connect Colombian drilling sites to the Ecuadorian pipeline in Esmeraldas. This project was financed by a new loan from the World Bank.

New economic decisions sent by IMF economists to Ecuador included a rise in the prices of fuels and taxes, which caused the Ecuadorian people to revolt. The episode ended with the overthrow of President Bucaram. An illegal interim government was put in place by political oportunists against the will of the people and Constitutional order. New elections took place in 1998, but IMF’s heavy demands continued to deepen the economic crisis and the people revolted again, forcing President Mahuad to leave the country. Vice-president, Gustavo Noboa became the president, and he was allowed more freedom to govern, under two conditions: that his administration adopt the U.S. dollar as the currency of the land and increase oil exports.  IMF's representatives new that the oil reserves left within the country were in the Yasuni National Park. Ecuador complied and the U.S. dollar became the currency approved for business since 1999. 2000 was the final deadline for all people to change their currency to dollars. El Salvador followed the same path 2001.

Why did the Bush administration ask small countries to give up their currencies and adopt the U.S. dollar? U.S. politicians realized that a common European currency--The Euro, strengthened European markets and their general economy. Obviously, when there is more demand for something, its price goes up. The big difference between the Bush administration's strategy and the European Union's monetary policy is that Europe opened its borders for people and capitals to move freely within the member countries, while Bush's policy is unidirectional. Only companies (wealthy representatives) and capital can flow freely, but common people are confined within the borders of each country. His policies gave special privileges to wealthy investors and denied the common people an equal ground to compete for better wages.

The burden of foreign debt for Ecuador started in 1981. By 1988, according to statistics presented by political figures to the nation, such as Jaime Hurtado, a member of the Ecuadorian Congress, Ecuador had paid five times in interests and fees to the IMF of what it had received in loans. At this time Ecuador was already dedicating around 50% of its GDP to the service of the debt. Hurtado was shot and killed one afternoon, right in front of the Congress building, as he was leaving the place.

Kurt Schuler, from the economic committee of the U.S. Congress, gave several speeches in Guayaquil in 2002. He stated that Ecuador did not have monetary stability in 20 years, which is since 1982. Such statement is correct, and it is important to notice that this date coincides with IMF's economic intervention. He gave a brief historic background of the Ecuadorian economy since 1927 when the Ecuadorian Central Bank was established. He said the Ecuadorian currency was devaluated only once in several years until 1981. The GDP saw its highest point in 1981, and then it went down. Annual inflation remained below 15 percent until 1981, and grew up to 24 percent in 1982. He also recognized that the breaking point of the Ecuadorian economy occurred in 1998, (which coincided with the economic crisis of Russia, East Asia, Mexico, Brazil and Argentina, all of them under IMF’s economic tutelage). (Instituto Ecuatoriano de Politica Economica, 2002. www.his.com/~ieep/spandol.html)

However, Schuler puts the Ecuadorian economic crisis as the context in which the Ecuadorian government seeks to replace its currency for the U.S. dollar in order to ameliorate the economic problem, not as something imposed from the outside. He said that the IMF’s president would not have recommended it, but was willing to support it. Such statements are inconsistent with IMF’s modus operandi. He recognized that those who advocated for the adoption of the U.S. dollar were a small group of economists and business representatives who were organized with the name of Foro Económico. In reality, these people represented private and foreign interests who financed their campaigns for the adoption of the dollar, and their campaign was against the skeptics in the Ecuadorian Congress.

According to Schuler, the adoption of the dollar brought positive results to the Ecuadorian economy, mainly, monetary stability. But he conveniently ignored the inflation that has taken place since 2000, which has continued to rise as never before. Workers wages did not change much, compared to the price of land, housing, medicines, clothing, etc. Even in the present, the wages of non-skilled workers remain at $10 per day, while the prices of land and housing are as high as those in the United States. Furthermore, the use of the U.S. dollar puts Ecuador at greater disadvantage for trade with its neighbor countries--Colombia and Peru; because the Ecuadorian products are priced in dollars and cannot compete with cheaper products form any Latino American countries. This monetary aspect also pits Ecuadorian workers and small business owners against illegal imports from Colombia and Peru, and creates a huge wave of human migration from those nations to Ecuador, causing social instability in cities and rural areas, and great conflicts along the border.

According to NPR news in 2001, IMF’s policies drove Argentina into a deep economic crisis, and its government decided that it was time to take control of its economy. George W. Bush called many times the Argentinean government in 2002, asking them to submit to what he called “sound economic policies of the IMF,” in order to receive the help they needed. But the Argentinians refused. Instead they made it clear to IMF officials, that Argentina will pay its debt as their economic situation allwed, and will no longer follow IMF's dictate. This change in domestic policy allowed Argentina a fast recovery and real growth of 5% by the end of 2003

There has been a lot of talk about Venezuela’s opposition to U.S. corporate control of the world economy. Chavez’s opposition became more apparent after the failed coup orchestrated by the CIA in common agreement with the Venezuelan wealthy elite. Chavez had been kidnapped, blindfolded, and sent in a helicopter to an undisclosed location, thought to be in the Caribbean.

In 2000 by recommendation of the World Bank, the water supply of Cochabamba, Bolivia was privatized. The people revolted against the foreign company in control. Confrontations with the police were bloody and President Hugo Banzer resigned. During the 2002 elections, U.S. ambassador Manuel Rocha warned the Bolivian people not to vote for Evo Morales, because if they did, U.S. markets would be closed to them and aid programs would be cut off. Sanchez de Lozada won the election, but resigned due to social protests over the administration of funds derived from the extraction of natural gas and left the country to the vice-president. He escaped to the United States. (www.en.wikipedia.com) The new president was unable to comply with the demands of the people and the opposing demands of the IMF, and resigned in 2005. Evo Morales won the elections, but local groups of power have caused him a great deal of problems and accusations since the beginning.

Ecuador, Nicaragua, and lately El Salvador elected liberal governments, which had been accused by the Wall Street Journal and conservative groups of the United States as “Leftists” and “fascists.” Ex-Senator, Rick Santorum, Rush Limbaugh, and a Christian leader James Dobson accused Ecuador, Bolivia, Venezuela, and Nicaragua of being in alliance with Russia, Iran, and North Korea to attack the United States. They recommended prompt action to end “leftism,” although they presented no evidence of anything they said, except that Santorum had seen the Iranian President, Ahmadinejad visiting Nicaragua and Venezuela. (Focus on the family program, 2006)

Although they recognized the importance of knowledge of history to understand the present events, their commentaries were void of real historical analisis. They re-played a portion of a speech given by Winston Churchil during WWII, dealing with the Nazi threat to England after the fall of France. The idea was that the Iranian President was now the Hitler figure, and the "leftist" countries were his allies. This was no more than a dishonest and immoral fear monguering tactic to create a social push for an attack to Iran and military interventions in Latin America.

 

Free Trade Agreements

George W. Bush made several visits to Latin America in 2004 and 2005, asking the major countries to subscribe to the Free Trade Agreement of the Americas (FTAA). The people of Central America requested time for national referendums, but the U.S. officials did not allow it. Instead they gave an ultimatum—to join the global community and have access to the global markets or be left out and isolated. Fear and confusion among the people made easier for Central American politicians to comply to Bush’s demands. Panama signed the FTAA, but its ratification is still pending in the U.S. Congress, thanks to the action of progressive groups. Colombia, Chile, and Peru also signed the FTAA, but Colombia’s ratification by the U.S. Congress was also pending until early in 2009.

The major problems with the “free” trade agreements is that once a country signs it, major global corporations move in, buy out large extensions of land and other resources, displace the local people and local businesses, reclaim privilege rights to local resources that even the native people do not have, exert too much influence and increase corruption in local governments, do not submit to local laws or accept any responsibility for the impact of its operations in the community or the environment. Once small local businesses disappear, the local people become dependent on foreign businesses to provide jobs, goods, and services for the local people. This creates big economic monopolies and domination; it is in reality another form of colonialism that makes richer the already super rich.

The GDP of a host nation might increase, which gives economists ground to assert that there had been economic growth as a result of the FTAA. What they overlook is the fact that such growth occurs only in corporate profits and the accounts of few people of the local elite, not the general economy. A small percentage of the common population in China and India benefited from WTO policies, those who had access to higher education and training in high technological skills, while local farmers were displaced to transform their farms into huge industrial complexes. Furthermore, the high tech jobs were outsourced from the United States, leaving millions of North Americans jobless, and the U.S. economy falling from crisis to crisis, growing public debt and trade deficits. According to GDP measures, the U.S. economy was growing at a rate of 2 to 3 percent between 2000 and 2007, and between 1 and 2 percent in 2008. However, most of the U.S. families have seen an economic shrink for themselves instead of growth. Furthermore, economists overlooked the huge increases in public debt, which almost doubled during the Bush administration and causes additional spending in interests of nearly $800 billion a year.

Free Trade Agreements puts the North American workers in disadvantage with low paid Third World workers. Major U.S. cities and States also have to compete against each other, lowering their legal demands and standards, and offering economic incentives in order to attract investment. Tax cuts and subsidies are examples of incentives, which means less revenue for the state and biger budget deficits, which translates into smaller budgets for education, public infrastructure, health care, and other needed social services.

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