by Norman Lowe
(f) Bolivia
One of the poorest states in Latin America, after gaining independence from Spain in 1825, Bolivia had a long history of instability and military dictatorships. Since the Second World War the Bolivian economy was controlled by the USA, which, among other things, processed all Bolivia’s tin exports. In the 1950s, when the country was trying to become more self-sufficient in spite of its limited available capital, the USA insisted that this capital should be used to pay the country’s foreign debts rather than to finance its own developments designed to increase revenue. In 1964 the military seized power and in 1967 the army, with the help of US advisers, easily defeated a guerrilla campaign led by Ernesto ‘Che’ Guevara, who was captured and murdered on CIA orders. The army stayed in control until 1982 when Bolivia returned to democracy, with a string of presidents who took care not to antagonize the USA. In 1997 Hugo Banzer, a former general and dictator-turned democrat, was elected president. He made important progress in eliminating coca production and drug trafficking, much to the delight of the USA.
The near-eradication of coca farming by 2001 was an extremely controversial issue that was to have profound effects on Bolivia’s future. Coca had been an important crop in Bolivia for around 4000 years and as Nikolas Kozloff explains, it has several legal uses:
In Bolivia and the Andes coca leaf is legally used as an infusion to make tea. The leaf is usually chewed with a bitter wood-ash paste to bring out the stimulant properties similar to caffeine or nicotine. In the Andes, visitors are commonly offered coca tea to combat altitude sickness, which can cause headache or vertigo. Coca is also used for cosmetic products and toothpaste. Outside the region, however, coca is classified as a prohibited drug. In order to convert coca leaf into cocaine, it must be combined with other ingredients and subjected to a complex chemical process.
Thousands of coca farmers became unemployed and were plunged into poverty; the coca growers’ union joined with other trade unions and social interest groups to form an organization called MAS (Movement Towards Socialism), which campaigned on a platform of decriminalizing coca and nationalizing the country’s natural resources. The call for nationalization of resources was a response to the unpopular privatization of water resources by foreign companies, which led to a doubling of water prices.
In December 2005 the MAS candidate, Juan Evo Morales, was elected president. An Aymara Indian, he was the first Bolivian president to come from the country’s ethnic majority. He had been a leader of the coca growers’ federation and was determined to do his utmost to get coca decriminalized. In September 2006 he told the UN General Assembly in New York that coca had therapeutic uses and should not be criminalized. While agreeing that it was necessary to fight drug smuggling, he insisted that prohibition of pure coca leaf was ‘an historic injustice … coca does not harm human health’. He added that criminalizing coca was simply a strategy by the USA and Europe to recolonize the Andes region. Clearly Hugo Chávez had found a courageous ally in his anti-US stand. Morales soon signed trade agreements with Venezuela and refused to have anything to do with the US-sponsored American Free Trade Area, which he described as ‘an agreement to legalize the colonization of the Americas’. He added that Bolivia, Venezuela and Cuba might form ‘an axis of good’ in contrast to the ‘axis of evil’ that included the USA and its allies. Further anti-neo-liberal moves included signing new contracts with the private gas companies designed to bring in more revenue for the government; and a partial nationalization of the hydrocarbons industry. According to Noam Chomsky:
Since the election of Morales in 2005, Bolivia’s economic performance has been quite impressive. A Center for Economic and Policy Research (CEPR) study found that in the four years since Morales took office, ‘economic growth has been higher than at any time during the last 30 years, averaging 4.9 percent annually. Projected GDP growth for 2009 is the highest in the hemisphere and follows its peak growth rate in 2008, along with “several programs targeted at the poorest Bolivians”.
Morales was re-elected for a second term in 2009 with an increased majority, and MAS won a two-thirds majority in both houses of Congress.
(g) Ecuador
Ecuador is another of the poorest states in Latin America. It became fully independent in 1830 and was ruled by centre-right presidents until 1895, when a revolution led to half a century of more liberal governments. The army seized power in 1972, but giving way to popular demand, they returned the country to democracy in 1979. However, progress towards modernization was disappointing; successive governments failed to deliver on their promises of land reform, an end to unemployment and the provision of social services. In 1998 a fall in the world price of oil, Ecuador’s main export, caused an economic crisis; inflation rose to over 40 per cent, and the poverty rate rocketed to around 70 per cent. Although the economy recovered quickly, the government became increasingly unpopular, because of its strict austerity measures together with blatant corruption among leading politicians. In 2006 there were huge protest demonstrations against a proposed free-trade agreement with the USA which was widely seen as a ploy to tighten US control over Ecuador’s economy. The presidential election of November 2006 was won by the left-wing economist, Rafael Correa.
It soon became clear that the new president intended to follow the example of Chávez and Morales. He announced that ‘the long neo-liberal night’ had come to an end and promised an economic revolution to renegotiate the foreign debt and channel as much money as possible into health and education. Correa’s first term was due to end in January 2011, but a new constitution was proposed which would weaken Congress, strengthen the powers of the president and allow him to stand for two further terms. His critics accused him of trying to make himself into a dictator, but in a referendum held in September 2008, the new constitution was approved by 64 per cent of voters. This now required a general election in April 2009. Correa was easily re-elected for a second term to last until August 2013, which could be extended to 2017 if he were to be elected again. In 2010 legislation was passed requiring foreign oil companies to renegotiate their contracts so that more of the profits went to the government, to be used in the campaign against poverty and its causes. Companies were warned that if they refused, they would be nationalized and forced out of the country.
These policies alienated various right-wing groups and in September 2010, after President Correa took the dangerous step of ending bonuses and other benefits for the police force, protest demonstrations broke out in which the police were heavily involved. Road blocks were set up and protesters invaded the National Assembly and the state-run TV station. When Correa tried to talk with police representatives, he was kidnapped and held hostage. It looked as though a coup was being attempted, and the president declared a state of emergency and called on the army to intervene. During the night an army unit rescued him from a hospital where he was being held; after fighting between the army and the police, order was restored and Correa continued in office.
By 2012 there were signs that Correa’s social policies were working: both unemployment and poverty levels had fallen, and there had been vastly increased expenditure on roads, hospitals and schools. In 2011 Ecuador’s economy grew by 7.8 per cent, helped by higher oil prices. Not surprisingly the president’s popularity with the poor increased considerably, but the middle classes complained about rising prices and rising taxation, while human-rights groups accused him of making himself too powerful. Although the opposition was divided and relatively small in number, Correa had to contend with a largely hostile media. However, it was widely expected that he would be re-elected, if he decided to stand again in August 2013. Ecuador gained worldwide attention in the summer of 2012 when President Correa granted political asylum to Julian Assange, the founder of WikiLeaks, which publishes classified information, including US military and diplomatic documents. He was wanted for questioning in Sweden in relation to a rape investigation, and there was a strong possibility that he could be prosecuted in the USA over th
e WikiLeaks publication of confidential documents. The British government wanted to hand him over to Sweden, but from June 2012, with the situation locked in stalemate, Assange was living under diplomatic protection in the Ecuadorian embassy in London.
(h) Nicaragua
Taking office in January 2007, President Ortega had become less ‘revolutionary’ and toned down his anti-capitalist stand during his years in opposition since 1990. He claimed that he was now motivated by Christian principles rather than by Marxism. There were allegations of fraud during the election, and both the USA and the EU suspended their aid programmes to Nicaragua. Nevertheless, Ortega introduced new schemes to improve healthcare, social services, education (including a system of scholarships for poor students) and housing. Progress was slow – in 2011, towards the end of his term in office, the country was still the poorest in Latin America, with 46 per cent of the population living below the poverty line. On the other hand, private businesses had been allowed to continue without state interference, and the government could claim with some justification that the mixed economy had produced a period of sustained economic growth. According to Robin Yapp, writing in the Telegraph (7 October 2011), Nicaragua was ‘helped by cheap oil from Hugo Chávez’s Venezuela, which has helped to prop up social schemes like subsidized housing. Ortega has also been able to attract foreign investors who see Nicaragua as a safe haven compared to neighbouring Honduras or El Salvador which have the world’s highest murder rates.’
Ortega has attracted considerable criticism from many sections of society. Some of his former left-wing supporters have left the party, accusing him of kowtowing to the neo-liberals simply in order to stay in power. Democrats claim that he is well on the way towards becoming a dictator like the Somozas. He certainly got the Supreme Court to cancel the ban on presidents standing for consecutive terms, enabling him to stand again in November 2011. Yet his popularity with the masses remains such that he won a comfortable victory, taking 62 per cent of the votes.
This chapter has shown how, during the early years of the twenty-first century, Latin America became one of the most fascinating regions of the world. Starting in Venezuela with the election of Hugo Chávez in 1998, a new trend began to spread across the region. This was the change from neo-liberalism to policies which allowed a country’s resources to be shared more equally among the great mass of the population, and which enabled modernization to take place. Of course there were different degrees of change: the USA did its best to divide Mexico, Chile and Guatemala from the rest by making separate trade agreements with them, so that relations between the four states are reasonably cordial. Venezuela, Bolivia, Cuba, Ecuador and Argentina were the most decisive in their rejection of neo-liberalism, while Brazil, Nicaragua and Uruguay were middle of the road, with a mixture of policies.
There was another strand in this move towards modernization – the growth of regional co-operation between states. A number of institutions and organizations were set up; named after Simon Bolívar, the famous nineteenth-century revolutionary leader, the Bolivarian Alternative for the Americas (ALBA) was the creation of Chávez in 2004. In the words of Nikolas Kozloff, it was ‘an initiative designed to encourage greater trade, solidarity and exchange between nations standing outside the usual market-based strictures’ (i.e. outside the US orbit). Its activities went far beyond simple free-trade agreements, to include mutual economic and social assistance. For example Venezuela supplies Cuba with oil from its state-owned refineries at very reasonable prices and in return Cuba has sent thousands of doctors and teachers to work in Venezuela. Cuban doctors have also worked in Bolivia and provided medical supplies. In 2012 the membership of ALBA included Venezuela, Cuba, Bolivia, Ecuador, Nicaragua, Haiti and various small islands in the Caribbean. Discussions were well under way into the adoption of a common currency, the sucre, although there were problems with the small Caribbean islands which were already members of the Eastern Caribbean monetary union.
Another regional organization is the Union of South American Nations (UNASUR), which was set up at a meeting in the Brazilian capital in 2008. It brought together two existing customs unions – Mercosul and the Andean Community of Nations. In 2011 there were 12 member states – Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Venezuela and Uruguay. The plan was eventually to set up a South American parliament to be situated in Cochabamba, the third largest city in Bolivia.
The Bank of the South was launched in 2009 with initial capital of $20 million, the bulk of which was supplied by Argentina, Brazil and Venezuela, with smaller contributions from Bolivia, Ecuador, Paraguay and Uruguay. The bank provides loans for approved social and infrastructure improvements to any Latin American country as an alternative to the IMF. However, some governments prefer to use smaller regional funds that are on offer, such as the Andean Development Corporation and the state-run Venezuelan Development Bank, known as BANDES. This has branches in Ecuador, Bolivia and Uruguay, and it has been especially helpful to Bolivia in financing educational programmes. Whichever of these alternatives the countries of Latin America decided to choose as a source of funding, the outcome would have been similar: the IMF was on the verge of being eclipsed as a force within the region. In a no-nonsense assessment of the situation, Jason Tockman, an expert on ALBA and Bolivia, declared that ‘US influence through international financial institutions like the IMF has collapsed’.
And finally, some of the Latin American countries began a diversification of markets and investment, with China as an increasingly important partner. Venezuela, the leading oil exporter in the hemisphere, delivered quite a blow to Washington’s energy policies. Having built up probably the closest relations with China of any Latin American country, Venezuela plans to export increasing amounts of oil to China as part of its effort to reduce its dependence on the openly hostile US government. In fact Latin America as a whole is increasing trade and other relations with China, in particular raw materials exporters such as Brazil, Peru and Chile. For Brazil, now often called ‘the farmer of the world’, China is now its largest trading partner. These increases are just part of the move toward a more diverse world that is causing considerable agitation among American planners and businessmen, who had assumed for a long time that their global domination would continue indefinitely. As Noam Chomsky explains:
The former colonies in Latin America have a better chance now than ever before to overcome centuries of subjugation, violence, repression and foreign intervention. … These are exciting prospects for Latin America, and if the hopes can be realized, even partially, the results cannot fail to have a large-scale global impact as well.
FURTHER READING
Ali, T., Pirates of the Caribbean: Axis of Hope (Verso, 2006).
Castaneda, J. and Morales, M. (eds) Tales of the Latin American Left (Routledge, 2008).
Chomsky, N., Hopes and Prospects (Penguin, 2010).
Gott, R., Hugo Chávez and the Bolivarian Revolution (Verso, revised edition, 2011).
Grandin, G., The Last Colonial Massacre: Latin America in the Cold War (Chicago University Press, 2004).
Grandin, G., Empire’s Workshop: Latin America, the United States and the Rise of the New Imperialism (Owl Books, 2006).
Harten, S., The Rise of Evo Morales and the MAS (Zed Books, 2011).
Jones, B., Hugo: The Hugo Chávez Story from Mud Hut to Perpetual Revolution (Vintage, 2009).
Kozloff, N., Hugo Chávez: Oil, Politics and the Challenge to the US (Palgrave Macmillan, 2006).
Kozloff, N., Revolution! South America and the Rise of the New Left (Palgrave Macmillan, 2008).
Raby, D. L., Democracy and Revolution: Latin America and Socialism Today (Pluto, 2006).
Sivak, M., Evo Morales: The Extraordinary Rise of the First Indigenous President of Bolivia (Palgrave Macmillan, 2010).
QUESTIONS
What were the problems facing the countries of Latin America at the end of the Second World War? Explain why progress in
solving these problems was so slow.
In what ways and with what motives was the USA involved in the affairs of Latin America during the second half of the twentieth century?
‘The Cold War was to have profound effects on the economic and political systems of Latin America.’ How far do you agree?
‘The election of Hugo Chávez as president of Venezuela in 1998 was the beginning of a left-wing revolution that was to transform Latin America over the next decade.’ Explain what happened in this transformation. Do you think this statement is an accurate assessment of recent events in Latin America, or is it an exaggeration?
There is a document question about US–Latin American relations on the website.
Part VI
Global Problems
Chapter 27
The changing world economy since 1900
