Open Veins of Latin America: Five Centuries of the Pillage of a Continent

by Eduardo Galeano

  Generally speaking, industry landed as an airplane does, without affecting the airport: conditioned by and serving the needs of a previously existing internal market, it never broadened that market enough to make great structural changes possible. Industrial development required more and more imports of machinery, spare parts, fuel, and intermediate products,† but exports, the source of foreign currency, could not pay for these since they came from an activity condemned to backwardness by its masters. Under the Perón regime, the Argentine state achieved a monopoly of grain exports but did not touch the land-ownership system; nor did it nationalize the big U.S. and British meatpacking plants or the wool exporters. Thus the official push toward heavy industry was extremely weak and the state did not realize in time that if it did not give birth to a technology of its own, its nationalist policy would take flight with clipped wings. By 1953 Perón, who had come to power in direct confrontation with the U.S. ambassador, was giving Milton Eisenhower a rousing welcome and soliciting the cooperation of foreign capital in promoting dynamic industries.** The need for a “partnership” between national industry and the imperialist corporations became pressing as substitution for imported manufactures was speeded up and as the new factories required rising levels of technology and organization. The same trend emerged in Getulio Vargas’s industrialization plan, and was dramatized in Vargas’s final tragic decision. Foreign oligopolies, with their ultramodern technology, steadily and not very secretly took over the national industry of all Latin American countries, including Mexico, by the sale of manufacturing techniques, patents, and new equipment. Wall Street had definitely taken the place of Lombard Street, and it was the U.S. concerns which settled down to enjoy superpower in the region. To this penetration of the manufacturing field was added ever increasing interference in banking and commerce: the Latin American market was being integrated into the internal market of the multinational corporations.

  † “The transfer of a particular product to internal production only ’substitutes’ for part of the aggregate value previously generated outside the economy. … To the extent that consumption of this ’substituted’ product expands rapidly, the resultant demand for imports can rapidly overtake the foreign-currency economy. …”5

  ** The minister of economic affairs replied thus to a representative of the magazine Visión on November 27, 1953:

  “Apart from the oil industry, what other industries does Argentina want to develop with the cooperation of foreign capital?”

  “To be precise, let us cite in order of priority oil.… Secondly, the steel industry.… Heavy chemistry.… Manufacture of transport units.… Manufacture of tires and axles.… And construction of diesel engines.”6

  In 1965 Roberto Campos, economic czar of the Castelo Branco dictatorship, announced that “the era of charismatic leaders surrounded by a romantic aura is giving place to a technocracy.”7 The U.S. embassy had directly participated in the coup against the João Goulart government; the fall of Goulart, Vargas’s heir in style and aim, rang down the curtain on populism and mass politics. “We are a beaten, dominated, conquered, destroyed nation,” a friend wrote to me from Rio de Janeiro some months after the success of the military plot: the denationalization of Brazil meant iron-fisted rule by an unpopular dictatorship. Capitalist development could no longer be fitted in with the great mass mobilization around a caudillo like Vargas. To contain runaway inflation at the expense of the greater poverty of the poor, the regime had to ban strikes and destroy unions and parties, to jail, torture, and kill, to cut workers’ wages by any means necessary. A survey in 1966-1967 showed that 84 percent of Brazil’s big industrialists thought the Goulart government’s economic policy had been harmful. Undoubtedly, among them were those captains of the national bourgeoisie Goulart tried to lean on in order to stem the imperialist bloodletting of the national economy. The same process of repressing and strangling the people occurred under Onganía in Argentina—actually, it had begun with Perón’s defeat in 1955, just as in Brazil it began with the shot that killed Vargas in 1954. In Mexico, too, denationalization of industry coincided with increasingly repressive policies by the party that monopolizes the government.

  As Fernando Henrique Cardoso has noted, light or “traditional” industry, which grew under the benevolent protection of populist governments, requires increased consumption by the masses, the people who buy shirts or cigarettes.8 But “dynamic” industry—the production of intermediate and capital goods—is directed toward a restricted market, one which has the big concerns and the state at its top: a few consumers with big financial resources. Dynamic industry, now in foreign hands, rests upon and subordinates previously existing traditional industry. In the traditional sectors, technologically at a low level, national capital retains some strength; the less the capitalist is tied to international modes of production by technological and financial dependence, the more he tends to favor agrarian reform and the raising of mass consumer-power through the trade union struggle. On the other hand, those with closest foreign connections, representing dynamic industry, simply want strengthened bonds between the dependent countries’ islands of development and the world economic system, and they subordinate internal transformations to this priority. Here are the throats from which the song of the industrial bourgeoisie emerges, as is shown in all the recent Argentine and Brazilian surveys Cardoso uses as raw material. The big businessmen are firmly opposed to agrarian reform; most of them deny that the manufacturing sector has different interests from the rural sector and believe that nothing is more important for industrial development than the cohesion of all productive classes and the strengthening of the Western bloc. Only 2 percent of the great industrialists in Argentina and Brazil think the workers are of primary political importance. Most of those interviewed were “national entrepreneurs”; and most were bound hand and foot to foreign power centers by the myriad bonds of dependency.

  Could anything else be expected at this point? The industrial bourgeoisie is a dominant class dominated in turn from abroad. The chief latifundistas on the Peruvian coast, now being expropriated by the Velasco Alvarado government, are also owners of thirty-one transformation industries and many other assorted enterprises. The situation is similar in all the other countries: a few hundred families own the factories and lands, the large businesses and banks.9 Mexico is no exception: the national bourgeoisie, subordinated to big U.S. concerns, is much more afraid of mass pressure than of imperialist oppression, in whose bosom it is developing without independence—and without the creative imagination attributed to it—and has efficiently multiplied its interests.* In Argentina, the founder of the Jockey Club, center of latifundista social prestige, was also the leading industrialist, and thus an immortal tradition was born at the end of the past century.† Manufacturers with fattened bank accounts marry landlords’ daughters to gain entry to the oligarchy’s most exclusive salons, or buy land for the same purpose; and not a few cattle ranchers have—at least in boom periods—invested capital surpluses accumulated in their hands in industry. Faustino Fano, who made a good part of his fortune as a textile merchant and industrialist, held the presidency of the Sociedad Rural for four terms before his death in 1967: “Fano destroyed the false contradiction between agriculture and industry,” his press obituaries proclaimed. Industrial surpluses are turned into cows. The powerful Di Tella brothers sold their auto and refrigerator factories to foreign capitalists and now raise prize bulls for Sociedad Rural shows. Half a century ago the Anchorena family, which owned Buenos Aires province up to its borders, built one of the city’s biggest metallurgical plants.

  * As Alonso Aguilar says: “Mexican capitalists are more and more versatile and ambitious. With business freedom as their point of departure for acquiring wealth, they—or at least the most prominent—enjoy a network of channels through which to multiply and interweave their interests by friendships, business partnerships, marriage compaternity [compadrazgo] of children, extension of mutual favors, membership in
certain clubs or groups, frequent social gatherings and, of course, affinity in their political positions.”10

  † He was Carlos Pellegrini. The Jockey Club honored him by publishing his speeches; those in which the industrialists’ point of view were supported were omitted.11

  In Europe and the United States, the industrial bourgeoisie made a very different kind of entrance onto the stage of history, and grew and consolidated its power in quite a different way.

  WHICH FLAG FLIES OVER THE MACHINERY?*

  * “Which flag flies” is part of a famous saying by José Artigas. (Trans.)

  The old woman stooped and fanned the fire with her hand. Back bent, wrinkled neck extended, she looked like an ancient black tortoise. But her ragged dress certainly gave less protection than a shell, and, after all, it was only the years that made her so slow. Behind her the wall of her hovel, made of bits of wood and tin, sagged like its occupant; beyond were similar hovels of the São Paulo slum. Before her the water for coffee was boiling in a blackened kettle. She lifted a small tin can to her lips and, before drinking, shook her head and shut her eyes. “O Brasil é nosso,” she said—Brazil is ours. In the center of the same city, and at that same moment, the executive director of Union Carbide was thinking the same thing—but in another language—as he raised a crystal glass to drink to the firm’s capture of still another Brazilian plastics factory. One of the two was mistaken.

  Since 1964 Brazil’s successive military dictators have marked the anniversaries of the various state enterprises by announcing their imminent denationalization, now known as “recuperation.” Ministers flock to celebrate every opening of a foreign factory. Law 56,570, passed on July 6, 1965, reserved the petrochemical industry for the state; Law 56,571, passed the same day, annulled Law 56,570, opening up petrochemicals to private investment. Thus directly, or through “partnership” with the state, Dow Chemical, Union Carbide, the Rockefeller group, and Phillips Petroleum won the most coveted “filet mignon,” the oil derivatives industry in which a boom in the 1970s was anticipated. What happened in the few hours between the two laws? Rustling curtains, footsteps in the hallway, desperate hangings on the door, green bills in swift motion, a flurry in the palace: from Shakespeare to Brecht, many would have enjoyed describing it. A government minister admits: “In Brazil, apart from the state itself, and with honorable exceptions, only foreign capital is strong.”12 And the government does its best to avoid any irksome competition with U.S. and European corporations.

  Foreign capital for manufacturing began copiously flowing into Brazil in the 1950s, and got a strong impetus from the development plan President Juscelino Kubitschek put into effect between 1957 and 1960. Those were the days of growth euphoria. Brasilia emerged as if from a magician’s cauldron, in a wilderness where the Indians had not yet heard of the wheel; highways and great dams were built; automobile factories produced a new car every two minutes. The industrial curve climbed steeply. Doors were flung open to foreign investment, the dollar invasion was hailed, the dynamism of progress was felt in the air. Banknotes circulated before the ink dried; the leap forward was financed by inflation and a heavy external debt that would be unloaded on the backs of successor governments. A special type of exchange for remitting profits to the foreign concerns’ head offices and amortizing their investment was introduced and guaranteed by Kubitschek. The state assumed co-responsibility for payment of debts contracted abroad by these concerns, and arranged a cheap dollar for amortization and interest on these debts: according to an ECLA report, over 80 percent of all investment between 1955 and 1962 came from state-guaranteed loans.13 In other words, more than four-fifths of these concerns’ investments came from foreign banks and became a further addition to the Brazilian state’s millstone of external debt. Special benefits were also granted for the importation of machinery.* National enterprises did not enjoy the benefits extended to General Motors and Volkswagen.

  * Eugênio Gudin, an economist much in favor of foreign investment, estimates that under this heading alone Brazil made a present to U.S. and European concerns of no less than $1 billion. According to Moacir Paixão, privileges extended to the auto industry in the period of its inception were equivalent to the national budget. Paulo Schilling notes that while the Brazilian state showered benefits on the big international corporations, permitting them maximum profits with maximum investments, it refused help to the Fábrica Nacional de Motores, created in the Vargas period.14 Later, during the Castelo Branco regime, this state enterprise was sold to Alfa Romeo.

  The denationalizing effects of this seduction of imperialist capital emerged in the findings of the university’s Instituto de Ciencias Sociales when it investigated Brazil’s great economic groupings.15 Of conglomerates with capital exceeding 4 billion cruzeiros, more than half were foreign and most were U.S.-owned; of those with more than 10 billion cruzeiros, twelve were foreign and five Brazilian. “The bigger the economic group, the more likely it is to be foreign,” concluded Mauricio Vinhas de Queiroz in analyzing the results of the investigation. Equally or more eloquent was the fact that of the twenty-four Brazilian groups with over four billion in capital, only nine were not linked by shareholdings to U.S. or European capital, and two of the nine had interlocking foreign directorships. The survey showed that ten economic groups had a virtual monopoly in their respective lines, and that of these, eight were affiliates of big U.S. corporations.

  But all this was child’s play compared to what came later. Between 1964 and mid-1968, fifteen auto and auto parts factories were swallowed up by Ford, Chrysler, Willys Overland, Simca, Volkswagen, and Alfa Romeo. In the electric-electronic sector, three important Brazilian concerns passed into Japanese hands. Wyeth Laboratories, Bristol Meyers, Mead Johnson, and Lever Brothers gobbled various laboratories, reducing national production of drugs to one-fifth the market. Anaconda pounced on nonferrous metals and Union Carbide on plastics, chemicals, and petrochemicals; American Can, American Machine and Foundry, and other colleagues took over six Brazilian machine and metallurgical concerns; the Companhia de Mineração Geral, owner of one of Brazil’s biggest metallurgical plants, was bought for a song by a Bethlehem Steel-Chase Manhattan-Standard Oil consortium. A parliamentary commission set up to investigate the matter reached some sensational conclusions, but the military regime closed the doors of Congress and the findings never got to the Brazilian public.*

  * The commission found that in 1968 foreign capital controlled 40 percent of the capital market in Brazil, 62 percent of external trade, 82 percent of ocean transport, 67 percent of external air transport, 100 percent of motor vehicle production, 100 percent of tire manufacturing, more than 80 percent of the pharmaceutical industry, about 50 percent of the chemical industry, 59 percent of machinery and 62 percent of auto parts production, 48 percent of aluminum and 90 percent of cement production. Half of the foreign capital was that of U.S. concerns, followed by German. It is interesting to note in passing the increasing weight of the Federal Republic of Germany’s investments in Latin America. Of every two autos made in Brazil, one comes from the Volkswagen plant, the biggest in the whole region. The first auto factory in South America was German—Mercedes-Benz Argentina, founded in 1951. The German firms Bayer, Hoechst, BASF, and Schering control a substantial part of Latin America’s chemical industries.

  Under Castelo Branco, an investment-guarantee agreement was signed which gave foreign concerns virtual extraterritoriality: taxes on their profits were cut and they were given extraordinary credit facilities, while tourniquets applied by the Goulart government to the profits drain were removed. The dictatorship hawked the country to foreign capitalists as a pimp offers a woman, and put the stress where it belonged: “The treatment of foreigners in Brazil is among the most liberal in the world … no general restrictions are in effect with reference to the nationality of owners, partners, or shareholders.… There is no limit to the percentage of the registered capital that may be remitted as profit.… No limitation is placed on the re
patriation of capital, and reinvestment of profits is considered as an increase of the original capital.…”16

  Argentina competes with Brazil for the role of imperialist-investment favorite, and its military regime did not lag in singing the benefits during the same period. In his 1967 speech defining Argentine economic policy, Juan Carlos Onganía reaffirmed that the hens granted equal opportunity to the fox: “Foreign investments in Argentina will be considered on an equal footing with investments of internal origin, in accordance with the traditional policy of our country which has never discriminated against foreign capital.”17 As in Brazil, Argentina puts no limitations on the entrance of foreign capital, its movement within the national economy, the export of profits, or the repatriation of capital; payments for patents, royalties, and technical assistance are made freely. The government exempts the concerns from taxes and extends to them special exchange rates, in addition to many other stimuli and exemptions. Between 1963 and 1968, fifty important Argentine enterprises— twenty-nine of which passed into U.S. hands—were denationalized in such varied sectors as steel, autos and auto parts, petrochemicals, chemicals, the electrical industry, paper, and cigarettes. In 1962 two private-capital Argentine concerns, Siam Di Tella and Industrias Kaiser Argentinas, were among the five biggest industrial enterprises in Latin America; in 1967 both had been generously surrendered to imperialist capital. Of the country’s largest enterprises, those with sales exceeding 7 billion pesos a year, half the total value of the sales belongs to foreign firms, one-third to the state, and barely one-sixth to private companies with Argentine capital.18