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

by Eduardo Galeano

  Almost one-third of U.S. investment in Latin American manufacturing is in Mexico, which also puts no restrictions on the transfer of capital and the repatriation of profits; its exchange restrictions are conspicuous in their absence. The obligatory “Mexicanization” of capital, under which nationals must hold the majority of shares in some industries, has, according to the Secretary of Industry and Commerce, “generally speaking been well received by foreign investors, who have publicly recognized various advantages in the creation of mixed enterprises.” He continued: “It should be noted that even internationally renowned enterprises have adopted this form of partnership in companies they have established in Mexico, and it should also be stressed that the policy of Mexicanization of industry has not only not discouraged foreign investment in Mexico, but that after this investment flow broke a record in 1965, the volume reached in that year was again exceeded in 1966.”19 Of the hundred most important enterprises in Mexico in 1962, fifty-six were wholly or partly controlled by foreign capital, twenty-four belonged to the state, and twenty to private Mexican capital. These twenty accounted for slightly more than one-seventh of the hundred concerns’ total sales volume.20 Big foreign concerns now control more than half the capital invested in computers, office equipment, machinery, and industrial equipment; General Motors, Ford, Chrysler, and Volkswagen have consolidated their power over the auto industry and its network of auxiliary factories; the new chemical industry belongs to Du Pont, Monsanto, Imperial Chemical Industries (British), Allied Chemical, Union Carbide, and Cyanamid; the chief laboratories are in the hands of Parke-Davis, Merck, Ross Laboratories (a subsidiary of Abbott), and Squibb; the influence of Celanese plastics is decisive in the manufacture of manmade fibers; Lever Brothers and Anderson, Clayton have an increasing hold on edible oils; and foreign capital participates overwhelmingly in the production of cement, cigarettes, rubber and its derivatives, housewares, and assorted foods.

  BOMBARDMENT BY THE INTERNATIONAL MONETARY FUND HELPS THE CONQUERERS TO LAND

  Testifying before the parliamentary commission on the denationalization of Brazilian industry, two government ministers admitted that indigenously owned factories had been put at a disadvantage by the Castelo Branco regime’s measure permitting the direct inflow of external credit. They were referring to the famous Order 289 of early 1965, which allowed foreign concerns operating in Brazil to get loans from abroad at 7 or 8 percent interest, with a government-guaranteed exchange arrangement in case the cruzeiro was devalued. Brazilian concerns had to pay almost 50 percent interest on credits they obtained—with difficulty—at home. The inventor of the measure, Roberto Campos, offered this explanation: “Obviously the world is unequal. Some are born intelligent, some stupid. Some are born athletes, others crippled. The world is made up of small and large enterprises. Some die early, in the prime of life; others drag themselves criminally through a long useless existence. There is a basic fundamental inequality in human nature, in the condition of things. The mechanism of credit cannot escape this. To postulate that national enterprises must have the same access to foreign credit as foreign enterprises is simply to ignore the basic realities of economics. …”* According to this brief but meaty “Capitalist Manifesto,” the law of the jungle is the natural code governing human life; injustice does not exist, for what we know as injustice is merely an expression of the cruel harmony of the universe: poor countries are poor because… they are poor; our fate is written in the stars and we are born only to fulfill it. Some are condemned to obey, others are appointed to command. Some put their necks out and others put on the rope. The author of this theory was the creator of International Monetary Fund policy in Brazil.

  * This testimony appeared in the report of a parliamentary commission investigating transactions between national and foreign enterprises, dated September 6, 1968. Soon afterward Campos published a curious interpretation of the Peruvian government’s nationalist stance. According to him, the Velasco Alvarado government’s expropriation of Standard Oil was no more than an “exhibition of masculinity.” The only objective of nationalism, he wrote, is to satisfy the human being’s primitive need for hate. However, he added that “pride does not generate investments or increase the flow of capital.…”21

  As in other Latin American countries, application of IMF formulas opened the gates to let foreign conquerers into an already scorched land. From the end of the 1950s economic recession, monetary instability, the credit drought, and a decline in internal purchasing power all helped to capsize national industry and put it at the mercy of imperialist corporations. With the magical incantation of “monetary stabilization,” the IMF—which not disinterestedly confuses the fever with the disease, inflation with the crisis of existing structures—has imposed on Latin America a policy that accentuates imbalances instead of easing them. It liberalizes trade by banning direct exchanges and barter agreements; it forces the contraction of internal credits to the point of asphyxia, freezes wages, and discourages state activity. To this program it adds sharp monetary devaluations which are theoretically supposed to restore the currency to its real value and stimulate exports. In fact, the devaluations merely stimulate the internal concentration of capital in the ruling classes’ pockets and facilitate absorption of national enterprises by foreigners who turn up with a fistful of dollars.

  In all Latin America, the system produces much less than the necessary monetary demand, and inflation results from this structural impotence. Yet the IMF, instead of attacking the causes of the production apparatus’s insufficient supply, launches its cavalry against the consequences, crushing even further the feeble consumer power of the internal market: in these lands of hungry multitudes, the IMF lays the blame for inflation at the door of excessive demand. Its stabilization and development formulas have not only failed to stabilize or develop; they have tightened the external stranglehold on these countries, deepened the poverty of the dispossessed masses—bringing social tensions to the boiling point—and hastened economic and financial denationalization in the name of the sacred principles of free trade, free competition, and freedom of movement for capital. The United States, which itself operates an enormous protectionist system—tariffs, quotas, internal subsidies—has never earned a glance from the IMF. Toward Latin America, on the other hand, the IMF is inflexible: for this it was brought into the world. As soon as Chile accepted the first IMF mission in 1954, the country swarmed with its “advisors”; and today most of the governments blindly follow its directives. The therapy makes the sick man sicker, the better to dose him with the drug of loans and investments. The IMF extends loans or flashes the indispensable green light for others to extend them. Born in the United States, headquartered in the United States, and at the service of the United States, the Fund effectively operates as an international inspector without whose approval U.S. banks will not loosen their pursestrings. The World Bank, the Agency for International Development, and other philanthropic organizations of global scope likewise make their credits conditional on the signature and implementation of the receiving governments’ “letters of intention” to the all-powerful Fund. All the Latin American countries put together do not have half as many votes as the United States in the direction of the policy of this supreme genie of world monetary equilibrium. The IMF was created to institutionalize Wall Street’s financial dominion over the whole planet, when the dollar first achieved hegemony as international currency after World War II. It has never been untrue to its master.

  It is true that the Latin American national bourgeoisie, with its vocation for living above its income, has done little to stop the avalanche of foreigners; but it is also true that imperialist corporations have used a bewildering range of demolition methods. With the IMF’s preliminary bombardment facilitating the penetration, some enterprises were taken by a mere telephone call, after a sharp drop in the stock market, in exchange for a little oxygen in the form of shares, or by calling in some debt for supplies or for the use of patents, brand names, or
technical innovations. Such debts, multiplied by currency devaluations—which oblige local enterprises to pay more in national currency for their commitments in dollars—thus become a death trap. Technological dependency costs dearly; the corporations’ know-how includes expertise in the art of devouring one’s neighbor. One of the last of the Mohicans of Brazilian national industry remarked shortly before the military government sent him into exile: “Experience shows that the profit from sales by a national enterprise often never reaches Brazil, but remains, bearing interest, in the financial market of the purchasing country.”22 The creditors collect by taking over the installations and machinery of the debtors. Banco Central do Brasil figures show that no less than one-fifth of new industrial investments in 1965,1966, and 1967 was in reality a conversion of unpaid debts into investment.

  On top of the financial and technological blackmail is the unfair “free” competition between strong and weak. As part of a global structure, the big-corporation affiliate can permit itself the luxury of losing money for a year, or two, or whatever is necessary. Prices fall, and it sits down to wait for the victim to surrender. The banks collaborate in the siege: the national enterprise is less solvent than it looked, supplies are denied it, and it soon raises the white flag. The local capitalist becomes a junior partner or functionary of his conquerors. Or else he brings off the most coveted feat—he retrieves his property in the form of shares in the foreign concern and ends his days as a well-heeled coupon-clipper. An eloquent story with regard to price “dumping” is that of Union Carbide’s capture of the Brazilian tape factory, Adesite. Scotch Tape, part of the multitentacled Minnesota Mining and Manufacturing, began steadily lowering the price of its products in Brazil. Adesite’s sales kept going down. The banks cut off credit. Scotch Tape continued lowering its prices—by 30 percent, then by 40 percent. Then Union Carbide appeared on the scene and bought the desperate Brazilian concern for a song. Later Union Carbide and Scotch Tape got together to share the national market: they divided up Brazil, taking half each, and agreed to digest what they had eaten by raising the price of tape by 50 percent. The antitrust law of the old Vargas days had been annulled years earlier.

  The Organization of American States admits that the abundant financial resources of U.S. affiliates “in times of very low liquidity for national enterprises, has on occasion enabled some national enterprises to be acquired by foreign interests.” In fact, the scarcity of financial resources, sharpened by the IMF-imposed contraction of internal credit, smothers local factories. But the same OAS document tells us that no less than 95.7 percent—80 percent in the case of manufacturing industries—of the funds U.S. enterprises require for their normal functioning and development in Latin America come from Latin American sources in the form of credits, loans, and reinvested profits.

  THE UNITED STATES IS GENEROUS WITH OTHER PEOPLE’S SAVINGS: THE INVASION OF THE BANKS

  The siphoning off of national resources into imperialist affiliates is largely explained by the recent proliferation of U.S. branch banks pushing up their heads throughout Latin America like mushrooms after rain. The offensive against local savings in satellite countries is linked with the United States’ chronic balance-of-payments deficit, which compels the restriction of its own investments abroad, and with the dollar’s dramatic deterioration as a world currency. Latin America provides the saliva as well as the food, and the United States limits its contribution to the mouth. The denationalization of industry has turned out to be a gift.

  According to the International Banking Survey, there were seventy-eight branches of U.S. banks south of the Río Grande in 1964. By 1967 there were 133; they had $810 million in deposits in 1964 and $1.27 million in 1967.23 In 1968 and 1969 the foreign bankers’ advance picked up speed: today First National City alone has 110 branches scattered through seventeen Latin American countries—the figure includes various recently acquired local banks. Chase Manhattan Bank acquired the Banco Lar Brasileiro (34 branches) in 1962, the Banco Continental (42 branches, in Peru) in 1964, the Banco del Comercio (120 brances, in Colombia and Panama) and the Banco Atlántida (24 branches, in Honduras) in 1967, and the Banco Argentino de Comercio in 1968. The Cuban Revolution had nationalized twenty U.S. banking agencies, but the bankers more than recovered from this blow: in 1968 alone more than seventy U.S. bank affiliates were opened in Central America, the Caribbean, and the smaller South American countries.

  No one knows the precise extent of the simultaneous growth of parallel activities—subsidiaries, holding companies, finance companies, agencies. What is known is that an equal or greater amount of Latin American funds have been absorbed by banks which, while not operating openly as branches, are controlled from abroad through decisive blocks of shares or by the opening of conditional external lines of credit.

  This banking invasion has served to divert Latin American savings to the U.S. enterprises established in the region, while national enterprises are strangled by lack of credit. The public relations departments of the various U.S. banks operating abroad unblushingly announce that their chief aim in the countries in which they operate is to channel internal savings into the multinational corporations which are their head offices’ clients. Let us indulge in a flight of the imagination: could a Latin American bank establish itself in New York and capture the national savings of the United States? The bubble explodes: such an outrage is expressly prohibited. U.S. banks, through numerous branches, dispose of Latin America’s national savings at their pleasure. Latin America watches as the United States takes over its finances as tenderly as does the United States itself. In June 1966, however, the Banco Brasileiro de Descontos consulted its shareholders about a great and vigorous nationalist step which it proposed to take. It printed the phrase “Nós confiamos em Deus” on all its documents. The bank pointed with pride to the fact that the dollar bears the motto “In God We Trust.”

  The credit policies of such Latin American banks as have not been captured, infiltrated, or surrounded by foreign capital follow the same lines as National City, Chase Manhattan, and Bank of America affiliates: they, too, prefer to meet the requirements of foreign industrial and commercial enterprises, which enjoy solid guarantees and operate on a large-volume basis.

  AN EMPIRE THAT IMPORTS CAPITAL

  The Government Economic Action Program worked out by Roberto Campos anticipated that, in response to such a benevolent policy, foreign capital would flow in to promote development and would contribute to economic and financial stability in Brazil.24 * New direct investments from abroad of $100 million were announced for 1965; $70 million arrived. There were assurances that the projections for 1965 would be surpassed in succeeding years, but the conjuring was in vain. In 1967, $76 million came in; the flight of profits and dividends, together with payments for technical aid, patents, royalties, and the use of brand names, amounted to more than four times the new investment. And on top of all this there were the clandestine remittances. The Banco Central admits that $120 million left Brazil in 1967 outside of legal channels. As we can see, far more went out than came in. Actually, new investments in the key years of industrial denationalization—1965, 1966, 1967—were well below the 1961 level.† Most U.S. capital in Brazil is invested in industry, but it amounts to less than 4 percent of global U.S. investment in manufacturing. In Argentina it is a bare 3 percent; in Mexico 3.5 percent. Swallowing up Latin America’s biggest industrial establishments has not meant great sacrifices for Wall Street. It has brought in few dollars and taken out many.

  * Speaking on December 22, 1966, at Mackenzie University in São Paulo, Campos insisted: “Since economies in the process of organization lack resources to dynamize themselves—for the simple reason that if they had them they would not be backward—it is right to accept the aid of all who want to run with us the risks of the marvelous adventure that is progress, in order to receive from it a part of the fruits.”

  † According to the Ministry of Planning and Economic Coordination, “The flow of intere
st, profits and dividends, royalties, and technical assistance payments from Brazil has shown a marked increase since 1965, when legislation altering the foreign investment law of 1962 became effective.”25

  “Under modern capitalism, when monopolies prevail, the export of capital has become the typical feature,” wrote Lenin.26 In our day, as Baran and Sweezy have pointed out, imperialism imports capital from the countries it operates in. In the period 1950—1967, new U.S. investments in Latin America (not including reinvested profits) totaled $3,921 billion. Profits and dividends sent abroad in the same period totaled $12,819 billion. The siphoned-off profits were more than three times the new capital invested in the region.* According to ECLA, the profit bloodletting has since increased to five times the new investments; Argentina, Brazil, and Mexico have suffered the greatest widening of this escape hatch. But this is a conservative calculation. A substantial part of the funds repatriated as debt amortization is in fact identical with profits on investments, and the figures include neither remittances abroad for patents, royalties, and technical-aid payments, nor other invisible transfers customarily concealed under the rubric “errors and omissions.”† Nor do these figures take into account the profits that accrue to the corporations when they inflate the prices of the supplies they ship to their affiliates and—with equal enthusiasm—inflate their costs of operation.

  * President Kennedy has already admitted that in 1960, “from the under-developed world, which needs capital—we took in $1,300,000,000 and we sent out in capital for investment $200,000,000. …”27

  † Between 1955 and 1966, for example, the mysterious “errors and omissions” amounted to over $1 billion in Venezuela, $743 million in Argentina, $714 million in Brazil, and $310 million in Uruguay.28