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

by Eduardo Galeano

  The enterprises are equally imaginative with respect to the investments themselves. In effect, as the technical progress fever keeps shortening the periods of fixed capital renewal in advanced economies, most of the installations and factory equipment exported to Latin America have already completed a cycle of their useful life in their place of origin. Thus they have been partly or wholly amortized. This factor in investment abroad is overlooked: the value arbitrarily placed upon machinery is often a small fraction of what it is if the wear it has previously undergone is taken into account. Furthermore, the head office has no reason to involve itself in the expense of producing in Latin America the goods formerly sold to it from afar. And Latin American governments undertake to prevent this by advancing resources to the local affiliate, which has access to local credit from the moment it puts up a sign on the lot chosen for its factory. It gets exchange privileges for its imports— purchases the enterprise customarily makes from itself—and in some countries can even be assured of a special exchange arrangement to pay its external debts, which are often debts to the financial arm of the same corporation. A Brazilian magazine estimated that foreign currency input by the auto industry in Argentina between 1961 and 1964 was 3.5 times more than would have been needed to build seventeen thermoelectric and six hydroelectric stations, with a total power of more than 2,200 megawatts; and that it equaled in value the machinery and equipment that the dynamic industries would have to import over an eleven-year period to produce a 2.8 percent annual increment in product per inhabitant.29

  TECHNOCRATS ARE BETTER HOLD-UP ARTISTS THAN MARINES

  In taking out many more dollars than they bring in, the enterprises whet the region’s chronic dollar hunger; the “benefited” countries are decapitalized instead of capitalized. And here the loan mechanism goes to work. International credit organizations are important in helping to dismantle the weak citadels of nationally capitalized industry and in solidifying neocolonial structures. “Aid” works like the philanthropist who put a wooden leg on his piglet because he was eating it bit by bit. The U.S. balance-of-payments deficit is the result of military spending and foreign aid, and is a critical sword of Damocles over U.S. prosperity. At the same time, it makes that prosperity possible: the Imperium sends forth its Marines to save its monopolists’ dollars; more effectively, it sends its technocrats and loans to extend business and assume raw materials and markets.

  At its global center of power the capitalism of our day exhibits a clear identity of interest between private monopolies and the state apparatus. Multinational corporations make direct use of the state to accumulate, multiply, and concentrate capital, to deepen the technological revolution, to militarize the economy, and by various means to assure success in the crusade to control the capitalist world. The Export-Import Bank (Eximbank), AID, and other smaller organizations function in this role, as do some purportedly international organizations in which the United States has unchallenged hegemony: the International Monetary Fund, its twin the International Bank for Reconstruction and Development (IBRD), and the Inter-American Development Bank (IDB). These assume the right to decide the economic policy of countries asking for credits, pouncing successfully on the countries’ central banks and decisive ministers. They get hold of all the secret economic and financial data, draft and impose national laws, and ban or authorize steps proposed by governments whose course they chart down to the last detail.

  International charity does not exist; it begins at home, for the United States as for everyone else. The role of foreign aid is primarily domestic—the U.S. economy aids itself—and it was defined by none other than Roberto Campos, when he was the ambassador for Goulart’s nationalist government, as a program of broadening foreign markets to absorb U.S. surpluses and alleviate superproduction in U.S. exporting industries. In the early days of the Alliance for Progress, the U.S. Department of Commerce pointed to its successful creation of new businesses and job sources for private enterprise in forty-four states.30 In January 1968, President Johnson assured Congress that more than 90 percent of U.S. foreign aid in 1969 would be applied to financing purchases in the United States, and that he had personally and directly intensified efforts to increase this percentage. In October 1969 cables sizzled with statements by Carlos Sanz de Santamaría, chairman of the Alliance’s Inter-American Committee, who said in New York that the aid had turned out to be excellent business for the U.S. economy and for its treasury. After the disequilibrium of the U.S. balance of payments became critical at the end of the 1950s, loans were conditioned upon buying U.S. industrial goods, usually costing more than similar products from other countries. More recently, certain mechanisms were put into effect, among them “negative lists” to see that the credits are not used for exporting articles which the United States can sell on the world market under good competitive conditions without recourse to auto-philanthropy. Subsequent “positive lists” have made possible the sale through “aid” of certain U.S. manufactures at prices from 30 to 50 percent higher than the same goods from other sources.

  “Tied aid” (so called by the OAS document cited earlier) bestows “a general subsidy on U.S. exports.” In Brazil, “sales of U.S. capital exporters are faced with increasing competition from other exporters … [and] are at a serious disadvantage unless they can take advantage of the more liberal financing available under the various aid programs.”31 When, in a speech late in 1969, Richard Nixon promised to “untie” the aid, he referred only to the possibility of alternative purchases in Latin American countries. Such had been the case with the loans that the Inter-American Development Bank granted and charged to its Special Operations Funds. But experience shows that the United States—or the Latin American affiliates of its corporations—always ends up as the chosen supplier in the contracts. Loans from AID and Eximbank, and most of those from the IDB, also require that at least half of the shipments be made in U.S. bottoms. Freight rates on U.S. ships run as much as double those of other available shipping lines. The firms insuring the transported merchandise, and the banks through which the operations are effected, are also usually U.S.-owned.

  The OAS has made a revealing estimate of the extent of real aid received by Latin America. When chaffis separated from grain, one must conclude that a mere 38 percent of the nominal aid can be considered as real aid. Only one-fifth of the authorized total of loans for industry, mining, and communications, and compensatory credits, constitutes aid. In the case of Eximbank, the aid travels from south to north: the financing it extends, says OAS, means not aid but extra costs for the region in view of the inflated prices of U.S. articles exported via the bank.

  Latin America provides most of the ordinary capital resources of the IDB. But IDB documents carry the Alliance for Progress emblem in addition to its own insignia, and the United States is the only member country with veto power; the votes of the Latin American countries, in proportion to their contributions of capital, fall short of the two-thirds majority necessary for important resolutions. In his famous report to President Nixon in August 1969, Nelson Rockefeller admitted that “while the United States’ veto power over IDB loans has not been used, the threat of its use for political purposes has influenced decisions.” On most of the loans it extends, the IDB imposes the same conditions as do openly U.S. organs: the money must be spent on U.S. merchandise, at least half of which must be transported in ships flying the Stars and Stripes—and the Alliance for Progress is expressly mentioned in the publicity. The IDB determines the tariff and tax policy of the services it touches with its fairy wand: it decides how much must be charged for water and fixes the taxes for water mains and housing on the basis of proposals by U.S. consultants named with its gracious approval. It approves work plans, drafts the bidding terms, administers the funds, and keeps watch on how the job is done.* In the task of restructuring higher education in the region according to the standards of cultural neocolonialism, the IDB has played a fruitful role. Its loans to universities block the possibility of modifyin
g laws and statutes without its knowledge and permission; at the same time, it imposes specific pedagogical, administrative, and financial reforms.† In the case of a difference of opinion, the OAS’s general secretary names the arbitrator.

  * For example, in Uruguay, the text of the contract signed on May 21, 1963, between the IDB and the Montevideo departmental government for the extension of water mains.

  † For example, in Bolivia, the text of the contract signed on April 1, 1966, between the IBD and San Simón University, Cochabamba, to improve the teaching of agricultural sciences.

  Agency for International Development contracts not only mandate U.S. merchandise and freightage, but also ban trade with Cuba and North Vietnam and make the administrative tutelage of AID technicians obligatory. To compensate for the divergence of price between U.S. tractors or fertilizers and those more cheaply obtainable on the world market, the elimination of taxes and customs duties for products imported with credits is stipulated. AID aid includes jeeps and modern weapons for use by the police in safeguarding law and order in the countries concerned. Not for nothing is one-third of the credits payable immediately, while the other two-thirds are conditional on approval by the IMF—whose recipes normally kindle a fire of social agitation. And as if the IMF had not succeeded in dismantling all the mechanisms of sovereignty as one dismantles a watch, AID generally throws in the requirement of approval of specific laws and decrees. AID is the chief vehicle for Alliance for Progress funds. To cite but one example of the labyrinths of generosity, the Alliance’s Inter-American Committee got the Uruguayan government to sign a commitment whereby the income and expenditures of state bodies, and the official policy on tariffs, wages, and investments, would pass under the control of this foreign organization.32 But the most pernicious conditions rarely appear in the published texts of contracts and commitments, and are hidden in secret codicils. The Uruguayan parliament never knew that in March 1968 the government had agreed to limit rice exports in that year so that the country could receive flour, corn, and sorghum under the U.S. agricultural surplus law.

  Numerous daggers glint beneath the cloak of aid to poor countries. Teodoro Moscoso, who was chairman of the Alliance for Progress, confessed: “It may happen that the United States needs the vote of a particular country in the UN or the OAS, and it is possible that the government of that country [following the sacred tradition of cold war diplomacy] may ask a price in exchange.”33 In 1962 the Haitian delegate to the OAS Punta del Este conference changed his vote in return for a new airport, and thus the United States got its majority in its attempt to expel Cuba.* Ex-director Miguel Ydígoras Fuentes of Guatemala said he had to threaten the United States with withholding his country’s vote at Alliance for Progress conferences to make the United States keep its promise to buy more Guatemalan sugar.35

  * The Duvalier dictatorship was also promised, as a token of gratitude, a road out to the airport. Several authors agree that this was a case of bribery.34 But the United States did not keep its promise to Haiti, and “Papa Doc” Duvalier, guardian of death in voodoo mythology, felt he had been swindled. The old sorcerer is said to have invoked the Devil’s aid to bring vengeance on President Kennedy, and to have smiled contentedly when the bullets in Dallas felled the president.

  It might at first sight seem paradoxical that during the Goulart regime Brazil was the country most favored by the Alliance for Progress. But the paradox vanishes as soon as one realizes the internal distribution of the aid received: Alliance credits were sown in Goulart’s path like explosive mines. Carlos Lacerda, governor of Guanabara and at that time leader of the extreme right, got seven times more than all of the Northeast: Guanabara, with scarcely 4 million inhabitants, was thus able to create beautiful gardens for tourists on the shores of the world’s most spectacular bay, while the Northeast remained the open sore of Latin America. In June 1964, after the coup d’état that successfully put Castelo Branco in power, Thomas Mann, undersecretary of state for international affairs and right arm of President Johnson, explained: “The United States distributed among the efficient governors of certain Brazilian states the aid that had been destined for the government of Goulart, thinking to finance democracy in this way; Washington gave no money for the balance of payments or the federal budget, because that could directly benefit the central government.”36 The U.S. administration had decided to deny any kind of cooperation to Belaúnde’s government in Peru “unless it would give the desired assurances of following an indulgent policy towards the IPC. This Belaúnde refused to do and, as a result, by late 1965 he was still not receiving the share of Alliance for Progress funds that his government has earned the right to expect.”37 Later, as we know, Belaúnde compromised—and lost both oil and power: he had obeyed in order to survive. In Bolivia, U.S. loans did not provide a centavo for the country to build its own tin smelter, so that crude tin continued journeying to Liverpool and from there, smelted, to New York. “Aid” gave birth to a parasitic commercial bourgeoisie, inflated the bureaucracy, built large edifices and modern auto highways and other white elephants in a country that competes with Haiti for the highest rate of infant mortality in Latin America. The credits from the United States and its “international” organs denied Bolivia the right to accept Soviet, Czech, and Polish offers to create a petrochemical industry, extract and smelt zinc, lead, and iron, and install smelters for tin and antimony. At the same time, Bolivia was obliged to import products exclusively from the United States. When the Movimiento Nacionalista Revolucionario (MNR) government finally fell, its foundations eaten away by U.S. aid, U.S. Ambassador Douglas Henderson began to attend René Barrientos’s cabinet meetings regularly.

  The loans indicate as precisely as thermometers the general business climate of each country, and help clear political rainclouds or revolutionary storms from the blue sky of the millionaires. “The United States,” announced a group of businessmen led by David Rockefeller in 1963, “will arrange its economic aid program in countries showing the greatest inclination to favor the investment climate, and will withdraw aid from other countries not showing a satisfactory performance.”* The text of the foreign aid law provides categorically for the suspension of aid to any government that has “nationalized, expropriated, or acquired property or control of property belonging to any U.S. citizen, or any corporation, society, or association” that belongs not less than 50 percent to U.S. citizens.38* Not for nothing does the Alliance for Progress Trade Committee include among its most distinguished members top executives of Chase Manhattan, National City Bank, Standard Oil, Anaconda, and Grace. AID clears the road for U.S. capitalists in many ways—for instance, by requiring approval of agreements guaranteeing investments against possible loss through wars, revolutions, insurrections, or monetary crises. In 1966, according to the U.S. Department of Commerce, U.S. private investors received these guarantees in fifteen Latin American countries, for one hundred projects involving more than $300 million, under the AID Investment Guaranty Program.39

  * David Rockefeller’s daughter Peggy decided shortly afterward to go and live in a Rio de Janeiro favela called Jacarezinho. Her father, one of the world’s richest men, went to Brazil to look after his multimillion-dollar affairs and personally visited the humble family house Peggy had chosen; he sampled the modest dinner and discovered with alarm that the house leaked and rats entered under the door. On his departure he left a check with a string of zeros on the table. Peggy lived there for some months, collaborating with the Peace Corps. The checks kept coming in, each one worth as much as the master of the house could earn by ten years’ work. When Peggy finally left, the Jacarezinho house and family had been transformed. Never had the favela known such opulence. Peggy had come straight from heaven. It was like having won all the lotteries at once. The master of the house then became the mascot of the regime. TV and radio reportage, newspaper and magazine articles, publicity ran wild: the man was a model whom all Brazilians should imitate. He had emerged from poverty thanks to his indom
itable will to work and his capacity to save: look, look, he doesn’t spend what he earns on booze, and now he has a TV, a refrigerator, new furniture, shoes for the kids! The propaganda left out one detail: the visit of Peggy, the fairy godmother. Brazil has 90 million inhabitants and the miracle had been performed for only one of them.

  * It is no accident that this legal text explicitly refers to measures adopted against U.S. interests “on January 1, 1962, or a later date.” On February 16, 1962, Governor Leonel Brizola had expropriated the phone company, a subsidiary of ITT, in the Brazilian state of Rio Grande do Sul, and this had hardened relations between Washington and Brasilia. The firm did not accept the indemnity proposed by the government.

  ADELA is not a Mexican revolutionary song, but the name of an international investment consortium. It was started by First National City Bank, Standard Oil of New Jersey, and the Ford Motor Company. The Mellon group joined enthusiastically, and so did major European corporations because, as Senator Jacob Javits remarked, “Latin America provides an excellent opportunity for the United States to show, by inviting Europe to ’enter,’ that it does not seek a dominant or exclusive position.”40 In its 1968 annual report ADELA offered special thanks to the IDB for the parallel loans it had extended to promote the consortium’s business in Latin America, and also saluted the performance along the same lines of the International Finance Corporation, an arm of the World Bank. ADELA is in continuous contact with both institutions to avoid duplication of effort and to evaluate investment opportunities.41

  Many more examples of such holy alliances could be given. In Argentina, Latin American contributions to the resources of the IDB have served as very convenient loans benefiting such concerns as the Electric Bond and Share affiliate Petrosur (over $10 million for construction of a petrochemical complex), and The Budd Company (Philadelphia) affiliate Armetal (to finance an auto parts plant). AID credits made possible the expansion of Richfield’s chemical plant in Brazil, and Eximbank extended loans to ICOMI, a Bethlehem Steel affiliate in the same country. Also in Brazil, contributions from the Alliance for Progress and the World Bank enabled the Dutch Phillips Industries to install Latin America’s biggest complex of fertilizer factories in 1966. It all comes under the heading of “aid”—and all adds further to the weight of external debt on the countries so favored.