Transition Economies & US Capitalism in Latin America

Economies in Transition and U.S. Corporate Capitalism in Latin America Allison Brown HIST 4494: The U.S. in Latin America Dr. Hampton March 31, 2022 Throughout the earlier history of the United States in Latin America, the distinctions between public and private corporations and dealings are faded. Through wide companies such as the “banana republics”, hegemonic trade control, and the establishment of bilateral trade relations, the U.S. undeniably acted unilateraly using economic control and trade as its method for increasing economic benefits and the extraction of raw materials region-wide. The decades during the 1800s were the start of the economic and political revolutions which would take place in Latin America. At the core of this transformative period was the growing need for the economies in Latin American to have access to world markets. As Europe and North America went through a second wave of industrialization, the economic potentials of Latin America as a region of increasing importance for raw materials to expand the economies of the North Atlantic. To take advantage of the possibilities that this economic period opened, elites in Latin America directed their countries to shift towards export economies to the United States and European countries. This economic shift also entailed a series of social and political developments which constituted a new order in Latin America. This order that took place region-wide is often described neocolonial. as Neocolonial in the sense suggests that the internal and external structures characterizing the region maintained a hegemoic presence from the U.S. in a new form. Although many Latin American elites profited from the new order, they let a degree of their control over their countries be given to the industrializing economies of the North Atlantic. Similar to colonial times, Latin America in this new era continued to be largely an exporter of raw materials and an importer of manufactures. Regardless of the economic changes, it is important still to note that hierarchiss of race and class continue to define both social and economic relations. These heirachries are particularly evident during this time period in Cuba, especially with the Platt Amednment later in 1901. According to 1 Ferrer the amendment established, “... not outright colonialism, but something close to it -- an American prerogative to exercise permanent, direct rule in Cuba. Among other things, the eight articles of the Platt Amendment limited the Cuban government’s ability to sign treaties with third 1 nations or to incur debt on its own.” By establishing these ties with Cuba, the U.S. was able to economically control the island and establish a monopoly on trade in a time where other European powers and colonies were also vying for power in the region, prior to U.S. hegemonic political and economic control. These heiarches are also evident in the citizenship debates which would take place across Latin America, as citizenship wasn’t always considered or granted or racial or ethnic identity, but in part by hiarchical and economic conditions in a society as regarded by the U.S. Although similarities existed with the neocolonial era to that prior with colonial trends, differences came with economic, social, and political changes. Economically, the phrase “neocolonial” does not capture the complexity and dynamics of this economic period regionwide. Through the mid-19th century many local and state interests within Latin America had doubts about opening their economies to the world. In countries like Peru and Colombia, producers, including merchants, successfully lobbied their governments to set up barriers against the entrance of foreign competition. By the 1860s and 1870s, however, protectionism from some Latin America countrie was swept away by a wave of free-trade liberalism. Regardless of initial influence by European powers, the doctrines of liberalism, with free trade internationally and open markets domestically in Latin America, became hegemonic for the U.S. The lack of capital that had plagued Latin America in the colonial post-independence era was resolved by foreign 1 Ada Ferrer, “American Interregnum,” in Cuba: An American History (New York: Scribner, 2021), 157-184. (pgs. 178-179) 2 capital and corporate interests by amounts previously unknown. Investments from Europe provided financial support for infrastructural improvements and other foreign firms constructed railways, electric networks, and other infrastructure which would transform the region for foreign corporations. Even as it opened up areas of economic production and brought infasturucte, this new orientation of Latin American economies imposed certain limits with debts on countries from the U.S. and other European powers. The concentration on exports of primary goods and the competition of imported manufactures with domestic products served as powerful disincentives to economic diversification. An example of this lack of economic diversification at this period is Cuba’s monocultural economic specialization with sugar. Cuba’s economic focus with sugar is similar to Central America’s with coffee, exempilfying patterns of monoculture, in which an entire national economy was dependent on the health and economic viability of one particular crop. Even where more than one product was central to a country, the reliance on these exports made Latin American economies vulnerable to shifts in demand and prices on the world market, as well as to local conditions influencing production. Most notably in Central America and in the Caribbean, the local elites’ activities were largely restricted to the production of primary export goods, and economies retained more of a neocolonial orientation. The social ramifications of the rise of export economies were vast. The acceleration of the export economies and related commerce fostered a tendency toward urbanization. The period was one of general population growth in much of Latin America, the overall increase, the rise of cities was particularly noteworthy. Throughout Latin America the position of rural and peasant workers was complicated by corporate interests in the large plantations, ranches, and estates which were expanding and 3 growing with foreign funding to take advantage of potential profits from the export economies. Peasants and indigenous communities had resisted corporate displacement for some time before both the political favor shifted with hiarchies and the balance of power shifted in favor of the large landowners. An example of this shift is the displacement of populations during the U.S. construction of the Panama Canal in the early 1900s with completion in 1904. With industrial centers in the “zone”, or the Panama Canal Zone, which was the administrative entity in Panama over which the U.S. exercised jurisdictional rights from 1903 to 1979. The Panama Canal Zone was U.S. corporate and business intersts actualized. In the zone in addition to the regional control and labor, “Panaminians lost the right to participate in all active municipal political life, which 2 was one of the cornerstones of political life both in the United States and Panama.” The erasure of municipal interactions in the Panama Canal Zone was strategic from the U.S. government and businesses, as limiting these interactions outside of labor would prevent collective organizations which would slow the construction and technological developments necessary for the completion of the Panama Canal. In December of 1904, it is also important to note the shift which took place in the U.S. with foreign policy goals with President Roosevelt announcing his corollary to the Monroe Doctrine. Although promising that responsible nations “need fear no interference from the United States” and that overnments that failed to maintain order or pay their obligations would force the United States “to exercise an international police power, Implicit in the policy was the assumption that the region’s debts should be transferred to U.S. creditors, thereby precluding European intervention and giving Washington DC leverage over the nations near the 2 Canal Zone, also called Panama Canal Zone, historic administrative entity in Panama over which the United States exercised jurisdictional rights from 1903 to 1979 (pg. 104) 4 3 Panama Canal.” Roosevelt warned the the advances in economic growth and political stabilization as seen from the U.S. which were met with challenges and struggles in Latin 4 America which would need to be addressed. With these shifts also came dollar diplomacy, a new era of economic and corporate interests was shaped with international debts. Challenges to economic growth and stabalization derived from both internal and external origin as nations struggled with U.S. neocolonial and corporate rule. As the U.S. and European powers shifted focus to World War I, interests and corporate control shifted as well. During this period, corporate control also came from a well known avenue with U.S. corporate interests coming from the private sphere with “banana republics”. The United Fruit Company was founded in 1899, and was the first true modern multinational corporation. In 1916, the US Embassy in Honduras reported, “the territory controlled by the Fruit Company is a state itself, within another state…it houses its employees, cultivates plantations, operates railroads, 5 stations, steamship lines, potable water systems, power plants, commissaries, [and] By clubs.” the 1920s, the company had spread across Central and South America, where it owned large spaces of land and established infrastructure to commercialize regions. Initially, the Honduran government blocked United Fruit from entering the country. But in 1911, one of United Fruit’s business partners financed and organised its overthrow with speculated interference from the U.S. government. This overthrow in Latin America from a U.S. company marked the beginning of a history of ‘regime changes’ which would favor the banana trade and lead to increased profit margins for the United Fruit Company. As the U.S. and other European markets shifted focus, so 3 Jason M. Colby, “Corporate Colonialism, 1904-1912,” in The Business of Empire: United Fruit, Race, and U.S. Expansion in Central America (Cornell University Press, 2011), 79-117. (pg. 85) 4 Jason M. Colby, “Corporate Colonialism, 1904-1912,” in The Business of Empire: United Fruit, Race, and U.S. Expansion in Central America (Cornell University Press, 2011), 79-117. (pg. 84) 5 Merrill, Federal Research Division, Library of Congress; edited by Tim L. (1995). Honduras: A Country Study (3rd ed.). Washington, D.C., U.S. G.P.O. ISBN 0844408360. 5 too did the economies of Latin America, with the United Fruit Company and other U.S. corporate interests remaining. Few Latin American nations felt strong identification or alliances with either of the alliances in World War I (1914-18). Of the major countries, only Brazil followed the U.S.’s declaration of war on Germany, while Mexico and Argentina, which respectively saw the U.S. as a hemispheric rival, took a stance with Latin American neutrality. All Latin American countries were affected by the wartime disruption of trade and capital flows, particularly those that had in recent years most successfully engaged in European trade markets with their own exports and become important consumers of goods and financial services. Argentina was an example as the outbreak of war brought a decline in its trade as the Allied powers diverted shipping elsewhere and Germany was unable to be reached by Argentinian markets. Although exports economically recovered, imported manufactures were scarce because overseas factories were devoted to war 6 production, and scarcity drove up prices. This situation in Argentina exemplifies how U.S. markets had a hold on Latin American economies with their own corporate interests domestically in the U.S. looking to raise international trade prices surrounding consumer goods and financial services during World War I. The postwar period in Latin America led to the end of wartime economic disruptions and the unprecedented growth of Latin Amrican capital as exporters took advantage of the shortages and demand in the global marketplace. With these shortages, came more corporate interests and development in Latin America from the U.S. conditions in the world market for Latin American development were unfavourable for Latin America’s terms of trade, since demand for most of 6 Spruk, R. The Rise and Fall of Argentina. Latin American Economics Review 28, 16 (2019). https://doi.org/10.1186/s40503-019-0076-2 6 the primary commodities that the region specialized in was not keeping pace with the growth of production, with items such as coffee and fruit unable to sustain the production quantity desired in the U.S. and Europe. Regardless, the periods of economic development and infrastructure development in Latin America leading up until World War I were fraught with U.S. private and public interests and corporate hegemony. Regardless of the potential benefits of railroads and infrastructure, the forced displacement of indigenous peoples, the establishment of hierarchical structures to better suit corporate interests, large nation debts to the U.S. and other European debtors, the environmental degredation, and land distribution would shape economic development in Latin America in the coming years and present day. 7