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Latin America 1: Economy and Investment

Latin America is the Cinderella of world politics. In comparison with Africa and Asia it has been neglected, as a glance at the shelves in the libraries and bookshops will show. Penguin paperbacks, for example, have published a whole African Library but nothing comparable on Latin America, and even the left wing have been relatively silent on the subject. Why is this? The main reason is that while Afro-Asia’s struggles of “national independence” are either current or very recent, Latin America’s similar struggles occurred over a century ago. And while the left has seen “socialism” in just about every Afro-Asian state, Latin America has been a United States colony, ridden with rightist governments and dictators. The Cuban revolt caused a momentary flutter but interest soon waned when the whole continent didn’t follow Cuba’s example and when the inevitable “degeneration” set in.

The rise of the Tupamaros plus Allende’s electoral victory have produced a reawakening of interest, so it would be a good opportunity for us to assess the situation in Latin America and the prospects for the growth there of socialist ideas. And what a task this is! We are dealing with 14 per cent of the world’s land mass containing 7 per cent of its population and with greatly varied technology and culture. A continent dominated by a mountain range which severely restricts communications, a continent with the world's greatest jungles and even a desert, and yet with an extremely high level of urbanisation and great cities on the scale of London, Paris and Milan. Alongside this are remnants of feudalism in the rural areas with master and serf relationships, not to mention those pockets where people are still living in primitive tribal societies.

The modern history of Latin America starts with independence from Spain and Portugal at the beginning of the 19th century. The continent was, and to a lesser degree still is, ruled by landowning oligarchies. America, Britain and France soon made it an area of investment and a market for their manufactures. Today, America has largely ousted the others and made the continent its own preserve. Of course American domination has tended to keep Latin America industrially backward in order to maintain it as an outlet for exports. Even now, when American big business sets up large scale industry, such as car factories, it does so only to protect existing markets from foreign rivals and local entrepreneurs. It is this situation which has thrown up the growing bourgeois and military nationalists plus the would-be imitators of Castro and Guevara, all determined to end “Yankee Imperialism”.

The major problem for Latin America is, how can it become industrialised to the extent that is required? The need is for the accumulation of capital to finance expansion carried out by one means or another — through military juntas as in parts of Afro-Asia; through “revolutionaries” using highly centralised government action as in the “communist” world; or through a home-grown recognisably capitalist class perhaps utilising some of the methods of the other two groups. The first two groups have already made their presence felt in Peru and Cuba respectively, and the signs are that the last group is at long last coming through. Whichever aspirants come to power in whatever country their most important task must be to tackle the antiquated and inefficient methods of agriculture caused by the system of landowning.

Until now this system has severely hampered industrialisation. The big landowners often trace their ancestry back to the conquistadors and regard wealth through feudal eyes — as ownership of land providing, above all, social status. As a result the land is often badly and underused so agriculture remains static with too many people producing only enough — and usually not even that — for themselves. Consequently, there can be no surplus for investment in industry nor a rural population with any money to become emergent industry’s consumers.

Undoubtedly Latin America’s system of landowning is archaic. Land is owned mainly in large estates (latifundios) and the rest in dwarf holdings (minifundios). On the large estates can work wage slaves plus a variety of peasantry categorised as follows

    (1)   Tenant Farmers: works part of landlord’s land for himself giving a money rent in return.

    (2)   Sharecropper: gives part of produce in return.

    (3)   Labour Tenant: gives personal service (labour) in return and is an out and out feudal throwback. [1]

It is these three groups that the rural guerrillas set their sights on. The following figures show the extent of big landowner’s holdings: Between 3 and 8 per cent of landlords own between 60 and 80% of the continent’s cultivable land. In Paraguay eleven lots cover 35% per the eastern region. In Chile 63% of arable land is owned by big owners, the remainder being dwarf holdings. In the Peruvian Highlands 1.3 per cent of estates control more than 50 per cent of land. [2]

So agriculture must be modernised by getting it onto a capitalist basis in order to stimulate investment, free a major portion of the population to become workers in industry and commerce, and create the mass of consumers necessary for a home market. Right, but who is to carry out the role of accumulators? Obviously the Castro-type solution is out, as the guerrilla movement — where it even exists — is being given short shrift by the U.S. trained Latin American military. Witness the experience of Guevara in Bolivia. Also, the peasantry is fatalistic in its outlook and will only join in a revolt after it is seen to be winning. Besides, any idea of splitting up the land amongst the peasantry is, in the long run, opposed to modernisation in that while it may produce happier peasants it does not lead to a surplus for investment.

Can military dictatorships of a nationalist complexion fill the bill as in, say, Egypt, Indonesia, or Nigeria? This is likely in some of Latin America’s less developed nations where the bourgeoisie are still too weak or disunited, but in the more advanced nations a native bourgeoisie is emerging strong and determined enough and has been flexing its muscles of late, particularly in Chile and Venezuela.

Of course their potential has always been there as was shown during the depression years when, paradoxically, a considerable degree of industrialisation was achieved. As the flow of foreign funds dried up then the state and local capital stepped in to fill the vacuum. And during world war two, when Latin America’s normal suppliers of manufactures were otherwise engaged in mutual mayhem, a profitable opportunity beckoned for home investors. Then there is the 5 billion dollars of Latin American capital which is invested overseas, [3] so it’s not as if there is simply nothing in the kitty. Given the right climate for home investment (political stability) the continent’s capitalists could be induced to plunge heavily. Until now the state has had to do the job of laying the foundations of industrialisation. In what is virtually America’s backyard 30 per cent of all investment is by the state!  [4] Nationalisation, so beloved by the left, is embraced by conservative regimes easily enough. Oil, railways, steel, electricity, mining, are either wholly or partly state owned in many Latin American countries. And why not? It is often the logical way for an as yet economically weak owning class to run things by combining into a community of capital.

So far we have been reviewing Latin America’s past and present. In the next article we shall be considering the prospects for the future.

(To be concluded)

Vic Vanni


1. P. Cole Latin America: an economic and social geography

2. T. Szulc Wind of Revolution

3. P. Nehemkis Latin America: myth and reality

4. J. P. Cole (ibid).