[News] The Economic Crisis and Latin America

Anti-Imperialist News news at freedomarchives.org
Tue Oct 21 19:00:40 EDT 2008


October 21, 2008

Time to Delink

The Economic Crisis and Latin America


The economic and financial crisis, whose 
epicentre is found in the United States, has to 
be utilised by Latin American countries to build 
an integration favourable to the peoples and at 
the same initiate a partial delinking.

We need to learn the lessons of the 20th century 
in order to apply them at the beginning of this 
century. During the decade of the 1930s, that 
followed the crisis that exploded on Wall Street 
in 1929, 12 countries in Latin America suspended 
for a prolonged time the repayment of their 
foreign debt, prinicipally to North American and 
Western European bankers. Some of them, such as 
Brazil and Mexico, imposed on their creditors a 
reduction of between 50% and 90% of their debt 
some 10 years later. Mexico was the one that went 
the furthest with their economic and social 
reforms. During the government of Lazaro 
Cardenas, the petroleum industry was completely 
nationalised without any compensation for the 
North American monopolies. Moreover, 16 million 
hectares were also nationalised and in large part 
handed over to the indigenous population in the 
form of comunal goods (“el ejido”). During the 
thirties and up until the middle of the sixties, 
various Latin American governments carried out 
very active public policies with the aim of 
seeking a partially self-centred development, 
known later by the name of the model of 
industrialisation via substitution of 
importations (ISI). On the other hand, beginning 
in 1959, the Cuban revolution attempted to give a 
socialist content to the Bolivarian project of 
Latin American integration. This socialist 
content began to appear in the Bolivian 
revolution of 1952. Brutal US intervention, 
backed by the dominant classes and the local 
armed forces, was necessary to put an end to the 
ascending cycle of social emancipation during 
this period. The blockade of Cuba since 1962, 
military junta in Brazil from 1964, US 
intervention in Santo Domingo in 1965, the Banzer 
dictatorship in Bolivia in 1971, the Pinochet 
coup in Chile in 1973, installing of 
dictatorships in Uruguay and Argentina. The 
neoliberal model was put in practice first in 
Chile with Pinochet, and with the intellectual 
guidance of the Chicago Boys of Milton Friedman, 
and afterwards was imposed on all the continent, 
aided by the debt crisis that exploded in 1982. 
With the fall of the dictatorships in the 
eighties, the neoliberal model continued in 
force, principally through the application of 
structural adjustments programs and the 
Washington Consensus. The governments of Latin 
America were incapable of forming a common front, 
and the majority applied the recipes dictated by 
the World Bank and the IMF in a docile manner. 
This ended up producing a large popular 
discontent and a recomposition of popular forces 
that led to a new cycle of elections of left or 
centre left governments, beginning with Chavez in 
1998, who committed himself to installing a 
different model based on social justice.

There is a dispute between two projects of integration
At the beginning of this century, the 
Bolivarian[3] project of integration of the 
peoples of the region has gain new momentum. If 
we want this new ascending cycle to go further it 
is necessary to learn the lessons of the past. 
What was particularly missing in Latin America 
during the decades of the 1940s to the 1970s was 
an authentic project of integration of economies 
and peoples, combined with a real redistribution 
of wealth in favor of the working classes. We 
need to be conscious of the fact that in Latin 
America today there is a dispute between two 
projects of integration, that have an antagonist 
class content. The capitalist classes of Brazil 
and Argentina (the two principal economies of 
South America) are partisans of an integration 
based on their economic domination over the rest 
of the region. The interests of Brazilian 
companies, above all, as well as Argentine ones, 
are very important in all the region: oil and 
gas, large infrastructure works, mining, 
metallurgy, agrobusiness, food industries, etc. 
The European construction, based on a single 
market dominated by big capital is the model that 
they want to follow. The Brazilian and Argentine 
capitalist classes want the workers of the 
different countries in the region to compete 
amongst themselves in order to obtain maximum 
benefit and be competitive on the world market. 
 From the point of view of the left, it would be 
a tragic error to fallback on a policy of stages: 
support a model of Latin American integration 
according to the European model, dominated by big 
capital, with the illusionary hope of giving it a 
socially emancipatory content later on. Such 
support implies putting oneself at the service of 
capitalist interests. We do not have to involve 
ourselves in the capitalist’s games, trying to be 
more astute and letting them dictate the rules.

The other project of integration, that falls 
within Bolivarian framework, wants to given a 
social justice content to integration. This 
implies the recuperation of public control over 
natural resources in the region and over large 
means of production, credit and 
commercialisation. The levelling from above of 
the social conquests of the workers and small 
producers, at the same time as reducing the 
asymetries between the economies in the region. 
The substantial improval of paths of 
communication between countries of the region, 
rigourously respecting the environment (for 
example, developing railway lines and other means 
of collective transport before highways). Support 
for small private producers in numerous 
activities, agriculture, artisan, trade, 
services, etc. The process of social emancipation 
that the bolivarian project of the 21st century 
is pursuing aims to liberate society from 
capitalist domination supporting forms of 
property that have a social function: small 
private property, public property, cooperative 
property, comunal and collective property, etc. 
At the same time, Latin American integration 
implies equiping oneself with a common financial, 
judicial and political architecture.

Latin American is losing precious time

The current international conjuncture, favorable 
for developing countries that export primary 
products, needs to be utilised before the 
situation changes. The countries of Latin America 
have accumulated close to US$400,000 million in 
reserves. This is no small figure, in the hands 
of Latin American Central Banks and which needs 
to be utilised at an opportune moment in order to 
help regional integration and shield the 
continent in the face of the effects of the 
economic and financial crisis that is unfolding 
in North America and Europe and that threatens 
the whole planet. Unfortunately, we should not 
create illusions: Latin American is on the path 
to losing precious time, while the governments, 
beyond the rhetoric, pursue a traditional policy: 
signing of bilateral agreements on investment, 
acceptance or continuation of negotiations over 
certain free trade agreements, utilisation of 
reserves to buy bonds from the US Treasury (that 
is, lending capital to the dominant power) or 
credit default swaps whose markets have collapsed 
with Lehman Brothers, AIG etc, advance payments 
to the IMF, World Bank and the Paris Club, 
acceptance of the World Bank Tribunal (ICSID) as 
a way to resolve differences with transnationals, 
continuation of trade negotiations within the 
framework of the agenda of Doha, maintainance of 
the military occupation of Haiti. Following a 
loud and promising start in 2007, the initiatives 
announced in regards to Latin American 
integration seem to have come to a halt in 2008.

Bank of the South

In regards to the launching of the Bank of the 
South, this has already been delayed quite a bit. 
Discussions have not progressed. We have to get 
rid off any confusion and give a clearly 
progressive content to this new institution, 
whose creation was decided upon in December 2007 
by seven countries in South America. The Bank of 
the South has to be a democratic institution (one 
country, one vote) and transparent (external 
auditing). Before using public money to finance 
large infrastructure project that don’t respect 
the environment and which are carried out by 
private companies whose objectives are to obtain 
maximum benefit, we have to support the efforts 
of the public powers to promote policies such as 
food sovereignty, agrarian reform, the 
development of studies in the field of health and 
the establishment of a pharmaceutical industry 
that produces high quality generic medication, 
reinforce collective rail-based means of 
transport, utilize alternative energies to limit 
the impact on depleted natural resources, protect 
the environment, develop the integration of education systems


Contrary to what many think, the problem of the 
public debt has not been resolved. It is true 
that the external public debt has been reduced, 
but it has been replaced by an internal public 
debt that, in certain countries, has acquired 
totally huge proportions (Brazil, Colombia, 
Argentina, Nicaragua, and Guatemala) to the point 
that it derails a considerable part of the state 
budget towards parasitically financial capital. 
It is very worthwhile following the example of 
Ecuador, which established an integral auditing 
commission to study the external and internal 
public debt, with the aim of determining the 
illegitimate, illicit and illegal parts of the 
debt. At a time when, following a series of 
adventurous operations, the large banks and other 
private financial institutions of the United 
States and Europe are wiping out dubious debts 
with an amount that by far surpasses the external 
public debt that Latin America owes them, we have 
to constitute a united front of indebted 
countries in order to obtain the cancellation of the debt.

Nationalisation of the banks without paying 
compensation and exercising the right of reparations

Private banks need to audited and strictly 
controlled, because they run the risk of being 
dragged down with the international financial 
crisis. We have to avoid a situation where the 
state ends up nationalising the losses of the 
banks, as has happened many times before (Chile 
under Pinochet, Mexico in 1995, Ecuador in 
1999-2000, etc). If some banks on the brink of 
bankruptcy have to be nationalised, this should 
be done without paying compensation and 
exercising the right of reparations over the patrimony of their owners.

Moreover, numerous litigation cases have emerged 
in the last few years between the states of the 
region and multinationals, from the North and the 
South. Rather that taking them to the 
International Centre for Settlement of Investment 
Disputes (ICSID), which is part of the World 
Bank, dominated by a handful of industrialised 
countries, the countries of the region should 
follow the example of Bolivia, which has pulled 
out of the organisation. They should create a 
regional organism for the resolution of 
litigation cases initiated by other countries or 
private companies. How can we continue to sign 
loan contracts or trade contracts that state 
that, in the case of litigation, the only 
jurisdictions that are valid are those of the US, 
United Kingdom or other countries of the North? 
We are dealing here with an inadmissible 
renouncement of the exercising of sovereignty.

It is worthwhile establishing a strict control 
over capital movements and exchange rates, with 
the goal of avoiding capital flight and 
speculative attacks against currencies in the 
region. For the states that want to make the 
Bolivarian project of Latin American integration 
for greater social justice a reality, it is 
necessary to advance towards a common currency.

Integration has a political dimension

Naturally, integration has to have a political 
dimension: a Latin American parliament elected by 
universal suffrage in each one of the member 
countries, equipped with a real legislative 
power. Within the framework of political 
construction, we have to avoid repeating the bad 
example of Europe, where the European Commission 
(that is, the European government) has 
exaggerated powers in regards to the parliament. 
We have to move towards a democratic constituent 
process with the goal of adopting a common 
political constitution. We also have to avoid 
reproducing the anti-democratic procedure 
followed by the European Commission that attempts 
to impose a constitutional treaty elaborated 
without the active participation of citizens and 
without submitting it to a referendum in each 
member country. On the contrary, we have to 
follow the example of the constituent assemblies 
of Venezuela (1999), Bolivia (2007) and Ecuador 
(2007-8). The important democratic advances 
achieved in the course of these three processes 
will have to be integrated into the Bolivarian constituent process.

Likewise, it is necessary to strengthen the 
powers of the Latin American Court of Justice, 
particularly in matters regarding the 
guaranteeing for the respect of inalienable human rights.

Until now, various processes of integration 
coexist: the Community of Andean Nations, 
Mercosur, Unasur, Caricom, Alba
.It is important 
to avoid dispersion and adopt a integration 
process with a social-political definition based 
on social justice. This Bolivarian process should 
bring together all the countries in Latin America 
(South America, Central America and the 
Caribbean) that adhere themselves to this 
orientation. It is preferable to commence this 
common construction with a reduced and coherent 
nucleus, rather than with a heterogeneous set of 
states whose governments follow contradictory, if 
not antagonistic, social policies.

Partial delinking from the world capitalist market

Bolivarian integration should be accompanied with 
a partial delinking from the world capitalist 
market. We are dealing with trying to 
progressively erase the borders that separate the 
states that participate in the project, reducing 
the asymmetries between the member countries 
especially thanks to a mechanism of transfer of 
wealth from the “richer” states to the “poorer”. 
This will allow for the considerable expansion of 
the internal market and will favour the 
development of local producers under different 
forms of property. It will allow for the putting 
into action of a process of development (not only 
industrialisation) with substitution of 
importations. Of course, this implies the 
development, for example, of a policy of food 
sovereignty. At the same time, the Bolivarian 
project made up of various member countries will 
partially delink itself from the world capitalist 
market. This means in particular the repealing of 
bilateral treaties in areas of investment and 
trade. The member countries of the Bolivarian 
group should also pull out of institutions such 
as the World Bank, the IMF and the WTO, at the 
same time as promoting the creation of new 
democratic global institutions that respect inalienable human rights.

As was mentioned before, the member state of the 
new Bolivarian group would equip itself with new 
regional institutions, such as the Bank of the 
South, which would develop collaborative 
relations with other similar institutions made up 
by states from other regions in the world.

The member states of the new Bolivarian group 
will act with the maximum number of third states 
in favour of a radical democratic reform of the 
United Nations, with the objective of ensuring 
compliance with the United Nations Charter and 
the numerous international instruments that 
defend human rights, such as the international 
pact on economic, social and cultural rights 
(1996), the charter on the rights and 
responsibilities of states (1974), the 
declaration on the right to development (1986), 
the resolution on the rights of indigenous people 
(2007). Equally, it would lend support to the 
activities of the International Criminal Court 
and the International Court of Justice in The 
Hague. It would act in favour of reaching 
understandings between states and the peoples 
with the goal of acting in order to limit climate 
change as much as possible, given that this 
represents a terrible danger for humanity.

Eric Toussaint, president of the Committee for 
the Cancellation of Third World Debt – Belgium 
<http://www.cadtm.org/>www.cadtm.org , author of 
World Bank: A Critical Primer, Pluto, London, 2008.

Translated by Fred Fuentes

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