Transcript Latin American Transformation

Transformation of Modern Latin
America, 1880 – 2000
Phase I: Initiation of ExportImport Growth 1880 - 1900
Landowners
autonomous, self-sufficient entities not
market oriented
European industrialization provided market
foodstuffs & raw materials
L. A. market for goods
1880’s major changes
Argentina  foodstuffs & pastoral goods:
wool wheat & beef
Chile copper
Brazil coffee
Cuba coffee, sugar, & tobacco
Mexico henequen, sugar, copper, & zinc
Central America bananas & coffee
Peru sugar & silver
Imported goods from Europe
Textiles, machines, luxury items, & other
finished goods
unfavorable balance of trade created
as market lack of competition
as producer growing competition
Investments in L. A.
British investments
1870
85 mil. #s sterling
1913
757 mil. #s sterling
2/3 foreign investment in L. A. Brit. 1913
main investment railroads  Argentina, Mexico,
Peru, & Brazil
Brit., France, & U. S. invested in mines in
Mexico, Chile, & Peru
L. A. investment was minimal in
comparison
Export-import phase in raw materials ?
what kind of labor needs did this create?
Dependency
The impetus & capital came from abroad
L. A. became “dependent” economically and
economic growth dependent, that is on
decisions and prosperity in other parts of the
world
19th Century Liberalism
Liberalism-intellectual rationale  justification
faith in progress
free market through limited govt.
maximization of individual liberties
rationale imported as well w/o the same
socio-economic changes taking place in
Europe
Results
L. A. opened their markets hoping to gain
taxes & income for the ruling elite
vision of creating Europe in L. A. only to
be ravaged by imbalance of trade
Protective tariffs beaten back by economic
liberalism, argued L. A. not well-suited,
resources bargaining position, to violate the
natural principles of free trade
only the elites were involved in the debate
limiting the debate to 5% of pop.
controlling the wealth & power elites at
local, regional, & national levels
Immigration key to building skilled labor corps
rather than development of native labor
Portugal, Spain, & Italy
presumption of inferior native workforce
Rapid growth transformed societies
1. modernization of upper-class elites sought to
maximize profits opportunities
entrepreneurial spirit emerged marking
significant change in outlook seeking
efficiency and commercial success not the
semi-feudal system in place
2. new professional “service” group emerged to
play additional economic roles commercial
sector has two major groups
A.merchants – many foreigners who tied to
economies of European trade centers
B. lawyers – representing both foreign and
domestic interests—crucial during the
export-import phase
Assumed crucial new roles helping to determine
the institutional framework for new era
3. Political change
Large landowners began to take a clear
interest in national policies & politics
began to pursue national political power &
the era of the traditional caudillo was
coming to an end
4. Quest for political power
Two forms
A. Direct control – landowners & economic
elites Argentina & Chile
built strong & exclusive regimes with
military support, with constitution (legit)
political parties exist, but had little
differences “oligarchical democracy”
B. imposition of dictatorship (caudillo) military
forces
 Porfirio Diaz indirect rule applied by
elites through dictator who did not come
from the same class as the elites
In either case, the emphasis was on stability
and social control, dissident groups were surpressed & struggle for power was contained
within restricted circles
one of the basic goals of these regimes
was to centralize power, stripping the
regional caudillos, to create powerful &
dominant nation-states
Converse
Dom Pedro II in Brazil made significant
headway toward the establishment of an effective nation-state thereby also provoking
a regionalist backlash that contributed to
the empires overthrow in 1889
the aim of most regimes was to promote the
import-export model appeared to be working
political stability was viewed as essential
to attract foreign investmentforeign investment  investment helped strengthened
law & order
Railroads good example
Foreign investors would be reluctant to put
funds into a country threatened by political
disorder  Once the railroads were built, as
in Mexico, they became important instruments in con-solidating central rule  They
could be used to dispatch federal troops to
put down uprisings in almost any part of the
nation
Transformation of Modern Latin
America, 1880 – 2000
Phase II: Expansion of Import –
Export Growth, 1900 – 1930
Early 20th Century some political reforms in
larger countries
 1912 – Argentina’s voting law opened suffrage
to large sectors of the population & permitted
the middle-class party, the so-called Radical
Party to win the Presidency in 1916.
 1890s – Chile changes occurred – parliamentary rule on a previously presidentialist system
 1889 – Brazil the overthrow of the monarchy
opened a period of limited electoral polity
 Cuba’s separation from Spain and subject status to
the U. S. makes it special
 Mexico – even where a large-scale revolution broke
out in 1910, the generalization holds: the original
goal of the revolutionary movement was not to
transform Mexican society, but merely to gain
access to the political system for excluded fragments
of the country’s middle class.
The reformist movements often produced a “cooperative democracy” – effective participation
spread from the upper class to the middle class,
to the continued exclusion of the lower class.
For the most part the goals were limited
 attempt of the ruling elites to co-opt the middle
sectors into supporting the system
 a cadre of professional politicians was a
significant side effect, men who would devote
their entire adult lives to the pursuit of political
power.
 the cadre as often as not represented the
interests of the reigning aristocracy, but
identified themselves as an identifiably
different group, as prominent actors on
the political scene, they would also
become targets for the disdain and wrath
of the military establishment.
For the elites this reformist formula appeared
to work fairly well. WW I  D for exportimport economy integrating ito the global
world market
 Political adaptations seemed to assure
the long-run hegemony of national elites
 In fact, liberalism – both political &
economic – was seen found wanting.
 Latin Americans found their reality did not
lend itself to copying the dogma of the legal
institutions & philosophical phrases. They
failed to understand that originally European
liberalism was the ideology of a rising social
class whose growing economic power gave it
the political leverage to put its ideology into
practice
Now what we have to ask ourselves is this
anything more than Latin America lacked a
large scale middle class or more
fundamentally, Latin America had remained
an agrarian economy whose export sector
was matched, in most countries, by a huge
subsistence sector
→Liberalism had a chance only because, after
1850, a small but growing sector of the society
thought it saw its interests as different from those
of the traditional sectors
Specifically, the professionals – lawyers,
doctors, military officers, civil servants, and
the merchants – all constituted an urban
interest that ascribed to the European liberal
ideals without gaining the relative economic
power.
 their livelihood was usually tied to the agrarian
sector even though they lived in cities.
 their clients, customers, and employers were men
whose incomes depended largely upon
commercial agriculture & the prosperity of this
sector in turn, depended upon foreign trade.
For Latin America to abandon this system which
they came to recognize as flawed would have meant
a cost for them in the short run, personally.
 Protective tariffs, for example, would mean
urban consumers paying higher prices for lower
quality goods & could have resulted in reciprocal
actions by their exporter nations.
 Liberals were, therefore, disinclined to advocate
industrialization, which alone could have
increased their number sufficiently to give them
the political power that might have made
possible the realization of liberal political ideals.
Economic & political liberalism crosscut in yet another way.
 Non-liberal ideas in economics, such as
protective tariffs & controls on foreign
investments, were often associated in practice
with anti-liberal political ideals. Thus the
connection was easily established: deviation
from liberal principles in economics must mean
authoritarian government, and it was therefore
held in low regard.
Whenever proposals for government support of
national industries were made, opponents charged,
often to good effect, that a small group of selfish
investors were seeking to profit at the expense of
the public.
 Latin American entrepreneurs were invariably
under financed & inexperienced as every where in
the developing world, they faced formidable
competition from goods imported from the
industrial countries without subsidies & protection
they had little hope.
Latin American liberals appear to have been
uncertain about an underlying assumption of
liberalism, faith in the rationality & enterprise of
the individual countrymen
 Brazilians claimed the slaves were necessary in
the tropical economy because those of
European decent could not survive the kind of
work needed.
The event that transformed this atmosphere was
the spectacular collapse of the world capitalist
economy of 1929 – 1930.
Transformation of Modern Latin
America, 1880 – 2000
Phase 3: Import-Substituting
Industrialization, 1930 – 1960.
The Great Depression had catastrophic
effect on Latin American
Latin American exports dropped in total value for the years
1930 –1934 was 48% below 1925 – 1929
This world depression put great pressure on the political
systems of L. A. countries, with many military coups &
attempted coups
Within 1 yr. Of 1929 Oct. crash, army officers had sought to take
power or took power in Argentina, Brazil, Chile, Peru, Guatemala,
El Salvador, & Honduras
Mexico went through a serious constitutional crisis &
Cuba succumbed to a military coup in 1933
The Great Depression had catastrophic
effect on Latin American
While the depression was not fully responsible for the
political collapse of these regimes, its economic effects
cast a shadow of doubt to the viability of the exportimport growth model of growth, helping to discredit the
ruling political elites, & made the populace more
prepared to accept their displacement even by military
regimes.
 From the 1930’s onward, the military reasserted its
traditional role as a principle in L. A. politics
L. A. had two (2) clear options in its response
1. get even closer commercial links to the
industrial nation to insure a steady share of the
market regardless of the cost so the long term
relationship would be secure
Argentina & Britain  1933 RocaRunciman Pact quotas in the English market
exchanged for purchase of British goods &
insurance of profits on British business in
Argentina
L. A. had two (2) clear options in its response
2. the alternative was to industrialize, which had military
support, because it fostered greater economic independence, by building its own industry, L. A. would be less
dependent on European & U. S. for manufactured goods


Military arms would need to domestically produced
Domestic integration of industrial complex, agriculture, & mineral goods would make them more
self-sufficient, less vulnerable to foreign shocks
 A second purpose was to create jobs for the working
classes the continued to grow in size & importance
The L. A. proletariat was concentrated in the cities &
struggles to organize & sustain union movements as
opposed to the previous generations, it was now trying to
exert power as a social force
Some, ie Chile, unions were free of government control,
others, ie Mexico & Brazil, politicians recognized labor as
a political resource & took a direct hand in stimulating (&
controlling) labor organization
Whether perceived as ally or threat, the urban working class
was seeking secure employment & L. A. leaders saw
industrialization as one way to respond
L. A. did not copy European Industrial form, instead
they started producing manufactured goods that they
had formally imported from Europe & U. S.  (ISI)
import-substitution industrialization
→ The major countries, Argentina, Brazil & Mexico met
with relative success & developed significant industrial
plants that helped generate economic growth – initially
the result was to generate momentum but there were
limitations & draw backs
Social consequences of industrialization were complex
1. the formation of an entrepreneurial capitalist class
 industrial bourgeoisie, Marxists
 Chile – this group remained based in the landed
elite
 Mexico & Argentina – this group was comprised
of a different social group therefore presented a
potential challenge to the hegemony of traditional
ruling elites
 Either way the basic point remains that ISI created
a new power sector group in L. A. society
Of particular importance here was the role of the state in
stimulating ISI growth, L. A. governments actively
promoted industry , this was done in various ways
 erecting tariff barriers  prices so high to allow
domestic firms to compete
 creation of demand by favoring local producers in
government contracts  military supplies
 establishing government-run companies & investing
directly in government firms
Through protection & participation, the state in L. A.
furnished critical impetus for the region’s industrial
growth
As industrialization progressed, the working classes also grew
in strength & importance, whether autonomous or state
directed, union movements increased rapidly & the support
(or control) of labor became crucial for the continuation of
industrial expansion ... ..organized labor emerges during
this period as a major action on the L. A. scene
1. continuation of co-operative democracy this in which
industrialists & workers gained access to power –
Chile good example where political parties were
organized to represent the interests of new groups &
strata in society
pro-labor & pro-industrialist parties entered the
Chilean electoral process, leading eventually to the
tragic confrontation of the 1970s
1. most common response involved the creation of
multi-class “populist” alliances
 the emergence of an industrial elite & the vitalization of the labor movement made possible a
new, pro-industrial alliance merging with the
interests of entrepreneurs & workers
challenging in some instances the predominance
of the landowning elite & landed interests
 This can be seen by the example of:
Juan Peron
Argentina 1940s
Getulio Vargas Brazil 1930s
Lazaro Cardenas Mexico
1930s
Most populist regimes had two key characteristics
1. they were at least authoritarian:
 they usually represented coalitions against some
other set of interests ( such as landed interests) that
were by definition prevented from participation, &
this involved some degree of both exclusion &
repression
2. they represented class interests – workers & industrialists – groups bound to be in conflict among
themselves
 The maintenance of such regimes therefore
depended in large part on the personal power &
charisma of individual leaders Peron & Vargas
It also meant that, with or without magnetic leadership, they
would be hard to sustain in times of economic diversity
Phase 4: Stagnation in ImportSubstituting Growth, 1960s to 1980s
1960’s presented new challenges created by the
economic strategies applied to the post-1939
industrialization policies
 These new challenges fall into both economic
& political challenges
1st the Economic Sphere
In the economic sphere inherent problems were
the first to emerge out of this
 ISI because of the very nature of the beast
 The ISI was structurally incomplete 
domestic producers had to first import the
capital goods to produce consumer products
 This meant, ultimately, that the economy was
still dependent on the industrial nation, but
now on a different level
1. One of the major problems was the uneven
terms of trade inherent in the world market
where L. A. principle exports (coffee, wheat, &
copper) underwent a steady decline in
purchasing power, while capital goods
remained high
 Industrial growth reached a bottle neck 
quantity of primary goods might/would only
depress prices
2nd
As domestic products began to reach points close to
or at saturation levels the national D ran into a
lack of buyers at prevailing prices & credit terms
 only so many durable goods could be sold,
especially in markets with the extreme unequal
distribution of income
 this situation might have been avoided if a
multinational  L. A. Common Market had
been formed before the rush to individualize,
hence a competitive rather than
complementary market formed
 this competition hindered the attempt by the
economists calling for a regional market
because once again the short term costs 
this in turn means examining the cost factors
of production
3rd
Closely related to these issues was the
relatively high degree of technological
production processes employed in L. A.
industry. This was heavy capital-intensive
investment which called for a smaller work
force compared to 19th century Europe &
United States which has three (3) results
 a. fewer people employed than
elsewhere
 b. need for educated work force –
immigration
 c. limitation of consumer market to
employed the size of the unemployed
population still continued to go 
2nd result, again unintended in the 1960s
began to pose a serious threat to the
prevailing social order
military coups:  Brazil 1964, Argentina
1966, & Chile 1973
 in all three (3) cases, the most important
decisions were made (or subject to veto)
by the top ranking officers of the military
 Many of the officers were well educated
men, who had either gone to school in the
U. S. or had been trained by those who
had been schooled in the U. S.
They saw their situation as one in which
the need for investment was paramount
Stimulation through investment would
over come the stagnation in the economy
To accomplish this, they reasoned they
needed to dismantle, perhaps even crush,
the collective power of the working class
The more organized the working class,
the more difficult the task became
All three (3) military regimes created a
“command economy” when it came to labor
relations.
 once assuming power, they took control
of the decisions concerning labors most
vital interests – wages, working
conditions, fringe benefits, and the right
to organize
 Chile outright strikes were virtually
nonexistent between 1973 – 1979
 Brazil between 1968 – 1978 saw the
most repressive years with a relaxation
beginning in 1978 after the “miracle”
economic turn around for Brazil
 Argentina’s stronger tradition of union
initiative was harder to suppress, but
here labor leaders there were forced to
show great prudence
The question that appears to be needed, at this
point, to be asked is why repression or heavy
handed tactics needed to be applied ?
In all three cases the economies were
suffering heavy inflation & extremely
dangerous deficits in the balance of trade
payments which made their economies
vulnerable to total collapse
 There was a need for stabilization in all three
(3)
cases in order to attract public & private capital
 All three required stabilization programs to
be launched
 Traditionally in L. A. the labor movements
resisted stabilization programs because in
capitalist economies they had only succeeded in
carrying out economic stabilization programs by
producing a drop in real wages usually very
large.
All three (3) military regimes claimed the
countries woes were due to incompetence,
dishonesty, or treachery of politicians, as an
“anti-political” force the military would be
free of the usual burdens of politics
the military, however, was very aggressive
against the radically leftist politicians &
labor leaders, few if any channels remained
open to the opposition
Chile
which had been the most open
democracy was also the most repressive
instituting draconian measures, abolishing
all political parties & burning electoral
rolls
Argentina’s military government took stern
measures in 1976, suspending Congress & all
political parties, but no complete
Brazil’s military which came to power in a
relatively bloodless coup in 1964
Regimes pursuing this path became known as
“bureaucratic authoritarian” states & they
have several characteristics
 1. they granted public offices to people
with highly bureaucratized careers
military, civil service & large
corporations
 2. Political & economic exclusion of
the working class & control of the
popular sector
 3. Reduction of near – elimination of political
activity  especially in the early phases of the
regimes
 4. Problems were defined as technical, not
political
 they were to be met with administrative
solutions rather than negotiated political
solutions
 5. Bureaucratic – authoritarian governments had
sought to revive economic growth by
consolidating ties with international economic
forces  revising, once again, the terms of
dependency on the global world system
Specifically leaders of these regimes often forged
alliances with multinational corporations
 to establish credit & gain time, they also needed
to come to terms with their creditors, such as
the U. S. & European banks & the international
lending agencies (such as the World Bank & the
Inter-American Development Bank)
 it fell to the young economists who had
frequently been trained in the U. S. to bring
about the needed changes because they were
usually the most internationalized members of
the new ruling coalition
in Chile the group’s nickname Chicago Boys
was not always applied lovingly
While it appeared in all three (3) cases that it
was the military that was in charge  the
bureaucratic-authoritarian regimes were in
reality fragile coalitions made up of local
industrialists who felt threatened by
multinational corporations & the militaries
instinct to annihilate any militant opposition
aroused opposition from the middle-sector
supporters
 a major point is the military rule in these
three countries did not endure
 1979 about 2/3 of L. A. lived under
military control, by 1985 nearly 90% were
ruled by far more relative democratic
governments – excluding Chile
 civilian presidents were elected in Peru
1980, Argentina 1983 & Brazil 1985
 however, in all cases the military wielded
a great deal of power, however, the
transition created more political “space” in
which the public (including social sectors
once poorly represented) could engage in
open politics
This process took place during L. A. worst
economic period since the Great Depression
& a debt crisis was beginning to emerge
 in order to pay i on the obligations
Argentina, Brazil & Mexico had to pay the
equivalent of 5% of their Gross Domestic
Product GDP
 by the end of 1986, 22 to 25 L. A. nations
(excluding Cuba) had a per capita lower
than in 1980 Argentina & Peru the 1986
figure was below 1970
 this economic crisis exceeded those
which had contributed to military coups
in the 1960s
Phase 5: Crisis, Debt, and Democracy,
1960s—1990s
Economic growth l970s often relied on
external borrowing
petroleum-exporting countries abrupt
increases, 1973-74 & again 1979-81, world
price of oil made massive deposits in
international banks
banks sought to lend out this money to
capital-starved but creditworthy clients
– Prominent bankers Europe & U.
S.decided that L. A. countries looked like
good potential clients at profitable
interest rates
– especially if their governments were
committed to maintaining law and order.
a frenetic cycle of lending and
borrowing began
Between 1970 & 1980 Latin America  its
external debt from $27 billion to $231
billion
annual debt-service payments (interest plus
amortization) of $18 billion
Commodity prices  real interest rates 
bankers became reluctant to make still more
loans
Countries of the region experienced 
difficulty meeting obligations on the debt
August 1982 Mexico declared its inability to
pay
U.S. govt frantically put together rescue
package for Mexico
it provided only short-term respite it covered
interest payments only
major Latin American debtors
Argentina, Brazil, and Mexico-had to pay
yearly the equivalent of 5 % of their GDP
Caught in a squeeze between  export
earnings &  debt-service
“neo-liberal” ideas called for “structural
adjustments”
1980s, international authorities imposed strict
terms on Latin American borrowers
U.S. govt private bankers, & especially, the
International Monetary Fund (IMF)
If the governments would undertake
fundamental economic reforms, they could
qualify for relief from debt burdens
reforms always included opening up
economies to foreign trade & investment
-reducing the role of the govt
-promoting new exports
-taking steps against inflation
This amounted virtually to a complete
repudiation of time-honored ISI strategies
most Latin American governments accepted
IMF-sponsored conditions with little choice
Chile & Bolivia, first succeeded in carrying
them out
Mexico made significant headway by late
1980s
Argentina and Peru in the early 1990s
Brazil, the largest country of all, would resist
IMF formulae until mid- 1990s
Real economic output (GDP) per capita 
By 1990, more loans were made just to cover
current interest (i)
payments of L. A.’s total external debt  to
$417.5 billion
From 1982-1989 L. A. transferred over $200
billion to industrialized nations
equivalent to several times the Marshall Plan
in 1981, 1982, 1983, 1988, & 1989-& showed
cumulative  of almost 10% over the
decade
In this context of economic crisis
Latin America turned away from
authoritarianism & toward democracy
coalitions behind bureaucratic-authoritarian
regimes turned out to be relatively fragile
Local industrialists felt threatened by
multinational corporations
military’s instinct to annihilate any militant
opposition aroused protest from intellectuals,
artists, & middle-sector representatives
some military leaders chose to return to the barracksand let civilians take over what seemed to be an
“unsolvable problem”
Pressure also welled up from below
A conspicuous feature of L. A. politics
throughout ‘80s was  in civic participation
ordinary citizens began insist on their rights &
demand accountability from governments
In part this resulted from the uniting of
opposition forces produced by the brutality
of military repression
2nd was  commitment to electoral process,
people clamored for free & fair elections
3rd a consequence of all these processes, there
appeared a new cadre of civilian, middleclass, well-educated presidents in Brazil,
Argentina, and Chile
Most regimes were not complete democracies
In many countries the military still wielded
considerable power
Marxists left by the 1990s was largely divided
after years of repression (including physical
elimination) by military dictatorships
Marxists were demoralized, & discredited by
collapse of communism in East Europe &
the Soviet Union
in some countries the left was still denied
effective participation in politics
Key topics, land reform, stood no chance of
serious consideration
Human rights suffered continuing violations
And many crucial decisions, especially on
economic policy, were made in high-handed
& authoritarian fashion
early 1990s, L. A. at last began to reap
rewards accepting stringent reform policies
ave infl throughout the region 130 % 1989 to
14 % in 1994
Brazil postponed its reforms until 1994
response= international investors looked with
favor on L. A.
The inflow of private funds from abroad 
from $13.4 billion 1990 to impressive total
of $57 billion 1994
The inflow from Europe, Japan, & U. S.
Result = ave  L. A.  from only 1.5 % 198589 to respectable level 3.5 &in 1990s
Problems lingered nonetheless
new private funding “portfolio” investments
paper stocks or bonds rather than “direct”
investments (such as plants or factories)
Portfolio investments be highly mobile &
notoriously volatile & can leave almost
instantly
when U.S. Fed. Reserve started  i rates early
1994, investors began to anticipate
improved returns in the U.S. market
This expectation led to a 14 percent drop in
capital flows to Latin America in 1994
Mexico crashed December 1994, foreign
investors fled markets throughout the region
it came to be known as the “tequila effect”
implication painfully clear: despite impressive
& often courageous efforts at economic
reform, L. A. remained vulnerable to
vagaries of world financial markets
structural problems existed
1. persistence of poverty
international standards, nearly 40 % pop.
L. A. qualified as “poor” in mid-1990s
2. long-term problem was inequality
since 1950s, L. A. has displayed the most
uneven distribution of income world more
than Africa, South Asia, & Middle East &
situation was getting progressively worse
early 1990s, the richest 10 & of households L.
A. were receiving 40 & of total income,
bottom 20 & was getting less than 4 %
Social equity thus came to pose a major
challenge for the region
late 1990s, political spectrum in L. A.
encompassed a broad span
one end might be called “electoral
authoritarianism,” its harshest form
Guatemala
other end was “incomplete democracy,” with
many cases lying in between
After long struggle tyranny, Chile resumed its
position, along with Costa Rica, as perhaps
the most democratic country in the region—
despite continuing autonomy of the armed
forces
Showing a remarkable degree of political
openness, Argentina and Brazil transferred
presidential power through free and fair
elections
political institutions were notoriously
weak
Partly as result of the military dictatorships
especially the judiciary, the legislature, & the
civil service, as well as governmental
ministries and institutions
Peru faced perhaps the starkest institutional
vacuum of the entire region