Latin America

Development and Conflict since 1945

John Ward, John Ward

• Publisher: Routledge
• Year: 2004
• ISBN:
  9781134368303
• Edition: 2
• Topic: Geschichte
• Subtopic: Weltgeschichte

Bringing the story up-to-date, this expanded new edition takes into account recent developments including Argentina's 2001 debt default and the 2002 presidential election in Brazil. Latin America provides an introduction to the economic and political history of the region in the last half century.

Beginning with a brief history of Latin America since 1492, John Ward discusses the interactions between economic, political and social issues. The discussions includes:

* the long-term background to the 1980s debt crisis
* the effects of neo-liberal free market reforms
* relations with the United States and the wider world
* welfare provision in relation to wider economic issues
* social trends as reflected by changes in the status of women
* globalization and environmental debates
* comparisons with the more dynamic East Asian economies.

Also including biographies of the leading figures of the period and an expanded bibliography, it will provide central reading to Latin American history students, researchers and the interested general reader.

1 Introduction

Latin American history began in 1492 when Christopher Columbus, sponsored by the Spanish crown, led a naval expedition across the Atlantic and made landfall on various Caribbean islands. Further voyages of exploration and settlement followed. At first the newcomers concentrated their activities in the West Indies, working alluvial gold deposits and exterminating most of the indigenous inhabitants, used as forced labour. However, Spanish adventurers soon reached the mainland, where they found and quickly subjugated large ‘Indian’¹ populations, concentrated in Central America and the Andean highlands of South America. These regions would become the main centres of Spain’s transatlantic empire which, by 1600, stretched 6,000 miles, from what is now the southwestern US to central Chile and Argentina. For comparison, by 1750, after a century and a half of colonization, British settlers in North America had penetrated only about 200 miles inland from the eastern seaboard, along a 1,000 mile front. The Spanish conquistadors advanced so rapidly because of their eagerness to acquire the gold and silver which was available in great quantities, an aggressive military spirit, a wish to spread the Catholic Christian faith, and the weakness of the established indigenous empires (the Aztecs in Mexico, the Incas in Peru). The Spanish American economy came to be based on the extraction of tribute from the Indians, and the mining of precious metals. The colonial elite also established large agricultural estates (haciendas) to supply the mines, and the towns where most Spanish settlers, immigrant and locally born (creole), took up residence.

At first, the Spanish comprised a small minority among the conquered Indians. However, the diseases introduced to the Americas by the Europeans devastated Indian populations, while there was a rapid growth in the number of whites and mestizos (people of mixed white/Indian descent). Also, black slaves were imported from Africa. By the early nineteenth century the population of Spanish America, totalling about 16 million, was made up roughly as follows: 18 per cent white, 28 per cent mestizo or mulato (of mixed white/black race), 42 per cent Indian, and 12 per cent black (Skidmore and Smith 2001: 25).

The coastal zone of present-day Brazil was discovered by the Portuguese in 1500 and developed during the sixteenth and seventeenth centuries as Europe’s main source of sugar. From the 1690s important gold deposits began to be discovered and worked in the interior. Because Brazil’s Indians were less numerous than Spanish America’s, the Portuguese relied more heavily on the labour of African slaves. By the 1820s about 23 per cent of Brazil’s four million population was white, 18 per cent mixed race, 50 per cent black, and 9 per cent Indian (Skidmore and Smith 2001: 25).

The racial composition of Latin American colonial society differed markedly from the patterns found in other European overseas territories. In the thirteen British North American colonies that eventually became the US, whites were an overwhelming majority and the Indians a marginal element by the eighteenth century. Black slaves accounted for about 10 per cent of the population. Alternatively, in colonial Asia and Africa whites usually remained a very small minority, unable to retain power when indigenous anti-European nationalism gathered strength after 1900. In Latin America whites and mestizos led the movements against Spanish and Portuguese colonial rule that brought to independence all the region, except Spain’s Caribbean islands, between 1808 and the mid-1820s.² Latin American societies have remained more or less racially diverse and stratified to this day.

Despite their apparent natural advantages – rich mineral deposits and extensive areas of fertile land – the Latin American colonies did not achieve sustained growth in output per head of population, or in manufacturing and commercial activity as a share of output. By the early nineteenth century the region’s economic development compared unfavourably with that of Britain or the US, where rapid industrialization was in progress.

Spanish America’s extensive territories had proved difficult to administer effectively, and vulnerable to attack from predatory European rivals: the Dutch, the French, and the British. In both Spanish America and Brazil heavy taxation limited savings and investment. Legal restrictions and poor transport facilities limited trade. The Inquisition conducted by the Catholic Church against heresy discouraged scientific thought. Most large estates were farmed carelessly. Salaried managers, deputizing for absentee owners, supervised poorly motivated coerced labourers, usually conscripted or indebted Indians in the Spanish colonies and black slaves in Brazil. Poverty prevented the Indian communities which still controlled about half of Spanish America’s agricultural land from improving their methods (Williamson 1992: 119–32, 183–90).

Latin American economic retardation was perpetuated for several decades after independence by chronic political instability. The creole elites who had shaken off European rule were split between ‘Conservatives’ who wanted to maintain established institutions, and ‘Liberals’ who sought modernizing reform, for example by cutting back the privileges of the Catholic Church. Frontier disputes broke out between several of the successor states. Mexico lost a third of its national territory (present day California, Arizona, New Mexico, and Texas) to the expansionist US. The wars of independence had severely damaged the silver mines, a main source of tax revenue during the colonial period, so governments now lacked sufficient income. Effective authority often passed to individual strongmen (caudillos) whose power derived from the ownership of large, landed estates and from the personal command over fighting men (Halperin Donghi 1993: 42–114; Bulmer-Thomas 1994: 19–45).

Disorder persisted until the second half of the nineteenth century. Hitherto the region’s exports had been limited to silver, gold, and the few other items, such as sugar from coastal Brazil and the Caribbean, which could bear the cost of shipment to distant markets. Then, from about 1850, the demand generated by Western European and US industrialization, combined with the cheaper transport offered by railways and steam shipping, made it feasible for Latin America to send out a greater range and volume of bulk cargoes, including coffee, wool, grain, meat, cotton, nitrates, and base metals. However, landowners could only profit from these new opportunities by accepting strong central government, to secure property, mobilize labour, and attract outside money for building railways and other essential infrastructure. Some caudillos tried to hold out against this new model of political economy, but once in motion it usually had an irresistible momentum. The growth of foreign trade enlarged governments’ tax revenues, and loans from European and US financiers, reassured by the better business prospects. Adequately paid and equipped national armies, now often with railways at their disposal, could crush regional opposition, further improving investment conditions, state finances, and domestic security.

By 1900 most Latin American countries were controlled by restricted groups of large landowners, dedicated to export expansion through collaboration with foreign capitalists, and subscribing, formally at least, to the principles of laissez-faire economic liberalism, imported from Europe. According to this doctrine, international free trade maximized prosperity, by allowing each country to specialize in products for which its resources were best suited, according to the principles of comparative advantage. So, Latin America should export raw materials in return for European and US manufactured goods. State intervention in the national economy should be kept to a minimum. The main function of government was to uphold law and order, allowing private enterprise to flourish. In practice, however, the dominant elites often secured government help when it was likely to be profitable for them, including highly illiberal repressive measures against social inferiors. Characteristic ruling oligarchies included the coffee planters of Brazil’s São Paulo region, the leading influence in the country’s First Republic (1889–1930), and Argentina’s estancieros, their fortunes based on the production of wool, grain, and beef. Some governments were dominated more completely by a single man. In Mexico, where the post-independence political instability had been particularly severe, Porfirio Díaz held office as president almost continuously from 1876 until 1911.

The export booms enriched Latin America’s elites, but brought little benefit to the population at large. Over the nineteenth century as a whole, average output per head did not rise significantly; in terms of economic development the region fell further behind Western Europe and North America. Liberal ideology was used as a pretext for taking collectively held land from Indian communities and adding it to the haciendas. The strengthened armies and police forces were put at the service of employers in recruiting and disciplining workers. Cash crops for sale overseas encroached on the growing of food for local consumption. Competition from cheaper factory-made goods, imported or national, destroyed handicrafts and the employment which they provided. The widening income disparities between rich and poor held back industrialization by limiting the demand for simple manufactures. The elites preferred luxury imports (Bulmer-Thomas 1994: 83–154, 410–14).

Nevertheless, some industrial and commercial growth did occur in Latin America, fostering urban ‘middle sectors’ that eventually became strong enough to challenge the export oligarchies. With growing affluence the elites required more doctors, lawyers, shopkeepers, and other functionaries. Estate owners were reluctant to tax their own income or property, so they unintentionally fostered industrialization by using duties on imported goods as a main source of government revenue. Exports often required some processing before being shipped abroad. Transport equipment had to be maintained. For example, the establishment of meat packing plants (frigoríficos) and railway repair workshops contributed to the growth of Buenos Aires, Argentina’s capital.

As urban populations became more numerous, they grew increasingly self-confident, assertive, and critical of elite rule, with its alleged subordination of national interests to foreigners. The Mexican Revolution (1910–20) provided a reforming, nationalist example for Latin America as a whole. The First World War limited the supply of imported manufactured goods and gave some extra encouragement to industrialization within the region. The next major impetus to social and political change was provided by the international economic depression that followed the 1929 New York stock exchange crash. Although Latin America’s foreign trade fell sharply, in most of the region’s larger countries economic activity soon recovered. The decline of raw material exports made imported manufactures scarcer and more expensive, so national industry grew faster than before, by enlarging its share of the home market. Then, the Second World War revived export earnings. Latin America lay at a distance from the main theatres of armed conflict, comparatively well placed to help meet the demands of the US and its allies for metals, oil, and other strategic materials (Bulmer-Thomas 1994: 155–257).

Latin American manufacturing growth accelerated after 1945, with increasingly active government support through deliberate policies of import substituting industrialization (ISI). Higher protective duties and new controls were imposed to exclude foreign manufactures. Public enterprises were made responsible for some of the more ambitious industrial projects. At first, state-supported ISI yielded impressive results, but by the later 1950s the strategy had begun to show various limitations. The new or enlarged industries were quite successful in meeting national demand for the simpler consumer products, but required considerable imports of machinery and raw materials. As world commodity prices began to fall after the end of the Korean War in 1953, Latin American earnings from raw material exports failed to keep pace with import needs, and many countries incurred persistent balance of payments deficits. Higher inflation impaired the competitiveness of Latin American exports, aggravating balance of payments problems. Social conflict intensified as workers struggled to secure pay increases that would offset anticipated declines in the value of money. By the early 1960s ISI was in crisis.

Latin American countries responded with a range of adjustments or reforms, their detail and emphasis differing according to local circumstances (Chapters 2 and 5). Nevertheless, although economic growth continued during the 1960s and 1970s, balance of payments deficits widened further, so by 1980 Latin America had become heavily reliant on loans from foreign banks. Then the region suffered a severe recession, precipitated by a downturn in the world economy, depressed prices for raw material exports, and higher international interest rates. The debt crisis caused widespread disillusionment with ISI as a development strategy, pursued in its various modified forms, since the 1960s. Also, foreign creditors were able to impose their view that efficiency would be improved by reducing government intervention and opening up national economies to competitive forces. Thus, a fashion for economic liberalization took hold in Latin America during the later 1980s, cutting back the protective tariffs, the state agencies, and the state controls built up since 1945. Yet, so far the results from liberalization have been disappointing. In most Latin American countries output per head fell during the 1980s, the region’s ‘lost decade’. The early 1990s brought a modest recovery, but this was soon threatened by renewed financial difficulties, and the current outlook is most uncertain (Bulmer-Thomas 1994: 155–409; ECLAC 2000, 2002).

Latin American attempts to promote economic development since 1945 have been accompanied by persistent political instability. Although there are considerable differences between countries, the common sequence runs as follows. As a result of the post-1929 crisis in world trade and finance, many ruling export oligarchies lost power, often through a military coup. With the growth of manufacturing and of cities, governments increasingly took on a populist character. They represented, or claimed to represent, a broad coalition of mainly urban supporters: the professional and service middle classes, industrialists, and manual workers. Populist leaders based their appeal on nationalist measures against foreign business interests, and rhetorical attacks against landowning elites, condemned as ‘backward’, ‘feudal’, and the foreigners’ allies. However, few substantive measures were taken to break up the big, landed estates, and conservative landowners remained a significant political force, especially when they could enlist support from the middle classes and the military, alarmed at populist excesses. Mexico (1910–20) and Bolivia (1952) were exceptional in undergoing broadly based revolutionary upheavals that yielded major agrarian reforms, though even here considerable inequalities in landownership remained. Then, in 1959, forces led by Fidel Castro overthrew the Cuban dictator Batista. Castro’s regime soon became socialist, closely allying Cuba with the Soviet Union against the US, and broadcasting revolutionary propaganda to the rest of Latin America.

The threat from Cuba and the crisis of ISI provoked military coups against elected civilian governments in Brazil (1964) and Argentina (1962, 1966). The ‘bureaucratic-authoritarian’ military regimes established here claimed to be above politics, and capable of putting ISI on a more disciplined, sustainable basis, by imposing austerity programmes. Elsewhere, for example in Peru (1968) and Ecuador (1972), the military took charge, committed to a more ‘left-populist’ line. In Chile, disappointment with civilian politicians’ attempts at moderate reform during the 1960s led, in 1970, to the election as president of Salvador Allende, a professed Marxist. After three turbulent years, power was seized by an especially harsh military dictatorship, led by General Pinochet. Mexico gave an impression of stability under its governing party (the PRI), established by the 1910–20 revolution. However, economic difficulties and social discontent weakened the PRI’s authority, so policy implementation became increasingly erratic.

In most of the small Central American republics restricted landholding elites were still dominant, often ruling through the armed forces. A single family, the Somozas, controlled Nicaragua. During the 1960s and 1970s these oligarchies had to contend with growing popular unrest, mainly in the form of rural and peasant-based uprisings. The Sandinista guerrillas overthrew Nicaragua’s Somoza regime in 1979. Rural insurrectionary movements also affected parts of Colombia, Peru, and Mexico. In the Southern Cone (Argentina, Uruguay, Chile) ultra-left ‘urban guerrillas’ were more conspicuous. The kidnappings, bombings, and armed attacks perpetrated by these small groups of young, predominantly middle-class, activists served as another pretext for military intervention, to root out terrorism (Halperin Donghi 1993: 292–400; Skidmore and Smith 2001).

From the early 1980s violent social conflict moderated over most of the region, and politics became less sharply polarized. The debt crisis brought a return to democracy as discredited military regimes gave up office. Their civilian successors were, on the whole, cautious and restrained, by the standards of pre-1960 populism. In a number of cases presidents secured re-election, despite implementing painful measures for economic stabilization. Urban guerrilla activity, effectively crushed by 1980, showed no signs of revival. So, at least up to the mid-1990s it seemed that painful experience might have established a more secure consensus, bringing to an end the abrupt swings between populist, authoritarian, and radical alternatives that characterized the 1945–80 period. Subsequently, however, some republics experienced political instability once again, through public dissatisfaction with the results of free market reform.

Table 1.1 gives some recent indicators of Latin America’s economic standing. Output per head of population is estimated on a purchasing power parity basis, which takes account of international differences in price levels. (For comparative purposes this method is preferable to calculations of the type often used, based on national currencies at official or market exchange ...