World Orders Old and New – Latin America

The Colossus of the South

“When the resources of that vast country are taken into account,” the editors of the Washington Post wrote in 1929, “it becomes evident that within a few years Brazil will become one of the leading powers of the world.” “The United States rejoices in the rise of this great republic in South America,” which “has found the road to permanent prosperity and peace.” The euphoric predictions seemed not unreasonable. “Brazil is notable for its tremendously favorable combination of large size, low population density, and rich endowment of natural resources,” Peter Evans observes, and it had nothing to fear from external enemies. In the second half of the 19th century, real per capita income rose more rapidly in Brazil than in the United States. Its leading export, coffee, was under control of local capital (Brazil provided over 80 percent of world output by the turn of the century). Some weaknesses were showing: the economy relied so heavily on exporting primary products that this rich agricultural country had to import even food staples. Nevertheless, the “colossus of the South,” as the New York Herald Tribune termed it in 1926, appeared to be a true counterpart to the Colossus of the North, well-placed to rise to prosperity and power. It seemed, indeed, “a mighty realm of limitless potentialities,” “a nation which staggers the imagination,” as other US journals described it.

The Wall Street Journal, in 1924, offered a more caustic glimpse of the future: “No territory in the world is better worth exploitation than Brazil’s.” Five years later, “American businessmen boasted a larger share of the export market than their British rivals” and “New York had replaced London as the major source of new capital investment” (Joseph Smith). US investment grew tenfold from 1913 to 1930; trade more than doubled, while that of Britain declined by nearly 20 percent. The picture was much the same throughout the region. Direct US investment in Latin American enterprises almost doubled to $3.5 billion in the 1920s, while portfolio investment (bonds and securities) more than quadrupled to over $1.7 billion. Venezuelan oil under the Gómez dictatorship, mines in Bolivia, Chile and elsewhere, and the riches of Cuba were among the favored targets. From 1925-1929, US capital inflow to Latin America was about $200 million a year, while the annual outflow to US investors was about $300 million.

Serious US interest in Brazil dates from 1889, when the monarchy was overthrown and a republic established, and a Pan-American conference was held in Washington “as part of a wider strategy designed to oust European competition and thereby secure American commercial ascendancy in Latin American markets,” Smith writes. The US was hesitant to recognize the republican government, in part because “the conservative instincts of American politicians were alarmed at the overthrow of a symbol of authority and stability by military violence.” But as incoming Secretary of State James Blaine recognized, “Brazil holds in the South much the same relationship to the other countries that the United States does in the North,” and commercial opportunities were vast. Hesitations were soon overcome.

Recognized to offer “incalculable” commercial opportunities, Brazil was chosen as the site of the third (1906) Pan-American conference, where Secretary of State Elihu Root declared that the US and Brazil, “acting together, would form a single and eternal guarantee for the integrity of America.” From 1900 to 1910, US trade and investment with Latin America more than doubled, growing at the fastest rate in the world. As global power shifted toward the United States with World War I, Washington was able to implement the Monroe Doctrine beyond its Caribbean sphere. The already substantial US economic and political influence throughout the hemisphere increased, giving rise to the euphoria of the 1920s.

US dominance of the Brazilian market peaked after World War II, when the US supplied half of Brazil’s imports and bought over 40 percent of its exports. By then, the vision of Washington planners was so expansive that Latin America had come to play only a minor part, though it was not forgotten. “Latin America’s role in the new world order,” Stephen Rabe observes, was “to sell its raw materials” and “to absorb surplus U.S. capital.” In short, it was to “fulfill its major function” and be “exploited” for the benefit of the core industrial countries, along with the rest of the South.

Rabe’s description of the New World Order of 1945 is no less apt today; the same is true of Bolívar’s concerns about the “very powerful country, very rich, very warlike, and capable of anything” that stands “at the head of this great continent.” The major theme of the Colombian era — the service role assigned to the South — persists as we advance to a “new imperial age.”

  1. “The Welfare of the World Capitalist System”

The New World Order of 1945 is sometimes described with considerable candor in mainstream scholarship. A highly-regarded study of US-Brazilian relations by the senior historian of the CIA, Gerald Haines, opens frankly: “Following World War II the United States assumed, out of self-interest, responsibility for the welfare of the world capitalist system.” He could have gone on to quote the 1948 CIA memorandum on “the colonial economic interests” of our Western European allies, or George Kennan’s call for reopening Japan’s “Empire toward the South,” among other analyses reflecting real interests.

“American leaders tried to reshape the world to fit U.S. needs and standards,” Haines continues. It was to be an “open world” — open to exploitation by the rich, but not completely open even to them. The US desired a “closed hemispheric system in an open world,” Haines explains, following Latin Americanist David Green, who had described the system “formalized” after World War II as “A closed hemisphere in an open world.” It was to be a world closed to others in regions already controlled by the US or held to be of critical importance (Latin America and the Middle East), and open where US dominance had not been established. Haines’s phrase captures the vaunted principle of the Open Door in its doctrinally approved sense: What we have (if it is important enough), we keep; elsewhere, open access to all. The operative principle was articulated by the State Department in 1944 in a memorandum called “Petroleum Policy of the United States.” The US then dominated Western Hemisphere production, which was to remain the largest in the world for another quarter century. That system must remain closed, the memorandum declared, while the rest of the world must be open. US policy “would involve the preservation of the absolute position presently obtaining, and therefore vigilant protection of existing concessions in United States hands coupled with insistence upon the Open Door principle of equal opportunity for United States companies in new areas.”

That Latin America would be ours is an expectation that goes back to the earliest days of the Republic, given an early form in the Monroe Doctrine. The intentions were articulated plainly and illustrated consistently in action. It is hard to improve upon the formulation by Woodrow Wilson’s Secretary of State, Robert Lansing, which the President found “unanswerable” though “impolitic” to state openly:

In its advocacy of the Monroe Doctrine the United States considers its own interests. The integrity of other American nations is an incident, not an end. While this may seem based on selfishness alone, the author of the Doctrine had no higher or more generous motive in its declaration.

With some reason, Bismarck had described the Monroe Doctrine in 1898 as a “species of arrogance, peculiarly American and inexcusable.”

Wilson’s predecessor, President Taft, had foreseen that “the day is not far distant” when “the whole hemisphere will be ours in fact as, by virtue of our superiority of race, it already is ours morally.” Given the awesome power that the US had achieved by the mid-1940s, Washington saw no reason to tolerate any interference in “our little region over here” (Stimson).

In the global order of 1945, Haines continues, the goal was “to eliminate all foreign competition” from Latin America. The US undertook to displace its French, British, and Canadian rivals so as “to maintain the area as an important market for U.S. surplus industrial production and private investments, to exploit its vast reserves of raw materials, and to keep international communism out.” Here the term “communist” is to be understood in its usual technical sense: those who appeal to “the poor people [who] have always wanted to plunder the rich,” in John Foster Dulles’s phrase. Plans were similar for the Middle East, to which the US extended the Monroe Doctrine after World War II, with enormous consequences for southern Europe, North Africa, and the region itself.

Though Haines happens to be concentrating on the richest and most important country of Latin America, the conclusions generalize. In Brazil, he writes, the US worked to prevent economic nationalism and what the Truman and Eisenhower Administrations called “excessive industrial development” — that is, development that might compete with US corporations; competition with foreign capital was not
“excessive,” therefore allowed. That US demand had been imposed on the hemisphere generally by February 1945, as already discussed (chapter 2.1).

What was new in these priorities was the scale, not the character. The intent of the prewar Good Neighbor programs, David Green writes, was “to stimulate a certain diversification of Latin American production in the expectation that the Latin Americans would find ready markets in the hemisphere; [but] such diversification was to be limited to products not competitive with existing lines of production in already established Western Hemisphere markets,” meaning in practice US lines of production. The proposals of the Inter-American Advisory Commission called for the US to absorb Latin American imports so as to enhance “the development of Latin America’s capacity for purchasing more United States manufactures” (Green’s emphasis). The earliest projects of the US-dominated inter-American agencies “were all of a consumer-goods rather than a producer goods variety.” The purpose “was certainly not to cut into the United States’ `share’ of exports to Latin America,” specifically “machinery and heavy industry exports.”

The occasional exceptions highlighted the point. Washington agreed to finance a Brazilian steel project, but as government economist Simon Hanson pointed out, that meant only a “shift in the type” of American steel exports to Brazil, not a loss in total volume or value: the Brazilian plant would produce “the simpler manufactured products,” which in turn would “require import of more complex materials” requiring more advanced technology; that “is where we come in,” keeping US export markets safe. An analysis concluded that “the countries who will lose most of the Brazil business which will ultimately be handled by this plant are England and Germany.”

Quite generally, Haines observes, US leaders “opposed major industrialization plans of the Third World nations and rejected foreign aid programs based on public loans to promote economic growth.” They preferred a “mercantilist approach,” with Third World economies integrated “into their U.S.-dominated free trade system”; the concept of “mercantilist free trade” captures nicely the doctrinal framework. The US “tried to guide and control Brazilian industrial development for the benefit of private U.S. corporations and to fit Brazil into its regional economic plans.” The humanitarian Point Four program, which was to be “a model for all Latin America,” was designed “to develop larger and more efficient sources of supply for the American economy, as well as create expanded markets for U.S. exports and expanded opportunities for the investment of American capital.”

What US planners “envisioned, but seldom stated, was a neocolonial relationship, with Brazil furnishing the raw materials for American industry and the United States supplying Brazil with manufactured goods.” They pursued a “neocolonial, neomercantilist policy” — which is, somehow, “a classic liberal approach to development,” showing again how flexible an instrument economic theory can be. Industrial development was tolerable only if it was “complementary to U.S. industry.” The basic concept was “that Brazilian development was all right as long as it did not interfere with American profits and dominance,” and ample profit remittance was guaranteed. Agricultural development was also promoted, as long as it avoided “destabilizing” programs like land reform, relied on US farm equipment, fostered “commodities that complemented US production, such as coffee, cacao, rubber, and jute,” and created “new markets for U.S. agricultural commodities” such as dairy products and wheat.

“Brazilian desires were secondary,” Haines observes, though it was useful “to pat them a little bit and make them think that you are fond of them,” in Dulles’s words.

The Cold War framework was in place at once. By 1946, Soviet machinations in Brazil were of much concern to Ambassador Adolf Berle, a leading liberal statesman from the New Deal through Kennedy’s New Frontier. The Russians are like the Nazis, he warned: “Horribly, cynically, and terribly, they exploit any center of thought or action which may make trouble for the United States”; they are so unlike us, in this regard. Intelligence could detect no Soviet trouble-making in Brazil apart from economic missions and other common practices. But as usual, that conclusion was not considered relevant, and Berle’s position was endorsed. As Haines summarizes an intelligence report a few months later, “the Soviet Union might conceivably find it to its advantage in the future to fish in troubled inter-American waters,” so no chances could be taken, another illustration of the “logical illogicality” that governed global policy planning. The potential Communists must be eliminated before they have a chance to interfere with our pursuit of our goals.

US leaders used Brazil as a “testing area for modern scientific methods of industrial development,” Haines observes. US experts provided instructions on all sorts of topics. For example, they encouraged Brazilians to open the Amazon to development and to follow the US model of railroad operation — the latter a touch of black humor, perhaps. But crucially, they provided Brazil with sincere advice on how to benefit US corporations.

Throughout, Haines’s account is interlarded with such phrases as “the best of intentions,” “sincerely believed,” etc. By lucky accident, what was “sincerely believed” conformed nicely to the interests of US investors, however ruinous it might be to our wards. Again, Haines strikes traditional chords, including the faith in the benign intent that so miraculously serves self-interest.




Year 501 Copyright 1993 by Noam Chomsky. Published by South End Press.

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