First published: May 1990
The return of the ballot box in several key Latin American countries (a rarity in the last ten years) has been hailed as the return of democracy in the continent.
This is less than half the truth. While some of the most vicious dictatorships have gone, in Brazil, Argentina, Chile, Uruguay, Bolivia, Peru, and others have either been severely weakened or thrown into total disarray as in Paraguay and Haiti, this ‘democratic’ wave has not touched the decisive countries in Central America such as Guatemala and El Salvador, and the policies of the new civilian governments are determined by strict limitations imposed by the outgoing military and the utterly capitulating character of the parties coming to office. Besides, the ‘democracy’ that has been introduced is severely faulty, to put it mildly.
These countries face massively intensified imperialist pressure. On the one hand, the US has deepened its military and political interference in the region, primarily in Central America, and on the other the catastrophic economic crisis looms ever larger. The bleeding represented by the external debt is facing some countries with complete economic paralysis or simple collapse.
This is compounded by the situation in Eastern Europe with the diverting of capital investment flows from Latin America into that area. World prices of primary commodities, on which many of these economies heavily depend, have been declining rapidly. The only commodity doing well is cocaine. The ‘war against drugs’ is simply an excuse for US imperialism to intervene militarily in the area.
On top of all this the new governments in the region are not prepared to break the vicious circle of impoverishment imposed by the IMF, accepting the ‘financial discipline’ it prescribes to obtain fresh money, which only throws them deeper into crisis. The recipe of the IMF is well known: drastic reduction in government spending on welfare and education, severe cuts in both wages and subsidies of essential commodities, massive privatisation programmes leading to higher unemployment.
The figures speak for themselves. Economic growth in the region declined from 0.9 per cent in 1988 to 0.7 per cent in 1989, but due to population growth GDP per head actually fell 1.1 per cent and all the indications are that this will worsen in the 1990s. Since 1980 GDP per head has fallen by 8 per cent throwing living standards to 1978 levels. The rate of growth of the debt, which had declined by 4 per cent in 1988, was 1.5 per cent in 1989, and although the net transfer of resources on account of the external debt declined slightly in 1989 to $27.7bn from $29.3bn in 1988, the ratio of total debt to exports worsened in 1989 for the third consecutive year.
Furthermore, the net outflow of resources from the region between 1982 and 1988 was US$178.7bn and the rate of investment as a percentage of GDP fell from an average of 23.7 in 1973–80 to only 14.2 in 1988.
The US’s reliance on foreign capital investment (primarily Japanese) means maintaining or increasing both the value of the dollar and interest rates, policies which create havoc for the beleaguered Latin American economies. The aggregate external debt of Latin America is about $500bn – therefore a 1 per cent increase in interest rate leads to substantial increases in the absolute size of the debt or a 1 per cent increase in the value of the dollar increases its debt in real terms by $5bn.
Many of the civilian governments came to power on a populist ticket. Large sections of the masses voted for them to get the military off their backs, but the populists Mark II don’t enjoy exuberant support from the poor. Their mass social and political base is rather precarious, tending to fade as they get to grips with economic policy, showing their true colours.
The most dramatic effort to deal with the economic crisis has been in Brazil, whose recently elected president Fernando Collor de Melo, in order to drastically reduce inflation (running at over 100 per cent per month) simply froze $100bn (about 30 per cent of the country’s total GDP) deposited in banks in the form of current accounts and individual savings. This amounted to sheer sequestration.
The measure was beefed up with the passage of a law forbidding injunctions against it and giving special powers to the police to enforce the anti-inflationary package. At a stroke, Collor de Mello soaked up the excess liquidity in the economy, blamed for the high rate of inflation. Zelia Cardoso, the economy minister, has made clear that Brazil is not prepared to pay more than $5bn in arrears on interest payments on the foreign debt.
The reduction of liquidity in the economy has affected the rich more than the poor and Brazil’s stance on the debt requires sacrifices from foreign creditors ‘commensurate with the sacrifices now being undertaken by Brazilian society’, as Cardoso put it.
What has attracted less attention are measures affecting the poor. These include axing nearly all subsidies, the promise to lay off thousands of public employees, the closing or shutting down of 11 ministries and government agencies and privatising $18bn worth of state companies. Collor’s shock treatment has also reduced retail sales so much that unemployment is bound to increase sharply.
Although Collor has been forced to backtrack on several of the most extreme aspects of his package, these very drastic steps reflect the awareness of sections of the Brazilian ruling class that the country is in no position to bear any more of the burden without severely undermining its own rule. It already faces a formidable challenge from the working class in the form of the electoral successes of the Workers’ Party at the general elections last November.
Argentina also faces severe economic dislocation resulting from the generalised imperialist offensive. With a much less powerful economy than its neighbour Brazil, Argentina faces an even worse situation. In March the monthly inflation rate was 200 per cent, economic activity went down by 8 per cent in 1989 and has declined further in the first months of 1990. The exchange rate of the Argentine currency, the austral, was 1,700 to the dollar last January – in March it was 5,500.
Most of this can be accounted for by the severe haemorrhage through the external debt and the consequent sharp de-industrialisation. The austerity measures introduced by the Peronist Menem has led to food riots in the shanty-towns of Buenos Aires and other cities. In fact, rioting has become frequent in this hitherto relatively rich and economically developed Latin American country – beef was Argentina’s staple food.
Menem has of course gone back on all his radical promises. He has totally capitulated on the Malvinas, has blocked the bringing to justice those in the military guilty of human rights atrocities. He has embarked on a sharply anti-working class course, with frenzied selling of state assets to private companies, and favouring debt-equity swaps to reduce the debt.
Wages have lost 55 per cent of their purchasing power over the last year, and Menem now plans lay-offs in the public sector probably affecting 14 per cent of the industrial workforce, whilst the economy minister has allowed substantial price increases for items such as petrol, water, telephones, etc.
The economy is moving rapidly towards total collapse. Interest arrears on the debt in March, which Argentina has not paid since April 1988, were approaching $6bn.
The Peronist trade unions are heavily divided between support for Menem and those who oppose his economic policies. The latter have already attempted to organise general strikes. Oppositionist Peronist leaders such as Miguel Correa said: ‘Menem is just a traitor. It is as simple as that’. Moreover, in less than a year in office Menem’s government has lost at least 150 ministers and senior officials.
In the face of economic collapse and the total inability of the Peronist government to get to grips with it, sections of the Radical Party are calling for a government based on a ‘national pact’ involving business, the unions, the church, the army, the Peronists and the Radicals. The trend is for the Peronist bureaucracy to further distance itself from its trade union base in order to implement ever more unpopular economic policies, leaving the country more vulnerable to both the onslaught by the IMF and imperialism. The conditions for a massive confrontation are unfolding.
The PRI, Mexico’s ruling party, is under increasing pressure from its left in the form of the Party of the Democratic Revolution (PRD) headed by the charismatic Cuauhtemoc Cardenas. Last March PRD supporters occupied 22 town halls in the state of Guerrero protesting at election rigging and were violently evicted by armed police.
Cardenas’ party expresses the fragmentation of the PRI itself, which has totally dominated Mexican politics. This takes place against the background of growing signs of strain in the Mexican economy with an external debt of nearly $100bn. Salinas de Gortari, the Mexican President, has struck agreement after agreement with the US and international financial institutions over debt payments.
Mexico does not face economic collapse, due mainly to being regularly bailed out by US imperialism which considers the stability of Mexico vital to its interests. In order to maintain internal economic stability and keep up scheduled payments on the debt, Mexico has been forced to accept increasing integration with the US economy. The US accounts for 66 per cent of Mexico’s trade.
Salinas de Gortari has abandoned completely any semblance of nationalism, if it ever existed in the PRI, and has embarked on reducing trade tariffs (average tariffs are 6 per cent and 95 per cent of items are now being imported without license), leading to the closure of manufacturing plants and an increasing switch to activity in the service sector. This policy will increase the Mexican trade deficit to an estimated $600m for the current financial year which Salinas expects to cover with fresh loans. He is reducing state spending, and has embarked on a programme of privatisation (the biggest of which is Telmex, the national telephone company), and has turned to debt-equity swaps in privatisations in order to reduce the size of the debt.
In order to implement his economic policies Salinas has to loosen the tight relationship that has traditionally existed between the Mexican trade union bureaucracy organised in the Confederation of Mexican Workers (CMT) and the PRI, while maintaining a stranglehold on them. The loosening of the links between the PRI and the CMT union bureaucracy has opened up a space for independent union activity in some key sectors, such as auto workers, teachers, public employees and important sections of the private manufacturing sector. Many of these sectors have engaged in militant industrial action over the past year. On 28 March, over 120 organisations set up a new trade federation ‘aimed at fighting for workers’ constitutional rights, including the right to bargain collectively and strike’, called the United Front in Defence of Workers and the Constitution. The CMT bureaucracy, probably with the complicity of government officials, have employed thugs to physically attack militant workers who are taking industrial action.
The days of PRI hegemony are drawing to an end, and it will face increasing challenge by militant sections of the working class.
Colombia is another so-called democracy where decomposition is reaching extraordinary levels. A large part of its economy is dominated by the cocaine barons based in Medellin and Cali. Its external debt is not great relative to Brazil or Argentina, however, the workings of the economy and its politics are being perversely infiltrated by the cocaine trade.
It was the ruling class, especially the landlord/armed forces which propped up the murderous activities of the cocaine cartels. It has been well documented that the cocaine barons payroll the right wing death squads. The majority of assassinations are political, with the victims mainly left activists, trade unionists, and peasant organisers.
However, anybody who threatens the activities of the cocaine cartels can become a target, as with the populist Liberal candidate Luis Carlos Galan who was assassinated in front of the TV cameras while delivering a public speech. He was campaigning for government action to eliminate the cocaine trade.
Virgilio Barco, the current president, faced with international outcry and growing pressure from the US, took some steps to curb the activities of the cocaine barons scoring some impressive temporary results. But the cocaine trade continues unabated.
In March Bernardo Jaramillo, the candidate of the Patriotic Union (UP), a coalition of left wing organisations, was assassinated at Bogota airport. This was followed by riots and mass demonstrations in the capital. The teachers’ union called a 48-hour protest strike. The assassin was from Medellin, headquarters of the main cocaine cartel. In 1987, Jaime Pardo Leal, UP’s first leader, was also murdered. More than a thousand UP members have been murdered since its foundation in 1986.
There have been recurrent spells of left guerrilla activity in response to this situation. Around 12,000 guerrillas organised in five guerrilla groups are active in the country. Some guerrilla groups such as the M-19 have fielded candidates at local and national elections after laying down their weapons in exchange for legal participation in the political life of Colombia, but the activity of right wing paramilitary groups does not augur well for their prospects in the electoral arena. On 25 April Carlos Fizarro, the M-19 presidential candidate and its leader, was murdered on the plane taking him to an election rally. Again the assassin was from Medellin.
The formal political system has been totally dominated since the 1820s by the Conservative and the Liberal parties and the administrations have been rife with corruption, violence and clientelism. To these now must be added the influence of narco-dollars which pervade the whole social, economic and political fabric of Colombia.
Although Colombia’s external debt is small ($17bn) and its economy has fared better than most countries in Latin America, due mainly to the informal inflows of narco-dollars, it is nevertheless under increasing pressure from imperialism through the agency of the IMF and World Bank to liberalise its economy. Its economy is heavily dependent on the export of coffee whose price on the world market has been steadily falling, reducing export earnings and putting a squeeze on economic growth, forcing currency devaluation and filling the growing trade gap with borrowed money. Any reduction in the protectionism of the economy, as the IMF and World Bank want, will only exacerbate the problem, making Colombia’s external debt larger.
Should the efforts of the Colombian and US administrations to drastically reduce drug trafficking succeed, reducing these ‘invisible’ export earnings, it would only aggravate Colombia’s trade deficit. It is estimated that the cocaine industry represents about 15 per cent of the country’s economic activity.
Peru faces one of the deepest processes of political decomposition and economic dislocation in the continent. Its rate of inflation is over 100 per cent monthly, in 1988 as a result of government deflationary policies real wages lost 66 per cent of their purchasing power, retail sales have declined by over 70 per cent, the official rate of unemployment is 10 per cent but the rate of under-employment is over 50 per cent (there are between 500,000 to 1 million street sellers in Lima, the capital city, alone); at present Peru’s balance of payments depends by about 50 per cent on the exports of cocaine.
Peru has approximately 200,000 hectares of arable land devoted to the growth of cocaine, with between 300,000 to 400,000 peasant families dedicated to its cultivation. A peasant leader in the Ayacucho region (the geographical base of Sendero Luminoso) expressed this economic reality by explaining that if in the 1960s the slogan of the peasant was ‘Land or Death’ present circumstances have modified it to ‘Cocaine or Death’.
The UN has estimated that approximately 5 million Peruvians out of a total of 22 million are living in extreme poverty. Should cocaine go that figure would rise to staggering heights.
The scourge of the death squads has emerged in Peru too. It is estimated there are between 80 to 100 violent deaths per month. The repression and economic hardship of the peasant masses has led from passive resistance to guerrilla warfare giving birth to one of the most extraordinary political phenomena in Latin America: Sendero Luminoso.
Sendero Luminoso, the Shining Path, is a maoist guerrilla organisation with a mass base among the peasantry, especially in the Ayacucho province. From being active exclusively in the rural areas, they increasingly operate in the cities. They have successfully launched several ‘armed general strikes’ and the ensuing repression of civilians has just expanded Sendero’s mass base. It is estimated that at present Sendero controls about one third of the country’s territory. The US is becoming increasingly involved in fighting the guerrillas, in the last months using the ‘drugs war’ as an excuse to send the Green Berets into areas controlled by Sendero.
APRA, the party of Alan Garcia, Peru’s president, had no programme to offer for the general elections on 8 April and its electoral support simply collapsed. The decomposition of traditional politics was seen in the strongest votes going to Mario Vargas Llosa, a novelist of international reputation, and Alberto Fujimoro, rector of the Agrarian University, who up to a few weeks ago was an unknown quantity in Peruvian politics. On 8 April Fujimoro cut down Vargas Llosa’s lead (the polls were giving him close to an absolute majority) to around 30 per cent, forcing a second round, throwing FREDEMO (the right wing coalition behind Vargas Llosa) into turmoil.
Fujimoro has based his campaign on opposition to Vargas Llosa’s brutal economic shock treatment, expressing concern for the poor, and on proposals for growth by protecting the domestic economy from international competition, hinting at Japanese support for his plan.
However, there are no indications that Japan will seriously invest in Latin America, let alone Peru. Japan’s share of total foreign investment in the region has actually fallen from 29.6 per cent in 1965 to 13.7 per cent in 1988 with most of this going to the Caribbean, Mexico and Brazil. Japan has always prioritised South East Asia for investment, for economic and political reasons, and currently, with economic problems at home, is finding it increasingly difficult to maintain capital flows to the US, leaving little left over for Latin America!
The Latin American ruling class’s strategy of growth in the 1940–60s was domestic industrialisation, which meant a mild but real increase in standard of living and employment. Its political expression was populism, which objectively improved the relation of forces in favour of the working class and sections of the poor. In the 1970s and part of the 1980s, the strategy shifted to alliance with multi-national capital to export manufactured goods to the imperialist countries. While this necessitated vicious dictatorships to depress wages and weaken the working class to boost profitability, there was significant economic growth in some of the key Latin American countries such as Brazil, Argentina, Chile and Uruguay.
From the late 1980s a new pattern has set in, combining economic regression with intensified repression due to the massive and unprecedented imperialist offensive. Under these circumstances the chances for democratic government or economic growth are highly unlikely indeed. Consequently Latin America has entered into a period of massive economic dislocation which augurs very sharp class struggles. In this grim panorama the working class and the poor have no option but to fight back. The chances of a solid recomposition of populism are slim and we can expect to see its increasing fragmentation and the emergence of mass class struggle currents such as the Workers’ Party in Brazil.