Latin America is a continent undergoing “reform”, which is a code word for neo-liberal economic counterrevolution. Bourgeois economists internationally even suggest that the continent could develop as a model for Europe, as a society without welfare and social security.
These imperialist neo-liberal policies throughout Latin America are paid for by dramatically increasing poverty in the mass of the population. In 1980, the continent’s poor numbered 136 million (49 percent); ten years later the number had doubled to 270 million (61.8 percent). This in turn has created a climate for mass struggle, and some really militant examples have shown a much more real “Latin American model” for the rest of the world. The 12 million strong general strike in Brazil in June is the latest example.
All developments in Latin America are for the short term, nothing is really stable. In the last ten years, different Brazilian governments have tried to introduce five entirely new economic models, including new currencies. In 1992 Brazil’s growth in GDP was negative, the economy was shrinking. Two years later, hyperinflation was a seemingly incurable disease. And then in 1995, with the new currency, the Real, Brazil again was the great success story, with inflation down to one digit and accompanied by strong growth. In 1996, business as usual is back again, now with an industrial crisis and the GDP turning down again. Political crises are linked to economic problems – with today’s Brazil now coming into collision with yesterday’s hero, President Cardoso. Dramatic swings between alleged successes and real crisis are taking place in most Latin American countries.
What’s Economic Reform?
In Latin America, economic reform was a reply to the debt crisis of the 80s. It is a way for international capital to earn money out of state deficits and debts, thereby turning the risks of the 80s into advantages in the 90s. It is the program of imperialism all over the globe, perhaps taking its most advanced form so far in Latin America. There are four cornerstones of the “reform” program:
1. Tariffs slashed
This is intended to give multinationals free access to the markets. In Mexico, average tariffs on imported consumer goods were cut from 60 percent in 1985 to 20 percent in 1992. One of the effects was to cut the markets for wheat and maize from Chiapas, thereby increasing poverty in that region. In Brazil, it is calculated that 500,000 “agrojobs” have been lost because of imports.
Limits on private or foreign ownership have generally been abolished. Foreign banks have been established. Investment capital can move in and out more or less without restrictions. For example, well known short term super speculator George Soros is now buying land and agribusinesses in Argentina. Deregulation also covers scrapping of minimum wages, workplace safety etc.
3. Dramatic state budget cuts
Just some examples: In Argentina, pensions and unemployment benefits have been reduced from 70 percent of wages to 45 percent. In Mexico, state support to rural areas in 1995 was less than a quarter than in 1980. In Brazil, a wage freeze is proposed for state employees, and the health system is collapsing. In Paraguay, 100 000 state jobs are threatened if budget targets are to be met.
4. Large scale privatization
Since the break through with Telmex, Mexico’s Telecom, this is the area where Latin America has taken a leading position internationally. The now 80 percent private Telefonica España, Spanish Telecom, today controls telephone companies in Chile, Argentina, Peru, Colombia, Mexico and Venezuela. An illustration of the scale of what is involved is shown by the following example: In 1996, financial companies JP Morgan and Merryl Lynch organized a presentation in 23 cities in Europe, the US and Japan – and this was just for the sale of a part of Telecom of Peru.
In Mexico there were 1 200 state companies 1995, and only 200 ten years later. In Argentina, only one in five state employees remained in work after the privatizations of 1991-94. On the railways, 110 000 out of 130 000 workers lost their jobs after the privatization. The latest state assets up for sale in Argentina are three nuclear power stations and an international nuclear waste dump, without any environmental restrictions. Privatizations have improved the Argentinean telephone network, but it is also four times more expensive to make a call now than it was before. In Brazil, so far 45 companies have been privatized for $ 12 billion. Much more is now to come, since the constitution has been changed to allow the sale of for example the world’s biggest iron ore mine, CVRD. Sao Paulo and other Brazilian states are now in for big privatizations.
In Bolivia, the neo-liberal president Gonzalo Sanchez de Lozada has started a privatization program of 50 percent of all state industries. Speculators are now demanding the privatization of the jewel in the crown of state companies in most Latin American countries, the oil industry. In Peru, the sale of Petroperu has already started. The sale of state industries for much less than their real value has nevertheless given money to the state budgets, and a short term breathing space. The question is what is left to sell when even the oil is private?
In the last ten years, financial markets have become the first really globalized markets. This means that imperialist capital can establish a new discipline on governments. Without the pressure from revolutionary movements, any detour from neo-liberalism will be extremely short-lived. Classic Latin American bourgeois populism – state lead protectionist economic development plans, balancing between different international powers, and limited reforms – is dead. This spring, this was again proved by the U-turn of Venezuela’s president Caldera. He won the elections in 1993 with a new party standing against the two parties which had been in power for 35 years. His rhetoric was strongly anti-imperialist, basing himself on the mass protests in 1989 against IMF austerity plans. Now, he has agreed with the same IMF to cut the state deficit from 6.1 percent of GDP to 2 percent. This means a threat against 500 000 of 1.4 million public sector jobs. The newly elected president of Ecuador, Abdala Bucaram, will go the same way, despite some populist rhetoric. And, in both cases, against the opinion of the mass of the people who elected them. In Ecuador, a referendum proposing a strike ban “in essential services” was defeated in 1995.
For a year or two, the policy of economic reform claimed to have achieved spectacular results. In 1991-94, $163 billion poured into Latin America. Of this, $70 billion was foreign direct investments (FDI), $50 billion equities and $43 billion state bonds. Hyperinflation fell to a figure below 10 percent in Brazil, Argentina and Bolivia. “Success for Bolivia”, shouted a headline in a Swedish paper. Among other statements, it claimed that pensioners in Bolivia would gain from privatization. This is in a country where the retirement age is 65, and life expectancy age is 60.
Spectacular economic growth was recorded in Chile, with 6-9 percent a year in almost 15 years. And Argentina seemed to be on the same track, its economy growing 30 percent in 1990-94. Shares in 50 Latin American companies are traded on the New York Stock Exchange. The new economic blocks, NAFTA and Mercosur, opened a new chapter for the Latin American economies. On top of this, Mexico became member number 25 in the OECD, the club of the advanced capitalist countries. Then came December 1994…
The Mexican Crisis at a Turning Point
The “Mexican miracle”, as an example for the rest of the region, was the focus of the main discussions at the “Summit of the Americas”, organized in Miami only 18 months ago in December 1994. The “club of rich nations hails it (Mexico) as the perfect student of economics”, the Economist wrote in an adulatory survey in 1993. Credit was given to the “half dozen men running Mexico – nearly all US-educated”. Mexico’s President Carlos Salinas expressed hope to become “one of the great men of the 20th century”. That was of course before it was publicly known that his brother had $120 million in European banks, apart from suspected involvement in murders within the ruling party PRI. A few weeks after the Miami gathering came “the first crisis of the 21st century”, as it was named by the IMF boss, Michel Camdessas. An attempted limited devaluation started a crisis which today is in its eighteenth month. In the first months the Mexican peso fell from 3,5 to a US dollar to 7.5, and the stock market value was cut by half. GDP fell by 6.9 percent in 1995, and one million jobs were lost. The crisis sent shock waves all over the world. Stock markets fell in Asia; decisions on investments in China and other developing countries were reconsidered; currencies in Spain, Portugal, Sweden and other countries were affected. The biggest effects were of course in Latin America, with a sharp crisis developing in Argentina.
Why Did the Mexican Crisis Occur?
From 1990-93 Mexico attracted most of the capital entering Latin America – $ 92 billion. The bulk was short term money, “while the party lasts”. The Mexican peso was connected to the US dollar, but with much lower productivity. To sustain the exchange rate and attract capital, Mexico had to offer high interest rates, which in turn pushed the current account deficit up, eventually reaching 8 percent of GDP. The limited devaluation of the peso threatened the safe return of capital invested in Mexican bonds and shares. The run started. Behind this was the weak performance of the real economy. Between 1950 and 1980, the Mexican economy was growing on average 6.6 percent a year. In the 90s, no year exceeded 4 percent growth, and GDP per capita was still lower than 1980. The instability was of course increased by the Zapatista uprising of 1994 and the profound political crisis of the PRI. U.S. imperialism had no choice but to intervene, not to save “Mexico”, but to assure US investors in Mexico, as well as the political stability of its neighbor and the prestigious NAFTA. The rescue fund totaled $ 51 billion. $20 billion came from US government funds, $18 billion from the IMF (its biggest project ever), and $10 billion from the Bank of International Settlements and three from commercial banks. Unlike any previous crisis in Mexico, the conditions linked to the package were further “economic reform” and austerity programs. Prices increased dramatically: tortilla, the basic food, increased by 27 percent, petrol by 35 percent, electricity by 20 percent. VAT was increased from 10 percent to 15 percent. New budget discipline means public spending cuts of 10 percent in 1996. The pension system will be “reformed” (i.e. privatized), like in Chile, Argentina, El Salvador and other Latin American countries. Even more important, the US is keeping Mexico’s oil income as a guarantee to ensure debt payments. In 1996, more than one third of Mexico’s export income, $ 28.7 billion, is being set aside for debt payments.
The stabilization plan also contains further privatization programs. In the last months, some optimistic reports on Mexico’s economy have appeared in the international press. These are mainly based on increased export, which is an inevitable result of the fall of the peso, and on the Mexican government’s commitment to further “reform”. Still, the dominating feature is further crisis, not least in the key banking sector, with seven collapsed banks so far.
The “Chilean Miracle” Cannot Be Repeated
The Mexican crisis exposed the hollowness of the boom in Argentina. GDP fell 4.4 percent 1995, plus a fall in the “sister economy” in Uruguay with 2.2 percent. As in Mexico, the Argentinean stock market fell by 50 percent and speculative capital fled the country. The IMF conditions of a balanced state budget in 1996 will fail, and the situation is still getting worse. Since 1992, the Argentinean peso was connected to the US dollar by law, so formally the Mexican way out through devaluation is closed. To sustain this position means a partial East German scenario, with a further slaughter of industry and jobs. On the other hand, to break or change the currency law, probably inevitable at a certain stage, would mean a similar catastrophe, with complete loss of political confidence and prestige, loss of foreign investment and a likely return to hyper-inflation. Argentina is therefore in for explosive crises in the coming years. What about the “economic revolution” in Chile, then? Doesn’t this show the way out? There is without doubt real economic growth and important changes. From his visit earlier this year, Tony Saunois of the International Secretariat compared the sale of individual tea bags in the 80s with the widespread use of walkmans in the 90s. The Chilean government is now planning to invest $ 1.4 billion in education. This would give three extra school hours a day, and a small library in every class room. The Chilean economic growth is based on peculiar circumstances which do not exist in other countries. The Chilean boom is a “post-Civil War boom”. The military junta killed thousands from 1973 onwards, destroyed the unions, slashed the productive forces and created a deep depression. Economic policy since then has been led and directed by the head of the state and the military. The world’s biggest copper mine, Coldeco, is still in state hands, and pays more taxes than all private companies combined. On this basis the upswing has been possible because of the natural resources of Chile. The strong export growth is based on raw materials, with the export of copper, fruit, fish, wood and wine. Finally, Chile is a small part of the Latin American economy, only 4 percent and therefore not able to give an impulse to the economy of the whole continent. The presence of former dictator Augusto Pinochet as head of the military is still an important factor holding back struggle. But now in Chile, there are reports of a new mood developing, with questioning of who is gaining from the boom. Last year, health workers and teachers were on strike, and this year has seen a miners strike against wage cuts and worsening conditions.
The economic future of Latin America will be decided by Brazil, accounting for 35 percent of the continent’s economy. At present, the Brazilian economy has been hit by a deep industrial downturn. For example the Swedish truck company Volvo in Sao Paulo has gone from producing 37 trucks a day to 30 a week. But even when production is increased, jobs are cut. The car industry in Sao Paulo increased production by 57 percent from 1990-95, but with 7 percent fewer workers employed. In those five years, it is reckoned that 1.6 million industrial jobs were lost in Brazil. At the same time, industrial companies in Brazil earn more from financial deals than from production. Economic perspectives for Brazil has to be conditional, but new events like the debt crisis in the different states of Brazil or a bank collapse, could send the economy further down wards.
There is still room for maneuver with privatization, but this can in turn create mass protests and militant struggle. Brazil’s strategy is to develop the trading block Mercosur as a platform. The trade between the Mercosur members has increased fourfold since 1990, and in October, Chile becomes an associate member. But this block is still far away from offering any real way forward. Of the present four member countries, Paraguay and Uruguay make up for only 3 percent of the economy of Mercosur. Of Brazil’s own exports, Mercosur receives 13 percent, compared to 27 percent for the European Union and 19 percent for the US. Many goods are still outside the free trade agreements within Mercosur, and Brazil is in conflict with Uruguay over textile products and Argentina over cars. Mercosur will develop its own “EU-rhythm”, taking some steps forward, combined with crisis and limitations.
The economic impasse of Latin American capitalism is reflected in the crisis of the bourgeoisie politically. Last year’s presidential election “heroes”, Menem in Argentina and Cardoso in Brazil, won because of the lack of a real alternative and their threat of “vote for me or for hyperinflation”. Now, they are on the run. Menem’s Peronists faced a humiliating defeat in June in the elections for mayor in Buenos Aires, coming third with only 18 percent of the votes. Cardoso has faced a dramatic drop in support because of privatization plans for pensions and the cover up of corruption. The two of them could soon join the number of ex-presidents who have been driven out of office, like Collor de Mellor in Brazil in 1992, or even forced to flee abroad, like Alan Garcia of Peru and Carlos Salinas.
In March this year, the council in Yumbo, Colombia, announced the sacking of 271 council workers. The workers reply showed their desperation. Three local union leaders crucified themselves, with nails through bleeding hands and feet. Thousands of local workers and the oppressed then carried the crosses on protest marches around the town. After three days, ambulances came to pick up the leaders, among them the council workers leader named Fidel Castro! As soon as the ambulances left, police attacked the crowd. Two of the protesters were killed and 50 wounded. The situation in Colombia is particularly desperate. There are ten political murders every day, and every fifth killed is a union activist. The guerrilla war has led to 17,000 dead from 1991-94. This spring, the guerrillas have increased their attacks. The president Ernesto Samper is linked to drug money and the US authorities have put him on a black list. “The crisis have shown up a vacuum and the lack of organized opposition – no one know what they want”, one political science professor commented. There are now rumors of a coup, planned by a new “National restoration movement”, backed by businessmen and the US. This could even get some initial support, if it promised to stop killings and corruption. In Venezuela, there were two attempted coups from 1992-93, where a populist anti-IMF-profile got public support. Over the last year, Latin America has seen a number of generalized strikes by the working class, the only force to show a way out. On the 21st of June, 12 million Brazilian workers took part in a general strike, which in numbers must have been one of the biggest in Brazilian history. This was preceded by a one day strike in April by federal public workers against a wage freeze. In 1995-96, Bolivia has seen the most widespread strikes and struggle for a decade, against the neo-liberal education reform. In 1995, general strikes were organized in Peru, Uruguay, Venezuela and general strikes combined with local revolts in at least eight of Argentina’s regions. The oil workers in Mexico and Brazil have been out on month-long militant occupations and strikes against privatization and in defense of the environment. In Mexico the strike was supported by a local uprising in Tabasco.
Politically it seems that the Brazilian workers party, the PT, is going through the same process of bourgeoisification as the Social Democratic and Socialist Parties in Europe. The party leader Lula even went on television condemning the oil workers’ strike. The Chilean Socialist Party is in a bourgeois coalition with the Christian Democrats. The Communist Party has gained in union elections in Chile, without putting forward a decisively alternative program. In most Latin American countries there [have never] existed any mass workers parties. The task in front of the working class in for example, Argentina, is the creation of a workers’ party, with a revolutionary program. Today’s political vacuum opens the way for bourgeois opposition parties like PAN in Mexico and the Radicals in Argentina, or for future Latin American Berlusconis gaining support.
The new world situation has meant the end of classical left wing guerrilla movements like FMLN/FDR in El Salvador. Their political leaders have followed Social Democratic and Stalinist leaders internationally to openly pro capitalist positions. In the same period, we have seen the formation of EZLN, the Zapatista movement in Mexico. The Zapatista uprising started as a broad revolt, triggered by the NAFTA agreement, which abolished article 27 in the Mexican constitution. This article, a legacy of the revolution, promised land to every group of workers who asked for it. But the basis of EZLN was the situation facing Indians in Chiapas: 55 percent are illiterate; life expectancy is 44 years; 70 percent malnutrition etc. The Zapatistas have broad support in the cities and other parts of Mexico. A Swedish reporter met three brothers drinking tequila in a bar in northern Mexico. Only one of them had job, working part time. Neither economic miracles nor crisis meant so much to them, but they were “dreaming of revolution and a Marcos-led government for Mexico”. The Zapatistas have set an example, and a new guerrilla movement the ERP has been formed in the state of Guererro. In this state, the repression is the worst in the whole of Mexico, with 19 peasants killed by a police ambush in June 1995. The EZLN started as a fighting and revolutionary force, but its future is still unclear, lacking a clear program.
The land question is the focus of militant struggle in Brazil. When the movement of the landless, the MST, organized a march of 2,000 in the state of Para in April 23 of them were killed, ten of them after being arrested. It was then exposed that the owners had paid $100,000 to the local police chief to carry out this repression. Today, 40 000 people live on 109 occupied estates in Brazil. The MST has gone from undertaking occupations secretly to declaring their intentions openly in advance, and marching with red banners to the estates. The land question is another field where president Cardoso promised to be different compared to previous presidents, and has failed.
Any new movement in Latin America has a tendency to become anti-imperialist. This is shown by the example of El Barzan, a campaign which claims to organize more than one million debt-trapped Mexicans: farmers, shop owners, self-employed etc. In June they stopped the Mexican finance minister from entering a conference in Monterey, demanding an end of their debt-nightmare. Their slogans are against Wall Street, and they are described as “can’t pay, won’t pay”.
Where is Cuba Going?
Anti-imperialist feelings in Latin America are strengthened by US imperialism’s actions against Cuba. The Castro regime is the biggest remaining thorn in the side of US imperialism. As part of imperialism’s strategy to roll back what workers have achieved, to restore capitalism in Cuba is essential. So also is the defense of Cuba in the eyes of millions of workers. Cuba is an example of revolution, and of social reforms. But, because of the isolation and the policy of the regime, the process of capitalist restoration is on its way. However, the situation is different to Eastern Europe, Soviet Union and China. The regime still has popular support, even though it has been eroded by more recent developments, especially among the youth. Cuba has a ruling class in exile, which never will accept a Nelson Mandela-like role for Castro. While the masses in Eastern Europe looked to the richer West, Cuba’s neighbors are not only the USA, with huge riches alongside all the poverty, but also the absolute destitution of Central America and Caribbean states like Haiti. This points towards the likelihood that the Cuban regime must be overthrown to re-establish capitalism.
The other possible perspective is the one of the European Union and of regimes in Latin America, of reconciliation, to win at least a majority of the Cuban regime over to the idea of capitalist restoration.
Cuba experienced a drop in GDP of 35 percent from 1989-93. This forced the regime to find support from new sources, instead of the Soviet Union and the Stalinist world. Already, 100 percent foreign ownership of companies is allowed. Fiat, Mercedes Benz, Benetton, Heineken and Canon are among the new established companies. Alongside this, there are new co-operatives, self-employed and more independently working state companies. This has increased the wage differentials and created a new pro-capitalist petty bourgeoisie. Today, dollars are needed to get full access to medicine, food and clothes. In 1996, two more steps have been taken. Industrial zones will give 12 years rebates on taxes, labor costs etc. A bank reform aims to “offer services as in all other countries”.
The new Helms-Burton blockade decided by the US in March this year has again united the opposition to imperialism in Cuba. But to sustain this, the regime has to offer economic growth and avoid further steps towards the market. Even a healthy workers’ regime could be forced to make deals with capitalist companies. But only to win time, never for a second losing the perspective that only the international revolution could save Cuba. The worst scenario would be for the Cuban regime going so far in direction of capitalism that it undermines the possible resistance against imperialism. Different international events can affect the development in Cuba, but despite the rhetoric of the regime it has entered the road to capitalist restoration.
Latin American Revolution and the CWI
Latin America is a continent of enormous contradictions. In Brazil, the richest 10 percent owns 43 times more than the poorest 10 percent. In the mother country of inequality, the USA, the difference is 24 times. The poverty and distribution of wealth is similar in Argentina and Mexico. Latin America is also a continent characterized by reaction at different times in its history. The last military regime in Brazil lasted 21 years, from 1964-85. At the end of the 70s most countries were military dictatorships. In the last two years, there have been rumors of coups in Colombia, Paraguay, and even Mexico and Brazil. As The Economist put it in an article on Paraguay from a capitalist point of view: “the problem is democracy”.
In other words, the program of “reform” has to be implemented against the resistance of the masses. At the same time, any attempt towards military regimes in the near future will meet even stronger movements, and are therefore unlikely. The economic counterrevolution has to rely on the fact that there are no a mass political alternatives. The local bourgeoisie are more than ever in the grip of imperialism. Any stand they would take against imperialism could provoke mass movements, which they fear much more than imperialist robbery and domination. This pressure from imperialism is today also extended to unions, workers leaders, guerrilla movements etc.
Latin America is also a continent of rich revolutionary traditions. With a clear Marxist leadership and mass revolutionary workers parties, victorious struggles in Chile, Nicaragua, Bolivia and other countries could have given a new start for the world revolution. Our task is to link Marxism of the 90s to those traditions. In the last year the CWI has taken important steps forward in all countries where we have a presence in Latin America.
The work and debates inside the PSTU in Brazil has strengthened the CWI’s section, there, and this autumn the organization is standing candidates in elections in Sao Paulo and Cotia. Socialismo Revolucionario has organized student protests, and had 30 in a delegation at the Sao Paulo student federation conference. As well in Chile, the CWI’s section, Alternativa Organizacíon Socialista, is standing independent candidates on the PC (Communist Party) lists in the forthcoming elections in Santiago and Talca. We have intervened successfully in the miners’ strike, and a comrade is standing as candidate for leader of the Santiago federation of the Textile workers union. In Mexico, our comrades have produced a platform for intervention in the struggle. There are also CWI members in Argentina, and a number of openings in other parts of the continent. The next step will be a Latin American CWI-bulletin. Important work like this is a key part in forming a mass international, as the first step towards securing a socialist future for Latin America and indeed the whole world.