The Open Veins of Latin America, Part Two

The forced exportation of coffee, bananas, petroleum, and minerals

     During the twentieth century, in the aftermath of the emergence of monopoly capitalism, and facilitated by the development of imperialist policies and neocolonial structures, Latin America continued to play a peripheral role in the world-economy, supplying cheap raw materials to the core on a base of low-waged labor.   Natural resources flowed from the region, as though it were destined to have open veins, as expressed by the imagery of Eduardo Galeano, in his classic work, Open Veins of Latin America, originally published in 1971.

      Coffee, as I noted in my previous post, was first developed as a significant export in the nineteenth century.  Coffee production in the region continued to expand during the twentieth century.  By the 1950s, Latin America produced four-fifths of the coffee that was consumed in the world.  Brazil, El Salvador, Colombia, Guatemala, Costa Rica, and Haiti were the principal producers.  The plantation workers were salaried, but their wages were at the level of superexploitation, meaning that they were paid less than what they needed to live.  And Galeano observes that the forms of social control had in some respects feudal characteristics.

     A tendency during the twentieth century was declining terms of exchange for raw materials exports.  Galeano notes, for example, that in 1967, Colombia had to pay the equivalent of fifty-seven bags of coffee in order to buy a jeep, whereas in 1950, sixteen bags had been enough.  In 1967, Brazil needed 350 bags of coffee to pay for a tractor, but in 1953 seventy bags had been enough.

     As the price of coffee fell, a greater quantity of dollars was taken by the principal consuming country, the United States.  But, Galeano notes, these dollars did not go directly to U.S. citizens, as the price to the consumer continued to increase.  The dollars were usurped by U.S. companies that managed its distribution in the United States.  However, U.S. citizens benefited indirectly, as the distribution and sale of coffee provided jobs for hundreds of thousands of persons, and the usurped capital may have had other positive secondary effects for the U.S. economy.  Galeano writes:

Coffee benefits much more those who consume it than those who produce it.  In the United States and in Europe it generates income and employment and generates a high level of capital; in Latin America it pays hunger wages and accentuates the economic deformation of the countries placed in its service.  In the United States coffee provides work to more than 600,000 persons: the North Americans who distribute and sell the coffee earn salaries infinitely higher than the Brazilians, Colombians, Guatemalans, Salvadorans, or Haitians that plant and harvest the grain on the plantations.

To place these comments in context, I remind that Galeano was writing in 1970, before the global neoliberal project increased inequality, concerning which I will be writing in future commentaries.

     Brazil developed an industry for the production and export of instant coffee.  It produced cheaper and higher quality instant coffee than a younger U.S. industry dedicated to the fabrication of the same product.  But the core countries, Galeano reports, imposed taxes on Brazilian imports of instant coffee, establishing a protectionist obstacle to the development of the Brazilian industry.  This had serious consequences for the economic development of Brazil, inasmuch as instant coffee is a manufactured product developed on a base of higher wages; it is a core-like activity, beneficial for the development of a nation’s economy.  In contrast, the export of coffee beans (whole or ground) is a peripheral activity based on low-waged labor, promoting underdevelopment of the regions where it is produced.

     Banana enclaves in were developed by North American companies in Central America at the beginning of the twentieth century.  In the 1870s, a company owned by a U.S. citizen was granted land in Costa Rica, as payment for the construction of a railroad.  The land was used to cultivate bananas for export to markets in the United States, with Afro-descendants from the English-speaking Caribbean providing a low-waged, superexploited workforce.  In 1899, the company merged with others to from the United Fruit Company, which began to operate plantations in the Caribbean coast in Guatemala.  It subsequently established banana plantations on the Pacific Coast, utilizing labor primarily from the Caribbean and from El Salvador.  The United Fruit Company earned infamy in 1928 through harsh repression of striking banana workers in Colombia; up to a thousand workers may have been killed in what came to be known as the banana workers massacre.

     In Honduras, banana production grew rapidly in the 1890s, and by the 1920s, Honduras had become the world's leading exporter of bananas.  Prior to 1899, there were more than 100 small-scale enterprises, owned by Hondurans, which sold bananas to North American merchants, who in turn sold them in North American markets.  In 1899, two North American banana-producing enterprises were formed (including United Fruit), and a third was founded in 1905.  As the demand for bananas in the world market rapidly expanded, an increasing amount of capital became necessary in order to clear the tropical forest, develop a transportation system, modernize the productive process and develop a system of refrigeration for maritime transport.  The North American producers, with greater access to the necessary credit and capital, were able to become more competitive than the Honduran producers.  By 1911 the three North American producers had displaced the Honduran producers and completely dominated the market.

     The North American banana companies were aided by concessions from the Honduran government in their rapid domination of Honduran banana production and in their rapid expansion after 1911.  These concessions included free grants of the richest land, permission to construct railroads and to control the administration of the railroads, and exemptions from taxes and tariffs on imported equipment and construction materials and on exports.  The government permitted the North American companies to have complete control of the entire system of transportation and commerce on the north coast, the region of the banana production.  The banana companies came to own not only banana enterprises, but also related industries, including transportation, communication, energy, food, and retail outlets.  This dominance by foreign economic interests inhibited the development of a national bourgeoisie able to formulate and defend national interests.  Local elites became employees or consultants of foreign companies, serving as intermediaries between them and the government, defending the interests of the companies and seeking new concessions.  Given the limited potential for local accumulation of capital, and given low-wage labor in raw materials export production, the country would not be able to develop the capital or the home market necessary for industrial development.

     Although sugar, coffee and bananas were significant Latin American exports during the twentieth century, petroleum and mineral resources also came to be essential exportations, integrally tied to the technological development of the United States.  Galeano describes the increasing dependency of the United States on the petroleum and minerals of Latin America during the twentieth century, including copper, tin, iron, bauxite, magnesium, and nickel.  Given their importance in the development of the economic and military power of the United States, Galeano refers to them as the “underground sources of power.” Writing in 1970, he notes that petroleum, copper, zinc, bauxite, iron, manganese, nickel, and tungsten were necessary for the U.S. Armed Forces, which at the time were engaged in the Vietnam War.  He writes:

The growing dependency with respect to foreign supplies causes a growing identification of the interests of North American capitalists in Latin America with the national security of the United States.  The internal stability of the world’s greatest power appears intimately linked to North American investments south of the Río Grande.  Nearly half of these investments are dedicated to the extraction of petroleum and the exploitation of mineral wealth, indispensable for the economy of the United States as much in peace as in war.  

By the 1960s, Latin American governments had granted generous concessions to U.S. companies providing access: to iron, manganese, and radioactive elements in Brazil; to lead, silver, and zinc in Bolivia; to petroleum in Venezuela; to copper in Chile; to nickel and manganese in Cuba (prior to 1959); and to bauxite and manganese in British Guiana.

     With respect to petroleum, Galeano (in 1970) wrote:

No other magnet attracts foreign capital as much as “black gold” . . . . Petroleum is the wealth most monopolized in the entire capitalist system. There are no companies that enjoy the political power that the great petroleum corporations exercise on a universal scale. Standard Oil and Shell lift up and dethrone kings and presidents; they finance palace conspiracies and coups d’état; and they dispose of innumerable generals and ministers; and in all regions and languages, they decide the course of war and peace. . . . The natural wealth of Venezuela and other Latin American countries with petroleum in the subsoil, objects of assaults and organized plundering, has been converted into the principal instrument of their political servitude and social degradation. This is a long history of exploits and of curses, infamies, and defiance.

     The war between Bolivia and Paraguay from 1932 to 1935, Galeano maintains, was provoked by competition between Standard Oil of New Jersey and Shell. Standard financed the Bolivian Army, and Paraguay was backed by Shell. Since Paraguay and Bolivia were among the two poorest countries of South America, the war came to be known as “the war of the soldiers without clothes.”

     Chile has the largest copper reserves in the world.  During the Great Depression, with the consolidation of U.S. neocolonial domination of Latin America and the final displacement of Britain, Chilean copper fell under the control of the United States.  Galeano reports that the two largest reserves were owned by the Anaconda Copper Co. and the Kennecott Copper Co., “two companies intimately tied with each other as part of the same world consortium.” And he maintains that as the owners of copper, they were “the owners of Chile.”

     Galeano writes that Chilean copper expressed the extreme inequalities that pertain to the world-economy.  On the one hand, from the 1930s to the 1960s, the two principal companies had remitted four billion dollars from Chile to their corporate headquarters, even though they had not invested more than 800 million dollars, and nearly all of this investment came from profits earned in Chile.  On the other hand,

Chilean minors lived in narrow and sordid cabins, separated from their families, which inhabited miserable hovels on the outskirts; separated also from the foreign personnel, which in the large mines inhabited a universe apart, a mini-state within the state, where only English was spoken. . . .  The average salary in the Chilean mines was one-eighth the basic salary of the refineries of Kennecott in the United States, even though productivity was at the same level.

The taxes paid by the companies to the Chilean state did not begin to compensate for the exhaustion of this non-renewable resource.  In 1965, Galeano reports, the government signed an agreement with Kennecott that supposedly established the government as a partner, but in fact it established a new tax scheme that enabled the company to triple its profits.

     And then there was tin in Bolivia.  Galeano reports that in the 1870s, Simón Patiño, in a condition half dead from hunger, discovered in the Bolivian high plains the richest vein of tin in the world.  The concentration was so high that the tin could be sent directly to the port, without need for a process of concentration.  Patiño became the “King of Tin” and one of the richest men in the world.  “From Europe he for many years lifted up and overthrew the presidents and ministers of Bolivia, planned the hunger of the workers and organized their massacre, and expanded and extended his personal fortune.  Bolivia was a country that existed in his service.”

     Even after the nationalizing of mining by the Bolivian state, Bolivian mining continued to conform to the peripheral role in the international division of labor, and the Bolivian workers continued to suffer wages of superexploitation and to live in social conditions characteristic of underdevelopment.  Galeano reports that they lived in one-room shacks with dirt floors, with 60% of male youth sharing a bed with a sister.  They lacked bathrooms, having instead small public sheds with latrines; the people preferred the garbage dumps, where at least there was open air.  They had to wait for the delivery of water, collecting it in containers when it arrived.  Meals were limited, consisting of potatoes, noodles, rice, maize, and occasionally tough meat.  During dinner, the minors chewed coca leaves, which function to dull hunger and to mask fatigue.

       The worst, writes Galeano, was the dust, which condemned the minors to death by asphyxiation.   “The slow and quiet death constitutes the specialty of the mine.  Vomiting of blood, cough, and a sensation of a lead weight on the back and an acute oppression in the chest are the signs that announce it.  After the medical analysis come the never-ending bureaucratic pilgrimages.  They give a period of three months to vacate the house.”

     Galeano describes how tin mining destroyed the environment, leaving tunnels as well as accumulated grey mounds from the residue that is left after the tin is separated from the rock.  Rains washed the residual tin and deposited it everywhere.  Everything had the dark color of tin, from the mountain streams to the walls of the minors’ shacks.  

     Galeano also notes the importance of iron: In 1970, 85% of the industrial products of the United States contained steel, and you cannot make steel without iron; and thus is explained the interest of the major U.S. steel corporations in the iron of Venezuela and Brazil during the 1950s and 1960s.  Steel and iron conform to the international division of labor between core and periphery. “Steel is produced in the rich centers of the world, and iron in the poor periphery; steel pays the salaries of the ‘worker aristocracy,’ and iron, day wages of mere subsistence.”

     Galeano observes that U.S. Steel and Bethlehem Steel directly controlled the extraction and exportation of iron from Venezuela.  Since the iron was destined for their own iron and steel works in the United States, their primary interest was in obtaining cheap iron and not in maximizing profits from the iron-exporting activities. Nonetheless, in the single year of 1960, they earned more in profits from the exportation of iron than they paid in taxes to the Venezuelan state during the previous ten years.

     Written in 1970, Open Veins of Latin America formulates the Latin American perspective on its role in the world-economy.  The book provides a concrete presentation of the core-peripheral relation as seen from the peripheral side, organizing the presentation according to the various raw materials that played a role in the development of underdevelopment in Latin America and the Caribbean.  Although the world-system has passed through various stages, there has been continuity in its development, illustrated by the continuous Latin American role as supplier of raw materials for the core of the system: gold, silver, sugar, coffee, bananas, petroleum, copper, tin, and iron have played important roles in the development of a Latin American political-economic system in a distorted form, in dependent relation with the core of the world-system.

     But the suffering of the people has not been forgotten.  Leaders emerged to speak in their name.  Leaders with exceptional capacities to understand the global systemic sources of their suffering, and to exhort them to unified action in their own defense.  Thus, the distorted and dependent Latin American development has given rise to movements that seek, not merely formal independence that is negated in practice by a dependent neocolonial relation, but the full and true independence of Latin America and the Caribbean.  Important moments in this quest for independence from the neocolonial world-system include: the Mexican Revolution; the Cuban Revolution; revolutionary democratic socialism led by Salvador Allende in Chile; the Sandinista Revolution in Nicaragua; and the reform/revolutionary movements that have transformed Latin America today, led by Hugo Chávez in Venezuela, Evo Morales in Bolivia, and Rafael Correa in Ecuador.   I will be discussing these movements in future commentaries.

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Preface - April 6, 2021

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