Make your work easier and more efficient installing the rrojasdatabank  toolbar ( you can customize it ) in your browser. 
Counter visits from more than 160  countries and 1400 universities (details)

The political economy of development
This academic site promotes excellence in teaching and researching economics and development, and the advancing of describing, understanding, explaining and theorizing.
About us- Castellano- Franšais - Dedication
Home- Themes- Reports- Statistics/Search- Lecture notes/News- People's Century- Puro Chile- Mapuche

World indicators on the environmentWorld Energy Statistics - Time SeriesEconomic inequality

(The excerpts that follow are a useful set of ideas and facts in the
process of understanding modern economic imperialism and the role that
United States' ruling class has played in the building of the
contemporary 'globalized' economy. Rˇbinson Rojas).

From Monthly Review, Vol. 21, No 11, April 1970:
Eduardo Galeano

Colonialism and Dependence

In "Imperialism, the Highest State of Capitalism", Lenin warned, in
refuting Kautsky, that the domination of finance capital not only
does not lessen the inequalities and contradictions present in the
world economy, but on the contrary accentuates them.

Time has passed and proven him right. The inequalities have become
sharper. Historical research has shown that the distance that separated
the standard of living in the wealthy countries from that of the poor
countries toward the middle of the nineteenth century was much smaller
than the distance that separates them today.

The gap has widened. In 1850 the per capita income in the industrialized
countries was 50 per cent higher than in the underdeveloped countries.
To have an idea of the progress that has been achieved in the
DEVELOPMENT OF INEQUALITY, we have only to listen to President Richard
"...and I think about what this hemisphere, the new world, will be like
at the end of this century. And I consider that if the present growth
rates of the United States and the rest of the hemisphere have not
changed, at the end of this century the per capita income in the United
States will be 15 times higher than the income per person of our
friends, our neighbors, the members of our family in the rest of the

The oppressed nations will have to grow much more rapidly just to
MAINTAIN their relative backwardness. Their present low rates of
development feed the dynamic of inequality: the oppressor nations are
becoming increasingly rich in absolute terms, but they are richer still
in relative terms.

The overall strength of the imperialist system rests on the necessary
inequality of its component parts, and that inequality is achieving ever
greater proportions.

Capitalism is still capitalism, and unequal development and widespread
poverty are still its visible fruits.

"Centralized" capitalism can afford the luxury of creating and believing
its own myths of opulence, but myths cannot be eaten, and the poor
nations that constitute the vast capitalist "periphery" are well aware
of this fact. Imperialism has "modernized" itself in its methods and
characteristics, but it has not magically turned into a universal
philanthropic organisation. The system's greed grows with the system

Nowadays imperialism does not require the old-style colonial
administrations. The archaic Portuguese model of control over Angola
and Mozambique is no longer the most "convenient". Lenin described the
reality of his time, saying that " capital finds it
most 'convenient', and is able to extract the greatest profit from a
subordination which involves the loss of the political independence of
the subjected countries and peoples".

In his report to the Twenty-second Congress of the CPUSSR in 1961,
Nikita Khruschev reached the conclusion that "imperialism has
irrevocably lost its control over most of the peoples of the world."
According to his report, 40.7 percent of the population of the world,
without counting the socialist countries, had won their independence
after 1919, and the total number of people living in colonies, semi-
colonies, and dominions included, at the beginning of the 1960s, less
than 3 percent of the world's population. "The revolutions of national
liberation have dealt a demolishing blow to the colonial Bastille",
Khruschev said. "Forty-two sovereign states have emerged on the ruins
of the colonial empires."

In this connection, it can well be said that Latin America is a
prophetic zone within the Third World. The political independence of
almost all the Latin American countries dates back to the beginning of
the nineteenth century. IT WAS AS A RESULT OF THAT INDEPENDENCE,
from the "foreign" viceroys to "national" merchants advocating free
trade, but it was precisely then that all obstacles were removed for the
total incorporation of the entire region into the international division
of labour that was centered in England.

The words "sovereignty" and "independence" were not then, and still are
not in most cases, more than the lip service that vice pays to virtue.
In reality, most Latin American countries have never controlled their
own internal markets nor the destination of the economic surplus
generated by their productive forces.

The control of their basic resources has always been in foreign hands,
either through direct appropriation of the sources of the production of
raw materials and food, or through the monopoly of demand in the foreign

The humiliating conditions under which they have received "foreign aid"
have always facilitated the penetration of foreign products and capital.
Exactly one century after Argentina achieved its "independence", Lenin
was able to describe that country as a British semi-colony, and he
warned that "finance capital is such a great, it may be said, such a
decisive force in all economic and international relations, that it is
capable of subordinating to itself, and actually does subordinate to
itself, even states enjoying complete political independence".
Subsequently this Latin American nation, perhaps the most fortunate in
its relations with imperialism, passed through a rather intense process
of industrialisation and accelerated urbanization: Buenos Aires is one
of the largest and most attractive capitals in the world. But this does
not keep Argentina from being today a U.S. semi-colony, at least in
regard to its oppressive financial dependency on Washington and the
omnipotence that direct investments by U.S. corporations enjoy in its
internal market.

The threads that make up the dense web of imperialist power have
multiplied and become more subtle. It is not by chance that the world-
wide process of capitalist integration under the hegemony of the United
States, a process filled with tension and conflict, has coincided with
the irreversible decline of the old colonial powers and their methods
of control.

The eminent Brazilian anthropologist Darcy Ribeiro described the new
situation in America as follows:

"Hegel, in his classic study on the philosophy of history, foresaw the
 war between the Latin and Anglo-Saxon peoples of the Americas. This
 war is already taking place. However, instead of troops movements and
 pitched battles, it is being waged by conspiracies, bribery, contracts,
 intimidation, coups, programs of sociological studies, economic plans,
 and publicity campaigns. Through these means of pressure and
 compulsion, the United States is implementing, extending, and
 strengthening its own plan for exploiting our resources, organizing our
 societies, regulating our political life, determining the size of our
 population, and determining our destiny." (2)

The Investments Change Their Direction

The First World war was followed by the well-known withdrawal of
European interests from certain underdeveloped areas of the world. In
Latin America, due to obvious geopolitical reasons, the devastating
advance of U.S. imperialism took place before and with greater speed
than it did in other regions; already by the end of the nineteenth
century the Caribbean was the MARE NOSTRUM of the United States.

When Lenin wrote his book on imperialism, however, U.S. capital still
represented less than a fifth of all private, direct, foreign investment
in Latin America; today it represents close to three fourths.

What concerns us most here is to point out that after the Second World
War there was an important change in the direction of these investments.
The tendency is clear. Capital invested in public services and mining
has been losing its relative importance, while the proportion invested
in petroleum and, above all, in manufacturing industries is increasing.
Forty years ago U.S. investments in manufacturing represented only
6 percent of the total value of U.S. capital in Latin America; in 1960
the proportion had come close to 20 percent; and at present almost a
third of total U.S. investments is in manufacturing.

The three largest countries in Latin America -Argentina, Brazil, and
Mexico- are the ones that offer the most attractive markets for foreign
industrial capital. The Organization of American States (OAS), the
United States' traditional "Ministry of Colonies", describes the process
as follows:

"Latin American enterprises are beginning to achieve superiority over
 already established industries and technologies of lesser
 sophistication, and private North American investments and probably
 also investments from other industrialized countries are rapidly
 increasing their participation in certain dynamic industries that
 require a relatively high degree of technology and are more important
 in determining the course of economic development." (3)

The penetration has been successful; the potential of U.S. factories
located south of the Rio Grande is much greater than that of Latin
American-owned industry in general. It can be seen from data released
by the U.S. Department of Commerce and the Inter-American Committee of
the Alliance for Progress that, based on an index of 1961=100,
industrial production in Argentina rose to 112.5 in 1965, while during
the same period sales by U.S. subsidiaries in Argentina rose to 166.3.
The respective figures for Brazil are 109.2 and 120; and for Mexico,
142.2 and 186.8.

Of the fifty largest Argentinian businesses (those with a sales volume
in excess of 7 billion pesos annually), half of the sales volume
originates in foreign businesses, a third in state enterprises, and only
a sixth in private Argentinian businesses.(4)

In 1962, two enterprises operating with private Argentinian capital
ranked among the five largest industrial enterprises in Latin America;
by 1967 both of them had been taken over by foreign capital.(5)

A study carried out by the Institute of Social Sciences of the Federal
University of Rio de Janeiro and published in 1965 revealed that of the
fifty-five multi-billionaire private groups in the Brazilian economy,
twenty-nine were foreign, twenty-four Brazilian, and two of mixed
foreign and Brazilian capital; of the Brazilian groups, only nine had
no links through stockholders with foreign groups or enterprises. A
subsequent study by the Brazilian Congress provided new data which spoke
eloquently of the denationalization process that is proceeding at
breakneck speed in that country's industry.(6) A minister of the
Brazilian government said publicly in 1969 that "with a few honourable
exceptions, the only strong sector in Brazil, besides the government
itself, is foreign capital".(7) His statement is valid not only for
Brazil. According to figures published in 1962, fifty-six of the hundred
most important enterprises in Mexico are totally or partially controlled
by foreign capital, twenty-four belong to the state, and twenty to
Mexican private capital.(8) These twenty private Mexican concerns
account for barely 13.5 percent of the total sales volume of the one
hundred enterprises under consideration.

Except in the case of petroleum and some public services -activities in
which the state clearly predominates in Argentina, Brazil, and Mexico-
almost all of the other enterprises included in the above-mentioned
studies are manufacturing industries, and it is precisely in this sector
that foreign capital is most prominent.

If this is the situation in the strongest countries in Latin America, it
would be redundant to offer examples of foreign penetration of the few
industries in the weaker countries. By far the largest part of these
investments in manufacturing belongs to U.S. corporations, although
there are European enterprises with quite considerable interests in
Latin America. For example, Volkswagen do Brasil, the largest
manufacturer of automobiles in Latin America, is a German concern.

The interest of imperialist corporations in appropriating the fruits of
Latin American industrial growth for themselves and capitalizing it for
their benefit does not imply, certainly, a lack of interest on their
part in all the other traditional forms of exploitation. It is true that
the railway which used to belong to United Fruit in Guatemala was no
longer profitable and that Electric Bond and Share and the International
Telephone and Telegraph Corporation made a splendid profit when their
properties were nationalized in Brazil and they were paid indemnities in
gold for outmoded installations.

But this abandonment of public services in search of more lucrative
activities does not occur in the case of many raw materials and
foodstuffs. While a relative decline has been registered in the total
volume of new investments in minerals, the U.S. economy cannot do
without the supply of vital materials coming from the southern part of
the hemisphere.

In THE AGE OF IMPERIALISM, Harry Magdoff has shown that the
United States' need for iron, copper, and long list of strategic
materials is steadily increasing; the proportion of imports is growing
as the internal production of the United States declines. This is also
the case with petroleum. After all, the splendid iron deposits in the
Brazilian valley of Paraopeba caused the fall of two Presidents before
the deposits were graciously ceded to the Hanna Mining Company; copper
certainly has something to do with the disproportionate amount of
military aid that Chile receives from the Pentagon; bauxite was
certainly a factor in the conspiracy to overthrow Cheddi Jagan in
Guyana; Cuban nickel explains the blind fury of the Empire even better
than sugar; while the largest U.S. military mission in Latin America is
located in Venezuela, the great oil preserve of Standard Oil and Gulf.

But all of this should not keep us from emphasizing the importance of
this new phenomenon, which has occurred long after Lenin's period: the
capture of markets FROM WITHIN. The affiliates of U.S. and European
corporations jump at a single leap over Latin American tariff barriers,
paradoxically erected against foreign competition, and seize control of
the internal processes of industrialization. They export factories or,
frequently, take control of and devour the already existing national
factories. For this they can count on the enthusiastic aid of the
majority of the governments of Latin America.

Under the Sign of Progress?

"The export of capital," wrote Lenin, "greatly affects and accelerates
the development of capitalism in those countries to which is exported".
Historical experience has demonstrated that this is not so. The
imperialism that Lenin knew -the greed of industrial centers in the
search for world markets for their excess production and the capture of
all the possible sources of raw materials; the extraction of iron, coal,
and oil; the railways cementing their control of the areas under
exploitation; the usurious loans made by the financial monopolies; the
military expeditions and the wars of conquest -certainly did not
accelerate anything except "the development of underdevelopment", as
Andrew Gunder Frank expresses it so well. Contrary to Midas, imperialism
has turned everything it touched into scrap.

But now some are tempted to deny this, basing themselves on the
supposedly different situation that exists today. It is possible that
Lenin was mistaken when he attributed an accelerated effect on
development to the "old model" of imperialist exploitation, they argue,
but this is not the case with the "new model". There is no lack of
technocrats today prepared to demonstrate that foreign capital, in its
new positive guise, benefits the areas it penetrates. To the degree that
the model of exploitation has changed, they tell us, its consequences
have also changed. Previously, imperialism razed the places where a
colony or semi-colony might have dared to erect its own factories, but
now the rich countries stimulate the industrialisation of the poor
nations. This "industrialising imperialism" of our day, they maintain,
contrary to the imperialism of past times, has an inevitable civilizing
effect on a universal scale. Now guilty consciences no longer need
alibis, since they are no longer guilty; modern imperialism radiates
technology and progress, and it is even in bad taste to use that hateful
word to describe it.

What actually are the effects of the increasing shift of foreign
investment toward manufacturing industries in Latin America?

In the first place, it is necessary to note that this process of
industrial denationalisation has not required a large influx of capital.
After all, direct investments of U.S. origin in 1966 in Argentinian,
Brazilian, and Mexican industry, so important for the virtual
monopolization of "key" manufacturing industries, was barely 3, 3.8, and
3.6 percent respectively, of the total amount of U.S. capital invested
on a world-wide basis.

And it must be noted that even those investment figures are inflated. In
effect, since the rapidity with which technology is advancing is
shortening at an ever increasing rate the length of time needed for
amortization of fixed capital in the advanced economies, the vast
majority of the manufacturing installations and equipment exported to
Latin America has already passed through a complete productive life
cycle in its country of origin and has been completely or partially
amortized before it is exported. This "detail" is not considered for the
purposes of calculating the amount of foreign investment -the value
placed on the machinery is fixed at an arbitrarily high level and would
not be even remotely so expensive if the frequent cases of prior
depreciation were taken into account. But why should the parent company
incur expenses to produce in Latin America goods which were previously
sold there after being manufactured in the home country?

The Latin American governments themselves make sure that the foreign
companies do not incur these expenses, by extending aid to the
affiliates that are being installed, they say, to redeem the Latin
American countries from their condition of underdevelopment. The
affiliates have access to local credit from the moment they first post
a sign on the land where the factory is to be built; they can count on
foreign exchange privileges for their imports -imports which the
companies usually purchase from themselves- and in some cases (such as
Brazil) they can even count on special exchange rates for the payment
of their foreign debts, which frequently are debts that they owe to the
financial branch of the same corporation.

The affiliates are also exempted from numerous taxes over long periods
of time, and it is even common for them to receive guarantees against
the risk of expropriation and monetary devaluation. 

They finance their subsequent expansion by reinvestment of part of their
juicy profits, and, above all, by means of the credit they receive in
the country where they are operating. According to the OAS, an
unimpeachable source in this respect, barely twenty cents of every
dollar that U.S. industrial affiliates use for their operations and
expansion come from the United States. The remaining eighty cents come
from Latin American sources, through credits, loans, and the retention
of profits. U.S. affiliates employ Latin American capital almost
exclusively to finance their various operating needs. (9)

This channeling of national resources into foreign enterprises is due in
large part to the proliferation of U.S. bank branches spread throughout
Latin America in order to pour national savings into foreign hands.
There were 78 branches of U.S. banks in the area in 1964; in 1967, the
number had risen to 133.(10) The Bank of New York acknowledges publicly
that the most important among its new goals in Latin America is the
capture of domestic savings for the benefit of the multinational
corporations, so as to meet their productions and sales needs. (11)
It is worthy to note that the number of national banks which, without a
change of name, are coming under foreign banking control is growing.
Even those Latin American banks which have not been infiltrated or
captured find it highly convenient to satisfy the credit requests of
foreign affiliates, which are solidly backed and have a very
considerable sales volume. The mobilization of local resources does not
have, of course, the slightest effect on the capital structure of these
enterprises. In general, 99 percent of the affiliates' stock is
controlled by the parent corporation. (12)

A form of foreign penetration which does not require any investment at
all is becoming increasingly common in Latin America. Even the OAS
itself recognizes in the above-cited document that the development of
U.S. companies in Latin America is due to a great degree to "the
acquisition of Latin American industrial enterprises by U.S. interests,
a phenomenon that has been observed over the last few years". Every
method of financial coercion is employed for this purpose, including
dumping, financial blackmail, and the infinite possibility for exerting
financial pressure provided by an overwhelming technological

The old mechanism by means of which the creditor acquires the debtor's
property, for example, is employed on a large scale. Debts acquired
through the purchase of supplies, the use of patents and trademarks,
etc., complicated by monetary devaluations that force the national
enterprise to pay more pesos for the same amount of dollars, frequently
lead to bankruptcy.

Since the end of the 1950s, economic recessions, monetary instability,
tighter credit, and the drop in the buying power of the internal market
have all facilitated the task of bringing national enterprises to their
knees before the large foreign corporations. Besides, since the
affiliates of these corporations are no more than cogs in a world-wide
system, they can afford the luxury of losing money for a year or two or
indeed for whatever time is necessary. Consequently, the lower their
prices and wait for their victim's demise. The siege begins. The banks
collaborate, and the national enterprise is found not to be solvent as
it seemed -it is therefore denied assistance. The national enterprise,
completely surrounded, soon raises the white flag. Both sides then
merrily celebrate the surrender. The Latin American "national
bourgeoisie", which was produced by the old agricultural exporting
system, rediscovers its destiny -the local capitalist becomes either a
junior partner or a functionary of his conquerors. Or he gains the most
coveted prize of all: he receives the ransom of his goods in stocks in
the foreign parent corporation and ends his days living the soft life
of a shareholder.

The great corporations, then, do not need to bring many dollars along
with them. Quite to the contrary, they take them out of the country.
"Under modern capitalism, when monopolies prevail, the export of CAPITAL
has become the typical feature", wrote Lenin. In our days, as Baran and
Sweezy have pointed out, imperialism imports capital from the countries
where it operates. In the 1950-1967 period, new U.S. investments in
Latin America totaled, without including profits which were reinvested,
$3,921 million. In the same period, $12,819 million were repatriated by
those enterprises in profits and dividends. The earnings which have been
drained off are more than three times as much as the total amount of new
capital invested in Latin America. But this is a conservative estimate.

A good part of the money which was sent back to the U.S. as amortization
was really profits, and the figures also do not include payments abroad
for patents, royalties, and technical assistance; nor do they reveal
other invisible transfers that usually appear under the heading "errors
and omissions"; nor do they take into account the profits that the
corporations receive when they inflate the prices of supplies sold to
their affiliates and when they inflate, with equal enthusiasm, their
operating costs. The negative flow of capital reflects increasingly
greater profits, above all in the most underdeveloped areas: Latin
America, Africa, and, to an even greater degree, Asia.

The profound structural deformations in the Latin American economy,
which can be seen everywhere and at all times, like a bone laid bare by
a wound, are also reflected in the simple and terrible fact that half of
all investments in Latin America are of a unproductive nature.(13)

The "internationalization" of the industrial process has only increased
this waste, allowing the economic surplus produced in the region to be
drained off by foreign interests. It is becoming more and more evident
that the bread of the oppressive minorities in Latin America is the
poison of the oppressed majorities; south of the Rio Grande private
interests coincide less and less with public interests. Foreign
investment in industry does not alter this picture of things; it only
confirms it in a dramatic fashion.

When they remove more dollars than they bring, the foreign enterprises
help increase the growing deficit in the balance of payments; THE REGION

And it is important to observe that the international credit
organizations play a very important role in dismantling the defensive
citadels of Latin American industry. Lenin rightly emphasized the fact
that the export of finance capital is, for the imperialist countries, a
means of stimulating the export of goods. In this sense, the conditions
attached to loans made by the Alliance for Progress, "tied" to the
purchase of goods and services in the United States, are instructive.
This holds true to such an extent that the portion of REAL aid in
official U.S. financial assistance to Latin America is less than half
the amount of NOMINAL aid, again according to unimpeachable sources,(14)
as a result of the conditions under which is given.

The changes announced by President Nixon do not significantly alter the
situation. But it is still more important to note the importance of
international credit in "clearing the way" for direct investments by the
large corporations. "The characteristic feature of imperialism", wrote
Lenin, "is NOT industrial capital, BUT finance capital." The evolution
of capitalism since then implies and evolution of imperialism.

In the last half century changes has taken place within the capitalist
system; in the United States banks no longer control industrial
corporations, but are instead integral parts of the same system.(15)

And just as the multinational corporations are multinational because
they operate in the four corners of the capitalist globe, while their
property is in no way international, so the international monetary
organizations are in no way at the service of the numerous countries
that provide the capital with which they operate, but instead fulfill
the designs of the great integrating power of world capitalism - the
United States. The death of the system based on the gold standard, which
signaled the definitive decline of the British Empire, enormously
increased the international supply of finance capital and made possible
the appearance of organizations such as the World Bank, the
International Monetary Fund, and, on the regional level, the Inter-
American Development Bank, which reserve for themselves the right of
governing the Third World and of determining the course to be followed
by the countries that benefit from the credit they extend. The presence
of the marines is becoming less and less necessary; the international
technocrats disembark instead (tears flow, not blood) and mount assaults
on the central banks and the key ministries of the poor nations.

With its direct investments, imperialism bleeds dependent economies.
With its loans, it administers the drug neccesary to keep them on their
feet and takes control, in an increasingly arrogant way, of the internal
power structure. Imperialism first makes its subject ill, and then it
constructs the hospital in which the patient lies imprisoned and without
any possibility of being cured. Latin America is now living through what
economists call the "debt explosion". It is a vicious circle of
strangulation: loans and investments increase, and as a result the
payments of amortizations, interests, dividends, and other services also
increase. In order to make these payments, new injections of foreign
capital that generate greater obligations are needed, and so on
successively. According to the World Bank, payments for services in 1980
will completely cancel out the influx of foreign capital to the
underdeveloped world. In the decade 1956-1965, Latin America's public
foreign debt climbed from $4 billion to close to $11 billion. In 1965,
the influx of credit was already less than the capital leaving the
region to meet commitments previously contracted.

The World Bank, the Alliance for Progress, and U.S. private banks make
their loans contingent on approval by the International Monetary Fund
(IMF). The IMF uses the magic phrase "monetary stabilization" to impose
on Latin America the policies of liberalization of trade, tightening
internal credit, freezing wages, discouraging state activities, and
monetary devaluations that are theoretically intended to stimulate
exports but that in fact only stimulate the internal concentration of
capital in the hands of the large landowners, the bankers, and the big
speculators. This is a policy intended to destroy national defenses
against the omnipotent penetration of foreign private capital. THE

All these imperialist organizations for international philanthropy
insist on the struggle against internal and external imbalances in the
Latin American economy. Their prescriptions correspond to the diagnosis.
We cannot, given the brevity of this study, demonstrate the many ways by
which the policy imposed by them aggravates those imbalances instead of
lessening them. What interests us here is simply to observe the effect
that imperialist investments in the field of industry have on one of the
most important factors in Latin American economic imbalance -foreign

The "trade gap" is becoming wider and wider because the need to import
products is growing steadily in relation to the financial resources
generated by exports. Only a tenth of Latin American exports are
provided by manufactured products. The region depends on sales of
unprocessed or hardly processed primary products that have very unstable
prices on international markets controlled by the rich countries and
their powerful corporations.

Latin American exports grow in volume but their prices tend to fall -or,
in the best of cases, they remain stagnant- while the prices of
industrialized products imported by the region rise. Buying power is
diminishing. Taking 1950 prices as a base and adding data from various
documents published by the United Nations Economic Commission for Latin
America and the UN itself, it can be seen that Latin America lost, due
to the deterioration of its terms of trade, more than $18.5 billion in
the ten years from 1955 to 1964. Now then, IMPERIALIST INVESTMENTS IN
ECONOMIES. The importance of "traditional" exports is actually growing
within the total picture rather than diminishing, and the proportion of
foreign sales by foreign affiliates is steadily decreasing within the
total volume of sales.

The head of a U.S. technical mission to Brazil, John Abbink, announced
prophetically in 1950:
"The United States must be prepared to 'guide' the inevitable
industrialization of underdeveloped countries if it wants to avoid the
blow of very intense economic development outside of U.S. influence...
Industrialization, if it is not controlled in some way, will lead to
a substantial reduction in U.S. export markets."(16)

There was absolutely no reduction in the Latin American market for U.S.
goods. One of the paradoxes of industrialization to REDUCE imports is
that it forces an INCREASE in imports. Certain goods that previously
were imported are produced internally, but such internal production
generates a "derivative" demand for intermediate products and capital
goods, the magnitude of which goes far beyond the original saving in
foreign currency. The United States now sells Latin America a greater
proportion of more sophisticated products requiring a higher level of

"In the long run", says the U.S. Department of Commerce, "as Mexican
industrial production increases, there are greater opportunities for
additional exports from the United States...."(17) The affiliates of
great corporations have leaped the tariff barriers to supply Latin
American markets from within, and they obtain additional benefits to the
degree that they make purchases abroad, buying materials from their
parent corporations or from other affiliates at prices set deliberately

This imperialism that even exports entire factories corresponds to the
highest state in the development of monopoly capitalism. In Lenin's
time, free competition was already a museum piece. Today the
corporations comfortably enjoy the control of prices in the countries
where they operate.

In Latin America they protect themselves behind a Chinese Wall of
protective tariffs to produce, at prices two or three times higher,
products that they used to export to our countries from abroad.
Investments are low, manpower is as abundant as it is cheap, and the
state subsidizes the financing of installment buying. Nevertheless,
everything is more expensive. Control over the market is facilitated by
the complete freedom which these enterprises enjoy, by the magic prestige
of U.S. trademarks and advertising slogans in English, benefiting from
an unparalleled and effective international publicity campaign, and from
the fact that foreign industrial investments control the "modern sector"
of the dependent economies which, by its own dynamics, subordinates all
the other sectors to it.

The internal markets, then, provide juicy profits, even though the
significant consumers in Latin America represent only a very small part
of the total population. Barely one out of every four Brazilians can be
considered a real consumer. The population is growing at a dizzy rate,
and yet the development of dependent capitalism -a voyage with more
disasters than survivors- leaves more people on the margin of the
economy than it integrates into it.

In the majority of Latin American markets there is only an elite with
buying power. Foreign industry is aimed, above all, at that elite, and
it does not show the slightest interest in expanding the consumption of
the masses beyond a certain limit. The market could only be expanded
both horizontally and vertically if profound changes were made in the
entire socio-economic structure.

Fernando Henrique Cardoso has noted (18) that national capital in
Argentina and Brazil is strongest in the "traditional" industrial
sectors, those with a low technological level which depend to the
greatest degree on a mass market, while the foreign affiliates or the
national capitalists subjected to "structural dependency" only "require
the strengthening of economic links between the islands of development
in the dependent countries and the international economic system, and
subordinate internal changes to this primary objective."

The studies that have been carried out concerning the need for agrarian
reform are very instructive in this regard, above all if one takes into
account the fact that the agrarian question is the main bottleneck in
Latin American development. In Argentina as well as in Brazil, "the
managerial sector shows a marked tendency to oppose agrarian reform"(19),
and the studies that have been made show clearly that the more dependent
the managerial sector is on the "international mode of production", the
sharper is its opposition to changes in the agrarian structure. The
industrially less complex sectors are the ones that favor drastic
broadening of the market.

The most complex sectors, when they represent national capital, are
usually bound to foreign interests by their technological or financial
dependency, and the payment on account of patents, profits, interest,
royalties, stock dividens, or "know-how" is accompanied by an attitude
of resistance to possible structural changes. There is a direct
relationship between the manager's degree of dependency and his
political panic when there is the slightest possibility  of change in
the power structure from which he benefits. The LATIFUNDIUM continues
untouched -it is his ally.

The continued existence of the rural LATIFUNDIUM generates a constant
and growing flow of workers moving from the countryside to the cities,
but the factories do not provide employment for the surplus workers.

On the contrary, industrial productivity is increasing in the face of
ever-diminishing job opportunities -and Latin America has the highest
demographic growth rate in the world. The "internationalized"
industrialization has an exclusive character; the enterprises bring a
technology along with them to save on manpower in countries where

Factory workers represented 14.5 percent in the decade of the fifties,
but only 11.6 percent in the decade of the sixties.(20) A fourth of the
active population is currently unemployed or underemployed; in the large
cities a growing multitude is crammed into the 'favelas', the 'villas
miseria', the 'ranchos', the 'cantegriles', and the 'callampas', broad
belts of poverty around the wealth of the urban centers. The system
vomits forth men, but industry gives itself the luxury of sacrificing
manpower to an even greater degree than European industry does.(21)

In contrast to the "classical" models of capitalist development, there
is no coherent relationship between available manpower and applied

Rich lands, vast underground wealth, and very poor people -that is the
panorama presented by this realm of abundance and need. Great numbers of
workers are abandoned by the roadside by the system which condemns them
to a marginal existence and frustrates the development of the internal
market and lowers the wage level. The eruption of the urban bourgeoisie
onto the stage of history has not provoked, in contrast to Europe and
the United States, any agrarian revolution; dependent industrialization
functions on the structure just as it is. It is true that "poles" are
developing around which the production and wealth of each country are
being concentrated, but they do not share the benefits of their growth.
They are oases of prosperity in the desert, the shining cities that
feign their existence amid the desolate landscape of widespread poverty.

The new type of foreign capital, which raises smokestacks in
underdeveloped areas, is concentrated around these poles in such a way
that it not only sharpens social contradictions by segregating the
labour force and polarizing wealth still further, but also sharpens
regional contradictions within the borders of each country and within
the overall limits of Latin America. The efforts that are being made to
form a Latin American Common Market reflect, in this sense, the desire
to lay the basis for a new division of labour that would benefit the
most developed urban centres, thus broadening the markets for the
denationalized industry, while leaving intact the structure each country
must endure.

The native Latin American bourgeoisie, a bourgeoisie of merchants
without creative spirit, connected by its umbilical cord to the power
of the land, is on its knees before the altar of the goddess technology.
It is in the name of technological progress that national enterprises
pass into the hands of foreign interests, sometimes in the most direct
and brutal fashion and at other times through the consolidation of
multiple hidden forms of dependency.

Raul Prebisch himself warns that "U.S. enterprises in Europe install
laboratories and engage in research that helps strengthen the scientific
and technical capacity of those countries, something which has not
occurred in Latin America." And he reveals a very serious fact.
"National investors," he says, "due to their lack of specialized
knowledge (know-how), carry out most of their transfer of technology by
This "national" bourgeoisie with its clipped wings is defeated in
advance. The great multinational corporations, which stand at the
controls of technological progress, obviously also hold the keys to the
Latin American economy. The transfer of power to foreign interests is,
when things are seen in their proper perspective , much more serious
than the statistics indicate. It is also necessary to keep in mind that
the large imperialist investments in the most dynamic sectors of the
Latin American economy provide those corporations with limitless power
to manipulate the consumer market, which is increasingly attracted by
U.S. advertising, to channel national savings and the economic surplus
produced by our countries, to use advertising and the various other ways
of creating public opinion, and, also, to exert that political pressure
required by imperialism's digestive needs.

The new type of imperialism does not make its colonies more prosperous,
even though it enriches its "enclaves"; it does not alleviate social
tensions, but on the contrary sharpens them; it extends poverty and
concentrates wealth; it takes over the internal market and the key parts
of the productive apparatus; it appropriates progress for itself,
determines its direction, and fixes its limits; it absorbs credit and
directs foreign trade as it pleases; it does not provide capital for
development, but instead removes it; it encourages waste by sending the
greatest part of the economic surplus abroad; it denationalizes our
industry and also the profits that our industry produces. Today in Latin
America the system has our veins as open as it did in those distant
times when our blood first served the needs of primary accumulation for
European capitalist development.
(Translated by William Rose)


1.- Richard M. Nixon, speech to the OAS, April 14, 1969. Of course, it
    is also necessary to take into account the rate at which the gap
    separating the poor from the rich widens WITHIN Latin American
    countries -per capita income is a deceptive average.

2.- Darcy Ribeiro, "El dilema latinoamericano", unpublished.

3.- General Secretariat of the OAS, "El financiamiento externo para el
    desarrollo de la America Latina" (Washington, 1969). A document of
    limited distribution presented to the sixth annual meeting of the
    Interamerican Economic and Social Council.

4.- Quoted by the United Nations Commission for Latin America ("Estudio
    Economico de America Latina", 1968).

5.- Rogelio Garcia Lupo, "Contra la ocupacion extranjera" (Buenos
    Aires, 1968).

6.- See Eduardo Galeano, "The De-nationalization of Brazilian Industry",
    MONTHLY REVIEW, December 1969.

7.- Speech by Minister Helio Beltrao before the Commercial Association
    of Rio de Janeiro, CORREIO DO POVO, May 24, 1969.

8.- Jose Luis Cecena, "Los monopolios en Mexico" (Mexico, 1962)

9.- OAS, op. cit.

10.- International Banking Survey, JOURNAL OF COMMERCE, New York,
     February 25, 1968.

11.- Robert A. Benett and Karen Almonti, "International Activities of
     United States Banks (New York, 1969).

12.- Celso Furtado, "La economia latinoamericana desde la Conquista
     Iberica hasta la Revolucion Cubana (Santiago de Chile, 1969).

13.- Aldo Ferrer, "Distribucion del ingreso y desarrollo economico",
     EL TRIMESTRE ECONOMICO, Mexico, April-June, 1954.

14.- OAS, op. cit.

15.- Paul Baran and Paul M. Sweezy, Monopoly Capital (New York, 1966)

16.- JORNAL DO COMERCIO, March 23, 1950.

17.- INTERNATIONAL COMMERCE, a U.S. Department of Commerce weekly,
     April 24, 1967.

18.- Fernando Henrique Cardoso, "Politica a desenvolvimento em
     sociedades dependentes: ideologias do empresariado industrial
     argentino e brasileiro", unpublished thesis, Sao Paulo, 1968.

19.- Ibid.

20.- United Nations Economic Commission for Latin America, op. cit.

21.- OAS, op. cit.

22.- Raul Prebisch, "La cooperacion internacional en el desarrollo
     latinoamericano", DESARROLLO, Bogota, No. 12, January, 1970
     (Emphasis added)