Opposition to trade agreement
The FTA needs solid political support, given that it faces opposition from certain lobbies in the US Congress, that the recession is continuing, that this is an election year for Bush and that, in Canada, a country in a deep crisis, more than half the population expressed its opposition to the trilateral agreement in a recent Poll.4
The FTA, like the other trade agreements under discussion, will bring diverse advantages to the capitalist sector oriented to the external market and to those layers of the population in various countries who, thanks to their high purchasing power, can enjoy a high level of consumption, but the impoverishment of the great majority of countries will continue, s People in these
In reality, these agreements will have effects similar to those produced by the Brady Plan: only a happy few will be chosen. Thus, Lawrence Summers, director of the World Bank's economists, has cynically indicated, in assessing the Brady Plan introduced in March 1989: "Those invited to the party have done well out of it; but the party was not a
LATIN AMERICA very big one." Until now, only five countries on the sub-continent and three outside it have obtained real benefits from this plan, which has allowed them to reduce their debt by szobn. But even this figure is small compared to the total debt.
The main problem for the
Initiative for the Americas is the following: can the governments continue to apply their present economic policies and at the same time maintain social stability without a massive and permanent influx of capital intended for long term investment in the of productive sectors the region's countries? This has not been the case until now.
Thus, official
Japanese economists have pointed out that, for 1992, the shortage of capital at the international level has risen to the tidy sun of $100bn. And, a Bank of Mexico report (Mexico is a country held up as an example to the rest of Latin America)
notes that: "while in 1990 41.8% of foreign resources were directed into direct investment, in the first six months of
1991 this proportion had fallen to only
19.1%." The same source has indicated that "for every $10 of foreign investment that has gone into Mexico in the last half of 1991, eight has gone to buy shares and only 2 on productive projects"&
Drastic reduction in role of state
After the eruption of the debt crisis in
1982 the Latin American governments embarked on a project of structural reform aimed at drastically reducing the role of the state. Since then an economic policy has been applied tending to a reduction in the weight of the state in the economy through the sell-off of all kinds of enterprises, including in strategic sectors
Today, it is private capital that is responsible for the rate of growth in most of these countries. However it is not the national capital that existed in the epoch of import substitution but above all the capital of multinationals or joint companies that now holds the reins.
The "reform of the state" means that in countries that have experienced revolu-
1. See Excelsior, December 19, 1991.
2. Mercosur brings together Brazil, Uruguay, Argentina and Paraguay. See Excelsior, January 2, 1992, Libération, January
11, 1992 and Latin American
Newsletters.
3. Excelsior, January 11, 1992.
4. Le Monde, Bilan économique et sociale, 1991.
5. Informe Latinoamericano, no. 5, February 6, 1992.
6. Excelsior, December 17, 1991.
11
7. Excelsior, December 27, 1991.
8. Expansion, no. 57, Mexico, December 11, 1991.
LATIN AMERICA governments (Peru, Argentina) the social bases that sustained the relations between the state and the masses are being dismantled, at the same time as the state is withdrawing from the economy. This implies a significant reduction in social investment (infrastructure, education, health, housing and so on), leads to a generalized pauperization of the population and deepens the insertion of these dependent economies in the world econ-
George Landau, president of the Society of the Americas, sees this phenome-
"while previously symbols, today a national symbol is to deal in shares on the New York stock exchange."
The "reform of the state" does not in any way lead to democratization; on the contrary, we are seeing a reinforcement most anti-democratic features. Whether in Mexico, Panama, Argentina, Brazil, Venezuela or Peru, authoritarianism, rule by decree and the denial of "civil society" are more powerful than ever. The neo-liberal economic approach goes hand-in-hand with dictatorial political practices.
The "adjustment programmes" imposed on the region in the past ten years all take the form of an austerity policy, which, unlike in Europe, means a downward plunge in the standard of living of the majority of the population; a loss of real purchasing power of wages, unemployment, a lowering of domestic consumption and a speeded up development of poverty.
The 1980s: Decade of declining growth
Between 1981 and 1990, the growth of the Gross Domestic Product (GDP) by inhabitant in Latin America declined by -9.6%; the slight upward growth of 0.9% in 1991 is nowhere near enough to compensate for the fall in living standards.
in the Third World means that a minority of the population can meet its needs while the majority founders in poverty, as is shown by these state-
"Our main problem remains poverty, which affects almost 40% of the population" according to Chile's President Ayl-
Or from Venezuela: "72% of the population is still extremely poor and spends 70% of its income on food. "11
Or Peru: "More than half of the 13 million inhabitants live in poverty" 12
And Mexico, where the wage earners "have registered the lowest level in their unemployment "affects some 13.5% of the active population" and it is estimated that "17 million of the 86 million Mexicans live in extreme pov12
And finally Panama where "in a mere International Viewpoint #223 • March 2, 1992 two years [1989-1990]" according to official figures "the index of poverty has gone from 44 to 54%, of which 27% are in the category of 'extreme poverty"" 14
This list could be extended for all the region's countries.
For as long as the IMF and WB contininsist on their "adjustment programmes" the majority of the population cannot hope to see an improvement in their standard of living in the short or term. Furthermore, since the integration based on the development of exports rather than the expansion of domestic markets, the tendency will be for social and economic inequality to get worse.
Economic adjustment, which implies an abandonment of state protectionism, is a long-term policy. Capital is not only interested in reducing wages; above all it wants guarantees that the present changes are irreversible. This is also the reason why the bourgeoisies and their governments have extended their offensive to areas considered taboo even up until a few years ago, as for example, with the counter-reform" of government in Mexico or the attempt at total privatization of the mines in Boliv-
While it is clear that neo-liberal policies are on the advance everywhere in the region, this is accompanied by the spectre of instability.
Apart from Mexico, Chile and Bolivia. where, thanks to different methods, the governments have succeeded in applying the adjustment plans with overall positive results for capital, in the remainder of the sub-continent, political, economic and social instability are a permanent feature reflected in the permanent search for economic measures that would permit a real social stabilization.
Extreme deterioration in Central America
Throughout Central America, despite the vast sums invested by the US in the recent past with the aim of weakening social base of the revolutionary movements, the situation has undergone an extreme deterioration. In the Southern Cone, the situation is not qualitatively different. The governments of Chamorro, Fujimori, Collor de Melo, Menem and so on have been obliged to replace the ruling teams and promise a policy of economic stability and social peace. Even in Venezuela, where the social democratic government of Democratic Action, led by Carlos Andres Perez, has tried to present itself as stable and democratic, the noise of jackboots has been heard.
Such instability is not the same thing as a pre-revolutionary situation, but it does mean that the conditions do not exist for carrying out capitalist restructuring without major social turmoil. In most cases the restructuring programmes are being applied by governments with a narrow social base. In all cases the measures of stabilization adopted by a number of Latin American countries need more time to be consolidated, which does not depend exclusively on the economic dynamic in each country.
The key objective both for the Latin
American and international bourgeoisie is to attain overall stability. If progress is made only on trade agreements while the political and social flank remains unguarded, then the integration of the US-promoted geopolitical bloc will be carried out on top of a powder barrel.
People who have an optimistic vision of the economic development of Latin
America must, if they wish to be consistent, also be optimistic about the debt crisis. In 1991, nine countries were obliged to pass restructuring agreements and/or renegotiate their debts with the IMF. This will involve (or has already involved) a reduction in capital or in interest or the two at the same time, while 12 other countries are behind with their payments of services on the debt to a total of $26bn.
An end to the export of
One can ask whether, after ten years of net transfers of capital abroad, this problem has been resolved or, at least, if the situation has basically CEPAL report for 1991 shows that in that year the region recorded income derived from borrowing and/or investments higher than its spending. Latin America is no longer exporting capital and its debt has reached $426bn. It seems that formulae for reducing the debt (purchases, restructuring and so on) put on the agenda by the Brady Plan, have had
However, according to the last World Bank report, which deals with 1990, these remedies have not produced the intended results. In fact the Bank's fig ures show that of the 26 countries studied "only six now owe less than five years ago", while the total debt is 78% higher than in 1980.15 This institution estimates that, in 1992, Latin America must spend more than $24bn for depreciation of capital and another $23bn on interest payments. Such a haemorrhage does not leave much room for optimism, even if 9. The Society of the Americas is an organization whose members hold 80% of US investments in Latin America. See El Financiero, Mexico, December 30, 1991. 10. Excelsior, January 1, 1992 11. Excelsior, January 2, 1992 12. Frankfurter Rundschau, quoted in Excelsior, January 11, 1992. 13. From a seminar organized by the Autonomous University of Mexico (UNAM) published in La Jornada, Mexico, December 26, 1991 and Le Monde, Bilan économique et sociale 1991. 14. Excelsior, December 27, 1991. 15. CEPAL героп, 1991.
EMI leave much room for optimism, even if governments have benefited from the worldwide reduction in interest rates in 1991.
Even if external borrowing has begun to grow again and if some countries such as Mexico have gained renewed access to international financial markets, the fuse that could explode the debt bomb is still fizzing. International conditions are not the same as they were at the time of the first discovery of the debt crisis in 1982. At the time, the international capitalist economy was coming out of generalized recession. Countries such as Mexico, Venezuela, Colombia or Peru could then benefit from the world oil price (which was already falling); there was an accumulation effect derived from the growth in the region at the start of the 1980s; private banks providing loans were not protected against a debt crisis and so on.
Today the situation is quite different: there is reduced growth - or even recession - in the imperialist countries, and a shortage of capital; there is the globalization of the world economy; an intensification of inter-imperialist competition to attract capital; and raw material prices are low. And this is against the background of a sub-continent that has had to make a violent transfer of capital to the imperialist countries in the past decade, permitting the latter to restructure their IMF urges new round of belt tightening
The creditor imperialist countries and the IMF are insisting on the need to further "tighten the belt", which in fact means reductions in public spending, devaluation, and a speed up in tax and monetary reforms to provide the money needed to pay the debt. In this domain, and owing to the weight of the debt, the situation in Brazil will be crucial: its government has just negotiated a credit of $2bn with the IMF which will increase tension among the workers and the people.
The Latin American bourgeoisie has embarked on a very risky policy. Following the crisis of the forms of populist and nationalist domination that erupted at the end of the 1970s, it is trying to implement a new social pact corresponding to its current needs - that is to say one which reduces the economic weight of the state while changing the balance of forces against the workers and the population as a whole and pursuing a capitalist restructuring process that will give it new negotiating cards in its dealings with imperialism.
This is a clearly defined project and aims at an alternative model to that in force during the period of import substitution. The only choice that the bourgeoisie has is to accept economic and political integration as proposed by the
The risks of this gamble lie in deeper dependence (the only point currently being discussed between Mexico and the United States before the signing of the Free Trade Agreement is over oil) and in the fact that the application of the neoliberal policy will destroy the former social base of these governments without the new project being consolidated. It may be replied that all that is needed is time, which is true, but time can also work against the governments, as it did in the past decade.
For a while now, some penitent analysts and politicians have been promoting the coming to power of social democratic governments, of the type presently in power in France or the Spanish State, in this region. They overlook the fact that countries such as Venezuela,
Ecuador have already been governed by social democratic parties and that these same governhave frenziedly applied austerity programmes and market liberalization. Still worse, they neglect the fact that, at least for the moment, these governments are not the best equipped to attract international or local capital.
In Latin America, capitalism is trying to dance to imperialism's tune. There is a race to make up for lost time; the time of capitalist modernization and restructuring that has taken place in Europe, Japan and the USA from 1982 onwards. The consequences of this choice can also be seen in the frontal attacks against the gains wrested in past decades by the workers and other sectors of the masses. Productivity must be increased to the detriment of working conditions. Faced with this, the supporters of social democracy look to a supposed policy of charity by the state (the "solidarity state").'
The Latin American bourgeoisie and imperialism need a substantial change in the totality of relations which regulate work: this is why we are seeing the shedold-style Latin American trade unionism, which has an essential purpose; the unionism born in the 1930s
LATIN AMERICA that was useful until the 1970s no longer serves the needs of capital. The weight of the unions must be reduced on the very terrain which justifies their existence, that is to say as concerns the control of production and the representation of the
The attempt to reduce this role involves quality circles,
"universal worker" and flexibility. Behind the lay-offs of millions of workers in Latin America (more than a million jobs went in 1991) there is a policy that is targeted on the union structures, and which has to some extent succeeded. This has meant a weakening of the political weight of the working class. majority of those people who sell their labour power increasingly find themselves in the informal sector; they have neither stable incomes nor social bene-
Working class wages defensive struggles
There is also a developing phenomenon of reorganization of the working class and other sectors, on which the success of the present gamble depends in the medium term. Even if the mobilizations of 1991 and the start of this year in some countries have not succeeded in blocking the capitalist offensive - which is impossible without the support of workers in the imperialist countries - their importance should not be minimized. These are defensive struggles, but they indicate that there is still life.
The Latin American economy grew again in 1991 but it is doubtful that it will produce an overall positive result in the immediate future. The recession in the imperialist countries, the failure of the world economy to rise out of its long depressive wave as well as the limited room for manoeuvre left by the privatizations worsen the situation. Public enterprises, whether banks, mines, or oil, can only be sold once. Bush's Initiative for
16. Informe Latinoamericano no. 2, January 16, 1992. 17. Soe the arile by Jorge Catafeda, "The new dog: 1 3 mas in Latin America" in El Pais, January 31, 1992. March 2, 1992 • #223 International Viewpoint
Unhappily, the capitalist restoration which it implies will be neither efficient (in relation to the objective of a better life, except for a fortunate minority) nor democratic (because it will be necessary to protect minority against the growing anger of the others).
The road these countries are following will not lead towards their own thirst for profit and needs for which a demand is expressed on
All this has been harped on and credited to the "invisible hand" of the market. And it is absurd to reject in its totality an argument in part founded on reality. But in part only; the limits of the pseudosovereignty of the consumer and the capacity of the market to respond to needs have been known for a long time. It is necessary, firstly, to consider all the ways
FOR THE former Sovlet Union and the countries of eastern Europe, the
1990s are to be the era of the transition to the market economy.
This vocabulary is used nearly everywhere, even In countles like
Yugoslavia and Hungary which
Introduced reforms rellant on market mechanisms as early as the
1960g.
CATHERINE VERLA
T HE pace of change is being
forced by the International Monetary Fund (IMF, the western creditors and the most radical ideologues of market liberalism, supported by a substantial section of the former and new ruling elites. The precepts of Jeffrey Sachs in Poland are the same as those which have already ravaged Bolivia: privatization and opening to world competition are supposed to rationally direct future investments in the new world without frontiers of the multinationals.
The goal is no longer understanding the use of the market in a system which remains non-capitalist, but rather a return to what is presented as the model of a "normal economy", de facto "capitalist", based on a market in labour and capital whose logic is subordinated to the criteria
For the peoples of the countries concerned, such were not the goals of those "revolutions against" of which the "for" remained vague: against the former so-called socialist system, to live better and more freely; that, in broad outline, substituted for a programme. The movements and broad fronts, around in opposition very quickly broke up (and continue to divide and marginalize themselves) from the moment when it was necessary to speak of "how to construct another society".
The popular model extolled by the ideologues of market liberalism also takes it as self-evident that the current process amounts to "returning to the normal 14 normal and "efficient" countries by course of history", falling in line with the International Viewpoint #223 • March 2, 1992 the Sweden of the 1970s, but to a reduction to Third World status where the eventual growth will benefit a small portion of dominated by the logic of the multinationals. It is a road which is all the more dangerous in that it will come up against the cultural and socioeconomic aspirations of developed countries and egalitarian values deeply rooted in their societies. Unhappily, this is now being practically demonstrated. But it is also important to discuss the arguments which have been advanced, associating market, privatization and democracy.