Skidmore, Thomas E. Smith, Peter H.
"The Rise of U.S. Influence"
Modern Latin America
2nd ed. Oxford University Press, 1989
p.340-368

The Rise of U.S. Influence

Between 1880 and the outbreak of World War I Britain lost her supremacy in Latin America. Other European powers, especially France and Germany, increased their economic ties, competing with British investors and merchants. But the most important challenge came from the U.S.

During these thirty­five years, U.S. influence spread southward. The deepest penetration was closest to home, in the Caribbean and Mexico. U.S. investors found the Mexico ruled by Porfirio Diaz to be attractive for investment and trade, and they poured capital into Cuba as well. Even before the Spanish­American War erupted in 1895, the U.S. had come to overshadow Spain in Cuba's economy.

U.S. entry into Cuba's revolt against Spain signalled a new phase in North America's relations with Latin America. After the MexicanAmerican War (1846­48) the U.S. continued to occupy and settle portions of the present­day Southwest. When the U.S. entered the war in 1898 and decisively defeated the Spanish, it was more than a military victory. It was a symbolic struggle that impressed all of Latin America. The time was long past when Latin American nations were absorbed only in their own problems.

The 1898 war was an independence battle by Cuban patriots against Spain. Other Latin Americans immediately sympathized with the Cubans. Yet the Yankees suddenly seized control of the rebellion. This naturally demoralized many Cubans, who had desperately hoped to defeat the Spaniards on their own. Furthermore, it underlined a common Latin American worry: Were the Spaniards and their American descendants inherently (i.e., biologically) weaker than the North Americans? Was the U.S. racially "destined" to take over Latin America?

A similarly agonizing self­appraisal had gripped Mexican elites after their humiliating defeat by the U.S., in 1846­48. They explained their weakness on the battlefield by linking it to supposed defects in their character, or, more ominously, their racial background. Now, in the 1890s, racism was at its height in the U.S. and Europe. The Jim Crow laws of the U.S. had institutionalized segregation, and the universities and churches overflowed with professors and preachers who calmly explained the scientific basis for believing in "inferior" and "superior" races.

These racist doctrines also penetrated Latin America. In country after country, leading intellectuals faithfully repeated the racist dogmas of the Europeans. Underlying such introspection was a lurking fear that some new conquistadors might take away their lands, manifested in the occasional nativist reaction against the British through the nineteenth century. The precipitating incidents were often petty, such as brawls by British sailors when ashore, but they called forth a deep hostility. The Latin American elites knew that both the British and the North Americans often viewed them with contempt.

It is therefore not surprising that the crushing defeat of the Spanish by the U.S. in 1898 deeply troubled the Latin Americans. Having seized Puerto Rico and Cuba (the latter as a protectorate), it was widely asked, how much farther would the Yankees go? The pessimists in Mexico had long believed that the U.S. had designs on more of their land.

United States expansionism into the Caribbean showed that the Latin American fears were not entirely groundless. The U.S. search for a satisfactory transcontinental canal site revealed what the Yankees would do to achieve their economic and geopolitical interests. President Theodore Roosevelt, that arrogant embodiment of North American imperialism, rode roughshod over objections to his site for the canal in a northernmost section of Colombian territory extending northward into Central America. Thus was born the new nation of Panama, and the canal was built between 1904 and 1914. The U.S. got its canal, but it took the bogus creation of a new republic.

Between 1880 and 1914 the U.S. also attempted to create a new hemisphere­wide alliance of nations. It began with the ambitious plans of the U.S. Secretary of State James Blaine. On his initiative the First Pan-American Confence was held in Washington in 1889. Between 1826 and 1864 there had been five congresses, all attracting only a limited number of countries. The 1889 meeting was the first to involve all the Latin American nations and the U.S. Ironically, this was when the U.S. began its imperialist offensive in Latin America.

Out of the 1889 conference came an authorization for a "Commercial Bureau of the American Republics," from which emerged the Pan-American Union and later the Organization of American States (OAS). Accomplishments were limited primarily to commercial issues.

The U.S. diplomatic, economic, and military offensive into Latin America after the 1880s prompted a strong reaction among Latin American intellectuals and students. The Spanish­American War aroused Jose Enrique Rodo, Uruguayan­born and one of the most celebrated of these militant critics of the U.S. In 1900 he published Arzel, a slim essay in which he contrasted North America's excessive materialism to Latin America's superior cultural sensitivity. Of the U.S. he charged: "Her prosperity is as great as her inability to satisfy even a middling concept of human destiny...."

Rodo's ideas had great influence in Spanish America, whose elites were well prepared to hear of their spiritual superiority. They were also spurred to think in terms of a Latin American identity arising from the cultural unity toward which Rodó was groping. The theme was picked up and spread widely by such writers as the Argentine Manuel Ugarte, who wrote newly elected President Woodrow Wilson in 1913 to demand that "the stars and stripes cease to be a symbol of oppression in the New World." Other famous intellectuals caught up in this pan Latin American reaction were Jose Martí of Cuba (whose critique began in the 1870s), Rubén Darío of Nicaragua, and Rufino Blanco­Fombona of Venezuela. Their writings were published throughout the continent in what was one of Latin America's most culturally integrated eras. Many themes from this anti­yanqui movement have survived in inter­American relations down to our day.

European influence continued to be highly important in Latin Amer~ca between 1880 and 1914, despite the growing U.S. role. One need only look at the size of investment and trade. Table 11­1 demonstrates the magnitude of North American investment, which came to embrace the Caribbean and South America as well as Mexico and Central America. Even so, as Table 11­2 indicates, Britain was far and away the most important single source of capital on the eve of World War I; France and Germany were also prominent.

TABLE 11­1 U.S. Investment in Latin America, 1897­1914 (millions of dollars at end of year)

	Caribbean Countries	Mexico and Central America	Soutlh America	Total
1897	4.5	221.4	37.9	304.3
1908	220.2	713.0	129.7	1,062.9
1914	329.0	946.7	365.7	1,641.4

Source: United Nations, Economic Commission for Latin America, External Einancing in Latin Amenca (New York: United Nations, 1965), p. 14.

Another important sphere of European influence was military training and technology. From the time of their Wars of Independence Latin America elites had known that they lacked military skills and advanced weaponry. To defeat the Spanish garrisons, usually undermanned and cut off from resupply, the patriots often had to hire or appeal to foreign soldiers and sailors.

As the nineteenth century continued, other European military establishments offered examples to ambitious Latin American rulers. In both Chile (1885) and Argentina (1899), for example, German military missions were contracted for extended periods to introduce new weapons and teach their use. Equally important, they taught new methods of staff organization and command. In Brazil the rapidly growing state of Sao Paulo contracted in 1905 for a French mission to train the state militia, which included cavalry. These European missions were expected, above all, to transmit the new professionalism that had transformed the military in Europe. War was no longer a matter for aristocrats; now it was a serious business which required thorough scientific and technical training.

What did this transfer to military "professionalization" imply for Latin America? It had enormous consequences in politics, as the "professionalized" armies became more active, ironically, in the constitutional realms of Chile, Argentina, and Brazil. The political implications would become obvious only after World War I.

TABLE 11­2 Long­Term Foreign Capital Investment in Latin America, 1914 (millions of dollars)

Origin	Foreign Private Investment (and External Public Debt)	Percentage
Britain	5066	51.9
France	1013	10.4
Germany	367	3.8
U.S.	1487	15.2
Others	1821	18.6
Total	9754	100.0

Source United Nations, Economic Commission tor Lalin America, External Financing in Latin Amenca (New York United Nalions, 1965), pp. 16 ­ 17.

The Consolidation of U.S. Influence.

The First World War, although of no direct concern to Latin America at the outset, fundamentally changed the region's relationship with the world. For one thing, it accelerated Britain's decline as the most important economic force in the hemisphere. Drained by the long and costly hostilities on the continent, England had to draw on her overseas investments to pay for the war. Furthermore, Britain had begun to experience a long­term decline in world economic competitiveness.

Second, the war highlighted the dynamic U.S. economy, based on a continent full of resources and now mature enough to become a net exporter of capital. The decisive U.S. intervention in the war proved it now held the balance of economic and military power: European powers could never again disregard the U.S.

Latin America was essentially a bystander in the conflict. The U.S. pressed hard to use the war as an occasion to strengthen its political influence in Latin America, but with varying results. Only eight Latin American republics declared war on Germany: Brazil (the only major country), Cuba, Costa Rica, Guatemala, Haiti, Honduras, Nicaragua, and Panama. Another five broke diplomatic relations: Bolivia, the Dominican Republic, Ecuador, Peru, and Uruguay. Seven nations remained neutral: Argentina, Chile, Colombia, Mexico, Paraguay, El Salvador, and Venezuela.

By the conclusion of World War 1, U.S. power and influence in Latin America were clearly on the rise. The U.S. now exercised virtual hegemony in the Caribbean basin, as could be seen in the military occupations of Nicaragua (1912­25), Haiti (1914­34), the Dominican Republic (1916­24), and Cuba (1917­23). Even when the U.S. did not occupy these countries, it deeply influenced their development, wielding veto power over their domestic politics. Most of the elites in these countries took U.S. hegemony for granted; indeed, they would have been surprised to think the world could have been otherwise.

The two exceptions to this pattern were Mexico and Cuba. In Mexico, the Revolution of 1910 threatened to change the country's relationship with the U.S. Washington was distributed over the direction taken by the Revolution, and made repeated interventions, including the military landing at Veracruz in 1914 and the sending of General John J. Pershing's column in 1916 to pursue Pancho Villa's irregulars. Yet the Revolution succeeded in giving the Mexicans an elan, a pride, a degree of mobilization that would eventually help check the traditional brand of U.S. intervention. It nonetheless remained true that the Mexican people could do little without taking due account of the continuous pressure of that powerful neighbor to the north.

Cuba was a different case. There the U.S. had established a protectorate after ending its military occupation in 1902. This U.S. presence generated a nationalist reaction, erupting most often among students at the University of Havana. Although easily suppressed, they represented an important dissenting opinion within the elite, and in the 1930s they seized center stage in Cuban politics.

The world Depression hit Latin America hard. New capital ceased flowing into the region, and foreign investors found it hard to repatriate profits. Country after country defaulted (or declared a unilateral moratorium) on their debts. The reason was obvious. The collapse of the world economy had reduced demand for the primary products on which Latin America depended for its foreign exchange earnings. Suddenly these countries had no way to earn the dollars, pounds, marks, or francs to repay their foreign creditors. So Latin Americans could not now expect to receive any net inflow of capital. Even more important, they would be short of foreign exchange to pay for the imports essential to domestic economic development, especially industrialization.

The 1930s were thus a time when Latin American countries had to look inward. Not coincidentally, it was a period of high nationalist feeling. With the options for foreign economic help so reduced, it was logical to concentrate on domestic resources. Argentina, Brazil, and Mexico, for example, all took steps to increase national control over the oil industry. Mexico went the farthest, when in 1938 President Cardenas nationalized all foreign oil firms. Argentina had already created an autonomous government oil enterprise in the 1920s, while in Brazil the state oil enterprise was given its definitive shape in 1953.

The 1930s also brought one new import to Latin America: fascist ideology. The clearest version came from Italy, where Mussolini's movement grew in response to the emerging revolutionary leftóespecially the syndicalists and the communists. With the rise of Nazism in German, European fascism gained an even more powerful exemplar. Especially important for Latin America was the fact that Spain and Portugal had both fallen prey to authoritarian regimes (Franco after 1936 in Spain and Salazar after 1928 in Portugal) which had corporatist, many would say fascist, overtones.

Europe's swing to the right gave ammunition and prestige to those anti­democratic and anti­liberal groups in Latin America that had their own reasons for wanting to create authoritarian governments. None of the Latin American "fascist" movements were exact copies of European cases. In Brazil, the Integralists were a primarily middle­class movement, preaching the need for order, with an essentially corporatist message. Argentina had several rightist paramilitary groups that resembled European fascist organizations, but the deepest influence was in the military. The secret "lodges" within the officer corps produced initial stimulus for the Peronist movement, which owed part of its inspiration to the Italian model. But Peronism never gained a doctrinal and organization form like that of Italian fascism. In Mexico there was a small rightist movement, sinarquismo, which showed European influence; it also drew primarily on right­wing Christian sentiment. In Chile, finally, there wa~a National Socialist Party, clearly an imitation of the Nazi Party, which provoked a furious response from the Chilean left.

None of these parties or movements came close to winning power in the 1930s. In Chile and Mexico they faded, as the civilian political system proved capable of containing and absorbing them. In Argentina fascist sentiments were overshadowed by the Peronist movement, once World War II entered its final phase. In Brazil the Integralists almost appeared to be on the threshold of power in 1936, but they were swept away by Vargas's Estado Novo in 1937.

As the 1930s continued, Latin America became a staging ground for geopolitical competition. The Germans and the Italians both looked to Latin America to increase their economic and political influence. The Italians were especially active in Brazil and Argentina, where large Italian communities offered a possible base of operations. The Mussolini government sought to keep the Latin American republics pro­Italian. That meant stimulating and reinforcing anti­British (and, by extension, anti­U.S.) opinion. The Italian government also contributed directly to Brazilian fascists, by using its embassy to pass large sums of money to the Integralists.

As the most powerful partner in the European Axis, Hitler's Germany was even better situated to exert pressure in Latin America. The Nazi regime used its fully owned subsidiary airline, Condor, and its diplomatic service to create a network of agents and contacts throughout South America. Hitler and his more aggressive advisers convinced themselves that Latin Americans of German descent were eager to join the Fatherland and create separatist territories, alert to Berlin's every direction.

But the Germanic population in Brazil proved to be extremely loyal to its New World nation. The effect of Nazi measures in Brazil was just the opposite of what the Germans had intended: the Vargas government adopted stringent new laws requiring that all school classes be taught in Portuguese, thereby eliminating the exclusively German language schools in the south of the country. The result was to accelerate the assimilation of the German descendants in Brazil.

The Axis powers were of course not the only outside nations engagilrg in this geopolitical competition. For many years the U.S. military had regarded Latin America as a vulnerable flank. This provided the military rationale for expansion in the Caribbean: the need to protect vital sea lanes. The vast, virtually unpatrolled boundary with Mexico was another area difficult to defend. The Panama Canal gave the U.S. an additional danger zone. What was needed, some officers thought, was an arc of military security stretching into northern South America.

As Nazi Germany built its war machine, U.S. officers cast a more worried look at the Latin American flank. With Japanese power growing in the Pacific, the U.S. was faced with the likelihood of a two­ocean war. Latin America could now be menaced from both east and west. The U.S. therefore examined its hemispheric ties in a new light: How could Washington gain maximum support from the Latin Americans in case of war?

Part of the answer would depend on cultural relations. Latin America between the wars saw a sharp rise in cultural programs sponsored by foreign governments. Because of their enormous cultural prestige, the French had the favored position. French was still the most widely spoken foreign language, and Paris was the point of reference for artists and writers of Latin America. Latin American universities, primarily copied from Iberian models, came under increasing French influence. In Brazil, for example, when the paulistas wanted to found a new university -the University of Sao Paulo, in 1933- they sent a delegation to France. In response, Paris sent a mission of leading professors in the social sciences, including such luminaries as Claude Levi­Strauss Jacques Lambert, and Pierre Monbeig. The French government established a fellowship program for study in France; similar programs also emerged elsewhere in Latin America.

While European influence remained dominant among the elites, North American influence was making great inroads through mass media -the unchallenged vehicles of popular culture in our century. By the 1930s Hollywood films were the craze throughout Latin America. U.S. film stars such as Jean Harlow and Clark Gable were household names in even provincial towns, as Argentine novelist Manuel Puig's Betrayed by Rita Hayworth poignantly shows. U.S. music, especially jazz, had a similar effect. The dynamic, fluid, dazzling and futuristic North American society proved fascinating, although engendering a split between elite and popular reactions to the U.S. which was to deepen and prove increasingly important over time.

As the war broke out in Europe, the U.S. government stepped up its recruiting of military and political allies in Latin America. Franklin Roosevelt's government sought: (1) military bases, especially in the Caribbean and on the Atlantic coast of South America; (2) guaranteed accessibility to vital raw materials, such as natural rubber and quartz; (3) willingness to join the U.S. in an alliance against the Axis, should the U.S. join the fight; or (4) at the very least, a neutrality that would prohibit hostile extra­continental powers from creating footholds in their countries.

The U.S. Iargely achieved these aims. The inter­American system, emerging with painful slowness since the 1880s, was now harnessed to the security interests of the U.S. The U.S. military got the use of valuable bases, especially in Brazil, and U.S. war industry got access to the vital raw materials it needed.

World War II greatly increased U.S. influence in Latin America. Germany and Italy, once important powers in the region, were discredited: Italy, by its blustering lurch for new territory in North Africa; Germany, by the horrendous suffering its war machine unleashed on Europe. Fascism was a bankrupt legacy by 1945. Only the anomalous survival of Franco in Spain and Salazar in Portugal kept alive the rightwing ideology, and neither country, ironically, had great political influence in Latin America.

The British and French, although victors in the war, were gravely weakened. Both had to liquidate overseas investments to pay for the war. Neither had the resources or the will in 1945 to compete for influence in distant Latin America. The net result was that 1945 saw U.S. influence at an all­time high in Latin America.

The Zenith of U.S. Influence

The U.S. emerged from the Second World War with greatly increased prestige and authority. The war brought the U.S. economy out of the Depression and into a massive industrial effort. Unlike Europe or Japan, however, the U.S. suffered no war damage at home. Her economy was intact and prosperous. In 1945 the U.S. accounted for half the world's manufacturing output and about two­thirds of global exports. The U.S. had built up the most imposing arsenal the world had seen, capped by the atomic bomb -the "ultimate weapon," which only the U.S. possessed. The war also provided the U.S. with a network of alliances that offered a strong power base in postwar international politics.

With the war over, many Latin American politicians hoped the newfound U.S. interest in Latin America would pay off. They expected increased attention to their problems, especially the obstacles to economic growth. After all, the U.S. could now afford to look south, where it would be logical to consolidate its greatly increased influence.

But it was not to be. U.S. government policy virtually lost track of Latin America after 1945. Attention focused, instead, on rebuilding Europe and Japan. The Truman administration (1945­53) and the Congress, along with farsighted business leaders, realized that an economically sound Europe was essential for a prosperous U.S. The Marshall Plan of 1947 appealed to the U.S. public on both humanitarian and economic grounds and helped to direct attention primarily toward Europe.

What about Latin America? It simply did not seem significant to U.S. policymakers. The Latin American specialists in the State Department and the military services found themselves downgraded or transferred. The Truman administration apparently assumed it would continue to receive loyal backing from Latin America, almost as a matter of course.

This relative U.S. indifference was broken again by an outside threat. As U.S. relations with the Soviets began to cool in 1946, the Truman administration decided to mount a Cold War offensive in Latin America. It assumed two aspects. First was pressure to get Latin American governments to severNer diplomatic relations with the Soviet Union.This was remarkably successful, as every country with the exception of Mexico, Argentina, and Uruguay followed suit. The second aspect was to press Latin American to outlaw the local communist parties. Although not highly publicized in the U.S., the success of this campaign demonstrated how responsive the Latin American political elites still were to U.S. direction

The Truman administration also decided to make more permanent the military alliance created during the war. A special 1945 meeting of hemispheric foreign ministers in Mexico City agreed on the need to redesign the Pan­American system. The first step was taken in 1947, when delegations approved a treaty (the "Rio Pact") defining an attack on any American state, from inside or outside the hemisphere, as an attack on all, requiring collective measures to counter the aggression.

The second step was taken in Bogota, Colombia, in March of 1948, when a new body was created: the Organization of American States (OAS). The structure included a legal charter creating a council to deal with day­to­day business, inter­American conferences every five years, and foreign ministers' consultative meetings to handle threats to the hemisphere. A bureaucratic infrastructure took shape as the General Secretariat and the Pan­American Union. OAS member states committed themselves to continental solidarity (which the U.S. wanted) and total nonintervention (which the Latin Americans wanted), along with the principles of democracy, economic cooperation, social justice, and human rights. In short, the U.S. and Latin America created the world's most highly articulated regional association. Not surprisingly, the member states expected very different things from it.

The OAS got an important test when war broke out in Korea in 1950. The U.S. had troops stationed in South Korea and was thus immediately drawn into the conflict. As North Korean troops streaked south, the U.S. convinced the UN Security Council to brand North Korea as the aggressor. The Truman government then turned to the OAS, asking it to define the North Korean attacks as aggression against the U.S.- thereby obligating the OAS members, by the Rio Pact, to join the battle. What the U.S. wanted was additional legitimacy and military contributions from Latin America.

The other OAS members balked at this appeal, except for Colombia, which sent a battalion of infantry. In their speeches the Latin Americans showed much more concern for their own economic problems than for the military clash in distant Korea. The OAS produced a compromise: in return for a commitment to improve their military defenses and increase military cooperation, the Latin Americans got a U.S. promise that it would submit proposals for solving the hemisphere's economic problems.

To U.S. policywakers the Korean War demonstrated that their battle with communism was world­wide, not just in Europe. The "fall" of China in 1949 further dramatized the point. In 1951 the Truman administration and Congress accordingly decided to extend to Latin America the U.S. Military Security Program of 1949, originally aimed at Europe. From 1952 to 1954 the U.S. signed bilateral mutual defense assistance pacts with ten Latin American countries: Ecuador, Cuba, Colombia, Peru, Chile, Brazil, the Dominican Republic, Uruguay, Nicaragua, and Honduras. (Argentina and Mexico were conspicuous by their absence.) Under these agreements the U.S. was to exchange military equipment and services in return for Latin American promises to expand defense capacities, to send strategic materials to the U.S., and to restrict trade with the Soviet bloc.

The implications of these new defense arrangements were far-reaching. The U.S. was tying Latin America's armed forces into the U.S. webóonce possessing American equipment, they would depend on the U.S. for parts, replacements, and ammunition. Furthermore, by frequent contact with U.S. military, in training programs and joint exercises, the Latin American officers could be expected to identify closely with the U.S. No less important, the U.S. was offering far more equipment than the recipient countries could have bought through the normal appropriations of their governments. The armed services thereby gained power in their societies without having to fight budget battles at home. These U.S. military links were a revival of the structure the Roosevelt administration had created on the eve of U.S. entry into World War II. Now, in the early 1950s, the U.S. was building on its wartime prestige to expand and consolidate its influence.

One other country earned great prestige during the war: the Soviet Union. The Soviets had lost far more of its population (20 million) and endured much more suffering than the U.S. Many Latin Americans admired the endurance and fortitude of the Russian people, and some of that admiration was transferred to the Latin American communist parties, which enjoyed a flurry of popularity in 1945. The Brazilian Communist Party, for example, won 10 percent of the vote in the presidential election of 1946. Later that year three members of the Chilean cabinet were communist, and there were communist members of the national congress in Cuba, Colombia, Peru, Ecuador, Brazil, Chile, Bolivia, Uruguay, and Costa Rica.

The Truman administration began pursuing an aggressively anti-Soviet line in Latin America as early as 1946. The chain of bilateral military pacts was only one of the instruments to mobilize the Latin Americans against the Soviets. Since military officers were normally a bulwark of anti­communist and anti­Soviet OpilliOII, the U.S. hoped to tie this pro­U.S. element even tighter and strengthen its anti­commllnist resolve. Military pacts and trainiIlg programs now gave the U.S. a monopoly on foreign links among I.atin Americal1 military.

At first glance this penetration might look; similar to the relationship the Soviets established with its East European statellites after 1945. The Soviets, however, achieved a far greater integration of its client nations' military structure into the Soviet oneówith direct link­up of command structure, communication systems, and Soviet intervention in day­today operations. The Soviets were especially careful in screening candidates for higher command positions. They took further advantage from the fact that large numbers of their own troops were still stationed in many of the satellites. Although the Soviet control of its satellites' military was more pervasive and complete, it resembled the U.S. in Latin America in that both superpowers had little opposition.

The Truman administration also expressed an interest in technical and economic help for Latin America, as a partial replication of the Marshall Plan -the oft­cited prototype of American overseas aid. But the situations proved to be very different. The Marshall Plan was directed at nations which were physically devastated but still possessed the most important economic ingredient of all: skilled and experienced manpower. An investment in these European countries -Britain, France, Italy, West Germany- could and did have a quick pay­off. These industrial economies revived and were poised to participate in the rapid growth of world trade that was to occur after 1950.

The economic problem in Latin America was more fundamental. There was relatively little industry even in the largest countries. There was an enormous shortage of skilled labor and technological know­how. Infrastructure (roads, railroads) was often lacking. Economists did not know how to stimulate rapid economic development in such areas as Latin America.

Whatever the labels, economists and planners soon found that simply supplying more capital, in the form of­dollars or investment goods, was not the answer. Economic development was (and is) a complex process that requires adjustment at every societal level. The Truman administration favored a sympathetic look at the problem. In his 1949 inaugural speech President Truman proposed (in his address it was "Point Four," a label which then stuck) a U.S. government­coordinated technical assistance program to aid developing countries. This was in response partly to Latin American complaints that the U.S. was ignoring their fundamental economic problems, while concentrating its attention on Europe.

Before Truman's Point Four program had a chance to go far, the Democratic Party was turned out of the White House by the .1952 electoral victory of Ceneral Dwight D. Eisenhower. The Republicans brought a new philosophy, especially in international economics. They took a strongly laissei­faire stance, and thought government's first obligation was to let the free market operate. President Eisenhower's secretary of the treasury, Cleveland businessman George Humphrey, soon made clear that this free­enterprise philosophy would rule out any large­scale economic aid overseas, even through low­interest government loans. An equally coId shoulder was turned to current proposals for commodity agreements, de­signed to stabilize world­market prices for such products as coffee and cocoaóprimary products of great importance to Latin America. Above all, said the Republicans, Latin Americans must not discourage private foreign investment, which in these years meant primarily U.S. investment. This Republican orientation toward Latin America provoked a strong reaction among reformist and development­minded younger politicians and technocrats in Latin America. Not coincidentally, Latin America was now beginning to produce its own analysis of its economic problems. This diagnosis was to help Latin America elites define their relationship to the outside world. Ideological competition was turning intense once again. In the 1930s the confrontation had pitted fascism and corporatism, linked to growing Axis power in Europe, against economic and political liberalism, linked to the U.S. and Britain. Now, in the 1950s, it was radical nationalism and Marxism versus neo­liberalism, with a position in between that we have called reformist developmentalism.

The Nationalist Impulse

Nationalism had deep roots in Latin America. In early form in contributed to the rebellion against Spain and Portugal in the early nineteenth century. During the course of the nineteenth century, however, few nationalists were prepared to resist foreign economic intrusions. The dictator José Gaspar Rodríguez de Francia of Paraguay (1814­40) was one, as were his successors from the López family (1844­70). But Paraguay was a relatively insignificant country, and its defiance of British economic power made little difference to the rest of the continent. The occasional outbreaks of economic nationalism in Chile and Argentina before mid­century left little permanent effect. The nineteenth century saw the triumph of economic liberalism in Latin America. Its export­oriented strategies were based on the law of comparative advantage. A few nationalist voices cried out against this strategy, but without much practical impact.

It was not until the 1930s that the economic nationalists could hope to capture policymaking. One of their targets was oil exploration and production. Some nationalists, such as Alejandro Bunge in Argentina and Roberto Simonsen in Brazil, also argued vigorously for industrialization. They reasoned that their countries could never gain control of their economic future until they industrialized. In other words, they should break with a simple­minded application of the law of comparative advantage, which restricted them to exporting primary goods to pay for imported finished goods. They must create the productive capacity to survive slumps in the world economy, such as the 1929 crash.

The pro­industrialization arguments began to influence government policy in the 1930s in Brazil and Chile and, to a lesser extent, in Argentina. In all three countries the state took the initiative by creating public enterprises (state oil and steel companies in Argentina and Brazil, CORFO in Chile, PEMEX in Mexico). This greatly increased the state role in the economy, which was anathema to believers in liberal economic doctrine.

After World War II economic liberalism staged a comeback in Latin America. In part it was tied to the resurgence of political liberalism. It flourished also because the world demand for primary products was strong in 1946­47, boosting foreign exchange earnings of the Latin American economies. By the early 1950s, however, they had all run into trouble. The world demand for primary products became erratic, and their prices fluctuated dizzily. The pro­industrializationists reappeared, arguing that economic liberalism was no solution for Latin America's future.

In the 1950s the debate was joined by an articulate new Latin American voice: the Economic Commission for Latin American (ECLA), a United Nations regional agency created in 1948. lt was to be a secretariat of technicians, primarily economists, who were to analyze systematically the economic problems of the Latin American region and its individual countries. Its executive secretary was Raul Prebisch, a talented Argentine economist who had played a key role in the creation of the Argentine central bank in the 1930s. ECLA was located in Santiago, Chile, in a deliberate effort to obtain distance from the U.S.dominated atmosphere of the OAS headquarters in Washington, D.C.

ECLA became an aggressive participant in the analysis of Latin America's relationship to the world economy. One of its major accomplishments was to train a generation of Latin American economists who learned, during their time with ECLA, to see their countries' problems in a continental perspective. They also got to know their counterparts in other nations and were able to compare notes on the problems and possibilities of economic policymaking. Essentially, ECLA helped to produce a Latin American mentality in economic analysis.

It would be misleading to imply that ECLA had a single message. It was careful to confine its publications to technical analyses of past economic trends, along with discussion of current policy options and projections of the effects of likely policy choices. Yet the choice of topics and the direction of the analysis showed the strong influence of Prebisch and his disciples.

The Prebisch­ECLA thesis, as it became known, was that the world economy since the 1880s had been working systematically to the disadvantage of the countries that relied on the export of primary products. It was argued that the prices of finished goods went up faster than prices for primary goods, so the developing countries found themselves in a steadily deteriorating position vis­a­vis the industrial countries. The way out of this dilemma? First, adopt international commodity agreemeets to protect primary­product exporters from huge market­price fluctuations. Second, the larger developing countries should industrialize.

These conclusions were never stated as such in ECLA documents, which had to remain technical studies produced by a branch of the UN bureaucracy. But they were the unmistakable implications, and they were widely recognized as such.

These arguments provoked fierce responses, both in Latin America and the U.S. They irritated the Eisenhower administration (1953­61), which saw ECLA as a beehive of deluded statist thought, promoting policies likely to harm private enterprise. In fact, the Prebisch­ECLA analysis furnished ammunition for centrist politicians such as Vargas, Kubitschek, Frondizi, and Frei. Above all, ECLA gave reform­minded

Latin Americans the confidence to shape their own development strategies, knowing they could call on an intellectual resource which was authentically Latin American.

In other words, ECLA offered a milestone in Latin America's search for self­knowledge. This was an important step, since Latin American analysts and politicians had long felt at a disadvantage when facing the economists, bankers, and businessmen of the industrial world.

The other important intellectual force gaining new strength in the 1950s was Marxism. To understand the force of Marxism in Latin America, one has to look closely at the history of the communist parties, since they were the primary channels of Marxist thought, at least into the 1960s. It is true that there were a few influential noncommunist party Marxist thinkers and politicians, of whom Peru's Jose Carlos Mariategui was the most famous and influential. But they were the exceptions. It was the orthodox communist parties, affiliated with the Comintern in the 1920s and 1930s, which did most to spread the Marxist message. By the early 1950s they had lost the prestige that rubbed off from the Red Army in 1945. They were a negligible force in elections, except in Chile. They had some strength among student organizations and labor unions, but in general they suffered from identification with Stalinism.

Their Marxist analysis was a relatively crude form of economic determinism. Its application to individual countries was spelled out by the local parties, acting on Moscow's instructions. Few Latin Americans completely accepted the party line. When the communists moved to tap sentiments of economic nationalism, however, they could mobilize a wider following. Nationalist sentiment was usually directed against the U.S., on which the communist parties concentrated their fire. The communists and many Marxists sought to develop a clearly anti­imperialist (meaning, above all, anti­American) political stance. Nonetheless, Marxist thought was relatively isolated in Latin America in the 1940s and early 1950s, closely identified with a network of communist parties under Soviet discipline.

A crisis in the 1950s furnished strong evidence for the antiimperialist argument. As described in Chapter Ten, the U.S. strongly opposed the reformist program of Colonel Jacobo Arbenz in Guatemala. The CIA­organized exile invasion of Guatemala in 1954 imposed Carlos Castillo Armas as president, who promptly reversed the expropriation of United Fruit lands, and dutifully signed a mutual defense assistance pact with the U.S. in 1955. The Soviets, for their part, merely stood by and watched. A similarly managed coup succeeded in Iran in 1953, ousting Mossedegh and reinstating the Shah. With its power and wealth, the U.S. was flexing muscle on a global scale.

Especially in Latin America, the State Department could count on a solid phalanx of Latin American votes in the UN. The dogma of free enterprise continued to dominate U.S. hemispheric policy, despite a chorus of Latin American voices calling for international commodity agreements, a multi­lateral development bank for the Americas, and expanded accessibility to technology. Democratic reformers in Latin America, such as José Figueres in Costa Rica, Romulo Betancourt in Venezuela, and Eduardo Frei in Chile, urged the U.S. to encourage democracy and social reform. The U.S. had too often favored the dictators, argued Figueres, thereby nurturing the kind of extreme leftism that emerged in Guatemala. Time was growing short -"one minute to midnight," as Figueres like to announce dramatically.

Such pleas fell on deaf ears in Eisenhower's Washington until Vice President Nixon traveled to Latin America in 1958. The trip was largely ceremonial, to attend the inauguration of President Arturo Frondizi of Argentina, with stops in seven other South American countries. Nixon's well­publicized past as a virulent anti­communist made him a natural target for student leftists in Latin America. Despite repeated warnings from his security staff, Nixon insisted on making his public appearances. There were demonstrations everywhere, but they were especially ugly in Lima and Caracas. On one occasion Secret Service agents had their guns drawn against a mob attacking Nixon's car when the driver just succeeded in whisking the shaken vice president away. The events got world­wide publicity, and Washington worried over the possible causes of such anti­American feeling. The first important revisions in U.S.­Latin American policy began to appear in 1959, when the U.S. government dropped its opposition to the creation of an InterAmerican Development Bank. There were also plans to expand U S bilateral aid. But events in the Caribbean soon overtook this modest change in official U.S. thinking.

Increasing the International Options?

During his guerrilla war against the dictator Batista, Fidel Castro had presented himself as a democratic reformer, fighting tyranny to restore representative democracy. Once in Havana, however, Fidel moved steadily to the left. He knew that any threat to U.S. investmentóor to U.S. political hegemony -in Cuba would bring U.S. intervention. Early in 1959, Fidel made overtures to the Soviets; by the end of the year Cuba was receiving economic aid from Moscow. By the end of another year Cuba had completed an almost total switch in trade relations- from overwhelming trade dependence on the U.S. to overwhelming trade dependence on the Soviet Union. Soviet military aid had also begun pouring into Cuba. The Soviets were obviously now willing to take a far bigger gamble than they ever contemplated in Guatemala in 1954.

The U.S. reaction foreseen by Fidel now began. The attempted landing at the Bay of Pigs in early 1961 might have succeeded if President Kennedy had ordered use of U.S. navy air cover, but Washington said no. The dilemma was all the more acute because the Kennedy administration was working frantically to produce a new ancl more enlightened Latin American policy.

The U.S. was humiliated: first by the failure of the anti­Castro invaders, second by the clumsy cover used to conceal U.S. involvement. The defeat left Fidel stronger than ever. He had dramatic proof that the U.S. presented a constant threat to Cuba's security. He could now crack down against all domestic opposition.

The failed invasion also confirmed the entry of the other superpower into the hemisphere. The long­discussed U.S. fear -Soviet penetration of the Americas- was now fact. If the Soviets were willing to supply the Cubans, how many other guerilla movements in Latin America might hope for the same support? That worry goaded tbe Kennedy policymakers to speed up the formulation of their new Latin American program.

The new policy, as arrnounced in 1961, had two distinct aspects. The first was a major multi­laterally sponsored economic and social development program, christened the "Alliance for Progress." It was to involve both economic growth and social reform, to be carried out by democratic governments. Each Latin American nation would have to submit a detailed development plan to a council of nine "wise men," economists and technocrats. The U.S. government promised to provide funding, up to $20 billion over ten years. It also promised to push the multi­lateral authorities and private investors in the U.S. and Europe to increase their capital flows to Latin America. The U.S. Iaunched this new policy in a blaze of publicity, including a gala White House dinner for the Latin American diplomatic corps.

Considerable groundwork for this new program had beerl laid by the Eisenhower administratiom Yet the dramatic embrace of the cause of social reform, and the willingness to press for public funds, would have been difficult for a Republican administration. In effect, the U.S. government was now adopting the logic put forward by the ECLA and by the democratic reformers, such as Figueres and Betancourt. To the surprise of many of its detractors, the U.S. government was now claiming the leadership of a peaceful social revolution in Latin America.

The second aspect of the Kennedy administration's new Latin American policy was less publicized. It was a stepped­up counter­insurgency program by which the U.S. government would help Latin American governments fight guerrilla movements. The Kennedy policymakers were not betting on ecanomic development and social change alone. Even the most committed reformer, they reasoned, might run afoul to a wellorganized guerrilla opponent. Conventional military and police could not do the job alone. New methods were needed, such as the British had perfected in their successful anti­guerrilla campaign in Malaya. The Kennedy mystique was therefore now applied to the creation of a new, elite corps of counter­insurgency experts. They were given a distinctive green beret, and told that training counterpart forces in the Third World would be one of their main tasks.

As part of this effort to protect favored governments, the U.S. increased its military supply and training programs. There was a premium on modernizing the military, making them capable of the rapid and coordinated action needed to fight well­trained guerrillas. A new element was also added: the training and equipping of police forces to control urban riots and sabotage, and improvement of their techniques of interrogation and record retrieval. This activity was housed in the U.S. Agency for International Development (USAID) and bore the euphemistic label of "public safety."

The theory behind this two­pronged U.S. policy was that the U.S. had an interest in identifying and supporting strongly reformist leaders, giving economic aid to achieve growth, and at the same time offering the means to defeat armed domestic opponents who might have Soviet or, more likely, Cuban help. The U.S. was now betting on the anti­communist reformers to ride the historical tide in Latin America and to produce more prosperous, more egalitarian, and therefore stronger nations with interests compatible with those of the U.S. Soviet penetration would be stopped, the U.S. sphere of influence would be preserved, and everyone in the hemisphere could be better off.

The Alliance for Progress was born to widespread applause. The glamor and eloquence of the new U.S. president, contrasting sharply with the pro­big business image of Eisenhower, excited Latin American imaginations. Liberals in the U.S. and Europe were thrilled, as were those long­time critics of U.S. policy who had excoriated Uncle Sam for always siding with the dictators.

Then Cuba hit the headlines again. The CIA, apparently with clearance from the White House (or at least Robert Kennedy), tried several plots to assassinate Castro. All failed. Meanwhile Fidel tightened his grip on Cuba, and looked to spread the revolution elsewhere in Latin America.

The Soviets became emboldened by U.S. weakness at the Bay of Pigs and decided to act. During 1962 they flooded Cuba with military equipment, including missilesóhardly a defensive weapon, since the missiles were too close to be detected by the U.S. warning system. The U.S. got the OAS to approve a blockade against all ships carrying offensive weapons to Cuba. There followed a frightening face­off, and the Soviets finally agreed to remove the missiles, but only when the U.S. promised to lift the blockade and pledged not to invade Cuba in the future.

The "missile crisis" of October 1962 had great implications for Latin America's relations with the U.S. and the world. First, the Soviets had been forced, by threat of direct U.S. attack on their Cuban installations, to give up the strategic advantage they tried to win by stealth. In effect, the Soviets were ratifying anew the U.S. strategic military hegemony in Latin America outside of Cuba.

Second, the U.S. had promised to keep hands off of -at least by direct invasion- the "first socialist experiment in the Americas." Fidel now knew he could concentrate on building socialism at home and exporting revolution abroad. Nonetheless, he needed a large security force to ward off CIA and exile­sponsored raids, as well as to prevent Cubans from fleeing the island.

Castro was in a good position to extend support -including money, materials, and training- to revolutionaries elsewhere in Latin America. Cuba became a "platform" for the export of revolution. At prime target was Venezuela, where President Romulo Betancourt was a prototype of the democratic reformer the Kennedy administration sought in Latin America. In November 1963 the Venezuelan government announced its discovery of arms sent to Venezuela from Cuba, and asked the OAS to act. The Venezuelans charged that the arms were intended for local guerrillas, precisely the kind of anti­democratic forces Washington had said would justify U.S. counter­insurgency aid. The OAS dutifully endorsed the Venezuelan charge and, in July 1964, asked member nations to sever all diplomatic ties with cube and to suspend all commercial and transportation links. Cuba was to be an outcast nation in the hemisphere. All OAS members complied, except Mexico, which had reason to want the U.S.­Cuban stalemate to continue, since it had partially replaced Cuba both as tourist attraction and as a supplier of sugar.

The pattern for Cuba's role in the hemisphere was now set. Backed up by an extraordinary Soviet subsidy -far greater per capita than the U.S. subsidy to any of its client regimes in Latin America- the Castro regime pressed ahead on two fronts. One was the difficult task of constructing socialism in Cuba, far more difficult than most revolutionaries had foreseen in 1960. The second was the promotion of revolution abroad. It was best exemplified by Che Guevara, who soon found that, like the achievement of socialism at home, the promotion of revolution abroad was easier said than done.

The Fidelistas were by no means the only source of the call to revolution in Latin American during the 1960s. Just as Soviet penetration via the cuban revolution shattered the U.S. hegemony in the hemisphere, so the Sino­Soviet split in world communism fragmented the revolutionary left. Back in the 1940s and 1950s, the Latin American left had been dominated by national communist parties, almost all under Moscow's direction. In the late 1950s, however, the split between Peking and Moscow created new opportunities for Latin American revolutionaries. The Chinese communist Maoists gave inspiration to Latin Americans long dissatisfied with the bureaucratized orthodox communist parties. They yearned for revolution now, not in some distant era when "objective conditions" would be favorable. Revolutionaries of this bent arose in every major country in the 1960s. Almost invariably they met a bloody end.

Democratic Reformers and the Alliance for Progress

The framers of the Alliance for Progress banked on an improbable combination of favorable factors: elected governments promoting economic growth while achieving social reform. If Latin America had all the problems its analysts so often described, how could politicans suddenly produce the consensus necessary to carry out such ambitious programs? Why would the wealthy and privileged stand by? Could economic growth be achieved if governments mounted social reform threats to established producers?

Elsewhere we have seen the fate of democratic reformers in Chile, Brazil, Argentina, and Peru. In Chile, Frei (1964­70) fell far short of his goals in key areas such as land reform and redistribution. Power then passed to a more radical reformist, Salvador Allende (1970­73), under whom politics polarized dangerously and the economy spun out of control, due in part to U.S. economic warfare against Chile. Reformismóof which Allende was still a representative -had failed dramatically. Chile's repressive military regime after 1973 was exactly what the Alliance for Progress was designed to avoid.

In Brazil, Janio Quadros (1961) at first appeared to be the dynamic vote­getting reformist Brazil needed. But he resigned after only seven months in office, opening a three­year political crisis that culminated in a coup against his ineffectual successor, Joao Goulart (1961­64). The military­dominated governments after 1964 emphasized economic growth, with little effort toward social reform. The result was an increase in social inequality, combined with a steady move in the 1960s away from direct elections -a path the architects of the Alliance for Progress would have thought was an invitation for trouble.

In Argentina, the best hope for democratic reformism was Arturo Frondizi's government (1958­62), but it was soon jeopardized by a highly unpopular anti­inflation program and became a casualty of the longstanding Peronist­military confrontation. None of the succeeding governments m Argentina came close to the model envisioned in the Alliance for Progress.

Venezuela, one of the few countries to maintain a continuous civilian government, was a bright spot for the U.S.­promoted reformist policy. Yet it produced little significant social reform and its relevance was always compromised by its windfall of oil revenues.

In Peru, President Fernando Belaunde Terry (1963­68) looked like a democratic reformer, and he bet on economic development, especially by opemng up the Peruvian Amazon. But he ran afoul of nationalists in the military and also met severe economic difficulties. He was then deposed in a military coup led by General Juan Velasco Alvarado, whose military regime carried out a land reform more radical than any contemplated by Belaunde. Velasco was in turn replaced by a more pro­private­sector military regime, which allowed elections again in 1980, and Belaunde, long in exile in the U.S., was re­elected to the presidency. But the economic odds were stacked against his reformist government.

Colombia was another country where U.S. planners placed great hope. The president from 1958 to 1962, Alberto Lleras Camargo, was an articulate and attractive Liberal Party politician from a prominent Colombian family. His cadre of economists and technocrats prepared the kind of detailed economic and social plans called for in the Alliance for Progress. They won large loans from the U.S. government and the multilateral agencies, and Colombia was soon labeled a "showcase" for democratic reformism by enthusiastic U.S. observers. Unfortunately, the hopes proved premature, as the Colombian government achieved little reform in crucial areas such as land redistribution. Although economic growth was forthcoming, precious little of it benefitted the rural sector or the mushrooming shanty towns around the cities. By the mid­1960s Colombia had become a prime example for U.S. congressional critics, such as Senator J. William Fulbright, who found far too few of the Alliance aims accomplished in this "showcase" country.

Events in the Dominican Republic brutally exposed the contradictions in U.S. policy. The assassination in 1961 of Rafael Trujillo, one of the Caribbean's most notorious dictators, opened the way for a free presidential election -won by Juan Bosch, a popular reformer whose ideas certainly fit the mold of the Alliance for Progress. Despite U.S. support, Bosch was deposed by a military coup in 1963. Another armed revolt in 1965 triggered fears in the Lyndon Johnson administration that a Castro­like regime might emerge, which would be a disaster both for Johnson's foreign policy and for his standing with U.S. domestic. opinion. Johnson listened to all his advisers and then sent in 20,000 U.S. troops. They were joined by troops from Brazil, now ruled by a military government anxious to show its Cold War zeal.

A new civilian, Joaquín Balaguer, was elected president in 1966 and the U.S. and Brazilian troops left. But the U.S. had aroused resentment in much of Latin America for the heavy­handed manner in which the Johnson administration demanded (and just barely got) OAS blessing for the U.S. intervention. It wasn't quite the 1920s again, but it certainly wasn't the bright new era John Kennedy had envisioned in 1961.

Clearly, the Alliance for Progress had failed as of 1970. The expectations had been too high, given the political realities of the decade. Furthermore, the goal of promoting democracy soon conflicted with the goal of preventing any more Cubas. In Brazil, for example, the U.S. became convinced that President Joao Goulart was leading his country dangerously leftward and Washington therefore quickly endorsed a military­civilian conspiracy when it overthrew him. By the end of the decade the Brazilian military regime had joined the ranks of the highly repressive, with little pretense of social reform; nevertheless it continued to be the largest baneficiary of U.S. aid.

In Argentina between 1963 and 1966, the U.S. found itself dealing with the ineffectual civilian government of Illia, which was succeeded by the repressive regime of General Onganía. But here too, a general had his attractions for Washington, as did his military successors, because they were cracking down on the growing guerrilla movement.

The ideology of the Alliance for Progress was set by John F. Kennedy and the "New Frontiersmen," although President Lyndon B. Johnson pledged to continue the basic policies when he took office in November 1963. The election of Richard Nixon in 1968 brought a change in U.S. policy. Although Nixon maintained a rhetorical commitment to democracy and social reform, at heart he and his advisers favored a return to the more traditional Republican stance of leaving economic development primarily to the private sector. The Nixon administration also increased military aid, acting on the advice of governor Nelson Rockefeller, whose 1969 presidential mission to Latin America pointedly noted that "a new type of military man is coming to the fore and often becoming a major force for constructive social action in the American republics." The implications were obvious.

Nixon was the first U.S. president to have to deal with an elected Marxist head of state in Latin America. Salvador Allende's victory in 1970 was a test for the U.S., publicly committed to social reform but strongly opposed to leftist movements. Although Allende's regime never reached a revolutionary stage, the Nixon administration was determined from the day of Allende's election to use every means ("make the economy scream" was one of Nixon's suggestions to CIA Director Richard Helms) to prevent his inauguration or, failing that, to speed his overthrow.

The U.S. discouraged new private investment in Chile and obstructed, wherever possible, Chile's access to financing from multi­lateral agencies such as the International Monetary fund, the World Bank and the Inter­American Development Bank. At the same time, President Nixon ordered the CIA to develop and carry out a secret plan for harassing the Chilean government. At least $10 million was spent in subsidies to the Chilean opposition press (especially the militantly antiAllende El Mercurio) and to opposition groups, including many strikers who helped paralyze the Chilean economy in 1972­73. Seen in the context of all Allende's problems, the U.S. effort was probably of marginal importance. It was the Chilean military and the Chilean middle and upper classes who rose up against the Popular Unity government. They needed no lessons from the U.S. in why and how to do it. But the U.S. increased the sense of sedge felt by the Allende government and encouraged the opposition to believe generous U.S. aid awaited them after a coup.

Not the least important result of the Allende era was the wide publicity about the U.S. covert activities. The official documentation of a U.S. Senate Select Committee in 1975 and subsequent journalistic revelations confirmed that the U.S. was still ready to intervene in the way Latin Americans had so long claimed.

In retrospect, these events reveal long­run continuities and transitions in the United States posture toward Latin America. Over the past 150 years, it appears that the form and extent of U.S. involvement in the region has passed through four separate stages (these stages refer only to U.S.­Latin American relations, whereas the overall subdivisions in this chapter refer to Latin America's relationship to the entire world).

Stage l (1819­80): Territorial Aggrandizement. Early in the nineteenth century the United States, itself a fledgling republic, engaged in outright territorial expansion at the expense of Latin America. The U.S. purchased Florida from Spain in l819, just as the Wars of Independence were entering their final phase, and thereafter began its campaign to obtain land from Mexico -from the annexation of Texas in 1844 to the war of 1846­48 to the Gadsden Purchase of 1853. In the 1850s other expansionist efforts flourished and faltered, such as the Ostend Manifesto of 1854 (which set down terms for the purchase of Cuba) and William Walker's filibustering expedition in Nicaragua, and then the land­grabbing impulse started to fade. Throughout this era the U.S. jealously attempted to exclude Europeans from Latin America, principally through the Monroe Doctrine of 1823.

Stage 2 (1880­1932): Investments and Protectorates. Economic growth and industrial development in the U.S. kindled a new type of interest in Latin America, as North American entrepreneurs looked to the region for raw materials and markets for their goods. The political prerequisite for economic investment was stability (and/or Washington's influence), and for this reason the U.S. created and sustained a string of "protectorate" states throughout the Caribbean -in Cuba, Haiti, the Dominican Republic, Pánama, Nicaragua, and Central America in general. The U.S. also attempted to control the outcome of the Mexican Revolution, as Woodrow Wilson justified the dispatch of U.S. marines by vowing "to show those Latins how to elect good men" but eventually had to settle for indirect forms of leverage. In South America the U.S. came to rely more on diplomacy than naked force, but negotiations could still be heavy­handed and one­sided. As Teddy Roosevelt had once declared, in dealing with Latin America the United States should "speak softly and carry a big stick."

Stage 3 (1932­72): Good Neighborhood and Economic Aid. U.S. entanglements in World War II and the Cold War prompted still another redefinition of national interest in Latin America, one that stressed the importance of "good will" among hemispheric neighbors while the U.S. was locked in bitter struggles with rival world powers. The economic development of Latin America came to be seen as a key element in this strategy, since it would reduce the temptation for dissatisfied Latins to align themselves with unfriendly camps (first Nazi Germany, then Communist Russia). Franklin Roosevelt's announcement of the Good Neighbor policy occurred as these tensions were still on the horizon, but the implementation of his principles picked up appreciably during and after World War II. The idea of good­neighborliness reached its peak with John Kennedy's pronouncement of the Alliance for Progress in the 1960s. For the most part the U.S. refrained from overt military intervention (with conspicuous exceptions in Cuba and the Dominican Republic), preferring instead to rely on covert operations (as in Guatemala). Increasing emphasis was placed on diplomatic negotiation, promoting private trade and investment, and, under Kennedy, on government­to­government aid for economic development.

Stage 4 (1972 to the present): Waning Influence. For the last two decades U.S. influence in Latin America has been on the decline, as nations of the region have achieved more independence and autonomy, in part by playing the international superpowers off against each other. Japan has entered the commercial scene, trade with Europe and the Soviet Union has continued to increase, investment now comes in from diverse areas. Latin American leaders have attempted to manage and reduce their dependency by a strategy of diversification, so their countries would become partially dependent on a variety of outside nations and external influences, rather than wholly dependent on a single power: the U.S. On occasion the U.S. stoutly resisted this trend, as shown by its attempt to destabilize the Allende government in Chile and by its support for the Contra cause in Nicaragua. (Undercover action revealed that the threat and use of force had become much more subtle and selective than in the "big stick" era, but it nonetheless remained a constant feature of U.S. policy.) From the viewpoint of Latin America, however, diversification seemed to many like a workable and realistic approach. It also underlined one basic truth of hemispheric relations: What is good for Latin America may not be good for the U.S.

The Economic Dimension

By 1960 West Europe and Japan were entering Latin America as major investors and traders. Another increasingly important force were the multinational corporations (MNCs). Firms such as International Telephone and Telegraph (ITT), Philips, and Royal Dutch Shell were no longer identified with any one country. Their multi­country base of operations meant they could play off one country against another while channeling business among branch firms. Multinationals predominated in many high technology areas. In some key sectors, such as pharmaccuticals or computers, countries had little alternative but to allow the multinationals to enter.

As time passed, Latin America was unable to devise an effective strategy for this problem of technology transfer. The hard fact is that advanced technology in industrialized countries is produced by private firms which use it to make profits. They are unwilling to sell the technology, and insist on marketing it themselves. Distribution and sales require direct investment, leading to eventual profit remissions that can, in principle, far exceed the original investment. Furthermore, the MNCs may be able to wield monopolistic power in the local market, charging prices higher than a competitive market would have allowed.

Attempts by individual counties (or even country consortia) to develop advanced technology have faced long odds. The research facilities and experience of an IBM or Bayer are hardly within the reach of hard­pressed scientists and researchers in Latin America. In consequence, the terms of transfer of technology have become one of the central issues in the relationship of the Latin American economies to the industrialized world.

By the late 1980s a far graver short­run problem weighed down the Latin American economies: their staggering foreign indebtedness. By early 1988 the combined debt to the commercial (private) banks, as well as such multi­lateral lenders as the World Bank and and the InterAmerican Bank, was $400 billion and growing daily. The three largest debtors were Brazil ($113 billion), Mexico ($ 108 billion), and Argentina ($54 billion). Most of the debt had been incurred since the huge OPEC oil price hikes of 1973 and 1979, which sharply increased the import bill for most of Latin America. The loans came primarily from private banks (flush with deposits from the oil exporters), and they made possible a higher rate of growth then the borrowers could otherwise have enjoyed. In truth, however, they simply postponed payment for the increased cost of oil. The borrowers were assuming that they could increase their trade surplus enough to repay the loans. This applied to almost all of Latin America, except the net oil exporters (Bolivia, Ecuador, Venezuela, post­1975 Mexico, and post­1978 Peru) and Argentina, which was virtually self-sufficient in oil.

By the late 1970s, the loans were not limited to the oil importers. Almost every Latin America country borrowed massively, partly because bankers aggressively sought out Latin America customers. One major U.S. bank, for example, anxious to emulate the giant New York banks, entered the game late and had to be content with lending to Peru, one of the poorer risks. The bankers like these customers because they were paying high interest rates and because they were supposedly immune from bankruptcy -the U.S. would never allow that to happen to a sovereign country. Soon the borrowed funds were going for current consumption, enabling governmentsówhether military or civilian- to win short­term favor from their import­consuming urban countrymen. Thus all of Latin America, with the conspicuous exception of Colombia, became hooked on private bank loans.

Net borrowing by developing countries is perfectly normal. The U.S., for example, was a net borrower until 1900. If the funds had gone for investment in Latin America to insure future growth and to promote exports, then the capacity to repay would have increased. Instead, much of the money was squandered. In countries such as Mexico and Argentina, the rich commandeered much of the borrowed funds and promptly deposited them in bank accounts abroad.

In August 1982 Mexico declared it could no longer make payments on its foreign debt, thereby triggering a would credit crisis. Brazil, the largest borrower, joined Mexico in December. Since 1982 no major Latin debtor has been able to pay anything on principal. Even to maintain the interest payments has required repeated "rescue" loans, which the debtors then immediately sent back to the banks as interest payments. Such rescues offered no long­term relief for the borrowers, but they produced lucrative "fees" for the lending banks and kept U.S. banks from having to classify the loans as delinquent. This, in turn, allowed them to avoid increased bank reserves which would have reduced their profits.

Meanwhile, the major debtors faced interest payments equal to 5 or 6 percent of their GDP. Not even Weimar Germany's burden of payments on World War reparations had reached that level. Virtually all observers agreed that the Latin American loans would never be repaid in full. Banks wishing to sell those loans in 1988, for example, found the going rate to be about 50 percent of face value. Confronted with such losses, the bankers investigated other solutions, such as swapping debt for equity investments (in the same country) or for "exit bonds," which would be readily negotiable on the open market. None of these plans promised to reduce sign)ficantly the Latin American debt service charges in the short run. Only a general write­down of the total indebtedness and a stretch­out of payments could do that. If this were not accomplished through negotiation, it seemed likely to come by default, either declared or de facto. Some U.S. banks began to accept that inevitability in 1987, as they increased their reserves against probable loan losses in Latin America.Latin America's credit crisis has been accompanied by a protracted economic slump since 1982. Country after country has had to adopt an orthodox IMF­style austerity economic plan to satisfy foreign creditors. Deflationary measures, combined with the capital outflow for debt payments, has produced stagnation. In per capita terms, Latin America's GDP fell by 6.5 percent between 1981 and 1986. Not surprisingly, the cost was paid disproportionately by those at the bottom, as real incomes of the poor shrank most. But Latin America's economic distress also hit the U.S., whose exports to the region fell from $42 billion in 1981 to $31 billion in 1986. Caterpillar factory workers in Illinois, for example, were laid off as South American road contractors had no dollars to buy the giant yellow earth movers. Dependency, alas, can be a two­way street.

Additional costs of interdependence became apparent through one of the most alarming developments of the 1980s: the precipitous expansion of trade in illicit narcotics between Latin America and the United States. According to some estimates, the commerce in illegal drugs amounted to as much as $110 billion, and it was said to be the most important economic activity of organized crime in the U.S. As supplies from other parts of the world dried up (the infamous "French connection" came to a halt in the early 1970s), resourceful traffickers turned Latin America into a major source of drugs for the ever­growing market in the U.S. Peru, Bolivia, Colombia, and Mexico became cultivation centers for marijuana, cocaine, and heroin. Jamaica, Panama, Venezuela, Brazil, and Argentina became centers for the transshipment of drugs and the laundering of funds.

One of the most corrosive effects of this trade was to build up powerful trafficking rings which came to represent genuine challenges to legitimate political authority. This was most apparent in Colombia, where organized criminal groups -most notably the "Medellin cartel"- exercised de facto power through a combination of corruption and intimidation. Between 1982 and 1987 the narcotics groups and their hired thugs assassinated no less than fifty­seven judges, killed twenty­four journalists, and murdered one attorney general: they had, in effect, taken Colombia hostage. Though somewhat less visible in the other countries, drug barons and their criminal organizations were accumurating economic and political leverage throughout the entire region.

By the late 1980s there was no clear response to the dangers posed by the narcotics trade. The Reagan administration continued to demand that Latin American governments close down sources of supply. Latin Americans argued that the ultimate cause of the problem was the existence and growth of demand in the United States, where as many as 25 million people made habitual use of illegal drugs. Some observers called for the creation of an international police force; others spoke out for decriminalization of drug possession in the U.S. Only one thing was apparent: as long as t~e illicit traffic continued, it would pose a serious threat to the social order of Latin America and a major obstacle to U.S.­Latin American relations.

Latin America, in the World of the 1980s

In the 1980s Latin America projected itself onto the world stage more than ever before in this century. There were the more than 50,000 Cubans in Africa, as military and social service personnel in Angola, Mozambique, Ethiopia, and a half dozen other African republics. The Cubans were there to prove the superiority of socialist ways, backed by Soviet military support. Here was a new dimension to Latin American relations with the world: a Latin American country taking the initiative outside the continent, representing the cause of the Third World (as interpreted by Havana) in another ex­colonial setting. However compromised by the Soviet sponsorship, these Cuban initiatives represented a unique effort by a more advanced part of the Third World to reach out to a less advanced region.

By the 1980s Latin America was receiving recognition on ihe world stage in other ways. Argentina won soccer's World Cup in Buenos Aires in 1978, and Brazil shocked the U.S. by beating its team in the basketball final of the 1987 Pan­American Games. In tennis, Argentines Guillermo Vilas and José Luis Clerc had shown their prowess against the best of the U.S. and West Europe. The secretary generalship of the UN went to a Peruvian diplomat, Javier Pérez de Cuellar. The Latin American novel had become an artistic and commercial success in the U.S. and Europe, with Carlos Fuentes (Mexico), Gabriel García Márquez (Colombia), Jorge Amado (Brazil), and Julio Cortázar (Argentina) impressing North American and European readers and critics. Worldrenown poets included Gabriela Mistral (Chile) and Jorge Luis Borges (Argentina). Leading composers of music were Carlos Chávez (Mexico), Alberto Ginastera (Argentina), and Hector Villalobos (Brazil).

There were also dramatic changes in the sphere of economic thought. Many of the 1980s policymakers in Latin America turned to the freemarket economic doctrines best publicized by Milton Friedman of the University of Chicago, who had lone; argued for fixed monetary policies and strong control over all sources of public spending. Friedman became a guru for reigning technocrats in Chile and Argentina, where application of his policies led to major recessions. But Friedman argued that the long­run consequences could justify the short­run sacrifices.

It looked like a return to the economic liberalism of nineteenth century Latin America, as the rapid reduction of tariffs staggered Argentine and Chilean industry. Meanwhile, the burden of anti­inflation programs in both countries was borne disproportionately by the workers.

Mexico and Brazil followed more pragmatic policies, but still faced a huge shortfall in jobs available relative to new entrants into the labor market. Nowhere had the combination of economic growth, social reform, and political democracy taken hold. The 1960s vision of the developmental reformists still seemed very far in the distance.