3. The Influence and Power of the U.S
3.2. Economic Factors
3.2.3. The effect of the rising nationalism on economic policy
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complaining about the possibility of repeating the same mistake that happened in Guatemala, this time in Nicaragua:
Dulles told us exactly what Reagan is telling the American people now:
that U.S. support for the rebels will foil the spread of communism. Later I learned that Dulles had lied to us. Communism was not the threat we were fighting at all; land reform was. Fulfilling his campaign pledge to transform Guatemala into a ‘modern capitalist state’, President Arbenz took over some unused land belonging to United Fruit. That angered the Boston-based company which considered its rights to Guatemala superior to those of Guatemalans… Our success in Guatemala led to 31 years of repressive military rule and the deaths of more than 100,000 Guatemalans. (Roettinger, 1986)
Private companies would play an important role in U.S. interference in Latin America.
This fact was also part of the rift that was formed between the two regions of the Americas. Latin American antipathy for the U.S. would continue to increase over the years, especially after the constant American interventions.
3.2.3. The effect of the rising nationalism on economic policy.
The previously mention NSC 144/1 already commented on the discomfort that was being felt in Latin America at the beginning of the Cold War,
The people of Latin America are becoming increasingly aware that 90%
of the wealth of the Western Hemisphere (less Canada) is produced by one of the American republics –the United States- while 10% is produced by the remaining 20 American states… a doctrine labelled ‘nationalism’
or ‘colonialism’ has gained wide popular acceptance in the area
From 1929 in different Latin American countries there would be a progressive construction of political movements integrated by a generation of nationalist reformers that would rise to power between the 1930s and 1950s. Washington found itself facing an uncontainable nationalism that could be more easily controlled by the Soviet Union. For the U.S., this nationalism had to be connected to the Soviet threat because it could easily be converted into communism; this idea would be reinforced when in the mid-1950s the Soviet Union launched what is been known as the Soviet Economic Offensive (SEO) in Latin America –January 1956. Even if the anti-American feeling had more to do with nationalism rather than communism, the threat the Soviets were posing required a review in the U.S. economic policy. At the time, the Eisenhower administration was engaged in fostering the economic development of
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Latin America through the expansion of free-market capitalism, which would aggravate the problem. Their policy consisted in replacing aid for private investment and that, according to Latin American, represented a clear threat to their local economy. The reason why this wasn’t being accepted in the region is because this implied lowering the amount of money dedicated to aid. Even though the Soviet offensive was not the only reason for the final decision to review the economic policy, it gave them the necessary stimulus to do so. As we have seen, national security was the main concern for the U.S., and Latin America, being their backyard, was highly important. This meant that they needed to be kept under the U.S. influence. They couldn’t allow this rise of anti-americanism to keep growing. According to the CIA, many of the elements that were contributing to the rise of nationalism in Asia and Middle East, were also present in Latin America. The area was underdeveloped, thus, many people were living in poverty and ignoring what was going on in international affairs. The CIA report on the issue also states that the strong anti-american feeling was similar to the anticolonialism that was being felt in Asia and Middle East, therefore blaming the U.S. for their underdevelopment and their lack of industrial development. Also, the CIA mentions that the local communist parties were using this anti-American feeling to get rid of governments that supported the American
“imperialism”, and that the Soviet Union were intensifying their economic programs in Latin America –namely, the SEO- to ease the way to a confrontation between these countries and the U.S. (Pettinà, 2007: 590). Henry Holland, assistant secretary of state for inter-American affairs, in his memorandum to Secretary Dulles, shows the significance that the SEO had for policy-makers,
We need something new that does not involve broad grant aid, soft loans, loans to the oil industry or loans to projects for which private capital is available…We must put the other country in a position where it is obvious to her that if she accepts Soviet credits we can quietly diminish or cut off continuing benefits which are more important to her than anything Russia can offer (Sewell 2008: 856)25
In this situation, cutting on the aid could worsen even more the perception that Latin Americans had towards the U.S. Indeed, Holland would tell an economic subcommittee in December 1955 that ‘The level of lending should be at least the
25 Memorandum from Assistant Secretary of State for Inter-American Affairs Henry Holland to Secretary of State John Foster Dulles (1956, February 24).
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minimum amount necessary to keep Latin Americans from complaining’
(Memorandum of a Conversation, 1955)
Figure 2. Trend of U.S. Economic Assistance to MSP26 Countries
Fiscal Years 1953-1961 (Millions of Dollars)
Includes 80 million for inter-American Development Bank (IDB)
Source: US Agency for International Development (USAID)
As we can observed in Figure 2, the trend of the economic assistance was extremely low in 1954 following Eisenhower economic policy.
In Table 4 we can see the exact amount of millions of dollars that were assigned to aid, and understand why the people in Latin America were feeling bothered by U.S.
actions.
26 Mutual Security Program
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Table 4. U.S. Foreign Assistance to Latin America (Millions of Dollars – Historic value)
Years Economic -
Source: US Agency for International Development (USAID)
On January 18 1956, Dulles would inform Samuel Waugh, president of the EXIM, that he was concerned ‘as to whether the operations of the Export-Import Bank in the area was of a volume sufficient to serve as an effective defense against the Russian campaing’ (Sewell 2008: 857). What happened for the actual policy changes, however, would be more in the line of a strategic turn than an actual increase in aid for development as the Latin American countries wanted. In the Panama Presidents Meeting that was celebrated in August 1956, Eisenhower made a proposal to start a multilateral committee, run by the Organization of American States (OAS), to discuss economic issues. This idea would be greatly accepted in Latin America. Yet, it was done for ‘strategic purposes’ and the ‘economic principles in the region’ that were present before stayed the same. (Sewell 2008: 859) The expectations that this policy created were huge; thus, after Latin America started to realize that it was mostly an empty document, problems began to emerge again. Even when in 1961 President John F. Kennedy announced his Alliance for Progress –Alianza para el Progreso27, the situation would not change significantly. As it can be seen in table 4, Kennedy did
27 Initiated by President John F. Kennedy in 1961, aimed to establish economic cooperation between the U.S. and Latin America. The economic assistance to Latin America nearly tripled from the fiscal year 1960 to 1961.
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increase the aid –almost tripled- from the year 1960 to 1961. But both presidents were confronted with the reality of trying to pursue both an ideal economic policy for the development of Latin America, while trying to protect the U.S. national security (Sewell 2008: 867-8)