Open Veins of Latin America

Section 1 Summary: “An Impotent Talisman”

While most private investments in Latin America once belonged to various European countries, much of these investments now come from the US. After World War II, European interests in Latin America declined. With new interest from the US, the industries of focus shifted from mining to petroleum and manufacturing. Galeano describes US private investments in Latin America as a “new-model imperialism” (227) in which inequality and wealth disparity becomes further exacerbated through the new terms of participation in the global capitalist market. The US frames their investments as having to do with “progress and national liberation” (228). However, by forcing Latin American countries to become further indebted to the US through loans and participation in an international banking system that does not benefit them, this new form of imperialism only furthers the poverty within Latin American countries.

According to Galeano, modern-day global capitalism brings the rise of the industrial bourgeoisie, a ruling class within Latin American countries that orchestrates economic decisions that sustains the free trade power imbalance between their own countries and the US. While in the past, the bourgeoisie or middle-class could encourage social change on a systemic level, Galeano believes that modern-day capitalism has not produced a bourgeoisie that is “strong and creative enough to reshoulder the task [of social change] and follow it through to its end” (228).

Section 2 Summary: “The Guards Themselves Open the Gates: The Guilty Sterility of the National Bourgeoisie”

Galeano continues to examine the changing structures and motives of the ruling and bourgeoisie class in Latin American countries as they have always historically influenced major political and economic decisions for their countries. Galeano refers to the ruling class of Latin American countries in modern-day capitalism as the industrial bourgeoisie as he asks the question, “[…] what hope is there that, at this stage of history, Latin America’s bourgeoisie will lead the impossible venture of independent capitalist development?” (229).

The growth of industrialization and manufacturing has transformed the circumstances of modern-day capitalism as Latin American countries must reorganize their capitalist development in relationship with Western countries. Galeano cites the ruling governments of Getúlio Vargas of Brazil, Lázaro Cárdenas of Mexico, and Juan Domingo Perón of Argentina as examples of administrations that had to contort to the power of the industrial bourgeoisie. Each of these governments treated industry as “conditioned by and serving the needs of a previously existing internal market [though] it never broadened that market enough to make great structural changes possible” (231). These governments struggled to forge a “‘partnership’ between national industry and the imperialist corporations” (231), which became further enmeshed with each advancing manufacturing technology generated by US and Europe. The advancing technology forces Latin American industry to purchase patents, machinery, and new techniques to operate and keep up with the international market.

Galeano notes that modern-day capitalism presents a shift from a traditional to a dynamic industry. Whereas the former needed a growing number of consumers to consume the products made in mass production, the latter catered to the few consumers who have the financial resources to purchase the products. Thus, the industrial bourgeoisie in Latin American countries always inevitably side with Western multinational corporations. For Galeano, “The industrial bourgeoisie is a dominant class dominated in turn from abroad” (233).

Section 3 Summary: “Which Flag Flies Over the Machinery?”

Galeano discusses several examples of Latin American countries that have given control over their industry to foreign capital through denationalization. Since 1964, Brazil has gone through several military dictatorships that have operated under a denationalization platform, often retaining their power by “avoid[ing] any irksome competition with U.S. and European corporations” (236). Given Brazil’s receptiveness to foreign capital, the country also has accumulated debt in trying to keep up. Of the 80 percent of state-guaranteed loans between 1955 and 1962, four-fifths of these concerns came from foreign banks. Later, US automotive corporations such as Ford, Chrysler, Willys Overland, Simca, Volkswagen, and Alfa Romeo replaced Brazilian-owned companies in the country. Galeano describes this relationship as one in which “a pimp offers a woman” (237).

Similarly, Argentina opened its doors to foreign capital. In 1972, Argentinian companies Siam Di Tella and Industrias Kaiser Argentinas, two of the five biggest corporations in Latin America, merged with US corporations. In Mexico as well, the US has taken over one-third of manufacturing with the majority of the country’s enterprises controlled by foreign capital.

Section 4 Summary: “Bombardment by the International Monetary Fund Helps the Conquerors to Land”

The International Monetary Fund (IMF), which began in 1945, became an institution that fostered greater inequality through loans, debts, and further ties to foreign capital for Latin American countries. Galeano points out that when it comes to loans, there is disproportionate treatment between Latin American countries and wealthier countries like the US. Despite the US’s protectionist policies, the IMF has never attempted to modify the country’s economic practices, yet when it comes to Latin America, the IMF has been “inflexible” (241).

While the IMF purports to stimulate the growth and economic development of Latin America, Galeano argues that the institution further places Latin American countries in further debt to the point where they have to give up their national enterprises to foreign control. The IMF states that its goal is to achieve “monetary stabilization” (240) yet its methods seem to counter this effort. For instance, it bans direct barter agreements, forcing all exchanges to pass through the IMF. It also devalues currency in the supposed attempt to stimulate the demand for Latin American exports. Yet this method seems to only yield direct profits for the Latin American bourgeoisie. Once these countries accumulate enough debt, they must relinquish their state industries to foreign corporations. One of the main ways in which this occurs is when creditors come to the country to collect on debts by taking over the debtor’s installations, machineries, and other aspects of manufacturing.

A report published by the Organization of American Studies suggested that the IMF loans keep Latin American countries tethered to US control. The report shows that 95.7 percent of the funds that the US requires to maintain foreign investments in Latin America come from credits, loans, and reinvested profits.

Section 5 Summary: “The United States Is Generous with Other People’s Savings: The Invasion of the Banks”

Since the creation of the IMF, the number of US banks have grown tremendously throughout Latin America. While there were 78 branches of US banks in Latin America in 1964, the number grew to 133 in 1967. In 1968, more than 70 branches opened throughout Central America, the Caribbean, and smaller South American countries. These banks absorbed Latin American funds from industries that U.S. interests took over. Latin American savings diverted to US banks while national enterprises struggled to stay afloat through lack of credit. Galeano points out the double standard between US and Latin American financial practices, asking for comparison: “could a Latin American bank establish itself in New York and capture the national savings of the United States?” (244). The question suggests that this would not be possible given the power that the US has over Latin American finances.

Section 6 Summary: “An Empire that Imports Capital”

The flow of capital has changed under the circumstances of modern-day capitalism. While Vladimir Lenin once wrote, “Under modern capitalism, when monopolies prevail, the export of capital has become the typical feature” (245), Galeano adds that wealthier countries such as the US import capital from Latin American countries. Between 1950 and 1967, the US invested $3,921 billion in Latin America, earning profits and dividends totaling $12, 819 billion. The US earned more money through Latin American investments than they invested. These profits did not make their way back to growing the economy of Latin American countries. Furthermore, while Latin American countries took out loans to purchase the advanced machinery and other manufacturing devices produced by the US, these products did not last forever. These products required Latin American countries to keep purchasing new technology to sustain their manufacturing work, thus extending the practice of acquiring loans.

Section 7 Summary: “Technocrats Are Better Hold-Up Artists than Marines”

Multinational corporations, through the assistance of international banking institutions such as the IMF and the World Bank, rely on control of state functions in order to carry out their agenda to accumulate and multiply their capital. According to Galeano, multinational corporations prioritize advancement of technology and military investments in order to cultivate state reliance on their private enterprises. These multinational corporations generally stem from the US, the nation that founded the IMF and works in conjunction with other international banking institutions such as the International Bank for Reconstruction and Development (IBRD) and the Inter-American Development Bank to keep Latin American countries indebted to the US.

Galeano argues that any international aid that the US provides is self-motivated. For instance, in 1969, US distribution of aid to Brazil alleviated the nation’s production surpluses. The price to purchase these products was set higher abroad than within the US. The US benefitted by relieving its surpluses and earning a profit from sales.

In the IDB, the US also possess the majority voting power. In order to advocate for reforms to lending decisions, other countries must earn a two-thirds majority vote, which is impossible given the US majority. In a report to then US President Richard Nixon, Nelson Rockefeller once stated that “while the United States’ veto power over IDB loans has not been used, the threat of its use for political purposes has influenced decisions” (249).

In another money-lending institution, the Agency for International Development (AID), the distribution of loans by lending contributions oftentimes force borrowing countries to align with their political decisions. In the case of the US, this includes refusing trade with communist countries such as Cuba and North Vietnam. The conditions for lending also require borrowing countries to agree to economic stipulations. 

To ensure that the flow of capital would always be beneficial to wealthier countries where multinational corporations are based, these money-lending institutions also control political activities to create an economic climate in borrowing countries. In 1963, businessman David Rockefeller proclaimed that the US would “withdraw aid from other countries not showing a satisfactory performance” (252). The statement placed pressure on Latin American countries to manage their political climate so that the circumstances would be ideal for further loans in the future.

Given the number of Latin American countries that are now indebted to these money-lending institutions, Latin America is experiencing a “debt explosion” (256). The system is set up so that these countries are not able to pay off their debt, so they keep pursuing loans through foreign capital to subsist.

Section 8 Summary: “The Organized Inequality of the World Is Unchanged by Industrialization”

Structurally, the system of modern-day international trade offers the lowest prices for buyers, the US and European countries. The US, in particular, “consumes almost as much as all the rest of the world” (257), which creates further disproportionate power in trade. This negatively impacts Latin American countries as they lose wealth from years of nonexistent exports. Citing a group of Chilean economists surveying trade unions, Galeano reports that if the price of Latin American exports in 1928 had risen at the same rate of imports, then Latin American countries would have received $57 billion more for their exports between 1958 and 1967. This has created a “trade gap” (257) where import needs do not match the return from exports. The trade gap will only continue to expand. In response, Latin American countries will continue to rely on “international loan sharks” (259).

While the US and European countries install protectionist policies, they expect Latin American countries to be the political and economic opposite. The buyer countries pressure Latin America to arrange prices for their exports that are not beneficial to them. For instance, the “coffee war” (260) in 1967 between the US and Brazil occurred because US corporations, Nestlé and General Foods had a monopoly on purchasing coffee beans from Brazil to manufacture soluble coffee. When Brazil started producing their own soluble coffee, these US corporations protested. Brazil had no choice but to impose a higher tax on their soluble coffee so that it would cost more to purchase the item in its own country than the US product. The terms of modern-day international trade do not yield lower prices for all consumers, but rather yields profit for foreign shareholders. The notion of “free play of market forces” (262) only serves to mask the inequities of trade relations between buyer countries and Latin America.

Section 9 Summary: “The Goddess Technology Doesn’t Speak Spanish”

Modern-day capitalism and trade create a system of dependency between buyer countries and Latin America, which ultimately shapes the development of technological advancement in the latter. Just as Latin America relies on the US and Europe for foreign capital, it also looks to them for new technology as the economic circumstances do not create the circumstances for Latin American countries to make their own. Galeano argues that Latin America is “condemned to suffer the technology of the powerful, which attacks and removes natural raw materials, and is incapable of creating its own technology to sustain and defend its own development” (263). Latin American countries can only imitate the technological advancements put forth by US and Europe, which further tethers them to these buyer countries economically. Dependency on the US and Europe for the latest manufacturing technology also comes at great monetary costs for Latin America as well.

Section 10 Summary: “Surplus People, Surplus Regions”

Modern-day capitalism also produces a cheap labor force in Latin America. Despite rising technological advancement in manufacturing, wages and quality of life have not necessarily improved for workers in Latin America. Increasing unemployment crops up not only in rural places but in urban areas as well. As the population of Latin America continues to grow, there is now a “surplus” (268) of people in need of work and not enough job opportunities to meet this need. The modernization of manufacturing technology should suggest more opportunities for work, yet this has not been the case.

The circumstances of modern-day capitalism does not only create poverty and unemployment but also wealth disparity on the regional and local level. There is a consolidation of wealth among a privileged minority in each country with a growing impoverished class. Between 1955 and 1966, the productivity of Brazil’s mechanical, electrical, and auto industries increased by 130 percent though workers’ wages only increased six percent. The low wages of Latin American workers are evident through the low prices of Latin American raw materials purchased by buyer countries like the US and Europe whose workers earn significantly more than their Latin American counterparts.

Section 11 Summary: “The Integration of Latin America Under the Stars and Stripes”

The Latin American Free Trade Area (LAFTA) began as part of the Treaty of Montevideo in 1960, signed by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, Uruguay. The agreement sought to facilitate a system of trade between these Latin American countries that might ease some of the export and import inequities created by the US and Europe. The agreement was to offer each of the participating countries tariff rebates. However, this only seemed to create “the distribution of Latin American production centers and markets for the benefit of the great multinational corporation” (272). Ultimately, rather than motivate trade between Latin American countries, this agreement funneled profits back to US and European multinational corporations that had footholds in these countries. Unable to avoid the overbearing presence of US and European multinational corporations, Latin American countries “progressively dismantle their economic, financial, and fiscal barriers in the monopolies’ favor” (273).

Rather than create structural economic change, the integration of Latin American countries under LAFTA only seemed to “augment the previously existing inequality between privileged poles and submerged areas” (276). The wealth disparity between the privileged classes and the impoverished people remain unchanged at the core. Additionally, the integration of Latin American countries also fostered competition between those countries in the agreement. For Galeano, Brazil had become a “sub-imperialist” (277) nation of South America just as US is an imperialist nation of the world. One-third of the goods sold within LAFTA came from Brazil, indicating that the country presided over the rest in the agreement due to its receptiveness to colluding with the US and Europe.

Section 12 Summary: “As Simón Bolívar Prophesied: ‘We Shall Never Be Happy, Never!’”

Unlike the US which began as a nation of thirteen colonies that expanded under the banner of “manifest destiny” (281) to accrue more territories that were eventually united as a single country, Latin America “developed outwardly and blew into fragments like a grenade” (281). Latin American countries do not have many direct channels between each other, oftentimes having to go through US and Europe to facilitate trade and communication even among other countries in the same region. By comparing the disparate paths of the US and Latin America, Galeano issues a challenge that the reconstruction of Latin America be a social cause that everyone must take up. To rebuild Latin America, there must be a revolution by the most marginalized classes. The people must start with the “overthrow of its masters, country by country” (281).