Guatemala 2009

Jeanne Hey spoke with our class on February 26 addressing economic trends of Latin American development. Sardonically, unequal “free trade” has procreated Latin America’s dependency cycle to the present day.

Between the 1800s and 1930s the South’s defendant economy (validated notion by Western modernization theorists) fed industrializing nations raw materials they needed to build their societies. Such goods including Guatemala’s bananas, Chile’s copper, Argentina’s wool and wheat, Peru’s silver, Cuba’s sugar and tobacco, and Brazil’s mahogany wood and coffee just to name a few were favorite possessions of the North. In return, these countries received a small sum of hard currency that landed in the pockets of the elite. The great depression had devastating repercussions in Latin America economies since they depended on the West’s capital. This did not stop industrializing countries from sucking out the South’s resources and raw materials at a disgustingly cheap rate, while leaving them with useless currency. This unidirectional continuum fostered neo-colonial economic interests; simultaneously stunting the South’s development and deepening the gap with the North. Countries tried to break away from this dependency model by implementing import substitution industrialization (ISI). They ushered in local production of industrialized products and implemented high import tariffs to cut foreign trade and economic relations. In theory, ISI sounded like a smooth departure from dependency; but in practice, those who could afford to purchase their nation’s import substitution products would buy goods from European and Western countries instead. This in turn orchestrated unparalleled economic ramifications

So what happened? Latin America needed capital and turned to foreign countries for help. Oh and they did “help” via the hands of private banks that lent out risky loans attached with anticommunist agendas and floating interest rates. It was just a matter of time this would prove to be another epitome of disaster-and soon enough the lost decade of the 1980s topped off by corrupt governments, bad policy, poorly managed infrastructure projects, and a mounting debt crisis opened the door for neo-liberalism. Neo-liberalism “to the rescue” includes a family of lending governments, IMF, World Bank, and their constituents referred to as Structural Adjustment Programs (SAP). This current stage of economic development in Latin America has not only once again enabled dependency, but also forces conditionalities that harvest foreign exploitation and exacerbated debt: including privatization, devaluation of currencies, agricultural reform, and cutting governmental spending on social funds particularly education, health care, infrastructure projects, and sustainable alternatives. Consequently, many countries that followed SAP rules have witnessed growing inequality between women and men, increased debt, and internal conflict.