The way out of the debt crisis
THE LEVEL OF the foreign debt for all the countries of Latin
America has now reached the astronomical figure of 400 thousand million dollars. This means that the repayment of such debts is now a wholly hypothetical question.
Developments in the world monetary system (the rise in the dollar, in interest rates and the movement of capital when added to the problem of the debt have helped to create a situation of acute crisis for the Latin American economies.
As usual it is the workers and popular masses who are being made to pay for this crisis through unemployment, wage cuts and increased lowering of the standard of living for certain sectors.
The debt itself is at the centre of the economic crisis and formed the theme of a recent conference organised by the Cuban leadership, which called on all the countries of Latin America to refuse to pay.
We publish below an article taken from an oral contribution to a meeting of the leaderships of Latin American sections of the Fourth
International which took place in CLAUDE DEVILLIERS
The Latin American continent has entered into the most serious crisis in its history, more serious even than the economic crisis of the 1930s. This crisis is reflected in the actual erosion of the infrastructures of production and society at large. It poses a crucial problem of perspectives for the bourgeoisie.
September 1985.
The economic and social crisis in Latin America has been developing, alongside of the effects of the revolutionary process unfolding in Central America, since 1981-82. At the moment when the revolution brought its first victory in Nicaragua, there was a deep and prolonged crisis going on. The crisis coincided with a whole
9
process of revolution and counterrevolution with several consequences on different levels.
The effect of this situation on the national bourgeoisies of Latin America was reflected, for example, in the twists and turns taken by the Contadora group which was hoping to find a negotiated solution to the conflict in Central America. (1) It is no accident that the Mexican government talks in terms of social peace and not just social contracts.
At the same time the Central American revolution effects the recomposition of the workers and popular movement, as much on the level of the trade unions as on the level of the revolutionary vanguard. The appearance of political currents like the Izquierda Democratica (ID) in Uruguay and the United Mariateguista Party in Peru reflect this development. (2) Cuba represents an alternative pole
From 1979 to 1981 the fundamental question posed in Central America was the question of power and the strategy for the conquest of power. Since then two new problems have arisen. These came about with the development of the imperialist counter-offensive, marked by the invasion of Grenada; the increasing intervention in El Salvador; the withdrawal of the revolutionary forces in Guatemala in 1982; the many-sided intervention in Nicaragua and the militarisation of the region as a whole.
On the one hand the more and more direct confrontation with imperialism is posing the problem of national independence and sovereignty; for what is at stake today is not simply the formal right of independence but the real possibility of social change. On the other hand, the socio-economic situation in Nicaragua under the impact of this aggression raises the needs for a continent-wide response to imperialist policies.
Economic cooperation between the countries of Latin America, and not just the Central American countries, is much more important than it was in the 1930s. This is as much from the point of view of their insertion into the system of imperialist domination as from the point of view of relations between the countries themselves.
In this context, the existence of the Cuban state constitutes an alternative socio-economic pole. Faced with a growing social crisis, Cuba embodies the possibility of a society which functions according to a different logic. 10
Cuba is an important and active factor in the situation. So, the initiatives of the Cuban leadership relation to the Latin American debt introduce an element of polarisation of the situation between, on the one hand, imperialism and the bourgeoisies linked to it and, on the other, the anti-imperialist forces. The outcome of this polarisation obviously depends on the activity among the popular masses on this issue.
It is a matter of taking up the banner of the fight against the debt among the popular masses because it is on this terrain that the battle is difficult for the bourgeoisie to carry out. In order to organise this fight seriously, the bourgeoisie has to face up to certain rather tricky questions such as: why is there such a debt? What was the money spent on? Why should the debt be paid off and how? These questions directly challenge the competence of the Latin American bourgeoisies and their relations with imperialism.
The Cuban initiative also aimed explicitly to change the regional relation of forces to prevent imperialism from concentrating all its political and military force on Central America. The desynchronisation between the different revolutionary processes unfolding in Central America inevitably creates internal tensions and centrifugal forces in Latin America as a whole. Through posing the central question of a continent-wide dimension it is important to create a wider opening for the development of a strategy which would draw together the anti-imperialist activity in the region.
The economic crisis is unfolding in the context of a social structure which has certain particular characteristies especially compared to the 1930s:
The working class has been qualitatively strengthened despite an uneven level of development of trade-union and political organisation. This strength is very real even if the working class has, at the same time, in countries like Chile and perhaps in the future, Bolivia, undergone a structural weakening. In general there exists a strong popular resistance to the policies of austerity even if this is only for elementary reasons of survival. This has been shown in the mobilisations which took place in recent months in Uruguay and Brazil, for example.
### Urban concentration massive impoverishment in the urban sector also constitute a new element. The crisis hits those societies which are already partially breaking up and we are beginning to see the emergence of organisations of self defence, and of. resistance by these populations.
This is shown in the organisations of the popular living quarters known as colonos in Mexico, pueblos jouenes in Peru and favelas in Brazil.
- The agrarian crisis is very severe and the land question often becomes a question of survival in this situation of economic crisis. The agrarian movement is very divided. It includes sections of the landless peasants, day labourers, agricultural workers, small producers and cooperatives. Their demands raise the question of the problems of prices and credits which have a general political aspect in that they relate to decisions taken by governments. This alters the import of the workers' and peasants' alliance on the political level.
- The pauperisation of the middle classes and the petty bourgeoisie is not automatically reflected in their evolution to the left. It rather provokes a differentiation within these layers which brings about a sort of double polarisation.
The combination of all these elements makes it difficult to envisage any return to the political dominance of nationalist populism of the type which developed in Latin America with APRA (Alianza Popular Revolucionaria Americana) in Peru or Peronism in Argentina. It also makes it difficult to stabilise long-lasting social contracts. Siles Suazo has already spectacularly failed in Bolivia. It will not be long before we see exactly the room for manoeuvre that Alan Garcia has in Peru.
Beneath this crisis, then, lie the beginnings of a collapse of a whole historical model of economic development. It is not just the external factor, the debt, which has caused this crisis. That is rather the ultimate expression of the impasse reached by this model of development subordinated as it is to imperialism.
This model of development involved the beginnings of the establishment of an import substitution industry, the price of which was a systematic need for foreign capital. And this is just how the whole thing got caught up with the debt. This model corresponded to the need of the large industrial centres in the West to export production goods. A large part of the revenue going into Latin America from the export of raw materials went towards the purchase of such goods. But the capital required to finance the importation of such infrastructures went largely beyond what was accrued from the
The Contadora group includes Mexico, Panama, Venezuela and Colombia. For an analysis of the contradictions and the ambiguities which this group got itself involved with, see 'International Viewpoint", No 79, July 1, 1985.
See 'IV' No 65, December 10, 1985.
International Viewpoint 10 February 1986
sale of raw materials under the unequal conditions of exchange dictated by the grip of imperialism on the world economy.
The only way to pursue this process of industrialisation was thus to allow the influx of foreign capital. This is how the vicious circle of continuously exporting in order to reinvest the financial returns in the purchase of production goods and technology, began.
This economic model is, by its very nature, subject to the fluctuations of the world market, as was shown in 1981 and 1982, and also of the financial market. It favours the development of the most dynamicsectors of production like, for example, the automobile industry in Mexico or Brazil, whose products are destined for the better-off sections of society, thus excluding a large part of the population. This model therefore carries within itself certain limits which prevent it from benefiting society as a whole and from producing the cumulative effects of development. These sectors rely on a large degree of state investment. This has enormous social consequences because of consequent budget restrictions linked to policies of austerity which are currently developing. But if such expenses are not reduced the budget deficit increases, interest rates go up in order to attract savings and investment dries up. This is a speculation spiral.
The collapse of this economic model is now concretely visible. Between 1979 and 1983, no less than 100 thousand million dollars fled Latin America for the United States. From 1982 to 1985 the flight of capital has increased still further. Today it probably represents more than half of the continent's debts. For the month of June 1985, alone, Miami bankers announced an influx of 3.5 thousand million dollars from Latin America. The breathtaking increase in drugs trafficking is a further indication of the historic collapse of the 'developmentalist model. It is now much more profitable for business people to speculate on high interest rates than to invest in production especially since some countries have seen interest rates at 25 and 35% above inflation.
Imperialism's role in this fiasco is undeniable. But we have to add to that the responsibility of the local ruling classes also associated with it. This is what gives rise to such burning questions as what type of development with what goal should replace this failed model? And what are the social forces capable of maintaining a new model of economic development?
This crisis and the changes in
International Viewpoint 10 February 1986
REALLY, Y0U ARE
HARD ON US.
DESTE
15000c0. 480 BANKS economic policy dictated by the International Montary Fund (IMF) coincides with the patent failure of the system of domination which had its heyday in Latin America -that of open military dictatorship. For the moment imperialism and the Latin American bourgeoisies are responding to this situation through an overall policy of encouraging limited and controlled democratic openings coupled with the removal of the military from direct administration of the state. From this stems the importance of popular demands for the release of the 'disappeared; for the judgement of those guilty of crimes under the military dictatorships etc. (3) At the same time an attempt is being made to rebuild the repressive apparatus after only a limited cleanup. The most successful example of this operation at the moment is in Brazil. But the measures taken by Alan Garcia in Peru, with limited purges of the most corrupt sections of the military apparatus, conducted in direct collaboration with the US drugs control units, go in the same direction. Similarly with the judgement on the Argentinian military. Crisis of US domination
A further effort is being undertaken, within the framework of this policy, to give more weight to the productive sector of the economy. This is because, on the one hand, an increase in exports is the only way to ensure the payment of the debt and because, on the other hand, nonproductive expenditure had grown considerably under the military regimes and that is without taking account of the enormous diversion of funds which took place as in the case of Argentina.
Some manoeuvres are also underway in an attempt to use sections of the Church and the unions to encourage acceptance of a policy of social contracts.
In conclusion, all these measures are taking place in the context of a systematic delimitation of the democratic margins of manoeuvre open to the popular masses. This is combined with the careful preparation of selective and paramilitary repression against the most radical and active sections. Of course, under the twin blows of the crisis and weight of the debt, this project is becoming more and more precarious and unstable. Several explosive issues remain in the air.
First, who accumulated this debt? Often it was the military regimes themselves who were directly responsible. The link between the debt and the fight for human rights is thus easily established as was shown in the Argentinian appeal launched by Perez Esquivel. (4)
Moreover, the context of the relations between Latin America and imperialism has altered substantially since the 1930s. At that time, several countries, at the initiative of Peru in 1931, declared a unilateral moratorium on the debt. This did not pose a big problem. The main preoccupation of the US in Latin America, at the time was to supplant Great Britain and forestall Germany. This was not a heavy price for achieving such a result. Today the moratorium on debts would involve a different
3. See 'IV" No 88, December 9, 1985.
4. Ibid.
11
VIVAD
CUBA. level of confrontation with imperialism. For the US, up until 1981, the export of capital to Latin America was a source of profit. Also, the Latin American debt is concentrated in a series of big banks such as Manufacturers Hanover Trust and Citibank. In some cases the debt represents up to 180% of the property of these banks. Latin America constitutes the main investment area for US capital outside of the United States itself, and also one of the main sources of raw materials.
The response of the US to this worrying situation is thus to strictly control production and to subordinate to its own interests the current and future profits accruing from the Latin American economies. This is in accordance with the need for valorisation and recomposition of world imperialist capital and of the local capital associated with it. The conclusion from this is clear; that is, that given the interrelationship between imperialism and the Latin American bourgeoisies, there are no sections of that bourgeoisie who, in the battle against the debt, are capable in a consistent way of heading the resistance to imperialism, not even in Brazil.
The crisis of US domination is now a reality which shows itself daily. However the reality of this crisis should not lead us to underestimate or misunderstand imperialism's current overall counter-offensive. The main target of this counter-offensive, conducted on the pretext of controlling the spread of communism, is Central America.
In fact, this crisis of US domination 12 sine is not taking the same form as in 1975. For today it is tied into a real capacity to launch a military and political counter-offensive combined. Thus it is the US National Security Council which is openly directing counterrevolutionary operations in Central America. It is conducting a policy dividing the countries and fitting the corresponding sub-regions into specific diplomatic, military and economic plans. These plans, whether in Central America, the Caribbean or the Andes belt, are presented each time as a recognition of distinct geopolitical realities. In fact, however they are designed to strengthen and consolidate the divisions and differences in each situation in order to prevent any revolutionary dynamic developing in the particular area.
US imperialism is prepared to treat Mexico or Brazil, which are considered as intermediary powers, in a specific way and on the basis of conflicting but organised reciprocal relations. Similarly with Argentina and Venezuela, the other great debtors. It is trying to separate off Central America and the Caribbean and to break the dynamic of the relations with Central America which came about in the recent process of decolonisation. This was one of the functions of Reagan's initiative in the Caribbean basin. In a parallel way, it is stepping up the pressure to unite Central America against Nicaragua and to reintegrate Guatemala within this front. At the same time it is pursuing other specific projects in the Andes region or in the Southern
Cone.
The basic policy of US imperialism consists in maintaining discussion and negotiation on the debt in a bilateral and non-global framework. The alternative to this traditional divide and rule policy has to lie in the defining of a common policy on a Latin American level. This is the issue raised by Fidel Castro.
Finally, the crisis in Latin America is combined with a prolonged crisis within the imperialist countries themselves. This time, the recession had already begun in Latin America before it had developed in the imperialist centres. The slight recovery in 1984 in Latin America only touched the surface, and was due mainly to the restrictions on imports. The renewed recession was to add to the effects of previous ones. With a fall in the price of most raw materials, the buying power of exported goods subsequently decreased. Interest rates will probably go down, but not in relation to the drop in exports. This type of vicious circle means that the idea of getting out of the crisis of the debt cycle through an increase in exports is totally illusory. But for the moment this is the only solution the moment this is the onlv solution being put forward by the local bourgeoisies or indeed by the reformist bureaucracies.
In the first quarter of 1985 alone the value of Latin American exports went down by 14.5%. The figures for the second quarter will undoubtedly be worse. In this framework the idea of the new world economic order taken up by Fidel Castro in the 1985 Havana conferences can no longer have the same meaning as in the 1970s. At that time this meant demanding new North-South relations essentially around the issue of stabilising the prices of raw materials.
Today the main cartel providing raw materials, OPEC, is in a state of collapse. This collapse is proof of the impasse that has been reached. It is now obvious that the formula of a new economic order can only be understood in the radical sense, that is involving a model of development axised around the social requirements of Latin America and around different trading relations between the different countries in the region. Such changes in relations could not simply be reduced to a change in North-South relations, but in SouthSouth and South-East relations. However, such a perspective, if it were to be applied at the level of the continent as a whole, would involve the implementation of a coherent economic policy and of a common currency, utilising, at best, complementary aspects of the different Latin American economies. The problem of the
International Viewpoint 10 February 1986
establishment of a state power which would govern in the interests of the proletarian masses is then posed.
The figures for the debt in the Latin American countries are well-known. It is, however, useful to re-examine the effects of the debt, and the implication for workers' and popular demands and the axes of struggle. Export of Latin American capital
During the 1960s the net inflow of capital which came to Latin America was financed by middle and long-term credit. The result was obvious: a decline in direct imperialist investment. There were several reasons for this, one of which was the simultaneous attraction of the European and Canadian markets. This was the time of the great American Challenge' and the fear of the effects of the Cuban revolution on the continent of Latin America. The loans being granted in Latin America were essentially Eurocredits, or loans coming from international or government organisations.
During the 1970s, however, the private banks stepped up their penetration of Latin America. This credit then became an important element of profit-making for imperialist finance capital and its allies. There developed, at the same time, an abundance of credit, thanks to the availability of petrodollars and a lowering of investment in the imperialist coun tries themselves. This is where the decline in public credit and the development of private credit in Latin America originated. It was concentrated on four countries which included Mexico and Brazil.
The abundant supply of money and the increase in the sale price of raw materials masks the exhaustion which is already perceptible in the model for developing currently being followed in these countries. Since the 197374 economic crisis growth levels have remained high which all helps to perpetuate the illusion. However, during this period there have already been warnings on the debt in Jamaica, Zaire, Peru and Turkey. Although limited, this crisis has already been of sufficient gravity to impose changes on imperialist strategy. Since 1978 the banking system has changed their loans into short-term credit only. This was a sign of the loss of confidence of the banks in light of the development of the economic situation in these countries. The proportion of this type of credit within the loans total has gone up rapidly. So much so that in 19811982, five elements of a real crisis began to come together;
- High interest rates in the USA (20% in 1981 compared to 11% in 1979) due to the arms race and to the US deficit budget.
- A lowering of the price of raw materials since 1981, partly linked to technological changes.
- The coordination of terms for the recovery of medium-term loans with those for short-term loans.
- The development of the crisis in the imperialist countries which brought with it a reduction in demand and a possibility of exporting to these countries.
- A withdrawal of credit by the private banks who find it more financially profitable and less risky to invest in the US itself than in Latin America. From now on it was to be the USA which absorbed most of the credit from the European market.
It was this accumulation of circumstances which was at the origin of the 1982 crisis. Such a crisis was not forseen by those concerned and was most spectacularly revealed by the crisis of debt payment which Mexico underwent during the summer of that year. From this date the big credit banks were looking for a way of permanently refinancing without injecting massive new credits. This involved sustaining the debt payment and keeping the economies afloat without embarking on any great schemes for development. The credit banks have moved from a kind of economy of interest to a commission economy which has a totally parasitic aspect to it.
The consequences are clear. Since 1982, the economic resources of Latin America have served to relaunch the economies of the US and Europe to the detriment of their potential to revive economic activity on the continent itself.
Since then we have witnessed the wholesale export of capital from Latin America to the imperialist centres through the payment of interest on the debts and the flight of capital. The increase in the level of the debt means that the payment of interest alone soaks up a growing part of the revenue from exports. In some cases it soaks up well over half and up to 140% in Argentina. This means that it is physically impossible to pay off this debt or to get out of the vicious circle of debts and dependence.
This only brings out the position of dependence of all the countries in the region in which about 30% of Gross Domestic Product is tied up in credits, except in Colombia. The problems of independence and national sovereignty are once again sharply posed. This general situation is related to the so-called policies of 'adjustment' and austerity practised by different governments. Following this schema the flow of productive capital remains low in volume. Imperialism took advantage of this to sieze control of whole branches of industry in these countries which were considered as of strategic importance such as, for example, computer science. But the amount of investment and jobs created is very modest in comparison to the extent of the crisis. It was, moreover, the only thing which the local bourgeoisies still hoped for. They were not expecting an influx of new credit but they did expect selective imperialist investment to take over control of the most modern sectors of the economy. This was at the price of a growing alienation of the national economies, which were undergoing at the same time, programmes of denationalisation (as in Argentina, Peru, Mexico, Bolivia); and the relaxing of customs regulations. The result of these measures and of the freeing of imports was that the relation between US imperialism and the countries of Latin America developed in the direction of trading rather than production. This took the form of the conquest of the Latin American market and the taking over of certain sections of the service and agricultural industry by US imperialist capital. Dependency is thereby increased anew. The bourgeoisie divided
The local dependent bourgeoisies nevertheless have an interest in putting slight pressure for negotiations with imperialism on the conditions of this change. This however, has nothing to do with any kind of confrontation. However, the industrial development of the 1960s and 1970s was very real and it brought with it, in Latin America, very real social forces also. But the problem for the Latin American bourgeoisies lies in the impossibility of establishing a common front of the bourgeoisie across the continent which would go beyond a few very general demands such as: the lowering of the interest rates; or the demand for the IMF to allocate credit at preferential rates (which would amount to a socialisation of the losses through the mechanism of the IMF); or even the demand to offset the value of exports against the debt repayments. Alan Garcia reckons that the debt repayment should not go beyond 10% of exports while Jose Sarney puts the limit at 25% for Brazil. But a sort of 'Contadora of the economy' would not be able to go beyond these decla-
13
International Viewpoint 10 February 1986
Trade
OCTOBER 23, 1985, was decreed a day of continent-wide fight against the foreign debt and the International Monetary Fund (IMF) by a trade union conference of Latin
American and Caribbean workers on the foreign debt held in Havana last July (see IV, no 85, October
28, 1985, which published the call sections of the Fourth
International to support this initiative). A meeting of trade-union representatives was held in Montevideo, Uruguay, last November 29 to draw up a balance-sheet of actions organized as a result of this call. All together, even though they were on the whole quite modest, the mobilizations that occurred on
October 23 mark the beginning of a continent-wide campaign against the debt and the IMF.
The main October 23 protests took place in Mexico and Peru.
In Mexico 66,000 people assembled at a demonstration called by dozens of trade unions that oppose the control of the workers' movement by the trade-union bureaucracy linked to the party in power, the Partido Institucional
Revolucionario (PRI). Let us remember, by the way, that our comrades of the Revolutionary
Workers Party (PRT), the Mexican section of the Fourth International, inaugurated their deputies seats, won in the last elections, by proposing a two-year suspension of the
Mexican debt so as to use the rations of principle because there are too many differences of interest in terms of exports and markets amongst the Latin American bourgeoisies themselves. For example, Brazil only exports 20% of its products to the US whereas 70% of Mexico's total exports go there. Beyond the general statistics the structures of the debt are therefore different. For the two major debtors the important thing is to renegotiate the conditions. But such a renegotiation always comes back to accepting the perspective of a new increase in the debt itself. If today it has reached 400 million million dollars, with an interest rate of 7% it will reach 600 million million dollars by 1990 and that is if the negotiations go well.
The renegotiation of the terms of the debt would consist in putting off the crucial moment of the crisis and relying on the imperialist economy picking up in the meantime. Other hypotheses are also possible. It is pointless to speculate 14 unionists fight the debt money owed for compensation of the earthquake victims. This proposition was quickly rejected by the government (see IV No 84, October
14, 1985).
In Peru, there were 25,000 people who participated in a demonstration called principally by the Peruvian General Workers Confederation (CGTP) joining with the
Peruvian Communist Party (PCP).
Other demonstrations on smaller scale took place in Chili,
Bolivia and Colombia. In Argentina a demonstration called by the opposition sections of the Peronist
Confederacion General del Trabajos
(CGT) took place.
The situation was a little different in Uruguay owing to the position of the Inter-Union Workers
Plenum - National Workers Convention (PIT-CNT), which supports nonpayment of the debt. Doubtless in order to avoid demonstrations on this theme, the Uruguayan government preferred to declare
October 23 a day off.
In Brazil different initiatives were taken in the principal large cities and wherever the United
Confederation of Workers (CUT) is implanted. It was in fact at the initiative of CUT that these actions and protests occurred. The chief demonstration took place in Rio de
Janeiro. It got together however, only 6,000 people while the election campaign was attracting the on the likelihood or otherwise of a banking failure but it is always possible. The debt cannot be paid!
A second possibility, which is very real and very dangerous in the medium term, is that envisaged by MacNamara and the World Bank. This is the idea of turning the debt into some form of liability which would amount to a transfer of the ownership of assets to the imperialist states with low and long-term interest rates. This would mean in effect a thorough-going process of denationalisation within the dominated economies. The US had already carried this out in the Dominican Republic before the Second World War and it was this that served as the pretext for the imperialist intervention in 1965, "to recover our rightful property' '. This solution would attention of all Brazil. In Sao Paulo a public meeting of 3,000 people was held. The CUT played an essential role in the organisation of these initiatives, developing a polities of unity by appealing to the Congress of the Working Class (CONCLAT), the trade union current led by the "yellow" bureaucracy and the Brazilian Communist Party (PCB). In spite of the importance of this question the CONCLAT has often adopted an ambiguous position that leads it as, at Belo Horizonte, to refuse to organise a common demonstration with the CUT.
On the occasion of the third congress of the PIT-CNT in Uruguay, a meeting was held on November 29 of Latin American trade-union organisations. A common declaration was adopted and signed by the CGT (Argentina), the CST (Colombia), the CUT (Brazil), the CGTP (Peru), the CTC (Cuba), the CNT (Chili), the COB (Bolivia), the CPTE (Paraguay, in exile), as well as representatives of the Autonomous University of Mexico workers union and some regional trade union organisations. This assembly reinforced the idea of calling a meeting of Latin American trade unions in the coming months. For its part, the leadership of the Brazilian CUT proposed for next May 1 another continent-wide day of demonstrations against the debt and the IMF. give imperialism time to defer the crisis but at the obvious cost of overriding still further the national sovereignty of the countries of nearly an entire continent. In the current process underway as with the suggestion of this medium term solution, the question of independence and national sovereignty of the indebted countries is therefore posed.
So the debt is unpayable; from the economic point of view because the repayment would deepen the spiral of dependence; from the political point of view, because it undermines national sovereignty; and from the moral point of view because this running up of debts is illegitimate and the payment of it pushes onto the workers and peasants the cost of the military dictatorships, their arming, the military chaos, speculation and the flight of capital. We could also add that the debt is unpayable from the social point of view, becaus of the effort it involves and the laman hole in the wealth of the country International Viewpoint 10 February 19
it represents with, as a consequence, an increase in the misery of the population. -The debt should therefore be purely and simply annulled. Within this perspective the formula which, in each country, best expresses the demand for non-payment, that is either for suspension of payment or for a unilateral moratorium, is a tactical question. The decision not to pay takes on its true political meaning insofar as its effective application would take away from the IMF any power to control the future and destiny of the peoples of Latin America. The most important question is not the moratorium in itself, which under certain circumstances already exists in some countries such as, for example, Bolivia, but the political content of the decision. To recover its debts imperialism cannot simply • use the same methods used by a national state against bankrupt debtors. There are no courts or international police force. The only pressure they have is political and economic blackmail. 8 To illustrate the legitimacy of the demand for non-payment of the debts as against those who say that the payment of debts is a duty, it is important to show the illegitimacy in every detail of the debt itself. If the imperialist banks have lent money to private enterprise then that is the problem of the companies involved, not the problem of the population as a whole. Now, one of the aims of the renegotiations currently being undertaken by some of the Latin American governments is that the national states should take responsibility for the debt of private companies thus mortgaging the entire country for the benefit of the private sector. In this way the state becomes a kind of insurance for the private sector. This is why the curious notion of the 'indirect public debt' begins to appear more and more often in order to give a name to this state guarantee.
Rejecting the whole legitimacy of the debt therefore creates the best conditions for concrete and punctual mobilisations around the opening of the account books or for the expropriation of those companies which are in debt, for example.
A further aspect of the legitimacy of the debt is the question of the endless flight of capital. This capital is already in the coffers of the imperialist banks. And sometimes it comes back in the form of new credits. This escaping of capital constitutes a diversion of the surplus value and wealth of the country. Instead of negotiating the repayment of the debt, it would almost be more logical to recommend to the imperialist banks to pay them-
International Viewpoint 10 February 1986 selves back directly by seizing exported capital which already represents a considerable part of that debt.
Finally, a large part of the loans which caused the debt were either spent on investments in costly and useless operations or in corrupt practices which were perfect illustrations of the parasitism of the local ruling classes and of their responsibility in it all.
The illegitimatising of the debt was the road chosen by the Sandinistas in Nicaragua after the overthrow of the dictatorship. They began by refusing to recognise the debt and linked that to the investment in the repressive apparatus of the old regime. This pedagogic approach is important because there is no spontaneous tradition within popular morality for non-recognition of the debt. Bourgeois leaders know very well that once the illegitimacy of the debt becomes
PLACE conceivable, the whole thing could snowball. What would it mean for mass popular consciousness, for the legitimacy of the peasants' debts to the banks or for the legitimacy of housing speculation?
The main opponents of the Cuban proposal for the non-payment of the debt take up the argument of realism from two angles: first they say they do not want to precipitate a generalised economic crisis and second they refuse to risk retaliation from imperialism. (5) On this argument Fidel Castro responded that a reduction of 10 to 12% in the military budgets of the imperialist countries would be enough to pay off the debt. This argument helps
5. Castro's response was explained in an interview given to a Mexican newspaper, 'Excelsior', on March 21, 1985. It was also published in the French LCR journal Critique Communiste, No 43, 1985.
15 SL
→-).
COBAL I--n to connect the fight against the debt with the struggle of the anti-war movements in the imperialist countries.
As for the argument on the danger of retaliation, it is only valid if each country were to confront the 'northern colossus' on its own. The cancellation of the debt has to be posed in a continent-wide, if not an international, framework. What kind of economic retaliation could the US put up against a whole continent? How could it boycott a whole continent? It is not a question of economics, but a political question of the relation of forces. Imperialism is united through the IMF. The six hundred banks which negotiate with Mexico do not do so one by one but through a single delegation. The debtor countries could confront their creditor with a common plan. Here we are entering the realm of scenarios, hypotheses and, to a certain extent, fiction. But it is possible to have the argument out on this terrain.
It is possible, as has already been mooted, that imperialism would respond to a suspension of payment with a cut in commercial credit to ninety days. Such credits are vital for the functioning of the whole economy. But if the suspension of payment was embarked on through a common movement then common reserves could be drawn on. We already have the example of Brazil, Mexico and Venezuela who, although they are also in debt, were able to help Argentina through short-term 16
'NICKEL PETROL credits. Moreover, some big banks might have the means to follow an order for a boycott. But there are a whole lot of little banks who would be prepared to take their place, for competition exists between banks as well and a country which declares a moratorium and continues to export becomes 'a good risk'. Finally, there is competition between the imperialist exporters themselves, who have already divided over the embargo against Nicaragua.
The question of sovereignty and national independence, whichis intimately linked in to the problem of the debt, is a powerful method of dividing those sections of society who are 'vende patria' (literally — selling the country) from the others. In this way the non-payment of the debt has become a key point of discussion on election platforms and even a central agitational theme. In the countries where the government is putting forward the idea of social dialogue, it is possible - in the workers' and peasants' movement - to make the non-payment of the debt a precondition of every possible consultation.
The question of national sovereignty raises, in fact, many other burning questions like control of national resources and a rejection of policies for denationalisation of the economy, for the liberalisation of trade and the ending of exchange control and the nationalisation of the multi-nationals. The defence of sovereignty would basically be hollow without the control on the national resources.
The debt question can be looked at in two ways. 'Misery is the national destiny' is one way, to use use Fidel Castro's description, and the other is the cancellation of the debt accompanied by a concrete and positive social and economic reconstruction of the countries involved. Not subordinated to financial concerns, such a plan should aim to obliterate misery, unemployment and hunger and should be for independence. Such a plan would involve the use of resources on the basis of need; a fight against under-employment; making proper use of the underused capacity in the economy; the phasing out of the strict imperative of production for export only and the ensuring of a more equal distribution of wealth to expand the internal market and to stimulate production on the basis of the needs of the broad masses; to implement radical agrarian reform which will assure production of basic foodstuffs and put a check on the rural exodus.
It is enough to put forward a set of measures like this, which are coherent and which go alongside the non-payment of the debt, to understand that only the workers and peasants in alliance with the popular sectors in the towns, including sections of the petty bourgeoisie who follow their lead, only these groups are capable of conducting a struggle with real commitment. This of course poses a problem for a government seeking to defend its interests.
On the other hand, the continuing payment of the debt will lead inevitably to austerity policies of a more and more severe nature and thus to social explosion and, at the end of the day, to a renewed squeeze on those democratic rights which it has been possible to force during periods of struggle. Military institutions have, for the most part, remained intact despite democratic openings and already whole areas have been militarised. Moreover, paramilitary forces and militias belonging to large propertyowners have never allowed their operations to be interrupted.
As for the question of the new economic order, it is not so much a matter of getting involved in a confused debate for or against a particular concept, but of spelling out what the practical content of such an economic system should be today; mutual trade between Latin American contries outside of foreign exchange control; the creation of an unexchangeable monetary system. Under today's conditions, this would involve, not a return to autarky, but the perspective of a socialist federation of Latin America, capable of confronting imperialism in the context of a new balance of forces. International Viewpoint 10 February 1986
Castro speaks out on
Latin American debt problem
WE PUBLISH below an extract from the interview given by Fidel Castro to the Mexican journal, Excelsior in its March 21, 1985 issue. In it the Cuban leader cites several statistics concerning the debt in Latin America and gives an idea of the scale of the problem.
According to the latest figures published by the United Nations Economic Commission on Latin America and the Caribbean, Brazil owes 108.8 thousand million dollars; Mexico owes 95.9 thousand million; Argentina, 48 thousand million; Venezuela, 34 thousand million; Chile, on a very conservative estimate, owes 18.44 thousand million; Peru, 13.5 thousand million; Colombia, 10.8 thousand million; a little country like Costa Rica, with a population of about two million inhabitants has a debt of 4.05 thousand million dollars; Panama, with a similar population, has a debt of 3.55 thousand million; Uruguay, 4.7 thousand million. And these figures are on the whole conservative, because, according to reports from, for example, friends in Uruguay and Chile, the real debts there are 5.5 thousand million and 23 thousand million respectively. In other words the official figures are well below the real level of the debt. In many cases international organisations and even the governments themselves find it difficult to know what the real volume of the debt is because debts in the private sector are not registered and have then to be added to the public debt ...
A country like Argentina devotes 52% of its revenue to paying off the interest on the debt; Bolivia, 57%; Mexico, 36.5%; Peru, 35.5%; Brazil, 36.5%; Chile, 45.5%. In fact it is estimated that even as much as 20% of export revenue given over to paying off the debt is almost insupportable.
What do these figures mean? That no country can develop under these conditions as is shown in the fact that the Gross Domestie Product of all the Latin American countries has declined between 1980 and 1984; in Uruguay it has declined by 13.9%; in Argentina, by 6%; in Chile by 5.4%; in Venezuela, by 6.1%, despite the enormous economic resources of that country.
Because the population has increased at the same time, the Gross Domestic Product per head of the population has declined even further. In Bolivia, for example, it has fallen by 24.6%; in Costa Rica by 14.1%; in Chile, by 11.2%; in Mexico, by 6.3%, in Argentina, by 11.8%; in Venezuela, by 16.2%; in Uruguay, by 16.2%. In the case of Venezuela, the Gross Domestic Product per head of the population has not only gone down from 1981 to 1984 but for the last seven years running it has declined by a total of 24%.
We can see the impact of the economic crisis and the foreign debt, above all in the last few years, in the fact that production per country and per inhabitant has not only stagnated but declined even further. Some countries are making really impressive efforts to confront the situation as the example of the three biggest shows.
In 1982, Brazilian exports amounted to 20,172 mil-
International Viewpoint 10 February 1986 lion dollars worth and in 1984 to 26,960 million, whilst imports declined by 19,395 million dollars worth in 1982 and to the tune of 14,360 million dollars in 1984.
Mexico, which had exported 22,810 million dollars worth in 1982, raised this figure to 23,500 million dollars in 1982 to 10,000 million in 1984.
Argentina raised exports from 7,622 millions in 1982 to 8,700 million in 1984 and reduced imports from 4,859 million in 1982 to 4,270 million in 1984.
By making a huge effort to increase exports and by reducing imports to almost intolerable limits, for the economy, these countries achieved a very lavourable balance of trade. Brazil's trade balance was 12.6 thousand million, that of Mexico 13.5 and that of Argentina 4.43. This credit was the result of tremendous efforts and was obtained by using up stocks of raw materials, till they were almost dried up and also by undermining the regular maintenance and repair of production equipment. It served exclusively to pay the interest on the foreign debt.
The countries of Latin America in 1984 paid out in interests and profits, 37.3 thousand million dollars, more than 3,000 million more than in 1983 and only received 10.6 thousand million in loans and investments.
The net transfer of financial resources going from Latin America to the outside in the form of interest and profits went up in 1984 by 26.7 thousand million dollars and in 1983 and 1984 only by 56.7 thousand million dollars. In short, the underdeveloped countries of Latin America, as a whole, are financing the economy and development of the industrial and richest countries in the world and with enormous sums of money. This is the reality. And this money has gone for good without any hope of getting it back.
The rate of increase of the debt did slow down to a rate well below the record one of 24% attained in 1981. This is logical since nobody dares borrow any more. But, in any case, the debt itself has gone up for one reason or another by 5.5%. In the next ten years the payment of interest on the debt, assuming that this will hardly go up, would run to about 40 thousand million dollars per year.
Twenty-four years ago, at the time of the Alliance for Progress, Kennedy had envisaged a 20 thousand million doilar economic investment programme over a period of 10 to 15 years, in order to confront the social problems and stimulate development in Latin America. This idea had been born under the impact of the trauma provoked by the Cuban revolution and was an attempt to prevent the appearance of conditions which would bring about new revolutions.
Currently, the economically under-developed countries of the sub-continent, with double the population and three times the social problems will be paying 40 thousand million dollars to the industrialised countries in the form of interest on the debt and should pay 400 thousand million over ten years. This is twenty times the sum which Kennedy was proposing to invest over 10 to 15 years of economic cooperation to resolve the economic and social problems of Latin America ...
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