Latin American integration — an alternative to capitalist crisis?

Dandelion Salad

Posted with permission from Green Left Weekly

by Eric Toussaint
translated by Federico Fuentes
Green Left
31 October 2008

The below article is based on a paper presented on October 8 by Eric Toussaint to the international Responses from the South to the World Economic Crisis seminar held in Caracas. It has been translated by Federico Fuentes and is abridged from socialist e-journal Links, Links. Toussaint is from the Committee for the Abolition of Third World Debt.

Other speakers on the panel included Venezuelan President Hugo Chavez and planning minister Haiman El Troudi, as well as Ecuador’s minister for economic coordination, Pedro Paez, minister of economic coordination. The entire conference was broadcast live by Venezuelan state television.

The economic and financial crisis, whose epicentre is in the United States, has to be utilised by Latin American countries to build an integration favourable to the peoples and initiate a partial “de-linking” from the world capitalist market.

We need to learn the lessons of the 20th century in order to apply them.

During the Great Depression of the 1930s, 12 countries in Latin America suspended for a prolonged time repayment of their foreign debt, principally to North American and Western European bankers. Some of them, such as Brazil and Mexico, imposed on their creditors a reduction of between 50% and 90% of their debt some 10 years later.

Mexico went the furthest with its economic and social reforms. During the government of Lazaro Cardenas, the petroleum industry was completely nationalised without any compensation for the North American monopolies.

Moreover, 16 million hectares of land were nationalised and in large part handed over to the indigenous population.

From the ’30s until the mid-’60s, various Latin American governments carried out very active public policies that aimed at a partially self-centred development, known later as the model of industrialisation via substitution of imports.

On the other hand, beginning in 1959, the Cuban Revolution attempted to give a socialist content to the “Bolivarian” project of Latin American integration (named after Simon Bolivar, who helped liberate South America from the Spanish and promoted South American unity).

This socialist content began to appear in Bolivia’s 1952 revolution.

Brutal US intervention, backed by the dominant classes and the local armed forces, put an end to the ascending cycle of social emancipation during this period.

Examples include the blockade of Cuba since 1962, the military junta in Brazil from 1964, the 1965 US invasion of the Dominican Republic, the Banzer dictatorship in Bolivia in 1971, the Pinochet coup in Chile in 1973, and the installation of dictatorships in Uruguay and Argentina.

The neoliberal model was put in practice first in Chile under the dictatorship of Augusto Pinochet, and with the intellectual guidance of right-wing US economist Milton Friedman. Afterwards, it was imposed on all of the continent.

With the fall of the dictatorships in the 1980s, the neoliberal model continued in force, principally through the application of structural adjustments programs and the “Washington Consensus”.

The governments of Latin America were incapable of forming a common front, and the majority applied the recipes dictated by the World Bank and the International Monetary Fund (IMF) in a docile manner.

This ended up producing significant popular discontent and a re-composition of popular forces that led to a new cycle of elections of left or centre-left governments, beginning with Chavez in Venezuela in 1998, who committed himself to a different model based on social justice.

Two integration projects

The Bolivarian project of integration of the peoples of the region has gained new momentum. If we want this new ascending cycle to go further, it is necessary to learn the lessons of the past.

What was particularly missing in Latin America during the decades of the ’40s to the ’70s was an authentic project of integration of economies and peoples, combined with a real redistribution of wealth in favour of the working classes.

We need to be conscious of the fact that in Latin America today, there is a dispute between two projects of integration, that have an antagonistic class content.

The capitalist classes of Brazil and Argentina (the two principal economies of South America) are partisans of an integration based on their economic domination over the rest of the region.

The European model based on a single market dominated by big capital, is the one that they want to follow. The Brazilian and Argentine capitalist classes want the workers of the different countries in the region to compete among themselves in order to obtain maximum benefit and be competitive on the world market.

From the point of view of the left, it would be a tragic error to fall back on a policy of stages: support a model of Latin American integration according to the European model, dominated by big capital, with the illusionary hope of giving it a socially emancipatory content later on.

Such support implies putting oneself at the service of capitalist interests.

The other project of integration, which falls within the Bolivarian framework, wants a social justice content to integration. This implies public control over natural resources in the region and over large means of production, credit and commercialisation.

It also implies the levelling from above of the social conquests of the workers and small producers, at the same time as reducing the differences between the economies in the region. It means the substantial improvement of communication between countries of the region, rigorously respecting the environment (for example, developing railway lines and other means of collective transport before highways).

It also means support for small private producers in numerous activities, agriculture, artisanal, trade, services, etc.

The process of social emancipation that the Bolivarian project of the 21st century is pursuing aims to liberate society from capitalist domination, supporting forms of property that have a social function: small private property, public property, cooperative property, communal and collective property, etc.

At the same time, Latin American integration implies the creation of a common financial, judicial and political architecture.

Losing precious time

The current international conjuncture, favourable for developing countries that export primary products, needs to be utilised before the situation changes.

The countries of Latin America have accumulated close to US$400 billion in reserves. This is no small amount in the hands of Latin American central banks and needs to be utilised at an opportune moment in order to help regional integration and shield the continent from the effects of the crisis unfolding in North America and Europe, and that threatens the whole planet.

Unfortunately, we should not create illusions: Latin America is losing precious time, while governments, beyond the rhetoric, pursue a traditional policy of signing of bilateral agreements on investment, acceptance or continuation of negotiations over certain free trade agreements, utilisation of reserves to buy bonds from the US Treasury (that is, lending capital to the dominant power) or credit default swaps whose markets have collapsed with Lehman Brothers, AIG etc.

Also, governments continue policies of advance payments to the IMF, World Bank and the Paris Club, acceptance of the World Bank tribunal — the International Centre for Settlement of Investment Disputes — as a way to resolve differences with transnational corporations, continuation of trade negotiations within the framework of the Doha agenda, and the maintenance of the military occupation of Haiti.

Following a loud and promising start in 2007, the initiatives announced in relation to Latin American integration seem to have come to a halt in 2008.

In regards to the launching of the Bank of the South (Bancosur), this has already been delayed quite a while. Discussions have not progressed.

We have to get rid off any confusion and give a clearly progressive content to this new institution, whose creation was decided upon in December 2007 by seven countries in South America.

Bancosur has to be a democratic institution (one country, one vote) and transparent (external auditing).

Before using public money to finance large infrastructure projects that don’t respect the environment and that are carried out by private companies whose objectives are profit, we have to support the efforts of the public powers to promote policies such as food sovereignty, agrarian reform, the development of studies in the field of health, the establishment of a pharmaceutical industry that produces high-quality generic medications, collective rail-based means of transport, alternative energy to limit the impact on depleted natural resources, protection of the environment and the development of integrated education systems.

Cancel the debt, nationalise the banks

The problem of the public debt has not been resolved. It is true that the external public debt has been reduced, but it has been replaced by an internal public debt that, in certain countries, has acquired totally huge proportions (Brazil, Colombia, Argentina, Nicaragua and Guatemala) to the point that it diverts a considerable part of the state budget towards parasitic financial capital.

It is very worthwhile following the example of Ecuador, which established an auditing commission to study the external and internal public debt, with the aim of determining the illegitimate and illegal parts of the debt.

At a time when, following a series of adventurous operations, the large banks and other private financial institutions of the US and Europe are wiping out dubious debts with an amount that by far surpasses the external public debt that Latin America owes them, we have to constitute a united front of indebted countries in order to obtain cancellation.

Private banks need to be audited and strictly controlled, because they run the risk of being dragged down with the international financial crisis. We have to avoid a situation where the state ends up nationalising the losses of the banks, as has happened many times before (Chile under Pinochet, Mexico in 1995, Ecuador in 1999-2000, etc.).

If some banks on the brink of bankruptcy have to be nationalised, this should be done without paying compensation.

Moreover, numerous litigation cases have emerged in the last few years between the states of the region and multinationals, from the North and the South.

Rather that taking them to the ICSID, which is part of the World Bank dominated by a handful of industrialised countries, the countries of the region should follow the example of Bolivia, which has pulled out of the organisation.

They should create a regional organisation for the resolution of litigation initiated by other countries or private companies. How can we continue to sign loan contracts or trade contracts that state, in the case of litigation, that the only jurisdictions that are valid are those of countries of the North?

We are dealing here with an inadmissible renouncement of sovereignty.

It is worthwhile establishing strict control over capital movements and exchange rates, with the goal of avoiding capital flight and speculative attacks against currencies in the region. For the states that want to make the Bolivarian project of Latin American integration for greater social justice a reality, it is necessary to advance towards a common currency.

Political dimension

Naturally, integration has to have a political dimension: a Latin American parliament elected by universal suffrage in each one of the member countries, equipped with a real legislative power.

Within the framework of political construction, we have to avoid repeating the bad example of Europe, where the European Commission has exaggerated powers in regards to the parliament. We have to move towards a democratic process with the goal of adopting a common political constitution.

We also have to avoid reproducing the anti-democratic procedure followed by the European Commission that attempts to impose a constitutional treaty without the active participation of citizens and without submitting it to a referendum in each member country.

On the contrary, we have to follow the example of the constituent assemblies of Venezuela (1999), Bolivia (2007) and Ecuador (2007-08). The important democratic advances achieved in the course of these three processes will have to be integrated into the Bolivarian constituent process.

Likewise, it is necessary to strengthen the powers of the Latin American Court of Justice, particularly in matters regarding the guaranteeing for the respect of inalienable human rights.

Until now, various processes of integration coexist: the Community of Andean Nations, Market of the South (Mercosur), the Union of South American Nations (Unasur), the Caribbean Community (Caricom, the Bolivarian Alternative for the Americas (ALBA). It is important to avoid dispersion and adopt an integration process based on social justice.

The Bolivarian process should bring together all the countries in South America, Central America and the Caribbean that adhere to this orientation. It is preferable to commence this common construction with a reduced and coherent nucleus, rather than with a heterogeneous set of states whose governments follow contradictory, if not antagonistic, social policies.

Global capitalism

Bolivarian integration should be accompanied with a partial de-linking from the world capitalist market. We are dealing with trying to progressively erase the borders that separate the states that participate in the project, reducing the unevenness in development between the member countries, especially thanks to a mechanism of transfering wealth from the “richer” states to the “poorer”.

This will allow for the considerable expansion of the internal market and will favour the development of local producers under different forms of property.

It will allow for a process of development (not only industrialisation) with substitution of imports. Of course, this implies the development of a policy of food sovereignty.

At the same time, the Bolivarian project, made up of various member countries, will partially de-link itself from the world capitalist market. This means, in particular, the repealing of bilateral treaties in areas of investment and trade.

The member countries of the Bolivarian group should also pull out of institutions such as the World Bank, the IMF and the World Trade Orgaisation (WTO), at the same time as promoting new democratic global institutions that respect inalienable human rights.

As was mentioned before, the member states of the new Bolivarian group would equip themselves with new regional institutions, such as the Bank of the South, which would develop collaborative relations with other similar institutions created by states from other regions in the world.

The member states of the new Bolivarian group will act with the maximum number of third states in favour of a radical democratic reform of the United Nations, with the objective of ensuring compliance with the United Nations Charter and the numerous international charters, declarations and resolutions that defend human rights.

It would act in favour of reaching understandings between states and peoples with the goal of acting to limit climate change as much as possible, given that this represents a terrible danger for humanity.

From: International News, Green Left Weekly issue #773 5 November 2008.

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