The
Geopolitics Of Latin American Foreign Debt
By Pablo Dávalos
25 September 2006
Axis
Of Logic
Despite
its importance, consideration of foreign debt over the last few years
has been diffuse and blurred. Whereas in the 1980s foreign debt was
the focus of argument, twenty years later it appears as a marginal issue,
as much in discussion of public policy on the development financing
of alternatives to the current model as in critical theory.
The relevance of stabilization
policies is not even discussed in the region. Argentina and Brazil may
have cleared their debt with the IMF but at the same time their governments
remain faithful to prescriptions for stabilization. Even ECLAC (1),
formerly critical of power and a source of inspiration as much for critical
theory as for the adoption of public policies of endogenous growth and
income redistribution has now joined the single ideology chorus.
Despite that, the issue of
debt in current circumstances may be perhaps even more strategically
important than in the 1980s when the debt crisis broke and the programmes
of adjustment and stabilization began.
In effect, reflections on
debt have prioritized financial and also macroeconomic aspects in relation
to development finance, without seeing debt as the trigger for radical
changes in the structure e of the State and, now, in the negotiations
and concessions relating to territorial sovereignty inherent in free
trade agreements. In the same way that debt management worked as the
master key to disengage projects of industrialization via a regulatory
State, now it works through strategic plans like IIRSA (2) and Plan
Puebla Panama to give coherence and consistency to free trade agreements
linking structural reforms to mega projects involving intensive exploitation
of natural resources and labour.
Operators of neoliberal reforms
of the same type and vast, deep reach as the IMF and the World Bank,
like the Andean Development Corporation (CAF), Fonplata and the Inter-American
Development Bank have disappeared from sight. In fact, in reflections
on debt neither the CAF nor Fonplata appear as political agents of neoliberal
reform. The case of the reforms to the internal statutes of the CAF
incorporating countries like the US and Brazil as class A investors,
a fact of vital importance for the region because it implies de facto
concession of territoriality and resources to corporations through the
presence of the CAF as an IIRSA funder, has gone unnoticed in the theoretical
debate. The consequences of the fact that private US banks can now finance
the more than 300 IIRSA projects have not been analysed.
Nor has an analytical link
been developed between the new process of multilateral indebtedness
via the IADB and the CAF and the free trade agreements the US is imposing
in the region. A closer look at recent processes shows there is something
more than coincidence in placing US military bases in the wealthiest
areas of biodiversity, along with projects of either IIRSA or Plan Puebla
Panama and multilateral funding. From that point of view, the separatist
declarations of elites in Zulia, Guayaquil or Tarija and Santa Cruz,
are more significant and may be related to this new modality of negotiating
state sovereignty. All of this without doubt offers a more dense and
complicated panorama of the burden of debt payment for any country than
merely viewing debt as an accounting aspect of development funding.
And so to understand these
new dynamics of foreign indebtedness and consider foreign debt as "an
agent of political transformation" linking free trade agreements
with the demands of corporations, one has to escape from the financial
and macroeconomic focus on debt and look at it as basically a political
problem. Foreign debt is essentially a political problem working as
a device to make radical changes in the State and in society and which
now accommodates its formats and institutional frameworks to the requirements
of capitalism.
Once the region has internalized
the argument for stabilization as an argument of its own and in which
critical voices have been extinguished, to the extreme that the whole
of political economy has turned into variations on the theme of stabilization.
Once the structural reform of the State has been consolidated and societies
have been disciplined thanks to that reform's transversal axes like
the fight against poverty, local participation, anti-corruption drives
and decentralization, in such a way that even critical voices end up
using the same conceptual schemes as the World Bank, like the dollar
a day concept to define poverty. At that point, power needs to move
into a deeper phase, namely the dismantling of the territorial sovereignty
of States, because sovereignty dictates the use, ownership and management
of natural resources.
So then it is necessary to
render incoherent the vestiges of sovereignty that States may have over
their natural resources and even over their populations. The free trade
agreements the US is imposing in the region are meant to break up sovereignty.
In effect the free trade agreements thanks to their single format, which
almost by definition blocks any negotiating strategy, break up territorial
sovereignty and open up territory for the operation of corporations
and financial capital.
The free trade agreements
are the terminus of the structural reforms. They are also meant to be
points of no return, to be final, absolute strategies. And the mechanism
that permits a direct convergence between corporations and financial
capital with control, management, operation and ownership of territorial
sovereignty and of natural resources is, precisely, foreign debt.
It is from this point of
view that I propose a political reading of foreign debt in the region
in which one can identify three main processes or stages, complementary
one to the other but different in the function of the dynamic that orders
them:
a) A financial stage in which
world financial architecture is redesigned and in which international
corporate finance consolidates and expands as a fundamental actor in
financial globalization. This financial stage is typified by the imposition
of structural adjustment programmes and macroeconomic stabilization
programmes. This began with Mexico's debt crisis in 1982 and continues
to the present. The principal organization in this stage is the IMF
and the legitimating theoretical model for the transfers of resources
to the capitalist centre is monetarism, whose concrete expression in
order to guarantee debt payments and articulate structural adjustment
programmes is a monetary focus on the balance of payments. During this
stage, debtor countries design public policy around paying the debt
and become net exporters of capital. The way these public policies are
imposed in the economic field is via Letters of Intent agreed with the
IMF.
b) A second stage that began
in 1985 during the joint meeting of the World Bank and the IMF in South
Korea is characterized by a series of credits from the World Bank aimed
at projects to reform the legal and institutional structure of the State.
From the time James Baker in 1985, then US Treasury Secretary, defined
the new role of the World Bank in economic adjustment until the publication
in 1989 of (John) Williamson's Washington Consensus, a period existed
in which conditionalities of the IMF and the World Bank were juxtaposed
so as at times to contradict each other as regards the time and speed
of the structural reform.
The beginning of the 1990s
clarified the roles of the IMF and the World Bank, so the latter focused
on structural reform of the State; that is, on carrying out a series
of projects whose main aim is to privatize State functions. So this
stage can be defined as one of structural reform and institutional reform
of the State. The basic axes are privatization, liberalization of markets,
labour flexibility, public spending cutbacks and structural changes
in the make-up of the State and the definition of public policy. The
theoretical framework that legitimizes and offers some rationality to
the strategies put forward in this stage consists of political and economic
variants on neo-institutionalism.
During this phase, the new
indebtedness focuses on programmes and projects of social control and
institutional transformation of the State. To give normative and analytical
coherence to these changes, the World Bank uses the so-called Country
Assistance Strategies, equivalent to the IMF's Letters of Intent. The
legitimising discourse is the fight against poverty, and the construction
of poverty as an economic phenomenon dependent on economic growth. For
its part, growth is conceived by the World Bank as a task and responsibility
exclusively of the private sector.
c) A third stage, concomitant
with the structural reform of the State, is related to the "strategic
plans" that define mega projects for the intensive exploitation
of natural resources and the labour force, as is the case with Cana
Brava in Brazil, Camisea in Peru, or Yacyreta in Argentina and Paraguay,
among others (6). These mega projects have been integrated into two
grand initiatives covering the whole of Latin America - Plan Puebla
Panama originating in the Tuxtla agreements of 1991 and the South American
Regional Infrastructure Integration Initiative created in the presidential
summit in Brazil of 2000. This stage incorporates the creation of strategic
plans which integrate structural reform policies with the need to extract
resources and create a physical base from which multinational corporations
can expand their operations and control strategic resources like energy,
water and biodiversity.
The stage can be described
as strategic from the presence of these mega projects, which privatize
natural resources and create vast areas of intensive exploitation. This
stage complements new indebtedness with private investment and with
the creation of regional markets guaranteed by free trade agreements
between various countries in the region and the United States. The key
institutions for this stage are the IADB, the CAF and Fonplata. No comprehensive
theoretical framework exists in the same way as one did for the previous
stages, but rather ad hoc theoretical proposals for new situations within
the general epistemological framework of classical liberalism. In that
sense, the most important theoretical creation for this new stage is
the schemes of payments for environmental services.
So adjustment and structural
reform of the State are global processes that define the geopolitics
of power and the pre-eminence of financial capital. The strategic plans
are regional maneuvers carried out to ensure the control, domination,
ownership and use of strategic natural resources and abundant availability
of labour. Both Plan Puebla Panama and IIRSA should be seen within the
geostrategic world conflict for control of key areas. The frontier that
defines control of strategic resources runs through points of armed
conflict, like the area of coltan (7) in the Congo or the war for oil
in Iraq (both wars treated in the news media as "civil wars").
And thus the US military bases in the case of Plan Puebla Panama and
IIRSA border the areas wealthiest in resources, the Andean Choco, the
Guarani aquifers and the Amazon basin.
To guarantee control and
access to these areas, the US has tried to form a regional market in
which US corporations would have privileged and unrestricted access
to these resources with legal security and property rights via the Free
Trade Area of the Americas. After the FTAA's failure the US has carried
forward a bilateral strategy of free trade agreements with various countries
in the region with the same components as the FTAA. The US has negotiated
and in some cases signed free trade agreements with the Central American
countries, with Mexico and Canada, with Colombia and Peru, with Chile,
and is in the process of negotiations with Uruguay, Paraguay and Ecuador.
So Latin America, as it has
been since the Monroe Doctrine of the 19th Century, is the object of
hegemonic control by the US, which has oscillated between open and covert
intervention and direct hostility towards governments that separate
from or try to separate from that hegemonic control. Therefore, the
region's economic, political, social and legal phenomena have to be
understood within the geopolitical matrix of neocolonialism, interventionism
and US domination.
And that means foreign debt
has to be understood as a geopolitical phenomenon whereby the adoption
of measures in one region necessarily affects the metropolis. If in
the 1980s, when the debt crisis began, Latin American countries with
high indebtedness like Mexico, Brazil and Argentina had acted together
and established joint negotiating political priorities, the world order
would have been significantly changed.
For that reason, one of the concerns of US administrations has been
precisely to avoid coordinated, convergent action by Latin American
countries on the problem of foreign debt. The US assumed as a priority
the task of avoiding the formation of a debtors' syndicate and as a
secondary task to secure and protect its internal financial system by
transferring the costs of excess credit and lack of financial regulation
to the region's countries via policies of structural adjustment.
There is a relation between
the debt crisis and the expansion of the US economy. Perhaps the most
dramatic example is from the 1990s, which ECLAC calls the new lost decade,
while for the US it was, by contrast, the "happy 'Nineties,”
to use the phrase of the Nobel economist Joseph Stiglitz. The US had
unprecedented growth while Latin America in the same period had serious
problems overcoming the economic crisis caused by foreign debt and structural
adjustment policies.
In addition the US transferred
the costs of its own crisis to Latin American countries by using the
debt problem as an opportunity permitting them greater geopolitical
control in the region. It is by virtue of these circumstances that one
ought to consider debt as basically a geopolitical phenomenon. The financial
details of the debt, despite its overwhelming importance for the continent's
peoples, are secondary to the neocolonial strategy, which is in truth
inherent in foreign debt.
Scarcely had the 1982 debt
crisis begun than the US reworked world financial arrangements and used
the IMF to advance its own interests. During the debt crisis the IMF
played a fundamental role, while during the crisis of August 1971, when
President Richard Nixon decreed the inconvertibility of gold, it was
shown to be powerless to protect the Bretton Woods system. It is the
IMF whose macroeconomic stabilization policies have been the master
key undoing regional strategies of industrialization and of the welfare
State.
Thanks to the IMF the region
went from prioritizing employment and growth to controlling inflation
as the main aim of political economy. In that way the transition was
made from policies of industrialization to policies of stabilization
and from the priorities of an industrializing bourgeoisie to the needs
of a financial and speculative bourgeoisie. After three decades of stabilization
and structural reform and adjustment, the number of households in poverty
has risen dramatically and unequal income distribution has become established.
The political crises in the
region have corresponded to that adjustment. Social fragmentation and
conflict have fed on the dynamics of adjustment and macroeconomic stabilization
imposed by the IMF and the World Bank. Stable economies in reality mean
under-resourced public spending for health, education and social services,
insecure employment, growing unemployment, migration, poverty and inequality.
But they also mean huge profits for financial capital and enormous net
capital transfers. The adjustment policies of the IMF were a kind of
artillery and aerial bombardment on the positions of a State that intervened
directly in social regulation and the assignment of resources to promote
growth, income distribution and employment creation.
Once those State strategies were disarmed by adjustment and stabilization
policies it was time for the World Bank infantry to come in, which,
following the structural reform projects, implacably wrecked the institutional
frameworks that one way or another still survived and which proposed
a State responsible for distributing income and creating employment
via public policy. When it was seen that the task of the World Bank
of destroying the welfare State was in its final phase, strategic plans
like Plan Puebla Panama and IIRSA came in to occupy the defeated, overthrown
territory.
This warlike metaphor is
more than just a rhetorical device, if one remembers that the French
philosopher Michel Foucault may well have been right when he inverted
the maxim of Clausewitz. For Foucault, war is not the continuation of
politics by others means, but rather the reverse. Politics is the continuation
of war because war and violence are the constant norm. In complete contradiction
to Kant’s Enlightenment project of perpetual peace, what really
exists is a state of permanent war.
The adjustment and structural
reform policies of the IMF and the World Bank and now the strategic
plans of the IADB and the CAF are part of this perpetual war. A war
whose purpose is conquest, territorial control, domination and pillage,
as in any war. One is not exaggerating. Remember that the US after invading
and conquering Iraq proposed condoning Iraq's foreign debt and in fact
did forgive a large part of the foreign debt while it militarily occupied
the country and took over its oil resources. Iraq's foreign debt was
used as a wartime argument so it is no exaggeration to think that the
geopolitics of debt might also be a military strategy.
Once, reading the Lugano
Report by Susan George, I thought she might possibly have exaggerated.
The world she proposed, in a very interesting exposition, seemed to
me too violent to be plausible. But reality always defeats the imagination.
Now, I think George came up short. That violence, that cynicism, those
designs of violence and domination of the Lugano Report are more than
plausible. They are absolutely real.
If Plan Puebla Panama and
IIRSA finally get implemented hundreds of indigenous peoples who live
in the areas of intervention will have their days numbered. Rural workers
families’ days will also be numbered. The tropical forest that
still exists will disappear and in their place will be either desert
or monocultivation of genetically manipulated crops. The Guarani aquifers
will be used up in short order. After timber operations, only vestiges
will remain of the Andean Choco. The multi-node corridors will not only
devastate nature but also produce more insecurity and more poverty.
IIRSA and Plan Puebla Panama are barely the tip of the veil covering
the face of the Medusa.
© Copyright 2006 by
AxisofLogic.com
The author: Pablo Dávalos
is a former Ecuatorian Vice-Minister of Economy and academic.
Translated into English for Axis of Logic by Toni Solo, Tlaxcala*
Original Source: Alainet.org