President Obama, at the opening ceremony of the Summit of the Americas in Port of Spain, Trinidad and Tobago, Saturday April 18, 2009.

US tactics and strategy toward the region becomes relevant, only if we take account of the recent historical, economic and political changes in Latin America and the evolving political alignments.

A realistic assessment of US policy by necessity must go beyond policy pronouncements
and Washington’s ‘projection of power’ to an analysis of its existing capabilities and the
resources available to implement Obama’s agenda for Latin America. In evaluating Washington’s
policy the key is to analyze its coherence and feasibility in light of its political diagnosis of Latin
America. This provides a basis for determining the compatibility or conflict of interests between
the two regions. A basic question arises: How do the Obama regime’s policies, objectives, and
available resources square with the development needs of different Latin American countries in a
time of deepening world depression?

To answer that question, requires we examine the recent policies and political alignments
in Latin America. It would be utterly foolish to over or underestimate the degree of US
“hegemony” or Latin American “autonomy,” especially in light of major shifts in power relations
over the past two decades, and continuing today.

Latin America’s relations with the US are decisively influenced by internal events,
including class conflicts, which determine the correlation of political forces, as well as external
events such as US intervention and outward expansion, and world market conditions. The shifts
in Latin America’s political-economic relations can be divided into distinct periods, which
provide an overview of the relative degree of hegemony and autonomy with regard to the US
empire.

The Changing Contours of US-Latin American Relations: 1990-2009

Any “general overview” of US-Latin American relations is subject to exceptions and
variations in particular country experiences, even as it highlight ‘dominant trends’ in the region.
The first two decades from 1980-2000 establish certain parameters for recent policies
particularly the conflicts and divergences of interests.

The period from 1980-1999 was defined for Washington and Wall Street as the ‘Golden
Age’ in US-Latin American relations. The regimes accepted and promoted US hegemony,
following the precise terms of the IMF, the Washington Consensus and a US centered model of
capital accumulation.

This included the lifting of trade barriers, the privatization of public enterprises
(including banks, oil wells, mines, factories and telecoms) and their subsequent denationalization
or transfer to US and European multinational corporations (MNCs).

The US and EU took over these public enterprises at exceptionally favorable prices and
terms, which led to the massive transfer of profits, interest and ‘rent’ payments to the MNCs and
provided them with extensive leverage over the entire financial/credit-system and access to local
savings in the Latin American countries.

On the political level, the incumbent regimes embraced and promoted the US sponsored
free market ideology known as “neo-liberalism” and backed US diplomatic and political
intervention in the region as well as overseas.

The plunder of public treasuries and private savings by the MNCs and the resulting
concentration of wealth and political power polarized society and precipitated major political
economic crises. This led to popular upheavals throughout most of the region during the period
from 2000-2004. Latin America witnessed the ousting of several US client regimes, serious
widespread questioning of the free market ideology and a growing potential for radical structural
changes.

As a consequence of the new correlation of forces, US political power declined and its
influence was largely confined to political and economic elites at the margins of governance and
under political siege from mobilized movements and disaffected electorates.

The ‘third period’ reflected ‘hybrid regimes’, which spoke to the populist demands and
critiques of ‘neo-liberalism’ (empire-centered economic structures and policies) without actually
reversing any of the unpopular structural/property legacies imposed by the earlier client regimes.
The rise and consolidation of a wide range of highly differentiated ‘center-left regimes’ benefited
from world economic conditions, especially high commodity prices, which facilitated social
welfare programs and economic recovery as well as the relative ‘decline’ of US political power.
This decline was intensified by the US involvement in a series of prolonged wars in the Middle
East and South Asia and its ‘global war on terror’.

The ‘third period’ featured an increase in the relative autonomy of Latin America aided
by huge windfall profits from exceptional prices and expanding markets in Asia, and from the
regional political-economic initiatives of Venezuela’s Chavez government.

The end of the primary commodity boom and the emergence of a world-wide depression
mark the beginning of the fourth period. Two contradictory phenomena impacted on US-Latin
American relations. Because the US was the epicenter of the world economic crisis and its
financial and investment institutions turned insolvent, finance and investment fled or were
repatriated, weakening the US presence in Latin America and its economic leverage in a region
with huge foreign reserves. Secondly, the over-extension of US military forces in other regions
(Middle East/Asia/Eastern Europe) lessened its capacity for military intervention in Latin
America. While developments in the world-economic and military situation opened opportunities
to exercise greater Latin American autonomy, the decline of export markets, the drying up of
credit markets and foreign capital inflows exposed the vulnerability of the ‘center-left’ regimes
with their dependency on ‘export strategies’. The contradictory features of the ‘fourth period’
shaped the framework for contemporary US-Latin American relations and define some of the key issues facing Latin American rulers and the Obama regime.

Rising Militarism, Financial Protectionism and Declining Trade

The policies of the Obama regime toward Latin America are negatively framed by its
three top policy priorities. The Obama regime’s foreign policy builds and expands the militarydriven
empire building of his predecessors. Contrary to the hopes and expectations of many of
his progressive and leftist advocates of peace, Obama has staffed his regime with committed
militarists, Zionists and Cold Warriors.

The major difference between Obama and Bush’s policy is the diplomatic language,
which accompanies empire building and the scope and depth of military activity. Obama has
adopted a rhetoric of ‘reconciliation,’ ‘negotiation’ and ‘change’ as opposed to Bush’s overtly
bellicose rhetoric of confrontation, even as Obama has accelerated and extended military
activities beyond the Bush regime.

A systematic analysis of the Obama regime’s policies reveals the overriding emphasis on
projecting military power as the main instrument for sustaining the empire throughout the world.

South Asia

The Obama regime has increased US military forces in Afghanistan by over 40% - by
21,000 troops added to the current 38,000 - and increased financing for doubling the size of the
Afghan mercenary army and police to over 200,000. Washington has extended the field of
warfare in Pakistan, escalated its bombing attacks in the Swat Valley on a daily basis and
increased cross-border commando operations. The Obama regime has formally extended the US
war-zone deeper into Pakistan territory and extended its reach into Pakistan intelligence
institutions.

Despite Obama’s intense pressure on the European Union and its allies and clients around
the world, few countries have pledged combat forces in support of Obama’s military strategy.
Just as during the Bush era, Obama unilaterally pronounces a major military escalation and then
expects his allies to follow. The Obama military and intelligence apparatus has moved even more
intrusively into Pakistani institutions with the clear intent to purge nationalist officers and select
officials who will more aggressively repress the communities, organizations and leaders opposed
to US intervention in Pakistan, Afghanistan and the Middle East.

Iraq

The contrast between Obama’s diplomatic rhetoric of military withdrawal and military
escalation is most blatant in the case of Iraq. The Obama regime has extended the time frame of
US military occupation and increased funding for permanent military bases and related
infrastructure. His military strategy envisions a massive mercenary Iraqi army and police force to
control the population and repress any nationalist resistance. Obama will double the number of
Iraqi mercenaries spread throughout the country under the Pentagon’s command.

Iran

The most striking policy adopted by the Obama regime toward Iran is his adding new and
even harsher sanctions to the existing economic embargo. Obama continues to threaten Iran with
a pre-emptive military assault in line with the contingency war plans developed by top Pentagon
officials held over from the Bush regime. In pursuit of this saber-rattling posture, Obama
appointed two of the most bellicose Israeli-American ideologues, includng Dennis Ross, as chief
emissary to Iran and Stuart Levey to the Treasury in charge of imposing economic sanctions. Washington is making a major diplomatic effort to isolate Iran, through negotiations with Syria,
Russia and China. In the face of these ‘facts on the ground’ Obama’s public rhetoric about
offering Iran a ‘new policy,’ is blatant propaganda stunt. The massive US air and naval armada
off the coast of Iran continues to threaten Teheran with a blockade or even massive air and naval
strikes. The Obama regime continues to fund and train terrorist groups to infiltrate Iran from their
bases in Iraq and Pakistan and to attack Iranian government facilities and officials. Israeli military
threats to strike Iran are made more probable with the Obama regime’s transfer of new military
technology, including the most advanced anti-missile system and ‘bunker-buster’ bombs designed
to destroy underground Iranian government facilities.

Palestine/South Lebanon/Syria

The Obama regime’s military policy is clearly evidenced in its unconditional backing of
Israel’s murderous military assault on Gaza, its selective assassination of Palestinian activists in
the West Bank and its threats against Hezbollah.

The Obama regime, together with both houses of Congress, has backed every Israeli act
of war– including its brutal economic blockade of Gaza and the systematic eviction of Palestinian
residents in occupied East Jerusalem and the West Bank. The Obama administration is deeply
infested with prominent pro-Israel Zionists at all levels precluding any change in Washington’s
robust military ties even with the far right militarist Netanyahu-Lieberman regime.

East Africa

Obama’s regime continues to pursue a confrontational policy toward Muslim Sudan by
funding the armed separatists in South Darfur and by a recently reported air attack on a Sudanese
military convoy. In the face of its failed military intervention in Somalia by its Ethiopian proxy,
Washington has opted for a new Somali client coalition backed by African mercenaries from
Uganda.

Russia/Eastern Europe

Under Obama, the provocative military encirclement of Russia continues via the
recruitment of new client NATO ‘members’ among the former Soviet Republics and the building
of bases on the very frontiers of Russia. Obama combines a double discourse of diplomatic
conciliation while building new military bases, missile sites and advanced radar stations from
Poland southward toward Ukraine and Georgia. Washington’s ‘diplomatic overtures’ to Russia
are driven by its logistical needs in Iraq, Afghanistan and Pakistan and especially its war
preparations toward Iran. The Obama regime is demanding that Russia provide logistical support
for the US/NATO Afghan-Pakistan war and occupation while demanding Russia cancel its sale of
advanced missiles as well as its nuclear power plant contract agreement with Iran in exchange for
US ‘good will’...

China

Although the Obama regime is acutely aware of its dependence on China’s continued
financing of the US economic deficits, it has nevertheless engaged in a high risk naval
confrontation in China’s off shore economic zones. Recent Pentagon reports on Chinese military
preparedness are laced with lurid Cold War rhetoric designed to inflate China’s ‘threat’ to US
dominance in Asia and its ‘lack of transparency’. Once again, the Obama regime presents the
double discourse of friendly diplomacy and aggressive militarist policies.

China faces a US military encirclement along an arc of US bases from Afghanistan,
Pakistan, Japan, to South Korea, as well as a new military doctrine labeling China a ‘threat’ to be
‘contained’ in Asia.

Obama’s Latin American Policy

To decipher the real content of the Obama regime’s policy to Latin America one needs to
look at the foreign policy priorities, the allocations of financial resources and public policy
commitments and ignore its inconsequential diplomatic rhetoric. The first major pronouncement,
in line with its global military policies, was to militarize the US-Mexican frontier, allocating
nearly one-half billion dollars in military and related aid to the right wing Calderon regime. The
entire focus of White House policy toward the Mexican and Colombian regimes over the problem
of narcotics and narco-violence is military –ignoring its socio-economic structural roots:

Millions of young Mexican peasant and small farmers driven into bankruptcy,
unemployment and poverty by the North American Free Trade Agreement NAFTA), created a
large pool of recruits for the narco traffickers.

The expulsion of hundreds of thousands of Mexican immigrant workers from the US and
the new militarized borders has closed off a major escape for Mexican peasants fleeing
destitution and crime. In contrast to the formation of the European Union, which provided tens or
billions to the less competitive countries, like Spain, Greece, Portugal and Poland, entering the
European Union, the US has provided Mexico with no compensatory funds to upgrade its
productive competitiveness and provide needed employment for its people.

President Barack Obama talks to Colombia’s President Alvaro Uribe during a working lunch at the 5th Summit of the Americas in Port of Spain, Trinidad and Tobago, Saturday April 18, 2009.

The highly militarized Colombian regime, notorious for its violation of human rights, is
currently the biggest recipient of US military aid in Latin America. Under Plan Colombia, the US
financed counter-insurgency program, Bogota has received over 5 billion dollars, the most
advanced military technology and thousands of American military advisers and sub-contracted
mercenaries. The Obama’s support for the right-wing Colombian regime is his response to the
emergence of democratically elected populist and radical governments in Ecuador and Venezuela.

Obama’s policies toward Latin America are driven by his extension of the military
defense/priorities of the Bush Administration, including the economic embargo of Cuba and its
virulent hostility toward Venezuelan nationalism. There are no new economic initiatives. Beyond
the rhetorical support for free trade, Obama upholds past quotas and tariffs on more competitive
imports from Brazil, even adding new protectionist measures against Mexican trucks and truck
drivers.

Obama’s relentless pursuit of military-driven empire building while in the midst of an
ongoing and deepening domestic economic depression forms the basis for understanding
Washington’s contemporary relation with Latin America today. His regime’s military approach
to Latin America is reflected in his inability or unwillingness to allocate economic resources and
underscores his concern to sustain two major US clients, Colombia and Mexico through military
aid programs. Obama’s limited interest and sparse commitment of economic resources to Latin
America reflects the very low foreign policy priority it has in the current White House. Latin
America is a fifth level priority after the US domestic economic depression, the Middle East and
South Asian wars, coordinating economic policies with the European Union and formulating
economic strategies and military relations with Russia and China. With these priorities, the
Obama regime has little time, interest, or programmatic offerings to help Latin America cope
with the onset of the economic recession.

At the most basic level the Obama regime is following a three-fold strategy of (1)
retaining support from rightist regimes (Colombia, Mexico and Peru); (2) increasing influence on
‘centrist regimes’ (Brazil, Argentina, Chile, Uruguay and Paraguay); and (3) isolating and
weakening leftists and populist governments (Cuba, Venezuela, Ecuador, Bolivia and Nicaragua).

What is most striking about the supposedly “progressive” Obama regime’s policy for
Latin America are the continuities with the previous reactionary Bush administration in almost all
strategic areas. These include:

(1) Latin America’s very low priority in US global policy;
(2) The US emphasis on military (“security”) drug enforcement collaboration
over any long term socio-economic poverty alleviation and drug addiction
treatment programs;
(3) Its close collaboration with the most rightwing regimes in the region (Mexico
and Colombia);
(4) The continuation of the US economic embargo of Cuba, despite the loss of
its last two Latin American backers;
(5) Obama’s double discourse of talking free markets while practicing
protectionism;
(6) The US financing and strengthening the role of the IMF as an instrument of
imperial expansion;
(7) The US policy of driving a wedge between ‘centrist regimes’ (Lula in Brazil,
Fernandez in Argentina, Vasquez in Uruguay and Bachelet in Chile) and ‘left
and center-left nationalist regimes’, (Chavez in Venezuela, Morales in
Bolivia, Correa in Ecuador and Ortega in Nicaragua) and
(8) Its support for separatist regional elites’ actions to destabilize center-left
governments operating from their traditional far right-wing bases in Sta Cruz
(Bolivia), Guayaqul (Ecuador) and Maracaibo (Venezuela).

In other words the Obama regime has embraced overall the strategic agenda of the Bush
Administration essentially intact, while making several secondary changes having to do with
adaptations based on the decline of US power. In addition, Obama has facilitated a few major
negative changes, which go further than the Bush administration in harming Latin America’s
financial and trading position. While reiterating the anachronistic demands for Cuba to convert to
capitalism (dubbed a “democratic transition”) as a condition for ending the US embargo, Obama
has slightly eased travel restrictions for US-based Cuban families to visit relatives in Cuba and
send them money. The State Department relies less on confrontational diplomatic language and
has made overt gestures to centrist regimes, including White House meetings with Lula Da Silva
(March 2009) and Vice President Biden’s attendance at a meeting with centrist Presidents (March
27-28, 2009) in Chile. Obama’s resort to “soft power”, which is not backed by any new
economic initiatives and which continues the basic policies of his predecessor has not gained him
new allies.

However, there is one set of ‘changes’ resulting directly and indirectly from the US
depression and Obama’s gigantic deficit financing, which has a very negative impact on Latin
America’s economic recovery. The Obama regime is absorbing most of the Hemisphere’s credit
to aid the financial bailout. This policy makes it difficult for Latin American exporters to finance
their sales. Moreover, the Obama regime’s demands on the financial sector to expand their capital
reserves and to direct their lending to the American domestic market has led banks to repatriate
capital from their Latin American subsidiaries at the expense of Latin American borrowers -
extending and deepening the recession in Latin America.

The Obama regime’s diplomatic and linguistic changes and affirmation of free trade have
little substance: the White House continues the double discourse of talking up “free trade” while
introducing a new and more virulent financial protectionism. In addition to the twenty billion
dollar subsidies to agricultural exporters, the Democrats have pushed the “Buy American”
provisions in Federal procurement policy and multi billion dollar subsidies to the auto industry.

Latin America faces a rising tide of US protectionism as the Obama regime reacts to the
domestic economic depression by forcing Latin America to seek new trading partners, to protect
their internal markets and to seek new sources for trade and credit.

Latin America Faces the World Crisis

Throughout Latin America, the economic depression is wrecking havoc on the economy,
the labor market, trade, credit and investment. All the major countries in the region are headed
toward negative growth, and experiencing double digit unemployment, rising levels of poverty
and mass protests. In Brazil in late March and early April, a coalition of trade unions, urban
social movements and the rural landless workers movement convoked large scale demonstrations -
including participation from the union confederation, CUT, which is usually allied with Lula`s
Workers Party.

Unemployment rates in Brazil have risen sharply, exceeding 10%, as massive lay-offs hit
the auto and other metallurgical industries. In Argentina, Colombia, Peru and Ecuador, strikes
and protests have begun to spread in protest over rising unemployment, the increase of
bankruptcies among exporters facing world-wide decline in demand and unable to secure
financing.

The more industrialized Latin American countries, whose economies are more integrated
into world markets and have followed an export growth strategy, are the ones most adversely
affected by the world depression. This includes Brazil, Argentina, Colombia and Mexico. In
addition, countries dependent on overseas remittances and tourism, like Ecuador, the Central
American and Caribbean countries and even Mexico, with their ‘open’ economies, are badly hit
by world recession.

While the US financial collapse did not have a major and immediate impact on Latin
America- largely because the earlier financial crashes in Argentina, Mexico, Ecuador and Chile
led their governments to impose limits on speculation - the indirect results of the US crash,
especially with regard to the credit freeze and the decline of world trade, has brought down
productive sectors across the board. By mid-2009, manufacturing, mining, services and
agriculture, in the private and public sector were firmly in the grip of a recession.

The vulnerability of Latin America to the world crises is a direct result of the structure of
production and the development strategies adopted the region. Following the ‘neo-liberal’ or
empire-centered ‘restructuring’ of the economies which took place between the mid-1970s
through the 1990s, the economic profile of Latin America was characterized by a weak state
sector due to privatization of all key productive sectors. The de-nationalization of strategic
financial, credit, trading and mining sectors increased vulnerability as did the highly concentrated
income and property ownership held mainly by small foreign and domestic elite. These
characteristics were further exacerbated by the primary commodity boom between early 2003
until the middle of 2008. The regimes’ further shift toward an export strategy relying on primary
products set the stage for a crash. As a result of its economic structure Latin America was
extremely vulnerable to the decision taken by US and EU policy makers in charge of key
economic sectors. De-nationalization denied the state the necessary levers to meet the crisis by
reversing the direction of the economy.

Structural changes imposed by the IMF/World Bank and its domestic ‘neo-liberal’ ruling
class partners ‘opened’ the countries to the full blast of the world depression while dismantling
the very state institutions which could have protected the economy or at least avoided the worst
effects of the crisis.

Privatization led to the concentration of income, lessened local demand and heightened
dependence on export markets while depriving the state of levers to control investment and
savings, which could counteract the decline of overseas inflows of capital and the collapse of its
overseas markets.

Denationalization facilitated the outflow of capital especially in the financial sector,
deepened the credit crises and adversely affected the balance of payments. Foreign ownership
made Latin American countries subject to strategic economic decisions made by overseas
economic elites looking at the costs and benefits to their economic empires. For example, in
Brazil the closing of US-owned auto factories and the mass firings of workers are based on
‘global market’ cost calculations, totally divorced from the needs of the Brazilian labor market.

The ‘export strategy’ was dependent on the state subsidizing the expansion of agrobusiness
plantations producing staples for export markets. This came at the expense of small
farmers, landless peasants and rural workers, weakening the domestic market as an alternative to
a collapsing overseas markets, increasing dependence on food imports and undermining food
security.

Export strategies depend on holding down labor costs, wages and salaries, thus
weakening domestic demand and making employment dependent on the fluctuations of overseas
demand. Specialized production in a vast complex international division of labor is central to the
multinational corporation. This has dramatically reduced the national diversification of industry
and integral manufacturing where all components of a product are produced within a single
geographic region. Under the current division of labor, a Brazilian manufacturer of car brakes is
totally dependent on external demand determined by the MNC. The strategic disadvantages of
this ‘specialization’ in a global capitalist chain of production have become strikingly evident in
this depression.

Despite these deep structural weaknesses, inherited from previous regimes, the current
center-left regimes in Latin American have not moved toward any structural changes to decrease
their economic vulnerabilities, with the partial exception of Chavez’s Venezuela.

The March 2009 summit of self-styled ‘third way’ regimes (plus the Obama-Biden and
British Labor governments) met in Santiago, Chile where they studiously avoided even
mentioning the flawed internal structures which have brought on the economic crises and promise
to deepen it.

The consensus proposals of the “third way” regimes repeated anachronistic appeals for
greater capital flows divorced from reality of the current crises. They called on the US, EU and
Japan to resurrect collapsing markets and to promote trade. Specifically the Santiago meeting
called for increased funding for the Inter American Development Bank (IDB, BID in Spanish),
and encouraged the G20 leaders to promote stimulus packages and to pledge against
protectionism. They called on Latin American regimes to increase spending and liquidity, to
lower interest rates and to prop up, financial institutions and promote exporters.

The center-left regimes meeting in Santiago made no mention of plans to increase
domestic demand through intervention in the labor market by preventing industrialists from firing
workers. They did not mention increasing the minimum wage. They avoided any discussion on
increasing demand in the rural areas through income generating agrarian reforms. They did not
consider establishing publicly funded import substitution industrialization, which could generate
employment for workers dismissed from export sectors.

In the face of rising food prices, no provisions were proposed to subsidize low income
families, the unemployed, children and pensioners on fixed income. The center-left regimes’
proposals demonstrated high structural rigidity and their incapacity to break with failed strategies
tied to the powerful agro-mineral export ruling class. Instead their proposals reaffirm their
dependence on the ‘expansionary’ stimulus programs of the ruling classes in the US and Europe.
Their repeated calls for ‘free trade’ and appeals to avoid ‘protectionism’ fell on deaf ears as all
the imperial countries follow a dual policy of promoting free trade for their dynamic overseas
multinationals and protectionism for their financial and troubled manufacturing sectors at home.

While eschewing any structural domestic changes that would favor unemployed workers,
peasants, public employees and small businesses, they persist in following policies favoring the
bankers, export elites and multi-national corporations. The main economic focus of Latin
America’s center-left regimes is not internal reform; it is the pursuit of new overseas markets and
investors.

In early April, Latin American leaders and their business elite met with their Arab
counterparts in Qatar to expand investments and trade through joint ventures. Similar missions to
China, Russia and Japan have led to investments almost exclusively in capital intensive extractive
industries (petroleum and minerals) and mechanized export agriculture. Inter-regional trade via
MERCOSUR has been highly asymmetrical as evidenced by Argentina’s $4 billion dollar trade
deficit with Brazil. The center-left is structurally incapable of recognizing that the world
depression has in large part undermined the ‘export strategy’; that the elites cannot overcome
their internal contradictions and class constraints by ‘exporting’ their way to economic recovery.
The search for new markets and investors in Asia and Middle East may provide a limited boost to
the export enclaves but they will have little or no impact on the industry, service and related
sectors, which employ the mass of workers and employees. Moreover, the Middle East and Asian
countries are in serious crises as trade (both imports and exports), manufacturing and
employment decline. Moreover China has opted for a vast economic stimulus plan based on
increasing domestic demand. Asia can provide Latin American regimes with little relief from the
crises.

The one country absent from the Santiago meeting of the center-left regimes was
Venezuela, in part because President Chavez has pursued an alternative economic strategy to the
world depression.

Chavez strategy includes the nationalization of key economic sectors like and oil and gas,
which increases state revenue; protection of strategic social sectors/food processing and
distribution sectors; and the expansion of agrarian reform to increase local production of food.
The government has a program of subsidized food prices, a 20% increase in the minimum wage
to cushion the effects of inflation and public spending on labor intensive infrastructure projects
which has resulted in a drop in unemployment with the creation of 280,000 new jobs in Jan-Feb
2009.

Chavez is pursuing a radical Keynesian program, which depends on large scale public
investments to expand the domestic market and social subsidies targeting a large swath of the
lower classes. His state investment policy relies on the ‘cooperation’ of the still-dominant private
sector, especially finance, construction, agro-mining and manufacturing, either via financialincentives and state contracts or through threats of intervention or nationalization.

Chavez’ domestic structural reforms are complemented by his promotion of regional
political-economic pacts, like PETROCARIBE and ALBA, with Bolivia, Cuba, Nicaragua and
several Caribbean and Central American states. He is counting on the growing financial and
investment agreements with China, Middle East, especially Iran, and Russia, particularly in joint
ventures in the petroleum and mining sectors.

While Chavez’ strategy represents a clear break with and alternative to the center-left
‘export-elite’ centered approach, it still confronts a series of serious contradictions. Venezuela is
over-dependent on a single export (petroleum) for 75% of its foreign exchange earnings and a
single market (the US). Secondly it is rapidly depleting its foreign reserves. Thirdly, its efforts to
promote regional integration have not prospered as the principle countries in Latin America look
toward the G20 for salvation. State intervention and nationalization have increased national
leverage over the economy but has not confronted the mal-distribution of income, property and
power. As a result, a wave of worker/employee strikes in education, mining, smelting and
manufacturing have hit the economy.

Equally serious a 30% rate of inflation has eroded buying power for those with fixed
incomes and salaries undermining recent increases in the minimum wage. Increases in the price
of foodstuffs, over 90% of which are imported, adversely affects the balance of payments. The
immediate future could pose a threat to the social stability of the Venezuela.

Latin America and the Deepening Depression

The participation of several major Latin American countries in the G20 meeting in
London, April 2, 2009, and the subsequent agreements reveal the political bankruptcy of the
current political leadership. The declaration of a major new “stimulus” package was belied by the
fact that most of the funds cited ($1.1 trillion dollars) were already allocated before the meeting
and would have no effect. The actual amount of ‘new money’ was only a “fraction” ($250 billion
dollars) and mostly geared to rescuing the financial sector.

The G20 solemn agreement to oppose protectionist legislation was belied by an OCED
report that 17 of the 20 countries have recently adopted measures protecting local industries and
restricting overseas financing. The biggest winner at the G20 was the IMF, which was promised
an additional $500 billion dollars to provide credit lines and financing. Given the US-EU
dominance of the IMF and given its past history of imposing restrictive conditions favoring the
imperial countries, the strengthening of the IMF poses a major obstacle to any progressive Latin
American recovery. The high expectations of Latin America’s center/left and rightist regimes that
G20 would provide a meaningful stimulus were dashed.

On the left, Fidel Castro and like-minded allies in Latin America cite China as an
alternative market and investment partner. Yet China’s overseas investments are almost always
directed to the extractive export sectors (minerals, petrol) and, to a lesser degree, agriculture. As a
result, Chinese investment in Latin America has created few jobs while favoring sectors that
pollute the environment. Latin America’s export profile with China is reduced to a primary
goods monoculture, highly vulnerable to the fluctuations of world prices. Moreover, China’s
trade agreements with Latin America include the import of Chinese manufactured good produced
by non-union, super-exploited workers which undermines any recovery of Latin America’s
manufacturing sector.

Latin American leaders, who look to China to pull them out of the depression, are
committed to a neo-colonial style recovery based on a raw material export model. Likewise, the
turn to Russia as a new market and stimulus is a highly dubious proposition, given Russia’s
petrol-gas dependent economy, its lack of competitive industries and above all its deepening
depression with an economic decline of over 7% for 2009.

The Latin American leaders’ search for a new stimulus package from the US and EU or
new trade alternatives with China and Russia are desperate efforts to save the failing elite export
model. The idea promoted by Brazil that since the imperial countries caused the world
depression, they should provide the solution, is a non-sequitor, especially in light of their
incapacity to stimulate their own economies. The US promotion of the IMF is directed toward
undermining any progressive Latin American policies and independent regimes, and not helping
them recover from the crisis.

Conclusion

Because of the Obama regime’s profound and costly commitment to military-driven
empire building and the multi- trillion dollar refinancing of its banking sector (while backing
credit-financing protectionism), Latin America’s ruling classes cannot expect any “stimulus
package” from US.

The deep political divisions between the US and Latin America (and between the classes
within Latin America), divergent national and class strategies preclude any ‘regional strategy’.
Even among the left nationalist regimes, apart from some limited complementary initiatives
among the ALBA countries, no regional plan exists. In this regard it is a serious mistake to write
or speak about a “Latin American” problem, or initiative. What we can observe today is a
generalized breakdown of the export-driven model and divergent social responses, between
income protecting policies of Venezuela and export subsidy policies of Brazil, Argentina and
Chile, Peru and Colombia. Throughout the recession, these center-left regimes have
demonstrated a high degree of structural rigidity, making no effort to deepen and expand the
domestic market and public investment, let alone nationalize bankrupt enterprises. The crisis
highlights the process of de-globalization and the increasing importance of the nation state.

The deepening economic crisis adversely affects incumbent regimes, whether they are
center-left or right, and strengthens their opposition. In Argentina the right and far-right have
dominated the streets, with a growing power base in the ‘interior’ among the Argentine agrarian
elite and the middle class in Buenos Aires. The progressive trade union, CTA, which has
organized strikes and protests, is not connected with any new left alternative political
organization.

Brazil has witnessed similar protests by social movements and trade unions against rising
unemployment of over 10% and the decline in export-oriented industries. But the principle
political beneficiary of the declining popularity of Lula’s self-styled “Worker’s Party” is the
Right.

In contrast, the center-left will benefit where rightist regimes are currently in power –
namely Mexico, Colombia and Peru. But as is the case elsewhere, the mass movements lack an
organized political response to a collapsing capitalism.

Moreover neither Cuba nor Venezuela offers a ‘model’ for the rest of Latin America. The
former is highly dependent on a vulnerable tourist economy while the latter is a petrol economy.
Given the systemic collapse of capitalism, these countries will need to move beyond ‘piecemeal
reforms’(such as Chavez food subsidies) and piecemeal nationalizations
and toward the
socialization of the financial, trade and manufacturing sectors.

Mass protests, general strikes, and other forms of social unrest are beginning to manifest
themselves throughout the continent. No doubt the US will intensify its support for rightist
movements in opposition and its existing rightist clients in power. US ‘hegemony’ over the Latin
American elite is still strong even as it is virtually non-existent among the mass organizations in
civil society. Given the overall militarist-protectionist posture of the Obama regime, we can
expect intervention in the form of covert operations as class struggle escalates and moves toward
a socialist transformation.

James Petras

Source: James Petras