FAILURE OF
INTEGRATION
900U0E
THE
CENTRAL
AMERICA:
CHEE by SARA BENTON
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An analysis of the repercussions of the present capitalist recession on the economic situation in Central America must begin with an examination of the changes introduced in the productive structure of the region by the Mercado Común Centroamericano (MCCA - Central American Common Market). Essentially, we may sum up these changes by observing that since 1960 there has been a dependent industrial growth in Central America based on a horizontal extension of the market (the "integration" of the five countries); this has permitted imperialist investment to flow preferentially to the sector of manufacturing industry. Beginning in 1960 (the year in which Guatemala, El Salvador, Honduras, and Nicarague signed the "General Treaty of Central American Economic Integration, " to which Costa Rica adhered in the middle of 1962), the annual growth rate of industrial gross national product largely exceeds the annual growth rate of gross national product as a whole. Between 1960 and 1968 the industrial gross national product of Central America grew at an average annual rate of 10.0%, while the total GNP registered an average annual increase of only 6.9%. In 1960 the share of total GNP represented by industrial GNP was 13.2%; by 1970 the figure had risen to 17.5%. Nonetheless, this type of industrial growth was not at all based on a structural modification of the Central American economy, nor did it generate any of the classic effects that accompanied the industrialization process in the imperialist countries in the past. In addition, the overall figures conceal extremely uneven situations among the various countries of the region. Reconversion of imperialist investments The main charocteristic of the new penetration of Latin America by the great international trusts is the relative abandonment of the sector producing raw materials, which had been the traditional favored terrain for imperialist investment, in favor of the industrial manufacturing sector. This overall phenomenon was also manifested in the Central American region, although with special features. In 1959 only 3.8% of total direct foreign investment in Central America was in manufacturing industry, by 1969 the figure had already risen to 30.8%. As for the national origin of this capital, of the 572 foreign companies with investments in the region, 413 - that is, 72% - were majority controlled by North American capital. The tendency to invest in manufacturing industry corresponds not only to the economic interests of a strong secfor of the imperialist bourgeoisie, but also to the political interests of imperialism. The rise of the class struggle under the impetus of the friumph of the Cuban revolution required that attempts to made to alleviate social contradictions and to present imperialist capital under the more acceptable guise of "development. " As long ago as 1960, the Charter of Pata del Este recommended 50 the adoption of "comprehensive agrarian reform plans, " explicitly declaring that such steps could contribute to "political stability." Moreover, there were attempts to "stimulate economic growth through creating new norms of consumption and investment." Integrating the elite Nonetheless, the "modernization" of the Central American economy in line with imperialist interests did not even pose any reform of the agrarian sector. The attempt was made to resolve the central problem of the market through the creation of a free-exchange zone protected by common tariffs, simply linking together the thin layers of consumers of manufactured goods that already existed in each of the five countries. In itself, this vulgar arithmetical operation indicated the narrow limits of the famous "substitution of imports" around which the Central American Common Market was based. More than 60% of the working population in Central America is concerned with agriculture. The agricultural sector is completely dominated by the twofold problem of the latifundio (large estates) and the minifundio (small-scale rural property). While the 80.9% of the agricultural population composed of landless workers and minifundistas accounts for only 41.5% of total agricultural income, the 5.3% composed of large landlords receives 56.8% of this income. As of 1970, per capita annual income among the landless workers and minifundistas fluctuated between S62 and S190. Even though it considers only the case of the rural workers, this brief description is sufficient to give a picture of the "depth" of a supposed economic integration that completely left out more than half the total population of Central America. "Considered as an economic unit, the MCCA remains a market of reduced dimensions. In fact, a few small companies, often a single company, suffice to satisfy total Central American demand.. . . This facilitates cartel arrangements among the companies, with the conscious division of markets, price fixing, determination of quality, etc. "(I) According to Edelberto Torres, an "optimistic" estimate would place the number of potential consumers of manufactured goods throughout Central America at 3 million.(2) The total population of Central America in 1970 was 15 million. In sum, the possibilities opened by the MCCA permitted nothing more than a proliferation of light manufacturing companies and simple transformation industries that in many cases scarcely go beyond a purely handicraft stage. This is clearly reflected in the sectoral composition of industrial production. In 1970, some 76.2% of "industry" was concentrated in the "traditional" sector, 16.0% of industry was in the "intermediary" category, and 7.8% in "metal and machinery. "(3)
Increase imports to try to reduce them Assembly and packing activities, predominant in Contral American "industry, " involve not only the import of investment goods, but also a very high percentage of imported raw materials. According to the industrial census of 1968, in the sector of "troditional" industries, the percentage of raw materials imported from third countries (that is, from outside the region) was 45.8%; in the sector of "intermediary" industries if was 67.5%, and in the "metal and machinery" sector if was 91.0%. As for the total per capita imports, according to United Nations data, these amounted to S47 in 1958-59, 559 in 1963-64, and S74 in 1968-69. This means that during these years the countries of Central America had higher per capita imports than the rest of the countries of Latin America or the countries of Africa and Southeast Asia. And this in the midst of a period of "substituting imports"| According to the apologists for the MCAA, however, the Common Market also has the function of diversifying Central American exports. With this argument they claim to justify the exaggerated increase in "productive" imports. The reality, however, is just the opposite. Central American industry is not sufficiently competitive to penetrate markets outside the region. The increase in the share of manufactured goods among total Central American exports is simply a statistical trick, because the qualitative difference between traditional exports and manufactured exports has been left out of account. While the former go to international markets, the latter are restricted solely to the Central American region. This means that only the traditional exports bring in currency; in other words, the ability to pay for imports derives solely from the export of traditional products. In sum, even after fifteen years of "substitution of imports, *the expansion of the Central American economy continues to depend on the fluctuating world market prices of a few raw materials. Such a situation is constantly aggravated by the unfavorable evolution of the terms of international trade, which always raise the prices of industrial goods compared with those of raw materials. For Guatemala alone, there was a net transfer of income of $175.6 million (at 1960 prices) from Guatemala to the rest of the world between 1960 and 1970 as a result of changes in import and export prices. As for the benefits allegedly derived from foreign investment, in Central America we have seen the development of one of the classic phenomena that accompany penetration by the monopolist trusts: The trusts take advantage of the possibilities of internal financing rather than bringing in their own capital. According to the rather conservative estimates of the World Bank, 33% of the loans granted by the Banco Centroamericano de Integración Económica were accorded to foreign companies. As for private banking, although the loans granted to so-called national companies doubled, loans to foreign companies tripled.
Moreover, with ever increasing frequency, foreign capital does not make new investment; it simply acquires already existing companies. In spite of the enormous difficulty in obtaining information, a recent study gives a list of fifty-one Guatemalan companies acquired by North American capital. (4) What we have just pointed out about foreign capital Immediately raises the problems of the balance of payments. In order not to spend too much time on a very well-known phenomenon, we will simply note that the net return on investment registered in the running account of the balance of payments produces a deficit for Central America as a whole: S11.7 million in 1960, S64.4 million in 1965, 5115.4 million in 1970(5) It is proctically impossible to give an approximate total figure for the profits of foreign companies in Central America. Capital utilizes a variety of "technical" methods in order to conceal its pillage. But according to a calculation based on a sample of forty foreign companies, the average rate of return on social capital was 29%. The declared repatriation of profit rose from 523,3 million in 1960 to S78,6 million in 1969(6) What, then, were the goals achieved by the Central American Cornmon Market? Very simple. Foreign capital and the Central American bourgeoisie associated to foreign capital were able to take possession of an already existing market, to utilize an abundant and cheap labor force, to escape most of the existing fiscal charges, and above all to protect their investments from the pressures of international competition. But the consequences of this ingenious operation sharpened the chronic crisis of the bourgeoisie throughout Central America. These are the effects of the MCCA that are of particular interest to revolutionary Marxists in Central America. The crisis of the MCCA The MCCA fell victim to uneven development, which is inherent in the system upon which the MCCA is based, the capitalist system of production. All the theses about the necessity for an integrated development, for an equal division of profits and charges through integration, were transformed into dead letters by the free movement of capital within the region. Subject to no logic other than that of profit, capital insists on investing wherever the best opportunities for obtaining profit exist. In the case of Central America, this phenomenon was reflected in a concentration of investment - and therefore of trade - in the countries with a relatively greater development: Guatemala and El Salvador. In 1970 the positive balance of these two countries in the realm of regional trade was $50. 6 million; for Honduras alone the deficit was $21,8 million. In the area of trade of manufactured products alone - the sort of trade that the MCCA was supposed to develop - Honduras's deficit amounted to $24.5 million. (7)
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In addition, the prices of manufactured goods within the region were considerably higher than the prices prevailing on the international market. According to the Honduran Minister Acosta, Honduras was paying between 25% and 100% more for its regional imports of industrial products. (8) Under these conditions, why pay such a high price for an economic integration that, far from according equal "development" possibilities for all and far from reducing regional inequality, instead leads to a sharpening of the regional division of labor? Decree 97, promulgated by Honduras at the end of 1970 and annuling all the integration accords, marked the end of the formal economic "community, " whose perpetual trade war had since been capped off by a war with rifles and cannon (the war between Honduras and El Salvador in 1969). Nonetheless, trade among the Central American contries continues, but so do the conflict tendencies. At the end of 1974, the Central American press announced "extraordinary growth." The breakdown was as follows: "Guatemala: the most profitable country. El Salvador: favorable balance-sheet, with significant increases. Honduras: regional and general deficit. Nicaragua: alarmingly unfavorable balance. Costa Rica: $43 million deficit. " During 1975 Honduran trade continued to be based on bilateral treaties; Costa Rica and Nicaragua imposed various protectionist measures and even closed their borders to certain products originating from Guatemala and El Salvador. In sum, the observable ten52 dency was toward growing deterioration of any sort of integration schema. What are the most obvious implications of this crisis? The progressive contraction of the external market caused by the deterioration of the MCCA - a contraction that tends to be intensified by the increasing opening of the region to international competition - sharpens problems on internal markets. In countries in which the immense majority of the working population and the fundamental sectors of production are in the agricultural sector, to speak of the internal market means to, speak of the transformation of this sector. The problem is not simply the low purchasing power of the population, but also the feeble extension of monetary relations, which are restricted by the existence of subsistence farming and the system of paying the work force in kind rather than in money. The negative cost of the agricultural sector But in addition, the agricultural sector has also proven incapable of responding vigorously to other requirements of capitalist development. The capacity to pay for imports — which, as we have pointed out, depends fundamentally on the traditional agricultural exports - suffers constant deterioration. Central American participa-
tion in world trade has diminished constantly. With the exception of sugar - whose price experienced an unprecedented boom, only to decline again later - the traditional products have suffered the negative impact of the present world recession. Exports of coffee, cotton, bananas, and meat, while they increased in absolute terms, were not sufficient to compensate for the increases in the prices of imports. For 1974, while coffee exports increased 9% compared with the preceding year, imports of raw materials and semifinished products increased 62.0%, consumer goods 45%, fuel 251.7%, and construction materials 91.6%. Obviously, results like this will be reflected in the balance of trade. In 1973 Guatemala was the only Central American country to register a balance of trade surplus: $36.9 million. Guatemala's deficit for 1974 amounted to $97 million. (9) As for production of low-price food products, especially corn, beans, and rice (which constitute the basis of the popular diet), the situation is disastrous. The progressive deterioration of the minifundista sector, which is based almost exclusively on such products, has given rise to acute shortages. There has consequently been an increase in the prices of these grains, an increase official statistics evaluate at 100-200% for 1974. In addition, domestic production of these foodstuffs is not sufficient to cover minimum needs, and if is thus necessary to import. That is, a good portion of available currency is alloted to the purchase of nonproductive consumer goods! The regional deficit in these grains at the beginning of 1975 was estimated at 33 million hundredweight. At the and of 1974 (calculated at then current prices, the deficit in basic grain in Guatemala (8.8 million hundredweight) required imports at a total cost of S115 million. If the cost for basic grain is odded to the cost for oil, the two categories represent imports of about 5800 million for all Central America. Before the fall in the prices of coffee, cotton, and meat, this meant that "more than 40% of the value of exports will have to be used simply to buy cereals and oil. "(10) The grain deficits have appeared in countries that traditionally produce these products. The shortage means not only an enormous deterioration in the standard of living of the great majority of the population, but also a sharp blow to those sectors of the bourgeoisie interested in the expansion of the domestic market. What are the basic roots of this situation? The Central Americon governments never run short of hurricanes and volcanoes in seeking excuses. But these fig leafs cannot conceal the real causes: the incredible degree of concentration/dispersion that characterizes the structure of land ownership; the fact that more than 52% of the land owned by the latifundistas lies fallow; the absolute surplus of agricultural labor and the resulting unemployment; the predominance of extensive methods of cultivation; the financial and technical abandonment of thesmall-scale producers, etc.
Impasse of the agrarian reform The solution to the agrarian problem is a question that concerns the entire Central Americon bourgeoisie as well as the imperialist interests involved in the region. But the problem is not purely economic; it is also political and social. Economically, it is easy to see the contradiction between the agrarian sector and the other sectors, especially industry. But the existence of this contradiction does not necessarily mean that there are also two separate and equally contradictory classes, one made up of the "traditional" landowners, the other made up of the various strata of the bourgeoisie linked to imperialist industrial and financial capital. Nor does it mean that the agricultural sector functions as a different structure, "archaic" and without precise links to the other sectors of the economy. On the contrary, it is a question of the internal contradictions of a subordinate and backward capitalism fully reflecting the consequences of an uneven development among the various sectors. Although there is not sufficient information to precisely analyze the composition of and mutual relations among the ruling classes, all available evidence indicates that the model of industrial growth advocated by the MCCA and the penetration of foreign capital into manufacturing industry stimulate an even greater interrelation between the old landowning oligarchy and industrial capital. Further, the hegemony of imperialist capital has erased the last traces of a "national" bourgeoisie capable of carrying through its own economic projects. But the chronic asphyxiation of the Central American economy is already intolerable, not only for the imperialist interests and their local allies, but aiso for the rise of the various layers of the petty bourgeoisie, whose future depends entirely on economic reactivation. Politically, this situation is expressed in the sharpening of social tensions, tensions that threaten the very existence of all the exploiters. In their own way, the representatives of the bourgeoisie also are trying to break down this contradiction at its weakest link: the agricultural sector. This is the objective basis of the reformist Inclinations now being manifested in the various countries, although in an extremely uneven manner. Although the agrarian reform theoretically corresponds to the equally theoretical interests of the bourgeoisie, other factors intervene that break down this schema in practice. For the Central American bourgeoisie and imperialism, it is not only a question of attacking the immediate interests of the large landed proprietors. The Central American bourgeoisie has already had some experience with the dynamic that can be triggered simply by partially questioning one of the forms of private propertyIn 1954 imperialism brought down the Jacobo Arbenz regime in Guatemala. Arbenz had promoted an agrarian
CENTRAL AMERICA reform whose declared objectives were; "to liquidate Feudal property in the countryside along with the relations of production that gave rise to this property and to develop the capitalist form of exploitation and methods of production in agriculture and prepare the way for the industrialization of Guatemala. "(11) Only unused land was supposed to be expropriated, and it was supposed to be paid for at an adequate rate of compensation. The most obvious reason for the reactionary coup in 1954 was the expropriation of the unused land held by the United Fruit Company. But the basic motive was the enormous agitation that had been provoked by the agrarian reform; the invasion of land declared to be "unaffected" by the reform; the formation of agrarian committees representing the rural population, which did not agree to exclude cultivated land from the reform, land that had always been cultivated by the peas ants and not by the owner. Not for the first time in history, the logic of the masses could not be held within the bounds of the logic of "stages," Once the closs struggle began, each position won by the peasants could be consolidated only by winning new positions. And the agitation was not limited to the peasant milieu. Even before the agrarian reform, the young Guatemalan workers movement had taken on impressive dimensions. In the space of only ten years' legal activity, 107,000 workers joined a united trade-union federation. With the proletariat, there is no room for resort to purely partial expropriations. If the land should belong to those who fill it, to whom should the factories belong? A similar, although not identical, phenomenon is occurring in Honduras today. Because this country has been the main victim of the functioning of the MCCA and because it is the most economically backward coun try in the region, a sector of the army is attempting to press ahead with a very modest project of redistribution of land. Day after day the Central American press publishes news about peasants taking over land and about the growing organization of the Honduran peasants. Once again, the agitation is not restricted to the contryside. Urban struggles round out the framework of a general rise of the mass movement, which is widely overstepping the limits the army wanted to impose on the "change." How has the Honduran bourgeoisie reacted to the plan that supposedly corresponds to its interests? The Partido Nacional (National party) and the Partido Liberal (Liberal party) - political representatives of the various factions of the Federación Nacional de Agricultores y Ganaderos de Honduras (FENAGH — National Federation of Farmers and Stockbreeders of Honduras ) - have unleashed a virulent campaign of opposition to the military government, opposition centered around the question of the agrarian reform. The FENAGH (behind which is grouped the majority of the "private initiatives ") has threatened to call a "general strike"(1) to protest the ograrian reform. The only political organizations supporting the military regime are the Communist party and the Christian Democracy. The regime is also supported by some sectors of the trade unions and other popular forces, but the military know very well that such support cuts two ways. In reality, the only more or less solid pillar is the army. And even within the army there is a clear contradiction between the young officers and the traditional hierarchy. In sum, it is an agrarian reform that objectively corresponds to the long-term interests of a supposedly national bourgeoisie in a country in which this bourgeoisie is not "national" any more than it is inclined to recognize such interests as its own today. In the middle of April 1975 the Costa Rican government defined its agrarian policy in "fifteen points": timehonored clichés about the necessity of "protecting" the small-scale producers, of "educating them, " of "guaranteeing" prices, of promoting cooperatives, and so on. There was only one categorical assertion: "The forces of order will drastically repress all those who engage in agitation and encourage land occupations and other acts that do not respect private property." Somoza's declarations during the meeting of Central American presidents held in Guatemala at the beginning of November this year are sufficient to demonstrate the importance the eternal Nicaraguan dictator accords the agrarian problem: "It is perhaps because we do not have a great agrarian problem that some people do not know our plans on this matter.
In Guatemala, the National Development Plan is centered around the simple colonization of virgin lands, the creation of cooperatives among the minifundistas, and the improvement of the trade system for agricultural products. The Guatemalan planners consider "that an agrarian reform is incompatible with the existence of a constitutional state. "(12) In El Salvador there is no extra land to be distributed without attacking the big latifundistas. In spite of the fact that as long ago as 1973 El Salvador President Armando Molina declared that: "It is indispensable to carry out an agrarian reform to increase production and productivity, "nothing concrete has yet been done in this direction. New rise of the mass movement In sum, the Central American bourgeoisie has proven itself completely incapable of carrying out an internal transformation that, basing itself on a reform of the agrarian sector, could constitute a point of departure for relative economic growth. In face of the present crisis, there is at most talk of an "aggressive" extraregional export policy. But such aggressiveness cannot be based on the real competitive capacity of Central American "industry." The road chosen seems to be that of state subsidies, which cannot be granted without increasing fiscal burdens on the entire population. Given the problems of the balance of trade, which originate from the dizzying rise of imports (which the bourgeoisie had dreamed of reducing), the usual "weapon" is being used again: increasing resort to foreign debt. All the economic measures that have been adopted by the Central American governments in the vain attempt o end the crisis have given a new impetus to the inflafionary spiral in the region. The most conservative calculatiors of the International Monetary Fund estimate that the annual increase in the cost of living is 25%. The popular response has not been long in coming: Varous mass movements are beginning to appear once again on the Central American horizon, in spite of the repressive atmosphere prevailing in the region. Revolutionary Marxists must pay particular attention to these embryonic manifestations of the mass struggle. In spite of the superficiality of the industrial growth induced by the MCCA, whose major features we have outFined above, it is a fact that the Central American societies today, although strongly marked by the weight of the agrarian question, are much more complex than had been the case in the past. Although the working class remains a minority compared with the peasantry, it is clear that the specific weight of the workers has increased in the same proportion as that of manufacturing industry, moreover, it is clear that the slow but gradual capitalization of Central American agriculture a constantly increasing the number and importance of the agricultural proletariat. Today more than ever, any ariant of the notion of "surrounding the cities from the countryside" is completely ineffective in responding to he overall problems of the Central American societies.
The unevenness among the various countries with respect to traditions of struggle and degree of organization and political consciousness is an obvious fact of life in Central America. Nonetheless, signs of a clear rise in the class struggle are emerging everywhere; the advanced point today is in Honduras. Revolutionary Marxists know that in spite of the strong will to struggle, the Central American proletariat today has not attained the level of organization and political consciousness necessary for a frontal battle against the bourgeoisie. But they also know that these are conditions that cannot be improvized, that a process of political education must be carried on, a process that begins from the present level of consciousness of the urban and rural proletariat and of the poor peasants and other popular layers, and demonstrates in practice the transitional links between the first battles and the final ones. The masses learn through struggle, and this education in turn serves to deepen their struggle. The collective task of revolutionary Marxists in Central America is to elaborate this transitional strategy. To build the revolutionary party capable of implementing this strategy is undoubtedly the central task. December 7, 1975 FOOTNOTES: 1. Eduardo Lizano, "Una reflexión acerca de la integración económica centroamericana, " Guatemala, 1973, p. 34. 2. Edelberto Torres, "Desarrollo, Integración y dependencia en Centroamérica, 1970, p. 501, 3. Traditional: food, drink, tobacco, textiles, shoes, etc.
Intermediary: paper, coal, rubber, oil, derivatives, etc.
Metal-machinery: machines, electrical apparatuses, transport equipment The census registers as "industry" all manufacturing astablishments with more than five employees. 4. Davis Tobis, "La Falacia de las Inversiones Norteamericanas en Centroamérica, EDUCA, 1974. 5. Data from SIECA, "El Desarrollo Integrado de Centroamérica en la presente década. 6. Ibid. 7. Ibid. 8. Quoted by Susan Bodenheimer, "El Mercomún y la ayuda norteamericana, " EDUCA, 1974. 9. Inforpress Centroamericana. 10. Ibid. 11. Article 1 of Decree 900, "Ley de Reforma Agraria." 12. Introduction to "Primer Plan Nacional de Desarollo, " 1970-75.