"Masterminding the Mini-Market: U.S. Aid to the Central American Common Market,"
Bodenheimer), Susanne Jonas (
To the average North American or Latin American taxpayer, the nature and workings of U.S. foreign aid programs remain a mystery, conducted behind closed doors. Although we pay for the show,...
...cit., pp...
...investors, it could have accepted a degree of planning...
...In order to assure regional "balance," the location of that plant would be determined by an inter-governmental regulation...
...Throughout the 1950s at CEPAL-sponsored meetings, there were discussions of a Fund to minimize dislocations and finance industrial expansion...
...Thus, if ROCAP has not generally attempted to dictate policy to SIECA, it is mainly because this has not been necessary...
...in addition, several U.S...
...and "international" aid agencies at work...
...would not have resolved the fundamental conflicts between a tiny ruling class and the great majority of Central Americans, whose interests had never been considered at all...
...Policy (Washington: Brookings Institution, 1972), p. 47.21 43...
...These contradictions become concrete if we briefly recapitulate the two principal U.S...
...agreements...
...In addition, the Tripartite Agreement violated the CEPAL-influenced 1958 Treaties, by excluding the Agreement on Integration Industries...
...in the awkward position of having to balance out the pressures from two U.S...
...The only real alternative would have been a common market based on thorough structural reforms within each country and a radical change in the class basis of power, leading to a large-scale redistribution of income and a broad market incorporating the lower classes in each country...
...sought to institutionalize its influence in two ways...
...authority in shaping the CACM than the controversy, at times battle, over integration industries.* The integration industries scheme (RII) was a CEPAL-inspired mechanism to insure balanced industrialization in Central America...
...This ideology is so prevalent that even the progressive functionaries I interviewed at the Bank seemed to be seduced by it...
...While AID officials insisted that this clause was strictly a banking measure (to reassure U.S...
...Although including CEPAL in the negotiations, the General Treaty followed closely the approach of the Tripartite Agreement, with one major exception: it formal- ly reincorporated the Agreement on Integration Industries...
...A final, less overt, objective of the RII was to regulate the extent of foreign capital in these major industries, by stipulating a minimum percentage of local capital for each integration industry...
...But in the long run, the internal contradictions of the CACM may well prove greater than the will of the United States...
...Far more than SIECA, BCIE owes its creation and continued existence to the U.S...
...policy and U.S...
...But the internal and external pressures to industrialize were mounting...
...Agency for International Development (AID) recommended that a new AID office be set up in Central America, with the following functions: to regionalize AID efforts...
...6 5 ** While the population grew at a rate of 3.2 percent a year and higher in the cities, urban unemployment and underemployment have risen, and industrial employment has declined as a percent of total employment...
...company Is wavering as to whether or not to invest in Central America, we try to convince the sponsors to invest here, by offering loans and other incentives...
...THE CONTRADICTIONS OF DEPENDENT CAPITALIST INTEGRATION Once operant proved further during commo re-unifi tive...
...3 ' This was an early example of how the U.S...
...First, the class structure of Central America remained that of dependent capitalism...
...Each half hour show is available on cassette tapes at $4.00 for individuals, and $8.00 for libraries and educational institutions...
...could give to integration...
...If CEPAL had really wanted to follow through on its principles of planning and bal- ance, it would have had to challenge the power of the capitalist class within Central America, since this class would never accept intergovernmental planning (e.g., through the integration industries scheme) unless its sur- vival as a class was threatened...
...The U.S...
...But the underlying problems were left unresolved...
...profile during the events of 1969-70, we cannot accept the view that the U.S...
...Department of State documents...
...Shortly thereafter, in March, 1959, the...
...and interviews...
...In short, the U.S...
...position was not so simple...
...thus, as AID officials came to realize, the Governors could not be relied on to comply automatically with U.S...
...Thus, in the very process of incorporating the RII, the General Treaty "virtually nullified" its impact, in the words of a State Department analyst...
...The Tripartite Treaty of February, 1960, deliberately left out the RII and was incompatible with it...
...funds from the program...
...corporations...
...We did this, for example, with International Nickel in Guatemala...
...but we seldom if ever get to peep through the keyhole of the closed doors, to see the U.S...
...influence, BCIE has followed a policy of "non-discrimination" against foreign capital in granting industrial loans...
...6 1 The U.S...
...support for Central American integration was acceptance of that shift in orientation, and exclusion of CEPAL as a primary actor...
...policy-makers to specific U.S...
...operations throughout the Third World, interviews, poetry and music...
...watched the movement for Central American integration from the sidelines...
...76 ff., based on U.S...
...235-6...
...cit., p. 68, and Dell, Trade Blocs and Common Markets (NY: Knopf, 1963), pp...
...cit., pp...
...STEPS IN Throughout the 1950s, the U.S...
...officials realized that if they allowed the movement to continue in the same direction, it could produce "undesirable" results...
...The loan had already been approved by the BCIE Directors (one Director for each country, elected by the Board of Governors...
...This has limited the expansion of the domestic market, which is necessary for increased foreign investment in Central America...
...achieved a strategic victory over CEPAL and the CEPAL approach of planned industrialization...
...campaign against the RII...
...In short, balanced development was a secondary objective...
...3 Shortly after the two Treaties were signed, CEPAL's role in Central American integration was reduced-primarily because of a sudden display of interest by another party, the government of the United States...
...PENETRATION OF CENTRAL AMERICAN INTEGRATION INSTITUTIONS Once having got its foot in the door of Central American integration, the U.S...
...The entire process was engineered independently of CEPAL-even "in defiance of it...
...For example, El Salvador has done this with regard to its "population problem," Honduras with its fiscal problems, and Costa Rica with its balance of payments problems...
...Robert Denham, "The Role of the U.S...
...At their December, 1969 meeting, the five Foreign Ministers established a commission to study the total reorganization of the CACM and a forum for the Ministers of Economy to discuss a modus operandi-a temporary basis for holding the CACM together until a more permanent restructuring could be agreed on...
...conception of BCIE...
...Roque Dalton (El Salvador)15 evicted the Salvadoran migrants...
...But CEPAL's commitment to planning should not obscure certain realities about CEPAL and its strategy...
...1, Jan.-April 1972...
...4) Fund for Agricultural and Industrial Development: As a final gesture toward correcting imbalances within the CACM, the governments resolved to create a new Fund, which would provide loans on easy terms, giving preference to enterprises in the relatively less developed countries...
...Recognizing that U.S...
...Thus, we may speculate, if the original CEPAL strategy had prevailed, the crisis and collapse of the CACM might have been postponed, since the regional imbalances would not have escalated so rapidly to the critical point...
...was forced upon Central America by U.S...
...1969, p. 669...
...could subsequently achieve its policy aims without resorting to the overt manipulation characteristic of the early years...
...have proven grossly inadequate...
...After the Cuban Revolution in 1958-9, the U.S...
...and the withdrawal of Honduras from the CACM was a result of the failure to resolve the problems of unbalanced development, the U.S...
...Econ...
...Thus, El Salvador's decision not to sign the m.o...
...And finally, it remains to be seen whether and how Nicaragua's position is affected by the December, 1972 Managua earthquake...
...Programs now available include: 1) an interview with Jean Marc von der Weid, exiled former president of the student union of Brazil...
...indicated a curtailment of Alliance for Progress funds in the area...
...by acknowledging it as one factor among many which resulted in the failure of the RII as a developmental mechanism...
...Aside from the 1-2,000 casualties and 100,000 refugees, the war caused a total disruption of CACM trade, particularly since Honduras closed its portion of the Pan American Highway to Salvadoran goods...
...We have to do it that way-not because BCIE doesn't have the money, but because his full salary is $35,000 a year-more than Ortez [President of BCIE], and it would create a political scandal if de Beausset received that amount publicly from BCIE...
...In short, Nicaragua agreed to give up its integration industry and all the attendant benefits from the Protocol of 1963...
...Home Ln...
...cit., pp...
...Here ROCAP can, and we intend to, exercise more over-all strategic leverage-by ear- marking funds for specific tasks and insisting on their setting priorities...
...Further- more, the government of Nicaragua agreed in writing not to oppose the establishment of a similar caustic soda plant in Central America, enjoying equal trade privileges...
...Throughout the first ten years of the17 CACM, the U.S...
...really represented a series of stopgap measures, of non-structural responses to structural problems...
...Rather than avoiding intra-CACM imbalances, the U.S...
...These facts come from: Carras, op...
...policy-a very weak and limited challenge-came from the U.N...
...Export Bank of Japan Export Bank of Japan Spain, Dollar Bonds Tecniberia (Spain) Kreditanstalt Bank (Germ...
...Once having accomplished its purpose of undermining the RII, AID subsequently (in 1967) allowed $600,000 of its own funds, through BCIE, to be used to finance Pennsalt, both because this operation would directly benefit a U.S...
...pressure through BID, BCIE had to sign a secret memo (which was not included in the public loan agreement) promising not to use BID resources "to finance any industry which constitutes a monopoly...
...See, for example, statement by Emilio Collado, Vice President and Director, Standard Oil of New Jersey, in U.S...
...Hence, the U.S...
...objectives is taken from James Cochrane, The Politics of Regional Integration: The Central American Case (New Orleans: Tulane University, 1969) pp...
...positions...
...During the m.o...
...Thus, CEPAL offered no serious alternative to the CACM...
...To the U.S., then, balance was desirable-so long as it could be achieved without upsetting the free play of market forces and the freedom of firms to choose their investment location...
...intervention, since U.S...
...The last-minute efforts to "save" the CACM in the early 1970s were wrecked by the coalition within Central America which the U.S...
...and "the enthusiasm of foreign business interests (together with their Central American business associates) which have been the main beneficiaries to date" are attempting to put the CACM back together and to restore "stability" there.' The international aid agencies, including the World Bank, have been offering new loans as an incentive...
...p. 85...
...We are committed to aid the movement...
...Agency for International Development (AID), Regional Office for Central America and Panama (ROCAP), "A Report on Central America's Common Market and Its Economic Integration Movement," reprinted in U.S...
...The implications of this story go far beyond Central America, and apply to hundreds of institutions in underdeveloped countries, which have felt the heavy hand of the U.S...
...objectives and interests...
...Soccer and Underdevelopment If any doubts remained as to the serious problems in the CACM, they were dispelled by the sequence of events beginning in June, 1969...
...interests were being represented by the privileged groups in Central America...
...Business Why did the U.S...
...Carfas and Slutzky (eds...
...Another force strongly backing the Salvadoran position was the business community in Central America (minus that of Honduras), particularly the organization of industrialists, FECAICA...
...To cite some examples: - Driving out of Guatemala City on the Roosevelt Highway, one passes a string of shiny, modem "factories," mainly drug and chemical companies-Upjohn, Hoechst, Abbott, Miles Overseas, Eli Lilly, etc...
...The result has been to aggravate inter-country tensions and hasten the collapse of the CACM...
...supported El Salvador, both directly and indirectly...
...These statistics are taken from: Christian Science Monitor, July 24, 1969...
...representatives pushed objectives of free market competition, development of the private sector, and foreign investment, and o p posed attempts at planning and extension of state controls.1 After 1962, these tensions were greatly eased, and the relationship between SIECA and ROCAP took on certain characteristics of an illicit love affair...
...Wionczek, "Latin American Integration .," p. 127...
...political control...
...cit., p. 59...
...intended that the principal role in industry should be left to private initiative.4s As a consequence, BCIE has not attempted to set guidelines for private investors, nor to regulate the degree of penetration by foreign capital...
...serious...
...2 2 In addition, the U.S...
...In a 1966 meeting of the CACM Economic Council, Honduras secured passage of a few measures granting preferential treatment...
...Cochrane, The Politics . ., p. 220...
...policy are contained in classified documents, to which I had no access...
...Trade, p...
...The U.S.-inspired Treaties of 1960, on the other hand, eliminated the mechanisms for regional planning, and subordinated balanced growth to immediate and unrestricted free trade...
...CEPAL's exclusion left the way clear for a decisive role by the U.S...
...Senate, Joint Economic Committee, Subcommittee on Inter-American Economic Relationships (Washington: GPO, 1963), p. 26...
...Thus, the RII provided for strict regulation of supply, prices, quality, and other aspects of the integration industries...
...business, especially U.S...
...Certainly the facts substantiated this assertion.* The serious disparities revealed that Honduras had been adversely affected by the very policiespromoted by the U.S.-which benefited the private sector in El Salvador and Guatemala...
...It is for this reason that U.S...
...this would have permitted greater balance within Central America, hence a more stable CACM, and more effective stop-gap reforms within each country...
...Hansen, opAcit., pp...
...BLA, Aug...
...p. 89...
...5 6 Nevertheless, although the measures under discussion were vastly inadequate to the basic problems, the m.o...
...2 3 ROCAP has also kept close control over BCIE through a series of "precedent conditions," accompanying loan agreements, which BCIE must fulfill before receiving loan funds...
...SIECA is a principal agency of the CACM: although it has no ultimate policy-making authority (this authority remains in the hands of the five governments), SIECA enjoys considerable prestige by virtue of its concentration of technical exper- tise and information...
...As a result of the disruption of trade, new foreign investment in the region has fallen off markedly since the end of 1970...
...has been pushing in Central America since the late 1950s, and whose product is dependent industrialization...
...In addition, it has resulted in a "war" of fiscal incentives among the Central American countries, each trying to offer the best terms to foreign corporations...
...had recognized the new Honduran government...
...Schmitter, op...
...Even after World War II, this situation had not changed...
...AID Regional Office for Central : America and Panama : SIECA: Secretaria Permanente del Tratado General : de Integraci6n Econ6mica Centroamericana (Per- manent Secretariat for Central American Economic Integration) list over a period of ten years...
...of El Salvador's President Jos6 Maria Lemus...
...The least acceptable aspect of this proposal to the region's industrialists was that it would curtail the freedom of private investors and allow the inter-governmental Economic Council to make decisions without consulting the private sector...
...once CEPAL's existence was an accomplished fact, the U.S...
...We make recommendations about infrastructure improvements needed to develop a new market, and arrange BCIE loans [to the Central American governments for the needed infrastructure...
...The irony of this position is that, of the two existing integration industries, GINSA in Guatemala is now a subsidiary of Goodyear-in direct violation of the 1963 Protocol granting GINSA integration industry status...
...in the area...
...strategy...
...The longer version of this article contains an extensive analysis of the m.o...
...At this meeting, CEPAL officials presented a series of projects, and each of the four delegations present selected one integration industry...
...Statement by Guatemalan Minister of Economy, El Grdfico, Dec...
...was well aware of the coming armed clash...
...cit., p. 24...
...Roy McVicker, Aug...
...opposition to the integration industries scheme crystallized early: according to one high ex-CEPAL official, the Guatemalan government came to Tegucigalpa in June, 1958, under pressure from the U.S...
...funds...
...53-4...
...But in fact, the integration process has changed the conditions of their struggle for survival--and for liberation...
...The U.S...
...position that, in implementing the RII, the meeting in Managua represented a "step backward" from the 1960 Treaty, and that this "retroceso" was becoming an obstacle to U.S...
...and "international" aid agencies exerting U.S...
...On paper, the General Treaty included the RII, despite U.S...
...To the lives of these people, the ups and downs of the CACM have made little apparent difference...
...3) a two part program on multinational corporations...
...negotiations broke down in the end was a kind of backhanded tribute to those limited advances, an indication that someone's interests were being threatened...
...In practice, BCIE has left the initiative in the hands of the private sector, responding on a firm-by-firm basis to loan requests, and, as the 1970 World Bank mission pointed out, analyzing those loan requests from the standpoint of the firm, rather than in terms of the firm's contribution to the national or regional economy...
...Devel...
...One approach5 crucial elements of U.S...
...But the strategy of dependent industrialization, which made the CACM a virtual playground of the U.S...
...DLF, op...
...cit., p. 24...
...has played a significant role in running SIECA...
...strategy for Central American integration...
...The gaps in income distribution have widened steadily...
...8-11, 1970 (Guatemala: SIECA, 1970...
...Moreover, if it is properly carried out, it can serve many interests of the U.S...
...conversely, El Salvador's willingness to say "no" openly enabled the Guatemalan government to achieve its aims without looking like a spoiler...
...yet AID, as well as the World Bank, has criticized BCIE for this failing...
...What, specifically, does this approach entail...
...Attitudes toward Central American Economic Integration," Inter-American Economic Affairs, Autumn, 1964, pp...
...Among the most important issues were the following: 5 5 1) San Josg Protocol: Final implementation of the Protocol (see above) had to be negotiated, specifically the stipulation of which industries would be exempt from the 30 percent import duty surcharge...
...68 ff...
...firm...
...According to a high ROCAP official interviewed in 1967, Formerly our assistance was confined to statistics and customs harmonization studies, and there was not much possibility for leverage in these areas...
...Concretely, with the signing of the General Treaty of 1960 and the establishment of the Central American Bank for Economic Integration (Banco Centroamericana de Integra- ci6n Econ6mica, BCIE), the U.S...
...4, 1966 (Washington: General Printing Office (GPO), 1966...
...cit., p. 19...
...Because it is under strong U.S...
...Federal Reserve Bank, was a key figure in BCIE's formative months, holding the double title of Regional Representative of AID (before ROCAP existed) and Financial Adviser of BCIE.11 the meeting of Managua has been to delay support which the U.S...
...representative, Arthur Marget, and as confirmed by others) Marget drafted a communique, which the State Department issued to the Central American Embassies in Washington, threatening a weakening of overall U.S...
...Even by conservative (World Bank) estimates, by 1970, 32 percent of BCIE industrial loans had gone to foreign-controlled firms, and an additional 34 percent to regionally controlled firms with foreign equity or technical assistance partners...
...71 ff...
...The U.S...
...approach...
...objectives: first, to promote the interests of U.S...
...s2 But in addition to the class conflicts, the war was also caused by imbalances within the CACM...
...5, 1971, p. 244...
...in these cases, to avoid duplication and encourage efficiency, exclusive free trade privileges would be granted to one plant...
...An institution that leaves the initiative with the private sector could hardly be expected to promote risky ventures in new fields...
...cit., pp...
...meanwhile, the costs of integration (e.g., the regressive sales taxes, to compensate for the governments' increasing fiscal problems) have been borne by the lower income groups...
...Washington was especially concerned about certain social conditions (such as the serious "overpopulation" problem in El Salvador) which might make Central America more susceptible to Commu- nist influence...
...The total effect of * Marget, a former high functionary of the U.S...
...5, 1970 and Nov...
...This was the essential irrationality of the U.S...
...The Salvadoran delegation received special attention from Thomas Mann, ex-Ambassador to El Salvador, and by 1959 Assistant Secretary of State for Inter-American Affairs...
...for an account of these initial steps, see also U.S...
...Fagan, op...
...No investor can ever be sure that designation of an industry related to his...
...AID officials, who had expected 5 to 3 (or even 6 to 2) approval of the loan, were furious, and began an intensive campaign to lobby individual Governors, both through ROCAP and through the country Embassies...
...Nye, "Central American Regional Integration," International Conciliation, no...
...In the early years, when CEPAL was the intellectual leader of Central American integration, a number of SIECA officials (including the first two heads of SIECA) had been associated with or influenced by CEPAL...
...4 2 But the price has been high...
...There were equally important external pres- sures: specifically, the post-war need of the industrial corporations based in the advanced capitalist nations to expand and open up new markets for investment...
...The business communities voiced strong opposition to it, with the result that only Nicaragua ratified it immediately...
...Second, there were technical deficiencies of the scheme, which have been pointed out by "developmentalist" critics as well as by apologists for U.S...
...World Bank, op...
...151 ff...
...The real reasons are diffi- cult to detect, because they are hidden behind a facade of stated justifications and rationalizations.* The real concern focused on the effects of the scheme on U.S...
...continued its campaign by other means...
...6 7 As a result, socio-economic conditions within each country for the majority of the population have worsened.** This, in turn, has sharpened social tensions...
...really objected more to the consumer protection regulations of the RH than to the existence of a monopoly per se...
...These principles were reflected in the two integration treaties signed in 1958...
...s If El Salvador openly took a hard line, Guatemala played a double game during the negotiations...
...26-9...
...corporations in Guatemala and to institute a serious agrarian reform...
...Second, even if it had been signed, the m.o...
...In short, CEPAL would have had to address not only the intra- regional disparities, but also the disparities stemming from the class structure of dependent capitalism...
...investment...
...Clearly, a major objective of the scheme was to stimulate the establishment of large-scale, basic industries...
...dominating...
...Hansen, op...
...CEPAL, Economic Survey of Latin America, 1970, Part I (Santiago: CEPAL, 1971) (E/CN.12/868), p. 47 and CEPAL, The CACM and Its Recent Problems, p. 67...
...35-6, 40...
...But these problems were not due to the basic premise of industrial planning (as U.S...
...and Guillermo Molina Chocano, Integraci6n Centroamericana y Dominaci6n Internacional (San Jos4, CR: EDUCA, 1971...
...The leader of the coup and new President of Honduras, General Oswaldo L6pez Arrellano, was much more cooperative and "flexible" on these questions...
...1970, pp...
...In order to begin implementing the RII and to elaborate specific projects, the Central American governments called a meeting in Managua for * Most written accounts and U.S...
...interest...
...considered absolute freedom for private investors to be more important than equal development among the Central American countries, its strategy contained the seeds of increasing crisis and eventual breakdown of the CACM during the second part of the decade-specifically in the withdrawal of Honduras from the CACM, and the collapse of the CACM as it had existed...
...The fruit of this policy was a syndrome of dependent industrialization, which did not alleviate the general unemployment, balance of payments, and fiscal problems of all the Central American countries, and which aggravated the intra-regional disparities and imbalances.4 In the long run, this policy could not work, because it did not address the real problems of underdevelopment in the region...
...Schmitter, op...
...discussions, in order to preserve the CACM...
...on most issues-specifically, the business community and those governments (El Salvador and Gua- temala) representing the most privileged business groups...
...trade and diplomatic relations had not been totally normalized even by the end of 1972...
...14, 1969, p. 257 and Jan...
...Home Loan Bk...
...Interviews with ex-ROCAP and -BCIE officials...
...also Cochrane, "U.S...
...STRATEGY FOR DEPENDENT INDUSTRIALIZATION By winning on the RII issue, the U.S...
...Robert Gregg, "The U.N...
...First, the other four countries were divided as to how to relate to Honduras, with Guatemala and El Salvador taking a hard line, of proceeding without Honduras-even if this involved the temporary loss of trade with Honduras...
...This study is based largely on interviews conducted in Washington and Central America, mainly In 1970 and 1971, and on unclassified documents...
...When a group of Guatemalans came to us with a project for a tractor assembly plant, we financed a feasibility study and tried to interest several U.S...
...Throughout the 1950s and 1960s, plans for Central American integration were linked with unifying the defense establishments of the five countries (see "Integrating the Big Guns," in this Report...
...2 0 The implication was that AID could suspend disbursements on the loan if it did not approve of a subsequent debt incurred by BCIE...
...If Arbenz' reforms were unacceptable, some alternative would have to be found...
...In addition, Honduras was subsidizing industrial development in these countries, at great cost to all sectors in Honduras (i.e., higher prices and lower quality for Honduran consumers, negative trade balances, loss of government revenues, and industrial unemployment...
...foreign policy...
...In the Interest of U.S...
...in the Alliance for Progress era came to support any movement-such as economic integration-which might strengthen the economies and defuse the social pressures in Central America...
...Director of BID intervened directly to veto the loan...
...By the 1950s, the region remained economically dependent on a few agricultural exports, such as coffee and bananas, whose prices in the world market fluctuated greatly and constantly...
...in February, 1960, the three signed the Tripartite Agreement of Economic Association, establishing the basis for immediate free trade for almost all commodities originating in member nations, and, in principle, the free movement of capital and people...
...and these problems were compounded by the fierce U.S...
...The 1958 Agreement did provide that a certain * The explanation most commonly given by U.S...
...of State, Office of External Research, 1969), p. 33...
...Second, they attribute to the U.S...
...Reciprocity and the desire not to benefit some nations at the expense of others implied a third principle, namely that industrial investment should be based on some form of regional planning...
...LAI/18 Second, even if CEPAL had retained its original stand, and even if that strategy had prevailed, it too contained fundamental contradictions...
...Since no Communist or Castroist threat was apparent on either side, the U.S...
...See discussion in Hansen, op...
...in reality, according to observers with reliable inside information, El Salvador never had any intention of signing the m.o...
...Simultaneously, the U.S...
...Marget was attempting to force a reversal of these actions...
...Cochrane, The Politics...
...Feasibility Studies Industrial Projects Export & Tourism Industries Industry, Infrastructure Industry, Infrastructure Preinvestment Studies Industry, Telecommunications Industry Economic Development Industrial Development Industry Industry Industry, Tourism, Exports Industry, Tourism, Exports Industry Industry Industrial Projects Industrial Projects Industrial Projects Industrial Projects Ind...
...See Marco Virgilio Carias, "Analisis sobre el Conflicto Honduras-El Salvador," in Marco Virgilio Carras and Daniel Slutzky (eds...
...p. 83 and in Cochrane, The Politics...
...13 De Beausset was the "idea man" who could make it happen-who could find funds, make all the necessary connections in the U.S...
...investors, most of the Central American private sector (minus that of Honduras), and the governments of El Salvador and Guatemala...
...Molina Chocano, "Interdependence or Dependence," CERES (FAO), no...
...cit., p. 83...
...Tables 8, 17...
...and other foreign corporations have been the main beneficiaries of Central American integration...
...of Calif., Grad...
...16-19...
...not finding such a person, Washington settled for a Central American, but retained the right of the U.S...
...Since Honduras' withdrawal at the end of 1970, the CACM crisis has deepened...
...investors would never embrace a scheme so full of regulations on price, quality, supply, and especially on the proportion of local capital...
...94-5...
...THE BEGINNINGS OF THE CACM Since the sixteenth century, capitalist underdevelop- ment and foreign domination have been more pronounced in Central America than in any other part of the hemisphere...
...The companion to this Treaty was the Agreement on Integration Industries, often referred to as the "Rfgimen" ("System") of Integration Industries (RII...
...The only challenge to U.S...
...see also Banco Centroamericano de Integraci6n Econ6mica (BCIE), Informe de la Primera Reuni6n de la Asemblea de Gobernadores, May 30-June 1, 1961 (Tegulcigalpa: BCIE, 1961) (BCIE/AG/1), p. 16...
...Foreign investors should have absolute freedom to invest in any country (with no regard for regional balance) and in any sector (permitting even takeovers of locally-owned enterprises in traditional sectors, as well as total dominance in the newer and more modern industries), to use local credit resources, to import any technology (without concern for the effect on employment), and so on...
...In this sense, the Central Americans are now reaping the harvest of U.S...
...This general Agreement was based on the idea that, for certain major industries, the Central American market could sustain only one plant...
...6 By the end of the 1960s CEPAL had lost its potential function as an outside critic or "conscience" of the CACM, and never seriously challenged the strategy imposed by the U.S...
...Attitudes...
...Throughout 1968 and early 1969, the Nicaraguan government attempted to force its partners to ratify it, by imposing taxes on imports from the other countries...
...Latin America, Oct...
...maintains its supervision of BCIE on a regular basis, with several ROCAP officials flying to Tegucigalpa for at least a couple of days each week.-Foreian Loans to BCIE through Seitember.1972 a" - Source of Loan To BCIE Ordinary Fund AID-598-001 AID-596-002 AID-596-004 AID-596-010 BID-33/SF-CA BID-50/SF-CA BID-93/SF-CA BID-152/OC-CA Banco de Mexico Dollar Bonds, 1976 Consortium of Italian Banks Netherlands Investment Bank Bank of America Bank of America Bank of America Bk...
...exerted direct control over the CACM, by penetrating the principal CACM institutions, and by intervening decisively and strategically in the controversy over integration industries...
...Apparently the old fear persisted that business interests dictate U.S...
...to coordi- nate U.S...
...Thus, the strong pressures from the U.S., from Central American economic interests that have benefited from the CACM, and from regional military leaders, plus the recent change of government in Honduras, may produce a CACM settlement within the next few years...
...Hansen, op...
...and some Central Americans, over the issue of integration industries (see below), SIECA has managed to avoid taking a strong political stand...
...Honduras was in effect subsidizing the industrial development of the other Central American states .. .. In order to correct these imbalances, Honduras needed preferential treatment and special privileges...
...pp...
...Task Force on Central American Integration stated, We therefore welcome wholeheartedly the joint AID/State Instruction sent to the Central American Embassies on integrated industries as a step indispensable in the interest of keeping the industrial development of Central America pointed in the right direction...
...was also maneuvering to consolidate its hegemony in BCIE by appointing a BCIE Executive Vice President (similar to the one in BID, who has veto power over BID operations whenever he chooses to exercise it...
...to channel U.S...
...9. J. Abraham Bennaton, El Mercado Comun Centroamericano: Su Evoluci6n y Perspectivas (thesis) (Tegucigalpa: Universidad Nacional Aut6noma de Honduras, 1964), p. 101...
...Bank Chicago Year 1962 1963 1964 1970 1963 1965 1966 1967 1966 1966 1967 1967 1966 1970 1972 1971 1966 1970 1967 1967 1968 1968 1970 1971 1969 1970 1966 1970 1970 1971 1972 1972 Use Industrial & Agric...
...Third, there was no agreement about the scheme within Central America: particularly those sectors which opposed governmental or intergovernmental planning and which stood to gain from unbalanced development (e.g., the government and the private sector of El Salvador) opposed the RII...
...What was the significance of the modus operandi...
...2 6 Mrst, they minimize the role of the U.S...
...by the end of the 1960s, largely as a result of ROCAP prodding, informal and formal channels for SIECA consultation with the private sector were well developed and integral to CACM functioning...
...AID funds channeled through BCIE to be used for sub-loans to integration industries...
...p. 82...
...anti-trust laws...
...13-14...
...But even though signing separate trade agreements with Guatemala, Costa Rica, and Nicaragua in the summer of 1971, Honduras remained firmly outside the CACM...
...Acosta speech, reprinted in Carfas, op...
...cit., p. 33...
...Promotion: Attracting and Subsidizing Foreign Investment Perhaps the most influential--and the highest paidofficial of the BCIE as of 1970 was a North American, Val de Beausset.* What made him so valuable, in his position as Special Assistant to BCIE President Enrique Ortez, was his expertise in "promotion...
...By setting up shop in Central America, U.S...
...Examples from Levine, op...
...8, 1972...
...By 1968, Guatemala contributed 34.2 percent of regional value added in manufacturing and El Salvador 23.8 percent, as compared with Honduras' 7.7 percent...
...cit., p. 19...
...In their private conver- sations with Central American Ministers, Frank and Turkel spelled out the principles underlying the U.S...
...And the President of the United States is more President of my country than the President of my country, who, as I said, nowadays, is called Colonel Fidel Sanchez Hernandez...
...and in Central America, and move the BCIE Board of Directors into action (in approving loans, etc...
...Examples of these accounts are: Cochrane, "U.S...
...By late 1970, it hardly mattered that the U.S...
...First, it revealed the problems inherent within Central American "development" during the 1960s--the problems of unequal benefits for some countries, of subsidies to private (mainly foreign) investors at high cost to consumers and state treasuries, of imported technology and raw materials, of16 industrialization based on the merging of five tiny upperand middle-class markets...
...Since 1964, Honduras had expressed dissatisfaction with the CACM on the grounds that it was less developedthan its neighbors and that, since entering the CACM, the nation's economic position had further declined: its regional trade balance had become unfavorable, its regional terms of trade were deteriorating, its consumer prices were rising, and the number of its unemployed artisans was growing as a result of industrial competition from the other Common Market members...
...A December 4, 1972 coup in Honduras ousted the elected government of Ramon Cruz...
...established certain power relations within Central America which would make overt U.S...
...on the above assertion, see also Cable, "The Football War .. ," p. 661, Los Angeles Times, July 23, 1972, New York Times, Dec...
...pressured BCIE not to finance integration industries, even out of non-U.S...
...another firm imports jumbo rolls of toilet paper, cuts them into smaller rolls, and sells them as Central American...
...The function of the Central American state, and of the intergovernmental integration institutions, meanwhile, has been "reduced...
...Second, and closely related, was the principle of "reciprocal industrialization," i.e., the effort to assure all of the Central American nations of an equal opportunity to industrialize...
...s It soon became clear that their mandate went beyond fact-finding...
...Fagan, op...
...To make matters worse, the governments could no longer meet balance of payments problems by limiting nonessential imports, because an increasing percent of these items were being imported from the rest of Central America and were therefore not subject to these restrictions...
...Contributions to the Fund would also be proportional, with the countries enjoying the greatest benefits from the CACM paying a larger share...
...and interview with ROCAP functionary...
...But despite the outward appearance of good will, there is substantial evidence that the Guatemalan government covertly shared the positions being voiced publicly by El Salvador...
...government agencies to withhold development funds...
...With a population growth rate of 3.8 percent a year, El Salvador has 3.3 million persons squeezed into 8,000 square miles...
...strategy amounted to letting them grow, then correcting them through a special fund (which became the BCIE), through which the U.S...
...This is not to say that the RII could have resolved Central America's problems of underdevelopment...
...Union Bank of Switzerland Consortium of Swiss Banks Syndicate of Belgian Banks Bk of London & So...
...and we recommend strongly that the influence of our government continue to be thrown in that direction in the handling of whatever further consequences may be found to follow from the Managua meeting...
...But the threat of suspending aid remained clear to Central Americans...
...24-5...
...had opposed even the creation of CEPAL in 1947...
...and indeed, as the main beneficiary of the soccer war and the subsequent disruption of trade between Honduras and El Salvador, 5 s Guatemala did have good reason to hold the CACM together and especially to keep Honduras in the CACM...
...began to mold it to suit U.S...
...First, the U.S...
...Whatever the legalities of the U.S...
...Through SIECA-sponsored regional meetings of Ministers or lower government officials, as one ex-ROCAP officer with close ties to SIECA explained to me, ROCAP gains intelligence on who in each government is sympathetic and hostile to U.S...
...desire to counter CEPAL's influence in Central America...
...To summarize briefly: the CEPAL-inspired Treaties of 1958 implied gradual integration, minimizing the "disturbances" to the national economies caused by integration, and, above all, stressed balanced growth among the countries, through regional planning and coordination...
...control in exchange for a few hundred million dollars...
...1963 Housing Program 1970 Housing Program 1970 Housing Yes 40 2.5% Yes 40 2.5% Yes 40 2.5% Yes 50 1.25 + .75% Yes 30 3.25 + .75% Yes 30 3.25 + .75% Total Integration Fund Yes 40 .75% No 24.5 8.125% No 25 8.125% Total Housing Fund Total All Funds Amount of Loan ($ millions) 5 2.5 10 30 6 8.2 3 10 5 1 0.225 1.3 1.35 5 2 2 1.43 3 1.74 4.6 5 7.2 1.5 2 6.4 5 1.3 3 3.3 3 1 5 1 148c 35 20 30 2.6 11.f 20 119c 10 5 5 2 0c 287c a) This chart does not include technical assistance grants to BCIE or to other CACM agencies such as SIECA...
...in response to the coup, the Kennedy Administration cut off all U.S...
...For example, in the only major policy dispute between the U.S...
...The end result of these cross-pressures, primarily from AID, is that BCIE is little more than a commercial bank with low interest rates, rather than a development bank.14 From the above, it is clear that the U.S...
...Development Loan Fund (DLF) (precursor of AID), Proposal and Recommendations of the Managing Director, Loan Paper for Loan DLF-210 (A-001) to Central American Bank for Economic Integration (P-266/2) (Washington: DLF, 1961), Project Analysis, p. 7. 21...
...The reason for his extraordinary influence throughout BCIE is simply that "promotion" has become synonymous with "development...
...also regarded it as a "workable substitute" for the RU...
...2) a report on recent events in Chile, the Dominican Republic and Panama...
...International Regionalism (Boston: Little Brown, 1968), p. 313...
...Torres Rivas, Interpretaci6n del Desarrollo Social Centroamericano (San Josd, CR: EDUCA, 1971...
...School of Business Administration, 1970), pp...
...One such incident followed the October 1963 overthrow of the constitutionally elected Villeda Morales government in Honduras...
...cit., pp...
...After the signing of the 1960 General Treaty, CEPAL's in- fluence in SIECA, as throughout Central America, de- clined greatly, and was replaced by U.S...
...Given the general tendency of capitalism toward uneven development, if abandoned to the "free play of market forces," these regional imbalances would be reinforced...
...The relative absence of overt political friction is also the outgrowth of a style which almost precludes policy clashes-a style based partly on personal friendships between high SIECA and ROCAP officials...
...rather, they signified an abrupt shift in its direction...
...Ramsett, op...
...On the one hand, "outside political pressure" (i.e., from the U.S...
...interests would be adversely affected by a collapse of the CACM, the U.S.-unlike its allies in Central America-apparently was willing to accept certain limited reforms, to avoid such a collapse...
...and various issues of Business Latin America and SIECA, Carta Informativa...
...It soon became clear that international financing was not to be a subordinate or "complementary" source for BCIE funds...
...The only significant shift in class structure during the 1960s was the incorpora- tion of new groups, mainly industrialists, into the ruling class, 6 6 solidifying the alliance with foreign capital...
...Finally, the U.S...
...cit., pp...
...Manufacturers Hanover Trust Manufacturers Hanover Trust Wells Fargo Bank Cent...
...with Central Americans whose interests coincided with U.S...
...Strategy But the attempt to preserve the dependent capitalist system is inherently contradictory...
...These difficulties were compounded by the unregulated proliferation of assembly industries, which generated large, inflexible import requirements...
...5 9 Moreover, Guatemala actually supported El Salvador at crucial moments during the negotiations, particularly at the end...
...Salvadoran troops invaded Honduras on July 14, and only withdrew by the end of July in the face of heavy pressure from the OAS, which was attempting to mediate the conflict...
...cit., pp...
...It reveals how, in the very process of building an institution, U.S...
...support, have created conditions which in the long run limited their own expansion in Central America...
...Molina Chocano...
...The question arose as to whether this aid cut-off should include AID funds channeled through BCIE...
...The situation with regard to assembly industries is symptomatic of a more general characteristic of BCIE industrial lending under U.S...
...Eximbank 2653-CA U.S...
...210-11;also Rep...
...objectives, and in the process, imposed on Central America a form of economic integration that was unviable...
...The Salvadoran daily, El Diario de Hoy, editorialized that U.S...
...That same narrow definition of U.S...
...cit., p. 54...
...In order to qualify as "Central American" and hence to enjoy full free trade privileges, a product would have to contribute a certain minimum "regional value incorporated" or comply with certain standards of "minimum processing" in Central America...
...This should be done, be made known to the Central Americans, and an American presence and aid should be used to foster the developments we favor, to block the others...
...Roque Dalton, "Notas sobre el Sistema Imperialista de Dominaci6n y Explotaci6n en Centroam6rica," OCLAE (Cuba) no...
...Attitudes...
...This coalition included: U.S...
...Cohen, op...
...companies, as well as the Central American economies, were hurt by the collapse of the CACM...
...The very emphasis on industrialization was evidence of this strategy, since it was the form of "development" which entailed the least possible challenge to vested interests, and which avoided or at least postponed the social upheaval that would necessarily accompany an agrarian reform.' Politically, the strategic decision not to require heavy sacrifices from existing private sector elites amounted to a tacit recognition that CEPAL's influence depended on cooperation from those elites...
...was thinking of a "recognized expert in banking from the U.S...
...THANK YOU TIO SAM We took their fish and left them bones took their copper and left them stones took their fruit took their oil took their lumber stripped their soil made them grow coffee instead of corn so their children starved before they were born we took their cattle, took their meat left their people with nothing to eat built roads and ports to rob them faster (Gringo aid is a national disaster) and now we all wonder and brood at Latin America's ingratitude...
...offer of $10 million to the proposed Bank-although the final amount of the loan was only $5 million...
...336-9...
...The negotiations broke down abruptly in December, 1970, just as they were apparently closest to reaching a successful conclusion: the government of El Salvador, under intense pressure from the Salvadoran private sector, refused to sign, claiming the agreements would give away too much to Honduras...
...Such a situation actually did arise in the mid-1960s, in the dispute between GINSA in Guatemala (which at the time had technical assistance from and minority stock ownership by General Tire) and Firestone in Costa Rica, putting the U.S...
...Schmitter, op...
...But the U.S...
...firms, and this naturally is not well received in the U.S...
...This loan was a $5 million credit line, to be used by BCIE for relending to private industrial investors in Central America...
...Coop...
...see also SIECA, Acta Final de la Tercera Reunibn de Ministros de Economia de Centroamkrica, Dec...
...Finally...
...What does this story mean to the majority of Central Americans who have been paying the bill, but who have not benefited from the hundreds of millions of dollars of U.S...
...Attitudes...
...and its allies...
...In addition, Frank and Turkel had a concrete incentive for the Central Americans: an offer of $100 million in U.S...
...we understand that big projects require foreign capital...
...position--all of which added up to a clear modification of the integra- tion process laid out in the 1958 Treaties, and the adop- tion of a new approach...
...And in fact the Bank has functioned this way: as one study summarizes the situation, As of April 1969, the Bank's overall resources amounted to $250 million, of which $215 million (or 86 percent) came from foreign sources-about three fourths from the United States and the biter-American Development Bank [BID], where the United States has decisive influence, and the other fourth from suppliers' credits granted by some Western Euro- pean countries and Mexico...
...officials continued to voice a hard line, at this point it finally became evident that the U.S...
...2. Keith Griffin, Underdevelopment in Spanish America (London: Allen & Unwin, 1969), p. 272...
...Eisenhower Administration sent two State Department experts, Isaiah Frank and Harry Turkel, on a fact-finding mission to Central America, "to consider prospects for helping the movement to advance...
...Second, the U.S...
...Cable, "The Football War and the CACM," Internafional Affairs, Oct...
...Eximbank (Coop...
...Miguel Murillo, "El Nucleo de Contradicciones del Proceso Integracionista Centroamericano," Estudios Sociales Centroamericanos no...
...This article is a summarized version of a much longer and more detailed study of U.S...
...Sources include: Torres Rivas, Interpretaci6n...
...to "improve private investment" in Central America...
...Fagan, op...
...CEPAL helped draft the BCIE Charter, but the basic concept was modified signifi- cantly from the earlier CEPAL-influenced notion of "balance": specifically, the BCIE Charter made no mention of a regionally planned list of priority industries or of the integration industries scheme...
...pressure," and that the first copy of the initial declaration among the three countries "was printed in English and had to be translated into Spanish...
...This December, 1961 meeting prompted an overt power play by the U.S.: (as recounted by a high Central American official, who claims to have heard it directly from U.S...
...Other sources for this box include: other issues of Latin America...
...corporations) in Central America, and of building a coalition with the most privileged sectors of the local bourgeoisie, which would then act to promote U.S...
...This account is based primarily on interviews...
...interbank rate 5 1% " Total Ordinary Fund To BCIE Integration Fund (Infrastructure) AID-596-L-006 1965 Infrastructure Projects AID-596-L-007 1968 Infrastructure Projects AID-596-L-008 1969 Infrastructure Projects BID-8/CD-CA 1967 Infrastructure Projects BID-132/SF-CA 1967 Infrastructure Projects BID-284/SF-CA 1971 Infrastructure Projects To BCIE Housing Fund AID-596-L-003 Fed...
...al., op...
...Dalton, op...
...In mid-December, 1961, AID sent the draft loan agreement to the BCIE Governors (the Minister of Economy and Central Bank President or Manager of each coun- try) with the request that they approve it within 15 days...
...Somehow, it seems, the U.S...
...Dell, A Latin American Common Market?, p. 66...
...Attitudes...
...15, 1970...
...s Worst of all, Honduras charged, the industries being subsidized were not really regional, insofar as a high proportion were assembly industries (usually U.S.-owned) using Guatemala, El Salvador, or Costa Rica as a base for putting together components imported duty-free from abroad...
...The Multilateral Treaty established free trade among the five countries for a limited number of products, and provided for the gradual expansion of that GLOSSARY AID: U.S...
...Contradictions of the U.S...
...not to sign the RII...
...bid for control over BCIE's operations came during the negotiations for the first AID loan to BCIE...
...henceforth the U.S...
...5. Isaac Cohen, Regional Integration in Central America (Lexington, Mass.: Heath, 1972), pp...
...Just as the ties binding Central America to the capitalist system have shifted from the national to the regional level, so too, the resistance is being regionalized...
...resulted from the determination of the Salvadoran private sector and the government it controlled not to make any concessions to Honduras, such as would have been implied by the Fund...
...Moreover, Central America had not followed the example of the larger Latin American coun- tries, which took advantage of the Depression and World War II, and the consequent decline in U.S...
...position on "balance" was only one aspect of a larger strategy for industrialization, which we shall examine briefly...
...81-4...
...In order to attract foreign investors to the area, the Central American governments developed a network of incentive laws, granting generous fiscal incentives in the form of exemptions from income taxes and from duties on machinery and raw materials imports...
...See Business Latin America (BLA), July 4, 1968, p. 209...
...Development Projects 1972 Econ...
...to normalize relations with El Salvador and with the CACM, insisting on a prior settlement of the border dispute with El Salvador and a restructuring of the CACM...
...8, 1970, p. 16...
...Moreover, Marget saw a favorable tendency in the U.S...
...cit., p. 21 (my emphasis...
...With regard to the second U.S...
...objective was stabilization of the potentially explosive situation in Central America and defense against the "internal Communist threat...
...spent several hundred million dollars by 1970...
...5 3 THE MODUS OPERANDI Because the modus operandi (m.o...
...BID funds ($1 million) were finally used to finance the BCIE loan to Pennsalt-but only after an agreement had been reached which effectively annulled Pennsalt's integration industry status...
...AID could prevent its credit lines to BCIE from going to integration industries, since all BCIE sub-loans using more than $500,000 of AID funds required direct AID approval...
...aid simul- taneously set in motion the forces that were to destroy it...
...Second, apologists for the U.S...
...Joseph Pincus, "Historical Background and Objectives of the CACM," presented to AID Mission Directors, July 6, 1962 (mimeo...
...Now that they are in a financial bind, we are getting into other areas...
...had a clear responsibility for those outcomes...
...Ind., Ag., & Tourism Projs...
...From the Tripartite Agreement, it was only a small step to the General Treaty of Economic Integration, signed in December, 1960...
...On the other hand, the basic problems leading to the dissolution of the CACM have not been resolved...
...The effect [of these problems] on potential investment from abroad is...
...New York Times, July 22, 1969...
...perceive CEPAL as a threat also gave the U.S...
...corporations...
...3) Regional Industrial Policy: In a quasi-revival of the integration industries scheme, this industrial policy would promote certain basic industries and would simultaneously further balanced development, by permitting only one plant in these industries and having the CACM Economic Council determine its location (giving preference to Honduras...
...It provided that a plant in certain industries which required access to the entire regional market in order to operate "economically" would be designated an "integration industry" and would enjoy several economic benefits and protections for ten years-the primary benefit being that the products of the designated plant would enjoy free access to the entire market, while competing goods would remain subject to national tariffs...
...as an External Actor in the Integration of Latin America," Journal of Common Market Studies, March, 1969, p. 200...
...intervention and the direct imposition of U.S...
...On every issue, important concessions were made to privileged business interests which had benefited from integration during the 1960s and wanted to preserve the status quo...
...In addition, since Honduras' departure, Costa Rica's position has deteriorated to the point where President Figueres began threatening to formally withdraw from the CACM...
...investors...
...In fact, representatives of U.S...
...A New Direction for the CACM Thus, by the late 1950s, the U.S...
...The U.S...
...For these corporations too, Central America had to develop a larger market in order to be a worthwhile investment...
...From the sketchy evidence available (not including clear policy statements, of which there were none), it seems that the U.S...
...Meanwhile, pressures were building up from other directions...
...Clearly, the study concludes, BCIE has been more success- ful in attracting foreign assistance than in mobilizing regional funds (see chart).8 Establishing U.S...
...Consequently, CEPAL understood that such integration would have to be implemented by the elites already in power within each Central American country...
...Thus, the Treaties of 1960 did not represent, as is generally claimed, an "acceleration" of the integration process...
...Even in October, 1963, Central American economists feared that the unfavorable reaction reported in the U.S...
...private investment in Central America...
...It would provide special protection for certain industries, but without setting up legal monopolies and without subjecting the plants covered to "rigid" controls...
...opposition and the lengths to which U.S...
...Through its financial leverage, the U.S...
...The first and most blatant U.S...
...corporations and a broader threat to the interests of the capitalist system, which CEPAL did not present...
...government was committed to protect...
...Sources for this section include: ROCAP rhemos, Sept...
...was interested in opening up Central America for trade and investment by U.S...
...and SIECA, with U.S...
...These examples are taken from AID loan agreements with BCIE and other institutions...
...For all the emphasis on industrialization, the region has remained essentially dependent on a few traditional agricultural exports to the world market...
...AID, "Guatemala's Trade with Honduras" (Guatemala: AID, May 1971...
...needed an institutional liaison...
...for an evaluation, see Dell, op...
...A second objective was to discourage duplication within certain industries...
...SIECA, El Desarrollo Integrado...
...The price of U.S...
...had helped establish the dominance of those groups within Central America whose interests coincided with those of the U.S...
...5 1.25% over Lon...
...will not seriously affect his own business...
...Thus, the fact remains that U.S...
...SIECA is empowered to formulate proposals which serve as the basis for inter-governmental negotiations, to supervise implementation of the integra- tion treaties, and to serve as troubleshooter in disputes and crises...
...AID, "Summary Report of the Task Force on Central American Integration," in Marget et...
...was to articulate its interests through its Central American allies...
...This tendency has been institutionalized and rewarded through subsequent policies and incentives...
...In the view of one expert, this provision "has allowed the U.S...
...had been working with and strengthening for ten years.4 i.e., another experience with a progressive, nationalist government, such as that of Jacobo Arbenz (1951-4), which dared to regulate the operations of U.S...
...In a sense, then, the war was the result of class-based cross pressures-both from dominant business groups and from the landless, unemployed masses-within each country...
...Morgan Guaranty Trust Co...
...economic interests crippled the U.S...
...La Guerra Inutil (San Jose, CR: EDUCA, 1971), esp...
...position on integration industries...
...94701...
...Even before the coup, L6pez had been meeting with Presidents Arana and Somoza of Guatemala and Nicaragua...
...The Hard Liners Carry The Day Specifically, which interests were responsible for torpedoing the negotiations...
...Its sophistication and subtlety notwithstanding, the U.S...
...In the first half of 1969, Honduras suffered a trade deficit of nearly $5 million with El Salvador alone, and its imports from El Salvador amounted to 168 percent of its exports there...
...By the 1950s, according to certain general economic indicators, Honduras and Nicaragua were relatively less developed than their neighbors and growing more slowly...
...March, 1963, pp...
...A third objective was the promotion of balanced development within the region...
...prodding and financing, the Bank has continued to spend a considerable portion of its institutional energy and resources on programs to stimulate foreign investment...
...Finally, what was the role of the U.S...
...the others retaliated with measures against Nicaraguan products' Finally, in the spring of 1969, both sides backed down, and the five Ministers of Economy agreed to begin discussions to reform the CACM and to prevent similar crises in the future...
...TUNE IN TO LATIN AMERICAN REPORT NOW...
...corporations, was contradictory...
...As one ROCAP official explained it, "Val de Beausset gets half of his salary through BCIE, half directly through ROCAP...
...managed to step in, once the groundwork for Central American integration had been laid, and to impose its own conditions...
...p. 25...
...Attitudes...," p. 90...
...81-3, 144...
...Since each integration industry was to have a major impact on the economy of the host nation, the scheme could be used to prevent further concentration of industry in El Salvador and Guatemala...
...At the same time, efforts to resolve these problems continued through an inter-governmental "Normalization Commission" in 1971 and a special SIECA Commission in 1972...
...hegemony, CEPAL officials "gave up their role as agents of change and became agents of the status quo...
...investors in Central America...
...Moreover, this kind of industrialization has led directly to the withdrawal of Honduras in 1970 and the collapse of the CACM as a free-trade area.* Thus, the multinational corporations, with official U.S...
...funds through BCIE until December, 1963, by which time the U.S...
...International Bank for Reconstruction and Development (World Bank), Report of the Industrial Finance Mission to Central America, Annex (Washington: World Bank, 1971), Table 78...
...6. Cohen, op...
...Moreover, SIECA has not challenged U.S...
...In short, AID had its way...
...3, 1969...
...aid as a means of manipulating people and governments in Central America to suit the particular needs and whims of U.S...
...If the governments were to promote legal regional monopolies, however, they also had to wield a strong hand in regulating their operations, to protect consumers and the national economies from the potentially harmful effects of monopolies...
...Through these more subtle means, ROCAP has maneuvered SIECA into acceptable positions...
...Comisi6n Econ6mica para America Latina (Economic Commission for Latin America) FECAICA: Federaci6n de Camaras y Asociaciones Industriales Centroamericanas (Federation of Central American Chambers of Industry) m.o.: modus operandi SRII: Regimen de Industrias de Integraci6n (Integration Industries System) * ROCAP: U.S...
...5 Finally, an important reason for its interest.at this particular time was the U.S...
...Without assurances about equal distribution of the benefits of integration, it would be difficult to convince the relatively less developed nations, Honduras and Nicraragua, that the CACM was worth the sacrifices it entailed...
...would not go so far as to suspend all U.S...
...interviews...
...Especially since BCIE is located in Honduras, BCIE officials feared that such a move would put BCIE in an "unbearable" position...
...But even this Protocol implementing the RII contained provisions which further emasculated it.* Moreover, the U.S...
...But the measures advocated by the U.S...
...At the most obvious level, this is a, story of U.S...
...government until the Central American governments decided what policy to follow...
...Second, the U.S...
...8. ROCAP, op...
...interests...
...corporations, whose interests the U.S...
...60-1...
...In many respects "promotion" is just a new name for the basic approach that the U.S...
...Finally, at their August meeting, the BCIE Governors approved the loan, with only a minor change in wording...
...41-3...
...officials hoped, moreover, to weaken forever the influence of CEPAL's Mexico office...
...It has encouraged duplication of investment-the most extreme example being petroleum refineries (of which there are six in the region, each owned by a foreign oil company) and auto assembly plants, of which there are six in Costa Rica alone...
...Serv...
...19, 37 ff...
...and interviews...
...We work with local investors to get them into new fields, to find them a "technical partner" [a U.S...
...investment...
...HAR, Oct., 1963, p. 948...
...THE U.S...
...AID also learned another valuable lesson from this incident...
...6 3 More important, ever since the earliest days of the CACM, the U.S...
...This account is taken primarily from interviews...
...Lea and Perrins imports Worcestershire sauce in bulk, bottles it in small bottles, and sells this as Worcestershire sauce "made in El Salvador...
...and in Latin America, we experience directly or indirectly the effects of U.S...
...The promise of U.S...
...Specifically, the RII provided that each nation must receive one integration industry before any nation could receive a second one...
...position, however, it seems quite plausible that the U.S...
...Permanent Secretariat for Central American Economic Integration (SIECA) Within ten blocks of the ROCAP office in Guatemala City lie the offices of SIECA, the Permanent Secretariat for Central American Economic Integration...
...Nevertheless, AID imposed its discipline on BCIE, preventing the disbursement to Hondurans of U.S...
...a very shallow approach to preserving social stability...
...op...
...Martha Griffiths, Economic Policies and Programs in Middle America, Report for U.S...
...cit., p. 31 (my emphasis...
...The President of my country nowadays is called Colonel Fidel Sanchez Hernandez...
...effort * It is clear that U.S...
...technical and finan- cial assistance...
...also interviews and general reading...
...20, 1972 and Dec...
...Specifically, this article* tells the story of how U.S...
...Internally, the only alternative to total dependence on unstable agricultural exports was "import substitution" (industrialization within the region, to produce the goods previously imported...
...would contribute as much as $100 million to a Fund for integration...
...We have worked out seven major industries which are needed in each country, and which are priorities for BCIE loans...
...2 8 At the March, 1962 Extraordinary Meeting of the BCIE9 Governors, U.S...
...It was an excuse for each ruling class to fortify itself militarily, to consolidate its power against political opposition, and to stave off profound class conflict...
...and CEPAL...
...Private (especially foreign) investors, for example, have always favored the areas of relatively greater development-in this case, El Salvador and Guatemala...
...But General Somoza, President of Nicaragua, is also President of my country...
...correspondingly, Honduras' position has worsened...
...In our daily lives, both in the U.S...
...And in fact, ROCAP, having learned the advantages of presenting a low profile in public, has seldom exerted direct and overt pressure on SIECA...
...In all the decisive debates in the early stages of the CACM (the Tripartite Treaty, integration industries, etc...
...and to make sure that integration did not take a direction detrimental to U.S...
...assistance funds.96 Lured by the $100 million bait, the governments of El Salvador, Honduras, and Guatemala began a series of discussions...
...foreign assistance legislation, and legally binding on AID), such as "tying" of aid to goods and services purchased in the U.S., shipping these goods on U.S...
...officials, who espoused free enterprise and free trade as absolute principles, regarded CEPAL's tenet that investment decisions should be based on planning as overly "statist," tending toward "socialism," hence dangerous...
...approach has not worked out in practice...
...4 3 In response to public criticism, BCIE has curbed lending to wholly-owned subsidiaries of foreign corporations...
...Bennaton, op...
...interviews...
...2 Thus, to be a corrective influence, according to CEPAL, integration must be based on regional planning and on mechanisms specifically designed to insure a "fair distribution" of the gains from integration among all member countries...
...The U.S...
...all the SIECA Actas (Minutes) of the meetings of the Ministers of Economy during the second half of 1970, and the working papers prepared for those meetings...
...Cohen, op...
...retaliation through a cut in its financial aid to the Bank is apparently sufficient to preclude Bank officials from ex- tending loans of less than $500,000 for 'integration indus- tries.' 34 Such retaliation was more than a remote threat: on one occasion in 1963 AID posed the possibility that the U.S...
...What were those objectives...
...aid to the CACM...
...had set into motion and nourished those forces which finally destroyed the CACM...
...and Philippe Schmitter, Autonomy or Dependence as Regional Integration Outcomes: Central America (Berkeley: University of California, Berkeley, Institute of International Studies, 1972...
...Agency for International Development (AID) 9 10 THE BATTLE OF THE INTEGRATION INDUSTRIES There is no clearer example of decisive U.S...
...Although we pay for the show, we seldom see it...
...Finding that no AID funds were available to an integration industry, they attempted to get BID funds channeled through BCIE (as an industrial relending credit line...
...Stuart Fagan, Central American Economic Integration: The Politics of Unequal Benefits (Berkeley: University of California, Institute of International Studies, 1970), p. 8. 41...
...Border incidents continued sporadically throughout 1970 and 1971...
...Central American wine" is made from an imported wine concentrate, using only local water...
...press opinion unfavorable to this economic policy might influence U.S...
...The Role of the U.S...
...position...
...had good reason for wanting to preserve peace and stability in Central America and, after the war, to normalize the situation in each country and between the two...
...cit., passim, David Tobis, "The Central American Common Market," NACLA Newsletter, Jan...
...Simultaneously the U.S...
...policy during the...
...House of Representatives, Committee on Foreign Affairs, Subcommittee on Inter-American Affairs, Central America: Some Observations on Its Common Market, Binational Centers, and Housing Programs, Report of Rep...
...policy in any basic way...
...Honduras was suffering from diminished fiscal revenues as a result of the exportation by the ,more developed members of the CACM of their pseudoCentral American products to Honduras exempt from tariffs...
...has overtly manifested its implicit intention of making BCIE an instrument of U.S...
...Yet there is a fundamental contradiction in the U.S...
...Pennsalt-A Caustic Story One of the most blatant instances of U.S...
...share (directly and through international lending agencies) has been substantial: at the beginning it was over 50 percent, and by 1970 it remained as high as 40-48 percent (according to different estimates...
...This Protocol would impose an economic stabilization tax, in the form of a 30 percent duty surcharge on all imports from third countries, and a recommended sales tax on luxury goods...
...Agency for International Development : BCIE: Banco Centroamericano de Integraci6n Econ6mica (Central American Bank for Economic SIntegration) BID: Banco Interamericano de Desarrollo (InterAmerican Development Bank) CACM: Central American Common Market CEPAL: U.N...
...The rationale was that in order to mobilize sizeable amounts of money from international financial agencies, BCIE had to look good to those agencies and conform to their standards...
...producers...
...supported and advocated independently the positions taken by this coalition of privileged groups...
...assistance to push ahead with the integration program...
...this treaty would establish low external tariffs and complete freedom of movement of goods, capital, and people within the common market...
...as a military man, L6pez has been more amenable to dealing with the other military strongmen in Central America...
...CEPAL had always been persona non grata in official Washington circles...
...Hegemony in BCIE Having become the main sponsor of BCIE, the U.S...
...might make no further loans to BCIE (whether or not for integration industries) unless BCIE conformed to the U.S...
...First, it stressed "gradual" integration, rather than immediate or total trade liberalization among the Central American countries: integration had to be carried out in such a way as to minimize "disturbances" to the national economies (e.g., "disturbances" resulting from suddenly exposing national producers to new competitors, or losing government revenues from import duties...
...newspapers...
...became obsessed with preventing similar revolutions in other countries...
...c) Figure not exact due to rounding...
...aid, designed to make direct military intervention in Central America unnecessary, may well fail to do so...
...newspapers, as compiled by Information Services on Latin America (Box 4267, Berkeley, CA 94704), a monthly clipping service of eight major U.S...
...Working in conjunction with certain groups in Central America during the 1950s, CEPAL presented economic integration as a necessary complement to import substitution, particularly for countries with tiny domestic consumer markets...
...In response to similar social tensions, in order to relieve pressure for land, the Honduran ruling class, in turn, O.A.S...
...In addition, CEPAL would have had to make a total break with the U.S., and thus to reject U.S...
...corporations investing in the region...
...Quoted in ibid., p. 25...
...See, for example, documents cited in Cochrane, "U.S...
...In fact, the intra-regional imbalances are increasing: since the end of 1970, Guatemala's trade balance vis-a-vis its CACM partners has improved even more...
...Hearing that the integration move- ment was at an impasse ant, needed support, Mann is said to have proposed a "real Common Market," immediately reducing trade barriers on almost all commodities...
...have hesitated to invest in Central America because they fear possible discrimination under the Regime...
...investment alone amounted to nearly $.5 billion...
...El Grdfico, Nov...
...Beyond the immediate problem of this particular loan, ROCAP felt that "effective control of [BCIE] must be placed in the hands of its Directors...
...Feasibility Studies Industrial Projects Industrial Projects Telecommunications Industrial Projects Industry, Studies, Services Services, Goods & Ships Cap...
...Aside from the concrete i Tblems the RII posed for private U.S...
...officials went to thwart the RII...
...al., Task Force Report on Economic Integration in Central America, Feb...
...Sidney Dell, A Latin American Common Market...
...purposes...
...11, 1970 and Dec...
...Third, the U.S...
...structure, timetable, institut- ions, and the like...
...1970...
...In the final negotiations, this change was made...
...BCIE, Informe de la Primera Reuni6n Extraordinaria de la Asemblea de Gobernadores, March 12-13, 1962 (Tegucigalpa: BCIE, 1962...
...corporations were holding back their investment in Central America because of the RII-because the privileges given to integration industries "exclude the possibility of competition by other U.S...
...Schmitter, "Central American Integration: Spill-over, Spill-around, or Encapsulation?," Journal of Common Market Studies, Sept...
...After Nicaragua secured integration industry status in the January, 1963 Protocol and Pennsalt was ready to proceed with the investment, the principal backers of the project sought additional funds...
...The U.S...
...26, March-April 1972, p. 52...
...A second U.S...
...redirected it, Central American integration could be perfectly consistent with, and could be used to further, U.S...
...Marc Herold, Industrial Development in the Central American Common Market (manuscript) (Berkeley: Univ...
...has consistently refused to allow U.S...
...This conclusion is based on interviews with participants and newspaper accounts...
...Wionczek, "The Rise...," p. 57...
...But the class inequalities would not have been resolved...
...The best class analyses include: Edelberto Torres Rivas and Vinicio Gonzalez, "Naturaleza y crisis del poder en Centroamerica," Estudios Sociales Centroamericanos (Costa Rica) no...
...hope to achieve through this power play, and how did it force an alteration of the Central American integration process...
...In interviews, de Beausset demystified the concept of promotion" by giving me examples of his work...
...cit., pp...
...see also Nye, op...
...and the Pennsalt/ Hercules complex in Nicaragua is owned by two U.S...
...did represent a clear acknowledgment of those problemsperhaps the first large-scale honest appraisal of the costs of Central American integration...
...285, 291-2...
...For example, Castillo, op...
...had nothing to do with those events...
...10-11...
...of Amer...
...however, the gist of it is confirmed by Cochrane, "U.S...
...From this general concern evolved the idea of amending the BCIE Charter, to provide that the Governors delegate the right to approve future loan agreements to the Direc- tors...
...As BCIE President Ortez put it to me, "We have no prejudices against foreign capital...
...The clearest example was the Salvadoran "population problem...
...Herold, op...
...as a result, U.S...
...Some of the working meetings were held in Washington...
...At the end of 1972 there were moves to change the situation...
...2 " BCIE officials spent the next several months attempting to renegotiate the loan to meet the Governors' objections, but without success...
...Having managed to weaken but not totally destroy the RII through the 1960 Treaties, the U.S...
...officials charged), but to imperfections in its application...
...Jerome Jacobson, "Developing Policies and Programs for Central American Economic Integration," in Arthur Marget, et...
...4 First, the U.S...
...This description obscures the full extent of U.S...
...First and most obvious, the breakdown of the m.o...
...2 4 In addition, the U.S...
...Fagan, op...
...wanted a specific commitment, through a treaty, to achieve a common market within a very short time (three years...
...Goods, Pub.& Pr...
...ROCAP, op...
...support...
...cit., p. 85...
...But despite the public stance of deploring the war, and washing its hands of all responsibility, the U.S...
...102-5, 13-14...
...26-7...
...The Treaty attempted to minimize the "disturbances" and dislocations in the national economies which could result from a more rapid liberalization of trade...
...But this is also a story of contradictions, a demonstra- tion that the mechanisms of capitalism sometimes do break down almost of their own accord, or as a result of conflicts among the dominant groups...
...companies closed down their Central American operations...
...negotiations, the U.S...
...The Governors, on the other hand, being Ministers of Economy and heads of Central Banks in each country, were under political pressures of nationalistic sentiments in their countries...
...aid helped create-and destroy-the Central American Common Market (CACM...
...nonetheless insisted that it was com- mitted to "balanced development," to be achieved through different mechanisms...
...investors in Central America...
...NACLA ON THE AIR Latin American Report--a biweekly radio program produced by NACLA--now offers copies of selected programs to our readers and interested groups...
...military assistance had increased the influence of the military in both countries...
...Rather, once the Central American governments had contributed their $4 million apiece to its capitalization, the Bank was to be primarily a magnet for attracting international funds to Central America...
...the mild and seemingly reasonable position of "opposing" integration industries, of discouraging participation of U.S...
...remained basically hostile, attempted to squelch all CEPAL-inspired proposals in inter-American meetings, and regarded CEPAL as a rival and a nuisance because it raised embarrassing questions about U.S.-Latin American relations.6 Beyond the competition for power and influence lay a profound philosophical/political dispute between the U.S...
...Thus, during the 1950s, CEPAL worked closely with Central American business leaders...
...technical experts and advisers from AID and the newly-created BID, even in such sensitive areas as selection of personnel...
...officials (in interviews) have distorted the story of this controversy in several ways...
...Clearly, the State Department knew what it wanted...
...cit., p. 24...
...By imposing its strategy during the formative years of the CACM, the U.S...
...With regard to the first, we have seen that the specific contours of the CACM were shaped in accordance with the changing needs of U.S...
...hoped to stabilize the soeio-economic system in Central America, but without making the necessary reforms...
...A Central American free trade area, placing no restrictions on investment and offering proper investment incentives, would create a larger market and new opportunities for U.S...
...see also NACLA, Yanqui Dollar (Berkeley: NACLA, 1971), pp...
...In addition, the push for re-integration has been supported by the region's military leaders, who (especially since the Honduran coup) are seeking to form a central American military-ideological "community" (see "Integrating the Big Guns," below...
...8-10, 1965) (Washington: GPO, 1965...
...As noted even by a 1970 World Bank study mission, the indiscriminate application of the laws has led to a sharp loss of revenue (from import duties and taxes foregone) to the governments, and has rewarded the utilization of imported rather than regional raw materials...
...As one7 ROCAP official described it, ROCAP gives money for, say, four new positions, and ROCAP and SIECA decide jointly what work should be done by these experts, and by whom...
...cit., Project Analysis and Annex 1. 23...
...flag vessels, U.S...
...18, 1970...
...98-9, June 10, 1971, pp...
...The important thing, he concluded, was that they were all in agreement that no definite decisions had been made at the Managua meeting, and that discussions were only beginning...
...had been less concerned about protecting the absolute freedom of U.S...
...Development Projects Repayment Annual Period Interest Tied (yrs) Rate Yes Yes Yes Yes Nob Nob Nob Nob Yes No Yes Yes No No No Yes No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No 15 4% 40 2% 40 2% 40 3% 20 4% 20 4% 20 4% 18 6.25% 10 6% 10 5% 8 5.9% 19 6.5% 2 & 5 6.5% 7 1% over prime 7 1% over prime 7 1% over prime 4.25 6.5% 4 1% over prime 9.5 7.25% 5,8 & 10 6.25-7.5% 3,5 & 7 6.2% 5 6 7 5.5 & 7% 7 6% 7 6% 15 6.5% 8 6.5% 8 5.75, 6.25 & 6% 3-8 7 & 7.5% 30 4 & 5.5% 4 1.5% over prime 4 1% over Eurdlr...
...also Cochrane, "U.S...
...opposed even the mildest forms of government planning until the "new look" of the Alliance for Progress brought a change of rhetoric in the early 1960s...
...had no policy: It is understood-from very well informed Washington sources -that the U.S...
...cit., p. 42...
...At the outset, for example, there was great antagonism between SIECA and various private sector organizations in Central America...
...Hondurans and other observers doubt that El Salvador would have launched the war without a green light from Washington...
...And General Stroessner, President of Paraguay, is also a little bit President of my country, though less than the President of Honduras, that is to say General Lopez Arellano, and more than the President of Haiti, Monsieur Duvalier...
...This clause required prior approval by AID of further borrowing by BCIE and gave AID "the occasion to require subordination of later loans if [AID's] position appeared to be jeopardized...
...funds could not be used to promote a scheme which violated US...
...Cochrane, The Politics..., p. 212...
...business interests in Central America.12 proportion of the capital of each integration industry must be of Central American origin...
...As stated in inter, views, both parties realized that their public image would be ruined if the relationship became too visible to outsid- ers, and recognized the importance of being discreet...
...Second, and closely related, the CACM structure has suffered because the response of each member to its deepening internal problems has been to project these onto the Central American stage, to avoid dealing with them nationally...
...pressure against it...
...Programs provide background and analysis of current events in Latin America, discussions of U.S...
...objective, the protection of U.S...
...The Arbenz experience in Guatemala demonstrated that Cen- tral America could not necessarily be taken for granted by the Western capitalist powers...
...Even then, the change did not go much beneath the rhetorical surface...
...Cohen, op...
...policy also reflected an aversion to the economic nationalism and protectionism inherent within CEPAL's formula for import-substitution, insofar as these violated orthodox notions of free trade...
...Although Guatemala never stated openly that it would not go along with the Fund or the industrial policy, throughout the negotiations Guatemala and El Salvador were in agreement on all the major issues, including the view that the m.o...
...agreements, and hoped to get Guatemala to go along with that position...
...Senate, Joint Economic Committee, Subcommittee on Inter-American Economic Relationships, Latin American Development and Western Hemisphere Trade (Sept...
...also Molina Chocano, Integraci6n Centroamericana . ., pp...
...But by granting immediate free trade to nearly all products originating in the region, the General Treaty effectively eliminated any special benefits to integration industries, hence any incentive for using the scheme...
...wanted the m.o...
...Similarly, if the U.S...
...In the process of cooperat- ing with the U.S...
...negotiations touched on all the exposed nerves of the ten-year-old integration process in Central America, it is worth mentioning briefly a few of the main substantive issues and the dynamics of the negotiations...
...Joseph Grunwald, Miguel Wionczek, and Martin Carnoy, Latin American Economic Integration and U.S...
...In the words of the State Department Many private investors...
...position maintain that the RII was badly designed, full of ambiguity and hence susceptible to political favoritism.35 Despite the grain of truth in these "technical" arguments, the principal motivations for U.S...
...If is little Re-cou...
...SIECA is also useful to the U.S...
...10 ff...
...investors, the U.S...
...Second, throughout 1971 and 1972, the CACM was further debilitated by new problems, specifically Costa Rica's attempts to protect its national market and balance of payments by imposing tariffs on Central American imports...
...Initially there was considerable distrust between the U.S...
...cit., p. 55...
...In its steadfast opposition to the integration industries scheme, the U.S...
...Regional Economic Commissions and Integration in the Underdeveloped Regions," in Joseph Nye (ed...
...CEPAL's integration strategy was based on certain principles...
...Source: U.S...
...1950s, culminating in the U.S.-sponsored ouster of Arbenz in 1954...
...6 2 Second, despite protestations of neutrality, the U.S...
...investment and aid (both of which CEPAL accepted as necessary...
...Cohen, op...
...approval of all sub-contracts, no trade with socialist countries...
...3 0 The first, and most crisis-ridden, stage of the integration industries battle more or less ended with the adoption of the Protocol in January, 1963...
...SIECA, El Desarrollo Integrado . ., p. 31...
...Banana Republic Splits In the aftermath of the war, Honduras used this opportunity to insist on a general restructuring of the CACM...
...For one thing, the scheme was designed only to preserve a balance among the underdeveloped countries of the region, not to improve living conditions for the lower classes or to alter the relations of power within each country...
...b) Tied to purchases from BID/IMPF members...
...But the signing of the CEPAL-inspired Treaties in 1958 made clear that the Central Americans were moving ahead with their plans for economic integration and awakened U.S...
...strategy was to cut off all available sources of funding, and thus to undermine the integration industries, which were by definition such large undertakings as to require outside funding...
...Congress of loan repayment), most Central Americans regarded it also as a bid to establish political control over BCIE's future operations, or feared that such control would be the effect of the clause...
...3 6 Initially the U.S...
...officials focuses on the monopolistic nature of the integration industries, and insists that U.S...
...On the one hand, the U.S...
...20, 1970...
...policy...
...But the more immediate consequence was the collapse of the CACM in the late 1960s...
...In order to exert direct control over the daily operations of the CACM institutions, the U.S...
...This article is an attempt to peep through that keyhole...
...We find local partners for foreign investors and convince foreign investors of the political advantages of working with a local partner...
...Underlying the war were the same factors that had caused earlier CACM crises...
...The need for this Fund, with its objective of promoting balanced development, evidenced the failure of BCIE, whose Charter had stated the same objective ten years earlier, and which had, in fact, allocated a higher proportion of its funds to Honduras and Nicaragua...
...Washington voiced its positions indirectly through El Salvador, as well as directly...
...as a source of information...
...11, 1970, on m.o...
...policies and programs for Central American integration agencies...
...El Salvador's population density in 1969 was over 380 persons per square mile, as compared with 57 persons per square mile in Honduras...
...The "benefits" from integration have all gone to the upper dass, particularly the industrialists...
...cit., p. 24...
...1 3 This Regional Office of AID for Central America and Panama, ROCAP, was established in Guatemala in July, 1962...
...Assurances about "reciprocal benefits" or "balanced development" were necessary because of the historical imbalances within the region...
...SIECA, El Desarrollo Integrado de Centroamrrica en la Presente Decada (Guatemala: SIECA, 1972) (SIECA/72-VII6/36), p. 33, Tables 5, 13;El Grdfico (Guatemala), Feb...
...interests that made the U.S...
...aid to the CACM...
...A third concern about the RII was that private U.S...
...go to such lengths to thwart the integration industries scheme...
...aid to the region if the integration industries scheme was pursued any further.* A February, 1962 memo from the U.S...
...trade and investment, to begin industrializing nationally...
...What did the U.S...
...and when the Central American Ministers of Economy met in January, 1963, to definitively approve and sign the first Protocol implementing the RH (granting the status to two plants), they did not know what to expect from the U.S...
...341 ff...
...In short, the commitment of U.S...
...6 0 Industrialists, at least in Guatemala and El Salvador, pressured their governments not to sign the m.o.-even if this meant losing the Honduran market...
...Within the context of industrial planning, the RII implied the recognition of "natural monopolies" in certain sectors, particularly for a market as small as the Central American...
...CEPAL, The Central American Common Market and Its Recent Problems (Santiago: CEPAL, 1971) (E/CN.12/885), pp...
...In short, having strengthened the position of its allies, the U.S...
...Write to NACLA, Box 226, Berkeley, Ca...
...could not have achieved its second objective, the stabilization of Central America, precisely because it was in contradiction with the first and narrower U.S...
...and other articles by Cochrane...
...In regard to the serious budget problems plaguing all the governments, for example, the San Jos6 Protocol was an emergency measure, a substitute for, rather than a stimulus to, direct taxation and serious tax reform...
...policy created a context in which the RII could not be used toward its original objectives of planned industrialization and balanced development within the capitalist framework...
...It reveals the workings of the aid agencies, both directly through manipulation, and indirectly through their allies in Central America...
...one Central American company imports screws without indentations, puts the indentations in, and sells these as Central American...
...According to several accounts, BID initially approved the loan, but subsequently reversed its position, after the U.S...
...Morgan Guaranty Trust Co...
...also Cochrane, "U.S...
...but that if the U.S...
...firm would doubtless exert great pressure on the State Department not to permit such favors to one corporation...
...Cable, op...
...State Department formally announced, in November, 1960, a U.S...
...has certainly contributed to the conservativeness of the Bank's lending policy and the timidity with which it has dealt with the issue of "regional" loans going to predominantly extra-regional capitalists.4 On the other hand, this posture has also had its negative aspects, even from the standpoint of the U.S...
...This did not mean, however, that the U.S...
...was not made at the last minute...
...policy were not technical, but ideological and political, and responsive to U.S...
...Moreover, as an outgrowth of its concern since the early 1960s about the explosive potential of El Salvador's "population problem," some charge, the U.S...
...But this was part of the alliance being built up by the U.S...
...Initially the U.S...
...Tegucigalpa: 1962), p. 18...
...Nevertheless, the U.S...
...officials were enraged by this meeting, referring to it privately as the "crime of Managua," and deploring the subservience of Central American officials (especially in SIECA) to CEPAL...
...The effect of this threat was not immediately clear...
...firms, and of withholding U.S...
...Economic Commission for Latin America (Comisi6n Econ6mica para Am6rica Latina, CEPAL...
...First, most CEPAL functionaries and CEPAL as an institution did not stick to their original principles as forcefully as would have been necessary to pose a serious alternative to the U.S...
...From the beginning, CEPAL viewed regional integration as a way of modernizing the Central American economies within the capitalist system...
...Because the U.S...
...Carras, op...
...was designed to normalize, not to restructure, the CACM...
...p. 82...
...Ind., Ag., & Tourism Projs...
...what they are and how they operate...
...Ibid., p. 218...
...1970, p. 55...
...after 1960 and adjusting to U.S...
...We shall focus here on ROCAP influence in the two principal Central American integration agencies: SIECA and BCIE...
...The main objections of the Governors centered on clause 6.09(c) of the draft loan agreement...
...cit., p. 37...
...prevented other international lending agencies, especially BID, from lending directly or indirectly to integration industries...
...Cruz had been resisting pressures from the Presidents of Guatemala, Nicaragua, and El Salvador (and indirectly from the U.S...
...International Organization in the Western Hemisphere (Syracuse, NY: Syracuse University Press, 1968), pp...
...objective, the contradic- tions are even clearer...
...By the mid-1960s, all of the Central American countries were feeling the effects of a generalized balance of payments crisis, rooted primarily in the worsening position of the region's exports to the world market...
...Although used by local investors as well, in practice these laws have been designed largely to appeal to foreign corporations...
...In many respects, then, the ROCAP-SIECA relationship has been less painful than most donor-recipient relationships in the foreign aid game...
...As the Honduran Minister of Economy stated in 1969, integration had brought Honduras fewer benefits and greater sacrifices than the other partners...
...companies, such as John Deere and Ford...
...In terms of both new industrial investment and trade creation, the overwhelming bulk of the gains had gone to El Salvador and Guatemala, and Honduras' disadvantage was getting worse...
...Mary Mackey December, 1961...
...cit., pp...
...aM for U.S route fb This qu of CEPR the mo headed many t tions, tl stages), after th other g terests policy...
...According to one account, Lemus came to Wash- ington seeking U.S...
...The meeting resulted in a jo