Latin America: 1800s to the Present

World Wars, Depression and Bananas History 134 History

Jason Suárez History Department El Camino College A century of export-led growth

In the century before the First World War, Latin America established an economic model of export-led growth.

By 1914, Latin America had been following a model of export- led growth based on free (unrestricted) trade for nearly a century.

The most successful countries in terms of the growth of exports per head were in the Southern Cone (Argentina, Chile, and Uruguay) and Cuba.

The high proportion of the labor force employed in agriculture reflected of the low level of labor productivity and technological advancement.

Latin America: Agricultural Labor Force The impact of the First World War

By the 1920s, the climate for export-led growth changed and became less favorable.

In part, this was because there were fewer restrictions on trade before the World War I.

When war broke out in Europe on August 2, 1914, both the international balance of power and the global trade and payments system were adversely impacted.

The hostilities in Europe froze the inflows of direct foreign investment into Latin America.

Disruption of supplies was impacted by a shortages of shipping due to the war and collapse in trade credit. The United States in Latin America after the First World War

Real government income was impacted by this decline in trade (dependent as it was on import tariffs). For example, Chile’s government revenue fell by nearly two-thirds.

By the 1920s Latin America, which had substantial trade surplus with the United States before the war, experienced a reverse after the war. See chart to the right.

This emergence of the United States in the 1920s as a major source of foreign capital for Latin America would have a mixed impact.

In addition, unstable conditions during and after the war fueled unpredictable commodity prices.

Exports to the United States The world depression

Latin American exporters experienced a particularly sharp decline in prices in the 1920– 21 depression as the world economy adjusted to peacetime conditions.

However, Latin America's external trade in the 1930s did recover in part due to change in its geographical distribution with new markets being forged in Germany, Italy, and Japan.

By 1938, Europe was purchasing nearly 55 percent of all exports and supplying nearly 45 percent of all imports. This trade relationship would be extremely vulnerable to the outbreak of hostilities should a second world war break out.

Latin American World Trade The United States and Latin America and Second World War

The Roosevelt administration (1933-1945) was acutely aware of the importance of avoiding economic collapse in Latin America.

At the same time, the United States needed to secure supplies of raw materials and strategic commodities in case its traditional sources outside Latin America were disrupted.

As a result, an Inter-American Financial and Economic Advisory Committee was created, which established the Inter-American Development Commission . This commission was given the tasks of stimulating trade between Latin America and the United States, to promoting trade within Latin America, and to encouraging industrialization.

Unfortunately for Latin American, after the Second World War, the main US focus was the reconstruction of Europe. This objective became even more important following the outbreak of the Cold War in 1947. Export Commodity Concentration Ratios, circa 1913 The Guatemalan Spring 1944-1954, the second revolution

Guatemala was the home of the second great social revolution in Latin America in the 20th century. 1898– 1920 Liberal Manuel Estrada Cabrera rules 1902 arrives in Guatemala 1931– 1944 Liberal rules Guatemala , a liberal, assumed office in 1872. He was a July 1, 1944 Ubico resigns, opening the way to the Guatemalan positivist who was referred to as “Little Porfirio Díaz.” During his Spring rule, Barrios made Guatemala a coffee republic. By 1885, coffee October 20, 1944 October Revolution establishes a progressive comprised 75 percent of the country’s exports, primarily controlled by provisional government Germany. March 11, 1945 Promulgation of new constitution March 15, 1945 Inauguration of Juan José Arévalo as president

February 8, 1947 Promulgation of labor code In 1898, Manuel Estrada Cabrera ruled Guatemala as a liberal who November 11, 1950 Jacobo Arbenz Guzmán elected president sought to modernize Guatemala’s economy by integrating it into the June 17, 1952 Land reform (Decree 900) redistributes large global capitalist system. landholdings December 1953– July 1954 CIA operation PBSUCCESS to remove communist influence from Guatemalan government In an attempt to offset a coffee focused economy , in 1902 Estrada June 16, 1954 Colonel launches military coup Cabrera invited the United Fruit Company (1899) to begin banana against Arbenz’s elected government production in Guatemala. This relationship would have dire June 27, 1954 Arbenz resigns presidency, bringing revolutionary consequences in Guatemala's future. changes to an end. Jorge Ubico and the United States

In 1931, Jorge Ubico was elected president and successfully consolidated his control over the country.

He abolished labor unions, persecuted workers, and embraced a rigidly patriarchal society which clearly was not received well.

In addition, Ubico’s foreign policy assumed a very strong pro– US political stance.

With the United Fruit Company firmly planted in the country, the US government gained a large degree of control over the country’s economic and political decisions.

However, his support of authoritarian administrations in Latin America fueled a loss of support from the US government. The 1944 Revolution

In 1944, civilian pressure, stemming from students, professionals and army officers, forced Ubico to resign from power on July 1, 1944.

His resignation launched the Guatemalan Spring, a period in Guatemalan history that sought to introduce vast reforms.

The end result was the creation of new constitution and the election of Juan José Arévalo as president. Guatemala’s new president worked to usher in a climate of political freedom, economic opportunity, and social justice – what was termed spiritual socialism.

Unfortunately, Arévalo’s reform agenda triggered significant resistance that led to thirty coup attempts against his government. Arbenz and his reforms

The reform movement was continued by Jacobo Arbenz, who became Guetemala’s president in 1951.

Arbenz’s government significantly sped up the pace of reforms. More specifically, his administration expanding voting rights, allowed for unions, and legalized political parties once banned.

More than anything, Arbenz wanted to end the neocolonial relations that had been forged by previous leadership. He wanted to make Guatemala into an economically independent country.

In 1952, Arbenz legalized the communist party, the Partido Guatemalteco del Trabajo. This would further sour his relationship with the US, particularly during this era of Cold War. Decree 900

Land reform became the focus of Arbenz administration’s. His groundbreaking land reform program reached its apex with Decree 900.

Guatemala hade evolved into a highly unequal society where 2 percent of the population owned 72 percent of all arable land.

Decree 900 expropriated land holdings over ninety hectares in size compensating landowners who had land sequestered with twenty-five- year bonds. Clearly, this would create tensions with the United Fruit Company.

In August 1953, president Dwight D. Eisenhower authorized a $ 2.7 million budget for a plan termed Operation PBSUCCESS.

The plan called for “a propaganda campaign against Arbenz, the recruitment of members of the Guatemalan military, and the disposal or assassination of fifty-eight leftist leaders.” The end of the Guatemalan Spring

On June 16, 1954, Colonel Carlos Castillo Armas launched a military coup against Arbenz’s constitutionally elected government. The success of this coup was braced by US provision of supplies and training.

In addition, right-wing military regimes in Nicaragua, Venezuela, and the Dominican Republic conspired against the Arbenz government and collaborated CIA and the State Department.

The military coup would introduce Guatemala to “a long and bloody series of military dictatorships. “

Castillo Armas’s himself would be assassinated three years later.