Latin America since Independence

4 The Export Economies

Latin America underwent a profound physical transformation between 1850 and 1900. In 1850, the colonial period lingered on almost everywhere. The pace of life was slow in both urban and rural areas. Goods were still transported by pack mules, oxcarts, or on the backs of Indians and African slaves, and the small volume of exports was loaded onto sailing ships in primitive ports. Cities, even the capitals, were still small. The elites lived close by the main square, where the cathedral or principal church and government offices were located, in colonial-era single-story adobe houses with tile roofs and interior patios.

Half a century later, the cities had grown and the larger ones featured horse-drawn or electric streetcars, paved streets, and gas or electric lighting. In the larger countries, factories belched smoke in the rising industrial districts on the outskirts. Elite houses in the colonial center had been divided up into tiny dwellings or demolished and replaced with tenements to accommodate the growing ranks of rural-to-urban migrants. Enriched by the export economies and increasingly influenced by Europe through modern communications and travel, the wealthy built their new mansions on the edge of the colonial city. Admirers of France and England, they built in Second Empire, Georgian, and other European styles. Reflecting their wealth and political power, elite men in most national and some provincial capitals built exclusive clubs for themselves—called the Club de la Unión in several places—where they consumed luxury foods and French wines and cognacs while making their financial and political deals.

By 1900, modernization had penetrated the countryside in select regions. Railroads had reached into the hinterlands, replacing animal traction in the conveyance of foodstuffs to the cities and wheat, cattle, coffee, sugar, and other commodities to ports that had been redone to accommodate large steamships. Mechanized agriculture had appeared in some areas, and refurbished or newly opened mines featured steam-driven machinery and giant ore crushers. Telegraph lines carried news instantly in the modernized parts of the country. Electricity and telephones occasionally reached beyond the cities.

Latin America’s transformation was more than physical: it was economic, social, political, cultural, and in several areas, ethnic. It was also incomplete: Some regions were little changed during this half-century, while in others there were few reminders by 1900, and certainly by 1930, of the lingering colonial period that was so evident in 1850. Latin America’s integration into the new world economy drove this great transformation.

THE GLOBAL ECONOMY AND LATIN AMERICA

A global economy began to emerge in the second third of the nineteenth century. By the 1880s, globalization had impacted many of the world’s countries and Europe’s colonies, and the pace of the world market’s expansion continued to accelerate until it was set back by World War I. After a few years of recovery, the Great Depression that began on Wall Street in October 1929 destroyed the economic ties that bound the world together and ended the first global economy (we now live in the second global economy).

The world economy grew out of the Industrial Revolution, which started in the late 1700s and centered in Great Britain. The Industrial Revolution drew on a revolution in technology. Steam power was harnessed to manufacturing and transportation, particularly railroads and oceangoing ships. Electricity, new mining techniques, and innovations in agricultural production were some of the other technologies that became common in the mid-to-late nineteenth century and underpinned the new world economy.

By the last third of the nineteenth century, industrialization had advanced to the point that Britain, France, Germany, and a few other European countries had accumulated capital to export and required large and growing quantities of raw materials that they could not acquire domestically; the United States was not far behind. The industrial countries also needed markets abroad for their manufactured products. These dynamics drew the independent countries of Latin America and Europe’s Asian, African, Caribbean, and Pacific colonies into a close economic relationship with the industrial countries based on the exchange of raw materials for manufactured goods. Growing demand for raw materials and the desire for captive markets led to the last major act in European imperial expansion: the partitioning of sub-Saharan Africa among several European powers in the 1880s.

Latin America had great potential for participation in the global economy: abundant mineral resources, plenty of land suited to agricultural production, and in most places, available labor. From the time of independence, Britain had made arrangements with the fledgling countries for free trade; thus the manufactures sent to Latin America in exchange for raw materials paid low tariffs, creating the institutional framework needed for the emergence of the global economy. What Latin America lacked, in order to respond to the new world market demands, was capital, technology, and in some areas, labor.

To tap Latin America’s resources, the industrializing European countries and the United States invested their capital in railroads, mines, land, processing plants, ports, steamship lines, and other facilities designed to extract raw materials or grow foodstuffs and transport them to market. They also invested in government bonds, which were not as risky by the 1880s as they had been at the time of independence; in banks; and in utilities such as power plants, urban lighting, and street car companies. Most capital came initially from Great Britain. The leader in the Industrial Revolution, Britain had capital to invest around the globe: Its investment in Latin America grew nearly tenfold between 1870 and 1914, to some $3.6 billion, accounting for around half of total foreign investment in the region. Meanwhile, the United States became the dominant foreign investor in the Caribbean Basin by the turn of the twentieth century, having placed around a billion dollars in Mexico and hundreds of millions in the Caribbean islands and Central America.

Latin America’s participation in the world economy would not have been possible without a revolution in transportation, beginning with railroads. Steam locomotives were hauling freight in England by 1825, and rail quickly spread to the European continent, the United States, and beyond. Latin America’s first short railroad opened in Cuba in 1837 to haul sugar from plantations to ports. From there, rail lines spread to the continent, and by 1930 Latin America boasted some 79,000 miles of track (by comparison, the much smaller Britain had 33,000 and the United States 431,000 miles of track). By the 1910s, nearly a third of all direct foreign investment was in railroads. Rail allowed for the profitable shipment of bulky, low value goods such as wheat and unrefined ore; it cut shipping costs dramatically, particularly in the extreme topography of the Andes and parts of Mexico and Central America.

The railroads were built primarily to facilitate exports; they connected at the ports with the other half of the transportation revolution, the steamship. The first steamships were built early in the nineteenth century, and they were regularly crossing the Atlantic by the 1830s. Steamships began serving Latin American ports by the 1840s, significantly cutting sailing times to and from Europe and the United States. As shipyards increased the size of the steamships they produced, over time the cargo capacity of steamships dwarfed that of sailing ships and the cost of shipping dropped sharply.

A partial list of other new technologies that underpinned Latin America’s entry into the world market includes the cyanide process for refining silver and gold; modern smelters; steam-powered sugar mills, dredges, mine pumps, and other machinery; cranes for loading and unloading at ports; electricity; the telegraph; the telephone; and agricultural machinery such as the mechanical wheat binder, the steel plow, and barbed wire. A submarine cable that linked Brazil with Europe in 1874 sped communication exponentially.

Railroad in Minas Gerais state, Brazil, 1880s Source: Library of Congress

With capital and technology flowing in and labor available in most areas, Latin America was producing exports on an unprecedented scale by the 1880s. Most export products fit into one of three categories: minerals, food staples, and luxury foods. Among mineral exports were silver, which rebounded from its postindependence decline; gold; nitrates for fertilizer and gunpowder; copper for the nascent electric industry; tin; petroleum; and a host of other minerals with specialized uses. Among the food staples destined for a hungry Europe were wheat, barley, and other grains along with beef and lamb, and bananas—a newly introduced food which rapidly became a favorite in both the United States and Europe. Luxury foods included products that were not essential to life but which, with the rise of disposable income among the middle and working classes in the industrializing countries, became items of mass consumption: coffee, sugar, cacao (to be refined into chocolate), and finer cuts of meat. Outside these three primary categories of exports were rubber from the Amazon Basin, wool, cotton, quinine (for use against malaria), henequen from Mexico’s Yucatán peninsula (which supplied the demand for agricultural binding twine), and other regionally important commodities. It is worth noting that of the main agricultural and animal-based exports—sugar, bananas, coffee, cacao, wheat, beef, lamb, wool, and cotton—only cacao is native to the Americas.

Today, we readily identify the countries where our raw material imports from Latin America originate. This association of product with country dates to the era of the export economies: While there have been some changes over time, such as wines from Chile and Argentina; soy from Brazil, Argentina, Paraguay, and Bolivia; cocaine from several Andean countries; fresh-cut flowers from Colombia; and others, raw material export patterns set in the nineteenth century have continued into the twenty-first. The Central American countries and Colombia supplied and continue to supply coffee from their highlands and bananas from their tropical Caribbean lowlands. Cuba, the Dominican Republic, and Puerto Rico have relied most heavily on sugar, and secondarily on tobacco. Bolivia supplied silver until around 1900, then became the world’s major exporter of tin. Chile exported minerals: nitrates until the 1920s, then predominantly copper. Argentina and Uruguay specialized in food staples, including wheat and other grains, meat, and wool. Brazil’s major export was coffee, with rubber in second place until that commodity collapsed around 1913. Venezuela and Ecuador defied the pattern of continuity in raw material exports: Petroleum surpassed Venezuela’s traditional leaders of coffee and cacao in the 1920s and Ecuador’s heavy reliance on cacao gave way to growth in banana production, and eventually to oil. Peru and Mexico were fortunate to develop a wide variety of mineral and agricultural commodities for export.

ECONOMIC AND SOCIAL IMPACTS OF THE EXPORT SECTORS

Of all the Latin American countries, Argentina experienced the most profound transformation during the era of the export economies. A major reason for this far-reaching change was the geographic breadth of the area affected by integration into the world market. In many countries, relatively small export enclaves developed around mines or agricultural areas where certain export crops such as cacao, bananas, or henequen could be profitably grown. In Argentina, by contrast, the primary export commodities—grains and animal products—were produced throughout much of the country and then passed through processing plants in Buenos Aires and port cities along the Paraná River. This pattern spread the economic impact widely. The other important factor driving Argentina’s transformation was immigration: Lacking sufficient domestic population to produce and process the exports, Argentina turned to Europe to supplement its labor force, undergoing a profound demographic change in the process.

The success of Argentine exports resulted primarily from Europe’s inability to feed itself after mid-nineteenth century because of urbanization and soil exhaustion (hence the demand for fertilizers, including Peruvian guano and later, Chilean nitrates). Thus, wheat and meat were in constant demand. Secondarily, Argentina supplied wool for the booming textile factories in Birmingham and Manchester, England, and elsewhere. But until the last quarter of the nineteenth century, Argentina lacked the capital, technology, and labor needed to develop exports.

At the dawn of Argentina’s transformation, a substantial part of the country’s territory, mostly south of the Río Colorado in northern Patagonia, was still in the possession of Indians. Driving the Indians off of lands capable of producing for export became a national priority. The “conquest of the desert,” facilitated by the new technology of the repeating rifle, took place in 1879–1880 under the direction of future president General Julio Roca. The brutal expulsion of the natives brought into the national orbit some 225,000 square miles of land more arid than the pampa húmeda (wet plain) inland from Buenos Aires but, with the benefit of irrigation, very productive for cattle raising and agriculture. As had occurred earlier, the newly conquered lands were acquired in large units by the wealthy and influential—many of them already owners of large estates known in Argentina as estancias.

The development of the Argentine export economy began with cattle. The Argentine plains were rich in wild cattle descended from stock introduced by early Spanish settlers and gone feral, grazing on the native grasses of the pampas. The gauchos so despised by the progressive elements of Buenos Aires lived by harvesting these “creole” cattle, often eating only the delicacies and leaving carcasses to rot. A colonial industry had developed to produce beef preserved by salting; most of this was exported for consumption by slaves in Brazil and eventually, Cuba. This saladero business continued well past independence, but its tough and tasteless product was not suitable to European palates.

The transformation of the cattle economy began in earnest in the 1870s. The first imperative was improving the meat. This required the importation of breeding stock of beef cattle, mostly Shorthorns and Herefords from England, to mix with the creole cattle and recast the genetic pool. In addition to imported pedigree cattle, two technological innovations were essential to this endeavor: barbed wire fencing, to keep the mixed-blood stock enclosed in order to prevent roaming creole cattle from breeding with them; and the steel plow, developed to conquer the native deep-rooted grasses of the U.S. Great Plains. The steel plow was needed in the pampa to dig up native grasses so that alfalfa, also protected from marauding creole cattle by barbed wire, could be cultivated to feed the genetically improving bovines.

Huge capital investment in infrastructure underpinned the new beef economy and brought large-scale technological change. By 1914, Argentina had received $3.2 billion in direct foreign investment, half of it British; this represented approximately 40 percent of all foreign investment in Latin America. Railroads were essential, as cattle headed for export could not be driven overland without toughening the meat. Argentina’s first track was laid in 1857; by 1913, the country had Latin America’s most extensive rail network, twenty thousand miles of mainly British-owned track radiating out into the interior from Buenos Aires and the river ports of Rosario and Santa Fe—clearly designed for the export economy rather than for tying the country together. Originally, cattle were herded onto steamships at Buenos Aires and upriver cities in ports deepened by steam-powered dredging and modernized by steam-driven loading equipment. In 1876, a French steamship, the Frigorifique, launched the era of chilled and frozen beef exports to Europe. This technological innovation gave rise to the frigoríficos, or meat-packing plants that proliferated near the ports. In addition to beef, other animal-based exports included lamb, wool, and hides.

Argentina Today Fact Box

Area: 1,073,518 square miles

Population: 43,431,886

Population growth rate: 0.93%

Urban population: 91.8% of total

Ethnic composition: white 97%, mestizo and indigenous 3%

Religious affiliation (nominal): Catholic 92%, Protestant 2%, Jewish 2%, and other 4%

Life expectancy: 77.69 years

Literacy: 98.1%

Years of schooling (average): 17 years

GDP per capita (U.S. dollars): $22,600

Percentage of population living in poverty: 30%

Household income (proportion in the highest and lowest 10%): highest 32.3% and lowest 1.5%

Military expenditures as percentage of GDP: 0.91%

Internet users (percentage of total population): 59.7%

Source: The World Factbook (Central Intelligence Agency, Office of Public Affairs).

Note: GDP, gross domestic product

The rise of a grain export economy further transformed Argentina. As late as the 1870s, the country was a net importer of wheat; by 1909, it had become the world’s largest wheat exporter. This turnaround occurred in tandem with the development of the beef export economy. The contraction of roaming creole cattle created space for wheat, which the steel plow made possible to grow and barbed wire protected from the remaining feral stock. Horse-drawn binding and threshing machines, developed for use on the U.S. plains, made possible a fifteen-fold expansion of wheat cultivation between 1872 and 1895, to some twenty-two million acres. Wheat rode the same rails as cattle, to flour mills that sprouted along the Paraná River and in Buenos Aires, and used the same ports for loading onto steamships bound for Europe. Besides wheat, grain exports included maize, barley, rye, and linseed.

Buenos Aires harbor, c. 1910 Source: Library of Congress

The total value of Argentine exports grew ten times in the forty years between 1871–1874 and 1911–1914, and more than doubled again by the late 1920s. This spectacular economic growth, which made Argentines confident that their country would soon surpass the United States as hemispheric leader, was underpinned by the millions of dollars of British investment and by technologies developed in the Industrial Revolution. But it would not have been possible without an influx of human capital that made Juan Bautista Alberdi’s dream of burying the rustic gauchos beneath a wave of European immigrants come true (Chapter 3).

Between 1857 and 1914, Argentina received some five million European immigrants, at a pace that increased substantially in the 1880s. Of these, approximately 3.5 million stayed in Argentina. Poverty, famine, loss of land, destruction of artisanry in competition with manufactures, politics, and war—the same forces that drove greater numbers of Europeans to the United States during the same period—pushed these immigrants out of their homelands. Some were attracted by colonization companies offering free passage and promises of land—promises that often failed to materialize. Most were lured by news of opportunities and by very affordable passage on steamships that carried exports to Europe and had space available on the return voyage. Passage became so cheap that thousands of Italian peasants migrated annually as golondrinas (swallows returning to the same nests every year) during the European winter, when they were idle at home, to the Southern Hemisphere summer where they worked the wheat harvest, moving in droves from north to south and returning home with money in their pockets in time for spring planting. Of the immigrants who settled, many initially worked on cattle or wheat estancias but found greater opportunities in the cities, particularly in rapidly growing Buenos Aires.

Dining room of immigrant hotel, Buenos Aires, c. 1910 Source: Library of Congress

The 3.5 million immigrants who became permanent residents, along with their offspring, swelled the Argentina population from 1.7 million in 1869 to 4 million in 1895 to nearly 8 million in 1914, when the outbreak of World War I temporarily halted immigration. During the same period, the United States absorbed around twenty-five million immigrants. Yet, Argentina was much more a country of immigrants than the United States. At the high point of the Great Migration, 14.4 percent of the U.S. population was foreign born; building on a far smaller pre-immigration population, Argentina reached a high point of 30.3 percent foreign born in 1914; in Buenos Aires, the figure was around 50 percent. Italians and Spaniards predominated among immigrants to Argentina, while people from all of Europe and small numbers from the non-European areas of the Ottoman Empire rounded out the mix. The era of mass migration also gave Argentina by far Latin America’s largest Jewish population.

During the period of the export economies, the capital cities of Latin America engaged in an undeclared competition to become the Paris of the hemisphere. Virtually all capitals built a national theater in imported European style, along with civic buildings, boulevards, and new residential neighborhoods for the elites—all reflecting export-based wealth—but only a few capitals were contenders for the title. At its centennial celebration of independence in 1910, Mexico City showcased the beautiful, monument-rich Paseo de la Reforma, a new central post office in Italianate style, and a neoclassical communications building. Construction of the sumptuous Palace of Fine Arts, planned for the centennial, ran into difficulties and was finally completed in 1934. Santiago offered the wide Alameda de las Delicias, the ornate stock exchange, the Club de la Unión, the neoclassical National Library, and elite neighborhoods reflecting the financial bounty of nitrate exports. Rio de Janeiro boasted new boulevards, the Theatro Municipal, the Palácio Monroe, the Palácio Laranjeiras, and the colossal, almost-finished statue of Christ the Redeemer overlooking the city.

But Buenos Aires was the clear winner. It had the elegant Retiro railroad station, beautiful neighborhoods, fancy restaurants, upscale department stores, and halls where the tango (a Buenos Aires invention) was danced. It featured paved streets lit by electricity, electric streetcars, and water and sewer systems. It had Latin America’s first subway, opened in 1913. The Colón Theatre, with its acclaimed décor and acoustics—rivaled only by the Milan opera house—attracted the world’s premier opera and repertory companies. And Buenos Aires boasted the world’s widest boulevard, the Avenida de Mayo which, as Baron Haussmann had done with his elegant Parisian boulevards, erased older parts of the city in the interest of progress. European visitors were reminded of Paris, and today’s tourist is still dazzled by the Buenos Aires of a century ago.

Club de la Unión, Santiago, Chile Source: Library of Congress

While Argentina underwent the greatest transformation as the result of integration into the world economy, other countries lagged. Paraguay failed to develop products for the world market. Haiti’s participation in the world economy was minimal and therefore had little transformative power. The basic problem for Haiti was that its formerly dynamic sugar export economy had been destroyed during the slave-led independence movement. With cane fields burned, sugar mills destroyed, and capital gone, Haiti’s leaders were hard pressed to promote development. By the late nineteenth century, Haiti exported coffee and cacao, but in low volume.

Honduras may have experienced the least change of all Latin American countries that participated robustly in the world market. Whereas Argentina’s export economy stimulated economic development and modernization throughout the country, Honduras’s export economy developed as an enclave that remained largely separate from the domestic economy. Honduras’s primary export was bananas, which accounted for 50 percent of the total value of its exports in 1913 and reached nearly 80 percent in the late 1920s. While banana production was important throughout Central America as well as in Colombia, Ecuador, and some Caribbean islands, no other republic was so beholden to the tropical fruit as Honduras—the world’s largest banana exporter.

Bananas were introduced into the Caribbean from Africa early in the colonial period, but their production was localized and limited. In the mid-1800s, a few ship captains began picking up stalks of the fruit to sell in New Orleans and other gulf ports. Presentation of bananas wrapped in tinfoil at the 1876 Philadelphia Centennial Exposition boosted the fruit’s popularity, and the demand for bananas in the United States grew until the potential for major exports of the fruit became clear. U.S. entrepreneurs then rushed to form companies for the cultivation of bananas on plantations in the Caribbean lowlands of Central America. They acquired huge tracts of land in the steamy, lightly populated north coast of Honduras by purchase or concessions offered by a government anxious to enter the world economy. Failing to lure many Hondurans from the interior to the disease-ridden lowlands to develop the plantations, railroads, and port facilities needed to grow and ship the bananas, the companies imported most of their labor from Jamaica and other West Indian islands.

In 1899, a merger of banana and shipping companies formed the United Fruit Company (UFCO). After this consolidation, UFCO enjoyed the dominant position in Honduran banana production and exports. It became a vertically integrated organization, developing its own railroads and ports and an inventory of over one hundred ships, known as the Great White Fleet, to ship the fruit to the United States. To fill the ships for the return voyage and to economize on provisioning its workers, the company imported virtually all the food, clothing, and other goods consumed on its plantations via the fleet. The banana enclave on the north coast was essentially autonomous from the rest of the country, and it was more closely tied to the United States than to the republic of Honduras. The cities on the north coast, San Pedro Sula and La Ceiba, prospered from their location while Tegucigalpa stagnated.

By importing labor and supplies, UFCO injected little money into the Honduran economy through payroll or the purchase of food and other essentials from national sources. Having financial resources far greater than the national government of Honduras, UFCO shaped official policy so that it paid very little in property and export taxes. It promised to build a railroad connecting Tegucigalpa with the coast but reneged, leaving Honduras with the only capital city in Latin America, with the exception of land-locked Paraguay, not connected to a seaport by rail. Thus compared to Argentina’s transformative insertion into the world market, Honduras’s participation in the global economy brought little development and modernization beyond the banana enclave itself.

UFCO not only dominated Honduras, but it was also the largest and most powerful entity in Central America, and it later expanded to Colombia and Ecuador and several Caribbean islands. It was known as “the octopus” for the extent and variety of its enterprises and its political power in the region. In addition to the Great White Fleet and the ports it built and owned, UFCO by 1912 controlled most of Guatemala’s railroads through the International Railways of Central America and soon extended its railroad network to El Salvador. In 1913, UFCO established the Tropical Radio and Telegraph Company that served much of Central America. The company thus achieved a near-monopoly of transportation and communication and charged high, even exorbitant rates for its services. To gain concessions of land and operating rights and to keep its taxes low, UFCO bribed government officials and even fomented coups on occasion. As a result of its dominance of Central America, UFCO became one of the primary symbols of “Yankee imperialism” (Chapter 6).

Honduras Today Fact Box

Area: 43,278 square miles

Population: 8,746,673

Population growth rate: 1.68%

Urban population: 54.7%

Ethnic composition: mestizo 90%, Amerindian 7%, black 2%, and white 1%

Religious affiliations (nominal): Catholic 97% and Protestant 3%

Life expectancy: 71 years

Literacy: 88.5%

Years of schooling (average): 11 years

GDP per capita (U.S. dollars): $4,900

Percentage of population living in poverty: 60%

Household income (proportion in the highest and lowest 10%): highest 42.4% and lowest 0.4%

Military expenditures as percentage of GDP: 1.05%

Internet users (percentage of total population): 19.4%

Source: The World Factbook (Central Intelligence Agency, Office of Public Affairs).

Note: GDP, gross domestic product

Hauling bananas in Central America Source: Library of Congress

Honduras’s banana economy was far from the only export enclave in Latin America; mining operations usually developed in enclaves, but most of them were not as autonomous from their host countries as was Honduras’s banana zone. Whether in the Andes of Peru and Bolivia or the northern deserts of Mexico, and whether nationally or foreign-owned, mining companies normally hired local workers for most of the jobs they created and purchased food and other supplies from the region in which they operated. Mined ore had to be transported by railroad, the construction and operation of which created more jobs, and mining normally paid significant taxes. Thus while mining did not transform countries as completely as Argentina’s agricultural exports did, it normally contributed more than bananas did in Honduras to national economic development.

Chile offers an example of a mining enclave that contributed importantly to a country’s economic progress. Chile wrested the nitrate-rich provinces of Tarapacá and Antofagasta from Peru and Bolivia, respectively, in the 1879–1883 War of the Pacific. The government then sold concessions for extracting nitrates, which were in great demand in Europe as fertilizer and the basis of gunpowder, to both Chilean and British operators. Recruiters scoured Chile’s agricultural regions for workers, luring tens of thousands to the remote desert area with promises of high wages. The agricultural heartland, the Central Valley, supplied the nitrate zone with most of the food and drink consumed there; the government even levied a high tariff on Argentine cattle to secure the market for Chilean cattlemen. The export tax on nitrates, set at 10 percent of value, brought in half the government’s revenue from 1890 to World War I. While agricultural producers prospered, the government used its windfall revenue to build a railroad system that knit the country together, create a national system of public education, and expand the bureaucracy. In the Chilean case, the mining enclave was the primary driving force of the country’s substantial economic development during the era of the export economies.

THE PRICE OF PROGRESS: ECONOMIC DEPENDENCY DEEPENED

While generating wealth and modernizing major parts of Latin America, the export economies also created problems. One of these was the establishment of a new relationship of economic dependency. As colonies, the future Latin American countries had been subject to economic control by the mother countries of Spain and Portugal. This meant that the basic economic policies—matters such as what could be produced in the colonies and the regulation of trade—were not made in Latin America but in Europe. Those restrictions disappeared with independence, but with massive foreign investment and the sale of Latin America’s products in the world market, an even stronger dependency arose after 1870.

The Latin American countries depended on forces that they could not control. Decisions about global investment strategy were made in European and U.S. corporate boardrooms: for example, decisions on whether to open a new copper mine in Mexico, Chile, Montana, or Northern Rhodesia (today’s Zambia), or whether to put more capital into banana production in Guatemala or Colombia. Some foreign companies became so large and wealthy that they dominated or at least heavily influenced politics in the countries where they invested, to their advantage. Such was clearly the case of UFCO in Central America. Moreover, foreign investors normally had access to much more capital than did national entrepreneurs, and thus could and sometimes did drive Latin American–owned firms out of business. Foreign investors had the advantage of being backed by their governments, which could use diplomatic pressure to protect and promote their nationals’ interests in Latin America. By the turn of the twentieth century, U.S. investors in the Caribbean Basin had the additional advantage of military backing (Chapter 6).

The price of commodities on the world market was also beyond Latin America’s control. Countries that relied on a single export product were the most vulnerable. For example, the cost of Cuba’s heavy reliance on sugar was illustrated by an extreme price swing following World War I. Pent-up demand drove sugar to a record high by May 1920; then the world market price fell by over 80 percent over the next few months, with serious social as well as economic repercussions. Coffee prices were subject to downward pressure as worldwide production grew, often outstripping demand. The two countries that developed quite diversified export economies, Mexico and Peru, enjoyed some protection against international price swings as falling prices for some commodities might be offset by rising prices for others. Since most of Argentina’s exports were food staples, the country’s economic development was relatively steady.

There were other hazards to dependence on exports—particularly on a single product. Plant disease and hurricanes were constant threats to banana production and caused considerable income fluctuation. Disease decimated Ecuador’s cacao industry, which accounted for nearly two-thirds of all exports in the 1910s. Chile relied heavily on nitrates after 1880 until German scientists developed a commercially feasible system for making synthetic nitrates during World War I, ruining the market for the natural product. Luckily for Chile’s economic welfare, copper exports rose just as nitrates fell, but with its price vulnerable to fluctuations in industrial demand and to competition from other copper-producing areas, copper kept Chile locked in economic dependency.

Rubber is another case in point. The discovery of vulcanization in the 1840s led to new industrial uses of rubber, which created a significant rubber tree-tapping economy along the Amazon and its tributaries by the 1880s. The advent of the automobile age at the turn of the twentieth century further stoked demand, creating a boom in Brazil and to a lesser extent in the upper Amazonian territories of Peru and Bolivia. The rubber boom created misery for Amazon natives, who had been largely ignored by the governments of their countries but who were now virtually enslaved to collect the valuable substance. So lucrative was the business that it justified the construction of a 225-mile-long railroad deep in the jungle, the Madeira-Mamore railway, to ship rubber from the interior Amazon to Europe and the United States. The ornate opera house in Manaus, a boom town that sprang up on the Brazilian Amazon, stands today as a monument to the opulence of the rubber era.

In 1913, the year after the completion of the Madeira–Mamoré railway, the Amazon boom ended under severe competition from Asia. A British national had taken seeds of the wild rubber trees to London in the 1870s, where they were successfully grown into trees in the Royal Botanical Gardens and transplanted to the British colonies of Malaya (Malaysia) and Ceylon (Sri Lanka). The tapping of wild trees in the Amazon could not compete with the more efficient and productive rubber plantations in Asia, and a rapid decline set in. On the eve of the collapse, rubber accounted for some 16 percent of the value of Brazil’s exports, second only to coffee.

During this period, there was one relatively successful instance of Latin American raw material producers’ intervention in the world market to protect commodity prices. Despite growing production in Central America, Colombia, and a few other countries, Brazil dominated the world coffee market in the first decade of the twentieth century, exporting 80 percent of the world’s supply. In 1906, a bumper crop eroded world market prices. With the country relying on coffee for some two-thirds of its export income, the governments of the major coffee states quickly responded by taking large amounts of coffee stock off the market, in a scheme referred to as “valorization.” This unilateral move stabilized coffee prices, although at a lower level than before, and Brazil repeated the maneuver twice more before the Great Depression sank the coffee market.

INDIANS AND THE EXPORT ECONOMIES

Another result of the rise of the export economies was the appropriation of much of the region’s surviving Indian-occupied land. As we have seen, Argentine agricultural and cattle production expanded after 1880 into the interior inhabited by Indians. Coinciding with the Argentine “conquest of the desert,” the Chilean government brought Aruacanian land south of the colonial Bío-Bío frontier under national control and Mexican authorities took aim at the northern territory occupied by Yaqui, Apache, and other Indians just as the United States completed its seizure of valuable native lands.

But much of the land that had potential for development was not on the fringe, but in the heart of several countries where native communally owned villages had survived three colonial centuries and a half-century of independence. Most Indians in communal villages practiced subsistence agriculture while sometimes producing small surpluses to sell or trade outside their communities. The potential of these lands to produce exportable products and feed growing cities increased their value. Thus, a major consequence of Latin America’s integration into the world economy was the transfer of millions of acres of Indian-owned land into non-Indian hands, most of it in the form of large landed estates. Following the appropriation of their land, millions of Indians became a rural proletariat, often working on their own ancestral land for the new landowners. Others were forced to migrate to mining camps or cities in search of survival.

In Mexico, thousands of traditional Indian communal landowning villages, or ejidos, had survived in the central and southern parts of the country. Driven by the lure of profit and aided by a new land law enacted in 1894, large landowners and entrepreneurs set their sights on those ejidos, whose occupants were required to produce valid titles to their land. Many, of course, had no such titles; those who did, illiterate and often not Spanish-speaking, faced overwhelming odds against well-heeled lawyers and judges who ruled in favor of the powerful. By 1910, over five thousand ejidos had lost some or all of the land that their ancestors had held for centuries or longer. At the outbreak of the Mexican Revolution in 1910, over half of all rural Mexicans lived on haciendas, often working the very land that they had until recently owned.

In Guatemala and El Salvador, the driving force of the assault on Indian land was coffee. With the arrival of railroads linking ports with the interiors of those countries, slowly growing coffee exports mushroomed: Guatemala’s grew nearly 500 percent between 1873 and 1900, while El Salvador’s followed a similar path. By 1914, coffee accounted for 80 percent of El Salvador’s exports and 85 percent of Guatemala’s.

Because most landed Indian communities in Guatemala were located above the two thousand—to five thousand–foot elevation most suitable for coffee culture, many of them survived. But most of those located in the coffee-growing altitudes succumbed to an 1877 law requiring privatization of communal land and to pressure from planters. As coffee expanded, the need for labor became acute. Still anchored to their villages and practicing subsistence agriculture, the highland Maya Indians would only sell their labor to the planters under duress. This necessary compulsion took the form of forced labor, legalized debt peonage, and vagrancy laws. In 1876, the government revived the colonial mandamiento, or labor draft. The following year, a law established Guatemala’s notorious vagrancy law that required all male Indians to carry a libreta, or notebook, that recorded their contract for coffee work and the number of days they had worked to fulfill their obligation. Those who could not prove that they were contracted to a plantation for seasonal work were declared vagrants and subject to the mandamiento. Most of those who contracted with growers accepted advances on their wages, which ensnared them in debt servitude and required them to return to the same plantation season after season. Although formally abolished in 1894, the mandamiento persisted into the 1920s and the vagrancy law until 1944.

In El Salvador, a mix of communal Indian villages and mestizo smallholders occupied the lands best suited for coffee. In 1881 and 1882, the government enacted laws that abolished communal property and divided it into individual plots, easing the way for planters to take over through purchase or legal trickery. Vagrancy laws similar to Guatemala’s were instituted in 1881, and a rural constabulary was created for their enforcement. Confiscation of the best coffee land enriched El Salvador’s oligarchy, known as the “fourteen families.” Despite resistance, by the 1920s, the great majority of small landowners had been proletarianized and impoverished, but more punishment awaited them. The Great Depression decimated coffee prices and created mass unemployment. In 1932, government troops confronted protesting idled workers, resulting in one of Latin America’s worst massacres: Between ten thousand and thirty thousand poor Salvadorans were killed in what became known as La Matanza (the slaughter).

The Andean highlands of Ecuador, Peru, and Bolivia were the other region where Indian communal landholding was traditional and widespread. At the time of independence, Bolivia was the most Indian of the new republics, at 75 percent of the population. Two groups constituted the great majority of Indians: two-thirds were speakers of Quechua (the language of the Inca Empire) and one-third were Aymara. The assault on their lands began with 1866 and 1868 laws, at the onset of the revival of silver mining which linked the country to the world market. Issued by the caudillo Mariano Melgarejo, the laws ordered the sale of all communal lands (ayllus), allowing communities to purchase their own lands within ninety days before public bidding began. An 1874 law went further: It abolished the ayllu altogether and allowed individual Indians to buy private plots. Further laws in the 1880s continued the same process. As elsewhere, illiterate, non-Spanish-speaking Indians found it very difficult to defend themselves against hacendados and lawyers. Much land was lost; but true to the colonial Andean tradition of rebellion against oppression, Indians defended their land by force, successfully in several areas. The best known and largest of these rebellions, the one led by Zárate “el temible” (the fearsome) Willka, broke out in 1899.

Despite fierce resistance, Indian land loss accelerated as the new tin export economy that replaced silver by 1900 created large mining camps and spurred urban growth, increasing rural land values. According to an 1846 census, prior to the rise of exports, 63 percent of Indians lived on ayllus; in 1900, after their numbers had grown by around 50 percent, only 27 percent of the larger Indian population clung to their ayllus. In 1880, haciendas occupied one-third of the land on the altiplano, home of the densest Indian population; by the 1920s, the figure was two-thirds. Living and working conditions on the haciendas were extremely oppressive and exploitive. In 1952, Indians would rise throughout the country to take back their land in the Bolivian Revolution (Chapter 8).

In neighboring Peru, Indians retained most of their land until late in the nineteenth century because most export commodities—guano, sugar, and cotton—came from the coast rather than from the Andean highlands where ayllus were concentrated. By the 1890s, however, the export economy picked up steam, railroads penetrated the Andes, mining operations proliferated, urban demand for foodstuffs grew, and Indians faced growing pressure from hacendados backed by regional political bosses, or gamonales. Despite considerable loss, numerous ayllus survived and Peru’s 1920 constitution recognized them as protected legal entities.

As with Peru, Ecuador’s export economy, based primarily on cacao, was located on the coast, far from Indian communal lands in the Andes. Ecuadorian Indians had to fend off expansionist hacendados who coveted their land, but faced no organized legal assault on their properties. After a railroad finally linked Quito with Guayaquil and the coast in 1908, and with the growth of urban markets, Indians faced more pressure to protect their land, but managed to hold onto much of it.

Accompanying and legitimizing the assault on Indian communal lands from Mexico to Bolivia was the pseudoscientific racism propagated by Count Gobineau, Herbert Spencer, and others, which became popular among Latin America’s elites in the later nineteenth century. To them, the superiority of whites was a given; people of all other races were considered manifestly inferior. But Latin American proponents of these theories split over whether Indians were hopelessly savage and backward, or whether they could be redeemed through tutelage and benevolence on the part of their superiors and eventually assimilated.

For the Mexican Francisco Bulnes, Indians were beyond redemption: “The Indian takes no interest in things, is stoical, unenlightened…. He loves seriously only four things: the idols of his old religion, the land that gives him his food, his personal freedom, and alcohol…. The only great occasion he knows is the wake: the presence of a corpse seems to bring him joy, and make him dance.”¹ In 1909, Bolivian Alcides Arguedas described the Aymara Indian of his country as “savage and wild like a beast of the forest, dedicated to his pagan rituals and to the cultivation of that sterile soil in which, no doubt, his race will soon become extinct.”² On the other hand, the Ecuadorian intellectual Luis Martínez well summarized the redemption argument in a 1904 presentation: “I speak in the name of a race, a race that deserves a different fate, because the Indian is not the stupid human being who cannot become civilized, he is not the idiot imagined by some people…. It is a race that still can be what it was before the white man enslaved it in [the] name of a religion that prohibits [Indian] slavery.”³

Both positions justified depriving Indians of their land: If they were completely incompetent and savage, whites should take the land and make it productive without regard to the outcome for the Indian; on the other hand, if they were capable of improvement within their permanent state of inferiority, they must be separated from their historic insularity on the communal lands and brought into the company of their white superiors, who might impart some lessons in civilization while exploiting their labor.

THE END OF AFRICAN SLAVERY

While Indians’ fortunes declined during the era of the export economies, the other group that inhabited the base of the colonial social hierarchy, African slaves, experienced a singularly positive development. The last holdouts of slavery in the Americas were Brazil and Spain’s Caribbean colonies of Puerto Rico and Cuba. The United States’ abolition of slavery during the Civil War, in 1863, ratcheted up pressure on the institution where it persisted, as did growing international condemnation. Both Spain and Brazil ended slavery incrementally. Just as many of the new Spanish American republics had done half a century earlier, they adopted “free womb” laws in 1870 and 1871, respectively; while no more slaves were born thereafter, children of slave mothers were obligated to serve lengthy apprenticeships with the mother’s owner—a condition that differed little from actual slavery.

Puerto Rico was smaller and less productive than Cuba, and slavery there was far less important as slaves accounted for only 5 percent of the population by 1870. An influential domestic abolition movement developed, and even some members of the landowning class became advocates. Three years after the free womb law (the Moret Law), the Spanish cortes abolished slavery in Puerto Rico with compensation to owners.

Abolition in Cuba was more problematic, as the island was the cash cow of Spain’s greatly diminished empire. Cuban sugar exports mushroomed during the nineteenth century, and the Spanish government was reluctant to jeopardize the benefits that the homeland enjoyed by tinkering with a labor system that was deeply rooted on the island. Momentum for abolition came from the first war of independence, the Ten Years’ War (1868–1878), which ended in failure. Abolition was one of the rebels’ goals; and in 1880, Spain enacted a new emancipation law that freed specified numbers of slaves annually, although the beneficiaries also had to continue serving their former masters for several years. A growing acceptance of the notion that sugar could thrive with free labor weakened opposition to abolition on the island. Succumbing to growing domestic and international pressure, Regent Maria Cristina abolished slavery in Cuba by royal decree in 1886 when only twenty-five thousand persons remained enslaved.

In Brazil, an important factor in abolition was the regionalization of slavery. As the traditional sugar economy of the northeast continued its long decline, the coffee export economy centered in the São Paulo region took off, creating a huge demand for labor. As slaves were sold south, the north retained few slaves and no reason to defend the institution on which it had relied so heavily in the colonial period; indeed, two northern states abolished slavery in 1884 and two more followed shortly thereafter. Following the free womb law of 1871 (the Rio Branco Law), which heralded the end of slavery, the Brazilian government began aggressively and successfully recruiting European immigrants who had been loath to enter a labor market dominated by slaves. Large-scale immigration assured Brazilians that labor would be available without slavery. Dissatisfaction with the results of the Rio Branco Law—the children of slaves still being held as virtual slaves—gave rise to a strong national abolition movement in the late 1870s that raised pressure on the national Congress. Emperor Dom Pedro II, a long-time opponent of slavery, weighed in more aggressively. By the mid-1880s, slaves began abandoning their positions en masse, and the Brazilian army refused to carry out its traditional role of slave catcher. As a result, the number of enslaved dropped from some 1.35 million in 1883 to 723,000 in 1887, the year before the “Golden Law” definitively abolished slavery.

Latin America’s insertion into the first global economy profoundly transformed much of the region. The era of the export economies not only brought material progress, modernization, and political order, but it also further entrenched economic dependency. Massive loss of Indian land and the final abolition of African slavery affected the lower ranks of society without fundamentally altering the legacy of a rigid social hierarchy. Progress during this period was real, but it was selective.