The Effects Of Interventions During The Cold War On The Latin American Economy

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The effects of interventions during the Cold War on the Latin American economy

What changes were in the Latin American economy derived from the cold war?

Now that the reason for the Cold War is already explained, it is possible to talk about the influence he had in the Latin American economy. Previously, an agro -export model predominated in this region that allowed foreign capital flow. Latin America was not a continent of industrialized states;Therefore, it depended a lot on the exploitation of the primary sector to maintain a stable economy in each of its belonging territories. Great depression strongly destabilized this model. This had an impact on the US trade relations with LATAM and reduced the purchasing capacity of property of the first. The collapse of foreign companies caused that, in Latam, they had to adapt and put aside agriculture to make their way in the industrialized world. Hence, the internal production of its goods and the cooperation between LATAM nations was favored.

The conflict between the US and the USSR caused LATAM to depend much on the foreign market. Shortly after the Marshall Plan appeared, the Economic Commission for Latin America and the Caribbean (ECLAC) appeared. This is an entity derived from the United Nations in order to bring economic development in that region;as well as reinforcing foreign trade. The first headquarters of this entity is located in Santiago, Chile. Developing the economy of a territory that depended openly on its agriculture, was not easy. ECLAC had to adopt a theory that allowed him to face the challenges that such task entailed. This theory required an approach to the establishment of foreign relations and international trade. Another necessary element is that this system would have to adapt to the complexity of the international economic system and its inequalities.

Raúl Prebisch, an important Argentine economist, developed Latin American structuralism with Aníbal Pinto and Celso Furtado. These last two propose a methodology based on the history of a country. Consequently, structuralist theory now had both economic and social approaches. This set of factors would represent the proposal for ECLAC that promoted economic development through a scheme. This is clear in the theory of the dependency developed by Prebisch. The theory states that world economic operations follow a pattern or center-periphery scheme. In the first category, influential states fall into the international economic system (EU). In the second, there are underdeveloped and dependent states already industrialized or with broad capital.

According to Prebisch, the states of the periphery would provide those of the raw material center. Subsequently, the latter would use those resources (metals, textiles, edible, etc.) to produce a good. Then, it would export its production to other states or even sell the final product to its matter supplier. Consequently, it would obtain sufficient capital to enrich themselves and increase the submission of Latin American states before their interests. The United States was already an industrialized country for its leadership in the automotive industry and could sell these cars manufactured in exchange for capital. This makes him a country in the center. Compared to Argentina, Chile and Mexico, which were periphery countries rich in mining, agriculture and textiles. Not being industrialized, it was not possible to sell these goods in their territory. The lack of industry limited the client portfolio and made it impossible for its purchase.

The economic model resulting from these efforts is the industrialization for import substitution (ISI). The way in which this model operated is based on favoring local trade;through industrialization and intervention of the State. The latter, through economic stimuli, complied with supporting the development of industrialization in Latin American territory. To complement the above, there was also intervention by other economic agents. These were private benches or financial institutions in which the State had some influence;same that would ensure exclusive credits to local industries. As a result, the importation of Latin American product showed high compensatory rates. Regarding this, there were figures close to 74% in Mexican import, 84% in Argentines and 184% in Brazilians.

These economic policies are made up of a protectionist nature of the model;because he sought to get rid of foreign trade and focus on the national market. The objective of these measures was to repeat the patterns made in European states when they were still in the process of development. The expectation was that, eventually, Latin America was able to become both producer and exporter of their manufactured goods. This was planned because the capital obtained from import payments reached the hands of industries. One of the disadvantages of such economic operations is that the primary sector would not see this capital arrive. This would go to industrial investors, as well as other local industry representatives. This disadvantage turned out to be the Achilles heel of the economic and cause of the strong criticisms to which he was subsequently subject because he did not favor the agricultural sector.

In Guatemala, one of the first efforts to obtain economic autonomy against foreign interests happened. United Fruit Company was an American company present in that state and had a strong influence on its economic decisions. This influence existed thanks to the links of its representatives with the US government. Among them, American secretary John Foster Dulles and his brother, who was director of the CIA, Allen Welsh Dulles. From here the term ‘’ banana republics ’’ arises . The then president, Jacobo Affenz, decides to promote agrarian reform that would give land to the peasants of the Guatemalan Labor Party (PGT) to work them. Many of these lands were owned by the UFCO and expropriate them would represent an economic blow;Therefore, he is overthrown in 1954 by the CIA.

Another example is that of Chile and the Popular Unity of Salvador Allende. According to development problems, since 1952, Chile already had American investment in its infrastructure. And with the support of the International Monetary Fund, there was an industrial monopoly focused on the exploitation of copper and iron mines, as well as saltpeter. This monopoly led inflation and devaluation of currency in the country, since Chilean workers did not have sufficient remuneration for their work;to the point of food and housing shortage. In an attempt to relieve the crisis, beyond the copper and aims to establish a communist government that would go against the capitalist current and the foreign companies involved. As in the previous case, the US government sought how to stop this threat. Finally, Allende is overthrown by Augusto Pinochet in 1973.

This interventions pattern also happened in places like Argentina, Panama and Nicaragua. Latin American states had something in common: economic crisis, high unemployment rates and abandonment of the agricultural sector. Those were the costs of industrialization. However, this happened and the objective was fulfilled. Already, approximately in the 80s, another stage of the Latin American economic system began. This stage is called the lost decade. He obtains this name for the financial crisis that happened in Latam during the 80s, following the 1979 oil crisis. This crisis was mostly reflected in Mexico and Venezuela;for being crude oil exporters. To settle this debt, the Baker Plan and Plan Brady, respectively, entered into circulation. Argentina and Bolivia also suffered a fall in their gross internal investment.

To complement the above, there are the figures shown by the Inter-American Development Bank of the year 1980-1985. In Argentina, the Iib was 22.764 MDD and 8.899 MDD. In Bolivia, it was 804 MDD and 647 MDD. The strategy proposed by the World Bank and the IMF to settle the debt contracted by the Third World did not work at all. The benefits were received by recovering part of its capital lost by the crisis. As a solution, another economic model appeared. This is the free market model -also called liberalist-. As contrast to the protectionist model, this does not require state intervention in the economy. This would bring interest clashes;mainly for the leading role of private benches.

This is a model that works through supply and demand laws. The market is now full of goods and services;ready to be sold to the highest bidder. In addition to reducing protectionism, it promotes reduction to public spending. The existence of state companies is getting smaller. On the contrary, privatization increases in this type of companies. According to Smith, this is the best administration of resources and corruption of state policies is less likely. The role of the State is merely guaranteeing freedom in economic operations. Also, there is higher priority to the world market rather than the national. Theoretically, the limitations are null and trade flows regardless of the country of origin of said good or service. Currently, the external debt in Latam still exists, and the market revolves around an economy where private companies are benefited.

American imperialism

To establish a relationship between these events and realism, we must explain the background of US interventions. US hegemonic strategy is strongly focused on coercion and threat. Something common during the Cold War, were the preventive wars . Noam Chomsky makes an interesting criticism about it. In hegemony or survival, it states that EU resorts to these in order to prevent all kinds of nationalism or economic autonomy. The action method is to finance coups and the search to control all energy source. Also, seek control of production – be in Latam or not – to prevent other states from obtaining stable capital and depending openly on the US. Production control and liberalist model would ensure an indisputable advantage for the US.

This imperialism cannot allow a decline. It is true that EU currently has the greatest economic presence around the world. If another state or region obtained greater economic and military power than EU, it would have a strong impact on their interests. Mainly, multinational companies would lose prominence in the international economy. In other entities, such as the OAS or the UN, EU would lose its influence and that of others – as Russia or Latam – would increase. The same goes for themes corresponding to international banking, such as the IMF or the World Bank. In figurative sense, EU represents a goliath on which it is still uncertain to know if a David will have. American foreign policy is imperialist in nature. The history and international system demonstrates it with facts.


The cold war marked a milestone in Latin American economic policy. This was affected by the ideological conflict between capitalism and communism. Mainly, by the establishment of puppet or dictatorial governments that favored one current or another. EU and the USSR exercised their power through subsidiary conflicts and economic reforms the region. The objective of this was always to ensure their own national interests. An example of this is the recovery of US capital with the Brady and Baker plans. This strategy did not work for Latin America;On the contrary, external debt increased and caused a stoppage in regional GDP. Despite this, the cold war also had positive effects. Such as foreign investment and the appearance of national industries. In addition, improvement in terms of infrastructure and commercial relations is undeniable.

Western and Eastern pressure forced Latam to abandon a farmer economic model, to enter an era of industrialization. In turn, it worked like a playground in search of superiority. Subsequently, he opened the way to modernization and saw the end of the bipolar world to enter the era of globalization. The appearance of ECLAC, supported the regional economy by serving as an intermediary with other important international bank organizations. On the other hand, it helped regulate part of the debt, through negotiations with the World Bank and the International Monetary Fund. The argument proposed in the introduction is sustainable, for the events that triggered the eu vs USSR conflict. In addition, Prebisch had already exposed the inequality of the international economic system. An economic model does not always seek the community;It is based on interest.

War is a useful tool to achieve a hegemonic position. Other tactics, such as espionage, are also key elements. In the case of the cold war and Latin America, it is the clear reflection of the establishment. The evidence of this is the incessant amounts of money that EU spends on armament and the conflicts where any presence had a presence. While diplomacy is also a tool, the sovereignty of the State is a priority. To give an idea of the scope that a war has, there is a Clausewitz date: ‘’ The same political objective can cause different reactions, in different nations and even in the same nation, at different times.’’. Of the war treaties as the previous. 

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