From Labor's Champion
June, 1989
By Jim Rosenbaum
In the last issue of Labor's Champion we saw how the development of the Mexican oil industry, under the domination of the U.S. monopolies, helped to increase rather than diminish Mexico's foreign debt. But this has been true generally for the growth of all of Mexico's industry. In the main, U.S. finance capital has sold the means of production (technology, plants, machinery, raw material etc.) to Mexico. Sometimes the arrangement just involves the sale of technology to Mexican state enterprises. In other cases, U.S. monopolies established their own factories in Mexico through Mexico's joint enterprise laws. In both cases, the export of capital goods to Mexico has reaped huge profits for the U.S. suppliers and increased U.S. domination.
Growing Reliance on U.S. Monopolies
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One measure of the growing subjugation of Mexico's economy by the imperialists can be found in the growing reliance of Mexican enterprises on basic supplies coming from outside the country. For example, while Mexico's industrial output showed a 5-fold increase between 1940 and 1965, its imports of industrial goods used in the plants and other enterprises increased 12.5 fold. Today, only about 2% of the materials used in the belt of industrial plants located near the U.S. border (maquiladoras) are supplied by Mexican producers. One study showed that over 90% of the supplies used in the maquiladoras were sent from the Midwest of the U.S.A.
Yankee monopolies also frequently dominate the export of articles produced in Mexico to other countries in Latin America, adding to the already large share they take of the profits produced by Mexican labor.
During the 1970s, Mexico began to develop heavy industry. But its existing enterprises didn't have the material means to produce the new plants. The development of this industry only further increased Mexico's consumption of imported industrial goods, to the point where imports made up 80% of all such goods in the country. Foreign loans were needed to pay for them and the debt increased accordingly. As imports of production goods increased 9 times during the 1970s the public sector foreign debt increased 6 times.
As we have seen before, the benefits went to the foreign monopolies. For each $1.00 invested in Mexico, these monopolists withdrew $2.50 to $3.00 in profits from the surplus-value produced by the Mexican laboring people.
The reason for this distorted development of the Mexican economy is that its economic relationship with the U.S. is one of exploited and exploiter. The Mexican economy is dominated by U.S. capital and developed in such a way to meet the needs of the U.S. economy, and in particular the needs of U.S. capital, not the needs of the Mexican people. The export of capital from the U.S. to Mexico is organized so as to guarantee an ever greater concentration of capital in the hands of the U.S. imperialists.
The Mexican banking system is one of the main means by which the Mexican economy is tied to the imperialist banks and lending agencies. The National Finance Bank (Nafinsa) got billions of dollars in foreign loans, over half its resources, from the U.S. through the World Bank and other agencies. The largest lenders included the Bank of America, Prudential Insurance Company, Chase Manhattan, Chemical Bank, First National City Bank (now Citibank), as well as Britain's Barclay's Bank and the Bank of Tokyo. The other major Mexican banks also cooperate closely with the international lending agencies and imperialist banks. These loans financed the building up of an infrastructure for agriculture. They financed the development of industry, particularly heavy industry and the petrochemical industry, which built up Mexico as a capitalist country dominated by imperialism. And they saddled Mexico with the second largest debt of all the dependent countries.
The Export of Capital
One of the characteristic features of imperialism (monopoly capitalism) is the export of capital. The advanced capitalist countries have accumulated an immense "super-abundance of capital". But this capital is not used for the benefit of the working people. As V.I. Lenin expressed it: "As long as capitalism remains what it is, surplus capital will be utilized not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries. In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap." (Imperialism, the Highest Stage of Capitalism," Chapter IV, p.73.)
The export of capital can take various forms. Sometimes, it means setting up or buying enterprises that loot the raw materials of another country, as Anaconda and Kennecott did with Chile's copper mines, or as United Brands does with Guatemala's bananas. At other times it means building factories to take advantage of the cheap labor in the dependent countries. This is the case with the maquiladoras (U.S.-controlled assembly plants) in Mexico, the assembly plants in Haiti, the manufacturing of computer chips in East Asia and El Salvador, etc. Frequently, capital export takes the form of loan capital.
Loan capital is in some ways the "purest" form of export of capital. And the debt service on the loan is a form of expropriating the surplus-value produced by the working people of the whole country, not just of the workers in a particular enterprise.
One use for loan capital is state investment in infrastructure. This refers to those sectors of the economy which, though not a source of profit in themselves, facilitate the making of profit in other areas of the economy. Particularly since World War II, the Mexican government has invested large amounts of capital in electrification, highway construction, fuel subsidies and education. We have already seen, in the March issue of Labor's Champion, how irrigation has been used to develop large-scale agriculture producing for the world market, to the benefit of the big capitalists in this sector. While the development of infrastructure is important for any economy, in an imperialized, semi-colonial country it serves mainly the interests of the foreign monopolists. As one example, U.S. economic "exports" are now calling on the Mexican government to improve the highways in the country. They want this only so that new maquiladoras can be set up in the interior of Mexico with easier transport of commodities, in order that U.S. capitalists can take advantage of the cheap labor in these areas as well.
Imperialist Plunder Leads to Mass Uprisings
The repayment of the debt enriches the imperialist bankers, while it leaves the working people of the imperialized, dependent countries in wretched poverty. Every year, the imperialized countries transfer to the imperialist countries over $35 billion more in repayment of loans and interest than they receive in new loans. The total foreign debt of the 15 largest borrowers, of which 10 are in Latin America, went from $348 billion in 1981 to $505 billion in 1988, while the payment of interest alone (not including repayment of the principal) went from $36 billion to $42 billion in that period.
The working people of the less developed countries have been bled dry to repay the imperialist banks and lending agencies. The International Monetary Fund and the World Bank have been the enforcers of the debt repayment plans, imposing austerity programs on the masses in these countries. But this has led to wide-spread uprisings in many countries. So far this year alone there have been revolts in Venezuela, Jordan, Argentina and Nicaragua against these austerity programs. These revolts have made the imperialists and the local capitalists fear for their security. As the New York Times put it on April 12 of this year, the U.S. and Mexican governments have a "stake in averting debt-related uprisings of the kind that left more than 200 dead in February in Caracas, Venezuela." They are also afraid, since the overall debt of the less developed countries has grown so great (about $1.3 trillion in all) that there is the possibility of large-scale defaults and the collapse of the international capitalist financial system. This could, eventually, lead to the development of revolutionary crises not only in the imperialized nations but in the major imperialist powers as well.
The imperialists have come up with a new scheme that is supposed to reduce the overall debt and debt payments, while increasing the hold of the imperialist banks on the economies of the dependent countries. The plan was officially proposed by U.S. Treasury Secretary Brady in March of this year. It calls for the banks to accept a reduction in the amount owed to them, by about 20%, recognizing that they would be unable to get back the full amount of the debt in any case. In return, the banks would be able to exchange the remaining debt for investments in the debtors economy or for bonds issued by the debtor. This is called a "debt swap." The whole arrangement would be backed by guarantees from the U.S. and other imperialist countries. (These guarantees are not unlike the government bail-outs of the bankrupt saving and loans institutions in the U.S., which place the burden on taxpayers, mostly the working class.)
The U.S. monopolists have been getting much of the surplus value extracted from the Mexican working people through the repayment of the debt. But they have always wanted to get direct ownership and control of Mexico's state-owned industries, such as the oil and airline industries. They are hoping that the "debt swap" will allow them to do this. This February, the U.S. Chamber of Commerce called on the Mexican government to "solve" the debt crisis by selling its state-owned industry to its international creditors. While the monopolists are talking of "debt swaps" to reduce the debt, new loans from the imperialist banks and lending agencies are continuing. And the impoverishment of Mexico's working people is increasing.
But as we shall see in the next issue of Labor's Champion, the workers' movement in Mexico is also growing. The Mexican working class is rallying the entire Mexican people to resist U.S. imperialist domination and bring about national and social emancipation.
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