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10-08-2015, 16:51

The Economy and the United States

At the beginning of the twentieth century, the economy of Latin America was based largely on the export of foodstuffs and raw materials. Some countries were compelled to rely on the export earnings of only one or two products. Argentina, for example, relied on the sale of beef and wheat; Chile exported nitrates and copper; Brazil and the Caribbean nations sold sugar; and the Central American states relied on the export of bananas. Such exports brought large profits to a few, but for the majority of the population, the returns were meager. DuringWorldWar I, the export of some products, such as Chilean nitrates (used to produce explosives), increased dramatically. In general, however, the war led to a decline in European investment in Latin America and a rise in the U.S. role in the local economies. That process was accelerated in the early years of the twentieth century when the United States intervened in Latin American politics to undertake construction of the Panama Canal, which dramatically reduced the time and distance needed for ships to pass between the Atlantic and Pacific Oceans. By the late 1920s, the United States had replaced Great Britain as the foremost source of investment in Latin America. Unlike the British, however, U.S. investors placed funds directly into production enterprises, causing large segments of the area’s export industry to fall into American hands. A number of Central American states, for example, were popularly labeled “banana republics” because of the power and influence of the U.S.– owned United Fruit Company. American firms also dominated the copper mining industry in Chile and Peru and the oil industry in Mexico, Peru, and Bolivia. Increasing economic power served to reinforce the traditionally high level of U.S. political influence in Latin America, especially in Central America, a region that many Americans considered vital to U.S. national security. American troops occupied parts of both Nicaragua and Honduras to pacify unrest or protect U.S. interests there. The growing U.S. presence in the region provoked hostility among Latin Americans, who resented their dependent relationship on the United States, which they viewed as an aggressive imperialist power. Some charged that Washington used its influence to keep ruthless dictators, such as Juan Vicente Gómez of Venezuela and Fulgencio Batista of Cuba, in power to preserve U.S. economic influence, sometimes through U.S. military intervention. In a bid to improve relations with Latin American countries, President Franklin D. Roosevelt in 1936 promulgated the Good Neighbor Policy, which rejected the use of U.S. military force in the region (see the box above). To underscore his sincerity, Roosevelt ordered the withdrawal of U.S. marines from the island nation of Haiti in 1936. For the first time in thirty years, there were no U.S. occupation troops in Latin America. Because so many Latin American nations depended for their livelihood on the export of raw materials and food products, the Great Depression of the 1930s was a disaster for the region. The total value of Latin American exports in 1930 was almost 50 percent below the figure for the previous five years. Spurred by the decline in foreign revenues, Latin American governments began to encourage the development of new industries to reduce de- pendence on imports. In some cases—the steel industry in Chile and Brazil, the oil industry in Argentina and Mexico—government investment made up for the absence of local sources of capital.

 

 

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