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.
World History
