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Neo Mercantilist Empire in Latin America
Bush, ALCA and Plan Colombia
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The fundamental problem facing the Bush Administration is expanding and consolidating the U.S. empire at a time of intensifying competition from rivals, growing economic recession in Euro-America and crises in Asia and Latin America, and rising socio-political opposition especially in Latin America, Russia, China and on special occasions in Western Europe and the U.S.

The first part of this paper will discuss the transition from Clinton to Bush: the manifest continuities in strategic goals and differences in style, tactics as well as the sectors of capital and their political spokes people which direct U.S. foreign policy. The second part of the essay will discuss Washington’s historic response to crises and expansion, focusing on the provocation of “Cold Wars” – military build-up, ideological confrontation and aggressive intervention within Third World countries, under the guise of engaging an “external threat” to U.S. security. Washington’s purpose in unleashing Cold Wars is to subordinate allies, impose client regimes in the Third World and extend and deepen imperial control against emerging popular challenges. The paper identifies three “Cold Wars.” The first Cold War began shortly after the end of World War II and was designed to defeat the revolutionary upsurge in Europe, Asia, Africa and Latin America, unleashed by the defeat of fascism and the rise of the anti-colonial movements. The second Cold War was launched by the Carter Administration shortly after the U.S. defeat in Indo-China and was directed at isolating and defending the anti-imperialist movements in Central America (Nicaragua), the Middle East (Iran), Southern Asia (Afghanistan), the Horn of Africa (Ethiopia/Eritrea) and Southern Africa (Angola/Mozambique/South Africa). The Third Cold War has been launched by the Bush Administration faced with economic crises and challenges to the empire.

The third section of the paper will discuss the crises of the empire followed by an analysis of the character and policies of the Bush Administration and specifically how they affect Latin America, including a discussion of U.S. military strategy (Plan Colombia – Andean Initiative) and its relation to ALCA – the twin approaches to the re-colonization of Latin America.

Managing Empire in a Time of Crises

To understand the Bush Administration’s problems and perspectives in managing the Empire, it is essential to examine the Clinton legacy. This requires that we examine the vast expansion of the Empire under Clinton, the domestic economic foundations of overseas expansion and the first signs of the imperial crises under Clinton.

Under President Clinton, the U.S. empire expanded far beyond the frontiers of any President since Harry Truman. From the Baltic countries to the Balkans and then onward toward the southern tier of what was formerly the USSR, the U.S. has established a series of client states, which are either new NATO members or “peace associates” (clients-in-waiting). In Asia, U.S. military has incurred in China’s airspace, modernized Taiwan’s military, bought into South Korea’s major industries and challenges the stagnant Japanese economy for supremacy in the region. Today, the U.S. has military bases on the frontiers of Russia, its missiles only five minutes from Moscow. Washington bombs Yugoslavia, Afghanistan, Somalia with impunity, organizes international “Show trials” in the Hague where is parades its defeated rivals. Washington has military bases in its new satellite states – Albania, Macedonia, Kosova and via NATO in Czech Republic, Poland, Hungary, Bulgaria, etc.

Euro-American empires have succeeded in imposing neo-liberalism on five continents, opening the door to takeovers of lucrative national enterprises (both public and private) and penetration of markets, thus extending and deepening imperial control over the economies of the Third World. The Clinton legacy with regard to the domestic economy, revealed a “two-faced” reality: on the surface an expansive economy covering nine years in which U.S. corporations were able to accrue enormous profits, in part based on the paper earnings of wild speculation on the stock market, the laundering by leading U.S. banks of hundreds of billions of “dirty money” annually, highly indebted consumer spending and huge trade deficits. Clinton’s further deregulation of the financial system and economy led to the highest level of inequalities and concentration of wealth on Wall Street of any U.S. president since the turn of the 19th century.

Thus overseas expansion was built on very fragile domestic economic foundations. Essentially the Empire’s domestic foundations were based on speculative internal investments and costly overseas conquests. By the end of Clinton’s Presidency the unviable and unsustainable economy imploded. While the crises began in the last months of the Clinton regime, it deepened under the Bush Presidency. The signs were evident in all economic sectors.


The collapse of information technologies industries (ITI) and the failure of most biotechnological enterprises were two prominent examples of the speculative propaganda that enticed millions of investors to invest billions of dollars in what amounts to a massive financial swindle. The 70% decline in the value of IT sector is comparable to the fall in stocks during the Great Depression. Most of the stocks which collapsed had stock values up to 200 times their earning capacity. Most of the IT stocks never earned a profit and some had not even produced a marketable product which could generate revenue. Many simply grew because of future expectations promoted by the speculators and swindlers who entered the market early, inflated the value, took their profits and left millions holding worthless paper. Bio-tech industry followed a similar path. Despite the market propaganda which enticed tens of billions from investors promised “miracle drugs” or “miracle discoveries” only 25% of the 400 leading firms made any money and only 63 new drugs were developed during the last 25 years after tens of billions in investments. The crash of these investments prejudiced investors, led to large scale under and unemployment and undermined confidence in the so-called “new economy.” More important the new economy siphoned off hundreds of billions of dollars from productive investments in the fundamentals of the U.S. economy, like new power and energy sources (sun, wind, ocean, etc.). Probably the greatest loss of potential investment funds was in the Y-2 swindle, where tens of billions was spent correcting computers under the dire threat of economic collapse – an event that didn’t take place in countries which spent under a million dollars. The IT bubble was in part stimulated by the scare from propaganda of the Y-2 scam.

The theoretical point is that the Clinton “prosperity” years were based on a paper, speculative economy that was unsustainable and which was fueled by false expectations based on market propaganda, disconnected from the real economy. Along with the predatory foreign policy which pillaged wealth overseas through corrupt privatization programs particularly in the ex-Communist countries, Latin America and Asia, the wealth of the Empire, was based more on political power and media promotion than reasoned market calculations.

The second aspect of the economic crises carried over from the Clinton to Bush regimes is the deep and prolonged recession in the manufacturing sector. From the end of 2000, long into 2001, the manufacturing sector has registered negative economic growth. During the first seven months of the recession over 500,000 jobs have been shed by manufacturers. While some of the unemployed have been absorbed in the low paid service sector, in most cases the redeployed workers experience a 30%-50% decline in wages and health benefits.

The third aspect of the crises is the unsustainable negative external accounts. The U.S. had a 437 billion dollar trade deficit in 2000 which was covered only because of the flows of foreign capital – much of it from Japan but also from “dirty money” from the Third World. U.S. law allows major U.S. banks to legally launder billions of dollars of overseas tax evaders and corrupt rulers. Moreover U.S. banks through ‘correspondent banks’ offshore launder an estimated $500 billion in illegal funds annually. The decline in U.S. competitiveness is in large part due to the siphoning off of billions into the speculative economy namely IT and bio-tech sectors which contributed little or nothing to increasing U.S. productivity.

Sooner or later, but increasingly the former, the U.S. will no longer be able to draw on external funds to make up its trade deficit and the repercussions will be severe on the capacity of the U.S. to maintain its ‘consumer based’ economy and the living standards of its population.

The fourth aspect of the crises is the increasing dependence of U.S. corporation on earnings and profits from overseas subsidiaries. With the decline in the U.S. economy, exports to the U.S. will decline and severely crimp the profits and earnings of neo-liberal economies based on the export strategies. This is likely to reduce profits for U.S. subsidiaries as their markets shrink in their host countries, as well as their markets in the U.S. Moreover, overseas markets are becoming increasingly competitive. European investors particularly Spain, Germany, England have been gaining footholds through buyouts of strategic sectors of the privatized economy in Latin America.

In summary, Clinton’s economic prosperity was based on flawed foundations, leading to huge mis-allocations of investments based on the deregulation of the economy and the states promotion of the speculative bubble. The Bush Administration, which of course, shares the basic “free market” assumptions and imperial goals of their predecessor, has to confront the dual reality of an expanded empire and a deepening crises: these are the economic parameters within policy toward Latin America is framed.

The economy is not the only crises area in the empire confronting the Bush Administration. There is a serious problem emerging from the aggressive politico-military expansion that took place throughout the 1990s. The major characteristic of Clinton’s empire building project was the indiscriminate and comprehensive intervention everywhere, without regard to region, priorities or strategy. Clinton’s concept of Empire was so inclusive that no region of the globe was immune to direct military assault, invasion or penetration. The Clinton Administration engaged in continuous bombing of Iraq throughout his Presidency leading to over 1 million children dying of diseases, malnutrition, etc. Washington declared war (via NATO) against Yugoslavia twice: once in Bosnia and later in Kosova, establishing military bases in Kosova, Albania and Macedonia. In Africa, Clinton sent troops to Somalia, which he later was forced to withdraw and later bombed the country, as he did in Afghanistan. Haiti was invaded in an attempt to impose a client regime. Clinton expanded NATO membership to include the new client regimes in Eastern Europe, many of whom received their baptism of fire as accomplices in the bombing of Yugoslavia and in the provision of military logistical support. The Clinton Administration recruited a new tier of “peace associates”, junior members of NATO in countries from the Baltic to the Caucuses. Finally the Clinton Administration buttressed the totally incompetent and kleptocratic Yeltsin regime in Russia, as a means to destroy Russia’s economy and military while Euro-American corporations pillaged its economy alongside the new Russian oligarches.

But as the Empire grew so did the contradictions. Washington could pillage the economies but it could not prevent ever deepening economic crises nor control an increasingly restive population. Yeltsin was replaced by Putin, and some semblance of an economy and foreign policy reappeared defending Russia from the most crude forms of depredations. In Belarus and Moldavia new regimes seeking closer ties with Russia came to power. In Eastern Europe, the Ukraine and elsewhere, the initial wave of support for incorporation into the new empire, faded with the undertow of corruption an plunder that accompanied the new free market rulers. By the late 1990s Washington’s economic boycott of Iran, Iraq and Libya was eroded as these countries signed economic cooperation agreements with Italy, France and other Western European governments and corporations.

While Clinton focused on Israel and Kosova, U.S. trade with the Mercosur nations – particularly Brazil – declined. The U.S. share of the Mexican market declined. European investors, particularly Spain, bought out lucrative telecommunication, energy, transport enterprises which were privatized.


As U.S. backed neo-liberalism spread and extended the Empire, exploitation and pillage via local client regimes deepened. However so did the growth of opposition, as nationalist regimes began to surface, and regional markets expanded. The European Common Market expanded, and so did Mercosur in Latin America. The Chavez regime in Venezuela provided leadership to OPEC, and deepened its ties to Russia, China and Cuba in defense of a multi- polar world. The UN rejected U.S. candidates for two commissions, and even the usually docile OAS (Organization of American States) opposed the U.S. economic boycott policy toward Cuba.

Bush and the Third Cold War

President Bush confronts a dual crises: a stagnant economy and a non-sustainable empire. Faced with this double crises, the Bush Administration’s response is in great part shaped by the sectors of capital and the ideological forces which make up his regime. Both the Clinton and Bush regimes are dominated by capitalists or their representatives. But there are significant differences in the sectors of capital represented.

The Clinton regime was heavily influenced by Wall Street investment bankers, financial and insurance enterprises, IT speculators, as well as overseas manufacturers. His regime depended heavily on client minority politicians (blacks, Hispanics) and trade union bureaucrats to mobilize the voters in exchange for political appointments and protection from judicial prosecution. In contrast, in the Bush regime, the influential capitalists are located in the “extractive” sectors (gas, oil, energy suppliers, mining, timber) sectors. They are geographically located in the southwest and Rocky Mountain states. There is strong backing from the military- industrial complex, agro-business sectors (particularly tobacco monopolies) as well as from overseas investors in the pharmaceutical industries.

The Bush regime depends on lower middle class religious fundamentalists, right-wing anti-Communist ideologues and the Chamber of Commerce (small business) to provide the political activists to win elections. Like Clinton, Bush provides “symbolic representation” to minorities (5 blacks and Hispanics and several women are in his cabinet) who are in agreement with his pro-imperial foreign policy and reactionary domestic policy. Once again, classless “diversity” serves reactionary goals.

Styles of Empire Building

While the strategic goals of the Bush regime are exactly the same as his predecessor, there are important differences in terms of styles of empire-building in part because of the changing context as well as because of differences in the internal composition of the two regimes.

Clinton was a maestro in dissimulation – a master in exercising power and pursuing the substantive goals of empire, while observing the forms of consultation and “multi-lateralism”, whenever it was likely coincide with U.S. objectives. The Clinton regime’s manipulation of the symbols of international cooperation was expressed via the process of formal consultation with allies and to a lesser degree with client states, followed by unilateral or multi-lateral military action. Formally “consultative” and informally “unilateral” that was the style and substance of the Clinton regime. When it was possible to secure EU support for bombing Yugoslavia, Clinton proceeded via consultation; when it was not possible, as was the case in the bombing of Somalia, Afghanistan, and Baghdad, the Clinton regime reacted unilaterally.

The Clinton style of empire building combined overt economic penetration and the recruitment of new political clients with covert military and intelligence intervention. The latter approach was used to buttress influence with disintegrating regimes or to undermine independent regimes or out compete EU/Japanese competitors via high level economic espionage, the so- called Echelon Project.

At the ideological level true to the distinction between form and substance, the Clinton regime elaborated, together with junior partner Tony Blair of Britain the idea of “humanitarian intervention” to justify the military invasion and the military occupation of Yugoslavia and the establishment of military bases in Eastern Europe and the Balkan States. The domestic counterpart of this version of “populist-imperialism”, was the doctrine of the “The Third Way”. This ideology paved the way for massive shifts in budgetary priorities from social welfare to capitalist subsidies and empire building in the name of providing an alternative to “statism” and the “free market.” Under the ideological forms of humanitarian intervention and the Third Way, Clinton aggressively pursued policies extending the U.S. Empire via military intervention, imperial conquest and the imposition of neo-liberal doctrines.

The legacy of Clinton’s extension of empire was a series of deepening structural contradictions and crises which made the Clinton policy of indiscriminate imperial expansion unviable. Clinton’s policy of stimulating overseas economic investment and high profits based on low wages at home was built around cheap consumer imports from even lower wage areas to compensate for the declining real income of U.S. workers. The upshot was an unsustainable trade deficit. The U.S. Treasury and Central Bank (Federal Reserve) policies were heavily dependent on large foreign inflows of capital to balance external accounts, while domestic recession depended on lowering interest rates which prejudiced overseas investors. Clinton’s indiscriminate empire building led to losing out in strategic economic markets while extending U.S. politico-military influence in economically marginal regions. Clinton’s drive to reassert U.S. supremacy over Europe via NATO, overlooked the decreased U.S. economic role in European trade and markets as well as the growing trade conflicts between the two “protectionist giants.”

The crises of Clinton’s empire is found in its incapacity to go beyond pillage and large scale transfers of wealth to the U.S. and client building. No long-term, large-scale integration of the subordinate economies came to fruition. Instead, pillage led to perennial crises; indiscriminate expansion led to loss or decline in strategic markets; consultation failed to eliminate competition or to regain U.S. ascendancy.


The Bush Administration, dominated by economic and strategic policymakers accustomed to imposing policies in their corporations and military hierarchies and dominating markets, reacted to this complex of crises and expanded empire by pursuing overt unilateralist policies, justified by the defense of U.S. imperial economic interests. In contrast to Clinton, the Bush regime made no pretense of “consulting” allies or clients on major strategic international policies: its calculations and decisions were directly related to the principal economic interests which were centrally located in the regime: extractive industries. The Bush regime rejected any and all international agreements which were perceived as lowering the profits and limiting the exploitation of natural resources by U.S. corporations, without any pretext of masking those interests in “humanitarian” ideology. Bush’s policy is based on unilateral, strategic involvement in confrontations with European capitalism, China, Russia and the Third World. This policy is one at the same time more aggressive (unilateralist) and less directed to military intervention in marginal regions. It is more directed toward capturing strategic economic markets and less in asserting a U.S. political presence in international forums. The Bush Administration is in turn divided between economic and ideological military imperialists, personified by foreign minister Powell on the one hand and Rumsfeld-Cheney on the other.

Countervailing Forces: Economic versus Ideological Imperialists

Unilateralism has been the hallmark of the first year of the Bush regime. From the beginning of his Administration he chose to pursue policies based exclusively on what were perceived to be U.S. corporate economic interests and to enact those policies without consulting allies or adversaries. The list of unilateral decisions taken by the Bush Administration continues and extends Clinton’s policies of rejecting any international treaties that limited or potentially limited U.S. imperial power. Clinton rejected international treaties on the use of land mines, childrens’ rights, and on international war crimes” tribunal. Bush rejected the Kyoto Agreement on control of greenhouse gases that contaminate the atmosphere, he revoked the anti-ballistic missiles (ABM) agreement with Russia and refused to end export subsidies as demanded by the EU. Bush’s trade representative threatens trade restrictions on countries which protest U.S. import quotas and “anti-dumping” policies as forms of neo-protectionism. Unilateralism, particularly with regard to the U.S. rejection of the Kyoto Agreement, was justified by Washington in terms of raising profits for U.S. extractive industries and manufacturers and securing competitive trade advantages over their European competitors.

The second example of U.S. unilateralism was Washington’s decision to reject negotiations with North Korea and engage in provocative military maneuvers with the South Korean armed forces. This action was necessary in order to maintain the fiction that North Korea was a rogue or “terrorist state” which threatened U.S. “national security” and therefore justified huge state subsidies for the new long range missile “defense systems” (thus benefitting the military-industrial complex).

The third example of U.S. “Unilateralism” was the provocative violation of Chinese airspace and the subsequent public announcement that Washington would continue this practice. Once again this action was directed at creating “tension” to justify higher military spending, to consolidate U.S. domination in the South China Sea, and to test the willingness of the Chinese leadership to sacrifice political sovereignty for economic goals. In this context the Bush Administration’s large scale sale of armaments to Taiwan was a further extension of U.S. policy of encroachment and tension – to promote weapons sales and political control.

The fourth unilateral move was the decision to revoke the Missile Defense Treaty of 1992 with Russia and thus provoke a new Cold War. The purpose was, once again to justify new multi-billion dollar government military contracts to the military-industrial complex and to force Europe to abide by U.S.-NATO commands.

Washington’s unilateral policies have had unintended and negative consequences: the revoking of the Kyoto Agreement has totally isolated the U.S. in the international forums. In the UN the U.S. lost two elections to two important committees – one on human rights and the other on the environment, in which it was clear that at least some EU countries voted against the U.S. candidates. The U.S. decision to break with North Korea was immediately followed by a EU visit to North Korea, the establishment of diplomatic relations and the signing of important economic agreements. In addition, the unilateral U.S. decision alienated vast sectors of South Korea public opinion.

The U.S. decision to abrogate the Missile Defense Treaty with Russia, alienated Western Europe, and hastened economic cooperation agreements between the EU and Russia.

The confrontational policies toward China provoked internal debates inside the Bush regime between the New Cold Warriors grouped around Cheney/Rumsfeld who are close to the military-industrial complex and Powell (the Secretary of State) who represents the viewpoint of Wall Street and the big overseas investor groups. The compromise reached between these elites led to the temporary resolution of the immediate conflict with China’s liberal leaders, without sacrificing either U.S.’s strategic military policy of encirclement nor U.S. business’s lucrative access to China’s markets and cheap labor. The Market Imperialists supporting Powell are more interested in China’s multi-billion dollar trade and investment market and the gradual conquest of China via economic colonization against the New Cold Warriors who are closely tied to the domestic military-industrial complex and the extractive industries.

The unilateralist position of the Bush regime reflects the attempt of Washington to impose its position and push more aggressively for greater U.S. corporate advantages even at the expense of alienating strategic allies and the domestic public. The relative decline in U.S. competitive position as is evident from the huge and unsustainable trade deficit is the driving force behind unilateralism.

Nevertheless, the political and economic realities of the contemporary world weaken the unilateralist posture. In the first place, the merger and acquisitions by European, U.S. and Japanese multi-national corporations undermine the attempt by the New Cold Warriors to develop policies exclusively at the behest of the U.S. military-industrial complex and extractive industries. Secondly, the military confrontational politics isolate U.S. corporations including extractive capital from lucrative market and investment sites in Iraq, Libya, Iran North Korea, China, Russia, etc. The economic links between Europe and the U.S. are as strong as their competitive differences, for the time being. The problem for the Bush Administration is the growing intra-European trade (within the EU) which strengthens European autonomy from the U.S. and limits Washington’s market access.

The relative economic decline of the U.S. in Europe and Asia means that Latin America has become one of the central areas for Washington’s imperial expansion and exploitation.

Fortress “America”: From Neo-Liberalism to the Neo-Mercantilism of Latin America


Confronted by stiff competition and negative trade balances with Asia and Europe, the Bush Administration decided to consolidate and deepen its control over Latin America. Under Clinton, Washington had spread the Empire over the four corners of the world, U.S. multi- national corporations had gained ascendancy but the U.S. “national economy” – that is the exports and imports, to and from the territorial U.S. economy, had suffered a relative decline as seen in its growing trade deficit. The only region where the U.S. still retained a favorable balance of payments was with Latin America. It was also the region where the U.S. had historical control over the military and secret police (intelligence agencies) apparatus and dominant influence in the economies. Yet during the 1990s despite the establishment of client regimes and huge flows of profits, interest payments and royalties to the U.S. and privatizations of public enterprises that benefitted U.S. multi-nationals, there were economic indicators, showing a relative decline in U.S. dominance: Mexico’s trade with the U.S. declined from nearly 92% of total trade in 1994 to 70% in 1998. MERCOSUR’s trade with the U.S. declined from 17% in 1994 to 14% of total trade in 1998. While MERCOSUR had an annual average trade surplus of $66.6 billion between 1991-99, it’s “service payments” – debt payments, profits remitted royalty payments – amounted to an annual average deficit of $89.5 billion between 1991-99, leading to an annual average deficit in the current accounts of $22.9 billion. The Bush Administration strategic goal is to increase the U.S. share of the service transfers as well as the U.S. share of MERCOSUR trade and to reverse the relative decline of the U.S. in the 1990s due to increased European competition. While Clinton was securing client regimes in Bosnia, Kosova and Macedonia U.S. share of trade with MERCOSUR declined nearly 18%. European multi-national corporations and banks, especially the Spanish capital bought out privatized telecommunication systems, banks and petroleum companies in Brazil, Argentina and Spain.

In addition, U.S. dominance in Latin America was being challenged by the growing guerrilla movements in Colombia, the independent-nationalist regime in Venezuela, and significant anti-imperialist indian and peasant movements in Brazil, Ecuador, Bolivia, Paraguay as well as trade union and urban movements in Uruguay and Argentina. In response to these challenges, Washington has devised a two-pronged complementary strategy: the Latin American Free Trade Area (ALCA) – the Latin American’s initials – and Plan Colombia-Andean Initiative both of which are designed to increase U.S. control and deepen its capacity to extract resources and wealth to the U.S.

ALCA is a logical outgrowth of the advance of the neo-liberal doctrine imposed by U.S. policymakers and their Latin American clients since the mid- 1970s. While it purports to speak of “free trade” it resembles the mercantilist system of earlier imperial system.

A discussion of ALCA should begin with a clarification of what ALCA is not. First of all it is not a free trade agreement. The United States reserves the right to maintain $30 billion subsidies for its agriculture, its so-called “anti-dumping” legislation to protect major industries, quotas on imports in economic sectors where it is not competitive, banking legislation which permits major U.S. banks to launder funds illicitly gained in Latin America, and a host of unilaterally decided “health” restrictions to reduce imports of cattle and other products. Latin American countries on the other hand will have to eliminate all trade barriers and comply with the “free trade” doctrine. At the Quebec summit when President Cardoso of Brazil addressed the issue of U.S. “anti-dumping” restrictions on Brazilian steel exports, President Bush told him “that has nothing to do with ALCA, that should be taken up at the Organization of World Trade”!

Secondly, ALCA has no resemblance to “economic integration”. The scenario resembles the subordination of colonies to imperial countries where the latter controls strategic sectors of the economy, dominates markets and labor and dictates economic policy., Integration implies more or less equal exchange of commodities, two way flows of capital, profits and interests, joint enterprises ? in a word, more or less symmetrical relations and benefits. ALCA is totally asymmetrical, with the U.S. multi-nationals accumulating Latin assets and determining the one-way flow of benefits (profits, interests, royalties) from South to North. Subordination, not integration, defines the nature of ALCA. In that sense, ALCA is very different from the European Union.

Thirdly, ALCA does not stimulate competition, it furthers monopoly. By establishing trade preferences within the trading bloc, ALCA penalizes Europe, Japan and other non- hemispheric trading partners and increases the monopoly trading positions of the dominant powers within the hemisphere ? namely, the U.S.A. By increasing the advantages of the U.S., it lessens the Latin American countries’ capacity to secure better prices, both in sales and purchases. In a word, ALCA lessens competition in the world market-place.

Fourthly, given the above restrictions in competition and trade, in other words, ALCA’s privileging a monopoly position for the U.S., it provides greater opportunity for U.S. firms to secure privatized enterprises at ‘political’ rather than ‘market’ prices. One of the dubious arguments of neo-liberal ideologues is that there is “no alternative to neo-liberalism”, U.S. advocates of ALCA would add, “there is no alternative to the U.S. market and investors”.

From the perspective of economy theory, ALCA is a denial of the basic premise of liberal (or neo-liberal) principles. ALCA is a mercantilist system, centered in the political supremacy of the U.S., whose economic policies are dictated by the imperial state via a set of asymmetric, monopolistic structures which facilitate the one-way flow of benefits.

The transition from neo-liberalism to U.S.-ALCA mercantilism is a result of two factors ? the deepening economic crisis of the U.S. and the increasing competition from Europe and Asia, leading to huge and unsustainable trade deficits. In a time of internal and external crisis and sharpening competition, Washington needs to seize a greater share of the Latin American market, public enterprises and natural resources. ALCA would establish the supremacy of U.S.-MNC over challengers from Europe by prioritizing U.S. access to markets and trade. “Free trade” within ALCA means U.S. monopoly control over their Latin competitors ? especially given the protective restrictions which Washington will impose on Latin exports.

Faced with increases in intra-regional trade, especially in MERCOSUR, ALCA will favor direct exports from the U.S. over trade via subsidiaries in regional markets. This will increase the U.S. trading surplus and undermine locally owned secondary suppliers of U.S. owned subsidiaries. ALCA is a return to asymmetric bi-lateral relations as opposed to ‘regional trade’ in which local regimes had some negotiating leverage. Most likely regional trade as it exists in MERCOSUR will decline, as it is subordinated to ALCA. The result will be to favor U.S. exporters, mainly agro-business, manufacturers, services (information technologies, banking, etc.), while undercutting Argentine agro-business and Brazilian industrialists. U.S. multi-nationals in these countries will then operate according to the rules of ALCA ? not their host country’s regulations ? particularly with regard to labor legislation, health and education.

Probably most important, ALCA will establish U.S. dictated rules and regulations in setting conditions for trade and investment over and against neo-liberal regional regimes. This means vast changes in education, health, labor relations, the environment, as well as in the economy. For example, health and education would be privatized via the end of “subsidies” opening the door for giant U.S. health corporations and high tuition charges for “public universities” (as is the case in the U.S.). Basically, ALCA will impose its mercantilist policies by establishing rules designed to favor U.S. protectionism and Latin American openness. ALCA means the end of the last vestiges of national sovereignty ? the recolonization of Latin America. It means that U.S. MNC’s do not have to transplant subsidiaries to Latin America, it can export directly from the U.S.


ALCA is the logical extension of neo-liberal policies extended from the national and regional level to the hemispheric. “Neo-liberalism” within a mercantilist system run by and for the U.S. and its local client regimes. If neo-liberalism allowed the U.S. to share in the pillage of Latin America, particularly the privatization of public enterprises, with Latin America’s rich and European and Asian capital, ALCA is designed to maximize the U.S. share of Latin American markets and resources. ALCA is designed to create “fortress North America” against Euro- Asian competition and to maximize the extraction of surplus to finance the deepening crisis in the U.S.

With so much of U.S. capital “offshore”, or in speculative or consumer activities, U.S. banks resort to laundering “dirty money”, estimated by the U.S. Senate to run over $250 billion dollars a year, thus serving to “compensate” for the negative domestic saving rate. “Criminal activity” today is what “pirate plunder” was to early capitalism: transfer of capital from the colonies to the imperial center. As Stephan Hasam argues, the plunder strategy requires a criminal economy which can generate large sums of money to be transferred to the legal side of the economy. This means that a criminal economy must be fabricated and “pump- primed”. Today the criminalization of drugs, the billion dollar people smuggling and white slavery stimulate the growth of the U.S. banking sector via dirty money laundering. It is important that Latin American elites stay corrupt and voracious and that their activity should be criminalized so that the flow of capital “northward” multiplies and its possession secures imperial power.

ALCA has generated widespread opposition from trade unions and peasant movements to sectors of the national bourgeoisie, particularly in Sao Paulo and Porto Alegre in Rio Grande do Sul, both in Brazil. The avariciousness of ALCA, which goes beyond neo-liberal policy to a mercantilist, imperial centered monopoly threatens the position of certain sectors of the bourgeoisie with displacement. While this bourgeoisie shares with the U.S. MNC’s their common support for reversing social and labor legislation, they oppose the total take-over of the economy by the imperial power. Hence Cardoso’s wavering between his economic dependence on foreign capital and banks and his political dependence on the Brazilian big industrial groups: Cardoso’s complaints about U.S. mercantilism in the name of “true liberalization” however falls on deaf ears in Washington.

In order to implement ALCA, the Bush Administration has two client regimes” President Fox in Mexico and at the other end of Latin America, Economic Minister Cavallo in Argentina. Both regimes act as “Trojan horses”. Argentina by lowering tariffs in MERCOSUR, favoring U.S. exports at the expense of Brazil and deepening financial dependence on U.S. banks (via the debt restructuring). Fox’s plans to extend the maquiladora system from “Puebla to Panama” extends U.S. influence southward. These two client regimes are part of a two stage policy of greater bilateral relations with the U.S. (undermining Brazilian links) in the first part, to be followed by pushing ALCA in the second stage as the only “viable alternative” to isolation from global markets, i.e., the U.S. market.

The mercantilist essence of ALCA has already aroused criticism from the neo-liberal fundamentalist regime in Chile. The Lagos regime’s attempt to enter NAFTA has come up against the Bush administration’s protectionist measures – a quota system – affecting the importation of Chilean grapes. Washington’s version of mercantilist “free trade” includes quotas on competitive Chilean agricultural products in “exchange” for free access to Chilean markets and resources.

In the north, President Fox’s Plan Puebla – Panama project involves the sale to U.S. banks and corporations of the last and most lucrative sectors of the Mexican economy – its leading banks, petroleum, petrochemical and energy sectors along with the “maquiladorizacion” of all of Mexico and Central America (”Plan Puebla-Panama). Citibank’s $12.5 billion dollar purchase of Mexico’s second largest bank makes it the biggest bank in the country. Earlier in June 2000, the Spanish bank, Banco Bilbao bought Grupo Financiero Bancomer making it at the time, the leading bank in Mexico. With $47 billion in combined assets and combined deposits of $42 billion, Citigroup is in a position to control a substantial part of Mexican savings, credit and financing, thus shaping the future of Mexican development. President Fox’s basic project is to convert Mexico into the 51 state of the Union, a defacto annexation by invitation. Mexico’s role is to export cheap labor to be exploited in the U.S. and to import U.S. capital to exploit savings, resources and public enterprises in Mexico. The Mexican elite will be incorporated as minority members of the board of directors in the denationalized enterprises. Fox’s annexation strategy however, conflicts with the U.S. strategy to colonize lucrative sectors of the economy, appropriate profitable enterprises, exploit cheap labor without incurring the social costs of maintaining and educating the labor force or paying for repressing discontent. In this light, Fox’s “Plan Puebla-Panama” involves suspension of all labor regulations and social benefits (in the style of the Maquiladoras) and the Mexican Government’s financing of massive infrastructure (roads, ports, etc.). Fox has proposed to finance the U.S. economic colonization by extending the 15% value added tax to food, medicine and other items of popular consumption.

Fox’s economic policy for Mexico is a pre-configuration of what ALCA would resemble in the rest of Latin America. The Fox-Cavallo regimes at each end of the Americas represent the basic anchors of the Bush regime’s ALCA strategy. The problem is that both leaders have a fragile basis of support within their countries and Washington has a problem dealing with the massive discontent in the Hemisphere, particularly in the radical triangle in the North (Colombia, Ecuador and Venezuela) and in Brazil.

ALCA and Plan Colombia-Andean Initiative: The Economic and Military Faces of Empire


ALCA takes place in a moment which is economically ripe but politically and socially conflictual. Neo-liberalism has given the U.S. a major influence in the Latin economies; U.S. banks have established a stranglehold on the financial sector. The IMF- World Bank has lowered all the barriers to foreign penetration. The key policymakers in the Central Banks, Economic and Financial Ministries have the “confidence” of Wall Street. These structural and political relations which are both cause and consequence of neo-liberalism are bridges toward ALCA. On the other hand, the growing social inequalities, massive poverty and un/under employment, the uprooting of millions of peasants and the downward mobility of millions of middle class public employees and professionals has created generalized opposition not only to ALCA but to the neo-liberal policies which precede it. This opposition has developed in unequal fashion and has taken a variety of forms but it is a constant that is growing, radicalizing and increasingly challenging not only local elites, but U.S. dominance.

To defend its dominant position and to deepen and extend it via ALCA, Washington is engaged in building a vast military empire, which is militarizing Latin American politics. Plan Colombia-Andean Initiative are only the biggest and most visible aspects of the defense of empire.

If the Brazilian, Mexican and Argentine markets are the centerpieces of ALCA’s strategy, Colombia, Ecuador and Venezuela are the political targets of Plan Colombia-Andean Initiative.

Washington sees the Colombian guerrilla and popular movements as the major threat to its empire in Latin America. A victory of the popular forces in Colombia would establish an alternative socio-economic system to U.S. directed neo-liberal model. In addition it would encourage neighboring countries to break with U.S. tutelage by demonstrating that mass struggle can win against the empire. Furthermore, Colombia has oil, gas, agriculture and industry in a country for 40 million – a capacity to resist U.S. economic pressures. Finally, a Colombian- Venezuelan-Cuban alliance would be a formidable economic-political-military force capable of resisting imperial aggression and aiding other countries in the region seeking to move in the direction of social transformation. For all these reasons, Washington has provided $1.3 billion and several hundred military officials and substantial logistic support as well as covert alliances with death squads (the so-called paramilitary forces) to destroy the livelihood and displace millions of peasants who are perceived to be the main base of support for the guerrillas. U.S. toxic spray of crops, paramilitary-military terror and high tech air surveillance are key elements of Washington’s military strategy to sustain the client Pastrana regime. As the U.S.-backed Colombian War Plan advances, it has spilled over into Ecuador, Peru and Northern Brazil. Washington has extended its militarization program via the so-called Andean Initiative policy, which increases U.S. military aid and advisers to these countries to repress mass movements such as the indian peasant movement (CONAIE) in the highlands of Ecuador.

An integral part of the new military empire is the establishment of U.S. military bases in Ecuador (Manta), El Salvador, and Iquitos (Peru). Washington has colonized the airspace over most of Northern and Central South America, as well as Central America, freely flying military reconnaissance planes in clear violation of their sovereignty. Similarly, U.S. military operations routinely take place along the rivers of Peru and Colombia and along the coastline from Mexico to Peru.

In addition to Plan Colombia, Washington has engaged in joint-military exercises in Latin countries in violation of their Constitutions, training and selecting promising Latin officials who will be the mercenary forces in any ground war. The vast increase in U.S. military expenditures in Latin America, the proliferation of training programs, military bases and the direct involvement of U.S. military officials in combat situations are indications that Washington understands the “building an empire is not a tea party.” Given the level of popular resistence that exists today against neo-liberalism, it is clear that the imposition of ALCA will lead to even greater potential for revolutions. That is why the advance of ALCA should be seen in relation to the building of the U.S. military empire. ALCA means greater concentration of wealth in the hands of U.S. MNCs and the elimination of “intermediary” petit-bourgeois/bourgeois forces capable of “mediating” or controlling mass opposition. The acute polarization resulting from ALCA means greater state repression, as the opposition will increasingly combine “nationalist” and social struggles.

Limits of Empire: Imperial Contradictions and Challenges for the Left

The whole mercantilist empire constructed over the past decade is under severe strain with the advent of the U.S. recession in 2000-2001. The crises of the U.S. economy has a profound impact on Latin American and Asian export economies. As the crises in the U.S. continues there is a sharp decline of imports and slowdown in the outward flows of capital, undermining the capacity of these economies to sustain their debt payments and import essential commodities. Because the internal markets have been devastated by the countries integration into the Euro-U.S. markets the crises from the U.S. spreads and deepens in the Third World, provoking a deeper decline in their economies. Precisely, the countries most tied to the export strategy are those most seriously affected. A prolonged recession in the North will inevitably lead to the collapse of the export economies and place on the agenda the need to rebuild the domestic market and re-orient investment and trade, which can only occur if there is a profound transformation of the leading classes and the state.

For the present, it is important to note that the recession in the U.S. will heighten the mercantilist tendencies in the U.S.: the crises will heighten and extend protectionist pressures within the imperial center, while the declining profits will fan the voracious appetites of multinational capital to seize new lucrative enterprises in Latin America.

The inter-capitalist rivalries within the empire have also intensified: the military-industrial complex which seeks to expand military spending is in conflict with the rest of the ruling class which seeks vast tax reductions and a smaller budget. The U.S. investors in China which totals over $40 billion is in conflict with the military-industrial complex and the ultra right-wing which seeks to provoke a military confrontation.

Competition and mergers with European and Japanese capital have intensified. While Washington has extended NATO to the Russian borders and is preparing a new missile system in violation of international accords, the EU has signed new economic agreements with Russia and has opposed the new missile system.

Washington’s “unilateralist” posture with regard to the Kyoto agreement on the reduction of “greenhouse gases has isolated it from the rest of Europe, alienated influential domestic groups and led to the ousting of the U.S. from two major United Nations Committees.

Washington’s backing of the Albanian terrorist group the KLA threatens to destabilize its clients in the adjoining Republics of Macedonia, Serbia and Montenegro – undermining the consolidation of imperial power in the Balkans.

Likewise, while U.S. multi-nationals secure lucrative multi-billion dollar contracts to exploit Saudi Arabian gas, the U.S. backed terrorist regime of Ariel Sharon in Israel heightens tensions throughout the Arab East. In the Gulf States and North Africa, the Empire has suffered a series of setbacks which undermines its monopoly of influence. Iraq has been reincorporated into the Arab League, OPEC and has broken the air and sea embargo. Iran has signed oil and other trade agreements with European and other powers. Libya has also developed economic ties with Italy and other European countries.

These “cracks” in the Empire, or the New World Order, will deepen as the economic competition heightens and the economic crises deepens, forcing imperial policymakers to adapt to the revised power alignments or engage in new and risky military adventures.

In Latin America, Washington’s principle allies President Fox of Mexico and Domingo Cavallo, the Minister of Economy lack political majorities to push ALCA. Cavallo received only 10% of the vote before he was appointed Minister and depends on an unstable party coalition in Congress. Fox, facing a major economic crises induced by the total dependance on the U.S. market, will have a hard time convincing Mexicans to deepen that dependance as employment declines, taxes increase and incomes plummet.

Brazil, the most important country in a potential ALCA agreement is also heading into crises, and its leading capitalist sectors in Sao Paulo are deeply skeptical in entering into a mercantilist trade relation in which their exports are restricted and their home markets are opened. In addition, the growth of the social-democratic Workers’ Party in the major cities and the precipitous decline of the Cardoso regime, provide little support for an ALCA agreement, despite the powerful backing of the financial sector. The growth of the MST in Brazil, the FARC in Colombia and the proliferation of mass movements in Bolivia, Paraguay and Ecuador capable of challenging state power call into question the imposition of an ALCA agreement.


If Clinton overextended the Empire beyond the capacity of the U.S. to profitably exploit key markets, Bush’s policy to project Fortress America via unilateral fiats has alienated allies, radicalized opponents and isolated the U.S. on many issues. The internal recession and the Fortress America strategy is built around a concept of a mercantilist empire in which force and violence – such as Plan Colombia, the Andean Initiative and new military programs – and economic monopoly (such as ALCA) form an integral part.

The mercantilist-military definition of imperial reality and the unilateral/confrontational style of implementation heightens inter-capitalist divisions, strengthens anti-imperialist tendencies in China, Russia, Vietnam and Cuba as well as encouraging new international alignments: Euro-Russian trade linkages, Russian-Chinese defense pacts, Venezuelan-Russian military agreements. The Bush administration has shifted from Clinton’s indiscriminate intervention to prioritizing the Gulf states, Latin America and East Asia. In the latter two regions the recession in the U.S. is undermining the neo-liberal economic model and generating mass discontent. More important, the collapse of the model and the U.S. attempt to impose the neo-mercantilist ALCA policy on Latin America is strengthening the credibility of the revolutionary anti-imperialist analysis and the practice of mass mobilization of rural and urban forces against electoral parties and client neo-liberal regimes.

(Republished from The James Petras Website by permission of author or representative)
• Category: Economics • Tags: Latin America 
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