Living with Nationalism: Chase in Latin America
Goff, Fred
INTRODUCTION Through a focus on Chase's Latin American operations, this article will explore several aspects of the contradictions between private banking capital and the Third World. We...
...1962 Banco Lar Brasileiro (51%), a medium-sized Brazilian bank...
...Chase's strategy for dealing with the new restrictions (see below) reflects its philosophy of accommodation with bourgeois nationalism...
...3. Business Week, January 17, 1970...
...2. American Banker, July 6, 1973...
...January 19, 1976...
...All of these operations are beyond the scope of this article...
...lobby pushing for the opening of full diplomatic and trade relations with the Soviet Union, Eastern Europe and China...
...The Rockefeller family for example owns large blocks of stock in the affected oil companies and also controls the largest block of stock in Chase...
...international bank loans since accounting practices do not require any recognition of loss due to missed loan payments from foreign or domestic loans...
...Chase, as well as other large U.S...
...capital has had to face the nationalist policies of governments which reflect, to varying degrees, the interests of local elites or bourgeoisies which want to renegotiate their relations with foreign capital to obtain a larger share of the benefits of capitalist exploitation of the working class in their countries...
...Local interests have gained strength and the power of the U.S...
...6 Similarly, in discussing a proposed $81 million Ford Administration aid package being prepared for Zaire, the largest single borrower in black Africa, Forbes magazine hinted that among the main beneficiaries would be the U.S...
...It also declared a state monopoly on foreign exchange dealings (one of the most profitable foreign banking activities) and barred any new foreign bank expansion...
...21-23, and March 11, 1971, p. 79...
...One third of the bank's international assets were employed in Latin America...
...The correspondent banks would also maintain accounts at Chase to cover services Chase would perform for their clients in the United States...
...NYT, January 15, 1976...
...government funds (for USAID, Embassy and military operations and for local currency funds accumulated in exchange for U.S...
...BLA, March 29, 1974, p. 92...
...It also facilitates the negotiations of large loans larger than any one of its individual partners could handle alone...
...The first form has already been implemented in some of the more pressing cases such as Chile and Zaire...
...banking interests the right to collect the country's taxes' Another possible alternative would be for the bankers to step in with a shadow government as they have in New York City today (see article below...
...state to intervene abroad has suffered setbacks...
...Business Week, March 1, 1976, p. 55...
...BLA, August 29, 1968, p. 276 and September 10, 1970...
...see also, "Economic Crisis Looms for South Korea," International Policy Report (Institute for International Policy, Washington, D.C...
...International operations now play a dominant role at the bank: they produce half its profits, generate higher returns on assets employed, and are growing at a faster rate than domestic operations...
...The wave of foreign expansion of which Chase became a part owed its strength not only to increased international trade, but also to the growing6 investments of U.S...
...in 1973...
...investments, including four Chase branches, and U.S...
...Washington Post...
...Two years later it organized Libra Bank, whose operations were geared solely towards Latin America...
...8 Through this strategy Chase gained not only a low profile overseas but also acquired an instant deposit base...
...One third of the 1975 deficit was accounted for by Brazil, Mexico and South Korea, all areas in which Chase is a major creditor...
...This arrangement allows the MNC's to maintain their profits through their control over technology and international marketing, rather than through direct ownership of the production process...
...January 14, 1976...
...2) attach state guarantees to future loans to the Third World...
...banking overseas is even more concentrated than banking domestically...
...A few additional facts illustrate the magnitude of the problem...
...Senate, October 16, 1974...
...In the words of Business Latin America: the creation of Libra is a response to changes in Latin America's investment climate, as well as the region's huge and growing financial needs...
...An examination of the bank's 1974 annual report, moreover, indicates that during the year earnings from U.S...
...16 Libra's structure lowers the profile of the partners by subsuming their individual identities into the consortium...
...The five include Brazil, Mexico, Argentina, Peru and Chile, with a total of over $8 billion...
...EXPANSION IN THE '60'S THROUGH FOREIGN AFFILIATES Until the early 1960's Chase conducted the bulk of its foreign operations through correspondent relationships with local banks overseas...
...capital to operate with its accustomed freedom...
...The World Bank will be the channel for the payments on the loan, and a default to the private creditor will be considered a default on the Bank, one of the best possible guarantees for the private loan...
...Another factor spurring Chase into overseas expansion was competition from its chief rival, Citibank...
...These banks, mainly U.S...
...banking facilities (including two Chase branches) in 1949...
...and ASARCO proxy statement, March 14, 1975, pp...
...When Citibank finally overtook Chase in the late 1960's as New York's largest bank, it was because of Citibank's commanding position in overseas banking...
...would be handled through Chase...
...The possible new strategies emerging from this explosive situation are explored in the conclusion...
...38 The Bank of America has already worked out a partial implementation of this plan...
...The banks' profits are made primarily in fees calculated as a percentage (.5 to 1.5 percent) of the financial package organized...
...imperialism...
...3 2 In an effort to assure the security of future loans, bankers may take more of a direct role in managing the projects which they finance (in the cases where project loans, rather than general budget support loans, are involved...
...private banks which would be spared defaulted loans...
...Ibid...
...In 1970 Chase negotiated a very favorable sale of its 51 percent share in Banco Continental to the Central Bank...
...152 mn Petrobras (Brazil's state-owned oil agency...
...2s This solution was earlier proposed by Che Guevara, when, speaking as a Cuban delegate to the first U.N...
...NYT, April 19, 1971...
...Foreign banks which refused to reduce their ownership to 20 percent would have their operations greatly restricted...
...foreign economic expansion have focused on corporations, the expansion of the country's largest banks has been equally dramatic...
...capital, worried about the possible spread of revolution throughout the region, wanted to avoid over-exposure...
...capital can reach a wide variety of accommodations with nationalist governments which preserve capitalism and maintain their countries within the worldwide network of imperialism - and Chase has been one of the leading innovators in these accommodations...
...9 In addition, Chase was being forced to give up some of its previous acquisitions: * In 1968 the Peruvian military government gave foreign-owned banks two years to "Peruvianize" by reducing their ownership to 25 percent or accept "foreign banking" status, which would mean greatly restricted operations...
...correspondent bank for the Bank of China...
...corporate investments abroad...
...7. US...
...NYT, January 15, 1976...
...In 1974 the Campora government in Argentina reclaimed ownership of seven banks which had fallen under foreign control during the 1966-73 military regime...
...2 In 1975 the "Big Three" Chase, First National City Bank (Citibank) and the Bank of America - accounted for 455 of the 732 foreign branches operated by U.S...
...According to the New York Times, Tinoco explained that his country was not trying to discourage foreign investment...
...This strategy was combined with continued branching where feasible...
...2. Henry C. Wallich, Board of Governors, Federal Reserve System, Statement before the Permanent Subcommittee on Investigations, Committee on Government Operations, U.S...
...1 While most of their business is conducted from London's international financial marketplace, Orion has subsidiaries around the world and Libra maintains representative offices in New York, Sao Paulo, Mexico and Bogota...
...E.M...
...3rd), the Royal Bank of Canada (1st), Mitsubishi Bank (4th), and Portugal's Banco Espirito Santo (4th).* The Libra strategy not only provides a vehicle for integrating banking capital from the developed countries, but also allows for inclusion, though on a junior partner basis, of banking capital from the Third World...
...A Bank of America executive is quoted as saying, "We would like official bodies to use public guarantees for commercial loans or to provide long-term funds from official lenders in order to improve the structure of debt in some countries...
...After participating in the economic blockade which helped bring about the overthrow-of the elected Allende government, they quickly swung their credit support behind the new military junta, whose brutality seems to know no bounds...
...BLA, March 11...
...Perhaps it is no coincidence that Tinoco had previously been chairman of the Banco Mercantil y Agricola, the Chase affiliate in Caracas...
...s In Latin America, Cuba had just nationalized all major U.S...
...The largest private project it helped finance was the S200 million credit it co-managed with Chase for Southern Peru Copper Co...
...See Fred Goff, "International Poor People's March to New Delhi: UNCTAD II," NACLA Newsletter, April 1968...
...The Federal Reserve Board estimates that as of mid-1974 nine of the largest U.S, banks accounted for two-thirds of all foreign activity by U.S...
...1964 Banco Continental (51%), Peru's fourth largest bank...
...Chase admits to having 54-5 billion, or 10 percent of its total assets, in loans to Third World countries.' * The activities described above involve only commercial banking and merchant banking loan syndication...
...foreign expansion intensified, Chase found it needed more of a banking presence overseas...
...The report also reveals that international operations produce higher returns on assets employed: 43 percent of the bank's assets were employed overseas and produced 49 percent of its profits...
...bank representative office in the Soviet Union in 1973...
...Henry Simon Bloch, executive v.p...
...See Elizabeth Farnsworth, Richard Feinberg and Eric Leenson, "Facing the Blockade," NACLA's Latin America & Empire Report...
...bankers see great potential markets in Latin America...
...This would take three forms: (I) having the state (through government lending agencies such as the Eximbank and government-financed international lending institutions, such as the International Monetary Fund and the World Bank) grant a delay on the repayment of the loans it has extended so the debtor governments can pay off the banks...
...A major question raised by this analysis, but not dealt with in the article, is whether these restrictions by the local bourgeoisie do, in fact, weaken U.S...
...In the banking sector the accommodation was described as follows by Business Latin America: foreign banks see their role in Venezuela shifting to one concentrating on international finance...
...Through acquiring controlling shares of existing banks and running them as joint ventures Chase gained a direct commercial banking presence in most of the region's major markets...
...This Chase (and Rockefeller) attitude is capsulized in a comment by the Venezuelan foreign minister, Pedro R. Tinoco, while defending his country's new banking restrictions before a group of New York executives in 1971...
...In March 1976 Business Week, in referring to Chile's debt problem, commented, ". . . thanks to the renegotiation of its official debts v . I nw10 to governments and multilateral organizations, it has met all payments due on the nearly $600 million in bank debt...
...overseas banking...
...9 "As long as Mario Simonsen is finance minister, Brazil will put paying its foreign debts before evething else, including social welfare...
...Whereas U.S...
...3 3 If past experience is any indicator, utilities, steel mills, shipping fleets, customs houses and central banks could be taken over by the bankers in return for new loans...
...In addition to these changes, reflecting varying degrees of bourgeois nationalism attempting to renegotiate the terms of dependency, foreign capital also faced the efforts of the Allende government in Chile (1971-73) to begin the elimination of capitalism and its replacement by socialism...
...News & World Report, March 8, 1976, p. 74...
...The traditional vehicle for U.S...
...1. San Francisco Chronicle (SFC), August 24, 1974...
...As an afterthought, the official, who asked not to be named, added, "I mean reschedule them...
...capital has had to deal with increased restrictions on its activities...
...NYT, January 15, 1976...
...In addition, foreign banking activities were significantly more profitable, due to fewer regulations and less competition than in the domestic market...
...BLA, January 21, 1971, pp...
...WSJ, January 29, 1976...
...Within this strategy, however, were the seeds of a new contradiction, as debt accumulated by the governments is becoming too heavy for the countries to bear...
...3 CHASE OVERSEAS A closer look at Chase illustrates the growing importance of international activities for the earnings of the handful of U.S...
...The recent changes in the Middle East are one of the clearest illustrations of how bourgeois nationalism is basically a renegotiation of the terms of dependency...
...and British, represented many of the same interests which had formerly owned the oil wells...
...The bank was forced to reduce its direct participation in commercial banking and adopted a new strategy of lending to state agencies and private companies from bases outside the region...
...Inherent in this overseas lending strategy, however, is a new contradiction, one which could transform this strategy of "minimal exposure" into a banker's nightmare of maximal exposure...
...A number of unfavorable changes in the terms of world trade for the Third World rising prices for imported oil, falling prices for Third World export commodities, and rising prices for capital goods imported from the industrialized nations have seriously jeopardized the ability of many Third World governments to meet the payments of interest and principle due to their foreign creditors...
...OVERSEAS EXPANSION OF U.S...
...Each of these changes restricted the operations of foreign banks...
...BLA, March 20, 1974, p. 92...
...The high price paid by the government for the shares, over five times their market value, reflected its desire to retain Chase as an important underwriter of its foreign debt and as a lender to large Peruvian mining and industrial projects (see below...
...The problem is particularly acute in Latin America, which accounts for five of the seven Third World countries with the highest long-term bank debt...
...As part of the recent financing arrangement for Southern Peru Copper Co.'s Cuajone copper development - Peru's largest mine - Chase was given control over the entire mine output as partial security...
...IBEC), a Rockefeller-family-controlled firm with numerous activities in Latin America, and Chase's arrangement of a $200 million credit in 1975 for Creole Petroleum, a subsidiary of Exxon, and Venezuela's largest oil producer.*.2 NEW CONTRADICTIONS TODAY An examination of Chase's and Libra's lending indicates that the bank's strategy of descreasing its direct commercial banking presence in the region and lending from bases outside Latin America has proved successful on one level sheer volume of loans...
...So deep has been their involvement in this effort to reach a rapprochement with the Arabs that the bank became the focus of a U.S...
...NYT, January 15, 1976...
...January 1973, p. 19...
...Chase's answer came through the creation of two London-based international consortium banks geared to underwriting large credits...
...What Chase, as well as other major foreign lenders, saw as a strategy for reducing its public exposure in Latin America, threatens to place it in an even more exposed position...
...December 9, 1975...
...On the other hand, U.S...
...Quoting Chase vice-president Charles Fiero, the magazine describes the analysis which lay behind the bank's worldwide expansion strategy: We took a good look in terms of nationalism, and the ability of the American bank overseas to become important in foreign markets .. . No matter how you slice it, a I U.S...
...capital to bring about a change in U.S...
...agricultural surpluses...
...65 mn' 9 In addition to its participation in loans managed by or with Libra, Chase still does a significant volume of lending in Latin America on its own, particularly in financing U.S...
...NYT, December 18, 1975...
...These policies are opposed to capitalist exploitation of its people whether by foreign or domestic capital...
...6. Ibid...
...Two significant recent developments which have involved the bank in major U.S...
...private bank loans...
...o1 * In December 1970 the Venezuelan government limited foreign ownership in banks to 20 percent and prohibited establishment of new banks without 100 percent Venezuelan capital...
...The problem is that if the basics of subsistence are further reduced in Brazil, Mario Simonsen will be able to stay in power only if the already repressive military regime comes down even harder on the Brazilian people...
...Business Week, March 1, 1976, p. 55...
...Direct branches start with zero deposits and have to build up a base, whereas Chase's strategy gave it immediate deposits...
...For in attempting to gain more control over their economies, the various governments demanded greater say in the use of their countries' financial resources as well as their natural resources and industries...
...They raise medium and long term capital for corporations, development projects and governments...
...exports in conjunction with the U.S...
...4. NYT, December 20, 1974...
...overseas bank branches showed more than a tenfold increase and from 1970-74 they more than tripled (to $140 billion).' Furthermore, U.S...
...3. Business Week, January 26, 1976, p. 24...
...SEARCH FOR A NEW STRATEGY Some international bankers seem to be making do with the faith held by Henry Simon Bloch, an executive in the prestigious investment banking firm of E. M. Warburg, Pincus & Co...
...BLA, January 25, 1973, p. 29...
...Only if one understands and accepts the force of nationalism, he said, is one able to lead it...
...in the forefront of the U.S...
...But by the early '60's, as Business Week put it, "in developing countries there was the roar of nationalism, in Europe quiet resentment...
...Many Third World governments are going deeper into debt just to meet their loan repayment schedules...
...WPlarburg, Pincus & Co...
...At the same time that it nationalized oil production the government turned around and signed technical service and marketing contracts with the same oil companies which previously owned the wells...
...According to the New York Times, the buildup of OPEC (mainly Middle East) oil revenues could touch $100 billion this year, or the value of all U.S...
...BANKS While recent studies of U.S...
...In 1964, a few years after Chase began its overseas push, foreign earnings accounted for only 14 percent of its total profits...
...200 mn Government of Jamaica...
...I branch has a tremendously difficult job in becoming important, and if it does become important it can become almost intolerable [to the host country .6 The Chase strategy was to reduce its exposure by buying into existing medium-sized banks, sometimes as much as 51 percent, and take an active role in management of the "affiliated" banks...
...How U.S...
...As U.S...
...Libra Bank, annual report 1974 and Financial Statement as at June 30, 1975...
...1968 Banco Argentino de Comercio (70%), a mediumsized Argentine bank.' By the end of 1968 the payoff of this strategy was readily apparent...
...For that reason, the extent to which international borrowers could be slipping behind in their payments is, in the words of a close observer, "one of the most carefully guarded secrets in American banking today...
...Venezuela needed foreign capital, technology, markets, and expertise, he said, but he called on his audience to recognize the force of nationalism in Latin America today...
...They also realize that Latin America's hunger for vast quantities of external financing will continue to grow and that Libra is in a position to build a bridge between the need and the source...
...We will begin by tracing the bank's initial strategy for gaining an overseas operating base in the 1960's...
...6 The Saudi Arabian Development Fund is headed by a Chase vice-president.' In 1974, Chase was the first U.S...
...policy toward the Arab nations - basically to stabilize the Middle East, strengthen its ties to the United States, and gain greater access to the Arab wealth...
...LIVING WITH NATIONALISM 1. Board of Governors of the Federal Reserve System, annual reports of "Assets and Liabilities of Overseas Branches of Member Banks of the Federal Reserve System...
...For some countries," writes a Wall Street Journal editor, "the growing annual burden of debt-service payments of interest and principal could become a socially intolerable drain on programs aimed at improving the lives of their people...
...In the short run the profits from these operations are minimal, but in the long run they could be substantial...
...BLA, August 2, 1973, pp...
...As this article will show, U.S...
...Though Libra now has ten strong partners, Chase's leadership is symbolized by the fact that Libra's chairman is Alfredo Machado Gomez, president of the Banco Mercantil y Agricola, Chase's Venezuelan affiliate...
...According to the Times, a "new device to reduce the risk of international loans was embodied in a $150 million loan to a Brazilian steel producer . . made jointly by a syndication of 16 commercial banks led by the Bank of America...
...See also, Rock Wolff, "The Foreign Expansion of U.S...
...It has subsequently become the Soviet Union's largest single creditor and has arranged a $240 million loan for Poland's copper industry.' In 1973 Chase also was appointed the U.S...
...Jewish boycott in 1970.1 One of the greatest banking movements of the 1970's has been a rush to the Middle East to soak up the billions of dollars accumulated in Arab treasuries as a result of greater participation in higher oil prices and oil company profits...
...In 1974 Libra added two new partners representing powerful economic groups in the two countries where it has concentrated its lending Brazil and Mexico.' 7 These two banks, the Banco Itau of Sao Paulo and the Banco de Comercio of Mexico, will help Libra arrange local currency loans as well as bring it a wealth of contacts and banking experience...
...1971, p. 79...
...38 33...
...50 mn Republic of Panama...
...Citibank, Bank of America and Chase, in that order, are the largest U.S...
...By 1970 the inadequacies of the Chase strategy were clear...
...But bankers, wary of stirring up latent resentment against their privileged and exploitative position, are extremely reluctant to take these drastic steps which put them in such an exposed position...
...6. NYT...
...That's a politer, more acceptable way of putting it...
...At roughly the same time that the government was nationalizing its oil production, it was also forcing foreignowned banks to reduce their control over the nation's banking system...
...banks.' Kuwait has over $1 billion on deposit with Citibank...
...Conference on Trade and Development (UNCTAD) in 1964, he suggested the poor nations refuse to pay their debts and band together to work out an independent course.26 So far no losses have been shown on any of the U.S...
...Ibid., p. 27...
...By 1974 this share had grown to 49 percent, and in 1975, for which final figures are not yet available, they accounted for over half the bank's total profits...
...And widespread default could, in fact, threaten individual banks and the health of the international financial market...
...foreign policy changes are its expansion of operations in the socialist bloc nations and the Middle East...
...For more on IBEC and Creole, see NACLA Newsletter, October 1971 (IBEC) and April/May/June 1969 (IBEC and Creole...
...NYT, April 10, 1971...
...This analogy is most dramatically illustrated in the case of Venezuela...
...Chase, in fact, leads all U.S...
...2 7 Already Zaire, to which Chase is a leading private bank lender, has fallen behind in its repayments and others are suspected of being in this position or on the brink of falling behind...
...4 The Federal Reserve Board recently disclosed that the oil producing countries of the Middle East and Africa have $14.5 billion on deposit in 21 U.S...
...During the period 1950-1970 the assets of U.S...
...While private bank credits financed only 5.5 percent of the external public debt of Third World countries in 1967, the percentage has risen to 15 percent in 1973 and 40 percent in 1975.24 Already several countries have had to renegotiate their foreign debt...
...60 mn DNER (Brazil's highway authority...
...189-90...
...But in some cases renegotiation may be a euphemism...
...bank had had direct banking relations with China since the Revolution took over U.S...
...changes were highlighted by the Peruvian military coup in 1968, promulgation of the Andean Code in 1970 with its strictures on foreign capital, and the victory of Peronism in Argentina in 1973...
...capital has had to face the socialist policies of governments serving the interests of the working class (such as Cuba, and Chile for the brief period under Allende...
...During the last fifteen years of its expansion in Latin America, U.S...
...While the Arabs, in a nationalist move, increased their control over and benefits from the foreign-owned oil wells, they then turned around and placed a large part of their newly acquired wealth in the hands of foreign banks...
...Through a subsidiary, the Chase International Investment Corp., the bank also makes substantial direct investments in manufacturing, mining, and agribusiness companies...
...1967 Banco del Comercio (48%), Colombia's fourth largest bank...
...NYT, November 21, 1975...
...bank expansion overseas had been branching...
...As the Venezuelan example makes clear, U.S...
...Business Week, March 1, 1976, p. 55...
...banking giants...
...Libra's list of partners illustrates how the bank has pulled together an impressive array of the largest sectors of international banking capital...
...Chase opened the first U.S...
...capital has reacted ruthlessly toward governments serving the interests of the working class (as in Cuba and Chile), on the other hand, it has shown it can reach a wide variety of accommodations with nationalist governments (such as Peru and Venezuela) which preserve capitalism internally and which maintain their countries within the worldwide network of imperialism...
...NYT, January 15, 1976...
...Although none of them greets the loss of commercial operations with anything but resignation, there is a determination to stay in the rich Venezuelan market by offering services to government institutions and private companies through representative offices and local affiliates...
...However, as the pace of U.S...
...The volume of financing arranged by Libra is impressive...
...The magnitude of the potential default involved is gigantic, U.S...
...Margaret Alexander Marsh, Bankers in Bolivia (New York: Vanguard Press, 1928), p. 5. 36...
...Both these banks are operated as merchant banks...
...No effort was made to buy out other foreign-owned banks acquired before 1966...
...New York Times (NYT), December 22, 1969...
...NYT, January 15, 1976...
...9. BLA, August 20, 1970, p. 271...
...In 1922 a $33 million loan to Bolivia gave U.S...
...The results were impressive, as a list of Chase's main acquisitions in Latin America shows: 1962 Banco Mercantil y Agricola (49%), Venezuela's third largest bank...
...Banks," Monthly Review, May 1971...
...On the other hand, U.S...
...Chase would maintain accounts with these correspondent banks to service the needs of Chase clients abroad and would participate with them in financing trade...
...In 1975 the non-oil-exporting countries of the Third World had a current account deficit of $38 billion, up from $28 billion in 1974 and $9 billion in 1973...
...2 David Rockefeller and Chase have also played a major role in the effort by powerful sectors of U.S...
...1966 Banco Atlantida (5 1%), Honduras' largest bank...
...Examples of the latter include Chase's $45 million loan in 1974 to the International Basic Economy Corp...
...and (3) have the state greatly increase official aid to the Third World through bilateral government agencies and international lending institutions...
...NYT, June 10, 1975...
...bank allowed back into Egypt since the Suez War of 1956 and the withdrawal of U.S...
...Marines were sent in to restore order...
...3 9 CONCLUSION Several tentative conclusions can be drawn from this brief examination of Chase's activities in Latin America...
...Business Latin America, a newsletter for U.S...
...7. This list was compiled from articles in Business Latin America (BLA), NYT, WSJ, and the American Banker...
...banks are supposedly responsible for over half the roughly $40 billion in private loans to the Third World (with European, Japanese and Canadian institutions holding the remainder...
...A more likely solution, and one currently being advocated by the bankers, is for the state to come to the aid of private capital in much the same way it did in New York City...
...The only ultimate threat to foreign capital is one which aspires to eliminate capitalism as a means of organizing its economy...
...In 1974 and the first six months of 1975 Libra managed or co-managed $1.3 billion in loans for Latin America.'$ In addition it participated on a more limited basis in at least a dozen loans organized by others...
...Libra's partners recognize that doing business from a Latin American base is pretty much out of the question these days, given the welter of restrictions or outright prohibitions of foreign banking activity...
...bankers have shown in their treatment of Chile, they do not seem to find this alternative of greatly increased repression to be a particularly repulsive one...
...In addition, foreign operations have become increasingly important to the giant banks which ddminate U.S...
...4 By the early '60's Chase realized it needed to expand quickly...
...how to exploit them most effectively is the question...
...For only its interests present a real threat to capital...
...CFE (Mexico's state-owned electric utility...
...Since private banks lend at interest rates substantially higher than government lending institutions and international aid organizations, the interest payments also increased...
...Other examples of Libra's loan syndications include: BNDE (Brazil's state-owned development bank...
...executives, summarized the bank's position as follows: "The Chase Manhattan Bank, which premised its expansion into Latin America on substantial equity purchases in local banks . . has found the door to foreign takeover bids being closed in more and more countries...
...In addition to Chase, the partners are (including their ranking within their own countries): the U.K.'s National Westminster Bank (2nd), Credito Italiano (5th), Westdeutsche Landesbank (3rd), Swiss Credit Corp...
...246-7...
...capital in general and Chase in particular resolve the current contradictions they face abroad will depend to a great extent on the strength of the working class within the region where they operate...
...banks...
...Export-Import Bank and in financing companies which are closely tied to the Rockefeller interests...
...Chase still maintains a representative office in Buenos Aires which arranges loans from its New York headquarters for government entities and private corporations.*" 2 CONFLICT WITH NATIONALISM IN THE LATE '60'S Chase's strategy, however, proved inadequate for dealing with political changes which swept over large sectors of Latin America in the late '60's and early '70's making it difficult for U.S...
...During the past few years, according to Business Week, foreign income from the top 10 banks has grown at a compound average rate of 45 percent, while domestic income gained only two percent...
...On the one hand, U.S...
...In 1911 a $1.5 million loan to Nicaragua extended at the request of the State Department (to forestall British intervention as a result of Nicaraguan government default on a loan from a British syndicate) gave Brown Bros...
...These * Recent changes in Colombian and Brazilian banking laws have not affected Chase's affiliates but have kept other foreign banks out...
...John Kouwenhoven, Partners in Banking (Garden City, NY: Doubleday, 1968), pp...
...See also Jack Anderson column, New York Post, January 20, 1970...
...This control was granted not only by the company (owned by Asarco, Cerro, Phelps Dodge and Newmont Mining) but also by MineroPeru, the state mining agency which supposedly controls all mineral marketing...
...Chase has also been involved in other banking-related activities in Latin America, such as mutual fund management, leasing, credit cards, business management advisory services, real estate development, travel services, financial data services, etc...
...He reportedly believes that "As long as Mario Simonsen is finance minister, Brazil will put paying its foreign debts before everything else, including social welfare...
...As merchant banks they do not conduct such commercial banking operations as accepting deposits and offering checking accounts or other retail banking services...
...The Times gingerly stated the problem as follows: "The implications of this increasing dependence of developing nations on privately controlled capital from abroad, and the potential for political as well as economic influence on policy in the more hard-pressed nations, have only begun to be understood...
...In addition, it means Libra can arrange financing in a variety of currencies...
...December 1975...
...Wall Street Journal, May 15, 1975...
...The Central Bank purchased Chase's 70 percent interest in the Banco Argentino de Comercio for resale to Argentine capitalists...
...Chase reduced its 49 percent ownership in Banco Mercantil y Agricola to the required limit, though, as the New York 7Tmes pointed out, "under a complicated offering of fully and partly paid capital shares, Chase will probably end up owning 30 percent of equity" - and this is more than enough to give Chase operating control...
...In 1970 Chase took leadership in organizing the Orion Bank, whose operations were to take place on a global basis...
...Chase did not have a direct banking investment in Chile and thus was not affected by the Allende government's nationalization of domestic and foreign-owned banks.7 NEW STRATEGY IN THE '70'S: LIBRA BANK By the early 1970's Chase realized it needed a new strategy for operating in Latin America., While the bank's earlier expansion strategy had been roughly analogous to the multinational corporations' (MNC's) "joint venture" strategy for penetrating foreign markets, its solution for the growing restrictions of the '70's was similar to the MNC's increasingly adopted strategy of service and marketing contracts...
...150 mn...
...Co...
...companies abroad and the need to have repositories for U.S...
...5. Business Week, April 29, 1967...
...7 Business Week went on to report that "some bankers want multilateral guarantees by the U.S., Japanese and European governments on future loans to developing countries, as well as stepped-up levels of official aid...
...100 mn *Chase's previous investments in its Latin American banks (see above) had been made in partnership with Dresdner Bank's subsidiary, Deutsch-Sudamerikanische Bank, which took minority shares ranging from 5 to 22 percent.8 ELMA (Argentina's state-owned shipping fleet...
...4. NYT, June 4, 1972...
...March 12, 1976...
...Fred Goff New Spheres for Profit Chase is constantly working to expand its moneygathering and lending activities on a global basis...
...banks in foreign loans to South Korea, with nearly $300 million, or 1.2 percent of all its outstanding loans (data for Brazil and Mexico are not available).23 As the deficits mounted so did the portion financed by the commercial banks...
...2 " At this point the contradictions in the international capitalist system begin to emerge most clearly on a global level...
...Libra Bank, annual report 1974...
...banks which have followed similar lending patterns, faces a new threat: default by foreign borrowers...
...control of the National Bank and the government-owned railway.' When this arrangement was threatened by a revolt in 1912, the U.S...
...The six banks associated with Chase in Latin America had 241 branches and agencies, whereas Chase itself had only 11 branches in Panama, the Dominican Republic and Trinidad (in addition to its branches in Puerto Rico and the Virgin Islands...
...American Banker, April 19, 1974;NYT, June 16, 1973...
...Saudi and Kuwaiti depositors alone are reported to have some $6 billion on deposit in the top three New York banks...
...WSJ, January 5, 1976...
...lenders to Third World countries and account for nearly half the total U.S...
...banks...
...capital has dealt ruthlessly with those governments which have attempted to remove their countries from the orbit of capitalist exploitation...
...The bank's structure also reflects the increasing internationalization of capital in response to the rising restrictions on foreign capital in the Third World and the growth of socialism...
...During the 1950's Citibank gained an edge in international banking through aggressive overseas branching...
...5. SIFC...
...Most of Libra's lending is to government agencies, though it has managed loans for private projects...
...Forbes, December 1, 1975, p. 19...
...and Roger Boyer, Elizabeth Farnsworth, and Bill Felice, "Investing in the Junta," NACLA's LAER, October 1974...
...8. Miguel S. Wionczek, "La Banca Extranjera en America Latina," published manuscript prepared for the 9th meeting of Latin American central bank advisors in Lima, November 1969), p. 13...
...activities actually fell nearly four percent, while earnings from international activities increased 31 percent...
...I think there is no choice but to wipe out the debts," the New York Times quoted a high Pakistani official as saying...
...Successful in this phase, Chase had to confront a wave of demands for national control of local banking facilities in the late 1960's and early '70's...
...aid for the Aswan Dam...
...Prior to this, no U.S...
...WSJ, May 28, 1974...
...According to the American Banker, "it is possible that most of the trade between China and the United States...
...See also, Shane Hunt, "Direct Foreign Investment in Peru," in Abraham Lowenthal, ed., The Peruvian Experiment (Princeton University Press, 1975), p. 316...
Vol. 10 • April 1976 • No. 4
