The Central American Common Market: The Integration of Underdevelopment
Tobis, David
Every individual in [Latin America] whose productivity can be raised above a subsistence level is a potential customer; and every person with a peso in his pocket after providing for minimum...
...Recently there has been a shift in this process such that Central American capital deposited in Europe is beginning to return to Central America...
...3 The elimination of internal tariffs, the imposition of high external tariffs and the promulgation of extremely profitable investment laws and tax benefits for industry have had the effect of: 1) tremendously increasing intra-regional trade, 2) changing the composition of imports into Central America, and 3) skyrocketing foreign investments...
...2 7 The expanded market created by regional integration will allow for utilization of some of this excess capacity.28 Production for a regional market will begin to make economies of scale more profitable...
...HEGEMONY Or again, look for the sources of American influence on foreign attitudes and cultures and where will one find them...
...On the grounds that there is not sufficient investment capital available domestically to provide for adequate development, these laws give the greatest benefits to new industries which produce capital goods and raw materials or semi-manufactures, packaging and consumer goods in which at least 50% of the value of the materials are Central American in origin...
...31 Hansen, pp...
...The company transfered its investments in Central America to the production of processed foods and freeze-dried goods...
...and every person with a peso in his pocket after providing for minimum living needs can, with others of his kind, broaden the markets for American goods . . . 1 H. W. Balgooyen Chief Executive Officer, American Foreign Power It has become increasingly difficult for U.S...
...To understand the effect of this increase in regional trade and the dramatic shift in its composition, one must examine the changes in the spheres of direct U.S...
...40.15 In addition to these benefits, the agreements provide for "integration industries" to be established on an equal basis in each of the five Central American countries...
...The result of these two processes has been that U.S.based firms have been able to retain the percent of the market of the goods imported by Central America that it had at the start of CACM, roughly 49...
...In fact, there is sufficient domestic capital in Central America for investment...
...Honduras signed in May, 1962 and Costa Rica signed in September, 1963...
...Before the establishment of CACM, the majority of goods traded between the five countries were unprocessed agricultural products...
...As this article has tried to show, the structure of the economies of Central America has not changed...
...3) CACM will accelerate the socialization of the costs of production...
...15 Ibid., p. 45...
...37 U.S...
...In essence, companies designated as integration industries are granted virtual monopolies for a period of ten years...
...During the same time period the imports from the Western European countries and Japan shifted from 12.6% of total imports in 1950 to 32.3% in 1960.* 13 * To a certain degree this shift is illusory since goods shipped to Central America from European-based subsidiaries of U.S...
...Such a military organization will make it more efficient and economical for the United States to defend militarily its control over Central America...
...9, January, 1970 Published monthly, except May-June and July-August when it is published bi-monthly, at 160 Claremont Avenue, New York, N.Y...
...As shown by Carlos M. Castillo, a director of ECLA, the structurally new elements of Central American industry (i.e., those industries producing industrial goods for export to other Central American countries) are almost without exception foreign...
...The problem is that it cannot compete with foreign capital...
...Once again, American industry will get Latin America to finance its own exploitation...
...Mission to Guatemala in 1967...
...The United States will train, equip and support an increasingly powerful international military force staffed by Central Americans...
...8, 9. 13 Committee for Economic Development, Economic Development of Central America, November, 1964, p. 107...
...19 Wardlaw, p. 30...
...Department of State, 1969, p. 7. 6 U.S...
...Subscription price: $5 per year...
...25 Interview, official of the Bank of Guatemala, August, 1966...
...2 0 Since United States' companies tend to be the largest in any given field,it is easiest for them to qualify as integration industries...
...NACLA NEWSLETTER NORTH AMERICAN CONGRESS ON LATIN AMERICA P.O...
...Department of Commerce, Survey of Current Business, various issues...
...808, May 7, 1969)-8 - FOOTNOTES 1 H.W...
...Agricultural products still occupied 29% of the regional trade but they had become canned and processed goods rather than the raw material...
...18 SIECA, Cinco Aos de Labores en la Integracion Econ6mica Centroamericana (October 12, 1966), p. 52...
...technology and imports of U.S.-produced semi-finished products, it is extremely difficult and very costly to shift to Frenchproduced machinery, semi-finished products or technology, though the cost of these items might be less than those supplied from the United States...
...This force will become increasingly independent of changing political and social structures of any one of the Central American countries and will become increasingly more dependent on the United States for its existence...
...1 8 A company which qualifies is granted a 10 year exemption from import duties on all materials, a 10 year exemption from all taxes and, most important, tariff protection from third countries and other Central American producers for 10 years.lY This means that any other company located in Central America which attempts to produce the same goods as a firm designated as an "integration industry" has to pay a tax equal to the external tariff to sell his goods in any of the other Central American countries...
...Bank funds available in Central America have also increased by 53% between 1961 and 1964.40 This increase is partly due to money deposited in Europe returning to the region...
...1 7 * Over the past decade, there have been periods of two to three years in which the U.S...
...corporations and subsidiaries in Central America and the percentage each contributes to the total regional trade in its field...
...10 Wardlaw, pp...
...4) The industries created as a result of CAciamave begun to attract domestic capital back to the region to invest...
...To do so would begin to increase the demand for labor and, for various reasons, would eventually cause the wage rate of all workers to rise...
...he is doing what he can with the elements at his disposal...
...In that time period, total direct U.S...
...A common market implies free trade within the union as well as free movement of the factors of production...
...3 4 This loss of revenue will make the Central American governments more dependent on foreign sources of funds...
...Channels of trade are by all odds the most effective means of disseminating understanding and knowledge of the United States...
...It is similar to U.S...
...he capital therefore leaves Central America...
...That is what he knows...
...The implications of each of these processes will be analyzed in turn...
...By 1968, there was equalization of external custom duties on 97.5% of all products imported into the region...
...investors in Central America can get insurance against devaluation or expropriation, a critical form of AID which competing Central American investors cannot receive...
...RATIONALIZATION OF CAPITAL Latin America's economic integration can be justified only if it is conceived in terms of defining common policy between national states and not as a coordinating link between the great foreign enterprises operating in the region...
...This schedule replaced the individual external tariffs of each country...
...The General Treaty and its supplements provide for: 1) A Central American Common Market to be established within five years...
...trade position...
...economic penetration of Central America, will be to rationalize capitalism in the region...
...Two countries are even more dependent on these crops now than formerly...
...43 John Saxe-Fernandez, "The Central American Defense Council and Pax Americana," Latin American Radicalism, ed...
...TABLE VI EXPORT COMODITY CONCENTRATION Country Percent of total exports from two major agricultural crops:, offee plus bananas or cotton (depending on the country) 1959-61 1964-65 Costa Rica 77 81 El Salvador 80 72 Guatemala 73 64 Honduras 59 58 Nicaragua 62 63 Source, Walter, p. 32...
...To remain a producer in the Central American market, therefore, one must become increasingly efficient...
...42 Interview, Peter Valkey, Deputy Chief of U.S...
...These are corporations which can supply at least 50% of the regional demand for a particular product...
...The general trend, however, is clearly up...
...To compound this situation, U.S...
...As .a result, local industrialists have begun to sell out to foreign interests when the need arises to enlarge and to modernize their plants...
...products...
...This was becoming harmful to the U.S...
...14 U.S...
...At the same time, the rate of increase in export of finished products to Central America by U.S.-based firms declined...
...Again, through the designated range from machetes (Collins Co...
...Finally, in May, 1964, a single common external tariff schedule for most products imported into the region was approved...
...Except for 50 specifically mentioned products, trade between the five countries will be made free of all duties and other restrictions...
...III, No...
...firms in the area...
...corporations to invest all of their surplus domestically...
...Mission to Guatemala, February, 1967...
...34 Wardlaw, p. 40...
...35 U.S...
...This will further tie Central America to the economy of the United States...
...3) socialization of the costs of production...
...ROCAP* had agreed to provide a tremendous number of first and second grade text books for the entire Central American region...
...Under this system a selected industry (rather than a firm) is granted special tariffs to protect it from producers outside the region...
...10 A second example is the United Fruit Company (UFC...
...Honduras, the least industrially developed of the five countries, is allowed to provide even greater advantages to attract foreign capital, on the grounds that its needs are the greatest...
...The Central American Common Market is a chief mechanism to promote this shift in the role of Latin America in relation to the United States economy.* The Central American Common Market (CACM), aided and promoted by the United States government since 1960, will become a means for American business: 1) to increase U.S...
...There is little value added within the region and therefore the increase in intra-regional trade does not represent a comparable increase in regional GNP nor a necessary increase in benefits to Central America...
...corporations...
...It has also raised the price of agricultural tools and raw materials which will eventually make Central American agricultural products more costly and less competitive on the world market...
...AID but serves the entire Central American region.7 the flags that are represented in the book are not the Guatemalan flag but a non-real, imaginary flag...
...The subtle ways in which U.S...
...An example will best illustrate this increased dependence...
...TABLE IV NET CAPITAL INFLOWS AND TRANSFERS TO CAEM COUNTRIES, PRIVATE a AD CENTRAL GOVERNMENTb SOURCES, 1956-64 (millions of US$) 1957 1958 34.0 22.9 55.7 41.9 1959 11.7 34.9 1960 1961 38.4 44.4 32.4 22.9 1962 1963 95.5 101.0 28.9 97.5 1964 175.8 44.5 aExcludes commercial bank loans and credits bIncludes both grants and loans from foreign governments Sources Ingo Walter and Hans C. Vitzthum, "The Central American Common Market," The Bulletin (No...
...Tariff elimination on the 50 items will be negotiated individually...
...This was done through a subsidiary, United Fruit and Food Corporation...
...4) The establishment of the Central American Bank of Economic Integration (CABEI) which will serve as the regional financial agency in promoting regional economic development.2 This treaty became effective for three of the five Central American countries in June, 1961...
...Appendix: AID "Public Safety" Programs...
...Originally, two companies were granted the status of "integration industries:" GINSA tire and tube company in Guatemala, a subsidiary of General Tire and Rubber Co., and a caustic soda and chlorinated insecticidles company in Nicaiagua, a subsidiary of Hercules Powder Co., Inc...
...For consumer goods the average ad valorem duty is 82.5%, whereas before the equalization of tariffs the average ad valorem duty was 65%.30 The consequences of this system of subsidy are clearly spelled out by Roger Hansen, an establishment economist: The Central American Common Market's uniform external tariff has raised effective protection for manufactured goods on an average of 40%, and in many cases the implicit rates of subsidy in the new tariff structure exceed 100...
...7 Coupled with the foreign control of new industries is the fact that a major part of the income in intraregional trade is composed of raw materials and components imported from outside the region...
...In addition to the distribution of gasoline from over 500 ESSO Standard service stations in Central America (1960), 9 Standard Oil has begun to produce fertilizers in the region...
...Minimum contribution for one-year subscription: $5.00...
...17, 1969), p. 24...
...Balgooyen, "Problems of United States Investment in Latin America," Latin America: Development Programming and U.S...
...According to Carlos Castillo: The typical Central American businessman continues to invest in the same economic activities, undersized plants and obsolete industrial processes...
...Investments, Clement G. Motlen et al, 1956, p. 51...
...It has 60% Central American capital and 40% foreign...
...In so oing, he is not conducting himself irrationally...
...8, December, 1969), p. 4. 28 Chase Manhattan Bank, World Business (January, 1968), p. 14...
...The increased production and the saturation of the domestic market resulting from an increased rate of domestic investment would eventually cause the selling price of goods to fall and again decrease profits...
...Regional commmerce was a way to take up occasional surpluses or shortages in agricultural goods...
...Until recently Latin America has been seen primarily as a source of raw materials and agricultural products and only secondarily as a place to sell luxury items and a small amount of other consumer goods...
...control over the area and the development of a small Central American industrial elite...
...This essentially eliminates import competition for U.S...
...23 Roger Hansen, "Time of Trial for the 'Other' Common Market," Columbia Journal of World Business (2:5, September/October, 1967), p. 99...
...38 Walter, p. 61...
...firms over Central American producers...
...Source: Survey of Current Business, International Commerce, various issues...
...9, 10...
...44, May, 1967) p. 46...
...Vol...
...This shift not only makes the consumer sector dependent on the United States but it promotes an industrial sector which becomes increasingly dependent on the United States...
...2) U.S.based firms began to export semi-finished products and technology...
...Balgooyen stated several years ago, Latin America can increasingly serve as a consumer of U.S...
...An industrial research institute funded by the common market has undertaken projects to improve technology, marketing facilites and the quality of merchandize for all private industry located within the region...
...3 Ibid., p. 15 4 Chase Manhattan Bank, World Business (January, 1968), p. 14...
...This process has been paid for by the Central American consumer who has to buy more expensive goods...
...TABLE II BREAKDOWN OF TOTAL U.S...
...hegemony in the area...
...To facilitate this process, the first stock market in the area was established in El Salvador in 1964.38 Through these joint ventures with foreign corporations, Central Americans are beginning to provide some of the investment funds used by U.S...
...share has currently returned to 49...
...TABLE V ECONOMICALLY ACTIVE Selected Sectors Agriculture Services Manufacturing Source United Ns 236...
...Dyer, p. 19...
...capital has come to dominate the Central American Common Market...
...the U.S...
...firms are better risks than Central American investors and can therefore borrow money more easily...
...97-98...
...Department of Commerce, International Commerce (March 24,1969), p. 13...
...Not in the literature disseminated by USIS [U.S...
...1) Before the establishment of CACM, because of capital-intensive production coupled with the small size of the market in each country, industrial capacity was underutilized...
...Guatamela 1950 1964 68.2 - 10.0 11.7 -POPULATION BY SECTOR OF ACTIVITY, 1950-64 (percent) Salvador Honduras Nicaragua 1950 1964 1950 1964 1950 1964 63.8 59.4 76.8 63.5 67.7 58.7 12.8 14.0 7.3 16.5 10.6 14.5 12.3 12.8 9.4 8.5 11.4 11.7 Costa 55.6 15.5 11.5 Rica 1964 48.7 18.1 11.6 tions, Evaluacion de la Integracion Economica en Centroamerica, 1966, p.235Por VADILLO >N*Pm >, . ~~>41>,, 4_ SW)_) )w_ reprinted from Siempre (No...
...12 American producers have already begun to dominate the processed food industry...
...DOMINATION Most of the establishment analysts of the common market have taken the increased intra-regional trade in Central America to be an index of the success of CACM...
...By 1965, when most internal tariffs had been eliminated, the majority of regional trade (52%) had shifted to non-durable consumer goods...
...Infrastructure necessary for industrial development is increasingly paid for publically rather than b private investors, as was the case in past years.36 For example, Alcoa plans to start a $65 million investment in Costa Rica to process local bauxite...
...U.S...
...I -4 To a large degree, European and Japanese producers were beginning to get a foothold on the Central American import market...
...Hegemony and the Future of Latin America," Latin American Radicalism, ed...
...investment in Central America was in manufacturing...
...corporations are increasingly looking to Latin America...
...firms to capitalize on this advantage...
...To him regional free trade is only an opportunity to do a little more of the same...
...firms had a much greater advantage over European and Japanese firms in the area of investment in Central America than they had in the area of trade...
...As Table II illustrates there has been a major shift of U.S...
...2 2 Initially there was much complaint from international funding agencies that integration industries were monopolies and should not be fostered...
...Second-class postage paid at New York, N.Y...
...As documented by Andr6 Gunder Frank, this situation has existed throughout all of Latin America...
...All capital goods, raw materials and semi-manufactures (metallic) which entered intra-regional trade in 1965 constituted only 4.3% of the total.5 Non-durable consumer goods, processed foods and chemicals have become the main items which are traded between the five Central American countries...
...4 The result is that there appears to be a lack of domestic capital for investment in Central America...
...A few highly illustrative examples will have to suffice...
...To qualify for the status of "integration industry," a firm must be able to produce at least 50% of the entire regional demand for a commodity market...
...17 Wardlaw, p. 44...
...2 6 Celso Furtado The second major result of CACM, in addition to increasing U.S...
...The high external tariffs and the favorable investment laws allowed the U.S...
...The result is that domestic capitalists eventually sell out to foreign concerns...
...firms are listed as imports from Europe...
...share of the market has temporarily decreased by two or three percent...
...INVES (percent) Manufacturing Trade Public Utilities Mines & Petroleum Other TMENT IN CENTRAL AMERICA* 1959 1961 1963 1966 1968 4.2 4.6 5.8 11.9 15.2 3.8 4.2 4.2 5.4 5.6 27.0 23.8 24.9 22.6 18.4 35.6 28.2 28.0 28.8 29.0 29.4 39.4 36.0 30.2 30.6 Total (U.S.$ million) 473 483 537 682 795 * The figures include investment in the West Indies since the Survey of Current Business does not break the figures down...
...Each Central American country is still nearly as dependent on one or two agricultural products for most of its export earnings in 1965 as it was before the start of the common market...
...4 2 Finally, as part of the agreements of integration, the United States has fostered the development of the Central American Defense Council (CONDECA...
...100-101...
...This latter aspect does not yet apply to the CACM, though by convention it is called a common market...
...Secondly, under the United States AID program, U.S...
...31, 32...
...Annual inflows of foreign capital have increased at an even faster rate...
...As Mr...
...20 Ibid., pp...
...capital will be the creation of a tiny bourgeoisie dependent on U.S...
...This will be discussed later...
...7 Carlos M. Castillo, Growth and Integration in Central America, 1966, p. 101...
...The capital is returning, not to compete with foreign firms, but to provide some of the investment funds needed by those firms...
...the result is that the operation of such industries subtract from, rather than add to, national income (emphasis added).31 This process of tariff protection causes a rise in the cost of living in Central America...
...In six years, from 1961 to 1967, intra-regional trade rose 480...
...41 Hansen, p. 104...
...Alcoa has agreed to lend (guarantee) the Costa Rican government $11 million to build a road and port which Alcoa wants before it will establish the plant The loan plus interest will be paid back to the company and Alcoa ends up with its needed facilities...
...The concrete processes leading to the formation of a Central American Common Market began in June 1951 at the meeting of the U.N...
...Copyrights 1970 by the North American Congress on Latin America, Inc...
...If a Central American country is importing toothpaste from the United States, it is relatively easy and inexpensive to shift to importing a lower-priced toothpaste from France...
...In 1960, the production of fertilizers in all of Central America was insignificant ($5,000...
...24 U.S...
...These concessions to foreign firms reinforce the comparative advantage already enjoyed by U.S...
...Due to increased competition from Western Europe and Japan, the percentage of goods imported into Central America from the United States fell from roughly 70% in 1950 to 49% in 1960...
...A recently acquired subisidiary, Compania Numar in Costa Rica, is producing shortenings, margarine, salad oil and mayonaise for the entire Central American region...
...33 Hansen, p. 98...
...Subsidiaries of multi-national corporations can tempori arily absorb losses through the parent company and therefore can control the selling price and the market, and squeeze competing investment capital out of the region or into non-competitive areas such as real estate...
...8, 12, 13...
...I~~~~~ 2) With few exceptions, uniform investment laws and other legislation on industrial development for the five Central American countries...
...Guatemalans, for example,have over $45 million invested in European and North American banks.H The Central American governments politically unable to severely restrict foreign capital, are continually confronted with a shortage of domestic capital for investment...
...Secondly, total Central American imports from the United States have increased from $210 million in 1961 before CACM to $365 million in 1968.14 FOREIGN INVESTMENTS The CACM has caused an increase in the rate of total domestic investment in Central America, as Table III shows...
...The opposition was due to the fact that "in the section on math, the book uses the dollar rather than the Quetzal, and * Regional Office for Central America and Panama...
...machinery, U.S...
...III, No...
...The monopoly character of production in the region allows producers in Central America to sell at prices artificially elevated to a point just below the ordinary selling price plus the tariff...
...4 3 In short, the Central American Common Market has led to the increased U.S...
...The costs of feasibility studies have also been taken over by the Central governments in the area through U.S...
...3 2 The consequences will be a loss of foreign exchange necessary for development.33 The establishment of tariffs for protection rather than for revenue has decreased the amount of income for each of the governments in Central America...
...dollars...
...The establishment of CACM allowed U.S...
...16 Chase Manhattan Bank, World Business (January, 1968), p. 15...
...Information Service], useful though that may be, but in the activities of International Harvester, Caterpillar Tractor, Singer Sewing Machine, Coca-Cola, Hollywood and so on...
...John F. McCurrant, Development Assistance in Central America, 1968, p.257...
...1 US Police Operations/Latin America...
...A customs union generally implies free trade within the union...
...Of11 NACLA Expansion: New West Coast Office.................................................2NACLA NEWSLETTER Vol...
...investment in manufacturing rose from $23 million in 1961 to $121 million in 1968.6 As a result of this increased flow into manufacturing, US...
...In 1961, 52% of U.S...
...10027...
...If, however, a Central American industry (regardless of ownership) is established with old U.S...
...4 The shift in the composition of intra-regional trade is equally significant...
...III, No...
...Foreign firms, for the first time on a significant scale in Central America, are beginning to sell non-controling, minority stock ownership in the region...
...Private Central 10.6 Govt...
...firms to do two things to regain their advantage: 1) U.S...
...TABLE I INTRA-REGJnNAL TRADE OF CENTRAL AMERICA (in U.S.$ millions) 1955 1960 1961 1962 1963 1964 1965 1966 1967 TOTAL 12.7 32.7 36.8 50.4 72.1 106.4 135.4 176.3 213.9 Selected items: Food products 6.2 14.5 14.6 22.2 23.2 29.5 35.9 39.7 Chemical products 0.6 2.4 3.5 5.2 8.5 19.1 21.2 26.4 Total manufactures 2.6 10.8 13.7 17.5 30.2 55.7 65.4 93.6 by material 1.2 6.2 8.1 11.0 18.8 26.7 36.1 51.4 machinery 0.6 1.5 1.3 1.1 1.8 3.1 5.1 7.6 miscellaneous 0.8 3.0 4.4 5.4 9.6 15.9 24.1 34.6 a) includes transportation equipment Sources: Andrew B. Wardlaw, Achievements and Problems of the Central American Common Market, Department of State, 1969, p.7...
...economic penetration of Central America and to increase Central American dependence on the United States, 2) to rationalize capitalism in Central America and 3) ultimately to preserve U.S...
...Toward the end of 1966,the Inter-American Development Bank (IADB) began to support the "integration industry" system which will probably accelerate the rate of new designations...
...firms began to intensify direct investment in consumer goods industries behind the tariff wall...
...But these laws provide benefits to all industries regardless of what they produce: e.g., 100% duty-free importation of machinery, equipment and raw materials for five to ten years, exemption from income and profit taxes for two to six years, and exemption from assets and net worth taxes for four to ten years...
...AID loans...
...9 Alejandro Baca-Mufoz, "The CACM and Opportunities for American Investors," The Caribbean: The Central American Area, edited by A. Curtis Wilgus, 1961...
...39 Frank, p. 3. 40 Walter, p. 50...
...8 To demonstrate that U.S...
...Subsequently, a plate glass factory in Honduras was designated as an integration industry...
...The Fertica plant, a subsidiary o Standard Oil of New Jersey was recently established in Costa Rica...
...TABLE III TOTAL ROSS INVESTMENT IN CENTRAL AMERICA: PRIVATE AND PUBLIC SOURCES, 1950-1964 (Millions of Dollars at 1962 Prices) 1950 1955 1960 1961 1962 1963 1964 Private Investment 171.4 238.6 275.7 252.1 280.0 342.8 405.7 Public Investment 35.2 74.6 87.0 91.3 96.7 103.7 122.1 Total 206.6 313.2 362.7 343.4 376.7 446.5 527.8 Source: Evaluaci6n de la Integraci6n Econ6mica en Centro Amrica, United Nations, 1966, p. 228...
...and, most important, 4) generation of new sources of capital...
...By 1968, over 15% of total direct U.S...
...Such an increase would be a pre-requisite for an improved general standard of living...
...Department of Commerce, International Commerce (Nov...
...9...
...By 1965, production of fertilizer for intraregional trade reached $4 million, chiefly from the Fertica plant...
...2 John Dyer, "The Central American Common Market: A Review," Business and Economic Dimensions (May, 1968), p. 15...
...3) The development of "integration industries...
...In This Issue: The Central American Common Market: The Integration of Underdevelopment...
...interests...
...3 5 A second major means of CACM to stabilize trade and rationalize commerce is the establishment of a regional monetary system to supercede the five individually valued currencies...
...Agency of International Development, Foreign Aid Through Private Initiative (no date), p. 16...
...8 Donald McClelland, The CACM's Contribution to Central American Economic Growth, Brookings Institute, May, 1968, p. 36...
...The result of Central American capital participating in joint ventures with U.S...
...hegemony in the region...
...Economic Commission on Latin America, but did not lead to the establishment of an operative common market until the early part of the 1960's.** In December 1960, the General Treaty on Central American Economic Integration, which supercedes previous weaker charters of economic integration, was developed by the five Central American countries...
...There are four major ways this will occur: 1) utilization of excess industrial capacity and rational allocation of investment...
...32 Wardlaw, p. 29...
...In all such cases, the subsidy received through tariff protection exceeds the total value added by the domestic production process...
...Imports originating within the region went from 6% of total imports in 1960 to 18% in 1967...
...This export from the Fertica plant represented over one-third of the extraregional export for the entire industrial sector...
...Between 1956-57 and 1964-65, private capital inflows into Central America increased by 52.1%.15 The increase in direct capital investment from the United States has been equally dramatic, rising from less than $20 million per year in 1960 to roughly $60 million in 1967.16 A series of extremely profitable investment incentive laws, uniform for the entire region, have been developed by the common market...
...investment into manufacturing since 1961...
...firms which go abroad tend to be giants with advanced technology and efficient marketing facilities, they can produce and sell at lower costs than the smaller Central American firms...
...As a result, the foreign debt of the Central American countries has grown...
...manufactured goods, U.S...
...Though the majority of the Fertica production was for intra-regional trade, it exported an additional $1.1 million of fertilizer to areas outside of Central America...
...A second means to accomplish this goal is by creating regional decisions and identification which results in a breakdown of nationalism...
...in Latin America, 1958, p. 8 0 . 12 United Fruit Company, Annual Report, 1966, pp...
...Unlike the integration industries, there is no requirement that any of the capital be of Central American origin...
...In the early 1950's, the Company had heavily invested in banana production (20.2% of all crop lands in Guatemala, Honduras and Costa Rica combined was owned by United Fruit in 1954) 11 and utilities (ports, telegraphs, shipping, railroads...
...26 Celso Furtado, "U.S...
...Irving L. Horowitz et al, 1969...
...2) One of the major mechanisms established to stabilize the consumer market in Central America is the imposition of high external tariffs...
...And specifically, the Central American Common Market has merely promoted the regional integration of imperialism...
...29 Castillo, pp...
...Due to the fact that U.S...
...NACLAExpansion:.New.West.Coast...
...International Commerce, March 24, 1969, p. 7 .3 investment in Central America...
...21 Chase Manhattan Bank, Latin American Business Highlights (13:2, 1963), p. 11...
...To absorb this investment and find outlets for U.S...
...Central American producers therefore become dependent on continued importation of U.S.-produced semi-manufactures, producer goods and technology...
...INTRA-REGIONAL TRADE AND U.S...
...The laws also require a certain degree of participation of Central American capital, running as high as 60% in certain industries...
...Needless to say, the regional currency (Central American pesos) will be on a par with U.S...
...2 3 A more comprehensive program to promote new regional industries, without a monopolistic character, was also set up in 1963 called the "Special System for Promotion of Productive Activities...
...27 Andre Gunder Frank, "The Underdevelopment Policy of the United Nations," NACLA Newsletter (Vol...
...capital...
...The increased industrial investment has not increased the percentage of the population engaged in industrial activities...
...For the Central American entrepreneur lacks the organ-6 izational skills, technology, financing and, of course 9 the experience which foreign enterprises have...
...2) stabilization and unification of markets, prices and mechanisms of exchange...
...In recent years, UFC has sold part of its land holdings and utilities...
...They therefore must attract additional foreign capital which makes it even harder for domestic capital to survive...
...Milton Freidman Economist As discussed above, the creation of a bourgeoisie in Central America dependent for its survival on foreign interests is one of the major ways to maintain U.S...
...direct investment in Central America was,in mining and petroleum and public utilities, while only 4.8% of total investment was in manufacturing...
...As Table I shows, the increase in intra-regional trade is truly impressive...
...22 Wardlaw, p. 31...
...Irving L. Horowitz et al, 1969, p. 73...
...to light bulbs (Phillips),the majority of the designated industries are dominated by U.S...
...The industries which will be established in this way will be controlled by and operate to fulfil the needs of multinational corporations and not to maximize benefits to the Central American countries...
...produced goods dominate the common market trade, it would be necessary to list all U.S...
...A similar analysis applies for the Latin American Free Trade Area, but it will not be discussed here...
...36 Castillo, p. 163...
...AID will promote the breakdown of nationalism was explained by Peter Valky, deputy Chief of the U.S...
...9 / January, 1970 The NACLA NEWSLETTER is published ten times a year by the North American Congress on Latin America...
...30 Walter, p. 34...
...Department of Commerce, International Commerce (March 24, 1969), pp...
...5 Andrew B. Wardlaw, Achievements and Problems of the Central American Common Market, U.S...
...ORIGIN AND COMPOSITION OF IMPORTS During the early 1950's, the United States was the only major supplier of goods to Central America...
...Box 57, Cathedral Park Station, New York, New York 10025...
...4 1 Nationalism has been one of the major rallying points of anti-imperialist movements in Latin America...
...11 National Planning Association, The United Fruit Co...
Vol. 3 • January 1970 • No. 9
