We are living in a moment of globalization, which will deepen with the coronavirus. This forces productive changes in Chile and Latin America and forces great efforts to integrate regionally.
As a product of Covid-19, most countries are adopting protectionist trade policies to control the spread of the virus. Restrictions have been imposed on the movement of people, services, technology and goods. This will persist at the end of the virus and protectionism will be manifest in the pharmaceutical, medical equipment, communications, artificial intelligence and food sectors, which will be considered national security.
Restrictions on globalization had already occurred with Trump’s war on China and will now be accentuated. The economy on a planetary scale, with segmentation of production processes, will change to a less interconnected system. In addition, our lives will be more physically limited and likely to be more virtual. Not that globalization is reversed. But it will change, it will take on new forms.
This opens up conditions for the advancement of industrialization in Latin American countries. As in the crisis of the 1930s and then the second world war, the brake on globalization will force productive transformations, allowing the supply of goods and services that until now were covered by imports. This is an opportunity to modify the production matrix, characterized by the production and export of natural resources, and thus move forward with development.
But at the same time, industrialization in narrow markets requires an effective integration effort between countries in the region, to operate on expanded scales and complement human and material resources and. The repeated failure of formal regional integration projects must make way for pragmatic initiatives between countries for mutual benefit.
Prebisch and dependency theory
In 1959, Raúl Prebisch, headed by the Economic Commission for Latin America (ECLAC), noted that in order to advance development it was essential to overcome the export dependence on raw materials in favor of the construction of an advanced industry. ECLAC was concerned about the negative impact of trade dependence, which was expressed in the deterioration of terms of trade, between manufactures imported from the centres and raw materials exported from the periphery
Prebisch argued, at the same time, that effective industrial advancement required the integration of the region’s markets. This would take advantage of expanded scales, together with import protection against competition from industry in central countries.
ECLAC believed that local bourgeoisie could commit to advanced industrialization and saw foreign capital only as a complement to domestic accumulation. That vision was questioned, however, by the so-called Theory of Dependency.
Foreign investment was not an external complement, as ECLAC conceived. With the term “spontaneous industrialization”, multinational companies, mainly of American origin, were deployed throughout Latin America. Its subsidiaries were installed in each of the domestic markets, with the purpose of capturing local consumers, thus avoiding the high tariff barriers that characterized trade policy at the time. Foreign control thus went on to hegemonize the advanced industry sector, mainly in automotive, metalworking and chemistry.
From the 1960s on, the region moved from a commercial-financial dependency to an industrial unit. This new form of dependence subordinated the national bourgeoisie to foreign capital, thereby preventing the possibility of an autonomous national development project, as ECLAC thought.
At the same time, the multiple integrationist initiatives and projects that, since the 1960s, have been promoted in South America have not served to increase intra-regional trade or to boost local industries; nor have they expanded the subregional negotiating force. This was the case in the past with alALC and the Andean Pact and has been in recent years with LAADI, MERCOSUR, ALBA, the Pacific Alliance, UNASUR, and recently PROSUR. The same has happened with the countries of the north, in Central America and Mexico.
Since the 1990s, countries in the region have privileged free trade agreements with developing countriestwo and, in recent years, with the Asian world. Instead of building their own regional force in commercial, business, educational and technological have competed among themselves, privileged an indiscriminate openness to developed countries and favoring, without restriction, the investment presence of their transnational corporations.
The inability to build a force of its own, as the European Union achieved, has to do with the fragility of entrepreneur and also of the political class of our countries. Both have subordinated themselves to transnational capital and have been complacent about American politics in the region. And, in many cases, they have been overtfolded by corruption, as has happened, shamefully, with ODEBRECH.
As a result, Prebisch’s proposal has not been fulfilled and, rather, the thesis of the Unit’s theory on the inability of Latin American bourgeoisies to promote an autonomous national project has been confirmed. But neither have the progressive and centre-left political sectors been willing to push forward a development proposal and economic policy that forces “patriotic behavior” to national bourgeoisie and orients foreign investors in favor of the processing industry.
Indeed, in the coming times, when manufacturing has moved to Asian countries neither the right, nor the Social Democrats nor the “socialists of the 21st century” have been able to promote domestic industry. They have accepted, even more intensely than in the past, that our economies are dedicated to producing and exporting fuels, minerals and food. And, instead of boosting productive diversification, they have slavishly accepted that transnational corporations overexplod our natural resources, in favor of the growth of developed countries and the Asian world.
This also explains why integrationist institutionality has been fragile and dispersed, and is characterized by unbearable rhetoric. Neither right-wing nor progressive governments have valued the importance of acting in bulk in the face of the power of transnational corporations, the United States, and China’s emerging economy.
Indeed, Lula successfully led the rejection of the CCAA, which was so interested in the US. But Brazil did not want to exercise its leadership to advance regional integration. Kirchner, for his part, concentrated all his efforts on solving the internal problems inherited from the Menem period, and embarked on a strictly nationalist economic project, setting aside regional policy; moreover, he devoted much of his foreign policy to a belligerent dispute with Uruguay over a cellulose plant, installed near its border.
For their part, Correa, in Ecuador and Evo Morales, Bolivia, prioritized the reformulation of their internal political systems, which strongly compromised their agendas. Finally, Chávez and then Maduro deployed vigorous activism to accumulate internal strength, but with a resounding failure in the field of economic construction. At the same time, they attempted to assert leadership positions in South America, with the installation of ALBA and UNASUR, with aggressive rhetoric that meant successive conflicts with several governments in the region. Chile, for its part, completely forgot about the region and chose to privilege its economic ties with developed countries and the Asian world.
Progressive, center-left leadership, which emerged in South America in the 2000s, also benefited by the supercycle of commodity prices, missed the opportunity to drive an alternative economic project to neoliberalism, let alone make regional integration a substantive component of a new development model. The inevitable result was its loss of legitimacy, which made its way right in all South American countries and to a deep crisis in Venezuela
Thus, the incorporation, without conditions, of our countries into the global economy has not helped development. On the one hand, we continue to export natural resources rapidly, while trade between our countries has been declining year after year and there are no productive complements. On the other hand, in both bilateral and multilateral negotiations, by acting divided against the dominant powers we have placed ourselves in a position of weakness in the substantive issues of the international agenda: financial openness, services, intellectual property, enterprise-state disputes, among others.
The indispensable integration
Despite the difficulties that the region has had in integrating not only at the present time but in its various stages of development, theour countries remains an indispensable project. Probably today more than in the past, because now the challenges are greater.
First, the particularities of the current phase of globalization make our countries more vulnerable to the swings of the world economy. Second, China’s and India’s emergence as growing powers, low-cost producers of manufacturing and services, hinders the competitive positioning of our economies, and this has become pressure for us to continue exporting fuels, minerals and food. As a result, new transnational production chains and their global reordering have pushed our countries to exploit exclusively their geographical comparative advantages, making it difficult to diversify the productive-export pattern.
To get out of underdevelopment, it is not possible to remain anchored in the production and export of primary goods and needs to be diversified. Improving productivity, and competing with Asian countries, requires more investment in science and technology and requires greater resources in public education. To accomplish these tasks the integration is ineseseslayable. Latin American countries are generous in primary goods but scarce in science, technology and education, forcing joint initiatives and efforts.
Only with the joint strength of human talents and the material conditions of each country in the region is that we will be able to meet the complex challenges of today’s world.
As a result, prebisch’s primary concern remains in place: integration is a fundamental component of development. To manufacture, add value to exports, empower small businesses, use state-of-the-art technologies, improve workforce efficiency and negotiate with industrial powers, regional union is critical, even more so under the new conditions of the global economy. But we must also not forget the concern of the Theory of Dependency on the inability of national bourgeoisies to promote a national development project.
The nascent protectionism and pandemic
Now, the brakes on globalization open up opportunities for transformation. President Trump’s protectionist policies and now covid-19’s painful experience are imposing restrictions on the movement of goods, services, capital, labor, and technologies. Joe Biden’s presidency does not guarantee the end of protectionism. Everything therefore indicates that international value chains will be shortened, and there will be a need to find self-suffestment in essential products for health and food and probably for some other goods.
We will have to rely on our own strength; but also seeking understandings between countries in the region. The Countries of The Assa have understood this with the subscription of a trade agreement on 15 November that includes China, Japan and South Korea and all of ASEAN.
Productive transformation, in favor of industry, will require an integration effort that must go far beyond trade openness, already existing in Latin America. It is about finding intelligent spaces of productive complementation between countries, with joint efforts in science, technology and higher education. If this has been possible between developed countries and China, geographically and culturally distant, it can most often be boosted between nearby countries.
At the present time there are objective conditions for ending rhetoric and advancing in favour of industrialization and effective regional integration. It is required by globalization, which will shorten us in the production of raw materials, and protectionism that will limit our economic dynamism. A new approach to integration must be able to transcend narrow nationalisms and political contingencies, to become an effective tool for the development of our countries. That’s how it’s been in Europe and that’s how it’s happening in Asia. We will see if politics in Latin America, with new politicians, is able to face the challenges of the present time.
The content poured into this opinion column is excluit is the responsibility of its author, and does not necessarily reflect the editorial line or position of El Mostrador.