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Castro calls for a general strike of all debtors

Fidel CastroOn 20 June 1985, the Latin American parliament issued a call for a continent-wide meeting to be held on 10-13 October in Montevideo, Uruguay, to discuss the foreign debt problem. In addition, the Latin American and Caribbean Trade Union Congress will discuss the foreign debt crisis on 15-17 July in Havana, Cuba. And there will be another Latin American conference on the debt in La Paz, Bolivia in August. The enormous foreign debt of the Latin American continent, over $360 billion, has now become the decisive social, economic and political question throughout the region.

It is of significance, in this context, that socialist Cuba, the country that has made the most substantial social advances for its people in the region, is playing a leading role in highlighting the debt crisis and pointing the way forward to its solution. In a series of major speeches and interviews, widely publicised throughout Latin America, Fidel Castro gives a detailed analysis of the debt crisis and argues that the foreign debt of Latin America and the Third World cannot be paid back and, therefore, must be cancelled. Even this, however, will not solve the problem unless a ‘new international economic order’ is created which sees ‘the disappearance of the iniquitous system of exploitation through which the Third World countries are victimised’. Castro argues that Third World countries are ‘being forced to think, to unite and to seek solutions, regardless of their political stands and ideologies, as an elementary matter of survival’. The foreign debt crisis will unite Latin American countries far more than even the Falklands/Malvinas war did. It has meant, despite all US imperialism’s efforts to the contrary, that Cuba’s isolation from other Latin American countries is finally at an end. On 19 June Cuba was admitted to the Latin American Parliament by an overwhelming majority vote of 140 to 25. Fidel Castro’s intervention is making sure that the Cubans will play a leading role in influencing the outcome of discussions on the foreign debt crisis throughout the oppressed nations of the world.

The foreign debt is unpayable

The crisis in Latin America is far worse than in the 1930s. The population is three or four times as large as in the 1930s and its social problems are incomparably greater. Except for oil, Latin America’s export products have far less purchasing power than in the 1930s. And most important at the time of the crisis in the 1930s, Latin America had practically no foreign debt. Today that debt is over $360bn and there is no way it can be paid back.

Countries such as Argentina are using 52% of their exports to pay interest on their debts. Bolivia is paying 57%, Mexico and Brazil 36.5%, Chile 45.5% and Peru some 35.5%. It is practically impossible for any country to keep going if more than 20% of its exports are absorbed by payment on foreign debts. Little wonder that this has had a devastating effect on the economies of Latin America and on the living standards of the people.

Between 1981 and 1984 the gross domestic product of Latin American countries fell. The fall in income per capita was greater because of the growth in population. This fell almost 10% for Latin America as a whole. In Bolivia it fell by 24.6%, in Chile by 11.2%, in Mexico by 6.3%, in Argentina by 11.8%, in Venezuela by 16.2% and Uruguay by 16.2%. In the case of Brazil, to restore per capita income to the levels of 1980 will require its economy to grow at 5% a year from now until 1990. Such a target cannot be met because of IMF-imposed austerity measures. Already at the beginning of July the Brazilian government announced a $8.8bn package of public expenditure cuts and tax increases so that it can resume negotiations with the IMF on a new $1.4bn standby loan and parallel austerity programme.

Certain countries have been forced to make desperate efforts to increase their exports and drastically cut back imports in order to build trade surpluses out of which interest payments on their debts can be financed. Brazil achieved a trade surplus of $12.6bn, Mexico $13.5bn and Argentina $4.5bn last year. This has been at the cost of practically exhausting stocks of raw materials and at the expense of the maintenance and replacement of productive installations, so seriously undermining the long-term productive capacity of the countries concerned.

In 1984 Latin American countries as a whole paid out $37.3bn for interest and profits to their foreign creditors and received only $10.6bn in loans and investments – a net transfer of resources abroad ot $26.7bn. In just two years, 1983 and 1984, the net flow of financial resources out of Latin America was a staggering $56.7bn. As Fidel Castro said:

‘The Latin American underdeveloped countries are financing the economies and development of the richest industrialised countries in the world with impressive sums of money…And that money has gone forever; there is no possible way of getting it back.’

The growth rate of the foreign debt has declined from the record 24% rise reached in 1981 as the imperialist banks have drastically cut back their lending to reduce their exposure and potential losses. Last year it grew by some 5.5% and the interest on it – even if the debt is held more or less at the same level – will average $40bn a year over the next ten years, and amount to $400bn paid out over that period, that is, just to finance the interest alone on the foreign debt.

The IMF restrictions for further loans cannot work. Consumer prices in Latin America increased by 175% on average in 1984, reaching staggering levels of 2,300% in Bolivia, 690% in Argentina, and 224% in Brazil. The latest figures for three months into 1985 are even worse. As Fidel Castro says

‘How can anyone ask that, in a single year, those countries reduce their inflation, balance their budgets and also pay astronomical amounts as interest on their debts?’

Castro warns the governments of Latin America that to demand massive reductions in the rate of inflation, drastic cuts in public expenditure and other restrictive measures, which will increase unemployment and poverty, can only lead to serious political and bloody social conflicts. This will threaten to destroy the ‘democratic opening’ which has been created by the masses in countries such as Argentina, Uruguay and Brazil. The Latin American countries, including socialist Cuba, for this reason have a united interest in urgently seeking a solution to the debt crisis.

The foreign debt cannot be paid back. It must be cancelled. The alternative, says Fidel Castro, is ‘generalised social upheaval throughout the hemisphere, possibly revolutionary social upheaval’.  The debt has already taken its first toll in blood in the Dominican Republic, in 1984, when the poor were gunned down in the streets, ‘Any attempt to pay the debt under the present social, economic and political circumstances in Latin America would cost our suffering and impoverished nations rivers of blood, and it could never be done.’

A new international economic order

Cancellation of Latin America’s foreign debt, however, in itself will not solve the problem. For many countries it would have little or no impact, and for others it would offer at best a few years’ respite. Fidel Castro points out that there can be no final solutions to Latin America’s problems as long as the unequal terms of trade between developing and industrialised countries remain in effect; as long as the imperialist countries impose protectionist policies and dump subsidized products to grab markets and depress prices of the exports on which many Third World countries depend; as long as monetarist policies imposed by one powerful imperialist country determines the interest to be paid and oppressed nations are lent money at one value and are expected to pay it back at a higher value; and as long as the capital needed for development is drained away.

Unequal terms of trade have had a decisive effect in creating the crisis. They involve the constantly rising prices for the equipment, machinery and other finished products imported from the imperialist countries compared with the declining purchasing power of the developing countries’ basic exports. An example of this is the fact that it took 200 tons of sugar to buy a 180-hp bulldozer 24 years ago. Today it takes 800 tons of sugar. Between 1980 and 1984, the terms of trade for developing countries’ basic exports deteriorated by nearly 22%. For Latin America as a whole with exports in the region of $95bn this was equivalent to a loss of nearly $20bn in purchasing power.

In addition Latin America relies heavily on US markets for its exports. 85% of the increase in Latin American exports between 1982-84 went to the US. With the slowdown in the US growth rate and the protectionist measures being taken to reduce the record US trade deficit of $123bn, a further fall in foreign exchange earnings for Latin America is almost certain. The problems will get worse.

The fact that interest rates are far higher than at the time when a large part of the debt was contracted leads to a further loss of capital for Latin America of some $l0bn. To which must be added the effects of the overvaluation of the dollar by some 30-40% – 80-85 per cent of Latin American debt is denominated in dollars leading to extra interest payments of some $5bn. Finally the high interest rates in the US resulting from the massive borrowing to finance the budget deficit and the highest military spending since the Korean War has led to a further capital outflow from Latin America of some $l0bn. Fidel Castro estimates on the basis of all this, together with ‘normal’ payments for profit and interest of nearly $40bn, that Latin America is financing the imperialist countries in one year the equivalent of over $70bn with $50bn of it in cash.

Unless these basic international economic relations are changed no real social progress in the oppressed nations is possible. Fidel Castro goes so far as to argue that even social change is not enough. Social changes can bring about a better distribution of social wealth, lead to more justice and a concern for the poorest, neediest classes in the country, but it is not enough. The Third World would lack the resources to solve the tremendous accumulation of social and economic problems.

‘We consider that the fundamental premise for the Third World countries’ independence, sovereignty and development – and even for the right to make social changes – is the disappearance of the iniquitous system of exploitation through which the Third World countries are victimised. That is, we consider the struggle for the new world economic order…to be the most essential thing in the short term. Marx himself considered economic development to be a premise for socialism. Experience forced a number of countries, Cuba among them, to take the socialist road of development. Each people should decide for itself what it wants to do. I am absolutely convinced that, for the peoples of the Third World … development is the most important current task and a vital priority for all, without exception, in which they can unite in a common struggle.’

Castro argues that in Cuba it was not just social change which paved the way for the remarkable social advances of the Cuban revolution. It was also ‘because a sort of new international economic order has been established in our relations with the socialist countries’. 85% of Cuba’s trade is with the socialist countries and its products are not sold at ‘rock bottom’ world market prices. It receives higher prices and so substantial earnings to finance economic development. Only 15% of Cuba’s trade is with the West so the effect of unequal trade relations is much less significant. The same is true of Cuba’s foreign debt. The debt with its main creditor, the Soviet Union – not for the first time – has  been renegotiated without any problem for 10 or 15 years, interest-free. The result of all this is that the servicing of its $3bn debt with the industrialised capitalist world comes to only 8.56% of the total value of Cuba’s exports. Cuba can make massive social progress, can use its resources for internal development and offer aid and help to other Third World countries precisely because of the ‘sort of new international economic order’ it has established with the socialist countries,

A general strike of debtors

The Third World has to establish the same kind of relations with the industrialised countries that exist between Cuba and the socialist countries. The key to creating this is unified action by Latin American and other Third World countries on the foreign debt. A general strike of debtors – some countries are practically on strike already – will be the only way of ensuring the imperialist countries sit down and talk.  ‘If we don’t force them, they’re not going to talk’. Fidel Castro believes this is the only realistic possibility and is one which would be supported by most oppressed nations and even some countries of the industrialised capitalist world. The socialist countries would also support such a development. The conditions, the discussions, the organisation has to be created now so that when a few countries are forced to default on their debt and economic and political action is tried against them, they have the full support of the entire Third World. As Fidel Castro argues,

‘they can’t blockade the entire Third World because they’d be blockading themselves, they’d be without coffee, without chocolate, without raw materials, without fuel, they’d be left with nothing’.

Castro points out that a 10 or 12% reduction in current military spending alone would be sufficient to solve the problem of debt. And with such a modest cut in their military expenditure the imperialist powers could make themselves responsible to their own banks for the foreign debts of the Third World countries. ‘It’s chicken feed, since those insane characters would still have enough money to destroy the world five times over’. But first they will have to be forced to sit down and talk. Fidel Castro’s brilliant intervention on the solution to the debt crisis will ensure that the Cuban revolution can no longer be isolated and that the Cuban people play a central role in a united effort to resolve what is now an ‘elementary matter of survival’ for the vast majority of humanity who live in the Third World.

David Reed (David Yaffe)

Fidel Castro’s main articles on the debt crisis can be found in Granma Weekly Review 7 April 1985 and 16 June 1985

Fight Racism! Fight Imperialism! No 51 August 1985

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