A new turn in Latin America?

The historic handshake between Barack Obama and Raúl Castro, political and economic turmoil in Venezuela, and stalled reforms in Bolivia – as well as crises in Brazil – symbolise a new turn in Latin America and the Caribbean. But in what direction? With an upturn in struggle by workers and the oppressed, a new volatile period beckons, writes TONY SAUNOIS.

Latin America has entered a new phase of economic crisis and political and social turmoil. The high expectations aroused by radical reformist governments in Venezuela, Bolivia and Ecuador have given way to crisis and disappointment. The proclamations by Hugo Chávez and Evo Morales, promising a road to socialism, were not matched by policies to break with capitalism and to begin building a socialist alternative. This has given way to a reversal of the reforms they implemented and to economic and social disintegration.

Countries like Brazil and Chile, headed by the so-called ‘centre-left’ governments of Lula and now Dilma Rousseff, and Michelle Bachelet respectively, have also entered a new phase of crisis. Almost unimaginable levels of corruption and political crisis grip most of the regimes, from Mexico in the north to Argentina in the south.

For more than a decade the continent witnessed rapid growth and economic expansion. The prospect of Brazil and Argentina joining the ‘first world’ was held out by the rulers of these countries. An expanding middle class and rising living standards for many workers and even the poorest – especially in Brazil – led many commentators to accept this prospect. For more than a decade Argentina recorded an annual economic growth of between 5% and 7%!

In some cases this growth allowed these centre-left governments to implement some reforms and raise living standards for a layer of workers. However, even in the boom times, millions gained little or nothing and continued to languish in poverty. That growth has now come to a shuddering halt. It was fuelled by rising commodity prices and exports to China. Oil, gas, copper, soya and other natural resources found in abundance in Latin America were desperately needed by the growing Chinese market. Chile, rich in copper, saw 40% of its exports go to China. The price increased fourfold to US$4 per pound. A similar story was to be told for oil and other commodities.

The slowdown in the Chinese economy has rapidly choked off commodity exports, and prices have crashed. It is having a devastating effect, economically, socially and politically. The boom times and the prospect of countries like Brazil joining the first world club have once again proved to be a chimera. A new era of crisis and class struggle has opened up throughout the continent. Brazil’s economy is set to contract for a second consecutive year – by up to 1% in 2015. It faces its sharpest economic decline since 1932. Argentina is also in a deep economic recession and Chile has slowed substantially.

The reliance on commodity exports during the boom resulted in a growing de-industrialisation of these countries which will leave them in an even weaker position than before – something the Committee for a Workers' International (CWI) commented on at the time. Manufacturing as a share of Latin America’s economic output has been in decline for more than a decade. In the 1990s, the share of raw materials exports had fallen to 27%, from 52% in the early 1980s. Now it has surged back up to over 50%. Commodities account for 60% of Brazil’s exports. Oil accounts for 96% of Venezuelan export earnings. China’s footprint on Latin America, according to one Harvard analyst, Dani Rodrik, has resulted in its "premature de-industrialisation".

That this new era of crisis has gripped the continent under left-wing or centre-left governments has resulted in much confusion among the Latin American left. It has led many to question whether the continent has swung to the right, due to fact that the traditional right-wing capitalist forces have tried to capitalise on the situation in a populist manner, a process apparently re-enforced by the threat of capitalist restoration in Cuba. Guardian writer, Jonathan Watts, posed this question in an article, ‘Scandals, Protests, Weak Growth: Is Latin America’s Left in Retreat?’ (22 March). He concluded: "The pink tide may be looking a lot murkier than ten years ago, but it is not over yet".

However, governments like Lula/Rousseff in Brazil or Christina Kirchner in Argentina have not applied left-wing policies. They have adopted pro-capitalist policies sprinkled, initially, with some concessions. In Venezuela, Chávez, and especially his successor Nicholás Maduro, and Morales in Bolivia, have fallen victim to their failure to break with capitalism, despite having implemented important reforms, which are now under attack. Recently, these governments have enacted more pro-capitalist policies and shifted sharply to the right.

Brazil’s toxic corruption

The ensuing anger and discontent which is developing has allowed some of the traditional parties of the right to resort to populist protests and campaigns and to win support. This does not reflect a right-wing shift in society. But it is the absence of a powerful, mass socialist alternative which has allowed some of the populist right to intervene in the vacuum which has opened up. This is clearly reflected in the massive crisis which has erupted in Brazil.

Brazil faces multiple crises, which may converge into a ‘perfect storm’ leading to massive, unprecedented social and political convulsions. This will give the emerging socialist left forces like PSOL (Partido Socialismo e Liberdade) and the homeless movement MTST (Movimento dos Trabalhadores Sem Teto) big opportunities to grow and build a powerful socialist alternative. The economic crisis has resulted in cuts, layoffs and attacks on the working class and middle class. This has provoked a wave of struggle this year. Public-sector workers, teachers, car and metal workers have all been involved in strikes and struggles. In Paraná an indefinite strike of public-sector workers forced the state government to withdraw its cuts package. Volkswagen and General Motors workers gained a partial victory in a strike against redundancies.

A highly toxic corruption scandal – which makes British MPs’ expenses seem like small change – centres on Petrobras, Brazil’s giant oil conglomerate. Up to US$10 billion was syphoned out of the company in kickbacks to construction companies, and payments to political parties, especially the PT (Partido dos Trabalhadores) of Rousseff and Lula. One manager has agreed to pay back US$100 million which he stashed away in offshore bank accounts.

One-hundred-and-three people have been indicted, and 33 members of the PT and Rousseff’s coalition are under investigation. The PT treasurer, João Vaccari, has been arrested and forced to resign. Over 40 politicians have been charged, including the heads of both houses of Congress. The largest coalition partner in Rousseff’s government recently refused to support a presidential act in Congress because one of its leaders was not exempted from investigation for corruption! Rousseff’s presidential election campaign in 2010 reportedly received funds from this corrupt source. According to federal police, ten major construction companies are under investigation. This scandal and the onset of the economic and social crisis have resulted in a collapse in confidence of the entire political system and the caste which leads it.

There is also the onset of a major drought affecting the south of the country, especially São Paulo. Water rationing is affecting millions and is set to explode into a major humanitarian catastrophe in one of the world’s largest urban centres. The main reservoir supplying São Paulo stood at 39% capacity in 2014. This year it has fallen to only 19.4% capacity – if we include the ‘death volume’ (volume morto), an emergency supply requiring a special and expensive procedure to use.

A new wave of struggle

This situation has arisen as a direct consequence of privatisation and deforestation. Lack of investment in infrastructure – up to 30% of water in São Paulo is estimated to be lost through leakages – has accelerated the crisis, which was anticipated a decade ago. Nothing was done by the federal or state governments, or the now privatised water companies. Protests have broken out and this is set to become a major issue in the coming months.

Rousseff managed to scrape into power for a second term three months ago. Her approval rating has now collapsed from 25% to 13%, the lowest for a president since the mass movement against the former president, Fernando Collor de Mello. He was vomited out of power in 1992 and faced impeachment charges for corruption. The traditional right-wing, pro-capitalist PSDB (Partido da Social Democracia Brasileira) has used these recent developments in a populist manner to launch a campaign for Rousseff’s impeachment. Mass, largely middle-class protests have followed, initiated by the right-wing. Many on these protests are not traditional right-wing supporters but people simply furious at what has unfolded, especially over corruption.

At the same time, the PT and government have attempted to mobilise the workers who have traditionally supported the PT. These developments have resulted in tremendous confusion, with big layers not wanting to support the PT leaders. Partly as the result of the work of the LSR (Liberdade Socialismo e Revolução – CWI Brazil), protests are demanding social reforms, opposing the government but also the traditional right-wing, pro-capitalist parties. On 15 April up to 30,000 rallied in São Paulo at a rally called initially by the MTST and PSOL, with the later engagement of the CSP-Conlutas trade union alliance. Reflecting the pressure from below the official trade union federation, CUT, was compelled to support the protest which became a national day of action, with protests and strikes in Porto Alegre, Recife and many other cities.

The question of a one-day general strike, which LSR has been raising for some time, is now being taken up. CSP-Conlutas is correctly demanding that a date be set immediately. For the first time in many years, the CUT, under pressure since the passing of anti-labour legislation which strengthens precarious contracts, has been compelled to support the idea of a general strike in the future. These developments in Brazil, the economic and political giant of the continent, are certain to have a major impact on the rest of Latin America. Especially if PSOL and social movements like the MTST are able to build a powerful socialist alternative to the government and right-wing, pro-capitalist opposition.

Argentina is also gripped by a devastating economic situation. Kirchner has pursued a pro-capitalist domestic policy but has also come into conflict with imperialist interests internationally. She has enriched her own personal wealth 20-fold since 2003! Significantly, the electoral growth of the Trotskyist alliance FIT (Frente de Izquierda y de los Trabajadores) refutes the idea that the continent is swinging to the right. However, the success of the FIT, which the CWI welcomes, poses a new challenge to it. Will it be able to build on these successes and reach out to those sections of former supporters of Peronist workers and trade unions through the building of a broad party of the working class?

The continent’s ‘showcase’, Chile, has also entered a new era. The economy is slowing down, affected by falling copper prices and declining exports to China. Michelle Bachelet and her ‘New Majority’ fought the election campaign promising reforms – none of which has she introduced since winning. The loss of authority of the established parties and political system was reflected in the 2013 elections. Only 41% of the 13 million electorate participated. This has been accompanied by a massive youth revolt and the beginning of the emergence of a new wave of workers’ struggles together with bitter and violent clashes involving the Mapuche people.

Venezuelan regime under pressure

In Venezuela, the threat of the right-wing MUD (Mesa de la Unidad Democrática) to the Maduro government is a serious one. The Henrique Capriles leadership has adopted an extremely populist approach to try and capitalise on the massive discontent which exists due to the economic situation. Maduro, despite references to ‘socialism’, has shifted further to the right to try and appease capitalism. This has not satisfied the right or US imperialism, which remains committed to the defeat of his government.

The shift to the right is reflected in the new management which has been installed at the state oil company, PDVSA, led by Eulogio del Pino. The minority private shareholders in joint ventures are being given greater influence. Symbolically, PDVSA workers are no longer obliged to wear red t-shirts and political appointees in the company are being dismissed.

The economic catastrophe has been enormously aggravated by the fall in oil prices. The economy is expected to shrink 5% this year, following a 4% contraction last year. Shortages of everything abound. An estimated one-in-three basic goods are unavailable, including foods, medicines and clothing. Noticeboards exist where people barter toilet paper for detergent. Venezuela is gripped by the world’s highest inflation rate, 70%.

These trends are serving to further undermine support for the government. In part, the shortages are a product of speculation and hoarding by the capitalists to try and destabilise the situation. However, they are also a product of the bureaucratic top-down administrative approach of the regime. Chávez’s reforms are being seriously eroded. The health system is in total crisis. Of 45,000 beds in public hospitals only 16,000 can be utilised due to shortages.

Maduro’s support is under 30% in the polls and a defeat is threatened. As the CWI has warned, this is the product of the impasse in the situation as a result of the failure to break with capitalism and usher in a genuine system of nationalisation of the economy and democratic workers’ control and management. The impasse has opened the way for disappointment and demoralisation, which the right-wing MUD is capitalising on.

Venezuela had previously secured loans from China in exchange for oil. The fall in oil reserves has resulted in a delay in oil shipments, a partial debt default to China by Venezuela. If faced with a more profound crisis, even Maduro could be driven to adopt more radical measures which encroach on capitalist interests. Although this is not the most likely perspective, it cannot be excluded.

Lifting the embargo on Cuba

At the beginning of the year, US president, Barack Obama, and Cuba’s Raúl Castro announced a series of historic agreements. These opened the way to restore diplomatic relations between the two countries, a relaxation on travel restrictions and the first steps towards the easing of the trade embargo which has been imposed since the revolution in 1959/60. The release of prisoners held by the regime, including US nationals, and Cubans held in the US has already taken place.

This step represents a decisive shift in the policy of US imperialism towards Cuba, re-enforced in the discussions between Obama and Castro at the recent Summit of the Americas in Panama. It also signifies a further step by the Cuban regime towards capitalist restoration, a process which has been unfolding for a number of years. The Panama announcements are the culmination of secretive talks between the two governments which have been taking place in Canada for a number of years. Negotiations involving the right-wing Canadian government and the Pope have been crucial in brokering the current agreement.

Obama recognised that, ‘You cannot keep doing the same thing (for more than 50 years) and expect a different result’. The European and Canadian ruling classes, and much of Latin American capitalism, adopted a different approach, one which Obama has now embraced. Raúl Castro, praising Obama, has called for him to be awarded the Nobel Peace prize. Yet as US president he has carried out more drone attacks in Afghanistan and the Middle East than George Bush!

Since the Cuban revolution, US imperialism has enforced a strict embargo and undertaken various attempts, including armed intervention in 1961, to overthrow the Cuban regime and restore capitalism. Despite the crippling consequences of the embargo, estimated to have cost the Cuban economy US$1 trillion since its enforcement, this policy failed. This was mainly due to the deep social roots and support for the revolution which has existed. The anti-Castro policy was also geared to winning the electoral support in the US of the Miami Cuban exiles who had fled from the revolution.

Now US imperialism is adopting a new policy by beginning to lift the embargo. The threat of capitalist restoration to an isolated workers’ state can come not only from the threat of military intervention. As Leon Trotsky warned in relation to the former Soviet Union, it can come in the form of "cheap goods in the baggage train of imperialism". The objective of US imperialism remains the same, but it hopes to reach it by that different route. It intends to flood the Cuban economy with goods and investment with the objective of fully restoring capitalism.

Eroding past gains

US imperialism’s change of policy has been facilitated by a generational change of outlook within the exiled Cuban community. While previously wedded to the embargo and a struggle to overthrow the regime, now (according to some opinion polls) 52% of Cubans living in the US support ending the embargo. Sections of the capitalist class, like the sugar magnate Alfy Fanjul, have pronounced in favour of lifting the embargo, eyeing the prospects of new markets within a capitalist Cuba.

Many Cubans are dependent on the remittances they receive from families in the US. An estimated 62% of Cuban households receive support from abroad. According to some estimates, they sustain an incredible 90% of the retail market. The dire economic situation means a disastrous situation for the masses. The massive social gains conquered as a result of the overthrow of capitalism are being rapidly eroded. Support for the revolution and hostility to capitalism and US imperialism meant that the Cuban regime incredibly was able to maintain the planned economy and bureaucratic regime throughout the 1990s (the ‘special period’) and into the early part of the 21st century. The value of wages in Cuba today is estimated to be worth only 28% of what it was prior to the collapse of the former Soviet Union.

Yet the regime and planned economy hung on through this time despite the tidal wave of free-market capitalism which dominated the world economy. The regime was able to sustain itself politically using the US embargo, which fuelled hostility to US imperialism. The arrival of Chávez to power in Venezuela also brought it a breathing space through the supply of cheap petrol and oil. This is now under threat as a consequence of the fall in oil prices and crisis facing the Maduro government. The lack of genuine workers’ control and democracy, and consequential bureaucratic mismanagement and corruption, further dogged and aggravated the economic and social crisis caused by the embargo and isolation.

The revolutionary convulsions which swept Venezuela, Bolivia and Ecuador at the beginning of the century offered the possibility for Cuba to break out of its isolation. A genuine workers’ democracy would have seized this opportunity and taken the steps necessary to try and form a voluntary socialist federation of these countries. This could have allowed economic co-operation and planning between them and could have begun to appeal to the working class of the whole of Latin America to offer an alternative to capitalism. This was a lost opportunity and the crisis unfolding in all of these countries means that the masses are paying the price for it.

Unfortunately, neither the Cuban bureaucratic regime nor the reformist leaderships of Morales, Chávez or Rafael Correa (in Ecuador) were prepared to take this step. The latter three have remained trapped within capitalism. The Cuban regime, on the other hand, has introduced a series of incremental steps beginning the process of capitalist restoration. The latest developments threaten a further step in this process.

A bridgehead for capitalism

Although the easing on travel restrictions will be welcomed, other steps represent a threat to the remaining gains conquered by the revolution which were already being dismantled. The new labour code represents a serious attack on workers’ rights. The age of retirement was raised by five years in 2008. The introduction of the ‘dual currency’ exchange, whereby some workers are now paid in dollars, vastly exacerbated inequality between them and those paid in pesos. The regime created the ‘convertible peso’ (CUC) which is pegged 1:1 with the dollar and is used in the tourist sector and imported products. Local products use the local peso (CUP) which is equal to about 1:25 of the CUC. The government announced its intention to scrap this dual currency but this has not been implemented so far.

Inevitably, this has boosted the black market. The government established a target of removing over a million workers from the state sector and allowing the establishment of thousands of small- and medium-sized businesses (‘cuentapropistas’) – 500,000 licenses have already been issued. However, these have centred on small businesses like restaurants. The number of workers employed in the private sector has increased from approximately 140,000 to 400,000 since 2007, significant but still a minority of a total workforce of over five million.

A bridgehead for capitalist restoration has been developed in the tourist sector which has been the centre thus far of foreign investment from European, Canadian, Brazilian and, more recently, Chinese enterprises. Prostitution, banished from society following the revolution, is now back on the streets of Havana, especially in the tourist areas.

Special development zones have been opened, such as a new port facility built in Mariel Bay and financed by investment from Brazilian and Singaporean capitalism. This is viewed with an eye on the future ending of the US trade embargo and also to capitalise on the expansion of the Panama canal and a new canal being planned in Nicaragua with massive Chinese investment. Here investors will be given 50-year contracts compared with the current 25-year deal. Investors can have 100% ownership. They will not be charged labour or local taxes, and are being granted a ten-year reprieve from paying a 12% tax on profits.

Despite these steps, foreign capitalist investors have to negotiate with the government or state-run companies. While the Cuban regime still uses some socialist rhetoric, in part reflecting the support which still exists for the revolution especially among the older generation, it increasingly reverts to the nationalism of José Marti, the leader of the independence movement against the Spanish colonisers.

The younger generation, desperate to enjoy new freedoms – the use of the internet and travel, among others – have experienced, not the gains, but the regression of the revolution, with economic and social crisis and the stifling dead hand of the bureaucracy. Initially, the arrival of cheap goods may hold an attraction until the reality of life in capitalist society becomes apparent.

These developments clearly represent an important move towards the reintroduction of capitalism. This is underway in some sectors, although under continued state supervision and agreement. The state still maintains a powerful control and could choke off these steps at a certain stage. Randal C Archibold quoted one US lawyer dealing with enquiries from businesses about Cuban investments: "What happens now if capital goes in and there is a change on the part of Cuba? You never know if the Cubans are going to change their minds. I think there are a lot of unknowns because this is a whole new train". (International New York Times, 9 April)

The transition to full capitalist restoration will not be a straightforward, uninterrupted process. Sections of the regime do not seem to want to go in this direction. Significantly, Maiela Castro, daughter of Raúl, firmly stated in January: "The people of Cuba don’t want to return to capitalism". At this stage, the decisive sectors of the economy have not been privatised or sold to foreign capitalists. The arrival of Mastercard and Netflix, although significant, are thus far largely symbolic.

Crisis and resistance

For socialists and the working class the move towards capitalist restoration represents a backward step. It would signify the erosion of the gains of the Cuban revolution for the masses. It would be utilised by the ruling class, especially in Latin America, to try and again discredit the idea of socialism as an alternative to capitalism. However, this would not have the same effects as the ideological offensive against the idea of socialism which was unleashed following the collapse of the former Stalinist regimes in the Soviet Union and eastern Europe in 1989/90.

A new phase of capitalist crisis and workers’ struggles has opened up internationally. The working class and the masses have passed through 25 years of the ‘supremacy of the free market’ and are beginning to struggle against it. The lifting of the embargo represents a defeat for the past policy of US imperialism and its attempt to overthrow the Cuban regime. It will give Cuba the opportunity to trade on the world market.

However, without the existence of a genuine workers’ democracy, this includes the danger that it can threaten the acceleration towards capitalist restoration. A state monopoly of foreign trade, controlled democratically by a genuine regime of workers’ democracy, is essential to help prevent this increasing threat. Under the conditions of new international capitalist crisis moves towards capitalist restoration can be checked. A mixed or hybrid situation could continue for some time.

Initially, such gains from the revolution as the health-care and education systems may be maintained, although even these have suffered greatly from a lack of investment in the recent period. Many obstacles remain to be overcome and some resistance is likely as the reality of capitalist restoration becomes apparent. Sections of the population are already fearful of losing the gains of the revolution and of Cuba being turned into another Puerto Rico. The need to build resistance to the developing pace of capitalist restoration and struggle for genuine workers’ democracy and nationalised planned economy in Cuba is more urgent that ever.