Dependency in Nineteenth-Century Latin America: An Historian Objects

Author(s): D. C. M. Platt
Source: Latin American Research Review, Vol. 15, No. 1 (1980), pp. 113-130
Published by: The Latin American Studies Association
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 DEPENDENCY IN
NINETEENTH-CENTURY LATIN AMERICA:
An Historian Objects

D. C. M. Platt
St. Antony'sCollege,Oxford

The dependency theory,under assault fromRightand Left,is scarcely

sustainable. Impatience with Prebisch's panacea, import-substitution
industrialization,gave birthto dependency. A new bogeyman,the multi-
national corporation,now preoccupies the scholar and polemicist.Para-
digms of Corporatism and Structurationsupply the ongoing situation
for furtherrefinementsin Confusionism. But this is the language of
economics and political science. Students of chrono-politics(history)
may stillwish to inquire whether the historicalevidence on which the
dependency theory was based is more enduring than its currencyin
modern social science. The issues are very much alive. It was scarcely
reassuringto be told, quite recently,that"radical writerson dependency
are engaged in much productiveand inventiveresearch."'
It may be convenient,forthe purpose of this argument,to begin
with what has become the classic definitionof dependency, Theotonio
Dos Santos' familiarpropositionthat"by dependence we mean a situa-
tion in which the economy of certain countries is conditioned by the
development and expansion of anothereconomy to which the formeris
subjected." Dos Santos continues: "The relationof interdependencebe-
tween two or more economies, and between these and world trade,
assumes the formof dependence when some countries (the dominant
ones) can expand and can be self-sustaining,while othercountries(the
dependent ones) -can do this only as a reflectionof that expansion,
which can have eithera positive or a negative effecton theirimmediate
development."2
The absence ofautonomyis critical."The theoriesofdependency,"
Philip O'Brien explains, "are tryingto show thatthe internaldynamics
of Latin American society and its underdevelopmentwere and are pri-
marily conditioned by Latin America's position in the international
economy,and the resultantties between the internaland externalstruc-
tures."3We can take it thatthese statementsare definitive.

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LatinAmerican Review
Research

A centralpivot fordependency is the importanceof the interna-

tional economy.4Even David Ray, in an otherwiseperceptiveand dam-
aging attackon the dependency "model," records as one of its achieve-
ments the demonstrationof "the bankruptcyof any research on Latin
America which ignores the international context."5 Andre Gunder
Frank's researches into Chilean historysuggest (to him) that, fromthe
Conquest, Chile was fullyincorporated"into the expansion and develop-
ment of the world mercantileand later industrial capitalist system."6
Osvaldo Sunkel feelsthatthe countriesof Latin Americaare "enmeshed
in thesystemofinternationalrelationsofthecapitalistworld . . . entirely
dependent on their foreigneconomic relations."7Stanley and Barbara
Stein identify,afterthe expulsion of Spain, a "colonial heritageof ex-
ternallyorientedeconomies linkedcloselyto essential sources ofdemand
and supply outside the new national economies."8
The suggestionis thatin this,as in otherrespects,a smoothtransi-
tiontook place between the colonial and national periods. The argument
oftheSteins' ColonialHeritageofLatinAmericais thattherewas a continuity
in thedependent relationshipofLatinAmericato Europe, and thatBritain
tookover what Spain had lost. No sooner had Chile ceased to be a colony
ofSpain, said Hernan Ramirez,than she became a dependency exploited
by Britishcapitalism.9 Britishhegemony was inheritedby the United
States, and to Fernando Henrique Cardoso and Enzo Faletto "el pre-
dominio de la vinculacion con los metropolis peninsulares-Espafia y
Portugal-durante el periodo colonial, la dependencia de Inglaterramas
tarde y de los Estados Unidos por utltimo,no puede carecer de trascen-
dencia."10 For otherdependentistas the transitionwas not necessarilyas
smooth,but all are agreed upon the internationalnature of Latin Ameri-
can economies afterIndependence. Dos Santos' "colonial dependence,"
which incorporated not only colonial Latin America but also the first
decades of politicalindependence, was "trade exportin nature."11Berg-
quist speaks confidentlyof independent Colombia as "a nation being
wrenchedmoretightlyintotheorbitoftheindustrialcapitalistsystem."'12
The conventional wisdom is that a marked economic interrela-
tionship existed between postcolonial Latin America and the outside
world. Latin America, colonial and national, was fromthe firstdrawn
into the internationaleconomy as an exporterof foodstuffs,raw materi-
als, and precious metals, and as an importerofcapital and manufactured
goods. "In general terms,"says O'Brien, "both social infrastructure and
directproduction investmentdecisions depended on the metropolitan
countries.Thus the determinantof the growthand structureof the Latin
American socioeconomic formations remained largely exogenous to

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

Latin America. By concentratingon primary product exports, Latin

Americawas unable to develop an autonomous capacityforgrowthand
change."13
Thus the opportunityin nineteenth-centuryLatin America for
autonomous, self-sustaininggrowthwas destroyed. "The development
ofindustrialcapitalism,"says Gunder Frank,"increasinglyopened Latin
America to free trade, and transformedthe economic, political, and
social structureof the continentto suit the new metropolitanneeds and
local bourgeois convenience."'14

All thisis tediouslyfamiliar,and it dovetails only too neatlyinto a

dependency theory so closely tied to the economic hegemony of for-
eignersin Latin America. Evidence, to be sure, is fragmentary and eva-
sive, but continuityhas always proved attractiveto historians,and there
is a magnificentsimplicityin thatnotion of "colonial heritage"argued so
fluentlyby Stanley and Barbara Stein.
Yet even the most coherentargumentcan be misleading. It cannot
be accurate to describe the economy of colonial Spanish America as di-
rectedtowards exports. Precious metals were centralto conquest. Once
the mines were established, theirproduct was exported. But silverand
gold, forall theirglamor,were only an elementin larger,inward-looking
economies that sustained themselves almost entirelyon domestic de-
mand and production.It is fancifulto suppose that"the most significant
heritage of Iberian colonialism was the traditionof the large estate,
producing foodstuffsand raw materials for local consumption or for
exportto WesternEurope."15 The equal emphasis on exportto Western
Europe is anachronistic.Frank Saffordexplains forColombia that"only
a small part of the colonial population was engaged in the export
economy,eitherdirectlyin theproductionofprecious metalsor indirectly
in the productionoftextilesor foods consumed in the miningregions."'16
He was not speaking forNew Granada alone when he described a great
partof its regional economy as engaged primarilyin local subsistence.
Independence from Spain did not, in practice, transformLatin
America into a major exporterof foodstuffsand raw materials to the
outside world. Nor did it bringLatin America into the marketas a large
importerof manufacturedgoods. The reason was simple. WesternEu-
rope, within itself,its colonies, Southern and Eastern Europe, and the
United States, was fullysupplied both with its foodstuffsand with its
industrialraw materials.Latin America could sell nothingto Europe, so
thatit could buy nothingin return.Afterthat first,furiousactivitythat
accompanied the reopening of blockaded markets,Spanish America re-

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LatinAmericanResearchReview

tiredover the edge of the periphery.It remained outside world markets,

to any significantdegree, forthe firsthalf centuryof politicalindepen-
dence.
In an area so large as Latin America thereare bound to be excep-
tions. The Steins were obviously unhappy in applying theirnotion of a
"colonial heritage" to Mexico and to Argentina,and they turned with
reliefto Brazil which, they said, provided a classic example for the
nineteenthcentury"of how a colonial heritageof export-orientedagri-
culture[sugar and cotton]based on slave manpower shaped the patterns
of economic and social change in the postcolonial period and formeda
neocolonial structure."17The example findsan echo in Cuba, as it does
in Peru afterthe opening of the guano trade. But it would be difficult
to
identifyanotherLatin Americaneconomy,in the firstdecades ofpolitical
independence, for which exports were significantand which, corre-
spondingly,had acquired the resources to importon a substantialscale.
This is illustratedby British statistics. Britain was by far the largest
exporterto Latin America in the firsthalfof the nineteenthcentury-' Her
exports (declared values) to the principal marketsof Spanish America
(Argentina, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, and
Venezuela) averaged a total of a bare 2.49 million pounds sterlingper
annum for the decade 1831-40, ?3.31 million in 1841-50, and ?5.45
millionin 1851-60.18Exportsto Spanish America formedan unremark-
able elementin totalBritishexportsforthe same period which amounted
to /43.53 million(annual average) for1831-40, ?41.74 millionfor1841-
50, and ?99.27 millionfor1851-60.19Exportsto Spanish America were
obviously unimportantfor Britain.But were they equally unimportant
forthe Republics? Population estimatesforLatin America as a whole are
wildly at variance, but even at theirmost pessimisticthe distributionof
?2.5 million of Britishmanufacturesamong the Spanish Republics of
South America,CentralAmerica,and Mexico can hardlyhave scratched
the surfaceof demand. It is evidentlyuntrue to say that "Great Britain,
technologicallyand industriallyadvanced, became as importantto the
Latin American economy as to the cotton-exportingsouthern United
States."20The annual average forBritishimports(computed real values)
from the whole of Latin America (includingBrazil) for 1856-60 was
?14.86 million. For the same period, the average annual importsfrom
the United States were ?36.59 million.21
Foreign trade was undoubtedly a high priorityforcontemporary
politicians and officials.It supplied, through the Custom House, the
only dependable source of governmentrevenue. For this reason it may
have come to loom larger in the consciousness of historians than we
should legitimatelyexpect. But Saffordis rightin doubting the implica-

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

tions of economic dependency in New Granada afterthe breakaway

fromSpain. The period of economic depression up to the middle of the
centurycannot necessarily be explained by relations with the outside
world: "The economy was drained and the governmentwas strapped in
part because the countrywas such a weak exporter,something more
usefullyexplicable in termsof specificeconomic and geographic causes
(topographic structure,population distribution,transportationcosts,
availabilityof markets, etc.) than in terms of the easy abstractionof
dependency."22In the unpromisingcircumstancesof Spanish American
trade afterthe London financialcrash of 1825-26, the characteristicre-
sponse of Britishmerchants was to withdraw fromLatin America, to
close theirbusinesses, and to remove what was leftof theircapital to
Britain,to the colonies, or to the United States.23Stagnant trade,bank-
ruptcies, and withdrawals-the reality-are in depressing contrastto
the great harvestthat was gathered,it seems, by Britishmerchantsand
manufacturers,bankers and shippers during the firsthalf of the nine-
teenthcentury,the period when theywere supposed to have "enjoyed a
dominantposition in the trade of the area":
Theirtextilesand hardwareundersoldthoseof theircompetitors;theircapital
long-term
resourcesfacilitated operationsincludingthepaymentofhighimport
duties;theyextendedcreditsto LatinAmericanmerchants at halftheinterest
ratesof theircompetitors;theirshippingsuppliedmorethan50 percentofthe
volumeof imports;London was the financialcenterwhichhandledinterna-
tionalpaymentsto the exportersof France,Germany,and the UnitedStates,
who,in turn,sold to LatinAmerica.24
It is a glitteringpicture.But how, precisely,was Latin America expected
to pay forit?
Politicalindependence broughtsomeredirectionof trade. The fo-
cus of foreigntrade, such as it was, shiftedfromthe IberianPeninsula to
NorthernEurope and the United States. Independent societies created
pressure to importin order to meet demand fornewly discovered "ne-
cessities" and the latest fashions. Larger markets opened, in turn, for
what was stilla relativelysmall exporttrade. Yet with these exceptions,
Latin America's externaltrade, imports and exports, remained funda-
mentallyunchanged fromthe colonial into the national periods. It could
not be otherwise so long as an external demand for Latin American
products failed to take shape. Foreign trade was unimportantand stag-
nant. While internationalmarkets remained closed to the produce of
Latin America, while European appetites were fullysatisfiedfromelse-
where, "dependent" Latin America was at one or more removes from
the world economy-"independent" and self-sufficient against its will.

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Was foreignfinanceany moreinfluential? GunderFrankis not

alonein thebeliefthatforeign investment and financehad forcenturies
been "an integralpartofworldcapitalistdevelopment."25 Yettheimpact
offoreignfinanceon thenew Republicsis clearlyexaggerated.Finance
could not succeed where tradefailed.It is truethatsuch mercantile
houses as survivedthe long depressiontook a significant partin the
financing of trade.Advanceson commodities, discountingand accep-
tanceofbills,remissionofspecie,dealingsin exchange-thesewerethe
familiaraccompaniments of mercantilebusinessin a periodwhichan-
ticipated,in LatinAmerica,thearrivalofthecommercial bank.26It was
not a sinisteractivity,
unless commercialbankingitselfis sinister,nor
was it necessarilythe monopolyof foreigners. FrancisFalconnetwas
askedbya Londonhouse,in 1849,to reporton thestandingofthemain
commercialhouses in the cityof Mexico. His lower estimateof total
wealthwas 23.45millionsilverdollars,ofwhichSpanishand Mexican
housesaccountedfor$18.4million,Germanfor$2.35million,Frenchfor
$1.5 million,and Britishfor$1.2 million.27
The distributionofresourcesin Mexico,at themiddleofthelast
century,illustrates
a pointthatis not,perhaps,sufficientlyappreciated.
Beforethe age ofrailwayconstruction, whichrequiredhuge quantities
of capital,domesticfinancewas sufficient to meetthe needs of indi-
vidualsand states.Railwaysbarelyexistedin LatinAmericabeforethe
1860s;evenin continental Europethesystemswereunimportant before
the1850s.Governments, theotherborrowers on a grandscale,had no
outletforlargequantitiesofcapital,foreign or domestic.Stateexpendi-
turewas modest,and budgetssmall. The revenueof the Provinceof
BuenosAiresin 1843was some /400,000,ratherless thanithad beenin
1822.28The incomeof the FederalGovernment of Mexicoin 1836was
estimated at $13 million (/2.6 million), of which only $3 million was
shared between Justiceand Administrationwhile the rest,less $1 million
forthe Navy,wentto the Army.29
Governments
were alwaysshortof
money, but they wanted two to three hundred thousand pounds at a
time,at once and in cash. In Latin America these needs were best satis-
fied at home. The rate of interestwas 15 percentor more, but therewas
no timeor opportunityforreferenceto London where such loans, in any
case, were too small and ill-securedto be quoted on the Stock Exchange.
Perhaps it is unreasonable to expect too much concern with com-
petitiveinterest
rateson short-term
borrowing
fromthewill-o'-the-wisp
financiersof the earlyyears of the Republics. The Mexican financemin-
istrywas directedby no less than 112 persons successivelybetween 1830
and 1863.30But even if governmentsmighthave found some purpose
forlarge internationalloans, theycould not have raised them. For a brief

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

period in the early1820s, when money was abundant, Britishand Dutch

capital was attractedby the interestrates offeredon the new generation
of Latin American governmentloans. The rates, while certainlycompe-
titive,were not unreasonably high. Fledgling, unrecognized govern-
ments could not (and did not) expect to enjoy the credit of the well-
established. In the early 1820s the Britishgovernmentwas able to bor-
row at 31/2percent; France, Austria, and Russia paid 5-6 percent; and
the 7-9 percent offeredon Latin American loans was in line with the
creditof otherborrowerson a competitivemarket.31London's financial
collapse put an end to any hope of furtherloans fromDecember 1825.
Subsequent default, on every Latin American governmentloan other
than Brazil's, closed foreignmarketsto Spanish American government
issues untilthe end of the 1850s.
The conclusion is obvious. Spanish America, duringthe firsthalf
centuryof political independence, stood outside the currentsof world
tradeand finance.Europe traded withinitself,with its existingcolonies,
with its traditionalsuppliers, and with the United States. European
capital was fullyengaged in Britishand continentalfinance,principally
railways; when it crossed the Atlantic,it found a home in the United
States. It is hard to understand what the Steins could have meant when
theyreferredto the continued strengthin Latin America,afterIndepen-
dence, of "externally oriented economies linked closely to essential
sources of demand and supply outside the new national economies."32

The dependentista view of the internationaleconomy of the new

Republics is clearly a misunderstanding; it is derived from what is
thoughtto have happened much later in the nineteenthcenturywhen
"English economic influence mushroomed in Latin America."33 The
internationaleconomy assumed some importance, fromthe middle of
the century,forsomenations at sometimes;it had been farless influential
in previous decades.
What was it, then, thatfinallybroughtLatin America into contact
with the world economy? The Steins believe that Britishmerchantsin
Latin America recognized, by the 1840s, that the limitsof Latin Ameri-
can demand forBritishmanufactureshad been reached, and that "the
problem was to increase sales by the development of unused or poorly
used resources in the interiorthroughrailway construction."34The se-
quence is wrong. A few residentBritishmerchants,by now chronically
impoverished,could not create a demand in Europe forunwanted Latin
American products simply because they wished to increase theircom-
missions on imports of manufacturedgoods. The most they could do
was to finance a few, very short railways. The real initiative,under-

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standably,came fromEurope itself.Europe was outgrowingits tradi-

tionalsourcesofsupplyforsugar,coffee,fertilizers, grain,and laterfor
metals,meat,and rubber.It was theoverflowofEuropeandemand,the
pressureof overcrowdedEurope foremigration, the exhaustionof at-
tractiveoutletsforEuropeaninvestment, whichfinallyawoke metro-
politaninterestin theneglectedperiphery.
The causes and effectsof this movementcan be describedin
manydifferent ways. Dos Santos' firsthistoricalformof dependence
was "colonialdependence,"the relationshipof Latin Americato the
outsideworlduntilthelastyearsofthenineteenth century. His second
formwas "financial-industrial dependence,"a productoftheend ofthe
century.Financial-industrial dependence was "characterizedby the
dominationof big capitalin the hegemoniccenters,and its expansion
abroadthroughinvestment in theproductionofrawmaterialsand agri-
culturalproductsforconsumptionin the hegemoniccenters";the de-
pendentcountriesthusdevelopeda productivestructure devotedto the
exportoftheserawmaterialsand agricultural goods.35
Argentinacertainlydevoteditselfto the supplyof wool, grain,
mutton,and beef to the "hegemoniccenters,"and grew richon the
proceeds.Could ithavebeenotherwise? H. S. Fernssuggestsan answer.
Argentine was delayedin favorof extremespecializa-
industrialization
tionin agriculture and ranchingsimplybecause "in 1896the termsof
tradebegan to alterin a way favourableto producersoffoodproducts,
and these termsof tradebecameprogressively, and even fantastically
favourable to Argentina until1929,exceptfora periodafterWorldWarI
in 1920-24."Capital flowedinto agriculture, livestock,and the com-
merceand industrywithwhichtheywere associated.Fernsadds that:
"It was so patentlyeconomically advantageousto do whatArgentina in
factdid thatitseemsa wasteoftimeand a profitless exerciseto lookfor
any otherexplanationof what happened. Argentinabecame a highly
specializedproducerbecause it was profitable to do so, and thosewho
profited mosthad no motiveto seekalternative policies."36
The Steinssupplya readyconclusion:"The Britishhad been the
majorfactorin the destruction ofIberianimperialism; on itsruinsthey
erectedtheinformal imperialism offreetradeand investment."37 Thisis
unhistorical.Could Britainreallyhave moldedthe economiesof Latin
Americato suitherown needs?Wastheresomemachinery in existence
at the timeby whichsuch a majorundertaking could be plannedand
put into,effect?Or did those economiesshape themselvesalong lines
determined domestically,in thetradition
oftheself-sufficiency enforced
by isolationfromworldmarketsduringthe firsthalfof thenineteenth
century?

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

Dependencytheoryhas alwaysemphasizedthedominantinflu-
enceoftheinternational economy,so thatthesignificance ofthedomes-
tic marketis oftenoverlooked.Citieslike Rio de Janeiroand Buenos
Aireswere alreadyconsiderableby the mid-century. Buenos Airesin
1855had a populationof 91,000.By 1869the populationhad risento
178,000,to 438,000in 1887,678,000in 1895,and 1,576,000in 1914.38
The timingis important. The literatureon dependencyassumes
that,fromthebeginning, foreign-owned railwaysin LatinAmericawere
merefeedersto externalmarkets,and thatthe shape ofArgentine rail-
waydevelopment-a fanofrailwaysfromBuenosAires-was intended
to speed Argentinedevelopmentas an exporter.On the contrary;a
majorpartoftheinterestwas domestic.BuenosAireswas a largecity,
theonlylargecityin Argentina, ill-servedby transport intotheinterior.
The Argentinegovernment, like all governments similarlyplaced in
Europeand elsewhere,was preparedto guaranteean interest(in this
case of7 percent)on thecapitalofitsrailways,itbeingunderstoodthat
theywouldservecommercial markets(homeand foreign), transportthe
military,and promotethepoliticalobjectiveofnationalunification.39 In
practice,theprospectofbuildingup Argentine exportsofprimary pro-
duce to metropolitan Britaincan have had slightimpacton eitherpro-
motersor investors.Foreigninvestors, whentheybought(in the1860s)
thefirstissues ofthe majorArgentinelines,the Centraland the Great
Southern,maywell have hoped (orbeen led to hope by a "puff"in the
prospectus)thatthe futureof therailwayswould includethe develop-
mentofArgentinaas an exporter. Buttheirobjectivewas morelikelyto
have been a guaranteed7 percentreturnon theircapital,by contrast
withthe 5 percentobtainableon railwaysecuritiesat home. The pro-
motersofthenew lines,and theboardsofdirectors, realizedthatfinan-
cial successmustdepend on the extentto whichtheirrailwaysmight
servetheneeds oftheArgentines themselvesand oftheircapitalcity.It
was fifteen yearsor morebeforeeitherline made muchimpressionon
Argentina's exportsto Britain.Argentine exportsto Britain,as recorded
werevalued (foras lateas 1883)at less than
in Britishimportstatistics,
/1 milion (/945,708).
The argumentneed notbe restricted to railways.Argentinabe-
came a majorproducerof grainto supplyits domesticmarket,and to
substitute forimportsfromChileand theUnitedStates.Argentina was
an importer of grainintothe 1870s,and onlyan erraticexporterof a
surplusinto the 1890s. Argentinaimprovedthe qualityof its native
cattleand bred new stockin orderto feed the inhabitantsof Buenos
Aires.Such improvements could not have been directedsimplyat the
possibilityofan exportmarket.The Republicdid notexportlivecattleto

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Europe untilthe 1890s, while the real boom in beef exportshad to await
the firstshipmentsof chilled beef in commercialquantitiesin 1901. It is
true thatArgentinafound itself,eventually,with a surplus of grain and
meat to export,but in otherproducts,like wine and sugar fromthe west
and northwest,home consumption always kept level with production
and therewas no surplus forexport.
Dos Santos has developed an imaginativestructureof big capital
fromabroad, fromthe "hegemonic centers,"invested specificallyin the
productionof raw materialsand foodstuffsforconsumption in the for-
eign metropolis. What he says may have some relevance to banana
plantations in Central America, or to copper mines in Chile and Peru.
But it was far more common for the development of Latin American
exportsto move in natural progressionfromthe gradual replacementof
importsto the complete satisfactionof the domestic market,and then,
finally,to the disposal of the surplus (if any) by export. It is simple
common sense. A developmentby naturalstages mustbe moreplausible
than a forceddevelopment to suit metropolitanneeds, more particularly
when the unplanned, highlycompetitive,almost anarchicoperations of
nineteenth-century entrepreneursand investorsare sufficiently under-
stood.

There is obviously some confusionin the dependency analysis so

far as it refersto the timingof economic development in nineteenth-
centuryLatin America. There is also some unrealityin the view, so often
repeated in the literature,that an alternative,more attractiveroute to
autonomous economic development,to industrializationand a balanced
economy, was blocked by an enforced integration into the world
economy as exportersof foodstuffsand raw materialsin exchange for
manufacturedgoods. Was there any realisticalternative?Can we join
the Steins in deploring "the failureof Latin American movements for
independence to createthe bases of sustained economic growththrough
balanced agricultural,ranchingand industrialdiversification"?40
In the case of industrialdiversificationand growth,it is clear that
the impact of imported manufactures on newly independent Latin
America is much overdone. The inabilityof Latin America to pay for
importsduringthe firsthalfcenturyof politicalautonomygave domestic
handicraftand manufacturingindustriesa furtherlease on life.Afterthe
1860s the failureof primitiveindustriesto develop autonomously may
be explained otherwise than by the importof large quantities of cheap
manufacturedgoods. Could Latin America,relieved of the hegemonyof
the metropolis,have developed an independent,balanced economy that
included a sufficientelement of domestic manufacturing?

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

The obstacles to autonomous industrialgrowthwere formidable.

Latin America lacked skilled labor; skilled labor could be imported,but
only at uncompetitivelyhigh rates. Latin America sufferedfroman en-
demic shortageof industrialfuels: oil was not extracteduntilthe end of
the nineteenth century; wood was in short supply; coal (which was
scarce in workable quantities) was imported at prices that, inclusive of
transport,rose to as much as four times its cost at the Welsh pithead.
Domestic marketswere small and scattered,too small formass produc-
tion; railways (afterthe 1860s) gradually opened markets of sufficient
size to absorb local production of consumer goods, but demand was
never enough to support the manufactureof capital goods. Exploitable
raw materialswere in shortsupply,ironin particular.Capital was scarce,
if not for small plants at least for large-scale industry.In regions of
relativelysparse population, like Argentina and Chile, there were ab-
solute shortages of labor, skilled or unskilled, which permanentlyre-
strictedopportunitiesforindustrialdevelopment. With handicaps such
as these, domestic manufacturingwas slow to develop in Latin America
with or withoutthe machinationsof the metropolis.
It may be helpfulto compare Latin America with countrieswhich
have achieved rapid and easy industrialization.Britainat the end of the
eighteenthcenturyand Japan afterthe 1860s shared certaincharacteris-
tics. Neither was a large primaryproducer; Britainexported raw wool
and Japan silk, but therewas nothingas competitiveas the huge grain
and meat production of Argentina to divert attentionfrom"balanced
autonomous growth." Britainand Japan were thrown in upon them-
selves; ifthey wanted to develop, therewas no alternativeto manufac-
turing.Furthermore,theyboth had access to commercialand agricultural
capital with which to embark on manufacturing.They both had large
urban communities to serve as markets for their manufactures.They
both had a type of banking systemby which commercialand industrial
capital was kept mobile and fullyemployed. They both had adequate
water communicationsand later,elaborate railway systemswith which
to transferindustrial raw materials, fuel, and finished products from
mine to mill and frommill to market.They both had coal and iron.
If comparable conditions had been experienced in nineteenth-
centuryLatin America, balanced autonomous growth mightwell have
been achieved. They did not, and the path to industrializationin Latin
America was necessarily through the creation of agricultural,pastoral,
or mineral wealth, and the provision of the type of plant required for
processing formarketsboth at home and abroad-grain elevators,flour
mills, meat packing and preparingplants, wineries, sugar mills, smelt-
ers, cotton factories,leather curing plants, and shoe factories.This, or

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LatinAmericanResearchReview

somethinglike it, was the natural path to development forsuch econo-

mies.

It seems likely,then, thatLatin American economies in the nine-

teenth centurywere shaped by domestic circumstancesratherthan by
the planned requirementsof a distantmetropolis.We know thatArgen-
tina in time developed into a greatprimaryproducer forworld markets;
the temptationis to conclude that Argentinedevelopment was deliber-
atelyplanned by a generationof foreigncapitalistsat work in RiverPlate
House (in the CityofLondon). Butitmightbe argued, withmore reason,
that in normal circumstances production for export was a secondary
development of production primarilyintended forLatin America's do-
mestic market.The main incentiveforthe initialdevelopment of coun-
trieslike Argentinaor,even more so, Mexico as grainand beefproducers
was the supply of the home market,and itwas on thishome marketthat
the whole structureof railways, of public utilities,and of citymodern-
ization was built.

Domestic development was similarly responsible for the first

stages in the introductionof foreigncapital, not only British,but also
French, Belgian, Dutch, German, and even Italian. Capital flowed to-
wards Latin America in and afterthe 1860s, the years of "informalim-
perialismof trade and investment."'41 Dependentistas are convinced that
the capital was intended to build up the countries of Latin America as
export economies, satellites,suppliers of foodstuffsand raw materials,
and consumers of foreignmanufactures.But this again is anachronistic.
Foreign capital reached Latin America decades in advance of develop-
ment as a serious exporter.It was attractedto Latin America at a time
when the supply of capital in Europe was plentifuland outlets in tradi-
tionalsectorswere scarcerthanbefore.It founda home in LatinAmerican
railwaysbecause railways in countrieswith risingpopulations, expand-
ing cities,and enlarged domesticmarketswere well known and liked by
the investor. By now the railway systems of Britainand France were
virtuallycomplete; new opportunitieswere open forrailway construc-
tionin Austria,Russia, Italy,Spain, Portugal,the United States, Canada,
and India, and theywere opening equally in Latin America.
Railway investors and promoterswere not, of course, thinking
primarilyof constructingan exporteconomy. Domestic demand had yet
to be satisfied.The 5 or 6 percenton capital invested, which had come to
be regarded as a reasonable return,was no longerobtainable forrailway
investmentin Northern and Central Europe, and investors hoped to
secure this rate or more by putting their money into one of the best-

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

understood of investments,the constructionof railways in areas where

cities were still served by oxcart and mule. The economics of railway
construction,ofgovernmentguarantees,were the same in Latin America
as theywere in Europe, with the added incentiveof generous European
migration,in Latin America as in the United States, to give promise of a
population that would settle the empty lands and build up local traffic
on the railway systems. As a mattersimply of chronologyit is evident
that the intentionof the first,large railway systems in Latin America
was to serve (and profitby) domestic needs.
The sequence of foreignborrowing in Argentina illustratesthe
patternforother large borrowerson internationalmarkets.No govern-
ment borrowingwas possible on the London Stock Exchange fromthe
firstdefault on the small Buenos Ayres Loan of 1824 (in January1828)
until the final compromise and settlementof arrears in October 1857.
Like the rest of Spanish America, Argentina was effectivelyremoved
fromthe world's capital marketsuntil the end of the 1850s. Argentina
was now in creditagain, and if it had not been forthe outbreak of the
Warof the TripleAlliance in April 1865, the Republic would have had no
currentneed for furthergovernmentborrowing abroad; in the years
1864-66 the ordinaryrevenue and expenditureof the Confederationleft
a healthy favorablebalance of ?569,931 .42 In the meantime Argentina
could affordto spare some part of its export earnings to service its
foreigndebt and to offera 7 percentguarantee on the capital of the new
railwaysystems. Argentina,in short,could and did borrow money just
like Italy,or Austria, or Russia, or the United States.
Something of the same kind may be said of the later periods of
Argentineborrowing,ofthose huge foreigninvestmentsin the late 1880s
and again between 1904 and 1913 (by which timeArgentinahad become
a major exporter). Much of this investment,in public utilities,in city
development and embellishments,in public works of one kind or an-
other,had littleor nothingto do with Argentina'srole as an exporterof
primaryproducts. New railway investmentwas forthe constructionof
feeder lines and for the extension of trunklines, often for reasons of
domestic politics and economics, into the remoterprovinces of the Re-
public. Of course, by now the main trunk lines were carryingbulk
products for export, principally grain. But the borrowing of money
abroad to extend and equip the railways could easily be serviced by
earnings on the lines, by furtherborrowing(afterthe early 1900s), and
by the foreigncurrencywhich poured into Argentinato pay forits huge
exports: nearly 15 million hundredweightof wheat to Britainin 1913,
nearly40 millioncwt. of maize, over 7 millioncwt. of chilled and frozen
beef, a million cwt. of mutton.43So long as Argentinacould service its

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LatinAmericanResearchReview

foreigndebt, so long as it maintained a large and increasinglyfavorable

balance of trade with its main customer(the United Kingdom), so long
as it could borrow readily at competitiverates while the interestrate in
Buenos Aires was scarcely higher than in Europe, it takes a creative
imaginationand perhaps even "inventive research" to establish a client
relationshipbetween Argentina,richat home and abroad, and a Britain
which, in the decade beforethe FirstWorld War,was selling farless to
Argentinathan it bought.
The dependency label is ever more widely applied, and thereare
few countries which cannot, at some stage of their development, be
categorized as "dependent." The danger is that "dependency" will lose
whatever meaning it once possessed. The experience of Argentinasug-
gests that there are degrees of political and economic autonomy for
which the label is in any case inappropriate.Argentinais oftenchosen
as the best example of a neocolonial economy,trapped into a dependent,
export-directeddevelopment by monopoly capital from hegemonic,
metropolitanBritain.A great deal of Britishcapital was invested in Ar-
gentina. Britishpublic investmentreached /269.8 million in 1910, of
which / 186 millionwere in railways;44the totaldoes not include private
investment(unknown to the stock market),mainlyin land, commerce,
and industrializationwhich, although comparativelysmall in volume,
was large in influence and effect.But this entireinvestment,normally
productiveinvestmentthat paid foritselfin the development of Argen-
tina's domestic and foreigneconomy, gave littlesensation of "depen-
dency" to contemporaryArgentines,or of "hegemony" to Britons.At a
timewhen debts were serviced and repaid, it was easy enough to bor-
row abroad in internationalmarketsthat were always competitiveand
normallyovercrowded. The creditof Argentinastood so high in the first
decade of the twentiethcenturythatit could at any momenthave raised
the money abroad (probablyin London itself)to buy up the entireBritish
railwaysystem,the tramways,the gas works, or whateverelse it chose.
Is dependency, then, a useful descriptionof a relationshipsuch as Ar-
gentina's with world trade and finance?If so, who has ever been "in-
dependent"?

Theories of dependency may stillhave some point as an approach

to the problems of some of the smaller Republics in the nineteenth
century,even if Argentina,Chile, and Mexico failto fitany identifiable
pattern.Quite apart fromthe "banana Republics," therewere times,for
others,when dependency is sufficiently descriptive-the quinine boom
in Colombia, Bolivian tin, Amazonian rubber. But in general, depen-
dency theoriesconfuse rathermore than they clarify.The economies of

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

thesmallerRepublics,forwantofexports,werelargelyindependentof
worldtrade.Theycouldattract foreign capitalonlyso longas theycould
earnsome foreignexchangeby whatevercroptheycould sell abroad-
perhapsa littlecoffee,sugar,tobacco,cocoa,rubber.
A reappraisalofLatinAmericaneconomiesforthelastdecadesof
thenineteenth century would showa fewstrongeconomies,muchrein-
forced(in thecompetitive marketsoftheday)bytheirabilityto exporta
surplusofproduction overconsumption. These wereaccompaniedbya
muchlargergroupofweakeconomies,whichusuallypossessedtheone
ortwoexportcommodities requiredto financea modestlevelofimports
and foreignborrowing,but which,in otherrespects,remainedin a
conditionnotso dissimilarto thatofcolonialSpanishAmerica-stand-
ing,thatis, outsidethegeneralpatternofworldtradeand financeforat
leastthefirsttwo-thirds ofthenineteenth century. in the
The difference
relativeweightingoftheRepublics,and in theirimpacton worldtrade,
in thestatistics
is reflected forBritish importsfromLatinAmericaduring
thepeak periodofactivity, between1880and 1913.British importsfrom
thewholeofLatinAmericarosefrom/17.62 millionin 1880to /61.08
million(retained)in 1913. The difference is to be accountedforvery
largelyby Argentina.Totalimportsintothe UnitedKingdomfromAr-
gentinain 1880werevalued at only/890,000;in 1913retainedimports
had reached /40.73 million.The increasewas farless dramaticelse-
where.BritishimportsfromLatinAmerica(less Argentinaand Brazil),
whichcame in totalto /10.87 millionin 1880,were stillonly /15.76
million(retained)in 1913.By contrast,Britishimportsfromall partsof
the worldrose from/411.23 millionin 1880 to /659.16 million(re-
tained)in 1913.45
In conclusion,it is evidentthatthe breakwithSpain, farfrom
confirming the integration of LatinAmericaas a dependentpartnerin
the worldeconomy,reintroduced an unwelcomehalfcenturyof "in-
dependence"fromforeigntradeand finance.Subsequentdevelopment
(whichleftmanycountriesstilluntouched)owed somethingto thein-
terestof Europe in new sourcesof foodstuffs and raw materials,and
new outletsforsurpluscapital.Yetapartfromplantation economiesand
mining"enclaves,"thepatternofeconomicdevelopmentwas initiated
and determined, even fora country as closelylinkedto theinternational
economyas Argentina, by domesticneedsand priorities. The overlapof
domesticand foreignpressureson growthis obvious, especiallyfor
Argentina. Butitcannotbe said thatthecountriesofnineteenth-century
LatinAmericacouldexpandand be self-sufficient onlyas a reflection
of
the expansionof the dominantcountries(Dos Santos), or that "the
internaldynamicsofLatinAmericansocietyand itsunderdevelopment

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LatinAmerican Review
Research

were primarily conditionedby LatinAmerica'spositionin theinterna-

tionaleconomy"(O'Brien). These are the definitions withwhichwe
started,and we have comefullcircle.
An "historicalperspective"is important to dependencytheory.
GunderFrankis deeplyconcernedwith"scientific" and
investigation
"historicaldepth."PhilipO'Brienexplainsthatmuchof thewritingon
dependencymakesuse ofhistoryto explainhow changesin capitalism
led to changeswithinLatinAmerica:"It is in thishistorical
analysis,and
the presentday analysisof the problemsof Latin America,thatthe
interestin a theoryof dependencylies."46Presentday analysismay
possiblyhave moreto offer,butwhenProfessor Frankand Mr.O'Brien
refertohistorical
analysis,whatpreciselydo theyhave in mind?

NOTES
1. My italics:C. RichardBathand DilmusD. James,"DependencyAnalysisof Latin
America,"LARR 11,no. 3 (1976):33.
2. Thisdefinition is repeatedinseveralofhisworks.Theversionquotedis fromhiscon-
ference paper"The Structure ofDependence,"American Economic Review(Papersand
Proceedings) 60:2(1970):231.
3. PhilipO'Brien,"A Critiqueof LatinAmericanTheoriesof Dependency,"in Ivar
Oxaal, TonyBarnett,and David Booth(eds.), BeyondtheSociology ofDevelopment:
Economy andSociety inLatinAmerica andAfrica (London,1975),p. 13.
4. O'Briensaysas muchin hisconclusion,"A Critique," p. 25.
5. David Ray,"The DependencyModel of LatinAmericanUnderdevelopment: Three
BasicFallacies,"Journal ofInter-AmericanStudies15:1(1973):6.
6. JamesD. Cockcroft, AndreGunderFrank,and Dale L. Johnson,Dependence and
Underdevelopment: LatinAmerican Political
Economy (New York,1972),p. 7.
7. Osvaldo Sunkel,"NationalDevelopmentPolicyand ExtemalDependencyin Latin
America," Journal ofDevelopment Studies6:1 (1969):23,30.
8. Stanleyand BarbaraStein,TheColonialHeritage ofLatinAmerica: Essayson Economic
Dependence inPerspective (New York,1970),p. 135.
9. Heman Ranmirez Necochea'sHistoriadel imperialismo en Chile(Santiago,1960),as
quoted by AndreGunderFrank,Capitalism and Underdevelopment in LatinAmerica
(Londonedn., 1971),p. 97.
10. Femando H. Cardoso and Enzo Faletto,"Dependenciay desarrolloen America
Latina,"in JoseMatosMar (comp.),La Dominaci6n de AmericaLatina(BuenosAires,
1968),p. 163.
11. Dos Santos,"The Structure ofDependence,"p. 232.
12. CharlesW Bergquist, "On Paradigms and thePursuitofthePractical," LARR 13,no. 2
(1978):247-48.
13. O'Brien,"A Critique,"p. 16.
14. Cockcroft, Frank,and Johnson, Dependence andUnderdevelopment, p. 34.
15. Stein,ColonialHeritage, p. 137.
16. FrankSafford, "On Paradigms and thePursuitofthePractical: A Response,"LARR 13,
no. 2 (1978):255.
17. Stein,ColonialHeritage, p. 147.Itmaybe thatStanleyStein'sconsiderable knowledge
ofBrazilhas tendedto colorhisviewsforTheColonial HeritageofLatinAmericaas a
whole,perhapstoan unwarrantable extent.
18. Porter'sTablesand GeneralStatisticalAbstract (UnitedKingdom);at thistimetheex-
changewas C1 sterling to $5 U.S.

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 DEPENDENCY IN 19TH CENTURY LATIN AMERICA

19. Ibid.
20. Stein,Colonial Heritage,
p. 135.
21. Trade andNavigation Accounts (UnitedKingdom).
22. Safford, "On Paradigms," p. 256. Safford'smaterialis derivedfrom. hisrecentbook
TheIdealofthePractical:Colombia's Struggle toForma TechnicalElite(Austin,1976).
23. I have describedthistrendin somedetailin mybookLatinAmerica andBritishTrade,
1806-1914(London,1972),pp. 47-61.
24. Stein,Colonial p. 154.
Heritage,
25. Frank,Capitalism andUnderdevelopment, p. 309.
26. The development ofBritishcommercial bankingin LatinAmerica,and itsrelation-
ship withlocal businessand nationaleconomies,is describedby CharlesJones,
"Commercial Banksand MortgageCompanies"in D. C. M. Platt(ed.), Business Im-
perialism,1840-1930:An Inquiry Basedon British Experiencein LatinAmerica (Oxford,
1977),pp. 17-52.
27. ReportdatedNew Orleans,26July1849,in theGuildhallLibrary, London(Baringar-
chives,H.C. 4.5.25).Falconnethad justbeenin Mexico.The exchangestoodat just
underfivesilverdollars(Mexican)to /1 sterling.
28. GuildhallLibrary, London(Baringarchives, letter
of24December1843.H.C. 4.1.14).
29. TheTimes,8 September1836.
30. Thiswas actuallytrue,butI realizethatwe arenotsupposedtomentionsuchthings!
Tocovermyself againstthechargeofEuro-centered jingoism,I shouldadd thatthere
were seventy-four Ministersof Financein Spain duringtheminority and reignof
Isabel11(1834-68),and fourteen morein thefewyearsbeforetheRestoration. Theef-
fecton short-term borrowing was muchthesame.
31. Theratesofissue(and henceinterest) werepublished.Someconfusion mayhaveari-
sen fromthepracticeofissuingloansat nominalratesofinterest wellbelowtheac-
tualmarketrate.If a government preferred, forexample,to issue 3 percentstock
whileitscreditwas no betterthan6 percent,theload had tobe sold to thepublicat
halfitsnominalvalue.Thefirst Mexicanloan,theGoldschmidt loanof1824,was ex-
pensive;thenew Government sold theloanof/3.2 millionnominalin 5 percentsat
58. The secondwas issuedby Barclay, Herring,Richardson& Co. in 1825,also for
/3.2 millionnominal.Thistimetheloan was in 6 percentssoldat 85.75;itwas rela-
tivelycheap. Bothwerewithinthemarketratescurrent at thetime.One ofthefew
historians tomakesenseoftheearlyborrowing ofLatinAmericais JanBaz-
practices
ant,Historia dela DeudaExterior deMexico,1823-1946(Mexico,1968),pp. 32-37.
32. Stein,Colonial p. 135.
Heritage,
33. Ibid.,p. 154.
34. Ibid.,p. 155.
35. Dos Santos,"The Structure ofDependence,"p. 232.
36. H. S. Ferns,Argentina (London,1967),p. 125.
37. Stein,Colonial p. 155.TheSteinsaredrawing,somewhatuncritically,
Heritage, on the
classicarticlebyJ.Gallagherand R. Robinson,"The Imperialism ofFreeTrade,"Eco-
nomic HistoryReview,2nd ser.,6:1 (1953):1-15.It is notunchallenged. I myselfhave
triedto showsomeofthedifficulties in twoarticles:"The Imperialism ofFreeTrade:
Some Reservations," Economic HistoryReview,2nd ser., 21:2 (1968):296-306,and
"Further Objectionsto an 'Imperialism ofFreeTrade,'1830-60,"Economic HistoryRe-
view,2nd ser.,26:1(1973):77-91.W.M. Mathewhas reviewedthePeruviancase in
his valuablearticle"The Imperialism ofFreeTrade:Peru,1820-70,"Economic History
Review, 2ndser.,21:4(1968):562-79.
38. The laterfigures are forthecityitself,notforGreaterBuenosAires.Theyare repro-
ducedbyNathanLake,"Argentina," in RichardMorse(ed.), TheUrbanDevelopment
ofLatinAmerica, 1750-1920(Stanford, 1971),p. 23.
39. The variety ofmotivesforthecreationoftheCentralArgentine Railwayhas recently
beendescribedbyPaulB. Goodwin,Jr.,inhisarticle"The CentralArgentine Railway
and theEconomicDevelopment ofArgentina, 1854-1881," Hispanic AmericanHistori-
cal Review57:4 (Nov. 1977):613-32.The argumentis further extendedin Sylvester

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LatinAmericanResearchReview

Damus' critiqueof Goodwin's articlein the HispanicAmericanHistoricalReview58:3

(Aug. 1978):468-73, and in Goodwin's reply,ibid., 474-76.
40. Stein, ColonialHeritage,p. 135.
41. The phrase is fromStein, ColonialHeritage,p. 155.
42. Fennon theFunds (London, 1876 edn.), p. 242.
43. Tradeand NavigationAccounts(United Kingdom).
44. George Paish, "Great Britain's Capital Investments in Individual Colonial and
ForeignCountries,"Journal oftheRoyalStatisticalSociety74 (1911): 182. Paish's conclu-
sions are supported by the more recentresearchofJ.F. Rippy and IrvingStone. But it
should be said that the totals are unreliable not only because they omit investment
outside the Stock Exchange (which is understandable, since the figuresare inaccessi-
ble), but because neitherPaish nor his successors take account of the factthatLondon
(at that time) was a trulyinternationalmarket-much of the capital quoted on the
London Stock Exchange was actuallyheld abroad. Thomas Skinner,in his prefaceto
the firstvolume of TheStockExchangeYearbook (1875), calculated thatnearlyhalfof the
securitiesknown on the Stock Exchange (foreignand native) were owned by foreig-
ners.
45. Tradeand NavigationAccounts(United Kingdom). These are the comparable figuresfor
exports: Britishexports (declared values) to the whole of Latin America rose from
/17.23 millionin 1880 to /52.99 millionin 1913. Britishexportsto the whole of Latin
America less Argentinaand Brazil, which were ?8.10 millionin 1880, were [17.88
millionin 1913. Britishexportsto all parts of the world were /223.06 millionin 1880;
they were /525.25 million in 1913. The export figuresfor 1880 and 1913 are not
strictlycomparable since, amongst other changes, the 1913 figuresincluded a rela-
tivelysmall element of "foreignand colonial" re-exports.
46. O'Brien, "A Critique,"p. 13.

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