CHAPTER6

The Confirmationof United States

Supremacyin Latin America

The Era of Direct Domination (1914-1932)

We have earlier noted how the Caribbean Sea was transformed into a veritable
American lake between the end of the Spanish-American War and the beginning
of World War I. Through a combination of financial supervision, commercial
penetration, diplomatic agreements regulating regulations with foreign nations,
and the occasional application of military force, the United States had acquired
effective control of the political and economic systems of some of the islands in
the Caribbean and the mainland republics of Central America that had achieved
independence from their European colonial masters in the course of the nine-
teenth century. The European powers, particularly Great Britain, acquiesced in
this extension of American hegemony because their national energies were ab-
sorbed by their own colonial rivalries in Africa and Asia as well as by the power
struggles in Europe that resulted in the First World War. It was the war itself that
confirmed American supremacy in the Caribbean region and facilitated the ex-
pansion of American economic power to the continent of South America as well,
for reasons presently to be discussed.
Historians have often remarked upon the irony that Woodrow Wilson, cham-
pion of national self-determination and critic of his Republican predecessor's
"dollar diplomacy" in Latin America, conducted more military and diplomatic
interventions south of the border than any American president before or since. It
is apparent from his private observations as well as his public declarations that
Wilson had genuinely persuaded himself of the essential morality of his inter-
ventionist policies in the Caribbean: A passionate proponent of good govern-
ment, he cringed at the widespread corruption, inefficiency, autocracy, and social
unrest that was conspicuously in evidence among America's southern neighbors.
Just as he had sought to cleanse the political institutions of New Jersey and then
of Washington, this progressive idealist set out to impose order, honesty, and ef-
ficiency on the Caribbean republics for their own good.
But beneath this disinterested idealistic position lay the same preoccupation
that had prompted the interventionist policies of Roosevelt and Taft in the era of
Republican supremacy: the fear that political revolution, social instability, and fi-

197
198 The Thirty Years' War (1914-1945)

nancial collapse in the Caribbean region would tempt the great powers of Europe
to intervene to protect the lives and investments of their citizens. The prospect of
European powers militarily ensconced, or even financially engaged, in a region
critical to the security of the Panama Canal, which had been opened in the sum-
mer of 1914 as the war clouds appeared in Europe, was more than any American
president could tolerate.
And so, behind a smokescreen of progressive rhetoric about America's obliga-
tion to foster good government in its own hemisphere, Woodrow Wilson re-
sumed the Roosevelt-Taft policies of military intervention and dollar diplomacy
in Latin America. The first beneficiary of this new form of American heavyhand-
edness couched in the language of Wilsonian benevolence was Nicaragua. The
Bryan-Chamorro Treaty (signed on August 5, 1914, and ratified two years later)
transferred supervisory authority over the finances of that nation from American
private banking interests to a commission controlled directly from Washington.
The United States government advanced funds to the financially strapped
Nicaraguan regime to reduce its public debt in return for an exclusive concession
to construct a trans-Isthmian canal and to establish naval bases at its two termina.
The object of this agreement was to protect the northern land approach to the
Panama Canal, preclude any future European-constructed canal along the alter-
native Nicaraguan route, and rehabilitate the finances of this perpetually insol-
vent nation so as to remove any possible pretext for European intervention. The
American marine contingent that had been landed in 1912 was retained and aug-
mented to provide the requisite armed support for the policy of financial reorga-
nization then undertaken.
Similar instances of social unrest and financial instability in the adjacent states
of the Dominican Republic and Haiti on the island of Hispaniola elicited similar
intimations of European intervention arrd, consequently, a similar preemptive re-
sponse from Washington. The reader will recall that a default on foreign loans by
the Dominican government in 1904 had resulted in the establishment of a cus-
toms receivership in the hands of an agent, appointed by the president of the
United States, who was empowered to distribute the customs receipts of Domini-
can ports to foreign creditors. As in so many of previous and subsequent in-
stances of American financial intervention in the Caribbean, this policy was mo-
tivated by the obsession with removing any pretext for intervention by European
nations on behalf of their aggrieved bondholders. The rapid breakdown of social
order and the attendant possibility of financial collapse in the Dominican Repub-
lic during Wilson's first term once again raised the prospect of European inter-
vention in that beleaguered country. To avert such a possibility, the United States
undertook to supervise national elections in 1914 and then to dispatch marines in
1916 to preserve order and assure American financial control.
In the contiguous Republic of Haiti, the possibility that Germany would ex-
ploit that nation's perennial political unrest and financial difficulties by seizing
control of its customs houses to ensure the service of its huge foreign debt in-
spired great unease in Washington. So too did the prospect of German naval
bases in H~iti that would command the passage between Hispaniola and Cuba to
 EZZJ
(1915-1934)

N
0 200 Mi.
COLOMBIA
t ,------,
0 200 Km

Central America and the Caribbean Before the Second World War
200 The Thirty Years' War(l914-1945)

the Panama Canal. When revolutionary disorders continued to rage, Wilson re-
solved to act unilaterally to preempt any such European involvement in Haitian
affairs. Marines were dispatched in 1915 to protect foreign lives and property,
American banks were persuaded to lend funds to the Haitian government to en-
able it to consolidate and refund its foreign debt, an American financial adviser
assumed control of the national finances, an American receiver-general was in-
stalled to supervise the collection of customs receipts, and American military of-
ficers took charge of the Haitian police forces. A new constitution (drafted by
Assistant Secretary of the Navy Franklin D. Roosevelt) transformed Haiti into an
American protectorate. In the same year the Wilson administration reintroduced
military forces into Cuba (from which they had been withdrawn in 1909) and
purchased the Danish West Indies (renamed the Virgin Islands) from Denmark
under the implied threat of seizure, all in the interest of keeping the European
belligerents out of the "American lake."
Wilson's most spectacular intervention in Latin America ironically took place
in a nation that had been relatively well disposed to the United States and was
scarcely in danger of falling under the sway of the European powers. Of all the
nations of Latin America, Mexico had retained the most cordial relations with
the United States since the end of the American Civil War. Resentment at the ter-
ritorial losses to its northern neighbor in the mid-nineteenth century had been at-
tenuated by the American government's decisive role in pressuring France to
withdraw its military forces from Mexico in 1867. This led to the overthrow by
Mexican nationalists of the French satellite empire headed by the Austrian arch-
duke Maximilian. As we have seen, between 1876 and 1910 Mexican dictator
Porfirio Diaz eagerly solicited American capital investment in Mexican land,
natural resources, railroads, and public utilities. But the Mexican Revolution of
1910-11 that ousted Diaz had plunged the nation into a social and political up-
heaval that seriously menaced these American properties and investments. The
assumption of dictatorial power by President Victoriano Huerta in February
1913 offended the democratic sensibilities of President Wilson, who withheld
diplomatic recognition and attempted to topple the new Mexican strongman by
permitting American arms shipments to his "Constitutionalist" enemies, who
controlled most of the northern sector of the country. The arrest in April 1914 of
American sailors on shore leave in the Caribbean port of Tampico, though in fact
nothing more than a spontaneous indiscretion by an overly zealous subordinate,
was viewed in Washington as a retaliatory action by the Mexican president that
deserved and required punishment. Consequently, American naval units occu-
pied the port of Vera Cruz and war between the two countries was narrowly
averted before a compromise settlement facilitated their evacuation seven
months later. In March 1916 one of the Constitutionalist leaders, Pancho Villa,
eager to provoke American intervention in the Mexican civil war so that he
could unite his divided country against the common enemy to the north,
launched a raid on an American border town in New Mexico. In retaliation, Wil-
son dispatched a punitive military expedition under General John J. Pershing
deep into the Mexican interior in pursuit of the "bandit" leader. The ostensible
 The Confirmation of United States Supremacy in Latin America 201

purpose of this quixotic adventure was to impress upon the Mexicans the neces-
sity of establishing a democratic government capable of preserving social order.
After angry protests from the Mexican government and clashes with Mexican
military forces, the American troops were finally withdrawn on February 5,
1917, two days after Washington's severance of diplomatic relations with Berlin
over the issue of unrestricted submarine warfare, which foreordained America's
intervention in the European war.
The Wilson administration's resumption of the Roosevelt-Taft policy of mili-
tary intervention and financial supervision in the Caribbean occurred at a time
when the United States was rapidly expanding its economic power to the conti-
nent of South America. In the aftermath of the Spanish American War, United
States commercial and financial involvement in Latin America was concentrated
almost exclusively in the neighboring Caribbean islands and the nations of Cen-
tral America. Between 1898 and 1914, American investment south of the border
had increased from $320 million to $1.7 billion, with Mexico and Cuba together
accounting for almost a third of the total. Despite the beginning of American
economic activity in the larger nations of South America, the foreign trade and
financial relations of those republics were still centered on Europe. At the tum of
the century, Great Britain was still the prime source of foreign capital for Latin
America as a whole, its direct and portfolio investments in the region totaling
$2.5 billion. By 1914 total British investment in Latin America had increased to
about $3.7 billion, with Argentina and Brazil receiving 60 percent of the total
and Chile, Peru, Mexico, and Uruguay taking most of the remainder. France be-
came a major investor in Latin America after 1880, increasing its total commit-
ment in the region threefold between 1900 and 1914 to $1.2 billion. Approxi-
mately $900 million of German foreign investment was in Latin America by
1914, principally in Argentina, Brazil, Chile, and Mexico. Thus, at the beginning
of the First World War, the value of Britain's investment in the region roughly
equaled that of her three principal foreign competitors combined.
Collectively, the major European economic powers supplied the Latin Ameri-
can republics with the largest proportion of their investment capital and manu-
factured products while receiving in exchange the bulk of their agricultural and
mineral exports. But World War I abruptly severed these financial and commer-
cial connections between Latin America and the old world. The British blockade
and the German submarine campaign, together with the diversion of European
industrial production, capital investment, and merchant shipping to war-related
purposes, deprived Latin America of the foreign trade and financial assistance
that had previously flowed across the Atlantic.
Into the economic vacuum in Latin America produced by the reduction of Eu-
ropean trade and investment during the war stepped the powerful, prosperous,
neutral state from the north. American manufacturers captured markets previ-
ously dominated by European exporters. American agricultural, mining, and pe-
troleum interests wrested control of Latin American land and subsoil resources
from British, French, and German firms. When Great Britain and France were
forced to curtail their investments in Latin America in order to finance their war
202 The Thirty Years' War (1914-1945)

effort and German holdings in the region were either sold or confiscated, Ameri-
can lenders promptly replaced their European competitors as the prime source of
investment capital. During the war the dollar value of American investments in
the region increased by about 50 percent. By the end of the war, the inflow of
American capital had paved the way for the spectacular expansion of United
States investment in and trade with Latin America during the 1920s as the Euro-
pean powers found it impossible to regain their prewar position as bankers and
trading partners of the region.
The spurt of American investment in the economies of the Latin American re-
publics after the war was facilitated by the passage in 1919 of the Edge Act,
which authorized for the first time the establishment of foreign branches of
American banking institutions. This legislation afforded American investors,
who had previously been required to conduct their financial operations through
the British banking system and its vast network of international affiliates, direct
access to the money markets of the various Latin American states. Wall Street
banks lent ever-increasing sums to national and municipal governments, as well
as to private corporations, whose securities could no longer find a market in a
Europe struggling to satisfy its own substantial capital requirements in the period
of postwar reconstruction. During the second half of the 1920s Latin America
absorbed 24 percent of the new capital issues floated for foreign account.
Accompanying this notable increase in United States portfolio investment in
Latin American countries was a spectacular upsurge in direct investment. Chan-
neled principally into electrical utilities, railroads, mining, petroleum, and tropi-
cal plantation agriculture, American direct investment in Latin America in-
creased almost threefold between 1914 and 1929. By the latter date it had come
to represent 44 percent of total United States direct investment abroad. The com-
bined total nominal value of American direct and portfolio investment in Latin
America had more than doubled in the decade after 1919, while British invest-
ments in the region remained roughly unchanged and those of France and Ger-
many declined dramatically.
This strong investment position enabled the American financial community to
acquire a large measure of control over the fiscal and monetary policies of the re-
cipient nations. The effects of this economic power were naturally felt most di-
rectly in those countries, such as Nicaragua, Haiti, and the Dominican Republic,
whose financial institutions had come under direct American supervisory con-
trol. But even such nominally independent states as Cuba, Brazil, Chile, and
Venezuela became so dependent on American investment that most of their tax
revenues were generated from economic activities directed by American banks
and corporations. Decisions taken in the boardrooms of these American-based
institutions often had an immediate and decisive impact on the budgetary poli-
cies of Latin American governments (and therefore on the distribution of na-
tional wealth). The sharp increase of American capital investment in Latin
America during the First World War transpired amid a remarkable expansion of
inter-American trade. The three years of American neutrality hastened the
process whereby the United States replaced Britain as the region's principal trad-
 The Confirmation of United States Supremacy in Latin America 203

ing partner for the reasons sketched above. After the war, operating under the
provisions of the Webb-Pomerene Act (which exempted firms engaged in the ex-
port trade from the application of antitrust laws), American conglomerates con-
tinued to supplant weaker European export firms in the Latin American market.
United States exports to Latin America tripled in value from 1914 to 1929, and
by the latter year accounted for almost 40 percent of the region's total imports. In
exchange for its sales of manufactured goods, the United States became the
major customer for Latin America's primary products (principally subsoil miner-
als and tropical foodstuffs), taking almost a third of Latin America's total ex-
ports by the end of the 1920s.
In different circumstances this inter-American commercial relationship might
have matured into a mutually beneficial exchange of surplus products between
complementary economic systems. Instead, it degenerated into a neocolonial re-
lationship from which one party derived extensive benefits while the other be-
came locked into a system of abject dependence. The unequal nature of inter-
American trading patterns that emerged in the postwar period can be traced to
several sources. The first of these was the tendency of American firms and their
financial backers to acquire through direct investment a controlling interest in the
principal export industries of many Latin American nations. Examples of this
overwhelming domination abound. American capital came to represent 92 per-
cent of the total investment in Chilean copper mines. American oil companies,
after forcing out their European competitors, acquired control of over half of
Venezuela's petroleum production. Two-thirds of the Cuban sugar crop was
owned by American producing and refining corporations. Two American firms,
the United Fruit Company and the Standard Fruit Company, together enjoyed a
monopoly of the banana plantations of Guatemala, Honduras, Nicaragua, and
Panama. This extraordinary degree of foreign ownership resulted in the repatria-
tion of profits generated from the exploitation of these national resources rather
than reinvestment in the infrastructure of the host country. This diverted scarce
capital that might otherwise have financed projects of domestic economic devel-
opment that would have increased the nation's productive capacity and raised the
standard of living of the indigenous population.
The second adverse feature of this pattern of inter-American commercial ex-
change from the Latin American point of view was the propensity of United
States direct investment to promote the intensive development of a single export
crop or commodity in each country at the expense of product diversification.
This tendency to "put all one's eggs in one basket" rendered most Latin Ameri-
can nations tragically vulnerable to the wild fluctuations of commodity prices
that characterized the 1920s. When the world prices of sugar, coffee, copper, and
other commodities dropped precipitously, as they frequently did during this pe-
riod, the national economies for which exports of these primary products repre-
sented virtually the only source of hard currency were plunged into severe crises.
Finally, the commanding share of the Latin American export trade acquired by
the United States during and after the First World War created a relationship of
dominance-subservience that naturally extended to other matters as well. The ex-
204 The Thirty Years' War(l914-1945)

tent of this export dependence was to reach incredible extremes in some cases: In
the year 1937 the United States was purchasing 80 percent of Cuba's exports, 88
percent of those of Honduras, and 91 percent of those of Panama. No nation
whose domestic prosperity depended so heavily on unimpeded access to the
American market could be expected to withstand pressure from Washington to
adjust their foreign and internal policies to the requirements of the national inter-
est of the United States.
Were the independent states of Latin America condemned to languish in a po-
sition of perpetual subservience to their powerful northern neighbor? As noted
earlier, the reduction of Europe's economic stake in Latin America as a conse-
quence of World War I removed whatever advantage the Latin republics had de-
rived from United States-European rivalry in the region. In light of the striking
imbalance of economic and military power in the western hemisphere, the only
alternative to a destiny of continual inferiority for the individual states south of
the North American giant was progress toward the type of political and eco-
nomic integration on a continental scale that the United States had achieved in
North America.
Sentiment for the unification of Latin America had surfaced soon after the ex-
pulsion of Spanish and Portuguese authority in the first quarter of the nineteenth
century. Under the inspiration of the great liberator, Simon Bolivar, the Congress
of Panama in 1826 produced a number of resolutions aimed at amalgamating the
Spanish and Portuguese successor states in order more effectively to combat the
anticipated menace of intervention by the European powers. But only four Latin
American republics sent representatives to that conference, and only Bolivar's
Colombia ratified the agreements on continental cooperation that were con-
cluded. Three more Latin American congresses met during the nineteenth cen-
tury, usually in response to the threat or reality of foreign intervention in the
hemisphere. But these four conferences (1826, 1847-48, 1856, and 1864-65)
produced nothing more promising than a single, innocuous consular convention
ratified by the few states that bothered to send delegates. Instead of advancing to-
ward some form of continental integration, the successor states of Latin America
were plagued by the opposite tendency of political disintegration after the with-
drawal of Spanish and Portuguese authority. The United Provinces of Central
America seceded from Mexico in 1823, then shattered into five small republics
in 1840. The Gran Colombia of Bolivar eventually split into Venezuela, Colom-
bia, and Ecuador, and the rump state of Colombia subsequently lost its province
of Panama in 1903. The Dominican Republic seceded from Haiti in 1844. As we
have seen, Mexico lost half its territory to the United States at midcentury. The
combination of geographical isolation, poor communications, and fierce national
rivalries nipped in the bud all integrationist tendencies, even when the advan-
tages of Latin American cooperation became so apparent during the achievement
of United States supremacy in the twentieth century.
The persistence of these centrifugal forces suggested that the unification of
Latin America stood the best chance of success under the aegis of one or the
other of those regional powers that exhibited some of the characteristics tradi-
 The Confirmation of United States Supremacy in Latin America 205

tionally associated with a leadership role. Brazil, comprising almost half of the
territory and over a third of the population of the South American continent, was
the obvious candidate to become the "Prussia" of Latin America. But Brazil's
historic rivalry with the other potential unifier of the continent, Argentina-not
to speak of the linguistic barrier separating the only Portuguese speaking nation
of the hemisphere from its Spanish-speaking neighbors-prevented it from as-
suming continental leadership. Instead of becoming an instigator of Latin Ameri-
can integrationist sentiment in opposition to North American domination, Brazil
was to become the United States' most loyal supporter in the region. This politi-
cal cooperation was enhanced by a profitable economic relationship based on
American purchases of Brazil's principal export crop, coffee, a commodity that
enjoyed great popularity in the United States and was not grown domestically.
Brazil's reluctance to spearhead a movement of Latin American solidarity in
resistance to American hegemony left Argentina as the sole aspirant to such a
position after the First World War. The special geographical and economic ad-
vantage enjoyed by Argentina enabled it to adopt an independent posture in
hemispheric affairs that frequently brought it into direct conflict with Washing-
ton. Its geographical location at the southern extremity of South America ren-
dered it less susceptible to American military and naval intimidation. Moreover,
unlike any other South American country, its major exports (beef and grain)
competed with rather than complemented American exports and therefore pre-
cluded the type of cooperative economic relationship that had developed be-
tween the United States and Brazil. On the contrary, American farmers obtained
extensive tariff protection against Argentinian grain and Western ranchers were
insulated against competition from Argentinian cattle in the form of a stringent
sanitary prohibition of beef imports from regions infected by foot-and-mouth
disease (a persistent condition in the pampas). This closure of the American mar-
ket impelled Argentina to preserve and extend its commercial relationship with
Europe during the very period that her sister republics were submitting to the
domination of American trade. As late as 1937, Argentina's imports from the
United States accounted for only 16.1 percent of its total foreign trade while it
received 59.1 percent of its imports from Europe. In the same year Argentina
shipped only 12.8 percent of its exports to the United States compared to 74.3
percent to Europe. This European commercial orientation was reinforced by the
presence of substantial numbers of first-generation immigrants in Argentina
from countries of the old world (principally Germany and Italy) who retained
close ties to their homelands. The combination of these geographical, economic,
and cultural factors helped to place Argentina beyond the reach of American
power in Latin America and enabled her to mount a spirited challenge to Ameri-
can hemispheric hegemony.
The rallying cry of Argentina's campaign to organize Latin American senti-
ment in opposition to United States domination was the ideology of pan-His-
panic solidarity, which it trumpeted as a preferable alternative to the Pan-Ameri-
can ideology that the United States had employed since the end of the nineteenth
century as a means of mobilizing its Latin American clients. But in light of the
206 The Thirty Years' War(l914-1945)

patent inequality of power in the western hemisphere, the likelihood of Latin

American solidarity and independence was problematical so long as the United
States continued to enjoy the prerogative of intervening directly in the domestic
affairs of Latin American nations to protect the lives of American citizens, pre-
serve social order, and collect public debts from governments that refused to
submit disputes with foreign investors to international arbitration. Consequently,
it was the issue of the right of intervention that became the focal point of the Ar-
gentinian-led assault on United States hegemony that enlivened the periodic Pan-
American conferences of the 1920s. This prerogative, which was both generally
recognized in international law and specifically codified in the Roosevelt Corol-
lary of the Monroe Doctrine, was periodically reasserted by the American gov-
ernment. The right of foreign intervention was deeply resented by the nations of
Latin America as a humiliating limitation to national sovereignty much in the
same way that the principle of extraterritoriality engendered fierce opposition in
China (see p. 228). In vain did the southern republics endeavor to secure accep-
tance by the United States of the Calvo Doctrine (after the Argentinian jurist
Carlos Calvo), which asserted the principle of a sovereign state's absolute immu-
nity from external intervention and recognized the judicial system of the host na-
tion as the final authority in disputes involving foreign citizens or corporations.
Though most Latin American nations customarily inserted a "Calvo clause" in
contracts signed with foreign investors (to preclude their appealing to their home
governments for diplomatic support in disputes with the host government), the
United States stubbornly declined to relinquish its right to intervene on behalf of
its aggrieved citizens if the host country refused to arbitrate.
The Latin American states just as resolutely refused to recognize the obliga-
tion to submit to international arbitration disputes between a host government
and citizens of a foreign government, denouncing it as an intolerable infringe-
ment on national sovereignty. Tl).ey pres~<iins_tead for the codification_9f an
inter-American system of international law that w9llldensll~_th_~pri11912le of
abs~lute ~.llillity and sovereignty of the nations of the w~s~~fllhe~e. The
United States, for its part, opposed the concept of a regional international law
t.gat would de rive it of the traditional right of interv nti~a.{!£tiQne!LbJ inter-
n~io~at~<l_!_gr~-.!_· Between 1889-90 (the meeting of the first Pan-Ameri-
can Conference) and 1928 (the sixth conference at Havana), the Colossus of the
North and its Latin American clients periodically sparred over this divisive issue.
At the Havana conference, in response to the introduction of a formal resolution
prohibiting intervention, United States delegate Charles Evans Hughes mounted
his country's last defense of its absolute right to intervene in its hemisphere to
preserve internal stability and national independence. That this dispute repre-
sented more than mere legalistic wrangling was attested to by the conspicuous
presence of American military forces in Nicaragua and Haiti as well as by the
legal constraints on the sovereignty of Cuba and Panama that remained in force
as the delegates deliberated.
In addition to this Latin American campaign on behalf of the doctrine of ab-
solute nonintervention, there were other indications of mounting resistance to
 BRAZIL

Rio de
Janeiro

South America Before the Second World War

208 The Thirty Years' War (1914-1945)

American hemispheric hegemony. The first of these was the refusal of most
Latin American states to follow the lead of the United States in the First World
War. In contrast to the British Dominions, which enthusiastically rallied to the
side of the mother country and made important contributions to the British vic-
tory, only eight of the twenty Latin American republics (of which seven were
tiny Caribbean and Central American nations under direct American domina-
tion) declared war on Germany. Such geographically strategic states as Mexico,
Colombia, and Venezuela maintained a position of strict neutrality.
This spirit of independence from American foreign policy resurfaced in the
postwar period. All of the Latin American republics joined the League of Na-
tions at one time or another after that world body had been repudiated and
shunned by the United States. Fifteen of them sat in the first Assembly of the
League; the presidency of the Assembly was often occupied by a Latin American
delegate; Latin American nonpermanent seats in the League Council increased
from one to three in the course of the 1920s. The very fact of Latin American
membership and active participation in the international organization signified a
defiant repudiation of the United States' conception of a self-enclosed inter-
American security system. But Latin American efforts to employ the League as a
counterweight to United States power in the western hemisphere were uniformly
unsuccessful. It was precisely such a possibility that had inspired American in-
sistence on the inclusion in the League Covenant of article 21, which specifically
denied League jurisdiction over matters within the purview of the Monroe Doc-
trine. Latin American attempts to persuade the League to repudiate this endorse-
ment of American hegemony in the western hemisphere failed to budge the cau-
tious European governments that dominated the League Council and were
reluctant to antagonize the United States. As a consequence, the League was able
to intervene in inter-American conflicts on only two occasions (and then only
after having secured the prior approval of Washington), successfully in the Leti-
tia conflict between Peru and Colombia (1932-35), unsuccessfully in the Chaco
War between Bolivia and Paraguay (1928-38).
To recapitulate: Between 1914 and 1929 the United States definitively re-
placed Great Britain as the dominant commercial and financial power in Latin
America after having successfully challenged British diplomatic and naval su-
premacy in the region at the end of the nineteenth century. Direct American mili-
tary domination and financial control of Cuba, Panama, Haiti, the Dominican
Republic, and Nicaragua, together with the acquisition of the Virgin Islands from
Denmark, completed the process of domination of the Caribbean region begun
before the First World War. The establishment of undisputed strategic mastery
of the Caribbean and economic preponderance in South America was facilitated
by the weakening of European economic power in the western hemisphere dur-
ing the war and then confirmed by the inability of the exhausted European states
to recapture their prewar position in the 1920s. Latin American efforts to counter
the southward advance of American power through some form of continental co-
operation were frustrated by Brazil's reluctance to renounce its privileged rela-
tionship with the United States and the unwillingness of the other republics to
 The Confirmation of United States Supremacy in Latin America 209

follow Argentina's lead in directly challenging American encroachments on

Latin American sovereignty. The promise of collective security represented by
the League of Nations proved illusory because of the European powers' hesita-
tion to risk Washington's displeasure by supporting the extension of the
League's protection to the nations within the inter-American security system
formed and dominated by the United States.

The Era of Indirect Hegemony (1933-1945)

The United States' acquisition of undisputed hegemony over Latin America dur-
ing the First World War and the succeeding decade removed the traditional justi-
fication for the employment of military force to forestall European intervention
in the western hemisphere. This new situation of absolute immunity from
transatlantic threats, which was confirmed by the abolition of the German navy
at the Paris Peace Conference of 1919 and the limitations on naval construction
adopted by the other maritime powers at the Washington Naval Conference of
1921-22, enabled Washington to adopt less overtly coercive means of preserving
its position of hemispheric dominance. As Latin American criticism of heavy-
handed American intervention and the legal principles on which it was based
reached a crescendo toward the end of the 1920s, the direct methods of military
force and diplomatic intimidation gradually gave way to a more subtle, but
scarcely less effective, mechanism for maintaining control of the client states
south of the border.
The first direct challenge to American power in Latin America was to come
from the contiguous nation of Mexico, which had lost half of its territory to the
United States in the middle of the nineteenth century, endured American military
and naval interventions between 1914 and 1917, and seen most of its natural re-
sources and valuable land fall into the hands of American investors and corpora-
tions. Memories of past humiliations, mingled with the daily experience of eco-
nomic subservience, rekindled resentment toward the powerful neighbor north of
the Rio Grande. These long-suppressed grievances bubbled to the surface as the
last contingent of American troops that had been dispatched southward by Presi-
dent Wilson to combat "banditry" was withdrawn in February 1917 once the
American chief executive was satisfied that representative government was about
to be restored. It is supremely ironic that the democratic government that Wilson
had insisted upon with such unbending determination proceeded in one of its first
official acts to adopt a national constitution that contained a number of articles
designed to liberate Mexico from the economic domination of foreign nations in
general and the United States in particular. The most controversial of these con-
stitutional safeguards vested in the Mexican nation ownership of all the subsoil
resources of the country (of which petroleum was indisputably the most valu-
able). Soon thereafter this constitutional provision was judged by the Mexican
government to apply retroactively: This signified the loss of title to hundreds of
millions of dollars worth of oil reserves owned by American petroleum compa-
nies. It is worth pausing to record that this unilateral action by the Mexican gov-
210 The Thirty Years' War (1914-1945)

ernment constituted a landmark in the history of the relations between the devel-
oped and the underdeveloped world; it was the first attempt by a country whose
economic system had fallen under the de facto control of foreign interests to as-
sert its prerogative to exercise exclusive legal authority over its own natural re-
sources.
This unprecedented gesture of defiance did not immediately produce the de-
sired result. The American government, under intense pressure from petroleum
interests with extensive Mexican holdings, wielded every diplomatic weapon
short of economic retaliation-including the policy of nonrecognition-to in-
duce Mexico City to· reverse its course. A compromise of sorts was reached in
1923, whereby the United States acknowledged Mexico's right to exercise au-
thority over its subsoil resources in return for Mexican acknowledgment of the
legal sanctity of contracts held by American oil companies prior to the adoption
of the 1917 constitution. A similar compromise was struck in 1927, following a
temporary revival of the dispute over retroactivity, which remained in force until
1938. In the latter year the Mexican government settled the matter for good by
expropriating the property of British, Dutch, and American oil companies after
they refused to abide by the ruling of the Mexican judicial system in a labor dis-
pute.
Efforts by the expropriated American oil companies to organize an interna-
tional boycott of Mexican crude in retaliation failed because of the eagerness of
Germany, Italy, and Japan to purchase this critical source of energy as their rear-
mament programs got into high gear. American concern about the potential
threat to national security posed by the development of intimate economic ties
between Mexico and the Axis powers eventually took precedence over the
parochial interests of the oil firms. A mutually acceptable agreement was signed
a few weeks before Pearl Harbor whereby Mexico retained control of its oil re-
serves in return for a promise of financial compensation to the dispossessed
American companies. Having extracted this major concession from the United
States, Mexico was to become a loyal supporter and supplier of the American
war effort, in sharp contrast to its defiant posture of absolute neutrality during the
First W odd War.
Mexico's persistent (and eventually successful) campaign to reassert control
of its national economic resources became an inspiration for burgeoning nation-
alist movements in other Latin American countries, which brought increasing
pressure to bear on their governments to challenge the United States' refusal to
acknowledge the prerogative of a sovereign nation to exercise political authority
over people and property within its borders. We have seen how Latin American
attempts to gain American recognition of this right at the Pan-American confer-
ences of the 1920s met with failure. At the sixth conference of the American
states in 1928, United States delegate Charles Evans Hughes's reference to a
"breakdown of government" as sufficient justification for American intervention
seemed so broad and imprecise as to justify virtually unlimited interference in
the domestic affairs of the sovereign states of Latin America.
Yet, by the early 1930s, the presence of American military forces in the
 The Confirmation of United States Supremacy in Latin America 211

Caribbean region had become a source of acute embarrassment to the United

States as it endeavored to mobilize world opinion against Japan's expansionist
policies in the Far East. The Japanese incursion in Manchuria had been officially
justified by Tokyo as a necessary step to protect Japanese citizens and property
endangered by Chinese lawlessness; such language was uncomfortably reminis-
cent of the rationale invoked by the United States in defense of its military inter-
ventions south of the Rio Grande. Sensitive to the mounting allegations of
hypocrisy that emanated from the world community, the new administration of
Franklin Roosevelt that took office in 1933 inaugurated a dramatic modification
of the Latin American policy of the United States. The groundwork for this
change had been laid by the Hoover administration in 1930, when the State De-
partment published a lengthy memorandum composed by Under Secretary of
State J. Reuben Clark that repudiated the Roosevelt Corollary to the Monroe
Doctrine as a justification for the American right of intervention in Latin Amer-
ica. Though the Clark Memorandum was replete with qualifications and did not
receive much serious attention from American officials, it heralded a new atti-
tude toward inter-American relations that had begun to crystallize in Washing-
ton. Before leaving office, the Hoover administration undertook a systemic
reevaluation of the interventionist policy that had been pursued by every Ameri-
can president since Theodore Roosevelt.
In his inaugural address on March 4, 1933, Franklin Roosevelt declared that in
the field of foreign policy he "would dedicate this Nation to the policy of the
good neighbor who resolutely respects himself, and, because he does so, respects
the rights of others." There was no reason for his listeners to believe that this in-
nocuous phrase applied specifically to Latin America since no geographical re-
gion was mentioned in the speech. But a month later, speaking at the office of the
Pan-American Union, the new American president mentioned the need for hemi-
spheric cooperation in such conciliatory tones that commentators were soon hail-
ing the new "Good Neighbor Policy" of the United States toward Latin America.
Later in 1933, at the seventh conference of the American states in Montevideo,
Uruguay, this presidential rhetoric was translated into government policy. The
new secretary of state, Cordell Hull, abruptly reversed a long-standing American
policy by supporting a resolution prohibiting any nation in the western hemi-
sphere from intervening "in the internal or external affairs of another." By this
historic act the Calvo Doctrine, resisted so long by the United States, was incor-
porated in an official document endorsed by Washington. Though Hull insisted
on reserving the rights of the United States conferred by international law, the
American reversal at Montevideo marked a turning point in inter-American rela-
tions. Soon thereafter, the United States proceeded to relinquish, one by one, its
treaty rights to intervene in the de facto protectorates in the Caribbean basin.
During the first two years of the Roosevelt administration, American military
forces were withdrawn from Nicaragua and Haiti. In 1934 the United States Sen-
ate abrogated the notorious Platt Amendment of 1901, which had restricted
Cuba's treaty-making power and established the prerogative of American mili-
tary intervention to protect Cuba's independence and preserve domestic order. In
212 The Thirty Years' War (1914-1945)

July 1935 an agreement was concluded with the government of Haiti enabling it
to regain control of its finances by purchasing the Haitian national bank from the
National City Bank of New York. A year later a treaty with Panama terminated
the American right of military intervention outside the Canal Zone (though Sen-
ate ratification' was delayed until 1939, when an exchange of notes authorized
"emergency" military action by the United States to protect the canal).
The Roosevelt administration had thus resumed and accelerated the radical
transformation of the traditional policy of the United States toward Latin Amer-
ica initiated by President Hoover. By 1934 no American troops were stationed in
the region (except at the military and naval bases retained in Guantanamo Bay,
Cuba, and the Panama Canal Zone). Washington had specifically relinquished its
claim to the right of intervention to protect persons and property. Financial su-
pervision of Haiti, the Dominican Republic, and Nicaragua was phased out be-
tween 1936 and 1940. Mexico had successfully nationalized American-owned
petroleum properties without suffering the effects of American retaliation. It
truly seemed that the previous relationship of dominance and subservience be-
tween North and Latin America had been replaced by a relationship of equality
and mutual respect.
But the modification of American policy toward Latin America was more ap-
parent than real. While the Good Neighbor Policy terminated the practices of
military intervention and financial supervision, it replaced this discredited diplo-
macy of the gunboat and the dollar with a more indirect form of American con-
trol. In essence this consisted of the utilization of noncoercive means of enlisting
the assistance of indigenous political, military, and business elites in preserving
the United States' grip on the economic resources of the region. The judicious
use of American Export-Import Bank loans to tie the economic systems of the
individual Latin American republics even more closely to the American econ-
omy, the training and equipping of national constabularies to suppress social in-
surrection against pro-American regimes, and financial assistance to autocratic
governments to balance budgets and stabilize currencies-these were the alterna-
tive means for perpetuating American hegemony once the employment of direct
military force and financial control were abandoned.
The experiences of Nicaragua and the Dominican Republic furnish typical il-
lustrations of this evolution from direct to indirect control. The United States had
retained military forces in Nicaragua from 1912 to 1933 (except for a brief inter-
lude in 1925-26). During the last years of the American occupation, American
officials trained and equipped a national guard to assume the function of preserv-
ing internal security upon the withdrawal of American troops. After the Ameri-
can evacuation in 1934, Cesar Augusto Sandino, leader of the rebel forces that
had been harassing American marines throughout the twenties, signed a truce
with the Nicaraguan government only to be murdered by members of the na-
tional guard. Two years later the head of the American-trained security forces,
General Anastasio Somoza, seized power and instituted a dictatorial regime that
brutally repressed revolutionary elements in the country and maintained close re-
lations with the United States. The Somoza family remained in power either di-
 The Confirmation of United States Supremacy in Latin America 213

rectly or through puppets until being overthrown by the ideological heirs of

Sandino in 1979.
A similar transfer of power from American military occupation authorities to
an American-trained indigenous elite occurred in the Dominican Republic. After
ruling that nation under martial law since 1916, the United States withdrew its
military forces in 1924 after establishing a national constabulary to replace the
departing marines. In 1930 General Raphael Trujillo, who had moved up the
ranks of the national guard to become its chief in 1928, assumed the presidency
after a fraudulent electoral campaign. With the financial assistance of American
sugar interests, the National City Bank, and the government in Washington, Tru-
jillo ruled his country with an iron hand for the next thirty-one years until his as-
sassination in 1961. Within a few days after Pearl Harbor all four of the former
American protectorates-Nicaragua, Cuba, Haiti, and the Dominican Repub-
lic-displayed their continuing loyalty to the United States by declaring war on
Japan, Italy, and Germany.
In conclusion, it may be said that Franklin Roosevelt abandoned the "big
stick" first wielded by his cousin in the years before World War I for a number of
economic and strategic reasons. First of all, the economic recovery of the United
States in the depths of the Depression required guaranteed and continuous access
to the raw materials and markets of Latin America. This became all the more im-
portant as the revival of economic nationalism and the increased likelihood of
war in Europe and Asia threatened to disrupt American trade with those distant
continents. Second, the rearmament of Germany, not to speak of the increasing
belligerence of Italy and Japan, revived the long-dormant issue of foreign inter-
ference in the Americas. In order to counter this new menace posed by the infor-
mal "unholy alliance" of Nazi Germany, Fascist Italy, and Imperial Japan, the
United States sought to strengthen the peacekeeping machinery of the Pax Amer-
icana. But the traditional methods of military coercion and diplomatic intimida-
tion had been rendered increasingly difficult to countenance in the face of sus-
tained resistance from the Latin American republics and the accusations of
hypocrisy from the world community. By substituting indirect for direct methods
of hemispheric domination, the Roosevelt administration cast off the embarrass-
ing albatross of old fashioned imperialism. It was thereafter free to act as the de-
fender of peace and national sovereignty in the world at large as well as to mobi-
lize its clients in Latin America in a hemispheric security system based on the
voluntary cooperation of juridically equal nations.
After the announcement of German rearmament and the Italian invasion of
Ethiopia in 1935, the United States government launched its first initiative aimed
at establishing a system of hemispheric solidarity amid the collapse of collective
security across the Atlantic. On January 30, 1936, President Roosevelt proposed
the convocation of a special inter-American conference to devise procedures for
protecting the western hemisphere from the new threat to world peace brewing in
Europe. At this conference, held in Buenos Aires in December 1936, the Ameri-
can and Argentinian delegations clashed head on over the question of how such
hemispheric security could best be assured. Foreign Minister Carlos Saavedra
212 The Thirty Years' War (1914-1945)

July 1935 an agreement was concluded with the government of Haiti enabling it
to regain control of its finances by purchasing the Haitian national bank from the
National City Bank of New York. A year later a treaty with Panama terminated
the American right of military intervention outside the Canal Zone (though Sen-
ate ratification' was delayed until 1939, when an exchange of notes authorized
"emergency" military action by the United States to protect the canal).
The Roosevelt administration had thus resumed and accelerated the radical
transformation of the traditional policy of the United States toward Latin Amer-
ica initiated by President Hoover. By 1934 no American troops were stationed in
the region (except at the military and naval bases retained in Guantanamo Bay,
Cuba, and the Panama Canal Zone). Washington had specifically relinquished its
claim to the right of intervention to protect persons and property. Financial su-
pervision of Haiti, the Dominican Republic, and Nicaragua was phased out be-
tween 1936 and 1940. Mexico had successfully nationalized American-owned
petroleum properties without suffering the effects of American retaliation. It
truly seemed that the previous relationship of dominance and subservience be-
tween North and Latin America had been replaced by a relationship of equality
and mutual respect.
But the modification of American policy toward Latin America was more ap-
parent than real. While the Good Neighbor Policy terminated the practices of
military intervention and financial supervision, it replaced this discredited diplo-
macy of the gunboat and the dollar with a more indirect form of American con-
trol. In essence this consisted of the utilization of noncoercive means of enlisting
the assistance of indigenous political, military, and business elites in preserving
the United States' grip on the economic resources of the region. The judicious
use of American Export-Import Bank loans to tie the economic systems of the
individual Latin American republics even more closely to the American econ-
omy, the training and equipping of national constabularies to suppress social in-
surrection against pro-American regimes, and financial assistance to autocratic
governments to balance budgets and stabilize currencies-these were the alterna-
tive means for perpetuating American hegemony once the employment of direct
military force and financial control were abandoned.
The experiences of Nicaragua and the Dominican Republic furnish typical il-
lustrations of this evolution from direct to indirect control. The United States had
retained military forces in Nicaragua from 1912 to 1933 (except for a brief inter-
lude in 1925-26). During the last years of the American occupation, American
officials trained and equipped a national guard to assume the function of preserv-
ing internal security upon the withdrawal of American troops. After the Ameri-
can evacuation in 1934, Cesar Augusto Sandino, leader of the rebel forces that
had been harassing American marines throughout the twenties, signed a truce
with the Nicaraguan government only to be murdered by members of the na-
tional guard. Two years later the head of the American-trained security forces,
General Anastasio Somoza, seized power and instituted a dictatorial regime that
brutally repressed revolutionary elements in the country and maintained close re-
lations with the United States. The Somoza family remained in power either di-
 The Confirmation of United States Supremacy in Latin America 213

reedy or through puppets until being overthrown by the ideological heirs of

Sandino in 1979.
A similar transfer of power from American military occupation authorities to
an American-trained indigenous elite occurred in the Dominican Republic. After
ruling that nation under martial law since 1916, the United States withdrew its
military forces in 1924 after establishing a national constabulary to replace the
departing marines. In 1930 General Raphael Trujillo, who had moved up the
ranks of the national guard to become its chief in 1928, assumed the presidency
after a fraudulent electoral campaign. With the financial assistance of American
sugar interests, the National City Bank, and the government in Washington, Tru-
jillo ruled his country with an iron hand for the next thirty-one years until his as-
sassination in 1961. Within a few days after Pearl Harbor all four of the former
American protectorates-Nicaragua, Cuba, Haiti, and the Dominican Repub-
lic-displayed their continuing loyalty to the United States by declaring war on
Japan, Italy, and Germany.
In conclusion, it may be said that Franklin Roosevelt abandoned the "big
stick" first wielded by his cousin in the years before World War I for a number of
economic and strategic reasons. First of all, the economic recovery of the United
States in the depths of the Depression required guaranteed and continuous access
to the raw materials and markets of Latin America. This became all the more im-
portant as the revival of economic nationalism and the increased likelihood of
war in Europe and Asia threatened to disrupt American trade with those distant
continents. Second, the rearmament of Germany, not to speak of the increasing
belligerence of Italy and Japan, revived the long-dormant issue of foreign inter-
ference in the Americas. In order to counter this new menace posed by the infor-
mal "unholy alliance" of Nazi Germany, Fascist Italy, and Imperial Japan, the
United States sought to strengthen the peacekeeping machinery of the Pax Amer-
icana. But the traditional methods of military coercion and diplomatic intimida-
tion had been rendered increasingly difficult to countenance in the face of sus-
tained resistance from the Latin American republics and the accusations of
hypocrisy from the world community. By substituting indirect for direct methods
of hemispheric domination, the Roosevelt administration cast off the embarrass-
ing albatross of old fashioned imperialism. It was thereafter free to act as the de-
fender of peace and national sovereignty in the world at large as well as to mobi-
lize its clients in Latin America in a hemispheric security system based on the
voluntary cooperation of juridically equal nations.
After the announcement of German rearmament and the Italian invasion of
Ethiopia in 1935, the United States government launched its first initiative aimed
at establishing a system of hemispheric solidarity amid the collapse of collective
security across the Atlantic. On January 30, 1936, President Roosevelt proposed
the convocation of a special inter-American conference to devise procedures for
protecting the western hemisphere from the new threat to world peace brewing in
Europe. At this conference, held in Buenos Aires in December 1936, the Ameri-
can and Argentinian delegations clashed head on over the question of how such
hemispheric security could best be assured. Foreign Minister Carlos Saavedra
214 The Thirty Years' War (1914-1945)

Lamas of Argentina, the leading proponent of Latin American resistance to

United States domination, trotted out a proposal for cooperation with the League
of Nations to implement sanctions against aggressor states anywhere in the
world. Predictably, the Argentine plan struck at the very heart of the Pan-Ameri-
can ideology propounded by the United States. It linked the security of the west-
ern hemisphere to the international organization headquartered in Europe, domi-
nated by the European powers and repudiated by the United States. The
American plan, introduced by Secretary of State Cordell Hull, preserved the
principle of Pan-Americanism by seeking to organize the republics of the Ameri-
cas in a common defense of hemispheric security. It proposed the creation of an
inter-American consultative committee comprising the foreign ministers of the
twenty-one republics, which would be authorized to hold consultations during
international emergencies. In the event of war involving any of the member
states, the neutral nations of the Americas would be obliged to enforce an em-
bargo of credits and arms supplies on all belligerents.
Determined Argentine opposition to this United States effort to circumvent the
League of Nations by establishing an exclusively inter-American security system
resulted in the passage of a seemingly innocuous compromise: The principle of
mutual consultation in the event of a threat to the peace of the Americas was em-
bodied in the Treaty for the Maintenance, Preservation, and Reestablishment of
Peace, but no institution was designated to hold such consultations and the oblig-
ation to embargo credits and munitions to belligerents was dropped. The absence
of effective peacekeeping machinery notwithstanding, the mere affirmation of
the principle of inter-American consultation represented a significant victory for
Washington in its diplomatic confrontation with Buenos Aires. It established the
precedent for the policy of hemispheric neutrality and collective defense that was
later to be adopted by the American states at the outbreak of war in Europe. The
price that the United States had to pay for this unanimous declaration of hemi-
spheric solidarity was the Special Protocol Relative to Non-Intervention, which
overrode the Hull reservation to the Montevideo resolution by prohibiting any of
the signatories from intervening "directly or indirectly, and for whatever rea-
son," in the internal or external affairs of the others. It was unimaginable that the
United States, which was earnestly endeavoring to mobilize its Latin American
clients against the menace of aggression from abroad, could cling to the last ves-
tige of its own prerogative to violate their national sovereignty. The abrogation
of all of the treaty rights authorizing United States military intervention and fi-
nancial supervision in the Caribbean by the end of the 1930s fulfilled the solemn
promises of the Buenos Aires protocol.
In the two years after the Buenos Aires Conference of December 1936, the de-
teriorating political situation in Europe underlined the necessity of institutional-
izing the principle of hemispheric security that had been endorsed by the Ameri-
can republics. The failure of the League of Nations to restrain Italian aggression
in East Africa and the inability of Great Britain and France to halt German revi-
sionism in Central Europe raised the possibility of a new European war that
would inevitably affect the economic and strategic interests of the western hemi-
 The Confirmation of United States Supremacy in Latin America 215

sphere. Most ominous of all was the apparent increase of Axis-inspired subver-
sion in those Latin American states, such as Argentina, Brazil, and Uruguay,
with substantial numbers of first-generation immigrants from Germany and Italy.
Hitler's agents had seized control of the major organizations and publications of
the Latin Americans of German descent. In some cases German immigrants were
blackmailed into serving the Nazi cause under the threat of reprisals against their
relatives at home. The resulting upsurge of subversive activity in these countries
was accompanied by a propaganda broadside launched from Berlin in the form
of radio broadcasts, press subsidies, and cultural exchange programs that was
aimed at promoting Latin American support for German foreign policy. In the
meantime, the Nazi regime made a determined effort to improve Germany's eco-
nomic position in the region through the granting of foreign credits to and the
conclusion of barter agreements with a number of Latin American states.
In the aftermath of the Munich Conference, the Roosevelt administration
began to exert pressure on the Latin American republics to tighten the bonds of
hemispheric solidarity in the face of the threat of war in Europe and the increase
in German political and economic activity in the Americas. At the Eighth Con-
ference of the American States in Lima, Peru, in December 1938, Secretary of
State Hull obtained unanimous consent to a pledge of joint cooperation to defend
against "all foreign intervention or activity" that might threaten any of the
twenty-one American republics. To facilitate the process of joint consultation en-
dorsed at the Buenos Aires Conference, a consultative organ composed of the
foreign ministers of the signatory states was formed to handle emergencies. As
was customary, Argentina resisted this United States-inspired movement toward
closer hemispheric cooperation and held out for the maintenance of close rela-
tions with Europe; but the mounting anxiety in Latin America about the threat of
a European war enabled Secretary Hull to win the day while the Argentine dele-
gate remained incommunicado after having prematurely stalked out of the con-
ference.
The consultative machinery established by the Declaration of Lima was first
put into operation in response to the outbreak of the European war in September
1939. The first ad hoc meeting of the foreign ministers, held in Panama Septem-
ber 23-0ctober 3, 1939, produced a series ofrecommendations that were unmis-
takably detrimental to the Axis and favorable to the Anglo-French cause. These
included the proscription of domestic activities on behalf of any belligerent state
(a measure aimed at German and Italian nationals residing in Latin America) as
well as the revision of maritime legislation to enable neutral ports in the western
hemisphere to receive armed merchant ships (thereby affording an advantage to
Great Britain's large surface fleet) and to exclude belligerent submarines
(thereby discriminating against the principal naval weapon of Germany). Less
successful was the Panama conference's designation of a neutral zone around the
western hemisphere extending several hundred miles from shore as far north as
Canada. This presumptuous redefinition of the laws of naval warfare deterred
none of the European belligerents as they launched the Battle of the Atlantic in
the winter of 1939--40.
216 The Thirty Years' War (1914-1945)

In addition to passing these blatantly anti-Axis resolutions, the Panama con-

ference strengthened the existing machinery of hemispheric solidarity by creat-
ing an inter-American Financial and Advisory Committee to promote economic
cooperation among the American republics. Behind the euphemism of inter-
American cooperation lay a concerted (and ultimately successful) campaign
waged by the United States to reduce Latin American trade with the Axis powers
and to reserve for itself the markets and the strategic raw materials of the region.
This American effort to forge a hemispheric economic bloc was the culmination
of a long and bitter trade dispute that had threatened to undermine United States
commercial predominance in Latin America. During the second half of the
1920s, the traditionally protectionist Republican administrations in Washington
had resisted Latin American initiatives, led by Argentina, to eradicate artificial
trade barriers (such as the notorious sanitary prohibition that excluded most Ar-
gentine beef from the American market). The Hawley-Smoot Tariff of 1930
placed additional obstacles in the path of Latin American exports to the United
States. This upsurge of American protectionism ultimately forced many of the
states of Latin America (with Argentina typically leading the way) to turn to Eu-
rope for alternative trading partners. The Roca Convention of May 1, 1933, es-
tablished a privileged commercial relationship between Argentina and the
British Empire (which had recently been reorganized into a virtually closed eco-
nomic bloc by the imperial preference agreements signed in Ottawa in the sum-
mer of 1932). Great Britain agreed to purchase a prescribed annual quantity of
Argentine beef and grain in return for assurances that Argentina would spend the
proceeds from these sales on British manufactured products. This preferential
trade arrangement, which adversely affected both American agricultural exports
to Britain and American exports of manufactured goods to Argentina, was fol-
lowed by other bilateral commercial agreements between various Latin Ameri-
can states and the increasingly closed economic systems controlled by Britain,
France, and Germany.
It was in response to this threat to inter-American commercial relationships
that American Secretary of State Hull promoted his pet project for the reciprocal
lowering of trade barriers to revive foreign commerce in the midst of the Depres-
sion. Though originally proposed to all of the major trading partners of the
United States, the lack of enthusiasm on the part of the European powers (which
were busy forming autarkic trade zones out of the extensive territory under their
political control) caused Hull to concentrate on reducing trade barriers between
the United States and the twenty other American republics. The American secre-
tary of state tirelessly pressed for the adoption of reciprocity at the conferences
of the American states, first in Montevideo in 1933, and with even more determi-
nation after the passage by the United States Congress of the Reciprocal Trade
Agreements Act in June 1934, which authorized the president to negotiate recip-
rocal reductions in tariff duties with individual countries. During the last half of
the 1930s a number of such bilateral agreements were signed with the nations of
Latin America. This lowering of barriers to trade, together with the extension
of commercial credits by the Export-Import Bank, forged a tight-knit commercial
 The Confirmation of United States Supremacy in Latin America 217

relationship between the United States and its Latin American clients that inten-
sified the economic solidarity of the western hemisphere.
The sudden collapse of the Low Countries and France in May-June 1940 pre-
sented the first direct challenge to the security and neutrality of the Americas.
The uncertain fate of the Dutch and Prep.ch possessions in the Caribbean and on
the northeast coast of South America raised the unnerving possibility of Ger-
many's extorting rights to bases in this region from the helpless Dutch and
French authorities. To avert such an eventuality, the U.S. Congress passed a joint
resolution on June 18, 1940, reaffirming America's traditional opposition to the
transfer of territory in the western hemisphere from one non-American power to
another. The hastily convened second conference of foreign ministers of the
American states, held in Havana July 21-30, 1940, endorsed the "no transfer"
principle and authorized the seizure and joint administration by the American re-
publics of any European possession judged to be in danger of falling into hostile
hands. The most momentous act of the Havana conference was the Declaration
of Reciprocal Assistance and Cooperation for the Defense of the Americas,
which defined an act of aggression by a non-American state against any one of
the twenty-one republics as an act of aggression against them all. This declara-
tion in effect represented the formal multilateralization of the Monroe Doctrine.
The principle of regional collective security, based on the mutual consent of the
twenty-one American republics, thereby replaced the unilateral prerogative of
the United Sti;ttesto prevent foreign intervention in the hemisphere.
The Declaration of Reciprocal Assistance enabled Washington to proceed
with its plans to organize the defense of the Americas in the face of the Axis
threat. The way in which hemispheric defense was to be managed became a sub-
ject of intense debate within the Roosevelt administration in the year before
Pearl Harbor. The State Department, led by Undersecretary Sumner Welles, ad-
vocated the extension of the multilateral principle underlying the Good Neighbor
Policy to the realm of regional military cooperation. Such an approach would
furnish a solid foundation for the recent trend toward hemispheric unity in politi-
cal and economic matters by giving all twenty Latin republics an equal stake in
the cause of regional defense. The War and Navy departments preferred to orga-
nize the defense of the Americas on the basis of the United States' own special
security requirements as defined by its service chiefs. This implied a series of
privileged bilateral military relationships with a handful of countries (Mexico,
Panama, Ecuador, and Brazil) strategically situated along the southern extension
of the United States' defense perimeter (which was thought to run from the Gala-
pagos Islands eastward to the Brazilian bulge). This approach would avoid
overextending American resources to the peripheral southern portion of Latin
America, which in any case contained two countries (Argentina and Chile) that
maintained relatively cordial relations with the Axis powers and therefore were
unlikely to be reliable partners in a hemisphere-wide security system led by the
United States. It would permit military planners in Washington to concentrate on
the two most pressing objectives of American strategy: the defense of the Pacific
approaches to the Panama Canal against Japan and the protection of Brazil's
218 The Thirty Years' War (1914-1945)

northeastern bulge from the potential naval threat from bases that Germany
might obtain in French West Africa.
Even before the entry of the United States in the Second World War, it be-
came apparent that American military authorities were prevailing in their bu-
reaucratic struggle with the advocates of a genuinely multilateral or collective
security system for the defense of the hemisphere. The Roosevelt administration
concluded bilateral defense agreements with the strategically situated republics
within the United States' defense perimeter. Bilateral commissions modeled on
the United States-Canadian Joint Board of Defense were established with Mex-
ico and Brazil to coordinate those two countries' contribution to hemispheric de-
fense. Negotiations were begun with Brazil and several states in the Caribbean
region to secure air and naval base facilities for the United States to supplement
those obtained in the British possessions in the new world by virtue of the de-
stroyers-for-bases exchange of September 1940. American military and naval
missions were dispatched southward to assist the individual states in their de-
fense preparations while Latin American army and navy officers were invited to
either the United States or the Panama Canal Zone for training. Lend-lease
agreements for the delivery of military supplies were eventually signed with
every Latin American nation except Argentina and Panama (which received
American aid under a separate arrangement for the protection of the canal zone).
Washington's success in assuming the role of the sponsor of strategic and eco-
nomic coordination in the western hemisphere was facilitated by the common
sentiment of danger from Axis-controlled Europe that gripped the ruling elites of
Latin America after the fall of the Low Countries and France. That sense of a
foreign menace, together with the abandonment of overt coercion within the
hemisphere by the United States, secured the cooperation of the Latin American
republics (always excepting Argentina) in the cause of hemispheric solidarity
that was championed and dominated by the senior partner to the north.
This is not to suggest that this wartime expansion of America's hegemonic po-
sition in its hemisphere occurred without any resistance on the part of the weaker
nations to the south. Even two such pro-American states as Brazil and Panama,
for example, dragged out for many years their negotiations with the United
States for base rights on their territory. But the behavior of Latin America as a
whole after the United States' entry in the Second World War exhibited a coop-
erative spirit unprecedented in the history of inter-American relations. In contrast
to the First World War, all of the twenty republics of Latin America eventually
followed the United States into war, although Chile and Argentina held out until
the last minute. At the third conference of foreign ministers in Rio de Janeiro,
January 15-28, 1942, all of the American republics except Argentina and Chile
severed diplomatic relations with the Axis powers, undertook to cooperate in the
suppression of German espionage in the Americas, and adopted an extensive
program of inter-American economic coordination and the pooling of strategic
materials. Strategically located states such as Ecuador, Brazil, and the Caribbean
republics eventually furnished base facilities to American military and naval
 The Confirmation of United States Supremacy in Latin America 219

forces, which accommodated over 100,000 United States troops by the end of the
war.
These developments collectively reflected the unequal distribution of inter-
American military and economic power that had been evident for so long.
Notwithstanding the ubiquitous references to multilateral cooperation and collec-
tive security in the rhetoric of American officials concerned with Latin America
during the war, the Roosevelt administration engineered the military buildup in
the western hemisphere according to the specific strategic requirements of the
United States. The most notable exception to the general trend toward bilateral-
ism in the United States' security relations with its Latin American clients was
the establishment in 1942 of the Inter-American Defense Board. But that sole
surviving symbol of the State Department's original project for multilateral
hemispheric defense was reduced to an innocuous advisory role as the United
States military establishment pursued its preferred policy of bilateral links with
the military elites of the individual states to the south.
But Latin America's most important contribution to the war effort was eco-
nomic rather than military. Under the procurement programs drawn up by the
War Department in Washington, the Latin nations were induced to step up pro-
duction of raw materials essential to the struggle against the Axis and to export
them northward at artificially low prices in exchange for the provision of Export-
Import Bank loans. This emergency program of wartime production led to the al-
most total reorientation of the economies of the Latin American states toward the
United States, placing them in a position of great dependence on the American
market for the specific strategic commodities involved. Once the demand for
these war-related exports abruptly declined after 1945, most of the supplier
countries were condemned to endure a painful readjustment to peacetime condi-
tions. In the meantime, the reciprocal trade agreements (which reduced Latin
American tariff barriers to United States exports) and Export-Import Bank loans
strengthened the bilateral commercial ties between each of the individual Latin
American countries and their powerful and prosperous neighbor to the north at
the expense of the region's former trading partners in wartorn Europe and Asia.
Thus the Second World War and the intense inter-American cooperation it gen-
erated reinforced the long-term trend toward United States dominance of eco-
nomic relations in its hemisphere and launched the process of bilateral military
cooperation between the armed services of the individual Latin states and their
sources of military aid and training in Washington.