Proceedings of the 1980 Conference of the Canadian Association of Latin American and Caribbean Studies
Edited by J. Nef, Vice President CALACS

Diplomacy: The Roots of Dependence

Patricia O. Frankman
Concordia University
Myron J. Frankman
McGill University

In the current issue of the Latin American Research Review the British historian D.C.M. Platt has raised objections to the interpretation of nineteenth-century Latin American history presented by adherents of the dependency school. [1] With regard to the years up to at least 1850, Platt argues that Latin America was isolated and removed "from the world economy - 'independent' and self-sufficient against its will". [2] As far as external trade is concerned, Platt has the following to say:

Latin America could sell nothing to Europe so that it could buy nothing in return. After that first, furious activity that accompanied the reopening of blockaded markets, Spanish America retired over the edge of the periphery. It remained outside world markets to any significant degree, for the first half century of political independence. [3]

Not only was trade insignificant according to Platt, but so also were financial flows, as London markets were closed to the Spanish American governments, by virtue of their loan defaults, from the mid-1820's to the end of the 1850's. [4] Even, in his view, if these markets had been open to the Spanish American countries, they would have been unlikely to have made recourse to them:

Governments were always short of 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 satisfied at home . . . such loans, in any case, were too small and ill secured to be quoted on the (London) Stock Exchange. [5]

For Platt,

The conclusion is obvious - Spanish America, during the first half century of political independence, stood outside the currents of world trade and finance. [6]

This leads Platt to reject the dependentista view of the new Republics and to question what “finally brought Latin America into contact with the world economy?” [7]

Barbara and Stanley Stein in the same issue of the Latin American Research Review engage in an exchange with Platt over his interpretation of the data on the value and relative importance of trade between Latin America and the United Kingdom. [8] On the financial side, one cannot dispute the absence of new lending, but one must not neglect the simple fact that loans received must eventually be repaid, about which we shall speak briefly later. It is our contention, however, that a search for the roots of modern dependence in Latin America should not focus either exclusively or obsessively on the magnitude of exports and imports or on the size and continuity of international financial flows. That search should be able to provide an answer to the following paraphrase of Platt's query: Under what conditions was Latin America brought into contact with, or incorporated into, the world economy? To answer that question requires a return to the no-longer fashionable study of diplomatic history. We shall try to demonstrate, in the limited space available to us, that the initial treaties signed between the United Kingdom and the various Latin American countries, and we will speak here primarily of Mexico, Costa Rica and Guatemala, established the roots, or might one say the ruts, of dependence. It could be said that the treaties, by both proscribing and prescribing, led to the establishment of dominant channels or least-resistance paths of commercial intercourse from which flows tended over the decades not to be deflected.

In recent years we have heard growing calls for a new international economic order and for a new international division of labor. One of the foremost proponents of such a reordering, Raul Prebisch, writing in the early 1960's, introduced the concept of "implicit reciprocity" [9] to be applied to tariff negotiations: de facto reciprocity in outcome was to be achieved through de jure abandonment of equivalent concessions. By reducing tariffs on products of interest to the less developed countries (LDC's), the industrial countries would gain, insofar as the increased LDC revenues from exports would perforce be spent in the industrial countries. By arguing that discriminatory means could achieve reciprocal, mutually-beneficial ends, Prebisch struck at the heart of a system of international agreements, which predates Bretton Woods and the General Agreement on Tariff and Trade (GATT) of the 1940's by more than a century; a system which the United Kingdom had a major hand in extending to the newly independent Latin American republics in the first one-half of the nineteenth century. We speak, of course, of the system of most-favored nation agreements which are generally embodied in bilateral treaties of Friendship, Commerce, and Navigation. The signatories of these documents promise to accord to each other's nationals treatment equal to the best given to the citizens of any other country. Some treaties occasionally go beyond this and concede national treatment for foreigners; in so doing a country would forego its ability to provide incentives aimed at stimulating local activities. The weak in the world of the strong [10] may enter voluntarily into such compacts through inexperience and/or in order to preserve their newly won political independence.

Relations between weak and strong are obviously not a new chapter in the affairs of states and legal commentators have spoken of the problem of de jure equality and de facto inequality since at least the time of Samuel Pufendorf in the seventeenth century. Pufendorf spoke explicitly of what he called "unequal treaties", which he deemed to exist "when the things promised by the two parties are unequal, or when either party is made inferior to the other." [11] For Pufendorf promises were unequal if they were not in proportion to the strength of the contracting parties. [12] More recent writers suggest the absence of “equality of capacity” as being sufficient for the existence of an unequal treaty regardless of whether an agreement was freely concluded. [13] Nineteenth century diplomats, including those from Latin America, were clearly aware, in the words of James Buchanan, then Secretary of State of the United States, in speaking of the US treaty of 1825 with the Federation of Central America, that some treaty provisions "though reciprocal in terms, would prove unequal in their operation." [14]

Let us examine some of the provisions of the early British treaties with our southern neighbors, so that we may be clear as to the nature of the reciprocal concessions made. Britain signed treaties of Commerce in the first one-half of the nineteenth century with the following states of the Western Hemisphere: the United Provinces of Rio de la Plata (1825), Colombia (1825), Mexico (1826), Brazil (1827), Venezuela (1834), the Peru-Bolivian Confederation (1837), Bolivia (1840), Texas (1840), Uruguay (1842), Costa Rica (1849), Guatemala (1849), Dominican Republic (1850) and Peru (1850). Although some specifies differ, the main provisions of these treaties were the same, as will be illustrated by an examination of the British treaties with Mexico, Guatemala and Costa Rica, the latter two having been signed almost one-quarter of a century after the Mexican treaty.

All three treaties - those between the United Kingdom and Mexico, Guatemala and Costa Rica - contain provisions for the reciprocal granting of most favored nation treatment for goods traded and for access of ships to ports and for the reciprocal granting of national treatment to the ships and cargo of the contracting parties, to merchants, citizens and subjects and to the disposal of personal estates. Taken together, these provisions had the effect of orienting the external economic relations of the Latin American signatories toward the United Kingdom, the dominant industrial economy of the time, and away from any opportunity to forge bonds with neighbors. These treaties also had the effect of retarding the development of local commerce and navigation.

Let us consider first the implications of the most favored nation treatment for goods by contrasting it with what is known as the Bello Clause ( claúsula Bello), which is named for Venezuelan born Andrés Bello, the author of several works on international law, who served for many years as an advisor to the Chilean Ministry of Foreign Relations. The fullest expression of the Bello Clause is contained in Article 2 of the Chile-United States Treaty of Peace, Amity, Commerce and Navigation of 1832 and in its additional Article I of 1834. The latter stipulated that Chile's existing or future trade and navigation with all the new American nations which were formerly under Spanish rule, regardless of the alterations they may experience in constitution, name and boundaries, were to be exempt from most-favored nation treatment.

Chile's struggle to implement Bolivar's vision of close links between the Spanish American republics was already doomed well before the Chile-U.S. Treaty of 1832. How could Mexico establish preferential relations with Chile when in its treaty of 1826 with Great Britain it had already granted unconditional most-favored nation treatment to trade with the latter? With each successive treaty embodying most-favored nation provisions signed by Latin American nations with Great Britain, the United States, France and others, the opportunity for making concessions to one's neighbors was foreclosed, in favor of a uniform international system in which "perfect equality and the most exact reciprocity" [15] placed the weak at the advantage of the strong.

The effect of the various treaties of commerce was to close off certain options and favor others. We shall merely advance the hypothesis here, without attempting a rigorous demonstration, that most favored nation provisions were an important obstacle in the way of the reuniting of the Republic of Central America after its dissolution in 1839, Mario Rodríguez puts the matter differently:

When Central American liberals struggled to re-establish a republic . . . their efforts again floundered in the quagmire of Central American politics and the rivalry of Great Britain and the United States for control of the interoceanic passageway through Nicaragua . . . the centrifugal tendencies of Central American society had triumphed over the forces of modernization. [16]

We would suggest that the view of Rodríguez can be stood on its head: it was not the centrifugal tendencies which "triumphed over the forces of modernization," but rather the forces of modernization, as manifested in standardized treaties, which reinforced centrifugal tendencies. Costa Rica and Guatemala both agreed in 1849, as Mexico had in 1826, to grant most favored nation status to Great Britain and to make the similar grant to the United States in articles containing identical wording in 1851 and 1849, respectively. To underline the point being made: by these treaties Guatemala pledged itself, for example, to levy the same tariff on a particular good, whether it came from France, the United States, Great Britain or neighboring Honduras. The politics and diplomacy of foreign intervention have heretofore been a focal point of scholarly attention, we would suggest that the diplomacy of business-as-usual, while seemingly more mundane, should not be neglected. Three of the commercial treaties just referred to were signed in the relatively short period between the British occupation of San Juan de Nicaragua on the Mosquito Coast in 1848, an event which is said to have "strengthened the hand of unionist liberals" in Central America [17] and the Clayton-Bulwer Treaty of 1850.

As noted above, these same treaties called for grants of national treatment as well. Specifically Mexico, Costa Rica and Guatemala agreed on a reciprocal basis with Great Britain to levy no higher port charges on each other's ships than are payable by national ships. All agreed to impose the same duties on goods carried on the vessels of the signatory as are imposed on national ships and all agreed that British merchants, commanders of ships and other British subjects shall have full liberty to manage their own affairs. At the time of the signing of the U.K.-Mexico and U.K.-Guatemala treaties, the British Navigation Acts, which dated back to 1651 were still in force and required that the nationality of the vessels be precisely determined for purpose of taking advantage of the proffered national treatment. Mexican and Guatemalan vessels were to receive national treatment in British ports, while British vessels were to receive national treatment in Mexican and Guatemalan ports. To quality as a Guatemalan vessel, however, a ship must have been built in Guatemala, have been the bona fide wholly-owned property of one or more citizens of Guatemala and have had the master and three-quarters of the crew as citizens of Guatemala.

In both the cases of Mexico and Guatemala, the British acknowledged in additional articles that it would not be possible for Mexico and Guatemala, given the present state of their shipping “to receive the full advantage of the reciprocity established" in the treaties.” [18] As a supposed remedy, Mexico was to be allowed ten years during which vessels built anywhere could qualify as Mexican if ownership, master and crew conditions were met. Guatemala was to be given seven years in which to build its merchant fleet sufficiently to take "full advantage of the reciprocity established," Mexico was granted a further concession which was denied Guatemala: during those same ten years Mexico would be allowed to charge higher duties on goods carried on British bottoms than on goods carried on Mexican vessels. However, whatever concession the British gave with the right hand, they also took back with the left: exact de jure reciprocity of course required that goods carried in Mexican vessels arriving in British ports were to be subject to duties levied on ships of the most-favored nations, but not to the same duties levied on goods carried on British ships. It is probably superfluous to observe that the granting of a seven or ten year period to a new nation to put its infant shipping industry on a competitive basis with the merchant fleet of the world's dominant seafaring nation was at best an empty gesture. Those Latin American nations that granted national treatment to foreign vessels and foreign merchants forfeited their ability to give meaningful incentives to native shipping and commerce. In fact the treaties actually accorded foreign merchants a privileged position in that, unlike nationals, they were exempt from compulsory- military service. These provisions were of course reciprocal, but, even without supporting evidence, it is reasonable to presume that Costa Rican merchants in Britain were less prominent than British merchants in Costa Rica.

In this brief paper we cannot hope to do justice to the interplay of British diplomacy and the interests of British bondholders, but given D.C.M. Platt's dismissal of financial considerations as being irrelevant during the second quarter of the nineteenth century, we feel some comment is appropriate. Lord Palmerston described the intervention of the British Foreign Office on behalf of the bondholders as having been limited to instructing envoys to make "earnest and friendly, but not authoritative, representations" to foreign states. [19] A single instance may suffice to demonstrate this to be a considerable understatement. On November 14, 1840, one day following the signing in London of a Treaty of Commerce and Navigation between Britain and the Republic of Texas, [20] Palmerston and General James Hamilton of Texas signed a Convention by which Texas promised to take upon herself 1,000,000 of the capital of the pre- 1835 foreign debt of Mexico on the joint condition that Mexico accept Britain's offer of mediation within thirty days of learning of the Convention and that a Treaty of Peace be concluded within six months. [21]

D.C.M. Platt has argued that British treaties were "one-sided in effect, if not intention. But to later generations the position could be reversed". [22] Historical time is not reversible, however. Opportunities lost can never fully be gained. Nations balkanized can rarely be reconstituted.

Treaties embodying most favored nation and national treatment clauses can be viewed as having assisted in establishing the monopoly of a world system of de jure equality and de facto inequality in which the weak surrendered the tools which might otherwise have been at their disposal for nation-building. During the century that followed, conditions were not reversed, but rather exacerbated. It has only been in the last two decades or so that a modest beginning at a reversal through the creation of a system that would take explicit account of the limited capacity of the weak has occurred. It is only now, following a long history of lost opportunities, that serious consideration is being given to creating a world system embracing the principle of employing de jure inequality as a means to foster de facto equality.

[1] D.C.M. Platt, “Dependency in nineteenth-century Latin America: An Historian Objects,” Latin American Research Review (LARR), XV (no.1, 1980), 113-130.
[2] Ibid., p. 117.
[3] Ibid., pp. 115-16.
[4] Ibid., p. 119.
[5] Ibid., p. 118.
[6] Ibid., p. 119.
[7] Ibid.
[8] S.J. Stein and B.H- Stein, "D.C.M. Platt: The Anatomy of 'Autonomy'," LARR, XV (no. 1, 1980), 136-38 and D.C.M. Platt, LARR, XV (no. 1, 1980), 147-49.
[9] United Nations Economic Commission for Latin America, Towards a Dynamic Development Policy for Latin America (New York, 1963).
[10] The phrase is borrowed from the title of a recent book: R.L. Rothstein, The Weak in the World of the Strong: The Developing Countries in the International Systems (New York: Columbia University Press, 1977).
[11] Fariborz Nozari, Unequal Treaties in International Law (Stockholm, 1970), p. 108.
[12] Samuel Pufendorf, De jure naturae et gentium libri octo, vol.II. The Translation of the Edition of 1688 , trans. C. H. Oldfather and W.A. Oldfather (London, 1934), p.1331.
[13] Noxari, p.111 and E.D. Dickinson, The Equality of States in International Law (Cambridge, Mass., 1920), p.150.
[14] Buchanan to E. Hise, Washington, June 3, 1848 in W.R. Manning, ed., Diplomatic Correspondence of the United States: Inter- American Affairs , 1831-1860. III (Washington, 1933), 33-34.
[15] Samuel Lamed to Henry Clay, Santiago, November 1, 1827 in Manning, ed., Diplomatic Correspondence of the United States Concerning the Independence of the Latin-American Nations . II (New York, 1925), 1122.
[16] Mario Rodríguez, Central America (Englewood Cliffs, 1965), p.49.
[17] Ibid., p. 84.
[18] Lewis Hertslet, ed., A Complete Collection of the Treaties and Conventions and Reciprocal Regulations between Great Britain and Foreign Powers (London, 1840-1922), III, 254-56 and VIII, 528-29.
[19] "Circular addressed by Viscount Palmerston to Her Majesty's Representative in Foreign States, respecting the Debts due by Foreign States to British Subjects," Foreign Office, January 1848 in Platt, Finance, Trade and British Foreign Policy , 1815-1914 (Oxford, 1968), p.398.
[20] Hertslet, VI, 807-811.
[21] Ibid., VI, 111-13.
[22] Platt, Finance, Trade and Politics ..., p.315.