Eric Tousaint’s study of the odious debt doctrine
by Eric Toussaint
Part 14 - The USA’s motivations regarding the two repudiations (Cuba and Costa Rica)
The United States’ motivation in the two repudiations that have just been analysed (Cuba in 1898 and Costa Rica in the 1920s) is clear: to increase their influence and power in the region. Cuba was in a strategic location for Washington; the rich island was just a stone’s throw from the coast of the United States. With Puerto Rico, which the United States had also taken from Spain in 1898, Cuba was the last Spanish colony in the Americas.
As for Costa Rica, it is part of Central America, which the United States considers its own “back yard”. Until then, Britain had been the dominant financial power in the entire region. The United States was very pleased to oust a large British bank from the country and send a warning to everyone else: other repudiations could take place, since the British banks, like the French banks, had dirtied their hands in highly irregular affairs that kept Latin American countries in debt. And the US banks were chomping at the bit to take over that action themselves.
In 1912, Taft, then president of the United States, had said in a speech: “The day is not far distant when three Stars and Stripes at three equidistant points will mark our territory: one at the North Pole, another at the Panama Canal, and the third at the South Pole. The whole hemisphere will be ours in fact as, by virtue of our superiority of race, it already is ours morally.”
President Taft actively backed the extension of North American banks into Latin America in general and Central America in particular. In December 1912, he declared before Congress: “[…] the Monroe doctrine is more vital in the neighborhood of the Panama Canal and the zone of the Caribbean than anywhere else. There, too, the maintenance of that doctrine falls most heavily upon the United States. It is therefore essential that the countries within that sphere shall be removed from the jeopardy involved by heavy foreign debt and chaotic national finances and from the ever-present danger of international complications due to disorder at home. Hence the United States has been glad to encourage and support American bankers who were willing to lend a helping hand to the financial rehabilitation of such countries […]”
Thus Taft’s ruling in favour of Costa Rica was highly calculated. He refused to support Costa Rica’s argument concerning the despotic and unconstitutional nature of the Tinoco regime, whereas it would have been easy to put that argument forward, since Washington and London had both refused to recognize that regime. He chose other arguments.
He wanted to avoid establishing a precedent based on the democratic or non-democratic nature of a regime. He knew perfectly well that Washington and US corporations were supporting dictators, and would continue to support dictators in the future – not to mention actively contributing to putting them in power.
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