Good Neighbor Policy
Author’s note: This is part 1 of 3
The United States will go to war for oil rang the headlines across México and much of the world throughout the late 1970’s and early 1980’s. On February 14, 1979, then-president Jimmy Carter, a Democrat, was set to meet with Mexican president José López Portillo. Both heads of state were meeting in Mexico City for three days, February 14 through the 16th. The United States was emerging from the chaos of oil shortages across the country because of the Oil Embargo of 1973 that lasted well into 1974. México, on the other hand, was in the midst of modernizing its economy while recovering from a devastating Peso devaluation.
Franklin Roosevelt made it the policy of the United States to not intervene in Latin America. It became known as the Good Neighbor policy. However, the term was previously used by Woodrow Wilson, right before he invaded México. The Good Neighbor policy sounded pleasant and reasonable to the ears of U.S. citizens, but for Mexicans, it carried with it the broken promise of Wilson to stay out of Mexican affairs only to invade it shortly after.
The U.S. government’s policy of non-intervention in Latin America ended when the United States foreign policy shifted towards containing the expansion of Communism that resulted in the Cold War.
Yankee imperialism denotes the notion that the United States’ policy is to intervene in other country’s affairs for its own security and prosperity. The actual term was American imperialism. The term defined the notion that the United States affects and controls the affairs of other countries through overwhelming cultural, economic and military intervention. The American Empire doctrine, which is the expansion of the United States, was cemented in México when James K. Polk invaded México. The invasion resulted in the loss of almost half of México’s national territory. The belief that the United States can intervene in Mexican affairs on a whim was further cemented by the occupation of the Port of Veracruz, ordered by Woodrow Wilson in 1914.
Over time, Yankee imperialism evolved into imposing the U.S. value system upon México through overwhelming economic pressure.
During Jimmy Carter’s term, the Mexican trade portfolio with the United States consisted of nearly 70% of México’s total exports and almost 60% of its imports. Today, México exports about 80% of its products to the United States and imports about 50% of its imports from the U.S. The trade balance hasn’t significantly changed since NAFTA was enacted. What has changed is the volume of trade.
The U.S. economy engulfed México soon after México lost almost half its territory to the U.S. Yankee imperialism, in Mexican political and elite circles, now became the overwhelming reliance on the U.S. Mexico’s foreign investment portfolio increased to over $3 billion by the 80’s, up from $1.2 billion in 1970. U.S. private banks carried $11.5 billion in Mexican debt by 1976, an increase from $2.5 billion from the previous year. México’s political agenda, because of the new oil reserves (in the 1970’s it was thought México’s oil reserves were only second to Saudi Arabia’s), was to attempt to modernize by borrowing to build the infrastructures needed to leverage the oil for national prosperity.
As the Mexican export economy grew, it wanted freer access, i.e. lower tariffs, for its goods in the United States. However, U.S. industrialists continually resisted the liberalized policies of opening the U.S. markets to Mexican goods by lowering tariffs. That is the Mexican mindset under which the Mexican government viewed the United States when the idea of NAFTA was first floated.
Although Jimmy Carter tried to reassure México that it could count on the United States was a friend, generally, México continued to fear the goliath to the north.
The Arab nations, who were members of OPEC, imposed an oil embargo against the United States in retaliation for the United States resupplying the Israeli military during the Arab-Israeli War. The oil embargo exposed the U.S. dependence on Arab oil. It was a vulnerability that the U.S. could ill-afford.
In response, Richard Nixon launched an energy policy, Project Independence, dictating that the United States would boost internal oil production. The U.S. government also created the Strategic Oil Reserve to thwart the threat of a lack of oil resources for military operations.
During this time México, which had been steadily expanding its oil exports at six percent annually, suddenly announced the discovery of new reserves in 1974.
Although Nixon attempted to negotiate greater access to the Mexican oil, México continued to keep its distance from the goliath to the north. México continued to fear that the United States would engulf it.
In addition to the politics of oil and the unrelenting support for Israel, the United States was geopolitically bolstering its alliances to counter Soviet influence in the Arab world as the Cold War intensified.
Against this political background, the investment bank Blyth, Eastman, Dillon & Co. published a report arguing for a North American Common Market so that the United States could access the Mexican oil reserves. The report proposed establishing a “security umbrella” over México. However, the report went further than that.
Besides placing México under a “security umbrella” and giving the United States unfettered access to Mexican oil, the investment bank argued for eliminating tariff protection over Mexican products, supply the US with “cheap” Mexican labor and remove México sovereign control over its own currency, the Mexican Peso.
The report argued that Washington should go to any means to protect itself against its oil dependence on the Middle East, even it meant a military invasion of México.
If the United States had control of México’s oil reserves it would have a strong “security posture during a conventional war.”
The report, intended to influence the U.S. political agenda, was leaked to the public shortly before Jimmy Carter was to meet with his counterpart in México.
The U.S. political agenda is driven by private think-tanks that create reports on various topics. They are extraofficial policy statements meant to persuade official U.S. policy. Today, it is the lobbyists and the Breitbart’s, funded by wealthy benefactors, that influence U.S. policy. For México, the report brought back memories of the last time the goliath to the north felt it needed to control México for its prosperity at the cost of Mexican sovereignty. It harkened back to the days when James K. Polk saw Mexican territory as the right of the United States under the notion of Manifest Destiny. Although mischaracterized commonly as the Mexican-America War in the United States, the fact is that the United States invaded México to take its land to expand the U.S. territory.
Now, under the common market theme, rather than land, México was now a resource for the United States to curtail the activities of its arch enemy, the Soviet Union, better known today as Russia. Oil, was the new land the U.S. goliath wanted.
As a matter of fact, then-United States Defense Secretary Harold Brown and Energy Secretary James Schlesinger issued a statement on February 25, 1979 declaring that the United States was prepared to intervene anywhere in the world militarily to secure its oil supplies.
On the agenda, during Jimmy Carter’s visit to México, was access to Mexican oil.
The investment bank report argued that a “common market” would “integrate the vast energy resources” of North America, mainly Mexican oil. If “nationalistic differences” could be cured, a “very large crude oil pipeline to the nearest crude trunk lines in Texas could be built to carry several million barrels daily.”
Jimmy Carter offered México access for Mexican workers to work in the United States in return for México dropping tariffs on its industrial sector. Carter also demanded that México relinquish sovereignty over the Peso by linking it to a common U.S.-Canada-México currency.
As today, currency manipulation is seen by U.S. industrialists as an impediment for access to foreign markets for their U.S. goods. During the presidential campaign, Donald Trump argued that China was manipulating its currency unfairly to the detriment of the United States. Instead of labelling China a “currency manipulator” as he promised to during the election, Trump instead declined to say that China was manipulating its currency after meeting with the Chinese premiere.
In tomorrow’s edition, we will delve deeper into the Common Market theme.