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Albert Hirschman Centre on Democracy

Business with the Devil? Assessing the Financial Dimension of Authoritarian Regimes in Latin America, 1973-85.

Project lead: Carlo Edoardo Altamura

Timeline: 2019-23

Keywords:  Democracy; Latin America; International finance; Human Rights

Funding Organisation: Swiss National Science Foundation, Ambizione

From the early 1970s, Western commercial banks came to play a pivotal role in the financing of authoritarian regimes around the world. Especially in Latin America, commercial banks replaced official lenders such as the World Bank or the Inter-American Development Bank, which dominated in the 1950s and 1960s.The reason for this increasingly strong involvement is threefold. First, after the oil crisis of 1973 Western commercial banks had huge amounts of money to invest (the so-called ‘petrodollars’) and were increasingly looking for new markets abroad to compensate for the economic downturn in Europe and the United States after the oil crisis of 1973. Second, the new authoritarian regimes that emerged in Latin America committed to costly development programmes to legitimate their rule. Third, during the Cold War authoritarian regimes were seen as worthy clients, rejecting Bolshevism and welcoming foreign capital while resisting foreign direct investments.

Despite the vast literature on the debt flows to the Global South in the 1970s, the strategic role of non-governmental financial actors in the legitimization and consolidation of authoritarian regimes remains a critically understudied topic in international contemporary history. The omission of the financial dimension in current literature is difficult to justify because, as scholars have argued, ‘effective repression and the purchasing of loyalties require means.’ As new archives are being opened to the public for research, this project seeks to study for the first time a central but neglected aspect in international economic and political history: that is the interplay between International Financial Institutions, Western commercial banks, especially European, and authoritarian regimes during the 1970s in a representative set of Latin American countries (Argentina, Brazil, Chile and Mexico,) i.e. four of the ten largest borrowers in the world by 1982.

The project will focus on bureaucratic-military-authoritarian regimes (defined as excluding and non-democratic political systems where military and civilian technocrats play a central role in policy setting in close association with foreign capital).iii By relying on a wide range of primary and secondary sources, some of which hitherto unexplored (e.g. selected archives of large French and British Banks or Banco de Mexico) the project will provide new data and a detailed description of how business relations between authoritarian governments, large commercial banks and Western governments were forged in the wake of the oil crisis and the economic, political and societal consequences of these financial flows on recipient countries.

This innovative project will break new grounds in our understanding of authoritarian regimes in the Global South addressing three main research objectives: 1) the assessment of the involvement of international finance in supporting authoritarian regimes 2) the economic and political impact of foreign debt 3) the societal repercussions and possible links with human right violations. The research will prove especially relevant to political scientists, economic, international and political historians working on the Cold War in a global context, scholars in area studies specializing in Latin America and to governmental and non- governmental organizations involved in human rights protection in Switzerland and abroad.