September 25, 2007

Well over a century ago, Cyrus McCormick helped change the face of U.S. agriculture with the invention of the reaper. In the ensuing decades, a technological revolution transformed U.S. agriculture, as threshing machines, steel plows, tractors, chemical fertilizers, and other agricultural "input" products were invented.

Today, these same products are transforming Latin America's agriculture. But in the age of monopoly capital, they are no longer produced by small enterprises owned by individuals like Cyrus McCormick, but by large transnational corporations. Tractors are produced by John Deere, fertilizers by Exxon, and agrichemicals by DuPont - to name only a few of the companies involved in the multibillion dollar industry of producing agribusiness inputs. These enterprises hold a dominant position in the input industry around the world through their control of technology, financial resources, manufacturing facilities and marketing. Thus, the modernization of agriculture in Latin America is inevitably linked to these foreign corporations.

In this article we will first examine the expansion of two key input industries in Latin America - chemical fertilizers and farm equipment. Then, we will discuss the adverse social consequences of the use of modem agribusiness inputs under capitalism in Latin America.

MONOPOLY INDUSTRIES Of all the areas of agribusiness, the mechanized farm implements industry is the most highly concentrated. Four U.S. companies - John Deere, International Harvester, Ford, and J. I. Case (a Tenneco subsidiary) - along with a Canadian firm, Massey Ferguson, dominate the international production of tractors and market most of the farm equipment sold in Latin America. With the exception of Ford, which began as an automotive company, these firms are some of the oldest agribusiness corporations, having consolidated their positions in the North American market in the first quarter of the twentieth century.(1)

The fertilizer industry is not as tightly controlled by U.S. companies, and international competition from Western European and Japanese firms is intense. However, in the United States a relatively small group of firms dominate the industry. W. R. Grace, Monsanto, International Minerals & Chemicals, Williams Companies, Beker Industries, Exxon, and Allied Chemical number among the largest producers. The fertilizer and farm implement companies made their first direct investments in Latin America much later than the food processing companies. Until the late 50's, they controlled the Latin American market almost totally through exports, with production taking place in their large, capital-intensive manufacturing facilities in the United States. Even today, approximately half of the region's fertilizers are imported, and many countries still rely totally on imports for their mechanized farm equipment.(2)


Besides creating a severe drain on Latin America's foreign exchange reserves, the reliance on imported farm inputs has subjected the region's agriculture to the economic cycles of the monopoly industries. The economic dislocations caused by the boom and bust cycle of the fertilizer industry over the past fifteen years illustrates the adverse repercussions that arise when third world countries are dependent on transnational corporations for vital industrial commodities.

The cycle began in the early part of the 60's, when technological advances cut the production costs of petro-based fertilizers in half. As companies rushed to take advantage of new profit possibilities, there was a rapid expansion of production facilities in both the advanced countries and the third world.(3) Many of the third world investments were made in Asia but some production facilities were set up in Latin America. The result of this expanded production was a world-wide glut. The U.S. government stepped in to help the companies solve the overproduction problem by extending A.I.D. (Agency for International Development) loans to finance fertilizer exports to many third world countries, significantly expanding the market in Latin America. One W. R. Grace executive noted, "thanks to AID financing, Chile and Brazil became important fertilizer markets."(4)

But this growing import dependency soon took its toll. In response to the overproduction crisis, some of the oil companies pulled out of fertilizer production, both in the United States and Latin America. These cutbacks in investments led to a fertilizer shortage just as the world food crisis occurred in 1973-74. When fertilizer prices more than doubled, many countries were forced to cut back on fertilizer imports. The U.N. Food and Agriculture Organization calculated that in the 43 poorest countries the resulting loss in agricultural production was equal to 2.7 million tons of grain, the margin between subsistence and starvation in many countries.(5)

The U.S. fertilizer industry profited handsomely from the rise in prices - especially firms like W. R. Grace, Williams Companies, and Beker Industries, which had bought some of the facilities sold by the oil firms. These fertilizer companies made annual returns on invested capital that ranged as high as 65 percent. An executive of Beker Industries admitted, "you might say we're gouging the poor."(6)


While still relying heavily on exports to penetrate the Latin American markets, the farm equipment and fertilizer companies are expanding their direct investments in the region. The new investment sites are chosen carefully by the companies: capital requirements for tractor and fertilizer production are enormous, usually in the tens of millions of dollars. Thus corporations look not only for countries where the political situation guarantees a favorable investment climate, but also for locations where they will be assured a large market. Thus, most of the foreign-owned tractor and fertilizer facilities are located in the countries where large-scale capitalist agriculture is most developed - namely Brazil, Argentina and Mexico.

Currently, the farm equipment manufacturers are especially interested in gaining direct access to the rapidly expanding Brazilian market where growth rates are much higher than in the United States. According to a J. I. Case executive, the U.S. tractor market is growing by "maybe 2 to 3 percent per year," but if "you put the same amount of investment into Brazil you get a market growing at 10 percent to 15 percent per year."(7) J. I. Case, Massey Ferguson and Ford all have subsidiaries in Brazil, with Ford's new $100 million plant the largest.

The advantages to foreign investors of production in Brazil - a cheap and controlled labor force, and government incentives - also make the country a prime candidate to become an export platform for supplying other third world countries. J. I. Case has already begun to export tractors from its Brazilian subsidiary and plans to nearly double its sales abroad this year.(8)

Latin American investments also play an important role in the global strategies of the fertilizer industry. Like the implement manufacturers, the fertilizer companies are most interested in penetrating the more developed markets in the region. Because of the large capital outlays required for new production facilities, the industry is relying on the participation of both international lending agencies and local governments. In both Argentina and Brazil, the Inter-American Development Bank and the U.S. Export-Import Bank have helped finance fertilizer facilities. Williams Companies, which already owns plants in Brazil and Argentina, is contemplating a new $38 million facility in Brazil if it can find "acceptable financing arrangements" for $23 million of the total investment.' While production facilities are concentrated in the largest markets, the fertilizer companies have penetrated the smaller markets in Latin America by setting up plants to mix and bag fertilizer produced in other countries.*

* In some cases Latin American governments operate fertilizer facilities without the direct participation of foreign companies. In Mexico, most of the country's fertilizers are produced by the state-owned enterprise, Guanomex, while in Brazil the government in the early 70's took over direct control of a fertilizer subsidiary of Phillips Petroleum. However, in setting up a new fertilizer facility, the governments are almost always dependent on international financing from organizations like the World Bank and the Inter-American Development Bank, and they rely on the technology provided by foreign construction firms like M. W. Kellogg and Fluor.

[See PDF for chart.]

An important new trend in the fertilizer industry is the establishment of plants in Latin America to take advantage of low production costs to supply the U.S. market. The Caribbean, with its access to cheap natural gas (one of the principal materials used in making fertilizers), plus its lack of strong anti-pollution regulations, is becoming especially attractive to U.S. companies. W. R. Grace is currently building an $80 million facility in Trinidad, and when completed 90 percent of its production will be shipped to the United States.

[See PDF for chart.]


The increased use of these agribusiness inputs characterizes the region's agricultural modernization process. Although the use of modern inputs lags far behind that of advanced countries, Latin America's adoption of them has increased significantly in recent years: between 1965 and 1975, its consumption of fertilizers more than tripled, while its pool of tractors increased by approximately 75 percent.(10)

But the important question is: what is the social impact of the use of these inputs? While modern inputs greatly increase the productivity of agriculture, in Latin America their use has done little to alleviate hunger or malnutrition. Available evidence suggests that the bulk of modern inputs are used in the production of export crops, by far the most developed and capital-intensive sector of agriculture in Latin America.(11)

The introduction of modern inputs also increases inequalities in the countryside. A clear example of this is found in the state of Sonora, Mexico, the birthplace of the Green Revolution. There, in the late 1940's, Nelson Borlaug (the "father" of the Green Revolution), with the backing of the Rockefeller Foundation and other agencies, developed the hybrid seeds that became the basis of the Green Revolution. While these hybrid seeds dramatically increased yields in Sonora, only a relatively small group of agricultural producers benefited from the new technology. The specially bred varieties could be planted only on irrigated lands and required the intensive use of pesticides and chemical fertilizers. Thus, it was Sonora's larger commercial farmers who were able to take advantage of technical assistance and credit to use the new varieties. The attempts to introduce the high-yielding seeds to the ejidatarios - small peasant farmers who worked communal lands - were a complete failure. In fact, in some instances production on the ejidos actually declined, and the ejidatarios became even more impoverished. (12)

Although the Green Revolution has not been applied extensively in Latin America, Sonora is only a more dramatic example of a similar process occurring in many parts of the region as capitalist agriculture develops. Only those large producers who already dominate land and wealth can afford to adopt agribusiness inputs on a systematic basis. In Mexico, for example, over 85 percent of agricultural credit, the key to purchasing expensive inputs, goes to the top .5 percent of landowners.(13) Thus the introduction of modern inputs has gone hand in hand with the further concentration of wealth among an already privileged elite in the countryside.

It is important to emphasize that the adverse impact of fertilizers and farm implements comes not from the technology itself, but rather from the social structures into which the technology is introduced. In socialist countries, the same technologies that have increased inequalities in Latin America have been used to increase production and facilitate the equitable distribution of food resources. During the Vietnam war, the North Vietnamese for example smuggled Green Revolution rice varieties out of South Vietnam and planted them in the north to increase the country's rice yields. Cuba today experiments with hybrid seeds and uses large quantities of chemical fertilizers, while China plans to construct multi-million dollar fertilizer plants.

Two contrasting examples, one in Peru and the other in Cuba, show that the impact of mechanization is determined by who controls the process - large landowners bent on increasing their profits, or governments which take into consideration the needs of the entire society. In Peru in the 60's, W. R. Grace & Co. owned the Paramonga estate, one of the largest sugar plantations in the country. Because of a strong labor union, the work force earned wages that were significantly higher than those of other sugar plantation workers in the area. In a move designed to undermine the union and cut labor costs, the company decided to mechanize the sugar harvest. Over 75 percent of the workers were fired and forced on to a labor market that was already swollen with high unemployment rates.(14)

In the 60's, the socialist government in Cuba also started mechanizing some of its sugar plantations with a very different motive - to increase the country's ability to harvest more sugar cane to free workers for other agricultural and development projects, and to alleviate the hard, backbreaking work of cutting sugar cane.

In every other Latin American country but Cuba, the impulse for agricultural mechanization comes from the drive of capitalists to increase profits - both by increasing production and by reducing labor costs. The loss of jobs in the face of mechanization is a serious problem for agricultural workers in every capitalist country - and one being faced by U.S. farm workers in the lettuce and tomato fields today. But mechanization has a particularly devastating impact on the work force in Latin American countries, where unemployment ranges from 20 to 30 percent, industry has little capacity to absorb displaced workers, and social welfare programs are almost non-existent. In the early 70's, for example, many Brazilian farmers shifted from labor-intensive coffee production to growing soybeans with mechanized equipment, forcing thousands of coffee workers to join the huge pool of impoverished farm laborers (see last article). In Latin America as a whole, according to International Labor Office estimates, the current pool of tractors displaces a minimum of 2.5 million workers.(15)

Mechanization not only increases the army of unemployed, but it also accentuates existing inequalities in the countryside. Like other resources, the distribution of tractors in Latin America is highly concentrated. A survey found that in Chile over 90 percent of the country's tractors belonged to large farms with more than 50 hectares. In Mexico, producers with more than 50 hectares owned three-fourths of the nation's agricultural machinery. Figures for Brazil show that only 2 percent of the country's five million agricultural units owned both a plow and a tractor." 1 As the ILO study points out, the benefits of mechanization "have gone mainly to swell the profits and rents of the large landlords and the wages of a few tractor drivers."(17)


Pesticides, another of the agribusiness inputs associated with the advance of commercial agriculture, also have adverse effects on the work force. U.S. farmers and farm laborers have suffered for years from the use of pesticides. Dildrin and Aldrin, pesticides which cause vomiting, dizziness, and skin rashes, were used in the United States until the mid-70's. They were finally banned when studies revealed they might cause cancer.

Latin Americans suffer even more devastating effects from the use of pesticides. Since U.S. restrictions on pesticide use do not apply to the export or production of pesticides abroad, U.S. firms like Dow Chemical, Eli Lilly, Dupont, Monsanto and Chevron sometimes sell pesticides in other countries that have been banned in the United States.' 1 DDT, for example, is sold in Latin America today, even though it has been banned in the United States since 1972.

The most flagrant abuses in Latin America occur on cotton plantations where production relies on the intensive use of pesticides. In an effort to raise yields, cotton producers now apply pesticides 30, 40, and even 50 times a year, compared to 7 applications in the past. Crop dusting planes apply the pesticides, indiscriminately spreading the toxic chemicals over the dwellings and villages of workers and others who live near the plantations.

A recently released study by the United Nations Environment Program and the Central American Research Institute for Industry revealed that in the Guatemalan and Nicaraguan cotton producing regions, the average DDT content in human blood is 520 parts per billion compared with 46 in Dade County, Florida.(19) In Central America between 1972 and 1975, there were 40 reported deaths attributable to the use of pesticides and 14,133 DDT-related illnesses. Doctors, priests and peasant leaders in the area say there are many additional unreported deaths attributable to pesticides. A planter in the region summed up the attitude of the growers: "More insecticide means more cotton, fewer insects mean higher profits."(20)

Some efforts are being made to curb the more flagrant abuses. Guatemala plans to prohibit the importation of DDT in 1979. A Guatemalan guerrilla movement, the Army of the Poor, recently took more immediate measures by destroying 22 crop duster planes. And in Colombia, where the use of pesticides in cotton producing regions caused aborted pregnancies and livestock deaths, the government has finally banned Phosvel, one of the more dangerous pesticides.(21)

U.S. pesticide producers have responded to these moves by producing and marketing a chemical that can be even more lethal to human beings than DDT. A trade journal survey of the leading pesticide firms revealed that the companies foresee continued growth in the Latin American markets, with all but one of them planning to expand production in the region before 1980.22 For the pesticide companies, expansion will undoubtedly continue as long as large-scale capitalist enterprises are able to determine the direction of agricultural modernization.


1. W. G. Phillips, The Agricultural Implement Industry in Canada, University of Toronto Press, 1956, pp. 12-15. 2. U.N. Food and Agriculture Organization, Monthly Bulletin of Agricultural Economics and Statistics, March, 1976, pp. 5 & 9. 3. Michael Perelman, "The Green Revolution: American Agriculture in the Third World," in Radical Agriculture, Ed. Richard Merrill, New York University Press, 1976, p. 120. 4. NACLA Interview, December, 1977. 5. NACLA Report, March, 1976, p. 20. 6. New York Times, October 20, 1975. 7. Business Week, December 5, 1977, p. 76. 8. Ibid. 9. Williams Companies,Annual Report, 1977. 10. U.N. Food and Agriculture Organization, pp. 5,256. 11. Raimo Vayrynen, "Main Tendencies in the Production, Consumption and Trade of Fertilizers," in Political Economy of Food, Ed. Vilho Harle, Tempere Peace Research Institute. Research Report No. 12, 1976, p. 25. Also Celso Furtado, Economic Development Latin America, Cambridge University Press, London, 1970, p. 118. 12. For a thorough study of the Green Revolution in Mexico see: Cynthia Hewitt de Alcantara, The Social and Economic Implications of Large-Scale Introduction of New Varieties of Food Grains, Country Report: Mexico, U.N. Research Institute for Social Development, November, 1974. 13. Veronika Bennholdt-Thomsen and Albrecht Boeckh, "Problemas en el analisis de clases del sector agrario en estados con reproduccion dependiente del mercado mundial: Un nuevo enfoque, el caso de Mexico," Universitatsschwerpunkt Lateinamerika- forschung, Universitat Bielefeld, Arbeitspapiere, Nubmer 10, August 1977, p. 34. 14. K. C. Abercrombie, "Agricultural Mechanisation and Employment in Latin America," in Mechanization and Employment in Agriculture, International Labor Office, Geneva, 1973, p. 68. 15. Ibid., p. 63. 16. Movimento, October 1, 1977. 17. K. C. Abercrombie, p. 56. 18. Washington Post, December 26, 1976. 19. U.N. Environment Programme and Central American Research Institute for Industry, An Environmental and Economic Study of the Consequences of Pesticide Use in Central American Cotton Production, ICAITI Project No. 1412, Guatemala, January, 1977, pp. 2 & 3. 20. New York Times, November 9, 1977. 21. NACLA Interview, November, 1977. 22. Farm Chemicals. September, 1976, pp. 28-30.

Tags: agribusiness, chemical fertilizers, farm equipment, monopoly capitalism

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