Old Wine in New Bottles: Geopolitics and Venezuela's Debt
11/22/17
Mark Weidemaier & Mitu Gulati
Robin Wigglesworth and John Paul Rathbone have an insightful piece in the Financial Times on how China, Russia, and the US are jockeying for position in Venezuela, which needs debt relief. The other governments are in a position to either facilitate or impede this, with conditions. Very roughly speaking, Russia wants regional influence, China wants oil, and the US wants regime change (ideally, while limiting Russian and Chinese influence in the region).
Finance has long been both a tool of, and a pretext for, foreign intervention in Latin America. For example, historian Emily Rosenberg and others have written about “dollar diplomacy”—the US government’s early-20th century practice of tying loans to control over customs and taxing authorities. The practice was justified by narratives about the benefits of financial expertise and professionalization, but of course it also served to protect the interests of US lenders while limiting the influence of European powers. Venezuela is no stranger to this history, having endured heavy-handed and often brutal interventions by western powers in the early 1900s.
We jointly teach a class on international debt to students at Duke and the University of North Carolina law schools. Next semester, we will focus on the Venezuelan debt crisis, and we decided to begin the semester with some of this history. In preparing for that, we came across this interesting article, by historian Ben Coates, which focuses on a somewhat different part of this history.
There has been a great deal written about the role of foreign powers in enforcing international loans (whether through gunboat diplomacy, diplomatic intervention, or other means). Coates focuses on the transition to a regime in which the law and lawyers played a central role, often by promoting arbitration as a method for resolving disputes. His story features a powerful and unscrupulous corporation (the New York and Bermudez Company); a giant lake of asphalt in Venezuela that NY&B wanted to exploit; and the company’s unsuccessful effort to topple the government of Jose Cipriano Castro. After the coup failed and Castro ejected NY&B from the country, the company turned to the US government for help.
Coates recounts how the US government refused to intervene forcefully on NY&B’s behalf. Instead, the dispute was channeled into arbitration. NY&B eventually won, and was even paid by Castro’s eventual successor. Coates is especially interested in documenting the way that imperialist powers deployed law as a tool. He emphasizes that law, though ostensibly civilized (and civilizing), could be manipulated to serve imperialist purposes. He elaborates on these claims in a recent book, Legalist Empire. For readers interested in the link to arbitration, one of us has previously written about how early arbitration clauses in loans to Latin American governments were closely tied to US imperialism.
The story Coates recounts provides useful context for our class. Indeed, it still resonates today, with foreign powers competing for influence in the country. Policy actors might even benefit from reading it—those who read, anyway.
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