How Debt and Free Trade Subordinated Independent Latin America

28 June 2016 by Eric Toussaint

The open veins of Latin America. The Latin America Memorial, Sao Paulo

Contrary to the dominant narrative, the 19th century Latin American debt crises did not cause the difficulties experienced by the Northern banks and other creditors. The truth is that, from the beginning the debt crises were caused by the policies of the European bankers and the crisis that struck in London. On top of that, the combined effects of external borrowing and Free Trade policies constituted fundamental instruments of a new way of subordinating Latin American countries that developed in the 19th century. This study, the second of six, covering the 1820-1850 period and entitled “Debt: the subordination of Latin America”, follows up the series of five recently published articles:

Between 1820 and 1825, Britain, especially the financial sector in London was agitated by an investment mania seeking high profits. Speculation reached its apogee in 1824-1825. The new States that came into existence in South America, following the military victories of the liberation movements against the Spanish crown, became a favourite destination for the London Stock Exchange’s surplus liquidities Liquidities The capital an economy or company has available at a given point in time. A lack of liquidities can force a company into liquidation and an economy into recession. . The loans granted to the Principality of Poyais are the best illustration. In 1822, a Scottish adventurer, Gregor McGregor [1] successfully launched the bonds of a non-existent country that he called Poyais and of which he was the self-proclaimed monarch (Cacique). He managed to cream off 200,000 pounds sterling on the London Stock Exchange. He enticed British colonists to sail to the fabulous country. By the time it became known that the country was fictitious McGregor had hopped it. Nevertheless, five years later another London banker tried to issue bonds in the name of the same fictitious country.

The Poyais swindle

In 1817, Gregor McGregor was a general in the liberation army of Francisco Miranda, Simon Bolivar’s predecessor. His relationship with Bolivar had turned sour and they parted company. McGregor took to piracy in the Caribbean before returning to London where he proclaimed himself Cacique of Poyais situated on the Caribbean coast of Nicaragua and Honduras, inhabited by the ’Moskito’ Indian people.
The supposed location of the Republic of Poyais

In 1822 McGregor launched a great sales campaign to gain investments in the Poyais territory. According to the propaganda the capital of Poyais, St. Joseph, had a population of 20,000 people, paved streets, an opera house, a cathedral, a central bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

; a parliament and a royal palace and other amenities. The climate was particularly healthy and had become an attraction for Caribbean colonials wishing to improve their health. The inhabitants of Poyais were of British stock and future colonists could hope for three harvests of cereals a year. McGregor printed and issued paper money ’Poyais Dollars’ that he exchanged with future colonists for Pounds sterling.

He also sold land and gave attention to details: granting a cobbler the title of ’by appointment’ of the Poyais Crown. Of the 250 colonists that parted about 80 survived, of which 50 returned to England in 1823. McGregor had not accompanied them on the voyage. In 1827 McGregor returned to London after a period in France, and again convinced a London banker to make a new bond Bond A bond is a stake in a debt issued by a company or governmental body. The holder of the bond, the creditor, is entitled to interest and reimbursement of the principal. If the company is listed, the holder can also sell the bond on a stock-exchange. issue in the name of the Republic of Poyais for £800,000. It was a fiasco.

One dollar, issued by the Bank of Poyais

The new bond of Poyais

In 1824-1825 alone, in the thick of economic euphoria, 624 new limited liability companies were created in London, of which 46 were specialised in commercial transactions, credit and investments in South American mines. The part of the foreign investment boom that was directed to Latin America was by far the largest; the capital of the 46 companies was the equivalent of half the total capital of all the 624 new companies. Another sign of the attraction of Latin America: of the £24 million worth of bonds sold on the London market in 1824-1825, a little more than two-thirds, £17 million, were issued in the names of new Latin American States. [2]

At Ayucacho, Peru, in December 1824 the Latin American independence army won the final victory of their fifteen years’ war against Spanish domination. [3] From Mexico to Argentina new republics were born. The British, who, since the end of the Napoleonic wars, had joined the Holy alliance along with the monarchies of the Austro-Hungarian Empire, France, Russia, Prussia and Spain, were supposed to defend their allies from threats. [4] However, the British government gave more and more discreet support to independence movements, hoping to spread its influence in this vast region rich in mineral, industrial, agricultural and commercial resources. The fact that the United States, Britain’s main competitor for influence in the region, recognised independent Colombia in 1822 accelerated London’s change of priorities. [5]

Simon Bolivar

Simon Bolivar, one of the principal Latin American leaders, was well aware of the situation. Whilst negotiating, with London, a loan for the purchase of arms he wrote to Antonio Sucre, another Latin American leader, in May 1823: England is the first to be interested in this transaction (a loan for Peru) because she desires to form a league with all the free nations of America and Europe against the Holy Alliance, in order to put herself at the head of all these peoples and rule the world…It is not in England’s interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. that ….Spain maintain a possession like Peru in America, and therefore prefers that she (Peru) be independent, albeit weak and with a fragile government. [6]

The British bankers were quite prepared to take risks organising loans for the new States, especially as they only acted as intermediaries. They issued the bonds on the London Stock Exchange in exchange for juicy commissions. While interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
at the time were around 3% the Latin American countries had to promise 6% (real yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. was higher still) and the commissions charged by the bankers were around 8-10% of the amounts effectively realised.

A critical analysis of the conditions imposed by the bankers on the bond-issuing country clearly shows the conditions to be unfair: excessive interest rates; multiple and abusive commissions; low remittances to the borrowing States in comparison to the debt incurred. [7] Five London banks controlled the Latin American debt market: Barclays; B.A. Goldsmith & Co (see below their behaviour concerning the first Mexican loan); Herring, Powles and Graham; Baring Bros. and Rothschild. Some of these banks were also involved in Latin American mining.

The crisis of 1825

The first great crisis of World capitalism began on the London Stock Exchange in December 1825 in the wake of the speculative bubble Speculative bubble An economic, financial or speculative bubble is formed when the level of trading-prices on a market (financial assets market, currency-exchange market, property market, raw materials market, etc.) settles well above the intrinsic (or fundamental) financial value of the goods or assets being exchanged. In such a situation, prices diverge from the usual economic valuation under the influence of buyers’ beliefs. created over the previous years. This crisis caused the failure of hundreds of banks, closure of hundreds of businesses and factories, a sharp drop in economic activity and international trade, an aversion against risk among the bankers and an economic depression. British bankers, quickly followed by European bankers, cut off foreign as well as domestic lending. The new states that counted on borrowing to repay their existing debts were unable to find bankers, in London or Paris, to grant them loans. The crisis affected all the European financial markets. After London and Paris the effects spread to Frankfurt, Berlin, Vienna, Brussels, Amsterdam, Milan, Bologna, Rome, Dublin and St. Petersburg.

It is important to note that at the moment when the crisis exploded the newly formed Latin American countries were still making their debt repayments. It was over the following year that several countries (Peru and Gran Colombia that included Colombia, Venezuela and Ecuador) had no other option than to suspend payments [8] once their sources of funding had dried up and the drop in international trade had reduced demand for their produce and it so followed, their revenues. The Latin American States did not cause the crisis, but on the other hand they did suffer from it.

By 1828 all the Latin American countries, from Mexico to Argentina had suspended payments. For some countries the suspension lasted for fifteen to thirty years. This does not mean that no payments at all were made during that period. The Latin American governments made partial payments when their treasury situation permitted them to do so. However, the drop in international trade (with slow growth in Europe in particular and the World in general between 1826 and 1847) did not permit them to collect the foreign currency to repay consistently, even if negotiations took place from time to time.

The ABC of loans

London bankers and brokers issued sovereign bonds on the Stock Exchange for the borrowing States. It is important to realise that most often the bonds were sold at a price that is lower than their nominal value. [9]

In the case of the Poyais bonds, each one issued by Lord John Perring’s [10] (who was Lord Mayor of London in 1803) bank in 1822 had a face value of £100, but was sold for £80. [11] The interest rate was 6%. It thus paid a coupon of £6 each year. A yield of £6 on an £80 bond is in fact 7.5%. Of course this was never paid and McGregor got away with a good haul.

The 1824 Mexican loan

Now let’s take the example of a real transaction, for the Mexican State in 1824: B.A. Goldsmith & Co in London issued Mexican bonds for a total value of £3.2 million. [12] The price paid for a £100 bond was only £58. The nominal interest rate was 5%; it thus paid a coupon of £5 each year. A yield of £5 on a £58 bond is in fact 8.6%.

The loan as seen by the bondholders

Bondholders are most often bankers or private investors. If Mexico honours its repayments regularly the value of the bond will probably improve on the market. The buyer at £58 may possibly sell at £70 and make a good profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . The purchaser at £70 also does well, because the coupon being at 5% this produces a yield of 7.1%. Unless Mexico starts to have payment delays in which case the value may go down, or crash completely, perhaps to as low as £10 on the second market. The purchaser at £10 can make an enormous profit if Mexico, after one year, resumes coupon payments. A coupon at £5 for an outlay of £10 represents a yield of 50%. As soon as Mexico resumes coupon payments the value of the bonds on the second market can rise sharply, perhaps as far as £50. In this case the purchaser at £10 may, after cashing in a coupon, resell at £50 and so make 400% profit.

The purchaser at £50 is also looking for profits. If Mexico pays the £5 coupon the following year the purchaser obtains a yield of 10% and if at maturity Mexico fully pays up the initial bond price of £100 as promised, the purchaser will obtain a profit of 100%.

It is useful to keep this explanation in mind if one is to understand the manipulations and wagers on upward or downward movements on the prices of bonds, which are the stuff that the speculation by bankers, brokers and other beasts in the financial zoo feed on. This frenzied activity does not create any real value; it is simply a dangerous and unstable way of transferring funds.

Of course there are winners and losers on the bond market Bond market A market where medium-term and long-term capital is lent/borrowed in the form of bonds. Bonds are creditor stakes issued by companies or States. . Usually it is the small portfolios that pay the costs of the debts. The bankers and investors buy and sell at the right moment. As they hold vast quantities of bonds they can sell heavily and force the price down in order to buy at a lower price and sell when the price rises. We shall come back to this practice.

Up to now the explanations have been from the point of view of the bondholder. He buys or sells. Now let’s look at the other side of the coin, the point of view of the banks who are the intermediaries between buyers and sellers on the London Stock Exchange.

The Mexican loan as seen by the bank selling the securities to the London Stock Exchange

Let us return to the case of Mexico. In 1824 it signed an agreement with the London bank B. A. Goldschmidt & Co. allowing the latter to issue Mexican securities for a face value of £3.2 million. The bank informed Mexico that it had sold the securities at 58% of their face value, i.e. it had collected £1.85 million. Moreover, it had deducted £750,000 in commissions and other fees. Mexico received £1.1 million while its debt amounted to £3.2 million. [13]

Loans as seen by the Borrower State

The Mexican State was indebted for £3.2 million and received £1.1 million. Despite the suspension of payment, Mexico paid £1 million in principal and £0.5 million in interest between 1824 and 1831. However, the country still had to pay at least £6 million in principal and interest. To achieve this impossible task, evidently the country’s resources had to be drained and new loans contracted in order to continue debt repayments.

Loans as seen by the local ruling classes

The local ruling classes were composed of big landowners, wealthy merchants, clergy, the most affluent members of the liberal professions and wealthy mine owners. Supporting external debt allowed them to evade tax or pay a bare minimum. Without external loans the State would have needed to tax the ruling classes because the overwhelming majority of the people, already devastated by taxes and consumption taxes, (with an additional levy on agricultural produce) could not finance large-scale government expenditure. The loans also empowered the State to order from the local dominant classes. A significant portion of the loans was spent on imported goods. This boosted commercial imports at the expense of the local productive sectors. This development of relations with foreign countries permitted the big landowners to export a part of their produce, or develop land and mineral resources coveted by foreign markets. Finally, the local ruling classes simultaneously bought securities of external and internal debts. [14]

In short, the combined use of external borrowing and free trade (i.e. the abandonment of protectionism) with Great Britain was conducive to the interests of the “comprador bourgeoisie”. The bourgeoisie was more interested in the import of manufactured goods and the export of primary products (such as raw materials and agricultural products) rather than local production and manufacturing / industrial activities. [15]

External loans as seen by the governments

In the early years of the wars of independence, not having the means to produce them themselves, the independentists borrowed from abroad to buy the weapons and equipment necessary to achieve victory. This averted conflicts with the local ruling classes that would have been inevitable had the leaders of the independence movement found it necessary to impose high taxes on them. This is what eventually happened to Simon Bolivar at the end of the independence wars. Gran Colombia’s ruling classes abandoned him because he wanted to contribute to the process of consolidating the new state.

Most of the governments had close ties with the local ruling classes from which they originated. Once the nations were free and stabilised, they found it extremely convenient to keep borrowing from abroad because it allowed the wealthy to avoid taxation.

The external debt also facilitated government corruption as the foreign bankers were willing to pay under the table commissions in order to secure deals (see below).

Latin American rulers were an exception to the above rules. Paraguay’s was such a case during the reign of Francia and his successors between 1810 and 1865. Francia successfully implemented a self-sufficient development project without recourse to external debt. This is reminiscent of Muhammad Ali in Egypt at the same time, [16] although Francia and his successors never tried to expand Paraguay through other conquests. Great Britain successfully forged a Triple Alliance among Argentina, Uruguay and Brazil to stop this dangerous experiment. Paraguay refused to grant free access to the exports of Great Britain and its allies. This was used as a pretext (the same pretext to wage the Opium Wars against China in the years 1839-1842 and 1860 [17] by the Triple Alliance to launch, in 1865, a five year long war that included the genocide of the Paraguayan people. The population declined by 80%. Argentina and Brazil heavily borrowed from the British bankers during this abominable war of total destruction. Paraguay’s momentous development remains unmatched into the 21st century.

Regarding debt payment in the 19th century, the government of Benito Juarez in 1860s’ Mexico was also a noteworthy Latin American exception to the rule.

External debt and free trade

During the first half of the 19th century, All Latin American governments except that of Francia’s Paraguay adopted free trade policies under pressure from Britain.

Since the local ruling classes did not invest in processing or manufacturing activities for the domestic market, the implementation of free trade did not threaten their interests. Consequently, free import of mainly British manufactured goods hindered the development of these countries’ industrial fabric. The abandonment of protectionism destroyed a large part of the local factories and workshops, particularly in the textile sector.

In a way, we can say that the combined use of external debt and free trade was the driving force behind the development of underdevelopment in Latin America. This is of course related to the social structure of Latin American countries. The local ruling classes, including the comprador bourgeoisie, made these choices in their own interest.

At the end of the 18th century, several Latin American regions, although still under colonial rule, accomplished a real artisanal and manufacturing development, mainly supplying to the local market. Aspiring for an economic domination over the region, Great Britain supported the Latin American people’s desire for independence. From the beginning Great Britain’s conditions for recognising the Independent States were clear: they had to allow free entry of English goods into their territory (the aim was to limit the import duties at about 5 %). Most new states agreed and the local producers, particularly artisans and small entrepreneurs, were put into great difficulty. British goods invaded the local markets. Eduardo Galeano has provided outstanding examples in his book The Open Veins of Latin America. [18]

The British authorities practised highly protectionist policies until 1846. This propelled the rise of Britain as the foremost industrial, financial, commercial and military power during the 19th century. [19] Since 1810-20 they had obtained agreements from the independentist Latin American leaders for opening the economy of the still developing new States to British goods and investments. [20] Yet, the British authorities were protective about their own industries and trade. Britain remained at the forefront by strongly protecting its market and its booming industries, while destroying the factories of its competitors (e.g. India’s textile industry). Once British industry had achieved a prominent technological lead, Britain embraced free trade as it did not need to worry about any serious competition. Paul Bairoch wrote that starting from the late 1840s “the most highly developed country had become the most liberal, which made it easy to equate economic success with a free trade system, whereas in fact this causal link had been just the opposite.” [21] Bairoch added that “before 1860 only a few small Continental countries, representing only 4% of Europe’s population, had adopted a truly liberal trade policy”. [22] These were the Netherlands, Denmark, Portugal, Switzerland, Sweden and Belgium. Let us not forget that the United States remained protectionist throughout the 19th century (and during most of the 20th century).

George Canning, the 23rd British Prime Minister from April 10, 1827-August 8, 1827

George Canning, a prominent British politician, [23] wrote in 1824: “The deed is done, the nail is driven, Spanish America is free; and if we do not mismanage our affairs sadly, she is English.” Thirteen years later, Woodbine Parish, the British consul in La Plata, described a gaucho from the Argentine pampas in the following way: “Take his whole equipment— examine everything about him— and what is there not of raw hide that is not British? If his wife has a gown, ten to one it is made in Manchester." [24]

Great Britain did not need to depend on military conquests to achieve this (although it did not hesitate to use force whenever it felt so inclined). It used two very effective economic weapons: granting international credits and imposing the abandonment of protectionism.

In 1827, the prominent Swiss economist Jean Sismondi [25] clearly explained that Britain was interested in lending to the newly independent States because the latter would buy English goods with the loans. “The opening up of the immense market afforded by Spanish America to industrial producers seemed to offer a good opportunity to relieve British manufacture. The British government were of that opinion, and in the seven years following the crisis of 1818, displayed unheard-of activity to carry English commerce to penetrate the remotest districts of Mexico, Columbia, Brazil, Rio de la Plata, Chile and Peru. Before the government decided to recognise these new states, it had to protect English commerce by frequent calls of battleships whose captains had a diplomatic rather than a military mission. In consequence, it had defied the clamours of the Holy Alliance [26] and recognised the new republics at a moment when the whole of Europe, on the contrary, was plotting their ruin. But however big the demand afforded by free America, yet it would not have been enough to absorb all the goods England had produced over and above the needs of consumption, had not their means for buying English merchandise been suddenly increased beyond all bounds by the loans to the new republics. Every American state borrowed from England an amount sufficient to consolidate its government. Although they were capital loans, they were immediately spent in the course of the year like income, that is to say they were used up entirely to buy English goods on behalf of the treasury, or to pay for those which had been dispatched on private orders. At the same time, numerous companies with immense capitals were formed to exploit all the American mines, but all the money they spent found its way back to England, either to pay for the machinery which they immediately used, or else for the goods sent to the localities where they were to work." [27] Sismondi further added that this policy went against British interests because the new over-indebted States squandered money (as the above citation shows) and suspended debt payment. Now, adopting Carlos Marichal’s view we have mentioned before that payment suspensions did not cause the crisis in London. It was the other way round: the crisis in London caused a shutdown of financial flows in the form of credits to Latin America. Consequently, the indebted States could not borrow and repay. Remember that the Latin American States serviced their debts normally when the crisis broke out in December 1825. It was over the next two years that they partially suspended payments. That said, Sismondi’s analysis is very interesting because he points out Great Britain’s enormous interest in lending to the new independent States. Britain stood to gain on many levels, as Sismondi said. The new States could now afford to buy goods (weapons, uniforms for the troops, etc.) from England with the loans they procured at high rates of interest. The circle was completed as the money lent by England returned to England.

Sismondi could not have known in 1827 what the eventual outcome would be: England and other European powers would take advantage of the suspension of payments to impose a series of conditionalities on the indebted countries.

Epilogue and conclusion

The first great Latin American debt crisis was born in London. Great Britain, followed by other powers such as France, used it to impose on Latin America a capitulation to the bankers’ conditions and the Old Continent’s interests in trade and industry. The Latin American countries which had gained liberty from direct Spanish and Portuguese colonial rule [28] returned to a cycle of dependence, subordination and destruction, masterminded by British capital and its French counterparts in collusion with their respective authorities. The USA’s big capital, supported by its government, intervened later, except in the case of Mexico, where it intervened constantly. Paraguay’s initiative for a self-sufficient development was crushed between 1865 and 1870. In the 1860s, Mexico rebuffed a major offensive from the creditors but agreed to free trade. That thwarted its development. In the 1880s, the Mexican government again yielded to the creditors (see next article).

The weapon of debt and the withdrawal of protectionism was a crucial factor behind the submission of States and the transfer of wealth from the peoples of the periphery to the capitalist classes of the centre. The local ruling classes pocketed their commission in the process.


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- Marx-Engels, La crise, col. 10/18, Union générale d’éditions, 1978, 444 p
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- Sack, Alexander Nahum. 1927. Les effets des transformations des États sur leurs dettes publiques et autres obligations financières, Recueil Sirey, Paris. (In French. The entire text can be freely downloaded from the CADTM website here: For examples of the application of the odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
doctrine see : and (in French)
- Sismondi, Jean de. 1819. Nouveaux principes d’économie politique ou de la richesse dans ses rapports avec la population, Paris, 1827. Available in French here: The book has been translated in English by Richard Hyse as New Principles of Political Economy: Of Wealth in its Relation to Population and published by Transaction Publishers, New Brunswick (U.S.A) and London (U.K.) in 1991.
- Stiglitz, Joseph E. 2002, La Grande désillusion, Fayard, Paris, 324 p. (in French). (Original English version: Globalization and its Discontents. W. W. Norton & Company, USA)
- Toussaint, Éric. 2004. La finance contre les peuples. La bourse ou la vie, CADTM-Bruxelles/CETIM-Genève/Syllepse-Paris, 640 p. (in French). Your Money or Your Life, the Tyranny of Global Finance (in English). Haymarket, Chicago, 2005.
- Toussaint, Éric, 2016, “Newly Independent Greece had an Odious Debt round her Neck”.
- Toussaint, Éric. 2016, “Greece: Continued debt slavery from the late 19th century to the Second World War”
- Toussaint, Éric. 2016, “Debt as an instrument of the colonial conquest of Egypt”
- Toussaint, Éric. 2016, “Debt: how France appropriated Tunisia”


The author wishes to thank Claude Quémar and Patrick Saurin for their review and Pierre Gottiniaux for the illustrations.
The author accepts full responsibility for any errors that may occur in this work.

Translated by Mike Krolikowski and Suchandra de Sarkar


[1See Carlos Marichal 1989. A Century of Debt crises in Latin America: from Independence to the Great Depression, 1820-1930, Princeton University Press, p. 50. See Carmen
Reinhardt and Kenneth Rogoff, This time it’s different: eight centuries of financial folly, Princeton University Press, 2010. Also see:

[2Otherwise, the two Greek issues of in London in 1824-1825 realised £2.8 millions.

[3Antonio Sucre, the Independentist friend of Simon Bolivar was at the helm of this battle.

[4Great Britain did in fact withdraw its support for the independentists between 1815 and 1820, just after the constitution of the Holy Alliance.

[5As from 1823, the Monroe Doctrine named after the US President of the same name who introduced it, was an important element in US foreign policy concerning the rest of the American continent. This Doctrine refused all European interference in ’American’ affairs and was used to justify the aggressive conquest of Latin America by the USA, starting by the annexation of a large part of the Mexican territory (Texas, New Mexico, Arizona and California) in the 1840s. US troops occupied the Mexican capital in September 1847.

[6Letter from Simon Bolivar to Antonio Sucre, 26 May 1823, Quoted by Carlos Marichal in A Century of Debt crises in Latin America: from Independence to the Great Depression , 1820-1930, Prince¬ton University Press, Princeton, 1989, pg 14.

[7See Carlos Marichal, p. 37 to 54.

[8In 1826, Greece had to suspend payments for the same reasons.

[9Face, or nominal, value is the value indicated on the ’face’ of the financial asset. For example: A Mexican bond of $100 has a face value of $100 even if it is acquired on the second market for $20. The value of a bond is the scriptural value on the bond when it is issued. It is this value which is the basis of the yield calculations.

[13Bazant, Jan. 1995. Historia de la deuda exterior de Mexico, 1823-1946, El Colegio de México, Centro de Estudios Históricos, Mexico, 1995, p. 38 (in Spanish)

[14See Bazant, Jan. Op. citus. p. 96

[17Rosa Luxemburg, 1969. L’accumulation du capital, Maspero, Paris, Vol. II, p. 60 to 67 (in French). The Accumulation of Capital (in English) was first published in 1951 by Routledge and Kegan Paul. The relevant section is available here: Section three, Chapter 28 Also see Joseph Stiglitz, La Grande désillusion, Fayard, Paris, 2002, p. 95 (in French). (Original English version: Globalization and its Discontents. W. W. Norton & Company, USA)

[18In his valuable book The Open Veins of Latin America (1970), Eduardo Galeano has portrayed this destruction in a wholesome and picturesque way. Till date, this book remains the best and handiest presentation of the various forms of domination and dispossession suffered by the Latin American peoples. This work is well documented and points out the responsibility of the dominant classes, both from the Old Continent and the New World.

[19See Paul Bairoch, 1993. Mythes et paradoxes de l’histoire économique, La Découverte, Paris, 1999, p. 37. Economics and World History: Myths and Paradoxes (In French). University of Chicago Press, Chicago, 1993 (in English)

[20See Luis Britto, El pensamiento del Libertador - Economía y Sociedad, BCV, Caracas, 2010 (in Spanish)

[21See Paul Bairoch, Economics and World History: Myths and Paradoxes, The University of Chicago Press, Chicago, 1993, pg 21

[22Ibid, pg 22.

[23George Canning, Under Secretary of State for Foreign Affairs, became Prime Minister in 1827. See

[24Woodbine Parish, Buenos Ayres and the Provinces of the Rio de la Plata, London, John Murray, 1839, p. 338. Quoted by Eduardo Galeano in Open Veins of Latin America, p. 176. Available here :

[25Read Sismondi’s biography here: The original quotation in French is from the second and enlarged edition (1827) of Nouveaux principes d’économie politique ou de la richesse dans ses rapports avec la population (1819), page 368 and onward. The book is available here: The book has been translated in English by Richard Hyse as New Principles of Political Economy: Of Wealth in its Relation to Population and published by Transaction Publishers, New Brunswick (U.S.A) and London (U.K.) in 1991.

[26Remember that the monarchies of Russia, Austria, Hungary and Prussia created the Holy Alliance in 1815 following Napoleon’s defeat. Later Great Britain and post-Restoration France (from 1818) joined. From 1820, popular and military uprisings greatly destabilised the Spanish monarchy on its own territory. The revolt took off when the Spanish military refused to set sail from Cadiz to Latin America to fight the independentists (see:, (in French) and In 1823, a French intervention backed by the Holy Alliance (a French expeditionary force of 95,000 soldiers participated in this large-scale operation) came to the aid of the Spanish monarchy and crushed the liberal revolution. The restored Spanish monarchy refused to recognise the States which had just emerged from its empire in threadbare conditions. Great Britain should have shown solidarity and refused to recognise the new independent States, but it did not do so.

[28Cuba and Puerto Rico were still Spanish colonies and this rule ended in 1898. Heroic struggles led to Haiti’s liberation from its French rulers in 1804, but the country again succumbed to French neo-colonial domination in 1825. Other than Britain, the Netherlands and France retained their colonies in the Caribbean and in the region between Brazil and Venezuela.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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