Crises of Rule: Insurrectionary Geographies and the Impacts of War
on Central American Elites During the 1980s
Avri Gabrielle Beard, Instructor, Department of Behavioral Studies, Kingsborough Community
College, City University of New York.
Elizabeth Oglesby, Associate Professor of Geography and Latin American Studies, University of
Arizona.
The 1980s were a watershed for Central America. The political violence that wracked the
region created deep and lasting scars that are well documented. Less known, however, is the
story of how the revolutionary decade brought about other sorts of long-term changes in the
structures of power in the region. The Nicaraguan revolution of 1979-1990, the civil war in El
Salvador, and the height of insurgency and counterinsurgency in Guatemala, all challenged the
dominant position of traditional elites and the political systems that sustained them. In some
cases, particularly Nicaragua and El Salvador, the upheaval of the 1980s helped usher in
consequential structural changes in the economy and in existing patterns of accumulation. In
other cases, such as Guatemala, broad structural change did not occur, but the armed conflict
tested the mechanisms of rule and the hegemonic position of the old-style elite. The regional
turmoil even spilled over into the internal affairs of Honduras and Costa Rica, especially after the
Reagan administration drew both of these countries into its semi-covert war against the
Sandinistas.
This paper offers an overview of the impact of armed conflict and social upheaval on
Central American elite formations and elite-society relations. Our main argument is that the
1980s were a period of rupture with respect to the influence of traditional elite sectors in Central
America, although the precise characteristics of that rupture were felt differently in each of the
five Central American countries. We want to understand how the revolutionary experience
impacted economic change in the region, particularly intra-elite and elite-state relations. These
questions are key to understanding Central America's postwar political economic landscape.
They also challenge our interpretive framework by stressing the role that social struggle played
in unsettling the dominant order in Central America during the 1980s.
Two challenges arise in this effort. First, disentangling these causal factors can be tricky.
The most intense years of revolutionary unrest coincided with a global recession and plummeting
prices for the region's traditional export commodities, as well as a deep debt crisis that affected
the region as a whole and certain countries in particular. These elements of change were
mutually reinforcing, and, in tandem, they exerted tremendous pressure on the existing
economic, social and political systems in Central America.
Without underestimating the impact of global economic pressures on Central America, it
is important to understand the multiple trajectories of change that shaped the region during the
1980s. At minimum, we can argue that the revolutionary experience accelerated certain socioeconomic changes already in motion. In other instances, civil war and revolution created sudden
crises of legitimacy that pried open space for new social actors, including renewed or emergent
elite sectors and their pursuits of new axes of accumulation, and/or reinforced projects of
governance.
A second challenge is to understand the relationship between regional economic and
political transformation and specific national or sub-national shifts. Revolutionary movements
are socially grounded processes; they emerge from and shape social fields in historically specific
ways. The differences in the scope, strength and success of Central America's three revolutionary
cases (Nicaragua, El Salvador and Guatemala), and the relative absence of these types of
movements in Costa Rica and Honduras, are central points of departure for our analysis. These
"insurrectionary geographies" help explain the options available to elites in each instance, the
relative room to maneuver, and the threats that were perceived by different power blocs at
particular moments.
As is well known, revolution in Central America led to massive U.S. military and
economic intervention during the 1980s. U.S. policy directly affected Central American elites in
a number of ways, yet the footprint of the U.S. was felt differently across the region. In
Nicaragua, the thrust of U.S. policy was to attack the revolutionary Sandinista government while
giving aid and political support to the internal opposition. In El Salvador and Guatemala, the
goal was counterinsurgency, seen as not just a military endeavor but also as a political and
economic project.
During the 1980s, the United States sought to create a class of entrepreneurs in Central
America willing to spearhead a shift into maquila export promotion and contract farming of
"non-traditional" products. These activities were supposed to provide an alternate source of
foreign exchange following the collapse of primary commodity prices, and, in theory, they would
raise rural incomes and quell insurgency unrest. It was assumed as well that moving producers
away from labor repressive plantation agriculture would give rise to more "democratic" attitudes
among elites (see McCleary, 1999; this argument goes back to Moore, 1966). In some instances,
U.S. efforts were relatively successful at encouraging the creation of new parallel private sector
organizations to challenge both the traditional elite (El Salvador) as well as remnants of state
developmentalism (Costa Rica).
Yet, a comparison between El Salvador and Guatemala illustrates our point about the
differentiated impact of revolution and counterrevolution on elite activity. As we describe below,
the civil war in El Salvador dramatically reshaped the economic structure of the country,
following a U.S.-backed land distribution and the nationalization of financial and export sectors.
El Salvador during this period experienced a rapid decline of export agriculture, the rise of new
commercial and service sectors, and the impact of remittances from the hundreds of thousands of
Salvadorans who fled the country during the war. In Guatemala, in contrast, no such sweeping
structural change occurred during the 1980s, in large part because of the weakness of the
insurgency there, the unswerving opposition of the landed elite to any type of agrarian reform,
and the relative limitations of the U.S. effort to move agro-elites away from plantation
agriculture and into "non-traditional" activities. Agro-export production thus remained important
in Guatemala throughout the 1980s, as we will show below.
This is not to argue that a rupture did not occur in Guatemala. Although the changes in
Guatemala were not as far-reaching as in El Salvador, new elite sectors did emerge and these
groups would gain an increasing political profile in subsequent decades. As a result of the armed
conflict, Guatemala during the 1980s also experienced significant tensions between the military
state and powerful private sector groups around tax reform, which the army high command
pushed as part of a counterinsurgency effort to build a stronger state. Moreover, the large-scale
indigenous mobilization of the late 1970s and early 1980s shocked many in the national elite,
and it motivated a group of "organic intellectuals" from a powerful core of the private sector to
see the urgency for a new elite-led hegemonic project, a new way of “doing politics” to assure
the survival of their existing model of accumulation. Fears of an indigenous uprising also had
dramatic effects throughout the countryside, in many instances motivating local ladino elites to
flee and abandon their century-long grip on economic, social and political power in the
municipalities, and creating space for the rise of a new indigenous elite class in these local
contexts. At the same time, Guatemala's three-decade armed conflict ushered in the army as a
new economic actor, with profound repercussions for present-day questions of power and
impunity.
Honduras and Costa Rica were also drawn into the regional conflagration, with
significant impacts on the political economy of elite sectors in both places. Costa Rica was
especially hard hit by the debt crisis of the early 1980s, and U.S. aid poured into the country in
exchange for Costa Rican cooperation in the Reagan administration's war against the Sandinistas,
in what is sometimes referred to as the "Sandinista windfall" (Seligson and Franzoni, 2005). The
U.S. Agency for International Development helped engineer an opening up of the Costa Rican
economy with significant shifts in axes of accumulation for particular elite groups. Honduras
experienced a similar deluge of U.S. aid (both military and economic), and, like Costa Rica, this
accelerated the process of economic structural adjustment during the 1980s.
Warfare also led to a regional refugee crisis. Over the course of the 1980s, some 50,000
immigrants received refugee status in Costa Rica and tens--perhaps hundreds--of thousands more
entered illegally (Wiley 1995:423). Although the refugees were a boon to the agricultural sector,
where many of the undocumented worked for less than minimum wages, the costs of
accommodating refugees and concerns about the impacts of migrants on domestic wages
generated substantial popular opposition to the immigrants. As was also the case with Mexico-destination for tens of thousands of Salvadoran and Guatemalan migrants--the migration spurred
the Costa Rican government to push for regional peace accords.
This paper, then, looks at the question of rupture during the 1980s at the regional level,
but also seeks to understand how broad regional trends had a differentiated impact on elites in
each Central American country depending on factors such as the aforementioned
"insurrectionary geographies," the U.S. military and economic footprint, and the historical drag
of elite class configurations and political alliances, all of which shaped the options that elites
faced during the turbulent decade of the 1980s. The paper proceeds with a comparative case
analysis. We first analyze the decade of revolution in Nicaragua and its impact on elite strategies
and configurations. We then turn to El Salvador and Guatemala within a comparative
framework, and, finally, to Honduras and Costa Rica, and the ways in which the regional
conflagration spilled over into domestic economic changes in these two countries.
The two authors of this paper, sociologist Avri Beard and geographer Elizabeth Oglesby,
have conducted extensive qualitative research among elites in El Salvador and Guatemala,
including more than 100 interviews, and we draw on that primary research for these two sections
of the paper. For the Nicaraguan, Honduran and Costa Rican cases, we draw on secondary
sources.
A note on lexicon: In the case of El Salvador, the revolutionary decade can clearly be
described as a civil war, in which significant expanses of national territory were under the
effective control of the Frente Farabundo Martí para la Liberación Nacional (FMLN). In
Guatemala, in contrast, there has been debate over whether the brutal upsurge in violence in the
early 1980s is best described as a civil war or as massive state repression. We are not addressing
that debate, and have preferred to use the term "armed conflict," as does the Guatemalan
Commission for Historical Clarification (CEH). Our use of the term "elite" is meant to suggest
elites at the national level, although where appropriate we make mention of sub-national, supranational or local level elite formations. We also distinguish between "traditional" elites (with
characteristics commonly ascribed to an oligarchy, that is, concentrated control over the means
of production and political power), "renewed elites" (traditional elites who emerged strengthened
from the rupture of the 1980s, sometimes with new political or economic projects), and
"emergent elites" (sectors not part of the traditional oligarchy, but which have entered the ranks
of the economically and politically powerful by exploiting new avenues of accumulation that
opened up during the 1980s). Of course, these categories are fluid, and at times overlapping.
A crucial point in the comparative analysis of Central American elites during the 1980s has to do
with how the armed conflicts profoundly altered elites’ relationships to the military. This is
especially pronounced in Nicaragua, where the Sandinistas created a new army that survived into
the post-revolutionary era. The legacy of military rule is also especially prominent in Guatemala,
where the so-called "hidden powers," or clandestine networks of active and retired military
officials, are now reconstituted as organized crime rings. Central America's armed conflicts
transformed the region's militaries into elite sectors in their own right, and created a legacy of
impunity with deep implications for the post-war exercise of power.
Nicaragua: Fractured Elites and Failed States
The Nicaraguan class structure prior to the revolution was markedly different from much
of the rest of the region. Although dependent on agro-exports like the rest of the nations
discussed here, Nicaragua’s export profile was relatively diversified and large landowners were
responsible for less than a third of export crop production. Medium-sized landholders, known
locally as the chapiolla, played a significant role in agricultural production for both export and
domestic use. Nicaragua’s industrial sector was likewise characterized by relatively greater
participation of small and medium industries. Regional and sectoral conflicts had divided the
Nicaraguan elite since the nation’s founding. The successive Somoza regimes courted elite
support through generally pro-business policies and the suppression of labor demands, while
undermining independent elite political organization through quasi-corporatist and clientelistic
relations with the private sector (Spalding 1994). However, this strategy began to fail by the
1970s as elites grew increasingly resentful of the corrupt and dysfunctional state.
The Somoza regime’s gross misuse of international aid following the 1972 earthquake
further eroded both popular and elite support. Some professionals and a few elites began to
support the small armed opposition forces of the Frente Sandinista para la Liberación Nacional
(FSLN). However, the bulk of the economic elite, seeking less radical paths to regime change,
scrambled to create new sectoral and political organizations to overcome the sector’s historic
weakness and fragmentation. Nicaragua’s first peak business organization, cotton-growers’
association, and agricultural producers’ umbrella organization were created in the 1970s. A
coalition of bourgeois political parties with significant elite support was formed in 1974 at the
urging of prominent newspaper owner Pedro Joaquin Chamorro. Chamorro’s assassination four
years later, presumably by Somoza’s National Guard, was a final straw for many disaffected
elites and middle sectors. The bulk of the elite launched a business strike in protest; after three
weeks, the regime showed no signs of weakening and the strike was cancelled. The failed strike
underscored their political impotence to many elites and in its wake capital flight soared,
reaching some $1.5 billion in 1978-1979 (Vilas, 1986:137).
The flurry of elite organizing proved too little, too late to gain control of the
revolutionary momentum. In September 1978, support for the FSLN surged when Somoza
responded to urban insurrections by bombing several provincial cities. A final FSLN offensive
drew widespread and multi-class support and on July 19, 1979, Somoza and his closest allies fled
Nicaragua. The triumphant Sandinistas disbanded the National Guard and announced a
“government of national unity”, hoping to maintain the cross-class alliance that had ushered in
the revolution. The first five-person Junta de Gobierno de Reconstrucción Nacional (JGRN)
included two elite representatives, Alfonso Robelo and Violetta Chamorro, and prominent
economic elites were given leadership positions in the Ministries of Agriculture and Industry and
of Commerce, the Supreme Court, and the Central Bank.
Although the uprising was brief, the ferocity of the regime’s response made the
Nicaraguan revolution extraordinarily destructive. Between 30,000 and 50,000 Nicaraguans died
during the war, one quarter of the nation’s population was left homeless, and 50,000 children
were orphaned. GDP stopped growing in 1978-1979 and dropped 30 percent from 1979 to 1980
(Weeks, 1985:156). The aerial bombardment campaign caused extensive damage to
manufacturing infrastructure: ECLA figures suggest $500 million in damage to infrastructure
and productive capacity from war (cited in Weeks, 1985:158). The consequent collapse of
manufacturing and the cessation of urban construction led to surging urban unemployment; over
a quarter of workers in Managua in 1979 were unemployed (Weeks, 1985:162). The final phase
of the insurrection also occurred during the sowing period for key agro-export crops and the
massive internal displacement caused critical labor shortages. Cotton production was particularly
hard-hit, with a massive drop in acreage from 1978-79, while a lesser but still significant drop
occurred in coffee production. Ranchers slaughtered some 20 percent of cattle herds 1979 and
beef exports plummeted from $95 million in 1979 to $21 million in 1981 (Weeks, 1985:167).
Together, material damages and capital flight in 1978-79 cost the nation some $2 billion-roughly the country’s entire GDP (Vilas, 1986:153).
In this context, the revolutionary government’s immediate concern was reactivating the
war-ravaged economy. The new junta expropriated the agricultural and industrial estates of the
Somoza family and its allies; these holdings served as the initial bases for the state production
sector, the Area Propiedad del Pueblo (APP). The manufacturing firms in the APP were scattered
across the economy, making a centrally planned economy impossible, and the agricultural lands
were both smaller and less productive than the new leaders had hoped. Unable to control
production, the Sandinistas moved to control distribution by nationalizing banks, exchange
houses, savings and loans, finance companies, insurance companies, and foreign trade in the
traditional exports. The nationalizations of commerce and the financial sector effectively
dissolved the large, diversified investor networks that dominated the Nicaraguan economy prerevolution and weakened the bourgeoisie’s ability to employ capital flight. The resultant
economy thus included a substantial state sector but some 60 percent of GDP remained in private
hands, hence the Sandinistas continued to depend upon private producers to maintain export
revenue and ensure sufficient domestic foodstuffs.
The fragile alliance between the Sandinistas and business elites did not last long.
Bourgeois opposition grew despite the fact that FSLN policies were generally not anti-business:
workers’ demands for wage increases were ignored and labor organizing limited, foreign firms
were allowed to repatriate capital, and credit policies, particularly in the agricultural sector, were
quite liberal. While the leadership of the FSLN probably regarded bourgeois participation as
transitional, many of the elite collaborators seemed to believe that they could eventually control
the Junta through politicking (Vilas, 1986, Stahler-Sholk, 1990, Spalding, 1994). However, the
Sandinistas’ three-seat majority on the JGRN, its control over the new military, and its powerful
mass organizations tilted the balance of power definitively toward the Frente (Vilas, 1986). The
FSLN exhorted the private sector to “produce without power” but private sector investment
remained sluggish and both export income and domestic food stores stagnated. Fixed private
investment in 1981-1983 was a third to a half as much as 1977-78 (Vilas, 1986:160).
By the first anniversary, the bulk of the elite had given up hope of controlling the
direction of the revolution. In April 1980, following a dispute about the composition of the new
legislative body, both Robelo and Chamorro resigned from the Junta and five private sector
organizations subsequently abandoned the legislature. Faced with strong evidence of
decapitalization in the agricultural sector, the FSLN announced harsh new anti-decapitalization
laws and an expanded agrarian reform in July 1981. As Sandinista rhetoric grew increasingly
anti-capitalist, elite/FSLN relations deteriorated rapidly. Interviews conducted by Gilbert
(1988:119) in 1983 found “no significant sector of the bourgeoisie supported the revolution.
Even businessmen whose firms had positive relations with the government harbored negative
attitudes toward the Sandinistas.” Newly-organized and plagued by both historic enmities and
divisions carefully fostered by the FSLN1, the business elite was unable to unite in the means of
opposition. With little hope of competing democratically, disaffected elites began to support the
ongoing American campaign against the revolution.
The American response to the FSLN victory, cautious under the Carter administration,
turned decidedly antagonistic under Ronald Reagan in January 1981. During that year, the US
suspended all bilateral aid and loans to Nicaragua and, in 1983, cut the Nicaraguan sugar quota
by 90% and blocked multinational agency lending. Loans from the World Bank and InterAmerican Development Bank dropped from 78 percent of contracted borrowing in 1978 to
nothing by 1984 (Stahler-Sholk, 1990:56). In 1985, the US imposed a general trade embargo in
defiance of international law, which cost Nicaragua an estimated $169.7 million in its first year
1
The FSLN fostered sectoral conflict by distinguishing between “patriotic producers” and the traitorous
opposition and granting the former favorable treatment. Rice growers, for example, benefited from high
prices set by the government and proved largely cooperative with the Sandinistas, while cotton producers
remained staunchly opposed. FSLN attempts to ally with the chapiolla bourgeoisie against large
landowners were less effective.
(Close, 1988:103). In March 1981 the CIA allocated $19 million for covert ops against the FSLN
government. By August, the CIA had helped create the key force of the counterrevolutionary
war, the Nicaraguan Defense Force (FDN). Based in Honduras and lead by former National
Guard members, the so-called Contra army eventually included some 12,000 well-armed
combatants (Gilbert, 1988:165).
The Contras proved largely ineffective militarily and attracted little domestic support; the
costs of fighting the war and of Contra economic sabotage, however, were extremely high. The
war led to steep declines in export and domestic use agriculture. In the areas most affected by
Contra violence as many as 250,000 campesinos were displaced (Close, 1988:93). The resultant
decline in agricultural production led to falling export revenues and domestic food shortages. By
1983, the war dominated national life and defense spending ballooned; where social programs
initially comprised half the national budget and defense spending less than 20 percent, these
percentages had reversed by 1987 (Gilbert, 1988:168). The sharp cuts in social spending
alienated some the regime’s popular support. Middle class and professional families, fearing the
violence and military conscription, began to flee the country. Although many were wary of the
former National Guard members and of the American role, by 1984, most economic elites
supported the Contras. Some prominent elites, including former Junta member Robelo, publicly
joined the Contras, however most elites remained non-committal in public as open support for
the Contras often led to expropriation by the FSLN (Gilbert, 1988).
Although the Contra forces were largely contained by 1985-86, the economy continued to
spiral out of control. Displaced peasants flooded into urban areas. Per capita income fell 13%
between 1980-1985 and real wages fell to 57% of 1980 levels (Close, 1988:81). Price controls
and poor fiscal policymaking led to parallel markets and fed inflation, which surpassed 1000%
by 1987 (Gilbert, 1988:15). As inflation eroded formal sector salaries, urban workers
increasingly sought employment in the informal sector, which comprised 45% of the economy
(Close, 1988:100). By mid-decade, some 10,000 professionals had joined the urban informal
sector, an additional ten thousand had left the country, and only 18 thousand continued in
salaried jobs (Stahler-Sholk, 1990:74). Attempting to rein in hyper-inflation, the Sandinistas
adopted a “survival economy” in 1985, slashing consumer subsidies and loosening price
controls. The private sector’s failure to respond to these measures pushed the regime to evermore drastic adjustment policies, culminating in 1988 in massive devaluations and government
downsizing, further undermining popular support for the revolution.
In the 1990 presidential elections Nicaragua’s war-battered electorate voted the
Sandinistas out of power. The new president was Violeta Barrios de Chamorro, the candidate of
the Unión Nacional Opositora (UNO), a cobbled-together coalition of 14 political parties-ranging from parties with strong links to the Contra army to the Communists--united only in
opposition to the FSLN and by American pressure. The UNO government moved to reverse
many of the FSLN reforms and initiated a haphazard project of structural adjustment. The
remaining properties of the APP were privatized and elites who had fled the country began to
return. Many of the returning exiles had established contacts with international capital while in
exile and returned well-positioned to take advantage of the economic opening (Spalding, 1994).
Also well-positioned were a handful of Sandinista leaders, who used their access to the State to
amass land and capital or to purchase the hastily-privatized businesses. Those elite families who
had remained in Nicaragua through the decade--particularly traditional agricultural elites--faced
dim prospects and viewed both rising groups with enormous resentment, further undermining
elite coherence.
The fractious UNO government heralded the end of the revolution and the failure of the
Sandinista attempt to create a strong and functional Nicaraguan state. While united in opposition
to the FSLN, the Nicaraguan elite remained internally fragmented, incapable of developing a
coherent governance program or transforming the UNO into a hegemonic party.
El Salvador: War, Ruin, and Reconfiguration
In the wake of the FSLN victory in Nicaragua and facing rapidly growing resistance from
the armed organizations of the Frente Farabundo Martí para la Liberación Nacional (FMLN),
junior officers in the Salvadoran Armed Forces launched a military coup in October, 1979. The
new "revolutionary junta" comprised a heterogeneous and unstable coalition of junior officers,
urban middle sectors, reformist political parties and their allied unions, and elements of the
Catholic hierarchy (Cardenál, 2002). The coup leaders hoped to avert revolution through
structural reforms of the kind long blocked by the extraordinarily powerful and united landed
oligarchy. The new junta took on their former allies headfirst, announcing plans to nationalize
banks and external commerce as well as an extensive agrarian reform. In protest, a number of
elites left the country. According to Infopress, Capital flight reached at least $1 billion from just
1979 to 1982.
The new junta had a weak social base, however, and hardliners within the military,
supported by both the economic elite and the US embassy, began to push the new junta
rightward. Rightist members of the Salvadoran Armed Forces formed underground ties with
traditional elites, especially in rural areas, in support of death squads, while state repression of
popular sectors increased (Montgomery, 1995).2 By January 1980, all of the civilian members of
2
The death squads targeted student, labor and peasant leaders along with anyone else suspected of being
a guerrilla sympathizer. Death squad activity reached a peak at more than 1000 murders a month in the
the Junta had been forced out or resigned in protest. Seeking new civilian allies to legitimate
their rule and to grant a semblance of continuity to the leadership, the junta invited the USsupported Christian Democratic Party (PDC) to join the government. The military leadership,
however, was unwilling to cede any control over the direction of the ongoing civil war and the
willingness of PDC leader Napoleon Duarte to tolerate the repression fatally undermined the
party’s legitimacy and alienated the left wing, which abandoned the party in protest. The
repression and the junta’s inability to control the death squads also drew international
condemnation. By the 1982 the military leadership, under strong pressure from its American
advisors, began a controlled transition to civilian rule. With extensive American support, Duarte
won the 1984 presidential elections, from which left parties were banned.
While effective in securing continued American support, this limited democratic opening
failed to establish a regime with a domestic support base of any weight, leaving the PDC
administration almost entirely subject to American dictates. For five years, the Duarte
government and its American counterinsurgency advisors attempted to avert revolution by
weakening the traditional oligarchic elite while continuing repression of the far left. The strategy
failed. Instead, the military, the US embassy, and the PDC gained the enmity of both the left and
the right in an increasingly polarized nation. The structural reforms were less effective in
breaking the traditional oligarchy than hoped and the revolutionary left expanded, controlling
roughly half of the Salvadoran countryside by mid-decade. The Armed Forces responded by
turning areas under FMLN control into “free fire zones”, using scorched earth tactics that killed
wake of the coup. Death squad activity slowed down after 1983 under extraordinary American pressure.
The dominant bloc within the military, however, aligned the institution with the American strategy of
controlled reform, infuriating the Salvadoran elite.
tens of thousands of peasants and displaced over a million people. Despite massive American
military assistance, the war remained stalemated throughout the decade.3
The combined effects of civil war, the debt crisis, world economic downturn, and the
collapse of prices for key agricultural commodities nearly devastated the Salvadoran economy
during the 1980s. The decade was, in the words of one Salvadoran policymaker, “a veritable
descent into hell” (Salazar Candél, 1995:185). By the ceasefire in February 1992, the
government estimated that the war had cost $329 million in direct damages and $708 million in
indirect damages (cited in Dunkerley, 1994:12). Alienated from the leadership of the Armed
Forces and from their former allies in the US embassy, elites struggled to adjust as the economy
spiraled out of control and civil war raged. Between 1978 and 1984 real wages fell steadily, GDP
dropped by nearly a quarter, basic grains production fell by 15 percent, and the cost of living nearly
doubled (Dunkerley, 1980:410). The profound anti-communism that had characterized elites since
the 1930s predominated through the early years of the civil war, burying sectoral conflicts under
its totalizing discourse. As the civil war dragged on, however, internal battles, changing
accumulation strategies, and the formation of new organizations reshaped the private sector
landscape.
The structural reforms undertaken by the revolutionary junta drew ferocious elite
opposition and contributed to the fragmentation of the economic elite, though more slowly and
far less definitively than their designers hoped. The banking elite had largely decapitalized in
advance of the nationalization of the sector while agro-exporters generally received favorable
3
Over the course of the decade, the Salvadoran military received over $1 billion in American military aid
(Cuenca, 1992:26) and the army more than tripled in size (Barry and Castro, 1991:109). With this influx
of aid, the Salvadoran Armed Forces began to mirror their Guatemalan counterparts, engaging in military
entrepreneurialism and corruption, including cases of the kidnapping and murder of elites (Stanley, 1996).
treatment from the new state agencies overseeing external commerce. Far more threatening to the
elite was the three-stage agrarian reform decreed in March of 1980, which the US Congress had
made a condition for continued aid to El Salvador. Oligarchic opposition blocked full
implementation of the reform, however: the first phase only reached a small percentage of farms
and phase two--which would have dramatically impacted elite landholdings--was never even
attempted. Altogether, the landed elite lost somewhere between 14 and 23 percent of its land to
the reforms.
Fear of additional expropriations, the effects of civil war in the countryside, and
economic sabotage (carried out by both the FMLN and some elites seeking to undermine the
Duarte regime and the agrarian reform) collectively battered export agriculture. Cotton and cattle
production dominated in the eastern and central departments, where most of the war was fought;
owners abandoned their farms out of fear and because of the mass displacement of the
workforce. Combined with low international cotton prices for much of the decade, this
disinvestment led to the virtual disappearance of both industries. Although the best coffee lands
were not in the conflict zones, increasing labor militancy and the climate of insecurity generated
by the war led to significant disinvestment in the coffee sector as well. By the end of the decade,
the traditional agro-export economy had collapsed; from representing nearly twenty percent of
GDP in 1980, export agriculture sunk to less than five percent by 1992 (Wood, 2000:55).
While the wealth and power of the landed oligarchy steadily eroded, those elite families
with diversified holdings and liquid capital were able to survive the ravages of the 1980s. Some
transferred money into the maquiladora sector, which was largely unaffected by the war and by
the ongoing fiscal crisis that hit other sectors. Others moved capital toward the growing sectors
linked to the mass influx of foreign capital: finance, imports, retail, construction, and real estate,
as low wages allowed profit rates for non-agricultural enterprises to climb from less than ten
percent in 1980 to over twenty percent in 1991 (cited in Wood, 2000:74). The rising economic
sectors--largely urban and hence less affected by the violence of the war--responded to the flood
of dollars into the country from US aid and the remittances sent by the million or more
Salvadorans who fled to the US during the war. By 1991, remittances and foreign aid exceeded
the value of exports (Wood, 2000:60). The commercial sector—one of the few economic sectors
not traditionally dominated by the elite—grew most spectacularly, increasing from pre-war
levels of twenty to twenty-five percent of GDP to more than thirty-six percent by the end of the
decade (Wood, 2000:55). This commercial boom allowed a few non-oligarchic families,
particularly several Arab families, to amass wealth and, eventually, political influence.
In 1981, a small group of hard-right elites and their allies in the military formed a
political party, the Alianza Republicana Nacionalista (ARENA). Initially, the party was
dominated by hard right agrarian elites. The party’s “maximum leader” and first presidential
candidate, Major Roberto D’Aubuisson, was deeply involved in the death squads and the party’s
sole coherent ideology was a ferocious anticommunism.4 Lacking an alternative vehicle,
battered by the war and the Duarte regime’s failed economic policies, the bulk of the elite rallied
to ARENA.
The shifting elite accumulation strategies affected the range of tactics, both licit and
illicit, the Salvadoran elite developed in its attempt to recapture its traditional influence over the
4
The shifting elite accumulation strategies were also evident in changes in the rise and fall of various
private sector organizations. The traditionally dominant agricultural organizations, particularly the coffee
growers’ and coffee processors’ associations, saw their influence within the peak business association, the
National Private Enterprise Association, erode steadily. By the end of the decade, the agricultural
associations were plagued by infighting while the formerly weak Chamber of Commerce and Industry
assumed increasingly powerful positions within ANEP.
state. The rise of more moderate elites with interests outside of the traditional agricultural sector
was reflected in the landscape of elite sectoral and political organizations. While some elites
continued to envision their political role primarily in terms of anti-communism, for many their
respective country’s major struggle by the 1990s was to succeed in the global market.
By the middle of the decade, ARENA began to show signs deep divisions between its
hard-right, agriculturist founders and the increasingly vocal group of more moderate elites.[v]
Through careful maneuvering, the party leadership managed to prevent a definitive schism.
Radical rightists maintained their allegiance to party founder Roberto D'Aubuisson, but the
American veto on a D’Aubuisson presidency led to the choice of a moderate scion of an
oligarchic family, Alfredo Cristiani, as the (victorious) ARENA candidate for the 1988 elections.
By this point, the changes in the Salvadoran economy and in elite accumulation strategies had
strengthened more moderate sectors vis-à-vis the largely agricultural hard right. As President,
Cristiani was thus able to pursue a radical neoliberal agenda and a negotiated end to the war
despite the opposition of the far right.
Neoliberalism had a strong domestic ally: the Salvadoran Foundation for Economic and
Social Development (FUSADES). The think-tank was formed in 1983 with support from the US
Agency for International Development as part of an American strategy to create a “civilized
Right”. More moderate, often young elites--most US-educated and disproportionately
representing the commerce sector—united with technocrats in FUSADES to flesh out a
Washington Consensus for El Salvador. As ARENA and FUSADES grew more hegemonic,
ANEP gradually reduced its role to a technical support organization for its members and the
agricultural elite lost any influential channel to the state. Cristiani, one of FUSADES' first
directors, filled his administration with FUSADES associates, earning his party the nickname
"Fusarena.” The administration moved quickly to align El Salvador with Washington's agenda.
In 1990, El Salvador joined GATT and in 1991, Cristiani signed a $75 million structural
adjustment loan with the World Bank and fully complied with the Bank's recommendations. .By
the end of the 1990s, the Heritage Foundation (2001) ranked El Salvador as the top free market
economy in Latin America and one of the freest in the world. While the PDC remained in power,
the Salvadoran elite vociferously objected to any attempts at peace negotiations. By 1990,
however, ARENA was in power and the hard-right opposition to negotiation was alienated from
the core of the party.[vii] More moderate elites were less concerned with anti-communism than
with success in the globalized economy--increasingly viewed an end to the war as a prerequisite
for economic growth. By 1990, the Cristiani administration agreed to peace negotiations with the
FMLN moderated by the United Nations.5 On January 16, 1992, the government and the Armed
Forces signed the Chapultepec Accords, ending twelve years of civil war.
Guatemala: Continuity and Rupture
Guatemala's internal armed conflict spanned more than three decades (1960-1996), but in
the early 1980s widespread social mobilization and political violence reached a crescendo. By
1981, armed revolutionaries had stepped up actions in sixteen of the country's twenty-two
provinces. Wealthy Guatemalans began evacuating their capital amidst fears of an insurgent
5
There were at least four coup attempts in El Salvador in 1990-91 as the peace negotiations neared
completion, but attempts had support only from a fraction of the elite. According to one general
prominent during that period, the civilian support for the coups was comprised of dispossessed
landowners who were, in his knowledgeable estimation, "no longer heavyweights" (Beard interview San
Salvador June 21, 2000).
victory, as Guatemala appeared poised to follow neighboring El Salvador into all-out civil war
and possible revolution.
But Guatemala was not El Salvador. Although wide areas of the countryside exhibited
near insurrectionary conditions by 1980, the small groups of poorly armed guerrilla fighters
could not match the well equipped and highly trained Guatemalan military. In 1981, the army
responded to the guerrilla threat with a two-pronged strategy that focused on demolishing the
insurgents' urban base in the capital city, and then marching through the Mayan highlands with a
scorched earth campaign to separate the guerrillas from their grassroots supporters (CEH, 1999).
Unlike El Salvador, where a stalemate in the civil war left the FMLN in de facto control of
nearly one-third of Salvadoran territory, in Guatemala the guerrillas were beaten back militarily
and their bases of support were severely eroded. By the mid 1980s, this counterinsurgency
campaign had left hundreds of villages in ruins, tens of thousands of people killed, and more than
one million displaced.
Given this somber scenario, did the armed conflict alter the landscapes of power in
Guatemala in any meaningful way? At first glance, perhaps it did not. The armed conflict did not
have a measurable impact on the country's inequitable economic structure. Indeed, in many
ways, the Guatemalan private sector as a whole came out of the 1980s unscathed (even if
individual families suffered, at times greatly, from guerrilla actions such as assassinations,
kidnappings and economic sabotage). Unlike El Salvador and Nicaragua, Guatemala did not
have a redistributive agrarian reform in the 1980s, and its skewed land tenure system remained
intact. A small yet economically and politically powerful elite maintained its control over the
country's richest agricultural lands, especially in the fertile export zone along the Pacific coast.
The landed elite continued to diversify into other economic activities such as real estate, banking
and financial speculation (Dosal, 1995), yet agriculture's overall weight in GDP in Guatemala
remained constant from the 1970s through the 1990s, while export agriculture rose from 64.4%
of all agricultural production in 1986 to 72.8% in 1998 (AVANCSO 1994:38; UNDP 1999:21).
Unlike other countries in Central America, during the 1980s the United States had
relatively little success in Guatemala at engineering a structural transition away from plantation
agriculture. The goal of U.S. policy was to encourage the growth of non-traditional exports (both
agricultural and industrial). In theory, this would give rural peasants an alternative source of
income (thereby undercutting support for the revolutionary movement), and it would also
marginalize the most retrograde sector of the landed elite. The U.S. Agency for International
Development invested in highland export production, and a number of studies deal with these
changing production relations among small-scale farmers (see, for example, Paus, 1988;
AVANCSO, 1994). But the United States was not able to create the sort of parallel private sector
structure that it achieved in El Salvador and Costa Rica. During the 1980s, for example, the NonTraditional Exporters Association was only marginally affiliated with Guatemala's main business
umbrella association, the Coordinating Committee of Agricultural, Commercial, Industrial and
Financial Associations (CACIF), as a subgroup within the Chamber of Industry. McCleary
(1999) suggests that the relative weakness of the U.S. efforts to transform the Guatemalan elite
was due to the less significant amounts of U.S. foreign aid sent to Guatemala during the 1980s, a
result of political battles in Congress over human rights concerns.6 It was also due to the
unbroken dominion of the landed elite in Guatemala. Non-traditional agriculture grew in
Guatemala by drawing in peasant producers through alliances with foreign rather than national
6
U.S. military aid to Guatemala had been cut off in 1977 because of human rights concerns. Although
small amounts of U.S. military aid continued during the 1980s, the Guatemalan army carried out its
counterinsurgency drive with support from proxy governments, such as Israel, Taiwan and Argentina.
capital, and it did not involve a shift in production strategies on the part of the landed elite. One
plantation scion explained the reluctance to shift to the kind of “contract” farming promoted by
USAID: "We already control the best land in the country down here," in the Pacific littoral, "so
why would we want to get involved with peasants up in the highlands?"7
Agrarian reform was never part of the army’s counterinsurgency project in Guatemala.
Dosal (1995) explains the strident opposition to agrarian reform on the part of Guatemala’s
landed elite as an effect of the “trauma” that Guatemalan elites experienced during the decade of
reform from 1944 to 1954, particularly the 1952 agrarian reform law and the rural organizing
that it inspired. The U.S.-orchestrated military coup of 1954 in Guatemala and the second coup
of 1963 forestalled not only revolutionary change, but also the emergence of middle-class
reformists or military-backed populists such as occurred in other Latin American countries in the
early and mid twentieth century. Although the relationship between the military and elites has
often been jagged, during the three decades of the war no progressive elite sector emerged to
challenge military rule, and military leaders did not pursue redistributive policies in any
sustained way.
Yet, during the 1980s, the Guatemalan army did admonish elites that they owed a
“security debt” to the country. After the 1982 coup that brought General Efraín Ríos Montt to
power, Guatemalan army officers stressed that consolidating a long-term counterinsurgency
project would mean building a strong state to bring about national stability (Guatemalan Army
High Command, 1987). This would cost money, and in 1987 the army backed a proposal by
Guatemala’s new civilian president, Christian Democrat Vinicio Cerezo, to raise taxes on the
wealthy. CACIF threatened a capital strike in response to the tax reform (Palencia Prado, 1988),
7
Oglesby interview with Ramón Campollo, director of Ingenio El Pilar, Guatemala City, October 14, 1994.
demonstrating a characteristic ability to draw medium and large-scale producers together in
granitic opposition to the state. Opposition to the army high command’s national stability project
came from disgruntled sectors of the military as well as some members of the oligarchy. In May
1988, these groups came together in an aborted coup against Cerezo. Although the coup failed, it
led to political realignments that ended the vision of a developmentalist state as neoliberal
reforms took hold. The tax issue remained unresolved: at the close of the armed conflict,
Guatemala's tax income was 7.9% of GDP, the second lowest in the hemisphere, while less than
one-quarter of tax income came from direct taxes on wealth (a question that would be broached
yet again as part of the peace process).8
By the end of the 1980s, then, the Guatemalan elite continued to show remarkable unity
around the bedrock issues of opposition to redistributive policies, and large-scale agricultural
production remained a key elite activity. The cotton export economy collapsed by the end of the
decade, but coffee remained relatively steady throughout the 1980s, despite the disruptions of the
armed conflict.9 The amount of land planted in sugarcane along the Pacific coast more than
doubled between 1985 and 2000 (Oglesby, 2002:52). While maquila industrial production rose
to 12% of export earnings by the mid 1990s, two-thirds of this growth stemmed from foreign
(mainly Korean) capital (Ibid:50). Control over land remained key in Guatemala throughout the
1980s, yet there was very little that was “traditional” about the emerging power brokers of the
agricultural elite. The sugar enterprise Pantaleón, Central America’s largest sugar mill, illustrates
the tight integration between agricultural enterprises and finance capital in Guatemala. Listed by
the Ministry of Finance as one of the top ten businesses in Guatemala, in the late 1990s
8
Central America Report, January 10, 1997.
With international competition in the 1990s, the coffee economy shifted from lower-value industrial grade coffee
produced on large plantations to higher-value, high altitude coffee produced by peasant farmers; see, Oglesby 2002.
9
Pantaleón’s finance company merged with the Grupo Paiz, the largest investment group in the
country, and the Banco Cuslatán, of El Salvador, becoming a major player in the regional capital
markets.10 Land played a role in this expansion as security to enter the region’s emerging bond
markets and to speculate in international financial and futures markets. Throughout the course of
the armed conflict, control over land thus remained important both economically and politically
in Guatemala.
Yet, even though Guatemala's armed conflict did not produce systemic economic change,
in many ways it was a dramatic social rupture, as indigenous mobilization exploded into view. A
massive 100,000-strong plantation strike in 1980 shut down the cotton and sugar plantations
along the Pacific coast during the harvest season. The strike was the culmination of years of
organizing that united Maya and non-Maya workers in a demand for higher wages and better
working conditions, and it upended strategies of labor control that had been based on the
manipulation of ethnic divisions. From the perspective of plantation owners, it was a dramatic
sign that something had changed in Guatemala, perhaps irrevocably (Oglesby, 2013). The 1980
strike, and the brief, ill-fated rural insurrection that followed, shattered the myth of Indian
docility.
A wave of assassinations followed, and the plantation labor unions crumbled. But the
1980 strike also prompted a rethinking on the part of key sectors of the agro-industrial elite
(especially the sugar producers) about how to ensure their long-term survival. Starting with the
large sugar mill Pantaleón (the largest mill in Central America), the azucareros developed new
methods to rationalize their control over the plantation labor force, as well as create a broader
project of governance in the post-war era (Oglesby, 2013; 2004). Pantaleón's general manager,
10
Latin American Private Equity Analysis, Vol. 1, Issue 3 (December 1997) and Vol. IVV Issue 1 (January 2000).
Miguel Fernández, one of the private sector's new managerial "organic intellectuals," described a
realization after 1980 that "we were in the middle of a social whirlwind." During the 1980s,
Fernández coaxed his peers in Guatemala's business associations that a "change in mentality"
was needed, from an attitude of "this is our finca" to a more sophisticated vision of hegemony in
the post-war period.11
An important backdrop to these private sector organizing efforts was the tentative start
of peace talks between the government and the URNG rebels in the late 1980s. For the private
sector, this raised the question of how to ensure its influence on the peace process, and it became
urgently important for the business class to articulate and promote a vision of national socioeconomic development whose basic tenet would be the preservation of private property rights.
The armed conflict was not the only trigger for the reorganization of the elite in
Guatemala. According to Marco Augusto García Noriega, a frequent president of CACIF, the
process of building a greater organizational vision within the Guatemalan elite was due to a
confluence of international and national influences. Starting in the mid 1980s, business leaders
began to meet with a group of economists from the University of Chicago and to attend
workshops at Georgetown University organized by the World Bank and the Inter-American
Development Bank. The goal of these meetings was to situate Guatemala within the “currents of
world history.” “We began to see what was going on in the rest of the world and to develop a
medium and long-term vision,” García Noriega described. Another important factor was the rise
within the various chambers of CACIF of a younger generation of business executives, who had
known each other intimately since youth and had attended the same Jesuit high schools in
Guatemala City (the Liceo de Guatemala and the Liceo Javier, where students received not only
11
Oglesby interview with Miguel Fernández, Guatemala City, November 21, 1994.
a rigorous education but also a certain social formation) at roughly the same time. This
generation included: Dionysio Gutierrez; Juan Luis Bosch, Peter Lamport; Edgar Heinmann;
Victor Suarez; Alejandro Botrán and Miguel Fernandez. It also included Alvaro Arzú (president
of Guatemala from 1996-2000) and several key figures of his administration, including Oscar
Berger (president of Guatemala from 2004-2008); Marco Sosa; Eduardo Stein; and Gustavo
Porras, a former guerrilla leader. According to García Noriega, what the members of this
extended cohort had in common was a “desire to see change in Guatemala.”12
Beginning in the mid 1980s, new private sector foundations were created to act as a
“facilitator and accelerator” of the programs of structural adjustment and to project a “clear and
futuristic vision” to the rest of the private sector and the society.13 In the early 2000s, Julio
Herrera, of Pantaleón, led a World Bank “petite comité” to encourage corporate social
responsibility in Guatemala, leading to the creation of the Center for Corporate Responsibility
(CENTRARSE) in 2005. Other members of this group were: Eduardo Gonzalez, of Bancafé,
William Stixrud, a former head of the National Coffee Association; José Pivaral, of Banco
Quetzal; and a representative from the department store chain, Cemaco.14 In this context, it is
important to understand corporate social responsibility not as a form of paternalism or as a
whitewashing of business practices, but as institution building and as a channel for elites to
influence national development debates that had broadened during the period of the peace
process and immediate post-war.
What changed for Guatemalan elites during the 1980s? A generational changing of the
guard within the Guatemalan private sector does not necessarily imply the emergence of more
12
Oglesby interview with Marco Augusto García Noriega, Guatemala City, January 10, 2001.
Oglesby interview with María Silvia Pineda de Sajché, executive director of the National Sugar Foundation (
FUNDAZUCAR), Guatemala City, December 7, 1999.
14
Oglesby interview with Mario Marroquín, World Bank, Guatemala City, January 14, 2001.
13
"progressive" values among leading elite sectors; in fact, elite attitudes toward issues such as
land reform, tax reform and labor unions remained as intransigent as ever. What did change
during the 1980s was that the most dynamic sectors of the Guatemalan elite realized that they
had unprecedented problems to resolve, from new competitive pressures to the need for more
sophisticated means of social and political hegemony. And this implied a different kind of
engagement with Guatemalan society no longer predicated solely on the direct use of violence.
The rupture of the 1980s can be seen in the reaction of CACIF to the 1993 serranazo, during
which leading members of the business class (including Miguel Fernandez, Victor Suarez, Peter
Lamport, Edgar Heinmann, Juan Luis Bosch and Morris Farchi) protested against President
Jorge Serrano for suspending the constitution and dissolving Congress (McCleary, 1999:221).
After the 1980s, the organized business class in Guatemala appeared willing to accept at
least the minimal trappings of political democracy in Guatemala. The real divisions within the
Guatemala elite at the close of the armed conflict had less to do with splits between agrarians and
industrialists (since these groups remained tightly bound together), and more to do with nuanced
divisions between elites who remained wedded to violence as their main way of exercising
power, and those who sought to develop a more stable project of rule.
But the new institutionality also meant that elites had to work to navigate the shoals of
the democratic transition and the peace process. Potential threats included the weakened
remnants of a popular project that coalesced around the peace accords, as well as the specter of
state populism that resurfaced with the post peace accord government of Alfonso Portillo.
Through an aggressive agenda of forums, publications and the creation of new private sector
foundations, these re-emergent elites sought to position themselves as an influential sector
within Guatemalan civil society. They advocated for the “privatization of development,” or the
channeling of international aid directly to the private sector to fund the health, housing and
literacy programs that directly benefitted their long-term plans for accumulation.15 And using the
“privatization of development” slogan as their shield, they staked out a newly vigorous political
terrain in opposition to any redistributive policies such as tax and land reform.
Other changes also occurred during Guatemala's three-decade armed conflict, for
example, the emergence of the Guatemalan army as an elite sector in its own right. From the
1960s to the 1980s, militarized state developmentalism and state violence came together to create
a new wave of army-led primitive accumulation, one which reconfigured local political and
economic landscapes in various parts of the country.
Between the early 1960s and the mid 1980s, Guatemala experienced nearly unbroken
military rule. This was also a period of relative growth in the size of the state, as well as
government investment (via foreign aid and loans) in large-scale infrastructural projects such as
road building. The synergy between military rule and state developmentalism deepened avenues
of accumulation for particular sectors of the army. In 1972, for example, the Banco del Ejército
was established as a semi-autonomous state enterprise, with military officers as its principle
shareholders. By 1985, the Army Bank had become the seventh largest bank in Guatemala
(Painter, 1989: 47-50), helping to open up new areas of the country such as the northern Petén to
cattle ranching and agro-export activities.
In the late 1970s, the border zone between Mexico and Guatemala became known as the
"zone of the Generals," due to land-grabbing associated with the construction of the Franja
Transversal del Norte, an arterial roadway cutting east-west through the rainforest. In some
cases, these land conflicts set the stage for large-scale massacres against Mayan villagers in the
15
FUNDAZUCAR, for example, was highly successful at soliciting international aid from the World Bank, the
European Union, Japan and USAID for its housing and health programs on the Pacific coast.
early 1980s, for example, in the Ixcán region of northern El Quiché (Manz, 2004). As in the
Franja, military officers also bought up land along the Pacific coast following a violent
displacement of campesino settlers there in the 1980s (here, the displacement destroyed what
were in many cases the last vestiges of the aborted 1950s-era agrarian reform).16
Not all regions of Guatemala experienced the aftermath of the armed conflict in the same
way, of course. In fact, the conflict produced a double movement: in some parts of the country,
the army-backed land seizures exacerbated local conflicts, elevated the status of local officials
linked to the military, and helped pave the way for the 21st century growth in extractive-based
accumulation (oil drilling in Ixcán, for instance) or new monocrop plantations (biofuels in the
Petén). In other regions, however, even those that were devastated by military
counterinsurgency, the armed conflict acted as a kind of corrosive, dissolving a century of
Ladino (non-Maya) political and economic control at the local level.
Since the late nineteenth century, Ladinos dominated most towns in the Guatemalan
highlands. Ladinos owned large tracts of land in the highlands, and they controlled major
economic activities such as labor contracting, commerce and transportation. In most places, the
local Ladino elite also monopolized municipal-level politics. Important local-level Maya
cultural, political and economic movements during the 1960s and 1970s began to erode this
multivalent Ladino control, yet the real break came in the 1980s. Guerrilla actions such as
selective assassinations and the occupation of fincas (large farms) provoked many Ladinos to
flee the highland towns and take refuge in the capital city. In many areas of the western
highlands, especially in El Quiché, the exodus of Ladinos opened up political and economic
16
Oglesby, fieldnotes, Escuintla, 1999-2000.
opportunities for Mayas and the emergence of a new sector of municipal-level indigenous
elites.17
In summary, Guatemala experienced a very different trajectory from El Salvador and
Nicaragua during the 1980s and after. No sweeping structural change occurred in Guatemala as a
result of the armed conflict. Yet, the 1980s were certainly a period of rupture, especially with
regards to the widespread indigenous mobilization. Although the landed elite in Guatemala was
not toppled by revolution nor by state decree, nevertheless the social and political terrain shifted
for these national elites, as it did for local-level elites in many parts of the country.
The “USS Honduras”
Central America’s poorest and less industrialized nation, Honduras has traditionally been
one of the most peaceful and least repressive. Moderate reforms untaken by military regimes in
the 1970s help prevent the violent unrest experienced in the neighboring republics. However, the
warfare in Nicaragua and El Salvador and a massive influx of American military aid threatened
to undermine Honduras’ traditional stability in the 1980s. The already extraordinarily powerful
military grew in size, influence, and corruption and moved toward an internal security
orientation more in line with the repressive militaries of northern Central America. Civilian
complicity with this militarization discredited the political elite, particularly the more progressive
Liberal party.
The quintessential “banana republic”, Honduras lacks a powerful agro-export oligarchy,
or indeed a coherent native economic elite. Foreign capital largely controlled Honduras both
economically and politically well into the 20th century. The Honduran government showed little
to no will or capacity to promote development or direct economic growth until after WWII, and
17
Oglesby, fieldnotes, 1986-2010. See also, Stoll (1993).
remained weak into the 1970s (Brockett, 1987). As across the region, the Honduran economy
diversified and modernized in the post-WWII period, although comparatively late and weakly.
The Honduran industrial sector is the smallest in the region; in the early 1980s, primary products
still accounted for eighty-four percent of export earnings (Norsworthy, 1994:55). The Honduran
capital sector was both sectorally and regionally divided, with a more progressive, modernizing
industrial and commercial elite based in San Pedro Sula and a conservative, landowning elite
based in Tegucigalpa. The regional divide also has a powerful ethnic component, pitting
Honduran elites around the capital against a Sanpedrano elite, especially in the commerce sector,
of overwhelmingly Arab and, to a lesser extent, Jewish heritage (Euraque, 1996).
Although Honduras has one of the longest traditions of two-party rule in Latin America,
both the National and Liberal parties are historically programmatically weak, personalist, and
reliant on patronage, fraud, and selective repression to capture power. Well into the twentieth
century, the banana companies controlled most of the levers of power. Because Honduras lacks a
powerful elite based in labor-repressive agriculture, the Armed Forces historically maintained
greater independence from elites and focused less on internal repression than in neighboring
nations. The military acted more as an arbiter of politics than the repressive arm of the oligarchy
or state, allying opportunistically with diverse parties and social sectors (Norsworthy, 1994,
Rosenberg, 1995, Ruhl, 1996).
During the 1970s, the military assumed direct rule in an unusual alliance with labor and
industrialists in the Liberal party (Euraque, 1996) and launched a series land and other reforms
early in the decade. These decidedly un-radical measures did not dramatically ease Honduras’
historic inequality but did help calm protest and kept Honduras from sliding into violent conflict
like its neighbors. By mid-decade, however, the reformist program weakened and by the end of
the decade, the military had spent its political capital in corruption and misrule. With the
Sandinista victory in 1979, Honduras became central to US counterinsurgency strategy in the
region. Under pressure from civil society and the US embassy (which sought to market Honduras
as a regional “showcase for democracy”), the military ceded power in relatively free elections in
1980 and 1981 and Liberal candidate Suazo Córdova became president in 1981.
This opportunity for a meaningful democratic opening was immediately undermined as
the nation became deeply embroiled in the regional morass. The Armed Forces controlled the
transition to civilian rule and ensured extraordinary praetorian power, including veto power over
cabinet appointments and total control over military strategy (Ruhl, 1995).18 Indeed, despite
civilian rule, the power of the military increased in the 1980s, buoyed by a flood of US dollars.
Honduras became a staging place for American military efforts in the region, and US military aid
reached a high of $81.1 million by 1986 (Ruhl, 1996:39). From just 1978 to 1984, the armed
forces doubled in size (Norsworthy, 1994:37). Honduras became the staging point for the Contra
forces, training ground for (and occasional collaborator with) its traditional enemy, the
Salvadoran Armed Forces, and the “USS Honduras—a sort of land-locked aircraft carrier” for
American forces (Sheperd, 1984:112). American forces constructed a vast new military
infrastructure, including airfields, bases, and radar sites.
From 1980-1984, political power coalesced around a US-supported General, Gustavo
Alvarez Martinez, who pushed the military toward a harsh national security doctrine and created
alliances with right-wing elites, particularly in the agricultural sector, a paramilitary organization
18
Under the terms of the transition, the president must convey all orders to the military through the head
of the Armed Forces. This head is selected, without presidential input, by Congress from a list of
candidates provided by the military’s governing body, the Superior Council of the Armed Forces.
18
18
and elite counter-insurgency battalions. Alvarez and his allies, inspired by the Southern Cone
examples, launched a small “dirty war”, arresting, torturing, assassinating, and “disappearing”
leaders of the small guerrilla organizations as well activists from peasant, labor, and other
popular groups.19 In 1984, however, this slide toward a Salvadoran/Guatemalan model of
counterinsurgency terror was arrested when Alvarez was overthrown by segments of the Armed
Forces who opposed growing human rights abuses, closer relations with the Salvadoran Armed
Forces and, especially, the General’s attempt to amass personal control over the institution.
Following the coup, repression eased and Honduran military involvement in the Salvadoran war
diminished, but the Contra forces continued to control a significant swath of Honduran territory.
By 1986, roughly 40,000 Contras and their families lived in the so-called “New Nicaragua” in
Honduras (Norsworthy, 1994:21).
The roughly $1.6 billion in military and economic aid received from the US during the
1980s (Norsworthy, 1994:159) did not prevent Honduras from suffering from the region-wide
economic crisis. Sharp drops in export revenues and foreign investment, massive capital flight,
and restricted international credit led to a doubling of foreign debt over the course of the decade
and recurring balance of payment crises. Honduras remained dismally poor, real wages sunk
steadily over the 1980s, and unemployment rose. By one estimate, open unemployment exceeded
80 percent by 1990 (Norsworthy, 1994:62).
While diversification had weakened the power of foreign capital in the decades leading
up the 1980s, as the “USS Honduras”, new foreign powerbrokers to some extent replaced the
banana companies in political influence. USAID gained enormous sway over nearly all sectors of
19
According to the Human Rights Ombudsman, there were 184 political killings in the 1980s, almost all
under Alvarez’ watch (cited in Brockett, 1998:196).
Honduran society during the 1980s; largely due to AID funding, the number of NGOs tripled
(Norsworthy, 1994:123). AID-trained technocrats gained ascendancy in economic policymaking
by mid-decade and AID-written policy proposals were adopted nearly word for word by the
successive regimes of the 1980s. In the 1989 elections, the discredited Liberal party lost to the
Nationalist candidate for president, Rafael Leonardo Callejas, a neoliberal businessman whose
cabinet had strong ties to AID (Norsworthy, 1994).
Although reliant on the flood of US assistance, while the Contra war continued, the
Honduran government had enough bargaining room resist some US pressure to adopt the full
complement of structural adjustment reforms, particularly cuts in social spending and
nontraditional export promotion. With the end of the Contra war, this bargaining room
disappeared. In 1990, the Callejas regime implemented a paquetazo of neoliberal reforms.
Honduras entered the 1990s still desperately poor and as or more vulnerable than ever to the
whims of American policymakers. American aid had helped expand and strengthen the military,
now lacking a clear mission. The US embassy quickly became a major critic of the Armed
Forces and the Honduran economic elite, alarmed by rising military influence and resentful of
the creeping economic power of the Instituto de Provision Militar, joined the anti-military
movement (Williams, 1994).
Costa Rica as Central America's "Showcase"
Costa Rica's system of relative social democracy and expansion of public services began
to fall apart in the early 1980s. In part, Costa Rica's dilemma during the 1980s was a debtinduced resource squeeze that highlighted the foundations of dependency upon which its mid
twentieth century economic "miracle" had been constructed. At the same time, Costa Rica's
economic vulnerability helped draw the country into the vortex of Central America's regional
conflict. Using political leverage created by the debt crisis, the Reagan administration turned
Costa Rica into the southern front for its semi-covert war against the revolutionary Sandinista
regime in Nicaragua, converting Costa Rica's border area with Nicaragua into a staging area for
the U.S.-funded "contra" attacks against Nicaragua. In the economic realm, Costa Rica was one
of the first countries in Latin America to attempt structural adjustment reforms under the heavyhanded tutelage of both the United States and international financial institutions. Yet, both
internal political factors and external factors such as Costa Rica's strategic role in the U.S.
onslaught against Nicaragua gave Costa Rica room to maneuver and slowed down the "shock"
effect of the structural adjustment.
Costa Rica was one of the first Latin American countries to experience the stark
debt crisis in the early 1980s, and its per capita debt became one of the highest. The high growth
rates that Costa Rica had maintained from the 1950s to the 1980s were reversed by the global
recession of the late 1970s and early 1980s. Inflation soared from 17.8 percent in 1980 to 81.8
percent in 1982, while Costa Rica's public foreign debt more than tripled (Rovira Más, 1987;
Seligson and Martínez Franzoni, 2005). The causes of the crisis were manifold: the fall of coffee
and banana prices with the worldwide recession, skyrocketing oil prices and steeply rising global
interest rates in the late 1970s all took their toll. So did the collapse of the Central American
Common Market with the regional warfare and stagnating growth. The deeper causes were
indicative of Costa Rica's ongoing dependency on primary exports, foreign borrowing and a
relatively shallow domestic industrialization (Robinson, 2003; Seligson and Martínez Franzoni,
2005). The crisis of the early 1980s became the initial catalyst for restructuring.
Key to our analysis is to understand how Costa Rica's economic crisis became
intertwined with the geopolitical moment in Central America. The Reagan administration saw
Costa Rica as a bulwark against revolutionary upheaval in the region, and Costa Rica became a
priority for U.S. policymakers. Costa Rican president Luis Alberto Monge adroitly exploited
Washington's paranoia, warning U.S. officials that Costa Rica could "go communist" without a
significant economic bailout. A certain level of political chaos in Costa Rica during this period
added to the tension: feuding Nicaraguan Contra groups carried out sporadic acts of terrorism
within Costa Rica (mostly against each other), and there were even a few armed actions on the
part of some sectors of the Left in Costa Rica. This fear gave the Costa Rican government
leverage with Washington in order to press for a bailout, and it also gave Washington political
leverage against some domestic elite groups who resisted the economic reforms (Clark, 2001;
Robinson, 2003).
Because of the key role that the United States assigned to Costa Rica within this
geopolitical context, the country soon began to receive massive amounts of economic support.
This came from the United States and from international institutions such as the IMF and the
World Bank, with conditionalities that were mutually reinforcing. Within this triad of structural
adjustment, the IMF focused on macroeconomic targets like reducing inflation. The World Bank
concentrated on the elimination of tariffs, and the U.S. Agency for International Development
worked on creating new private sector institutions. As Clark (2001) notes, USAID took the lead
on Costa Rica's domestic restructuring process because it gave more money than the IMF and the
World Bank combined, and because AID staff on the ground were in closer day-to-day contact
with local business leaders. Indeed, AID had deep pockets in Costa Rica during the 1980s: by
1983, Costa Rica was second only to Israel in terms of per capita U.S. aid (Dunkerley, 1989:592;
Honey, 1994:62). Most of the aid came in the form of Economic Support Funds, but it also
included security aid. There was a clear "quid pro quo" whereby the U.S. supplied aid to Costa
Rica in direct exchange for the country's assistance in helping to overthrow the Sandinista
government in Nicaragua, and threatened to suspend aid whenever Costa Rica balked at this
proxy role (Honey, 1994; Clark, 2001).
The key component of AID's assistance program was the creation of a "parallel state" of
private sector enterprises. In other words, AID-funded structural adjustment was not a frontal
assault on the state, but a war of attrition. In this war of attrition, state institutions were not
dismantled; rather, scores of new private sector bodies were created with AID funds to take on
the same functions. For example, AID challenged the state's holding company and development
bank, CODESA, with the creation of a new Corporation of Private Investments (PIC), and
helped create a new private sector think tank, the Coalition of Development Initiatives (CINDE),
as well as a parallel "ministry" of agriculture to promote non-traditional exports (Honey, 1994;
Clark, 1997, 2001; see also Fox 1998). COINDE serves as an infrastructure for dismantling the
old ISI development model and as a channel to create a new ideological consensus around the
new neoliberal policies (Clark, 2001; Wilson, 1994). Top leaders of both parties were hired by
AID to staff the new institutes and agencies (Robinson, 2003:139).
Despite Costa Rica's claims to "exceptionalism," it was not immune to the crisis
sweeping Central America in the 1980s. Costa Rica's geopolitical role as a staging ground for the
contras and as a "showcase" of neoliberal economic reforms made it a linchpin of U.S. policy.
Unlike other Central American cases, Costa Rica did not experience an institutional rupture, or a
major schism between different factions of the elite. The landed elite did not have to be displaced
(as in El Salvador), since their hegemony had already been broken during the 1948 civil war.
Although the early 1980s were marked by some fierce political infighting between those who
sought to maintain the old ISI model and the neoliberals who wanted to dismantle it, eventually
an elite social consensus coalesced around neoliberal policies, and elites found new avenues of
accumulation through finance and in non-traditionals. The Left did protest these changes, and a
certain culture of protest emerged, but Costa Rica did not have a revolutionary upsurge. Some
scholars have pointed to the Costa Rican experience as a "gradual" structural adjustment, as
opposed to a radical "shock doctrine" (Wilson, 1994; Clark, 2001; Seligson and Martínez
Franzoni 2005). Yet, as gradual as the structural adjustment may have been, the 1980s were a
watershed period in terms of the erosion of state developmentalism and the ascendance of
neoliberalism in Costa Rica.
Conclusions
A comparative analysis of Central America during the 1980s permits us to see that the
vortex of revolutionary change impacted the position of elites across the entire region, although
each country experienced that tumultuous decade in different ways. From the Sandinista
revolution in Nicaragua, to the counterinsurgent reforms in El Salvador, to the mixture of
continuity and change in Guatemala, to the protagonism of Costa Rica and Honduras in the
regional conflict, we have tried to document the ways that politics at multiple scales shaped the
options and responses of Central American elites during the 1980s. Indeed, by showing how the
trajectories of elite change in Central America responded not simply to the seemingly
“agentless” pressures of globalization, we are attempting precisely to rescue a sense the
importance of politics to an understanding of Central American elites during the 1980s. What we
call the “insurrectionary geographies” shaped elites’ room to maneuver in variegated ways. In
some cases, new fractions of capital emerged triumphant, in other cases, “traditional” elites
became less so, yet across the region economically powerful sectors had to grapple with
conditions not entirely of their choosing. Alongside the global economic changes of the 1980s,
the region's revolutionary movements and armed conflicts shaped the relative strength of
different components and strands of elite groupings. Understanding how elites in Central
America not only were social actors during the 1980s, but also were acted upon provides
important insights into the political and economic contours of the post-war era.
A crucial point in the comparative analysis of Central American elites during the 1980s
has to do with how the armed conflicts profoundly altered elites’ relationships to the military.
This is especially pronounced in Nicaragua, where the Sandinistas created a new army that
survived into the post-revolutionary era. The legacy of military rule is also especially prominent
in Guatemala, where the so-called "hidden powers," or clandestine networks of active and retired
military officials, are now reconstituted as organized crime rings. Central America's armed
conflicts transformed the region's militaries into elite sectors in their own right, and created a
legacy of impunity with deep implications for the post-war exercise of power.
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