The Forgotten History of Cinco de Mayo Is About Rich Countries Strangling Poor Ones Jon Schwarz - The Intercept
go to original May 5, 2017

Maximilian I of Mexico (Alchetron)

To the degree most Americans think about it all, Cinco de Mayo is a day to drink lots of Mexican beer.

But the forgotten history behind Cinco de Mayo is fascinating and remains extremely relevant today. In fact, it’s so relevant for small countries around the world that it’s hard not to believe that’s exactly why it’s been forgotten.

Cinco de Mayo celebrates the victory of Mexican troops over the invading French army at the Battle of Puebla southeast of Mexico City on May 5, 1862. Because the Mexican soldiers were badly outnumbered and outgunned, the unexpected triumph was a watershed in forging the country’s national identity. (Militarily it wasn’t that significant — the next year France captured the Mexican capital and installed a member of the Austrian nobility as Maximillian I, “Emperor of Mexico.”)

But here’s important part for everyone else to remember today: France was invading Mexico essentially because Mexico owed France money.

Getting into unsustainable debt is not something unique to Mexico; countries have done so over and over throughout history, particularly during wars. The U.S. borrowed more than we could ever repay from France and the Netherlands during the Revolutionary War, and the U.K. borrowed far beyond its means from the U.S. during World War I.

When this happens, it’s far better for both the debtors and creditors to organize some kind of default rather than forcing the debtors to pay all the money back on the original terms. The advantage for debtors is obvious. More intelligent creditors understand it’s also good for them, because they generally don’t have a choice between getting all or just some of their money back. Instead, it’s a choice between getting some of it back or much less.

To understand why, imagine loaning too much money to a software engineer. If you demand that the engineer sell all their computers to make interest payments, you’re unlikely to get much more money after that.

And indeed both the U.S. and U.K. defaulted to varying degrees after their wars. Likewise, in 1862 the U.K. and Spain agreed to accept less than they were formally owed by Mexico.

France, however, invaded Mexico in an attempt to get all its money back, which is why French troops were there for the Battle of Puebla on May 5.

In a sense, the invasion was admirably honest. International relations are often like organized crime on a gigantic scale, but people pretend otherwise. Here there was no pretense: The loanshark’s enforcers beat the crap out of an entire country.

Read the rest at The Intercept

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