hos 2

Latin Am erica

Latin Am erica: Countries of South Am

erica and Central Am erica &

islands of Caribbean Sea

• colonial era in Latin Am

erica began in the 15th–16th centuries w hen explorers

such asChristopher Colum busand

Am erigo Vespuccim

ade voyages of discovery to the N

ew W

orld. •

1532 the first Portuguese settlem ent w

as m ade in Brazil.

• Rom

an Catholic church soon established m any m

issions → Rom

an Catholicism is

still the chief religion in m ost Latin Am

erican countries •

Spanish & Portuguese colonists enslaved the native Indian population, w

hich w as

soon decim ated by ill treatm

ent and disease,then im ported African slaves to

replace them

• Betw

een 1808 and 1826 all of Latin Am

erica except the Spanish colonies of Cuba and Puerto Rico slipped out of the hands of the Iberian pow

ers 1.

reform s im

posed by the Spanish Bourbons in the 18 thc provoked great instability in

the relations betw een the rulers and their colonial subjects→

Creoles(those of Spanish parentage but w

ho w ere born in Am

erica) felt Bourbon policy to be an unfair attack on their w

ealth, political pow er, and

social status. 2.

Thom as Hobbes,John Locke, M

ontesquieu, and Jean-Jacques Rousseau→

m ore

questioning attitude tow ard traditional institutions and authority →

Enlightenm ent

inspired leaders of the independence m ovem

ents across Latin Am erica →

A series of m

ovem ents for independence, led by José de

San M artín,Sim

ón Bolívar, and others, sw

ept Latin Am erica in the early 19

thc 3.

final victory of Latin Am erican patriots over Spain began in 1808 w

ith Spanish king and his son Ferdinand taken hostage by N

apoleon

Independence

• https://video.search.yahoo.com

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erican+independence+video+youtube& type=E211U

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LATIN AM

ERICAN IN

DEPEN DEN

CE DATES

Country Independence

A rgentina

9 July 1816 (from Spain)

Belize 21 Septem

ber 1981 (from U

K)

Bolivia 6 A

ugust 1825 (from Spain)

Brazil 7 Septem

ber 1822 (from Portugal)

Chile 18 Septem

ber 1810 (from Spain)

Colom bia

20 July 1810 (from Spain)

Costa Rica 15 Septem

ber 1821 (from Spain)

LATIN AM

ERICAN IN

DEPEN DEN

CE DATES (2)

Cuba 20 M

ay 1902 (from Spain: 10 D

ecem ber 1898; adm

inistered by the U S from

1898 to 1902)

D om

inican Republic 27 February 1844 (from

H aiti)

Ecuador 24 M

ay 1822 (from Spain)

El Salvador 15 Septem

ber 1821 (from Spain)

French G uiana

A n overseas departm

ent of France; the only territory in m ainland A

m ericas to still be fully integrated into a

European country

G uatem

ala 15 Septem

ber 1821 (from Spain)

G uyana

26 M ay 1966 (from

the U K)

H aiti

1 January 1804 (from France)

H onduras

15 Septem ber 1821 (from

Spain)

M exico

16 Septem ber 1810 (from

Spain)

N icaragua

15 Septem ber 1821 (from

Spain)

Panam a

3 N ovem

ber 1903 (from Colom

bia; becam e independent from

Spain: 28 N ovem

ber 1821)

Paraguay 14 M

ay 1811 (from Spain)

Peru 28 July 1821 (from

Spain)

Puerto Rico none (territory of the U

S w ith com

m onw

ealth status)

Surinam e

25 N ovem

ber 1975 (from the N

etherlands)

U ruguay

25 A ugust 1825 (from

Brazil)

V enezuela

5 July 1811 (from Spain)

B uilding new

nations (1826– 50)

• Representative governm

ent and the concept of popularsovereignty had w

eak presence in Iberian

political culture→ Thus, influence of the

Enlightenm entfor

producing constitutions

• Latin Am

ericans encountered a great deal of difficulty in finding suitable European princes to rule their countries→

local figures, lacked the necessary authority to be accepted as m

onarchs→ for practical as w

ell as ideological reasons,republicsw

ere the rule during the 19 thc but as leaders sought greater

centralization, they adopted new form

s of republicanism &

stronger and centralized

states •

in the 1825–50 period, Latin Am erica experienced a high degree of political

instability → governm

ents changed hands rapidly in m ost areas

social hierarchy w as based on social stratification

This classification determ ined a person’s influence, control,

suprem acy and individual rights in the Latin Am

erica

Latin Am erica social hierarchy w

as totally structured on one thing –

the place one w as born. Sim

ply if a person w as born in Spain

then he autom atically cam

e under the superior class

The hierarchy starts from the highest rank group having utm

ost pow

er and influence in Latin Am erica &

finishing w ith the

social group having low est rights, control and pow

er

Latin Am erica Social Hierarchy (1)

Peninsulares / Spaniards

• The highest social group in the Latin Am

erica social hierarchy •

people w ho w

ere born in Spain, considered of true blood •

controlled the entire governm ent along w

ith econom ic system

Creoles The people w

ho w ere born in Latin Am

erica but their parents w ere Peninsulares.

• w

ere provided w ith the m

ajority of the local land ow nership

• enjoyed nobility over other social classes of the Latin Am

erica

Latin Am erica Social Hierarchy (2)

• M

ulattoes / M estizos

• This social class incorporated people w

ho w ere of m

ixed ancestry.

• W

hen a Creole m arried a low

erclassperson, the babies they had fell in the category of M estizos.

• Indio

• the Indigenous class

• provided few

rights along w ith som

e authorities in the society •

N egro

• people from

black ancestry or having black skin appearance. They w ere basically African slave descendent.

• Slaves

• These people w

ere not free people. They w ere slaved labors for the higher social classes, w

ith zero rights of their ow

n

Political and econom ic transitions in the second half of 19

thc

• Europe &

N orth Am

erica experienced a second w ave of industrialization→

began to reevaluate the econom

ic potential of Latin Am erica→

the region looked to them like a

vital source of raw m

aterials → to take advantage of the possibilities that this

conjuncture opened, elites in Latin Am erica directed their countries ever m

ore tow ard

export econom ies

• Investm

entsfrom Europe provided m

uch of the financial support for infrastructural im

provem ents→

Britain w

as the predom inant pow

er in the region, follow ed by

the United States,France &

and Germ any→

profits from these investm

ents poured to Europe

N ew

order em erging, 1910

– 45

• W

W 1 : Few

Latin Am ericans felt strong em

otional identification w ith either of the

contending alliances in W

orld W ar I(1914–18)

• only Brazil follow

ed the exam ple of the

U nited Statesin declaring w

ar on G

erm any, w

hile M exico and

Argentina, w hich saw

the U nited States asa

hem ispheric rival, vied for a leadership role on behalf of Latin Am

erican neutrality

• The outbreak of w

ar brought a sharp decline in its trade as the Allied

pow ersdiverted shipping elsew

here and G erm

any becam e inaccessible.

• W

W 2 : M

exico cooperated w ith U

S, Brazil sent forces overseas ,w hich put an

expeditionary force in Italy. In the end all countries not only broke relations w ith

the Axis pow ers but declared w

ar, though Argentina

took the step in M arch 1945.

National backlash & Cultural Nationalism

• im

portance of foreign capital inevitably provoked a nationalist backlash, w hich

reinforced cultural nationalism &

anti-im perialistsentim

entprovoked by U.S. intervention around the Caribbean and in M

exico. •

Culturalnationalism w

as associated w ith cherishing Iberian heritage as a shield against

corrupting Anglo-Saxon influences & anti-im

perialism w

ith leftist ideology •

rapid spread of the new m

edium of radio throughout Latin Am

erica &

transportation infrastructure

also contributed to greaterintegration of isolated

population clusters→ m

ass culture •

further escalation of econom ic nationalism

cam e w

ith the econom ic

depression of

1929→ a pound of Cuban sugar w

as selling for less than the U.S. tariff on the sugar→ in

response to the crisis, Latin Am erican countries raised their ow

n tariffs and im posed

other restrictions on foreign trade

The postw ar w

orld econom y

1870-1929 first globalization w ave cam

e at a tim e w

hen the w orld trade w

as exchange of raw

m aterials and food products > Latin Am

erica w as in good position, given its pattern of

specialization> after 1929 things changed→ econom

iesgrew, but at a slow er rate than in

m ost ofEurope

or EastAsia, so that Latin Am erica’s relative share of w

orld production &

trade declined

• im

pact of outside events not only on its econom y but also politically, by the spread of

im ported

ideologiessuch as com m

unism , fascism

→ M

ilitary dictatorships and M arxist

revolution w ere am

ong the solutions put forw ard, but none w

ere successful.

Com m

on features in Latin Am erica’s Econom

y

Latin Am erica is a m

ixture of countries of different sizes, geography, clim

ate, population, social econom

ic structure , factor endow m

ents , There are still som

e com m

on features in Latin Am

erican history: 1.

the Iberian colonial experience , 2.

specialization in natural resource-based products &

prim ary export patterns→

held them

back from gaining access to m

ore technologically dynam

ic segm ents of the

global m arket

Com m

on features in Latin Am erica’s Econom

y (2)

3. U

neven incom e distribution &

Poor m asses

4. Sim

ilar periods of grow th pattern

• 1820-70 the export-led grow

th

• 1870-1980 State led industrialization &

ISI •

Since the 1980s, Latin Am erican econom

ies have focused on strengthening the financial stability of m

arkets by m eans of neoliberal policies that cam

e to be know

n as the “W ashington Consensus”

Prebish-Singerthesis : w orldw

ide dem and shift tow

ard higher quality production caused substantial problem

s for Latin Am erica →

prom oted ISI→

pursued 1930s through the 1960s in Brazil, Argentina, and M

exico

• The econom

ic shocks delivered by the depression and tw o w

orld w ars, in

com bination w

ith nationalism , tilted

econom ic policy

after 1945 tow ard

dom estic developm

ent •

Protectionism w

as strong against agricultural products and textiles com ing from

the developing w

orld> Latin Am erica’s share of w

orld trade sank.

• Argentine econom

istRaúl Prebisch, head of the United Nations Econom

ic Com

m ission for Latin Am

erica & British econom

ist Hans Singer insisted that the

term s of trade &

investm ent in the contem

porary w orld w

ere stacked in favor of the developed industrial nations of the “center” as against the developing nations of the “periphery.”

• Their strategy therefore included em

phasis on econom ic diversification

and im

port substitution industrialization (ISI)

• recom

m ended internal structural reform

s including land reform both to

elim inate underutilized latifundios and to lessen inequality of incom

e distribution that w

as an obstacle to grow th of the dom

estic m arket.

Econom ic Integration in Latin Am

erica

• ISI

• in big countries new

approach received full play through protective tariffs, subsidies, and official preferences

• the sm

all Caribbean and Central Am erican republics &

sm aller and poorer

South Am erican nations, the prospects for ISI w

ere sorely lim ited by

m arket size→

called foreconom ic integration

am ong the Latin Am

erican countries them

selves, w ith a view

to attaining econom ies of scale.

• Starting in 1960 w

ith agreem ents fostering econom

ic union, such as the Latin Am

erican Free Trade Association, Central Am erican Com

m on

M arket,Andean Pact

Cold W ar Period: rural guerrilla conflict and urban terrorism

in response to social inequality and political repression

• great m

ajority of Latin Am erican governm

ents sided w ith U

S •

threat developed in Central Am erica w

hen the G

uatem alan

governm ent ofJacobo

Arbenz(1951–54), w hich frankly accepted the support of local com

m unists, attacked the

holdings of the U

nited Fruit Com pany

as part of an am bitious land reform

→ U

S to assist G

uatem alan counterrevolutionaries and neighboring Central Am

erican rulers in overthrow ing

Arbenz. •

CIA assistance to the Chilean m ilitary in ousting their country’s M

arxist president,Salvador Allende, in 1973

• Sandinista revolutionary governm

ent that took pow er in

N icaragua

in 1979, only to be w orn

dow n by covert action and econom

ic harassm ent to the point that it peacefully accepted defeat

in a free election in 1990 •

Fidel Castro, w ho, after ousting Batista at the beginning of 1959, proceeded by stages to turn

the island into the hem isphere’s first com

m unist state, in close alliance w

ith the Soviet U

nion.

End of 20 thc W

ashington Consensus (Econom ic neoliberalism

)

• privatization of public industries

• decreasing governm

ental social spending & increase in taxes

• deregulation of the financial sector

• reduction in the grow

th rate of dom estic credit, &

increase in the real dom estic interest rate

• Devaluation

• Free trade

• openness to FDI

W hat happened?

1. M

arket-opening reform s had surfeited Latin A

m erican countries w

ith cheap im

ports, 2.

the region becam e m

ore vulnerable to exogenous factors & turbulences in the

global econom y

3.Latin Am erica’s increasing econom

ic openness and trade liberalization w ere

im plem

ented alongside a w eak institutional developm

ent strategy

4.Latin Am erica’s export pattern produces low

level of value added but do generate econom

ic rents for big landlords → w

ere not in favor of educating the w

orkforce because they feared education w ill build w

orkers capacities and thus political pow

er→ resulted in the concentration of political pow

er in favor of landlords→

high econom ic and political inequality

5. Around 2000, Latin Am

erica’s population had com pleted an average of 7.1 years of

schooling> low com

pared to W est →

som e developm

ent of the education system in

M exico, Venezuela, Colum

bia. 6.

Politics w hich give m

arket efficiency precedence over the redistribution of social benefits do not am

end the situation of w ealth inequalities > contributed to increasing

rural and urban poverty→ the electorate strongly rejected political program

s w hich act in

accordance w ith the neoliberal policies and chose m

ore left political parties 7.

dependence on US econom y

Inequality: Latin Am erica is a region w

ith the highest levels of incom e inequality in the

w orld

1. To w

hat extent does the existence of the inequality account for region’s relative backw

ardness? 2.

To w hat extent is this a characteristics of the region’s style of developm

ent?

Ø oligarchic aspect of Latin Am

erican developm ent m

anifested in the concentration of politic pow

er, w ealth and incom

e in elite groups & landow

ners & finance groups w

ho controlled the econom

y Ø

State led industrialization had different results in term s of equality in different countries→

developed som

e form of w

elfare state w ith declining inequality for som

e tim e (Argentina , Chile ,

Uruguay). In others w

ith very large dom estic m

arkets and highly segm ented labor m

arkets in w hich a large

percentage of the population w as m

ade up of the descendants of slaves or m estizo cam

pesinos (i.e.., peasants of m

ixed Am erican-Indian-European ethnicity) called indigenous groups, the

industrialization process heighten the concentration of w ealth (Brazil).

M ain Econom

ic Sectors: Agriculture & M

ining

• Latin Am

erican econom y

is an export-based com posed of tw

o m ain econom

ic sectors:Agriculture &

M ining (rich in m

inerals) •

Agriculture: Latin Am erica produces and exports a diverse range of agricultural products

such ascacao, coffee, bananas, soya, beef. •

Latin Am erica accounts for 16%

of the w orld's food and agriculture production.

• Brazil &

Argentina lead the region in term s of net export due to high grain, oilseed, and

anim al protein exports.

• Structure of the agriculture sector is very diverse. In Brazil and Argentina large farm

s account for m

ost of the com m

ercial agriculture, but in m uch of Latin Am

erica, agriculture production com

es from the region's sm

all farm s.

M ining Sector

Brazil stands out in the extraction ofiron ore (w

here it is the second w orldexporter), copper,

gold, bauxite (one of the 5 largest producers in the w

orld),m anganese (one of the 5 largest producers in

the w orld),tin

(one of the largest producers in the w orld),niobium

(concentrates 98% of reserves know

n to the w

orld) and nickel.

In term s of precious stones, Brazil is the w

orld's largest producer of am ethyst, topaz, agate &

one of the m

ain producers oftourm aline,em

erald,aquam arine, garnet

Chile contributes about a third of the w orld

copperproduction Peru w

as the 2nd largest producer ofsilver & copper in the w

orld, and the 6th largest producer ofgold, third largest producer in the w

orld ofzinc & tin

and 4th in lead

Bolivia is the 5th largest producer oftin, the 7th largest producer ofsilver &

8th largest producer ofzincin the w

orld .

Mexico is the largest producer ofsilverin the w

orld, representing alm ost 23%

of w orld production, &

has im

portantcopperand zincand produces a significant am

ount ofgold.

Industrial Activity

• m

ain econom ies of Latin Am

erica are Brazil, Argentina, Colom bia, M

exico, & Chile

• industrialization of these countries received a great boost from

W orld W

ar II:→

im port substitution

• abundant local raw

m aterial, the low

w ages paid to the labor force and a certain

specialization brought by im m

igrants, countries such as Brazil, M exico and

Argentina, as w ell as Venezuela, Chile, Colom

bia and Peru, w ere able to

im plem

ent im portant industrial parks.

• setting up of plants to assem

ble im ported parts or sem

ifinished m aterials into

consum er goods that w

ere im m

ediately exported, thus taking advantage of Latin Am

erica’s low labor costs, particularly for w

om en w

orkers. Such plants proliferated along M

exico’s northern border (w here they w

ere know n

asm aquiladoras) but sprang up also in

Central Am erica

and around the Caribbean

O il &

N atural Gas

• O

il: Brazil is the 10 thbiggest

oil producer in the w orld,

M exico 12

th, Colom bia 20

th, Ecuador in 28

th& Argentina

29 th

• In 2015 Venezuela w

as 21 stbut

a big drop in production after 2015 due to lack of investm

ents. •

natural gas: Argentina, M

exico, Venezuela, Brazil, Bolivia,, Peru, Colom

bia.

GDP per capita 2020 (U S$)

Inequality: Latin Am erica is a region w

ith the highest levels of incom e inequality in the w

orld

Ø Institution building lacked in the relationship betw

een state and the m

arket. → M

arket reform s of the late 20

th

century led to a significant increase in inequality.

Ø Region’s tendency tow

ard rent econom y > m

anifested both as a dependence on the rents by natural resource endow

m ents &

its reliance on those to be derived from a

special relationship w ith the state.

Cityscapes of Crim e

Corruption

• Corruption

is a m ajor problem

for Latin Am erican countries &

affects their econom

ies. •

According to Transparency International in its 2019 report ranking 167 countries

by the perception of transparency: Colom

bia rank 83/36% ;

Argentina 106/35% ;

M exico 111/34%

; Venezuela the low

est at 158/19% .

Drug Trade

• Illegal Drug Trade: particularly ofcocaine from

the Andes that is transshipped throughout the hem

isphere, generates huge profits.→ m

oney laundering of these

black-m arketfunds is often w

ith the com plicity of financial institutions and

governm ent officials.

• Violence from

narcotrafficking has been significant in M

exico & Colom

bia

CRISIS in Latin Am

erica

1. debt crisis : m ost com

m on problem

in Latin Am erica since independence-Latin Am

erican countries borrow

ed at historically low

rates, but then interest rates increased sharply. M ost of the debt w

as US dollar denom inated.

Hence, to pay for the debt, LA nations needed US dollars. They could have obtained them from

exports, but they currencies w ere overvalued. As capital began leaving the countries dom

estic interest rates w

ere increased, decreasing investm ent. Central Banks engaged in seignorage, creating

inflation.

2. Steep devaluation associated w ith balance of paym

ents crisis has been frequent since the W

W 2

3. Banking crisis: frequent since 1980s

• M

ost crisis have been dual (com bined debt &

balance of paym ents crisis )

• since the 1980s m

any of them have been triple crises

Lessons for the Future ??

Econom ic perform

ance is the outcom e of a com

plex constellation of social / cultural/ political relationships and how

of those factors interact w ith geographical

settings.

The factors that have been decisive in Latin Am erica

• legacy of colonial tim

es •

process of state building •

region’s social structure •

distribution of pow er and w

ealth

Lessons for the Future ??

Ø The colonial legacy over extrem

e econom ic and

social inequality has been perpetuated and heightened in the 20

thand 21 stcentury

Ø large transfers of natural resource incom

e are quite difficult to digest for countries w

ith im

perfect institutions Ø

Social policy is needed if the econom ic system

continues to reproduce high level of inequality in incom

e distribution.

References •

Baten, Joerg (ed.) (2016) A History of The Global Econom y-1500 To the Present,

Cam bridge U

niversity Press, UK, pp.121-166.