Your topic essay should answer the following two questions: What were the consequences of the European “conquest” of Amerindian civilizations? What internal problems are mostly responsible for the region’s present-day socio-economic problems?

(Here, we are looking at two different faces of Buenos Aires, Argentina. This contrast is rather common in Middle and

South Americas.)

Middle and South America: Present and Future In my first two lectures on Middle and South America, I focused on historical legacies that shaped the realities of this geographical realm. In this lecture we will analyze the economic realties of the region and conclude with what the future holds there. Let me remind your that when averaged out, Middle and South American countries are not underdeveloped. Most of them are identified by our textbook as either lower-middle or upper-middle income economies. Our question still remains though: why not higher or better living condition, despite their strong geographical attributes? The problems Middle and American societies face stem from their unproductive use of land. Agricultural productivity is low due in large part to a mixture of three factors: lack of landownership on the part of the farmers, a slow pace of modernization and the exploitative nature of commercial agriculture. (Argentina, however, is an exception that it contains a vast and fertile agricultural land called pampas, which serves as a breadbasket as well as the grazing capital of the region. Argentina exports a large share of its agricultural products.) Since farmers are not the owners in most of cases, they have no desire or means to mechanize their agricultural production. Without the use of farm machineries and fertilizers, obviously, productivity is low, thereby relegating the peasants into a life of subsistence farming. (Take a look at the picture to your right.) It means producing and existing on the minimum necessities to sustain life and spending most of the time in pursuit of survival. Also, in commercial, plantation agriculture, peasants are paid the lowest possible wage by the corporations that own and operate the plantations according to the laws of profit maximization. Debt Crisis: Do you know that the world’s major debtors are located in Middle and South America? Their habit of borrowing heavily and falling behind in their payment goes back to 1950s when these Latin American countries sought to develop their economies in speed. Their developmental strategy is generally known as import substitution. What the countries such as Mexico, Argentina, and Brazil did was building different industrial production lines of their own while putting up the tariff wall against foreign products to protect their own domestic products. Guess what. The products these factories churned out proved to be inferior in quality therefore, not very attractive. The result was a disaster in many countries. (Well, one positive consequence was increased number of people working in the factories, rather than in agricultural fields. But that change by itself does not say much about the well being of the economy or people.) You know that in order for a nation to develop industrialized economy, it needs capital to begin with. Investment capital could be either borrowed from foreign banks or raised domestically. Lacking domestic source of capital, they borrowed heavily but failed to produce goods that could compete in the world market. Obviously, Mexico, Brazil, and Argentina degenerated into the status of world’s largest debtor nations. The potential was there; these countries had

natural resources and a sizable and literate population, which promised an efficient labor force and eager consumers. But that potential was not realized. Mismanagement, corruption, inefficiency, and the burden of repaying the debt, principal and interest, undermined industrial development. The countries that borrowed heavily were left with gigantic loan repayment obligations. The geographer David Clawson writes that the debtor nations of South and Middle America “owe more money than the value of all goods and services produced in a given year. When debt reaches those levels, countries find it difficult to make timely payments of even the interest due on the loans; repayment of the principal is almost entirely out of the question.” This is known as debt crisis. Some of these countries have gone through government defaults, hyperinflation, and minus growth (shrinkage of economic output.) The picture above shows a protester expressing his anger at government’s inability to control hyperinflation, which renders the currency useless. Class Division: We have already discussed how the conquistadors were given large landholdings (haciendas and latifundia) that still survive, giving enormous wealth and political power to the decedents of early colonizers from Europe. Even today, rural landholding is terribly top-heavy, with peasant masses who actually work and survive on land not owning much of it. Despite some attempts at land redistribution in the past, such as establishment of communally held land or forced breakage of rural estates owned by non-tiller, large number of rural population suffers from poverty and social backwardness. Since life in the countryside is hard, unrewarding and precarious, rural population in general seeks every opportunity to move to the cities. Here comes another major problem shared by Middle and South American countries share: urban population explosion, which we will discuss down below. (The picture above shows a rural shantytown in Peru.) In any event, as our textbook notes, in South America, “[T]he richest 20 percent of the population controls 70 percent of [the entire] wealth, while the poorest 20 percent controls only (an astonishingly small) 2 percent….South America, above all else, is still a continent of stupendous contrasts.” Do you know what makes poverty worse? Discontent and frustration of the people are heightened by a sense of “relative poverty,” which is caused by conspicuously rich elite whose enjoyment of material life, beyond imagination of the masses is so obviously displayed. This is the reason why,

as we had discussed already, Marxist revolutionary doctrine of class struggle and peasant guerrilla warfare doctrine enunciated by Mao Tse-tung of China still find sympathizers in Middle and South Americas. For the same reason, Castro who came to power in the late 1950s is still holding onto power in Cuba. The support behind Castro's regime is in many ways is based on their anger toward the long history of U.S. domination over the region. Actually, many Cubans will tell foreign visitors that they prefer a communist Cuba to a U.S.-dominated one, which Cuba was before the revolution. In any event, social hierarchy in Latin America reflects pigmentation hierarchy. European-looking individuals by far enjoy more opportunities in Latin American societies. Individuals of Mestizo of African features could face disadvantages in life. Urbanization: Peasants who leave the countryside to the cities in search of better life usually do not. Lacking resources to find adequate housing, find themselves in shantytowns that circle the cities. Such slums are known as disamenity, a “zone of peripheral squatter settlements. One observer commented on the vistas of Rio de

Janeiro: “Look one way between the towering skyscrapers of waterfront…and you see one of the world’s most famous beaches. Look landward, and luxury gives way to deprivation.” One geographer noted that in the worse of these slums, which are called barrios or favelas, “sizeable numbers of people…are so poor that they are forced literally to live in the streets.” Many residents of the slums are of descendents of African slaves who constitute Brazilian society’s underclass. In Brazil, conditions in slums are so poor, in a bitter irony, they attract foreigners who pay to take a guided tour of shantytowns. (Click to right and you will be led to a website created by an individual who took a tour of one of slums in Brazil.) Well, could you imagine how annoying these picture-taking foreign tourists could be to people who actually live

there? In any event, most of Middle and South American cities suffer from pollution and traffic snarls that are number one culprit in polluting the air. (To the left is Mexico City, probably the most polluted city in Middle and South America.) Take a look at the following cities of both Middle and South Americas that contains a large share of the nation’s population:

 Buenos Aires (Argentina): one-third (of the entire population)

 Montevideo (Uruguay): one-third

 Mexico City (Mexico): one-fourth The following cities contain one-fifth, or 20 percent of the nation’s population: Lima (Peru), Santiago (Chile), Havana (Cuba), Caracas (Venezuela), Asuncion (Paraguay), and San Jose (Costa Rica). Corruption, Mismanagement and Inefficiency in resource-rich South and Middle American countries are staggering. Let’s take the petroleum industry for example. In Mexico, Venezuela, and Argentina, the state-owned oil and gas companies for many years have been losing money. Don’t you think it is odd that companies that pump oil that is in high demand throughout the world are losing money? But it is true. Main cause is inefficient use of resource and graft. (The above is an image of Venezuelan oil driller. Venezuela is a major oil producer, but, plagued by political instability and economic doldrums.) Political Uncertainty: As one geographer noted, in Latin America, “dictators outnumbered elected officials.” This is changing as Latin American countries are embracing democracy. But, still, there are frequent and, often violent, clashes between the land-owning, conservative forces and the leftist and populist factions supported by the poor. Many observers of Latin American politics note that as long the existing landownership structure is not altered, and a large number of people are relegated to a live in slum, a meaningful political stability is not a tenable goal. Let us now discuss what economic opportunities are there in Middle and South America, and whether they would lead to betterment of life in the region. Let’s start with plantation economy, or agro-capitalism. One major economic sector of Middle and South American countries is the plantation. Geographer Robert West and John Augelli noted that the plantation economy is characterized by the following:

 Located in humid tropical coastal lowlands – unhealthy working environment  Production of export crops – shortage of foodstuff  Foreign Ownership – outflow of profit to foreign countries  Seasonal labor – busy during the harvest, idle at other times  Factory-in-the-field – harsh labor condition

When you really think about it, plantation industry does not provide a whole lot of opportunities or hope. (Brazil’s large citrus fruit products (above) are mostly exported to outside markets in the form of juice concentration.) Another major component in the economies of Latin America, which is closely connected to American economic influence, is tourism, also known as “irritant industry.” Every year about 20 million tourists come to Caribbean nations, whose total population is 37 million. Tourism generates one-sixth of the regions GNP. Tourism, however, engenders the following negative effects including highlighting of the poverty in the region. One observer writes of tourism in the Caribbean Basin: “There is a negative cumulative effect that intensifies contrasts and disparities: gleaming hotels tower over substandard housing, luxury liners glide past poverty-stricken villages, opulent

meals are served in places where, down the street, children suffer from malnutrition.” Also, since foreign corporations mostly run resorts, the local entrepreneurs lack ability to compete in the industry, therefore, chance to benefit from it.

In the 1980s and the 90s, as labor cost for manufacturing light industrial goods, electronics and textile, for example, in the advanced economies soared, many companies found Latin America as an alternative base of production. So came what is known as Maquiladora, “factories that assemble imported, duty-free components and raw materials into finished industrial products.” Maquiladora is most prevalent in northern part of Mexico because of the North American Free Treaty Agreement (NAFTA) between the U.S. and Mexico, which allows duty-free trade between the two economies. However, other countries of the region have also attracted foreign assembly lines In this particular industry, foreign companies take advantage of low wage and, some times, lax environmental laws. For

some of the local population, maquiladora plants mean job opportunities and chance to move out of backbreaking and not-so-rewarding agricultural labor. But, this too is not a permanent solution to the region’s underdevelopment. Let me quote an observer of maquiladora: “Unfortunately, there is a downside as well: factory workers are usually exploited through long work weeks, receive minimal if any fringe benefits, and too many have no choice but to reside in the squalid slums and shacktowns that often surround the plants.” Nearly 80 percent of the assembly plants are owned and operated by U.S. companies. Narco-Capitalism: One major source of income in the northern part of South America is production and smuggling of cocaine into the U.S. Three countries in the region, Bolivia, Peru and Colombia produce 75% of the world total cocaine supply. This particular income source invites not only international criticism but also U.S. intervention in the form of anti-drug operations. With resources provided by the U.S., the governments in the drug producing regions have been conducting anti-drug operations, including spraying of defoliants from the sky. You could probably imagine the harm on environment and humans by use of chemicals to fight drug production. But this battle is essentially a losing one for it is virtually impossible for government to convince the poor farmers, known as campesinos, to plant maize (corn) instead of coca that guarantees a hefty return. Also, anti-government guerrilla forces of Latin America are closely linked with drug production and trafficking. (Above is an Amerindian woman in the poppy field.) Destruction of Environment: One way of increasing economic resources in Middle and South Americas has been deforestation, or destruction of rainforest for farming, grazing, and lumber production. Every year, 3 million acres of Central American and Mexican woodland disappear because of logging and farming. In the Amazon Basin between

20,000 to 30,000 square miles of forests are cut or burned annually. The destruction of rainforests not only kills the existing plant and animal species but, also, terminates the evolutionary process that produces new species. This is why one ecologist called the lose of tropical rainforests as “the death of birth.” Free Market Reform: Another solution is to embrace free market economy, or privatization. This particular approach to economic development requires selling off of state industries to private companies that will streamline the operation, which often means downsizing. Also, it means less government intervention in economy in the form of reduction in taxes on high-income earners and corporations, as well as cuts on social

welfare programs. Free market reforms, on the one hand, makes the countries that are implementing them more attractive for foreign investors. On the other hand, it creates socio-economic problems such as unemployment and disappearance of social welfare net, which affect the poor the most. (In the picture above shows protesters against NAFTA, which symbolizes free market reform.)

Revolutionary Movements: To some in the region, a violent overthrow of the existing government and socio-economic structure is the only option to break the cycle of underdevelopment and class division. The guerrilla movement rooted in the peasantry is most active in the Andean South America with a large Amerindian and mestizo population who are occupy the lower rung of socio-economic hierarchy in Middle and South America. Notable groups are Sendero Luminoso (Shinning Path) of Peru and the Revolutionary Armed Forces of Columbia (FACR) of Columbia that is being suspected of involved in cocaine production and smuggling. These forces are not strong enough to defeat the government, but enough to harass and

intimidate the government. In the meantime, people who are caught in between are suffering. In the meantime, people who are caught in between are suffering. Just one example: in Peru, it has been recently revealed that nearly 70,000 people were killed between 1980 and 2000 by the rightist government soldiers, as well as by the leftist guerilla forces. Immigration: Some countries in South America, in particular, have opened themselves to immigrants from Asia in anticipation that they would inject

entrepreneurial spirit and energize the economy. Well….they did to a certain extent. However, their success, achieved in relatively short period of time often provokes jealousy and antagonism from the non-immigrant population who feel that immigrants are taking away opportunities from them. In Brazil, for example, Japanese immigrants, who began to immigrate there in the early part of the 20 century, have done very well in coffee business. They came to Brazil as agricultural workers but now have grown into an economically influential community of 1.5 million. You are probably thinking to yourself that I am pretty a pessimistic an observer, as far as Middle and South Americas concerned. Not entirely. There are signs that the future of this realm is going to be brighter than now. Let’s look at Brazil. Under the innovative leadership of the President Luiz Inácio Lula da Silva, Brazil’s economy has been growing and in terms of its Gross Domestic Product, it is the eighth largest economy in the world. What is going on in Brazil, which was once treated as a sleeping giant of South America? The present government has freed itself from the populist policy of using government tax revenues to finance social programs that did not make fundamental improvements in people’s lives or contributed to sustainable growth in economy. What the government has done is not broadening welfare spending but to focus government intervention in such areas as education to go after the fundamental roots of poverty and underdevelopment in Brazil. Also, government as relaxed its control over the private sector, eliminating regulations that discouraged foreign investment. If Brazil’s smart social policies and liberalization continues, as many economists predict now, Brazil, which has a huge resource base, will become the fifth largest economy in the world in a decade or two. One obvious sign of Brazil’s economic development and expansion is the aircraft industry, as seen in right. Actually, many wealthy people do not want to bother with Brazil’s roads. So they fly in jets. But let us not be intoxicated by the experience of Brazil. As seen in the earthquake stricken Haiti, there are plenty of problems that Middle and South Americans must overcome: poverty, underdevelopment, and uneven distribution of wealth, and political instability. So, before we conclude, let us go back to the very beginning of our discussion on Middle and South Americas. Earlier, I said my favorite chapter title on Latin America is “First Rate Geography, Second Rate Development.” Should I use this concept continuously? What do you think?