Political Economy of Latin America, Essay Example

Introduction

The concept of “globalization” in trade expanded after the 1970’s.  This impacted the Latin American countries from a number of different perspectives.  This paper sets out to explore those perspectives in terms of the following considerations:

1. The specialisation of Production
2. A view of internal considerations within different Latin American countries
3. Cross border travel and communication
4. International development and Foreign Aid
5. Beneficial impacts to the global economy

Specialization of Production in Latin America

Since the 1980’s  all of the Latin American countries have been working hard to both reform their economies and inject better business practices for sound economic management.  Most of the Latin American countries faced world economic conditions and did not make attempts to hide behind protectionist barriers.  “Export Revenue stagnated or declined inn the second half of the 1950’s and early 1960’s, while import needs as a proportion of GDP did not fall quickly enough.”  (Mahon, 1992). This became the feature of the Recurrent balance of payments crisis which impacted the major Latin American countries.  There has been a genuine concerted effort to move forwards.  It is useful to examine a cross-section of the larger countries to gain an appreciation of the complexities and progress made.

Peru

The significant aspect here is the overall improvement of social conditions in the last 20 years.  In general terms the standard of living has increased significantly.  Poverty still remains but many people now consider themselves in the middle income class.  The following Table produced from Statistics obtained from the World Bank illustrates the levels of improvements on a number of different fronts.   The increase in the Literacy rate, the increase in life expectancy and the significant reduction in infant mortality.

Argentina

Argentina has suffered a bitter recession for three years. Recovery started to take place in 2002. It was impacted in 1999 by its neighbour Brazil who devalued its currency.  This heavily impacted the Argentine economy with the external debt reaching 50% of GDP, 14% unemployment and a high fiscal deficit.

The above chart illustrates very little difference in the literary rate.  Argentina considered to have a high ongoing literacy rate.  Life expectancy has increase and significant reduction in infant mortality.

Brazil

Brazil faces some tremendous challenges in entry to the Latin America global market.  It has a very high public sector deficit, this needs to be reduced without creating a tremendous burden ob Brazilian society.  Considerable financial reforms are required around the taxation systems  and credit subsidies. This needs to attack the fiscal deficit problem.  Brazil needs to move towards more transparency and an open economy. It needs to examine how its resources can be used to stimulate and promote economic growth. It needs greater exposure to world markets after decades of protectionism. Above all it needs to address the issue of poverty and income distribution.

Venezuala

Globalization has been kind to Venezuala owing to its wealth in Oil production together with the refined bi-products.  It has been diversifying and in 2003 figures shown 94% expansuion in growth  with the bulk of this outside the oil sector.  So the country has experienced 5.5 years of exceptional growth.  The collapse of the world financial situation pointed towards a more gloomy time ahead for Venezuala as it does not receive any significant investment from the United States.  They have a confident leadership and they have worked hard on the domestic front to improve the social conditions of the Venezualan people.

Chile

Chile has one of the strongest economies in Latin America.  Market conditions are open with some 57 Free Trade agreements in place.  The country has both a high level of investment and employment.  Owing to the international confidence in the Chilean markets they have been relatively unaffected by the worlds financial problems.

Columbia / Bolivia and Paraguay

Paraguay is less significant in the Latin America countries doev to poor navigable infrastructure. The leading exports are soybeans, feed, cotton, meat, edible oils, electricity, wood, and leather. The leading imports are vehicles, consumer goods, tobacco, petroleum products, and electrical machinery. Paraguay main trading partners are Brazil, Uruguay, Argentina, and China.  As such you can see it is more inward focused other than China in the global arena context.

Bolivia by contrast is one of the poorest Latin American countries and highly dependent upon foreign aid.  It made some progress in the 199o’s under the stewardship of the President Sanches de Lozada.  ” included the signing of a free trade agreement with Mexico and becoming an associate member of the Southern Cone Common Market (Mercosur), as well as the privatization of the state airline, telephone company, railroad, electric power company, and oil company.”  (Class Brain.com , 2008).  Recent years have been very turbulent with a slowdown in growth in 1999, civil disturbances in 2000, further slowdown in 2001, and civil riots and looting in 2003 with loss of confidence in the Government.  Overall  a disastrous decade of performance with huge reliance on foreign aid to develop its natural resources.

Cross Border Travel and Communication

The varying republics of South America have always been more external than inward looking regarding travel and communications.  This is because they are mainly exporters of raw materials to the USA, Europe and other international markets.  In addition the internal terrain of  South America is fairly sparsely populated in the interior consisting of mountains, jungles, rainforests and much inhabitable terrain.  Until fairly recently there has been no dynamic force that pushes for domestic communication lines between the countries.  Most of those countries with a coastline prefer the sea as a means of communication and transportation.  Brazil has made some attempts to improve internal communications with air transportation, railroads  and telegraph lines.  The territory is vast and the geographical challenges huge.  Another big issue is that in most countries the population centres are some distance from their frontiers or borders. Hence the borders are in dense jungle, mountains, deserts or wilderness areas.  “Professionals who enter the developing world in order to create the conditions necessary for transnational corporations to do what they do. It is the story oh hardworking men and women who travel regularly across international borders to implement policies to foster global trade”. (Jackson, 2005). Honduras is a good example of a country that is highly reliant upon Foreign Aid. However, they are seen as bringing about concepts of globalization by co-operating with foreign agencies to bring about economic and political improvements in the country.  This has included imported help from the World Bank, United Nations, US Agency for International Development, to name but a few.  Funds moved in have amounted to millions of dollars.  This has helped political stability in the region.

International Development and Foreign Aid

Some Latin American countries are more reliant than others for Foreign aid and money in economic development. Paraguay, Bolivia and Peru being good examples.  Others like Chile, Venezuela and Argentina are less reliant.  US foreign aid has been fairly significant but not sufficient to make a substantive difference.  Aid from elsewhere has historically proven to be more rhetoric than firm implementation.   ” In 2005, total aid from the 22 richest countries to the world’s developing countries was just $106 billion—a shortfall of $119 billion dollars from the 0.7% promise. On average, the world’s richest countries provided just 0.33% of their GNP in official development assistance (ODA). The United States provided just 0.22%.”  (Sachs, 2005).  In essence economic aid that is promised often does not come to fruition in real terms and very often it is a fraction of the original offer that gets through.  When aid is not forthcoming it tends to increase the migration of the workforces to more prosperous countries, be this legal or illegal migration.  The situation between that of Mexico and the USA has been an ongoing problem, consider : “The total number of Latin American migrants in the United States increased from 8.6 million in 1990 to about 16 million in 2000 (an 86 percent increase), of that number, close to 10 million had Mexican origin. That same year, according to the U.S. Census figures, the number of Cubans (870,000) or Salvadorans (820,000) in the United States (that is, the countries with the second and third highest number of migrants, respectively) represented fewer than 10 percent of the Mexican figure.”  (Pablo Fajnzylber, 2007)

Most beneficial inputs to Global economy

Most of the manufacturing and production of raw materials in Latin America is Export oriented.  This includes a broad range of items from minerals, coffee, pharmaceutical products, oil and gas,  fabrics etc.  They are aimed as being competitive products in developed countries markets. In the 1980’s there was a movement towards “fair trade” , whereby producers hoped to gain access to conventional markets and reform same.  This was particularly true of the coffee production in South America. The change of the network was elevated by demand to increase the size of fair trade markets. The objective was to improve the global economic perspective by helping the poorer producers by having a network based upon trust and co-operation. Nevertheless, the emergence of globalization and neoliberal policies decreased the capacity of individual nations to act self-autonomously. “This is especially true of the rich nations in the North, in particular the United States, which have constructed neoliberal globalization

in their own interest and continue to employ its concepts selectively to their own benefit ” (Fridell, Nov 2006)

Both Costa Rica and the Dominican Republic are good examples of two Latin American countries that tried to take advantage of the Free Trade Zone.  Both moving away from traditional goods into exports of apparels and other manufactured goods. Costa Rica moved towards export of goods with a high technology component and was more successful than the Dominican Republic that concentrated on clothing exports. The problem with the apparel industry is that it was reliant upon the developed countries like the USA and Europe for its market, as such it did not stimulate internal economic growth.  ” Like commodities, they have limited long term growth and a tendency to reduce prices in the long run and do not create the productive assets required to generate a virtuous circle of exports”  (Sanchez-Ancochea, June 2006)

” Two of the largest exporters to the European Union (Turkey and Romania),and three to the United States (Mexico, Honduras, and the Dominican Republic) fit the description of regional exporters. They reflect the existence in Europe and the Americas of a division of labour between higher- and lower cost countries in each macro region, which is, in turn, associated with a particular type of production network connecting near-by suppliers to core markets, traditionally described as the assembly model of subcontracting.” (Jennifer Blair, Feb 2006)

Costa Rica has benefitted from the FTZ  but was smart enough to realise this alone would not drive the economic stimulus on a sustained basis.  ” While the fair-trade movement has made significant headway in bringing social and environmental concerns to the marketplace and in providing farmers with guaranteed minimum prices for their coffee, farmers’ reactions to production for fair trade indicate a number of problems that farmers and fair-trade cooperatives are facing in their efforts to reap the potential benefits of fair trade. As currently structured, fair-trade markets alone do not adequately address the needs of small farming families in Latin America.”  (Sick, 2008)

Works Cited

Fridell, G. (Nov 2006). Fair Trade and Neoliberalism: Assessing emerging perspectives. Latin American Perspectives , 8-28.

Jackson, J. (2005). The Globalizers, development workers in action. In J. Jackson, The Globalizers, development workers in action (pp. 23-259). John Hopkins.

Jennifer Blair, E. D. (Feb 2006). Global commodity chains and Endogenous Growth: Export dynamism in Mexico & Honduras. World Development , 203-21.

Mahon, J. (1992). Was Latin America too rich to prosper? Journal of Development Studies , 241-263.

Pablo Fajnzylber, J. H. (2007). Close to Home: The development impact of remittances in Latin America. World Bank , 57-59.

Robinson, W. (April 2004). Global Crisis and Latin America. Bulletin of Latin American Research , 135-153.

Sachs, J. (2005). Ending Poverty in our time. Human Rights Magazine.

Sanchez-Ancochea, D. (June 2006). Development trajectories and new comparative advantages: Cost Rica and the Dominican Republic under Globalization. World Development , 996-1015.

Sick, D. (2008). Coffee Farming Families and Fair trade in Costa Rica: New Markets same old problems. Latin American Research Review , 193-208 .

Stallings, B. (1992). International Influence on Economic Policy : Debt stabilization and structural reform. In B. Stallings, The Politics of Economic Adjustment (pp. 42-88). Princeton University Press.