Latin America: Jaguars Awaken

Human Development Index (HDI)  Life expectancy at birth Expected years of schooling  Mean years of schooling Gross national income (GNI) per capita
HDI rank Country Value (years) (years) (years) (PPP $)
2015 2015 2015 2015 2015
45 Argentina 0.827 76.5 17.3 9.9 20,945
54 Barbados 0.795 75.8 15.3 10.5 14,952
60 Panama 0.788 77.8 13.0 9.9 19,470
62 Antigua and Barbuda 0.786 76.2 13.9 9.2 20,907
65 Trinidad and Tobago 0.780 70.5 12.7 10.9 28,049
66 Costa Rica 0.776 79.6 14.2 8.7 14,006
68 Cuba 0.775 79.6 13.9 11.8 7,455
71 Venezuela  0.767 74.4 14.3 9.4 15,129
77 Mexico 0.762 77.0 13.3 8.6 16,383
79 Brazil 0.754 74.7 15.2 7.8 14,145
87 Peru 0.740 74.8 13.4 9.0 11,295
89 Ecuador 0.739 76.1 14.0 8.3 10,536
94 Jamaica 0.730 75.8 12.8 9.6 8,350
95 Colombia 0.727 74.2 13.6 7.6 12,762
96 Dominica 0.726 77.9 12.8 7.9 10,096
99 Dominican Republic 0.722 73.7 13.2 7.7 12,756
110 Paraguay 0.693 73.0 12.3 8.1 8,182
117 El Salvador 0.680 73.3 13.2 6.5 7,732
118 Bolivia  0.674 68.7 13.8 8.2 6,155
124 Nicaragua 0.645 75.2 11.7 6.5 4,747
125 Guatemala 0.640 72.1 10.7 6.3 7,063
130 Honduras 0.625 73.3 11.2 6.2 4,466
163 Haiti 0.493 63.1 9.1 5.2 1,657
Latin America and the Caribbean 0.751 75.2 14.1 8.3 14,028


I.    Environment

A.  Indigenous Cultures

1.   Mayas - settled 2,000 years ago in Middle America. “Greeks of

Latin America”. Built magnificent pyramids and palaces, and astronomers developed accurate calendar.

2.   Aztecs - Powerful society in Mexico early in 14th century, used advanced agricultural techniques. Later, used ruthless force to extract tribute and subjects of human sacrifice.

3.   Incas - Largest, most organized American empire late in the twelfth century. About 20 million people from southern Colombia to central Chile. Central planning, communal agricultural labor.

Summary - Experience with social, economic, and political development, authoritarian organization, and colonial exploitation long before the Europeans arrived.

II.  History

A.  Colonial Period

1.   Spanish struggle to free their country from the Moors. Authoritarianism.

2.   Extractive motives. Distorted transportation systems.

3.   Natives suffered from conquest, slavery, disease.

4.   Top administrators born in Europe; lower posts held by criollos and mestizos, leading to middle class.

5.   Growing population needed more food-- dualistic system of latifundios and minifundios.

B.  Independence

1.   Forces for independence. America example ports to British ships, weakening the system of colonial control.  All free by 1824;

2.   Few internal structural reforms

C.  Import Substitution, State Control, and Revolution

1.   Export-led growth continued until the 1930s,  then ISI, supported by ECLA. Real incomes nearly doubled between 1950 and 1973. 

2.   Deficiency of ISI strategy-- authoritarianism. Perón, Castro, Allende  examples.

D.  Export Promotion and Market Reform

1.   Brazilian military leaders adopted export-oriented development strategy and an open door to foreign investment. For several years, this strategy seemed successful.

2.   Pinochet in Chile, beginning in 1973.

3.   Debt crisis, late-1980s and early-1990s

II.  Agriculture

A.  Share of total employment fell from 20% (for the full region) in 1992 to 14% in 2013. However, that's still much higher than 2% in North America.

B.  Before 1910 in Mexico, mainly small holdings with no titling of land. Afterward, during the presidency of Porfirio Díaz, privatization that created plantations and haciendas. Many small holders lost their ancestral land to large estates.

C.  Revolution and Land Reform
In Mexico, that led to the Revolution that forced Diaz to resign in 1911. However, disputes over land ownership have continued throughout the region.


III. Industrial Organization

AMicroenterprises are the norm; larger companies account for most of employment and sales.

B.  Informal Economy

CBig Business and Multinationals - The 500 largest companies account for about one-third of the gross product of the entire region.

DMaquiladoras - after 1966, using treaty between Mexico and the United States that created special duty-free zones. Symbolize flight of manufacturing jobs to factories in Latin America. Lost special tariff status in the year 2001 when all of Mexico became a free-trade zone.

E.  State Ownership and Privatization

1.   Long history of state participation, going to Incas and Aztecs.

2.   During 1930s, dissatisfaction with foreign owners led to expropriation and nationalization of energy, telephone systems, and other public utilities. For example, a dispute over wages and benefits in 1938 led to seizure of the Mexican oil industry from 17 companies, and to the creation of a state-owned petroleum monopoly, Petróleos Mexicanos (PEMEX), still the largest company in Mexico.

3.   Also in 1930s, ISI led to the establishment of state-owned manufacturing companies. This process continued after World War II, and accelerated during the 1960s.


IV. The Labor Market

A.  Difficult to develop stable systems of collective bargaining. 19th century legal codes in many countries prohibited workers from signing binding contracts with their employers.

B.  Generally, labor unions were illegal until early twentieth century. Earliest unions, encouraged by the Catholic Church, allowed workers to pool resources in a social insurance system; usually no attempt to bargain with employers. Eventually, when unions attempted to organize strikes, governments often supported employers with military force.

C.  During Great Depression, more labor codes to protect rights of workers. With growth of state-owned enterprises, governments unable to serve as impartial referees.

D.  Now, privatizations, efforts for more cooperative relationships, consultation - Economic Solidarity Pacts in Mexico; spread to other countries.

E.   Labor market inflexibilities - Laws prohibiting temporary employment and requiring large severance payments for "unjust" dismissals; severance payments are larger than similar payments in Europe; relatively high social security payroll taxes. Chile shifted to a system based on personal saving, rather than on taxation.


V.  Inflation and the Financial Sector

A.  Inflation

1.   Consumer Price Inflation Rates

Inflation Rates


2.   Traditional approaches: Monetarism vs Structuralism

3.   Alternatives: Political instability, ISI reduces financial discipline, indexation.

B.  Financial Repression and Liberalization

If nominal interest rates are controlled while inflation accelerates, real interest rates become negative, so credit markets and market-oriented financial institutions cannot play their normal role to stimulate savings or efficiently allocate financial resources. Governments increase intervention: Credit rationing, foreign exchange regulation.

Debt crisis made all these problems worse, forced reforms, restored capital inflows (for better or worse).


VI. The Church, the State, and the Poor

A.  Poverty during the 1980s -- debt crisis and regional distribution of income.

B.  The Role of the Church -

1.   Traditional charitable role of Roman Catholic church,

2.   Liberation theology,

3.   1995 Bishop's meeting in Mexico City.  The ruling neoliberal orthodoxy "unnatural and inhuman," and eventually "will fall by itself, perhaps more rapidly than communism."

C.  Public Programs to Reduce Poverty

1.   Education - World Bank analysis -  if the macroeconomic environment is stable, two-thirds of the absolute poverty in Latin America could be eliminated by improving educational facilities and increasing average schooling to nine years.

2.   Public health expenditures needed.

3.   Social security systems underfunded, most countries (including relatively high-income countries such as Mexico) do not have an unemployment compensation program.

Latin American GDP Growth

From the Latinobarometro 2007 report: