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)
(2011 PPP $)
2014
2014
2014
2014
2014
40 Argentina
0.836
76.3
17.9
9.8
22,050
42 Chile
0.832
81.7
15.2
9.8
21,290
52 Uruguay
0.793
77.2
15.5
8.5
19,283
55 Bahamas
0.790
75.4
12.6
10.9
21,336
57 Barbados
0.785
75.6
15.4
10.5
12,488
60 Panama
0.780
77.6
13.3
9.3
18,192
64 Trinidad/Tobago
0.772
70.4
12.3
10.9
26,090
67 Cuba
0.769
79.4
13.8
11.5
7,301
69 Costa Rica
0.766
79.4
13.9
8.4
13,413
71 Venezuela 
0.762
74.2
14.2
8.9
16,159
74 Mexico
0.756
76.8
13.1
8.5
16,056
75 Brazil
0.755
74.5
15.2
7.7
15,175
84 Peru
0.734
74.6
13.1
9.0
11,015
88 Ecuador
0.732
75.9
14.2
7.6
10,605
97 Colombia
0.720
74.0
13.5
7.3
12,040
99 Jamaica
0.719
75.7
12.4
9.7
7,415
101 Dominican Rep.
0.715
73.5
13.1
7.6
11,883
103 Suriname
0.714
71.1
12.7
7.7
15,617
112 Paraguay
0.679
72.9
11.9
7.7
7,643
116 El Salvador
0.666
73.0
12.3
6.5
7,349
119 Bolivia
0.662
68.3
13.2
8.2
5,760
124 Guyana
0.636
66.4
10.3
8.5
6,522
125 Nicaragua
0.631
74.9
11.5
6.0
4,457
128 Guatemala
0.627
71.8
10.7
5.6
6,929
131 Honduras
0.606
73.1
11.1
5.5
3,938
163 Haiti
0.483
62.8
8.7
4.9
1,669

 

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

Latin American Inflation

 

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.

http://www.eclac.org/publicaciones/xml/3/33873/LCG2386_P_I.pdf

Latin American GDP Growth


From the Latinobarometro 2007 report:
http://www.latinobarometro.org/