Latin American Politics; Week 1
Latin American Politics; Week 1 POL-UA-530-001
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This 6 page Class Notes was uploaded by Sara Mendez on Sunday January 31, 2016. The Class Notes belongs to POL-UA-530-001 at New York University taught by Pablo Querubin Borrero in Spring 2016. Since its upload, it has received 92 views. For similar materials see Latin American Politics in Political Science at New York University.
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Date Created: 01/31/16
Latin American Politics Lecture 1: Broad Economic Trajectories Common Patterns There are 5 distinctive characteristics of Latin American economies: 1. Middle Income not as poor as SubSaharan Africa or S. Asia not as wealthy as N. America or W. Europe stuck in middle income level 2. Urbanized massive and recent process of urbanization this is very important to politics 3. Unequal* one of the most important characteristics huge gap between the rich and the poor 4. Primary Products Based & Undiversified economies depend on agricultural goods and natural resources each country focuses production on a handful of things; makes them very dependable 5. Volatile & Vulnerable since they only produce a handful of things, a drop in the price of one good can be disastrous to their economy highly dependent on commodity prices Side Note: GNP v. GDP GNP: it’s national; measures a country’s production within its borders and around the world GDP: includes all production that takes place within its borders only, this includes multinational corporations who produce in that particular country Middle Income Latin America is 9 times richer than SubSaharan Africa and South Asia It is 8 times poorer than N. America High income countries contribute a lot more pollution to the environment: CO2 emissions for Latin America…. 2.8% CO2 emissions for North America….19.4% It’s a tradeoff: pollute the environment for economic advancement Now that high income countries are well off, they care about the environment and want to limit pollution Low and middle income countries deliberately ask high income countries for compensation if they are expected not to pollute the environment. Inequality The richest 10% of the population hold 40% or more of the wealth in Colombia, Guatemala, Nicaragua, Brazil Uruguay is relatively equal by Latin American standards Mexico has the lowest level of land inequality in Latin America. This can be attributed to the major social revolution it went through Exports of Primary Products agricultural products / natural resources Latin American countries are extremely dependent on their exports (often just a single product) Chile, one of the richest Latin American countries, still exports 84% primary products Mexico decreased exports of primary products from 88% in 1980 to 16% in 2000…. Thanks to NAFTA! Latin American Growth (Volatile & Vulnerable) Average growth rate = 3.9% Coefficient of variation = 0.67 Growth has been volatile which is why investors are hesitant to invest… it’s risky! Generates instability for the country Are They Condemned? Other countries with similar characteristics have adopted alternative routes E. Asia labor & capital based Relying on natural resources isn’t necessarily a bad thing Norway has been successful When Did Latin America Fall Behind? Latin American countries were substantially riches than North America 500 years ago The “great divergence” happened in the last 200250 years They fell behind in the 19 century Industrial Revolution in W. Europe and N. America takes place Latin America did not benefit Too busy fighting for their independence Conditions for this were set during colonization Basic SubPeriods 1. Colonization 2. Exportled growth & emerging markets (18801930) 3. ISI & protectionism (19301970) reverse economic strategy shuts its doors to trade impose high tariffs 4. Neoliberalism (1980now) move back toward free trade and capitalism 5. 21 Century Socialism? left wing politicians across the region Broad Trends Decline trend between independence & 1870 Political instability Industrial Revolution takes off in W. Europe & N. America Upward trend in 18701980 Moves from low income to middle income Decline since 1980s Economics crisis Mediocre growth World Production Output 1870 = 2.6% 1929 = 5.2% 1980 = 9.5% 2008 = 7.8% Two historical periods in which Latin America fell behind and couldn’t catch up: th 1. 19 century 2. 1980s Colonization Highly extractive societies Mining & haciendas (Andes) Plantations & slavery (Caribbean & Brazil) Trade monopolies Coercive colonial institutions Forced indigenous towns to work for free Encomienda, Mita, Repartimiento (we’ll learn more about these things) Isolation countries not allowed to trade with each other All this leads to social stratification Useful Typologies 1. IndoAmerican Peru, Bolivia, Ecuador, Colombia 2. AfroAmerican Caribbean, Cuba, Colombia 3. EuroAmerican Argentina, S. Brazil Liberal Era & First Globalization There are 3 important elements: 1. Liberal ideology postindependence eliminate trade barriers 2. High demand for primary products from industrialized nations mining resources & food 3. Political stability civil wars end more willingness to invest (not as risky) more infrastructure Large inflows of foreign capital for infrastructure Some remarkable takeoffs (1870s1930s) Argentina, Uruguay, Chile, Cuba contributes to inequality in Latin America But…. Integration into world markets benefitted mostly elites inequality increased massive land expropriations Most profits were not reinvested in domestic country multinational corporations took their money elsewhere Repressive labor practices continued Migration was encouraged European labor arrived Countries became very dependent on a couple of products growth stopped during Great Depression When Europe Sneezes…. Latin America gets the flu! Great Depression in 1929 puts sudden stop to external demand for primary products illustrates reliance on world economy 4. Many countries started basic industrialization 5. Great Depression stops Latin American growth leads politicians to reverse trade strategy A Latin American Ideology 6. Dependency theory emerged Latin American integration into world markets keeps them specializing in primary products prevents structural transformation of their economy this is why they are suffering 7. Solution: stop trading with Europe and force industrialization in their own countries 8. This ideology was embedded in a context of nationalism & a rising working class Failure of ISI Average growth = 56% (decent) But growth was not sustained Few incentives for innovation or productivity subsidies handed out to friends of politicians corrupted; distribution of incentives not based on merit Macroeconomic Instability OPEC Crisis in 1970s brings flows of capital to Latin America Latin America starts borrowing a lot at low interest rates 1980s interest rates increase due to tight monetary policy in the U.S costs of borrowing increase Argentina, Mexico, Brazil…. All default in debt massive economic contraction GDP decreased by 8.3% some countries’ attempt to take short cuts (i.e print more money) led to hyperinflation
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