Economics -- Latin American Country Trends

Cuban poverty
Figure 1.--Despite the fact that Fidel Castro and Communism has turned Cuba from one of the most prosperous countries to one of the poorest, both Fidel and Cuba remain icons among large numbers of Latin Americans. The appeal rather than the performance of socialism and anti-Americanism remain powerful forces in Latin America. This image of Cuban children, especially the bare feat, is different from the official propaganda standards. The photo was taken in Puerto Escondido. Click on the image for a fuller discussion.

Latin America for much of its history has been a economic and backwater. Although colonized by Europeans over a century before North America, the region lagged far behind North America. Spanish conquistadores had very different motivations than the religious desidents that landed at Plymouth. Spanish and Portuguese authorities in fact banned religious desidents from the colonies. Even after independence, average incomes were far below North America. No important medical, technical, and scientific developments have come from the region. This was in large measure the heritage of the Inquisition as well as poor educational systems and a reluctance to invest in the region's human capital. The economies are largely based on resource extraction rather than manufacturing and processing. Very high import duties prevented the development of world class companies. Some countries (especially Argentina and Uruguay) in the early 20th century looked like they were preparing to make the transition to a modern developed ecomomies. Populist politicans making commitments to labor unions and other groups that the country's nascent developing economies could not support. The result was economic stagnation from which the countries have yet to emerge. Communist economic experiments in other countries (Cuba, Nicaragua, and Venezuela) have proven even more damaging, but continued to be persued for ideological and political reasons. There is widespread sympathy in Latin America and a general failure to assess their ecoconomc history dispationately. Free market economics first attempted in Chile have proven remarakably successful and several countries (Brazil, Chile, and Colombia) have achieved notable ecomomic progress. A major problem in the area continues to be corruption and drug traficking, problem affecting several countries, including Mexico.


The European conquest of the Americas began in the Caribbean with Columbus' First Voyage (1492). The Spanish were disappointed with what became known as the Spanish Main. There was little gold and the Ameriindians began to die meaning there were no labor to work the Land. The Spanish and Portuguese focused on the mainland (16th century). And the Spanish found the gold they were looking forward. Islands that the Spanish saw as of little worth soon prove to be some of the most valuable realestate. in the world. The Dutch, English, and French imprted captive Africans and converted the islands into sugar islands. Even small islands like Barbados created vast wealth. The most valuable island possession was French Haiti because of it size. The sugar islands were essentially death camps requiring constant shipments of captive Africans to replace those who died in the sugar plantations. After the Napoleonic Wars and the British Royal Navy campign against slvery, the industry was no longer sustaninable. And it in no way benefited the people who came to populate the islands. Sugar was still produced and the Spanish finally began producing it on Cuba, the largest Caribbean island. Much of he Caribbean declined into poverty and subsistence agriculture. An exception became Cuba which the United states helped liberate from Spain (1898). Cuba became one of the wealthiest counties in Latin America. Fiedel Castro's Communist Revolution has turned once flourishing Cuba into an economic disaster. The rest of the Caribbean has higly caried economies ranhing from poverty sticken Haiti to the Cayman Islands with high income levels. The Caribbean islands have few natural resources. Cuba has nickle. Jamaica has bauxite. Tinidad has oil. The orincipal resource is, however, climate and beaches making possible important tourist industries. Some islands have achieved some success success with financance and banking. It is unclear just what economic future of the Caribbean is. One problem is that the public school system on mist islands is not of high quality. a serious problem in an increasingly competive global economy.

Central America and Mexico

All of Central America except for Belize (British Hondurs) are Spanish speaking and part of the former Spanish Empire. Central American was a neglected part of the Spanish Empire. With independence in the early 19th century the region entered the world economy. Central America including Mexico although geographically close to the United States is generally classified as part of the developing world. Geographically, Mexico is part of North America, but culturally and economically it makes more sence to consider it as part of Central America. Agriculture predominted the economies and two export crops becme importnt, first coffee and thn bananas. During the 20th century coffee has been the single most important export commidity throughout the region. Bananas became important during the 20 century (Honduras, Panama, and Costa Rica), giving rise to the term 'banana republics'. Most of the production was exported to the nearby United States creating strong trade links between the United States and Central America. In recent years, the countries of the region have had some success in diversifying both the products exported as well as expanding trading partners. The countries are still, however, clssified as developing countries. This means that the population was generally poor using percapita GDP as an a measure, short life expectancies, low literacy and education levels, inadequate diet, and poor health care. Based on these and other pertiment indicators, there is significant economic diversity within the region. Nicaragua is generally considered to be the leat developed of the seven countries because it ranks lowest in the key indicators. Panama and Costa Rica are the most developed. This is interesting becuse Panama and Costa Rica, especially Panama, are the two countries with the greatest contact with the Unites States. The Cubans and Nicaraguan communist insusts that the United States and free market capitalism have impeded development, yet the richest countries are those most connected with America (Panama and Costa Rica) and the poorest country is the coontry most connected with Socialiam and Communist Cuba (Nicaragua). Another important factor in Central America is ethnicity. Costa Rica has a relatively small Native American population while Guatemala has a large Native Americn population. Democrahpics is another favtor. El Salvador is densely populated while neighboring Honduras is lightly populated.

South America

News of gold and silver from the New World mesmerized Europeans especially after the conquest of the Aztec and Spanish Empires. The bullion flowing into Europe stimulated the economy of the Western Europe and not just Spain. Eventually it would be silver from Potosi in modern Bolivia that would have the greatest impact. But even more thn the bullion were the agricultural products. First corn from Mesoamerica and then potatoes from the Andes in South America. No crop has had such a massive impact on Europe as the potato. European farmers focused on wheat, but his was a crop that was developed in the Middle East. The climate in Europe, especially northern Europe is very diffrent. Potatoes were actually more suited for northern Europe and yielded a far greater yield per acre. This increased output led to amassive increase in the European population. Crop exchanges worked both ways and the Europeans brought crops the the New World. The first important one was sugar. Which became a hugely valuable one in Brazil and the Caribbean. Even after the colonial era, South American countries continued to have economies based primarily on exporting commodities. And countries went through boom and bust cycles depending on commodity movements. Countries in the region lanuished in poverty amd did not develop modern economies. In an era of industrial and scientifc devlop, virtunally no great achievements camefrom South America. The one exception to economic development was Argentina which was on the cusp of becoming a successful industrial nation when Peronismo with its socialist orientation destroyed the economy. Uruguay also damage theirprosperous economy with scilist reforms. Market reforms helped modernize the Brazilian economy, but a combination of socialism and coruption has dome enormous damage. Chile and Colombia haave achieved progress with market reforms, but there is a lingering infatuation with socialism. Just as socialism destroyed Cuba's prosperous economy, socialism in Venezuela even destoyed an oil rich economy. Venezuelans today have trouble fonding food in the stores. Mothers who cannot feed their children are having to deliver them to state orphanages. No where in the cotinent do we see the remarkavle economic transformation that we have seen in Asia, first with te Adian Tigers and then with Communist China turning to capitalism, we continue to see South American countries pursuing socialist policies. Bolivia and Ecuador are the latest to turn to socialism.


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Created: 11:31 PM 4/21/2011
Last updated: 3:17 PM 2/13/2018