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.




Cuba was Spain's second Caribbean colony. It was from Cuba that Cortwz launched the conquest of Mexico. The indigenous population of Cuba perished because of enslavement and European diseases. Africans were imported as slave labor. Sugar became the primary Spanish crop. Cuba as a result of its insulsr geography, remained a Spanish colony when during the early-19th century, the criollos throughout Spanish America achieved independence on the mainland. Thus slavery continued for several decades. Cuban resistance dusrupted Spanish control, but it was the the American invasion during the Spanish-American Ear (1898) that finally led to independence. The proximity to the United States and U,S. investment led to rapid growth and Cuba's emergence as one of the most wealthy Latin American countries. Fidel Castro seized control of the democratic July 26 Movement and ousted dictator Fulgencio Batista (1959). He converted it into a personal political movement which helped him install a Communist dictatorship (1962). The result was economic decline, stagnation, and the flight of the middle class. Despite massive Soviet Cold War subsidies, Communist Cuba languished in poverty and economic failure. The collapse of the Soviet Union ended the subsidies and forced the regime to make economic reforms. Cuba has managed to obtain some financial aid from oil-rich Venezuela. As a result of socialist economics, however, continues to be among the poorest countries in the region. Castro after a long period of silence because of ill health to tell an American reporter that "the Cuban model no longer works" (September 2010). Speaking with university students later, he back tracked and insisted he was not referring to socialism. The Cuban Government subsequently announced that it could no longer afford its massive payroll and that it is laying off 10 percent of state workers. It is unclear where those laid off will find jobs as the private sector is so restricted in Cuba.

Dominican Republic


Independent Haiti has been unable to develop the counry's economy. And what was the richest colony in the Americas gradualy evolved into one of the poorest countries in the world. The French after seizing the ciolony proceeded to build large numbers of plantatiins. The Spanish had descimated the Native American population so both French plnters imported African slaves. About a quater of the colony was arable land. Huge fortunes werte made, but the plantation system was incredablr brutal. The apauling conditions on the plantations combined with the French revolution resulted in a slave revolt and eventual independendence. The slaves when they revolted from French rule, destoyed the plantatios where they had toiled and been brutalized. The slaves killed all the white that they capured, including women and children. In destroying the plantations, they obliterated the economic vitality of the colony. This ensuing isolation and subsequent incompetent rule left Haiti the poorest country in the Americas. The economy is still largely agricultural with two-thirds of the country earning its livlihood from agriculture. The envirinmental devestation and priitive methods limit the productivity of agriculture. There is also some light industry and muniing. Economic failure has led to a range of ecological problems, including deforestation and overfishing leaving the country an ecological nightmare. Haiti has an obstensiably free market economy. It has some advantages such as low labor costs and free access to the U.S. market. The chaos, lack of the rule of law, largely uneducated population, and other factors have left the country poverty stricken. This combined with ith the enviromental degredation and government coruption have meant that the country unlike many Caribbean countries has made no economic progress. An estimated 80 percent of the opulation live in povery and over half in abject poverty. Haiti experienced a mssive earhquake (January 2010). A devestating 7.0 magnitude earthquake destroyed much of its capital city of Port-au-Prince and surrounding areas. The earhquake only woirsened the economic conditions. Only a massive international relief effort led by the United States prevented a humanitarian nightmare. The chaos and coruption in the country discourage needed fireign investment.


Puerto Rico

Puerto Rico was like most of the Catibbean islands inhabied by the Taino, an Arawak people. The economy was a mix of hunting and gathering along with agriculture. The island enviroment more or less forced the islanders to move away frim nomadic hunter-gatering and adopt a at least primitive agriculture. The Taínos both hinted and fished to supplement gatering and agriculture. They made canoes for boh fishing nd trading. Basic marine technology were necessary for their abcestors to get to the islands. It involved making dug-out canoes. Their main crops were corn, cassava, garlic, potatoes, yautías, mamey, guava, and anón. Corn and pototatos were an engineered crop develop in Peru and Mexico, showing how agricultural technology had spread throughout the Americas before the arrival of the Spanish. The economy was transformed with the arrival of the Spanish (1493). Strangely, the Spanish did not adopt sugar as their main crop like the Dutch, English, and French on their island (Cuba, Hispaniola, and Puerto Rico). After the early years of the Spanish Main, the Spanish focus was more on the mainland. The economies of the Spanish islands became moee oriented on supply and prorecting Spanish shipping moving from the mainland colonies and Spain. Spanish colonial policy was to exlue foreigners and trade with foreign countries and colonies. Only after the Napoleonic Wars in the 19th century did sugar become an important crop on the Spanish islands, especially Cuba. nother major change occurred in Puerto Rico when the U.S. Army liberated the island from Spain (1898). This introduced American economic patterns and a much more robust economic partner. Puerto Rico became an American Commnwealth. Special laws were past to promote economic development on the Island, primarily by offering tax breaks. The result has made Puerto Rico the most wealthy island in the Caribbean other than small islands like the Caymans with tax have banking industries. Income levels, however, remained far below thise than un the mainland United states. Cutbacks in the subsidies in recent years have adversly affected the Island economy which is currently experiencing a Greek-style fiscal crisis.

Trinidad and Tobago

Trinidad was for three centuries a part of the Spanish Empire. The Spanish showed little interest in Trinidad. The first settlement sid not appear until Domingo de Vera founded St. Joseph (1592). Sir Walter Raleigh looking for El Dorado landed on the island and reported only mosquitoes, bush and despair. He visited Pitch Lake and burned St. Joseph. Few Spanish settlers came to Trnidad. At one time there were only 160 Spanish settlers on the Island which became a haven both smugglers and pirates. Trinidad was a colonial backwater. Conditions were so poor on the Island that a settler wrote to the King complaining that they could only go to mass once a year and in clothes they had to borrow form each other. Some settlers arrived from the French islands (Martinique and Guadeloupe). The French Revolution devolved into two decades of war in Europe. A British invasion fleet seized the island (1797). The British were in full control by the Napoleonic Wars (1803). As the Spanish population was small, the British had little difficulty converting Trinidad into a British colony. The British comvered into another Caribbean sugar colony, importing captured Africans as slave labor. Economic conditions followed swings in sugar prices. Following alave revolot in Jamica, Britain emancipasted slaves in the Empire (1834). The former slves did not want to work on the plantations. An alternative was an indentured labor schemes (1852). This introfuced Chinese and East Indians to the Idland. Trams and railways were built (second half of the 19th Century). Oil was known to exist on the Island for centuries, but it had no substantial value. This changed in the early-20th century. The advent of the automobile and internal-comustion engine, the conversion of the British Royal Navy from coal to oil, and other developments radically changed the economic picture. Oil became a very valuable resource and fundamentally changed the Trinidaduan economy. Oil fiukds were developed in the Guayguaygare, Point Fortin, and Forest Reserve areas. Oil and petroleum producrs came to dominate the economy and in the process the country's demographics changed from a rural agricultural population to an urban one. The most imprtant economic sectors in modern Trinidad are: petroleum and petrochemicals, construction, services, and agriculture. The modern Trinidadian economy continues to be dominated by the petroleum industry which developed in the early-20th century. The petroleum resource and industry has provided Trinidad the highest percapit income level in the Commonwealth Caribbean--$$6,000 (1985). The petroleum indistry produves about 5 percent if the GDP. Trinidad id sepleting its oil resources, but has large-untapped gas resources.

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


Argentina is one of the Latin American countries most blessed by nature. The vast Pampas is a fertile region that along with arange of natural should support a prosperous economy. And it looked like Argentina would become the first developed ecomnomy in Latin America. World War I gave a tremendous boost to the country's economy. This development was, however, ultimately failed because of the developing politcal power of socialist-oriented labor unions combined with the populist politics of Col. Juan Peron. The subversion of the legal system by the Peronistas and the commitment to social welfare programs the economy could not support resulted in economic disaster. Entrpreneuers were reluctant to invest in Argentina. And as a result the country has lurched from one econimic crisis to another. The Falklands War was a thinly duisguised effort by a military junta to destract the population from economic problems. As a result, living standards have remained far below European and North American standards. National bankruoptsy resulted in some free market reforms and prudent fiscal policies. Argentina in recent years has benefitted from the rise in commodity prices, especially increasing agricultural prices. The Government of President Cristina Kirchner has pursued a range of repressive policies and increasingly havy-handed state control. This continued the now familiar Argentine pattern of inflation, repression, and state cintrol leading to economic failure despite the country's great potential.


Brazil is half of South America, a huge country with enormous natural resources. Historians differ on the nature of the pre-Colombian Native American economy. Portuguese settlement was orimarily along the coast and focused on sugar plantations based on slavery. A large portion of the Africans transported by the trans-Atlantyic slave trade went to Brazil. After jndependence, coffe developed as a major commidity during the Imperial period. At the turn-of-the 20th century there was a rubber boom. The country gradually began to develop the enormous Amazonian basin. After a period of polituical instability, Marxist insurrection, and military rule, Brazil has adopted free market economics which has resulted in an extended period of economic growth. The country coverted from gasoline to sugar profuced alcohol, but is now finding oil off its coast. Brazil is a major exporter of raw materials, both mineral and agricultyural. Brazil in recent years as a xresult of the free market for the first time has developed manufacturing companies able to compete in the world market. Socialist parties who have won free and open elections have decioded to pursue free market policies to promote economic growth. President Lula was a controversial figure in Brazilian politics, but proved to be a masterful steward of the country's economy. There are very few examples in modern economics of countries converting resource wealth into a modern productive economy. Rare success stories are Australia, Canada, and Norway. Brazil seems well on its way to finally accomplishing this. There have, however, been a series of booms in Brazilian economic history )sugar, coffee, and rubber). Brazil is now electing a new president (2010). It will be up to the winner to continue President Lula's policies to fruition.




Ecuador has experienced many economic regimes. It was recently added to the Inca Empire at the time of the Spanish contact. The Inca economy was essentially a Communist economy and virtully the only communist society that actully worked. There are areas of the Andes that were never as productive as under the Inca. And the production was reasonbly well distributed. The Spanish colonial Empire which followed was very different. After the Pizarros destoyed the Inca Empire, Ecuador found itself located between the two viceroyalty centers (Lima and Bogotá). It first became part of the Viceroyalty of Peru and then later the the Viceroyalty of Nueva Granada. The two Viceroyalties were similar in many ways. Agriculture and thus land ownership were the heart of the economy, centered primarily in the Sierra (Andes). Ecuador was different in one respect, especially from the Viceroyalty of Peru which proved to be the source of incredible amounts of silver. There was very little mining activity in Ecuador. The land was asigned to Spanish landlords-- the Conquistadores who had participated in the Spanish Conquest. The Spanish established a feudal system called encomiend with the Native Americans turned into serfs (landless peasantry) tied to the land. The The serfs or encomenderos were called by various names. In Eduador a common term was husipungero. [Icaza] The Sierra varied, but much of it was well watered and temperate, suitable for agriculture on the colonial hacendas. The major crops became grains imported by the Spanish (barley and wheat). Native American crops (corn and potatos) were also imprtant. The coast was less well watered, but cacao became very important. Other crops included sugarcane, coconuts, tobacco, and cotton. Only in the independence period did highly perishible babanas become important. Manufacturing was of minor importance, largely becaused of Spanish colonial regulations which sought to make the colonies a market for Spanish manufacture. There was some manufacture of textiles. There were obrajes (perhaps best described as sweatshops) in the Sierra (Riobamba and Latacunga) which produced textiles for export, both woolen and cotton fabrics. Ther was a shipyard in Guayaquil drawing on the availability of timber, in short supply in Spain. Sugar mills manufactured sugar, molasses, and rum made from the molasses. Sugar cane could not be shipped, it had to be converted to its product forms. The basic Spanish economic system continued with some changes after independence (1810s-20s). The major change was that trade was possible with ither coyntries besides Spain. The manufacture of hats became an important activity as a result of the Califirnia gold rush (1848-49). With imprivements in maritime transport, bananas became an important crop. The modern economy is largely agricutural and the country continues to be poor. The economy of Ecuador is based mostly on exports of oil, bananas, seaffood, gold, other primary agricultural products. Bananas are imprtant along the Pacific coast. Ecuador is the world's largest exporter of bananas and an imortant expoter of seafood (motly shrimp). Exports of non-traditional products such as flowers and canned fish have grown in recent years. There is very little industrialization The industry is not competitive in international markets. It is oriented to servicing the domestic market. Money transfers from nearly a million Ecuadorian emigrants employed abroad, primarily in the United States, has become a major source of revenue. Oil in recent years has provided important export income. The oil income pays a substantial portion of public-sector revenue and export earnings. The decline in oil prices (2014-15) has signifucantly reduced these earnings. The country ranks very poorly in terms of economic freedom, both in world wide terms, along with Bolivia, Argentina, Venezuela, and Cuba. Ecuador is part of the Bolivarian Alliance for the Americas (ALBA), led by Communist Venezuela, and has promoted relations with Iran and China. There have been some improvement in controling coruption, but has fallen in many other areas such as the rule of law.


It is notable that both land-locked South American countries are very poor. Latin American socialists argue that the region has been expoloited by the Unites States and other industrialized countries. Both Paraguay and Bolivia as a result of being land locked have more limited international commerce than the coastal countries. This would mean that they should be the lease exploited, yet they are both deperately poor. Paraguayan percaputa uncome approaces about $7,000 dollars annualy, low by even South American standards, but somewhat higher than Bolivia when percapita income is loser to $6,000 annually (2012) The country has some important economic advtages. The most important is abundant freshwater, a critical natural resource thtt many countries are habing increaing problems with. Paraguay benefits from countless streams that form the river network of the River Plate Basin. The Guarani Aquifer, believed to be one of the largest reserves of fresh water on earth and extends across the entire country. Even so, agriculture production is affected by periodic droughts. The Guarani and Paraguay River not only provide water for africulkture, but bountiful quantities of inexpensive clean hydro-electric power. The country has a market economy and like many Latin American cuntries, there is a substantial informal sector, which includes the re-export of imported consumer goods to neighboring countries, inckuding Brazil Uruguay, and Argentina. Many urban residents make a living by operating microenterprises or working as street vendors. In rural areas, a large percentage of the population work as farmers, many on a subsistence basis. The substantial size of the informal sectormakes national economic statistics educated guesses at best. We note varying estimates of Paraguayan economy. One source claims that "real income has stagnated at 1980 levels." The World Bank gives a more optimistic assessment stressing the modernization of the agricultural export sector and rising commodity prices. Paraguay is an especially important soy exporter. Beef and other agricultural producsare important. Soy and beef now constitute 50 percent of expoorts. The country was hit by a drought in 2008 and then the severe world-wide recesessioin in 2009. Growth has been highly volitile since 2009 with some very good years, affected by Government stimulus packages. Although volitile, growth in recent years has aberaged anout 5 percent. Drought and foot-and mouth disease impaired 2012 results. Economists list political uncertainty, corruption, lack of needed structural reform, and poor infrastructure as important limiting factors. The World Bank reports important advances in health care and public education.




Fiedel Castro who took control of Cuba in 1959, like many Third World leaders, believed that socialism was a superior economic system to capitaism. It waa a reagic mistake which has condemned the Cuban people to poverty and economic want. Hugo Chavez who was elected president in 1998 on a popularist campaign has no excuses. By this time it was clear that socialism was a failed economic system. As he under cut Venezezuelan democracy he has been able to drive the Venezuelan economy steadily toward socialism. And unlike Cuba, Chavez had the country's substantial oil income tonpay the bills as well as to lelp support like-minded politicand in his Bolivarian Bloc. And prhrams to help the poor made Chavez popular enough to win elections. The ecomomic result of Chacez's socialist ecomomic policies have, however, steadily reduced production in a country that was already importing large quanties of food and other esentials. Venezuela's oil revenues vary with internationa; prices, but even at high price levels, the oil income can not funance the entire economy and consumers wracked with spiraling inflartion face increasing shortages of eldectricity and food essebtials like milk. Governmrnt agencies report the GNP fell nearly 6 percent in the first quarter of 2010 and inflation reached 30 percent. As a result of Chavez's nationalization, capital is fleeing the country. Inefficent state industries, ill-conceived land reform, and the lack of investment is the cause of the declining national production. This is at a time that economies in most other countries are recovering from the 2009 economic downturn. Chavez's response has been to go after store owners who raise prices and currency traders. The result, of course will simply put further restrictions on both production and needed imports. There are National Assesmby elections scheduled (Fall 2010). Chavez is using the tatic of the Iranian Mullahs, disqualify opposition candidates. This will probably keep him in control. It will not, however, slow the implosion of the Venezuelan economy.


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Created: 11:31 PM 4/21/2011
Last updated: 5:44 PM 5/26/2017