** economics country trends South America








Economics -- South American Country Trends

potato
Figure 1.--Here we see a Bolivian women in La Paz selling potatoes with her daughter. The humble potato developed by Andean farmers is one of the most important plants in history. European farmers before the arival of the potato (16th century) focused on wheat, but this 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.

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. We see a rnge of commodities: sugar, rubber, coffee and metals including silver, copper, iron, and oil). Countries in the region went through boom and bust cycles depending on commodity movements. The region lanuished in poverty amd did not develop modern economies. In an era of industrial and scientifc devlopment, virtunally no great achievements came from South America. And unlike Asia and Africa, Latin America was exosed to European thought and ideas. Little attention was given to develoing human capital. The one exception to economic development was Argentina which was on the cusp of becoming a successful industrial nation when Peronismo with its socialist orienttion destroyed the economy. Uruguay also damage theirprosperous economy with socialist reforms. Market reforms helped modernize the Brazilian economy, but a combination of socialism and cruption has dome enormous damage. Chile and Colombia have 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 cannt feed their children are having to deliver them to state orphanages. No where in the cotinent do we see the remarkable economic transformation that we have seen in Asia, first with the Adian Tigers and then with Communist China turning to capitalism. Despite this remarkable transformation, we continue to see South American countries pursuing socialist policies. Bolivia and Ecuador are the latest to turn to socialism.

Argentina

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 control leading to economic failure despite the country's great potential.

Bolivia

Boliviais today is anomg the poorest of the Larin Americn countries. This has not always been the case. The Pre-Colomnian economy primarily based on agrculture and animal husbundry. The Altiplano was developed with irrigated agriculture and supported a relatively dense population despite the relatively adverse growing condutions. This was a situation that developed over time by kingdoms of the Aymara-speaking Amer-Indian competing wuth Quechua-speaking tribes aling with a rnge of coastal civilization. At the time of the Spanish conquest, the Quechua-speaking Inca had created the lrgest Amneri-Indian empire, uniring coastal and Andean aeas frim central Chile north to Ecuador. The population of the Empire were the most propsperous peoole of the Americas. The Inca Empire was in many ways, the only successful Communist economy. As a result of the Spanish conquest and the introduction of European disseses the Amer-Indian pooulatoin collaped. And those that survived were reduced to medieval serfdom under the Encomieda system. Living standards for Amer-Indians fell below that of Inca Empire. For the Spanish there was a huge bonanza. A huge silver desposit was discivered at Potosí -- essentially a silver mountain (16th century). Bolivia at th time was knowen as Upper Peru. The silver mines made the region one of the wealthiest and most heavily populated in the Spanish Empire. Bolivia had the largest population in Latin America, exceeeded by only Brazil (1800). Great fortunes were made, but the Aner-Induan population did not benefit. Spanish mining involved the brutal exploitation of Native American workers. The Amerr-Indians were forced into basically brutal slave labor in the mines. Upper Peru was more important and more heavily populated than the southern come countruies (Argentina, Uruguay and Chile) or the rest of the Andean colonies. The Spanish were after gold, but found silver--huge quantities if it. The American silver from Upper Peru and Mexico had a huge impact on the European economy. The immense amount of silver helped finance the economic expansion of Europe. The silver was transported llama and mule train to the Pacific coast. From there it was shipped north to Panama City, taken by mule train across the isthmus of Panama to Nombre de Dios or Portobelo and then to Spain on the Spanish treasure galleons organized into fleets. The heavily laden Spanish treasure ships were primary targets of the English Sea Dogs. Silver was also shipped West to the Philippines and then on to China--the Manila Galleon trade. otably while the European economy benefitted, neither the Spanish or Bolivian/Mexican economies did not benefit in the long term. While the siover created a mining industry, when the silver ran out, so did the econony of Bolivia and Mexico. Bolivia in particular became a Latin American backwater and the economy nprimarily subsistence agriculture on over worked land. Ohere mining operations develped after indepemdence: antimony, iron, lead, gold, silver, tin, tungsten, and zinc, Other resources include: natural gas, petroleum, and timber. Exploiting these natural resources are the mainstay of the Bolivian economy. The country faces a range of eniromental issues, including clearing of land for agricultural (especially slash-and-burn agriculture) purposes and logging tropical timber, both leading to deforestation and soil erosion. Overgrazing and poor cultivation methods are also factors.

Brazil

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.

Chile


Colombia


Ecuador

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 Bogot�). 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.

Paraguay

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.

Peru

Peru is the only successful country in history with a socialist economy. Of course this was before Karl Marx invented the term socialism, but in the Inca Empire land and wealth was controled by the state and assigned to peasant farmers to work. The system suppoted a higher density of population in Peru than until very modern times. The Inca were only the most recent people to dominate the andean Highlands, but they built the lagest of all the Amerindian empires streaching from what is now the Chilean Central Valley north to the Ecuadorian-Colombian border and knit together with an impressive network of roads. This was important because of the different climatic zones and the natural resources to be exploited. In adition to griculture, the Inca were masterul weavers. Trade was, however, limited by the failure to master the wheel and the lack of large animals like horses and oxen. Peru played a fundamental role in the development of modern Europe. While the Conquistadores in the 16th century were primarily after gold, the humble potato made possible a population explosion that played a key role in the industrial revolution and the making of modern Europe. Peru was regarded as vital to the Spanish colonial empire, not because of the potato, but because of the mineral wealth--especially silver. The silver resource was part of colonial Peru, but the Potosi mines were located im modern Bolivia. The silver was shipped back to Spain (through the Spanish Main/Caribbean) and to China (through the Philippines) to finance Spanish trade there. The silver was shipped through Callao, the port of Lima. Agiculture was the mainsty of the colonial economy, but it was based on the hacienda, vast Andean estates using an essentialy feudal system of Native American workers--the Ecomienda system. Peru was the most conservtive part of Spanish Empire and the bastion of Spanish Royalist power during the revolutions which began in the Napoleonic era. The Royalist forces were finally defeated at Ayachucho on the easstrn slope of the Andes (1824). Independence did not significantly transform Peruvian society and the country limped into the 20th century with a backward agricultural economy supported by cotton and mineral (mostly copper) exports.

Uruguay


Venezuela

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.







CIH






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Created: 3:22 PM 2/13/2018
Last updated: 8:51 AM 6/3/2021