economic cooperation in latin america

8/14/2019 Economic Cooperation in Latin America

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EconomicEconomiccooperation incooperation inLatin AmericaLatin America

Ing, Tom Dud, PhD.Ing, Tom Dud, PhD.


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IntroductionIntroduction Latin America has 17 countriesLatin America has 17 countries

Colonized by Spain & Portugal (Iberian countries)Colonized by Spain & Portugal (Iberian countries)

Large, diverse populationsLarge, diverse populations 490 million people total490 million people total

75% of the people live in cities75% of the people live in cities

Several megacities (more than 10 million people)Several megacities (more than 10 million people) Industrialization & development grew since 1960sIndustrialization & development grew since 1960s

Free Trade Area of the Americas (FTAA) proposes to integrateFree Trade Area of the Americas (FTAA) proposes to integrateeconomies of Latin America, North America and the Caribbeaneconomies of Latin America, North America and the Caribbean(except Cuba)(except Cuba)

Natural resource extraction remains importantNatural resource extraction remains important


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IntroductionIntroduction

Common colonial pastCommon colonial past Often military regimesOften military regimes Differences across the regionDifferences across the region

Developing nationsDeveloping nations Main export articles agricultural productsMain export articles agricultural products

and natural resourcesand natural resources Large social disparitiesLarge social disparitiesThe role of the state in the economy isThe role of the state in the economy is

importantimportant


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0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2 000 000

Brazil

Mexico

Argentina

Colombia

Venezuela

Chile

PeruEcuador

DominicanRepub

lic

Guatem

ala

CostaRica

ElSalvador

Bolivia

Uruguay

Panama

Honduras

Paraguay

Nicaragua

Haiti

GDP in Latin America in 2008 (mil. USD, PPP)


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0

2000

4000

6000

8000

10000

12000

14000

16000

Chile

Argentina

Mexico

Uruguay

Venezuela

Panam

a

CostaRica

Brazil

Peru

DominicanRepublic

Colombia

ElSalvador

Ecuador

Guatem

ala

Paraguay

Bolivia

Honduras

Nicaragua

Haiti

GDP/c in Latin America in 2008 (USD, PPP)


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Main features of ecoMain features of economic developmentnomic development

in Latin Americain Latin America

Import substitution policiesImport substitution policies Strong role of the state in theStrong role of the state in the

economyeconomy

Huge investments in order to buildHuge investments in order to buildnational industries and infrastructurenational industries and infrastructure

PopulismPopulism Low level of domestic savings theLow level of domestic savings the

need of external financingneed of external financing


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Failure of import substitution Failure of import substitution The Lost DecadeThe Lost Decade

La Dcada Perdida

It is a designation to the financial period ofcrisis in Latin America during the 1980s

Average level of economic growthbetween 1980 and 1989 1,2

Hyperinflation in many countries

Growth of income and wealth inequality Unsustainable foreign debt

Rise of military regimes in the region


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Main factors behind theMain factors behind theeconomic collapseeconomic collapse

The prices of main export articles (agriculturalThe prices of main export articles (agriculturalproducts and natural resources) were falling in theproducts and natural resources) were falling in theinternational marketsinternational markets

The price index of these products fell 28 % in the 80sThe price index of these products fell 28 % in the 80s

and the share of Latin American countries decreasedand the share of Latin American countries decreasedconsiderably (1960 7,7 %, 1990 4 %)considerably (1960 7,7 %, 1990 4 %) The economic problems led to the fall of the domesticThe economic problems led to the fall of the domestic

consumption what led to the collapse of the industryconsumption what led to the collapse of the industry The export oriented industries were not able toThe export oriented industries were not able to

support the economysupport the economy Collapse of domestic private investmentsCollapse of domestic private investments Corruption and capital flightCorruption and capital flight


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MacroeconomicMacroeconomicdisequilibriumdisequilibrium

Rapid growth of the consumer prices fromRapid growth of the consumer prices from19801980 (80 56 %, 85 274 %, 89 1023 %)(80 56 %, 85 274 %, 89 1023 %)

Record levelsRecord levels: Argen: Argentinatina 3731 %, 3731 %,Nicaragua 6727 %, Peru 2948 %Nicaragua 6727 %, Peru 2948 %

Long term deficits in the balance ofLong term deficits in the balance ofpaymentspayments

Rapid growth of external debt from 228 bln.Rapid growth of external debt from 228 bln.

USD to 481 bln. USDUSD to 481 bln. USD Fiscal policy is a notorious weak point ofFiscal policy is a notorious weak point ofLatin American governments huge budgetLatin American governments huge budgetdeficits are normaldeficits are normal


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Economic reforms in theEconomic reforms in the90s90s

Democratization and economic reformsDemocratization and economic reforms Washington consensus created by the MMFWashington consensus created by the MMF

and the World Bankand the World Bank LiberalizationLiberalization

PrivatizationPrivatization Anti inflation policiesAnti inflation policies Growing economic cooperationGrowing economic cooperation Mintaorszg ArgentnaMintaorszg Argentna

Argentina model countryArgentina model country Economic turbulences and crises in the late 90sEconomic turbulences and crises in the late 90s

Brazil and Argentina Brazil and Argentina


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Chile Chile oppression and economicoppression and economicreformsreforms

Salvador Allende Salvador Allende socialist presidentsocialist president 1970 1970

Military coup led by August Pinochet in 1973Military coup led by August Pinochet in 1973(financed by US corporations and the CIA)(financed by US corporations and the CIA)


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Chile Chile oppression andoppression andeconomic reformseconomic reforms

Neoliberal economic policiesNeoliberal economic policies Chicago Chicagoboysboys

Result fastest growing economy in LatinResult fastest growing economy in Latin

AmericaAmerica Reform of the pension system one of theReform of the pension system one of the

most copied and controversial reformsmost copied and controversial reforms

1989 1989 the return of democracy intothe return of democracy into ChilChilee Limited role of the state in the economy Limited role of the state in the economy

the only exception is the copper miningthe only exception is the copper mining


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Chile Chile oppression andoppression andeconomic reformseconomic reforms

Chile is the local champion of freeChile is the local champion of freetrade FTAs with USA and Canadatrade FTAs with USA and Canada

Problem still big income inequalityProblem still big income inequality


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Start of economic cooperationStart of economic cooperationin Latin Americain Latin America

ALALCALALC - Latin American Free Trade Association- Latin American Free Trade Association Goal - creation of a free-trade zoneGoal - creation of a free-trade zone

Lost impetus as of 1965, and almost come to aLost impetus as of 1965, and almost come to acomplete standstill in the 70'scomplete standstill in the 70's

ALADI - The Latin American IntegrationALADI - The Latin American IntegrationAssociationAssociation Goal - economic preference zone was establishedGoal - economic preference zone was established

creating conditions favorable to the growth of bilateralcreating conditions favorable to the growth of bilateralinitiativesinitiatives


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Mercosur - Mercado ComnMercosur - Mercado Comndel Surdel Sur

It is a Regional Trade Agreement among Argentina, Brazil, ParaguayIt is a Regional Trade Agreement among Argentina, Brazil, Paraguayand Uruguay founded in 1991 by the Treaty of Asuncin, which wasand Uruguay founded in 1991 by the Treaty of Asuncin, which waslater amended and updated by the 1994 Treaty of Ouro Preto.later amended and updated by the 1994 Treaty of Ouro Preto.

Mercosur origins trace back to 1985 when Presidents Ral Alfonsn ofMercosur origins trace back to 1985 when Presidents Ral Alfonsn ofArgentina and Jos Sarney of Brazil signed the Argentina-BrazilArgentina and Jos Sarney of Brazil signed the Argentina-Brazil

Integration and Economics Cooperation Program or PICEIntegration and Economics Cooperation Program or PICE Bolivia, Chile, Colombia, Ecuador and Peru currently have associateBolivia, Chile, Colombia, Ecuador and Peru currently have associate

member status. Venezuela signed a membership agreement on 17member status. Venezuela signed a membership agreement on 17June 2006, but before becoming a full member its entry has to beJune 2006, but before becoming a full member its entry has to beratified by the Paraguayan and the Brazilian parliamentsratified by the Paraguayan and the Brazilian parliaments


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Union of South AmericanUnion of South AmericanNationsNations

ItIt is an intergovernmental union integrating two existingis an intergovernmental union integrating two existingcustoms unions: Mercosur and the Andean Communitycustoms unions: Mercosur and the Andean Communityof Nations, as part of a continuing process of Southof Nations, as part of a continuing process of SouthAmerican integration.American integration.

It is modeled on the European UnionIt is modeled on the European Union -- including aincluding acommon currency, parliament, and passportcommon currency, parliament, and passport

One of the initiatives of UNASUR is the creation of aOne of the initiatives of UNASUR is the creation of asingle market, beginning with the elimination of tariffssingle market, beginning with the elimination of tariffsfor non-sensitive products by 2014 and sensitivefor non-sensitive products by 2014 and sensitive

products by 2019.products by 2019.


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The Dominican Rep blicThe Dominican Republic


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The Dominican RepublicThe Dominican RepublicCentral America Free TradeCentral America Free Trade

AgreementAgreement Originally, the agreement encompassed theOriginally, the agreement encompassed theUnited States and the Central AmericanUnited States and the Central Americancountries of Costa Rica, El Salvador,countries of Costa Rica, El Salvador,Guatemala, Honduras, and Nicaragua, and wasGuatemala, Honduras, and Nicaragua, and wascalled CAFTAcalled CAFTA

In 2004, the Dominican Republic joined theIn 2004, the Dominican Republic joined thenegotiations, and the agreement was renamednegotiations, and the agreement was renamedDR-CAFTADR-CAFTA

The goal of the agreement is the creation of aThe goal of the agreement is the creation of afree trade area, similar to the North Americanfree trade area, similar to the North AmericanFree Trade Agreement (NAFTA).Free Trade Agreement (NAFTA).

economic cooperation in latin america

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