An analysis of the many problems with latin americas economic development

Explore the latest strategic trends, research and analysis The World Economic Forum meets in Mexico at a time when the Latin American economy is at a crossroads. The commodity super-cycle, on which many Latin American countries had surfed during the last decade, seems to have come to an end. The price of commodities fell dramatically inputting export revenues of commodity-driven Latin American economies under pressure.

An analysis of the many problems with latin americas economic development

This idea is known as the Prebisch—Singer thesis. Prebisch, an Argentine economist at the United Nations Commission for Latin America UNCLAwent on to conclude that the underdeveloped nations must employ some degree of protectionism in trade if they were to enter a self-sustaining development path.

He argued that import-substitution industrialisation ISInot a trade-and-export orientationwas the best strategy for underdeveloped countries. Baran in with the publication of his The Political Economy of Growth.

Structural Changes

Some authors identify two main streams in dependency theory: Using the Latin American dependency model, the Guyanese Marxist historian Walter Rodneyin his book How Europe Underdeveloped Africa, described in an Africa that had been consciously exploited by European imperialists, leading directly to the modern underdevelopment of most of the continent.

It was used to explain the causes of overurbanizationa theory that urbanization rates outpaced industrial growth in several developing countries.

Technology — the Promethean force unleashed by the Industrial Revolution — is at the center of stage. The Center countries controlled the technology and the systems for generating technology.

Foreign capital could not solve the problem, since it only led to limited transmission of technology, but not the process of innovation itself. Baran and others frequently spoke of the international division of labour — skilled workers in the center; unskilled in the periphery — when discussing key features of dependency.

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Baran placed surplus extraction and capital accumulation at the center of his analysis. Further, some of that surplus must be used for capital accumulation — the purchase of new means of production — if development is to occur; spending the surplus on things like luxury consumption does not produce development.

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Baran noted two predominant kinds of economic activity in poor countries. In the older of the two, plantation agriculture, which originated in colonial timesmost of the surplus goes to the landowners, who use it to emulate the consumption patterns of wealthy people in the developed world; much of it thus goes to purchase foreign-produced luxury items —automobiles, clothes, etc.

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The more recent kind of economic activity in the periphery is industry—but of a particular kind. It is usually carried out by foreigners, although often in conjunction with local interests.

An analysis of the many problems with latin americas economic development

It is often under special tariff protection or other government concessions. The surplus from this production mostly goes to two places: Again, little is used for development. Baran thought that political revolution was necessary to break this pattern.

In the s, members of the Latin American Structuralist school argued that there is more latitude in the system than the Marxists believed.

Domino Effect

They argued that it allows for partial development or "dependent development"—development, but still under the control of outside decision makers. They cited the partly successful attempts at industrialisation in Latin America around that time Argentina, Brazil, Mexico as evidence for this hypothesis.

They were led to the position that dependency is not a relation between commodity exporters and industrialised countries, but between countries with different degrees of industrialisation.

In their approach, there is a distinction made between the economic and political spheres:According to the United Nations Economic Commission for Latin America and the Caribbean, Latin America experienced an average GDP growth rate of about % in You may have arrived at this page because you followed a link to one of our old platforms that cannot be redirected.

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The report also discusses Latin America's growing economic ties with China, which have contributed to Latin America's above-average recovery from the global economic downturn. But Pendzich argued that this economic relationship could add to the social and environmental problems faced by the region.

An analysis of the many problems with latin americas economic development

Latin American countries need to use the fruits of recent growth to incite a move towards more knowledge-based sectors, by investing in research and development, fostering start-ups and cultivating the 21st century skills which are needed to tap into global opportunities.

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