Economic dynamics and policies in Latin America: 19 and 20 centuries

1. Economic dynamics and policies in Latin
America: 19 and 20 centuries
Dr. Jacqueline LAGUARDIA MARTINEZ
Jacqueline.Laguardia-Martinez@sta.uwi.edu

3. Spanish Latin America: Economic features
• Imports from Europe (Spanish trade monopoly)
• Export orientated: mining (gold and silver)
• Rigid economic monopoly = Mercantilism
• Smuggling trade increased in the colonies (UK, France)
• Agriculture (subsistence farming, plantation
agriculture)
• Cattle ranches
• Indigenous populations, African and poor immigrants
as work force
• Transfer of Amerindian lands to European ownership
• Land seen as the symbol of and source of wealth
• Deterioration and destruction of local subsistence
economies
The rise of profit
making and
commodity
production
Nor feudalism,
nor capitalism
https://www.youtube.com/watch?v=8IW29QI-1Ls

4. Latin American colonial economies
• Enrique Semo's interpretation of the colonial Mexican formation as a
system that brought feudalism, "embryonic capitalism," and "tributary
despotism" (the mode of production of indigenous communities subjected
to a tributary relationship with the state) into dynamic and unequal
coexistence. (Stern, 1988).
• Angel Palerm argued vigorously that Spanish Mexico had constituted a
"colonial segment" of the capitalist mode of production. (Stern, 1988).
There was not a fully constituted mode of
production in Latin American colonies

6. Learning to be independent: Liberalism (19th century)
• Inspired in the ideals of the Age of Enlightenment, liberal ideas in Latin America fueled
the Independence Wars in in the context of the Napoleonic invasion to Spain.
• It served as the basis for the rule of law, representative democracy and the division of
powers in the newly independent countries. Under these ideals, the Constitution is the
national norm that governs the rights and duties of citizens. Presidential Republics were
installed, inspired in the U.S. political model.
• It promoted civil liberties and opposes despotism by appealing to Republican principles.
• It appeals to individual responsibility and defended the exercise of individual freedom
(free white man)
• When applied to the economy (Economic Liberalism), it was in favor of limiting State
interventions in economic life (less regulations) and repealed the theory and practice of
mercantilism imposed by the Spanish crown.
• The new Latin American countries, however, could not cut heavily on taxes and
customs duties since they were a key income for State budget.

7. Latin American economies in the 20th century
• Agro-exporting economies
• Raw material single producers
• Dependent on few export markets
• Latifundismo (landlord-tenant)
• Unbalanced industrialization
• Limited internal markets
• Deficient energy, transport and communications infrastructures
• FDI in key economic sectors
• Highly indebted economies
• UK/US as main economic partner (FDI, loans, economic concessions)

12. Banana Republics in Central America
https://www.youtube.com/watch?v=QgydTdThoeA

13. https://openendedsocialstudies.files.wordpress.com/2017/04/select-us-military-interventions-in-latin-america-and-the-caribbean-early-20th-century.png
US Military Interventions

14. Social movements and popular responses around WWII
• Sandino’s anti-imperialist struggle in Nicaragua (1926 - 1932).
• Popular insurrection of El Salvador (1932).
• The Revolution of the 1930s in Cuba.
• Foundation of the Confederación de Trabajadores de América Latina (CTAL) in
Mexico (1938).
• The Guatemalan Revolution (1944-1954) Juan Jacobo Árbenz
• The Bolivian Revolution (1952) Victor Paz Estenssoro
• In Venezuela, Rómulo Gallegos is elected President (1948).
• The “Bogotazo” following the murder of Jorge Eliécer Gaitán in 1948.
• Communist Parties followed the strategy of conforming Antifascist United
Fronts (VII Congress of the Communist International in 1935).

15. Augusto César Sandino
• Nicaraguan revolutionary and leader of a
rebellion between 1927 and 1933 against
the U.S. military occupation of Nicaragua.
• He drew units of the U.S. Marine Corps into
an undeclared guerrilla war. The U.S.
troops withdrew from the country in 1933.
• Sandino was assassinated in 1934 by
National Guard forces of Gen. Anastasio
Somoza García, who went on to seize
power in a coup d'état two years later.

16. The post WWII period and its impacts on Latin America
• Colonies obtain political independence in Africa, Asia and the Caribbean.
• Strengthen of unions and working class.
• Popular mobilizations.
• Rise of Marxism and Decolonialization: Emergence of a Latin-American critical
social science and ideologies (to reinterpret Marxism according the
socioeconomic characteristics of the colonized world).
• Rise of the Socialist Bloc in Europa: State intervention and central planning.
• New world institutionalization: UN and Bretton Woods institutions (World Bank,
IMF, GATT).
• Cold War

17. Impacts of the Cuban Revolution (1959)
• Rise of the guerrillas in Peru,
Brazil, Nicaragua, Bolivia,
Guatemala, Uruguay, Argentina
and Colombia.
• Popular uprising in the
Dominican Republic (1965).
• Resurgence of national-
populism in Brazil, Argentina,
Ecuador and Guyana.
• Attempt of socialist revolution
by pacific routes: the
government of the Popular
Unit in Chile (1970 - 1973).

18. Latin America’s quest for development
•Structuralism
•Dependency(ies)
•Marxism(s)
• Growing rejection to the idea that
there is one recipe for economic
growth and development with
social justice.
• Emphasis on development of
national capabilities and the role of
the State as engine of economic
development.
• Heavy emphasis on historical
analysis.

19. Modernization Theory is challenged
• Development as a standard process that all countries follow (from
‘traditional’ societies to ‘modern’ societies).
• Latin American countries are to follow the same development path taken
by developed countries. They only are at an earlier point or stage of
development.
• Developed countries could assist development through aid, investment
and technology transfers.
• Developing countries need to improve educational levels and adopt the
Western cultural values to facilitate development.
• Developed countries are the benevolent force.

20. https://www.slideserve.com/kylie-alvarado/chap-9-development

21. Prebisch–Singer hypothesis
• In two papers published in 1949, one by
Hans Singer, one by Raúl Prebisch, both
authors observe that the price of primary
commodities declines relative to the price
of manufactured goods over the long term,
which causes the terms of trade of
primary-product-based economies to
deteriorate.
• Underdeveloped/developing countries are
able to purchase fewer and fewer
manufactured goods from the developed
countries in exchange for a given quantity
of their raw materials exports.
Deterioration
in terms of
trade

22. Economic Structuralism
• Developing countries exported primary commodities to the developed countries who in
turn manufactured (value added) products out of these commodities and sold them back.
• Prices of manufactured products > prices of raw materials: Trade inequality.
• Due to the declining terms of trade primary, Latin American countries looked for
diversifying their economies and lessen their dependence on primary commodity
exports by developing their industrial sector.
• Proposed solution: Import Substitution by Industrialization (ISI).
• It recognized that economic inequality and distorted development was an inherent
structural feature of the global system exchange.
• The approach was promoted from the Economic Commission for Latin America (ECLA
or CEPAL) and is primarily associated with its Raúl Prebisch and Celso Furtado.

23. United Nations Economic Commission for
Latin America and the Caribbean (ECLAC)
• It was established in 1948.
• It includes 46 Member States (20 in Latin America, 13 in the
Caribbean and 13 from outside the region), and 13 Associate
Members.
• Its goal is to encourage economic cooperation.
• The founding of ECLAC is connected to debates on
structuralism and its policy implementation in Latin America.
• Between May 1950 and July 1963, Mr. Prebisch was Executive
Secretary of ECLAC. Later, he served as Secretary-General of
UNCTAD.
Raúl Prebisch

24. https://repositorio.cepal.org/bitstream/handle/11362/43308/CEPALpatrimonio2018_es.pdf?sequence=4&isAllowed=y

25. Economic policy: Import Substitution Industrialization (ISI)
• Prices of manufactured products > prices of raw materials: Trade inequality.
• Solution: To replace imports with domestic production to reduce foreign dependency
through local production. Latin American countries looked for diversifying their economies
and lessen their dependence on primary commodity exports by developing their industrial
sector.
• It looked for the development of domestic market and national consumers.
• Some degree of protectionism in trade is needed to encourage domestic production.
• Opposed to trade-and-export strategy.
• Emphasis on state-induced industrialization through public investment. The State is a key
actor on design and implementing economic policy.
• Emphasis on development of national capabilities.
• ISI strategy was widely emerged after WWII until the 1980s even if some Latin American
countries began an early implementation of ISI policies during the depression of the 1930s.

26. • The 1950s – 1960s
• Keynesianism from the 30’s
• The World-Systems Theory
• Latin American Structuralism
• Marxist inspiration
• Dependency describes a situation in which the economy of certain countries is conditioned by
the development and expansion of another country’s economy to which the former is
subjected.
• Development and underdevelopment constitute the two sides of the same coin: capitalism.
• The periphery is underdeveloped because of the development of the center.
• Modernization, Industrialization, Urbanization do not lead to Development. They produce a
“mockery” of developed societies while perpetuating underdevelopment and leading to a
pathological form of modernization.
Dependency Theory(ies)
• Theotônio Dos Santos
• Ruy Mauro Marini
• Vânia Bambirra
• Fernando Henrique Cardoso
• Enzo Faletto
• Raúl Prebish
• Celso Furtado
• Aníbal Pinto

27. Dependency Theory(ies)
• To understand Latin America from a world/global context embracing a historical
perspective that explain Latin America role in the world economy considering its role as
provider of raw materials and market for European (high value-added) goods (history of
exploitation from international capitals).
• The current situation of Latin America is the consequences of centuries-long participation
in the process of world capitalist development.
• Latin American societies and economies were shaped according global markets demands.
• Latin American economies were born from and for trade, ancillary to the European
metropolitan economies.
https://www.youtube.com/watch?v=QO56aGTrZJg

28. Latin America’s economic policies
• Structural economic change (to move from the colonial heritage)
• Industrial and manufactures’ production
• Economic diversification and “balanced” economy with inter sectoral linkages
• Increases in productivity and competitiveness
• Creation of employment
• Urban development
• Middle class increase
• Less poverty
• Less inequality
• Improvements in social wellbeing
• Development vs. underdevelopment