Question

1. Provide two reasons why Latin America did not actively engage in institutions that were fostering trade liberalization as soon as these institutions were created.
2. How could international trade have improved the income distribution within Latin America during the 20^th century?
3. Comparative and absolute advantage theories are concerned about the costs related to the production of goods in different countries. Nevertheless, there is a key conceptual difference between the relevant type of cost. What is it?
4. Why Import Substitution Industrialization strategy contradicts 200 years of economic theory?

Answer 1

Latin American nations faced bureaucratic government structures coupled with high debt and leverage which resfrained them for trade liberalisation which would have kicked up growth prospects at cost kf burgeoning debts.

International trade could create higher employment and higher wages due to feep pocketed players and mostly would have high free cash fkow to invest amd thus the High income class and low income class would get commensurately paid but marginally benefits lower income groups and reduced income inequality.

Absolute advantages deals with lower cost of production while comparative advantage deals with lowering the opportunity cost in comparison to competition.

Import substitutions industrialisation strategy shows that foreign dependency was reduced to spur domestic employment and reduce terms of trade and trade deficit and thus kick-start growth.

However as per data it did completely opposite as this increased cost of production, created losses and ultimately high layoff and high unemployment which again led to fall of real GDP.

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