Question

What factors have shaped the growth patterns of Latin America?

Answer 1

What factors have shaped the growth patterns of Latin America?

Ans………..

Factors have shaped the growth patterns of Latin America

A .Internal factors &

B External factors

A .Internal factors

1. Development models

• In its first two decades, the LSI model made remarkable achievements. By the end of the 1960s, however, its flaws and shortcomings, combined with the unfavorable external environment, led to an unprecedented economic crisis in the 1980s. The 1980s was considered as the lost decade for Lath America.

• In order to get rid of the hardships, Lath American nations once again adjusted the development model by walking towards the road of reform and opening to the outside world. This model was mainly composed of privatization of the state-owned enterprises, trade liberalization, financial opening, and marketization of the economic system. Dubbed as the neoliberal model, these measures achieved some positive results, but the negative outcome was also very serious.

2. Political stability

• This transfer of power represented the beginning of a democratic wave that would soon spread across Lath America. Since then most of the countries in Latin America have been successfully maintained political stability.

• At the same time, however, some counties have suffered from political turmoil, causing disarray to their political and economic development. It was estimated that, since the 1980s, there have been fourteen Lath American presidents who could not fulfill their duties as scheduled by the constitution.

3 Comparative advantage vs. Industrial restructuring

• In the past, exports of primary products turned some Latin American countries into the richest nations in the world. At the end of the 19th century, for instance, demand of the European market for agricultural produce was rising rapidly. In order to expand food production, Argentina brought in foreign capital and international immigrants. Argentina shipped a large quantity of agricultural produce to Europe. As a matter of fact, economic growth rate in Argentina at that time was among the highest in world. By the early 20th century, this South American nation had been nicknamed the world's warehouse of gain and meat. Even in 1950 Argentina was still richer than Japan and as rich as Italy, Austria and Germany.

• Only in the 1950s did Argentina start to make more efforts to develop the heavy industry and chemical industry. Therefore, Argentina had lost an opportunity to become industrialized before and during the Second World War.

4. international competitiveness

• Most of Latin American countries' competitiveness is not strong. Many factors affect a nation's competitiveness, and technological innovation is one of them due to lack of the capacity of research and development (R&D) mainly.

• Education in Latin America is not undeveloped. Its education system has two major flaws. First of all, higher education is given much more emphasis than on primary education. As a result Latin American scientists can win Nobel Prizes, but ordinary workers cannot acquire enough skills, thus hindering the rise of labor productivity. Secondly, educational quality is not high.

• Latin America ranks the lowest in terms of the share of R&D expenditure in GDP.

5 Social problems

• Wide-spread poverty (almost 40% of the total population lived in poverty and 15% of the total population in extreme poverty)

• Income inequality: Gini Coefficient in Brazil and Bolivia is above 0.6, and the index for many other Latin American countries is close to 0.6.

• Public safety is worsening. Latin America, along with Africa, has registered the rapidest increase in

B. External Factors

1. U.S. economic situation

• The region's deepening reforms have made it more integrated with the outside world. Close integration with the world economy also means that Latin America has become more dependent upon it. When the U.S. sneezes, Lath American countries would catch a cold.

• Apparently, of the external factors that can affect Lath America's development prospects, the U.S. factor is the most important. The U.S. is not only the largest trade partner for Lath America, but also the major provider of capital and technology. Most of the remittance Lath American countries can receive regularly comes from the U.S.

2. China and India

• In recent years China and India have also become an important factor influencing Lath American economic development. China and India's growth has not been a zero-sum game for LAC [Latin America and the Caribbean], but the potential benefits are not being fully realized. It is crucial that LAC countries take full advantage of the growing presence of China and India in world markets by adopting offensive strategies that facilitate both the participation of LAC firms in global production networks and their commercial presence in the two Asian economies' markets.

• The World Bank report mentioned three reasons why Lath America can benefit from the economic rise of China and India. First, the two Asian nations can offer large markets for Lath America. Second, China and India can be important sources of capital for Lath America. With the opening of the financial market in China. Third, there is great scope of cooperation in the field of science and technology.

• Lath America's trade with China is more asymmetrical. Lath America have been building up a growing trade deficit with China.

3. Prices for the primary products

• Movement of prices for the primary products (oil,grain etc) in the world market would also be an important factor that determines Lath America's development prospects as it is major commodity producer.