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Latin America

Page history last edited by Brian D Butler 12 years, 3 months ago



Table of Contents:


 see also: emerging markets



Country by country guides (Latin America)

















add more country reviews....


Game to test your knowledge about Latin America:


This Traveler IQ challenge compares your geographical knowledge against the World's First Travelogue's other 4,456,835 travelers who have taken this challenge as of Thursday, August 27, 2009 at 04:21PM GMT. (TravelPod is a TripAdvisor Media Network partner) 




Facts and Figures about Latin America


  • Its population of 361 million people.
  • Covers an area of over 17 million square kilometers, larger than the largest country, Russia
  • Possesses 27% of the world's freshwater sources
  • Has eight million square kilometers of forested land and is surrounded by two oceans
  • Is the world's foremost food producer and exporter
  • Its stock of hydrocarbon resources will last 100 years
  • Some 95 percent of its inhabitants share a single religion
  • The great majority of its inhabitants speak one of two languages (Portuguese & Spanish)
  • Has a GDP at  2008currency exchange rate of 2,65 trillion dollars as estimated by the IMF in 2006.
  • The export earnings amount to 181 billion 856 million dollars



Politics of Latin America


Politics in Latin America - left vs right 




Trade and investment promotion agencies


Belize BELTRAIDE - Belize Trade and Investment Development Service

Costa Rica Costa Rican Investment Board (CINDE)

El Salvador Promoting Investment in El Salvador

Guatemala FUNDESA Invest in Guatemala

Honduras Honduras - The Foundation For Investment & Development of Exports

Nicaragua NicaExport

Panama BusinessPanama Group

Argentina Invest in Argentina The Investment Promotion Agency ADI

Brazil BNDES Brazil

Chile Chile Foreign Investment Committee Chilean Economic Development Agency (CORFO)

Colombia Colombia Foreign Investment Promotion Agency

Ecuador Ecuador's Corporation for Promotion of Exports and Investment (CORPEI)

Guyana Guyana Office For Investment

Paraguay Paraguay - General Office for the Promotion of Exports and Investments (Proparaguay)

Peru Agencia de Promoción de la Inversión PROINVERSIÓN

Uruguay Uruguay XXI Investment and Export Promotion Agency

Venezuela Venezuelan Council for Investment Promotion (CONAPRI)




Business in Latin America


Startup / Entrepreneurship



Telecom Business

Telecom in Latin America



Macro trends in Latin America


Economics and development


Back in the early 1900's, most countries in Latin America were open to trade and investment, but this changed in the 1960's as most countries in the region adopted policies of protectionism, and import substitution model of development.   Country after country erected barriers to trade and investment, and sought to eliminate "dependence" on foreign influences.   Governments increased their ownership of enterprise, and sought to protect local industries, and to encourage local manufacturing.  see also:  Inter-American Development Bank and the Andean Development Corporation.



Regional integration and Free Trade


Single Market in Latin America?

The idea is to combine the two trading blocs (Mercosur, and the Andean Community) and create one larger trading block (to better negotiate with the US and Europe).   The Comunidad Sudamericana de Naciones (CSN) has been renamed to be called Unasur.    It is a fledgling supranational and intergovernmental union that will unite two existing free-trade organizations –  and Mercosur the Andean Community - as part of a continuing process of South American integration. It is modelled on the European Union.  One of the initiatives of Unisur the creation of a single market, beginning with the elimination of tariffs for non-sensitive products by 2014 and sensitive products by 2019.



Infrastructure projects across the region

Unasur/Unasul started plans of integration through infrastructure cooperation with the construction of the Interoceanic Highway, a road that intends to more firmly link the Pacific Coast countries, especially Chile and Peru with Brazil and Argentina by extending highways through the continent, allowing better connections to ports to Bolivia and the inner parts of Argentina, Peru and Brazil. The first corridor, between Peru and Brazil, began construction in September 2005, financed 60% by Brazil and 40% by Peru, is expected to be ready by the end of 2009.



Regional Energy pacts?

The South American Energy Ring (Anillo Energético Sudamericano/Anel Energético Sul-Americano) is supposed to interconnect Argentina, Brazil, Chile, Paraguay and Uruguay with natural gas from several sources, such as the Camisea Gas Project in Peru and Tarija Gas Deposits in Bolivia. Though this proposal has been signed and ratified, economic and political difficulties in Argentina and Bolivia have delayed this initiative, and to this date, this agreement remains more like a protocol than an actual project, since Chile and Brazil are already building LNG terminals to import gas from overseas suppliers.


Free movement of people?

Visits by South American citizens to any South American country (except French Guyana) of up to 90 days require only the presentation of an Identity Card issued by the respective authority of the travellers' country of origin. On 24 November 2006, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela waived visa requirements for tourism travel between nationals of said countries.



Monetary policy unity?

see discussion on Banco del Sur.  Presidents of the 7 founding countries (Argentina, Bolivia, Brazil, Ecuador, Paraguay, Venezuela and Uruguay) officially launched the South American Bank in Buenos Aires in December 2007.  The capital will be US$ 7 Billion, which Venezuela will be responsible for US$ 3B and Brazil US$ 2B. The headquarters will be located in Caracas with offices in Buenos Aires and La Paz.  The "Banco do Sul" will finance economic development projects to improve local competitiveness and to promote the scientific and technologic development of the member countries. Chile and Colombia participated on initial meeting, but they decided not to join the project.    The founding chart affirms that the Bank will promote projects in "stable and equal" manner and priorities will be to reinforce South America integration, to reduce asymmetries, and to promote equalitarian distribution of investments.  The Brazilian Minister Guido Mantega informed that the bank is not similar to the International Monetary Fund; it will be a credit institution similar to the World Bank or the BIRD.




Economic History


1980's:  Debt Crisis

What were the causes and implications of the debt crisis of the 1980s in Latin America ?


2003-2007: Economic Boom

This boom was based on the extraordinary combination of three factors: high commodity prices, exceptional financing conditions and high levels of remittances. Whenever the first two factors are combined, Latin America always booms. The last time these two positive factors coincided was in the 1970s. All three factors have never been seen together before this boom in 03-07.





Business & Culture


In Latin America, in general, there is a prevalence of family run businesses, much more so than in the US.  This has a large impact on the business culture, and on the rules for conducting business. 




Economic Development



Growth Models:


export-oriented industrialization vs. import-substitution industrialization:


It is interesting that both models were ultimately trying to achieve the same objective: encourage national economic development and to build up their economies to avoid poverty. Both regions were aware of the “two faces of development”. On one hand they were attracted to the promise of less poverty, better health, longer lives and greater international status. But at the same time, both regions were aware of the threat of dependence and were repulsed by the high cost of development, the potential loss of culture and independence.


Reforms needed


Much needed investment in health and education, civil rights and property rights both need to be strengthened, judiciary and regulatory agencies and the huge income inequalities



Asia vs. Latin America


The two regions were heavily influenced by the world around them. In East Asia, the “tigers” saw the amazing economic transformation that Japan had undergone post WWII, and they were determined to follow a similar model. In much of Latin America, they were more influenced by their historical connections with Europe, and they looked to France and even Russia as influencers.


The Asian countries were ultimately better able to jump out of poverty and make the faster transition to economic development. A big part of this leap was that they were less afraid of the repulsive “face” of development, and they embraced the attractive face with more enthusiasm. The Asian countries tried to take more advantage of the opportunities that were presented by the international markets and they tried to maximize the benefits of modernization. In order to minimize the risks of the “ugly face”, the Asian markets typically relied on a very strong state intervention to protect their home markets. In general, the Asian politicians were willing to risk dependency and went after the benefits of development. They tried to limit that risk with a strong state. They were influenced by a mix of liberal and mercantilist perspectives.


The Latin American countries were more concerned about the threat of dependency than the Asian ones were. In general, they saw the international market forces as a threat, and they attempted to wall off their markets and develop internally. Brazil is a very good example of a country that thought they could use the Import substitution model as a means for growth. This had its root in the 1950s when influential scholars were critical of the “comparative advantage” theory of the division of labor, and produced the “dependency critique”. This led to a feeling that culturally and economically, Latin America needed to avoid dependency and needed to self-develop their own markets and manufacturing base. The goal was to produce “home grown” industries and technologies.


In a way, both the Asian and the Latin American experience were very similar in the beginning. Both wanted to get away from just exporting raw materials and importing finished goods. They were both concerned about the foreign exchange drain of being just a primary goods exporter and a finished goods importer. They both wanted to develop their manufacturing base and to develop economically. What is interesting is that the second stage of development is where the Asian and the Latin American strategies diverged.

The Asian strategy has been branded the “export-oriented industrialization” because their main focus was to build up a manufacturing base with the express intent on exporting their products to the world markets. The Latin American strategy, on the other hand, has been called “import-substitution industrialization” because their main focus was to build up their local manufacturing base with the intent on servicing their home markets. While the Asians sought to build advanced machinery to export to the world, the Latin Americans sought to build products to service their local markets.


One of the key reasons why the Asian model has been so successful is that because they focused on producing goods and services for the world markets, they had to continuously focus on improving the quality of their goods and they had to continuously seek ways to become more efficient and produce at a lower cost. The Latin Americans on the other hand, but just focusing on their local markets, they sought to protect themselves from global competition. As a result of not facing global pressures of quality and price, many of their industries fell behind in technology and in business practices.


The Latin American “walled-off” markets were much smaller than the ones faced by the Asian companies. Instead of trying to sell to the whole world, the Brazilian companies just tried to sell their products to other Brazilians. The problem is that countries such as Brazil had large portions of their population as very poor, so there was a tendency of the companies to just focus on the relatively small population of consumers that could afford to buy their products. With a small relative market size, the companies inside of the import-substitution economies became complacent.


The Asian development story is actually quite interesting. They had a very strong influence by the government in choosing winners and losers and re-organizing the national economy to help promote export oriented growth. They would choose an industry where they thought that they would have a comparative advantage, and then they would protect those national companies with import barriers. They would also invest heavily in education and in technology to try and create a comparative advantage relative to other companies in other parts of the world. They focused at first on consumer goods, but later expanded into heavy industries such as petrochemicals, and automobile production (for world wide consumption, not just for their local markets). In order to pull off this economic “miracle”, the Asian governments encouraged a high level of national savings and investment. The governments also helped establish private banks to ensure the free flow of capital. They removed import barriers on essential raw materials essentially lifting all barriers to FDI. By investing in high levels of education and job training, the Asian governments attempted to increase productivity relative to other countries.


The part of the Asian “miracle” that doesn’t get talked about as frequently is that countries such as South Korea and Taiwan were some of the largest recipients of US aid. Even until today, S Korea benefits largely from the US military presence in the region. But during their development, these countries were seen as strategically important in combating communism and therefore the USA looked the other way at some of the more questionable tactics that they employed in order to develop. South Korea, for example, went through a military coup in the 1960s and then later repressed all forms of labor unionization. In today’s world, the US turning the blind eye to this kind of behavior would not be tolerated in the world press. Also, the US poured billions of dollars into these economies, but at the same time, they allowed them to impose high import tariffs on US made goods. This kind of double standard…allowing them to export with not barriers but putting high import barriers on our products…this was tolerated because these countries met other IPE objectives of the US at the time.


Also, it is important to note that Taiwan and Singapore and Hong Kong are all very small nation-states with a relatively short history as primary goods producers. This is in stark contrast to a country like Brazil who has a massive farming and agricultural base and has traditionally been a primary exporter of raw materials. The book points out that it was easier said than done as Latin America tried to get away from relying on primary good exports.


In general, I think governments should study both of these experiences carefully because they both hold some of the keys to economic development. From the Asian experience, we can clearly see that it is better to keep an eye on the international markets and that you should try and compete globally. By allowing your products to compete internationally you will expose yourself to international pressures to innovate and improve. Also, the Asian countries taught us that strong mercantilist policies can be very useful for helping a country develop. While it may not be beneficial for all countries in the world to act like economic nationalists, it is clear that if the rest of the world is acting liberal, and if you find it possible to behave as a mercantilist, then you will have an advantage in developing. In some of these Asian examples, they took advantage of other global IPE concerns (spread of communism) and used the chance to develop their economies.


From the Latin American experience I think we learn a lot about what not to do. But, while the book may have been a bit critical of the import-substitution policies of Latin America, I am left to wonder if it really was all that bad of a thing. Take a country like Brazil for example; I actually think the ISI model worked quite well in getting foreign automobile companies to invest in local manufacturing facilities inside of Brazil. Before the ISI policies were put in place, the foreign auto industries that wanted access to Brazil’s huge internal market were able to just import them from abroad. With the implementation of ISI policies (high import duties), these same companies were forced to set up local manufacturing plants. Over the past 30 years, those same plants have modernized and now produce some of the most sophisticated engines anywhere. Back in the 1970-80’s, Brazil decided to be self-reliant on ethanol rather than gasoline for automobiles. Now, today, Brazil is the world leader in Ethanol cars.



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