Chapter 6 South America in the World Economy

1
Chapter 6South America in the World Economy

• Historical phases of S. A. economy
• Contemporary economy
• Regional development projects
• Criticism of regional development schemes
• Trend toward privatization and free-trade
• Interpretation of S. A. economy

2
Introduction

• Great economic contrasts
• Modern economic development in large cities near
  the coast
• Economic booms and falls
• Local economic activities ? regional
• ?national ? global economies

3
Historical phases of S. A. economy

• Limited economic integration and regional
  economic activities before European arrival
• Europeans integrated South American economy to
  the world system
• Labor provided mostly by African slaves
• Economic exchange between metropolis and colony ?
  mercantile capitalism
• Main exports sugar, silver and gold

4
Historical phases of S. A. economy

• Metropolitan powers received from their colonies
  only what strengthen them economically
• Europeans imposed to their colonies production
  mode that benefited the European mercantile
  operating system
• After political independence from Spain and
  Portugal, colonies found easier to maintain their
  roles as suppliers of raw materials

5
Historical phases of S. A. economy

• Industrialization was limited to the areas of
  strongest exportation S. Brazil. Argentina and
  Colombia
• This legacy has been an obstacle to the balanced
  and sound development of South Americas
  economies

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Pre-Hispanic Economies

• Before 1492 food crop production for immediate
  use or short storage for familial unit
• Exchange was limited to cotton, coca, pearls,
  medicinal plants, seashells, bird feathers,
  obsidian and metallic objects
• Transportation was by canoe, rafts, by foot or by
  llamas.
• Muiscas and Chibchas and others from Northern
  Andes and NW coast served as trade intermediates
  between Central America and Central Andes. Hub
  Gulf of Darien

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Pre-Hispanic Economies

• Inca empire
• Most elaborates Pre-Hispanic economy
• Elaborated tax collection
• Economy partially directed by the state
• Taxes were collected mainly in the form of labor
  tribute mita
• Food stored in the large centers for the army and
  needy communities in the event of poor harvest

8
Pre-Hispanic Economies

• Inca empire (cont.)
• Some young women were chosen to serve as wives
  for nobility or nuns for the state cult
• Yanakuna individuals selected to work forever as
  servants
• Mitmaq system relocation of entire communities
  to different parts of the empire to pacify
  recently conquered lands or to perform any
  activity needed by the state
• Family farmed for their own subsistence in tracts
  of lands called tupu

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Pre-Hispanic Economies

• Inca empire (cont.)
• Cooperative work party, minga, get together to
  perform community tasks
• Sophisticated distribution of surpluses
• Concept of capital accumulation was non-existent

10
Monopolizing Colonial Economyand Regional
Specializations

• Mineral exploitation by Spaniards
• Local labor
• Castilla del Oro, first political unity created
  in Tierra Firme
• Important gold economies emerged in Antioquia
  (Colombia), Ecuador and Peru
• Silver mining found in Potosi (Bolivia)
• 1500-1800 90,000 tons of silver (80 of the
  world production)

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Monopolizing Colonial Economyand Regional
Specializations

• Colonial Brazil
• Early economy oriented to supply Portuguese ships
  going to East Indies with water, fresh vegetables
  and meat
• Sugar cane production to the metropolis ? main
  commercial activity ?plantation elites of coastal
  Brazil
• Cattle and pack stock raising in NE, sertão
• Rich gold mines in Central Brazil (Minas Gerais)
• Cattle raising and mule-breeding operations to
  support small mining towns in Central and
  Southern Brasil ?mining-ranching aristocracy

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The Exporting Economies of theXIXth and XXth
Centuries

• Independence from Spain and Portugal
• Strong rulers in Spanish South America
• After Napoleon invaded Portugal in 1807,
  Portuguese ruler King John VI (Dom João)
  established his throne in Rio de Janeiro
• King John VI abolished the monopoly trade to
  Portugal and introduced economy reforms

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The Exporting Economies of theXIXth and XXth
Centuries

• The British in South America
• British empire was the main beneficiary of the
  independency of S.A. countries from Portugal and
  Spain
• Motivation looking for raw materials to feed the
  industrial revolution
• British bank loans to the leaders of new
  republics for modernization of farms and mining
  exploration
• Loans lead to importation of industrial
  implements, weapons, ships and transportation
  equipment from creditors
• Rise of local agrarian and mining elites
• Local and foreign entrepreneurs did not reinvest
  profits in projects of long-term economic
  development

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The Exporting Economies of theXIXth and XXth
Centuries

• Exploitation of natural resources
• Silver in Bolivia became under the control of
  local, Chilean and European entrepreneurs
• Bolivian billionaire Simón Patiños
• Copper mines from Cerro de Pasco in Peru were
  sold to North Americans
• Guano deposits from Peru were exploited by local,
  North American and European entrepeneurs
• Nitrate mines and coal mines belonged to foreign
  entrepreneurs in Chile

15
The Exporting Economies of theXIXth and XXth
Centuries

• Agricultural exports
• Railroads, fast steam freighters and refrigerated
  ships trigged the development of farmlands in S.
  A.
• Argentina and Uruguay wheat
• Chile dry meat, wheat and wine
• Brazil coffee, prime export commodity until
  1970s in Southern Brazil. Coffee plantations
  moved to Minas Gerais and Espirito Santo.
  Currently, soybeans are the main agricultural
  export commodity of Brazil.

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The Exporting Economies of theXIXth and XXth
Centuries

• Agricultural exports (Cont.)
• Ecuador cacau and Panama hats
• Colombia coffee, tobacco and bananas
• Brazilian Amazonia natural rubber Charles
  Goodyear
• British and American whalers harvested the
  southern Atlantic and the Pacific for oil and
  blubber (important commodity in manufacture of
  candles and in waterproofing of sails).
• Falkland Islands conflict

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Contemporary economy

• Ways to measure the economy of a region
• Number of people employed in each activity
• Contribution by each activity to the NGP
• Balance of expenditures and income
• Degree of the nations fiscal solvency

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Contemporary economy

• Classification of economic activities
• Primary sector Extractive activities
• Silviculture, fishing, agriculture, mining
• Secondary sector Urban settings activities
• Manufacturing, construction, commerce, finance
• Tertiary sector Services to individuals and
  communities (rural and urban settings)
• Educators, health providers, bureaucrats

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Contemporary economy

• Geography of dominant activities according to GNP
  and goods produced
• Urban and service oriented countries of the
  temperate S. A.
• Argentina, Chile and Uruguay
• Rural and agricultural countries
• Ecuador, Bolivia and Paraguay
• Transition from rural to urban economy character
• Brazil and Colombia

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Contemporary economy

• Agriculture-based economies
• Most S.A. countries have labor-intensive
  agriculture practices, with low contribution to
  the GNP, relative to the number of workers
• Exception Argentina, highly mechanized
  agricultural sector

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Contemporary economy

• Agriculture-based economies (cont.)
• Paraguay
• Silviculture exploitation
• Subsistence manioc, maize, sweet potatoes, beans
• Export sugar cane, cotton, soybeans, cattle
• Most profitable economic sector 1.9B in 1990

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Contemporary economy

• Agriculture-based economies (cont.)
• Bolivia
• Diversified agriculture based on regions.
• Highlands barley, wheat, quinoa, and potatoes
  mostly for local consumption
• Andean valleys maize, vegetables, wheat, cattle,
  and dairy products
• Tropical Yungas citrus, sugar cane and coca
• Eastern lowlands cattle, rice, valued wood and
  peanuts
• Except for illegal exports of coca, the export
  value of agricultural commodities are very low

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Contemporary economy

• Agriculture-based economies (cont.)
• Ecuador
• Agriculture is the main economic support
• Production for national consumption and
  exportation.
• Tropical western lowlands banana, cacao and
  coffee
• Coastal region rice and shrimp
• Andean highlands potatoes, maize, barley, wheat,
  beans, onions and dairy products

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Contemporary economy

• Agriculture-based economies (cont.)
• Colombia
• Diverse and regionalized agriculture
• Coffee third commodity in terms of total value
  of legal production. Second to coal and oil.
• Production of maize, rice, banana and wheat is
  sufficient to provide for local demand
• Food importation not encouraged by the government

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Contemporary economy

• Agriculture-based economies (cont.)
• Guyana
• Sugar cane for export
• Rice mainly for internal consumption
• Basic staples for local demand are produced on
  the coast
• Agriculture productivity for export is in decline

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Contemporary economy

• Agriculture-based economies (cont.)
• Temperate countries
• Production enough to national needs and for
  export
• Argentina and Uruguay
• most efficient agricultural producers
• Good soil and favorable landscape
• Well-developed infra-structures
• For national consumption and for exports wheat,
  maize, beef, leather, soybeans
• Chile
• Exports fruits, wine and vegetables

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Contemporary economy

• Mining-based economies
• Chile, Peru and Venezuela have the largest part
  of workers in mining activities
• Brazil comes close to the Andean country mining
  activities exploits iron, bauxite, coal and gold
  resources

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Contemporary economy

• Mining-based economies (cont.)
• Metallic ores
• Copper, silver and tin (Chile, Peru, Bolivia)
• Iron (Venezuela and Brazil
• Hydrocarbon fuels
• Oil and natural gas (Venezuela, Ecuador)
• Most S.A. countries have toimport hydrocarbon
  fuels
• Residual minerals
• Bauxite for aluminum production (Guyana and
  Venezuela)

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Contemporary economy

• Manufacturing-based economies
• Most profitable economic activity in many S. A.
  countries
• Top three Brazil, Argentina and Peru
• Brazil
• Manufacturing contributes most to the national
  product
• Fast growth in the states of São Paulo, Rio
  Grande do Sul, Santa Catarina, Paraná, e Minas
  Gerais

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Contemporary economy

• Manufacturing-based economies
• Brazil (cont)
• Manufacturing sector includes
• Metallurgy and machinery
• Chemical and pharmaceuticals
• Food preparation
• Textile
• Transportation equipment
• Brazil benefits from a large internal market and
  from government exportation incentives
• Brazils production is more labor efficient in
  the manufacturing sector than the agricultural,
  forestry and

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Contemporary economy

• Manufacturing-based economies
• Argentina
• Second largest manufacturer in S. A.
• Important products
• Food products
• Textiles and clothing
• Transportation equipment
• Chemicals
• Appliances
• Declining in manufacturing products due to the
  declining buying power of its government in the
  last few decades

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Contemporary economy

• Manufacturing-based economies
• Uruguay
• Employs the highest percentage of its
  economically actively population in the
  manufacturing sector
• Main products
• Textile
• Food processing
• Clothing

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Contemporary economy

• Services in S.A. national economies
• Expansion in the service sector in S.A. follows
  the growth of the primary and secondary sectors
• Financial, legal, advertising, communications and
  personal services are required to support
  economically growing societies

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Contemporary economy

• Services in S.A. national economies
• Services account for
• gt 1/3 of total employment in Uruguay and Chile
• ¼ in Venezuela and Argentina
• 1/5 in Colombia
• Nationalization of medical and educational
  services and transportation and major commercial
  agencies, governments become the major investors
  in services

35
Contemporary economy

• The impact of internal growth on construction
  activities
• Construction is seen as an indicator of a
  countrys economic growth
• Employment in construction is highest in Brazil
• Venezuela is second largest
• Decline in construction jobs reflect stagnation
  in urban growth (decline in population growth) or
  deep economic crisis

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Regional Development Projects in South America

• Formulated to correct uneven spatial distribution
  of wealth and poverty, well-being and misery
• Governments to supervise crucial industries for
  national development
• Oil industries in Venezuela, Bolivia and
  Argentina
• Nitrates and copper in Chile
• Tin in Bolivia
• Manufacturing in Argentina
• Fishery in Peru
• Coffee in Brazil and Colombia

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Regional Development Projects in South America

• Growth Pole Theory
• Developed by François Peroux
• Planning strategies to assert spatial
  distribution should concentrate on key industries
  in determined locations where government
  officials could direct and control investments,
  promote population flow and trigger establishment
  link between industries
• Diffusion would allow transfer of technology and
  financial resources from developed to developing
  countries
• Providing growth of key poles would eventually
  benefit the surrounding populations

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Criticism of the S.A. Regional Development Schemes

• Failure of regional development projects
• Major criticism
• The establishment of the growth pole projects
  created a larger dependence on the developed
  cities and served to advance industrialized
  countries
• Corruption, fiscal irresponsibility and
  embezzlement, characteristic of many political
  practices
• Use of inefficient and highly-visible projects to
  serve as monument policy to promote politician
  interests, not peoples needs
• Patchwork approach of regional development plans

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Trends toward Privatization and Free Trade Zones

• To be continued!