Transformation of Latin America 1880-2000

Time Periods:

    1880-1900: Initiation Export-Import Growth
    1900-1930: Expansion of Export-Import Growth
    1930-1960: Import Substituting Industrialization
    1960-1980: Stagnation of ISI
    1980-2000: Crisis, Debt and Democratization

1880-1900

-Post-independence colonial economy destroyed.  Infrastructure physical damaged or gone.  Trade relationships disrupted.

-1880 begins a period of increasing European demand for primary products.  This demand triggers the growth of primary product provision by Latin America.  Exports of raw materials begin and continue to grow throughout this time period.

-drawbacks: primary commodity prices are unstable and lower overall than prices of *value added* products.
    examples: Brazil/Colombia = coffee
                    Cuba = coffee, sugar, tobacco
                    Mexico = sugar, industrial materials (copper and zinc)
                    Peru = sugar, silver
                    Central America = coffee, bananas

1870-1913

-European investment accelerates - 85 million pounds sterling to 757 million pounds sterling

-by 1913 British investors own 2/3rds of the total foreign investment in Latin America (railroads in Argentina, Mexico, Peru, Brazil)

    Consequences:
    1) control of key economic sectors is foreign
    2) South Americans not forced to invest in these sectors
        -therefore the export-import development model consolidated and economies are "dependent" on decisions and prosperity in other parts of the world.
    3) raw material sector growth stimulated by foreign demand
        -intellectual rationale to justify: "liberalism" - faith in progress comes in economics via free market, and in politics via limited government, maximizing individual liberty.
        -imported ideology from Europe - lacked economic and political preconditions of industrialization and resulting class structures.

Character of Society:

1) elites dominate and committed to economic liberalism (even limited tariffs opposed)
2) concerned with racial inferiority of population
3) sense of inferiority also from "environmental determinism" theories popular in Europe at the time (tropical climates not hospitable for advanced civilization).

Societal Transformations:

1) modernization of upper class elite
    -large landowners sophisticated "profit maximizers"
2) emergence of new professional/service groups
    -commercial sector - merchants, now foreigners working to tie LA economies to overseas markets.

Political Change: economics at stake, elite motivation to become involved in politics - two common techniques:

1) direct control - landowners or other elites take control over government (Arg, Chile)

2) control via authoritarian dictator (Mexico, Venezuela, Peru)

-under both forms the emphasis is on stability and control
-centralization of power
-promotion of export-import growth required stability to draw FDI (has this changed?)

1900-1930 Export-Import Consolidation and Consequences

Export-import development model brings great wealth
    -Argentine "playboy (wheat, beef economy)
    -United Fruit expansion in Central America

Increasing sensitivity to trends in international economy (LA exports earned money to purchase imports).

Industrialization begins in: textiles, leather, beverages, food processing, construction materials
    -dynamic service sectors: transportation, government bureaucracy, commerce and finance.

Two (consequent) Changes in Social Structures

1) appearance/growth of middle social strata
2) working class - aggressive effort to encourage European immigration (workers)
    -Argentina "alluvial" era (1880s)
    -Brazil, Peru, Chile
    -exceptions: Cuba (unique) - black slaves will compose working class; Mexico - large peasant population -

Impact on Labor:

1) Workers in export sectors empowered - because of critical nature of exports for overall economy
2) Most firms small with less than 25 employees (low level industrialization).

1914-1927 Labor mobilization surges across Latin American region.  Governmental response varies from country to country.  Example: Chile pays more attention to a legal framework compared to Argentina and Brazil.

Rural/Urban labor balance:
    -imported labor fuels city growth (Buenos Aires - 750,000 in 1900)
    -immigrants initially limited power (not citizens)
    -elites allow systemic changes in effort to gain, consolidate power (add middle sectors to elites in power sharing - problem of intent)

    -1912 suffrage is expanded in Argentina - 1916 Radical Party wins presidency
    -1890s parliamentary system replaces presidential system
    -1889 Brazil monarchy ends, period of limited electoral politics ensues.
    -1898 Cuba independent from Spain - cedes independence to USA?
    -1910 Mexican revolution Los de Abajo (the Underdogs)

The problem of intent: "the goals of various revolutionary movements in Latin America were not transformative but merely to gain access to the political system for excluded sectors of the middle class" (Skidmore and Smith)

    is this really a problem?
Co-optative democracy - elite exp to allow middle class access, intent is to broaden elite power base.  Lower classes remain excluded.
    -some unintended consequences of reforms: Mexican revolution, cadre of professional politicians, exposure to liberal political ideals without economic/class structures to back up, provide power support to achievement of said ideals.

    -European liberalism was fueled by a (1) rising middle class that used its economic power to put political ideals in place - SA lacked a broadly based middle class with the requisite economic power. (2) LA economy agrarian-export with matching subsistence.  Urbanites absorbed theory but not sufficient economic power. (3) LA liberals uncertain about rationality, motivation to act in economic self interest of other segments of LA society - indigenous, blacks - legacy of slavery assumption of ethnic inferiority.  Liberalism undermined by these attitudes.

1929-1930 global economic collapse

1930-1960: Import Substitution Industrialization

-depression shrinks global export markets for LA goods - no alternative outlet
-value shrinks 48% in 1930-1934 from 1925-1929 levels
-one year post 1929 crash - military coups in Argentina, Brazil, Chile, Peru, Guatemala, El Salvador, Honduras
-legacy - 1930s on military cements position in politics throughout the region.

Two options: 1) closer economic linkage to guarantee market regardless of size 2) industrialize

Industrialize option
    -could increase independence of region from foreign shocks
    -decrease dependence on manufactured goods (imports)
    -job creation for city oriented work-force
Industrial path was to begin producing products that had formerly been imported from Europe/USA ="Import/Substituting industrialization"

Socio-economic Changes:

1) Formation of entrepreneurial capitalist class (industrial bourgeoisie)
2) increased presence of state in economic decisions
3) growth of working class organizational strength and political importance

Political Expressions?

    -continuation of co-optative democracy - industrialists and workers gained limited access to political system
        ex: labor: in Chile labor movement organized and not targeted by state, but in Argentina and Mexico political elites saw labor as a tool

    -creation of multiclass "populist" alliances.  Industrial class allied with labor = pro-industrial group (workers and industry) combined to challenge traditional landed interests over political power.  Movements led by leaders who also utilized the state to advance personal interests (Peron in Argentina, Getulio Vargas in Brazil, Lazaro Cardenas in Mexico)

Populism - (populist regimes) were usually authoritarian (because they represented coalitions against other interests that had been previously prevented from participation).  They also represented class interests (workers, industrialists) that were doomed to come into conflict with one another.  Long term maintenance of these regimes depended on personal power or charisma of the leadership.

Stagnation in ISI 1960-1980:

Problems:

1) Structure of ISI limited
    -industrialization only in certain sectors
    -capital goods necessary for production of a finished product were still imported (eg, machine tools)
    -local firms vulnerable to price fluctuations.
    -state role: strong government activism to support industrialization in target sectors, other sectors, workers, ignored.
        - tariff barriers, raised import prices, favored local producers in government contracts (created demand), established government run companies and provided direct investment in corporations.

    -ISI thus altered but did not end the region's dependency on industrialized nations.
    -complicated by declining terms of trade for traditional exports....world market prices declined - coffee, wheat, copper (why?)

2) Domestic demand for manufactured products ran into inevitable limits (large sector - lower class - immobile, fixed numbers of elites and middles, no expansion of consumer base).  Trade between regional economies difficult because all were attempting to achieve the same goal (and protecting from imports, even regionally).
   

3) Technology intensive nature of industrialization did not create many jobs...skipped the labor intensive industrial path taken by earlier industrializers

    - example: line phone, cell phone
    - what would dependency theorists say about this?

Unintended consequences:
    a) ceiling on size of domestic market - can't grow the market without jobs
    b) unable to slow problem of growing unemployment (this remains a problem)
    c) relatively organized labor movement begins to look like target to military (obstacle to investors)

Military regimes come to power as a result of poor economic performance and resulting social/political instability (Chile, Argentina, Brazil)
    -labor strikes most visible manifestation of "instability"
    -organized labor most visible in its economic demands
    -government needs to engage in unpopular economic decisionmaking
    -international lines of credit closed or virtually closed
    -militaries also blamed corrupt politicians, and aggressively closed channels of democratic activity - suspended Congress, eliminated political parties, burned voter rolls

These regimes were Bureaucratic-Authoritarian states - characteristics:
    1) granted public office to people with highly bureaucratized careers (military, civil service, large corporations)
    2) politically and economically excluded the working class and controlled the popular sector (repression)
    3) reduce/eliminate political activity (problems were technical, as opposed to political.  Solutions should therefore be administrative)
    4) goals of these governments were to revive the economy by consolidating ties with international economic community.

Crisis, Debt and Democracy 1980s-2000

1970s explosion in oil profits to Middle Eastern oil producers place enormous amounts of money (capital) into the international banking system.  Bankers looked for credit worthy investments (loans) they could make.

1970-1980 LA increased external debt from 27 billion to 231 billion -- annual debt service at 18 billion
    -complications: commodity prices declined, interest rates climbed, banks reluctant to make more loans
    -to cover loans some countries began paying 5% of GDP