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UIUC ECON 452 - ECON452_L2

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Lecture'Notes'#2'ECON'452'–'Fall'2016'The'La;n'American'Economies'Instructor:'Fabrício'd’Almeida'1. Slow'integra;on'into'the'world'market''2. Growing'European'market'for'La;n'American'exports'(commodi;es)'3. Fragmenta;on'of'Spanish'America''aRer'independence-'more'barriers'and'even'less'division'of'labor'4. Privileged'posi;on'of'Britain''5. Rural'elite'rule'–'and'loss'of'skilled'and'experienced'administrators'La;n'America'aRer'Independence''6. Literacy'and'property'requirements'for'vo;ng:'masses'disenfranchised'7. Early'debt'defaults'8. Church'loses'many'of'its'proper;es,'resul;ng'in'declining'of'educa;on'9. 'Use'of'public'office'to'encroach'on'community'lands'–'and'thus'further'spread'of'la;fundism'''10. 'Revolu;on'for'independence'was'not'a'social'revolu;on,'and'income'distribu;on'was'based'on'power'rather'than'produc;vity'La;n'America'aRer'Independence''1. Impact'of'industrial'revolu;on'was'finally'reaching'La;n'America'2. Huge'increase'in'flow'of'capital'to'region'3. Immigra;on,'especially'to'Argen;na,'Brazil'and'Chile'4. Rapid'growth'of'exports'of'commodi;es:'– coffee,'silver,'nitrates,'wool,'etc.'– evolu;on'into'mono-export'economies,'that'is,'dependence'of'individual'countries'on'a'small'number'on'exports'of'primary'goods'– rise'of'problems'due'to'overspecialized'economies'Second'half'of'XIX'century'5. Foreign'investments:'infrastructure,'railroads,'mining,'planta;ons,'trade'and'finance'6. Role'of'foreign'investment:'to'link'interior'output'of'primary'goods'to'ports'and'thus'to'the'growing'world'trading'system'7. enclave'development'–'and'weak'linkages'within'economies:'– Backwards'linkage'vs.'forward'linkage'1850’s'to'1910’s'8. Guaranteed'rates'of'return'for'railroad'investors'9. by'1913'total'foreign'investment'in'La;n'America'amounted'to'$'8.5'billion'(in'1913'dollars):'– one'third'in'government'bonds'and'the'rest'in'direct'investment''– about'$'5'billion'came'from'the'U.K.''1850’s'to'1910’s'• Cycle'of'Coffee'• Growth'of'coffee'exports'''a) Paraiba'Valley'(1820-1860)'• 'based'on'slave'labor'b) Coffee'fron;er'moves'South'and'West''into'state'of'São'Paulo'(1860-1940)''• based'on'immigrant'labor'• Clash'of'economic'systems:'– free'labor'vs.'slavery'– effect'on'ins;tu;ons'and'poli;cs'Brazil'• Con;nued'presence'of'sugar'exports'from'Northeast;'also'colon,'cocoa.'• The'Amazon'Rubber'boom:'– Last'“cycle”'– The'“purchase”'of'Acre'''Brazil'• Very'lille'industry'un;l'1890’s,'when'there'began'an'industrial'growth'of'light'industries'(Industrial'growth'vs.'Industrializa;on)'• Foreign'investments'in'railroads,'later'on'public'u;li;es;'trade'• Barão'de'Mauá'• European'Immigra;on:'5'million'''• S;ll'by'1920'70%'of'popula;on'employed'in'agriculture'and'other'primary'ac;vi;es'Brazil'• Rich'in'minerals''and'agricultural'endowments'(coffee,'sugar,'rubber,'petroleum,'colon,'lead,'copper,';n,'iron,'silver,'zinc)'• More'diversified'trade'• Mexico'under'Porfirio'Diaz'(Porfiriato)'1876-1910:'a. provided'poli;cal'stability'(Republic)'b. increase'of'large'landed'proper;es'–'from'church'lands,'public'lands'and'indigeneous'lands''Mexico'c. Government'moderniza;on:''• upda;ng'trademark'laws;'• removal'of'local'customs'du;es;'• lowering'taxes'to's;mulate'mining;'• simplifica;on'of'mining'claims''d. Industrial'produc;on'increased'in'1870s:'protec;ve'tariffs'and'tax'incen;ves'e. Over-reliance'on'external'sector'and'lack'of'internal'par;cipa;on'f. US'dominance'in'mining'sector'and'oil'g. Worsening'of''income'distribu;on'and'percep;on'of'control'by'large'landowners'and'foreigners'brings'on'1910'revolu;on'Mexico'1. Late'colonial'days'and'early'independence'shiR'of'economic'ac;vi;es'to'Buenos'Aires'and'Pampas'area'2. Ranching'developed'at'mid-century'–'large'“estancias”'3. Landlords'were'produc;ve:'selected'breeding,'fencing'fields'4. Immigrant'ranchers'–'from'Scotland,'Ireland,'France,'and'England'5. Wool'exports:''1829''38,000'kgs.'''''''''''''''''''''''''''''''''''1850''7.7'million'kgs.'''Argen;na'6. 1876'–'refrigerated'ships'–'export'of'meats'rise'and'growth'of'''“Frigorificos”,'dominated'by'Bri;sh'and'French'capital.'7. large'foreign'investment'in'railroads'–'these'would'also'reac;vate'economic'ac;vi;es'in'the'old'Western'Argen;na'(wine,'sugar)'–'also'guaranteed'rates'of'return''8. Large'investments'in'educa;on'' ''' 'Literacy:'''''''''''1869-'22%''' ''''' ''''''''''''1895-'50%'' ''''''''''''''''''''''''''' ''''''''''''1914-'66%'9. Backward'and'forward'linkages''Argen;na'117R. Soto and F. Zurita | LATIN AMERICA AT ITS BICENTENNIAL CELEBRATIONBy 1870, half a century after independence, these five Latin American economies had entered a period of political control of internal affairs, enacted significant liberalization reforms and, benefiting from favorable external conditions, resumed sustained growth. European countries and the US, in the meantime, had taken full advantage of industrialization and progressed to the point of doubling income per capita to around US$ 2,000. Some Latin American countries—Argentina and Chile—managed to keep pace with advanced economies in terms of relative income levels, while Mexico and Venezuela remained as stagnant as all Asian economies (the significant exception is Singapore that had already caught up with regional levels). Interestingly, evidence for Spain in Table 1 indicates it performed less dynamically that its ex-colonies and its income level grew very slowly, reaching around one half of that in the US and not significantly different of those in Argentina and Chile.Table 1. Real GDP per capita(Geary-Khamis International Dollars of 1990)1820 1870 1920 1970 2010Argentina 1,311 3,473 7,302 11,886Chile 694 1,290 2,768 5,231 13,490Colombia 1,255 3,094 6,445Mexico 759 674 1,823 4,320 7,732Venezuela 460 569 1,173 10,672 9,599Europe* 1,234 2,080 3,313 10,925 21,436Spain 1,008 1,207 2,212 6,319 18,091USA 1,257 2,445 5,552 15,030 30,543China 600 530 778 8,931India 533 533 635 868 3,397South Korea 600 604 1,092 2,167 20,771Thailand 570 608 1,694 9,088Taiwan 550 550 861 2,537 24,484Hong Kong 615 683 5,695 32,537Malaysia 603 663 1,110 2,079 10,515Singapore 83 682 4,439 28,090World 666 870 3,726 6,874Source: Maddison, Contours of the World


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