Economic Liberalization and Integration in Latin America and

Length: 8 Pages 2103 Words

In the 20th century the region of Latin America and the Caribbean (LAC) was marked by the rise and fall of powerful dictators who ran the economy much like they ran the country. Statist models that actively pursued import substitution industrialization (ISI) were common during this time in many Latin American countries. Eventually, the authoritarian governments fell and were replaced by representative and constitutional democracies (many corrupt, but democracies nonetheless). With the passage of time, the new democracies have tried limit the extent of government corruption, mostly due to pressures from the developed countries and from civil society. With consolidated democratic regimes, the region’s economic situation is improving and LAC countries are closer to trade liberalization and integration with their neighbors than ever before. The World Bank and the U.N. Commission for Latin America and the Caribbean estimate that the region's gross domestic product (GDP) grew by 1.5% in 2003 (slightly more than the population growth rate of 1.3% - 1.4%), compared with a 0.4% - 0.8% contraction in 2002. Those LAC countries that have adopted sound fiscal policies and oriented their economies toward greater foreign investment and ru Continue...


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The economies of the LDCs where the presence of TNCs are most heavily felt are booming because of the direct foreign investment that is pouring into the country, while the cheap labor is suffering from inhumane living conditions and illegal wages. The GSDF is a fuzzily defined program that seeks to promote corporate investment in sustainable projects in the world's poorest countries. The EU also practices export dumping, that is, products are exported at prices far below the costs of production. These steps often include minimizing business regulation and weakening codes for labor, health, and the environment. Due to the unstable financial system in LAC, capital flight is a problem, and so vast amounts of capital are drained from the LDCs. Many corporations are richer and more powerful than the states that seek to regulate them. In the factories that the TNCs have set up in Haiti and in many other LAC countries, the workers toil under appalling conditions for extremely low wages. So while the rich enjoy greater amounts and more varied foodstuffs, the inhabitants of the LDCs are starving. But the agricultural subsidies and other trade barriers in the United States and throughout the European Union prevent poor countries from gaining equal access to the most important markets. By the end of the 20th century, TNCs had gained control of many of the former government monopolies in telecommunications, power generation, and transportation in the LDCs. As the presence of foreign capital erodes the economic sovereignty of the LDCs, it is becoming increasingly apparent that it is not so much the developing countries that desire FDI, but rather it is the representatives of the industrialized world that want the LDCs to desire FDI. A step towards that has been made with the United Nations' proposed Global Sustainable Development Facility (GSDF). For example, the EU is one of the highest cost sugar producers in the world, but with the subsidies it receives from the government, it is the world's second largest sugar exporter. For example, along the Mexican-United States border, US companies have set up factories in tax-free industrial zones, many of the municipalities lack adequate funds for proper infrastructure and schools. The developed countries use international financial institutions and regional trade agreements to compel the poor developing countries to "integrate in the world market by reducing tariffs, privatizing state enterprises, and relaxing labor and environmental standards.

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