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Latin America Economy Analysis

Decent Essays
Not unlike the political transformations that pepper Latin American history, Latin America experienced several changes in economic systems. Each country possesses its own unique history, however there are several structural similarities that create a likeness across national borders. When examining Mexico, Argentina, Chile and Venezuela one major commonality is the shift from Import Substitute Industrialization to Neoliberal reforms in times of economic downturn. Nevertheless, each country experienced distinctive outcomes placing their economies on different scales of development and stability. To understand how inequality, economic growth and structural independence influence these countries, an examination of each country's major economic…show more content…
First, Mexico experienced an economic boom from the 1940-1970s under their oil based ISI economy known as the "Mexican Miracle". In addition to rapid economic growth, the nation did experience a downturn in inequality and people felt that Mexico's economy was beginning a new era of growth and success. One major element of ISI was the Ejido system land reform policy that created communal land for peasant farmers to cultivate. However, the need for loans from international sources to support ISI, and subsidies like the Ejido system, linked Mexico to the international economy making them subject to global bomb and bust cycles. The dependence on oil led Mexico to default on their loans when the oil crisis hit in the 1980s, starting neoliberal economic reforms. This included traditional neoliberal policies such as, " private sector cut backs" (Vanden and Prevost 322), privatization of national enterprises and a switch to free market structures. This change occurred easily in part due to President de la Madrid's training in the United States and belief in the power of neoliberalism. This transformation steered Mexico into joining NAFTA. The signing of this agreement came only two years after President Salinas altered the constitution to eliminate the Ejido system, which devastated poor rural farmers who relied on this communal land. According to Wise under NAFTA, "Mexican Farmers on average lost more than $1 billion…show more content…
Before the Dirty War the country participated in ISI under Peronist Presidencies, but economic instability and hyper inflation in the years leading up, during and post the war under Alfonsín, forced the country to abandon ISI. President Menem introduced neoliberal reforms in the country. One vital element of this reform was his Convertibility Plan, pairing of the peso to the dollar in order to reign in hyperinflation. Additionally, under neoliberalism "all state enterprises and services were privatized and transferred to domestic or foreign owners," forcing people out of the formal workforce (Vanden and Prevost 356). Moreover, "most economic activities were deregulated, a number of regulatory agencies were eliminated, and there were massive dismissals of public employees" (Vanden and Prevost 356), all highlighting how neoliberalism increased inequality in the country. Furthermore, the Convertibility Plan only led to initial growth but in the end hurt the economy by making Argentine goods more expensive and less competitive to export. In the end, this system lead to an economic recession beginning in 2001, where the country saw high levels of unemployment, increased poverty and inequality, and continued dependence on the international economy. The recession worsened under Dhualde who reverted the convertibility plan severely decreasing the value of the currency and increasing poverty. During Nestor Kirchner’s
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