Issue 10, August 2009
|Economics and Trade|
Overall economic development has lagged in much of Latin America for the same reasons it has in Mexico.
Like Mexico, many Latin American countries went through macroeconomic structural adjustment programs mandated by foreign lenders when their economies hit the “lost decade” of the 1980s. In some cases their ability to take advantage of global trade has been hampered by lack of microeconomic reforms needed to make markets work in their favor. Corruption and state patronage have contributed to an economic inequality which precludes the development of the critical middle class. Privatization has often led to the creation of powerful monopolies owned by oligarchs who are often considered above the law.
Some experts have gone as far as to use the term “economic apartheid” when describing Latin American, including Mexican, class dynamics. The vast disparity of wealth in Latin American countries reflects ineffective and inefficient fiscal policies which fail to help the poor even when developed in the name of populism. Expenditures on education, pensions, and energy do not always go to the neediest citizens.
Most Latin American countries, like Mexico, are dependent on natural resources for economic growth – from oil to timber to gold, and from sugar to minerals.
Finally, Mexico and Latin America share a similarity in the prominence of the informal sector of the economy. From street trade and domestic services to prostitution, drugs, and organized crime, many people operate outside the official economy and undermine the economic sovereignty of the government.
Numerous free trade agreements exist within Latin America, some of which include Mexico.