World Savvy Monitor

Overall economic development has lagged in much of Latin America for the same reasons it has in Mexico.  

• In the colonial period, mercantilist arrangements discouraged the development of domestic industries.  

• Foreign investment, debt, and ownership of assets drained countries of capital and resources.  

• Chaotic politics, lack of sufficient regulation and infrastructure, and instability caused by civil wars and rebellions deterred constructive investment.  

• State control of key economic sectors led to inefficiency and corruption.  

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.  

• As discussed in the Mexican Economy section, the natural resource curse is often in play as economies fail to diversity, prices are often volatile, and inflation rises.

• Commodities-based economies throughout Latin America are at the mercy of boom and bust cycles created by fluctuating world demand and the trade policies of other nations.

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.

• All countries in the region maintain free trade policies with other countries and within regional associations.

• All are members of the World Trade Organization (WTO).

• As the most significant Latin American economies, Brazil, Argentina, and Mexico often find themselves in multiple concentric circles with respect to economic organizations.  Mexico and Argentina are members of the Group of 20 Industrialized Nations (G-20).  Argentina and Brazil are in Mercosur; Mexico is in NAFTA.  Brazil is one of the growing economies known as BRICs, and  Mexico is the only Latin American country in the Organization of Economic Development Cooperation (OECD).

Next:  Mexico in the Context of Latin America:  Migration