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Neoliberal Policies and Inequality Issue
iberal Policies and Inequality Issues In Latin America
Neoliberal Reforms: Ideology and History (Sophia)
In order to be able to understand the impact of neoliberal policies and their link to inequality in Latin America, it is necessary to have an understanding of their history and basic tenets.
What is neoliberalism?
Although neoliberal reforms reach deep into the political system, neoliberalism is at its core an economic ideology. To understand this ideology, it may be useful to deconstruct the word itself. Liberalism, in politics, refers to an ideology which advocates greater government control in the economy, higher taxes, and a greater degree of social programs. In the realm of economics, this is not the case at all. Liberal economics essentially advocates the reduction of government control in the economy, which should be self-regulating.
simply means new, so neoliberal is the re-emergence of liberal economics in the 20th century. Modern neoliberalism advocates:
Very limited government intervention in the market, with the notable exception of enforcing property laws
Tax reform – flat tax instead of a graded system of taxation
Free trade between all world economies – no barriers or tariffs
Privatization of all public and government holdings, such as utilities
Reduction or elimination of social welfare programs and the minimum wage
Reduction of inflation
See the following video, which details the tenets of neoliberalism.
The history of liberal economics
Liberal economics actually stems back to the late 18th century, where at the Enlightenment in Europe had brought about a new
Adam Smith, The Wealth of Nations
host of philosophers, scientist and economists with new ideas. Notably, economists like Adam Smith and his classic treatise
The Wealth of Nations
promoted the idea of
economics (literally, let-do) and free markets where the
(the idea that one man working in his self interest would translate into wealth for all of society) would result in greater prosperity. This period also the promotion of individual freedoms, one of the driving forces in economically liberal ideologies.
The early 20th Century saw a backlash against the ideals in the face of two world wars, the Great Depression in the 1930s, and the emergence of socialism. The depression brought about economists like John Maynard Keynes, who advocated gov
ernment intervention to regulate the extremes of the business cycle, and President Roosevelt’s “New Deal” in 1933, which used these interventionist policies in order to pull the United States out of the depression. Every political and economic ideology has its opponents, and Keynesian economics certainly had its very own.
The origins of neoliberalism
Although neoliberalism wasn’t put into to practice in Latin America until the 1980s and 90s, its “intellectual origins”
can be traced back to the late 1940s. In 1947, prominent Austrian economist Friedrich August von Hayek founded the Mont Pelerin Society, a group of like-minded economists who believed in the ideals of economic liberalism. To quote Steger, Manfred and Roy:
Hayek considered most forms of state intervention in the economy as ominous milestones on the ‘road to serfdom’ leading to new forms of government engineered despotism.”
Hayek’s ideas greatly influenced American economist Milton Friedman, the man often credited with being the founder of modern neoliberalism. Like Hayek, Friedman (who died in 2006) advocated the freedom of the individual and the freedom of markets. He believed that people could “express their absolute free will through their consumer choices.”
He was also a professor at the University of Chicago, and approached economics with unprecedented scientific rigour. One of his most famous theories is the theory of monetarism – that “only the self-regulating free market allowed for the right number of goods at correct prices produced by workers paid at wage levels determined by the free market.”
The Chicago School of Economics and the ‘war against developmentalism”
Riding on the coattails of Keynsianism came developmentalism, a system popular with many developing countries at the time. Developing economies aimed do decrease their dependence on foreign imports by industrializing and developing more industry at home. In Latin America it corresponds directly to the program of import substitution, policies followed aggressively through the 50s and 60s in the southern cone of Latin America.
Import substitution regularly involved the government interference of large private corporations, many of which were the result of direct foreign investment from the United States. For example, in 1954, Guatemalan president Arbenz Guzmán expropriated some of United Fruit Company’s unused land in Guatemala, albeit with full compensation.
Arbenz was removed by a CIA sponsored coup, and United Fruit regained its power.
Simply put, developmentalism and ISI threatened US economic interests in the region. It should also be noted that the 1950s saw the height of the Cold War, and American policymakers feared the creation of “another Cuba”
. Klein notes: “American and British foreign policy circles attempted to pull developmentalist governments into the binary logic of the Cold War.”
Their solution: paying to send Chilean students to study at the Chicago School of Economics, in hopes that graduates would take their new knowledge of neoliberalism back home to be implemented. The Latin American birthplace of neoliberalism was Chile, where developmentalist leader Salvador Allende was deposed by the United States and replaced with dictator Augusto Pinochet who implemented neoliberal reforms demanded by the United States, the International Monetary Fund and the World Bank in exchange for debt relief. However, the result was a tenfold increase in unemployment and “the erection of shanty-towns”
See the following article,
“Milton Friedman did not save Chile”
by Naomi Klein, a well-known critic of neoliberal policies as she discusses the recent earthquake in Chile and the legacy of neoliberalism. The reason I chose this article was because even though the heyday of neoliberalism has perhaps passed, it can still be brought up in the context of modern events, like 8.8 magnitude earthquake that took place in Chile on February 27th, 2010.
In the article, Naomi Klein combats a claim by Wall Street Journal columnist Bret Stephens, who claims that Chile has Milton Friedman and the spirit of neoliberalism to thank for Chile's "notoriously strict building codes." Says Klein:
"According to Stephens, the radical free-market policies prescribed to Chilean dictator Augusto Pinochet
by Milton Friedman and his infamous "Chicago Boys" are the reason Chile is a prosperous nation with "some of the world's strictest building codes."
Stephens even went so far as to insinuate that this was the reason Chile was still standing and Haiti lies in ruins. As Klein rightly (and ironically) points out, Chile's building codes were implemented in 1972, one year previous to Pinochet's US backed coup. This actually would credit developmentalist leader Salvador Allende with the implementation. It is interesting that proponents of neoliberalism continue to argue for their cause to this day, although Stephens' factually incorrect certainly do not provide valid evidence in favour of the ideology.
While my part of the project details the theory and history of neoliberalism as an ideology, German’s part is concerned with examining the condition of Latin America and why it made an ideal subject for the actual implementation of neoliberal reforms. Natalie and Charm will analyse the impact of neoliberalism in two countries in hopes of coming to a conclusion about the effectiveness of these reforms.
Steger, Manfred, and Ravi Roy.
Neoliberalism: A Very Short Introduction
. Oxford Univ Pr, 2010. Print.
The Shock Doctrine: The Rise of Disaster Capitalism
. Vintage Canada Ltd, 2008. Print.
 Steger, 17
 Klein, 66
 Klein, 67
 Klein, 68
 Hillman, Richard S. Understanding Contemporary Latin America. Rienner, 2005. Print
 Klein, 67
 Klein, Naomi (March 2010)
Milton Friedman Did Not Save Chile.
The Guardian UK. Retrieved from
Latin America before Neoliberalism (German)
For much of the twentieth century the overwhelming majority of the world's population did not experience the economic prosperity and affluence that people in developed countries did. So, the obvious question was: given the great amount of wealth produced in the world each year and within the developing countries, why have so many developing countries remained impoverished and underdeveloped? The quest for development confronted most of the Latin American countries specially since the end of the World War II. Traditionally, the economy of Latin American countries has been organized around producing large among of world's supply of primary goods such as coffee, cattle, sugar cane, copper, and other primary resources. But World War I, the Great Depression of 1930s, and World War II disrupted international trade so Latin America had virtually no market for their goods. Thus, the vacuum left by the disintegration of the global economy, Latin America struggled toward a new strategy for national development and adopted the formula of economic nationalism
Dependency Theory and Importation Substitution Industrialization (ISI)
Latin America adopted the policy of import-substitution industrialization (ISI) through the 1950s and 60s as a strategy of development and industrialization. High tariffs on imports, subsidies and incentives to local industries, and trade controls were the main components of (ISI). However, at the end of 1980s the ISI strategy created many undesirable effects. Problems with the balance of trade and payments, an increase in domestic prices- inflation, greater inequality and less competitive national industries became the reality by which governments move from (ISI) to the strategy of export oriented policies.
The inward-looking and nationalistic import substitution was implemented with the purpose to reduce dependence on foreign capital,technology, and market by promoting "home growth industries." However instead of reducing dependence of foreign capital, Latin America countries had to borrow from abroad to finance the deepening of their import substitution.Most observers agree that ISI has been largely unsuccessful.Among the undesirable outcomes were: Many industries remain inefficient and costly operated,trade protection(tariffs, quotas)and overvalued exchange rates raises domestic prices and made export less competitive, ISI caused chronic problems with the balance of payment and countries tended to run substantial budget deficit and inflation. From political and social perspectives ISI also seemed to have a nasty effect on poverty and income distribution. the agriculture sector was weakened increasing rural poverty. In this context,Latin America faced during 1970s and early 1980s economic stagnate, political and social unrest, and the 1982 debt crisis. The 1980s would later be labelled as the lost decade for Latin America.
In general, and because ISI led to a periodic of crisis and greater inequality, the impressive march toward industrial developmen flagged in Latin America. Thus, the crisis of 1970s and 1980s drove Latin America economies toward an economic aperture to integrate national economies and global markets. Starting around 1985, Latin America countries left fifty years of import substitution behind and moved to export, open markets, privatize and deregulate
The GINI coefficient clearly shows the deficiency in income distribution in the Latin American region.
Frieden, Jeffrey A. Global Capitalism. W.W. Norton & Company, New York, 2006. 301, Print.
The Failure of Neoliberalism
The present article illustrate the crisis of neo-liberal policies that were implemented by conservatives government in Britain (1979) and United States (1981).Although the article describe the global effect of neo-liberalism, and emphasizes that neither market oriented policies nor statism or welfarism has raised the economic and social condition of millions of people,it is relevant to the Latin America countries because in some respect market ideology was rooted in the crisis of the import substitution industrialization model that Latin America countries applied since 1950s until the early 1980s.The article also show that the negative effect of neo-liberalism has been in developing countries and in industrial societies where the gap between the poorest and richest has increased.For instance, between 1979 and 2004 the wealthiest 1% in the United States, has increased their share of national income of 78% while the 80%of the people has seen an overall decrease in their income by 15%. In regard Phillip Blond asserts,the growth rates of Latin America countries "dropped by over 60% after they embraced IMF-sponsored neo-libealism." finally, what I find important from the article are two issue: first, neo-liberalism is an ideology of right wing which are motivated to pursue profit. second, the issue of economic development become an open question to the Latin American countries, because from the strategy of import substitution to the neo-liberal agenda, these countries seem to be in vicious circle of economic development failure.
The Impact of Neoliberlism in Mexico and Argentina (Natalie)
Before Neoliberalism in Mexico and Argentina 1930s-1980s
Prior to the introduction of neoliberlism to Latin America, Mexico and Argentina were export-oriented economies. The reliance on economic nationalism caused both countries to fail to establish an industrial democracy. The reversal of Argentina and Mexico’s development can be understood by the effects of the transformation that took place in the social structure as a consequence of policy changes followed during and after World War II till the 1980s with the intention of investing in domestic industrialization. This policy is called the Import Subsitution Industrialization (ISI) and Harper, Cuzan (2005) states it is based on the premise that a country should attempt to reduce its foreign dependency through local production of industrialized goods
. To add, Waisman theorizes that this policy was radical or absolute protectionism for imports and primarily catering to the upper class and industrial bourgeoisie
In Argentina, large economic groups have traditionally had an important say in the development of the Argentine economy, but since the mid 1970s when a new regime was set in place they acquired increase and renewed significance leading to a dominance they had not had up to then
. Under the ISI strategies of the 1940s, 1950s, and 1960s, their importance was circumscribed to some large banks, industries, and exports. Nevertheless, they operated in an environment characterized by predominate small and medium sized businesses. Interestingly enough, under the ISI some of the largest companies were public services or producers of strategic goods, such as petroleum, steel, and coal, and they did not have the hegemony they acquired later on under neoliberalism.
In Mexico, after the Cold War, the country took advantaged of the low world interest rates to fund many of the country’s programs specifically geared towards improvements in infrastructure and industrialization under economic nationalism. However, when the world economy went into recession due to the oil price hike in 1973 to 1974, Mexico's debt continued to increase and the only way to pay off its old debt was to service new ones. On August 1982, the massive debt forced the Mexican government to declare that it could no longer make debt payments. Moreover, instead of reducing expenditures the government spent more and caused the Mexican peso to lose its value with a 98.84% inflation rate (Banco de Mexico). Greater spending also increased Mexico's fiscal deficit reaching 17% of the GDP- Gross Domestic Product
. Therefore, the 1982 debt crisis ended with the involvement of the International Monetary Fund (IMF) in assisting the government with implementing various monetary and fiscal policies.
The Introduction of Neoliberalism in Mexico and Argentina
Neoliberalism was first introduced to Mexico in the late 1980s after the 1982 debt crisis, which was mainly due to the excess build up of external debt and the oil price hike in 1973-1974
. After the Cold War, Mexico and Argentina took advantaged of the low world interest rates to fund many of the country’s programs specifically geared towards improvements in infrastructure and industrialization. However, when the world economy went into recession due to the oil price hike, Mexico struggled to pay off its old debts with new ones, and in August 1982, the Mexican government declared it could no longer make debt payments. Further spending by the government also caused the Mexican peso to lose its value and for the Mexican fiscal deficit to reach 17% of the GDP- Gross Domestic Product
. The economy also experienced a 98.84% inflation rate in the same year
.Therefore, the 1982 debt crisis ended with the involvement of the International Monetary Fund (IMF) in assisting the government with implementing various monetary and fiscal policies. These various monetary and fiscal policies gave birth to what we call as neoliberalism
. An economic policy dedicated to liberating the economy from state intervention and promoting private enterprises.
Between April 1991 and December 2001, Argentina institutionalized a Neoliberal Convertibility Plan. In this period, the major economic groups were enhanced by the continuing indebtedness of government combined with a large privatization program and widespread deregulatory measures. The plan is argued to be a major example of the birth of neoliberlism policies in Argentina.
Neoliberalism During Mexico’s 1885 Economic Boom
Subsequent to the 1982 crisis, Mexico’ economy experienced a consumption boom as a cause of a decrease in saving rates and an increase in capital inflows. July 1985 marked the beginning of the trade liberalization in Mexico, which involved the reduction of the number tariff categories imposed by the government on imported and exported goods and the elimination of import licenses for capital and goods and the elimination of import licenses for capital and goods
. Prior to these reductions, tariff categories and import licenses have helped and protected many small businesses from cheap imports. The trade liberalization program ended with the formation of the North American Free Trade (NAFTA) in 1994 that mainly increased the mobility of capital between Mexico and the United States who is the country’s current number one trading partner and foreign investment source as the U.S. receives 80.5% of Mexico’s estimated exports in 2009.
Neoliberalism and Mexico’s Financial Liberation during 1988-1990s
During, 1988 to 1989 the Mexican government eliminated credit quotas and interest rate ceilings. The interest rate ceilings provided protection to borrowers, preventing financial institutions to charge anything higher than the set maximum interest rate for owing loans. Subsequently, direct foreign investments regulations were reformed and the stock market to foreign investors was opened. The decade of the 1990s started on a high note as the Mexican government decided to settle its external debts by signing agreements with creditor banks regarding its reduction on February of 1990. The rest of the decade involved stabilization of bonds and the Mexican stock exchange.
Neoliberlism During Times of Political and Economic Crisis in Argentina
In December 2001, Argentina drew attention worldwide with its economic and political crisis amidst widespread protests and riots. Dinerstein says that some have blamed the IMF (International Monetary Fund) supported stabilization and structural adjustment program for pushing the country into a vicious debt-crisis-debt cycle while others blame it on the Argentina government for not fully complying with IMF’s directions
. The crisis, thus, affected various socioeconomic factors in Argentina.
Socioeconomic Effects and Inequality in Argentina
-Working Population Effects
Labor Markets: The rise of unemployment rates which increased steadily from 6.5% in 1991 to 17.5% in 1995
Layoffs were due to privatization of state enterprises
Production of large firms was biased towards capital-intensive methods as the fixed exchange regime was instrumental in artificially cheapening capital goods
Between 1991 and 2001 real wages in the formal and informal sector decreased
Argentine Workers in Protest
-Income Distribution and Poverty Effects
The Convertibility Plan had a negative impact also on income distribution. According to the unemployment data from the Ministry of Economy and Production of Argentina website, the Gini coefficient increased swiftly from 21.6 in 1990 to 58.1 in 2001 and further to 85.5 in May 2002
. In other words, a lower Gina coefficient indicates a more equal distribution in wealth, while a higher Gini coefficient indicates a more uneven distribution.
According to World Bank data, poverty in Argentina has slightly improved during 1990-1992; however, this improvement was not a result of deliberate poverty alleviation efforts of the government. After 1994, poverty continuously rose and reached at rate of 37.1 % in 2001. The 2001 crisis would unfortunately bring 21 million people of the population, face to face with poverty with nearly 10 million classified as extremely poor.
-Education and Health Effects
The Ministry of Economy and Production of Argentina website says, both education and health spending expanded throughout the coarse of the Convertibility Plan. Education/ GDP ratio rose from 3.6 % in 1991 to 5.2 % in 2001, and quickly decreases to 4.3 % in 2002. Public spending on healthcare as a share of GDP increased during the 1990s at 4.3 % and slightly increased4.4 % in the following year of the crisis.
Socioeconomic Effects and Inequality in Mexico
-Employee Wage Effects
The change in the labor composition is due to the increasing importance of the manufacturing labor demand. A higher demand for such labor is resulting to faster rates of increased wages in the manufacturing sector marginalizing many unskilled and already poor workers. Since 1988, relative labor payments have been reduced in many low wage sectors including agriculture and construction.
-Effects of Reduced Government Spending
Due to reduction in government spending the state has also condensed the amount of educational, institutional and social programes that has benefited many Mexicans before. They have also limited wage increase to further minimize the fiscal deficit. Consequently, the reduction in government spending coupled with improper distribution of wealth has increased the poverty incidence rate from 2.39% in 1984 to 18.59% in 1994
just after Mexico agreed to be part of multilateral trade agreement with the United States and Canada.
-Effects of Reduced Economic State Intervention
Neoliberal reforms are guilty of exempting many small and medium scale businesses from thriving and competing in an open economy. However, the abolition of protectionism policies with economic nationalism has left many workers in the agricultural sector of the economy vulnerable to changes in world prices. The coffee growers in the city of Chiapas are an ideal example of this situation. Coffee growers, who are mostly small peasant farmers, have been the most affected by the neoliberal reforms such as the massive cuts in support prices and subsidies, the growing competition in the world market and the privatization of many resources including the Mexican Institute of Coffee (INMECAFE). INMECAFE has provided many coffee growers the assistance and support that they need, some of them including the collection, transportation and marketing of the crops. The privatization of the INMECAFE has driven small coffee growers in debt as they try to keep up with large producers who have controlled the institution.
Location of Chiapas, Mexico
Coffee growers in Chiapas, Mexico
The Uprising of Guerilla Movements in Mexico
The unequal distribution of income has resulted in the uprising of many guerrilla movements prominently in the area of Chiapas as they hope for change and equality. Neoliberalism has posed challenges to the Indian population has they strive for Indian peasant mobilization, land ownership and self government. As NAFTA went into effect, the Zapatista National Army (EZLN) didn’t hesitate to carry out a frontal attack portraying their dissatisfaction to the new agreement and neoliberal policies. Their demands of self government and land ownership go directly in contradiction to the core neoliberal goals of privatization and individualization imposed by the government.
The EZLN and its spokesperson Subcomandante Marcos believe that the NAFTA will only further widen the gap between the rich and the poor.
Benefits of Economic Liberalization and Accomplishments of the Convertibility Plan in Argentina
By late 1993 privatiation had earned more than US $15 billion and US$5.8 billion corresponded to the capitalization of public debt (domestic and foreign).
Early in 1994 any person in Argentina had the option of choosing a private pension or retirement fund to manage the funds for his or her own retirement instead of the state.
Price Stability: As can be seen in Table 1, yearly price increase at the height of Argentina's hyperinflation reached 3,079% in 1899 and 2,314% in 1990. Therefore, rates fell dramatically in the years subsequent to the introduction of the 1991 Convertibility Plan, reaching the one digit level in 1994, and becoming negative in 1999 (
Baer, W., Elosegui, P. & Gallo, A. (2001) (p.5). And so, the Argentine peso fixed on a par with the dollar devaluation expectations was controlled. This was due to capital flow linearization measures.
The impact on Argentina's international trade can bee seen in Table 2. A rapid increase of imports from US$ 4.2 billion in 1990 to US$ 21.7 billion in 1994, and reaching US$ 31.4 billion in 1998. The imports of goods and services/GDP ratio rose from 6.6% in 1989 to 12.9% in 1998 and 11.5% in 1999. This reflects to a large extent the dramatic opening of the country's economy.
Benefits of Economic Liberalization in Mexico
Decrease in inflation rates and the Mexican fiscal deficit
According to Banco de Mexico, the inflation rate in December 1987 reached a staggering 159.17% while the Mexican inflation rate in the same month of 2007 was 3.14%.
In 2000, Mexico had a fiscal deficit equal to 1.2% of its GDP[Gross Domestic Product](
) while in 1982, Mexico experienced a fiscal deficit equivalent to 17% of its GDP[Gross Domestic Product].
Substantial growth in productivity of various economic industries and employment
The total participation rate for men and women both increased from 69.67 and 22.57(1984) respectively to 74.56 and 30.47.
During 1988 to 1993, Mexican agricultural employment grew at 5.8% annually and output grew at 1.9%.
Success in attracting foreign investments due to various liberalization strategies
From 1994 to 2002 Mexican foreign direct investments reached annual levels of $9.5 billion which is double the 1980s GDP.
Similar Patterns of Neoliberal Politics in Mexico and Argentina
Both took advantage of low interest rates
Both paid off old debts with new ones
Both experienced high inflation rates
Both experienced similar socioeconomic effects such as: poverty, poor income distribution, and government spending education and health cuts
Comparing Mexico and Argentina’s Economic Globalization Index
Mexico's Index Numbers
Mexico received its highest economic globalization index of 64.15 in 1995 in its first few years under neoliberalism government (KOF Index of Globalization) Today, Mexico is one of the leading globalized countries in Latin America and ranks 81st out of 208 countires with an economic globalization index of 61.28 (
2010 KOF Index of Globalization
1970-2007 Mexico's Annual Index of Globalization courtesy of KOF Index of Globalization, http://globalization.kof.ethz.ch/
Argentina's Index Numbers
While Mexico received its highest economic globalization index in 1995, Argentina’s highest index of 60.73 was achieved in 1999. Argentina is one of the leading globalized countries in South America. According to the 2010 KOF Index of Globalization, Argentina has a globalization index of 61.18 placing it at 70th place out of 208 countries beating both Mexico and Brazil.(
2010 KOF Index of Globalization
1970-2007 Argentina's Annual Index of Globalization courtesy of KOF Index of Globalization, http://globalization.kof.ethz.ch/
Comparing Neoliberlism Then and Now in Mexico and Argentina
It is clear that Mexico’s economic nationalism polices then and neoliberal reforms now are complete ends of the spectrum. One promotes protectionist policies and ISI while the other promotes globalization and EOI (export oriented industrialization). However, as different as they can be, neither has proven that it’s the appropriate policy for Mexico. The debt crisis of 1982 and the current world recession that started in 2007 both prove that neither policy possess full immunity to economic changes. Nevertheless we can’t forget that each had its strengths as well. The economic nationalism promoted equality and proved to experience less poverty incidence rates while neoliberalism decreased inflation rates and increased levels of productivity. In the end, neither one is perfect however; it would be with great difficulty seeing Mexico return to its old ways as the country is much more closely tied to the U.S. both economically and politically than any other Latin American country.
The prospect for a strong term recovery in Argentina is poor says Horenbeck. Argentina's hopes currently rest with the latest debt swap announced in November 2001.
Although the plan is conceptually feasible, it raises significant questions and may have difficulty gaining credibility. The Argentine government has some $132 billion dollars in debt. and $95 billion dollars in bonds. The current proposal calls for over $60 billion of bonds to be refinanced as a tax receipt guaranteed loan. The swap could lower the interest rate between 11-12% to 7% and extend the maturity of those notes by three years. In short, the expected savings is $4 billion, which would be used to reduce pension fun contributions, lower taxes, and high unemployment compensations. Horenback says that this plan has a few problems. Firstly, the swap targets domestic bondholders with little leverage to resist. Failing to comply would result in bankruptcy for banks (where the people's debt is held). Secondly, a $4 billion fiscal stimulus would equal 1.3% of Argentina's GDP, but most of the net economic stimulus will likely come from the portion saved on foreign rather than domestic debt payments. Bottom line, without economic growth and a return to more reasonable lending rates, it is only a matter of months before Argentina again faces another debt situation.
Current News Article Discussing the future of Argentina's Economy (Natalie)
Economy Argentina:The Worst is Over
This article sheds a more positive outlook on the future of Argentina's economy whereas Horenback's arguments lack confidence. Although, 2009 was the worst year for the Argentine economy since 2002 and 2003, both government and official and economic analysts say the worst of the 2009 crisis is over and that growth will return in 2010, in light of improved internal and external conditions. It is forecasted that GDP will grow 4.8% and that things will get back to normal, and growth at least in the short term. The recovery of agricultural industry in Argentina will also boost growth. The article alculates that Argentina's total harvest will rise from 61 million tonnes in 2009 to 83 million tonnes this year, and the soy crop alone will increase from 33 to 52 million tonnes, thanks to rainfall.The recovery of agricultural output alone will account for much of this year's GDP growth. Another factor that will boost growth is new monthly family allowances of nearly 50 dollars per child to parents who are unemployed or work in the informal economy. The new cash payments will benefit the families of 3.5 million children, stimulating demand and adding half a percentage point to GDP growth. In all, Valente reports on the future of Argentina's ecomony as hopeful with facts to support it.
Current Neoliberal News Article Discussion Pertaining to Many Latin American Countries (Charm)
****Uruguay outperforms other regional economies, expanding 2.9% in 2009 - MercoPress****
It’s evident that many Latin American countries have shown economic growth due to the implementation of neoliberal policies during the 1980s and 1990s. However, the current financial crisis that started in 2007 is posing many challenges to the Latin American region. Since the start of the current world crisis, the decline in the American economy has greatly affected many Latin American countries especially Mexico due to strong U.S economic integration.
While Mexico and Chile continue to suffer the consequences due to the flaws brought on by neoliberal policies many other Latin American countries are showing great progress. Countries such as Uruguay, Argentina and even Brazil all show rather small but positive economic growth. Small values of positive economic growth compared to before might be due to the neoliberal policy of free trade. Free trade like every other policy has both its positive and negative effects. Negative effects of increased capital mobility between parties involved are clearly presented in Mexico’s current economic situation.
Harper, Richard. Cuzan. Alfred.
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Waisman, C.H. (1987)
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. Princeton University Press. 94-100, Print.
Teubal, M. (2004)
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. SAGE Publications. 174, Print.
Harper, Cuzan. 154-155
(n.d). Retrieved March 24, 2010 from Banco de Mexico:
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Ros, Jaime. Bouillon, Cesar.
“Mexico: trade liberalization, inequality and poverty” Economic Liberalization, Distribution and Poverty: Latin America in the 1990s.
‘Ed. Rob Vos, Lance Taylor, Ricardo Paes de Barros. Massachusetts: Edward Elgar Publishing, 2002. 348-349, Print.
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