HUMN 3981
Assignment 2
2018/04/14
Part A: Critical Reflection
This module is divided into three sections:
- Section 1: Distribution of Wealth
- Section 2: Globalization and Regional Integration
- Section 3: The Consequences of Development
- Provide a synthesis of each of these three sections: Part A
Latin America is a region that has experienced many challenges since the days of colonialism, just like most other colonies. However, the most significant issues arise from the unequal distribution of wealth, globalization and regional integration, and the industrial development. Yes, provide synthesis of each, Furthermore, I believe that many problems stem from the lingering effect of colonialism.
As regards to wealth distribution, one can see that the resources are unevenly distributed among the people who live in this region.Thats true in every country. Compare with US. In US top 10% owns 90% of the wealth. For example, huge pieces of land are in the hands of a few minority groups who are the Whites (Green 113). Did this occure during colonialism? On the other hand, the majorities who are indigenous are poor people own small pieces of land where they rear a few animals and grow food crops such as beans, maize, and potatoes for sustenance. There are poor non-indigenous as well. However, the majority still make a living by working for wealthy landowners (Green 113). Interestingly, Canada is a country that gained independence almost at the same time as the Latin American countries, and yet she is not experiencing the same issues regarding wealth distribution like the countries in this region. That’s because you ignore First Nations living in reserves with no running water. First Nations in Canada are as poor as indigenous in LA.
Do not state the obvious. Latter says nothing. In one way, globalization enabled big companies like Coca-Cola and Nike to operate in the Latin American area. In my opinion, these companies have made it hard for local companies manufacturing similar products to operate due to competition. Also, globalization facilitated trade between the developed nation and the Latin American countries. However, this kind of trade seemed to benefit the developed nations more than the countries in these regions because of their comparative advantage over the Latin American countries. In the immediate post-colonial era, Latin American growth was swamped by population increase. In the last two decades, globalization has moved western factories to LA, beginning with Mexico, and created high wage jobs.
However, regarding industrial development, one can see that it has had a negative impact on the Latin American environment. That’s stating the obvious again. How can development not impact the environment anywhere? For example, in Costa Rica, some resort developers built a structure on the mangrove swamps that prevented the region from strong winds and waves. In addition, the oil companies in Ecuador have become the primary polluters of its tropical rainforest even though they constitute more than 40% of the country’s economy. Furthermore, these countries experience extreme land degradations because of excessive mining, which is a major economic activity in this region. However, despite the negative impact that industries development has in the Latin American countries, I believe that it is still necessary for these countries to undergo industrial development because of its economic benefits. 20/30
Part B: Essay
Explain the factors that contributed to the debt crisis in Latin America. How has this been resolved?
The Latin American debt crisis of 1982 not just one year, was a financial crisis whereby the foreign debt of Latin American countries exceeded their Ability to re-pay or pay interest. This began in the early seventies when the oil companies where? In LA or outside? were making a lot of profits, due to increased oil Price. Furthermore, the banks were lending more to any nation in LA that needed it for development. Why were the banks lending now? Consequently, most of the developing countries in Latin America borrowed a lot of money from these banks because the interest rates at the time were relatively low. You are not forced to borrow just because someone wants to lend. they did not use the funds for investment and economic growth, but used it for consumption. That’s the problem, not easy loans. Therefore, when the time of re-payment and interest came, they had no money to repay them because they had not grown the economy.
various factors led to the Latin American debt crisis of 1982. One of them is the massive borrowing of money to fund industrial projects by the Latin American countries, but not used to fund those projects. In fact, by 1983 Argentina, Brazil, and Mexico had borrowed up to 50% of their GDP from other countries. However, this money was used for other purposes rather than the one it was intended for thereby putting the countries into debts. Repetitive. Another cause of the Latin American crisis was the increase of interest rates by 20% by lenders bin the United States. The objective was to curb inflation, confused. Separate the US but explain why high US rates influence lenders to LA. which was prevalent at that time. However, the high-interest rates caused debtor nations to default on their foreign loans. That’s because they borrowed using flexible rates. Among the countries that were significantly affected were Brazil and Argentina.
Another primary cause of this financial crisis was the increase in the oil prices in the mid-seventies. You said earlier that was good. Clarify. During this period the oil prices shot up by more than 300%. Latin American countries faced higher import costs because they were net importers of oil (George 6). Not if you produce and export oil. As a result, these countries were forced to borrow from other nations to meet its oil demand. That’s what created the debt before. Rater confusing writing style. Furthermore, the Middle East countries made billions of dollars from the booming business to the point that they were able to lend some of it to the Latin American nations at a low-interest rate. Why is this bad? The fourth cause of the Latin American debt crises was the reduction of the prices on raw material because of increased oil prices. Consequently, the countries in the Latin American regions could not make enough money from their exports to repay their debt.
However, the prospect of massive default posed a grave problem for creditors who wished to see the issue resolved. As a way of addressing the issue, particular individuals made some proposals. One of them was the Baker plan proposal of 1985. Mr. Baker, the Secretary-Treasurer made this proposal as a response to the mounting debt crisis that was becoming a significant issue. His plan emphasized that the crisis could only be resolved through sustained growth in debtor countries (Ruggiero). However, to achieve that, here commended debtor countries to adopt programs that would require economic reforms and structural adjustments. He also emphasized the importance of saving and home investment. However, the Baker plan did not thoroughly address the Latin American debt crisis. However, it became a precursor to the discussions that followed regarding the mounting debt problem.
The second attempt to address this issue was the Brady plan. This plan emphasized on the debt reduction as a way to solve this crisis. The plan called for the “securitization” of the loans that were owned by sovereign debtors by converting them into bonds which were then offered to the public (Miller 686). The money that was generated by the selling of these bonds was used to pay the country’s debts. In fact, arrangement gave banks courage to lend out more money because they were no longer afraid of collapsing in case a state defaulted. Another way that the sovereign debtor’s benefited from the Brady bonds is that they were issued at a discount. Furthermore, this Brady plan helped the individual investors make a profit from the sovereign debt market (Miller 686). Because of this plan’s success, many Latin American countries have converted all their loans to Brady bonds.
The third strategy to address the issue of the Latin American debt crises was the use of use of Bridge loans. These loans permitted the countries to continue paying interest rates on their loans even though they were not able to pay the whole amount (Miller 681). Furthermore, it was the only way of protecting banks from collapsing because debtor nations were likely to default if they were forced to pay their entire debts.
To sum up, the Latin American debt crisis of 1982 had several causes. Among them was the massive borrowing, increased interest rates, and increased oil prices. In addition, a reduction in the costs of the raw material because of booming oil business also caused this event. However, governments were able to come up with ways to address this issue. Some of these ways included the Baker plan proposal, Brady plan, and the use of the Bridge loans. You did not address how the loans wewre repaid by high economic growth in the last 2-3 decades. 55/70
Works Cited
Devlin, Robert. Debt and Crisis in Latin America: The Supply Side of the Story. Princeton University Press, 2014.
George, Samuel. “Surviving a debt crisis: Five lessons for Europe from Latin America.” 2013.
Green, Duncan, and Sue Branford. Faces of Latin America: (Revised). NYU Press, 2012.
Miller, Jessica W. “Solving the Latin American sovereign debt crisis.” U. Pa. J. Int’l Econ. L. 22, 2001, 677.
Ruggiero, G. “Latin American Debt Crisis: What were its Causes and is it over? Independent Study.” Angelfire, 15 March 1999, www.angelfire.com/nj/GregoryRuggiero/latinamericancrisis.html. Accessed 10 April 2018.
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