Globalization in Latin America


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Guest Lecture for the course Globalization and its Discontents, at Victoria University of Wellington. The topic of the lecture was Globalization in Latin America, May 2009.

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Globalization in Latin America

  1. 1. Globalization in Latin America Paula Pereda PhD Candidate Victoria University of Wellington 2009 1
  2. 2. Outline 1. Origins of Globalization 2. Understanding Globalization 3. Latin America in a global context 4. Globalization in Latin America 2
  3. 3. Origins of Globalization I 2   key factors Imperialism Trade expansion  Historical     milestones The Roman Empire I to XV century The Crusades XI to XV century The discovery and conquest of the Americas in the XV century Age of exploration 3
  4. 4. Origins of Globalization II Socio-political processes  The formation of empires and federations from ancient times  Big migrations Human  World activities exploration  Wars  Trade  The development of more advanced communications. 4
  5. 5. Understanding Globalization I  Globalization is a historical trend characterized by:   multiple and complex economic, political, social and cultural interrelations   the interconnection between peoples of the world and their institutions that lead to the unification of the space All this as a result of diverse social processes on a planetary level. 5
  6. 6. Understanding Globalization II  It is a movement in a certain direction, towards a certain state that by definition is hypothetical.  It has been a long lasting historical trend, but it has been a dominant phenomenon only in the last three decades.  As a consequence now are more aware than ever we live in a globalized world. 6
  7. 7. Understanding Globalization III Globalization has been facilitated by:  Information and communication revolution with reduction in transport, information and telecommunication costs.  The growing diffusion of communication technologies.  The dissolution of the old colonial empires and the (quasi) end of the Cold War and the division of the world associated with it.  Development of numerous international and trans-national organizations. 7
  8. 8. Transport and communication costs (Index 1930 = 100) 8
  9. 9. Understanding Globalization IV  Policy shifts in various countries:   The development of a worldwide system of production and exchange of goods and services that has led to:   Integration into world economy of other emerging economies (China, South Asia and former Soviet block states). Commercial and financial integration Globalization has enabled countries to accelerate growth and improve standards of living. 9
  10. 10. Economic growth and integration Average on indicated period (%) 10
  11. 11. Other features of globalization  Globalization allows a more efficient resource allocation, technology transfer, investment financing, smoothing of national income fluctuations and diversification of economic assets risk, among others.  Local economies are more exposed than ever to international market conditions. 11
  12. 12. Other features of globalization  However, the worldwide system of production and exchange of goods and services is controlled by a limited number of social agents.  Still, some states could promote and at the same time interfere with the trend of globalization.  We could still live in an even more globalized world than today. 12
  13. 13. In Summery…. I  The trend towards globalization is the result of various social processes through which the planet is becoming an increasingly interconnected space due to multiple international and trans-national relations.  These relations are multidimensional (in the sense that they are not purely economic or purely political).  These relations are sustained by specific social agents (governments, corporations, NGO’s, etc.). 13
  14. 14. In Summery…. II  There are significant differences of power between these agents  These processes involve as much the homogenization as the social, cultural, political and economic differentiation trends.  This is a very longstanding trend, which takes on particular importance in this historic moment due to the planetary scope that currently characterizes it and the increased awareness of globalization. 14
  15. 15. Latin America  ‘America’ was coined after Amerigo Vespucci (16c).  The title, Latin America, was given by Napoleon III in the 19c.  Designates the territories colonized by Spanish, Portuguese and French settlers.  Today it referes to countries in the Americas where Spanish or Portuguese languages prevail: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Uruguay and Venezuela. 15
  16. 16. 16
  17. 17. Latin America Green Orange Blue Violet Light green :Spanish :Portuguese :French :American English :British English 17
  18. 18. Dates of Latin American national independence 18
  19. 19. Globalization in Latin America The trend of globalization is not a phenomena taking place outside of Latin America, but is a trend in which regional social agents take part and affect the globe. The trajectory of Latin American countries, to face the challenges of globalization, has been marked by the economic models prevailing in the region since the 19th century onwards. These models have determined the social, cultural and political development of countries in Latin America in an increasingly globalized world. 19
  20. 20. Globalization in Latin America  Communicational  phenomena Mass media communications   Cultural Industries Mass entertainment products  World supremacy of American companies  International promotion of English as the global language  Consumer patterns, representations and values of American society  Racial presentations 20
  21. 21. Globalization in Latin America  Political  Phenomena American and European view of democracy and civil society  Cultural phenomena Migrations  Indigenous Movement  Protestant churches  21
  22. 22. Globalization in Latin America  Economic     phenomena Trans-national corporations Free trade area Specific markets: tourist services, production and commercialization of medicines and cosmetics, natural and organic food, traditional craft and ethno-music. International Monetary Fund (IMF) 22
  23. 23. Development Models in Latin America  Outward  Classical economics, Laissez-faire  Inward  development model (1880-1940) development model (1940-1970’s) Keynesian economics, state intervention  Market-oriented (1980’onwards)  development model Neo-liberalism, monetarism 23
  24. 24. Market-oriented development model (1980’s onwards) I  Integration process took place after the 1980 debt crisis.  Complemented  by structural reforms. Application of neoliberal economic policies from the Chicago School of Economy.  Priority was given to trade integration and financial liberalization.  Elimination of economic borders 24
  25. 25. Market-oriented development model (1980’onwards) II  The increase in international exchange, particularly in terms of trade and investment flows.  Reduction of the State in size and power.  Privatisation of formerly owned State companies.  Short term social policies. 25
  26. 26. Globalization in Latin America  Globalization has increased the need to closely monitor international events; Highly specialized working teams on global markets.  Frequent meetings with international institutions and authorities (e.g. IMF, BIS)  Increased use of resources to follow what is happening outside frontiers.  26
  27. 27. Disappointing results  Despite reforms, disappointing:       have been Modest poverty alleviation. Worsening income inequality. Growth remained low and volatile, especially compared to East Asia. Widening income gaps with G-7 Macroeconomic crises Macroeconomic achieved:  results stability was Inflation still high in some countries. not fully 27
  28. 28. Reaping benefits of globalization I  To cease the opportunities brought by globalization, necessary steps towards more integration must be taken.  Reaping benefits and mitigating costs of greater integration involves reinforcing policies to open market orientation; completing structural reform processes; and installing a strong institutional setting.  Consolidate macroeconomic stability based on solid institutional framework 28
  29. 29. Reaping benefits of globalization II  Improve  quality of institutions: What is required are strong institutions with efficient bureaucracies and an enabling business environment. Strengthen financial systems through better regulation and supervision.  Complemented by a predictable and efficient judicial sector.  Create better business climate.  Improve infrastructure and reduce regulatory barriers.  29
  30. 30. Reaping benefits of globalization III     Adoption, diffusion and head-on involvement in technology will help reap the benefits. Increased competition, further flexibility of labour markets and a highly-skilled labour force is needed. Generate consensus within the civil society increases the political feasibility of the changes and chances of success. Policy and structural reforms need to be defined at the country level. Countries differ in:    Timing Delivery Political legitimacy 30
  31. 31. Challenges of Latin America    To close the income gap, it is necessary to go beyond basic requirements (stability, openness, competition and institutions), and get a head-on involvement in technological innovation, education and training of labor force. Furthermore, the creation of consensus and incorporation of the civil society is essential to the reform process, increasing political legitimacy and limiting reversal possibilities. Moreover, today's rare historical juncture is very good for undertaking the needed structural reforms to enhance economic performance. 31
  32. 32. Fin Sources CEPAL, 1999. Revista de Economia Mundial, 2007. Mato, Daniel, 2000. Teichman, J. 2001. Chiriboga, M, 2002 Central Bank of Chile, 2007 32