Sunday, November 29, 2015

Free Trade and Dependence in Latin America

Here is a conservative op-ed on economic reform in Latin America. It actually mentions that communism is still a problem in the region, but I digress. It makes this claim:

There is a tectonic shift underway in Latin America involving two diverging blocs. On the Pacific Rim, the nations of Mexico, Panama, Colombia, Peru, and Chile all seek to modernize and diversify their economies, integrating them into the global economy through freer trade. They are eager to move beyond the vicissitudes of global commodity markets. The other bloc of countries, including Argentina, Cuba, and Venezuela, still find themselves handcuffed by authoritarian and illiberal regimes who offer the false platitudes of populism, and remain at the mercy of commodity prices for raw materials. 

We've seen countless "left is bad, right is good" articles, but this is a new argument. I have not seen evidence that pro-market governments are more likely to diversify than their more statist counterparts. Indeed, entering into free trade agreements with more countries tends to make certain decisions on diversification impossible. That was the whole reason import substitution was popular for a few decades: it involved protectionism of targeted industries. Without such protection, countries will focus on what they do well, and that is usually commodities.

The whole "integration into the global economy" argument is also silly. Peru and Venezuela are both very well integrated into the global economy, and both are dependent on commodities for economic growth. Both will almost certainly remain that way. Artificially separating countries into ideological blocs won't change that.


  © Blogger templates The Professional Template by 2008

Back to TOP