Economic and Political Issues for Governments and Firms
New Horizons in International Business series
Edited by Sidney Weintraub, Alan M. Rugman and Gavin Boyd
Chapter 2: The political economy of development in Latin America
Gavin Boyd Latin America has a history of failures in macromanagement and regional economic cooperation. These failures have been attributable primarily to problems at intermediate levels of political development, above the primitive forms of personal rule and the despotisms in other Third World areas. The failures have been sources of constraints on domestically based growth, and have contributed to increasing asymmetries in dependence on access to the US market and the attraction of US investment. Rivalries between Latin American administrations, moreover, have entailed weak bargaining strengths in interactions with US governments and firms, and these disadvantages have become more significant in exchanges about hemispheric trade and investment liberalization while the USA has been recovering from the recession which ended its 1990s boom. There are challenges to concert Latin American bargaining strategies, to ensure substantial reductions of US levels of protection against imports of primary products and low technology manufactures. The US interest is to secure lower Latin American barriers to virtually all imports: very large trade deficits threaten to become unsustainable for the American economy. Degrees of dependence on the US market and on the attraction of US direct investment have been highest in Mexico, and as a member of the North America Free Trade Area this country has become a base for southern US corporate expansion. European economic links with Latin America are weaker, overall, than those of the USA, as European firms, operating out of their slower growing home economies, have been less active in world markets. Economic...
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