New trade block in Latin America
Cocaine, military rule, weak governance and crumbling economies has been the trademark of Latin America for decades. However, in the 21st century some Latin American countries have defied the tradition and have been on the path of solid growth for some time. Grouped as ‘The Pacific Pumas’; Chile, Mexico, Colombia and Peru are experiencing rapid growth and stability unforeseen in the history of those countries. Alongside Uruguay, the Pacific Pumas have been praised for their success in economic achievements.
The rise of Andean and Pacific Latin economies
The Puma, a leopard-like carnivore, is common throughout Sudamerica. The name was picked as the group tries to evaluate the model of Asian Tigers (Hong Kong, Taiwan, South Korea, Japan) good governance, macroeconomic management, and integration with global economies. While the traditional large economies of Argentina and Brazil have been eroding for years, The Pumas show signs of a new era of growth in the Latin region. The Latin block has a population of almost 230 million and a combined economy of 4.4 trillion USD (PPP) or 2.2 trillion USD (Nominal), high human development performance and most importantly, democratic governments.
Historically, Latin economies are based on resource extraction and agricultural exports: Beef and soybean, fruits and timber, minerals and oil have been the driving force. However, the fluctuation of commodity pieces meant export earnings fluctuated. For example, world’s seventh wealthiest nation Argentina saw abysmal poverty since the 1930s as the price of commodities decreased. Despite being an agricultural superpower, Brazil has also failed to grasp the short term ‘Brazilian Miracle’ benefits in the 1980s. Venezuela’s over dependence on oil export resulted in a complete crash of economies due to falling oil prices. Keeping all these regional examples in mind, Puma economies have taken several steps to counter the chronic inefficiencies evident throughout the region.
Keeping all these in mind, Pumas have taken several major reforms. It’s easy to float currency models that have been effective against the global financial crisis of 2008-2009. The four pacific nations account for almost half of Latin America’s export earnings. New structural reforms have reduced the public debt to a great extent. The formation of Pacific Alliance (2012) and MILA (Mercado Integrado Latinoamericano), a process which integrates 92% of the Puma nations as tariff free, are major driving forces behind the rise of this block. Their combined export makes them one of the largest trading partners of European Union (EU), surpassing Brazil and India. Puma economies are also well integrated with that of China, Japan and other major Asian countries. Rising foerign direct investment (FDI) means in the future these nations will continue to reap the benefits of global economies.
Mexico and Peru specially, once served as the main resource centres for the Spanish crown. Ships full to the brim with Andean gold and silver from Mexico criss crossed from Pacific to Atlantic. The colonial days are long gone but the 21st century, many experts predict, will see a thriving trans-pacific trade owing largely to these 4 countries.
Case studies of the Pumas
Blessed and cursed by its geographical proximity with the U.S., Mexico experienced wars with its larger neighbor (Mexian-American war of 1846-48), a 7 decade long dictatorship and a devastating revolution in the early 20th century. The Mexican miracle, a short time growth spanning 40s to 60s, failed to gain expected results. Mexican economic crisis was so deep that the country declared itself bankrupt in the 1980s. Another major issue for Mexico was the constant fear of drug cartels who, with the help of corrupt politicians and bureaucrats, remain a serious security problem to this date.
Things have changed in the past two decades. While the cartel problem remains, Mexico has achieved a nominal GDP of 1.3 trillion and per capita income ranging over ten thousand USD. A large, relatively young population of 120 million shows the great potential of Mexico. It has the 11th largest economy in the world in terms of PPP. Mexico has the world’s sixth largest electronic industry, the country produces more vehicles than any other North American country and the remittance sent from Mexicans living in the U.S. has largely shaped its economy. Rising manufacturing and service industry enabled Mexico to reduce its dependence on mineral and oil export. It’s a newly industrialized country strongly integrated with the U.S.. Mexicans have experienced steady growth for more than a decade now and if things don’t go wrong, the world will likely see another North American giant trailing the U.S.. Today, Mexico is predicted to be the fifth or seventh largest economy by 2050.
During Spanish rule, Lima; the peruvian capital, was the centre of New Spain, a crown colony. Peru’s economy historically has been dependent on the export of gold, silver, copper, zinc type minerals and agriculture. Several wars with neighboring Chile, Colombia and Ecuador alongside unstable governments made Peru a poor, backward state. A devastating civil war with hardline leftist group Sendero Luminosos (Shining Path) had left Peruvians in shambles during the 1980s. However, things began to change in the 1990s with the rise of firebrand rightist political leader Alberto Fujimori. Fujimori’s government introduced what is known as ‘Fujishock’: an emphasis on liberalizing the economy, decreasing state monopoly and abolishment of price control. Fujimori also defeated mainstream Shining Path outfits, pushing them back into the jungles and mountains. Since then, Peru has enjoyed stable government and consistent growth of 4 to 5 percent per year with 13% during the early years of Fujimori government.
However, poverty remains considerably high which Peru aims to combat by providing alternative crash crops instead of cocoa and state induced subsidies. Peru is considered an upper-middle income country with a nominal GDP of almost 6,000. It enjoys strong economic ties with China, the U.S. and neighboring Chile. The Peruvian economy still mostly depends on export earnings, but its service and manufacturing is strongly progressing.
For decades, the name Colombia was associated with Marquez the writer, FARC the guerrillas and Escober the drug lord. However, things have changed recently. Cocaine has become the problem of Mexico, FARC left their armed struggle and emerged as a political party in 2016 and Colombia itself, for the first time in history, has been credited as a major rising economy.
With a population of almost 50 million and a GDP of more than 300 billion, Colombia has every potential to become South America’s leading economy. Civil war meant previously the country was unable to tap into the natural resources it had in the rural areas. Colombia today has one of the largest information sector industries in Latin America (second to Mexico), a thriving agriculture and mineral export industry and tourism. Just like the‘Korean Wave’, Colombia too is on the path of promoting its culture and country image. It has successfully maintained economic growth over 3 to 4 percent for decades now. Oil and natural gas still play a major part in Colombian economy. But the country is also benefiting from Japanese and E.U. investment, high commodity prices in the world market, expansion of cash crops and livestock business. But most importantly, elimination of security threats from leftists hardliners has enabled the country to achieve an investment friendly economy. Today, Colombia is the fourth largest economy in the Latin world (behind Brazil, Mexico and Argentina).
The country of Neruda was the largest exporter of copper in the world. Chile is a major South American economy with a population of 17 million. The country has the highest per capita income (more than 12,000 USD by nominal GDP measure) among major Latin economies. By the scale of economic freedom, Chile ranks first in Latin America and 7th in the world.
Chilean growth has a bleak history foregrounding it. The country was treated as the Guinea Pig for economic experiment. Yankee professor Milton Friedman, along with his troop of economic experts known as Chicago Boys, tried their best to make Chile an ultra liberal, rightist economy. While Friedman’s liberal policies helped to achieve growth, poverty remained high in the 1980s alongside repressions and corruption of military junta. Since the 1990s, the democratric government has introduced various social welfare benefits alongside tax and revenue reforms. Today, almost 70% of Chileans enjoy state provided welfare benefits. Chile is also free of anti-state elements and foreign investment has been rising since the 1990s. Still largely dependent on copper export, the Andean state is going through rapid industrialization and growth in the service sector. Already a prosperous nation, Chilean growth indeed can be dubbed as Miracle of the Andes.