Neoliberalism and Globalization in Latin America
Neoliberalism is an economic policy philosophy that advocates for the government's role in economic regulation to be as limited as possible and supports the capitalist mechanism. The government should interfere in the market to protect private property and ensure contract rights are followed.
The Impact of Globalization in Latin America
Globalization is the mechanism by which foreign operations such as commerce, transportation of goods and services, and communication within and between nations become increasingly interconnected. Latin America's liberal globalization entailed the embrace of the free market and the abandonment of state power. Both neoliberalism and economic globalization had various impacts in Latin America in the after-war periods when the two theories took effect in Latin America, outside Cuba.
The Free Market Economy in Latin America
The free market economy in Latin America began in the early years of the 1980s and was founded on the principle that it would result in economic growth and development, and improved living standards of the peoples of Latin America (Chasteen, 2001). The process of neoliberalism incorporated a mix of policies that were not carried out simultaneously but at different times.
Free Trade and Its Consequences
Free trade following the Latin American government action of removing imports tariffs, that had existed to protect the local infant industries, strangled the domestic industries in Latin American countries. This move was worsened by the profit repatriation by the multinational companies as the neoliberal Latin American states governments lifted the minimal allowed annual profit repatriated by foreign corporations (Chasteen, 2001). This problem was further aggravated by the governments’ withdrawal of subsidies and incentives initially given to the producers of public goods. This move made the prices of the foodstuffs expensive and unaffordable to the poor.
The Role of Multinational Companies
As more and more American companies entered the Latin American market as a result of the removal of restrictions to trade, the Latin American countries experienced an increase in technology use (Chasteen, 2001). These multinational companies introduced advanced foreign capital into the Latin American nations. The products of the companies improved the welfare of the first-class citizens while the poor people were left behind.
Increased Foreign Debts
Foreign debts of Latin American countries increased with the introduction of the market mechanism. This rise was partly caused by the hike in oil prices and the tempting and available short-term loans from foreign banks. The rise in interest rates in the 1980s exaggerated the debts, and the total external debts of the Latin American countries shot to $397 billion in 1986 from $105 billion in 1976 (Chasteen, 2001). Brazil and Mexico were the most indebted countries of the region.
IMF and World Bank Influence
With the increase in the debts of the Latin American countries, the governments turned to the International Monetary Fund (IMF) and the World Bank for loans. These loans came with conditionality, most of which promoted neoliberal ideas, particularly, the IMF insisted on the cutting of governments' spending on social programs (Chasteen, 2001).
Unequal Income Distribution
Another impact of capitalist economy introduced by neoliberalism and globalization in Latin America is the unequal distribution of incomes (Chasteen, 2001). An example is demonstrated by the case of inequality in Chile. Poor landowners lost their lands to wealthy investors.
Conclusion
In conclusion, neoliberalism and globalization in Latin America starting from the 1970s and 1980s involved a mix of policies introduced at different times in different countries of Latin America. The primary effect was the abolition of the Latin American nationalists' economic management policies. These new economic reformations produced both negative and positive effects on the lives of the Latin American peoples.
References
Chasteen, J. C. (2001). Born in blood and fire: A concise history of Latin America. WW Norton & Company.
