www.ignou-ac.

in

www.ignou-ac.in

www.ignou-ac.in

N
1
www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in1

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

ASSIGNMENT SOLUTIONS GUIDE (2014-2015)

M.P.S.E.-2
State & Society in Latin America
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Auhtors for the help and Guidance
of the student to get an idea of how he/she can answer the Questions of the Assignments. We do not claim 100% Accuracy
of these sample Answers as these are based on the knowledge and cabability of Private Teacher/Tutor. Sample answers
may be seen as the Guide/Help Book for the reference to prepare the answers of the Question given in the assignment. As
these solutions and answers are prepared by the private teacher/tutor so the chances of error or mistake cannot be denied.
Any Omission or Error is highly regretted though every care has been taken while preparing these Sample Answers/
Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer & for uptodate and exact
information, data and solution. Student should must read and refer the official study material provided by the university.
SECTION I
Q. 1. Identify the significant features of populist movements in Latin America.
Ans. Populism was an urban phenomenon that emerged in the 1930s in Latin America. It was a heterogeneous
coalition of the urban have-nots, which sought to break the monopoly of the oligarchy. Populism was a general regional
response to the first crisis of delayed and dependent capitalist development in the region. Since 1870s, Latin American
economies had experienced a boom based on the exports of primary products. The European countries and the United
States led to export boom and Latin American economies had also become even more deeply integrated with and dependent
on these capitalist economies for markets, capital and technology. The outward-oriented economic model was severely
affected by the economic crisis of 1930s. It has a great impact on the delayed and dependent development and the
oligarchic rule. Large sectors of the middle class began agitating for political and economic changes. There was a significant
rise in the nationalist sentiments which found expression in the general desire for autonomous national development.
From the 1930s, the dominant ideological themes throughout the region were the nationalism and developmentalism
which led to the emergence of populism. Populist movements however varied widely across the region. In Argentina and
Peru, the highly personalized style Brazil constructed the movements. In Mexico, the populism emerged from the Peasants
Revolution. In Peru and Bolivia, it emerged in an organised way to oust the oligarchy and promote national economic
ownership. Following were some common features of Latin American populist movments:
(i) Populist movement was not revolutionary. It did not advocate a radical break from the past and a total overhaul
of the existing economic and social structures. It was a reformist attempt at limited structural change aimed at
adapting to the new exigencies while maintaining basic continuity with the past patterns of elite political domination
and skewed income distribution.
(ii) For the populists, the key problems of Latin America were economic underdevelopment and deformed economic
structures. In Peru and Bolivia, populists also focused on the geographical and ethnic-cultural divisions that
were reinforced by economic dualism.
(iii) The populists believed Latin America remained underdeveloped because of the exploitation of the nation by the
anti-nation, the oligarchy. The nation included all the groups other than the oligarchy. Thus, they sought to
form a broad multi-class movement of national forces to unseat the antinational oligarchy and install a leadership
that would represent the entire nation.
(iv) The objectives of the populist movement included national economic independence and social justice for all
sectors of the nation. The central themes for the populists were state, nation, development and social justice. The
task of coalition was to seize the state and use it to promote development and distribution.
(v) Populist movement was against capitalism and imperialism, but it also did not favour socialism. Populists like
Peron talked about neither socialism nor capitalism, and advocated a third path of development, which he called
justicialismo. They wanted reform and to regulate the internal and external structures so as to attain a controlled,

N
2

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in2

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

but autonomous economic development under the aegis of the state. It was some kind of a state capitalism or a
reformed capitalism. They stood for integral development to achieve the maximum socio-political harmony.
They also rejected the Marxist notion of class struggle and the ideas of economies of scale. Populists wanted a
society that would have interdependence and cooperation among its various sections.
Q. 2. Examine the features of the Peasant and Land Rights Movements in Latin America.
Ans. Latin America witnessed peasant uprisings and slave rebellions during the colonial period. After independence, traditional inequitable agrarian structures and lack of concerted initiatives in respect of just land reforms led to
agrarian and land rights movements in the region. These movements have taken different forms. Some countries have
taken action to ensure rights to the peasant, in some countries it has been a mere formal exercise with no practical
impact. The Emiliano Zapata movement in Mexico, which had agrarian reform as its principal objective, the Movimento
Sem Terra (MST) of Brazil and the politically motivated rural violence in Colombia are examples of such movements.
Land rights movements are not necessarily be a movement of the peasantry, it can be a movement for rights
political, social, economic and cultural. But here we are focusing on the issues involved in dealing with the peasant and
agrarian movements alone.
In the hacienda system, the exercise of overt or covert repression of the peasantry is called by anthropologist Holmberg
the culture of repression. The situation in which the peasantry lives both in the haciendas and as free peasants is called by
Rodolfo Stavenhagen as internal colonialism. This is because of the existing unjust land structure as well as the expansion
of capitalism and economic liberalism during the second half of the 19th century. In the past, peasant resistance has been
crushed. Peasants have been seen as a hurdle to progress due to their opposition to change. In recent years, there is
resistance of the peasantry to the culture of repression. Besides there are other factors which have lead to peasant movement
like the emergence of charismatic leadership, increasing awareness among the peasantry and the support to the peasant
movements. Peasants have adopted radical approaches including civil disobedience and even violence to reach their aim.
We will discuss below two such land rights movements.
Emiliano Zapatas Movement in Mexico: The Emiliano Zapata-led revolution of 1910-1920 in Mexico inspired
the agrarian reform legislations in the country. It was a movement against the hacendados who took over the community
lands and forced the villagers to work on their fields. Zapata started recovery of lands by removing the fences, which had
been illegally put up by the hacendados.
Francisco Madero was the first to start activities of a national movement in Northern Mexico. He got support from
peasant groups against re-election of the dictatorial Porfirio Diaz to presidency. In a declaration against Porfirio Diaz, the
protestors mentioned that all the lands taken away from the people by force would have to be returned.
Zapata supported Madero to overthrow Porfirio Diaz with a hope that land reforms will be carried out. When his
expectation was not met, Zapata rose in armed rebellion. In late 1910, he took up arms with the cry of land and liberty. His
army consisted of armed peasants recruited from plantations and villages. He called for the return of the land to the
indigenous people and started seizing land by force. Zapata formulated his own agrarian programme which was outlined
in the Plan de Ayala.
According to his programme, the original land owners should claim immediate possession of their land that they had
been illegally deprived of.
By the end of 1911, Zapata controlled most of Morelos. Later on he extended to cover Guerrero, Oaxaca, Puebla and
the Federal District. Zapatas forces occupied Mexico City three times in 1914-15. He negotiated for agrarian reform, but
failed with one of the generals. In 1914, Zapata applied Plan de Ayala with speed. In that year, the government issued a
decree, taking official notice of the importance of agrarian reforms.
Movimento Sem Terra (MST): The Movimento Sem Terra (MST) or the landless peasants movement is most
striking of the peasant movements of Latin America in recent times. MST originated in Brazil and has been spreading fast
across the continent. Hundreds of thousands of families of the rural poor have been involved in this movement.
Its main goal is to secure land and to redistribute the land among the rural poor. It supports the creation of large areas
of collective settlements (assentamentos). Though MST is not a political party, it carries political weight. It calls for an
early implementation of cooperative principles as a prelude to collectivization, leaving the modus operandi to the people
of the concerned locality. The MST, it underlines the requirement for participatory democracy of the people. It calls for a
change in the existing and exploitative social order.
The movement was criticized for its loose and disorganized structure. Yet, the alternate health and education and
environmental frameworks that it calls for shows that its policies have a great deal of potentiality as an alternative to the

N
3

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in3

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

neo-liberal policies.
The MST has now has spread across large parts of Latin America. In Bolivia, the campesinos have appropriated
thousands of acres of land. After the MST forcibly occupied the vast Collana Estate, the MST leader Angel Durn has
said that at least 1300 of the 1800 hectares of land would be redistributed to the campesinos.
In Bolivia, indigenous communities, the Quechuas and the Ayemaras, are demanding some 22 million hectares as
part of the compromise between the government and the MST some years ago.
In Brazil, it has started to occupy private landed estates and has began organizing rural strikes and roadblocks or
piqueteros in north and central Brazil to press for demands that include the handing over of several million hectares of
farmland and the resettlement of two million landless people.
With less than 4 per cent of the landed elements occupying 78 per cent of the farmlands in Brazil, MST leader Mauro
has issued a notice stating that even if it comes to organizing armed conflict, it would go ahead with its plans of rapid
occupation of the large landed estates of Brazil. The MST has also started a vigorous and militant struggle for land in
other countries including Uruguay, Venezuela and Ecuador.
Q. 3. What do you understand by dependency? Compare the theory of dependency with other major
theories of development and growth in Latin America.
Ans. Global dependency implies that countries are not self-sufficient and dependent on external sources or other
countries for their economic growth and development. Countries are dependent on other countries for foreign trade,
investment, technology transfer and military hardware. Countries may stagnate and collapse economically without all
these supports. Countries in Latin America depend on the US primarily for much of their foreign investment, aid, technology transfer and creative ideas, including cultural products in the form of movies. These countries also depend disproportionately on the US market for exports.
Main Parties: In the exchange of products and services between the US and Latin America, three parties are involved
Latin American industrialists, Latin American State and MNCs originating from the US. US-based MNCs are catalysts to
the introduction of new products and services in Latin America. Microsoft, General Electric, Exxon, General Motors and
Ford are examples of such MNCs. These firms can manipulate the prices and the terms of trade in their favour. The
position of these mega corporations has been consolidated by these Latin American countries with their economic investment
and tax policies conducive to these firms. The Latin American industrialists are also closely connected with the US
multinationals through participation in the marketplace. Many of the Latin American industrial corporations are subsidiaries
of major US corporations and an active cooperation of these three parties let the cycle of dependency sustain itself.
There are many theories that explain the growth and development of the Latin American countries. Four major
theories are liberal-pluralist, theory dependency/world system theory, developmental and neo-liberal theory.
Liberal-Pluralist Theory: Inspired by Adam Smith liberal pluralists state that individual welfare is accomplished
when people are allowed to pursue their most appropriate economic and political interests. The sum of individual interests
is synonymous with collective welfare. The theory believes an invisible hand of the market place.
In the liberal pluralist approach, the key assumption overlooked by many is that a self-regulating market place is
possible only if an impartial administrative and institutional infrastructure is given. In the absence of such an infrastructural
support, capitalism cannot perform well. In Latin America, the role of the state is more important as there are not enough
private individuals or corporations to look after the infrastructural framework needed to make capitalism work.
In Western Europe and the US, the market might have played the role as the supreme arbitrator of economic behaviour,
yet in the context of Latin America, the effective operation of markets too often required the presence of strong and
interventionist states. This was the scenario Latin America had in the 1940s, 1950s, and 1960s. This was the Import
Substitution Industrialization (ISI) phase in the region.
The ISI policy was adopted as a reaction to the long standing vulnerability that the region had experienced vis--vis
the world market. Latin America had been an exporter of primary products for a long time and it had little control over the
prices they could command. The countries in the region had faced a negative fiscal balance, which means they paid more
for the products they imported than the prices they got for the products that were exported from their countries. They
aimed to reverse the trend with the implementation of the ISI.
Dependency/World System Theory: Influenced by the Marxist-Leninist intellectual vision of society, scholars of
the Dependency/World System theory viewed the state as a dependent entity, an instrument of oppression serving the
interest of the propertied class at the expense of the propertyless class. They viewed the state as an agent of the dominant
classes, which in turn served the economic and political interests of MNCs of the industrialized nations.

N
4

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in4

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

Instead of exclusively focusing on class, the World System Theory gives much importance to the location of the state
in the world system. In this view, state capacity to facilitate growth or resolve conflict depends on the countrys structural
location. Latin American countries are likely to be located in the bottom two tiers in a hierarchical three-tier system and
thus, the state elites do not have the capacity required to involve in successful societal change.
On the basis of the development experiences of the earlier decades, many scholars by the 1970s and 1980s started to
challenge the validity of the above approaches. In the changing global environment, the United States and other leading
capitalist nations became hard pressed in a world of more intense and uncertain economic and political competition.
These led to more independent state activities globally.
The Latin American state was depicted by many studies in the late 1970s and the early 1980s as a forceful and a
relatively independent actor in the development process.
The reason for why and how modern state elites formulated and pursued their own goals in the region was that the
state has had a major say in the consolidation of the internal market through the adaptation of the ISI strategy. Under this
policy, active state encouragement and subsidies contributed to an increasing penetration of foreign investment, especially
in manufacturing. Foreign MNCs got encouraged by various state incentives to set up subsidiaries in the region.
Latin America offered the infrastructure and complementary economic activities to make investment productive. The
states role differs from country to country and thus, made a difference in the level of growth and development achieved.
Some dependency-oriented scholars recently have entertained the possibility of an alliance of foreign capital and the
state elite to foster industrial growth. The alliance in some cases may involve domestic industrialists. The MNCs in this
line of argument collaborated with the state elites to stimulate the industrial sector. This led Latin America to globalize the
domestic markets.
The Developmental State: When many other regions, especially East Asia, overtook Latin America by the 1980s in
terms of the economic growth rate, relative egalitarian distribution of income and social progress, the Latin American
countries started debating over it.
A developmental state aims to lead and actively intervene in selected sectors of the economy to guide and promote
particular developmental goals. Many Latin American states did this after the Second World War. The state provides
incentives to sway the private sector and help it to become more competitive inter-nationally.
A successful developmental state has (i) a high level bureaucratic autonomy, and (ii) closer institutionalized cooperation
with private businesses. However, the developmental state had been notoriously authoritarian as far as the non-business
elements, such as labour and the popular sectors are concerned.
Getting encouragement from the US, many Latin American countries started imitating some East Asian policy postures,
in particular the sphere of institutionali-zed cooperation with private businesses and this led to the emergence of a neoliberal state.
The Neo-liberal State: The neo-liberal state aims at economic liberalization or globalization. It is characterised by
(a) greater focus on exports, (b) an emphasis on manufacturing, (c) an asymmetrical link between capital and labour in which
capital is more mobile across national borders, (d) deregulation of state economic control and privatisation of public sector
companies, and (e) an alliance of international financial agencies like the IMF and the World Bank, foreign MNCs, domestic
industrialists and state elites. All these characteristics have not manifested themselves to the same degree across the region.
The state role was reduced and private international and domestic agents were encouraged to lift the economy.
Putting the Theories in Perspective: Latin American countries in the 19th and early 20th centuries acted as liberal
states. They adopted policies to facilitate foreign investment. They made policies relevant to all sectors with regard to
development. These states regulated foreign investment, developed infrastructure and guaranteed certain social safeguards
to the poor and lower middle classes against economic problems, mainly caused by price fluctuations in the international
market. Yet the Latin Americas economies remained dependent on the international market for foreign exchange which
they required to pay for the goods and services they imported. To expand economic activity, Latin American states also
borrowed from foreign banks and international agencies like the World Bank and the IMF. As they depended so much on
the sale of their export products, a slight decline in the export prices caused havoc in their capacity to repay the debt. In
the 1980s, they faced the tremendous burden of repaying debt to international banks. This fiscal imbalance partly contributed
to a revision in the states role in development. When analyses were conducted, greater developmental achievements in
other regions of the world, especially in East Asia, were highlighted. Besides, there was a change in the nature of ideological
warfare, a thorough re-analysis of development thinking was carried out which eventually produced the neo-liberal state.
It is now more than two decades when most Latin American countries started experimenting with some form of the
economic liberalization policy.

N
5

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in5

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

Despite adopting the economic liberalization programmes, economic growth of Latin American states has not
materialised on a sustained basis. Besides, Latin American economies became more vulnerable to the fluctuations in the
economies of the United States and European Union. Recent economic indicators paint a bleak picture for Latin America
with regard to income inequality and poverty. Since the 1970s, the income distribution in the region has worsened. In
recent years the military expenditure in the larger countries of the region which has been done at the expense of social
development causes concern regarding the priorities of ruling elites in the region.
SECTION II
Q. 4. (a) Plantation Economy in Cuba.
Ans. Since Columbus discovered Cuba in 1492, it had become the staging post for the expeditions that went to
conquer Central America, part of South America and Mexico.
Cuba lacked mineral wealth and a large native labour force, yet it had sound maritime infrastructure. It relied on
foreign commerce for its prosperity. As compared to Mexico or Peru, colonial administration and institutions were weak.
Catholic Church had influence over the faith and wealth of the island. Until the end of the 17th century, Cuba
remained stagnated, ravaged by hurricanes, plagued by diseases, depopulated by the magnetic pull of Mexico and Peru
and challenged by pirates.
Around the middle of the 18th century only with the development of sugar plantation economy and the emergence of
a powerful and very cohesive planters classcalled sucarocracia, Cubas importance began changing. The rise of plantation
economy was coincided with the industrial revolution in England. Steam engine was introduced in the refining process of
sugar. Its geographic location and climatic conditions were perfect for a plantation economy to emerge. African slaves
were transported to Cuba. In the middle of the 19th century, some 375,000 black slaves were brought to Cuba. Foreign
investment and introduction of modern technology and management converted Cuba into the sugar bowl of the world.
Cubas importance further increased with the rise of British naval power and British design to monopolize the international
trade in sugar.
Cuba had the comparative advantage in sugar which placed the country into the global system of commerce. Its entire
economy and society geared to the production, processing and export of sugar. It imported all its requirements ranging
from foodstuffs, textiles, machinery and other capital goods. People born in Spain (peninsulares) were the planters in
Cuba. A small farming class of Cuba born criollos cultivated coffee, tobacco on the eastern part. Cuba was under Spanish
rule when Wars of Independence began in Spanish America. There were concerns among the planters in Cuba that any
movement for independence might lead to slave rebellion as had occurred earlier in Haiti. During the English occupation
of Havana in 1862-63, the benefits of free trade were felt more strongly as new markets were found and the economy was
further integrated with the international commercial network. Spain also further liberalized the trading system after pressures
from both Great Britain and the rising power of an industrializing US. New investments and technology were introduced
to the sugar economy.
A War for Independence began, led by the independent, small, white farming class of eastern Cuba, began in 1868,
but it was put down brutally and remaining non-sugar sector of the economy was devastated. As a result, sugar plantation
expanded now over the eastern part of the country with new foreign investment and technology. Foreign owned industrial
complexes dominated the economy of the island towards the end of 19th century. There were limited opportunities for
local management. Sugar producers increased production keeping economies of scale in mind. During 1880s-90s, the
US-Cuba relations were characterized by increasing dependence on the US market for trade, investment, technology and
industrial inputs even Spain remained as the colonial country. According to an estimate, the US investments in 1896 in
Cuba were $50 million, mainly in mining and sugar holdings. In 1897, the value of US-Cuba trade was $27 million. The
US imported sugar, molasses, tobacco and a few non-manufactured products from Cuba and exported manufactured and
industrial goods.
A different kind of nationalism took shape in Cuba with the growing penetration of a weak economy dominated by a
growing advanced capitalist industrial power. The forces for independence gathered momentum once again. There was a
new and a more compelling sense of unity and national purpose this time under Jose Marti who had a more matured vision
of political emancipation and nationalism based on self-determination. Jose Marti and his Cuban Revolutionary Party
offered a programme of decolonization of Cuba.
In 1998, the US militarily intervened and smothened the nationalist movement. It ousted the colonial Spain from
Cuba and Puerto Rico and ruled the island until 1902.
Besides sugar, Cubalying just 80 miles of the coast of Florida strategically well located for the US. Cubas
infrastructure including finance, administration and health and education were all built a new in the three years of US

N
6

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in6

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

military occupation. Cuba was benefited by these developments. The US Congress passed the Platt Amendment in 1901
making Cuba a US protectorate. It placed financial restrictions on the Cuban government and allowed US to intervene in
Cubas internal affairs. The Reciprocity Treaty in 1903 granted preferential treatment to Cuban sugar in the US market
and reduced tariffs on US exports to Cuba. US investments in Cubas sugar industry, cattle industry, public services,
utilities and other properties reached $200 million by 1909, which was about 50 per cent of all foreign investment in
Cuba. Platt Amendment was revoked only in 1933. The 1959 revolution radicalized the anticolonial nationalism into
socialism. Fidel Castro led the revolution.
Cuban plantation economy had all the key features of modern capitalist economy. All the social classes were integrated
into the economy. More than two-third of the rural labour force was engaged in the farming of sugar and other cash crops
by 1899. Secondly, the economy was shaped by the international demand for sugar. A specialized agricultural production
system based on intensive exploitation of land and labour developed. The latest machinery and milling technology were
adopted. Thirdly, there was large-scale production of sugar and corporate and absentee ownership. Fourthly, most of the
agricultural production was organized along monopolistic lines. There were output restrictions, pegged prices and other
forms of monopolistic control over the cultivation of sugar, tobacco, rice, potato and coffee. Lastly, there were associations
of mill owners, growers and wage workers. The mill owners or growers cartels, or sometimes by a three-cornered bargaining
relationship on the level of national politics determined the outputs, wages, prices and the distribution of sugar earnings.
Economic institutions were capitalist in nature, specific to Cuba and monopolistic in character.
(b) Neo-liberal economic policies adopted by Latin American countries in recent years.
Ans. Neoliberalism advocates economic liberalization, free trade and open markets. It supports the privatization of
nationalized industries, deregulation and enhancing the role of the private sector in modern society. Following are some
of the major elements of the neo-liberal economic policy adopted by Latin America:
(i) The states role in economic matters has been reduced with the market being increasingly unregulated. The free
market principle guided the national economic policies and the regional economic integration.
(ii) There is closer nexus between the private business and the elected governments, and institution of neo-corporatist
control mechanisms like the production contracts.
(iii) The neo-liberal policy lacks agenda to alleviate poverty and inequality. In this model of development, the general
assumption is that market-generated prosperity will automatically resolve such structural challenges.
(iv) It focuses on individual social mobility through the economic opportunities that growing markets can provide. It
advocates for individual and private solutions to the problems that are collective and structural in nature.
(v) Business interests influenced the politics of Latin American countries. Such influence and power is positive if
they are institutionalized. If such influence and power of private business is exercised through less formal channels
and/or undemocratic ones, then the situation is quite dangerous.
(vi) In neo-liberal development, the political influence of actors which formally enjoyed a lot of influence due to their
control over symbolic/ideological resources declined. The fall of the political influence of Church and the leftoriented political parties are examples of this.
(vii) In neo-liberal development, markets are premised on and practicing social exclusionary policies and states can
do nothing about it. Job growthparticularly in the informal sectorhas resulted in some countries to the fall in
poverty rate, yet its effects on income distribution remained extremely limited. The new economic policies have
also not effectively addressed Latin Americas historical problem of social inequality.
Q. 5. (a) Latin America and the Asia Pacific Region.
Ans. Several countries of Latin America and the East and South-East Asian countries in the early 1960s adopted
measures to develop their industries. Latin America adopted an import substitution strategy, while East Asia went for an
export-oriented strategy.
Decades later, East Asian countries were found to be more developed and dominant.
When trade between Latin America and the Asia-Pacific region is compared, the latter has had the upper edge.
During the 1980s and the 1990s, exports from Latin America to Asia grew at a much lower level than the imports from
the Asia-Pacific.
The kind of products traded between the two regions to a certain extent may be a reason for this. Imports from AsiaPacific include advanced technological products such as automobiles, electronic products and appliances which have
attained economies of scale. Exports from Latin America have included primary products like coffee, fish, copper, iron,
steel, zinc, wood, soybeans and some semi-manufactured items.
The difference in economic integration in East Asia and Latin America is another cause of the imbalance. One of the

N
7

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in7

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

goals for regional association in Latin America is to enhance the competitiveness of the region. However, the economic
processes and development policies adopted in Latin America have not been very conducive to increasing competitiveness.
Regional integration in Latin America has been relatively inward-looking even after renouncing the ISI strategy. Integration
in East Asia on the other hand is geared particularly toward boosting competitiveness internationally.
Latin Americas trade dependence on the US has increased steadily in the last two - three decades. The gap between
Latin Americas imports from the US and its exports has increased. The trade surplus between the US and Latin America
is loaded in favour of the former. When we consider the US and the East Asian countries, it is the reverse. When
compared to those of Latin America, it further shows how far ahead the East Asian economies are.
The kind of integration with the world economy experienced by the two regions is another striking feature. Regionalism
and liberalization in Latin America involves a high degree of deregulation of the foreign investment sector. It has
resulted in imports increasing much faster than exports.
In the last two-three decades, trade between the two regions has increased. The share of Latin America in the East
Asian trade however has remained the same. East Asian countries have taken full advantage of the opening of the Latin
American economies. East Asian exports to Latin America are as much as 10 per cent, while Latin Americas share in the
East Asian exports has remained at about 2-3 per cent.
In terms of foreign direct investment, Latin America has some advantages. FDI has been increasing in Latin America
more than in the East Asian region. This is because Latin America is more open to mergers and acquisitions by foreign
firms. FDI is happening in infrastructure sectors like energy, electricity and telecommunication.
Bilateral free trade agreements have also been considered between the countries in the two regions such as the
Japan-Mexican FTA and a Japan-Chile FTA. However, the East Asia-Latin America Forum (EALAF), now known as the
Forum for East Asia-Latin America Cooperation (FEALAC), is significant. The objective of the forum is to enhance
economic ties between the two regions.
All the Latin American countries are members of FEALAC. However, only three Latin American countries are
members of the Asia-Pacific Economic Forum.
If APEC and FEALAC are compared, APEC is narrower in its aims as it is concerned only with economic and
commercial aspects, while FEALACs scope is broader, covering even social and political issues.
Regional integration for the time being is institutionally stronger in Latin America than in East Asia. The creation of
bilateral FTAs between countries of the two regions can offset this situation. Latin American countries like Mexico and
Chile have experience in this regard and can tie-up with East Asia.
(b) Latin America and India Relations
Ans. Indias trade with Latin America during the last few years has been growing rapidly. In the early 1990s, the
economic reforms in India paved the way for foreign direct investment and an emphasis on boosting the competitiveness
of Indian exports. Indias foreign policy also acquired a commercial and trade focus after decades of following foreign
economic policy with a distinct bias toward state control. For Latin America, Asia, especially India, is now potentially a
huge market.
Considering the potential of Latin American region, an integrated programme Focus: LAC was launched in
November 1997 by the Indian Government.
Its trade with the region has increased from $1072.45 million in 1996-97 to $5365.44 million in 2005-06, registering
an increase of over 400% in a decade
Indias imports from the Latin American region have increased from $593.71million in 1996-97 to $2409.43 million
in 2005-05 registering a growth of 305%.
A Framework Agreement was signed between India and Mercosur on June 17, 2003 at Asuncion, Paraguay. The aim
of this Framework Agreement is to create conditions and mechanisms for negotiations in the first stage, by granting
reciprocal tariff preferences and in the second stage, to negotiate a free trade area between the two parties in conformity
with the rules of the World Trade Organization.
As a follow up to the Framework Agreement, a Preferential Trade Agreement (PTA) was signed in New Delhi on
January 25, 2004. The aim of this Preferential Trade Agreement is to expand and strengthen the existing relations
between Mercosur and India and promote the expansion of trade by granting reciprocal fixed tariff preferences with the
ultimate objective of creating a free trade area between the parties.
A Framework Agreement to Promote Economic Cooperation between India and Chile was signed on January 20,
2005. The Framework Agreement envisaged a Preferential Trade Agreement (PTA) between the two countries as a first

N
8

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in8

www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in

step. The Framework Agreement also provides for a Joint Study Group to go into the issues relating to a Free Trade
Agreement between the two sides.
Indias focus is mainly on four Latin American countries Argentina, Brazil, Mexico and Chile. This is a calculated
move by India because of the influence that these economies have in the region. Brazil and Argentina are the two leading
members of Mercosur, the main Latin American regional association. Mexico is the only Latin American country in
NAFTA. Chile is one of the more open economies in the region.
India exports mainly textiles, engineering products and chemical products to the Latin America. India and Latin
America are competitors in the European fruit market. In spite of that, the Indo-Latin American economic ties have been
improving by days.
India imports large quantities of ores and metal scrap, non-ferrous metals, other crude minerals, chemicals, plastic
materials and project goods from Latin American countries. Our analysis reveals that there is considerable scope for
further increasing imports of these products from the Latin American region.
Besides, India has signed a number of trade agreements with individual Latin American countries.

N
9
www.ignou-ac.in

www.ignou-ac.in

www.ignou-ac.in9