1. NS4540 Winter Term 2016 Reyes and Sawyer, Latin American Economic Development Ch. 1
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. Overview I
Javier Reyes and W. Charles Sawyer, Latin American Economic Development Ch. 1 Latin America and the World Economy
Main themes in Latin American economic development
Growth – The most serious problem of modern Latin America has been that economic growth has been slow relative to much of the rest of the world
Especially the case in the last several years
Commodities – Many countries in Latin America are major producers and exporters of commodities, and this has had a substantial influence on the economic development of the region.

3. Overview II
Import substitution industrialization (ISI) -- in in the second half of the twentieth century, many countries in Latin America attempted to create industries designed to replace imports from developed countries.
ISI has had very important implications for economic development in the region
Trade Policy – From the 1930s Latin America has pursued trade policies that tended to make the markets of the region relatively closed to foreign competition
This overall policy had a tendency to make Latin America less integrated into the world economy

4. Overview III
Exchange rate policy – Countries have a choice between managing their exchange rate and allowing it to float.
In Latin America these choices at times have had serious implications in terms of economic growth
Debt – A recurring theme in Latin American economic history has been the tendency for governments in the region to borrow heavily from banks and other financial institutions
Several debt crisis have ensued involving the International Monetary Fund (IMF)
Macroeconomic instability – On average GDP growth, inflation, and unemployment have been somewhat unstable in many countries in Latin America
This instability has been so pervasive that for many it is one of the defining characteristics of the region

5. Overview IV A recurring question is what went wrong in Latin America.
Poverty and Inequality – GDP per capita in Latin America is low relative to the high income countries.
In addition Latin America has had one of the most unequal distributions of income in the world.
A recurring question is what went wrong in Latin America.
Standard answer is a mixture of the history of the region, the natural endowments, and poor economic policy

6. Actual vs. Potential Growth