the \ latin american ^ / / \ / economy / y in 1969 \ «>sœ<s?ir|prQ: tFcrcocrsm ECLA ^cLQir^c^^v ECONOMIC COMMISSION FOR LATIN AMERICA the latin american economy in 1969 exeeorpt from EC LA «uiirvey UNITED NATIONS E/CN. 12/852/Rev. 1 Mayo de 1970 UNITED NATIONS PUBLICATIONS Sales N°: 70.11. G. 4 Price: $ 1. 25 Index Page I. BASIC ASPECTS OF LATIN AMERICAN DEVELOPMENT STRATEGY 1 Introduction 1 Development in the 1960's 1 Prospects and possibilities for economic development in the 1970's 3 The objectives of the strategy 4 II. THE LATIN AMERICAN ECONOMY IN 1969 8 A. General features 8 Over-all trends 8 Country trends 9 Salient features of main sectors of production 9 Inflationary pressures 11 External sector trends 12 B. Economic trends by countries 17 Argentina 17 Barbados 19 Bolivia 20 Brazil 22 Colombia 24 Costa Rica 27 Chile 29 Dominican Republic 31 Ecuador 33 El Salvador 35 Guatemala 37 Guyana 38 Haiti 39 Honduras 41 Jamaica 43 Mexico 45 Nicaragua 47 Panama 49 Paraguay 51 Peru 53 Trinidad and Tabago 55 Uruguay 57 Venezuela 59 III. INCOME DISTRIBUTION IN LATIN AMERICA 61 General features 61 Causes of greater inequality in income distribution 63 Consequences of the structure of income distribution 63 More specific aspects of the income distribution structure ... 63 Features of income distribution in selected countries 65 IV. THE TERMS OF TRADE IN LATIN AMERICA 68 V. RECENT TRENDS IN LATIN AMERICA'S MARITIME TRANSPORT . 73 Latin America's position in international sea-borne trade ... 73 National merchant marines and the balance of payments .... 75 Maritime freight rates and Latin America's foreign trade ... 77 Latin American maritime shipping policies 78 III Basic aspects of Latin American development strategy Introduction When the development of the low-income countries agencies and in national plans have not been is compared with the trends of the world economy, achieved. The fundamental internal and external the actual results give cause for a certain feeling problems of Latin American development, far of pessimism and frustration since the gap be- frombeing close to solution, have become gradually tween them and the industrialized countries in worse. Latin America is declining in economic terms of living conditions and rates of growth has importance in the world and at the same time grown. Scientific and technological progress has becoming increasingly dependent, financially and made great strides in recent years, but it has politically, in the international sphere. concentrated the benefits of economic expansion in the countries which already had the highest There is already awareness that the pro- income levels -Japan and the socialist countries. gramme for the Second United Nations Development The developing countries have little or no influence Decade must do more than fix new targets and on the major decisions in international finance and make statements and proposals that would for the economic policy, and they benefit from them only most part probably be a repetition of those already indirectly. made. It is urgently necessary to attack the fundamental problems, present them clearly, and Latin America as a whole in important re- examine possible solutions and practical measures spects is worse off than other regions of the to achieve them. The targets which are eventually periphery. At the end of the 1960's, although some fixed will then be closely related to basic decisions progress has been made in significant areas, the in both the internal and the external spheres. economic and social targets set by regional Davaiopment in tho 1960-c Only six Latin American countries attained the American enterprises engaged in traditional Alliance for Progress target of raising per capita economic, financial or other activities, without income by 2.5 per cent annually (see table 1). there being any technical or other justification for Regional exports grew by only 43. 8 per cent foreign take-overs and the weakening of Latin during the period 1960-1968, less than the increase American enterprise. achieved by the developed countries, the devel- oping countries as a whole, and the socialist There are, however, some positive devel- countries. Moreover, the terms of trade declined, opments: there is greater understanding and there was little diversification of exports, and practical knowledge of Latin America's economic, there was a high degree of concentration in the social and political problems, and also greater geographical distribution of trade. technical competence to tackle them; progress has been made in public sector planning and in curbing The region's indebtedness has more than inflation; agrarian reform programmes have been doubled, and remittances of profits and interest, launched in some countries and social services and amortization and other payments on foreign have been extended. Regional integration has been capital, represent over 35 per cent of the current set in motion and there has been co-ordinated value of exports of goods and services. Further- action by the Latin American Governments in more, there has been a great increase in private discussions of foreign trade and financing. Despite foreign investment in the acquisition of Latin all these advances, however, there is profound 1 disquiet regarding the ultimate course of Latin American development, stimulated by the fact that Table 1 social unrest and conflict have been aggravated and by the new dimensions and characteristics of long- LATIN AMERICA: AVERAGE ANNUAL RATE standing obstacles to development. OF GROWTH OF THE GROSS DOMESTIC PRODUCT AT FACTOR COST, 1960-1969 The average product per person employed in Latin America is barely 1 400 dollars (between (Percentages) one-quarter and one-sixth of the figures for Western Europe and the United States), and partly Per Total reflects the fact that probably less than 10 per capita product cent of the labour force is employed in the rela- product tively modern enterprises which produce 50 per cent of total output. Argentina 3. 5 1. 9 Bolivia 5. 4 3. 0 In addition to being low, average productivity Brazil 5. 5 2. 6 in Latin America increases very slowly, and is Chile 4. 5 2. 0 virtually at a standstill or even diminishing in the Colombia 5. 0 1. 5 rural subsistence-level sectors and in various Costa Rica 6. 9 2. 9 urban services, on account of the pressure of Cuba - _ important sectors with surplus manpower. Dominican Republic 3. 4 0. 1 Ecuador 4. 5 1. 1 One indication of the low level and insignif- El Salvador 5. 6 2. 3 icant growth of productivity is the inability of the Guatemala 5. 2 2. 2 economic process to absorb the working population Haiti 1. 5 -0. 8 in productive employment, which creates distor- Honduras 5. 3 1.8 tions in the employment structure that are all too Mexico 6. 9 3. 3 common. The low average product per person Nicaragua 6. 3 ; 3. 2 employed, the marked disparities in productivity Panama 8. 1 4. 8 and the scale of structural unemployment are Paraguay- 4. 5 1. 1 three interrelated factors which account for the Peru 5. 3 2. 1 low average level of income prevailing in the Uruguay 0. 8 -0. 5 region (approximately 410 dollars) and also for Venezuela 4. 5 1. 1 the extreme inequality in the distribution of income and consumption. Latin America 5. 2 2. 2 The basic causes of Latin America's eco- Source: ECLA, on the basis of official nomic and social backwardness are the slow pace statistics. of political and social change, opposition to the establishment of new institutional conditions that would facilitate the key decisions required for development, and the slow adaptation to changing substitution, the trend was towards industry, with conditions of international trade. Thus, national modern units superimposed on a whole slowly planning has merely added another official admin- evolving economic structure and a geographical istrative component to a traditional decision- concentration of economic activity. making structure which has remained essentially unchanged. This is illustrated by the hesitations During the 1960's, the average gross invest- about and opposition to agrarian reform program- ment coefficient in Latin America was 1'7 per cent mes, the failure to adopt bank and financial and, given the high concentration of income, it reform and to introduce substantial changes in the could have been greater were it not for the high existing tax systems, the weakening of national consumption levels in the upper social strata. enterprises, and the obstacles to the expansion of Moreover, if the high relative prices of capital intra-regional trade and to the establishment of a goods compared with consumer goods are adjusted, more efficient economic system. the gross investment coefficient will probably not have been more than 12 per cent. Public spending The absorption of technical know-how in and the composition of demand also influence the Latin America has, in general led to a limited structure of investment, particularly demand for form of modernization which has given shape to a durable consumer goods. Such a distribution of modern sector that is separated by a great gulf, resources prevents the social effects of the devel- in terms of productivity and income, from the opment process from spreading, since it keeps rest of the economy. While exports were the demand for consumer goods low in the poorer population groups and reduces the resources main stimulus to growth, the modern sector available for the production of consumer goods in expanded principally on the basis of export activ- popular demand, for increasing the social services ities; subsequently, v/ith the stimulus of import 2 that should be provided by the State, and for on such vital matters as incomes and prices, producing or importing essential intermediate and exchange rates, and government income and capital goods.