Development Path Of Latin America Economics Essay

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While talking about the development path of Latin American countries one should be clear about the meaning of development. What actually development means. In simple terms, development is defined as the process of gradual advancement through a series of progressive changes. Development includes progress in every respect, namely, economic, political as well as social. Just the economic growth or high GDP rates doesn't ensure development. The process of development goes beyond economic growth; it also focuses on improving the over all quality of life. The development process ensures eradication of social problems such as poverty, unemployment as well as it comprises of improved health and education facilities, development of human capital, environment sustainability, etc.

The geographical region known as Latin America is defined by 'language' more than just its location. The Princeton University "WorldNet" website defines Latin America as "the parts of North America and South America to the south of United States where Romance languages are spoken." It is evident from the definition that language and geography are inextricably linked. Latin America includes those countries in South, Central and North America where Spanish or Portuguese is the most common language. It doesn't include the United States of America, Canada or (complete) Caribbean islands where other languages are dominant.

Latin America includes:

Caribbean:

Cuba

Dominican Republic

Haiti

Central America:

Costa Rica

El Salvador

Guatemala

Honduras

Nicaragua

Panama

Belize

North America:

Mexico

South America

Argentina

Bolivia

Brazil

Chile

Colombia

Ecuador

Paraguay

Peru

Uruguay

Venezuela

It is difficult, and beyond the scope of this paper to talk about each and every country. So we will be talk about Latin America as a whole and will focus on some particular regions whenever and where ever necessary.

We will proceed in the following manner:

Starting with the political aspect we will move to the economic aspect covering the dependency and development theories, debt crisis and Washington consensus and growth patterns and reforms, covering social aspects such as poverty and employment, crime, violence and environmental degradation to finally focusing on the comparative study of the three developing regions namely, Latin America, East Asia and Sub-Saharan Africa.

The time period we are considering is from 1950s to 1990s as we consider this as the most crucial phase for Latin American countries. However at some points we will talk about the present time as and when required.

Political Aspect:

In the year 1940s there was a substantial political demand for reform in much of Latin America. Other countries in Latin America except for Venezuela and Costa Rica turned to models of Marxist revolution. As political democratization economic development and social reforms began to fail in most parts of Latin America, more radical solutions to ongoing problems were sought. Governments which attempted to move too swiftly were often met by resistance from the military. Latin America after the Cuban revolution in 1959 there was an emergence of new organization that sought to change the conservative status quo in politics. In the 1960s the guerrilla movement grew to where by the 1970s the guerrillas were engaging the Guatemalan military in open armed conflict. But by the early 1980s the revolutionaries were unable to withstand the scorched earth policy of General Efrain Rios Montt that drove entire peasant villages into exile in Mexico. By the 1960s, Latin American military believed that they were professionals best equipped to resolve problem of political instability. Concerned about the success of the Cuban revolution, the Military coups often with the compliance of the U.S. which overflow government in Brazil (1969), Argentina (1966), Chile (1973), Uruguay (1973), and Peru (1968). Military government was supposed to be above political partisanship and produce economic stability. Military government most often consisted of presidencies assisted by organized bureaucracies. Such government was often brutally repressive. Military economic policies sought to crush labour movement, develop new industrial strength, and promote the building of the infrastructure. In most cases, social problem were scarcely addressed. All military regimes were nationalistic. The nationalism of the argentine government led to a confrontation with Britain over control of the Falkland Island in 1982. In many parts of Latin America, the military began to restore civilian government in the 1980s. In some areas such as Peru, guerrilla movement continued to oppose democratization. Nearly all Latin America countries replaced military government with elected civilian government in this decade. Chile, Haiti, Panama and Paraguay remain the exception and the outlook for democracy in some is uncertain. Even those countries which returned to civilian rule are beset by problems. Balancing social and political aspirations against severely constrained economic realities has proved frustrating. The task of forging streamlined more efficient and competitive states out of complacent bureaucracies have been daunting. The hoped for results of unpopular policies seem further off than ever in many countries. However most of the Latin American countries do follows the Left party.

Latin Americans are mostly Left in power and have been electing presidents from popular-sector based, left parties consistently since the third wave of democratization swept through the region beginning in the late 1970s. Since the failure of the guerilla movements and the barbarities of military rule, many changed their views and come to accept the virtues of elections. Ideology of the 'New Left' is far from revolutionary; instead it combines a desire for social justice with a commitment to a measure economic liberalism and an adherence to the existing geopolitical 'rule of the game'. Moreover the Latin American left is not monolithic and certainly does not uniformly and consistently follow Chavez of Venezuela. Popular parties has the advantage of including genuine leftist parties, such as the socialist party in Chile under Allende, while also capturing the larger number of primarily statist and nationalist parties that have predominated historically on the left half of the political spectrum in Latin America. The left is by now well-rooted at local government level, reflecting the dynamism and local nature of the social movements. Historically, the most prominent "leftist" parties in Latin America have been nationalist as opposed to communist or socialist. This is particularly true in the post debt crisis context where even putatively socialist parties, such as the Socialist Party in Chile or the Workers Party in Brazil have abandoned any endorsement of socialist principles. In 1997 just 60 million Latin American were governed by the left at municipal level. By 2003 the number had risen to more than 200 million.

The left are still searching for a convincing alternative to neo-liberalism. Even a variety of perspectives suggest that governments elected on a leftist or nationalist platform would not be able to pursue an "anti-neoliberal" program and instead would be forced to how to an orthodox live. There are enough leftist governments in the region to declare resurgence and some good results: administration have been creative, responsive to the needs of the grass roots, and have made some headway against corruption. Since the 2000s, or 1990s in some countries, left-wing political parties have risen to power. Hugo Chavez in Venezuela, Lula da Silva and Dilma Rousseff in Brazil, Fernando Lugo in Paraguay, Néstor and Cristina Kirchner in Argentina, Tabaré Vázquez and José Mujica in Uruguay, the Lagos and Bachelet governments in Chile, Evo Morales in Bolivia, Daniel Ortega in Nicaragua, Manuel Zelaya in Honduras, and Rafael Correa of Ecuador are all part of this wave of left-wing politicians who also often declare themselves socialists, Latin Americanists or anti-imperialists.

Economic Aspect:

Dependency and Development:

Dependency theory is a development theory that provides the notion that resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states, enriching the latter at the expense of the former. It is a central contention of dependency theory that poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system." Dependency theory states that the poverty of the countries in the periphery is not because they are not integrated into the world system, or not 'fully' integrated as is often argued by free market economists, but because of how they are integrated into the system. They rely on the rich for the little work that is available to them, yet this causes a barrier from the nation growing independently.

Dependency theory originated as a reaction to modernization theory. Modernization theory argued that all societies progress through similar stages of development and that's why underdeveloped areas are facing similar situations when compared to the other developed areas. Thus the task of developed areas is to help the underdeveloped areas to come out of poverty and to accelerate them along the supposed common path of development by various means such as technology transfers, investment, closer integration into the world market, explained in paper published by Hans Singer and Raul Prebisch as the Singer- Prebish thesis. The paper concluded that the underdeveloped nations must employ some degree of protectionism in trade if they were to enter a self-sustaining development path. He argued that Import-substitution industrialization (ISI) was the best strategy for underdeveloped countries.

Dependency theory argues that underdeveloped countries are not merely primitive versions of developed countries, but have unique features and structures of their own and importantly, are in the situation of being the weaker members in a world market economy. Vernengo argues that the Core countries controlled the technology and the systems for generating technology. Foreign capital could not solve the problem, since it only led to limited transmission of technology, but not the process of innovation itself.

Dos Santos argues that the incorporation of Latin America into the capitalist world economy, directly through (Spanish and Portuguese) colonial administration but more subtly through trade, geared the region's economies toward meeting demands from the center rather than the needs of Latin America's people themselves, even when the main economic activities in the regional economy were locally controlled. Dependence skewed the region's social structure toward a small, enormously rich, elite and a mass of poor peasants. In terms of development, the gains made from exporting products sent to the center were used for luxurious consumption by the elite rather than for domestic investment. But real power was exercised from external centers of command in the dominant ("metropolitan") countries. Dos Santos concludes that dependence continues into the present through international ownership of the region's most dynamic sectors, multinational corporate control over technology, and huge payments of royalties, interest, and profits to corporations headquartered in New York and London.

Underdeveloped societies had a dual structure of modern and traditional sectors, each with its own characteristics and dynamic. Underdevelopment "is not due to the survival of archaic institutions and the existence of capital shortage in regions that have remained isolated from the stream of world history but, was and still is generated by the very same historical process which also generated economic development: the development of capitalism itself" (Frank, 1966, p. 18). In contrast to the world metropolis satellite, the development of national and regional metropolises was limited by their dependent status-for example, local metropoles, such as Brazil, or, Argentina, etc. could only achieve a dependent form of industrialization. Real development means separation from the global capitalist system in a more autonomous economy. In a hypothesis directly opposed to the finding of modernization geography that development was spread through contract with the metropolis, Frank hypothesized that the satellites experienced their greatest development when ties to the metropolis were weakest-historically during wars, geographically in terms of spatial isolation. In fact, for Frank, development could occur only when the links with global capitalism had been broken. However, the underdevelopment in Frank's theory was not an original condition of Latin America or Third World societies but, was generated by the development of the center i.e. from the loss of surplus expropriated for investment in the center's development.

Dependency theory was holistic in that it attempted to place a country into the larger (global) system. It stressed the external causes of underdevelopment rather than causes internal to a peripheral society. Emphasis was placed on economic rather than social or cultural interactions. For most theorists dependency and underdevelopment were synonymous, although Cardoso, for example, thought that at least dependent forms of capitalist development could be achieved. Finally, dependency theory was politically radical, with most adherents proclaiming the need for some kind of socialist revolution, although a purely nationalist politics could also emerge from the more spatial versions of the dependency perspective.

ISI (Import Substitution Industrialization), as a counter to dependency and (Under) Development:

ISI is an industrialization strategy based on the systematic deepening and horizontal integration of manufacturing industry, with the primary objective of replacing imports (Saad-Filho, 2005). Besides, it is a trade policy aimed to create domestic industries capable of producing substitutes for expensive imports and promote industrial growth and expansion of domestic markets.

There are different policy instruments that ISI used for the policy and function:

1. Protective tariff control and/or exchange rate for imports.

2. Special preference for domestic and foreign firms importing capital goods for new industries.

3. Preferential import exchange rates for industrial raw materials, fuels and intermediate goods.

4. The constructions were to be made by Governments of infrastructure especially designed to complement industries.

5. Direct participation of Government in certain industries, especially the heavier industries, such as steel.

6. To provide cheap loans by Government Development Banks for favored industries.

ISI during the time of its implementation has made the region's output to increase fivefold (5.3% annually) during 1950-1981. The per capita of the region too doubled despite the fastest population growth during this time. Besides, manufacturing of the region grew at the rate of 6.5%, and also the growth rate was higher than the OECD countries during that time. Apart from the achievements of the ISI above, it had also many disadvantages/shortcomings during the time of its implementation which had led to its failure. Some of them are as below:

Exhaustion due to the limited size of the internal market.

Export market could not develop because manufactured protected goods did not meet international standards.

Lack of economic integration due to sharp variation of economic performance across regions, small potential demand and politics.

Exacerbated income inequality.

Fostered creation of inefficient institutions which did not work efficiently and for the people but, were mainly of the development of the centre.

Neglect of agriculture which was the region's main economy before the institution of ISI.

But during 1980s various Latin American countries suffered from debt crisis. The excess inflow of petro dollars in the form of borrowings was the main reason.

Debt Crisis and Washington Consensus:

Debt Crisis:

During 1960s and 1970s large economies of Latin America namely Mexico, Brazil and Argentina borrowed huge amount of loans from the international agencies for industrialization and infrastructure programs. Between 1970s and early 1980s Latin American debt increased at a cumulative rate of around 20%. The debt service ratio increased drastically. Due to two oil-crisis in 1973 and 1979 the interest rates goes up in the United States of America and Europe and therefore the debt payments increased making it difficult for the borrowing countries to pay back their debts. With the accumulation of external debt and increased interest rates the debt crisis began when the international capital market became aware that the Latin American countries are not able to pay back their debts.

In August 1982, Mexico declared its incapacity to service the interest rate due on its debt of US$80 billion and soon Brazil and Argentina also declare their inability to repay their debts. Since Latin American countries, such as Mexico and Brazil, were not able to pay back their foreign debts, it showed that Latin America is not able to keep p with the pace in which their debts grew. Before the crisis, Brazil and Mexico tried to borrow money to enhance economic stability and reduce the poverty rate. But after this continuously borrowing money, they fell in the whirlpool of debt, and the innovations and improvement from past few years became meaningless.

Latin America's debt burden spiral became out of control as shown below:

The debt crisis of 1982 was the most serious of Latin America's history. Incomes dropped; economic growth stagnated; because of the need to reduce importations, unemployment rose to high levels; and inflation reduced the buying power of the middle classes. In fact, in the ten years after 1980, real wages in urban areas actually dropped between 20 and 40 percent. Additionally, investment that might have been used to address social issues and poverty was instead being used to pay the debt.

The particulars of the 1982 crisis:

• Latin American governments were borrowing simply to pay interest on existing loans.

• Second oil shock of 1979 (Iranian hostage crisis).

• Inflation in the United States (Ronald Reagan).

• Abrupt rise in interest rates (makes credit scarcer).

• Recession in OECD countries- imports from developing world reduced.

• Rapid fall in oil prices meant that Mexico lost revenues.

• Deterioration in terms of trade meant that debt was increasing in real terms.

• Mexico devalues its currency.

• Mexico defaults on its foreign debt in 1982.

Emergency Measures:

Bailouts: private external debt was taken on by the government. If private debtors who borrowed are not paying back the banks, taxpayers are now on the hook for this debt.

• Banks refuse to refinance the short‐term loans to other Latin American governments.

• Nationalization of banking debt in Mexico, Argentina, and Chile.

• Exchange controls to block capital flight

• Reserve requirements on banks were increased

• Sharp devaluation of exchange rate to confront trade deficits

• Slashed wages and drastic cuts in public expenditures to deal with massive budget deficits.

In 1989, John Williamson coined the term "Washington Consensus". Williamson wrote a background paper to make sure that authors from 10 Latin American countries address a common set of questions in the conference by Institute of International Economics.

He listed down 10 policy reforms namely:

Fiscal Discipline: As countries had large deficits in Balance of Payment account and high inflation rates so corrective measures should be taken.

Reordering public expenditure priorities: It includes switching expenditure in a pro-growth and pro-poor way, from things like non-merit subsidies to basic health care, education and infrastructure.

Tax reform: To have a tax system with broad tax base with moderate marginal tax rates.

Liberalization of interest rates

A competitive exchange rate: Leaving it directly on market conditions or to have full control. No dirty floating.

Trade liberalization: Removing trade barriers and to promote trade.

Liberalization of inward FDI

Privatization: Transfer of ownership from public to private sector as well as allowing private sector to enter in core industries.

Deregulation: Easing barriers to entry and exit.

Property rights: Providing the informal sector with the ability to gain property rights at an acceptable cost.

Growth Patterns and Reforms:

While talking about the growth pattern of Latin American Countries in the past 25 years, Latin American growth has generally underperformed relative to every other developing country region. Latin American countries exhibited roughly similar growth patterns until the 1980s.The figure confirms that Latin America had fairly high growth in the 1970s compared with other developing country regions, second only to East Asia.

Developing Country Regions: GDP Per Capita Growth 1970-2005

In an accounting sense, Latin American growth since the 1970s has been disappointing not because of low investment, low growth of the labor force or even low human capital accumulation, but because of declines in total factor productivity (TFP), that is, in the joint productivity-linked to the economy's technical or institutional capacity.

Latin America: Growth Accounting by Decade 1960-2000 (un-weighted averages)

Reforms:

Structural Reforms in Latin America:

Since mid 1980s there is a change in direction of structural policies. The developmental model which was based on protecting national markets and state interventions was replaced. The new sets of policies were aimed at improving the efficiency and to facilitate operations of the markets. Also state intervention was reduced in economic activities.

Trade Liberalization:

It means removing trade barriers such as tariffs and quota restrictions. Between mid 1980s almost all countries of Latin America began to lift controls on their trade regimes.

Exchange rates Unification:

During 1980s trading operations were slowed down because of the presence of multiple exchange-rate markets. The exchange rate differences reflected the presence of regulations as well as serious monetary imbalances. The adoption of fiscal and monetary stabilization policies resulted in taking apart the regulations and helped in reduction of exchange rate premiums. In 1997 only Haiti had an exchange rate differential of over 20%.

Financial Liberalization:

The aim for adoption of financial reforms was to grant operating freedom to financial intermediaries and to strengthen regulation mechanisms. It included lowering of reserve ratios, elimination of controls on interest rates etc. Overall interest rates were dismantled in all countries before 1995. With few exceptions, different forms of state interventions in aspects of lending agreements (in calculation and payment of interest rates, maximum level of interest rates and repayment policies) are still there.

Tax Reforms:

The basic aim was to have simplified tax rate system and increased collections. Taxes on company profits were reduced. Reduced differential rates are applied to lower incomes, and in most countries there is also a minimum limit of taxable income.

Privatization:

Although uneven but progress has been made in the process of privatization. Brazil and Argentina have carried out the largest amounts of privatization. Around 57 percent of the value of privatization was in infrastructure sector (which was previously closed for the private sector) during 1990s. Also 11 percent come from the sale of banking and similar entities. One of the more favorable and tangible effects of privatization has been the increase of foreign investment in the region. Until the late 1980s, many countries placed obstacles to the entry of foreign capital into various sectors and limited the remittance of profits and capital to the headquarters abroad. These restrictions were dismantled at the same time as new investment possibilities were opened through privatization.

Labor Reforms:

Reforms in the labor area have been focused on moderating layoff costs and facilitating temporary hiring of workers. Given the absence of universal social protection systems in most countries, the regulations that have traditionally covered labor activity were issued with the aim of securing labor stability and protecting workers from the risks inherent in unemployment, sickness, old age, and so forth. However, these objectives have not always been met, because these restrictions have lessened job creation and encouraged informal employment.

The reforms helped in improving the economic conditions of various economies in Latin American countries. But the result was not as good as expected.

Social Aspect:

Poverty and Employment:

(Focusing on Mexico and Chile)

Chile suffered two economic crisis, one in 1973 and another in 1982. The Unidad Popular (UP) came to power in November 1970. Government expenditures expanded greatly, and in 1971 real salaries and wages in the public sector increased 48 percent, on average. Salaries in the private sector grew at approximately the same rate.

Overall, the behaviour of the economy in 1971 seemed to vindicate the UP economists: real GDP grew at 7.7 percent and the rate of unemployment dipped below 4 percent. Also, and more important for the UP political leaders, income distribution improved significantly. In 1971 labour's share of GDP reached 61.7 percent, almost ten percentage points higher than in 1970. All of this created a sense of euphoria in the government.

All did not remain well in the economy in 1971. The UP's macroeconomic policies were rapidly generating a situation of repressed inflation. The high growth rate of GDP was largely the result of an almost 40 percent increase in imports of intermediate goods. The fiscal deficit had jumped from 2 percent of GDP in 1970 to almost 11 percent in 1971. The rate at which the money supply grew exceeded 100 percent in 1971. As a result, the stock of international reserves inherited by the Allende government was reduced by more than one-half in that year alone. A rapid reduction of inventories was another important factor in the expansion of consumption. During 1972 the macroeconomic problems continued to mount. Inflation surpassed 200 percent, and the fiscal deficit surpassed 13 percent of GDP. During the first quarter of 1973, Chile's economic problems became extremely serious. Inflation reached an annual rate of more than 120 percent, industrial output declined by almost 6 percent, and foreign-exchange reserves held by the Central Bank were barely above US$40 million. The depth of the economic crisis seriously affected the middle class, and relations between the UP government and the political opposition became increasingly confrontational. On September 11, 1973, the UP regime came to a sudden and shocking end with a military coup and President Allende's suicide.

Chile was rocked by another crisis in 1982, when its economy got overburdened with its debt accumulations of the past years. From 1982 to 1990, Chile underwent a prolonged journey back to democracy. The economic collapse in 1982 provoked some adjustments to the neoliberal model and sparked widespread protests against the regime. That recession was compounded by the international debt crisis.

The poverty scenario of Chile in the late 20th century is understandable given the economic mismanagement it had to undergo during the period. Latin America has traditionally had one the most unequal income distributions in the world. Chile has not been an exception to this rule. Although data are scarce, existing evidence suggests that during the years of military rule (1973-1990) income inequality increased significantly in Chile. It has been estimated that in 1985 about 25 percent of households lived in extreme poverty, and that 45 percent of households lived below the poverty line. During the 1990-93 period, the incidence of poverty declined substantially. In late 1993, the Ministry of Planning and Cooperation estimated that between 1990 and 1993 more than 1.3 million people moved out of poverty. This was the result of a combination of factors: the rapid rate of growth experienced by the economy; and the implementation of social programs aimed at to the poorest groups in society. The emphasis on social programs aimed at certain groups began in the mid-1970s. This approach seeks to deliver social programs directly to the poor, avoiding leakages to middle- and upper-income groups. These programs have been largely successful. It has been reported, for example, that 90 percent of the food distributed through the preschool nutritional programs went to the poorest three deciles of the population in the mid-1980s. Moreover, more than 80 percent of the food has reached the rural poor. Since the basic housing program was reformed in the early 1980s, more than 50 percent of the subsidies have been reaching the poorest three deciles of the population. In 1969, before the system was reformed, only 20 percent of subsidies were received by the poorest 30 percent of the population.

On the employment front also, Chile had to sail in troubled waters for over more than a decade. After years of high unemployment, in the 1990s the trend began to change. By late 1993 the rate of unemployment had plunged to 4.9 percent, a rate significantly lower that that of the rest of Latin America, and one of the lowest in Chile's modern history. Interestingly, this drastic reduction in unemployment has taken place at the same time as real wages have increased significantly. The United Nations Economic Commission for Latin America has estimated that average real wages increased by 13.7 percent between 1990 and 1993. This change in employment conditions has been the direct result of the emphasis that Chile's economic model has placed on the development of employment-intensive industries. The increase in employment has been so impressive that a number of analysts have argued that Chile may be running into a period of labor shortages

Mexico, yet another Latin American nation has had to undergo relatively more mayhem before successfully whitewashing its years of macro-economic blunders. Mexico suffered three crises- in 1982, 1986 & 1994. The roots of the 1982 crisis lay in the oil boom of the late 1970s. Oil prices rose sharply at a time when oil exploration in Mexico was at a peak. The nation found itself awash in petrodollars. Its infrastructure, barely adequate before the boom, was overwhelmed by the influx of imported goods that followed Mexico's rising foreign exchange reserves and the overvalued peso. Government spending did increase substantially following the oil boom. The new money fueled a level of inflation never before seen in modern Mexico; the inflation rate eventually surpassed 100 percent annually. Oil exports began to crowd out other exports. Like so many other developing nations, Mexico became a single-commodity exporter. With almost 50 billion barrels in proven reserves serving as collateral, Mexico also became a major international borrower. By 1982 almost 45 percent of export earnings went to service the country's external debt. By mid-1981, overproduction had softened the international oil market considerably. In July the government announced that it needed to borrow US$1.2 billion to compensate for lost oil revenue. The month before, Pemex had reduced its sales price for crude oil on the international market by US$4 per barrel. This uncertain situation--high external debt, stagnant exports, and a devalued currency as of February 1982--prompted investors to pull their money out of Mexico and seek safer havens abroad.

The 1980s witnessed the oil glut which proved disastrous for Mexico. The combination of low demand and high supply caused oil prices to fall over 70% by 1986 and gradually the country's foreign exchange reserves plummeted spelling crisis for the nation.The sudden devaluation of the Mexican peso in December 1994 spelt yet another crisis for the economy.

Poverty in Mexico has been more severe than in Chile during the late 20th century. During 1970-90, 53 % of population was poor and 22 % of the population lived in extreme poverty. In 1996, more than half of the population lived in poverty and 22 per cent in extreme poverty. This may be attributed mainly to the collapse of GDP and employment, the massive devaluation of December 1994 and the inflation that ensued. In Mexico, poverty only really started to go down after the crises of 1994-1995 but the rural- urban divide still remains quite significant.

Unemployment increased in the years before and immediately after the currency devaluations of 1982 and 1995. Mexico shows a systematically higher participation rate in all age groups, but especially in the 25-34 years age group for women and the 25-49 years age group for men. Mexico has a relatively higher participation rates for workers in the 15-24 years age group, which suggests an early entry into the labour market and a lower rate of young people attending school or training programmes than in Chile. Mexican young women (15-24 years old) start working in larger proportions than in Chile; and more women, aged 50 years or more, keep working due to the lack of social security. The situation of the labour market worsened with a rapid increase in temporal jobs, on-call work and employment with no social security. The Mexican labour market adjusts to shocks and crises through wage reductions. Unemployment eased in the 1990s when it remained below 8 % , but only until 2008.

Crime and violence:

According to the World Bank high rate of crime and violence in Latin America are undermining growth, threatening human welfare, and impending social development. Crime is extremely high in all major cities in Brazil; in large parts of Rio de Janeiro, city of Sao Paulo etc. and during 1996 crime statistics were high in El Salvador, Guatemala and Venezuela. Violence and crime ranges from physical harm, racialised abuses to the environmental destruction and threat. In today's time in Latin America crime and violence is increasing at a very fast pace. It's the region with highest murder rates in the world. Crime mainly in the form of banditry, petty theft, gender violence, drug trafficking and kidnapping has shaped perception of Latin American society by outsiders and has heavily influenced political decisions by local and national government. Such problems obstruct the development in the region while fear and mistrust hampers social capital and also undermines democratic governance. Crime impacts business and also an obstacle in investment. Crime increase access to finances declines and workers' productivity declines. Latin America saw the emergence of the dependency theory. The dependency theory originally developed in Latin America and explains the violent global processes that underlie the constitution of unequal development there. This theory has been challenged for its excessive structuralist explanatory approach to uneven development.

The period 1980s and 1990s saw the emergence of the global concern over unchecked deforestation, pollution of air, land and water ways; increasing desertification etc. It's related to human activity and blind belief in economic development at the expense of global ecosystem. By this it means that nature fell victim to the violence of development. To tackle with the problem a new perception originated. In the year 1987 in the Brundtland report, the notion of 'sustainable development' was born which aim to promote economic activity and growth, while preserving the environment. Also in an article by Ulrich Oslender on Colombia black communities living in pacific coast region, shows the global concern over environmental destruction which found its expression in the early 1990s in promotion of sustainable development projects that empowered local communities to protect their tropical rainforest and its biodiversity.

In recent years in many countries in Latin America problem of violence and crime is regarded as one of the most serious obstacles in development. The regions invested in crime prevention approaches like integrated citizen security programs, crime prevention through environment designs and public health approach that focus on risk factors for violent behaviours. These approaches decrease both property crime and inter personal violence.There are different responses across the region and few states have followed coherent programs to prevent violence. Policies have been inconsistent at best and the states have failed in their mandate to guarantee citizens security at worst.

There are two types of perspectives in development, the economic perspective and the social perspective. Economic perspective refers to matters related to costs of crime, violence as an obstacle to investment and the associated consequences of civil unrest for economic life. While the social perspective addresses the matters such as citizen security, community development and public health. In this approach there is high public understanding of violence with issues of gender based violence being side-lined within broader debates on public security. It is argued by few authors that the contemporary forms of violence are also political as they result from the policies that have exacerbated inequalities and also due to the continued failure of governments to address existing structural problems.

In Latin America there has been a rise in crime against property as compared to rise in crime against life and it's mostly committed by young men from the poorest neighbourhoods'. Pearce (1998) argues that the type of violence that plagues Latin America today is of a more social and multifaceted kind than the polarized and political violence characteristic of the 1980s'. The major problem in the development of appropriate policy frameworks to tackle crime and violence is the lack of adequate data collection mechanism. State registers for crime and violence are limited and generally more accurate for some crime like murder than others. Fear is also as much a threat to democracy as violence itself, whether it's due to threatened paramilitary or guerrilla aggression, racialised discrimination, gang rivalries or socio-economic constraints.

Comparative Study:

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