Syllabus: Economics 464
Economic Problems of Latin America
Professor: Eduardo Mendoza, Ph.D.
http://www-rohan.sdsu.edu/~jemendoz/port
Office Hours: 18:00 to 19:00 p.m. Tuesdays,
Office 321, Nasatir Hall
Email: jemendoz@mail.sdsu.edu
Phone: (619)594-5535 (SDSU)
Objective
The objective is to provide the students with the basic economic concepts to analyze the economic evolution of the Latin American countries during the second half of the 20 th century. Additionally, a historical overview of the economic problems and contradictions experienced by that region is covered. After taking the course the students should be able to distinguish economic growth from development, explain the role of institutions in economic growth, understand the import substitution period, explain the debt crisis, differentiate between economic stabilization and structural reforms and describe the major regional trade agreements.
Bibliography
- Franko, Patrice (1999), The Puzzle of Latin American Economic Development, Rowman and Littlefield Publishers, Inc. (textbook).
- Readings from that you will download from the web and ECR materials.
Grading Policy
Students grades will be based upon the performance and scores in the following areas:
Two midterms…………………........…….30%
Final Examination.…………………......…30%
Term paper…………………………………25%
Quizzes and Assignments ..........……......15%
Grades are based on the following scale: 90%-100% is in the A range, 80%-89% is in the B range, 70%-79% is a C, and 60%-69% is a D.
Important dates
Midterm 1:
Midterm 2:
Final:
Paper proposal due:
Paper outline/draft due:
Final draft of paper due:
Make-ups and missed exams
No make-up exams or late exams and papers will be allowed except under extraordinary circumstances.
Course Outline
1. The concept of development and the Latin American economiesAn outlook of the economic development complexities in the Latin American countries is presented. We also will look at the concepts of economic growth and economic development, in order to have an analytical framework to study the region.
- Economic Survey of Latin America and the Caribbean,
2001-2002. Economic Commission for Latin America and
The Caribbean (ECLAC).
http://www.eclac.cl/cgi-bin/getprod.asp?xml=/publicaciones/xml/4/10734/P10734.xml&xsl=/de/tpl-i/p9f.xsl&base=/de/tpl-i/top-bottom.xsl - Franko, chapter 1.
- Krugman Paul, 1998, “The Return of Depression Economics”, Chapter 3, Warning ignored: Latin America, 1995, W. W. Norton Company.
To be able to make an assessment of the economic policies implemented in the Latin American economics is necessary to learn about the economic, social and national diversity that lies within the region.
- Franko, chapter 2.
- United Nations, 1998, What do the Human Development Indices Reveal?
- Sokoloff, Kenneth and Stanley Engerman, “Institutions, Factor Endowments, and Paths of Development in the New World”, Journal of Economic Perspectives, V. 14n3, summer 2000.
The import substitution industrialization (ISI) is an industrial policy that Latin American governments used to encourage the development of domestically produced manufactures that could substitute for imports. The ISI allowed a rapid but temporary economic expansion. Eventually it created overvalued exchange rates, export disincentives, income inequalities and distorted economies. The theoretical foundation of the ISI was the Latin American dependency theory.
- Franko, chapter 3.
In this section the role and size of government intervention in the economy is discussed. In particular, the influence of the economic populists on Latin American economic development is analyzed.
- Franko, Chapter 6.
- Dornbusch, Rudiger and Edwards, Sebastian, 1999, The Macroeconomics of Populism.
5. The debt crisis and the return to financial markets
The debt crisis in Latin America began in August, 1982 with Mexico’s declaration of debt service moratorium (it could not pay interest or principal on its sovereign foreign debt). Such financial problem reflected the crisis of the model of economic development in this region. The adoption of the neoliberal model lead to a surge in new capital flows to the area in the mid 90s.
- Franko, chapters 4 and 7
- Edwards, Sebastian, “Muddling Through: Adjustment from 1982 to 1987,” in Crisis and Reform in Latin America: from Despair to Hope.
The goal of the economic stabilization policy was designed to stop the vicious circle of hyperinflation that the Latin American economies suffered (e.g. Bolivia 1985, annual percentage inflation of 11,804.8), as a result of the large and recurrent depreciation of their currencies.
- Franko, chapter 5,
While the stabilization policies are macro-oriented, the structural adjustment policies are oriented to the micro level. The objectives of such policies are based on the neoliberal proposals of reducing the government’s role in the economy, the privatization of state owned enterprises, the opening of the economies to free trade and foreign capital flows and the creation of flexible labor markets, among other issues.
- i. Franko, chapters 6 and 9
Trade liberalization is one of the most important proposals of the economic reform undertaken in Latin America. For some of the Latin American economies international trade has become the most important engine of growth. Trade theory has always supported the free trade view and recently some empirical studies have found strong evidence of the positive link between trade and growth.
- Franko, chapter 8
What is the present situation of Latin America in terms of income inequality, public infrastructure and social programs. What can be done today to improve the socioeconomic conditions? What is the recent development of the most important countries in the region.
- Franko, chapter 11-13
- Williamson, John, “ What Should the Bank Think About Washington Consensus?” Available online from the institute of International Economics ( http://www.iie.com) at http://207.238.152/TESTMONY/bankwe.htm.
- Economic Commission for Latin America and the Caribbean Annual Report