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Latin American Economic Systems

Latin American Economic Systems. Cuba Brazil. Review . . . Types of Economies. Economic Continuum. No system has a pure command or market economy. All economies combine aspects of both of the command and market economic systems – to different degrees.

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Latin American Economic Systems

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  1. Latin American Economic Systems Cuba Brazil

  2. Review . . . Types of Economies

  3. Economic Continuum • No system has a pure command or market economy. • All economies combine aspects of both of the command and market economic systems – to different degrees. • USA has some government owned businesses – schools, public colleges, postal services – in addition to the privately owned businesses.

  4. What’s Your Economy? • Cuba – command economy • Government owns all resources • Government decides what and how much is to be produced • Struggled since the breakup of the USSR • Brazil – mixed economy • Strong agricultural, mining, manufacturing & service industries • Strongest economy in South America • Government controls health care and postal services

  5. Specialization & Opportunity Cost • Opportunity Cost • Value of what is given up when a choice is made • Example • Country X makes chocolate • Country Y makes cars • Country Y needs to import chocolate • Opportunity cost is the money Country Y could have made if they made their own chocolate • Specialization • Focus on producing one or two goods really well • Advantages • Produce goods in less time • Produce goods for less money

  6. Trade Barriers • Tariff – tax • A trade barrier that is used to discourage trade with foreign companies • This type of barrier would restrict trade • Created to increase the prices of imported goods and protect a country’s own industries from foreign competition • Embargo • Forbidden trade with another country • This type of barrier would STOP the importing of an item • Can be put in place for safety reasons . . . Unsanitary conditions – lead paint • Also used for political reasons . . . Countries that violate human rights • Quota • Restrictions on the amount of a good that can be imported into a country • This type of barrier can create shortages and an increase in price. • EU placed a quota on Chinese imports of clothing when France and Italy, with strong textile industries, complained about cheap import prices.

  7. NAFTA (North American Free Trade Agreement) • 3 countries involved • USA, Mexico, Canada • Purpose • Increase trade between member nations by creating a large free-trade zone (remove trade barriers) • Key Functions – between member nations • Eliminate tariffs on goods shipped • Remove restrictions on investment • Remove custom barriers at border crossings (make it easier for trucks to pass into Mexico) • Establish tough standards for environmental, health and safety regulations in industries • Improve working conditions

  8. Economic Growth • 4 factors for economic growth • Entrepreneurship • Ideas, innovation and risk involved in starting a business • Land • Capital - Factories, machines, etc. • Labor - Human capital • How is economic growth measured? • Gross Domestic Product (GDP) • Total market value of the goods and services produced by a country’s economy in a specific year. • Used to determine the health of a country’s economy and compare it to other countries. • Strongest in Latin America – Brazil and Mexico • Weakest in Latin America – Haiti and Bolivia

  9. How does a country raise its GDP? • Invest in human capital • Education and skills training • Smarter people leads to a more productive workforce • Increase economic growth. • Literacy rate is used to determine the educational level of people . . . • Higher the literacy rate. . . Higher the GDP • Widespread poverty and lack of education in Latin America • Many students have to work instead of go to school. • Invest in capital resources • Provides workers with the most current and updated tools. • New factories, computers, roads • Increases productivity and economic growth

  10. What role does natural resource play in the success of a country’s economy? • Fuel for a country’s industries. • Source of income when exported. • Brazil • Rich mineral resources like iron ore (makes steel) • Fertile soil, plentiful forests, rivers • Mexico and Venezuela • Oil deposits • Have more than they need – sell to other countries

  11. What role do entrepreneurs play in the success of a country’s economy? • Generate new ideas • Invest in human, capital and natural resources • Willing to take risks • Help countries adapt to changing trends • In Latin America . . . • Unemployment is high among young adults • Developing classes to develop entrepreneurship • A lot of “red-tape” . . . 4 months to start a business in Venezuela • Starting a business is viewed as a way to get out of poverty!

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