The economic history of Latin America covers the development of the Latin American economy from 2500 BCE to the start of the 21st century.
In the pre-contact era, Latin America did not have an integrated economy. The indigenous peoples, particularly the Aztec Empire in central Mexico and the Inca Empire in the Andean region, had complex socioeconomic structures. However, their economic and political systems were more isolated due to the difficulty of north–south movement. From the beginning of the 16th century until the early 19th century, the New World was largely under the dominion of the Spanish Empire and the Portuguese Empire. The prosperity rested on the production and exportation of two primary commodities: silver and sugar. After independence, Britain exerted influence through economic neo-colonialism and private investment.
World War I (1914–1918) had a disruptive effect on British and European investments. Germany lost its trade connections and Britain suffered significant losses as the United States emerged as the dominant economic power in the region. The negative impact of the Great Depression of the 1930s was reversed by Allied purchases in World War II. Latin America countries accumulated financial reserves that were used to foster industrial expansion through import substitution industrialization. In the 1970s the region took on debt to fuel economic growth and integrate into the global market. The prospect of export earnings led to large loans denominated in U.S. dollars to expand economic capacity. Foreign capital flowed into the region, creating financial links between developed and developing nations, while the dangers of this arrangement were overlooked. In the 1980s and 1990s, most governments implemented structural reforms. These reforms included trade liberalization and privatization, often imposed as conditions for loans by the IMF and the World Bank. The worst hit countries sent migrants to the U.S., and their remittances home became increasingly important.
Pre–European contact
There was no integrated economy in Latin America prior to European contact, when the region was then incorporated into the Spanish Empire and the Portuguese Empire. The people of the western hemisphere (so-called "Indians") had various levels of socioeconomic complexities. The most complex and extensive at the time of European contact were the Aztec empire in central Mexico and the Inca Empire in the Andean region, which arose without contact with the Eastern Hemisphere prior to the late fifteenth-century European voyages. The north–south axis of Latin America, with the little east–west continental area, meant that movement of people, animals, and plants was more challenging than in Eurasia, where similar climates occur along the same latitudes. This prompted the rise of more isolated economic and political systems in pre-contact Latin America.Jared Diamond, Guns, Germs, Steel. New York 1997. Much of what is known about pre-contact Latin American economies is found in European accounts at contact and in archeological records.Rebecca Storey and Randolph J. Widmer, "The Pre-Columbian Economy" in The Cambridge Economic History of Latin America, vol. 1, New York: Cambridge University Press 2006,74. The sizes of indigenous populations, their organizational complexities and their geographical locations, especially the existence of exploitable resources in their vicinities had a major impact on where Iberians at contact, chose to settle or avoid in the late fifteenth and early sixteenth centuries. "The Indian peoples and the resources of their lands were the primary determinants of regional differentiation."Lockhart and Schwartz, Early Latin America, New York: Cambridge University Press 1983, p. 59.
Civilizations in Mexico and the Andes In Mesoamerica and the highland Andean regions, complex indigenous civilizations developed as agricultural surpluses allowed social and political hierarchies to develop. In central Mexico and the central Andes where large sedentary, hierarchically organized populations lived, large tributary regimes (or empires) emerged, and there were cycles of ethno-political control of territory, which ceased at the boundaries of sedentary populations. Smaller units functioned within these larger empires during the pre-contact period, and became the foundation for European control in the early contact period. In both central Mexico and the central Andes, households of commoners cultivated lands and rendered tributes and labor to local authorities, who would then forward goods to authorities further up the hierarchy. In the Circum-Caribbean region, Amazonia, the peripheries of North and South America, semi-sedentary and non-sedentary nomadic peoples had much political or economic integration.James Lockhart and Stuart B. Schwartz, Early Latin America. New York: Cambridge University Press 1983, pp. 31–57. The Aztec empire in central Mexico and the Inca empire in the highland Andes had both ruled for approximately a century before the arrival of the Spaniards in the early sixteenth century.
The Mesoamerican and Andean civilizations developed in the absence of animal power and complicated agricultural tools. In Mesoamerica, there was extensive cultivation of maize, accomplished by hand-held digging sticks, and harvesting of ripened cobs done manually. In the Andes, with steep hillsides and relatively little flat land for agriculture, the people built terraces to increase agricultural land. In general, there was no such general modification of the topography in Mesoamerica, but at the southern freshwater portion of the central lake system, the natives built chinampas and mounds of earth for intense cultivation. In Mesoamerica there were no large domesticated animals prior to the arrival of the Spaniards to ease labor or provide meat, manure, or hides. In the Andes, the staple crops were potatoes, quinoa and maize, cultivated using human labor. New World camelids such as llamas and alpacas were domesticated by the people and were used as pack animals for light loads and source for wool, meat and guano.Lockhart and Schwartz, Early Latin America, p. 48. There were no wheeled vehicles in either region. Both Mesoamerica and central Andes cultivated cotton, which was woven into lengths of textiles and worn by locals and rendered in tribute.
Tribute and trade The Mesoamerica and the Inca empires are required to make payments of tributes in labor and material goods. However, in contrast to Mesoamerica's trade and markets, the economy of Inca empire functioned without markets or a medium of exchange (money). The Inca economy has been described in contradictory ways by scholars: as "feudal, slave, socialist (here one may choose between socialist paradise or socialist tyranny)".Darrell E. La Lone, "The Inca as a Nonmarket Economy: Supply on Command versus Supply and Demand," p. 292. https://www.academia.edu/885136/The_Inca_as_a_nonmarket_economy_Supply_on_command_versus_supply_and_demand, accessed August 10, 2017 The Inca rulers constructed large warehouses or Qullqa to store foodstuffs for the Inca military, to supply goods to the populace during ritual feasting, and to aid the population in lean years of bad harvests.
The Incas had an extensive road system, linking key areas of the empire to some parts that are extant in modern era. The roads were used by the military for transporting goods using llamas and for warehousing of suppliesin stone-built qullqas. Tambos or stopping places were built approximately a day's travel along the roads, near the warehouses. Gorges were spanned by rope bridges, which did not permit pack animal use. The Inca road system was a costly investment in permanent infrastructure, which had no equivalence in the Aztec empire. There were land transport routes without improvement, with the exception of the causeways linking the island where the Aztec capital of Tenochtitlan was located. Sections of the road network could be removed to prevent invading forces. Around the lake system of central Mexico, canoes transported people and goods.
In Mesoamerica, trade networks and fixed markets were established quite early during the formative period (c. 2500 BCE – 250 CE). Trade differs from tribute in that, tribute was one-way, from the subordinate to the ruling power, whereas trade was a two-way exchange with profit for a desired outcome.Frances F. Berdan, "Trade and Markets: Mesoamerica" in Encyclopedia of Mexico, p. 1418. Chicago: Fitzroy Dearborn Publishers, 1997. Many settlements developed craft or crop specializations. Some market places functioned as regularly scheduled one-day markets, while others such as the great market at Tlatelolco, was a vast fixed emporium of goods flowing to the capital of the Aztec empire, Tenochtitlan. That market was described in detail by Spanish conqueror Bernal Díaz del Castillo in his first-person account of the Spanish conquest of the Aztec empire.Bernal Diaz del Castillo, True History of the Conquest of Mexico, multiple editions.
The Nahuatl word for market place tianquiztli, has become in modified version in modern Mexican Spanish, the word tianguis. Many Mexican towns with significant indigenous population continue to hold regularly scheduled market days, frequented by locals for ordinary household or work goods, with craft goods being particularly appealing to tourists. During the Aztec period, an elite group of long-distance merchants, the pochteca functioned as traders in high value goods as well as scouts to identify potential areas for future conquests for the Aztec Triple Alliance. They were organized into a guild-like structure, such that, the non-noble elites became emissaries of the Aztec state, thereby benefiting the investors in their expeditions and gaining state protection for their activities.Berdan, "Trade and Markets: Mesoamerica", p. 1419. High value goods included cacao, quetzal feathers, and exotic animal skins, such as jaguars. Since goods had to be transported by human porters called tlameme in Nahuatl, bulk products such as maize were not part of the long-distance trade. Cacao beans functioned as a medium of exchange in the Aztec period.
Record keeping Only in Mesoamerica did a system of writing develop and used for record keeping of tributes rendered from specific regions; such as seen in Codex Mendoza with polities in that region shown using a unique pictogram. The collective tributes rendered from that particular region was also shown in a pictographic fashion. In the Andean region, no system of writing developed, but record keeping was accomplished using the quipu, knots that could record information.
Circum-Caribbean, Amazonia, and peripheral areas
The islands of the Caribbean were fairly densely populated with sedentary, subsistence agriculturalists. No complex hierarchical social or political system evolved there. There were no tribute or labor requirements of inhabitants that could be co-opted by the Europeans upon their arrival as subsequently recorded in central Mexico and the Andean regions.
There were however, evidences of pre-contact trade in the Circum-Caribbean region, with an early European report by Peter Martyr noting canoes filled with trade goods, including cotton cloth, copper bells, copper axes (likely from Michoacan), stone knives, cleavers, ceramics and cacao beans, used for money. Small gold ornaments and jewelry were created in the region, but there were no evidences of metals being used as a medium of exchange nor being highly valued except as ornamentations. The natives did not know how to mine gold, but knew where nuggets could be found in streams. On the Pearl Coast of Venezuela, natives had collected large numbers of pearls, and, with the arrival of the Europeans, were ready to use them in trade.Carl O. Sauer, The Early Spanish Main. Berkeley and Los Angeles: University of California Press 1966, pp. 128–29, 108–09.