South America

IV

Patterns of Economic Development

Historically a colonial area, economically dependent on the export of agricultural and mineral commodities, South America has experienced growth and diversification in most of its economic sectors since the 1930s. After World War II (1939-1945) national policies of import substitution (the local manufacture of formerly imported goods) reshaped industry. The benefits of this rapid economic development have not spread evenly but have accrued more to the leading cities and their environs.

The development of free trade has also been of major importance to South America. This effort began in the late 1960s with the Andean Community and has been evolving ever since. In the early 1990s the creation of the Southern Cone Common Market (commonly known as Mercosur, from the Spanish “Mercado Comun del Sur”) greatly improved South America's trade and economic prospects. In 2004 the Andean Community and Mercosur joined forces to create the South American Community of Nations, increasing the potential for economic cooperation among member states.

A

Agriculture

Most crop and livestock production in South America is for home consumption and domestic markets. Nevertheless, revenues from agricultural exports are very important in many South American countries. The processing, internal marketing, and exporting of agricultural products account for a substantial part of commercial and manufacturing activity. Although agriculture, together with hunting, fishing, and forestry, accounted for about 12 percent of the gross domestic product (GDP) within the continent in the 1990s, it accounted for more than 30 percent of the labor force in Bolivia, Paraguay, Peru, and Ecuador, between 20 percent and 30 percent in Colombia, Brazil, and Guyana, and less than 20 percent in Suriname, Chile, Uruguay, Venezuela, Argentina, and French Guiana.

The most intensive forms of commercial agriculture are concentrated near cities. Perishables, such as vegetables, fruits, and dairy items, are the principal products here. The production of staples such as root crops, beans, and corn is more dispersed. In many areas these crops are raised by subsistence farmers under unfavorable climatic or soil conditions. Wheat and rice tend to be produced wherever conditions are most suitable. The nonexport beef-cattle industry is dispersed widely; the raising of beef cattle for export is of particular importance in Argentina, Uruguay, Paraguay, and Colombia. Export-oriented agriculture is pursued in the tropical areas and midlatitudes, where arable land and access to ports are optimal. Among the tropical crops, coffee is the most important. It is produced in the highlands, chiefly in southeastern Brazil and in west central Colombia. Cacao is important in eastern Brazil and west central Ecuador. Bananas and sugarcane are produced throughout the tropics, mostly for domestic markets. Bananas are grown for export in Colombia and western Ecuador; sugar is produced for export in coastal Peru, Guyana, and Suriname. Cotton has been produced for export for many decades in coastal Peru. Cotton and sugarcane are also raised (both for export and domestic markets) in northeastern and southeastern Brazil. In southeastern Brazil soybeans have, since the 1970s, become an important export crop. Soybeans are less important in Argentina, where fertile prairie soils have long supported grain and livestock industries of worldwide importance. Argentine wheat, corn, linseed, beef, mutton, hides, and wool are important items of international trade. Uruguay has a long-standing export trade dominated by wool and hides.

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B

Forestry and Fishing

Although the continent is 50 percent forested and is surrounded by seas rich in marine life, the forestry and fishing industries in most South American nations are small and oriented toward domestic markets. Some tropical hardwoods and softwoods are exported, however, much of the wood coming from the Amazon Basin, where large tracts of forest are being cleared for conversion into range and cropland. Also exported is pine lumber from southern Brazil and south central Chile, together with some pulpwood. Significant areas of commercial forest have been planted in Chile and Brazil. The widespread planting of eucalyptus trees for firewood, for timbering, and for use in rough construction has historically been important.

South America's most important commercial fisheries are the Pacific coastal waters. Large amounts of anchovies for fish meal are caught off the Peruvian and Chilean coasts, although overfishing has depleted recent harvests. Tuna are taken off the Ecuadorian and Peruvian coasts. Crustaceans are an important catch in Chilean, Brazilian, and Guianese waters.

C

Mining

Most mining for export is on a large scale. The long history of foreign corporate control of South American mining operations is waning because of national political pressures. Petroleum, copper, bauxite, and iron ore are the principal commodities in value and volume, but mineral exports are greatly diversified. South America is an important world producer of lead, zinc, manganese, and tin. Although all South American countries have some mineral production, Venezuela's oil and gas account for more than half the total value of the continent's output. Mineral production is of great importance to several national economies. Venezuela's exports are dominated by crude and refined petroleum, and derivatives, while the dependence on mineral exports is somewhat less in Suriname, Bolivia, and Chile. Peru and, in recent years, Ecuador, have relied heavily on the sale of minerals. Such exports generate government revenue, but mining contributes little to continental GDP and employment. Nevertheless, mineral commodities are important to the continent's growing industrial diversification.

D

Manufacturing

By the late 1970s manufacturing accounted for at least 25 percent of South America's GDP, up from 20 percent in 1956, when it first exceeded in importance both agriculture and commerce and finance. In the late 1990s, the industrial sector accounted for more than 30 percent of the GDP in Argentina, Venezuela, Brazil, Bolivia, Chile, Peru, and Ecuador.

The processing of agricultural commodities remains the most widespread and important industry, even in Argentina and Brazil, the most industrialized countries. The concentration and refining of minerals is also important but tends to be located near the mineral deposits. Other industries, however—such as petroleum refining, the making of iron and steel and cement, and the manufacture of consumer goods such as textiles, beverages, motor vehicles, electrical and mechanical equipment, and plastics—are concentrated in and near the largest cities.

Industrial development in South American countries has, in the past, taken place with government protection. Although many industries still operate as licensees or subsidiaries of foreign corporations, national governments have, since the 1930s, become directly involved in heavy industries such as iron and steel, motor-vehicle assembly, and shipbuilding. In some countries machine tools, aircraft, and military vehicles are built for export. Industrial development on the continent, however, continues to face several problems: the small size of the national markets, inadequate technology, and weak transportation and distribution networks. Since 1992 the governments of several countries, including Venezuela, Argentina, Chile, and Brazil, have begun selling off nationalized industries for the immediate financial benefits and in the hope of achieving higher efficiency at a lower cost. Such privatization, which has included the transportation and communications industries, has usually resulted in higher unemployment and significant rises in the prices of goods and services.

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