Executive Summary:
The geographic location, the region's historical background, and rich cultural diversity define what makes Latin America unique. The colonial legacy has shaped the ethnic and cultural composition of countries in Central and South America and the Caribbean. However, during the Cold War, the region became a focal point of political tension. Its proximity to the United States heightened its significance to this global power, leading to frequent U.S. interventions in the region’s political and economic affairs, which became commonplace during that era. Notable instances, such as the Cuban Missile Crisis, the regime change in Chile, and military conflicts in Nicaragua, underscore the extent of U.S. interference. In the past three decades, Latin America has witnessed the rise of both extreme rightist and leftist ideologies alongside ongoing economic struggles. The long history of direct or indirect military rule in many countries has undermined democratic institutions and disrupted democratic processes. This article explores the challenges currently facing Latin America and the extent of opportunities available for the region to leverage.
Introduction
Latin America is characterized by its linguistic and cultural ties to Southern European nations, primarily Spain and Portugal, stemming from a colonial legacy. Unlike the Anglo-Saxon influence predominant in the United States and Canada, Latin America showcases the distinct impact of Spanish and Portuguese colonization, which has evolved alongside a rich blend of indigenous and African cultures. While several Southern and Western states in the U.S. share historical and political connections to this Latin legacy, Latin America encompasses explicitly the countries of South America, Central America, and the Caribbean. These include the countries also known as the part of the Southern Cone: Argentina, Brazil, Chile, Paraguay, and Uruguay. Most of these nations have Spanish-speaking populations, with Brazil being a notable exception. Collectively, these countries share a common history marked by Iberian colonization in the 16th century, independence movements in the 19th century, and a prolonged struggle for development and democratic rights in the post-independence era.
The region's ancient history dates back to the pre-Columbian civilizations that emerged in Mexico and western South America (e.g., Chile) long before the Spanish conquest in the 16th century. These pre-Columbian cultures represented significant achievements in human civilization and society, comparable to the ancient civilizations of Egypt, Mesopotamia, and China. For over five hundred years, historical transformations in this area have been intertwined with political, economic, social, and cultural shifts elsewhere. Besides its rich historical context, the region boasts an extraordinary variety of natural resources and landscapes that extend from Mexico’s Sonora Desert through equatorial rainforests and the Andes down to the Patagonian coastline of Argentina.
The current economic state of Latin America:
The region is marked by significant countries such as Brazil, Mexico, and Argentina, and its proximity to the United States makes it a unique area. In 2023, the total GDP of the region reached $7.09 trillion, which translates to a per capita GDP of $10,681.70. The GDP experienced a year-on-year growth of 2.2%. However, the region faces challenges, including an unemployment rate of 6.2% and an inflation rate of 4.6%. While growth estimates for Latin America and the Caribbean are showing a positive trend, there is anticipation that this region could become more dynamic in the near future. Addressing fiscal imbalances and reducing debt will be crucial steps moving forward. As efforts intensify to recover lost earnings power, there is hope for revitalizing the significant advancements made in poverty reduction over the past decade. The upcoming period holds promise for overcoming these challenges and fostering a more robust economic landscape.
The regional GDP experienced a notable decline during the pandemic, but has begun to recover since then. In 2022, the external debt of Latin America and the Caribbean was estimated to be approximately 45.96 percent of the gross domestic product. The service sector accounts for nearly two-thirds of employment in the region, while 14% of employed individuals work in agriculture and 20% in industry.
Public sector reforms are strongly advised as countries aim to enhance both domestic and foreign investments. Since the COVID-19 pandemic, many Latin American nations have focused on maintaining fiscal discipline. For instance, Nicaragua and Honduras have achieved low budget deficits, while Chile and Guatemala have successfully stabilized theirs. In contrast, larger economies like Brazil and Argentina still require significant economic and systemic reforms to achieve fiscal balance. Economies ready for necessary adjustments may soon experience reduced growth rates, which could have broader implications for the region. The slowdown in economic growth in China continues to be a concern, though declining interest rates might offer new opportunities. Additionally, the sustainability of pension funds is becoming an increasingly urgent issue for many countries, highlighting the critical need for reforms to ensure their long-term viability in the face of upcoming challenges.
Many of the region's current economic and political challenges stem from its historical legacies. During the Cold War, military coups and direct military rule were prevalent in Latin America, significantly weakening the institutions essential for a stable and functional democracy. The lack of continuity in democratic governance over an extended period hindered most countries in the region from establishing the necessary foundations for democratic nations, including a strong civil administration, an independent judiciary, and reliable political processes. Hence, a closer look at the region’s history during the Cold War period and the nations’ inter-relations with the US and former Soviet Union can explain the intricacies better.
Cold War history of Latin America
An accurate assessment of Latin America’s history over the past hundred years must consider the region’s dynamic relationship with the United States. It is often argued that U.S. foreign policy significantly impacts this region, especially given the geographic proximity between the two. Colonial history and deep-rooted social inequality made this region a fertile ground for the proliferation of communist ideology in the post-WWII period. The Cuban Revolution in the 1950s inspired communist and leftist political activists across the region. Che Guevara’s struggle and subsequent assassination made him an iconic figure for other revolutionaries in Latin America and beyond. In the tumultuous years of the 50s and '60s, the world witnessed the rise of communist movements, with some turning into armed struggles. As a result, the U.S. government implemented a containment policy that involved political and military interventions in various countries. In addition to its military actions in Vietnam, the U.S. supported military coups and backed military juntas in nations such as Indonesia and Pakistan, where these groups unconstitutionally seized power. US policies for Latin American countries were no exception.
Significant differences arose between pre- and post-revolution Cuba. The collapse of Batista's government in 1952 paved the way for Fidel Castro's regime, which maintained its grip on power even after the Soviet Union's dissolution in 1991. While some positive developments occurred, the nation's economy encountered challenges. Over the past century, Cuba's economic journey has experienced significant ups and downs. Before the revolution, Cuba was one of the wealthiest Spanish-speaking societies, with per capita income comparable to Iceland and Finland's. Since 1970, Cuba's per capita GDP grew steadily at an annual rate of 2.2%, outpacing the Latin American average of 1.3%, partly due to a $5 billion annual subsidy from the Soviet Union. However, in 1980s despite sustained support from the Soviet Union and its allies, Cuba’s consumption ranking continued to fall in 70s and 80s. However, the country steadily improved HDI (Human Development Index) due to improved healthcare, leading to higher life expectancy and a government-supported education system.
The Cuban Revolution and subsequent geopolitical tensions, notably the Cuban Missile Crisis, captured significant global attention. The United States and its Latin American allies were concerned that Cuba’s example might inspire revolutions in other nations across the region. Consequently, the US provided political and military support where necessary to counter any potential threats. The next Marxist leader to gain power, however, did so through democratic elections: Salvador Allende, who became the President of Chile in 1970. His government, nonetheless, was overthrown by a brutal military coup supported by the United States within three years. General Augusto Pinochet led this coup and subsequently became a prominent military dictator in the region.
A similar trajectory was observed in Nicaragua under the Sandinista revolutionary government, where Daniel Ortega—a Marxist-Leninist guerrilla leader trained in Cuba—spearheaded an armed struggle that overthrew the US-backed regime in 1979. Throughout the 1980s, Ortega’s communist government faced military resistance from a US-supported group known as the Contras, ultimately leading to his resignation in 1990. In 1979, Cuba backed communist guerillas to topple the government of the Caribbean Island – Grenada. Cuba facilitated the Soviet Union’s effort to bring more Latin American nations into the Soviet orbit.
The Soviet influence in the region extended beyond merely training and financing guerrillas on Cuban soil. The Soviet Union also wielded political and economic clout by offering soft loans as an alternative to U.S. financial assistance, capitalizing on the desire of many Latin American countries to attain greater independence from the United States. In 1974, Moscow granted Argentina’s Videla regime a credit of $600 million for Russian equipment intended for hydroelectric projects. Despite Videla’s government being staunchly anti-communist and notorious for conducting the Dirty War—an instance of state terrorism that targeted thousands, including communist activists and sympathizers—the trade and diplomatic relationship between the Soviet Union and Argentina during this period was quite remarkable. Additionally, the Soviet Union provided loans to Brazil, Uruguay, and Peru to support infrastructure development.
In the wake of the Soviet Union's collapse, Cuba’s revolutionary influence waned as Latin American leftist movements began to seek alternative models for gaining power in the post-1990 era. Nonetheless, US influence in the region remained robust. In 1989, US troops were deployed to oust General Noriega, the military dictator of Panama, in an operation unrelated to Cold War issues. The US maintained a vigilant stance against drug trafficking and continued to collaborate with various Latin American regimes.
Latina America in the 21st Century
Since the beginning of the century, Latin American countries have started to experience a multiplicity of problems. As mentioned, the United States provided covert and overt support to military dictators such as Pinochet during the Cold War period. After the Cold War, Latin American countries transitioned into democratic practices. However, in the last three decades, in most cases, countries achieved disruptive and dysfunctional democracy. China’s emergence as a global economic powerhouse and Putin’s anti-West stance further emboldened nationalist, leftist politics in Latin America. Brazil’s Lula and Venezuela’s Hugo Chavez were the forerunners in leading radical left governments in the region. Subsequently, Evo Morales of Bolivia and Chavez’s successor, Maduro, further challenged US influence. Nevertheless, many countries experienced widespread political violence, human rights violations and election irregularities, which severely diminished the credibility of the democratic processes.
While direct military intervention has significantly declined over the past thirty years, the military's influence on democratic institutions remains substantial. Democratically elected governments often seek to appease the military by appointing its personnel to key civil positions to gain their endorsement. Numerous retired military figures, such as Hugo Chavez, have actively entered politics and garnered public support. This trend is also evident in various Asian and African nations, including Thailand, Myanmar, Pakistan, Nigeria, and Sudan, where the military is viewed as a disciplined and viable alternative to allegedly corrupt and ineffective political parties and civil administrations.
The region has witnessed a recent resurgence of political extremism. Historically, political rights have garnered significant support, but recent developments have seen Brazil and Argentina, the two largest countries in the region, led by far-right leaders. Brazil's former President, Bolsonaro, has faced widespread criticism for his climate change denial. Similarly, Javier Milei, a right-wing libertarian and anarcho-capitalist, is known for his staunchly ultra-conservative views. Consequently, Latin America is grappling with threats from both extreme right and left-wing politics, which reflects the long-standing irreconcilable frictions and political differences that have characterized the region for a century.
Dr Bidit L. Dey
Associate Professor in Marketing
Sheffield University Management School (the University of Sheffield), UK
LinkedIn: Bidit Dey | LinkedIn
Additional reading: