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5.6: Patterns of Globalization in Middle and South America

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    21079
  • The ongoing migration from Middle and South America points to a larger issue of global economic connectivity. Many of the region’s migrants are well-educated and leave in search of better economic opportunities. This contributes to brain drain, referring to the emigration of highly skilled workers “draining” their home country of their knowledge and skills. Around 84 percent of Haiti’s college graduates live outside of their home country, for example, the greatest percentage of any country in the world.

    When workers leave the region in search of work elsewhere, they often send home remittances, or transfers of money back to their home country. In 2014, global remittances totaled $583 billion, and in some countries, remittances represent a significant portion of the country’s GDP, in some cases exceeding the amount the country earns from its largest export. Mexico’s remittances alone totaled over $25 billion in 2015, or around 2 percent of its total GDP. Most remittances in Middle and South America originate in the United States.

    As countries in this region have sought to increase development, they have faced several challenges. Exports continue to flow from Latin America and the Caribbean to the rest of the world, though often coming at the cost of economic diversification. The island nations of the Caribbean have had particular challenges to sustainable development due to their small size and populations and limited natural resource base. These countries are referred to as Small Island Development States, or SIDS (Figure \(\PageIndex{1}\)). These countries have struggled with high technology, communication, energy, and transportation costs and have had difficulty developing in a way that doesn’t harm their fragile ecosystems. In the Caribbean, the SIDS have formed the Caribbean Community, or CARICOM, aimed at promoting economic integration and cooperation among its member countries.

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    Figure \(\PageIndex{1}\): Map of the Small Island Developing States of Middle and South America (Derivative work from original by Osiris, Wikimedia Commons)

    Some countries, particularly those in the Caribbean, have advanced their economies through offshore banking. Offshore banks are located outside a depositor’s country of residence and offer increased privacy and little or no taxation. When the wealthy utilize offshore banks, they can thus avoid paying taxes on income that would be otherwise taxable in their home country. Belize, Panama, the Bahamas, the Virgin Islands, and many other countries in the region have become popular locations for offshore banks. The Cayman Islands, though, is one of the world’s leading offshore banking locations. Around $1.5 trillion in wealth is held in the Cayman Islands and the British territory has branches for 40 of the 50 largest banks in the world. As a result, it has a GDP per capita of over $49,000 compared to just $8,800 for its much larger neighbor, Jamaica. Some countries have tried to strengthen their tax laws to prevent tax evasion through offshore banking.

    Others in the region have turned to the production and trade of illicit drugs as a way to generate income, particularly cocaine and marijuana. Coca, the plant used to make cocaine, is grown and harvested in the Andes Mountain region, particularly in Bolivia, Columbia, and Peru. In 2013, Peru overtook Columbia as the global leader in cocaine production. The drug trade in Middle and South America has led to the rise of cartels, criminal drug trafficking organizations, and widespread violence in the region. Cartels often fight each other for territory, with civilians in the crossfire, and in many areas, drug organizations have infiltrated police, military, and government institutions. In Mexico alone, the ongoing Mexican Drug War between the government and drug traffickers shipping cocaine from Central America to global buyers has killed more than 100,000 people. The United States continues to be the largest market for illegal drugs. Americans purchase around $60 billion in illegal drugs annually, funding drug violence and drug trade in Middle and South America.

    As countries throughout Middle and South America have increased their development, there have been some significant environmental concerns, particularly deforestation. When urban areas expand, forests are often cleared to make room for new housing and industry. Similarly, as agricultural lands expand and commercialize to feed growing populations and produce crops for export, it often leads to deforestation. Furthermore, nutrients in soil decline over time without careful land management, and thus after lands are intensively farmed for some time, soil fertility declines and new agricultural lands are cleared. Around 75 percent of Nicaragua’s forests have been cut down and converted to pasture land. The Amazon rainforest, which amazingly holds around 10 percent of the entire world’s known biodiversity, is down to around 80 percent of its size in 1970. The majority of the deforestation in the Amazon has occurred as a result of the growth of Brazil’s cattle industry and its global export of beef and leather.

    Despite slowing rates of deforestation and strides to address income inequality, this region remains largely in the global periphery. Some argue that it is to the advantage of countries like the United States to keep this region in the periphery, as it allows them to import cheap products. This idea is known as dependency theory, and it essentially states that resources flow from the periphery to the core, and thus globalization and inequality are linked in the current world system. While some have critiqued the specifics of the theory, others still see it as a useful way to understand the relationship between the core and the periphery. As Middle and South America continue to develop, they will face new challenges of how to do so in a way that is both ecologically and socially sustainable.

    Brain drain:

    refers to the emigration of highly skilled workers “draining" their home country of their knowledge and skills

    Small Island Developing States:

    small, coastal states with that face challenges related to sustainable development and have limited populations and natural resource bases, also known as SIDS

    Offshore banking:

    financial services located outside a depositor’s country of residence and offer increased privacy and little or no taxation

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