Resources

Our discussion of Latin American geography would not be complete without a large emphasis on the region’s remarkable abundance of natural resources. 

Traditionally, Latin America has been seen as a region rich in natural resources and an abundant labor force, but scarce in capital.  With increased globalization, the demand for an unskilled labor force and the production of labor-intensive products is continually expanding.  However, this image of Latin America as simply being capital poor with an abundance of unskilled workers is not entirely accurate.  Latin America’s true specialty lies in its huge endowment of natural resources (Gavin and Hausmann 1).  During the 1990s it started to become clear that the traditional view people had of the region was very misleading and leaves out import aspects of Latin America’s culture and identity.  This new appreciation can be attributed (at least in part) to an influential paper written by Sachs and Warner, which was the first to make an assessment of the association present between a region’s – or country’s – resource abundance and its economic growth (Gavin and Hausmann 1).  During this time, people started gaining a new appreciation for the region’s geography and its natural resources; realizing the impact these things have on other parts of the world.  The impact of this was clearly felt within several Latin American countries as they began to take advantage of global demand for their natural resources, leading to economic liberalization which was followed by growth in foreign investment and the export of natural-resource intensive products – while the growth of labor-intensive manufacturing began to slack off (Gavin and Hausmann 1). 

 

Further research by Gallup and Sachs (1998) has revealed more evidence showing a correlation between a country’s resource allotment and geography with its growth rate.  In both cases, evidence points to a slower growth of countries with a wealth of resources, as compared to those resource-poor emerging economies, such as the “Asian Miracle Economies.”  Convincing evidence has been provided to support the claim that geography has a substantial impact on this relationship (Gavin and Hausmann 1).  For instance, tropical countries, landlocked countries, and those countries located the greatest distance from major economic centers, show significantly slower growth rates than those with more temperate climates, coastal locality, etc. (Gavin and Hausmann 2).  Why?  Well, an obvious connection can be made between a country’s economic growth and its proximity to economic centers; those countries with a coastline also have the obvious advantage over landlocked countries because of their ability to ship export goods to overseas markets, further expanding economic opportunity.  But the question still remains concerning the correlation between climate and economic growth.  While Gavin and Hausmann pose similar important questions about what this all means for Latin America, they fail to provide a clear definition of the reasons as to why this relationship between climate and growth is present.  I feel there are several important factors contributing to this phenomenon, including the type of resources provided by these regions as well as the image that society has constructed about the ‘3rd World Countries’ common to the region.  The distribution of income also has a significant impact on this topic.  Income inequality, historically has been a serious issue within many Latin American countries.  One factor brought forward by Gavin and Hausmann in their research is a combination of economic growth and investment in human capital; investment in human capital, in the form of education, shows a highly positive correlation with economic growth (2).  Thus, a connection can be made between resource-rich economies and slower growth rates via a shortfall in education and an unskilled labor force.

In summary, this discussion made an attempt to take a deeper look into the correlation between Latin America’s geography (in the form of its abundant natural resources), globalization, and the impact this has on Latin America’s economic growth.  As you can see, it is impossible to investigate one topic without relating it to the others, which serves to demonstrate how all these aspects of a region are so closely tied together. 

If this discussion concerning the role of natural resources in Latin America’s economy has intrigued you as much as it has me, the full paper is available at the following link: http://hdl.handle.net/10419/87909